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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
For the fiscal year ended June 29, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-23400
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DT INDUSTRIES, INC.
[Exact name of registrant as specified in its charter]
DELAWARE 44-0537828
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Corporate Centre, Suite 2-300
1949 E. Sunshine 65804
Springfield, MO (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (417) 890-0102
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.01 per share
Series A Preferred Stock, par value $.01 per share
Preferred Stock Purchase Rights
(Title of each class)
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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 statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K X .
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As of September 15, 1997, the aggregate market value of the voting stock
held by non-affiliates of the registrant was $346,298,844 (based on the closing
sales price, on such date, of $31.25 per share).
As of September 15, 1997, there were 11,301,875 shares of common stock,
$0.01 par value outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement Dated September 29, 1997 (portion)(Part III).
Annual Report to Shareholders for the Fiscal Year Ended June 29, 1997
(portion) (Parts I, II and IV).
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<PAGE>
DT INDUSTRIES, INC.
INDEX TO FORM 10-K
Page
Part I
Item 1. Business................................................... 1
Item 2. Properties................................................. 11
Item 3. Legal Proceedings.......................................... 12
Item 4. Submission of Matters to a Vote of Security Holders........ 12
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.................................................... 13
Item 6. Selected Financial Data.................................... 13
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................... 13
Item 8. Financial Statements and Supplementary Data................ 13
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 13
Part III
Item 10. Directors and Executive Officers of the Registrant......... 14
Item 11. Executive Compensation..................................... 14
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................. 14
Item 13. Certain Relationships and Related Transactions............. 14
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K................................................... 15
<PAGE>
PART I
Item 1. Business
General
DT Industries, Inc. (the "Company" or "DTI") is an engineering-driven
designer, manufacturer and integrator of automated production equipment and
systems used to manufacture, test or package a variety of industrial and
consumer products. The Company is the largest manufacturer of integrated
assembly and test systems for discrete parts, as well as integrated tablet
packaging and processing systems in North America. Substantial growth
opportunities are believed to be provided by certain trends among its customers,
including increased emphasis on manufacturing productivity and flexibility,
concurrent engineering of products and assembly systems, globalization of
manufacturing and markets, vendor rationalization and outsourcing. To capitalize
on these trends, DTI has implemented a business strategy to provide, develop and
acquire complementary technologies and capabilities to supply customers with
integrated processing, assembly, testing and packaging systems for their
products. As part of this strategy, the Company seeks to cross-sell the products
produced by acquired companies through its larger company-wide sales force
providing for greater geographic and customer coverage. The Company operates in
two business segments: Special Machines and Components. Through acquisitions,
internal growth and product development, the Company's Special Machines business
has grown from consolidated net sales of $28.5 million in the fiscal year ended
June 30, 1993 to fiscal 1997 consolidated net sales of $348.6 million. In
addition, the Company's Components business, which produces precision metal
components and wear parts for a broad range of industrial applications, has
grown from consolidated net sales of $22.1 million in fiscal 1993 to
consolidated net sales of $47.5 million in fiscal 1997.
Special Machines Segment. The Special Machines segment's products are used
in the electronics, automotive, pharmaceutical/nutritional, consumer products,
tire, electrical components, appliance, plastics, medical devices, hardware,
cosmetics and many other industries. Sales of these products also produce a
stream of recurring revenues from replacement parts and service as the Company's
substantial installed base of equipment is maintained and upgraded over time.
The Special Machines segment, which accounted for approximately 88% of the
Company's consolidated fiscal 1997 net sales, consists of two groups: DT
Automation and DT Packaging. Each group offers a class of products and services
that complement one another in terms of markets, engineering requirements,
product needs and systems capabilities.
DT Automation. DT Automation designs and builds a complete line of
integrated automated assembly and testing systems. Integrated systems combine a
variety of manufacturing technologies into a complete automated manufacturing
system. Core capabilities of DT Automation include the design and manufacture of
small to large automated assembly systems, high-speed precision assembly
systems, flexible assembly systems, automated resistance and arc welding systems
and large thermoforming systems. The Company is the largest manufacturer of
integrated assembly and test systems for discrete parts in North America.
DT Packaging. DT Packaging designs and builds proprietary machines and
integrated systems used to perform processing and packaging tasks. Core
capabilities of DT Packaging include the design and manufacture of
thermoforming, blister packaging and foam extrusion systems, and a complete line
of tablet processing and packaging systems. The Company is the largest
manufacturer of integrated tablet processing and packaging systems in North
America.
Components Segment. The Components segment, which accounted for
approximately 12% of consolidated fiscal 1997 net sales, stamps and fabricates a
range of standard and custom metal components for the broad range of industries
including heavy trucking, agricultural equipment, textiles, appliance,
recreational products, and other consumer products.
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The following table summarizes all of the acquisitions made by the Company,
segregated by business segment and core business group:
<TABLE>
<CAPTION>
ACQUISITION DATE BUSINESS
----------- ---- --------
<S> <C> <C>
Special Machines Segment
DT Automation:
Peer Division of Teledyne, Inc. July 1992 Designer and manufacturer of resistance
("Peer") welding systems and related parts
Detroit Tool and Engineering August 1992 Designer and manufacturer of integrated
Company ("DTE") manufacturing systems and custom
equipment, including tools and dies
Advanced Assembly August 1994 Designer, manufacturer and integrator of
Automation, Inc. ("AAA") automated production and testing systems
Assembly Machines, Inc. January 1996 Manufacturer of high-speed assembly systems
("AMI")
Mid-West Automation Enterprises, July 1996 Designer and manufacturer of integrated
Inc. ("Mid-West") precision assembly systems
Hansford Manufacturing September 1996 Designer and manufacturer of integrated
Corporation ("Hansford") precision assembly systems
Lucas Assembly & Test Systems July 1997 Designer, manufacturer and integrator of
("LATS") automated production and testing systems
DT Packaging:
Sencorp Systems, Inc. ("Sencorp") August 1993 Designer and manufacturer of plastics
processing and packaging equipment,
systems and related parts
Stokes-Merrill, Inc. December 1993 Designer and manufacturer of rotary presses,
("Stokes-Merrill") tablet counting equipment and related parts
Lakso Division of Package February 1995 Designer and manufacturer of automated
Machinery Company ("Lakso") packaging machinery, systems and related
parts
Armac Industries, Ltd. ("Armac") February 1995 Designer and manufacturer of plastics
processing and packaging equipment
H.G. Kalish, Inc. ("Kalish") August 1995 Designer, manufacturer and integrator of liquid
filling and tablet packaging systems
Swiftpack Automation Limited November 1995 Designer and manufacturer of packaging
("Swiftpack") equipment primarily for the pharmaceutical
market
Components Segment
Detroit Tool Metal Products Co. August 1992 Manufacturer of custom stamped metal
("DTMP") components
Fred J. Potter Co., Inc. ("Potter") December 1992 Manufacturer of precision wear parts for
industrial knitting machines
Arrow Precision Elements, Inc. September 1995 Manufacturer and distributor of a line of
("Arrow") knitting elements
</TABLE>
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On July 29, 1997, after the close of fiscal 1997, the Company completed the
acquisition of certain of the net assets of LATS, a division of LucasVarity plc
of England, for approximately $49 million. LATS, which has been renamed Assembly
Technology and Test ("ATT"), is a designer and manufacturer of integrated
assembly and testing systems for automotive OEMs and their tier-one suppliers
with manufacturing facilities in the United States, the United Kingdom and
Germany. As part of LucasVarity plc, LATS recorded sales of approximately $112
million for the year ended January 31, 1997.
The Company is a Delaware corporation organized in January 1993 and the
successor to Peer Corporation, Detroit Tool Group, Inc. ("DTG") and Detroit Tool
and Engineering Company. Peer Corporation was organized in June 1992 to acquire
the Peer Division of Teledyne, Inc. and the stock of DTG, the sole stockholder
of DTE and Detroit Tool Metal Products Co. Through the acquisitions described
above, internal growth and product development, the Company has grown from
consolidated net sales of $50.6 million in fiscal 1993 to $396.1 million in
fiscal 1997.
The Company's principal executive offices are located at 1949 E. Sunshine,
Suite 2-300, Springfield, Missouri 65804 and its telephone number is (417)
890-0102.
Business Strategy
The business strategy of DTI is to provide, develop and acquire
complementary technologies and capabilities to supply customers with integrated
assembly, testing and packaging systems for their products. Key elements of the
Company's strategy include the following:
Acquisitions. The assembly, testing and packaging equipment markets are
highly fragmented. Special machines, for example, are characterized by a number
of industry niches in which few manufacturers compete. The Special Machines
segment has established its presence in particular niches through acquisitions,
and the Company intends to pursue additional acquisitions, or strategic
alliances, with companies which are established technical and market leaders.
The Company can provide its customers more complete integrated automation
systems by continuing to expand the breadth of its products and engineering
expertise, a capability the Company believes will enable it to benefit from its
customers' increasing demand for complete systems. Additionally, the Company
will continue to pursue acquisitions, or strategic alliances, with companies
which provide significant potential for cross-selling among the various product
lines and cost savings through more efficient utilization of manufacturing and
engineering capacity.
Product Line Expansion. Through acquisitions, product license arrangements
and strategic alliances, the Company has increased, and plans to continue to
increase, its engineering capabilities and product offerings. DT Packaging now
has the capability to provide customers with fully integrated tablet processing
and packaging systems. DT Automation has increased its assembly systems
capabilities as more fully described in "Markets and Products" below. The
Company's objective is to provide customers with integrated automation solutions
rather than single use equipment. The Company also uses its engineering
expertise and manufacturing capability to develop new products and technology
for markets the Company currently serves and to provide entree into new markets.
Cross-Selling. Substantial cross-selling opportunities exist across the
product lines of the Special Machines segment. As the Company implements its
acquisition strategy and integrates acquired operations, it is able to expand
its product offerings and customer base. Since the inception of the Company's
cross-selling program three years ago, over $70 million in projects have been
developed through cross-selling. The Company expects this growth to continue as
a result of new opportunities created through the awareness and expansion of its
customer base.
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Engineering Expertise. The Company's engineering strategy is to satisfy the
growing demand for small, medium and large complex, integrated automation
solutions by utilizing the versatile engineering expertise of its Special
Machines businesses. Additionally, the custom tool and die engineering expertise
of the Company's Special Machines segment provides the Components segment with
the ability to offer customers complex precision stamping solutions. The Company
expects to continue to acquire engineering and design expertise through
acquisitions and licensing arrangements.
Manufacturing Synergies. The Company intends to utilize its manufacturing
capacity and engineering capabilities fully by directing work to facilities with
specific capabilities and manufacturing strengths.
International. The Company seeks to increase its international sales
through strategic alliances, international agents, foreign offices and
acquisitions. The Company acquired Canada-based Kalish, and the United
Kingdom-based Swiftpack during fiscal 1996, significantly enhancing its
international packaging presence. Also, continued international sales growth by
DT Packaging has resulted from the strategic alliance with Davis Standard
Corporation for the sales of foam extrusion systems. DT Automation continued to
expand its international presence by forming an alliance with a subsidiary of
Claas KGaA opening a sales and service office in Beelen, Germany. This alliance
also allows the Company to market Claas KGaA's highly regarded automation
systems to the Company's existing customer base. The July 1997 acquisition of
Assembly Technology and Test brings DT Automation a strong international
presence with manufacturing facilities in the United Kingdom and Germany, as
well as the United States. International sales accounted for approximately 30%
of consolidated net sales in fiscal 1997.
Markets and Products
Special Machines. The Special Machines segment designs and builds a
complete line of automated production systems used to manufacture, test or
package products for a range of industries, including electronics, automotive,
pharmaceutical/nutritional, consumer products, tire, electrical components,
appliance, plastics, medical devices, hardware, cosmetics and many others. The
Company also manufactures custom production equipment for specific customer
applications, proprietary machines for specific industrial applications and
integrated systems which may combine features of custom and proprietary
equipment. The Special Machines segment consists of two core business groups: DT
Automation and DT Packaging.
DT Automation. DT Automation designs and builds a complete line of
automated assembly and test systems, special machines and large complex dies.
Sales from DT Automation accounted for approximately 63%, 45% and 45% of
consolidated net sales for fiscal 1997, 1996 and 1995, respectively.
Integrated Systems. Integrated systems combine a wide variety of
manufacturing technologies into a complete automated manufacturing system.
Utilizing advanced computers, robotics, vision systems and other technologies,
the Company provides small to large automated assembly systems, high-speed
precision assembly systems, flexible assembly systems and automated resistance
and arc welding systems for the electronics, automotive, appliance, electrical
components, and hardware industries. The Company's expansion in providing a full
range of integrated, automated systems has been enhanced by the acquisitions of
Mid-West and Hansford in fiscal 1997. These acquisitions offer a variety of
precision assembly equipment to industry, utilizing proprietary modular building
blocks which facilitate time-sensitive, concurrent engineering projects where
changes in tooling and processes can occur in an advanced stage of system design
and standardized components in carousel, in-line and rotary assembly systems.
The acquisition of Assembly Technology and Test in July 1997 further complements
DTI's range of integrated assembly and testing systems applications within the
automotive industry, including a strong European and international presence.
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Custom Machines. The Company's custom machine building capabilities
include: engineering, project management, machining and fabrication of
components, installation of electrical controls, final assembly and testing. A
customer will usually approach the Company with a manufacturing objective, and
DTI will work with the customer to design, engineer, assemble, test and install
a machine to meet the objective. The customer often retains rights to the design
after delivery of the machine since the purchase contract typically includes the
design of the machine; however, the engineering and manufacturing expertise
gained in designing and building the machine is often reapplied by the Company
in projects for other customers.
RIGO Thermoformers. Under a license agreement with RIGO Group, S.r.l., COMI
S.r.l. and PMM S.r.l., the Company has the rights to use certain deep-draw
thermoforming ("RIGO") technology. The Company is utilizing the RIGO technology
in a line of machines designed to produce the inner liners for refrigerators.
The Company believes the RIGO technology provides significant advantages over
competing technology, such as quicker changeover of tooling, lower material
costs, higher productivity and greater end product efficiency. The license
agreement continues until terminated in accordance with its provisions and may
be terminated by either party upon 90 days' notice to the other.
Automated Resistance and Arc Welding Systems. The Company manufactures and
sells a line of standard resistance welding equipment as well as special
automated welding systems designed and built for specific applications. Marketed
under the brand name Peer(TM), the Company's products are used in the
automotive, appliance and electrical industries to fabricate and assemble
components and subassemblies. The Company's resistance welding equipment is also
used in the manufacture of file cabinets, school and athletic lockers, store
display shelves, metal furniture and material storage products.
Tooling and Dies. The Company possesses considerable expertise in the
design, engineering and production of precision tools and dies. In addition,
personnel trained as tool and die makers often apply their skills to the
manufacture of the Company's special machines.
DT Packaging. The DT Packaging group designs and builds proprietary
machines and integrated systems which are marketed under individual brand names
and manufactured for specific industrial applications using designs owned or
licensed by the Company. Although these machines are generally cataloged as
specific models, they are usually modified for specific customer requirements
and often combined with other machines into integrated systems. Many customers
also request additional accessories and features which typically generate higher
revenues and enhanced profit opportunities. DT Packaging products include
thermoformers, blister packaging systems, extrusion systems, rotary presses and
complete integrated packaging systems. Packaging systems include: bottle
unscrambling, tablet counting, electronic and slat tablet filling, cottoning,
sealing and capping, labeling, collating, cartoning, and liquid and tube
filling. The Company believes this equipment maintains a strong reputation among
its customers for quality, reliability and ease of operation and maintenance.
The Company also sells replacement parts and accessories for its substantial
installed base of machines. Sales from DT Packaging accounted for approximately
25%, 37% and 31% of consolidated net sales for fiscal 1997, 1996 and 1995,
respectively.
Thermoformers. A thermoformer heats plastic material and uses pressure
and/or a vacuum to mold it into a product. Marketed under the brand names
Sencorp(R) and Armac(TM), the Company's thermoformers are used by customers in
North America, Europe and Asia to form a variety of products including:
specialized cups, plates and food containers, trays for food and medical
products and other plastics applications.
The Company's thermoformers are sold primarily to custom formers who use
the machines to create thermoformed items which are sold to a variety of end
users. The Company also sells thermoformers directly to end users, including
large producers of electrical and healthcare products, cosmetics, hardware, and
other consumer products.
The Company produces a line of thermoformers of different sizes, heating
ovens, maximum draw depths and press capacities. Certain thermoformers produced
by the Company feature a fully integrated process control system to regulate the
thermoformer's functions. Depending upon the customer's requirements, the
control system is capable of networking with, or downloading to, the customer's
computers
5
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or other equipment and the Company's service center. This on-line diagnostic
capability allows the Company to provide real-time service and support to its
customers.
Blister Packaging Systems. Blister packaging is a common method of
displaying consumer products for sale in hardware stores, convenience stores,
warehouse stores, drug stores and similar retail outlets. Batteries, cosmetics,
hardware items, electrical components, razor blades and toys are among the large
variety of products sold in a clear plastic blister or two-sided package. The
Company designs and manufactures machinery marketed under the brand names
Sencorp(R) and Armac(TM), which performs blister packaging by heat-sealing a
clear plastic bubble, or blister, onto coated paperboard, or by sealing
two-sided packages using heat or microwave technology.
The Company's blister packaging systems are primarily sold to manufacturers
of the end products. These customers, with higher volume production
requirements, may use a thermoformer in-line with a blister sealer to form
blisters, insert their product and seal the package in one continuous process,
referred to as a form/fill/seal configuration. Customers having relatively low
volume production often use a stand-alone blister sealing machine to seal
products in a package using blisters purchased from a custom former.
Extruders. An extrusion process is used to convert plastic resin and
additives into a continuous melt and to force such melt through a die to produce
a desired shape that is then cooled. Marketed under the brand name Sencorp(R),
the Company's foam extruders are used to produce products such as building
insulation, display board, meat trays, bottle wrap protection labels and egg
cartons. The Company's foam extruders are primarily sold to large plastics
companies that use the machines to create end products and sheet products. The
Company also manufactures reclaim extruders which process a variety of plastic
materials from ground form to finished pellet form.
Rotary Presses. The Company is the largest U.S. designer and manufacturer
of rotary tablet presses. The Company designs and manufactures rotary presses
used by customers in the airbag, candy, food supplement, ceramic, ordnance,
specialty chemical, and pharmaceutical industries to produce tablets. Marketed
under the brand name Stokes(TM), the Company's line of rotary presses includes
machines capable of producing 17,000 tablets per minute and other machines
capable of applying up to 40 tons of pressure. Products produced on the
Company's rotary presses include Lifesavers(R), and Breathsavers(R) brand mints,
Centrum(R) brand vitamins and inflation pellets for automotive airbags.
The Company has an agreement with Horn & Noack Pharmatechnick GmbH, for the
purpose of licensing German rotary press technology designed primarily for the
pharmaceutical and nutritional markets. The agreement gives the Company the
exclusive right to manufacture and market this press technology under the
Stokes(TM) brand name in North and Central America and non-exclusively in the
rest of the world, excluding Europe. The Company is marketing the pharmaceutical
press through DT Packaging, a leader in pharmaceutical filling and packaging
systems.
Packaging Systems. The Company designs, manufactures and distributes a
complete line of products utilized for packaging, liquid filling or tube filling
applications. The equipment manufactured by the Company, which includes bottle
unscramblers, slat counters, electronic counters, liquid fillers, cottoners,
cappers and labelers, collators and cartoners, can be sold as an integrated
system or individual units. These machines are marketed under the brand names of
Kalish(TM), Lakso(R), Merrill(R) and Swiftpack and are primarily delivered to
customers in the pharmaceutical, nutritional, food, cosmetic, toy and chemical
industries.
The Company benefits from a substantial installed base of Lakso(R) and
Merrill(R) slat counters in the aftermarket sale of slats. Slat counting
machines use a set of slats to meter the number of tablets or capsules to be
inserted into bottles. Each size or shape of tablet or capsule requires a
different set of slats. In addition, the practice in the pharmaceutical industry
is to use a different set of slats for each product, even if the tablets are the
same size.
Laboratory Machines, Tooling, Parts and Accessories. The Company produces a
line of small scale blister sealers and a line of tablet pressing equipment used
to test new materials and techniques, for quality control, laboratory or other
small run uses. The Company also sells parts and accessories for its proprietary
machines. In addition, the Company designs and builds special tools and dies
used in custom applications of its thermoforming systems, rotary presses and
slat counters.
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Components. The Company's Components segment produces custom and precision
components for the heavy trucking, agricultural equipment, appliance and
electrical industries, as well as wear parts for the textile industry. Sales
from Components accounted for approximately 12%, 18% and 24% of consolidated net
sales for fiscal 1997, 1996 and 1995, respectively.
Custom Stamping and Fabrication. The Company produces precision-stamped
steel and aluminum components through its stamping and fabrication operations.
The Company's stamping presses range in size from 32 tons to 1,500 tons, giving
the Company the flexibility to stamp flat rolled metal ranging in thickness from
.015 inches to .750 inches. Certain of the Company's presses can accommodate
dies up to 190 inches in length to perform several stamping functions in a
single press.
Through its Special Machines segment, the Company possesses considerable
expertise in the design, engineering and production of precision tools and dies.
The Company produces tools and dies for use in its own blanking and stamping
operations as well as for sale to other industrial customers. The Company
believes its tool and die design and engineering capabilities give it an
important competitive advantage in its Components segment.
Wear Parts. The Company is the only full-line U.S. manufacturer of
precision wear parts for industrial knitting machines. Marketed under the brand
names Potter(TM), Arrow(R), S&W(TM) and DURA-TECH(TM), these products are
components of circular knitting machines which produce tee shirts, socks,
pantyhose and other knit fabrics. The Company's branded products, which are
included as original equipment in certain circular industrial knitting machines
sold in the United States, are consumed in use and must be regularly replaced.
The Company believes that its Potter(TM), Arrow(R), S&W(TM) and DURA-TECH(TM)
products have a reputation for high quality.
Marketing and Distribution
Special Machines. The Company's special machines and systems are sold
primarily through the Company's approximately 75 person direct sales force and
to a lesser extent through manufacturers' representatives and agents. Sales of
special machines and integrated systems require the Company's sales personnel to
have a high degree of technical expertise and extensive knowledge of the
industry served. The Company's sales force consists of specialists in each
primary market in which the Company's special machines are sold. Each of DTE,
Peer, Sencorp, Stokes-Merrill, AAA, Lakso, Armac, Kalish, AMI, Swiftpack
Mid-West, Hansford and ATT has a sales force experienced in the marketing of the
equipment historically produced by each respective business. The Company
believes that cross-selling among the members of the Special Machines segment
and integration of proprietary technology and custom equipment into total
production automation systems for selected industries provide the Company with
expanded sales opportunities.
The Company's special machines are sold throughout the world by more than
65 manufacturers' representatives and sales agents in nearly 50 countries. The
Company has sales and service offices in China, Canada, England and Germany.
International sales continue to grow as the business grows and more resources
are focused in the international arena. International sales were approximately
30% of consolidated net sales for fiscal 1997 compared to 22% and 10% of
consolidated net sales in fiscal 1996 and fiscal 1995, respectively.
Components. The Company's custom stamping products are sold by the
Company's direct sales force. The Company's wear parts are sold to original
equipment manufacturers directly and to the textile industry directly and
through independent domestic distributors.
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Manufacturing and Raw Materials
Special Machines segment. The principal raw materials and components used
in the manufacturing of the Company's special machines include carbon steel,
stainless steel, aluminum, electronic components, pumps and compressors,
programmable logic controls, hydraulic components, conveyor systems, visual and
mechanical sensors, precision bearings and lasers. The Company is not dependent
upon any one supplier for raw materials or components used in the manufacture of
special machines. Certain customers specify sole source suppliers for components
of custom machines or systems. The Company believes there are adequate
alternative sources of raw materials and components of sufficient quantity and
quality.
DT Automation. Integrated systems to assemble and test various products are
designed and manufactured at the Company's facilities in Illinois, Michigan, New
York, Ohio, Pennsylvania, the United Kingdom and Germany where manufacturing
activity primarily consists of fabrication and assembly and, to a lesser extent,
machining. The facilities in Missouri house the machining, assembly and test
operations primarily used in the manufacture of tools and dies, custom special
machines, RIGO Systems and certain other integrated systems. A facility in
Michigan houses the machining, assembly and test operations used in the
manufacture of resistance welding equipment and systems. A number of
manufacturing technologies are employed at these facilities including:
fabrication of stainless steel, direct numerically controlled machinery,
computer generated surface modeling of contoured components and fully networked
CAD/CAM capabilities.
DT Packaging. Special machines, integrated systems and related parts for
the Company's tablet packaging and liquid-filling equipment are designed and
assembled at the Company's facilities in Massachusetts, Illinois, Canada and the
United Kingdom from components made to the Company's specifications by
unaffiliated vendors. Rotary presses are assembled at the Company's leased
facility in Pennsylvania. Special machines and integrated systems for the
plastics packaging industry are primarily manufactured at the two Company
manufacturing facilities in Massachusetts which include machining, fabrication
and assembly.
Components Segment. The principal raw materials used in the Company's
components manufacturing processes include carbon steel, aluminum, stainless
steel, copper and other metals in coil or sheet form. The Company is not
dependent upon any one supplier for raw materials used in the manufacture of its
metal products. The Company believes there are adequate alternative sources of
raw materials of sufficient quantity and quality.
The Company's components manufacturing operations are primarily located at
the Company's facilities in Missouri. Operations conducted at that facility
include blanking, heavy and precision stamping using precision single stage,
progressive and transfer dies, cutting, punching, forming, welding, cleaning,
bonderizing and painting. The Company utilizes a Metalsoft(R) FabriVision
optical scanning system for prototyping and quality control. At the Company's
Connecticut and North Carolina facilities, manufacturing processes include
precision stamping of wear parts, heat treating, drawing, tumbling, casting,
straightening and grinding.
Financial Information Relating to Business Segments, Foreign and Domestic
Operations and Export Sales
The Company operates predominantly in the business segments classified as
Special Machines and Components. The Company's principal foreign operations
consist of manufacturing, sales and service operations in Canada, the United
Kingdom and Germany. For certain other financial information concerning the
Company's business segments, foreign and domestic operations and export sales,
see Note 15 of the Notes to Consolidated Financial Statements in the Company's
Annual Report to Shareholders, which is incorporated herein by reference.
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Customers
The majority of the Company's sales is attributable to repeat customers,
some of which have been customers of the Company or its acquired businesses for
over twenty years. The Company believes such repeat business is indicative of
the Company's engineering capabilities, the quality of its products and overall
customer satisfaction.
Hewlett-Packard Company and Ford Motor Company, customers of the Company's
Special Machines segment, each accounted for over 10% of the Company's
consolidated net sales in fiscal 1997. The Goodyear Tire & Rubber Company, a
customer of the Company's Special Machines segment, accounted for over 10% of
the Company's consolidated net sales in fiscal 1996. PACCAR, Inc., a customer of
the Company's Components segment, accounted for over 10% of the Company's
consolidated net sales in fiscal 1995. The Company's five largest customers
during fiscal 1997 accounted for approximately 44% of the Company's consolidated
net sales.
Certain purchasers of the Company's special machines make advance and
progress payments to the Company in connection with the manufacture of machinery
and systems. Sales of the Company's components are typically made without
advance or progress payments.
Backlog
The Company's backlog is based upon customer purchase orders the Company
believes are firm. As of June 29, 1997, the Company had $175.5 million of orders
in backlog, which compares to a backlog of approximately $112.2 million as of
June 30, 1996. The acquisitions of Mid-West and Hansford increased the backlog
$60.4 million at June 29, 1997 in comparison to June 30, 1996. Excluding the
effect of these acquisitions, backlog would have been $115.1 million at June 29,
1997, an increase of $2.9 million, or 2.6%, from a year ago.
The backlog for the Special Machines segment at June 29, 1997 was $168.0
million, an increase of $62.0 million from a year ago. Excluding the effect of
acquisitions, the Special Machines backlog increased $1.6 million. The Special
Machines backlog reflects strong packaging orders offset by a drop in orders for
custom build-to-print machines. Backlog for the Components segment was $7.5
million at June 29, 1997, an increase of $1.3 million, or 22.4%, from the $6.2
million backlog a year ago.
The level of backlog at any particular time is not necessarily indicative
of the future operating performance of the Company. Additionally, certain
purchase orders are subject to cancellation by the customer upon notification.
Certain orders are also subject to delays in completion and shipment at the
request of the customer. The Company believes most of the orders in the backlog
will be recognized as sales during fiscal 1998. The Company's backlog at June
29, 1997 does not include the backlog of ATT.
Competition
The market for the Company's special machines is highly competitive, with a
large number of companies advertising the sale of production machines. However,
the market for special machines is fragmented and characterized by a number of
industry niches in which few manufacturers compete. The market for products by
the Components segment is also highly regionally competitive and fragmented. The
Company's competitors vary in size and resources; most are smaller privately
held companies or subsidiaries of larger companies, some of which are larger
than the Company; and none competes with the Company in all product lines. In
addition, the Company may encounter competition from new market entrants. The
Company believes that the principal competitive factors in the sale of the
Company's special machines are quality, technology, on-time delivery, price and
service. The Company believes that the principal competitive factors in the sale
of the Company's components are price, technical capability, quality and on-time
delivery. The Company believes that it competes favorably with respect to each
of these factors.
9
<PAGE>
Engineering; Research and Development
The Company maintains research and engineering departments at all of its
manufacturing locations. The Company employs more than 525 people with
experience in the design of production equipment. In addition to design work
relating to specific customer projects, the Company's engineers develop new
products and product improvements designed to address the needs of the Company's
target market niches and to enhance the reliability, efficiency, ease of
operation and safety of its proprietary machines.
Trademarks and Patents
The Company owns and maintains the registered trademarks Sencorp(R),
Merrill(R), Lakso(R) and Mid-West(R). The Company's use of the registered
trademark Arrow(R) is under a license and the licensor has agreed to assign
ownership of the mark for such use to the Company. Registrations for Company
trademarks are also owned and maintained in countries where such products are
sold and such registrations are considered necessary to preserve the Company's
proprietary rights therein.
The Company also has the rights to use the unregistered trademarks
Swiftpack(TM), Kalish(TM), Armac(TM), Stokes(TM), Potter(TM) and Peer(TM). The
trademarks Kalish(TM), Armac(TM), Sencorp(R), Merrill(R), Peer(TM), Lakso(R) and
Stokes(TM) are used in connection with the machines and systems marketed by the
Special Machines Segment. The trademarks Arrow(R) and Potter(TM) are used in
connection with the products of the Components segment.
The Company applies for and maintains patents where the Company believes
such patents are necessary to maintain the Company's interest in its inventions.
The Company does not believe that any single patent or group of patents is
material to either its Special Machines business or its Components business, nor
does it believe that the expiration of any one or a group of its patents would
have a material adverse effect upon its business or ability to compete in either
line of business. The Company believes that its existing patent and trademark
protection, however, provides it with a modest competitive advantage in the
marketing and sale of its proprietary products.
Environmental and Safety Regulation
The Company is subject to environmental laws and regulations that impose
limitations on the discharge of pollutants into the environment and establish
standards for the treatment, storage and disposal of toxic and hazardous wastes.
The Company is also subject to the federal Occupational Safety and Health Act
and other state statutes. Except for costs incurred in connection with the
environmental cleanup of its property in Lebanon, Missouri, which was completed
in October 1995, costs of compliance with environmental, health and safety
requirements have not been material to the Company.
The Company believes it is in material compliance with all applicable
environmental and safety laws and regulations.
Employees
At the end of August 1997, the Company had approximately 3,100 employees,
including those employed by ATT. None of the Company's employees are covered
under collective bargaining agreements. The Company has not experienced any work
stoppages in the last five years and considers its relations with employees to
be good.
10
<PAGE>
Item 2. Properties
The Company's administrative headquarters are located in Springfield,
Missouri. Set forth below is certain information with respect to the Company's
manufacturing facilities.
<TABLE>
<CAPTION>
Square
Footage Owned/
Location (approximate) Leased Lease Expiration Products
<S> <C> <C> <C> <C>
Special Machines Segment
DT Automation:
Buffalo Grove, Illinois 205,000 Leased July 31, 2003(3) Integrated precision assembly
63,000 Leased July 31, 2003(3) systems
20,000 Leased February 28, 2000(4)
Lebanon, Missouri 300,000 Owned Special machines, integrated
systems, tools and dies
Dayton, Ohio 160,000 Leased July 1, 2016(5) Integrated assembly and testing
systems
Buckingham, England and 150,000 Owned Integrated assembly and testing
Gawcott, England 40,000 Owned systems
Livonia, Michigan 86,000 Leased July 1, 2000(6) Integrated assembly and testing
20,000 Leased June 30, 2000(6) systems
Saginaw, Michigan 83,000 Owned Integrated assembly and testing
systems
Rochester, New York 87,000 Leased Sept. 30, 2006(5) Integrated precision assembly
26,000 Leased July 31, 2002(5) systems
Erie, Pennsylvania 56,000 Owned High-speed assembly systems
Benton Harbor, Michigan 43,000 Owned Resistance and arc welding
equipment and systems
Koblenz, Germany 9,000 Leased Dec. 31, 1998 Integrated assembly and testing
systems
DT Packaging:
Hyannis, Massachusetts & 98,000 Leased Dec. 31, 1997(3) Plastics processing and packaging
Fall River, Massachusetts 37,000 Leased Jan. 31, 2000(3) equipment
Montreal, Quebec(1) 81,000 Leased Aug. 14, 2017 Tablet packaging, liquid filling
and tube filling equipment and
systems
Leominster, Massachusetts 60,000 Owned Tablet packaging equipment and
systems
Bristol, Pennsylvania 43,000 Leased April 30, 2000(3) Rotary presses
Niles, Illinois 30,000 Leased July 15, 1998 Tablet counters
Alcester, England 22,000 Owned Electronic counters
Components Segment
Lebanon, Missouri 200,000(2) Owned Metal products
Winsted, Connecticut 28,000 Leased Dec. 31, 2001 Wear parts
Asheboro, North Carolina 15,000 Leased Sept. 26, 2000(7) Wear parts
</TABLE>
(1) Represents a new facility and new lease entered into as of August 15, 1997.
The lease on the old facility, consisting of two adjacent buildings of
approximately 86,000 square feet in the aggregate, will expire October 31,
1997.
(2) Two adjacent buildings of approximately 171,000 square feet and 29,000
square feet, respectively.
(3) The Company has an option to renew such lease for one additional five-year
term.
(4) The Company has an option to renew such lease for one additional term of
three years.
(5) The Company has an option to renew such lease for two additional terms of
five years.
(6) The Company has an option to renew such lease for one additional two-year
term.
(7) The Company has an option to renew such lease for three additional terms of
five years.
11
<PAGE>
The Company also leases other office, warehouse and service facilities in
Missouri, New Jersey, Canada, the United Kingdom, Germany and China. The Company
anticipates no significant difficulty in leasing alternate space at reasonable
rates in the event of the expiration, cancellation or termination of a lease
relating to any of the Company's leased properties.
To accommodate growth occurring at two of the Special Machines facilities,
the Company is reviewing its alternatives to expand its welding systems facility
in Benton Harbor and its plastics processing and packaging systems facility in
Hyannis. Upon adding additional capacity at these facilities, the Company
believes that its principal owned and leased manufacturing facilities will have
sufficient capacity to accommodate future internal growth without major
additional capital improvements.
Item 3. Legal Proceedings
Product liability claims are asserted against the Company from time to time
for various injuries alleged to have resulted from defects in the manufacture
and/or design of the Company's products. At June 29, 1997, there were
twenty-nine such claims pending. The Company does not believe that the
resolution of such suits, either individually or in the aggregate, will have a
material adverse effect on the Company's results of operations or financial
condition. Product liability claims are covered by the Company's comprehensive
general liability insurance policies, subject to certain deductible amounts. The
Company has established reserves for such deductible amounts, which it believes
to be adequate based on its previous claims experience. However, there can be no
assurance that resolution of product liability claims in the future will not
have a material adverse effect on the Company.
In addition to product liability claims, from time to time, the Company is
the subject of legal proceedings, including claims involving employee matters,
commercial matters and similar claims. There are no material claims currently
pending. The Company maintains comprehensive general liability insurance which
it believes to be adequate for the continued operation of its business.
Item 4. Submission of Matters to a Vote of Securities Holders
None
12
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The information required by this item is set forth under the caption
"Common Stock Information" appearing on page 40 of the Company's Annual Report
to Shareholders for the year ended June 29, 1997 ("the Annual Report"), which
information is incorporated herein by reference thereto.
The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol "DTII". As of September 15, 1997, the number of record holders of
common stock was 58. Such record holders include several holders who are
nominees for an undetermined number of beneficial owners. The Company believes
that the number of beneficial owners of the shares of common stock issued and
outstanding at such date was approximately 2,900.
Item 6. Selected Financial Data
The information required by this item is set forth under the captions
"Statement of Operations Data" and "Balance Sheet Data" on page 10 of the
Company's Annual Report, which information is incorporated herein by reference
thereto.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this item is set forth on pages 11 through 18
of the Company's Annual Report, which information is incorporated herein by
reference thereto.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data required by this item are
presented under Item 14 and incorporated herein by reference thereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
13
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
A definitive proxy statement is being filed with the Securities and
Exchange Commission on or about September 29, 1997. The information required by
this item is set forth under the caption "Election of Directors" on pages 1
through 4, under the caption "Executive Officers" on page 6 and under the
caption "Compliance with Section 16(a) of the Exchange Act" on page 13 of the
definitive proxy statement, which information is incorporated herein by
reference thereto.
Item 11. Executive Compensation
The information required by this item is set forth under the caption
"Executive Compensation" on pages 6 through 12 of the definitive proxy
statement, which information is incorporated herein by reference thereto.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is set forth under the caption
"Security Ownership of Certain Beneficial Owners and Management" on pages 4
through 5 of the definitive proxy statement, which information is incorporated
herein by reference thereto.
Item 13. Certain Relationships and Related Transactions
Certain of the information required by this item is set forth under the
caption "Certain Transactions" on page 13 of the definitive proxy statement,
which information is incorporated herein by reference thereto.
The Company has certain contractual agreements with affiliates of Harbour
Group Industries, Inc. ("HGI"), for whom Donald E. Nickelson, a director of the
Company, is Vice Chairman.
Under the terms of a management consulting and advisory services agreement,
the Company paid HGI and its affiliates fees totaling $847,000 in fiscal 1997,
related to corporate development services provided in identifying, negotiating
and consummating the Company's acquisitions. Fees paid to HGI and its affiliates
related to corporate development services were included in the costs of the
related acquisitions.
Under terms of management consulting and advisory services agreements, HGI
and certain of its affiliates, charge the Company for direct management and
administrative services provided to the Company based on actual, direct costs of
such services. The charges, which are included in selling, general and
administrative expenses in the Company's financial statements, totaled
approximately $393,000 for the fiscal year ended June 29, 1997.
14
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
1. Financial Statements
The following consolidated financial statements of the Company and its
subsidiaries, included on pages 20 to 39 in the Annual Report, and the
report of independent accountants on page 19 of the Annual Report are
incorporated herein by reference thereto:
Consolidated Balance Sheets as of June 29, 1997 and June 30, 1996
Consolidated Statements of Operations for the Fiscal Years Ended
June 29, 1997, June 30, 1996 and June 25, 1995
Consolidated Statements of Changes in Stockholders' Equity for
the Fiscal Years Ended June 29, 1997, June 30, 1996 and June 25,
1995
Consolidated Statements of Cash Flows for the Fiscal Years Ended
June 29, 1997, June 30, 1996 and June 25, 1995
Notes to Consolidated Financial Statements
Report of Independent Accountants
2. Financial Statement Schedule
Report of Independent Accountants on Financial
Statement Schedule S-1
Schedule VIII Valuation and Qualifying Accounts and
Reserves for the Fiscal Years Ended June 29, 1997,
June 30, 1996 and June 25, 1995 S-2
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
3. Exhibits
The exhibits listed on the accompanying Index to Exhibits are filed as
part of this Report.
4. Reports on Form 8-K
None
15
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
3.1 Restated Certificate of Incorporation of the Registrant (filed
with the Commission as Exhibit 3.1 to the Company's Registration
Statement on Form S-1, Registration No. 33-75174, filed with the
Commission on February 11, 1994, as amended on March 22, 1994
(the "1994 Registration Statement") and incorporated herein by
reference thereto)
3.2 Certificate of Amendment of Restated Certificate of
Incorporation of the Company dated November 11, 1996 (filed as
Exhibit 99 to the Company's Report on Form 8-K dated November
11, 1996 filed with the Commission on November 21, 1996 and
incorporated herein by reference thereto)
3.3 Amended By-Laws of the Registrant (filed as Exhibit 3.2 to the
1994 Registration Statement and incorporated herein by reference
thereto)
4.1 Rights Agreement dated as of August 18, 1997 between DT
Industries, Inc. and ChaseMellon Shareholder Services, L.L.C.,
as Rights Agent (filed as Exhibit 1 to the Company's Form 8-K
dated August 18, 1997, filed with the Commission on August 19,
1997 and incorporated herein by reference thereto). The Rights
Agreement includes as Exhibit A thereto the Certificate of
Designations, Preferences and Rights of Series A Preferred Stock
of DT Industries, Inc., as Exhibit B thereto the Form of Rights
Certificate and as Exhibit C thereto the Summary of Rights to
Purchase Series A Preferred Stock.
10.1* Purchase and Stockholder Agreement, dated September 30, 1993, by
and between Detroit Tool and Engineering Company and Stephen J.
Gore (filed as Exhibit 10.1 to the 1994 Registration Statement
and incorporated herein by reference thereto)
10.2* Stock Pledge Agreement, dated September 30, 1993, by and between
Stephen J. Gore and Detroit Tool and Engineering Company (filed
as Exhibit 10.2 to the 1994 Registration Statement and
incorporated herein by reference thereto)
10.3* $84,600 Promissory Note, dated September 30, 1993, by Stephen J.
Gore to Detroit Tool and Engineering Company (filed as Exhibit
10.3 to the 1994 Registration Statement and incorporated herein
by reference thereto)
10.4* Letter Agreement, dated September 30, 1993, by Stephen J. Gore
to Detroit Tool and Engineering Company (filed as Exhibit 10.4
to the 1994 Registration Statement and incorporated herein by
reference thereto)
10.5* Employment Agreement, dated September 19, 1990, by and between
Detroit Tool Group, Inc. and Stephen J. Gore (filed as Exhibit
10.5 to the 1994 Registration Statement and incorporated herein
by reference thereto)
10.6* Amendment to Promissory Note and Stock Pledge Agreement, dated
March 16, 1994, by and among DT Industries, Inc., Peer
Investors, L.P. and Stephen J. Gore (filed as Exhibit 10.6 to
the 1994 Registration Statement and incorporated herein by
reference thereto)
10.7* DT Industries, Inc. Employee Stock Option Plan (filed as Exhibit
10.21 to the 1994 Registration Statement and incorporated herein
by reference thereto)
10.8* DT Industries, Inc. 1994 Directors Non-Qualified Stock Option
Plan (filed as Exhibit 10.22 to the 1994 Registration Statement
and incorporated herein by reference thereto)
10.9 Asset Purchase Agreement, dated as of August 28, 1995, by and
among H.G. Kalish Inc., Kalish Machinery Ltd., Graham Lewis and
Kalish Canada Inc. (filed as Exhibit 2.1 to the Company's Report
on Form 8-K dated August 28, 1995 filed with the Commission on
September 11, 1995 and incorporated herein by reference thereto)
- --------------------
* Management contract or compensatory plan or arrangement.
<PAGE>
10.10 ISDA Master Agreement, dated as of June 28, 1995, between The
Boatmen's National Bank of St. Louis and DT Industries, Inc.
(filed as Exhibit 10.29 to the Company's Annual Report on Form
10-K for the fiscal year ended June 25, 1995 filed with the
Commission on September 22, 1995 (the "1995 10-K") and
incorporated herein by reference thereto)
10.11 Letter agreement, dated June 27, 1995, between DT Industries,
Inc. and The Boatmen's National Bank of St. Louis confirming an
interest rate swap transaction (filed as Exhibit 10.30 to the
1995 10-K and incorporated herein by reference thereto)
10.12 Insurance Agreement, dated June 28, 1993, by and between Harbour
Group Ltd. and Detroit Tool and Engineering Company (filed as
Exhibit 10.31 to the 1994 Registration Statement and
incorporated herein by reference thereto)
10.13 Amended and Restated Corporate Development Consulting and
Advisory Services Agreement, dated November 6, 1996, by and
between DT Industries, Inc. and Harbour Group Industries, Inc.
(filed asExhibit 10.3 to the Company's Quarterly Report on Form
10-Q for the quarter ended December 29, 1996 filed with the
Commission on February 12, 1997 and incorporated herein by
reference thereto)
10.14 Amended and Restated Operations Consulting and Advisory Services
Agreement, dated November 6, 1996, by and between DT Industries,
Inc. and Harbour Group Ltd. (filed as Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
December 29, 1996 filed with the Commission on February 12, 1997
and incorporated herein by reference thereto)
10.15 Agreement of Lease, dated April 30, 1997, between Teecan
Properties Inc. and Kalish Canada Inc.
10.16 License Agreement, dated February 7, 1994, by and among RIGO
Group, S.r.l., COMI S.r.l., PMM S.r.l., Sencorp Systems, Inc.
and Detroit Tool and Engineering Company (filed as Exhibit 10.45
to the 1994 Registration Statement and incorporated herein by
reference thereto)
10.17 Lease Agreement, Dated February 7, 1995, between Lanard &
Axibund, Inc., as agent, I-95 Business Center at Keystone
Park-1, as lessor, and Stokes-Merrill Corporation, as lessee
(filed as Exhibit 10.46 to the 1995 10-K and incorporated herein
by reference thereto)
10.18 Lease, dated December 8, 1989, by and among Parklands Properties
Trust and PI Acquisition, Inc. (filed as Exhibit 10.49 to the
1994 Registration Statement and incorporated herein by reference
thereto)
10.19 Amendment to Lease, dated April 20, 1992, by and between
Parklands Properties Trust and Sencorp Systems, Inc. (filed as
Exhibit 10.50 to the 1994 Registration Statement and
incorporated herein by reference thereto)
10.20 Amendment to Lease, dated June 30, 1997, by and between
Parklands Properties Trust and Sencorp Systems, Inc.
10.21 Indemnification Agreement, dated March 18, 1994, between DT
Industries, Inc. and Harbour Group Investments II, L.P. (filed
as Exhibit 10.54 to the 1994 Registration Statement and
incorporated herein by reference thereto)
10.22* Purchase and Stockholder Agreement, dated November 30, 1993, by
and between Detroit Tool and Engineering Company and Bruce P.
Erdel (filed as Exhibit 10.55 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 26, 1994 filed with the
Commission on September 23, 1994 (the "1994 10-K") and
incorporated herein by reference thereto)
- --------------------
* Management contract or compensatory plan or arrangement.
<PAGE>
10.23* Stock Pledge Agreement, dated November 30, 1993, by and between
Bruce P. Erdel and Detroit Tool and Engineering Company (filed
as Exhibit 10.56 to the 1994 10-K and incorporated herein by
reference thereto)
10.24* $33,300 Promissory Note, dated November 30, 1993, by Bruce P.
Erdel to Detroit Tool and Engineering Company (filed as Exhibit
10.57 to the 1994 10-K and incorporated herein by reference
thereto)
10.25* Letter Agreement, dated November 30, 1993, by and between Bruce
P. Erdel and Detroit Tool and Engineering Company (filed as
Exhibit 10.58 to the 1994 10-K and incorporated herein by
reference thereto)
10.26* Amendment to Promissory Note and Stock Pledge Agreement, dated
March 16, 1994, by and among DT Industries, Inc., Peer
Investors, L.P. and Bruce P. Erdel (filed as Exhibit 10.59 to
the 1994 10-K and incorporated herein by reference thereto)
10.27 Agreement relating to the sale and purchase of 76,000 Ordinary
Shares of (pound)1 each in the capital of Swiftpack, dated as of
November 23, 1995 by and among Peter Harris and Others and DTUK
and the Company (filed as Exhibit 2.1 to the Company's Report on
Form 8-K dated November 23, 1995 filed with the Commission on
December 7, 1995 and incorporated herein by reference thereto)
10.28 Put and Call Option Agreement dated as of November 23, 1995 by
and among the Company, DTUK and Martin Gully (filed as Exhibit
2.2 to the Company's Report on Form 8-K dated November 23, 1995
filed with the Commission on December 7, 1995 and incorporated
herein by reference thereto)
10.29 Agreement and Plan of Merger, dated July 19, 1996, by and among
Automation Acquisition Corporation, DT Industries, Inc.,
Mid-West Automation Enterprises, Inc. and the Stockholders
listed therein (filed as Exhibit 2.1 to the Company's Report on
Form 8-K dated July 19, 1996 filed with the Commission on August
5, 1996 and incorporated herein by reference thereto)
10.30 Indemnification and Escrow Agreement, dated as of July 19, 1996,
by and among Mid-West Automation Enterprises, Inc., the
stockholders listed therein, and LaSalle National Trust, N.A.,
as Escrow Agent (filed as Exhibit 2.2 to the Company's Report on
Form 8-K dated July 19, 1996 filed with the Commission on August
5, 1996 and incorporated herein by reference thereto)
10.31 Fourth Amended and Restated Credit Facilities Agreement, dated
July 21, 1997, among NationsBank, N .A. (successor by merger to
The Boatmen's National Bank of St. Louis) and any other persons
who become lenders as provided therein and DT Industries, Inc.
and the other borrowers listed on the signature pages thereof
10.32 Lease dated as of February 20, 1996 by and between CityWide
Development Corporation and Advanced Assembly Automation, Inc.
(filed as Exhibit 10 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 24, 1996 filed with the
Commission on May 3, 1996 and incorporated herein by reference
thereto)
10.33 Single-Tenant Industrial Business Lease dated July 19, 1996,
between American National Bank and Trust Company of Chicago, as
Trustee under Trust No. 63442, Landlord, and Mid-West Automation
Enterprises, Inc., an Illinois corporation and Mid-West
Automation Systems, Inc., an Illinois corporation, collectively,
Tenant (filed as Exhibit 10.58 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1996 filed with the
Commission on September 30, 1996 (the "1996 10-K") and
incorporated herein by reference thereto)
10.34* DT Industries, Inc. Amendment to 1994 Employee Stock Option
Plan, adopted May 16, 1996 (filed as Exhibit 10.59 to the 1996
10-K and incorporated herein by reference thereto)
- --------------------
* Management contract or compensatory plan or arrangement.
<PAGE>
10.35* DT Industries, Inc. Second Amendment to 1994 Employee Stock
Option, adopted September 18, 1996 (filed as Exhibit 10.60 to
the 1996 10-K and incorporated herein by reference thereto)
10.36* DT Industries, Inc. 1996 Long-Term Incentive Plan (filed as
Exhibit 10.61 to the 1996 10-K and incorporated herein by
reference thereto)
10.37* Employment and Noncompetition Agreement, dated August 28, 1995,
between Kalish Canada Inc. and Graham Lewis
10.38* Employment and Noncompetition Agreement, dated February 26,
1997, between DT Industries, Inc. and Eugene R. Haffely
10.39 Agreement and Plan of Merger dated September 23, 1996 by and
among H022 Corporation, a New York Corporation (the Buyer), DT
Industries, Inc., Hansford Manufacturing Corporation, a New York
corporation and the Stockholder listed therein (filed as Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 29, 1996 filed with the Commission on
November 8, 1996 and incorporated herein by reference thereto)
10.40 Indemnification and Escrow Agreement by and among Hansford
Manufacturing Corporation, DT Industries, Inc., the Stockholder
and Manufacturers and Traders Trust Company, a New York Bank, as
escrow agent (filed as Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 29, 1996
filed with the Commission on November 8, 1996 and incorporated
herein by reference thereto)
10.41 Lease Agreement by and between Van Buren N. Hansford, Jr., the
Stockholder and Landlord, and Hansford Manufacturing
Corporation, the Tenant, dated as of September 30, 1996 (filed
as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 29, 1996 filed with the
Commission on November 8, 1996 and incorporated herein by
reference thereto)
10.42 Underwriting Agreement, dated November 25, 1996, by and between
CS First Boston Corporation, Morgan Stanley & Co. Incorporated
and Schroder Wertheim & Co. Incorporated, as Representatives of
the Several underwriters names therein, and DT Industries, Inc.
(filed as Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended December 29, 1996 filed with the
Commission on February 12, 1997 and incorporated herein by
reference thereto)
10.43 Subscription Agreement, dated November 25, 1996, by and between
CS First Boston Limited, Morgan Stanley & Co. International and
J. Henry Schroder & Co. Limited and the other Managers named
therein and DT Industries, Inc. (filed as Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
December 29, 1996 filed with the Commission on February 12, 1997
and incorporated herein by reference thereto)
10.44 Indemnification Agreement, dated November 25, 1996, by and among
DT Industries, Inc. and Peer Investors L.P., Peer Investors II
L.P., Harbour Group Investments II, L.P., Harbour Group II
Management Co. and Fox Family Foundation (filed as Exhibit 10.5
to the Company's Quarterly Report on Form 10-Q for the quarter
ended December 29, 1996 filed with the Commission on February
12, 1997 and incorporated herein by reference thereto)
10.45 Lease Agreement dated February 11, 1997 between Kersten Randolph
Street Property and Mid-West Automation Enterprises, Inc. (filed
as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 30, 1997 filed with the Commission
on May 12, 1997 and incorporated herein by reference thereto)
- --------------------
* Management contract or compensatory plan or arrangement.
<PAGE>
10.46 Amended and Restated Declaration of Trust of DT Capital Trust
dated as of June 1, 1997 among DT Industries, Inc., as Sponsor,
The Bank of New York, as Property Trustee, The Bank of New York
(Delaware), as Delaware Trustee, and Stephen J. Gore, Bruce P.
Erdel and Gregory D. Wilson, as Trustees (filed as Exhibit 4.2
to the Company's Registration Statement on Form S-3,
Registration No. 333-30909, filed with the Commission on July 8,
1997 (the "1997 Registration Statement") and incorporated herein
by reference thereto)
10.47 Indenture for the 7.16% Convertible Junior Subordinated
Deferrable Interest Debentures Due 2012 dated as of June 1, 1997
among DT Industries, Inc. and The Bank of New York, as Trustee
(filed as Exhibit 4.3 to the 1997 Registration Statement and
incorporated herein by reference thereto)
10.48 Preferred Securities Guarantee Agreement dated June 12, 1997
between DT Industries, Inc., as Guarantor, and The Bank of New
York, as Preferred Guarantee Trustee (filed as Exhibit 4.6 to
the 1997 Registration Statement and incorporated herein by
reference thereto)
10.49 Placement Agreement dated June 12, 1997 among DT Capital Trust,
DT Industries, Inc. and Credit Suisse First Boston Corporation
(filed as Exhibit 10.2 to the 1997 Registration Statement and
incorporated herein by reference thereto)
10.50 Purchase Agreement dated June 12, 1997 among DT Capital Trust,
DT Industries, Inc. and the Purchasers listed on Schedule A
thereto (filed as Exhibit 10.3 to the 1997 Registration
Statement and incorporated herein by reference thereto)
10.51 Registration Rights Agreement dated June 12, 1997 among DT
Capital Trust, DT Industries, Inc. and the Purchasers listed on
Schedule A thereto (filed as Exhibit 10.1 to the 1997
Registration Statement, as amended on August 19, 1997, and
incorporated herein by reference thereto)
10.52 Umbrella Agreement relating to the Sale and Purchase of Assets
of Lucas Assembly & Test Systems in the United Kingdom, Germany
and the United States of America, dated July 29, 1997
10.53 Agreement relating to the Sale and Purchase of the United States
Assets of Lucas Assembly & Test Systems, dated July 29, 1997, by
and among Lucas Automation & Control Engineering, Inc., Lucas
Industries plc and Assembly Technology & Test, Inc.
10.54 Agreement relating to the Sale and Purchase of the English
Assets of Lucas Assembly & Test Systems, dated July 29, 1997, by
and among Lucas Limited, Assembly Technology & Test Limited,
Lucas Industries plc and Lucas Automation & Control Engineering
Limited
10.55 Agreement relating to the Sale and Purchase of the German Assets
of Lucas Assembly & Test Systems, dated July 29, 1997, by and
among Lucas Automation and Control Engineering GmbH, Lucas
Industries plc and Assembly Technologie & Automation GmbH
10.56 Industrial Building Lease, dated July 1991, by and between
The Allen Group Inc. and Lucas Hartridge, Inc.
11.0 Computation of Earnings Per Share
13.0 Annual Report to Shareholders
21.0 Subsidiaries of the Registrant
23.0 Consent of Price Waterhouse LLP
24.0 Powers of Attorney
- --------------------
* Management contract or compensatory plan or arrangement.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DT INDUSTRIES, INC.
By: /s/ Bruce P. Erdel
--------------------------------------
Bruce P. Erdel
Vice President - Finance and Secretary
Dated: September 29, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on September 29, 1997.
Signatures Title
---------- -----
* Chairman of the Board
- -------------------------------
James J. Kerley
* President, Chief Executive Officer and Director
- ------------------------------- (Principal Executive Officer)
Stephen J. Gore
/s/ Bruce P. Erdel Vice President-Finance and Secretary
- ------------------------------- (Principal Financial and Accounting Officer)
Bruce P. Erdel
* Director
- -------------------------------
William H.T. Bush
* Director
- -------------------------------
Frank W. Jones
* President-Packaging Machinery Group and Director
- -------------------------------
Graham L. Lewis
* Director
- -------------------------------
Lee M. Liberman
* President-Automation Group and Director
- -------------------------------
John F. Logan
* Director
- -------------------------------
Donald E. Nickelson
* Director
- -------------------------------
Charles Pollnow
*By: /s/ Bruce P. Erdel
--------------------------
Bruce P. Erdel
Attorney-In-Fact
- ---------------
* Such signature has been affixed pursuant to the following Power of Attorney.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Stephen J. Gore and Bruce P. Erdel as his
true and lawful attorney-in-fact and agent, each with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign the 1997 Annual Report on Form 10-K of DT Industries, Inc.,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and ratifying and confirming all that
each said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and
Stockholders of DT Industries, Inc.
Our audits of the consolidated financial statements of DT Industries, Inc.
and its subsidiaries, referred to in our report dated August 8, 1997, appearing
on page 19 of the Annual Report to Shareholders of DT Industries, Inc. (which
report and consolidated financial statements are incorporated by reference in
this Annual Report on Form 10-K) also included an audit of the Financial
Statement Schedule of DT Industries, Inc. listed in item 14(2) of this Form
10-K. In our opinion, the Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
St. Louis, Missouri
August 8, 1997
S-1
<PAGE>
DT INDUSTRIES, INC.
SCHEDULE VIII
Rule 12-09 Valuation and Qualifying Accounts and Reserves
(In thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F Column G
Balance at Charged to Charged to Purchase Balance at
Valuation and Beginning Costs and Other of Net End of
Reserve Accounts of Period Expenses Accounts Deductions Assets Period
<S> <C> <C> <C> <C> <C> <C>
For the Fiscal Year Ended June 29, 1997
Deferred Tax Assets Valuation
Allowance $1,029 $1,029
Accounts Receivable Reserve $1,294 $356 $0 ($373) $572(1) $1,849
(1) Reflects increase to Accounts Receivable Reserves due to acquisition of
Mid-West and Hansford
For the Fiscal Year Ended June 30, 1996
Deferred Tax Assets Valuation
Allowance $1,029 $1,029
Accounts Receivable Reserve $751 $167 $0 ($189) $565(1) $1,294
(1) Reflects increase to Accounts Receivable Reserves due to acquisition of
Kalish, Arrow and AMI.
For the Fiscal Year Ended June 25, 1995
Deferred Tax Assets Valuation
Allowance $1,029 $1,029
Accounts Receivable Reserve $ 815 $20 $0 ($484) $400(1) $751
(1) Reflects increase to Accounts Receivable Reserves due to acquisition of AAA
and Armac.
</TABLE>
S-2
AGREEMENT OF LEASE ENTERED INTO AT THE CITY OF MONTREAL IN THE PROVINCE OF
QUEBEC.
BETWEEN: TEECAN PROPERTIES INC., a corporation incorporated under the laws
of Quebec, having its head office at 4770 Kent Street, Suite 205,
Montreal, Quebec, represented by Stephen Kaplan, its President,
duly authorized in virtue of a resolution adopted by its Board of
Directors, a true copy of which is annexed hereto as Schedule A.
(referred to in this Lease as "Landlord")
AND: KALISH CANADA INC., a corporation incorporated under the laws of
New Brunswick, having its head office at 10th Floor Brunswick
House, 44 Chipman Hill, Saint John, New Brunswick, E2L 4S6,
represented by Louis Pallay, its Vice-President of Operations,
duly authorized in virtue of a resolution adopted by its Board of
Directors, a true copy of which is annexed hereto as Schedule B.
(referred to in this Lease as "Tenant")
WITNESSETH:
SECTION I DEFINITIONS
1.01 In this Lease, the following expressions have the following meanings:
(a) "Address for Notice" means for the purpose of all notices to Landlord:
3400 Jean Talon West
Suite 300
Montreal, Quebec
H3R 2E8
and for the purpose of all notices to Tenant after the Commencement
Date, the address of the Premises, and for the purpose of all notices
to Tenant prior to the Commencement Date:
165 Oneida Street
Pointe-Claire, Quebec
H9R 1A9
(b) "Base Rent" means an annual rent per square foot of gross constructed
area of the Building, as certified by the Project Architect, equal to:
(i) for the first five (5) years of the Term, $4.75;
(ii) for the sixth (6th) through the tenth (10th) year of the Term,
$5.25;
<PAGE>
-2-
(iii) for the eleventh (11th) through the fifteenth (15th) year of
the Term, $5.85;
(iv) for the sixteenth (16th) through the twentieth (20th) year of
the Term, $6.60.
(c) "Building" means, collectively, the building, structures and
improvements, including Landlord's Work, to be erected on the Land and
located at the northeast corner of the Trans Canada Highway Service
Road and Houde Avenue, in the City of Kirkland, Quebec, having an area
of approximately 80,000 square feet, comprising approximately 19,000
square feet of finished office space on two floors and approximately
61,000 square feet of manufacturing and warehouse space.
(d) "Commencement Date" means the later of 1 September 1997 and the
date on which the Building is Substantially Completed, as certified
by the Project Architect.
(e) "Expiration Date" means the day immediately preceding the twentieth
(20th) anniversary of the Commencement Date.
(f) "Land" means the land described in Schedule C.
(g) "Landlord's Work" means the work which Landlord has undertaken to
carry out pursuant to paragraph 14.01 of this Lease.
(h) "Lease" means this Agreement of Lease including the Schedules.
(i) "Lease Year" means a period of twelve (12) months commencing on the
1st day of January and expiring on the 31st day of December next
following. If the Commencement Date is not the 1st day of January, the
first Lease Year will commence on the Commencement Date and expire on
the 31st day of December next following. If the last day of the Term
is any day other than the 31st day of December, the last Lease Year
will commence on the 1st day of January preceding the last day of the
Term and expire on the last day of the Term. Landlord may change the
Lease Year from time to time but Tenant will not be exposed to any
additional or duplicated charges as a result of such change.
(j) "Plans and Specifications" means the drawings, plans, and specifi-
cations attached hereto in Schedule D.
(k) "Premises" means the Building and the Land, including the parking
areas and exterior facilities and improvements.
(l) "Project Architect" means Gross, Kaplan, Coviensky, Architects.
(m) "Real Estate Broker" means J.J. Barnicke Limitee.
(n) "Rent" means Base Rent and additional rent as defined in paragraph
21(h).
<PAGE>
-3-
(o) "Real Estate Taxes" means all taxes, surtaxes, rates, levies,
impositions and assessments, general or special, and any other taxes,
surtaxes, rates, levies, impositions or assessments (including
statutory penalties and interest thereon in the event that same arise
as a result of Tenant's failure to pay amounts as and when required by
section 6.01 below) which are now or which may ever be levied or
imposed against either or both of the Land and Building for municipal,
urban community, school, public betterment, general, local improvement
or other purposes. Real Estate Taxes shall not include Landlord's or
owner's federal and provincial income taxes or Taxes on Capital. If
the system of taxation now in effect is altered and any new tax,
surtax, rate, levy, imposition or assessment is imposed or levied upon
the Land or Building or the owner thereof other than federal or
provincial income taxes and Taxes on Capital in substitution for or in
addition to those presently levied or imposed upon immoveables, Real
Estate Taxes shall include such new tax, surtax, rate, levy,
imposition or assessment.
(p) "Schedules" means:
Schedule A Resolution of Landlord
Schedule B Resolution of Tenant
Schedule C Description of Land
Schedule D Landlord's Work
(q) "Substantially Completed" in respect of any portion of the Building
means that such portion of the Building has been completed in
accordance with all applicable statutes, by-laws and regulations and
the Plans and Specifications (subject only to completion of minor
items, the lack of completion of which will not materially interfere
with Tenant's use and occupancy of such portion of the Premises) and a
certificate of substantial completion has been issued for such portion
of the Building by the Project Architect.
(r) "Taxes on Capital" means the portion (as hereafter defined) of the
capital and large corporation tax imposed against Landlord for each of
Landlord's fiscal years during the Term, which taxes are wholly or
partly computed as a function of the capital employed in respect of
the Building and Land as determined for the purposes of such tax or
taxes, but excluding all taxes on income and profits. For purposes of
this paragraph, the "portion" of such tax or taxes means the amount of
tax that would be payable if Landlord had no other property than the
Building and Land.
(s) "Taxing Authorities" means any duly constituted governmental
authority, whether federal, provincial, municipal, school or other,
legally empowered to levy or impose any Real Estate Taxes.
(t) "Tenant's Work" means all improvements, alterations, additions to the
Premises and other similar items of work, other than Landlord's Work,
which are necessary to properly prepare or complete the Premises for
use and occupancy by Tenant for the purposes of its business or which
are undertaken by Tenant during the Term.
<PAGE>
-4-
(u) "Term" means the period commencing on the Commencement Date and
expiring on the Expiration Date.
1.02 Any expression indicated in this Lease by quotation marks and first
letter capitalization will have the meaning ascribed to it by the provision or
context wherein it appears.
1.03 This Agreement of Lease shall bear the reference date of 25 April
1997, notwithstanding the date of its execution by either party hereto.
SECTION II LEASE OF PREMISES
2.01 Landlord hereby agrees to acquire the Land, construct the Building
and lease the Premises to Tenant for the Term and Tenant hereby agrees to lease
the Premises from Landlord for the Term, on the terms and conditions set out
herein. On the Commencement Date the Building shall be Substantially Completed
and the Premises shall be delivered to Tenant in apparent good working order and
condition.
2.02 Landlord represents and warrants to Tenant that Landlord has the
capacity and power to lease the Premises pursuant to the terms hereof, and that
the Land now complies and the Building will be constructed and on the
Commencement Date will be in compliance with all applicable laws, regulations,
by-laws, ordinances and orders, including, without limitation, those relating to
the environment. Landlord makes no representation that the intended use of the
Premises by Tenant is permitted by any applicable zoning by-law or other laws,
governmental regulations or requirements, Tenant specifically waiving the
provisions of Article 1854(2) of the Civil Code of Quebec.
SECTION III EXPIRATION
3.01 This Lease shall expire, without notice or demand being necessary,
on the Expiration Date. Notwithstanding articles 1878 and 1879 of the Civil Code
of Quebec or any law or custom to the contrary, this Lease shall not be subject
to tacit renewal. Should Tenant remain in occupation of the Premises after the
Expiration Date without having executed a written extension or renewal of this
Lease or a new lease with Landlord, then Tenant shall be deemed to occupy the
Premises under a lease from month to month at a rent equal to 150% of the Rent
last payable under this Lease, and otherwise on the same terms and conditions as
herein contained, insofar as they are applicable to a lease from month to month,
without prejudice to Landlord's right to re-enter and take possession of the
Premises and remove Tenant therefrom without notice or indemnity to Tenant and
without prejudice to Landlord's other recourses hereunder or by law.
SECTION IV BASE RENT
4.01 Tenant covenants and agrees to pay the Base Rent to Landlord in equal,
consecutive, monthly instalments, in advance on the first day of each calendar
month during the Term.
<PAGE>
-5-
4.02 If the Commencement Date is not the first day of a calendar month,
then each instalment of Base Rent or additional rent payable for the broken
portion of such month in which the Commencement Date occurs will be calculated
at a per diem rate of one three hundred sixty-fifth (1/365th) thereof.
SECTION V NET RENTAL
5.01 Tenant acknowledges that the Rent shall be on an absolutely net net
net return basis to Landlord, and that save only as expressly otherwise provided
by this Lease, Landlord shall not be responsible for any costs, charges,
impositions, expenses or outlays of any nature or kind whatsoever arising from
or relating to the Premises, the contents thereof, or the business carried on
therein, and Tenant shall pay, to Landlord's complete and entire exoneration,
all such costs, charges, impositions, expenses and outlays (including those
incurred by or paid for by Landlord on Tenant's behalf) including, without
limiting the generality of the foregoing, the Real Estate Taxes and Taxes on
Capital contemplated by this Lease.
SECTION VI REAL ESTATE TAXES AND TAXES ON CAPITAL
6.01 Subject to the provisions of sections 6.02 and 6.03, Tenant shall pay
to Landlord as additional rent, the amount of Real Estate Taxes payable in
respect of the Term or any part thereof, as shown on the relevant invoice or
statement issued by the competent taxing authority. Landlord shall forward to
Tenant a copy of such invoice or statement, and the amount of Real Estate Taxes
as shown on the invoice or statement shall be payable by Tenant to Landlord on
the later of the date that is three (3) days following receipt thereof by Tenant
and the day that is three (3) days prior to the due date shown on the invoice or
statement. During the first and last years of the Term (in the event same do not
coincide with tax years) the amounts Tenant is required to pay pursuant to the
foregoing shall be subject to a per diem adjustment.
6.02 Tenant, but not Landlord, shall be entitled, at Tenant's sole cost and
expense, to contest, object to or litigate the levying or imposition only of
those Real Estate Taxes which are not in whole or in part in respect of a period
after the Expiration Date and only those valuations imposed with respect to such
taxes. Tenant shall advise Landlord prior to commencing any such contestation or
objection. Landlord, but not Tenant, shall be entitled to contest, object to or
litigate the levying or imposition of all other Real Estate Taxes or valuations
imposed with respect to such taxes and Tenant hereby waives its right to do so.
6.03 In cases where Tenant is entitled to contest, object or litigate and
elects to do so, it must do so in good faith, expeditiously and with reasonable
diligence. Tenant may file such contestations or objections or litigate in
Tenant's own name (or in the name of Landlord should this be necessary) and
Landlord agrees to execute, at the request of Tenant and at Tenant's expense,
all deeds and documents reasonably necessary for the purpose thereof. Tenant may
settle, compromise, consent to, waive or otherwise determine, in its sole
discretion, all matters and things relating thereto. In cases where Landlord is
entitled to contest, object or litigate, it shall consult with Tenant regarding
the advisability of doing so but, in case of disagreement, the final decision as
to whether
<PAGE>
-6-
or not to do so shall rest with Landlord. If Landlord contests, objects or
litigates, it may settle, compromise, consent to, waive or otherwise determine,
in its sole discretion, all matters and things relating thereto. Tenant shall
reimburse Landlord for that proportion of the expenses reasonably incurred by
Landlord in such regard which is reasonably determined to relate to the Term,
such reimbursement not to exceed the value of the benefit derived by Tenant from
such contestation in the form of reduced Real Estate Taxes.
6.04 Throughout the Term, Tenant shall pay, as additional rent, the Taxes
on Capital. During the first and last years of the Term (in the event same do
not correspond to fiscal years of Landlord), the amount Tenant is required to
pay pursuant to the foregoing shall be subject to a per diem adjustment.
6.05 Within ninety (90) days after the end of each of Landlord's fiscal
years, Landlord shall furnish Tenant with a statement verified by Landlord's
auditors setting forth the Taxes on Capital for such year and the amounts
thereof payable by Tenant pursuant to this Section VI, said statement to show in
reasonable detail the information relevant to the calculation and determination
thereof. Tenant shall pay to Landlord the Taxes on Capital shown on such
statement within ten (10) business days after receipt thereof. Landlord
estimates the Taxes on Capital to be $30,000 for its first fiscal year.
6.06 Tenant shall pay any federal goods and services tax, Quebec sales tax,
or other value-added tax or similar tax imposed on Tenant in respect of any
amount payable by Tenant under this Lease and, where required by the applicable
legislation, Tenant will remit such taxes to Landlord at the time of the payment
of the relevant amount to Landlord in addition to the said amount. Landlord
shall promptly remit to the relevant taxing authority when due all such taxes
received from Tenant and shall provide to Tenant Landlord's registration numbers
and all such other information and documents as Tenant shall reasonably require
for purposes of claiming input tax credits or other credit or reimbursement of
such taxes so paid.
SECTION VII USE OF PREMISES
7.01 Tenant shall use the Premises as office accommodation and for those
light industrial uses which are permitted by applicable laws, by-laws,
regulations and ordinances, are reasonable and appropriate for the physical
limitations and circumstances of the Premises, and (unless Landlord otherwise
consents in writing, which consent shall not be unreasonably withheld) which are
substantially similar to the type of activities conducted by Tenant in
Pointe-Claire, Quebec as of the date hereof, and for no other purpose. Tenant
will conduct its business operations in the Premises in a reputable and
first-class manner. Tenant shall obtain and maintain all permits and licences
required for its occupancy of the Premises and for the conduct of its business
therein, Landlord makes no representation regarding zoning permits or licences
which may be required in connection with Tenant's occupancy of the Premises.
<PAGE>
-7-
SECTION VIII READINESS FOR OCCUPATION
8.01 In the event the Building is not Substantially Completed or the
Premises are not ready for occupation by Tenant on 1 September 1997, Tenant's
obligations under this Lease, including the payment of Rent, shall be deferred
until the Building is Substantially Completed and the Premises are ready for
occupation by Tenant.
SECTION IX UTILITIES AND ADDITIONAL CHARGES
9.01 Tenant shall pay for the cost of all utilities consumed or used in or
for the Building or on or for the Land during the Term, including, without
limiting the generality of the foregoing, the cost of water, gas, electricity,
steam, fuel and other energy. Tenant shall also pay for the cost of all
fittings, machines, apparatus, meters or other things leased or acquired in
respect of any of such utilities and for all work or services performed by any
corporation, commission or supplier in connection with any thereof.
SECTION X TENANT'S PERSONAL TAXES
10.01 Tenant shall pay as and when due all personal taxes, including,
without limiting the generality of the foregoing, water taxes, water-rate and
service taxes and business taxes, and other similar rates and taxes which may be
levied or imposed upon the Premises or upon the business carried on therein, and
also all other rates and taxes which are or may be payable by Tenant as tenant
or occupant thereof. If the mode of collecting such taxes or rates be so altered
as to make Landlord or the proprietor liable therefor instead of Tenant, or if
the system of taxation now in effect is altered and any new tax or rate be
levied or imposed upon the Premises or upon the business carried on therein, or
if by law, regulation or otherwise such taxes or rates are made payable by
landlords or proprietors, Landlord will pay such account and Tenant will repay
Landlord as additional rent on demand the amount of the benefit derived by
Tenant from such change.
SECTION XI ASSIGNMENT AND SUBLETTING
11.01 Except as otherwise provided herein, Tenant shall not assign this
Lease or sublet the Premises or any part thereof or allow the Premises or any
part thereof to be used by another without the prior written consent of
Landlord, which consent shall not be unreasonably withheld. The consent of
Landlord to any such assignment, sublease or use shall not constitute a waiver
of this section and shall not be deemed to permit any further assignment,
sublease or use by another.
11.02 Any assignee, sublessee or user shall be deemed ipso facto by virtue
of the assignment, sublease or use to have assumed all of Tenant's obligations
under this Lease. Notwithstanding the subletting or use, Tenant shall remain
solidarily responsible with the sublessee, assignee or user, without benefit of
division or discussion, for the payment of the Rent and the performance of all
of the other obligations of Tenant under this Lease.
<PAGE>
-8-
11.03 All requests for Landlord's consent to a proposed assignment, sublease
or use must be in writing and be received at least fifteen (15) days prior to
the date same is proposed to become effective and must specify in detail
reasonably satisfactory to Landlord:
(a) the name, address and local telephone number of the proposed assignee,
subtenant or user and, if it is a corporation, the names of the
directors and majority shareholders (or in the case of a change of
control, the names of those who would subsequently acquire effective
voting control);
(b) details of the proposed assignee's subtenant's or user's prior
business experience (including, without limiting the generality of the
foregoing, experience in the business which is permitted to be
operated in the Premises pursuant to this Lease) and the specific
terms and conditions of the proposed assignment, sublease or use; and
(c) bank and other credit references, financial statements and such other
information as Landlord may reasonably request in order to assess the
business and financial responsibility and standing of the proposed
assignee, subtenant or user.
Unless Landlord notifies Tenant otherwise within fifteen (15) days of
Landlord's receipt of the information described in this section 11.03, Landlord
shall be deemed to have consented to the proposed assignment or sublease.
11.04 If at any time effective control of Tenant is acquired or exercised
by any person or persons not having effective control of Tenant on the date of
execution of this Lease, the same shall be deemed to constitute an assignment
subject to all of the provisions of this Section XI.
11.05 Tenant will not advertise the Premises for the purpose of any
assignment, sublease or use, without obtaining the prior written approval of
Landlord to the proposed text, such approval not to be unreasonably withheld. In
no event will the rental rate appear in any advertisements.
11.06 Notwithstanding anything to the contrary contained in this Section XI,
Tenant shall have the right to assign this Lease or to sublet all or part of the
Premises to a corporation affiliated with Tenant ( as defined for the purposes
of the Canada Business Corporations Act, hereinafter referred to as the
"Affiliate"), without the prior consent of Landlord under the following
conditions:
(a) Tenant shall advise Landlord of such assignment or sublease in writing
at least ten (10) days prior to the date same is proposed to become
effective; and
(b) Affiliate shall be deemed ipso facto by virtue of such assignment or
sublease to have assumed all Tenant's obligations under this Lease
and, notwithstanding such sublease or assignment, Tenant shall remain
solidarily responsible with Affiliate, without benefit of division or
discussion, for the performance thereof.
11.07 In the event that Tenant requests Landlord's consent to the assignment
of this Lease or the sublease of all or substantially all of the Premises for
all or substantially all of the remainder of the Term, to a person or persons
not affiliated with Tenant (as defined for the purposes of the
<PAGE>
-9-
Canada Business Corporations Act) and who intend to use the Premises other than
for purposes of continuing the operation of all or substantially all of Tenant's
business, then Landlord shall, as an alternative to granting its consent to any
such proposed assignment or sublease, have the right to terminate this Lease
effective the date that the proposed assignment or sublease was to be effective.
Such right of cancellation must be exercised by Landlord within fifteen (15)
days of its receipt of the information described in section 11.03.
11.08 Landlord may assign its rights and obligations under this Lease to a
corporation affiliated with Landlord (as defined in the Canada Business
Corporations Act) in which event such assignee shall be entitled to exercise the
rights and shall be solidarily liable with Landlord for the obligations of
Landlord under this Lease.
SECTION XII TENANT CARE
12.01 Subject to Section XIV, Tenant shall, throughout the Term, maintain
and keep the Premises and every part thereof, including, without limiting the
generality of the foregoing, the roof, the heating, ventilating, electrical,
plumbing, mechanical and other systems, services and equipment installed therein
or thereon, and all replacements, alterations, additions and improvements
thereto, in good order and condition and perform or cause to be performed all
repairs and replacements which may from time to time be required therein or
thereto, as would a prudent owner. Without limiting the generality of the
foregoing, Tenant will be obliged to do or cause to be done all work necessary
to maintain the Premises for their intended purpose. All such work shall be
performed at Tenant's sole cost and expense. Tenant shall advise Landlord in the
first year of the Term and thereafter as requested, of the names of the
contractors with whom Tenant has entered into service contracts for the repair
and maintenance of the heating, ventilating, electrical, plumbing or mechanical
systems, and such contractors shall be reputable and competent. Tenant shall
provide to Landlord, upon request, copies of such service contracts.
12.02 Tenant shall not bring into the Building or onto the Land any
machinery, equipment, article or thing that by reason of weight, size or
operation might cause damage thereto or which might overload the floors of the
Building or structure or exceed the safe load capacity of the Land.
12.03 At the Expiration Date or earlier termination of this Lease, Tenant
shall deliver the Premises to Landlord in the state and condition in which they
are required to be maintained and kept pursuant to the provisions of this Lease.
12.04 In the event Tenant fails to comply with its obligations contained
in this Section XII, Landlord shall have the right, after giving written notice
of five (5) days to Tenant, to carry out such Obligations for Tenant and any and
all costs incurred by Landlord in so doing, shall be payable by Tenant to
Landlord, as additional rent, on demand. However, in the event any work or
action is urgently required at a time when authorized representatives of Tenant
cannot be located, Landlord may proceed with such reasonable steps as it deems
necessary, in its discretion, for the protection and preservation of the
Premises and Tenant shall reimburse Landlord for the amounts expended, as
additional rent, on demand.
<PAGE>
-10-
12.05 Tenant shall give Landlord prompt written notice of defects in or
damage to the Premises or any part thereof, howsoever same may occur.
SECTION XIII REPAIRS, ALTERATIONS, ADDITIONS
AND IMPROVEMENTS
13.01 All Tenant's Work shall be the responsibility of Tenant and shall be
performed at Tenant's sole cost and expense, the whole subject to the provisions
and procedures contained in this Section XIII. No Tenant's Work may be carried
out without the prior written consent of Landlord, which consent shall not be
unreasonably withheld. The withholding of Landlord's consent shall be deemed to
be reasonable if the proposed work would have the effect of materially
diminishing the value of the Premises.
13.02 All architectural and other plans and specifications prepared in
connection with Tenant's Work may be prepared by a designer or architect of
Tenant's choice but shall be subject to the Landlord's prior written approval as
contemplated in this Section XIII. Tenant shall be responsible to ensure that
Tenant's Work, as designed, complies with all relevant laws, by-laws,
regulations and ordinances as well as with the Building module and structure and
with the Building's mechanical, electrical, plumbing and other systems and
facilities. Complete working drawings, plans and specifications for Tenant's
Work, if any, must be submitted to Landlord for its prior written approval.
Landlord shall have a delay of ten (10) days following receipt of such complete
working drawings, plans and specifications to notify Tenant either of its
approval thereof or of changes Landlord requires and if Landlord fails to
respond during such ten (10) day period, Landlord shall be deemed to have
approved the drawings, plans and specifications so submitted. If Landlord
notifies Tenant with such ten (10) day period that it requires changes, Tenant
shall, within ten (10) days thereafter, submit the necessary amended drawings,
plans and specifications to Landlord. Landlord shall have the right to inspect,
at its expense, any Tenant's Work to ensure that it is in accordance with the
working drawings, plans and specifications approved by Landlord.
13.03 Tenant shall not undertake any Tenant's Work without obtaining all
necessary permits from the appropriate public authorities. All such work shall
be done by contractors approved by Landlord, which approval shall not be
unreasonably withheld, but shall be conditional upon such contractors carrying
property damage and liability insurance satisfactory to Landlord for its
operations in the Building and upon such contractors providing to Landlord a
waiver and release of any and all legal hypothecs or rights of legal hypothec
that then or thereafter exist for work done or materials supplied in connection
with Tenant's Work.
13.04 All Tenant's Work (other than trade fixtures, equipment and
accessories thereto) and all repairs and replacements in or to the Premises
shall, upon their completion, become a part of the Premises and the property of
Landlord and shall be surrendered with the Premises upon the Expiration Date or
earlier termination date of this Lease without any compensation being due
therefor by Landlord; provided, however, that Landlord shall have the option, in
its sole discretion, by written notice to Tenant at least sixty (60) days prior
to the Expiration Date, to require Tenant to remove, at Tenant's cost and under
Landlord's coordination and direction, all or any of those items of Tenant's
Work for which Landlord has reserved the right to do so in its initial consent
(including
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such as may have been made by Landlord at Tenant's request prior to or during
the Term) and, in the cases where Landlord has exercised such right, to restore
the portions of the Premises affected by the removals, or any parts thereof, to
their original condition.
13.05 Tenant may erect, at its cost and expense, signs on any street
frontage of the Premises provided that:
(a) any such signs shall comply with the requirements of the applicable
municipal and other governmental authorities;
(b) no such signs shall be erected outside or on the exterior of the
Building or within the interior thereof if the same may be seen from
the exterior thereof, unless Landlord shall have given its prior
written consent (which consent shall not be unreasonably withheld) to
the location, style, colour, size and content thereof; and
(c) Tenant shall bear the cost of the installation, repair, maintenance
and removal of any such signs.
SECTION XIV LANDLORD'S WORK AND REPAIRS
14.01 Landlord shall, at its expense, construct the Building and effect the
work more fully described in Schedule D annexed hereto and initialed by both
parties for identification, in good and workmanlike manner in accordance with
the drawings, plans and specifications set out therein, subject to such changes
as may be agreed upon by Tenant and Landlord, and in accordance with all
applicable statutes, by-laws and regulations. Landlord shall, at its own
expense, procure all necessary licenses and permits for the Landlord's Work in
accordance with such specifications, statutes, by-laws and regulations.
Upon receipt by Tenant of the Project Architect's certificate that
the Building is Substantially Completed, Tenant shall have sixty (60) days
thereafter to inspect the Building and provide to Landlord a list of any
incomplete and/or incorrectly completed items of Landlord's Work, which Landlord
shall complete or correct, as the case may be, within a reasonable period of
time thereafter.
Tenant, its workmen and contractors shall be permitted to enter the
Premises to commence installation of the items for which it is responsible to
complete in connection with Landlord's Work and Landlord and Tenant agree to
cooperate in coordinating the scheduling of such work by Tenant with Landlord's
Work. Tenant, its workmen and contractors shall not otherwise, without the
consent of Landlord, be permitted access to the Premises for purposes of
installing Tenant's trade fixtures and furnishings prior to the date on which
the Building is Substantially Completed.
Landlord shall deliver to Tenant copies of all warranties and
guarantees provided by Landlord's general contractor, subtrades and suppliers
and others that Landlord may benefit from with respect to those items which
Tenant is obligated to repair, replace, or maintain in accordance
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with the terms of this Lease, and shall assign to Tenant the benefit of all such
warranties or guarantees given to Landlord which affect the obligation of Tenant
to maintain or repair the Premises.
14.02 Notwithstanding any contrary provision of this Lease, including,
without limiting the generality of the foregoing, Sections XII and XIII,
Landlord shall be responsible for:
(a) repairs and replacements to any part of the Premises required as a
result of latent defects in the Building or any part thereof or as a
result of any negligence or wilful act of Landlord or its contractors
in the construction of the Building;
(b) repairs and replacements to any part of the Premises required in the
first year of the Term as a result of any cause whatsoever other than
misuse by Tenant or normal aging or wear and tear.
SECTION XV ACCESS TO PREMISES
15.01 Landlord, its agents and representatives may enter the Premises at all
times, after twenty-four (24) hours prior notice (except in the case of
emergency when no notice will be required), to examine their condition to view
their state of repair and condition.
15.02 Tenant shall allow the Premises to be exhibited during Business Hours,
after twenty-four (24) hours prior notice, to persons interested in acquiring or
advancing money upon the security of the Land and Building. During the last
twenty-four (24) months of the Term, Tenant shall also allow the Premises to be
exhibited, after twenty-four (24) hours prior notice, to persons interested in
leasing same.
SECTION XVI COMPLIANCE WITH LAWS
AND INDEMNIFICATION
16.01 Tenant will not do or permit anything to be done in, upon or about
the Premises or bring or keep anything therein which will in any way conflict
with or cause the Premises to be in breach or violation of the regulations of
the fire, police or health departments, any environmental laws, rules,
regulations, by-laws, ordinances or norms applicable to the Premises, or with
the laws, rules, regulations, by-laws or ordinances of the municipality in which
the Land and Building are situate, the applicable urban community (if any), or
any governmental authority having jurisdiction over the Premises or the business
conducted therein (including, without limiting the generality of the foregoing,
those relating to the environment), all of which Tenant undertakes to abide by
and conform to, including, if necessary, effecting the alterations or repairs
necessitated thereby.
Tenant covenants and agrees that it will indemnify and hold harmless
Landlord against any penalty imposed for or damage arising from the breach of
any such laws, rules, regulations, by-laws, ordinances or norms by Tenant or
those for whom Tenant is responsible.
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16.02 Tenant shall comply with the rules and requirements of all insurance
advisory organizations and all insurance companies having policies of any kind
whatsoever in effect covering the Land and Building.
16.03 Landlord shall provide to Tenant on the Commencement Date a phase one
and boring analysis from a reputable environmental consultant indicating that
the Premises are not on the Commencement Date contaminated. Tenant warrants that
during its occupancy of the Premises, it will not bring in or on to, or store or
process on the Premises any contaminants, pollutants, toxic or dangerous or
hazardous substances or materials or wastes, PCB's, friable asbestos or oil
contaminants (other than minimal quantities of inflammables normally found in
similar premises, such as cleaning solvents) which create an environmental
problem (hereinafter collectively called "Contaminants"). At the Expiration
Date, any Contaminants stored, processed or brought in or on to the Premises by
Tenant, its employees, agents, subtenants, suppliers or invitees shall be
removed by Tenant at its cost and Tenant shall supply to Landlord an
environmental analysis of the same scope as the one Landlord supplied to Tenant
on the Commencement Date. Tenant shall indemnify and hold Landlord harmless from
all losses, liabilities, damages, costs, expenses and claims of any kind
whatsoever resulting from any breach of the foregoing warranty including,
without limitation, any seepage, spillage, discharge or misuse of any
Contaminant by Tenant, its employees, agents, subtenants, suppliers or invitees
and undertakes to immediately take all such steps as are reasonably necessary to
repair any such damage at its expense and to restore the Premises or any portion
thereof damaged by such seepage, spillage, discharge, misuse or storage to their
original condition, less ordinary wear and tear.
16.04 Tenant shall indemnify Landlord and hold Landlord harmless from and
against all claims, liabilities, damages, costs, suits or actions arising from:
(a) any breach, violation or non-performance of any covenant, condition or
agreement contained in the present Lease on the part of Tenant to be
fulfilled, kept, observed or performed;
(b) any accident or injury (including death) sustained by or for any loss
of or damage to property belonging to any person or persons in, on, or
about the Building and Land occurring during the Term, caused by or
arising out of any wilful misconduct, neglect or fault by Tenant, its
servants, employees, agents, subtenants or invitees;
(c) any accident or injury (including death) sustained by or for any loss
of or damage to property belonging to any employee, servant, agent,
subtenant or invitee of Tenant, no matter how caused (except if caused
by or arising out of the intentional or gross fault of Landlord or its
employees, servants, agents, subtenants or invitees); and
(d) failure of Tenant to fully, faithfully, and punctually comply with any
legitimate requirement of any public of quasi-public authority having
jurisdiction over the Premises.
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SECTION XVII FIRE AND DESTRUCTION OF PREMISES
OR EXPROPRIATION
17.01 In the event the Building is destroyed or damaged by fire or other
cause, in whole or in part, and Landlord notifies Tenant in writing within sixty
(60) days after the damage or destruction that the Building may not, in the
opinion of Landlord's architect, be restored or rebuilt to the same nature and
quality structure within 180 days after the damage or destruction, this Lease
shall be terminated immediately as of the date of the occurrence of the event
causing such damage or destruction.
17.02 In the event that the damage or destruction is such that the Building,
in the opinion of Landlord's architect (notice of which shall be provided by
Landlord to Tenant in writing within sixty (60) days after the damage or
destruction), may be restored or rebuilt to the same nature and quality
structure within the said 180 days, then
(a) if the damage or destruction affects twenty-five percent (25%) or less
of the total area of the Building, then Landlord shall be obliged to
rebuild or restore the part of the Building so damage or destroyed; or
(b) if the damage or destruction affects more than twenty-five percent
(25%) of the total area of the Building, Landlord shall give notice to
Tenant in writing within sixty (60) days after such damage or
destruction, of its decision whether or not to rebuild or restore the
Building.
17.03 If, within the sixty (60) day notice periods specified above, no
notice is given to Tenant of the opinion of Landlord's architect or of
Landlord's decision to rebuild or restore the Building, the Building shall be
deemed to be capable of being rebuilt or restored within the said 180 days and
Landlord shall be deemed to have elected to rebuild or restore the Building.
17.04 If Landlord is obliged or elects or is deemed to have elected to
rebuild or restore the Building, this Lease will remain in full force and effect
and Tenant shall be entitled to an abatement of Rent and additional rent from
the date of the occurrence of the damage or destruction in proportion to the
part of Premises of which Tenant has been deprived until the Building or part
thereof so damaged or destroyed is, in the opinion of Landlord's architect, fit
for occupancy. In such case, Landlord agrees that the Building will be restored
or rebuilt at its cost with due dispatch to substantially the same condition in
which the Building was initially delivered to Tenant. However, in the event that
Landlord is obliged or elects or is deemed to have elected to rebuild or restore
the Building and such rebuilding or restoration is not completed within 180 days
after such obligation or election or deemed election, (subject to delays caused
by events described in section 18.02 hereof), then Tenant shall have the right
to terminate this Lease by written notice to Landlord after the expiration of
such 180 day period, and prior to the completion of the rebuilding or
restoration.
Notwithstanding the foregoing, in the event such damage or
destruction occurs within the last two (2) years of the Term, Tenant shall have
the right, exercisable by written notice to Landlord within sixty (60) days
after the damage or destruction, to terminate this Lease as of the date of the
occurrence of the event causing the damage or destruction, notwithstanding that
the Building may be restored or rebuilt within the said 180 days.
<PAGE>
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17.05 If Landlord decides not to restore or rebuild the Building to the
same nature and quality structure, this Lease shall be terminated as of the date
of the occurrence of the event causing the damage or destruction.
17.06 In the event of the expropriation or other forceable taking or
condemnation by any competent authority for any purpose whatsoever of the whole
of the Premises or such part thereof which, in the opinion of both Landlord and
Tenant, acting reasonably, will render the remainder unsuitable or insufficient
for the economical conduct of Tenant's normal business operation, this Lease
shall cease and terminate from the date Tenant is forced to vacate the Premises
and all Rent and other payments for which Tenant is liable hereunder shall be
apportioned and paid in full to the date of such termination.
17.07 In the event of any expropriation or forcible taking or condemnation
by any competent authority for any purpose whatsoever of a part only of the
Premises which does not, in the opinion of both Landlord and Tenant, acting
reasonably, render the remainder of the Premises unsuitable or insufficient for
the economical conduct of Tenant's normal business operation, this Lease shall
remain in full force and effect with respect to the remainder of the Premises
and Landlord shall forthwith restore and repair the portion of the Premises not
expropriated to a tenantable condition. The Rent payable by Tenant hereunder
shall be reduced so as to give due allowance for the part expropriated according
to the nature and extent of such part.
17.08 Tenant shall have no claim in damages against Landlord relating to or
arising out of the expropriation, forceable taking or condemnation or arising
out of the cancellation of this Lease as a result thereof. Landlord and Tenant
shall cooperate, each with the other, in respect of any public taking of the
Premises or any part thereof so that, subject to the following rights of
Landlord (which include, without limitation, the right to receive compensation
for the Building or part thereof that is the subject of the public taking),
Tenant may receive the maximum award to which it is entitled in law for
relocation costs, business interruption and such other costs (including any
required higher rent in new premises) that it may be entitled to receive from
the expropriating authority and so that Landlord may receive the maximum award
for all other compensation arising from or relating to such public taking
(including all compensation for the Building or part thereof that is the subject
of the public taking).
SECTION XVIII NON-RESPONSIBILITY OF
LANDLORD AND TENANT
18.01 Landlord shall not be liable for any accident or injury (including
death) sustained by or for any loss of or damage to property belonging to
Tenant, its employees, servants, agents, subtenants or invitees which may result
at any time from any reason or cause whatsoever, other than the intentional or
gross fault of Landlord or its employees, servants, agents, subtenants or
invitees.
18.02 Except as otherwise expressly provided in this Lease or in any other
agreement entered into between Landlord and Tenant, Landlord will not be liable
in any manner to Tenant or to any other person claiming through Tenant for
Landlord's failure to perform any of its obligations hereunder or any damage
caused or required by strike, lock-out, riot, accident, government rule,
<PAGE>
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regulation or order, act of God or of any enemy of the Queen, fire or other
casualty, cas fortuit, force majeure or any other cause or condition which is
beyond the reasonable control of Landlord (not including, however, delays in
issuance of permits necessary for the construction of the Building, delays
attributable to Landlord's general contractor or subcontractors or delays
attributable to unforeseen adverse site conditions that can be remedied by
Landlord without undue hardship or expense) but, upon such occurrence, Landlord
shall without delay take all reasonable steps to terminate or correct the event
or circumstance in question.
18.03 Notwithstanding anything else contained in this lease, Landlord
agrees to indemnify and hold Tenant harmless from and against any and all
claims, suits, actions, damages, costs, judgments and other expenses sustained
or incurred by Tenant in connection with any environmental matters in respect of
the Premises other than those resulting from acts or omissions by Tenant during
its occupancy of the Premises.
SECTION XIX INSURANCE
19.01 Landlord shall take out and maintain insurance on the Premises as
would a reasonably prudent landlord of similar property and all such policies of
insurance covering loss or damage to the Premises shall contain a waiver of
subrogation rights which Landlord's insurers may have against Tenant, Tenant's
insurers or persons for whom Tenant is at law responsible. Tenant shall pay to
Landlord, as additional rent upon demand, all insurance costs, premiums and
deductible payments relating to fire, casualty, liability, property damage,
boiler, loss of rental and such other forms of insurance as Landlord may, from
time to time, reasonably obtain for or in respect of the Premises, provided,
however, that Tenant shall not be responsible for any increase in the premium
payable by Landlord for any such insurance that results from any act of
negligence or fault on the part of Landlord. Landlord hereby releases and waives
any and all claims against Tenant or those for whom Tenant is in law responsible
with respect to any loss of or damage to the Premises required to be insured
against by Landlord hereunder, and agrees to indemnify and hold Tenant harmless
from any and all such claims.
19.02 Throughout the Term, Tenant shall take out and keep in force:
(a) comprehensive general liability insurance with respect to the business
carried on, in or from the Premises and the use and occupancy thereof
for bodily injury and death and damage to property of others in an
amount of at least two million dollars ($2,000,000);
(b) all-risks insurance including the perils of fire, extended coverage,
leakage from sprinkler and other fire protective devices, earthquake,
collapse and flood in respect to furniture, equipment, inventory and
stock-in-trade, fixtures and leasehold improvements located within the
Premises and such other property located in or forming part of the
Premises, including all mechanical or electrical systems (or portions
thereof) installed by Tenant in the Premises, the whole for the full
replacement cost (without depreciation) in each such instance;
(c) if any boiler or pressure vessel is operated in the Premises, boiler
and pressure vessel insurance with respect thereto;
<PAGE>
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(d) business interruption insurance for a period of twelve (12) months;
and
(e) tenant's legal liability insurance.
19.03 All policies of insurance to be maintained by Tenant shall (i) be
in form reasonably satisfactory to Landlord, (ii) be placed with insurers
reasonably acceptable to Landlord, and (iii) provide that they will not be
canceled or permitted to lapse unless the insurer notifies both Tenant and
Landlord in writing at least thirty (30) days prior to the date of cancellation
or lapse. Each such policy shall name Landlord and any other party required by
Landlord, including, but not limited to, its property manager and hypothecary
creditors, as (an) additional insured(s) as its (their) interest(s) may appear.
Each comprehensive general liability insurance policy will contain a provision
of cross-liability or severability of interests as between Landlord and Tenant.
All other policies referred to above shall contain a waiver of subrogation
rights which Tenant's insurers may have against Landlord, Landlord's insurers
and persons under Landlord's care and control. Tenant hereby releases and waives
any and all claims against Landlord and those for whom Landlord is in law
responsible with respect to occurrences required to be insured against by Tenant
hereunder, and agrees to indemnify and hold Landlord harmless from and against
any and all such claims. Throughout the Term, Tenant shall furnish Landlord with
certificates of all such insurance policies and the renewals thereof. Tenant
shall, whenever it is requested to do so by Landlord, furnish certified copies
of the insurance policies.
19.04 Should Tenant fail to take out or keep in force the insurance
described in sections 19.02 and 19.03, Landlord will have the right to do so and
to pay the premiums therefor and in such event Tenant shall repay to Landlord
the amount paid as premiums as additional rent on demand.
SECTION XX DEFAULT
20.01 In any of the events following, namely:
(a) if Tenant shall fail to pay to Landlord when due, any instalment or
other amount of Base Rent, Real Estate Taxes, Taxes on Capital, or any
other additional rent payable under this Lease and such failure
continues beyond five (5) days after the date Landlord has notified
Tenant thereof in writing;
(b) if Tenant shall be declared dissolved, bankrupt or wound-up or shall
make any general assignment for the benefit of its creditors or take
or attempt to take the benefit of any insolvency, winding-up or
bankruptcy legislation or if a petition in bankruptcy or in winding-up
or for reorganization shall be filed by or against Tenant which is not
contested promptly by Tenant or if a receiver or trustee be appointed
for or enter into physical possession of the property of Tenant or any
part thereof;
(c) if Tenant shall assign, sublet or permit the use by others of the
Premises, in whole or in part, except in a manner herein permitted;
<PAGE>
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(d) if any execution be issued against the property of Tenant pursuant to
a judgment rendered against Tenant;
(e) if Tenant shall fail to take possession of the Premises or if Tenant
should vacate or abandon the Premises;
(f) if any insurance carried by Landlord be canceled in consequence of the
business carried on by Tenant or in consequence of anything brought
into or stored in the Premises by Tenant, provided that Tenant is
given notice of the possibility of such cancellation;
(g) if Tenant fails to fulfil any other of its obligations hereunder
(other than those referred to in another or other paragraphs of this
section 20.01) and (i) the default is not rectified within the
specific delay applicable to the default in question stipulated in a
specific provision of this Lease, or, (ii) in the absence of any such
specific delay, Tenant has not rectified the default within ten (10)
business days after Landlord has given Tenant written notice of the
default stating with reasonable particularity the nature thereof, or
(iii) if the default referred to in sub-paragraph 20.01(g) (ii) is not
reasonably capable of being cured within such ten (10) business day
delay, Tenant does not commence to cure such default within said ten
(10) business day delay and thereafter proceed to cure same with all
due diligence;
then this Lease may be terminated ipso facto at the option of the Landlord upon
written notice to Tenant to such effect, Tenant to be in default by the mere
lapse of time for performing its obligations hereunder. It is expressly agreed
that such termination shall be in addition and without prejudice to all other
rights and recourses of Landlord as provided by law or in this Lease. Upon
termination, Tenant shall immediately vacate and surrender the Premises and all
of its rights therein and thereto and in and to the Lease to Landlord. Upon the
occurrence of any such event of default, Landlord may forthwith, without notice
or any form of legal process, and with or without termination of the Lease,
suspend any services and utilities, bolt the Premises and change the locks
thereof. Upon termination, Landlord may forthwith, without notice or any form of
legal process, re-enter upon and take possession of the Premises, remove or
cause to be removed therefrom any persons and property occupying same and re-let
the Premises to whomsoever it may choose and, recover from Tenant all amounts
due, expenses of such re-letting and Rent for the six (6) months next succeeding
the date of such termination or such longer period as may be allowed by law, all
of which shall immediately become due and payable, the whole without limiting,
diminishing or extinguishing the liability of Tenant.
20.02 In the event of the bankruptcy, insolvency, winding-up, dissolution
or reorganization of Tenant, there shall immediately become due and exigible in
favour of Landlord, on account of accelerated rent, an amount equal to the Rent
for a period of three (3) months next following the bankruptcy or insolvency or
for such longer period of time as may be allowed by any applicable bankruptcy or
insolvency legislation in force from time to time. Furthermore, in the event of
Tenant's continued occupancy of the Premises after the filing of a proposal or a
notice of intention to file a proposal pursuant to the provisions of the
Bankruptcy and Insolvency Act, S.C. 1992 C-27, as amended from time to time, or
any replacement legislation, and such continued occupancy commences on a day
which is not the first day of a calendar month, any amounts of Rent payable on a
monthly basis for such month and for any other partial month shall be calculated
on a per diem
<PAGE>
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basis and be paid in advance. The rights of Landlord under this section 20.02
are in addition to and not in substitution for, nor shall they limit or
otherwise restrict, any other rights, claims and recourses that Landlord may
have, including, without limiting the generality of the foregoing, those
contained in section 20.01.
SECTION XXI ADDITIONAL PROVISIONS
(a) Landlord: In the event of any sale or sales of the Premises, Landlord
shall be and hereby is entirely released and relieved of all covenants
and obligations of Landlord hereunder, provided such purchaser agrees
to assume and carry out any and all covenants and obligations of
Landlord hereunder.
(b) Amendment of Lease: No assent or consent to changes in or waiver of
any part of this Lease shall be deemed or taken as made unless the
same be done in writing and attached or endorsed hereon by the
parties. No covenant, term or condition of the present Lease
stipulated in favour of Landlord shall be waived, except by express
written consent of Landlord, whose forbearance or indulgence in any
regard whatsoever shall not constitute a waiver of the covenant, term
or condition to be performed by Tenant; and until complete performance
by Tenant of the said covenant, term or condition, Landlord shall be
entitled to invoke any remedies available under this Lease or by law
despite such forbearance or indulgence.
(c) Punctual Payment: All sums owing by Tenant under this Lease not paid
when due shall thereafter bear interest until paid at a rate
equivalent to two percent (2%) above Landlord's borrowing rate from
its bank from time to time.
Landlord may impute any of Tenant's payments in payment of any sum
which has become due hereunder, regardless of any designation or
imputation by Tenant.
(d) Successors and Assigns: All the covenants herein contained shall be
deemed to have been made by and with the heirs, executors,
administrators and permitted assigns or successors of each of the
parties hereto, and if more than one Tenant, the covenants herein
contained on the part of Tenant shall be construed as being solidary
and where necessary reference to Tenant as being of the masculine
gender or in the singular number shall be construed as being in the
feminine or neuter gender or in the plural number.
(e) Brokerage Commission: As part of the consideration for the granting of
this Lease, Tenant represents and warrants that, with the exception of
the Real Estate Broker, if any, named in Section 1.01 of this Lease,
no broker, agent or other intermediary introduced the parties or
negotiated or was instrumental in negotiating or consummating this
Lease. Landlord shall be responsible for any fees payable to the Real
Estate Broker.
(f) Notice and Demands: Any notice or demand given by Landlord to Tenant
shall be deemed to be duly given when served upon Tenant personally,
on the business day following
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transmission when faxed to Tenant, or on the fourth (4th) business day
after mailing when mailed to Tenant at the Address for Notice.
(g) Publication of Lease: This Lease shall not be published at length but
only by short-form version thereof and then only after the form and
terms of such short-form version thereof have been approved by
Landlord, the whole at the cost of Tenant, including the cost of
publication and providing a copy to Landlord. Should this Lease be
published, Tenant shall, at the expiration or termination thereof,
cause same to be radiated at its expense, failing which Landlord will
have the right to cause such radiation and charge Tenant with the cost
of same.
(h) Additional Rent: Subject to any other provision of this Lease
expressly stipulating the contrary, all amounts payable to Landlord by
Tenant in virtue of this Lease, with the exception of the Rent, shall
be additional rent and collectible as such.
(i) Payment Requirements: Tenant shall pay all amounts which it is
required to pay in virtue of this Lease in lawful money of Canada to
Landlord at its offices in Montreal, Quebec, Canada or at such other
place or to such other person as may be specified from time to time by
Landlord, without prior demand for payment thereof being necessary and
without any deduction, abatement, diminution, subrogation, set-off or
compensation whatsoever.
(j) Prior Agreements: The present lease cancels and supersedes any and all
prior letters of intent, leases and agreements, written or otherwise,
entered into by Landlord and Tenant regarding the Premises leased
hereunder.
(k) Severability: If for any reason whatsoever, any term, obligation or
condition of this Lease or the application thereof to any person, firm
or corporation or to any circumstance is to any extent held to be or
is rendered invalid, unenforceable or illegal, then such term,
obligation or condition shall be deemed to be independent of the
remainder of this Lease and to be severable and divisible therefrom,
and its invalidity, unenforceability or illegality shall not affect,
impair or invalidate the remainder of this Lease or any part thereof
and the remainder of this Lease not affected, impaired or invalidated
will continue to be applicable and enforceable to the fullest extent
permitted by law against any person, firm or corporation and to any
circumstance other than those as to which it has been held or rendered
invalid, unenforceable or illegal.
(l) Governing Law: This Lease shall be construed and interpreted in
accordance with the laws of the Province of Quebec.
(m) Captions: The captions appearing in this Lease have been inserted as a
matter of convenience and for reference only and in no way define,
limit or enlarge the scope or meaning of this Lease or any provision
thereof.
(n) Time of the Essence: Except where otherwise provided by an express
provision of this Lease, Tenant shall be in default by the mere lapse
of time for performing its obligations hereunder.
<PAGE>
-21-
(o) Rights Cumulative: No right, remedy or recourse conferred upon or
reserved to Landlord by this Lease is intended to be exclusive of any
other right, remedy or recourse conferred upon or reserved to Landlord
by this Lease or by law, all of which rights, remedies and recourses
shall be cumulative and not in the alternative.
(p) Currency: Unless otherwise indicated, all amounts expressed herein in
dollars shall be deemed to be expressed in Canadian dollars.
(q) Waiver: Tenant specifically waives the provisions of Article 1883 of
the Civil Code of Quebec and Article 65.2 of the Bankruptcy and
Insolvency Act (Canada).
SECTION XXII SECURITY
22.01 As security for the performance by Tenant of its obligations here-
under, Tenant shall provide to Landlord concurrently with the execution of this
Lease and shall have renewed as often as necessary thereafter, an irrevocable
letter of credit issued by the NationsBank or such other bank as may be agreed
upon by Landlord and Tenant, in Canadian or US dollars as follows:
(a) for the first ten (10) years of Term, the letter of credit shall be
for an amount equivalent to CDN $800,000;
(b) for the eleventh (11th) through the fifteenth (15th) year of the Term,
the letter of credit shall be for an amount equivalent to CDN
$500,000; and
(c) for the sixteenth (16th) through the twentieth (20th) year of the
Term, the letter of credit shall be for an amount equivalent to CDN
$250,000.
22.02 The Canadian dollar equivalent of a letter of credit issued in US
dollars shall be computed at the rate of exchange published by the issuing bank
on the date of its issuance and if such rate of exchange thereafter changes such
that the Canadian dollar equivalent of the amount of the letter of credit is
less than ninety-five percent (95%) of the relevant amount stipulated in section
22.01, Tenant shall have the amount of the letter of credit increased to such
Canadian dollar equivalent amount.
22.03 If partial drawings are made under the letter of credit as per-
mitted thereunder and hereunder, Tenant shall ensure that the amount of the
letter of credit is restored to the amount provided for in section 22.01, within
ten (10) days thereafter.
22.04 Landlord shall reimburse Tenant the cost of maintaining such letter of
credit, up to an amount equal to one-half of one percent (0.5%) of the amount
stipulated in the letter of credit. Such reimbursement shall be paid by Landlord
granting to Tenant a credit against Rent owing hereunder on each anniversary of
the Commencement Date.
22.05 Landlord shall be entitled to draw on the letter of credit only in
the events and only to the extent provided hereafter:
<PAGE>
-22-
(a) if an event of default has occurred under this Lease and any notice
and cure periods have expired, Landlord shall be entitled to demand
payment under the letter of credit up to the amount owing by Tenant
under this Lease at the time of the demand;
(b) if at least fifteen days prior to the expiration date of the letter of
credit, Tenant has not furnished to Landlord evidence that the letter
of credit has been renewed (or, if the letter of credit is subject to
automatic renewal, Landlord is notified at any time by the issuer of
the letter of credit that it will not be renewed) and the letter of
credit has not been replaced, then Landlord shall be entitled, within
fifteen (15) days prior to the expiration date of the letter of
credit, and without further notice to Tenant, to draw on the full
amount of the letter of credit, but only in accordance with the terms
and conditions set out in section 22.06; and
(c) if Tenant fails to have the amount of the letter of credit restored as
required by section 22.03, and after any notice and cure periods have
expired, and such amount has not been replaced, then Landlord shall be
entitled to draw on the full amount of the letter of credit, but only
in accordance with the terms and conditions set out in section 22.06.
22.06 The terms and conditions referred to in paragraphs 22.05 (b) and (c)
are as follows:
(a) the funds received by Landlord under the letter of credit are invested
in an interest-bearing account;
(b) the interest earned on such funds shall accrue to the benefit of
Tenant;
(c) such funds so held by Landlord and the interest accrued thereon shall
be paid forthwith to Tenant upon the restoration of the amount of the
letter of credit or upon the renewal of the letter of credit or the
issuance of a replacement letter of credit or other security
acceptable to Landlord; and
(d) if an event of default should occur under this Lease which extends
beyond the expiration of any notice and cure periods provided for
herein, while the funds are so held by Landlord, the amount to be paid
to Tenant pursuant to paragraph (c) above shall be reduced by the
amount owed by Tenant to Landlord as a consequence of such event of
default, and such amount so owed by Tenant to Landlord shall cease to
be subject to the terms of this section 22.06.
SECTION XXIII EXPANSION
23.01 Tenant shall have the right (subject to the approval of Landlord's
mortgage lender which approval Landlord shall use reasonable efforts to obtain)
to require Landlord to expand the warehouse and manufacturing portion of the
Building by up to 25,000 square feet. In the event that Tenant exercises such
option, the Term shall be extended to the extent necessary to ensure that there
will remain at least fifteen years from the completion of the expansion to the
expiration of the Term. Landlord shall determine the rent that would be payable
for such expansion taking into account the cost of the expansion, the return on
investment required by Landlord, acting reasonably, and prevailing interest
rates and real estate investment market conditions, as well as the rent for the
<PAGE>
-23-
additional term for the original Building taking into account prevailing
interest rates and real estate investment market conditions, and shall
communicate such amounts to Tenant. If the parties do not agree on the rent,
Tenant shall be deemed to have withdrawn its request for the expansion.
SECTION XXIV SCHEDULES
24.01 The Schedules are included in and form an integral part of this Lease.
SECTION XXV ASSIGNMENT TO TENANT'S LENDER
25.01 Landlord consents to the assignment by Tenant of its interest in this
Lease to Tenant's secured lenders as security for Tenant's obligations to such
lenders, provided that the terms and conditions of any such assignment are
reasonably satisfactory to Landlord and that the obligations of Tenant hereunder
shall continue to be performed. In addition, Landlord shall enter into such
agreements with Tenant's secured lenders as may be reasonably requested by such
lenders including, without limitation, agreements waiving Landlord's lien,
hypothec or charge over any equipment, machinery, inventory and other movable
property of Tenant located on the Premises.
SECTION XXVI SUBORDINATION
26.01 Landlord declares that it may assign its rights under this Lease to a
lending institution or any mortgagee, hypothecary creditor or lender as
collateral security for any loan and in the event that any such assignment is
given and executed by Landlord and notification thereof is given to Tenant,
Tenant agrees that it will, if and whenever reasonably required to do so by
Landlord, subordinate this Lease to any such mortgage, hypothec or loan arranged
by Landlord on the security of the Premises, provided that such assignee or
holder of such mortgage, hypothec or loan delivers to Tenant a "non-disturbance"
agreement in form reasonably satisfactory to Tenant whereby such assignee or
holder agrees that so long as Tenant continues to pay the Rent and otherwise
performs its obligations under this Lease, and no default exists hereunder
(which continues beyond the expiration of any notice and cure period provided
for herein), Tenant may remain in quiet possession of the Premises in accordance
with the terms of this Lease.
26.02 If this Lease is not published prior to the rights of the lender or
lenders, if any, providing financing for Landlord's acquisition of the Land or
development and construction of the Building thereon, then Tenant's obligations
hereunder are conditioned upon Tenant receiving within sixty (60) days after the
date hereof an acceptable non-disturbance agreement from such lender or lenders
whereby such lender or lenders agree to the above non-disturbance provisions.
26.03 Tenant agrees that it will at any time and from time to time upon no
less than ten (10) business days prior written notice, execute and deliver to
Landlord in form reasonably acceptable to Tenant, a statement in writing
certifying that this Lease has been validly executed and delivered by Tenant
pursuant to due corporate action properly taken by it and is unmodified and in
full force and effect (or, if modified, stating the modification and stating
that same is in full force and effect
<PAGE>
-24-
as modified), the Commencement Date and the Termination Date, the amount of Base
Rent and any other amounts then being paid as additional rent hereunder, the
dates to which, by instalment or otherwise, Base Rent and additional rent
payable hereunder have been paid, whether or not there is any existing default
on the part of Landlord of which Tenant is aware and such other matters as
Landlord or its lender or any prospective purchaser may reasonably request. Any
such statement may be conclusively relied upon by any prospective purchaser or
purchasers or lender.
SECTION XXVII ENGLISH LANGUAGE
27.01 The parties have requested that this Lease be prepared in the English
language. Les parties ont demande que le present Bail soit redige en anglais.
SECTION XXVIII ARBITRATION
28.01 In the event the parties are unable to resolve any dispute arising out
of or in connection with this Lease, the parties agree that such dispute shall
be submitted to arbitration by written notice given by one party to the other
setting out with reasonable detail the issue in dispute. Within ten (10)
business days after such notice, the parties shall agree on the appointment of
one arbitrator. If the parties cannot agree on an arbitrator within such delay,
each party shall, within ten (10) business days thereafter, each choose one
arbitrator, and within five (5) business days after both such arbitrators are
chosen, the two of them shall choose a third arbitrator. The decision of the
arbitrator or arbitrators, as the case may be, shall be rendered within ninety
(90) days after the appointment of the panel and shall be final and binding and
non-appealable, except for the reasons set forth in article 946.4 of the Quebec
Code of Civil Procedure. All proceedings shall take place in Montreal and the
language of the arbitration shall be English. The arbitration proceedings shall
be governed by Book VII of the Quebec Code of Civil Procedure to the extent not
inconsistent with the provisions of this section 28.01. Each party shall pay its
own costs and share equally the costs of the arbitration.
SECTION XXIX SURETYSHIP
29.01 As security for the performance by Tenant of its obligations here-
under, Tenant shall provide to Landlord concurrently with the execution of this
Lease and shall cause to remain in force throughout the Term, an agreement of
suretyship or guarantee executed by DT Industries, Inc. in favour of Landlord
guaranteeing the performance by Tenant of its obligations under this Lease.
<PAGE>
-25-
IN WITNESS WHEREOF the parties have signed these presents at the place
and on the date indicated below.
SIGNED by LANDLORD on the 30th day of April 1997.
TEECAN PROPERTIES INC.
(signed Erik Charton)
- --------------------------
Witness: Erik Charton
(signed Wayne Heuff) Per: (signed Stephen Kaplan)
- -------------------------- ------------------------------
Witness: Wayne Heuff ("Landlord")
SIGNED by TENANT on the 30th day of April 1997.
KALISH CANADA INC.
(signed Wayne Heuff)
- --------------------------
Witness: Wayne Heuff
(signed Erik Charton) Per: (signed Louis Pallay)
- -------------------------- ------------------------------
Witness: Erik Charton ("Tenant")
Amendment to Lease
Agreement made this 30th day of June 1997 by and between PARKLANDS
PROPERTIES TRUST, a Massachusetts voluntary association having its principal
office in Boston, Massachusetts (hereinafter "Landlord") and SENCORP SYSTEMS,
INC., a Delaware corporation, having an office at 400 Kidds Hill Road, Hyannis,
Massachusetts 02601 (hereinafter "Tenant").
WHEREAS, the parties entered into a certain lease dated December 8, 1989
for the premises known as building No. 7 at 400 Kidds Hill Road, Hyannis,
Massachusetts 20601 (the "Lease"); and
WHEREAS, the parties amended the lease in the Amendment to Lease dated
April 20, 1992; and
WHEREAS, the parties wish to further amend the Lease as amended,
NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Article 26, paragraph (a) is hereby amended by striking "five (5) years
(the "Second Renewal Term") commencing on January 1, 1998 and expiring on
December 31, 2002," and substituting therefor the following: "one (1) year
(the "Second Renewal Term") commencing January 1, 1998 and expiring on
December 31, 1998,".
2. Article 26, paragraph (c)(iii) is hereby amended by striking "the FMV"
and substituting therefor the following: "$4.20 per square foot."
3. Article 27, paragraph (a), is hereby amended by striking the last
sentence in its entirety and substituting therefor the following: "If said
Option is exercised at any time after January 1, 1995, the purchase price
will be $2,750,000.00."
4. Except as expressly amended herein, all the terms, covenants and
provisions of the Lease as amended shall remain in full force and effect
and are hereby ratified and confirmed, in their entirety.
<PAGE>
5. Execution by the parties of this Amendment To Lease hereby constitutes
Tenant's Second Notice, as to renewal of said Lease for the Second Renewal
Term, as required under Article 26, paragraph (a), thereof.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of
the day and year first above written.
LANDLORD: TENANT:
PARKLANDS PROPERTIES TRUST SENCORP SYSTEMS, INC.
By: /s/ John D. Bambara By: /s/ Anthony Giovannone
---------------------------- -------------------------------
John D. Bambara Anthony Giovannone
President
COMMONWEALTH OF MASSACHUSETTS
Barnstable, ss. June 30, 1997
Then personally appeared the above-named John D. Bambara, a Trustee of
Parklands Properties Trust, a Massachusetts voluntary association, and
acknowledged the foregoing to be his free act and deed in his capacity as a
Trustee and the free act and deed of said association, before me.
/s/ Lynn G. Hall
-----------------------------------
Notary Public
My Commission Expires: 3/11/99
COMMONWEALTH OF MASSACHUSETTS
Barnstable, ss. June 30, 1997
Then personally appeared the above-named Anthony Giovannone, President
SENCORP SYSTEMS, INC., a Delaware corporation and acknowledged the foregoing to
be his free act and deed of said corporation, before me.
/s/ Lynn G. Hall
-----------------------------------
Notary Public
My Commission Expires: 3/11/99
FOURTH AMENDED AND RESTATED CREDIT FACILITIES AGREEMENT
among
NATIONSBANK, N.A.
(successor by merger to The Boatmen's National Bank of St. Louis)
as Administrative Agent and a Lender
and
ANY OTHER PERSONS WHO BECOME LENDERS
AS PROVIDED HEREIN
and
DT INDUSTRIES, INC.,
and
THE OTHER BORROWERS LISTED ON THE SIGNATURE PAGES HEREOF
July 21, 1997
<PAGE>
TABLE OF CONTENTS
1. Effective Date ....................................................... 1
2. Definitions and Rules of Construction ................................ 1
2.1. Listed Definitions ............................................ 1
2.2. Other Definitions ............................................. 1
2.3. References to Borrower ........................................ 1
2.4. References to Covered Person .................................. 1
2.5. References to Lenders ......................................... 2
2.6. References to Required Lenders ................................ 2
2.7. Accounting Terms .............................................. 2
2.8. Meaning of Satisfactory ....................................... 2
2.9. Computation of Time Periods ................................... 2
2.10. General ....................................................... 2
3. Lenders' Commitments ................................................. 3
3.1. Aggregate Revolving Loan Commitments .......................... 3
3.2. Limitations on Revolving Loan Advances ........................ 3
3.2.1. Aggregate Limit of All Revolving Loan Advances ........ 3
3.2.2. Aggregate Limit of Revolving Loan Advances to
Foreign Borrowers ..................................... 3
3.2.3. Aggregate Limit of Revolving Loan Advances to
UK Borrower ........................................... 3
3.2.4. Aggregate Limit of Revolving Loan Advances to
German Borrowers ...................................... 4
3.2.5. Other Limitations ..................................... 4
3.3. Voluntary Reductions in Commitments ........................... 4
3.4. Revolving Notes ............................................... 5
3.5. Swingline ..................................................... 5
3.5.1. Swingline Advances .................................... 5
3.5.2. Limitations on Swingline Advances ..................... 6
3.5.3. Swingline Notes ....................................... 6
3.6. Canadian Term Commitment ...................................... 6
3.6.1. Continuation of Canadian Term Loan .................... 6
3.6.2. Canadian Term Notes ................................... 6
3.7. Letter of Credit Commitment ................................... 6
4. Interest; Yield Protection ........................................... 7
4.1. Interest on Draws on Letters of Credit ........................ 7
4.2. Interest on Loans ............................................. 7
4.2.1. Aggregate Revolving Loan and Swingline Loan ........... 7
4.2.2. Aggregate Canadian Term Loan .......................... 7
4.3. Adjusted Eurodollar Rate and Adjusted Base Rate ............... 7
4.4. Continuation or Conversion of Loans ........................... 9
4.5. Interest Periods for Eurodollar Loans ......................... 10
4.6. Time of Accrual ............................................... 10
4.7. Computation ................................................... 10
i
<PAGE>
4.8. Rate After Maturity ........................................... 11
4.9. Compensation for Increased Costs and Reduced Returns;
Capital Adequacy .............................................. 11
4.9.1. ....................................................... 11
4.9.1.1. ............................................. 11
4.9.1.2. ............................................. 11
4.9.1.3. ............................................. 11
4.9.2. ....................................................... 12
4.9.3. ....................................................... 12
4.10. Limitation on Types of Loans .................................. 12
4.10.1. ....................................................... 12
4.10.2. ....................................................... 13
4.11. Illegality .................................................... 13
4.12. Compensation .................................................. 13
4.12.1. ....................................................... 13
4.12.2. ....................................................... 14
4.13. Treatment of Affected Loans ................................... 14
4.13.1. ....................................................... 14
4.13.2. ....................................................... 14
4.14. Taxes ......................................................... 15
4.14.1. ....................................................... 15
4.14.2. ....................................................... 15
4.14.3. ....................................................... 16
4.14.4. ....................................................... 16
4.14.5. ....................................................... 16
4.14.6. ....................................................... 16
4.14.7. ....................................................... 17
4.14.8. ....................................................... 17
4.14.9. ....................................................... 17
4.14.10........................................................ 17
4.15. Usury ......................................................... 17
4.16. Unavailability of Offshore Currency ........................... 17
4.16.1 Suspension of Obligations ............................. 17
4.16.2 Mandatory Assignment .................................. 18
4.17. Alternate Lending Installation ................................ 18
5. Fees ................................................................. 18
5.1. Commitment Fee ................................................ 18
5.2. Letter of Credit Fee .......................................... 19
5.3. Other Letter of Credit Fees ................................... 19
5.4. Calculation of Fees ........................................... 19
6. Payments ............................................................. 19
6.1. Scheduled Payments on Aggregate Revolving Loan, Canadian Term
Loan and Swingline Loan ....................................... 20
6.1.1. Interest .............................................. 20
6.1.2. Principal ............................................. 20
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<PAGE>
6.2. Prepayments ................................................... 20
6.2.1. Voluntary Prepayments ................................. 20
6.2.2. Mandatory Prepayments as a Result of Currency
Value Adjustments ..................................... 20
6.3. Reimbursement Obligations of Borrower ......................... 21
6.4. Manner of Payments and Timing of Application of Payments ...... 21
6.4.1. Payment Requirement ................................... 21
6.4.2. Nonconforming Payments ................................ 21
6.4.3. Application of Payments and Proceeds .................. 22
6.4.4. Interest Calculation .................................. 22
6.5. Returned Instruments .......................................... 22
6.6. Compelled Return of Payments or Proceeds ...................... 22
6.7. Due Dates Not on Business Days ................................ 23
7. Procedure for Obtaining Advances and Letters of Credit ............... 23
7.1. Initial Revolving Loan Advances ............................... 23
7.2. Subsequent Revolving Loan Advances ............................ 23
7.2.1. Borrower Requests ..................................... 23
7.2.2. Revolving Loan Advances to Repay the Swingline Loan ... 24
7.2.2.1. ............................................. 24
7.2.2.2. ............................................. 24
7.2.3. Administrative Agent's Right to Make Other
Revolving Loan Advances ............................... 24
7.3. Letters of Credit ............................................. 25
7.4. Fundings of Revolving Loan Advances ........................... 25
7.4.1. Funding of Dollar Denominated Advances ................ 25
7.4.2. Funding of Offshore Currency Denominated Advances ..... 25
7.4.3. Draws on Letters of Credit ............................ 25
7.4.4. All Funding Retable ................................... 26
7.5. Administrative Agent's Availability Assumption ................ 26
7.6. Disbursement .................................................. 26
7.7. Restrictions on Advances ...................................... 27
7.8. Restriction on Number of Eurodollar Loans ..................... 27
7.9. Each Advance Request and Letter of Credit Request
a Certification ............................................... 27
7.10. Requirements for Every Advance Requests ....................... 27
7.11. Requirements for Every Letter of Credit Request ............... 27
7.12. Exoneration of Administrative Agent and Lenders ............... 27
8. Security and Guaranties .............................................. 27
8.1. Domestice Borrower Stock Pledges .............................. 28
8.2. UK Borrower and Subsidiaries Stock Pledges .................... 28
8.3 Guaranties .................................................... 28
8.3.1. Domestic Borrower Obligations ......................... 28
8.3.2. Foreign Borrower Obligations .......................... 28
8.3.3. Borrower Obligations .................................. 28
8.3.4. Canadian Term Loan .................................... 28
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<PAGE>
9. Conditions of Lending ................................................ 29
9.1. Conditions to Initial Advance ................................. 29
9.1.1. Listed Documents and Other Items ...................... 29
9.1.2. Default ............................................... 29
9.1.3. Perfection of Security Interests ...................... 29
9.1.4. Representations and Warranties ........................ 29
9.1.5. Material Adverse Change ............................... 29
9.1.6. Pending Material Proceedings .......................... 29
9.1.7. Payment of Fees ....................................... 29
9.1.8. Other Items ........................................... 29
9.2. Conditions to Subsequent Advances .............................. 29
9.2.1. General Conditions .................................... 29
9.2.2. Representations and Warranties ........................ 29
9.2.3. Default ............................................... 30
10. Conditions to Issuance of Letteres of Credit ......................... 30
10.1. Reimbursement Agreement ....................................... 30
10.2. No Prohibitions ............................................... 30
10.3. Representations and Warranties ................................ 30
10.4. No Default .................................................... 30
10.5. Other Conditions .............................................. 30
11. Representations and Warranties ....................................... 30
11.1. Organization and Existence .................................... 30
11.2. Authorization ................................................. 31
11.3. Due Execution ................................................. 31
11.4. Enforceability of Obligations ................................. 31
11.5. Burdensom Obligations ......................................... 31
11.6. Legal Restraints .............................................. 31
11.7. Labor Contracts and Disputes .................................. 31
11.8. No Material Proceedings ....................................... 31
11.9. Material Licenses ............................................. 31
11.10. Compliance with Material Laws ................................. 32
11.10.1. General Compliance with Environmental Laws ........... 32
11.10.2. Proceedings .......................................... 32
11.10.3. Investigations Regarding Hazardous Materials ......... 32
11.10.4. Notices and Reports Regarding Hazardous Materials .... 32
11.10.5. Hazardous Materials on Real Property ................. 32
11.11. Financial Statements .......................................... 33
11.12. No Change in Condition ........................................ 33
11.13. No Defaults ................................................... 33
11.14. Investments ................................................... 33
11.15. Indebtedness .................................................. 33
11.16. Indirect Obligations .......................................... 33
11.17. Tax Liabilities; Governmental Charges ......................... 33
11.18. Pension Benefit Plans ......................................... 33
iv
<PAGE>
11.18.1. Prohibited Transactions .............................. 33
11.18.2. Claims ............................................... 34
11.18.3. Reporting and Disclosure Requirements ................ 34
11.18.4. Accumulated Funding Deficiency ....................... 34
11.18.5. Multi-employer Plan .................................. 34
11.19. Welfare Benefit Plans ......................................... 34
11.20. Retiree Benefits .............................................. 34
11.21. State of Property ............................................. 35
11.22. Negative Pledges .............................................. 35
11.23. Margin Stock .................................................. 35
11.24. Securities Matters ............................................ 35
11.25. Investment Company Act, Etc. .................................. 35
11.26. No Material Misstatements or Omissions ........................ 35
11.27. Filings ....................................................... 35
12. Modification and Survival of Representations ......................... 36
13. Affirmative Covenants ................................................ 36
13.1. Use of Proceeds ............................................... 36
13.2. Corporate Existence ........................................... 36
13.3. Maintenance of Property and Leases ............................ 36
13.4. Insurance ..................................................... 36
13.5. Payment of Taxes and Other Obligations ........................ 37
13.6. Compliance With Laws .......................................... 37
13.6.1. Environmental Laws ................................... 37
13.6.2. Pension Benefit Plans ................................ 37
13.7. Discovery and Clean-Up of Hazardous Material .................. 37
13.8. Termination of Pension Benefit Plan ........................... 38
13.9. Notice to Administrative Agent of Material Events ............. 38
13.9.1. ...................................................... 38
13.9.2. ...................................................... 38
13.9.3. ...................................................... 38
13.9.4. ...................................................... 38
13.9.5. ...................................................... 39
13.9.6. ...................................................... 39
13.9.7. ...................................................... 39
13.9.8. ...................................................... 40
13.9.9. ...................................................... 40
13.9.10. ...................................................... 40
13.10. Borrowing Officer ............................................. 40
13.11. Maintenance of Security Interests of Security Documents ....... 40
13.11.1. Preservation and Perfection of Security Interests .... 40
13.11.2. Compliance With Terms of Security Documents .......... 40
13.12. Accounting System ............................................. 40
13.13. Financial Statements .......................................... 40
v
<PAGE>
13.13.1. Annual Financial Statements .......................... 40
13.13.2. Quarterly Financial Statements ....................... 41
13.14. Other Financial Information ................................... 41
13.14.1. Stockholders and SEC Reports ......................... 41
13.14.2. Pension Benefit Plan Reports ......................... 41
13.14.3. Tax Returns .......................................... 42
13.15. Other Information ..... ....................................... 42
13.16. Audits by Administrative Agent ................................ 42
13.17. Access to Officers and Auditors ............................... 42
13.18. Confidentiality ............................................... 42
13.19. Proformas for Permitted Acquisitions .......................... 43
13.20. Further Assurances ............................................ 43
14. Negative Covenants ................................................... 43
14.1. Investments ................................................... 43
14.1.1. ...................................................... 43
14.1.2. ...................................................... 44
14.1.3. ...................................................... 44
14.1.4. ...................................................... 44
14.1.5. ...................................................... 44
14.1.6. ...................................................... 44
14.1.7. ...................................................... 44
14.2. Indebtedness .................................................. 44
14.2.1. ...................................................... 44
14.2.2. ...................................................... 44
14.2.3. ...................................................... 44
14.2.4. ...................................................... 44
14.2.5. ...................................................... 45
14.3. Indirect Obligations .......................................... 45
14.4. Security Interests ............................................ 45
14.4.1. ...................................................... 45
14.4.2. ...................................................... 45
14.4.3. ...................................................... 45
14.4.4. ...................................................... 45
14.4.5. ...................................................... 45
14.4.6. ...................................................... 45
14.4.7. ...................................................... 45
14.4.8. ...................................................... 45
14.4.9. ...................................................... 46
14.5. Acquisitions .................................................. 46
14.5.1. Aggregate Dollar Limitation .......................... 46
14.5.2. Individual Acquisition Dollar Limitation ............. 46
14.5.3. Surviving Company Becomes a Guarantor ................ 46
14.5.4. Satisfactory Due Diligence Completed ................. 46
14.5.5. Proforma Financial Statements ........................ 47
14.6. Disposal of Property .......................................... 47
vi
<PAGE>
14.7. Transactions With Affiliates .................................. 47
14.8. Conflicting Agreements ........................................ 47
14.9. Fiscal Year ................................................... 47
14.10. Transactions Having a Material Adverse Effect ................. 47
15. Financial Covenants .................................................. 47
15.1. Special Definitions ........................................... 47
15.2. Minimum Net Worth ............................................. 48
15.3. Maximum Funded Debt to EBITDA Ratio ........................... 49
15.4. Minimum Fixed Charge Coverage ................................. 49
15.5. Minimum EBITDA to Interest Expense Ratio ...................... 49
16. Default .............................................................. 49
16.1. Events of Default ............................................. 49
16.1.1. Failure to Pay Principal or Interest ................. 49
16.1.2. Failure to Pay Other Amounts Owed to Lenders ......... 50
16.1.3. Failure to Pay Amounts Owed to Other Persons ......... 50
16.1.4. Representations or Warranties ........................ 50
16.1.5. Certain Covenants .................................... 50
16.1.6. Other Covenants ...................................... 50
16.1.7. Acceleration of Other Indebtedness ................... 50
16.1.8. Bankruptcy; Insolvency; Etc. ......................... 50
16.1.9. Judgments; Attachment; Settlement, Etc. .............. 51
16.1.10. Pension Benefit Plan Termination, Etc. ............... 51
16.1.11. Liquidation or Dissolution ........................... 51
16.1.12. Seizure of Assets .................................... 52
16.1.13. Racketeering Proceeding .............................. 52
16.1.14. Loan Documents; Security Interests ................... 52
16.1.15. Rate Hedging Agreements .............................. 52
16.1.16. Guaranty; Guarantor .................................. 52
16.2. Rights and Remedies ........................................... 52
16.2.1. Termination of Commitments ........................... 52
16.2.2. Acceleration ......................................... 53
16.2.3. Right of Set-off ..................................... 53
16.2.4. Secured Party Rights ................................. 53
16.2.4.1. ............................................ 53
16.2.4.2. ............................................ 53
16.2.5. Miscellaneous ........................................ 54
16.3. Application of Funds . ........................................ 54
16.4. Limitation of Liability; Waiver ............................... 54
16.5. Notice ........................................................ 54
17. Administrative Agent and Lenders ..................................... 54
17.1. Appointment, Powers, and Immunities ........................... 54
17.2. Reliance by Administrative Agent .............................. 55
17.3. Employment of Administrative Agents and Counsel ............... 55
vii
<PAGE>
17.4. Defaults ...................................................... 56
17.5. Rights as Lender .............................................. 56
17.6. Indemnification ............................................... 56
17.7. Notification of Lenders ....................................... 57
17.8. Non-Reliance on Administrative Agent and Other Lenders ........ 57
17.9. Resignation ................................................... 57
17.10. Collections and Distributions to Lenders by
Administrative Agent .......................................... 57
18. General .............................................................. 58
18.1. Lenders' Right to Cure ........................................ 58
18.2. Rights Not Exclusive .......................................... 58
18.3. Survival of Agreements ........................................ 58
18.4. Assignments and Participations ................................ 58
18.4.1. Permitted Assignments ................................ 58
18.4.1.1. ............................................ 59
18.4.1.2. ............................................ 59
18.4.1.3. ............................................ 59
18.4.1.4. ............................................ 59
18.4.1.5. ............................................ 59
18.4.2. Register; Consequences and Effect of Assignments ..... 59
18.4.3. Agreement of Assignee and Assignor ................... 60
18.4.4. Register of Assignments .............................. 60
18.4.5. Notice to Borrower of Assignment ..................... 61
18.4.6. Assignment to Federal Reserve Bank ................... 61
18.4.7. Information .......................................... 61
18.4.8. Sale of Participations ............................... 61
18.5. Payment of Expenses ........................................... 62
18.6. General Indemnity ............................................. 62
18.6.1. ...................................................... 62
18.6.2. ...................................................... 63
18.6.3. ...................................................... 63
18.6.4. ...................................................... 64
18.6.5. ...................................................... 64
18.6.6. ...................................................... 64
18.7. Letters of Credit ............................................. 65
18.8. Currency Indemnity ............................................ 65
18.9. Changes in Accounting Principles .............................. 65
18.10. Loan Records .................................................. 66
18.11. Other Security and Guaranties ................................. 66
19. Miscellaneous ........................................................ 66
19.1. Notices ....................................................... 66
19.2. Amendments and Modifications; Waivers and Consents ............ 67
19.3. Rights Cumulative ............................................. 67
19.4. Successors and Assigns ........................................ 67
19.5. Severability .................................................. 68
viii
<PAGE>
19.6. Counterparts .................................................. 68
19.7. Governing Law; No Third Party Rights .......................... 68
19.8. Counterpart Facsimile Execution ............................... 68
19.9. No Other Agreements ........................................... 68
19.10. Negotiated Transaction; No Fiduciary Duty ..................... 68
19.11. Choice of Forum ............................................... 69
19.12. Service of Process ............................................ 69
19.13. Jury Trial .................................................... 69
19.14. Incorporation By Reference .................................... 70
19.15. Statutory Notice .............................................. 70
ix
<PAGE>
FOURTH AMENDED AND RESTATED CREDIT FACILITIES AGREEMENT
In consideration of the mutual agreements herein and other sufficient
consideration, the receipt of which is hereby acknowledged, DT INDUSTRIES, INC.,
as "Domestic Borrower", DT Industries (UK) II, Limited, as "UK Borrower",
ASSEMBLY TECHNOLOGIE & AUTOMATION GMBH, as "German Borrower", KALISH CANADA INC.
and DT CANADA INC., as "Canadian Borrowers", NATIONSBANK, N.A., as
"Administrative Agent", "Letter of Credit Issuer" and a "Lender", and any other
Persons who become "Lenders" as provided herein, agree as follows:
RECITALS:
A. The Boatmen's National Bank of St. Louis, to which NationsBank, N.A. is
successor by merger, and certain Subsidiaries of Borrower are parties to
that certain Third Amended and Restated Credit Facilities Agreement dated
as of July 21, 1997 (the "Original Loan Agreement").
B. The parties to the Original Loan Agreement desire to modify its terms, as
reflected herein.
AGREEMENT
Therefore, in consideration of the mutual agreements herein and other sufficient
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
1. Effective Date. This Agreement is effective July 21, 1997.
2. Definitions and Rules of Construction.
2.1. Listed Definitions. Capitalized words defined in the Glossary and
Index of Defined Terms attached hereto as Exhibit 2.1 shall have such
defined meanings wherever used in this Agreement and the other Loan
Documents.
2.2. Other Definitions. If a capitalized word in this Agreement is not
defined in the Glossary and Index of Defined Terms, it shall have such
meaning as defined elsewhere herein, or if not defined elsewhere herein,
the meaning defined in the UCC.
2.3. References to Borrower. The words Borrower, a Borrower, any Borrower,
each Borrower and every Borrower refer to Domestic Borrower, each of the
Canadian Borrowers and each Foreign Borrower separately. The word Borrowers
refers to Domestic Borrower, each of the Canadian Borrowers and Foreign
Borrowers collectively. The foregoing notwithstanding, the word Borrower in
Sections 3.1 through 3.5, 3.7 and 7 does not refer to either of the
Canadian Borrowers.
2.4. References to Covered Person. The words Covered Person, a Covered
Person, any Covered Person, each Covered Person and every Covered Person
refer to Borrower and each of its now existing or later acquired, created
or organized Subsidiaries separately. The words
<PAGE>
Covered Persons refers to Borrower and its now existing or later acquired,
created or organized Subsidiaries collectively.
2.5. References to Lenders. Until Persons in addition to NationsBank, N.A.
become parties to this Agreement as Lenders as provided herein, all
references herein to "Lenders" shall be construed as references to
NationsBank, N.A. alone, anything herein to the contrary notwithstanding.
After other Persons become parties to this Agreement as Lenders as provided
herein, all references herein to "Lenders" shall be construed as references
to all such Persons.
2.6. References to Required Lenders. The words Required Lenders means any
one or more Lenders whose shares of Lenders' Exposure at the relevant time
aggregate at least 51%.
2.7. Accounting Terms. Unless the context otherwise requires, accounting
terms herein that are not defined herein shall be determined under GAAP.
All financial measurements contemplated hereunder respecting Borrower shall
be made and calculated for Borrower and all of its now existing or later
acquired, created or organized Subsidiaries on a consolidated basis in
accordance with GAAP unless expressly provided otherwise herein. If Bor-
rower acquires a Subsidiary, such Subsidiary's financial results shall be
combined with Borrower's on a proforma basis in accordance with GAAP, for
entire applicable period of calculation, and included for purposes of
calculating Borrower's financial measurements for Section 15 and Section
4.3
2.8. Meaning of Satisfactory. Whenever herein a document or matter is
required to be satisfactory to Administrative Agent or satisfactory to
Lenders or satisfactory to Required Lenders, unless expressly stated
otherwise such document must be satisfactory to Administrative Agent,
Lenders or Required Lenders (as applicable) in both form and substance, and
unless expressly stated otherwise Administrative Agent, Lenders or Required
Lenders (as applicable) shall have the absolute discretion to determine
whether the document or matter is satisfactory.
2.9. Computation of Time Periods. In computing or defining periods of time
from a specified date to a later specified date, and in computing the
accrual of interest or fees, the word from shall mean from and including
and the words to and until shall each mean to but excluding. Periods of
days referred to in this Agreement shall be counted in calendar days unless
Business Days are expressly prescribed, and references in this Agreement to
months and years are to calendar months and calendar years unless otherwise
specified.
2.10. General. Unless the context of this Agreement clearly requires
otherwise: (i) references to the plural include the singular and vice
versa; (ii) references to any Person include such Person's successors and
assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement; (iii) references to one gender include all
genders; (iv) including is not limiting; (v) or has the inclusive meaning
represented by the phrase and/or; (vi) the words hereof, herein, hereby,
hereunder and similar terms in this Agreement refer to this Agreement as a
whole, including its Exhibits, and not to any particular provision of this
Agreement; (vii) the word Section or section and Page or page refer to a
section or page, respectively, of, and the word Exhibit refers to an
Exhibit to, this Agreement unless it expressly refers to something else;
(viii) reference to any agreement, document, or instrument (including this
Agreement and any other Loan Document or other agreement, document or
instrument
2
<PAGE>
defined herein), means such agreement, document, or instrument as amended,
modified, restated or replaced and in effect from time to time in
accordance with the terms thereof and, if applicable, the terms hereof, and
includes all attachments thereto and documents incorporated therein, if
any; and (ix) general and specific references to any Law means such Law as
amended, modified, codified or reenacted, in whole or in part, and in
effect from time to time. Section captions and the Table of Contents are
for convenience only and shall not affect the interpretation or
construction of this Agreement or the other Loan Documents.
3. Lenders' Commitments. Subject to the terms and conditions hereof, and in
reliance upon the Representations and Warranties, Lenders make the following
commitments to Borrower:
3.1. Aggregate Revolving Loan Commitments. Subject to the applicable
limitations in Section 3.2 and elsewhere herein, each Lender commits to
make available to Domestic Borrower, from the Effective Date to the
Revolving Loan Maturity Date, such Lender's prorata share of an Aggregate
Revolving Loan Commitment in the Dollar Equivalent Amount of $165,000,000
(the "Aggregate Revolving Loan Commitment") by funding such Lender's
prorata share (as listed on Exhibit 3 hereto) of Revolving Loan Advances
denominated in Dollars, Pounds Sterling or Deutsche Marks and made from
time to time by Administrative Agent as provided herein. Also subject to
the applicable limitations in Section 3.2 and elsewhere herein, each Lender
commits to make available to Foreign Borrowers such Lender's prorata share
of an Aggregate Offshore Currency Revolving Loan Commitment in the Dollar
Equivalent Amount of $80,000,000 (the "Aggregate Offshore Currency
Revolving Loan Commitment") by funding such Lender's prorata share (as
listed on Exhibit 3 hereto) of Revolving Loan Advances denominated in
Pounds Sterling (in the case of the UK Borrower) or Deutsche Marks (in the
case of the German Borrower) and made from time to time by Administrative
Agent as provided herein.
3.2. Limitations on Revolving Loan Advances.
3.2.1. Aggregate Limit of All Revolving Loan Advances. No Revolving
Loan Advance will be made, whether denominated in Dollars or an
Offshore Currency, which would result in the Dollar Equivalent Amount
of the Aggregate Revolving Loan exceeding the Maximum Available
Amount. No Revolving Loan Advance which is a Eurodollar Advance will
be made in a Dollar Equivalent Amount less than a whole multiple of
$2,000,000, and no Revolving Loan Advance which is a Base Rate
Advance will be made in a Dollar Equivalent Amount less than a whole
multiple of $500,000. The "Maximum Available Amount" on any date
shall be equal to (i) the Dollar Equivalent Amount of the Aggregate
Revolving Loan Commitment on such date, minus (ii) (a) the Dollar
Equivalent Amount of the Letter of Credit Exposure on such date
(except to the extent that such Revolving Loan Advance will be used
immediately to reimburse Letter of Credit Issuer for unreimbursed
draws on a Letter of Credit as required herein) and (b) the Dollar
Equivalent Amount of the Swingline Loan.
3.2.2. Aggregate Limit of Revolving Loan Advances to Foreign
Borrowers. No Revolving Loan Advance will be made to a Foreign
Borrower which would result in the Dollar Equivalent Amount of the
Foreign Revolving Loans, plus the Dollar Equivalent Amount of the
portion of the Letter of Credit Exposure attributable to Letters of
Credit
3
<PAGE>
issued for the account of Foreign Borrowers, exceeding the Aggregate
Offshore Currency Revolving Loan Commitment.
3.2.3. Aggregate Limit of Revolving Loan Advances to UK Borrower.
No Revolving Loan Advance will be made to UK Borrower which would
result in the Revolving Loans to UK Borrower, plus the portion of the
Letter of Credit Exposure attributable to Letters of Credit issued
for the account of UK Borrower, exceeding at any time the greater of
(i) (pound)40,000,000 or (ii) an amount in Pounds Sterling equal to
ten times EBITDA (as defined in Section 15.1) of UK Borrower in the
fiscal year of UK Borrower most recently ended prior to such time.
3.2.4. Aggregate Limit of Revolving Loan Advances to German
Borrowers. No Revolving Loan Advance will be made to German Borrower
which would result in the Revolving Loans to German Borrower, plus
the portion of the Letter of Credit Exposure attributable to Letters
of Credit issued for the account of German Borrower, exceeding at any
time the greater of (ii) DM20,000,000 or (ii) an amount in Deutsche
Marks equal to ten times EBITDA (as defined in Section 15.1) of
German Borrower in the fiscal year of German Borrower most recently
ended prior to such time.
3.2.5. Other Limitations. No Revolving Loan Advance will be made on
or after the Revolving Loan Maturity Date, but Lenders may, in their
absolute discretion, fund such Revolving Loan Advances and shall not
be deemed by doing so to have increased the Maximum Available Amount
and shall not be obligated to make any such Revolving Loan Advance
thereafter. If an Event of Default has occurred that has not been
waived by Required Lenders, the Aggregate Revolving Loan Commitment
may be canceled as provided in Section 16.2. Subject to the terms,
conditions and limitations contained herein, Domestic Borrower may
obtain Revolving Advances in any Offshore Currency, but UK Borrower
may only obtain Revolving Advances in Pounds Sterling and German
Borrower may only obtain Revolving Advances in Deutsche Marks.
3.3. Voluntary Reductions in Commitments. Domestic Borrower may reduce the
amount of the Aggregate Revolving Loan Commitment in whole multiples of
$500,000 at any time and from time to time, and may reduce the Dollar
Equivalent Amount of the Aggregate Offshore Currency Revolving Loan
Commitment in whole multiples of $500,000, but only if (i) Borrower gives
Administrative Agent written notice of Borrower's intention to make such
reduction at least two Business Days prior to the effective date of the
reduction, and (ii) Borrower makes on the effective date of the reduction
such payment in the Applicable Currency as is required to reduce the
Aggregate Revolving Loan to an amount equal to the reduced amount of the
Aggregate Revolving Loan Commitment or Aggregate Offshore Currency
Revolving Loan Commitment, as applicable. Any such reduction of the amount
of the Aggregate Revolving Loan Commitment shall be permanent. Each
Lender's initial Revolving Loan Commitment and initial Offshore Currency
Revolving Loan Commitment is its prorata share of the Aggregate Revolving
Loan Commitment and Aggregate Offshore Currency Revolving Loan Commitment,
respectively. Upon any reduction of the Aggregate Revolving Loan Commitment
or Aggregate Offshore Currency Revolving Loan Commitment, each Lender's
Revolving Loan Commitment and Offshore Currency Revolving Loan Commitment,
respectively, will automatically reduce by such
4
<PAGE>
Lender's prorata share of the applicable reduction. Reductions in the
Aggregate Revolving Loan Commitment will reduce the Aggregate Offshore
Currency Revolving Loan Commitment only to the extent that Borrower
designates in its notice of the reduction; except that once the Aggregate
Revolving Loan Commitment is reduced to the same amount as the Aggregate
Offshore Currency Revolving Loan Commitment, then all further reductions in
the Aggregate Revolving Loan Commitment shall reduce the Aggregate Offshore
Currency Revolving Loan Commitment by the same amount.
3.4. Revolving Notes. The obligation of Domestic Borrower to repay each
Lender's Revolving Loan shall be evidenced by one promissory note, payable
to the order of such Lender in a maximum principal amount denominated in
Dollars equal to its prorata share of the Aggregate Revolving Loan
Commitment, and each being otherwise in the form attached hereto as Exhibit
3.4 satisfactory to Administrative Agent and Lenders. The obligation of
UK Borrower to repay each Lender's UK Revolving Loan shall be evidenced by
a promissory note payable to the order of such Lender in a maximum
principal amount denominated in Pounds Sterling having a Dollar Equivalent
Amount equal to its prorata share of $80,000,000. The obligation of German
Borrower to repay each Lender's German Revolving Loan shall be evidenced by
a promissory note payable to the order of such Lender in a maximum
principal amount denominated in Deutsche Marks having a Dollar Equivalent
Amount equal to its prorata share of $80,000,000.
3.5. Swingline.
3.5.1. Swingline Advances. In order to reduce the frequency of
fundings of Revolving Loan Advances by Lenders, but subject to the
limitations in Section 3.5.2 and elsewhere herein, Administrative
Agent may make Swingline Advances as provided herein from time to
time from the Effective Date to the Revolving Loan Maturity Date.
Subject to the limitations in Section 3.5.2 and elsewhere herein,
Swingline Advances may be made in Pounds Sterling to UK Borrower and
Deutsche Marks to German Borrower, and Dollars or any Offshore
Currency to Domestic Borrower, and payments and prepayments that are
applied to reduce the Swingline Loan may be re-advanced as Swingline
Advances as provided herein. Whether a Swingline Advance is made
in any particular instance is within the absolute discretion of
Administrative Agent, and Administrative Agent may cease making
Swingline Advances altogether at any time, including such time as
Administrative Agent resigns as such as provided in Section 17.9,
in its absolute discretion.
3.5.2. Limitations on Swingline Advances. No Swingline Advance will
be made on or after the Revolving Loan Maturity Date, no Swingline
Advance will be made which would result in the Dollar Equivalent
Amount of the Swingline Loan exceeding the Maximum Swingline Amount,
and no Swingline Advance will be made in a Dollar Equivalent Amount
less than $250,000 for Advances denominated in an Offshore Currency
and $250,000 for Advances denominated in Dollars. Administrative
Agent may, however, in its absolute discretion make any such
Swingline Advances, but shall not be deemed by doing so to have
increased the Maximum Swingline Amount or reduced the minimum amount
for Swingline Advances and shall not be obligated to make any such
Swingline Advance thereafter. The "Maximum Swingline Amount" on any
date
5
<PAGE>
for any Swingline Advance shall be a Dollar Equivalent Amount equal
to the lesser of (i) $10,000,000 minus the Letter of Credit
Exposure with respect to all outstanding Swingline Letters of Credit
and (ii) an amount equal to the Maximum Available Amount as of such
date minus the Dollar Equivalent Amount of the Aggregate Revolving
Loan immediately prior to the making of such Swingline Advance.
3.5.3. Swingline Notes. The obligation of Borrower to repay the
Swingline Loan shall be evidenced by three promissory notes payable
to the order of Administrative Agent, one being in the maximum
principal amount of $10,000,000, one being in a maximum principal
amount denominated in Pounds Sterling having a Dollar Equivalent
Amount of $10,000,000, one being in a maximum principal amount
denominated in Deutsche Marks having a Dollar Equivalent Amount of
$10,000,000, and each being otherwise in the form attached hereto as
Exhibit 3.5.3 satisfactory to Administrative Agent.
3.6. Canadian Term Commitment.
3.6.1. Continuation of Canadian Term Loan. Each Lender commits to
continue and extend the currently outstanding term loan to the
Canadian Borrowers in the amount of its share, as listed on Exhibit 3
hereto, of $10,000,000, which is the current outstanding principal
balance of such term loan. Amounts applied to reduce the Aggregate
Canadian Term Loan may not be reborrowed.
3.6.2. Canadian Term Notes. The obligation of Canadian Borrowers to
repay each Lender's share of the Aggregate Canadian Term Loan shall
be evidenced by a promissory note payable to the order of such Lender
in a principal amount equal to such Lender's share of the Aggregate
Canadian Term Loan and otherwise in substantially the form attached
hereto as Exhibit 3.6.2.
3.7. Letter of Credit Commitment. NationsBank commits to issue standby
letters of credit from time to time from the Effective Date to the
Revolving Loan Maturity Date, but only in connection with transactions
reasonably satisfactory to Administrative Agent. Borrower shall designate
in each request for issuance of a Letter of Credit whether such Letter of
Credit is to be a Swingline Letter of Credit or a Revolver Letter of
Credit. If such Letter of Credit is requested to be a Revolver Letter of
Credit, it will not be issued if (i) the Dollar Equivalent Amount of the
Letter of Credit Exposure will as a result of such issuance exceed the
lesser of (a) $15,000,000 and (b) any excess of the Maximum Available
Amount over the Aggregate Revolving Loan, or (ii) the Dollar Equivalent
Amount of the initial face amount of such Letter of Credit would be less
than the minimum amount permitted for a Revolving Loan Advance denominated
in the same Applicable Currency. If such Letter of Credit is requested to
be a Swingline Letter of Credit, it will not be issued if (i) the Dollar
Equivalent Amount of the Letter of Credit Exposure with respect to all
outstanding Swingline Letters of Credit will as a result of such issuance
exceed the lesser of (a) the Maximum Swingline Amount and (b) any excess of
the Maximum Swingline Amount over the Swingline Loan, or (ii) the Dollar
Equivalent Amount of the initial face amount of such Letter of Credit would
be less than $25,000. In no event will a Letter of Credit denominated in an
Offshore Currency be issued if the Dollar Equivalent Amount of the Letter
of Credit Exposure with respect to such Letter of Credit will, when added
to the
6
<PAGE>
Dollar Equivalent Amount of all Offshore Currency Loans, exceed the
Aggregate Offshore Currency Revolving Loan Commitment. Letters of Credit
issued for the account of Domestic Borrower may be denominated in any
Applicable Currency. Letters of Credit issued for the account of UK
Borrower may be denominated only in Pounds Sterling. Letters of Credit
issued for the account of German Borrower may be denominated only in
Deutsche Marks. The expiration date of any Letter of Credit will be a
Business Day that is not more than one year after its issuance date and is
not later than the fifth Business Day preceding the Revolving Loan Maturity
Date; provided, however, that the expiration date for a Letter of Credit
may be later than the Revolving Loan Maturity Date if Letter of Credit
Issuer and Required Lenders consent to such issuance and Borrower provides
to Letter of Credit Issuer cash collateral satisfactory to Letter of Credit
Issuer and Required Lenders as security for Borrower's obligation to
reimburse Letter of Credit Issuer for all draws thereunder. Immediately
upon the issuance by Letter of Credit Issuer of a Revolver Letter of Credit
in accordance with the terms and conditions of this Agreement, but not in
the case of any Swingline Letter of Credit, Letter of Credit Issuer shall
be deemed to have sold and transferred to each other Lender, and such other
Lender shall be deemed to have purchased and received from Letter of Credit
Issuer, a prorata undivided interest and participation in such Revolver
Letter of Credit, the reimbursement obligation of Borrower with respect
thereto, and any guaranty thereof or collateral therefor. Such other
Lender's prorata undivided interest shall be the same as its prorata share
of the Aggregate Revolving Loan Commitment.
4. Interest; Yield Protection.
4.1. Interest on Draws on Letters of Credit. The unreimbursed amount of
each draw on a Letter of Credit shall bear interest at a rate per annum
equal to the then applicable Adjusted Eurodollar Rate.
4.2. Interest on Loans.
4.2.1. Aggregate Revolving Loan and Swingline Loan. Borrower may,
as provided and subject to the limitations in Section 7, designate
the whole of an Advance or any part of an Advance to be either a Base
Rate Advance or a Eurodollar Advance; provided that a Swingline
Advance that is denominated in an Offshore Currency shall always be
designated as a Eurodollar Advance. Each Base Rate Advance when made
will become a Base Rate Loan, which shall bear interest at the
Adjusted Base Rate. Each Eurodollar Advance when made will become a
Eurodollar Loan, which shall bear interest at the Adjusted Eurodollar
Rate. No Offshore Currency Loan may bear interest at the Adjusted
Base Rate.
4.2.2. Aggregate Canadian Term Loan. Canadian Borrowers hereby
acknowledge that the Aggregate Canadian Term Loan is currently a
Eurodollar Loan with an Interest Period of two months ending on
September 1, 1997, and bears interest at the Adjusted Eurodollar Rate
from the Effective Date. When the current Interest Period expires,
the Aggregate Canadian Term Loan or any part thereof may be continued
as a Eurodollar Loan or converted to a Base Rate Loan as provided
in Section 4.4.
7
<PAGE>
4.3. Adjusted Eurodollar Rate and Adjusted Base Rate. The "Adjusted
Eurodollar Rate" for any Eurodollar Loan is the Eurodollar Rate plus the
applicable Eurodollar Increment, and the "Adjusted Base Rate" for any Base
Rate Loan shall be the Prime Rate plus the applicable Base Rate Increment,
as prescribed for the applicable Level in the following table:
<TABLE>
<CAPTION>
- ----- -------------------- ----------------- ----------------- ---------- ---------
Level Ratio of Funded Debt S&P's Rating of Moody's Rating of Eurodollar Base Rate
to EBITDA Domestic Domestic Increment Increment
Borrower's Senior Borrower's Senior
Unsecured Unsecured
Corporate Debt Corporate Debt
- ----- -------------------- ----------------- ----------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
I Equal to or greater Less than BB Less than Ba2 1.125% 0%
than 2.5 to 1.0
- ----- -------------------- ----------------- ----------------- ---------- ---------
II Equal to or greater
than 1.5 to 1.0 but BB Ba2 0.875% 0%
less than 2.5
to 1.0
- ----- -------------------- ----------------- ----------------- ---------- ---------
III Equal to or greater
than 0.5 to 1.0 but BB+ Ba1 0.625% 0%
less than 1.5
to 1.0
- ----- -------------------- ----------------- ----------------- ---------- ---------
IV Less than 0.5 BBB- Baa3 0.450% 0%
to 1.0
- ----- -------------------- ----------------- ----------------- ---------- ---------
V N/A BBB Baa2 0.350% 0%
- ----- -------------------- ----------------- ----------------- ---------- ---------
</TABLE>
The applicable Level shall be the numbered Level in the above table that
corresponds to the higher of (i) the Level corresponding to the ratio of
Domestic Borrower's Funded Debt to EBITDA and (ii) the Level corresponding
to the higher of the ratings categories of Borrower's unsecured corporate
debt by S&P and Moody's (except that in any case when such ratings differ
by more than one Level in the above table, the Level corresponding to the
rating that is one category below the higher Level of the two ratings shall
be used). The applicable Level and the applicable Eurodollar Increment and
Base Rate Increment shall first be determined by Administrative Agent based
upon the ratings of Borrower's unsecured corporate debt by S&P and Moody's
on the Effective Date and the ratio of Borrower's Funded Debt to EBITDA and
as reflected in Borrower's Initial Financial Statements for the fiscal
quarter of Borrower ended just prior to the Effective Date and shall be
become applicable on the Effective Date. Thereafter, the applicable Level
and the applicable Eurodollar Increment and Base Rate Increment shall be
re-determined by Administrative Agent promptly after each delivery by
Borrower to Administrative Agent of Borrower's Financial Statements as
required in Section 13.13.2 and as of the date of any change in the ratings
of Domestic Borrower's unsecured corporate debt by S&P or Moody's and will
become applicable on the tenth day following the day when Domestic Borrower
delivers such Financial Statements to Administrative Agent or the day
following such rating change, as applicable. If, however, Domestic Borrower
does not deliver its quarterly Financial Statements to Administrative Agent
within the period required by Section 13.13.2 and such failure continues
for two Business Days after notice from Administrative Agent, the Base Rate
Increment and Eurodollar Increment corresponding to the Level that is one
lower than the level which had been applicable shall apply retroactively
from the first day after such period and shall continue to apply until
Domestic Borrower delivers such Financial Statements to Administrative
Agent, and Borrower shall pay any consequent shortage in its interest
payments upon demand by Administrative Agent. In the above table, the
symbol "greater than" means "greater than", the symbol "less than" means
"less than", and the symbol "equal to or greater than" means "equal to or
greater than."
8
<PAGE>
The Eurodollar Rate for each Eurodollar Loan shall be determined by
Administrative Agent before the beginning of the applicable Interest Period
and shall apply throughout such Interest Period. The "Eurodollar Rate"
shall be, for the applicable Interest Period therefor, the interest rate
per annum equal to the quotient of
(i) the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%), as determined by Administrative Agent
appearing, in the case of a Eurodollar Loan denominated in Dollars,
on Dow Jones Markets Page 3750 (or any successor page) as the London
interbank offered rate for deposits in Dollars, and in the case of a
Eurodollar Loan denominated in an Offshore Currency, the rate per
annum appearing on British Banking Association Interest Settlement
Rate, Page FRBD (or any successor page) as the London interbank
offered rate for deposits in the Applicable Currency, at
approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such
Interest Period. If for any reason such rate for a Eurodollar Loan
denominated in dollars is not available, the term "Eurodollar Rate"
shall mean, for any Eurodollar Loan for any Interest Period therefor,
the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period;
provided, however, if more than one rate is specified on Reuters
Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates (rounded upwards, if necessary, to the nearest 1/100
of 1%),
divided by
(ii) an amount equal to one minus the maximum rate (expressed as a
decimal number) at which reserves (including, without limitation, any
marginal, special, supplemental, or emergency reserves) are required
to be maintained under regulations issued from time to time by the
FRB or any other Governmental Authority to which any Lender is
subject (or any successor) against, including, in the case of
Eurodollar Loans, "Eurocurrency liabilities" (as such term is used in
Regulation D). Without limiting the effect of the foregoing, the
reserve requirement shall reflect any other reserves required to be
maintained by any Lender with respect to any category of liabilities
which includes deposits by reference to which the Eurodollar Rate is
to be determined, or any category of extensions of credit or other
assets which include Eurodollar Loans. (The entire amount of a Euro-
dollar Loan shall be deemed to constitute a Eurocurrency liability
and as such shall be deemed to be subject to such reserve require-
ments without benefit of credits for proration, exceptions or
set-offs which may be available from time to time to any Lender under
Regulation D.) The Eurodollar Rate shall be adjusted automatically
on and as of the effective date of any change in any such reserve
requirements.
4.4. Continuation or Conversion of Loans. Borrower may (i) at any time
convert some or all of a Base Rate Loan to a Eurodollar Loan, or (ii) at
the end of any Interest Period of a Eurodollar Loan, continue the Loan as a
Eurodollar Loan for an additional Interest Period or convert some or all of
such Eurodollar Loan to a Base Rate Loan; provided however, that if an
Event of Default has occurred that has not been waived by Required Lenders,
Borrower may not
9
<PAGE>
convert a Base Rate Loan to a Eurodollar Loan or continue a Eurodollar Loan
for an additional Interest Period. To cause any conversion or continuation,
Borrower shall give Administrative Agent, prior to 11:00 a.m. Central Time
three Business Days prior to the date the conversion or continuation is to
be effective, a written request (which may be mailed, personally delivered
or telecopied as provided in Section 19.1) specifying (i) the applicable
Borrower, (ii) the Applicable Currency, (iii) whether a conversion or
continuation is requested, (iv) in the case of a conversion, specifying the
amount to be converted and whether it is to be a Eurodollar Loan or a Base
Rate Loan upon the conversion, and (v) in the case of any conversion to or
continuation of a Eurodollar Loan, specifying the Interest Period therefor.
If such notice is not given by 11:00 a.m. Central Time on the third
Business Day preceding the last day of the Interest Period of a Eurodollar
Loan, then the applicable Borrower shall be deemed to have timely given a
notice to Administrative Agent requesting (i) as to any Dollar denominated
Revolving Loan, to convert (or continue such Loan as) a Base Rate Loan
bearing interest at the Adjusted Base Rate, and (ii) as to any Offshore
Currency denominated Revolving Loan to convert such Loan to (or continue
such Loan as) a Eurodollar Loan with an Interest Period of one month, in
each case until the applicable Borrower notifies Administrative Agent in
accordance with the terms hereof. In the case of a Eurodollar Loan, any
conversion or continuation shall become effective only on the day following
the last day of the current Interest Period. A Loan denominated in one
currency may not be converted into a Loan denominated in another currency.
4.5. Interest Periods for Eurodollar Loans. For each Eurodollar Loan
Borrower shall select an Interest Period that is either one, two, three, or
six months; provided that:
(i) every such Interest Period for a Eurodollar Advance shall
commence on the date of the Advance;
(ii) if any Interest Period would otherwise expire on a day of a
calendar month which is not a Business Day, then such Interest Period
shall expire on the next succeeding Business Day in that calendar
month; provided, however, that if the next succeeding Business Day
would be in the following calendar month, it shall expire on the
first preceding Business Day;
(iii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month;
(iv) no Interest Period for a Eurodollar Loan that is part of the
Aggregate Revolving Loan shall extend beyond the Revolving Loan
Maturity Date; and
(v) no Interest Period for the Canadian Term Loan may extend beyond
the Canadian Term Loan Maturity Date.
A Eurodollar Loan shall bear interest at the Adjusted Eurodollar Rate
throughout the applicable Interest Period designated by Borrower.
10
<PAGE>
4.6 Time of Accrual. Interest shall accrue on all principal amounts
outstanding from the date when first outstanding to the date when no longer
outstanding. Amounts shall be deemed outstanding until payments are applied
thereto as provided herein.
4.7 Computation. Interest shall be computed for the actual days elapsed
over a year deemed to consist of 360 days (30 days to each month) for all
Eurodollar Loans and actual days elapsed for all Base Rate Loans. The
Adjusted Base Rate shall change simultaneously with any change in the Prime
Rate and such change shall be effective for the entire day on which such
change becomes effective. The Adjusted Base Rate will be determined by
Administrative Agent on the Effective Date based on the Prime Rate in
effect on the Effective Date and on each Business Day thereafter when the
Prime Rate changes.
4.8 Rate After Maturity. Borrower shall pay interest on each Loan after
its Maturity, and (at the option of Lenders) on each Loan and on the other
Loan Obligations after the occurrence of an Event of Default, at a rate per
annum of 2.0% plus the rate that would otherwise apply hereunder.
4.9 Compensation for Increased Costs and Reduced Returns; Capital
Adequacy.
4.9.1. If, after the Effective Date, the adoption of any applicable
Law or any change in any applicable Law or any change in the
interpretation or administration thereof by any Governmental
Authority charged with the interpretation or administration thereof,
or compliance by any Lender (or its Applicable Lending Office) with
any request or directive (whether or not having the force of law) of
any such Governmental Authority, central bank, or comparable agency:
4.9.1.1. shall subject such Lender (or its Applicable
Lending Office) to any Tax with respect to any Eurodollar
Loans, Offshore Currency Loans, or its obligation to make
Eurodollar Loans or Offshore Currency Loans, or change the
basis of taxation of any amounts payable to such Lender (or
its Applicable Lending Office) under this Agreement in
respect of any Eurodollar Loans or Offshore Currency Loans
(other than Taxes imposed on the overall net income of such
Lender by the jurisdiction in which such Lender has its
principal office or such Applicable Lending Office);
4.9.1.2. shall impose, modify, or deem applicable any
reserve, special deposit, assessment, compulsory loan or
similar requirement (other than the reserve requirement
utilized in the determination of the Eurodollar Rate)
relating to any extensions of credit or other assets of, or
any deposits with or other liabilities or commitments of,
such Lender (or its Applicable Lending Office), including
the Commitment of such Lender hereunder; or
4.9.1.3. shall impose on such Lender (or its Applicable
Lending Office) or on the London interbank market any other
condition affecting this Agreement, such Lender's Revolving
Loan Commitment or its Note or any of such extensions of
credit or liabilities or commitments;
11
<PAGE>
and the result of any of the foregoing is to increase the cost to
such Lender (or its Applicable Lending Office) of making, converting
into, continuing, or maintaining any Loans or to reduce any sum
received or receivable by such Lender (or its Applicable Lending
Office) under this Agreement or its Note with respect to any Loans,
then the Borrower shall pay to such Lender on demand such amount or
amounts as will compensate such Lender for such increased cost or
reduction. If any Lender requests compensation by the Borrower under
this Section the Borrower may, by notice to such Lender (with a copy
to the Administrative Agent), suspend the obligation of such Lender
to make or continue Loans of the type or in the Applicable Currency
with respect to which such compensation is requested, or to convert
Loans of any other type into Loans of such type (but not convert
Loans of one Applicable Currency into another Applicable Currency),
until the event or condition giving rise to such request ceases to be
in effect (in which case the provisions of Section 4.13 shall be
applicable); provided, however, that such suspension shall not affect
the right of such Lender to receive the compensation so requested.
4.9.2. If, after the Effective Date, any Lender shall have
determined that the adoption of any applicable Law regarding capital
adequacy or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank,
or comparable agency charged with the interpretation or admin-
istration thereof, or any request or directive regarding capital
adequacy (whether or not having the force of law) of any such
governmental authority, central bank, or comparable agency has or
would have the effect of reducing the rate of return on the capital
of such Lender or any corporation controlling such Lender as a
consequence of such Lender's obligations hereunder to a level below
that which such Lender or such corporation could have achieved but
for such adoption, change, request, or directive (taking into
consideration its policies with respect to capital adequacy), then
from time to time upon demand the Borrower shall pay to such Lender
such additional amount or amounts as will compensate such Lender for
such reduction after giving effect (without duplication) to any
compensation payable pursuant to Section 4.9.1.
4.9.3. Each Lender shall promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge,
occurring after the Effective Date, which will entitle such
Lender to compensation pursuant to this Section 4.9 and will
designate a different Applicable Lending Office if such designation
will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Lender, be otherwise dis-
advantageous to it. Any Lender claiming compensation under this
Section 4.9 shall furnish to the Borrower and the Administrative
Agent a statement setting forth the additional amountor amounts to be
paid to it hereunder which shall be conclusive in the absence of
manifest error. In determining such amount, such Lender may use any
reasonable averaging and attribution methods.
4.10. Limitation on Types of Loans. If on or prior to the first day of
any Interest Period for any Eurodollar Loan:
12
<PAGE>
4.10.1. the Administrative Agent determines (which determination
shall be conclusive if made in good faith) that by reason of
circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such
Interest Period; or
4.10.2. the Required Lenders determine (which determination shall be
conclusive if made in good faith) and notify the Administrative Agent
that the Eurodollar Rate will not adequately and fairly reflect the
cost to the Lenders of funding Eurodollar Loans for such Interest
Period;
then the Administrative Agent shall give the Borrower prompt notice
thereof, and so long as such condition remains in effect, the Lenders shall
be under no obligation to make additional Eurodollar Loans affected by such
conditions, to continue such Eurodollar Loans, or to convert Base Rate
Loans to such Eurodollar Loans and the Borrower shall, on the last day(s)
of the then current Interest Period(s) for the outstanding Eurodollar
Loans, as applicable (i) convert such Eurodollar Loans into another
Eurodollar Loan which is not subject to the same or similar condition, (ii)
in the case of Dollar denominated Loans, convert such Eurodollar Loans into
Base Rate Loans, or (iii) in the case Offshore Currency Loans, promptly
repay such loans. The Administrative Agent shall give the Domestic Borrower
notice describing in reasonable detail any event or condition described in
this Section 4.10 promptly following the determination by the
Administrative Agent or the Required Lenders, as the case may be, that the
availability of Eurodollar Loans is, or is to be, suspended as a result
thereof, but failure of Administrative Agent to give such notice shall not
extinguish or diminish Borrower's obligations under this Section 4.10.
4.11. Illegality. Notwithstanding any other provision of this Agreement, in
the event that it becomes unlawful for any Lender or its Applicable Lending
Office to honor its obligation to make, maintain, or fund Eurodollar Loans
or Loans in any Applicable Currency hereunder, then such Lender shall
promptly notify the Borrower thereof and such Lender's obligation to make
or continue Eurodollar Loans or Loans in such Applicable Currency, as
applicable, or (if applicable) convert Base Rate Loans into Eurodollar
Loans, shall be suspended until such time as such Lender may again make,
maintain, and fund Eurodollar Loans or Loans in such Applicable Currency;
and such Lender's outstanding Eurodollar Loans shall be converted into Base
Rate Loans in accordance with Section 4.13 denominated in Dollars, and the
Borrower shall repay to such Lender all outstanding Offshore Currency Loans
owed to such Lender (together with accrued interest thereon) at the end of
their respective Interest Periods or on the date such payment is required
in order for Lenders to be in compliance with applicable Law, whichever is
earlier (in which case the provisions of Section 4.13 shall be applicable),
and Dollar Loans shall not be required to be repaid.
4.12. Compensation. Upon the request of any Lender, for each Loan in any
Applicable Currency, the Borrower shall pay to such Lender such amount or
amounts as shall be sufficient (in the reasonable determination of such
Lender) to compensate it for any loss, cost, or expense (including loss of
anticipated profits) incurred by it as a result of:
13
<PAGE>
4.12.1. any payment, prepayment, or conversion of an Eurodollar Loan
for any reason (other than pursuant to Section 4.11, but including,
without limitation, the acceleration of the Loans pursuant to the
terms hereof) on a date other than the last day of the Interest
Period for such Eurodollar Loan; or
4.12.2. any failure by the Borrower for any reason (other than a
default by such Lender or pursuant to Section 4.10 or 4.11) to
borrow, convert, continue, or prepay a Eurodollar Loan on the date
for such borrowing, conversion, continuation, or prepayment specified
in the relevant notice of borrowing, prepayment, continuation, or
conversion under this Agreement.
If a Lender claims compensation under this Section 4.12, such Lender shall
furnish a certificate to Borrower that states the amount to be paid to it
hereunder and includes a description in reasonable detail of the method
used by such Lender in calculating such amount. Borrower shall have the
burden of proving that the amount of any such compensation calculated by a
Lender is not correct. Any compensation payable by Borrower to a Lender
under this Section shall be payable without regard to whether such Lender
has funded its prorata share of any Eurodollar Advance or Eurodollar Loan
through the purchase of deposits in an amount or of a maturity
corresponding to the deposits used as a reference in determining the
Eurodollar Rate under Section 4.3 (and in the case of Offshore Currency
Loans, for deposits in the Applicable Currency of amounts comparable to
such principal amount and maturities comparable to such period).
4.13. Treatment of Affected Loans. If the obligation of any Lender to make
a Eurodollar Loan or to continue any Eurodollar Loan or to convert any Base
Rate Loan into an Eurodollar Loan shall be suspended pursuant to Section
4.9, 4.10 or 4.11 (such Loans being herein called "Affected Loans"), such
Lender's Affected Loans shall be automatically and immediately be converted
into Base Rate Loans on the last days of the then current Interest Periods
for Affected Loans (or, in the case of a conversion required by Section
4.11 hereof, on such earlier date as such Lender may specify to the
Borrower with a copy to the Administrative Agent) and, unless and until
such Lender gives notice as provided below that the circumstances specified
in Section 4.9 or 4.11 or that gave rise to such conversion no longer
exist:
4.13.1. to the extent that such Lender's Affected Loans have been so
converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Affected Loans shall continue
to be made and applied as provided for herein; and
4.13.2. all Loans that would otherwise be made or continued by such
Lender as Eurodollar Loans shall be made or continued instead as Base
Rate Loans, and all Loans of such Lender that would otherwise be
converted into Eurodollar Loans shall be converted instead into (or
shall remain as) Base Rate Loans.
If such Lender gives notice to the Borrower (with a copy to the
Administrative Agent) that the circumstances specified in Section 4.9, 4.10
or 4.11 that gave rise to the conversion of such Lender's Affected Loans
pursuant to this Section 4.13 no longer exist (which such Lender agrees to
do promptly upon such circumstances ceasing to exist) at a time when Loans
of the type of the
14
<PAGE>
Affected Loans made by other Lenders are outstanding, such Lender's Base
Rate Loans shall be automatically converted, on the first days of the next
succeeding Interest Periods for such outstanding Loans of the type of the
Affected Loans, to the extent necessary so that, after giving effect
thereto, all Loans held by the Lenders holding Loans of the type of the
Affected Loans and by such Lender are held prorata (as to principal
amounts, type of interest, and Interest Periods) in accordance with their
respective Commitments.
4.14. Taxes.
4.14.1. Any and all payments by the Borrower to or for the account
of any Lender or the Administrative Agent hereunder or under any
other Loan Document shall be made free and clear of and without
deduction for any and all present or future Tax, excluding, in the
case of each Lender and the Administrative Agent, (i) franchise
taxes, (ii) any Taxes (other than withholding taxes) that would not
be imposed but for a connection between a Lender or the Admin-
istrative Agent and the jurisdiction imposing such Taxes (other than
a connection arising solely by virtue of the activities of such
Lender or the Administrative Agent pursuant to or in respect of this
Agreement or any other Loan Document), (iii) any withholding taxes
payable with respect to payments hereunder or under any other Loan
Document under laws (including any statute, treaty, ruling,
determination or regulation) in effect on the Effective Date (except
that this subsection (iii) shall not include (A) withholding taxes
payable after the Effective Date as a consequence of the change in
the applicable tax treaty to eliminate any applicable exemption
contained in such tax treaty as in effect on the Effective Date from
the obligation to pay such withholding taxes, or (B) withholding
taxes arising because the applicable taxing authorities do not
accept the exemption or clearance application of any Lender or
Administrative Agent, except that the adjustments contemplated by
this Section 4.14 shall not be required with respect to the items
described in this clause (B) to the extent that such withholding
taxes give rise to offsetting tax benefits for such Lender, such
Administrative Agent or the respective Affiliates of such Lender or
such Administrative Agent), (iv) any Taxes imposed on or measured by
any Lender's assets, net income, receipts or branch profits and (v)
any Taxes arising after the Effective Date solely as a result of or
attributable to a Lender changing its Applicable Lending Office after
the date such Lender becomes a party hereto (other than at the
request of Borrower). Each Lender and the Administrative Agent will
use its commercially reasonable efforts to cause the applicable
taxing authorities to accept its respective exemption or clearance
applications. If the Borrower shall be required by Law to deduct any
Taxes from or in respect of any sum payable under this Agreement or
any other Loan Document to any Lender or the Administrative Agent,
(i) subject to the other provisions of this Section 4.14, the sum
payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional
sums payable under this Section) such Lender or the Administrative
Agent receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrower shall make such
deductions, (iii) the Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with
applicable Law, and (iv) the Borrower shall furnish to the
Administrative Agent, at its
15
<PAGE>
address referred to herein, the original or a certified copy of a
receipt evidencing payment thereof.
4.14.2. In addition, the Borrower agrees to pay any and all present
or future stamp or documentary taxes and any other excise or property
taxes or charges or similar levies which arise from any payment made
under this Agreement or any other Loan Document or from the execution
or delivery of, or otherwise with respect to, this Agreement or any
other Loan Document (hereinafter referred to as "Impositions").
4.14.3. If the Borrower fails to pay Taxes or Impositions when due
to the appropriate taxing authority or fails to remit to the
Administrative Agent, for the account of the respective Lender, the
required receipts or other required documentary evidence, the
Borrower shall indemnify the Lenders for any incremental Taxes or
Impositions, interest or penalties that may become payable by any
Lender as a result of any such failure. For purposes of this Section
4.14, a distribution hereunder by the Administrative Agent or any
Lender to or for the account of any Lender shall be deemed a payment
by the Borrowers.
4.14.4. Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution
and delivery of this Agreement in the case of each Lender listed on
the signature pages hereof and on or prior to the date on which it
becomes a Lender in the case of each other Lender, and from time to
time thereafter if requested in writing by the Borrower or the
Administrative Agent (but only so long as such Lender remains
lawfully able to do so), shall provide the Borrower and the
Administrative Agent with (i) Internal Revenue Service Form 1001 or
4224, as appropriate, or any successor form prescribed by the
Internal Revenue Service, certifying that such Lender is entitled to
an exemption from withholding Tax on payments of interest or other
income receivable pursuant to this Agreement or any of the Loan
Documents, (ii) Internal Revenue Service Form W-8 or W-9, as
appropriate, or any successor form prescribed by the Internal Revenue
Service, and (iii) any other form or certificate required by any
Governmental Authority (including any certificate required by
Sections 871(h) and 881(c) of the Internal Revenue Code), certifying
that such Lender is entitled to an exemption from withholding Tax on
payments pursuant to this Agreement or any of the other Loan
Documents.
4.14.5. For any period with respect to which a Lender has failed to
provide the Borrower and the Administrative Agent with the
appropriate form pursuant to Section 4.14.4, 4.14.9 and 4.14.10
(unless such failure is due to a change in treaty, law, or regulation
occurring subsequent to the date on which a form originally was
required to be provided), such Lender shall not be entitled to
indemnification under this Section 4.14 with respect to withholding
Taxes imposed by the United States, the United Kingdom or Germany, as
the case may be; provided, however, that should a Lender, which is
otherwise exempt from or subject to a reduced rate of withholding
Tax, become subject to Taxes because of its failure to deliver a form
required hereunder, the Borrower shall take such steps as such Lender
shall reasonably request to assist such Lender to recover such Taxes.
16
<PAGE>
4.14.6. If the Borrower is required to pay additional amounts to or
for the account of any Lender or Administrative Agent pursuant to
this Section, then such Lender or the Administrative Agent will agree
to use reasonable efforts to change the jurisdiction of its
Applicable Lending Office so as to eliminate or reduce any such
additional payment which may thereafter accrue if such change, in the
judgment of such Lender or the Administrative Agent, as the case may
be, is not otherwise disadvantageous to such Lender or the
Administrative Agent, as the case may be.
4.14.7. Within thirty (30) days after the date of any payment of
Taxes, the Borrower shall furnish to the Administrative Agent the
original or a certified copy of a receipt evidencing such payment.
4.14.8. Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section shall survive the termination of
the Commitments and the indefeasible payment in full of the Notes.
4.14.9. Prior to the date that any Lender or participant organized
under the laws of a jurisdiction outside the United Kingdom becomes a
party hereto, such Person shall deliver to the Administrative Agent
such certificates, documents or other evidence, as required by
applicable law, duly and properly completed and executed and
currently effective, by such Person, establishing that any payments
to such Person are not subject to any withholding Tax of the United
Kingdom.
4.14.10. Prior to the date that any Lender or participant organized
under the laws of a jurisdiction outside Germany becomes a party
hereto, such Person shall deliver to the Administrative Agent such
certificates, documents or other evidence, as required by applicable
law, duly and properly completed and executed and currently
effective, by such Person, establishing that any payments to such
Person are not subject to any withholding Tax of Germany.
4.15. Usury. Notwithstanding any provisions to the contrary in Section 4 or
elsewhere in any of the Loan Documents, Borrower shall not be obligated to
pay interest at a rate which exceeds the maximum rate permitted by Law. If,
but for this Section 4.15, Borrower would be deemed obligated to pay
interest at a rate which exceeds the maximum rate permitted by Law, or if
any of the Loan Obligations is paid or becomes payable before its
originally scheduled Maturity and as a result Borrower has paid or would be
obligated to pay interest at such an excessive rate, then (i) Borrower
shall not be obligated to pay interest to the extent it exceeds the
interest that would be payable at the maximum rate permitted by Law; (ii)
if the outstanding Loan Obligations have not been accelerated as provided
in Section 16.2.2, any such excess interest that has been paid by Borrower
shall be refunded; (iii) if the outstanding Loan Obligations have been
accelerated as provided in Section 16.2.2, any such excess that has been
paid by Borrower shall be applied to the Loan Obligations as provided in
Section 16.3; and (iv) the effective rate of interest shall be deemed
automatically reduced to the maximum rate permitted by Law.
4.16. Unavailability of Offshore Currency.
17
<PAGE>
4.16.1. Suspension of Obligations. Notwithstanding any other
provision of this Agreement, in the event that it becomes unlawful
for any Lender to honor its obligation to make Loans (or for Letter
of Credit Issuer to issue Letters of Credit) in any Offshore
Currency, or any Lender fails to have access to any Offshore Currency
on terms reasonably acceptable to such Lender, then such Lender shall
promptly notify the Borrower thereof (with a copy to the
Administrative Agent) and the obligation of any Lender to make Loans
denominated in such Offshore Currency, and the obligation of Letter
of Credit Issuer to issue Letters of Credit in such Offshore
Currency, shall be suspended until such time as each Lender may again
make Loans (and Letter of Credit Issuer may again issue Letters of
Credit) in such Offshore Currency. Nothing contained in this Section
shall suspend any obligations of the Lenders to make Revolving Loans
or payments denominated in Dollars.
4.16.2. Mandatory Assignment. In the event that any Lender delivers
a notice to Borrower and the Administrative Agent pursuant to Section
4.16.1, then, subject to Section 18.4 of this Agreement, and provided
that there is no Existing Default, Borrower may, at its own expense,
require such Lender to assign all or (with such Lender's and
Administrative Agent's consent) part of its rights and obligations
under this Agreement (except for rights to be indemnified for actions
taken while a party hereunder) to a replacement bank or financial
institution if the Borrower can identify a Person who is ready,
willing and able to be such replacement bank or institution with
respect thereto and such replacement bank or institution (which may
be another Lender) shall assume such assigned obligations, provided,
however, that (y) subject to Section 18.4 hereof, the Borrowers or
such replacement bank or institution, as the case may be, shall have
paid to such Lender in immediately available funds the principal of
and interest accrued to the date of such payment on the Loans made by
it hereunder and all other amounts owed to it hereunder and (z) such
assignment of the rights and obligations of such Lender does not
conflict with any law, rule or regulation or order of any court or
Governmental Authority.
4.17. Alternate Lending Installation. If at the time a Lender becomes a
party hereto or any time thereafter, such Lender has, acquires or
establishes a branch or office in Germany or the United Kingdom, such
Lender shall designate such branch or office as its office for making
Eurodollar Loans in such country if such designation would (a) reduce the
liability of the Borrowers to such Lender under Section 4.9 or 4.14, or (b)
avoid any unavailability of Eurodollar Loans under Sections 4.10, 4.11,
4.16 or provided that such Lender shall not be required to make such
designation if such designation would be unlawful or unreasonably
burdensome to such Lender, or would impose additional costs on such Lender.
5. Fees.
5.1. Commitment Fee. Borrower shall pay to Administrative Agent for the
account of Lenders a non-refundable, recurring Revolving Loan Commitment
Fee calculated by applying the daily equivalent of the Commitment Fee Rate
to the Unused Revolving Loan Commitment on each day during the period from
the Effective Date to the Revolving Loan Maturity Date. The "Unused
Revolving Loan Commitment" on any day shall be the difference between (i)
the amount
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of the Aggregate Revolving Loan Commitment and (ii) the sum of (a) the
Aggregate Revolving Loan, (b) the Letter of Credit Exposure as of the close
of business on such day, and (c) the Swingline Loan. The Revolving Loan
Commitment Fee shall be payable quarterly in arrears commencing on the
first day of the first calendar quarter beginning after the Effective Date
and continuing on the first day of each calendar quarter thereafter and on
the Revolving Loan Maturity Date. The "Commitment Fee Rate" shall be an
annual rate equal to the applicable rate in the table below, wherein the
"Level" is the then applicable Level determined as provided in Section 4.3:
---------------- -------------------
Applicable Level Commitment Fee Rate
---------------- -------------------
I 0.250%
---------------- -------------------
II 0.250%
---------------- -------------------
III 0.200%
---------------- -------------------
IV 0.150%
---------------- -------------------
V 0.125%
---------------- -------------------
5.2. Letter of Credit Fee. Borrower shall pay to Administrative Agent for
the account of Lenders (or to Administrative Agent for its sole account in
the case of Swingline Letters of Credit) a non-refundable recurring Letter
of Credit Fee for each Letter of Credit issued by Letter of Credit Issuer.
The "Letter of Credit Fee" for any Letter of Credit shall be an amount
determined by applying the quarterly equivalent of the Eurodollar Increment
that is determined to be applicable as provided in Section 4.3 to the
Dollar Equivalent Amount of the aggregate undrawn amount of such Letter of
Credit as of its issuance and as of the first day of each calendar quarter
thereafter. In addition, Borrower shall pay to Administrative Agent for the
sole account of Letter of Credit Issuer for each Letter of Credit issued by
Letter of Credit Issuer an "Issuance Fee" determined by applying the
quarterly equivalent of 0.125% per annum to the Dollar Equivalent Amount of
the aggregate undrawn amount of such Letter of Credit as of its issuance
and as of the first day of each calendar quarter thereafter. The Letter of
Credit Fee and Issuance Fee for each Letter of Credit shall be payable in
advance upon its issuance and on the first day of each calendar quarter
thereafter until the earlier of its expiration or the Revolving Loan
Maturity Date. Letter of Credit Fees will be distributed by Administrative
Agent to Lenders with Revolving Loan Commitments in accordance with their
prorata shares of the Aggregate Revolving Loan Commitment.
5.3. Other Letter of Credit Fees. Borrower shall pay to Letter of Credit
Issuer such Letter of Credit Issuer's other customary fees for issuance,
amendment, or renewal of a Letter of Credit and, as Letter of Credit Issuer
and Borrower may agree with respect to each Letter of Credit, for each
negotiation of a draft drawn under such Letter of Credit.
5.4. Calculation of Fees. All of the foregoing fees and all other fees
payable to Administrative Agent or any Lender that are based on an annual
percentage shall be calculated on the basis of a year deemed to consist of
360 days and for the actual number of days elapsed.
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6. Payments.
6.1. Scheduled Payments on Aggregate Revolving Loan, Canadian Term Loan
and Swingline Loan.
6.1.1. Interest. Borrower shall pay interest accrued on each Base
Rate Loan included in the Aggregate Revolving Loan, the Canadian Term
Loan and the Swingline Loan monthly in arrears beginning on the first
day of the first calendar month beginning after the Effective Date
and continuing on the first day of each calendar month thereafter,
and on the Revolving Loan Maturity Date. Borrower shall pay interest
accrued on each Eurodollar Loan at the end of its Interest Period
and, in addition, for each such Eurodollar Loan with an Interest
Period longer than three months, Borrower shall pay interest accrued
thereon quarterly on the last day of each calendar quarter ended
during such Interest Period. Borrower shall pay interest accrued on
each Revolving Loan and the Swingline Loan after the Revolving Loan
Maturity Date on demand.
6.1.2. Principal. Borrower shall repay the entire amount of the
Aggregate Revolving Loan as then outstanding on August 1, 2002.
Borrower shall repay the entire amount of the Swingline Loan on
demand, or if no demand is made, on August 1, 2002. Canadian
Borrowers shall repay the entire amount of the Canadian Term Loan on
August 4, 2002.
6.2. Prepayments.
6.2.1. Voluntary Prepayments. Borrower shall not be entitled to
prepay any Eurodollar Loan. Subject to the limitations in the
following sentences, Borrower may wholly prepay any Base Rate Loan
that is included in the Aggregate Revolving Loan or the Aggregate
Canadian Term Loan and may wholly prepay the Swingline Loan at any
time and may make a partial prepayments thereon from time to time,
without penalty or premium, but only if (i) Borrower gives
Administrative Agent written notice (which may be mailed, personally
delivered or telecopied as provided in Section 19.1) of Borrower's
intention to make such prepayment at least two Business days (one
Business Day in the case of a prepayment on a Base Rate Loan
denominated in Dollars) prior to tendering such prepayment, (ii) the
total amount of such partial prepayment is a whole multiple of
$500,000, or its Dollar Equivalent Amount if the Base Rate Loan is
denominated in an Offshore Currency, and (iii) Borrower pays any
accrued interest on the amount prepaid at the time of such prepay-
ment. All such prepayments will be applied by Lenders to reduce
the applicable Revolving Loans or the Canadian Term Loans (as
applicable) in accordance with their respective prorata shares of
the Aggregate Revolving Loan Commitment or their share of the
Aggregate Canadian Term Loan (as applicable). A Base Rate Loan may
only be prepaid in the Applicable Currency in which it is
denominated.
6.2.2. Mandatory Prepayments as a Result of Currency Value
Adjustments. Whenever a Eurodollar Loan is continued as a Eurodollar
Loan or is converted to a Base Rate Loan as provided in Section 4.4,
and whenever a draw is made on an Offshore Letter of Credit, the
Dollar Equivalent Amount of such Loan or the reimbursement
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obligation of the applicable Borrower, as applicable, shall be
adjusted based on the applicable Determination Date Exchange Rate. If
such adjustment would cause the total Dollar Equivalent Amount of the
Aggregate Revolving Loan plus the total Dollar Equivalent Amount of
the Letter of Credit Exposure to exceed the Aggregate Revolving Loan
Commitment, then Domestic Borrower shall, within two Business Days
after the effective date of such continuation or conversion, repay
the portion of such continued or converted Loan to the extent
necessary to ensure that the total Dollar Equivalent Amount of the
Aggregate Revolving Loan does not exceed the Aggregate Revolving Loan
Commitment (calculated based on the new Determination Date Exchange
Rate). If such adjustment would cause the portion of the Aggregate
Revolving Loan which is denominated in an Offshore Currency plus the
portion of the Letter of Credit Exposure which is denominated in such
Offshore Currency to exceed the applicable Aggregate Offshore
Currency Revolving Loan Commitment, or either of the limit amounts
for UK Borrower or German Borrower determined under Sections 3.2.3
and 3.2.4, then the applicable Foreign Borrower shall, within two
Business Days after the effective date of such continuation or
conversion, repay the portion of Aggregate Revolving Loan denominated
in such Offshore Currency (calculated based on the new Determination
Date Exchange Rate) to the extent necessary to ensure that the
portion of the Aggregate Revolving Loan which is denominated in such
Offshore Currency plus the portion of the Letter of Credit Exposure
which is denominated in such Offshore Currency does not exceed the
applicable Aggregate Offshore Currency Revolving Loan Commitment
and that the applicable limit amount for UK Borrower or German
Borrower determined under Section 3.2.3 or 3.2.4 is not exceeded.
The Administrative Agent will maintain records sufficient to identify
at any time the outstanding principal amount, Dollar Equivalent
Amount and Determination Date Exchange Rate with respect to each
Advance and Loan.
6.3. Reimbursement Obligations of Borrower. Each Borrower hereby
unconditionally agrees to immediately pay to Letter of Credit Issuer on
demand at the Letter of Credit Issuer's Applicable Lending Office all
amounts required to pay all drafts drawn under Letters of Credit issued for
the account of such Borrower and all reasonable expenses incurred by Letter
of Credit Issuer in connection with such Letters of Credit and in any event
and without demand to remit to Letter of Credit Issuer (which may be
through obtaining Advances if permitted under Section 3.2 or 3.5)
sufficient funds to pay all debts and liabilities arising under any Letter
of Credit issued for the account of such Borrower. All such reimbursements
shall be in the Applicable Currency in which the face amount of the
applicable Letter of Credit is denominated.
6.4 Manner of Payments and Timing of Application of Payments.
6.4.1. Payment Requirement. Unless expressly provided to the
contrary elsewhere herein, Borrower shall make each payment in the
Applicable Currency on the Loan Obligations to Administrative Agent
for the account of Lenders as required under the Loan Documents at
the Applicable Lending Office on the date when due, without
deduction, set-off or counterclaim. All such payments will be
distributed by Administrative Agent to Lenders as provided in Section
17.10 for application to the Loan Obligations as provided herein.
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<PAGE>
6.4.2. Nonconforming Payments. The Administrative Agent shall deem
that any payment by or on behalf of a Borrower that is not made both
(i) in the Applicable Currency and in immediately available funds,
and (ii) at or prior to 11:00 a.m. (Central Time) on the date any
such payment is due to be a nonconforming payment. Any such payment
shall not be deemed to be received by the Administrative Agent until
the time that such funds become available funds. The Administrative
Agent shall give prompt telephonic notice (confirmed in writing) to
the Borrower and each of the Lenders if any payment is nonconforming
(but the failure to provide such notice shall not affect the obliga-
tion of Borrower to make such payment). Interest shall continue to
accrue on any principal as to which a nonconforming payment is made
until such funds become available funds (but in no event less than
the period from the date of such payment to the next succeeding
Business Day).
6.4.3. Application of Payments and Proceeds. Subject to Section
6.4.2, all payments received in the Applicable Currency by
Administrative Agent in immediately available funds at or before
11:00 a.m. (Central Time) on a Business Day will be distributed by
Administrative Agent to Lenders as provided in Section 17.10 on the
same Business Day in such Applicable Currency. Such payments received
in the appropriate Applicable Currency on a day that is not a
Business Day or after 11:00 a.m. (Central Time) on a Business Day
will be distributed by Administrative Agent to Lenders as provided in
Section 17.10 on the next Business Day in such Applicable Currency.
The amount so distributed to a Lender will be applied by such Lender
to the relevant Loan Obligation on the Business Day when received.
6.4.4. Interest Calculation. Section 6.4.3 notwithstanding, for
purposes of interest calculation only, for all Applicable Currencies
(i) a payment by check, draft or other instrument received at or
before 11:00 a.m. (Central Time) on a Business Day shall be deemed to
have been applied to the relevant Loan Obligation on the second
following Business Day, (ii) a payment by check, draft or other
instrument received on a day that is not a Business Day or after
11:00 a.m. on a Business Day shall be deemed to have been applied
to the relevant Loan Obligation on the third following Business Day,
(iii) a payment in cash or by wire transfer received at or before
11:00 a.m. (Central Time) on a Business Day shall be deemed to have
been applied to the relevant Loan Obligation on the Business Day when
it is received, and (iv) a payment in cash or by wire transfer
received on a day that is not a Business Day or after 11:00 a.m.
(Central Time) on a Business Day shall be deemed to have been applied
to the relevant Loan Obligation on the next Business Day.
6.5. Returned Instruments. If a payment is made by check, draft or other
instrument and the check, draft or other instrument is returned unpaid, any
application of the payment to the Loan Obligations will be reversed and
will be treated as never having been made.
6.6. Compelled Return of Payments or Proceeds. If a Lender is for any
reason compelled to surrender any payment in an Applicable Currency because
such payment or the application of such proceeds is for any reason
invalidated, declared fraudulent, set aside, or determined to be void or
voidable as a preference, an impermissible set-off, or a diversion of trust
funds, then this
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<PAGE>
Agreement and the Loan Obligations to which such payment or proceeds was
applied or intended to be applied shall be revived as if such application
was never made; and Borrower shall be liable to pay to such Lender, and
shall indemnify such Lender for and hold such Lender harmless from any loss
with respect to, the amount of such payment or proceeds surrendered. This
Section shall be effective notwithstanding any contrary action that such
Lender may take in reliance upon its receipt of any such payment or
proceeds. Any such contrary action so taken by such Lender shall be without
prejudice to such Lender's rights under this Agreement and shall be deemed
to have been conditioned upon the application of such payment or proceeds
having become final and indefeasible. The provisions of this Section shall
survive termination of the Commitments, the expiration of the Letters of
Credit and the payment and satisfaction of all of the Loan Obligations.
6.7. Due Dates Not on Business Days. If any payment required hereunder
becomes due on a date that is not a Business Day, then such due date shall
be deemed automatically extended to the next Business Day.
7. Procedure for Obtaining Advances and Letters of Credit.
7.1 Initial Revolving Loan Advances. Provided that all conditions thereto
hereunder are satisfied, and subject to the limitations contained herein,
Lenders will make the initial Revolving Loan Advances in the Applicable
Currencies on the Effective Date as directed by Borrower in a written
direction delivered to Administrative Agent.
7.2 Subsequent Revolving Loan Advances.
7.2.1. Borrower Requests. Borrower may request subsequent Revolving
Loan Advances and Swingline Advances at any time, but not more often
than once each Business Day, by submitting a request therefor to
Administrative Agent that meets the requirements of Section 7.10.
Domestic Borrower may request Revolving Loan Advances in any
Applicable Currency, UK Borrower may request Revolving Loan Advances
only in Pounds Sterling, and German Borrower may request Revolving
Loan Advances only in Deutsche Marks. A request for a Eurodollar
Advance must be given prior to 11:00 a.m., Central Time, at least
three Business Days prior to the Advance Date for such Eurodollar
Advance. (Administrative Agent in any instance may accept a request
for a Swingline Advance that is to be a Eurodollar Advance two
Business Days prior to the Advance Date, but the acceptance of such
a request in any instance shall not constitute a waiver of the
requirement for three Business Days notice in any other instance).
A request for a Base Rate Advance must be given prior to 11:00 a.m.,
Central Time, on the Advance Date for such Base Rate Advance. A
request for an Advance, including a Swingline Advance, must meet the
requirements of Section 7.10 or such Advance will not be made. No
Advance Date for any requested Advance may be other than a Business
Day. Every request for an Revolving Loan Advance shall be
irrevocable. A request for a Revolving Loan Advance received by
Administrative Agent on a day that is not a Business Day or that is
received by Administrative Agent after 11:00 a.m. (Central Time) on a
Business Day shall be treated as having been received by Administra-
tive Agent at 10:59 a.m. (Central Time) on the next Business Day.
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7.2.2. Revolving Loan Advances to Repay the Swingline Loan.
7.2.2.1. Administrative Agent may in its absolute
discretion on any Business Day give notice to Lenders of the
amount of the Swingline Loan after application of all
payments to be applied thereto as provided elsewhere herein.
Such notice shall be given no later than 12:00 n. (Central
Time) and may include a demand that the Swingline Loan be
fully paid. If Administrative Agent demands that the
Swingline Loan be fully paid, then prior to 3:00 p.m.
(Central Time) on such date, Lenders shall remit funds to
Administrative Agent sufficient to reduce the Swingline Loan
to zero. The aggregate of such remittances shall be treated
as a Revolving Loan Advance and the Aggregate Revolving Loan
increased accordingly. Each such remittance by a Lender
shall be made in accordance with its prorata share of the
Aggregate Revolving Loan Commitment and shall be made
notwithstanding that (i) the amount of the aggregate of such
remittances by Lenders may not be in the minimum amount for
Revolving Loan Advances otherwise required hereunder, (ii)
any conditions to Advances in Section 9 may not be then
satisfied, (iii) there is an Existing Default, (iv) the
aggregate amount of such remittances by Lenders would result
in the Aggregate Revolving Loan exceeding the Maximum
Available Amount, or (v) such remittances by Lenders may be
made after the Revolving Loan Maturity Date; provided,
however, that in no event shall any Lender be required to
make any such remittance that would result in the Revolving
Loan of such Lender exceeding such Lender's Revolving Loan
Commitment.
7.2.2.2. If for any reason, including the commencement of
a proceeding in bankruptcy with respect to any Borrower,
remittances by Lenders as provided above cannot be made on
the date otherwise required above, then each Lender shall be
deemed automatically to have purchased from Administrative
Agent as of such date a prorata undivided interest and
participation in the Swingline Loan so as to cause such
Lender to share in the Swingline Loan in accordance with its
prorata share of the Aggregate Revolving Loan Commitment.
Each Lender shall remit its prorata share of the Swingline
Loan to Administrative Agent promptly on demand. All
interest payable with respect to such Lender's prorata share
of the Swingline Loan shall be for the account of
Administrative Agent to the date such remittance is made,
and shall be for the account of and remitted by
Administrative Agent to such Lender as a participant from
such date. Further, until such remittance is made, such
Lender shall pay to Administrative Agent, on demand,
interest on such Lender's prorata share of the Swingline
Loan at the Federal Funds Rate.
7.2.3. Administrative Agent's Right to Make Other Revolving Loan
Advances. With the prior approval of Required Lenders in each
instance, Administrative Agent shall have the right to make Revolving
Loan Advances in any Applicable Currency at any time and from time to
time to cause timely payment of any of the Loan Obligations.
Administrative Agent may select the Advance Date and the Applicable
Currency for any such Revolving Loan Advance, but such Advance Date
may only be a Business Day.
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Administrative Agent will give notice to Borrower after any such
Revolving Loan Advance is made. Any such Revolving Loan Advance
will be a Base Rate Advance.
7.3. Letters of Credit. Domestic Borrower may request the issuance of a
Letter of Credit denominated in any Applicable Currency, UK Borrower may
request the issuance of a Letter of Credit denominated in Pounds Sterling,
and German Borrower may request the issuance of a Letter of Credit
denominated in Deutsche Marks, by submitting an issuance request to Letter
of Credit Issuer and executing the reimbursement agreement required under
Section 10.1 no less than five Business Days prior to the requested issue
date for such Letter of Credit.
7.4. Fundings of Revolving Loan Advances.
7.4.1. Funding of Dollar Denominated Advances. In the case of
requested Revolving Loan Advances denominated in Dollars that are not
Swingline Advances, Administrative Agent shall promptly notify each
Lender of the amount of the Advance to be made on the Advance Date.
Each Lender shall make immediately available to Administrative Agent
on or before the date specified for such Advance, but not later than
by 1:00 p.m. (Central Time) on the Advance Date, funds consisting
solely of Dollars in the amount of its prorata share of such Advance,
rounded to the nearest penny, in accordance with such remittance
instructions as may be given by Administrative Agent to Lenders from
time to time.
7.4.2. Funding of Offshore Currency Denominated Advances. In the
case of requested Revolving Loan Advances denominated in an Offshore
Currency that are not Swingline Advances, Administrative Agent shall
promptly notify each Lender of the amount of the Advance to be made
on the Advance Date. Each Lender shall make immediately available to
Administrative Agent on or before the Advance Date, but not later
than 1:00 p.m. (Central Time) on the Advance Date, funds consisting
solely of such Offshore Currency in the amount of its prorata share
of such Advance, rounded to the nearest smallest unit of such
currency, in accordance with such remittance instructions as may be
given by Administrative Agent to Lenders from time to time.
7.4.3. Draws on Letters of Credit. In the event that a draw is made
on a Revolver Letter of Credit and Borrower does not reimburse the
amount of such draw in full to Letter of Credit Issuer on demand,
Administrative Agent may notify each Lender thereof and shall have
the right to cause a Revolving Loan Advance to be made, regardless
whether such Revolving Loan Advance would result in the Aggregate
Revolving Loan exceeding the Maximum Available Amount, by notifying
each Lender of the draw, the amount of the Revolving Loan Advance
required to fund reimbursement of such draw, and the amount of such
Lender's ratable share of such Revolving Loan Advance. Unless
otherwise agreed by Lenders, the Advance Date and time for such
Revolving Loan Advance shall not be later than 1:00 p.m. (Central
Time) on the first Business Day following Administrative Agent's
delivery of such notice to Lenders. By no later than such Advance
Date and time, each Lender shall make immediately available to
Administrative Agent funds consisting solely of the Applicable
Currency in which the relevant Revolver Letter of Credit is
denominated in the amount of its prorata share of
25
<PAGE>
such Revolving Loan Advance, rounded to the nearest smallest unit of
such currency, in accordance with such remittance instructions
as may be given by Administrative Agent to each Lender from time to
time. Each Revolving Loan Advance made by Administrative Agent
pursuant to this Section 7.4.3 shall be deemed to be a Base Rate
Advance.
7.4.4. All Fundings Ratable. All fundings of Advances shall be made
by Lenders in the Applicable Currency requested by Borrower or as
otherwise directed by Administrative Agent as provided herein in
accordance with their prorata shares of the Aggregate Revolving Loan
Commitment. Except as otherwise expressly provided herein, a Lender
shall not be obligated to fund Revolving Loan Advances that would
result in its Revolving Loan exceeding its Revolving Loan Commitment,
or make available any more than its prorata share of any Advance.
7.5. Administrative Agent's Availability Assumption. Unless Administrative
Agent has been given written notice by a Lender prior to an Advance Date
that such Lender does not intend to make immediately available to
Administrative Agent such Lender's prorata share of the Advance which
Administrative Agent will be obligated to make on the Advance Date,
Administrative Agent may assume that such Lender has made the required
amount available to Administrative Agent on the Advance Date and
Administrative Agent may, in reliance upon such assumption, make available
to Borrower a corresponding amount. If such corresponding amount is not in
fact made immediately available to Administrative Agent by such Lender on
the Advance Date, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender. If such Lender does not
pay such corresponding amount immediately upon Administrative Agent's
demand therefor, then Administrative Agent shall promptly notify Borrower
and the other Lenders and Borrower shall immediately pay such corresponding
amount to Administrative Agent. Administrative Agent shall also be entitled
to recover, either from such defaulting Lender or Borrower, interest on
such corresponding amount for each day from the date such corresponding
amount was made available by Administrative Agent to Borrower to the date
such corresponding amount is recovered by Administrative Agent, at a rate
per annum equal to (i) if paid by such Lender, the cost to Administrative
Agent of funding such amount at the Federal Funds Rate, or (ii) if paid by
Borrower, the applicable rate for the Advance in question determined from
the request therefor. Each Lender shall be obligated only to fund its
prorata share of an Advance subject to the terms and conditions hereof,
regardless of the failure of another Lender to fund its prorata share
thereof.
7.6. Disbursement. Provided that all conditions precedent herein to a
requested Advance or, if applicable, a Swingline Advance, have been
satisfied, Administrative Agent will make the amount of such requested
Advance available to Borrower on the applicable Advance Date in immediately
available funds of the Applicable Currency at the applicable Funding
Office.
7.7. Restrictions on Advances. No more than one Revolving Loan Advance and
no more than one Swingline Advance will be made on any one day pursuant to
a request for a Revolving Loan Advance. Advances will only be made for the
purposes permitted in Section 13.1.
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7.8. Restriction on Number of Eurodollar Loans. No more than thirteen
Eurodollar Loans with different Interest Periods may be outstanding at any
one time.
7.9. Each Advance Request and Letter of Credit Request a Certification.
Each submittal of a request for an Advance and each submittal of a request
for the issuance of a Letter of Credit by a Borrowing Officer shall
constitute a certification by Borrower that (i) there is no Existing
Default, (ii) all conditions precedent hereunder to the making of the
requested Advance or issuance of the requested Letter of Credit have been
satisfied, and (iii) the Representations and Warranties are then true and
will be true on the Advance Date or issuance date, as applicable, as if
then made, except as disclosed to Administrative Agent and the Lenders.
7.10. Requirements for Every Advance Request. Only a written request or
oral request (which shall be promptly confirmed in writing) from a
Borrowing Officer to Administrative Agent that specifies the amount and the
Applicable Currency of the requested Advance, the Advance Date for the
requested Advance, the portion of the Advance which is requested to be a
Eurodollar Advance and the portion of the Advance which is requested to be
a Base Rate Advance, and the Interest Period to be applicable to the
Eurodollar Loan that will result from a requested Eurodollar Advance, will
be treated by Administrative Agent as a request for an Advance.
7.11. Requirements for Every Letter of Credit Request. Only a written
request (which may be mailed, personally delivered or telecopied as
provided in Section 19.1) from a Borrowing Officer to Letter of Credit
Issuer that specifies the request face amount of the Letter of Credit,
whether the Letter of Credit is to be a Revolver Letter of Credit or a
Swingline Letter of Credit, and the Applicable Currency, the requested
issue date (which shall be a Business Day and in no event later than five
Business Days before the Revolving Loan Maturity Date), the account party,
and the beneficiary of the requested Letter of Credit, and other
information necessary for its issuance, shall be treated as a request for
issuance of a Letter of Credit.
7.12. Exoneration of Administrative Agent and Lenders. Neither
Administrative Agent nor any Lender shall incur any liability to any
Borrower for treating a request that meets the express requirements of
Section 7.10 or Section 7.11 as a request for an Advance or issuance of a
Letter of Credit, as applicable, if Administrative Agent or Letter of
Credit Issuer believes in good faith that the Person making the request is
a Borrowing Officer. Neither Administrative Agent nor any Lender shall
incur any liability to any Borrower for failing to treat any such request
as a request for an Advance or issuance of a Letter of Credit, as
applicable, if Administrative Agent or Letter of Credit Issuer believes in
good faith that the Person making the request is not a Borrowing Officer.
8. Security and Guaranties. Domestic Borrower shall execute and deliver to
Administrative Agent, or cause to be executed and delivered to Administrative
Agent, the following documents, each satisfactory to Lenders:
8.1. Domestic Borrower Stock Pledges. As security for the payment and
performance of all of the Loan Obligations, a Pledge Agreement from
Domestic Borrower granting to Administrative Agent for the benefit of
Lenders a first priority Security Interest in all of the outstanding
capital
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stock held by it in each of its Significant Subsidiaries domiciled in the
United States and in 65% of the outstanding capital stock of DT Canada,
Inc.; a Pledge Agreement from DT Canada, Inc., granting to Administrative
Agent for the benefit of Lenders a first priority Security Interest in 65%
of the outstanding capital stock of Kalish Canada, Inc.; a Pledge Agreement
from Domestic Borrower granting to Administrative Agent for the benefit of
Lenders a first priority Security Interest in 100% of the outstanding
capital stock of UK Borrower; and a Share Pledge Agreement from Domestic
Borrower granting to Administrative Agent for the benefit of Lenders a
first priority Security Interest in 100% of the outstanding capital stock
of German Borrower to secure the payment and performance of the Loan
Obligations of German Borrower, and a Security Interest in 65% of the
outstanding capital stock of German Borrower to secure the payment and
performance of all the Loan Obligations.
8.2. UK Borrower and Subsidiaries Stock Pledges. As security for the
payment and performance of the Loan Obligations of UK Borrower, a Pledge
Agreement from UK Borrower granting to Administrative Agent for the benefit
of Lenders a first priority Security Interest in 65% of the outstanding
capital stock held by it in its Significant Subsidiaries, and a Pledge from
DT Industries (UK), Limited granting to Administrative Agent for the
benefit of Lenders a first priority Security Interest in 65% of the
outstanding capital stock held by it in Swiftpack Automation Limited.
8.3. Guaranties.
8.3.1. Domestic Borrower Obligations. The unconditional guaranty by
every Significant Subsidiary domiciled in the United States of the
Loan Obligations of Domestic Borrower.
8.3.2. Foreign Borrower Obligations. The unconditional guaranty by
Domestic Borrower and every Significant Subsidiary of Domestic
Borrower domiciled in the United States of the Loan Obligations of
Foreign Borrowers.
8.3.3. Borrower Obligations. The unconditional guaranty by UK
Borrower of the Loan Obligations.
8.3.4. Canadian Term Loan. The unconditional guaranty by Domestic
Borrower, UK Borrower and every Significant Subsidiary of Domestic
Borrower domiciled in the United States of all of the Indebtedness
and obligations of the Canadian Borrowers with respect to the
Aggregate Canadian Term Loan and the payment and performance of all
other Obligations hereunder of Canadian Borrowers to Administrative
Agent.
Promptly after the Effective Date, Administrative Agent will release the
existing Security Interest of Administrative Agent for the benefit of
Lenders in all of the original Collateral (as defined in the Original Loan
Agreement) other than the capital stock described in this Section 8, and
Lenders, by becoming parties hereto, irrevocably consent to such release.
9. Conditions of Lending.
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9.1. Conditions to Initial Advance. Lenders will have no obligation to
fund the initial Revolving Loan Advance or any subsequent Revolving Loan
Advance unless:
9.1.1. Listed Documents and Other Items. Administrative Agent shall
have received on or before the Effective Date all of the documents
and other items listed or described in Exhibit 9.1.1 hereto as being
conditions to the initial Advances, with each being reasonably
satisfactory to Lenders and (as applicable) duly executed and (also
as applicable) sealed, attested, acknowledged, certified, or
authenticated.
9.1.2. Default. There shall be no Existing Default and no Default
or Event of Default will occur as a result of such Advance being
requested or made or the application of the proceeds thereof.
9.1.3. Perfection of Security Interests. Every Security Interest
required to be granted hereunder to Administrative Agent under
Section 8 shall have been perfected and shall be, except as
otherwise satisfactory to Lenders, a first priority Security
Interest.
9.1.4. Representations and Warranties. The Representations and
Warranties shall be true and correct.
9.1.5. Material Adverse Change. Since the date of the Initial
Financial Statements delivered to Administrative Agent, there shall
not have been any change which has or is reasonably likely to have a
Material Adverse Effect.
9.1.6. Pending Material Proceedings. There shall be no pending
Material Proceedings.
9.1.7. Payment of Fees. Domestic Borrower shall have paid and
reimbursed to Lenders all fees, costs and expenses that are payable
or reimbursable to Lenders hereunder on or before the Effective Date.
9.1.8. Other Items. Administrative Agent shall have received such
other consents, approvals, opinions, certificates, documents or
information as it reasonably deems necessary.
9.2. Conditions to Subsequent Advances. Lenders will have no obligation
to fund any Revolving Loan Advance after the initial Revolving Loan Advance
unless:
9.2.1. General Conditions. All of the conditions to the initial
Revolving Loan Advance in Section 9.1 (except the condition in
Sections 9.1.4 and 9.1.5) shall have been and shall remain satisfied.
9.2.2. Representations and Warranties. The Representations and
Warranties are then true and correct, with such exceptions as have
been disclosed to Administrative Agent in writing by Borrower and are
acceptable to Required Lenders.
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9.2.3. Default. There shall be no Existing Default and no Default
or Event of Default will occur as a result of such Advance being
requested or made or the application of the proceeds thereof.
10. Conditions to Issuance of Letters of Credit. As conditions precedent to
the issuance of any Letter of Credit:
10.1. Reimbursement Agreement. Borrower shall have executed and delivered
to Letter of Credit Issuer a reimbursement agreement satisfactory to Letter
of Credit Issuer and Administrative Agent under which Borrower further
evidences its obligation to reimburse to Letter of Credit Issuer on demand
and in the Applicable Currency each draw on such Letter of Credit as
provided in Section 6.3, together with interest from the date of the draw
at the rate provided in Section 4.1 and (without duplication) all
reasonable expenses incurred by Letter of Credit Issuer in connection with
such Letter of Credit.
10.2. No Prohibitions. No order, judgment or decree of any Governmental
Authority shall exist which purports by its terms to enjoin or restrain
Letter of Credit Issuer or any other Lender from issuing such Letter of
Credit, and no Law or request or directive (whether or not having the force
of law) from any Governmental Authority with jurisdiction over Letter of
Credit Issuer or any other Lender shall exist which prohibits, or requests
that Letter of Credit Issuer or any other Lender refrain from, the issuance
of letters of credit generally or such Letter of Credit in particular, or
imposes upon Letter of Credit Issuer or any other Lender with respect to
such Letter of Credit any restriction or reserve or capital requirement
(for which Letter of Credit Issuer or any other Lender is not otherwise
compensable by Borrower hereunder).
10.3. Representations and Warranties. The Representations and Warranties
are then true and correct, with such exceptions as have been disclosed to
Administrative Agent in writing by Borrower and are acceptable to Required
Lenders.
10.4. No Default. There shall be no Existing Default and no Default or
Event of Default is reasonably likely to occur as a result of such Letter
of Credit being issued or a draw thereon being made or paid.
10.5. Other Conditions. All of the conditions to the initial Advances in
Section 9.1 (except the conditions in Section 9.1.4) shall have been and
shall remain satisfied.
11. Representations and Warranties. Except as otherwise described in the
Disclosure Schedule attached hereto as Exhibit 11, Borrower represents and
warrants to Lenders as follows:
11.1. Organization and Existence. Each Covered Person is duly organized and
existing in good standing under the Laws of the state of its organization,
is duly qualified to do business and is in good standing in every state
where the nature or extent of its business or properties require it to be
qualified to do business, except where the failure to so qualify will not
have a Material Adverse Effect. Each Covered Person has the power and
authority to own its properties and carry on its business as now being
conducted.
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11.2. Authorization. Each Covered Person is duly authorized to execute and
perform every Loan Document to which such Covered Person is a party, and
Borrower is duly authorized to borrow hereunder, and this Agreement and the
other Loan Documents have been duly authorized by all requisite corporate
action of each Covered Person. No consent, approval or authorization of, or
declaration or filing with, any Governmental Authority, and no consent of
any other Person, is required in connection with Borrower's execution,
delivery or performance of this Agreement or any Covered Person's
execution, delivery and performance of any of the other Loan Documents to
which it is a party, except for those already duly obtained or to the
extent failure to obtain such does not have and is not reasonably likely to
have a Material Adverse Effect.
11.3. Due Execution. Every Loan Document to which a Covered Person is a
party has been executed on behalf of such Covered Person by a Person duly
authorized to do so.
11.4. Enforceability of Obligations. Each of the Loan Documents to which a
Covered Person is a party constitutes the legal, valid and binding
obligation of such Covered Person, enforceable against such Covered Person
in accordance with its terms, except to the extent that the enforceability
thereof against such Covered Person may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar Laws affecting creditors'
rights generally or by equitable principles of general application.
11.5. Burdensome Obligations. No Covered Person is a party to or bound by
any Contract or is subject to any provision in the Charter Documents of
such Covered Person which would, if performed by such Covered Person,
result in a Default or Event of Default either immediately or upon the
elapsing of time.
11.6. Legal Restraints. The execution and performance of any Loan Document
by a Covered Person will not violate or constitute a default under the
Charter Documents of such Covered Person, any Material Agreement of such
Covered Person, or any Material Law, and will not, except as expressly
contemplated or permitted in this Agreement, result in any Security
Interest being imposed on any of such Covered Person's property.
11.7. Labor Contracts and Disputes. There is no collective bargaining
agreement or other labor contract covering employees of a Covered Person.
To Borrower's knowledge, no union or other labor organization is seeking to
organize, or to be recognized as, a collective bargaining unit of employees
of a Covered Person. There is no pending or, to Borrower's knowledge,
threatened, strike, work stoppage, material unfair labor practice claim or
other material labor dispute against or affecting any Covered Person or its
employees.
11.8. No Material Proceedings. There are no Material Proceedings pending
or, to the best knowledge of Borrower, threatened.
11.9. Material Licenses. All Material Licenses have been obtained or exist
for each Covered Person.
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11.10. Compliance with Material Laws. Each Covered Person is in compliance
with all Material Laws. Without limiting the generality of the foregoing:
11.10.1. General Compliance with Environmental Laws. The operations
of every Covered Person comply with all applicable Environmental
Laws except for such non-compliance as has not or is not reasonably
likely to have Material Adverse Effect.
11.10.2. Proceedings. None of the operations of any Covered Person
are the subject of any judicial or administrative complaint, order
or proceeding alleging the violation of any applicable
Environmental Laws.
11.10.3. Investigations Regarding Hazardous Materials. To Borrower's
knowledge, none of the operations of any Covered Person are the
subject of investigation by any Governmental Authority regarding the
improper transportation, storage, disposal, generation or release
into the environment of any Hazardous Material, the results of which
have or are reasonably likely to have a Material Adverse Effect.
11.10.4. Notices and Reports Regarding Hazardous Materials. No
notice or report under any Environmental Law indicating a past or
present spill or release into the environment, or investigation by
any Governmental Authority regarding the improper transportation,
storage, disposal, generation, spill or release into the
environment, of any Hazardous Material (the results of which have
had or are reasonably likely to have a Material Adverse Effect) has
been received or filed by Borrower within the four years ending on
the Effective Date, or to Borrower's knowledge is required to be
filed, by any Covered Person.
11.10.5. Hazardous Materials on Real Property. No Covered Person,
nor to Borrower's knowledge, any other Person, has at any time
transported, stored, disposed of, generated or released any
Hazardous Material on the surface, below the surface, or within the
boundaries of any real property owned or operated by such Covered
Person or any improvements thereon in any case in violation of
applicable Environmental Laws. Borrower has no knowledge of any
Hazardous Material on the surface, below the surface, or within the
boundaries of any real property owned or operated by any Covered
Person or any improvements thereon in violation of applicable
Environmental Laws. No property of any Covered Person is subject
to a Security Interest in favor of any Governmental Authority for
any liability under any Environmental Law or damages arising from or
costs incurred by such Governmental Authority in response to a spill
or release of Hazardous Material into the environment.
11.11. Financial Statements. The Financial Statements are complete and
correct in all material respects, have been prepared in accordance with
GAAP, and fairly reflect the financial condition, results of operations and
cash flows of the Persons covered thereby as of the dates and for the
periods stated therein.
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11.12. No Change in Condition. Since the date of the Financial Statements
delivered to Administrative Agent as required herein, there has been no
change which has or is reasonably likely to have a Material Adverse Effect.
11.13. No Defaults. No Covered Person has breached or violated or has
defaulted under any Material Agreement, or has defaulted with respect to
any Material Obligation of such Covered Person which has, or if not
remedied within any applicable grace period is likely to have a Material
Adverse Effect. There is no Existing Default.
11.14. Investments. No Covered Person has any Investments in other Persons
except Permitted Investments.
11.15. Indebtedness. No Covered Person has any Indebtedness except
Permitted Indebtedness.
11.16. Indirect Obligations. No Covered Person has any Indirect Obligations
except Permitted Indirect Obligations.
11.17. Tax Liabilities; Governmental Charges. Each Covered Person has filed
or caused to be filed all tax reports and returns required to be filed by
it with any Governmental Authority, except where extensions have been
properly obtained. Each Covered Person has paid or made adequate provision
for payment of all Taxes of such Covered Person, except Taxes which are
being diligently contested in good faith by appropriate proceedings and as
to which such Covered Person or Domestic Borrower has established adequate
reserves in conformity with GAAP. No Security Interest for any such Taxes
has been filed and no claims are being asserted with respect to any such
Taxes which, if adversely determined, has or is reasonably likely to have a
Material Adverse Effect. The United States federal income tax returns of
Domestic Borrower and its Subsidiaries have been audited by the Internal
Revenue Service and passed upon without exception for all fiscal years
ended on or prior to June 30, 1993, or the period during which any
assessments may be made by the IRS with respect to such returns has expired
without waiver or extension. There are no material unresolved issues
concerning any liability of a Covered Person for any Taxes which, if
adversely determined, has or is reasonably likely to have a Material
Adverse Effect.
11.18. Pension Benefit Plans. To Borrower's knowledge, all Pension Benefit
Plans maintained by each Covered Person or an ERISA Affiliate of such
Covered Person qualify under Section 401 of the Code and are in compliance
with the provisions of ERISA in all material respects. Except with respect
to events or occurrences which do not have and are not reasonably likely to
have a Material Adverse Effect:
11.18.1. Prohibited Transactions. None of such Pension Benefit Plans
has participated in, engaged in or been a party to any non-exempt
PROHIBITED TRANSACTION as defined in ERISA or the Code, and no
officer, director or employee of such Covered Person or of an ERISA
Affiliate of such Covered Person has committed a breach of any of
the responsibilities or obligations imposed upon fiduciaries by
Title I of ERISA.
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11.18.2. Claims. There are no claims, pending or threatened,
involving any such Pension Benefit Plan by a current or former
employee (or beneficiary thereof) of such Covered Person or ERISA
Affiliate of such Covered Person, nor is there any reasonable basis
to anticipate any claims involving any such Pension Benefit Plan
which would likely be successfully maintained against such Covered
Person or such ERISA Affiliate except, in such case, claims for
benefits in the ordinary course in accordance with such Pension
Benefit Plan.
11.18.3. Reporting and Disclosure Requirements. There are no
violations of any reporting or disclosure requirements with respect
to any such Pension Benefit Plan and none of such Pension Benefit
Plans has violated any applicable Law, including ERISA and the Code.
11.18.4. Accumulated Funding Deficiency. No such Pension Benefit
Plan has (i) incurred an accumulated funding deficiency (within the
meaning of Section 412(a) of the Code), whether or not waived; (ii)
been a Pension Benefit Plan with respect to which a Reportable Event
(to the extent that the reporting of such events to the PBGC within
thirty days of the occurrence has not been waived) has occurred and
is continuing; or (iii) been a Pension Benefit Plan with respect to
which there exist conditions or events which have occurred that
present a significant risk of termination of such Pension Benefit
Plan by the PBGC.
11.18.5. Multi-employer Plan. All Multi-employer Plans to which
any Covered Person contributes or is obligated to contribute are
listed in section 11.18.5 of the Disclosure Schedule. No Covered
Person or ERISA Affiliate of such Covered Person has received notice
that any such Multi-employer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no such
Multi-employer Plan is reasonably expected to be in reorganization
or to be terminated within the meaning of Title IV of ERISA.
11.19. Welfare Benefit Plans. No Covered Person or ERISA Affiliate of any
Covered Person maintains a Welfare Benefit Plan that has a liability which,
if enforced or collected, has or is reasonably likely to have a Material
Adverse Effect. Each Covered Person and each ERISA Affiliate of any Covered
Person has complied in all material respects with the applicable
requirements of Section 4980B of the Code pertaining to continuation
coverage as mandated by COBRA.
11.20. Retiree Benefits. No Covered Person or ERISA Affiliate of such
Covered Person has an obligation to provide any Person with any medical,
life insurance, or similar benefit following such Person's retirement or
termination of employment (or to such Person's beneficiary subsequent to
such Person's death) other than (i) such benefits provided to Persons at
such Person's sole expense, (ii) obligations under COBRA, (iii) as
disclosed in the Financial Statements, and (iv) such obligations as have
not or are not reasonably likely to have a Material Adverse Effect.
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11.21. State of Property. Each Covered Person has good and marketable or
merchantable title to all real and personal property purported to be owned
by it or reflected in the Financial Statements, except for personal
property sold in the ordinary course of business after the date of such
Financial Statements. There are no Security Interests on any of the
property purported to be owned by any Covered Person, except Permitted
Security Interests.
11.22. Negative Pledges. No Covered Person is a party to or bound by any
Contract which prohibits the creation or existence of any Security Interest
upon or assignment or conveyance of any of the Collateral.
11.23. Margin Stock. No Covered Person is engaged or will engage,
principally or as one of its important activities, in the business of
extending credit for the purpose of PURCHASING or CARRYING MARGIN STOCK
(within the meaning of Regulation U of the Federal Reserve Board), and no
part of the proceeds of any Advance will be used to purchase or carry any
such margin stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock or for any purpose which
violates, or which would be inconsistent with, the provisions of
Regulations G, T, U or X of the Federal Reserve Board.
11.24. Securities Matters. No proceeds of any Advance will be used to
acquire from any Person any security in a transaction that is hostile from
the point of view of such Person and which is subject to Sections 13 and 14
of the Securities Exchange Act of 1934.
11.25. Investment Company Act, Etc. No Covered Person is an INVESTMENT
COMPANY registered or required to be registered under the Investment
Company Act of 1940, or a company CONTROLLED (within the meaning of such
Investment Company Act) by such an INVESTMENT COMPANY or an AFFILIATED
PERSON of, or promoter or PRINCIPAL UNDERWRITER for, an INVESTMENT COMPANY,
as such terms are defined in the Investment Company Act of 1940. No Covered
Person is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act or any
other Law limiting or regulating its ability to incur Indebtedness for
money borrowed.
11.26. No Material Misstatements or Omissions. Neither the Loan Documents,
any of the Financial Statements nor any statement, list, certificate or
other document executed and delivered by or on behalf of Borrower or any
other Covered Person to Administrative Agent or any Lender in connection
with the Loan Documents or any of the transactions contemplated thereby as
of the date thereof contains any untrue statement of a material fact, or
omits to state a material fact necessary to make the statements therein not
misleading as of such date.
11.27. Filings. All registration statements, reports, proxy statements and
other documents, if any, required to be filed by Borrower with the
Securities and Exchange Commission pursuant to the Securities Act of 1933,
and the Securities Exchange Act of 1934, have been filed, and as of date
thereof such filings are complete and accurate and contain no untrue
statements of material fact or omit to state any material facts required to
be stated therein or necessary in order to make the statements therein not
misleading as of the dates of such filings.
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12. Modification and Survival of Representations. Borrower may at any time
after the initial Revolving Advance is made propose to Lenders in writing to
modify the representations and warranties in Section 11, and any other
representation or warranty made in any certificate, report, opinion or other
document delivered by Borrower pursuant to the Loan Documents. If the proposed
modifications are satisfactory to all of the Lenders as evidenced by their
written assent thereto, then such representations and warranties shall be deemed
and treated as so modified, but only as of the date of Borrower's written
modification proposal. If such proposed modifications are not satisfactory to
all of the Lenders, then such proposed modifications shall not be deemed or
treated as modifying such representations and warranties. All such
representations and warranties, as made or deemed made as of a particular time,
shall survive execution of each of the Loan Documents and the making of every
Advance, and may be relied upon by Administrative Agent and Lenders as being
true and correct as of the date when made or deemed made until all of the Loan
Obligations are fully and indefeasibly paid, no Letters of Credit are
outstanding and the Letter of Credit Exposure is irreversibly zero.
13. Affirmative Covenants. Borrower covenants and agrees that, while any of the
Commitments remains in effect and until all of the Loan Obligations are fully
and indefeasibly paid, no Letters of Credit are outstanding and the Letter of
Credit Exposure is irreversibly zero, Borrower shall do, or cause to be done,
the following:
13.1. Use of Proceeds. Subject to the terms and conditions hereof, the
proceeds of the Revolving Loan Advances and Swingline Advances shall be
used only to refinance existing Indebtedness, for working capital and
capital expenditures, as the source for payment of Borrower's reimbursement
obligations with respect to Letters of Credit, to pay all or any part of
the consideration payable by Borrower for any Permitted Acquisition, and
for general corporate purposes.
13.2. Corporate Existence. Each Covered Person shall maintain its
existence in good standing and shall maintain in good standing its right to
transact business in those states in which it is now or hereafter doing
business, except where the failure to so qualify will not have and will not
be reasonably likely to have a Material Adverse Effect. Each Covered Person
shall obtain and maintain all Material Licenses for such Covered Person.
13.3. Maintenance of Property and Leases. Each Covered Person shall
maintain in good condition and working order, and repair and replace as
required, all buildings, equipment, machinery, fixtures and other real and
personal property whose useful economic life has not elapsed and which is
necessary for the ordinary conduct of the business of such Covered Person.
Each Covered Person shall maintain in good standing and free of defaults
all of its leases of buildings, equipment, machinery, fixtures and other
real and personal property whose useful economic life has not elapsed and
which is necessary for the ordinary conduct of the business of such Covered
Person.
13.4. Insurance. Each Covered Person shall at all times keep insured or
cause to be kept insured, in insurance companies having a rating of at
least "A" by Best's Rating Service, all property owned by it of a character
usually insured by others carrying on businesses similar to that of such
Covered Person in such manner and to such extent and covering such risks as
such properties are usually insured. Each Covered Person shall at all times
carry insurance, in
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insurance companies having a rating of at least "A" by Best's Rating
Service, against liability on account of damage to persons or property
(including product liability insurance and insurance required under all
applicable workers' compensation laws) and covering all other liabilities
common to such Covered Person's business, in such manner and to such extent
as such coverage is usually carried by others conducting businesses similar
to that of such Covered Person. All policies of insurance maintained
hereunder shall contain a clause providing that such policies may not be
canceled, reduced in coverage or otherwise modified without 30 days prior
written notice to Administrative Agent. Borrower shall upon request of
Administrative Agent at any time furnish to Administrative Agent updated
evidence of insurance (in the form required as a condition to
Administrative Agent's lending hereunder) for such insurance.
13.5. Payment of Taxes and Other Obligations. Each Covered Person shall
promptly pay and discharge or cause to be paid and discharged, as and when
due, any and all income taxes, federal or otherwise, lawfully assessed and
imposed upon it, and any and all lawful taxes, rates, levies, and
assessments whatsoever upon its properties and every part thereof, or upon
the income or profits therefrom and all claims of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons for labor,
materials, supplies, storage or other items or services which if unpaid
might be or become a Security Interest or charge upon any of its property;
provided, however, that a Covered Person may diligently contest in good
faith by appropriate proceedings the validity of any such taxes, rates,
levies, or assessments, provided such Covered Person or Domestic Borrower
has established adequate reserves therefor in conformity with GAAP on its
books, and no Security Interest, other than a Permitted Security Interest,
results from such non-payment.
13.6. Compliance With Laws. Each Covered Person shall comply with all
Material Laws. Without limiting the generality of the foregoing:
13.6.1. Environmental Laws. Each Covered Person shall comply and
shall use commercially reasonable efforts to ensure compliance by
all tenants, subtenants and other occupants, if any, with all
Environmental Laws, the non-compliance with which has or is
reasonably likely to have a Material Adverse Effect.
13.6.2. Pension Benefit Plans. Each Covered Person and each ERISA
Affiliate of such Covered Person shall at all times make prompt
payments or contributions to meet the minimum funding standards
under ERISA and the Code with respect to any Pension Benefit Plan
maintained by such Covered Person or such ERISA Affiliate, and shall
comply in all material respects with all reporting and disclosure
requirements and all provisions of the Code and ERISA applicable
to any Pension Benefit Plan maintained by such Covered Person or
such ERISA Affiliate.
13.7. Discovery and Clean-Up of Hazardous Material. Upon any Covered
Person receiving notice of any violation of Environmental Laws or any
similar notice described in Section 13.9.4, or upon any Covered Person
otherwise discovering Hazardous Material on any property owned or leased by
such Covered Person which is in violation of, or which would result in
liability under, any Environmental Law, Borrower shall: (i) promptly take
such acts as may be necessary to prevent danger or harm to the property or
any person therein as a result of such Hazardous
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Material; (ii) at the request of Administrative Agent, and at Borrower's
sole cost and expense, obtain and deliver to Administrative Agent promptly,
but in no event later than 90 days after such request, a then currently
dated environmental assessment of the property certified to Administrative
Agent and any future holder of the Loan Obligations, a proposed plan for
responding to any environmental problems described in such assessment, and
an estimate of the costs thereof; and (iii) take all necessary steps to
initiate and expeditiously complete all removal, remedial, response,
corrective and other action to eliminate any such environmental problems,
and keep Administrative Agent informed of such actions and the results
thereof.
13.8. Termination of Pension Benefit Plan. No Covered Person or ERISA
Affiliate of such Covered Person shall terminate or amend any Pension
Benefit Plan maintained by such Covered Person or such ERISA Affiliate if
such termination or amendment would result in any liability to such Covered
Person or such ERISA Affiliate under ERISA or any increase in current
liability for the plan year for which such Covered Person or such ERISA
Affiliate is required to provide security to such Pension Benefit Plan
under the Code which, in either case, has or is reasonably likely to have a
Material Adverse Effect.
13.9. Notice to Administrative Agent of Material Events. Borrower shall,
promptly upon any Responsible Officer of Borrower obtaining knowledge or
notice thereof, give notice to Administrative Agent of (i) any breach of
any of the covenants in Section 13, 14, or 15; (ii) any Default or Event of
Default; (iii) the commencement of any Material Proceeding; and (iv) any
loss of or damage to any assets of a Covered Person or the commencement of
any proceeding for the condemnation or other taking of any of the assets of
a Covered Person if such loss, damage or proceeding has or is reasonably
likely to have a Material Adverse Effect. In addition,
13.9.1. Domestic Borrower shall furnish to Administrative Agent
from time to time all information which Administrative Agent
reasonably requests with respect to the status of any Material
Proceeding.
13.9.2. Domestic Borrower shall furnish to Administrative Agent
from time to time all information which Administrative Agent
reasonably requests with respect to any Pension Benefit Plan
established by a Covered Person or an ERISA Affiliate of any Covered
Person.
13.9.3. Domestic Borrower shall deliver notice to Administrative
Agent of the establishment of any Pension Benefit Plan by a Covered
Person or an ERISA Affiliate of such Covered Person.
13.9.4. Domestic Borrower shall promptly inform Administrative
Agent of its receipt of, and deliver to Administrative Agent a copy
of, any (i) notice that any violation of any Environmental Law may
have been committed or is about to be committed by any Covered
Person, (ii) notice that any administrative or judicial complaint or
order has been filed or is about to be filed against any Covered
Person alleging violations of any Environmental Law or Employment
Law or requiring such Covered Person to take any action in
connection with the release of any Hazardous Material into the
environment, (iii) notice from a Governmental Authority or private
party alleging that a Covered
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Person may be liable or responsible for costs associated with a
response to or cleanup of a release of Hazardous Material into the
environment or any damages caused thereby, (iv) notice that a
Covered Person is subject to federal, state or local investigation
regarding the improper transportation, storage, disposal, generation
or release into the environment of any Hazardous Material, or (v)
notice that any properties or assets of a Covered Person are subject
to a Security Interest in favor of any Governmental Authority for
any liability under any Environmental Law or damages arising from or
costs incurred by such Governmental Authority in response to a
release of Hazardous Material into the environment.
13.9.5. Domestic Borrower shall deliver to Administrative Agent
notice of the following events promptly after they occur: (i) the
failure of any Covered Person or ERISA Affiliate of such Covered
Person to make any required installment or any other required
payment to any Pension Benefit Plan in sufficient amount to comply
with ERISA and the Code on or before the due date for such install-
ment or payment; (ii) the occurrence of any Reportable Event, or a
PROHIBITED TRANSACTION or ACCUMULATED FUNDING DEFICIENCY (as those
terms are defined in ERISA), with respect to any Pension Benefit
Plan maintained or contributed to by a Covered Person or an ERISA
Affiliate of such Covered Person; (iii) receipt by a Covered Person
or ERISA Affiliate of such Covered Person of any notice from a
Multi-employer Plan regarding the imposition of withdrawal
liability; and (iv) receipt by a Covered Person or ERISA Affiliate
of such Covered Person of any notice of the institution of any
proceeding or receipt by such Covered Person or such ERISA Affiliate
of any notice of the taking, of any other action which may result in
the termination of any Pension Benefit Plan maintained or
contributed to by such Covered Person or such ERISA Affiliate, or
the withdrawal or partial withdrawal by a Covered Person or ERISA
Affiliate of such Covered Person from any Pension Benefit Plan, and
the filing or receipt by a Covered Person or ERISA Affiliate of such
Covered Person of any such notice and filing or receipt of all
subsequent reports or notices under ERISA with or from the IRS, the
PBGC, or the DOL relating to the same; and, in addition to such
notice, deliver to Administrative Agent a certificate of a
Responsible Officer of Domestic Borrower, setting forth details as
to such events and the action that the affected Covered Person or
ERISA Affiliate of such Covered Person proposes to take with respect
thereto.
13.9.6. Domestic Borrower shall promptly deliver to Administrative
Agent notice of any default or event of default, or the occurrence
of any event which would with the passage of time, giving of notice
or otherwise, constitute a default or event of default with respect
to any Material Obligation.
13.9.7. Domestic Borrower shall promptly deliver notice to
Administrative Agent of the assertion by the holder of any capital
stock or any other equity interest in a Covered Person or any
Indebtedness of a Covered Person in the outstanding principal amount
in excess of $5,000,000 that a default exists with respect thereto
or that such Covered Person is not in compliance with the terms
thereof, or of the threat or commencement by such holder of any
enforcement action because of such asserted default or
noncompliance.
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13.9.8. Domestic Borrower shall promptly deliver notice to
Administrative Agent of any change in the name, state of
incorporation, or form of organization of any Covered Person.
13.9.9. Domestic Borrower shall, promptly after becoming aware
thereof, deliver notice to Administrative Agent of any pending or
threatened strike, work stoppage, unfair labor practice claim or
other labor dispute affecting a Covered Person which has or is
reasonably likely to have a Material Adverse Effect.
13.9.10. Domestic Borrower shall, promptly after becoming aware
thereof, deliver notice to Administrative Agent of any event that
has or is reasonably likely to have a Material Adverse Effect.
13.9.11. Domestic Borrower shall, promptly after becoming aware
thereof, deliver notice to Administrative Agent of an actual,
alleged, or potential violation of any Material Law applicable
to a Covered Person or the property of a Covered Person.
13.10. Borrowing Officer. Borrower shall keep on file with Administrative
Agent at all times an appropriate instrument naming each Borrowing Officer.
13.11. Maintenance of Security Interests of Security Documents.
13.11.1. Preservation and Perfection of Security Interests. Borrower
shall promptly, upon the reasonable request of Administrative Agent
and at Borrower's expense, execute, acknowledge and deliver, or
cause the execution, acknowledgment and delivery of, and thereafter
file or record in the appropriate governmental office, any document
or instrument supplementing or confirming the Security Documents or
otherwise deemed necessary by Administrative Agent to create,
preserve or perfect any Security Interest purported to be created by
the Security Documents or to fully consummate the transactions
contemplated by the Loan Documents.
13.11.2. Compliance With Terms of Security Documents. Each Covered
Person shall comply with all of the terms, conditions and covenants
in the Security Documents to which such Covered Person is a party.
13.12. Accounting System. Each Covered Person shall maintain a system of
accounting from which financial statements can be prepared in accordance
with GAAP. Without limiting the generality of the foregoing, each Covered
Person shall maintain detailed and accurate records of
all transfers of any proceeds of the Loans from Borrower to a Covered
Person or any other Affiliate.
13.13. Financial Statements. Domestic Borrower shall deliver to
Administrative Agent (with copies for its delivery to each Lender):
13.13.1. Annual Financial Statements. Within 120 days after the
close of each fiscal year of Domestic Borrower, year-end
consolidated and consolidating (on a group
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basis) financial statements of Domestic Borrower and its
Subsidiaries, containing a balance sheet, income statement, state-
ment of cash flows and an audit report without qualification by an
independent certified public accounting firm selected by Domestic
Borrower and satisfactory to Administrative Agent, and accompanied
by (i) a Compliance Certificate of the Chief Financial Officer of
Domestic Borrower, (ii) a certificate of the independent certified
public accounting firm that examined such financial statements to
the effect that they have reviewed and are familiar with this Agree-
ment and that, in examining such financial statements, they did not
become aware of any fact or condition which then constituted a
Default or Event of Default, except for those, if any, described
in reasonable detail in such certificate, (iii) the management
letter and report on internal controls delivered by such independent
certified public accounting firm in connection with their audit, and
(iv) if requested by Administrative Agent, any summary prepared by
such independent certified public accounting firm of the adjustments
proposed by the members of its audit team.
13.13.2. Quarterly Financial Statements. Within 45 days after the
end of each fiscal quarter of Domestic Borrower, unaudited
consolidated and consolidating (on a group basis) financial
statements of Domestic Borrower and its Subsidiaries for the
quarters not covered by the latest year-end financial statements,
in each case containing a balance sheet, income statement, and
statement of cash flows and accompanied by a Compliance Certificate
of the Chief Financial Officer of Domestic Borrower.
Each Compliance Certificate shall be in the form of Exhibit 13.13, shall
contain detailed calculations of the financial measurements referred to in
Section 15 for the relevant periods, and shall contain statements by the
signing officer to the effect that, except as explained in reasonable
detail in such Compliance Certificate, (i) the attached Financial
Statements are complete and correct in all material respects (subject, in
the case of Financial Statements other than annual, to normal year-end
audit adjustments) and have been prepared in accordance with GAAP applied
consistently throughout the periods covered thereby and with prior periods
(except as disclosed therein), (ii) all of the Representations and
Warranties are true and correct as of the date such certification is given
as if made on such date, and (iii) there is no Existing Default. If any
Compliance Certificate discloses that a representation or warranty is not
true and correct, or that there is an Existing Default, such Compliance
Certificate shall state what action Borrower has taken or proposes to take
with respect thereto.
13.14. Other Financial Information. Domestic Borrower shall also deliver
the following to Administrative Agent:
13.14.1. Stockholder and SEC Reports. Promptly upon the request of
Administrative Agent, copies of any (i) proxy statements, financial
statements and reports which any Covered Person makes available to
its stockholders, and (ii) reports, registration statements and
prospectuses with any securities exchange or the Securities and
Exchange Commission or any Governmental Authority succeeding to any
of its functions.
13.14.2. Pension Benefit Plan Reports. Promptly upon the request of
Administrative Agent at any time or from time to time, a copy of
each annual report or
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other filing or notice filed with respect to each Pension Benefit
Plan of a Covered Person or an ERISA Affiliate of a Covered Person.
13.14.3. Tax Returns. Promptly upon the request of Administrative
Agent at any time or from time to time, a copy of each federal,
state, or local tax return or report filed by Borrower or any other
Covered Person.
13.15. Other Information. Upon the request of Administrative Agent,
Borrower shall promptly deliver to Administrative Agent such other
information about the business, operations, revenues, financial condition,
property, or business prospects of Borrower and every other Covered Person
as Administrative Agent may, from time to time, reasonably request.
13.16. Audits by Administrative Agent. Administrative Agent or Persons
authorized by and acting on behalf of Administrative Agent or any Lender
may at any time during normal business hours audit the books and records
and inspect any of the property of each Covered Person from time to time
upon reasonable notice to such Covered Person, and in the course thereof
may make copies or abstracts of such books and records and discuss the
affairs, finances and books and records of such Covered Person with its
accountants, officers and employees. Each Covered Person shall cooperate
with Administrative Agent and such Persons in the conduct of such audits
and shall deliver to Administrative Agent any instrument necessary for
Administrative Agent to obtain records from any service bureau maintaining
records for such Covered Person.
13.17. Access to Officers and Auditors. Each Covered Person shall permit
any Lender and Persons authorized by Administrative Agent to discuss the
business, operations, revenues, financial condition, property, or business
prospects of such Covered Person with its officers, employees, accountants
and independent auditors as often as Administrative Agent may reasonably
request in its discretion, and such Covered Person shall direct such
officers, employees, accountants and independent auditors to cooperate with
Administrative Agent and make full disclosure to Administrative Agent of
those matters that they may deem relevant to the continuing ability of
Borrower timely to pay and perform the Loan Obligations.
13.18. Confidentiality. Administrative Agent and each Lender agrees that it
will not disclose to third Persons any information that it obtains about
any Covered Person or its operations or finances that are designated by
Borrower in writing as confidential or that Borrower has advised Lenders in
writing constitutes non-public information. Administrative Agent and
Lenders may, however, disclose such information to any of their respective
officers, attorneys, auditors, accountants, bank examiners, agents and
representatives (including, in the case of Administrative Agent, its
Subsidiaries and their respective officers, attorneys, auditors,
accountants, bank examiners, agents and representatives), who have a need
to know such information in connection with the administration,
interpretation or enforcement of the Loan Documents or the lending and
collection activity contemplated therein or the syndication of the Loans or
to the extent required by Law or a Governmental Authority. Lenders shall
advise such Persons that such information is to be treated as confidential.
A Lender may also disclose such information in any documents that it files
in any legal proceeding to pursue, enforce or preserve its rights under the
Loan Documents to the extent that such Lender's counsel advises in writing
that such disclosure is reasonably necessary. Lenders' non-disclosure
obligation shall not apply to any information that
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(i) is disclosed to a Lender by a third Person not affiliated with or
employed by Borrower who does not have a commensurate duty of
non-disclosure, or (ii) becomes publicly known other than as a result of
disclosure by a Lender.
13.19. Proformas for Permitted Acquisitions. Borrower shall, prior to
making any Permitted Acquisition, prepare and furnish to Administrative
Agent proforma financial statements for the Surviving Company,
demonstrating to the satisfaction of Administrative Agent that the
Surviving Company will be Solvent upon consummation of the Permitted
Acquisition and upon the passage of time thereafter, and that none of the
covenants in Section 15 will be violated as a consequence of such Permitted
Acquisition or with the passage of a reasonable time thereafter. Such
proforma financial statements shall contain balance sheets, income
statements, statements of cash flows and such other reports and
disclosures, and shall cover such forecast periods, as Administrative Agent
may in its reasonable discretion require. Borrower shall also provide to
Administrative Agent copies of the audited financial statements (if
available, or unaudited financial statements if no audited financial
statements exist) for the Target Company for the three fiscal years most
recently ended and for each of the completed fiscal quarters in the then
current fiscal year.
13.20. Further Assurances. Borrower shall execute and deliver, or cause to
be executed and delivered, to Administrative Agent such documents and
agreements, and shall take or cause to be taken such actions, as
Administrative Agent may from time to time reasonably request to carry out
the terms and conditions of this Agreement and the other Loan Documents.
14. Negative Covenants. Borrower covenants and agrees that, while any of the
Commitments remains in effect and until all of the Loan Obligations are fully
and indefeasibly paid, no Letters of Credit are outstanding and the Letter of
Credit Exposure is irreversibly zero, Borrower shall not, directly or
indirectly, do any of the following, or permit any Covered Person to do any of
the following, without the prior written consent of Required Lenders:
14.1. Investments. Make any Investments in any other Person except the
following:
14.1.1. Investments in (i) interest-bearing United States
government obligations; (ii) certificates of deposit issued by any
Lender; (iii) certificates of deposit issued by and time deposits
with any Qualified Financial Institution; (iv) prime commercial
paper rated A1 or better by Standard and Poor's Corporation or Prime
P1 or better by Moody's Investor Service, Inc.; (v) agreements
involving the sale to Borrower of United States government
securities and their guarantied repurchase the next Business Day
by a Qualified Financial Institution; (vi) United Kingdom government
securities denominated in Pounds Sterling and with less than two
years to run to maturity; (vii) Pounds Sterling denominated deposits
held in England with a bank which is an authorized institution
under the Banking Act 1987 and which has a short term senior debt
rating of A1 or better by Standard & Poor's Corporation of P1 or
better by Moody's Investors Service, Inc.; (viii) agreements
involving the sale to the Borrower of United Kingdom government
securities and their guaranteed repurchase the next Business Day
by a bank which is an authorized institution under the Banking Act
1987 and which has a short term senior debt rating of A1 or better
by Standard & Poor's Corporation or P1 or better by Moody's
Investors Service, Inc.; (ix) Federal Republic of Germany government
securities
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denominated in Deutsche Marks and with less than two years to run
to maturity; (x) Deutsche Marks denominated deposits held in Germany
with a bank which is an authorised institution under the
Kreditwesengesetz and which has a short term senior debt rating of
A1 or better by Standard & Poor's Corporation or P1 or better by
Moody's Investors Service, Inc.; or (xi) agreements involving the
sale to the borrower of Federal Republic of Germany government
securities and their guaranteed repurchase the next business day
by a bank which is an authorised institution under the
Kreditwesengesetz and which has a short term senior debt rating of
A1 or better by Standard & Poor's Corporation of P1 or better by
Moody's Investors Services, Inc.
14.1.2. Accounts arising in the ordinary course of business and
payable in accordance with Borrower's customary trade terms.
14.1.3. Any Investments that are Permitted Acquisitions.
14.1.4. Investments existing on the Effective Date and disclosed in
section 11.14 of the Disclosure Schedule.
14.1.5. Notes taken by Borrower from purchasers in connection with
any Management Incentive Stock Issue.
14.1.6. Indebtedness of any Covered Person or any of its wholly
owned subsidiaries to any other Covered Person.
14.1.7. Any other Investment in any Person if, after giving effect
thereto, the aggregate Investments in all such Persons that are not
Significant Subsidiaries is less than $30,000,000.
14.2. Indebtedness. Create, incur, assume, or allow to exist any
Indebtedness of any kind or description, except the following:
14.2.1. Indebtedness to trade creditors incurred in the ordinary
course of business, to the extent that it is not overdue past the
original due date by more than 90 days.
14.2.2. The Loan Obligations.
14.2.3. Indebtedness secured by Permitted Security Interests.
14.2.4. Any other Indebtedness of a Covered Person to the extent
such other Indebtedness of all Covered Persons does not exceed a
Dollar Equivalent Amount (as of the date incurred) of $5,000,000 to
any one Person or $10,000,000 in the aggregate.
14.2.5. Indebtedness secured by outstanding Letters of Credit.
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14.3. Indirect Obligations. Create, incur, assume or allow to exist any
Indirect Obligations except (i) Indirect Obligations existing on the
Effective Date and disclosed on section 11.16 of the Disclosure Schedule
and (ii) a guaranty by any Covered Person of an Obligation of another
Covered Person or of a wholly owned subsidiary of such Covered Person to
the extent the Obligations guarantied are not prohibited hereby, and (iii)
the Guaranties.
14.4. Security Interests. Create, incur, assume or allow to exist any
Security Interest upon all or any part of its property, real or personal,
now owned or hereafter acquired, except the following:
14.4.1. Security Interests for taxes, assessments or governmental
charges not delinquent or being diligently contested in good faith
and by appropriate proceedings and for which adequate book reserves
in accordance with GAAP are maintained.
14.4.2. Security Interests arising out of deposits in connection
with workers' compensation insurance, unemployment insurance, old
age pensions, or other social security or retirement benefits
legislation.
14.4.3. Deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds, and other obligations of like
nature arising in the ordinary course of business.
14.4.4. Security Interests imposed by any Law, such as mechanics',
workmen's, materialmen's, landlords', carriers', or other like
Security Interests arising in the ordinary course of business which
secure payment of obligations which are not past due or which are
being diligently contested in good faith by appropriate proceedings
and for which adequate reserves in accordance with GAAP are
maintained on such Covered Person's books.
14.4.5. Purchase money Security Interests securing payment of the
purchase price of capital assets acquired by Covered Persons after
the Effective Date in an amount not to exceed $3,000,000 in the
aggregate for all Covered Persons during any fiscal year of
Borrower and $10,000,000 for all Covered Persons in the overall
aggregate.
14.4.6. Security Interests of customers of Covered Persons in items
of Inventory for the manufacture of which such customers have paid
deposits to such Covered Persons, to the extent such Security
Interests secure the repayment of such deposits.
14.4.7. Security Interests securing the Loan Obligations in favor
of Administrative Agent for the benefit of Lenders.
14.4.8. Security Interests existing on the Effective Date that are
disclosed in section 11.21 of the Disclosure Schedule and are
satisfactory to Lenders.
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14.4.9. Security Interests that secure Obligations of Covered
Persons which, when added to Security Interests permitted in Section
14.4.5, do not exceed $20,000,000 for all Covered Persons.
14.5. Acquisitions. Acquire stock or any other equity interest in a Person
sufficient for such Person to become a Subsidiary or Affiliate of a Covered
Person, or acquire all or substantially all of the assets of a Person,
except (i) Investments permitted under Section 14.1.7, (ii) asset
acquisitions in the ordinary course of business that are not otherwise
prohibited herein and, (iii) if there is no Existing Default and no Default
or Event of Default will occur as a result thereof, any such acquisition of
equity interests or assets with respect to which all of the following
requirements have been met (a "Permitted Acquisition"):
14.5.1. Aggregate Dollar Limitation. Such acquisition may not cause
the aggregate consideration paid by all Covered Persons for
acquisitions (other than the acquisition by German Borrower,
Assembly Technology & Test, Inc. and Assembly Technology & Test,
Limited of the assets of the Lucas Assembly and Test Business and
certain assets related thereto of Lucas Industries plc and Lucas
Automation & Control Engineering, Inc. and their Affiliates) during
such fiscal year to exceed $75,000,000.
14.5.2. Individual Acquisition Dollar Limitation. Such Covered
Person must obtain the prior written consent of Required Lenders in
the event that the total consideration paid by such Covered Person
in any particular acquisition (other than the acquisition by German
Borrower, Assembly Technology & Test, Inc. and Assembly Technology &
Test, Limited of the assets of the Lucas Assembly and Test Business
and certain assets related thereto of Lucas Industries plc and Lucas
Automation & Control Engineering, Inc. and their Affiliates) will
exceed $35,000,000.
14.5.3. Surviving Company Becomes a Guarantor. The Surviving
Company, if it is not a Borrower or Guarantor under this Agreement
as of the time of the consummation of the acquisition but will be a
Significant Subsidiary immediately after such consummation, shall
become, contemporaneously with the consummation of the acquisition
either (i) a Guarantor by execution of a separate guaranty or a
joinder satisfactory to Administrative Agent to the appropriate
Guaranty or (ii) if Required Lenders consent, a "Borrower"
hereunder by execution of an amendment hereto and execution and
delivery of appropriate notes and other documents and instruments,
each of which is satisfactory to Required Lenders.
14.5.4. Satisfactory Due Diligence Completed. If prior consent of
Required Lenders is required under Section 14.5.2, Borrower and
Lenders shall have conducted appropriate, independent due diligence
investigations, including, without limitation, investigations of
fraudulent conveyance risks, contingent liabilities and contractual
obligations and the results thereof shall have been provided to
Lenders and shall be satisfactory to Lenders; and all financial,
accounting and tax aspects of the acquisition shall be satisfactory
to Lenders.
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14.5.5. Proforma Financial Statements. Domestic Borrower shall have
delivered to Administrative Agent the proforma financial statements
for Domestic Borrower and its Subsidiaries (including the Surviving
Company) together with a certificate of the Chief Financial Officer
of Domestic Borrower that the projections therein of their quarterly
financial condition, results of operations, and cash flows represent
Domestic Borrower's best estimate of their future financial
performance for the periods set forth therein, that such projections
have been prepared on the basis of the assumptions described in the
proforma financial statements, and that such Chief Financial Officer
believes such assumptions are fair and reasonable in light of
current and reasonably foreseeable business conditions.
14.6. Disposal of Property. Sell, transfer, exchange, lease, or otherwise
dispose of any of its assets, including any shares of stock of any
Subsidiaries of Domestic Borrower or any Foreign Borrower that are not
pledged to Administrative Agent for the benefit of Lenders, except for
sales in the ordinary course of business and sales and other dispositions
of other assets (excluding stock of any Subsidiaries) whose book value does
not exceed $5,000,000 in the aggregate.
14.7. Transactions With Affiliates. Enter into or be a party to any
transaction or arrangement, including the purchase, sale or exchange of
property of any kind or the rendering of any service, with any Affiliate,
or make any loans or advances to any Affiliate. If there is no Existing
Default, however, each Covered Person may engage in the such transactions
in the ordinary course of business and pursuant to the reasonable
requirements of its business and on fair and reasonable terms substantially
as favorable to it as those which it could obtain in a comparable
arm's-length transaction with a non-Affiliate.
14.8. Conflicting Agreements. Enter into any agreement, that would, if
fully complied with by it, result in a Default or Event of Default either
immediately or upon the elapsing of time.
14.9. Fiscal Year. Change its fiscal year.
14.10. Transactions Having a Material Adverse Effect. Enter into any
transaction which has or is reasonably likely to have a Material Adverse
Effect.
15. Financial Covenants.
15.1. Special Definitions. As used in this Section 15 and elsewhere
herein, the following capitalized terms have the following meanings:
"Adjusted EBITDA" means, for any period of calculation, EBITDA minus
Capital Expenditures (exclusive of expenditures for Investments and
expenditures permitted under Section 14.5) both as accrued in such period.
"EBITDA" means, for any period of calculation, an amount equal to the sum
of (i) Net Income, (ii) federal, state and local income tax expense, (iii)
Interest Expense (including the interest component of payments on Capital
Leases) in such period, (iv) depreciation and amortization expense and
other non-cash charges that reduced net income during such period, (v)
losses on
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the sale or other disposition of assets other than in the ordinary course
of business if included in the calculation of net income, and (vi)
extraordinary losses if included in the calculation of net income, minus
(a) gains on the sale or other disposition of assets other than in the
ordinary course of business if included in net income, and (b)
extraordinary gains if included in net income, all as accrued in such
period.
"Fixed Charges" means, for any period of calculation, the sum of (i)
Interest Expense accrued in such period, (ii) federal, state and local
income tax expense in such period, and (iii) dividends payable in such
period.
"Funded Debt" means, at any date, the sum of (i) the principal amount of
all Indebtedness for borrowed money of Domestic Borrower and its
Subsidiaries on a consolidated basis, and (ii) the unamortized capitalized
amount of all Capital Leases of Borrowers and their Subsidiaries on a
consolidated basis, all as of such date.
"Interest Expense" means, for any period of calculation, all interest
whether paid in cash or accrued as a liability, but without duplication, on
Indebtedness of Domestic Borrower and its consolidated Subsidiaries and all
interest, whether paid in cash or accrued as a liability, but without
duplication, by Domestic Borrower with respect to the Convertible Preferred
Securities during such period.
"Net Income" means, for any period of calculation, "net income" as
determined in accordance with GAAP.
"Net Worth" means, at any date: (a) the book value (net of depreciation,
obsolescence, amortization, valuation and other proper reserves determined
in accordance with GAAP) at which assets would be shown on a consolidated
balance sheet at such date prepared in accordance with GAAP; less (b) the
amount at which all liabilities (not to include the obligations of Domestic
Borrower with respect to the issuance by DT Capital Trust (a wholly-owned
Subsidiary of Domestic Borrower) of term income deferrable equity
securities on or about June 12, 1997), would be shown on such balance
sheet, including as liabilities all reserves for contingencies and other
potential liabilities which would be shown on such balance sheet or
disclosed in the notes thereto.
For the purposes of Section 15, "Indebtedness" shall not include the
Obligations of Domestic Borrower arising in connection with the Convertible
Preferred Securities.
15.2. Minimum Net Worth. Domestic Borrower's Net Worth as of the end of
each fiscal quarter of Domestic Borrower shall at no time be less than 90%
of Domestic Borrower's Net Worth as of the Effective Date plus (i) 50% of
Domestic Borrower's cumulative Net Income (but not any net loss) for the
period commencing with the Effective Date and extending through and
including the end of the applicable fiscal quarter and (ii) 75% of the
amount of the cumulative net proceeds received by Domestic Borrower for the
period commencing with the Effective Date and extending through and
including the end of the applicable fiscal quarter from the issuance of
equity securities of any Covered Person (other than in connection with any
employee benefit plan or employee compensation arrangement).
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15.3. Maximum Funded Debt to EBITDA Ratio. The ratio of Domestic
Borrower's Funded Debt as of the end of any fiscal quarter of Domestic
Borrower to Domestic Borrower's EBITDA for the four consecutive fiscal
quarters then ended shall not exceed the applicable ratio in the following
table:
----------------------------------- -----------------------
During the period The applicable ratio is
----------------------------------- -----------------------
Effective Date to July 1, 2000 3.0 to 1.0
----------------------------------- -----------------------
From July 1, 2000 to July 1, 2001 2.75 to 1.0
----------------------------------- -----------------------
After June 30, 2001 2.5 to 1.0
----------------------------------- -----------------------
15.4. Minimum Fixed Charge Coverage. The ratio of Domestic Borrower's
Adjusted EBITDA to Domestic Borrower's Fixed Charges, calculated at the end
of each fiscal quarter of Domestic Borrower for the four consecutive fiscal
quarters then ended, shall not be less than the applicable ratio in the
following table:
----------------------------------- -----------------------
During the period The applicable ratio is
----------------------------------- -----------------------
From Effective Date to July 1, 2000 1.50 to 1.0
----------------------------------- -----------------------
From July 1, 2000 to July 1, 2001 1.75 to 1.0
----------------------------------- -----------------------
After June 30, 2001 2.00 to 1.0
----------------------------------- -----------------------
15.5. Minimum EBITDA to Interest Expense Ratio. The ratio of Domestic
Borrower's EBITDA to Domestic Borrower's Interest Expense, calculated at
the end of each fiscal quarter of Domestic Borrower for the four
consecutive fiscal quarters then ended, shall not be less than the
applicable ratio in the following table:
----------------------------------- -----------------------
During the period The applicable ratio is
----------------------------------- -----------------------
From Effective Date to July 1, 2000 4.0 to 1.0
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From June 30, 2000 to July 1, 2001 5.0 to 1.0
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After June 30, 2001 6.0 to 1.0
----------------------------------- -----------------------
16. Default.
16.1. Events of Default. Any one or more of the following shall constitute
an event of default (an "Event of Default") under this Agreement:
16.1.1. Failure to Pay Principal or Interest. Failure of Borrower
to pay any principal of the Loans or interest accrued thereon when
due.
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16.1.2. Failure to Pay Other Amounts Owed to Lenders. Failure of
Borrower to pay any of the Loan Obligations (other than principal of
the Loans or interest accrued thereon) within 5 days after notice
from Administrative Agent that the same is due.
16.1.3. Failure to Pay Amounts Owed to Other Persons. Failure of
any Covered Person to make any payment due on Indebtedness of such
Covered Person to Persons (other than Lenders under the Loan
Documents) which continues unwaived beyond any applicable grace
period specified in the documents evidencing such Indebtedness and
which causes the aggregate amount of all such failures of all
Covered Persons to exceed $5,000,000; provided, however, that no
Event of Default will occur if such default or breach is being
diligently contested in good faith by appropriate proceedings and
Borrower has established adequate reserves with respect thereto in
conformity with GAAP.
16.1.4. Representations or Warranties. Any of the Representations
and Warranties is discovered to have been false in any material
respect when made.
16.1.5. Certain Covenants. Failure of any Covered Person to comply
with the covenants in Sections 13.1, 13.8, 13.9, 13.13, 13.16,
13.17, 13.19, 14 or 15.
16.1.6. Other Covenants. Failure of any Covered Person to comply
with of any of the terms or provisions of any of the Loan Documents
applicable to it (other than a failure which constitutes an Event of
Default under any of Sections 16.1.1 through 16.1.5) which is not
remedied or waived in writing by Administrative Agent within 30 days
notice thereof from the Administrative Agent to such Covered Person.
16.1.7. Acceleration of Other Indebtedness. Any Obligation (other
than a Loan Obligation) of a Covered Person for the repayment of
borrowed money becomes or is declared to be due and payable or
required to be prepaid (other than by an originally scheduled
prepayment) prior to the original maturity thereof as a consequence
of a default with respect thereto by any Covered Person and such
declaration or requirement causes the aggregate amount of the
Obligations of all Covered Persons which have been so accelerated to
exceed $5,000,000; provided however, that no Event of Default will
occur if such default or breach is being diligently contested in
good faith by appropriate proceedings and Domestic Borrower has
established adequate reserves with respect thereto in conformity
with GAAP.
16.1.8. Bankruptcy; Insolvency; Etc. A Covered Person (i) fails to
pay, or admits in writing its inability to pay, its debts generally
as they become due, or otherwise becomes insolvent (however
evidenced); (ii) makes an assignment for the benefit of
creditors; (iii) files a petition in bankruptcy, is adjudicated
insolvent or bankrupt, petitions or applies to any tribunal for any
receiver or any trustee of such Covered Person or any substantial
part of its property; (iv) commences any proceeding relating
to such Covered Person under any reorganization, arrangement,
readjustment of debt, dissolution or liquidation Law of any
jurisdiction, whether now or hereafter in effect; (v) has commenced
against it any such proceeding which remains undismissed for a
period of 90
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days, or by any act indicates its consent to, approval of, or
acquiescence in any such proceeding or the appointment of any
receiver of or any trustee for it or of any substantial part of its
property, or allows any such receivership or trusteeship to continue
undischarged for a period of 90 days; or (vi) takes any action to
authorize any of the foregoing.
16.1.9. Judgments; Attachment; Settlement; Etc. Any one or more
judgments or orders is entered against a Covered Person or any
attachment or other levy is made against the property of a Covered
Person with respect to a claim or claims, which causes the
aggregate amount of such judgments, orders, attachments and levies
against all Covered Persons (not paid or fully covered by
insurance, less the amount of reasonable deductibles in effect on
the Effective Date) to exceed $5,000,000, becomes final and non-
appealable or if timely appealed is not fully bonded and collection
thereof stayed pending the appeal; or any Covered Person enters into
an agreement to settle any claim or controversy which causes the
aggregate amount of the monetary Obligations of all Covered Persons
under such agreements (at current value based on a capitalization
rate of 9%) to exceed $5,000,000.
16.1.10. Pension Benefit Plan Termination, Etc. Any Pension Benefit
Plan termination by the PBGC or the appointment by the appropriate
United States District Court of a trustee to administer any Pension
Benefit Plan or to liquidate any Pension Benefit Plan; or any event
which constitutes grounds either for the termination of any Pension
Benefit Plan by PBGC or for the appointment by the appropriate
United States District Court of a trustee to administer or liquidate
any Pension Benefit Plan shall have occurred and be continuing for
30 days after Borrower has notice of any such event; or any
voluntary termination of any Pension Benefit Plan which is a
DEFINED BENEFIT PENSION PLAN as defined in Section 3(35) of ERISA
while such defined benefit pension plan has an ACCUMULATED FUNDING
DEFICIENCY, unless Administrative Agent has been notified of such
intent to voluntarily terminate such plan and Required Lenders have
given their consent and agreed that such event shall not constitute
a Default; or the plan administrator of any Pension Benefit Plan
applies under Section 412(d) of the Code for a waiver of the minimum
funding standards of Section 412(1) of the Code and Required Lenders
determine that the substantial business hardship upon which the
application for such waiver is based would cause the aggregate
liability to which all Covered Persons or ERISA Affiliates of all
Covered Persons could be subject to exceed $5,000,000.
16.1.11. Liquidation or Dissolution. A Covered Person files a
certificate of dissolution under applicable state Law or is
dissolved administratively and such dissolution is not rescinded
within 90 days, liquidated, or voluntarily dissolved, or suspends
or terminates the operation of its business, or has commenced
against it any action or proceeding for its liquidation or
dissolution or the winding up of its business which is not stayed
or dismissed within 60 days of such commencement, or takes any
corporate action in furtherance thereof, except in connection with
the consolidation of such a Covered Person and its assets with
another Covered Person and its assets.
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16.1.12. Seizure of Assets. Property of any Covered Person is
nationalized, expropriated, seized or otherwise appropriated, or
custody or control of such property of any Covered Person is assumed
by any Governmental Authority or any court of competent jurisdiction
at the instance of any Governmental Authority, and the same has or
could reasonably be expected to have a Material Adverse Effect
(determined only with regard to a Foreign Borrower and its
Subsidiaries or only with regard to Domestic Borrower and its
Subsidiaries domiciled in the United States), unless the same is
being contested in good faith by proper proceedings diligently
pursued and a stay of enforcement is in effect.
16.1.13. Racketeering Proceeding. There is filed against any Covered
Person any criminal action, suit or proceeding under any federal or
state racketeering statute (including, without limitation, the
Racketeer Influenced and Corrupt Organization Act of 1970), which
action, suit or proceeding is not dismissed within 120 days and
could result in the confiscation or forfeiture of any material part
of the assets of a Covered Person.
16.1.14. Loan Documents; Security Interests. For any reason other
than the failure of Administrative Agent to take any action
available to it to maintain perfection of the Security Interests
created in favor of Administrative Agent for the benefit of Lenders
pursuant to the Loan Documents, any Loan Document ceases to be in
full force and effect or any Security Interest with respect to any
portion of the collateral intended to be secured thereby ceases to
be, or is not, valid, perfected and prior to all other Security
Interests (other than the Permitted Security Interests) or is
terminated, revoked or declared void or invalid.
16.1.15. Rate Hedging Agreements. Borrower or any other Covered
Person breaches any of the terms or conditions of any agreement
under which any Rate Hedging Obligation is created and such breach
continues beyond any applicable grace period, or any action is taken
by Borrower or any other Covered Person to discontinue (except with
the consent of the Administrative Agent and any Lender which is a
counterparty) or assert the invalidity or unenforceability of any
such agreement or Rate Hedging Obligation.
16.1.16. Guaranty; Guarantor. Any Guaranty ceases to be in full
force and effect or any action is taken by any Guarantor, Borrower
or any of its Affiliates to discontinue or assert the invalidity or
unenforceability of any Guaranty or any Guarantor fails to comply
with any of the terms or provisions of any Guaranty, or any
representation or warranty of Guarantor therein is discovered to
have been false when made, or any Guarantor denies that it has any
further liability under any Guaranty or gives notice to Lender to
such effect, or any Guarantor fails to perform any covenant of such
Guarantor in any Guaranty.
16.2 Rights and Remedies.
16.2.1. Termination of Commitments. Upon an Event of Default
described in Section 16.1.8, the Commitments shall be deemed
canceled. Upon any other Event of
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Default, and at any time thereafter, Lenders whose shares of
Lenders' Exposure aggregate at least 2/3 of the entire Lenders'
Exposure may cancel the Commitments. Such cancellation may be,
in either case, without presentment, demand or notice of any kind,
which Borrower expressly waives.
16.2.2. Acceleration. Upon an Event of Default described in Section
16.1.8, all of the outstanding Loan Obligations shall automatically
become immediately due and payable. Upon any other Event of Default,
and at any time thereafter, Lenders whose shares of Lenders'
Exposure aggregate at least 2/3 of the entire Lenders' Exposure may
declare all of the outstanding Loan Obligations immediately due and
payable. Such acceleration may be, in either case, without
presentment, demand or notice of any kind, which Borrower expressly
waives.
16.2.3. Right of Set-off. Upon the occurrence of any Event of
Default and at any time and from time to time thereafter, each
Lender is hereby authorized, without notice to Borrower (any such
notice being expressly waived by Borrower), to the fullest extent
permitted by law, to set off and apply against the Loan Obligations
any and all deposits (general or special, time or demand,
provisional or final) at any time held, or any other Indebtedness
at any time owing by such Lender (or its Affiliate) to or for the
credit or the account of Borrower, irrespective of whether or not
such Lender shall have made any demand under this Agreement or the
Notes or any Guaranty and although such Loan Obligations may be
unmatured. The rights of each Lender under this Section are in
addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Lender may otherwise
have.
16.2.4. Secured Party Rights. Upon an Event of Default and
acceleration of the Loan Obligations as provided herein, and at any
time and from time to time thereafter:
16.2.4.1. Administrative Agent may exercise any or all of
its rights under the Security Documents as a secured party
under the UCC and any other applicable Law; and
16.2.4.2. Administrative Agent may sell or otherwise
dispose of any or all of the Collateral at public or private
sale in a commercially reasonable manner, which sale
Administrative Agent may postpone from time to time by
announcement at the time and place of sale stated in the
notice of sale or by announcement at any adjourned sale
without being required to give a new notice of sale, all as
Administrative Agent deems advisable, for cash or credit. A
Lender may become the purchaser at any such sale if
permissible under applicable Law, and such Lender may, in
lieu of actual payment of the purchase price, set-off the
amount thereof against Borrower's obligations owing to
Lender, and Borrower agrees that such Lender has no
obligation to preserve rights to Collateral against prior
parties or to marshal any Collateral for the benefit of any
Person.
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16.2.5. Miscellaneous. Upon the occurrence of an Event of Default
and at any time thereafter, Lenders may exercise any other rights
and remedies available to Lenders under the Loan Documents or
otherwise available to Lenders at law or in equity.
16.3. Application of Funds. Any funds received by Lenders or
Administrative Agent for the benefit of Lenders with respect to any Loan
Obligation after its Maturity, including proceeds of Collateral, shall be
applied as follows: (i) first, to reimburse Administrative Agent for all
unreimbursed costs and expenses paid or incurred by Administrative Agent
that are payable or reimbursable by Borrower hereunder; (ii) second, to
reimburse Lenders prorata for any amounts due to Lenders under Section
18.6; (iii) third, to reimburse to Lenders prorata all unreimbursed costs
and expenses paid or incurred by Lenders (including costs and expenses
incurred by Administrative Agent as a Lender that are not reimbursable as
provided in the preceding clauses) that are payable or reimbursable by
Borrower hereunder; (iv) fourth, to the payment of accrued and unpaid fees
due hereunder and all other amounts due hereunder (other than the Loans and
interest accrued thereon); (v) fifth, to the payment of the Loans of each
of the Lenders and interest accrued thereon (which payments shall be
prorata to each of the Lenders in accordance with the amount of the Loans
outstanding) and to the payment (pari passu with the foregoing) of any Rate
Hedging Obligations; and (vi) sixth, to Letter of Credit Issuer as cash
collateral to the extent of the Letter of Credit Exposure. Any remaining
amounts shall be paid to Borrower or such other Persons as shall be legally
entitled thereto.
16.4. Limitation of Liability; Waiver. Administrative Agent and Lenders
shall not be liable to Borrower as a result of any commercially reasonable
possession, repossession, collection or sale by Administrative Agent of
Collateral; and Borrower hereby waives all rights of redemption from any
such sale and the benefit of all valuation, appraisal and exemption Laws.
If Administrative Agent seeks to take possession of any of the Collateral
by replevin or other court process, Borrower hereby irrevocably waives (i)
the posting of any bonds, surety and security relating thereto required by
any statute, court rule or otherwise as an incident to such possession,
(ii) any demand for possession of the Collateral prior to the commencement
of any suit or action to recover possession thereof, (iii) any requirement
that Administrative Agent retain possession and not dispose of any
Collateral until after trial or final judgment, and (iv) to the extent
permitted by applicable Law, all rights to notice and hearing prior to the
exercise by Administrative Agent of Administrative Agent's right to
repossess the Collateral without judicial process or to replevy, attach or
levy upon the Collateral without notice or hearing. Administrative Agent
shall have no obligation to preserve rights to the Collateral or to
marshall any Collateral for the benefit of any Person.
16.5. Notice. Any notice of intended action required to be given by
Administrative Agent (including notice of a public or private sale of
Collateral), if given as provided in Section 19.1 at least 10 days prior to
such proposed action, shall be effective and constitute reasonable and fair
notice to Borrower.
17. Administrative Agent and Lenders.
17.1. Appointment, Powers, and Immunities. NationsBank is hereby appointed
Administrative Agent hereunder and under each of the other Loan Documents.
Each Lender
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hereby irrevocably appoints and authorizes the Administrative Agent to act
as its agent under this Agreement and the other Loan Documents with such
powers and discretion as are specifically delegated to the Administrative
Agent by the terms of this Agreement and the other Loan Documents, together
with such other powers as are reasonably incidental thereto. The
Administrative Agent (which term as used in this sentence and in Section
19.5 and the first sentence of Section 19.6 hereof shall include its
affiliates and its own and its affiliates' officers, directors, employees,
and agents): (a) shall not have any duties or responsibilities except those
expressly set forth in this Agreement and shall not be a trustee or
fiduciary for any Lender; (b) shall not be responsible to the Lenders for
any recital, statement, representation, or warranty (whether written or
oral) made in or in connection with any Loan Document or any certificate or
other document referred to or provided for in, or received by any of them
under, any Loan Document, or for the value, validity, effectiveness,
genuineness, enforceability, or sufficiency of any Loan Document, or any
other document referred to or provided for therein or for any failure by
any Covered Person or any other Person to perform any of its obligations
thereunder; (c) shall not be responsible for or have any duty to ascertain,
inquire into, or verify the performance or observance of any covenants or
agreements by any Covered Person or the satisfaction of any condition or to
inspect the property (including the books and records) of any Covered
Person or any of its Subsidiaries or Affiliates; (d) shall not be required
to initiate or conduct any litigation or collection proceedings under any
Loan Document; and (e) shall not be responsible for any action taken or
omitted to be taken by it under or in connection with any Loan Document,
except for its own gross negligence or willful misconduct.
17.2. Reliance by Administrative Agent. The Administrative Agent shall be
entitled to rely upon any certification, notice, instrument, writing, or
other communication (including, without limitation, any thereof by
telephone or telecopy) believed by it to be genuine and correct and to have
been signed, sent or made by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel for any
Covered Person), independent accountants, and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee
of any Note as the holder thereof for all purposes hereof unless and until
the Administrative Agent receives and accepts an Assignment and Acceptance
executed in accordance with Section 18.4.1.3 hereof. As to any matters not
expressly provided for by this Agreement, the Administrative Agent shall
not be required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected in
so acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions shall be binding on all of the Lenders;
provided, however, that the Administrative Agent shall not be required to
take any action that exposes the Administrative Agent to personal liability
or that is contrary to any Loan Document or applicable Law or unless it
shall first be indemnified to its satisfaction by the Lenders against any
and all liability and expense which may be incurred by it by reason of
taking any such action.
17.3. Employment of Administrative Agents and Counsel. Administrative
Agent may execute any of its duties hereunder by or through employees,
agents, and attorneys-in-fact and shall not be liable to any Lender (except
with respect to money or securities received by it or such agents or
attorneys-in-fact) for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Administrative Agent
shall be entitled to advice of counsel concerning all matters pertaining to
the agency hereby created and its duties
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hereunder and shall not be liable to any Lender for acting or failing to
act based as advised by such counsel, except where doing so violates an
express obligation of Administrative Agent under the Loan Documents.
17.4. Defaults. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default or Event of Default
unless the Administrative Agent has received written notice from a Lender
or the Borrower specifying such Default or Event of Default and stating
that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice of the occurrence of a Default
or Event of Default, the Administrative Agent shall give notice thereof to
the Lenders. The Administrative Agent shall (subject to Section 19.2
hereof) take such action with respect to such Default or Event of Default
as shall reasonably be directed by the Required Lenders, provided that,
unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interest
of the Lenders.
17.5. Rights as Lender. With respect to its Commitment and the Loans made
by it, NationsBank (and any successor acting as Administrative Agent) in
its capacity as a Lender hereunder shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were
not acting as the Administrative Agent, and the term "Lender" or "Lenders"
shall, unless the context otherwise indicates, include the Administrative
Agent in its individual capacity. NationsBank (and any successor acting as
Administrative Agent) and its affiliates may (without having to account
therefor to any Lender) accept deposits from, lend money to, make
investments in, provide services to, and generally engage in any kind of
lending, trust, or other business with any Covered Person or any of such
Covered Person's Subsidiaries or Affiliates as if it were not acting as
Administrative Agent, and NationsBank (and any successor acting as
Administrative Agent) and its Affiliates may accept fees and other
consideration from any Covered Person or any of its Subsidiaries or
Affiliates for services in connection with this Agreement or otherwise
without having to account for the same to Lenders.
17.6. Indemnification. The Lenders agree to reimburse and indemnify the
Administrative Agent (to the extent not reimbursed under Section 18.5
hereof, but without limiting the obligations of the Borrower under such
Section) ratably in accordance with their respective Commitments, for any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including attorneys' fees), or
disbursements of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against the Administrative Agent (including by any
Lender) in any way relating to or arising out of any Loan Document or the
transactions contemplated thereby or any action taken or omitted by the
Administrative Agent under any Loan Document; provided that no Lender shall
be liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the Person to be indemnified. Without
limitation of the foregoing, each Lender agrees to reimburse the
Administrative Agent promptly upon demand for its ratable share of any
costs or expenses payable by the Borrower under Section 18.5, to the extent
that the Administrative Agent is not promptly reimbursed for such costs and
expenses by the Borrower. The agreements contained in this Section shall
survive the termination of the Commitments and the payment in full of the
Loans, whether or not indefeasible, and all other amounts payable under
this Agreement.
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17.7. Notification of Lenders. Each Lender agrees to use its good faith
efforts, upon becoming aware of anything which has or is reasonably likely
to have a Material Adverse Effect, to promptly notify Administrative Agent
thereof. Administrative Agent shall promptly deliver to each Lender copies
of every written notice, demand, report (including any financial report),
or other writing which Administrative Agent gives to or receives from
Borrower and which itself (a) constitutes, or which contains information
about, something that has or is reasonably likely to have a Material
Adverse Effect, or (b) is otherwise delivered to Administrative Agent by
Borrower pursuant to the Loan Documents and is deemed material information
by Administrative Agent in its sole discretion. Administrative Agent and
its directors, officers, agents, and employees shall have no liability to
any Lender for failure to deliver any such item to such Lender unless the
failure constitutes gross negligence or willful misconduct.
17.8. Non-Reliance on Administrative Agent and Other Lenders. Each Lender
agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of
the Covered Persons and their Subsidiaries and decision to enter into this
Agreement and that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under the Loan
Documents. Except for notices, reports, and other documents and information
expressly required to be furnished to the Lenders by the Administrative
Agent hereunder, the Administrative Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition, or business of any Covered
Person or any of its Subsidiaries or Affiliates that may come into the
possession of the Administrative Agent or any of its affiliates.
17.9. Resignation. The Administrative Agent may resign at any time by
giving notice thereof to Lenders and Domestic Borrower, but such
resignation will not be effective until a successor has been appointed and
has accepted such appointment. Upon any such resignation, the Required
Lenders shall have the right to appoint, with the consent of Borrower
(which will not be unreasonably withheld or delayed), a successor
Administrative Agent. If no successor Administrative Agent shall have been
so appointed by the Required Lenders and shall have accepted such
appointment within 60 days after the retiring Administrative Agent's giving
of notice of resignation, then the retiring Administrative Agent may, on
behalf of the Lenders, appoint a successor Administrative Agent which shall
be a commercial bank organized under the laws of the United States of
America having combined capital and surplus of at least $100,000,000. Upon
the acceptance of any appointment as Administrative Agent hereunder by a
successor, such successor shall thereupon succeed to and become vested with
all the rights, powers, discretion, privileges, and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of Section 17.6 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was
acting as Administrative Agent.
17.10. Collections and Distributions to Lenders by Administrative Agent.
Except as otherwise provided in this Agreement, all payments of interest,
fees, principal and other amounts
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received by Administrative Agent for the account of Lenders shall be
distributed by Administrative Agent to Lenders in accordance with their
prorata shares of the outstanding Loan Obligations at the time of such
distribution (or entirely to Administrative Agent in the case of payments
of interest, fees or principal with respect to the Swingline Loan or to
Administrative Agent for the account of Letter of Credit Issuer in the case
of reimbursable fees and interest with respect to Swingline Letters of
Credit) on the same Business Day when received, unless received after 12:00
n. (Central Time) in which case they shall be so distributed by 12:00 n.
(Central Time) on the next Business Day. All amounts received by any Lender
on account of the Loan Obligations, including amounts received by way of
setoff, shall be paid over promptly to Administrative Agent for
distribution to Lenders as provided above in this Section. Such
distributions shall be made according to instructions that each Lender may
give to Administrative Agent from time to time.
18. General.
18.1. Lenders' Right to Cure. Lenders may from time to time, in their
absolute discretion, for Borrower's account and at Borrower's expense, pay
(or, with the consent of Required Lenders, make a Revolving Loan Advance to
pay) any amount or do any act required of Borrower or any other Covered
Person hereunder or requested by Administrative Agent or Required Lenders
to preserve, protect, maintain or enforce the Loan Obligations, the
Collateral or Administrative Agent's Security Interests therein for the
benefit of Lenders, and which Borrower or such Covered Person fails to pay
or do within a reasonable period (not exceeding 90 days) after written
notice by any Lender or Administrative Agent. All payments that Lenders
make pursuant to this Section and all out-of-pocket costs and expenses that
Lenders pay or incur in connection with any action taken by them hereunder
shall be a part of the Loan Obligations, the repayment of which shall be
secured by the Collateral. Any payment made or other action taken by
Lenders pursuant to this Section shall be without prejudice to any right to
assert an Event of Default hereunder and to pursue Lenders' other rights
and remedies with respect thereto.
18.2. Rights Not Exclusive. Every right granted to Administrative Agent
and Lenders hereunder or under any other Loan Document or allowed to it at
law or in equity shall be deemed cumulative and may be exercised from time
to time.
18.3. Survival of Agreements. All covenants and agreements made herein and
in the other Loan Documents shall survive the execution and delivery of
this Agreement, the Notes and other Loan Documents and the making of every
Advance. All agreements, obligations and liabilities of Borrower under this
Agreement concerning the payment of money to Administrative Agent and
Lenders, including Borrower's obligations under Sections 18.5 and 18.6, but
excluding the obligation to repay the Loans and interest accrued thereon,
shall survive the repayment in full of the Loans and interest accrued
thereon, whether or not indefeasible, the return of the Notes to Borrower,
the termination of the Commitments and the expiration of all Letters of
Credit.
18.4. Assignments and Participations.
18.4.1. Permitted Assignments. At any time after the Effective
Date, any Lender may assign to one or more Eligible Assignees all or
a portion of its rights and
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obligations under this Agreement (including all or a portion of the
Notes payable to it, its Commitments and its Loans), provided that
the terms of assignment satisfy the following requirements:
18.4.1.1. Administrative Agent shall have accepted the
assignment and (if no unwaived Event of Default has
occurred) Borrower shall have consented to the assignment,
which acceptance and consent shall not be unreasonably
withheld.
18.4.1.2. Each such assignment shall be of a constant, and
not a varying, percentage of all of the assigning Lender's
rights and obligations under this Agreement.
18.4.1.3. For each assignment involving the issuance and
transfer of Notes, the assigning Lender shall execute an
Assignment and Acceptance in the form attached hereto as
Exhibit 18.4.1 together with any Note subject to such
assignment and pay Administrative Agent a processing fee of
$3,500.
18.4.1.4. The minimum Commitment which shall be assigned
(which shall include the applicable portion of the assigning
Lender's Revolving Loan Commitment and Letter of Credit
Commitment (and in the case of Administrative Agent, the
Swingline Commitment)) is $10,000,000 (or $5,000,000 in the
case of an assignment from one existing Lender to another)
or such lesser amount which constitutes such Lender's entire
Commitment; provided, however, that no such minimum shall
apply between a Lender and its Affiliates.
18.4.1.5. The assignee shall have an office located in the
United States and is otherwise an Eligible Assignee.
Upon execution, delivery, and acceptance of such Assignment and
Acceptance, the assignee thereunder shall be a party hereto and, to
the extent of such assignment, have the obligations, rights, and
benefits of a Lender hereunder and the assigning Lender shall, to
the extent of such assignment, relinquish its rights and be released
from its obligations under this Agreement. Upon the consummation
of any assignment pursuant to this Section, the assignor,
the Administrative Agent and the Borrower shall make appropriate
arrangements so that, if required, new Notes are issued to the
assignor and the assignee. If the assignee is not incorporated under
the laws of the United States of America or a state thereof, it
shall deliver to the Borrower and the Administrative Agent
certification as to the exemption from deduction or withholding of
Taxes in accordance with Section 4.14.4. The assignee shall also
deliver to the Borrower and the Administrative Agent the
certifications required pursuant to Section 4.14.9 or 4.14.10, as
applicable.
18.4.2. Register; Consequences and Effect of Assignments. From and
after the effective date specified in any Assignment and Acceptance,
the assignee shall be deemed and treated as a party to this
Agreement and, to the extent that rights and obligations hereunder
and under the Notes held by the assignor have been assigned or
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negotiated to the assignee pursuant to such Assignment and
Acceptance, to have the rights and obligations of a Lender hereunder
as fully as if such assignee had been named as a Lender in this
Agreement and of a holder of such Notes, and the assignor shall,
to the extent that rights and obligations hereunder or under such
Notes have been assigned or negotiated by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released
from its future obligations under this Agreement.
18.4.3. Agreement of Assignee and Assignor. By executing and
delivering an Assignment and Acceptance, the assignor thereunder and
the assignee confirm to and agree with each other and the other
parties hereto substantially as follows: (i) the assignment made
under such Assignment and Acceptance is made under such Assignment
and Acceptance without recourse; (ii) such assignor makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of any Covered Person or the
performance or observance by any Covered Person of any of its Loan
Obligations; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the Financial
Statements and such other Loan ocuments and other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon
Administrative Agent, such assignor, or any other Lender, and based
on such documents and information as it deems appropriate at the
time, continue to make its own credit decisions in taking or not
taking action under this Agreement; (v) such assignee appoints and
authorizes Administrative Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the
other Loan Documents as are delegated to Administrative Agent by
the terms hereof and thereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it
will perform in accordance with their terms all of the obligations
which by the terms of this Agreement are required to be performed by
it as a Lender and a holder of a Note.
18.4.4. Register of Assignments. The Administrative Agent shall
maintain at its address referred to herein a copy of each
Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the
Lenders and the Commitment of, and principal amount of Loans owing
to, each Lender from time to time (the "Register"). The entries in
the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrower, the Administrative Agent
and the Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement.
The Register shall be available for inspection by the Borrower or
any Lender at any reasonable time and from time to time upon
reasonable prior notice. Upon its receipt of an Assignment and
Acceptance executed by the parties thereto, together with any Note
subject to such assignment and payment of the processing fee, the
Administrative Agent shall, if such Assignment and Acceptance has
been completed and is in substantially the form of Exhibit 18.4.1
hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt
notice thereof to the parties thereto.
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18.4.5. Notice to Borrower of Assignment. Upon its receipt of an
Assignment and Acceptance executed by an assigning Lender, if
Administrative Agent proposes to accept the assignment contemplated
thereby, Administrative Agent shall give prompt notice thereof to
Borrower requesting the consent of Borrower to such assignment,
which shall not be unreasonably withheld or delayed, it being
understood that Borrower may withhold consent if such assignment
would subject Borrower to the payment of additional amounts pursuant
to Section 4.12 or 4.14. Upon such consent, Borrower shall execute
and deliver replacement Notes to the assignor and assignee as
requested by Administrative Agent and necessary to give effect to
the assignment. If Borrower fails or refuses to execute and deliver
such replacement Notes after having given such consent,
Administrative Agent may, as agent and attorney-in-fact for
Borrower, execute and deliver such replacement Notes on behalf of
Borrower. Borrower hereby appoints Administrative Agent as its
agent and attorney-in-fact for such purpose and acknowledges that
such power is coupled with an interest and therefore irrevocable.
Administrative Agent shall not have any liability to Borrower or
anyone else, including any Lender, as a consequence of exercising
such power in any instance.
18.4.6. Assignment to Federal Reserve Bank. Notwithstanding any
other provision in this Agreement, any Lender may at any time assign
and pledge all or any portion of its Loans and its Note to any
Federal Reserve Bank as collateral security pursuant to Regulation
A and any Operating Circular issued by such Federal Reserve Bank.
No such assignment shall release the assigning Lender from its
obligations hereunder.
18.4.7. Information. Any Lender or Administrative Agent may furnish
any information concerning the Borrower, any other Covered Person or
any of their Subsidiaries in the possession of such Lender or
Administrative Agent, as the case may be, from time to time to
assignees and participants (including prospective assignees and
participants) provided that any such assignee or participant shall
first have agreed to be bound by confidentiality and nondisclosure
covenants in form and substance substantially similar to those in
Section 13.18.
18.4.8. Sale of Participations. Each Lender may sell participations
to one or more Persons (other than the Borrower or an Affiliate of
the Borrower) in all or a portion of its rights and obligations
under this Agreement (including all or a portion of its Commitment
and its Loans); provided, however, that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto
for the performance of such obligations, (iii) the participant shall
be entitled to the benefit of the yield protection provisions
contained in Article 4.9 and the right of set-off contained in
Section 16.2.3, (iv) the amount of the participation shall be in a
minimum amount of $1,000,000 or such lesser amount which constitutes
such Lender's entire Commitment, provided, however, that no such
minimum amount shall apply to participations between any of Lenders
or between any Lender and any of its Affiliates; and (v) the
Borrower, the other Lenders and the Administrative
Agent shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement, and such Lender shall retain the
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sole right to enforce the obligations of the Borrower relating to
its Loans, Advances and its Notes and to approve any amendment,
modification, or waiver of any provision of this Agreement (it
being understood that this shall not affect any rights of such
Lender or its participant as between each other with respect to
amendments, modifications, or waivers that (i) decrease the amount
of principal of the Loans, (ii) reduce the rate at which interest is
payable on the Loans, or (iii) extend the final maturity of the
Notes or the expiration date of any Letter of Credit, or (iv)
increase its Commitment if such increase is to be shared by any such
participant). Notwithstanding the foregoing: (x) the sale of any
such participations which require Borrower to file a registration
statement with the SEC or under the securities Laws of any state
shall not be permitted, and (y) the sale by any Lender of
participations aggregating 50% or more of its Commitments and
with respect to which the right of such Lender solely to approve
any amendment, modification, or waiver of any provision of this
Agreement requires the consent of or approval of such participants
shall require the consent of Domestic Borrower, which shall not be
unreasonably withheld or delayed.
18.5. Payment of Expenses. Borrower agrees to pay or reimburse to
Administrative Agent all of Administrative Agent's reasonable out-of-pocket
costs incurred in connection with: Administrative Agent's due diligence
review before execution of the Loan Documents; the negotiation and
preparation of proposals, a commitment letter and the Loan Documents; the
syndication of the Loans; the administration of this Agreement, the Loan
Documents, the Loans, and the Letters of Credit; the perfection of
Administrative Agent's Security Interests in the Collateral; the
interpretation of any of the Loan Documents; the enforcement of
Administrative Agent's rights and remedies under the Loan Documents after a
Default or Event of Default; any amendment of or supplementation to any of
the Loan Documents; and any waiver, consent or forbearance with respect to
any Default or Event of Default. Borrower agrees to pay or reimburse to
each Lender all of such Lender's reasonable out-of-pocket costs incurred in
connection with the enforcement of such Lender's rights and remedies under
the Loan Documents after a Default or Event of Default. Administrative
Agent's reasonable and customary out-of-pocket costs may include but are
not limited to the following, to the extent they are actually paid or
incurred by Administrative Agent: the cost of searches for Security
Interests and judgments existing against Covered Persons; recording and
filing fees; recording taxes; appraisal fees; environmental consultant
fees; litigation costs; and all attorneys' and paralegals' expenses and
reasonable fees. Attorneys' and paralegals' expenses may include but are
not limited to filing charges; telephone, data transmission, facsimile and
other communication costs; courier and other delivery charges; and
photocopying charges. Litigation costs may include but are not limited to:
filing fees, deposition costs, expert witness fees, expenses of service of
process, and other such costs paid or incurred in any administrative,
arbitration, or court proceedings involving a Lender and any Covered
Person, including proceedings under the Federal Bankruptcy Code. All costs
which Borrower is obligated to pay or reimburse Administrative Agent or
such Lender are Loan Obligations payable to Administrative Agent or such
Lender and are payable on demand by Administrative Agent or such Lender.
18.6. General Indemnity.
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18.6.1. Borrower (each an "Indemnifying Party") agree to indemnify,
defend and hold harmless the Administrative Agent and each Lender
and each of their affiliates
and their respective officers, directors, employees, agents, and
advisors (each, an "Indemnified Party") from and against any and all
claims, damages, losses, liabilities, costs, and expenses, including
reasonable attorneys' fees, that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of (including in connection with
any investigation, litigation, or proceeding or preparation of
defense in connection therewith) (i) the Loan Documents, (ii)
any of the transactions contemplated herein or the actual or
proposed use of the proceeds of the Loans (including any Permitted
Acquisition), (iii) the manufacture, storage, transportation,
release or disposal of any Hazardous Material on, from, over or
affecting any of the assets, properties, or operations of any
Covered Person or any predecessor in interest, directly or
indirectly (collectively, "Indemnified Liabilities"); provided,
however, that no Borrower shall have any obligation hereunder with
respect to Indemnified Liabilities arising from (i) the willful
misconduct or gross negligence of, or the willful breach of a
material provision of the Loan Documents by, the party seeking
indemnification, (ii) legal proceedings commenced against the
Administrative Agent or any Lender by any security holder or
creditor thereof arising solely out of and based solely upon rights
afforded any such security holder or creditor solely in its capacity
as such, (iii) any Tax imposed upon the Administrative Agent or any
Lender as a consequence of its failure to comply with Sections
4.14.4, 4.14.9, or 4.14.10, or (v) Taxes imposed and costs and
expenses incurred as a result of a transfer or assignment of any
Note or some or all of its rights hereunder or a participation
therein. In the case of an investigation, litigation or other
proceeding to which the indemnity in this Section applies, such
indemnity shall be effective whether or not such investigation,
litigation or proceeding is brought by an Indemnified Party or any
other Person, or any Indemnified Party is otherwise a party
thereto, and whether or not the transactions contemplated hereby
are consummated.
18.6.2. An Indemnified Party shall give written notice to the
Indemnifying Party promptly after the Indemnified Party receives
actual notice of any claim, action, suit, loss, cost, liability,
damage or expense incurred or instituted for which the indemnifica-
tion is sought. If requested by the Indemnifying Party in writing,
the Indemnified Party shall contest at the sole expense of the
Borrowers the validity, applicability and/or amount of such suit,
action, or cause of action to the extent such contest may be con-
ducted in good faith on legally supportable grounds; provided,
however, that if there is an Existing Default or if the Indemnifying
Party fails to deposit promptly with Administrative Agent, upon the
Indemnified Party's request therefor, funds in an amount sufficient
to pay the reasonably anticipated cost of such contest, then the
Indemnified Party shall not be required to do so; and if an Event of
Default occurs after such contest is undertaken, the Indemnified
Party may discontinue or settle the contest in such reasonable
manner as it deems appropriate and may apply any unexpended funds so
deposited to the payment of any such settlement and remit the
remainder (if any) to Administrative Agent for application to the
Loan Obligations as provided herein.
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18.6.3. If any lawsuit or enforcement action is filed against any
party entitled to the benefit of indemnity under this Section 18.6,
the Indemnified Party shall give written notice thereof to the
Indemnifying Party as soon as practicable (and in any event within
20 days after the service of any citation or summons). Not-
withstanding the foregoing, the failure so to notify the
Indemnifying Party as provided in this Section will not relieve the
Indemnifying Party of its indemnification obligation under this
Section 18.6. If the Indemnifying Party acknowledges in writing
to the Indemnified Party that the Indemnifying Party is obligated
under the terms of its indemnity under this Section 18.6 in
connection with such lawsuit or action and if the Indemnified Party
so agrees and there is no Existing Default, the Indemnifying Party
may take control of the defense and investigation of such lawsuit
or action and engage counsel of its own choice reasonably acceptable
to the Indemnified Party to handle and defend the same, at the
Indemnifying Party's sole cost, risk and expense, provided that the
engagement of such counsel by the Indemnifying Party would not
present a conflict of interest which would prevent such counsel from
effectively defending such action on behalf of the Indemnified
Party. If at any time thereafter, (i) the defendants in, or targets
of, any such lawsuit or action include both the Indemnified Party
and Indemnifying Party, and the Indemnified Party reasonably
concludes that there may be legal defenses available to it that are
different from or in addition to those available to the Indemnifying
party, or (ii) the Indemnifying Party fails to assume the defense of
the lawsuit or action or to employ counsel reasonably satisfactory
to such Indemnified Party, in either case in a timely manner, or
(iii) the Indemnifying Party and its counsel do not prosecute the
defense with diligence and in good faith, or (iv) an Event of
Default occurs, then the Indemnified Party may take control of such
lawsuit or action and employ separate counsel to represent or defend
it in any such action or proceeding and the Indemnifying Party shall
pay the fees and disbursements of such counsel. The party not
controlling such lawsuit or action shall cooperate (with all out of
pocket costs and expenses associated therewith to be paid by the
Indemnifying Party) in all reasonable respects with the party
controlling such lawsuit or action and its attorneys in the
investigation, trial and defense of such lawsuit or action and any
appeal arising therefrom. If no Event of Default has occurred, the
Indemnified Party shall not settle such lawsuit or enforcement
action without the prior written consent of the Indemnifying Party.
In no event shall the Indemnifying Party settle such lawsuit or
enforcement action without the written consent of the Indemnified
Party.
18.6.4. The obligations of Borrower under this Section 18.6 shall
survive the termination of the Commitments, the expiration of the
Letters of Credit, the indefeasible full payment and satisfaction of
all of the Loan Obligations, and the release of the Collateral.
18.6.5. To the extent that any of the indemnities required from
Borrower under this Section are unenforceable because they violate
any Law or public policy, Borrower shall pay the maximum amount
which it is permitted to pay under applicable Law.
18.6.6. Borrower may not assert any claim against the Administra-
tive Agent, any Lender, any of their affiliates, or any of their
respective directors, officers, employees, attorneys, agents, and
advisers, on any theory of liability, for special,
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indirect, consequential, or punitive damages arising out of or
otherwise relating to the Loan Documents, any of the transactions
contemplated herein or the actual or proposed use of the proceeds of
the Loans.
18.7. Letters of Credit. Borrower assumes all risks of the acts or
omissions of any beneficiary of any of the Letters of Credit. Neither
Letter of Credit Issuer, Administrative Agent, or any Lender nor any of
their respective directors, officers, employees, agents, or representatives
shall be liable or responsible for: (a) the use which may be made of any of
the Letters of Credit or for any acts or omissions of beneficiary in
connection therewith; (b) the validity, sufficiency or genuineness of
documents, or of any endorsement(s) thereon, even if such documents should
in fact prove to be in any or all respects invalid, insufficient,
fraudulent or forged; (c) payment by Letter of Credit Issuer against
presentation of documents which, on their face, appear to comply with the
terms of any Letter of Credit, even though such documents may fail to bear
any reference or adequate reference to any such Letter of Credit; or (d)
any other circumstances whatsoever in making or failing to make payment
under any Letter of Credit in connection with which Letter of Credit Issuer
would, pursuant to the Uniform Customs and Practices for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500 (as amended from time to time), be absolved from liability. In
furtherance and not in limitation of the foregoing, Letter of Credit Issuer
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
18.8. Currency Indemnity. If under any Law, whether as a result of a
judgment against Borrower or any other Covered Person or any Guarantor or
the liquidation of Borrower, any other Covered Person, or any Guarantor or
for any other reason, any payment to (or for the benefit of) the
Administrative Agent or any Lender under or in connection with the Loan
Documents is made or is recovered in a currency other than that which it is
required to be paid, then, to the extent that such payment (when converted
at the rate of exchange on the date of payment) falls short of the amount
unpaid under the Loan Documents, Borrower shall as a separate and
independent obligation fully indemnify Administrative Agent and the Lenders
against the amount of the shortfall; and for the purposes of this Section
"rate of exchange" means the rate at which Administrative Agent or such
Lender is able on the relevant date to purchase the currency in which the
payment is required to be paid with the currency in which the payment is in
fact made or recovered. This provision shall not be construed as a consent
by Administrative Agent or any Lender to payment in any currency other than
the currency in which payment is required to be made under the applicable
provisions of this Agreement and the other Loan Documents. To the extent
that such payment (when so converted) exceeds the amount of the applicable
Loan Obligation, such excess shall be applied in accordance with Sections
16.3, 16.4 or 17.10, as appropriate.
18.9. Changes in Accounting Principles. If any Covered Person, at the end
of its fiscal year and with the concurrence of its independent certified
public accountants, changes the method of valuing the Inventory of such
Covered Person, or if any other changes in accounting principles from those
used in the preparation of any of the Financial Statements are required by
or result from the promulgation of principles, rules, regulations,
guidelines, pronouncements or opinions by the Financial Accounting
Standards Board or the American Institute of Certified Public
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Accountants (or successors thereto or bodies with similar functions), and
any of such changes result in a change in the method of calculation of, or
affect the results of such calculation of, any of the financial covenants,
standards or terms found herein, then the parties hereto agree to enter
into and diligently pursue negotiations in order to amend such financial
covenants, standards or terms so as to equitably reflect such changes, with
the desired result that the criteria for evaluating the financial condition
and results of operations of such Covered Person shall be the same after
such changes as if such changes had not been made; provided, however, that
until such changes are made, all financial covenants herein and all the
provisions hereof which contemplate financial calculation hereunder shall
remain in full force and effect.
18.10. Records. The date and amount of all Advances to Borrower and
payments of amounts due from Borrower under the Loan Documents will be
recorded in the records that Administrative Agent normally maintains for
such types of transactions. The failure to record, or any error in
recording, any of the foregoing shall not, however, affect the obligation
of Borrower to repay the Loans and other amounts payable under the Loan
Documents. Borrower shall have the burden of proving that such records are
not correct. Borrower agrees that Administrative Agent's and any Lender's
books and records showing the Loan Obligations and the transactions
pursuant to this Agreement shall be admissible in any action or proceeding
arising therefrom, and shall constitute prima facie proof thereof,
irrespective of whether any Loan Obligation is also evidenced by a
promissory note or other instrument. Administrative Agent will provide to
Borrower a monthly statement of Advances, payments, and other transactions
pursuant to this Agreement. Such statement shall be deemed correct,
accurate and binding on Borrower and an account stated (except for
reversals and reapplications of payments as provided in Section 6.6 and
corrections of errors discovered by Administrative Agent or a Lender),
unless Borrower notifies Administrative Agent in writing to the contrary
within 30 days after such statement is rendered. In the event a timely
written notice of objections is given by Borrower, only the items to which
exception is expressly made will be considered to be disputed by Borrower.
18.11. Other Security and Guaranties. Administrative Agent or any Lender
may, without notice or demand and without affecting Borrower's obligations
hereunder, from time to time: (a) take from any Person and hold collateral
(other than the Collateral) for the payment of all or any part of the Loan
Obligations and exchange, enforce and release such collateral or any part
thereof; and (b) accept and hold any endorsement or guaranty of payment of
all or any part of the Loan Obligations and release or substitute any such
endorser or guarantor, or any Person who has given any Security Interest in
any other collateral as security for the payment of all or any part of the
Loan Obligations, or any other Person in any way obligated to pay all or
any part of the Loan Obligations.
19. Miscellaneous.
19.1. Notices. All notices, consents, requests and demands to or upon the
respective parties hereto shall be in writing, and shall be deemed to have
been given or made when delivered in person to those Persons listed on the
signature pages hereof or three Business Days after being deposited in the
United States mail, postage prepaid, or, in the case of telegraphic notice,
or the overnight courier services, after being delivered to the telegraph
company or in the case of an overnight courier service, on the Business Day
following delivery to the overnight courier
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service, or in the case of telex or telecopy notice, when sent,
verification received, in each case addressed as set forth on the signature
pages hereof, or such other address as either party may designate by notice
to the other in accordance with the terms of this Section. No notice given
to or demand made on Borrower by Administrative Agent or any Lender in any
instance shall entitle Borrower to notice or demand in any other instance.
19.2. Amendments and Modifications; Waivers and Consents. Unless otherwise
provided herein, no amendment to or modification of any provision of this
Agreement, or of any of the other Loan Documents shall be effective unless
it is in writing and signed by authorized officers of Borrower and Required
Lenders. Unless otherwise provided herein, no waiver of, or consent to any
departure by Borrower from, the requirements of any provision of this
Agreement or any of the other Loan Documents shall be effective unless it
is in writing and signed by authorized officers of the Required Lenders.
Any such amendment, modification, waiver or consent shall be effective only
in the specific instance and for the purpose for which given. The foregoing
notwithstanding, no such amendment, modification, waiver or consent shall,
unless signed by authorized officers of Borrower and of all the Lenders:
(i) change any Revolving Loan Commitment of any Lender, or change the
Letter of Credit Commitment or subject any Lender or the Letter of Credit
Issuer to a greater obligation than expressly provided for in this
Agreement, (ii) reduce or forgive the repayment of principal of any Advance
or the reimbursement of any draw on a Letter of Credit or change the rate,
or mechanism for determining the rate, of interest on any Advance or any
fees or other amounts payable by Borrower hereunder, (iii) change the
regularly scheduled dates for payments of principal or interest of any
Advance or other fees or amounts payable to any Lender under the Loan
Documents (including, without limitation, the Revolving Loan Maturity
Date), (iv) change the provisions of Section 17 to the detriment of any
Lender, (v) change the definition of Required Lenders herein, (vi) change
the provisions of this Section, (vii) release any of the Collateral or any
Covered Person or any Guarantor from its obligations under the Loan
Documents, or (viii) change any provisions of this Agreement requiring
ratable distributions to Lenders. No notice to or demand on Borrower in any
instance shall entitle Borrower to any other or further notice or demand in
another similar or different instance. No failure by Administrative Agent
or any Lender to exercise, and no delay by Administrative Agent or any
Lender in exercising, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise by
Administrative Agent or any Lender of any right, remedy, power or privilege
hereunder preclude any other exercise thereof, or the exercise of any other
right, remedy, power or privilege existing under any Law or otherwise.
19.3. Rights Cumulative. Each of the rights and remedies of Administrative
Agent and the Lenders under this Agreement shall be in addition to all of
its other rights and remedies under applicable Law, and nothing in this
Agreement shall be construed as limiting any such rights or remedies.
19.4. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and, subject to and as provided
in Section 18.4, all future holders of the Notes and their respective
successors and assigns, except that Borrower may not assign, delegate or
transfer any of its rights or obligations under this Agreement without the
prior written consent of Administrative Agent and the Required Lenders.
With respect to Borrower's successors and
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assigns, such successors and assigns shall include any receiver, trustee or
debtor-in-possession of or for Borrower.
19.5. Severability. Any provision of this Agreement which is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or lack of authorization without invalidating the
remaining provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction unless the
ineffectiveness of such provision would result in such a material change as
to cause completion of the transactions contemplated hereby to be
unreasonable.
19.6. Counterparts. This Agreement may be executed by the parties hereto
on any number of separate counterparts, and all such counterparts taken
together shall constitute one and the same instrument. It shall not be
necessary in making proof of this Agreement to produce or account for more
than one counterpart signed by the party to be charged.
19.7. Governing Law; No Third Party Rights. This Agreement, the Notes and
the other Loan Documents and the rights and obligations of the parties
hereunder and thereunder shall be governed by and construed and interpreted
in accordance with the internal Laws of the State of Missouri applicable to
contracts made and to be performed wholly within such state, without regard
to choice or conflicts of law principles. This Agreement is solely for the
benefit of the parties hereto and their respective successors and permitted
assigns, and no other Person shall have any right, benefit, priority or
interest under, or because of the existence of, this Agreement.
19.8. Counterpart Facsimile Execution. For purposes of this Agreement, a
document (or signature page thereto) signed and transmitted by facsimile
machine or telecopier is to be treated as an original document. The
signature of any Person thereon, for purposes hereof, is to be considered
as an original signature, and the document transmitted is to be considered
to have the same binding effect as an original signature on an original
document. At the request of any party hereto, any facsimile or telecopy
document is to be re-executed in original form by the Persons who executed
the facsimile or telecopy document. No party hereto may raise the use of a
facsimile machine or telecopier or the fact that any signature was
transmitted through the use of a facsimile or telecopier machine as a
defense to the enforcement of this Agreement or any amendment or other
document executed in compliance with this Section.
19.9. No Other Agreements. There are no other agreements between
Administrative Agent, Lenders, and Borrower, oral or written, concerning
the subject matter of the Loan Documents, and all prior agreements
concerning the same subject matter, including any proposal or commitment
letter, are merged into the Loan Documents and thereby extinguished.
19.10. Negotiated Transaction; No Fiduciary Duty. Borrower, Administrative
Agent and each Lender represent each to the others that in the negotiation
and drafting of this Agreement and the other Loan Documents they have been
represented by and have relied upon the advice of counsel of their choice.
Borrower and Administrative Agent affirm that their counsel have both had
substantial roles in the drafting and negotiation of this Agreement and
each Lender affirms that its counsel has participated in the drafting and
negotiation of this Agreement; therefore, this Agreement will be deemed
drafted by all of Borrower, Administrative Agent and Lenders, and
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the rule of construction to the effect that any ambiguities are to be
resolved against the drafter will not be employed in the interpretation of
this Agreement. Borrower acknowledges that neither Administrative Agent nor
any Lender has any fiduciary relationship with or fiduciary duty to
Borrower arising out of or in connection with this Agreement or any of the
other Loan Documents, and the relationship between Administrative Agent and
the Lenders, on the one hand, and Borrower, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor, and
that no joint venture is created hereby or by the other Loan Documents or
exists by virtue of the transactions contemplated hereby among the Lenders,
among the Borrower and the Lenders, or between Borrower and Administrative
Agent.
19.11. CHOICE OF FORUM. SUBJECT ONLY TO THE EXCEPTION IN THE NEXT SENTENCE,
BORROWER, ADMINISTRATIVE AGENT, AND EACH LENDER HEREBY AGREES TO THE
EXCLUSIVE JURISDICTION OF THE FEDERAL COURT OF THE EASTERN DISTRICT OF
MISSOURI AND THE STATE COURTS OF MISSOURI LOCATED IN THE CITY OR COUNTY OF
ST. LOUIS AND WAIVES ANY OBJECTION BASED ON VENUE OR FORUM NON CONVENIENS
WITH RESPECT TO ANY ACTION INSTITUTED THEREIN, AND AGREES THAT ANY DISPUTE
CONCERNING THE RELATIONSHIP BETWEEN ADMINISTRATIVE AGENT, LENDERS, AND
BORROWER OR THE CONDUCT OF ANY OF THEM IN CONNECTION WITH THIS AGREEMENT OR
OTHERWISE SHALL BE HEARD ONLY IN THE COURTS DESCRIBED ABOVE.
NOTWITHSTANDING THE FOREGOING: (1) ADMINISTRATIVE AGENT OR ANY LENDER SHALL
HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS
PROPERTY IN ANY COURTS OF ANY OTHER JURISDICTION ADMINISTRATIVE AGENT OR
ANY LENDER DEEM NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE
COLLATERAL, AND (2) EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY
APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY
HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.
19.12. SERVICE OF PROCESS. BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY
AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY
BE MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO BORROWER
AT ITS ADDRESS SET FORTH ON THE SIGNATURE PAGES HEREOF, AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE
BEEN SO DEPOSITED IN THE U.S. MAILS; OR AT ADMINISTRATIVE AGENT'S OR ANY
LENDER'S OPTION, BY SERVICE UPON UNITED STATES CORPORATION COMPANY, WHICH
BORROWER IRREVOCABLY APPOINTS AS BORROWER'S AGENT FOR THE PURPOSE OF
ACCEPTING SERVICE OF PROCESS WITHIN THE STATE OF MISSOURI. ADMINISTRATIVE
AGENT OR SUCH LENDER SHALL PROMPTLY FORWARD BY REGISTERED MAIL ANY PROCESS
SO SERVED UPON SAID AGENT TO BORROWER AT ITS ADDRESS ON THE SIGNATURE PAGES
HEREOF. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF ADMINISTRATIVE
AGENT OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW.
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19.13. JURY TRIAL. BORROWER, ADMINISTRATIVE AGENT, AND EACH LENDER HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR (2)
IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR EITHER OF THEM IN RESPECT OF THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE. BORROWER, ADMINISTRATIVE AGENT, AND EACH LENDER
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT EITHER MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.
19.14. Incorporation By Reference. All of the terms of the other Loan
Documents are incorporated in and made a part of this Agreement by this
reference.
19.15. Statutory Notice. The following notice is given pursuant to Section
432.045 of the Missouri Revised Statutes; nothing contained in such notice
shall be deemed to limit or modify the terms of the Loan Documents:
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW
SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER) AND US (CREDITOR)
FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING
SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER
AGREE IN WRITING TO MODIFY IT.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by appropriate duly authorized officers on August 28, 1997.
DT Industries, Inc. NationsBank, N.A., as Administrative
by its Agent and a Lender
by its
/s/ Bruce P. Erdel /s/ David Wilsdorf
- ---------------------------------- ----------------------------------
Name: Name: David Wilsdorf
Vice President
Notice Address: Notice Address and "Applicable Lending
Office":
Corporate Centre, Suite 2-300 800 Market Street
1949 E. Sunshine St. Louis, MO 63101
Springfield, MO 65804 Attn:
FAX # 417-890-0525 FAX # 314-466-7783
TEL # 417-890-0102 TEL # 314-466-6695
DT Industries (UK) II Limited Kalish Canada Inc.
by its by its
/s/ Bruce P. Erdel /s/ Bruce P. Erdel
- ---------------------------------- ----------------------------------
Name: Name:
Notice Address: Notice Address:
Corporate Centre, Suite 2-300 Corporate Centre, Suite 2-300
1949 E. Sunshine 1949 E. Sunshine
Springfield, MO 65804 Springfield, MO 65804
FAX # 417-890-0525 FAX # 417-890-0525
TEL # 417-890-0102 TEL # 417-890-0102
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DT Canada Inc. ASSEMBLY TECHNOLOGIE &
by its AUTOMATION GMBH
by its
/s/ Bruce P. Erdel /s/ Bruce P. Erdel
- ---------------------------------- ----------------------------------
Name: Name:
Notice Address: Notice Address:
Corporate Centre, Suite 2-300 Corporate Centre, Suite 2-300
1949 E. Sunshine 1949 E. Sunshine
Springfield, MO 65804 Springfield, MO 65804
FAX # 417-890-0525 FAX # 417-890-0525
TEL # 417-890-0102 TEL # 417-890-0102
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EXHIBIT 2.1
GLOSSARY AND INDEX OF DEFINED TERMS
ACQUIRING COMPANY -- the Person obligated to pay or provide the consideration
payable in connection with a Permitted Acquisition upon the consummation
thereof.
ACQUISITION DOCUMENTS -- in the case of any Permitted Acquisition, the documents
to which Borrower or any other Covered Person is a party and under which such
Permitted Acquisition is contemplated.
ADJUSTED BASE RATE -- is defined in Section 4.3.
ADJUSTED EURODOLLAR RATE -- is defined in Section 4.3.
ADMINISTRATIVE AGENT -- NationsBank in its capacity as Administrative Agent
under this Agreement, and its successors and assigns in such capacity.
ADVANCE -- a Revolving Loan Advance or a Swingline Advance.
ADVANCE DATE -- the date on which an Advance is requested by Borrower to be
made, or is otherwise contemplated or intended to be made, as provided herein.
AFFILIATE -- with respect to any Person, (a) any other Person who is a partner,
director, officer or stockholder of such Person; and (b) any other Person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such Person, and any partner, director, officer or stockholder of
such other Person described. For purposes of this Agreement, control of a Person
by another Person shall be deemed to exist if such other Person has the power,
directly or indirectly, either to (i) vote twenty percent (20%) or more of the
securities having the power to vote in an election of directors of such Person,
or (ii) direct the management of such Person, whether by contract or otherwise
and whether alone or in combination with others.
AGGREGATE CANADIAN TERM LOAN -- the from time to time outstanding principal
balance of the term loans to the Canadian Borrowers that have been continued
outstanding as provided in Section 3.6.
AGGREGATE OFFSHORE CURRENCY REVOLVING LOAN COMMITMENT -- the aggregate
commitments of Lenders to fund Revolving Loan Advances in Offshore Currencies as
provided in Section 3.1, as it may be reduced as stated in Section 3.3.
AGGREGATE REVOLVING LOAN -- the from time to time outstanding principal balance
of all Revolving Loan Advances.
AGGREGATE REVOLVING LOAN COMMITMENT -- the aggregate commitments of Lenders to
fund Revolving Loan Advances as provided in Section 3.1, as it may be reduced as
stated in Section 3.3.
<PAGE>
APPLICABLE LENDING OFFICE -- means, for each Lender and for each Loan, the
"Applicable Lending Office" of such Lender (or of an affiliate of such Lender)
designated for such Loan on the signature pages hereof or such other office of
such Lender (or an affiliate of such Lender) as such Lender may from time to
time specify to the Administrative Agent and the Borrower by written notice in
accordance with the terms hereof as the office by which its Loans are to be made
and maintained.
APPLICABLE CURRENCY -- as to any Advance or any conversion or continuation of a
Eurodollar Loan, Dollars or the Offshore Currency in which it is requested to be
denominated by the applicable Borrower as provided herein; and as to any Letter
of Credit, Dollars or the Offshore Currency in which its face amount is
requested to be denominated by the applicable Borrower as provided herein.
BASE RATE ADVANCE -- an Advance that will become a Base Rate Loan.
BASE RATE INCREMENT -- is defined in Section 4.3.
BASE RATE LOAN -- any portion of a Loan on which interest accrues at the
Adjusted Base Rate; provided, however, no Offshore Currency Loan shall bear
interest at the Adjusted Base Rate.
BENEFICIAL OWNER -- as defined in Rule 13-D-3 of the Securities and Exchange
Commission.
BORROWING OFFICER -- each officer of Borrower who is authorized to submit a
request for an Advance or the issuance of a Letter of Credit on behalf of
Borrower.
BUSINESS DAY -- a day other than a Saturday, Sunday or other day on which
commercial banks are authorized or required to close under the Laws of either
the United States or the State of Missouri.
CANADIAN BORROWERS -- Kalish Canada Inc. and DT Canada Inc.
CANADIAN TERM LOAN -- each Lender's share of the Aggregate Canadian Term Loan.
CANADIAN TERM LOAN MATURITY DATE -- The date when the Canadian Term Loan and all
unpaid interest accrued thereon is due as provided in Section 6.1.2.
CAPITAL EXPENDITURE -- an expenditure for an asset that must be depreciated or
amortized under GAAP, for goodwill, or for any asset that under GAAP must be
treated as a capital asset, including payments under Capital Leases. An
expenditure for purposes of this definition includes any deferred or seller
financed portion of the purchase price of an asset and the original capitalized
amount of a Capital Lease.
CAPITAL LEASE -- any lease that has been or should be capitalized under GAAP.
CENTRAL TIME -- local time in St. Louis, Missouri.
CHARTER DOCUMENTS -- the articles or certificate of incorporation and bylaws of
a corporation; the certificate of limited partnership and partnership agreement
of a limited partnership; the partnership agreement of a general partnership;
the articles of organization and operating agreement of a limited liability
company; or the indenture of a trust.
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CLAIMS ACT -- the Assignment of Claims Act of 1940.
COBRA -- the Consolidated Omnibus Budget Reconciliation Act.
CODE -- the Internal Revenue Code of 1986 and all regulations thereunder of the
IRS, as amended from time to time.
COLLATERAL -- the stock and all other property which is pledged as required in
Section 8.
COMMITMENT -- the Revolving Loan Commitment of a Lender, the Swingline
Commitment of Administrative Agent, or the Letter of Credit Commitment of Letter
of Credit Issuer.
COMMONLY CONTROLLED ENTITY -- a Person which is under common control with
another Person within the meaning of Section 414(b) or (c) of the Code.
CONTRACT -- any contract, note, bond, indenture, deed, mortgage, deed of trust,
security agreement, pledge, hypothecation agreement, assignment, or other
agreement or undertaking, or any security.
DEFAULT -- any of the events listed in Section 16.1 of this Agreement, without
giving effect to any requirement for the giving of notice, for the lapse of
time, or both, or for the happening of any other condition, event or act.
DEFAULT RATE -- the rate of interest payable on each Loan after its Maturity and
in certain other circumstances as provided in Section 4.8.
DETERMINATION DATE EXCHANGE RATE -- (i) in the case of any Advance denominated
in an Offshore Currency or a Letter of Credit whose face amount is denominated
in an Offshore Currency, the Spot Rate of Exchange as of the date two Business
Days preceding the date such Advance is to be made or such Letter of Credit is
to be issued, (ii) in the case of any Eurodollar Loan that is continued for an
additional Interest Period as provided herein or a Base Rate Loan that is
converted to a Eurodollar Loan as provided herein, the Spot Rate of Exchange two
Business Days preceding the effective date of such continuation or conversion,
(iii) in the case of a drawing under a Letter of Credit whose face amount is
denominated in an Offshore Currency, the Spot Rate of Exchange as of the date of
such drawing, and (iv) in any other case in which the value in Dollars of an
Offshore Currency must be determined hereunder as of any date, the Spot Rate of
Exchange two Business Days preceding such date, or if such Spot Rate of Exchange
cannot be determined by Administrative Agent, the rate of exchange of such
Offshore Currency into Dollars as reported in the most recent edition of the
Wall Street Journal.
DEUTSCHE MARKS and the sign DM -- the official currency of Germany.
DISCLOSURE SCHEDULE -- the disclosure schedule of Borrower attached hereto as
Exhibit 11.
DOL -- the United States Department of Labor.
DOLLAR LOAN -- Loans denominated and payable in Dollars.
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DOLLARS and the sign $ -- lawful money of the United States.
DOLLAR EQUIVALENT AMOUNT -- (i) with respect to any amount denominated in
Dollars, such amount, or (ii) with respect to any amount denominated in an
Offshore Currency, the equivalent amount in Dollars based on the applicable
Determination Date Exchange Rate as determined by Administrative Agent (or, in
the case of a reimbursement obligation with respect to a draw on a Letter of
Credit whose face amount is denominated in an Offshore Currency, as determined
by Letter of Credit Issuer).
DOMESTIC BORROWER -- DT Industries, Inc.
DOMESTIC REVOLVING LOAN -- a Revolving Loan to Domestic Borrower.
EFFECTIVE DATE -- the date when this Agreement is effective as provided in
Section 1.
ELIGIBLE ASSIGNEE -- means (i) a Lender; (ii) an affiliate of a Lender; and
(iii) any other Person approved by the Administrative Agent with the consent of
the Borrower, not to be unreasonably withheld or delayed; provided, however,
that neither the Borrower nor an Affiliate of the Borrower shall qualify as an
"Eligible Assignee."
EMPLOYMENT LAW -- ERISA, the Occupational Safety and Health Act, the Fair Labor
Standards Act, or any other Law pertaining to the terms or conditions of labor
or safety in the workplace or discrimination or sexual harassment in the
workplace.
ENVIRONMENTAL LAW -- the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Clean Air Act, or any other Law pertaining to environmental
quality or remediation of Hazardous Material.
EPA -- the United States Environmental Protection Agency.
ERISA -- the Employee Retirement Income Security Act of 1974.
ERISA AFFILIATE -- as to any Person, any trade or business (irrespective of
whether incorporated) which is a member of a group of which such Person is a
member and thereafter treated as a single employer under section 414(b), (c),
(m) or (o) of the Code or applicable Treasury Regulations.
EURODOLLAR ADVANCE -- an Advance that will become a Eurodollar Loan.
EURODOLLAR INCREMENT -- is defined in Section 4.3.
EURODOLLAR LOAN -- any portion of a Loan on which interest accrues at the
Adjusted Eurodollar Rate.
EURODOLLAR RATE -- is defined in Section 4.3.
EVENT OF DEFAULT -- any of the events listed in Section 16.1 of this Agreement
as to which any requirement for the giving of notice, for the lapse of time, or
both, or for the happening of any further condition, event or act has been
satisfied.
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EXISTING DEFAULT -- a Default which has occurred and is continuing, or an Event
of Default which has occurred, and which has not been waived in writing by
Administrative Agent.
FEDERAL FUNDS RATE -- for any day, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided that (a) if such day is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate charged to the Administrative
Agent (in its individual capacity) on such day on such transactions as
determined by the Administrative Agent.
FINANCIAL STATEMENTS -- the most recent of the Initial Financial Statements and
the financial statements required to be furnished to Administrative Agent under
Section 13.13 of this Agreement.
FOREIGN BORROWER -- either UK Borrower or German Borrower.
FOREIGN REVOLVING LOAN -- a Revolving Loan to a Foreign Borrower.
FRB -- the Board of Governors of the Federal Reserve System and any successor
thereto or to the functions thereof.
FUNDING OFFICE -- for Domestic Borrower, the office of NationsBank, N.A. in St.
Louis, Missouri, or such other banking institution domiciled in the United
States that is proposed by Domestic Borrower and acceptable to Administrative
Agent; for UK Borrower, the office of such banking institution domiciled in the
United Kingdom that is proposed by UK Borrower and acceptable to Administrative
Agent; and for German Borrower, the office of such banking institution domiciled
in Germany that is proposed by German Borrower and acceptable to Administrative
Agent.
GAAP -- those generally accepted accounting principles set forth in Statements
of the Financial Accounting Standards Board and in Opinions of the Accounting
Principles Board of the American Institute of Certified Public Accountants or
which have other substantial authoritative support in the United States and are
applicable in the circumstances, as applied on a consistent basis.
GERMAN BORROWER -- Assembly Technologie & Automation GmbH.
GERMAN REVOLVING LOAN -- a Foreign Revolving Loan to German Borrower.
GOVERNMENTAL AUTHORITY -- the federal government of the United States; the
government of any foreign country that is recognized by the United States or is
a member of the United Nations; any state of the United States; any local
government or municipality within the territory or under the jurisdiction of any
of the foregoing; any department, agency, division, or instrumentality of any of
the foregoing; and any court, arbitrator, or board of arbitrators whose orders
or judgements are enforceable by or within the territory of any of the
foregoing.
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GROUP -- as used in Regulation 13-D issued by the Securities and Exchange
Commission.
GUARANTOR -- each of the Persons required under this Agreement to execute and
deliver to Administrative Agent for the benefit of Lenders a guaranty of part or
all of the Loan Obligations.
GUARANTY -- any guaranty executed and delivered as required in Section 8.
HAZARDOUS MATERIAL -- any hazardous, radioactive, toxic, solid or special waste,
material, substance or constituent thereof, or any other such substance (as
defined under any applicable Law or regulation), including Asbestos Material.
HAZARDOUS MATERIAL does not include materials or products containing hazardous
constituents which are not considered to be waste under the applicable
Environmental Law or which are considered to be waste but are transported,
handled or disposed of in accordance with the applicable Environmental Law, or
asbestos or asbestos material which is not friable.
INDEBTEDNESS -- as to any Person at any particular date, any contractual
obligation enforceable against such Person (i) to repay borrowed money; (ii) to
pay the deferred purchase price of property or services; (iii) to make payments
or reimbursements with respect to bank acceptances or to a factor; (iv) to make
payments or reimbursements with respect to letters of credit whether or not
there have been drawings thereunder; (v) with respect to which there is any
Security Interest in any property of such Person; (vi) to make any payment or
contribution to a Multi-Employer Plan; (vii) that is evidenced by a note, bond,
debenture or similar instrument; (viii) under any conditional sale agreement or
title retention agreement; or (ix) to pay interest or fees with respect to any
of the foregoing. INDEBTEDNESS also includes any other Obligation that either
(i) is non-contingent and liquidated in amount or (ii) should under GAAP be
included in liabilities and not just as a footnote on a balance sheet.
INDIRECT OBLIGATION -- as to any Person, (a) any guaranty by such Person of any
Obligation of another Person; (b) any Security Interest in any property of such
Person that secures any Obligation of another Person; (c) any enforceable
contractual requirement that such Person (i) purchase an Obligation of another
Person or any property that is security for such Obligation, (ii) advance or
contribute funds to another Person for the payment of an Obligation of such
other Person or to maintain the working capital, net worth or solvency of such
other Person as required in any documents evidencing an Obligation of such other
Person, (iii) purchase property, securities or services from another Person for
the purpose of assuring the beneficiary of any Obligation of such other Person
that such other Person has the ability to timely pay or discharge such
Obligation, (iv) grant a Security Interest in any property of such Person to
secure any Obligation of another Person, (v) otherwise assure or hold harmless
the beneficiary of any Obligation of another Person against loss in respect
thereof; (d) any Obligation arising from the endorsement by such Person of an
instrument (e) any Obligation of such Person as a surety; and (f) any other
contractual requirement enforceable against such Person that has the same
substantive effect as any of the foregoing. The term INDIRECT OBLIGATION does
not, however, include the indorsement by a Person of instruments for deposit or
collection in the ordinary course of business or the liability of a general
partner of a partnership for Obligations of such partnership. The amount of any
Indirect Obligation of a Person shall be deemed to be the stated or determinable
amount of the Obligation in respect of which such Indirect Obligation is made
or, if not stated or determinable, the maximum reasonably anticipated liability
in respect thereof as determined by such Person in good faith.
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INITIAL FINANCIAL STATEMENTS -- the most recent financial statements of Domestic
Borrower and its Subsidiaries delivered to the Administrative Agent, comprising
the quarterly report of Domestic Borrower on Form 10-Q for the period ended
March 30, 1997 and the pro forma unaudited consolidated statements of operations
of Domestic Borrower for the fiscal year ended June 30, 1996 and for the nine
months ended March 30, 1997, and the pro forma unaudited consolidated balance
sheet of Domestic Borrower at March 30, 1997, as included in the registration
statement of Domestic Borrower on Form S-3 filed with the SEC on July 8, 1997.
INTEREST PERIOD -- the period during which a particular Adjusted Eurodollar Rate
applies to a Eurodollar Loan, as selected by Borrower as provided in Section
4.5.
INVESTMENT -- (a) a loan or advance of money or property to a Person, (b) stock
or other equity interest in a Person, (c) a debt instrument issued by a Person,
whether or not convertible to stock or other equity interest in such Person, or
(d) any other interest in or rights with respect to a Person which include, in
whole or in part, a right to share, with or without conditions or restrictions,
some or all of the revenues or net income of such Person.
IRS -- the Internal Revenue Service.
ISSUANCE FEE -- the fee payable to Administrative Agent for the account of
Letter of Credit Issuer as required in Section 5.2.
LAW -- any statute, rule, regulation, order, judgment, award or decree of any
Governmental Authority.
LENDER -- any one of the Persons who are or become parties to this Agreement and
obligated as lenders or any Person who takes an assignment from any of such
Persons of all or a portion of its rights and obligations as a lender as
provided herein.
LENDERS' EXPOSURE -- the sum of the Aggregate Revolving Loan, the Swingline
Loan, the Aggregate Canadian Term Loan and the Letter of Credit Exposure.
LETTER OF CREDIT -- any standby letter of credit issued by Letter of Credit
Issuer pursuant to the Letter of Credit Commitment herein.
LETTER OF CREDIT COMMITMENT -- the commitment of the Letter of Credit Issuer to
issue Letters of Credit as provided in Section 3.7.
LETTER OF CREDIT EXPOSURE -- the undrawn amount of all outstanding Letters of
Credit issued under the Letter of Credit Commitment and each of the letters of
credit outstanding as of the Effective Date issued by The Boatmen's National
Bank of St. Louis as provided in the Original Loan Agreement plus all amounts
drawn on such Letters of Credit and not yet reimbursed by Borrower.
LETTER OF CREDIT FEE -- the fee payable to Administrative Agent and Lenders as
required in Section 5.2.
LETTER OF CREDIT ISSUER -- the Lender that has committed in Section 3.7 to issue
Letters of Credit.
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LOAN -- a Revolving Loan, the Canadian Term Loan or the Swingline Loan.
LOAN DOCUMENTS -- this Agreement, the Notes, the Guaranties, the Security
Documents, any reimbursement agreements between Borrower and the Letter of
Credit Issuer and all other agreements, certificates, documents, instruments and
other writings executed in connection herewith.
LOAN OBLIGATIONS -- all Indebtedness owing to Letter of Credit Issuer,
Administrative Agent or Lenders under the Loan Documents, whether as principal,
interest, fees or otherwise, all reimbursement obligations to Letter of Credit
Issuer or Lenders with respect to the Letter of Credit Exposure, and all other
obligations and liabilities to Administrative Agent or Lenders under the Loan
Documents and all Rate Hedging Obligations (in each case including all
extensions, renewals, modifications, rearrangements, restructures, replacements
and refinancings of the foregoing, whether or not the same involve modifications
to interest rates or other payment terms), whether now existing or hereafter
created, absolute or contingent, direct or indirect, joint or several, secured
or unsecured, due or not due, contractual or tortious, liquidated or
unliquidated, arising by operation of law or otherwise, including but not
limited to the obligation to repay future advances by Administrative Agent or
Lenders hereunder, whether or not made pursuant to commitment and whether or not
presently contemplated by any Borrower or Guarantor, Administrative Agent or
Lenders in the Loan Documents.
LUCAS ASSEMBLY AND TEST BUSINESS -- The business of the design, manufacture and
implementation of assembly line and testing equipment with associated materials
handling and production control systems (and the provision of services related
thereto) conducted by each of Lucas Limited, Lucas Automation & Control
Engineering Inc., and Lucas Automation and Control Engineering GmbH.
MANAGEMENT INCENTIVE STOCK ISSUE -- the issuance of capital stock of Borrower to
its executive employees pursuant to purchase and shareholder agreements (copies
of which will be provided to Administrative Agent prior to such issuance) that
results in all executive employees of Borrower owning not more than 10% of the
total issued and outstanding shares of capital stock of Borrower immediately
after such issuance.
MATERIAL ADVERSE EFFECT -- with respect to any event or occurrence of whatever
nature (including any adverse determination in any litigation, arbitration,
investigation or proceeding), a material adverse effect on the business,
operations, revenues, financial condition, property, or business prospects of
Domestic Borrower and its Subsidiaries taken as a whole, or the ability of
Domestic Borrower and its Subsidiaries taken as a whole to timely pay or perform
their Obligations generally, or their collective ability to pay or perform any
of their Loan Obligations.
MATERIAL AGREEMENT -- as to any Person, any Contract to which such Person is a
party or by which such Person is bound which, if violated or breached, has or is
reasonably likely to have a Material Adverse Effect.
MATERIAL LAW -- any separately enforceable provision of a Law whose violation by
a Person has or is reasonably likely to have a Material Adverse Effect.
MATERIAL LICENSE -- (i) as to any Covered Person, any license, permit or consent
from a Governmental Authority or other Person and any registration and filing
with a Governmental Authority or other Person
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which if not obtained, held or made by such Covered Person has or is reasonably
likely to have a Material Adverse Effect, and (ii) as to any Person who is a
party to this Agreement or any of the other Loan Documents, any license, permit
or consent from a Governmental Authority or other Person and any registration or
filing with a Governmental Authority or other Person that is necessary for the
execution or performance by such party, or the validity or enforceability
against such party, of this Agreement or such other Loan Document.
MATERIAL OBLIGATION -- as to any Person, an Obligation which if not fully and
timely paid or performed has or is reasonably likely to have a Material Adverse
Effect.
MATERIAL PROCEEDING -- any litigation, investigation or other proceeding by or
before any Governmental Authority (i) which involves any of the Loan Documents
or any of the transactions contemplated thereby, or involves a Covered Person as
a party or any property of a Covered Person, and has or is reasonably likely to
have a Material Adverse Effect if adversely determined, (ii) in which there has
been issued an injunction, writ, temporary restraining order or any other order
of any nature which purports to restrain or enjoin the making of any Advance,
the consummation of any other transaction contemplated by the Loan Documents, or
the enforceability of any provision of any of the Loan Documents, (iii) which
involves the actual or alleged breach or violation by a Covered Person of, or
default by a Covered Person under, any Material Agreement, or (iv) which
involves the actual or alleged violation by a Covered Person of any Material
Law.
MATURITY -- as to any Indebtedness, the time when it becomes payable in full,
whether at a regularly scheduled time, because of acceleration or otherwise.
MAXIMUM AVAILABLE AMOUNT -- is defined in Section 3.2.
MOODY'S -- Moody's Investors Service, Inc.
MULTI-EMPLOYER PLAN -- a Pension Benefit Plan which is a multi-employer plan as
defined in Section 4001(a)(3) of Erisa.
NATIONSBANK -- NationsBank, N.A.
NOTE -- any Revolving Note, any Canadian Term Note or the Swingline Note.
OBLIGATION -- as to any Person, any Indebtedness of such Person, any guaranty by
such Person of any Indebtedness of another Person, and any contractual
requirement enforceable against such Person that does not constitute
Indebtedness of such Person or a guaranty by such Person but which would involve
the expenditure of money by such Person if complied with or enforced.
OFFSHORE CURRENCY -- either Pounds Sterling or Deutsche Marks.
OFFSHORE LETTER OF CREDIT -- a Letter of Credit denominated in an Offshore
Currency.
OFFSHORE CURRENCY LOAN -- any Loan denominated and payable in an Offshore
Currency.
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OFFSHORE CURRENCY REVOLVING LOAN COMMITMENT -- each Lender's prorata share of
the Aggregate Offshore Currency Revolving Loan Commitment.
PBGC -- the Pension Benefit Guaranty Corporation.
PENSION BENEFIT PLAN -- any pension or profit-sharing plan which is covered by
Title I of ERISA and all other benefit plans applicable to employees in the
United States, in each case in respect of which a Covered Person or a Commonly
Controlled Entity of such Covered Person is an "employer" as defined in Section
3(5) of ERISA.
PERMITTED ACQUISITIONS -- any acquisition by Borrower or a Covered Person of
stock of another Person or the assets of another Person permitted under Section
14.5, except acquisitions of assets in the ordinary course of business of
Borrower or such Covered Person.
PERMITTED INDEBTEDNESS -- Indebtedness that Covered Persons are permitted under
Section 14.2 to incur, assume, or allow to exist.
PERMITTED INDIRECT OBLIGATIONS -- Indirect Obligations that Covered Persons are
permitted under Section 14.3 to create, incur, assume, or allow to exist.
PERMITTED INVESTMENTS -- Investments that Covered Persons are permitted under
Section 14.1 to make in other Persons.
PERMITTED SECURITY INTERESTS -- Security Interests that Borrower is permitted
under Section 14.4 to create, incur, assume, or allow to exist.
PERSON -- any individual, partnership, corporation, trust, unincorporated
association, joint venture, limited liability company, Governmental Authority,
or other organization in any form that has the legal capacity to sue or be sued.
If the context so implies or requires, the term Person includes Borrower.
POUNDS STERLING and the symbol (pound) -- the official currency of the United
Kingdom.
PRIME RATE -- means the per annum rate of interest established from time to time
by NationsBank as its prime rate, which rate may not be the lowest rate of
interest charged by NationsBank to its customers.
QUALIFIED FINANCIAL INSTITUTION -- any commercial bank chartered under the Laws
of the United States or any state thereof having capital and surplus of not less
than $500,000,000.
RATE HEDGING OBLIGATIONS -- any and all obligations of Borrower and/or any other
Covered Person to Administrative Agent or any Lender whether absolute or
contingent and howsoever and whensoever created, arising, evidenced or acquired
(including all renewals, extensions and modifications thereof and substitutions
therefor), under (a) any and all agreements, devices or arrangements designed to
protect at least one of the parties thereto from the fluctuations of interest
rates, exchange rates or forward rates applicable to such party's assets,
liabilities or exchange transactions, including, but not limited to, Dollar-
denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts,
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warrants and those commonly known as interest rate "swap" agreements; and (b)
any and all cancellations, buybacks, reversals, terminations or assignments of
any of the foregoing.
REPORTABLE EVENT -- a reportable event as defined in Title IV of ERISA or the
regulations thereunder.
REPRESENTATIONS AND WARRANTIES -- The representations and warranties made by
Borrower with respect to itself and other Covered Persons in Section 11, as
modified from time to time as provided in Section 12.
RESPONSIBLE OFFICER -- as to any Person that is not an individual, partnership
or trust, the Chairman of the Board of Directors, the President, the chief
executive officer, the chief operating officer, the chief financial officer, the
Treasurer, any Assistant to the Treasurer, or any Vice President in charge of a
principal business unit; as to any partnership, any individual who is a general
partner thereof or any individual who has general management or administrative
authority over all or any principal unit of the partnership's business; and as
to any trust, any individual who is a trustee.
REVOLVER LETTER OF CREDIT -- any Letter of Credit which is designated by
Borrower as such in its request for issuance thereof.
REVOLVING LOAN -- any Lender's prorata share of the Aggregate Revolving Loan.
REVOLVING LOAN ADVANCE -- an Advance by Administrative Agent that is to be
funded by Lenders under the Aggregate Revolving Loan Commitment.
REVOLVING LOAN COMMITMENT -- the commitment of each Lender as stated in Section
3.1 to fund Revolving Advances.
REVOLVING LOAN MATURITY DATE -- the date when Borrower must repay the amount of
Aggregate Revolving Loan then outstanding as provided in Section 6.1.2.
REVOLVING NOTE -- any note delivered to a Lender as required by Section 3.4 to
evidence Borrower's obligation to repay such Lender's Revolving Loan.
S&P -- Standard & Poor's Corporation, a division of The McGraw-Hill Companies.
SECURITY DOCUMENTS -- all of the documents required or contemplated to be
executed and delivered to Administrative Agent for the benefit of Lenders under
Section 8, all other documents granting a Security Interest in any asset of
Borrower or any other Person to secure the payment or performance of any of the
Loan Obligations from time to time, including any such documents listed on
Exhibit 9.1.1 and any similar documents at any time executed and delivered to
Administrative Agent for the benefit of Lenders from time to time, by Borrower
or any other Person to secure payment or performance of any of the Loan
Obligations.
SECURITY INTEREST -- as to any item of tangible or intangible property, any
interest therein or right with respect thereto that secures an Obligation or
Indirect Obligation, whether such interest or right is created under a Contract,
or by operation of law or statute (such as but not limited to a statutory lien
for work
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or materials), or as a result of a judgment, or which arises under any form of
preferential or title retention agreement or arrangement (including a
conditional sale agreement or a lease) that has substantially the same economic
effect as any of the Foregoing.
SIGNIFICANT SUBSIDIARY -- (i) on the Effective Date, Detroit Tool and
Engineering Company, Detroit Tool Metal Products Co., Sencorp Systems, Inc.,
Advanced Assembly Automation, Inc., DT Industries (U.K.) Limited., DT Industries
(U.K.) II Limited, Swiftpack Automation Limited, Mid-West Automation Systems,
Inc., Mid-West Automation Enterprises, Inc., Pharma Group, Inc., DT Canada Inc.,
Kalish Canada Inc., Hansford Manufacturing Corporation, Assembly Technology &
Test, Inc., Assembly Technology & Test, Limited, and Assembly Technologie &
Automation GmbH; and (ii) thereafter, such Persons and such other Subsidiaries
of Domestic Borrower (other than DT Industries Foreign Sales Corporation or DT
Capital Trust) whose assets, together with the assets of all other Subsidiaries
(other than DT Industries Foreign Sales Corporation or DT Capital Trust) which
are then not Significant Subsidiaries, in the aggregate exceed $25,000,000, as
reflected in the Financial Statements, as of the end of the most recently ended
fiscal year of Domestic Borrower.
SOLVENT -- as to any Person, such Person not being "insolvent" within the
meaning of Section 101(32) of the Bankruptcy Code, Section 2 of the Uniform
Fraudulent Transfer Act (the "UFTA") or Section 428.014 of the Missouri Revised
Statutes, (ii) such Person not having unreasonably small capital, within the
meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section
428.024 of the Missouri Revised Statutes, and (iii) such Person not being unable
to pay such Person's debts as they become due within the meaning of Section 548
of the Bankruptcy Code, Section 4 of the UFTA or Section 428.024 of the Missouri
Revised Statutes.
SPOT RATE OF EXCHANGE -- the spot exchange rate determined by the Administrative
Agent in accordance with its usual procedures for the purchase by the
Administrative Agent of Dollars with such Offshore Currency at approximately
10:00 A.M., Charlotte, North Carolina Time on the applicable Business Day for
determining such rate as provided herein.
SUBSIDIARY -- as to any Person, a corporation or any other Person with respect
to which more than 20% of the outstanding shares of stock or other equity
interests of each class having ordinary voting power (other than stock or equity
interests having such power only by reason of the happening of a contingency) is
at the time owned by such Person or by one or more Subsidiaries of such Person.
SURVIVING COMPANY -- as applicable, either (i) the Person that will own the
assets to be acquired from a Target Company in a Permitted Acquisition upon the
consummation thereof, (ii) the survivor of the merger of an Acquiring Company
with the Target Company in a Permitted Acquisition upon the consummation
thereof, or (iii) the Target Company whose stock will be acquired by another
Person in a Permitted Acquisition upon the consummation thereof.
SWINGLINE ADVANCE -- an advance by Administrative Agent to Borrower under the
Swingline Commitment.
SWINGLINE COMMITMENT -- the commitment of Administrative Agent as stated in
Section 3.5.1 to make Swingline Advances.
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SWINGLINE LETTER OF CREDIT -- any Letter of Credit which is designated by
Borrower as such in its request for issuance thereof.
SWINGLINE LOAN -- the from time to time outstanding principal balance of all
Swingline Advances.
TARGET COMPANY -- the Person whose assets or stock will be acquired in a
Permitted Acquisition upon the consummation thereof, or if applicable, with
which an Acquiring Company will merge in a Permitted Acquisition upon the
consummation thereof.
TAX -- as to any Person, any tax, duty, impost, deduction, charges,
withholdings, assessment, fee, or other charge levied by a Governmental
Authority (and all liabilities associated therewith) on the income or property
of such Person, including any interest or penalties thereon, and which is
payable by such Person.
THIS AGREEMENT this document (including every document that is stated herein to
be an appendix, exhibit or schedule hereto, whether or not physically attached
to this document).
UCC -- the Uniform Commercial Code as in effect from time to time in the State
of Missouri or such other similar statute as in effect from time to time in
Missouri or any other appropriate jurisdiction.
UK BORROWER -- DT Industries (UK) II, Limited.
UK REVOLVING LOAN -- a Foreign Revolving Loan to UK Borrower.
United States -- when used in a geographical sense, all the states of the United
States of America and the District of Columbia; and when used in a legal
jurisdictional sense, the government of the country that is the United States of
America.
WELFARE BENEFIT PLAN -- any plan described by Section 3(1) of ERISA.
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The following page contains a list of Exhibits and Schedules which have
been intentionally omitted by the Registrant.
A copy of any omitted Exhibit or Schedule will be provided to the
Securities and Exchange Commission upon request.
<PAGE>
Exhibit 3 - Lenders' Commitments and Prorata Shares
Exhibit 3.4 - Form of Revolving Note
Exhibit 3.5.3 - Form of Swingline Notes
Exhibit 9.1.1 - Documents and Requirements List
Exhibit 11 - Disclosure Schedule of Borrower
Exhibit 13.13 - Form of Compliance Certificate
Exhibit 18.4.1 - Form of Assignment and Acceptance
EMPLOYMENT AND NONCOMPETITION AGREEMENT
This Employment and Noncompetition Agreement (this "Agreement") is made
this 28th day of August, 1995 between Kalish Canada Inc., a New Brunswick
corporation (the "Corporation"), and Graham Lewis (the "Executive").
WHEREAS, the Executive is currently serving as the President of H.G.
Kalish, Inc. (the "Seller"), a Quebec corporation engaged in the business of the
design, manufacture and sale of automated packaging equipment at its facilities,
headquartered in Montreal, Quebec, Canada, for use in the pharmaceutical
industry and a variety of other industries throughout the world (the "Business")
and has demonstrated experience and knowledge relating to the Business;
WHEREAS, on the date hereof the Corporation has acquired the Business and
substantially all the assets of the Seller pursuant to the Asset Purchase
Agreement, dated August 28, 1995, between the Corporation and the Seller (the
"Purchase Agreement");
WHEREAS, in connection with the transactions consummated pursuant to the
Purchase Agreement, the Corporation desires to retain the services of the
Executive as an employee of the Corporation in the capacity of President upon
the terms and conditions set forth herein;
WHEREAS, the Corporation also desires to secure the Executive's agreement
not to compete with the Corporation and its Affiliates and to keep confidential
and secret all information the Executive has regarding the operations of the
Corporation and its Affiliates all upon the terms and conditions set forth
herein;
WHEREAS, the Executive understands the necessity of keeping the
aforementioned information confidential and secret and recognizes the
proprietary nature of such information; and
<PAGE>
WHEREAS, the Corporation is willing to compensate the Executive for his
services in the capacity of President of the Corporation, together with his
noncompetition and nondisclosure covenants, all upon the terms, covenants and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants, agreements and
promises hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. Definitions.
a. "Affiliate" means, with respect to any Person, any Person now or
hereafter controlling, controlled by, or under common control with such Person,
including its Subsidiaries.
b. "Ordinary Course of Business" means the conduct of the business
and affairs of the Corporation in the usual and ordinary course and in a manner
which advances the purposes, and is in the best interest, of the Corporation.
c. "Person" means any individual, corporation, firm, partnership or
other business entity.
d. "Proprietary Information" means all information or data with
respect to the conduct or details of the businesses of the Corporation and its
Affiliates including, without limitation, methods of operation, customers and
customer lists, products, proposed products, former products, proposed, pending
or completed acquisitions of any company, division, product line or other
business unit, prices, fees, costs, plans, designs, technology, inventions,
trade secrets, know-how, software, marketing methods, policies, plans,
personnel, suppliers, competitors, markets or other specialized information or
proprietary matters of the Corporation or any of its Affiliates.
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e. "Subsidiary" means any corporation or other entity of which the
Corporation directly or indirectly owns beneficially or of record fifty percent
(50%) or more of (i) the outstanding shares of capital stock if such entity is a
corporation or (ii) the outstanding ownership interests if such entity is not a
corporation.
2. a. Employment and Duties. The Corporation hereby agrees to employ
the Executive and the Executive accepts such employment on and subject to the
terms and conditions set forth in this Agreement. The Executive agrees to devote
all of his business time, efforts and attention to the business of the
Corporation and its Affiliates. The Executive shall not accept any business
commitments other than with the Corporation and its Affiliates, other than
supervision of the Executive's personal investments, without the advance written
consent of the Corporation's board of directors.
b. Position. The Executive will have a position as President of the
Corporation and report to the Corporation's Chairman, who will also be the chief
executive officer of DT Industries, Inc. ("DTI"). The Executive shall, at all
times, act in a fiduciary capacity for the benefit of the Corporation. The
Executive will also have senior executive management responsibility for
Affiliates of the Corporation engaged in businesses complementary to the
Business, including the Stokes and Merrill-Lakso divisions of Pharma Group, Inc.
c. Right to Change Duties and Title. The Corporation shall have the
right from time to time to change the nature and scope of the Executive's duties
and title ; provided that during the term of his employment with the
Corporation, the Executive shall report directly to the chief executive officer
of DTI.
3. Term of Employment. The term of employment hereunder shall commence
on the date hereof.
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4. Salary. As compensation for services to be rendered by the
Executive hereunder, the Executive shall receive a base salary at the rate of
CND$245,000 per annum. Payment of the salary will be made each month in
accordance with the payroll policies of the Corporation in effect from time to
time. The Executive shall be entitled to have a salary review in accordance with
the policies and established practices of the Corporation in effect from time to
time.
5. Bonus. The Executive shall be eligible to participate in all of the
executive bonus plans applicable to the executives of the Corporation, including
a performance-based bonus calculated as a percentage of his annual base salary.
Such bonus shall be calculated on specific financial and operational objectives
set out at the beginning of each year and is payable on or about the first
quarter of the following year.
6. Benefits. The Executive shall be a participant in the Corporation's
benefit and pension plans according to the rules applicable thereto.
7. Automobile. The Executive shall be entitled to the use of a leased
Corporation automobile in accordance with the Corporation's automobile policy in
effect from time to time.
8. Other Corporation Policies. The Executive agrees to comply with all
policies of the Corporation in effect from time to time.
9. Agreement Not To Disclose.
The Executive agrees that:
a. He will not, during the period of his employment with the Corpora-
tion or its Affiliates or at any time thereafter, except with the express prior
written consent of the Corporation, directly or indirectly disclose, communicate
or divulge to any Person other than the Corporation, its Affiliates, and their
employees, officers, and agents, or use for the benefit of any Person other than
the Corporation and its Affiliates, any Proprietary Information. The restriction
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<PAGE>
contained in the preceding sentence shall not apply to any Proprietary
Information that (i) is a matter of public knowledge on the date of this
Agreement, (ii) becomes a matter of public knowledge after the date of this
Agreement from another source which is, to the Executive's knowledge, under no
obligation of confidentiality to the Corporation or its Affiliates, or (iii) is
furnished in the Ordinary Course of Business to Persons which sell, provide or
propose to sell or provide goods or services to the Corporation or its
Affiliates or which purchase, obtain or propose to purchase or obtain goods or
services from the Corporation or its Affiliates.
b. All data, designs, drawings, blueprints, tracings, sketches,
plans, layouts, specifications, models, programs, cards, tapes, disks,
printouts, writings, manuals, guides, notes and any and all other memoranda,
including without limitation any and all written information which may be or has
been furnished to the Executive or which may be produced, prepared or designed
by the Executive in connection with his employment with the Corporation, shall
be, become and remain the exclusive property of the Corporation. Upon the
termination of the Executive's employment with the Corporation, all originals,
copies and reprints in the Executive's possession, custody, or control shall be
promptly surrendered and/or delivered to the Corporation, and the Executive
shall thereafter make no further use, either directly or indirectly, of any such
data, designs, drawings, blueprints, tracings, sketches, plans, layouts,
specifications, models, programs, cards, tapes, disks, printouts, writings,
manuals, guides, notes or other memoranda or written information.
10. Agreement to Disclose.
a. The Executive agrees to disclose in writing to the Corporation
or its designee promptly and fully all works and property related to the
Business, including but not limited to all intellectual properties, ideas,
inventions, discoveries, concepts, computer systems or programs, works,
techniques, programs or any components or associated products thereof and all
hardware and software inventions, products, improvements, innovations,
discoveries and writings which are made, conceived, reduced to practice,
developed, written, contributed to or
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<PAGE>
prepared by the Executive during, or related in any manner whatsoever to, his
employment with the Corporation or any of its Affiliates or which result from or
are suggested by any work the Executive may do in connection with his employment
with the Corporation or any of its Affiliates, whether or not patentable or
copyrightable and whether made solely by the Executive or jointly with others,
all of such works and property being hereinafter referred to in this Agreement
as "Works and Property." The Executive acknowledges that he does not claim any
interest in Works and Property (defined for the purposes of this sentence to
include matters arising at any time during his employment with the Seller or
with the Corporation.
b. If the Executive includes in any written disclosure required by
Section 10(a) a request that ownership of any Works and Property be transferred
to him, the Corporation or the relevant Affiliate shall promptly determine, in
its sole discretion, whether it elects to transfer its ownership of such Works
and Property to the Executive and the terms and conditions, if any, of such
transfer. If the Corporation or the relevant Affiliate elects in writing to
transfer its ownership of any such Works and Property to the Executive and if
the Executive complies with any terms and conditions specified by the
Corporation or the relevant Affiliate in connection with such transfer, the
Executive shall thereafter have all right, title and interest to such
transferred Works and Property.
c. In the event that the Executive fails to disclose to the Corpora-
tion or the relevant Affiliate in writing any Works and Property in accordance
with Section 10(a), the Corporation or the relevant Affiliate shall retain
complete right, title and interest in Works and Property as specified in Section
11(a).
11. Ownership of Works and Property.
The Executive hereby agrees that:
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a. Except as provided in Section 10, all Works and Property shall
unconditionally be, become and remain the sole and exclusive property of the
Corporation or the relevant Affiliate forever;
b. Pursuant to Sections 101 and 201 of the United States Copyright
Law, and any similar provisions of Canadian law, all Works and Property shall be
"works made for hire," and all rights in such Works and Property shall belong
entirely and exclusively to the Corporation or the relevant Affiliate and their
successors and assigns forever, and the Corporation or the relevant Affiliate
and their successors and assigns may make any use or nonuse of such Works and
Property throughout the world without any further obligation to the Executive;
c. The Executive will promptly execute, acknowledge and deliver all
applications, oaths, declarations, and further documents and will provide such
additional assistance as the Corporation or the relevant Affiliate or their
counsel may deem necessary or desirable to evidence the Corporation's or the
relevant Affiliate's title to such Works and Property; and
d. In performing duties or services for the Corporation or the
relevant Affiliate regarding Works and Property, the Executive will not
knowingly infringe upon the rights, including but not limited to patent,
copyright, trade secret or other proprietary rights, of any third party
whatsoever.
12. Covenants Not to Compete.
a. The Executive covenants and agrees that he will not, at any time
during the period of his employment with the Corporation and for a period of
three (3) years after the termination of such employment, except with the
express prior written consent of the Corporation as evidenced by a resolution of
its Board of Directors, directly or indirectly, whether as employee, owner,
partner, agent, director, officer, consultant, shareholder (except as the holder
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<PAGE>
of not more than 1% of the outstanding shares of a corporation whose stock is
listed on any national or regional securities exchange or reported by the
National Association of Securities Dealers Automated Quotations System or any
successor thereto) either (i) establish any Person that competes with the
Corporation or any of its Affiliates or (ii) be affiliated or associated with
any Person that engages in a business or proposes to engage in a business which
competes with the business of the Corporation or any of its Affiliates within
the provinces of Quebec and Ontario, the provinces contiguous thereto, elsewhere
in Canada, the states of Illinois, Massachusetts, Michigan, Missouri, New
Jersey, Pennsylvania, Connecticut, the states contiguous thereto, elsewhere in
the United States, North America, South America, Europe, Asia and the Middle
East and elsewhere in the world (the "Area") in a position which is competitive
in any of its duties, responsibilities or activities with the Corporation or any
of its Affiliates. The parties further agree that if the Executive becomes
affiliated or associated with any Person described in clause (ii) of this
Section 12(a), the Executive shall be obliged to show by clear and convincing
evidence that none of his duties, responsibilities or activities entail
employment in a capacity which has been, is or is likely to become, competitive
with the Corporation or any of its Affiliates. The parties hereto agree that the
covenant contained in clause (ii) of this Section 12(a) shall be construed as a
series of separate covenants, one for each province, state or geographic area
specified in such clause (ii) and, except for geographic coverage, each separate
covenant shall be deemed identical.
b. The Executive covenants and agrees that he will not, at any time
during the period of his employment with the Corporation and for a period of
three (3) years after the termination of such employment, except with the
express prior written consent of the Corporation as evidenced by a resolution of
its Board of Directors, directly or indirectly solicit, divert or accept
competitive business from or otherwise take away or interfere with any customer
of the Corporation or any of its Affiliates, including without limitation any
Person who: (i) was a customer of, or whose business was being pursued by the
Corporation or the Seller within the period of the Executive's employment with
the Corporation or the Seller; or (ii) was known by
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<PAGE>
the Executive to be a customer of, or a Person whose business was being pursued
by the Seller, Corporation or any of its Affiliates within the period of the
Executive's employment with the Corporation or the Seller or one year after the
termination of such employment, including without limitation all customers
produced or generated by the Executive.
c. The Executive further covenants and agrees that he will not, for a
period of three (3) years after the termination of his employment hereunder,
except with the express prior written consent of the Corporation, as evidenced
by a resolution of its Board of Directors, directly or indirectly, accept
employment, be employed by or be a principal of any business or enterprise
operating within the Area which then employs or has as a principal or holder of
any interest therein (except as the holder of not more than 1% of the
outstanding shares of a corporation whose shares are publicly traded) any
individual who was previously employed in a managerial or executive position
with the Corporation or any of its Affiliates; provided, however, that this
prohibition shall not be applicable if (i) such business or enterprise does not
compete with the Corporation or its Affiliates, or (ii) (x) if such business or
enterprise engages in activities which do compete and other activities which do
not compete with the Corporation or its Affiliates (y) the Executive and/or the
other individual who was previously employed by the Corporation or any of its
Affiliates are employed by such business or enterprise in connection with
activities which in no way compete with the Corporation or its Affiliates and
(z) neither the Executive nor the other individual who was previously employed
by the Corporation or its Affiliates is or proposes to be a principal of such
business or enterprise.
13. Acknowledgments of the Executive; Injunctive Relief. The Executive
acknowledges the confidential and secret nature of the Proprietary Information.
The Executive also acknowledges that the Corporation and its Affiliates have
devoted considerable time, expense and other resources to the development or
acquisition of the Proprietary Information. In light of this expenditure of
time, money and resources by the Corporation and its Affiliates, the Executive
further acknowledges (i) that all of the Proprietary Information has great
economic value and is proprietary to the Corporation and its Affiliates, (ii)
that his violation of this
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Agreement would cause the Corporation and its Affiliates to suffer irreparable
damage and (iii) that the character, periods and scope of restrictions on the
Executive's activities following the termination of his employment by the
Corporation are fair and reasonably required for the protection of the
Corporation and its Affiliates. Therefore, in addition to any other remedies
which the Corporation may have under this Agreement or otherwise and subject to
Section 17(b) of this Agreement, the Corporation and each of its Affiliates
shall be entitled to apply to any court of competent jurisdiction for an
injunction restraining the Executive from committing or continuing any violation
of Sections 9 or 12 of this Agreement, and, provided that the Corporation or
such Affiliate has complied with all procedural requirements with respect to
such application, the Executive shall not object to such application except to
litigate whether, in fact, he has violated Sections 9 or 12 of this Agreement.
The Corporation agrees that in the event that the Corporation or any of its
Affiliates obtains a temporary restraining order or preliminary injunction
restraining the activities of the Executive, which restraining order or
injunction is subsequently held to have been improperly issued, the Executive
shall be entitled to apply to any court of competent jurisdiction for an award
of his damages and costs incurred in defense of such restraining order or
injunction.
14. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by registered mail,
return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Barrowgate House
246 Beaconsfield Boulevard
Beaconsfield, Quebec H9W 4A4, Canada
If to the Corporation:
c/o DT Industries, Inc.
441 West Elm Street
Lebanon, Missouri 65536 U.S.A. Attn: Chairman
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<PAGE>
or to such other address as either party may have furnished to the other party
in writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
15. Invalid or Unenforceable Provisions. In the event that any part of
this Agreement shall be held to be unenforceable or invalid, the remaining parts
hereof shall nevertheless continue to be valid and enforceable as though the
invalid portions were not a part hereof. In the event that any of the provisions
of this Agreement relating to the character, period of time or geographic scope
of restriction shall be deemed to exceed the character of restriction, period of
time or geographic scope which a court of competent jurisdiction would deem
enforceable, the character of the restriction, period of time and geographic
scope shall, for purposes of this Agreement, be deemed to be the character of
the restriction and maximum time period and geographic scope which a court of
competent jurisdiction would deem valid and enforceable in any state or province
in which such court of competent jurisdiction shall be convened.
16. Benefit and Burden. This Agreement shall inure to the benefit of, and
shall be binding upon, the parties hereto and their respective legatees,
distributees, estates, executors, administrators, personal representatives,
heirs, successors and assigns, and other legal representatives.
17. Miscellaneous.
a. No change or modification of this Agreement shall be valid unless
the same is in writing and signed by each of the parties hereto. No waiver of
any provision of this Agreement shall be valid unless in writing and signed by
the party against whom it is sought to be enforced. The failure of any party at
any time to insist upon strict performance of any condition, promise, agreement
or understanding set forth herein shall not be construed as a
11
<PAGE>
waiver or relinquishment of the right to insist upon strict performance of the
same or other conditions, promises, agreements or understandings at a future
time.
b. This Agreement shall be governed by, and construed in accordance
with the laws of Quebec and the laws of Canada applicable therein without regard
to such jurisdiction's conflicts of laws principles. Any action or proceeding
arising out of or relating to this Agreement, including the interpretation or
enforcement hereof, shall be brought in a court of competent jurisdiction
sitting in Montreal, Quebec, and each of the parties hereto hereby irrevocably
waives, to the fullest extent it or he may effectively do so, any objection it
or he may have to such venue and any defense of an inconvenient forum to the
maintenance of such action or proceeding.
c. The headings and other captions in this Agreement are for
convenience and reference only and shall not be used in interpreting, construing
or enforcing any of the provisions of this Agreement.
d. Unless indicated otherwise, each reference to currency in this
Agreement is a reference to Canadian currency and all payments and remittances
hereunder shall be made in Canadian Dollars.
e. The parties hereto acknowledge that they have requested that this
Agreement and the documents relating hereto be drawn up in English; les parties
aux presentes reconnaissent qu'elles ont exige que ce contrat et tous les
documents y afferents soient rediges en anglais.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
EXECUTIVE KALISH CANADA INC.
/s/ Graham Lewis By: /s/ Bruce P. Erdel
- -------------------------------- -------------------------------------
Graham Lewis Bruce P. Erdel
Vice President
EMPLOYMENT AND NONCOMPETITION AGREEMENT
This Employment and Noncompetition Agreement (this "Agreement") is made
this 26 day of February, 1997, between DT Industries, Inc., a Delaware
corporation (the "Company"), and Eugene R. Haffely, an individual residing in
the State of Ohio (the "Executive").
RECITALS
WHEREAS, the Executive desires employment with the Company and the Company
desires to retain the benefit of the Executive's services to facilitate the
conduct of the business and also desires to (i) keep confidential and secret all
information regarding its operations and (ii) secure the Executive's agreement
not to compete with the Company under the certain circumstances and for certain
time periods described in this Agreement; and
WHEREAS, the Executive understands the necessity of keeping the
aforementioned information confidential and secret, recognizes the proprietary
nature of such information, agrees not to compete with the Company under the
certain circumstances and for the certain time periods specified in this
Agreement and desires to be retained by the Company subject to the terms and
conditions of this Agreement;
NOW THEREFORE, in consideration of the mutual covenants, agreements and
promises hereinafter set forth, and other good and valuable consideration the
receipt of which is hereby agreed and acknowledged, the parties hereto agree as
follows:
<PAGE>
1. Definitions.
The following terms when used in this Agreement have the meanings set forth
below.
a. "Affiliate" means any Person (as hereinafter defined) now or here-
after controlling, controlled by, or under common control with another Person.
b. "Area" means the State of Missouri, the State of Ohio, the states
adjacent thereto, elsewhere in the United States, North America, the Western
Hemisphere, Europe, Asia and the world.
c. "Benefits" means Company paid healthcare benefits applicable to
the Executive in accordance with the policies of the Company in effect from time
to time.
d. "Business" means any businesses or operations engaged in or
proposed to be engaged in by the Company, Subsidiaries or any of their
Affiliates throughout the Area.
e. "Cause" means (i) the Executive breaches his fiduciary duties to
the Company or the Subsidiaries, (ii) the Executive commits an act constituting
intentional financial dishonesty against the Company, Subsidiaries, or any of
their Affiliates, (iii) the Executive is convicted of a crime, (iv) the
Executive engages in misconduct causing material harm to the Company,
Subsidiaries, or any of their Affiliates, or (v) the Executive engages in any
other act which would otherwise constitute "cause" under the laws of the State
of Missouri.
f. "Person" means any individual, corporation, firm, partnership or
other business entity.
2
<PAGE>
g. "Proprietary Information" means all information with respect to
the conduct or details of the business and operations of the Company or its
Subsidiaries including, without limitation, methods of operation, customers and
customer lists, details of contracts with customers, consultants, suppliers or
employees, products, proposed products, former products, proposed, pending or
complete acquisitions of any company, division, product line or other business
unit, prices and pricing policies, fees, costs, plans, designs, technology,
inventions, trade secrets, know-how, software, marketing methods, policies,
plans, personnel, suppliers, competitors, markets or other specialized
information or proprietary matters of the Company or its Subsidiaries.
h. "Subsidiary" means any corporation or other entity of which the
Company directly or indirectly owns beneficially or of record fifty percent
(50%) or more of (i) the outstanding shares of capital stock if such entity is a
corporation or (ii) the outstanding ownership interests if such entity is not a
corporation.
2. Employment.
The Executive shall serve in such executive or managerial capacities as may
be determined from time to time by the Board of Directors of the Company. The
Company shall pay to the Executive, and the Executive shall accept from the
Company in full payment for the Executive's services rendered to the Company
hereunder an annual base compensation of $200,000. The Executive shall also be
eligible to participate in bonus plans sponsored by the Company applicable to
senior executives of the Company.
3
<PAGE>
3. Nondisclosure.
a. The Executive covenants and agrees that, at all times from and
after the date hereof, except as required by law or by order of any court or
government agency, he shall keep completely confidential and retain in strictest
confidence and shall not, except with the express prior written consent of the
Company, directly or indirectly disclose, communicate or divulge to any Person,
or use for the benefit of any Person, any Proprietary Information. The
restriction contained in the preceding sentence shall not apply to any
Proprietary Information that (i) is a matter of public knowledge on the date of
this Agreement, (ii) becomes a matter of public knowledge after the date of this
Agreement from a source other than the Executive, or (iii) is later lawfully
acquired by the Executive from sources other than the Company.
b. All data, designs, drawings, blueprints, tracings, sketches,
plans, layouts, specifications, models, programs, cards, tapes, disks,
printouts, writings, manuals, guides, notes and any an all other memoranda,
including without limitation any and all written information which may be or has
been furnished to the Executive which may be produced, prepared or designed by
the Executive in connection with his employment with the Company, shall be,
become and remain the exclusive property of the Company. Upon the termination of
the Executive's employment with the Company, all originals, copies and reprints
in the Executive's possession, custody, or control shall be promptly surrendered
and/or delivered to the Company, and the Executive shall thereafter make no
further use, either directly or indirectly, of any such data, designs, drawings,
blueprints, tracings, sketches, plans, layouts, specifications, models,
programs, cards, tapes, disks, printouts, writings, manuals, guides, notes or
other memoranda or written information, provided that the Executive shall not be
obligated to deliver to the Company
4
<PAGE>
or prohibited from using such written information as a matter of public
knowledge on or prior to the date of the termination of his employment with the
Company.
4. Disclosure.
a. The Executive agrees to disclose in writing to the Company
promptly and fully all works and property, including but not limited to all
intellectual properties, ideas, inventions, discoveries, concepts, computer
systems or programs, works, techniques, programs or any components or associated
products thereof and all hardware and software inventions, products,
improvements, innovations, discoveries and writings which are made, conceived,
reduced to practice, developed, written, contributed to or prepared by the
Executive during, or related in any manner whatsoever to, his employment with
the Company or which result from or are suggested by any work the Executive may
do in connection with his employment with the Company, whether or not patentable
or copyrightable and whether made solely by the Executive or jointly with
others, all of such works and property being hereinafter referred to in this
Agreement as "Works and Property."
b. If the Executive includes in any written disclosure required by
Section 4(a) a request that ownership of any Works and Property be transferred
to him, the Company shall promptly determine, in its sole discretion, whether it
elects to transfer its ownership of such Works and Property to the Executive and
the terms and conditions, if any, of such transfer. If the Company elects in
writing to transfer its ownership of any such Works and Property to the
Executive and if the Executive complies with any terms and conditions specified
5
<PAGE>
by the Company in connection with such transfer, the Executive shall thereafter
have all right, title and interest to such transferred Works and Property.
c. In the event that the Executive fails to disclose to the Company
in writing any Works and Property, the Company shall retain complete right,
title and interest in Works and Property as specified in Section 5(a).
5. Ownership of Works and Property.
The Executive hereby agrees that:
a. Except as provided in Section 4, all Works and Property shall
unconditionally be, become and remain the sole and exclusive property of the
Company forever;
b. Pursuant to Sections 101 and 201 of the United States Copyright
law, all Works and Property shall be "works made for hire," and all rights in
such Works and Property shall belong entirely and exclusively to the Company and
its successors and assigns forever, and the Company and its successors and
assigns may make any use or non-use of such Works and Property throughout the
world without any further obligations to the Executive;
c. All Works and Property shall belong entirely and exclusively to
the Company and its successors and assigns forever, and the Executive hereby
grants and assigns forever to the Company all rights whatsoever that the
Executive might have therein, and the Company may make any use or non-use of
such Works and Property throughout the world without any further obligation to
the Executive;
6
<PAGE>
d. The Executive will promptly execute, acknowledge and deliver all
applications, oaths, declarations, and further documents and will provide such
additional assistance as the Company or its counsel may deem necessary or
desirable to evidence the Company's title to such Works and Property; and
e. In performing duties or services for the Company regarding Works
and Property, the Executive will not knowingly infringe upon the rights,
including but not limited to patent, copyright, trade secret or other
proprietary rights, of any third party whatsoever.
6. Covenants Not to Compete.
a. The Executive covenants and agrees that he will not at any time
during his employment with the Company and thereafter for the applicable
Post-Employment Restriction Period (as defined below in Section 7), except with
the express prior written consent of the President of the Company, directly or
indirectly, whether as employee, owner, partner, agent, director, officer,
consultant, shareholder (except as the holder of not more than one percent (1%)
of the outstanding shares of a corporation whose stock is listed on any national
or regional securities exchange or reported by the Nasdaq Stock Market or any
successor thereto) either (i) establish any Person that competes with the
Company or the Subsidiaries, or (ii) be affiliated in any manner with any Person
which engages in, the Business or proposes to engage in the Business within the
Area (a "Competitor") in a manner which is competitive in any of his
responsibilities, duties or activities with the Business. The parties further
agree that if the Executive becomes affiliated or connected with any Competitor
during either his employment with the Company or the Post-Employment Restriction
Period, the Executive shall be obliged to
7
<PAGE>
show by clear and convincing evidence that none of his duties, responsibilities
or activities entail employment in a capacity which has been, is or is likely to
become, competitive with the Business. The parties hereto agree that the
covenant contained in clause (ii) of this Section 6(a) shall be construed as a
series of separate covenants, one for each state or subdivision included in the
Area and, except for geographic coverage, each separate covenant shall be deemed
identical.
b. The Executive covenants and agrees that he will not, at any time
during his employment with the Company and for a period of three (3) years
thereafter, except with the express prior written consent of the President of
the Company, directly or indirectly: (i) solicit, divert or accept competitive
business from or otherwise take away or interfere with any Person for whom the
Company or any Subsidiary performed any services or to whom the Company or any
Subsidiary sold products or whose business was being pursued by the Company or
any Subsidiary during his employment with the Company or any Subsidiary and for
the Post-Employment Restriction Period; (ii) solicit for employment or any
similar arrangement any Person who is at such time an employee or independent
contractor of the Company or any Subsidiary; or (iii) induce or attempt to
induce any Person that is a supplier to the Company or any Subsidiary or, any
distributor or seller of products for the Company or any Subsidiary to terminate
or otherwise adversely change or cancel any written or oral agreement with such
entity.
c. The Executive further covenants and agrees that he will not for a
period of three (3) years after the termination of his employment hereunder,
except with the express prior written consent of the President of the Company,
directly or indirectly, accept employment, be employed by or be a principal of
any business or enterprise operating within the United States
8
<PAGE>
which then employs or has as a principal or holder of any interest therein
(except as the holder of not more than one percent (1%) of the outstanding
shares of a corporation whose stock is listed on any national or regional
securities exchange or reported by the Nasdaq Stock Market or any successor
thereto) any individual who was previously employed in a managerial or executive
position with the Company, Subsidiaries or any of their Affiliates, provided
however, that this prohibition shall not be applicable if (i) such business or
enterprise does not compete with the Company, Subsidiaries or any of their
Affiliates, or (ii) (x) such business or enterprise engages in activities which
do compete and other activities which do not compete with the Company,
Subsidiaries or any of their Affiliates, (y) the Executive and the other
individual who was previously employed by the Company, Subsidiaries or any of
their Affiliates are employed by such business or enterprise in connection with
activities which in no way compete with the Company, Subsidiaries or any of
their Affiliates and (z) neither the Executive nor the other individual who was
previously employed by the Company, Subsidiaries or any of their Affiliates is
or proposes to be a principal of such business or enterprise.
7. Post-Employment Restriction Period; Additional Compensation.
For the purposes of this Agreement, the applicable "Post-Employment
Restriction Period" shall be determined as follows:
a. If the Executive's employment with the Company or the Subsidiaries
is terminated for Cause, the Post-Employment Restriction Period shall be a
period of one (1) year commencing on the date of termination of such employment.
9
<PAGE>
b. If the Executive's employment with the Company or the Subsidiaries
is terminated due to a Permanent Disability, the Post-Employment Restriction
Period shall be a period of one (1) year commencing on the date of termination
of such employment. For the purpose of this Section 7, the Executive has
suffered a "Permanent Disability" if the Board of Directors of the Company or
their designee reasonably determines that the Executive has been or will be
unable, as a result of physical or mental illness or incapacity, to perform his
duties to the Company or the Subsidiaries for a period of four (4) consecutive
months or for an aggregate of more than six (6) months in any twelve-month
period.
c. If the Executive's employment with the Company or its Subsidiaries
shall be terminated by the Company or such Subsidiary without Cause, or if the
Executive terminates his employment within sixty (60) days after a substantial
reduction in his duties, responsibilities or compensation, the Post-Employment
Restriction Period shall be a period of one (1) year commencing on the date of
termination of such employment; provided, that (i) during the Post-Employment
Restriction Period the Company or the Subsidiary shall make monthly payments to
the Executive and (ii) during the Benefits Period the Company or the Subsidiary
shall provide to the Executive, the Benefits, as in effect on the date of
termination of such employment, or the reasonable equivalent thereof, as
determined by the Board of Directors of the Company in its sole discretion and
business judgment. For the purposes of this section 7, "Benefits Period" means a
period, commencing on the date that the Executive's employment with the Company
and the Subsidiaries terminates and ending on the earlier of (a) the end of the
initial Post-Employment Restriction Period and (b) the date that the Executive
commences other employment or any consulting arrangement. The amount of the
monthly payments shall be equal
10
<PAGE>
to one-twelfth (1/12) of the Executive's annual base compensation as in effect
(i) on the date of his termination or (ii), in the case where the Executive has
terminated his employment after a substantial reduction in his duties,
responsibilities or compensation, immediately prior to his reduction of
compensation, as the case may be, during the Benefits Period and 50% of such
amount thereafter until the end of the initial Post-Employment Restriction
Period determined by this Section 7.
d. If the Executive terminates his employment with the Company and
the Subsidiaries for any reason other than the Company substantially reducing
his duties, responsibilities or compensation, within thirty (30) days of the
date of such termination the Company shall have the option to designate an
initial Post-Employment Restriction Period of six (6) months commencing on the
date of termination which option is exercisable by notice given within thirty
(30) days after the date on which the Company receives notice of the Executive's
termination of his employment. Thereafter, the Company shall have three (3)
additional options to extend the Post-Employment Restriction Period for
additional consecutive periods of six (6) months each, which options shall be
exercisable at the times and in the manner set forth in this Section. If the
initial Post-Employment Restriction Period is determined by subparagraphs (a),
(b) or (c) above, at the end of the initial Post-Employment Restriction Period
the Company shall have two (2) options to extend the Post-Employment Restriction
Period for additional consecutive periods of six (6) months each. The Company
may exercise its additional options under this Section 7(d) by giving notice to
the Executive of each such election at any time which is not less than thirty
(30) days prior to the expiration of the Post-Employment Restriction Period (as
may have then been extended by prior exercise of an option pursuant to this
Section 7).
11
<PAGE>
During any such extension of the Post-Employment Restriction Period, the Company
shall make monthly payments to the Executive in an amount equal to one twelfth
(1/12th) of the Executive's annual base compensation as in effect on the date of
termination of his employment until the first full month in which the Executive
has obtained other employment or any consulting arrangement and 50% of such
amount thereafter. Notwithstanding any provision of this Section 7 to the
contrary, the Post-Employment Restriction Period shall not be extended beyond a
period of two (2) years without the consent of the Executive.
e. During the Post-Employment Restriction Period (including any
extensions thereof) the Executive shall give written notice to the Company
within five (5) days of any change in his employment or in his duties,
responsibilities or activities pursuant thereto. If the Executive voluntarily
terminates his employment with the Company and the Subsidiaries, the Executive
shall give written notice to the Company of any employment which the Executive
at that time expects to be engaged in within the six-month period following his
termination.
f. Notwithstanding any other provision of this Section 7 to the
contrary, the provisions of this Section 7 do not, and are not intended to,
waive, disclaim or otherwise extinguish any rights of the Executive as an
employee under any applicable federal, state or local statute or ordinance.
8. No Right to Continued Employment. The Executive agrees that no pro-
vision of this Agreement shall (i) give the Executive any right to be retained
in the employ of the Company or any Subsidiary, (ii) affect the right of the
Company or any Subsidiary to discharge
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<PAGE>
the Executive at any time or (iii) affect the Executive's right to terminate his
employment at any time.
9. Acknowledgments. The Executive acknowledges that the term, the
geographical areas of this Agreement and the scope of the restraints imposed by
the Sections 3 and 6 of this Agreement are fair and reasonably required for the
protection of the Company. Therefore, in addition to any other remedies which
the Company may have under this Agreement or otherwise, the Company shall be
entitled to apply to any court of competent jurisdiction for an injunction
restraining the Executive from committing or continuing any violation of
Sections 3 and 6 of this Agreement, and the Executive shall not object to such
application except to litigate whether, in fact, he has violated Sections 3 and
6 of this Agreement.
10. Remedies. The parties agree that it is impossible to measure in money
the damages that will accrue to the Company by reason of the Executive's failure
to perform his respective obligations under this Agreement, that such failure to
perform will result in irreparable damage to the Company, and that specific
performance of the Executive's obligations may therefore be obtained by suit in
equity. Without limiting the generality of the foregoing sentence, the Company
shall be entitled to an injunction from any court of competent jurisdiction
restraining the Executive from committing or continuing any violations of
Sections 3 and/or 6. The Executive will neither assert any claim nor any defense
in any action or proceeding to enforce any provision hereof that the Company has
or had an adequate remedy at law.
11. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given
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<PAGE>
when delivered or mailed by United States registered mail, return receipt
requests, postage prepaid, addressed as follows:
If to the Executive:
180 Southway Drive
Dayton, Ohio 45440
If to the Company:
DT Industries, Inc.
Corporate Centre, Suite 2-300
1949 East Sunshine
Springfield, Missouri 65804
Attention: Stephen J. Gore
or to such other address as either party may have furnished to the other party
in writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
12. Invalid or Unenforceable Provisions. In the event that any part of
this Agreement shall be held to be unenforceable or invalid, the remaining parts
thereof shall nevertheless continue to be valid and enforceable as though the
invalid portions were not a part hereof. In the event that any of the provisions
of this Agreement relating to the character, period or geographic scope of
restriction shall be deemed to exceed the character of restriction, period of
time or geographic scope which a court of competent jurisdiction would deem
enforceable, the character of the restriction, period of time and geographic
scope shall, for purposes of this Agreement, be deemed to be the character scope
which a court of competent jurisdiction would deem valid and enforceable in any
state in which such court of competent jurisdiction shall be convened.
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<PAGE>
13. Benefit and Burden. This Agreement shall inure to the benefit of, and
shall be binding upon, the parties hereto and their respective personal or legal
representatives, successors and assigns.
14. Indemnification. The Executive agrees to save and hold the Company
harmless from and against any claim, loss or damage whatsoever (including
reasonable attorneys' fee) arising out of the breach by the Executive of his
obligations under this Agreement. The foregoing shall be in addition to, and not
in limitation of, any rights the Company may have against the Executive arising
in connection with this Agreement.
15. No Conflicts. The Executive represents that there is no conflict
between the duties that he is required to perform pursuant to this Agreement,
and the duties that he is required to perform pursuant to any other contract,
agreement, arrangement or understanding to which he is a party or to any rule,
regulation, directive, order or law to which he is subject.
16. Modifications. No change or modification of this Agreement shall be
valid unless the same is in writing and signed by all the parties hereto. No
waiver of any provision of this Agreement shall be valid unless in writing and
signed by the party against whom it is sought to be enforced. The failure of any
party at any time to insist upon strict performance of any condition, promise,
agreement or understanding set forth herein shall not be construed as a waiver
or relinquishment of the right to insist upon strict performance of the same or
other conditions, promises, agreements or understandings at a future time.
17. Entire Agreement. This Agreement contains all of the promises,
agreements, conditions, understandings, warranties and representations between
the parties hereto with
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<PAGE>
respect to the subject matter of this Agreement. This Agreement is, and is
intended by the parties to be, an integration of any and all prior agreements or
understandings, oral or written, with respect to the subject matter hereof and
supersedes and replaces in their entity any prior employment agreements between
the Executive and the Company.
18. Governing Law. This Agreement, including, without limitation, the
interpretation, construction, validity and enforceability thereof, shall be
construed and enforced in accordance with and governed by the laws of the State
of Missouri, without regard to such jurisdiction's conflict of laws principles.
19. Forum Selection And Consent to Jurisdiction. Any legal action or
proceeding with respect to this Agreement may be brought in the courts of the
State of Missouri in Greene County or any United States Federal Court sitting in
the District of Missouri, and, by the execution and delivery of this Agreement,
the Company and the Executive hereby irrevocably accepts for himself or itself
and in respect of any of his or its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The Company and the Executive further
irrevocably consent to the service of process out of any of the aforementioned
courts in any such action or proceeding by hand delivery or by registered or
certified mail, postage prepaid, to the Company or the Executive at the
addresses described in Section 11 of this Agreement, such service to become
effective ten (10) days after hand delivery or fifteen (15) days after such
mailing. The Company and the Executive hereby irrevocably waive to the fullest
extent they may effectively do so, any objection they may have to venue and the
defense of an inconvenient forum to the maintenance of such actions or
proceedings.
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<PAGE>
20. Headings. The headings and other captions in this Agreement are for
convenience and reference only and shall not be used in interpreting, construing
or enforcing any of the provisions of this Agreement.
21. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same instrument. Any such counterpart may
be executed by facsimile signature with only verbal confirmation, and when so
executed and delivered shall be deemed an original and such counterpart(s)
together shall constitute only one original.
[The balance of this page has been intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
Company:
DT INDUSTRIES, INC.
By: /s/ Stephen J. Gore
----------------------------------------
Stephen J. Gore
President and Chief Executive Officer
Executive:
/s/ E. R. Haffely
----------------------------------------
Eugene R. Haffely
18
DATED July 29 1997
-----------------------------------------
(1) LUCAS LIMITED
(2) LUCAS AUTOMATION & CONTROL ENGINEERING INC.
(3) LUCAS AUTOMATION AND CONTROL ENGINEERING GmbH
(4) LUCAS INDUSTRIES plc
(5) LUCAS AUTOMATION & CONTROL ENGINEERING LIMITED
(6) ASSEMBLY TECHNOLOGY & TEST LIMITED
(7) ASSEMBLY TECHNOLOGY & TEST, INC.
(8) ASSEMBLY TECHNOLOGIE & AUTOMATION GmbH
(9) DT INDUSTRIES, INC.
U M B R E L L A A G R E E M E N T
relating to the Sale and Purchase of
Assets of Lucas Assembly & Test Systems
in the United Kingdom, Germany and the United States of America
Eversheds
10 Newhall Street
Birmingham
B3 3LX
Tel: 0121 233 2001
Fax: 0121 236 1583
BIRCORP 53013
<PAGE>
CONTENTS
1. Definitions
2. Sale and Purchase of the Activities
3. Consideration
4. Completion
5. Warranties
6. Purchaser Assurances and Warranties
7. Interest
8. Waiver
9. Notices
10. Costs
11. Entire Agreement
12. Survival of Certain Provisions
13. Governing Law
14. Announcements
15. Counterparts
16. Termination
17. Assignment
18-22. Guarantee
23. No Third Party Beneficiary
24. EC Notification
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SCHEDULE 1 Details of the Vendors and the Purchasers
SCHEDULE 2 Accounting Principles
SCHEDULE 3 PART 1 Pro-forma draft Completion Statements and Aggregation
Statement
PART 2 Allocation of purchase price
SCHEDULE 4 Warranties of Vendors
SCHEDULE 5 Warranties of Purchaser and Guarantor
SCHEDULE 6 Intellectual Property Agreements
SCHEDULE 7 Third Party Consents
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THIS AGREEMENT is made on July 29, 1997
BETWEEN
(1) THE VENDORS Those companies whose names and registered offices are set out
in Part 1 of Schedule 1
(2) LUCAS INDUSTRIES plc whose registered office is at Stratford Road,
Solihull, West Midlands
(3) LUCAS AUTOMATION & CONTROL ENGINEERING LIMITED whose registered office is
at Stratford Road, Solihull, West Midlands
(4) THE PURCHASERS Those companies whose names and addresses are set out in
Part 2 of Schedule 1
(5) THE GUARANTOR DT Industries, Inc. of Corporate Centre, Suite 2-300, 1949
East Sunshine, Springfield, MO 65804
RECITALS
(A) The Vendors carry on respectively the English Activity the German Activity
and the U S Activity (as each such expression is defined below)
(B) The Vendors have respectively agreed to sell each of the Activities and the
Assets comprised in each such Activity to the Purchasers on the terms and
conditions hereinafter appearing and on the terms of respectively the
English Sale Agreement, the German Sale Agreement and the US Sale
Agreement.
(C) Lucas Industries plc has entered into the English Sale Agreement for the
purposes of selling the English Property and certain registered
Intellectual Property and Lucas Automation & Control Engineering Limited
has entered into the English Sale Agreement for the purposes of selling
certain registered Intellectual Property
(D) In consideration of the Vendors entering into this Agreement in order to
sell the Activities and Assets to the Purchasers the Guarantor has agreed
to guarantee
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performance by the Purchasers of their obligations hereunder and under each
of the Transaction Documents in the manner hereinafter appearing.
NOW THIS AGREEMENT WITNESSES as follows:-
1. DEFINITIONS
In this Agreement (which expression shall include the Recitals of and
Schedules to this Agreement) except where inconsistent with the subject
matter or context:-
1.1 The following words and expressions shall bear the following meanings
respectively:-
"the Accounting Date" 31st January 1997
"the Accounting Principles" The accounting principles set out
in Schedule 2
"the Activities" The English Activity, the German
Activity and the US Activity taken
together
"the Amounts Recoverable on The Amounts Recoverable on
Contracts" Contracts (as defined in each of
the Sale Agreements) before:-
(i) making the Project Hedging
Provision; and
(ii) deducting the Project
Prepayments
"the Assets" The Assets the subject of the Sale
Agreements (and as defined therein)
taken together
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"Business Day" Any day (other than Saturday or
Sunday) on which banks which are
members of CHAPS Clearing Company
Limited are open for a full range
of banking transactions
"Business Unit" Any part of a member of the Lucas
Group or the activities of such a
member in either case in respect of
which separate management accounts
have customarily been prepared by
the Lucas Group or the relevant
member
"CERCLA" The Comprehensive Environmental
Response, Compensation and
Liability Act of 1980, 42 U.S.C.
9601, et seq
"Completion" Completion of the sale and purchase
hereby agreed and agreed pursuant
to the Sale Agreements in
accordance with clause 4 and "the
Completion Date" shall be construed
as the opening of business on the
date on which completion takes
place. References herein to
Completion shall be construed as
references to Closing (as defined
in the US Sale Agreement) and "the
Closing
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Date" shall be construed in the
same manner as the Completion Date
"the Consideration" The aggregate of the Fixed Price
Element and the Net Current Assets
Value
"the Contracts" The Contracts (as defined in each
of the Sale Agreements) relating to
the Activities sold to the
Purchasers pursuant to the Sale
Agreements
"the Creditors" The Creditors (as defined in each
of the English Sale Agreement and
German Sale Agreement) and the
Payables (as defined in the US Sale
Agreement) relating to the
Activities and which are to be
assumed by the Purchasers pursuant
to the Sale Agreements
"the Debtors" The Debtors (as defined in each of
the English Sale Agreement and the
German Sale Agreement) and the
Receivables (as defined in the US
Sale Agreement) relating to the
Activities sold to the Purchasers
pursuant to the Sale Agreements
"the Disclosure Letter" The letter of even date herewith
written by Lucas Limited to the
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Guarantor and the Purchasers in the
Agreed Terms (which shall for the
avoidance of doubt include the
documents disclosed by that letter)
"Effective Completion" Completion of all the Sale
Agreements in accordance the clause
4.5
"the English Activity" The Activity (as defined in the
English Sale Agreement)
"English Sale Agreement" An agreement of even date herewith
made between the English Vendor (1)
the English Purchaser (2) Lucas
Industries plc (3) and Lucas
Automation & Control Engineering
Limited (4) relating to the sale
and purchase of the English
Activity in the Agreed Terms
"the English Assets" The Assets the subject of the
English Sale Agreement (and as
defined therein)
"the English The Registered Intellectual
Intellectual Property" Property, the Unregistered
Intellectual Property and the
KnowHow the subject of the English
Sale Agreement (and as each such
expression is defined therein)
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"ERISA" The Employee Retirement Income
Security Act of 1974, as amended
"the English Plant The Plant Machinery and Equipment
Machinery and the subject of the English Sale
Equipment" Agreement (and as defined therein)
"the English Property" The Property the subject of the
English Sale Agreement (and as
defined therein)
"the English Purchaser" Assembly Technology & Test Limited,
registered number 3403962
"the English The Transferring Employees the
Transferring subject of the English Agreement
Employees" (and as defined therein)
"the English Vendor" Lucas Limited, registered number
872948
"the English The warranties and representations
Warranties" of the English Vendor relating only
to the English Activity contained
in Part B of Schedule 4
"the Exchange Rates" US $1.61 to (pound)1.00
dm 2.46 to (pound)1.00
"the Fixed Price (Pound)12,050,000 being allocated
Element" between the Property, the Plant
Machinery and Equipment, the
Goodwill, the Intellectual
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Property, the Contracts and the
other Assets which are not
reflected in the Net Current Assets
Value as set out in Part 2 of
Schedule 3
"the General The warranties and representations
Warranties" of the English Vendor contained in
clause 5 and Part A of Schedule 4
"the German Activity" The Activity (as defined in the
German Sale Agreement)
"the German Assets" The Assets the subject of the
German Sale Agreement (as defined
therein)
"the German The Unregistered Intellectual
Intellectual Property" Property and the Know-How the
subject of the German Sale
Agreement (and as each such
expression is defined there- in)
"the German Plant The Plant Machinery Machinery and
Machinery and Equipment the subject of the German
Equipment" Sale Agreement (and as defined
therein)
"the German Property" The Property the subject of the
German Sale Agreement (and as
defined therein)
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"the German Purchaser" Assembly Technologie & Automation
GmbH of Karl-Mand Str. 2, D-56070
Koblenz-Rheinhafen
"the German Sale An agreement of even date herewith
Agreement" made between the German Vendor (1)
the German Purchaser (2) and Lucas
Industries plc (3) relating to the
sale and purchase of the German
Activity in the Agreed Terms
"the German The Transferring Employees the
Transferring subject of the German Sale
Employees" Agreement (and as defined therein)
"the German Vendor" Lucas Automation and Control
Engineering GmbH, registration
number HRB 5258 with the Commercial
Register at the County Court at
Koblenz
"the German Warranties" The warranties and representations
of the English Vendor and the
German Vendor relating only to the
German Activity contained in Part D
of Schedule 4
"the Goodwill" The goodwill of the Vendors in
connection with each of the
Activities as sold to the
Purchasers pursuant to each of the
Sale
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Agreements
"the Guarantee" A guarantee in the form set out in
clause 18
"the Guarantor" DT Industries, Inc., a Delaware
Corporation, of Corporate Centre,
Suite 2-300, 1949 East Sunshine,
Springfield, MO 65804
"Holding Company" Holding company as defined in
Section 736 of the Companies Act
1985
"the Indemnities" All indemnities given by any of the
Vendors under this Agreement or
under any of the Sale Agreements
"the Independent The firm of chartered accountants
Accountant" to whom any matter is submitted for
final resolution in accordance with
clause 3.7
"Intellectual Property" The English Intellectual Property,
the US Intellectual Property and
the German Intellectual Property
"the Intellectual The licences briefly described in
Property Agreements" Schedule 6 in the Agreed Terms
"the Interim Payment" The amount (if any) by which the
Proposed Consideration is less than
the Provisional Consideration
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"the Leased Assets" The Leased Assets the subject of
the Sale Agreements (and as defined
therein) taken together
"Lucas Aftermarket Lucas Limited trading as "Lucas
Operations" Aftermarket Operations"
"the LAO Agreement" The agreement in the Agreed Terms
between Lucas Aftermarket
Operations and the English
Purchaser relating to the
relationship which will exist
between those parties after
Completion
"the Lucas Group" LucasVarity and any company which
is a Subsidiary or a Subsidiary
Undertaking of LucasVarity for the
time being and from time to time
"LucasVarity" LucasVarity plc, registered number
3207774
"Net Current Assets The aggregate of the values of the
Value" Debtors, the Prepayments, the Stock
and the Amounts Recoverable on
Contracts less the aggregate of the
values of the Creditors, the
Project Prepayments and the Project
Hedging Provision (to the extent
they are not already deducted in
the Amounts Recoverable on
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Contracts) at the Completion Date,
calculated in accordance with the
Accounting Principles and agreed or
ascertained in accordance with
clause 3 (save in the case of the
Project Hedging Provision which
shall be (pound)1,158,000)
"the Plant, Machinery The English Plant Machinery and
and Equipment" Equipment, the US Machinery and
Equipment and the German Plant
Machinery and Equipment
"the Prepayments" The Prepayments (as defined in each
of the Sale Agreements) relating to
the Activities
"the Project Hedging The sum of (pound)1,158,000
Provision"
"the Project The Project Prepayments (as defined
Prepayments" in each of the Sale Agreements)
"the Property" The English Property, the US Real
Property and the German Property
taken together
"the Proposed The amount shown as being the
Consideration" Consideration in the draft
Aggregation Statement served by the
English Vendor pursuant to clause
3.4
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"the Provisional The sum of (pound)30,000,000 being
Consideration" the aggregate of:-
(1) the Fixed Price Element; and
(2) (Pound)17,950,000 being the
estimated Net Current Assets
Value
"the Records" The Records to be passed to the
Purchasers pursuant to the Sale
Agreements (and as defined therein)
"Registered The Registered Intellectual
Intellectual Property" Property (as defined in the English
Sale Agreement) and the Registered
Intellectual Property (as defined
in the US Sale Agreement)
"the Sale Agreements" The English Sale Agreement, the
German Sale Agreement and the US
Sale Agreement taken together
"the Stock" The Stock (as defined in each of
the English Sale Agreement and the
German Sale Agreement) and the
Inventory (as defined in the US
Sale Agreement) relating to the
Activities sold to the Purchasers
pursuant to the Sale Agreements
"Subsidiary" A subsidiary company as defined in
Section 736 Companies Act 1985
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"Subsidiary A subsidiary undertaking as defined
Undertaking" in Section 258 Companies Act 1985
"the Transaction This Agreement, the Sale
Documents" Agreements, the LAO Agreement, the
Intellectual Property Agreements,
all the documents referred to in
those agreements as being executed
or delivered pursuant thereto and
any side letters or agreements of
even date herewith between any of
the parties to this Agreement
"the Transferring The English Transferring Employees,
Employees" the US Transferring Employees and
the German Transferring Employees
"the US Activity" The Business (as defined in the US
Sale Agreement)
"the US Sale Agreement" An agreement of even date herewith
made between the US Vendor (1) the
US Purchaser (2) and Lucas
Industries plc (3) relating to the
sale and purchase of the US
Activity in the Agreed Terms
"the US Assets" The Assets the subject of the US
Sale Agreement (and as defined
therein)
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"the US Intellectual The Registered Intellectual
Property" Property, the Unregistered
Intellectual Property and the
KnowHow the subject of the US Sale
Agreement (and as each expression
is defined therein)
"the US Leased The Leased Real Property the
Property" subject of the US Sale Agreement
(and as defined therein)
"the US Machinery and The Machinery and Equipment the
Equipment" subject of the US Sale Agreement
(and as defined therein)
"the US Purchaser" Assembly Technology & Test, Inc of
Corporate Centre, Suite 2-300, 1949
East Sunshine, Springfield, MO65804
"the US Real Property" The Real Property the subject of
the US Sale Agreement (and as
defined therein)
"the US Purchaser's Dickstein Shapiro Morin & Oshinsky
Solicitors" LLP, 2101 L Street, N.W.
Washington, DC 20037
"the US Transferring The Transferring Employees the
Employees" subject of the US Sale Agreement
(and as defined therein)
"the US Vendor" Lucas Automation & Control
Engineering Inc. of 1000 Lucas Way,
Hampton, Virginia
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"the US Warranties" The warranties and representations
of the English Vendor and the US
Vendor relating only to the US
Activity contained in Part C of
Schedule 4
"the Vendors' UK Eversheds of 10 Newhall Street,
Solicitors" Birmingham B3 3LX
"the Warranties" The General Warranties, the English
Warranties, the German Warranties
and the US Warranties taken
together
1.2 References in this Agreement to statutes or any statutory
provision shall include any statutory modification, re-enactment
or extension thereof and any orders, regulations, instruments or
other subordinate legislation made thereunder in each case in
force at the date of this Agreement.
1.3 In this Agreement:-
1.3.1 the masculine gender shall include the feminine and
neuter and the singular number shall include the plural
and vice versa;
1.3.2 references to persons shall include bodies corporate,
unincorporated associations and partnerships;
1.3.3 the expression "the Vendors" shall be construed as any
one of the Vendors or all of them as the context shall
permit;
1.3.4 the expression "the Purchasers" shall be construed as
any one of the Purchasers or all of them as the context
shall permit; and
1.3.5 the headings contained in this document are inserted
for convenience only and shall not affect its
construction.
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1.4 Whenever a document is referred to as being "in the Agreed Terms"
it shall be in the form agreed and initialled by or on behalf of
the Vendors and the Purchasers.
1.5 Except where the contrary is stated, any reference herein to a
clause or Schedule or party is to a clause of or Schedule or
party to this Agreement and any reference within a clause or
Schedule to a sub-clause, paragraph or other sub-division is a
reference to such sub-clause, paragraph or other sub-division so
numbered or lettered in that clause or Schedule. The Schedules
form part of this Agreement and shall have the same force and
effect as if expressly set out in the body of this Agreement.
1.6 The US Warranties shall be given jointly and severally by the
English Vendor and the US Vendor and the German Warranties shall
be given jointly and severally by the English Vendor and the
German Vendor.
1.7 Except where the context shall provide to the contrary words and
expressions defined in the Sale Agreements shall have the same
meaning in this Agreement.
2. SALE AND PURCHASE OF THE ACTIVITIES AND EXCHANGE OF DOCUMENTS
2.1 The provisions of this Agreement and of each of the Sale
Agreements shall apply relating to the sale of the Activities.
2.2 On the date of this Agreement the Vendors, Lucas Industries plc,
Lucas Automation & Control Engineering Limited, the Purchasers
and the Guarantor shall procure that each of the Sale Agreements
is entered into and exchanged by the parties thereto.
3. THE CONSIDERATION
3.1 The purchase price for the Assets shall be the Consideration and
the assumption and discharge by the Purchasers of the Assumed
Liabilities (as defined in the Sale Agreements) in accordance
with the provisions of the
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Sale Agreements. Each of the parties to this Agreement agrees to
report this transaction for tax purposes in accordance with the
provisions of Schedule 3 Part 2. The purchase price shall be
allocated for tax purposes in accordance with Schedule 3 Part 2
and in a manner consistent with the respective laws of England,
Germany and the United States. If this requires an adjustment to
the allocation made in Schedule 3 Part 2 the parties shall
consult in good faith with a view to agreeing a re-allocation of
the purchase price, but this shall not in any circumstances alter
the total amount of the Fixed Price Element and the Net Current
Assets Value.
3.2 On Completion the Purchasers shall pay to the Vendors in cash the
Provisional Consideration.
3.3 The following provisions shall apply regarding the calculation of
the Net Current Assets Value, namely:-
3.3.1 each of the Vendors shall in relation to their
respective Activity and in conjunction with the local
management of that Activity:-
3.3.1.1 have carried out a physical stock-take of the
Stock on or during the week preceding 30 June
1997; and
3.3.1.2 immediately following Completion carry out a
review of the Stock, Debtors, Prepayments,
Creditors, Amounts Recoverable on Contracts
and Project Prepayments
for the purposes of ascertaining the data to which the
Accounting Principles shall be applied in order to
determine the Net Current Assets Value;
3.3.2 the Purchaser will after Completion allow each of the
Vendors full access to the Property and the US Leased
Property, all
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relevant employees and all relevant records information
and other documentation to enable the Vendors to carry
out such review and to prepare the draft Completion
Statements and draft Aggregation Statement defined and
referred to in clause 3.4. In particular but without
limitation to the foregoing the Purchaser will grant
and procure that there is granted to the Vendors and
each of them access to and the services of each of
Wayne Schultz and Terry Markwell for all purposes of
this clause 3, including without limitation, the
ascertainment of the Net Current Assets Value pursuant
to clause 3.4;
3.3.3 the Net Current Assets Value shall be determined by
applying the Accounting Principles on the basis of
practices and methods consistent with those used in the
preparation of the management accounts of the Vendors
relating to the Activities for the financial period
ended on the Accounting Date and the project
contingencies allowed for within the Amounts
Recoverable on Contracts shall be calculated on the
basis of practices and methods consistent with those
used in the preparation of such management accounts of
the Vendors and shall be based on the project reviews
conducted by the Vendors in respect of the Activities
during July 1997;
3.3.4 without prejudice to the Accounting Principles which
shall apply to determine the amount of any relevant
provision, the draft Completion Statements, the draft
Aggregation Statement and the Final Completion
Statement (as each such expression is defined and
referred to in clauses 3.4 and 3.8) shall not contain
any provision in respect of any liability of any of the
Activities unless that liability is to be assumed by
the Purchasers under this Agreement or any of the Sale
Agreements and shall not attribute any value to any
assets
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which are excluded from the sale to the Purchasers
under the terms of this Agreement or the Sale
Agreements; and
3.3.5 for the avoidance of any doubt there shall be no
project hedging provisions made in any draft Completion
Statement, Aggregation Statement or Final Completion
Statement in excess of the Project Hedging Provision
notwithstanding any previously applied accounting
policy or principle.
3.4 Within 45 days following Completion the Net Current Assets Value
(determined in respect of each Activity) shall be ascertained by
the Vendors in conjunction with the local management for each
Activity and the English Vendor shall serve a written statement
("the draft Completion Statement") on the Guarantor within such
period showing in respect of each Activity the sums attributable
to the Creditors, the Debtors, the Prepayments, the Stock, the
Amounts Recoverable on Contracts and the Project Prepayments. The
English Vendor shall also serve within such period a further
statement ("the draft Aggregation Statement") containing an
aggregation of each draft Completion Statement and the Project
Hedging Provision (and accordingly the Net Current Assets Value),
showing also the Consideration (excluding VAT or other like tax
as contemplated by any of the Sale Agreements) and the sum due to
or from the Purchasers having regard to the amount of the
Provisional Consideration paid by or on behalf of the Purchasers
on Completion. A proforma of the draft Completion Statement for
each of the Activities and of the draft Aggregation Statement is
set out for the purposes of illustration only in Schedule 3 Part
1. All sums in the draft Aggregation Statement shall be expressed
in (pound)sterling and any sums expressed in US dollars or
Deutschmarks in the draft Completion Statements shall be
converted into (pound)sterling for this purpose at the Exchange
Rates.
3.5 Unless the Guarantor shall notify both the Finance Director and
the Legal Director, Lucas Aftermarket Operations on behalf of the
Vendors within 30 days after its receipt of whichever is the
latest to be served of the draft
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Completion Statements and the draft Aggregation Statement that it
does not accept and agree with their respective contents then the
Guarantor and the Purchasers shall be deemed to have accepted and
agreed with the contents of each of the draft Completion
Statements and the draft Aggregation Statement for the purposes
of this Agreement.
3.6 If within the aforesaid period of 30 days the Guarantor shall
notify both the Finance Director and the Legal Director, Lucas
Aftermarket Operations in writing that it does not accept and
agree with the contents of the draft Completion Statements and
the draft Aggregation Statement for the purposes of this
Agreement then the Guarantor and the English Vendor shall
endeavour to reach agreement upon adjustments to the draft
Completion Statements and the draft Aggregation Statement to meet
the Guarantor's objections. For the avoidance of any doubt any
matters not objected to in any notice served pursuant to this
clause 3.6 shall be deemed agreed by the Guarantor and the
Purchasers.
3.7 If the English Vendor and the Guarantor are unable to reach
agreement as aforesaid within 21 days of the Guarantor giving the
written notification contemplated by clause 3.6 or within such
later time as the English Vendor and the Guarantor may agree then
all matters not so resolved shall be submitted to Deloitte &
Touche of Hill House, 1 Little New Street, London EC4A 3TR (or,
if they shall decline to accept the appointment, an
internationally recognised firm of chartered accountants to be
agreed upon by the Guarantor and the English Vendor or (in
default of agreement within 7 days) to be selected at the
instance of either of them by the President for the time being of
the Institute of Chartered Accountants in England and Wales) for
final resolution in accordance solely and exclusively with this
Agreement, the Sale Agreements and the Accounting Principles.
Such submission shall be in the form of written statements of
position by the Guarantor and the English Vendor, as well as an
opportunity to respond to such written statements and any
requests for statements or information from the Independent
Accountant. The Guarantor, the Purchasers and the
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Vendors shall allow the Independent Accountant full access to all
relevant accounting and other records of the Activities, the
Property, the US Leased Property and all relevant employees as it
shall require for the purpose of giving its determination
hereunder. If the Independent Accountant determines that the
resolution of a given disputed item requires an interpretation of
law, then the Independent Accountant may request an independent
law firm of national standing in England chosen by it to render a
legal opinion as to such matter. The Independent Accountant shall
act as an expert and not an arbitrator and shall be directed by
the Guarantor and the English Vendor to make its determination as
soon as possible after the matter in dispute is submitted to it,
and such determination shall be final and binding upon the
parties hereto. In giving its determination the Independent
Accountant shall also adjust the draft Completion Statements and
draft Aggregation Statement if required to reflect the decision
of the Independent Accountant. The cost of such Independent
Accountant's review (including reasonable attorney's fees, if
any) shall be borne by the party or parties as determined by the
Independent Accountant. The Guarantor and Purchasers agree and
acknowledge that notwithstanding any provisions of the German
Civil Code to the contrary (including in particular but without
any limitation section 315 thereof) any decision made by the
Independent Accountant under this clause 3.7 shall be final and
binding and neither the Guarantor nor any of the Purchasers will
make any application to the court as contemplated by section 315
of the German Civil Code in respect thereof.
3.8 For the purposes of this Agreement the expression "the Final
Completion Statement" shall mean:-
3.8.1 the draft Aggregation Statement which the Guarantor and
the Purchasers are deemed to have accepted and agreed
pursuant to clause 3.5 or with which the Guarantor
indicates its acceptance and agreement on behalf of the
Purchasers within the 30 day period referred to in
clause 3.5 whereupon (in
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either event) the contents of the same shall become and
be final and binding on the Vendors and the Purchasers
for the purposes of this Agreement; or
3.8.2 the draft Aggregation Statement bearing any adjustment
made pursuant to clause 3.6, if clause 3.6 applies and
agreement is reached between the English Vendor and the
Guarantor as contemplated therein, whereupon the
contents of the same shall become and be final and
binding on the Vendors and the Purchasers for the
purposes of this Agreement; or
3.8.3 the draft Aggregation Statement, as adjusted in
accordance with the determination of the Independent
Accountant pursuant to clause 3.7, whereupon the
contents thereof shall become and be final and binding
upon the Vendors and the Purchasers for the purposes of
this Agreement.
3.9 For the purposes of determining the Net Current Assets Value and
all other matters contemplated as being determined in this
Agreement by reference to the Final Completion Statement the
Final Completion Statement and the contents thereof shall (save
in the case of manifest error) be final and binding on the
parties to this Agreement.
3.10 The Guarantor, the Purchasers or the Vendors shall bear their own
costs in acting in the manner contemplated by this clause 3
(including, without limitation, any professional costs and
expenses) save as contemplated by clause 3.7 if that clause
applies. It is agreed and declared that in any event no provision
for such costs shall be contained in the Final Completion
Statement.
3.11 If the Proposed Consideration is less than the Provisional
Consideration, the Vendors shall pay the Interim Payment to the
Purchasers in cash on the same day as service of the draft
Aggregation Statement by the English Vendor pursuant to clause
3.4 together with interest under clause 3.13.
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3.12 If the aggregate of (a) the Fixed Price Element and (b) the Net
Current Assets Value in each case agreed or ascertained in
accordance with clause 3:-
3.12.1 is less than the amount of the Provisional
Consideration paid by or on behalf of the Purchasers on
Completion (after deducting the Interim Payment) the
Vendors shall pay to the Purchasers the deficiency in
cash within 5 days of such agreement or ascertainment
together with interest under clause 3.13;
3.12.2 is more than the amount of the Provisional
Consideration paid by or on behalf of the Purchasers on
Completion (after deducting the Interim Payment) the
Purchasers shall pay to the Vendors the excess in cash
within 5 days of such agreement or ascertainment
together with interest under clause 3.13.
3.13 The Vendors shall pay to the Purchasers or the Purchasers shall
pay to the Vendors (as the case may be) interest on any sum due
under clauses 3.11 and 3.12 at the rate per annum which is 1%
above Barclays Bank plc's base lending rate from time to time,
such interest to accrue from day to day from the Completion Date
until the due date for payment in accordance with the foregoing
provisions of this clause 3.
3.14 The following provisions shall apply regarding the payments to be
made:-
3.14.1 all sums due from the Purchasers to the Vendors under
this Agreement shall be paid in (pound)sterling to the
Vendors by way of telegraphic transfer to the following
account:-
Name: Lucas Limited (Aftermarket Operations)
Bank: Barclays Bank plc
Branch: Newcastle Branch, PO BOX 17,
Stoke on Trent ST3 1RN
Sort Code: 20-59-23
Account No: 10990876
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or to such other account as the Vendors may hereafter
nominate in writing to the Purchasers; and
3.14.2 all sums due from the Vendors to the Purchasers under
this Agreement shall be paid in (pound)sterling to the
Purchasers by way of telegraphic transfer to the
following account:-
Name: DT Industries, Inc.
Bank: Nations Bank
Branch: 800 Market Street, St. Louis, MO
Sort Code: 08-100-0032
Account No: 100101234095
or to such other account as the Purchasers may
hereafter nominate in writing to the Vendors.
3.15 For the purposes of this clause 3 the Vendors hereby irrevocably
authorise and appoint Lucas Limited to act on their behalf and
the Purchasers may for the purposes of this clause 3 assume that
any act of or on behalf of Lucas Limited is an act of and duly
authorised by the Vendors. All sums payable by or to the Vendors
pursuant to clauses 3.2, 3.11 and 3.12 shall be paid by or to
Lucas Limited on behalf of the Vendors and the Purchasers shall
not be further concerned as to the application of any monies so
paid.
3.16 For the purposes of this clause 3 the Purchasers hereby
irrevocably authorise and appoint the Guarantor to act on their
behalf and the Vendors may for the purposes of this clause 3
assume that any act of or on behalf of the Guarantor is an act
duly authorised by the Purchasers. All sums payable by or to the
Purchasers pursuant to clauses 3.2, 3.11 and 3.12 shall be paid
by or to the Guarantor on behalf of the Purchasers and the
Vendors shall not be further concerned as to the application of
any monies so paid.
4. COMPLETION
4.1 Subject as hereinafter provided Completion shall not occur of any
of the Sale Agreements unless completion shall occur of all of
them.
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4.2 Completion of each of the English Sale Agreement and US Sale
Agreement shall take place in accordance with the following
provisions of this clause 4. The German Sale Agreement shall be
deemed to be completed (for the purposes of this Agreement) when
the conditions precedent to which it is subject are satisfied.
Completion shall only become effective of all the Sale Agreements
in accordance with clause 4.5. All documents exchanged and
delivered pursuant to each of the English Sale Agreement and US
Sale Agreement and monies paid pursuant to this Agreement shall
in each case be held to the order of the party or parties
delivering the same and in escrow so that their terms do not come
into force and effect until Effective Completion and all payments
made thereunder and hereunder will be held to the order of the
party making the payment until Effective Completion.
4.3 On exchange of this Agreement and the Sale Agreements the Vendors
shall deliver to the Guarantor:-
4.3.1 in respect of the English Activity:-
4.3.1.1 full management and control of the English
Activity;
4.3.1.2 all transfers assignments and novations in
respect of the Assets the subject of the
English Sale Agreement in the form, if any,
set out in the Schedules thereto or in the
Agreed Terms (as the case may be) save that
the provisions of clause 6.1 of the English
Sale Agreement shall apply to Debtors;
4.3.1.3 all property agreed to be sold pursuant to
the English Sale Agreement which is capable
of transfer by delivery whereupon the title
thereto shall pass to the Purchaser by such
delivery (subject to clause 13 of the English
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Sale Agreement and save for any Stock title
to which is reserved in favour of the
supplier);
4.3.1.4 the Records (as defined in the English Sale
Agreement);
4.3.1.5 the deeds and documents relating to the
English Property and transfers or conveyances
in the Agreed Terms relating to the English
Property; and
4.3.1.6 a certified copy of the Power of Attorney(s)
authorising execution of this Agreement and
the Sale Agreements on behalf of the Vendors,
Lucas Industries plc and Lucas Automation &
Control Engineering Limited;
4.3.2 in respect of the US Activity:-
4.3.2.1 a copy of the executed Corporate Warranty
Deed conveying all the US Vendor's interest
in the US Real Property to the US Purchaser
(the original of which shall have been
delivered to the Title Insurer, as defined in
the US Sale Agreement);
4.3.2.2 copies of the documents required to be
delivered to the Title Insurer under
Schedule 3 of the US Sale Agreement;
4.3.2.3 the Title Policy or a marked-up Title
Commitment (as defined in the US Sale
Agreement);
4.3.2.4 executed assignments, in appropriate form for
filing with applicable governmental agencies,
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of the Registered Intellectual Property (as
defined in the US Sale Agreement);
4.3.2.5 executed Assignment and Assumption Agreements
in respect of those agreements specified in
Part 1 of Schedule 7, together with letters
of consent from the other parties to such
agreements consenting to their assignment to
the US Purchaser and an executed Assumption
Agreement relating to part of the agreement
with The Allen Group Inc referred to in Part
2 of Schedule 7;
4.3.2.6 executed certificate of title respecting the
motor vehicle included within the US Assets;
4.3.2.7 executed Bill of Sale and Assignment
Agreement conveying good and marketable title
to all Assets not otherwise transferred or
conveyed by the documents delivered pursuant
to clauses 4.3.2.1 to 4.3.2.6 inclusive;
4.3.2.8 executed Assumption Agreement in the Agreed
Terms regarding the assumption of the Assumed
Liabilities (as defined in the US Sale
Agreement) by the US Purchaser;
4.3.2.9 a certified copy of (i) the Articles of
Incorporation of the US Vendor as in effect
on the date hereof (ii) the By laws of the US
Vendor as in effect on the date hereof and
(iii) the resolutions adopted by the Board of
Directors and by the shareholder of the US
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Vendor authorising its execution, delivery
and performance of this Agreement and the US
Sale Agreement and authorising the
consummation by the US Vendor of the
transactions contemplated thereby;
4.3.2.10 the opinion of Rudnick & Wolfe, counsel to
the US Vendor, dated the date hereof,
addressed to the Purchaser and substantially
to the effect that:
(i) the US Vendor is a corporation duly
organised, validly existing and in good
standing under the laws of the State of
Virginia and is duly qualified to
transact business as a foreign
corporation in and is in good standing
under the laws of the State of
Michigan;
(ii) the US Vendor has all requisite
corporate power and authority to own,
lease and operate its properties and
the US Activity as presently conducted
and to enter into and perform its
obligations hereunder;
(iii) the execution, delivery and performance
of this Agreement and the US Sale
Agreement by the US Vendor and the
consummation by the US Vendor of the
transactions contemplated hereby have
been duly authorised by all requisite
corporate action on the part of the US
Vendor; and
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(iv) this Agreement and the US Sale
Agreement have been duly executed and
delivered by the US Vendor and
constitute the legal, valid and binding
obligation of the US Vendor,
enforceable against the US Vendor in
accordance with its terms, except to
the extent that enforceability may be
limited by applicable bankruptcy,
insolvency or similar laws affecting
the enforcement of creditors' rights
generally and subject to general
principles of equity (it being agreed
that such counsel may assume for the
purposes of such opinion that the
internal laws of England and Michigan
are the same as the internal laws of
Illinois);
4.3.3 the Disclosure Letter;
4.3.4 the executed LAO Agreement;
4.3.5 the executed Intellectual Property Agreements; and
4.3.6 an executed deed of assignment in the Agreed Terms
between (1) CSC Computer Sciences Limited (2) Lucas
Industries plc and (3) the Purchasers relating to the
TeamSET Agreement dated 6th June 1995 made between (1)
Lucas Industries plc and (2) CSC Computer Sciences
Limited
4.4 On exchange of this Agreement and the Sale Agreements the
Purchasers or the Guarantor on behalf of the Purchasers shall
(against compliance by the Vendors with the provisions of clause
4.3):-
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4.4.1 pay to Lucas Limited on behalf of the Vendors the
Provisional Consideration;
4.4.2 deliver to the Vendors executed counterparts as
required by the Vendors of the documents referred to in
clauses 4.3.1, 4.3.2, 4.3.4 and 4.3.6 and executed
originals of the Intellectual Property Agreements;
4.4.3 deliver to the Vendors a certified copy of its resale
tax certificate;
4.4.4 deliver to the Vendors a certificate of good standing
in the Agreed Terms in respect of the Guarantor;
4.4.5 deliver to the Vendors an executed Assumption Agreement
in the Agreed Terms regarding the assumption of the
Assumed Liabilities (as defined in the US Sale
Agreement);
4.4.6 deliver to the Title Insurer the documents required to
be delivered to it by the US Purchaser under Schedule 3
of the US Sale Agreement;
4.4.7 deliver to the Vendors a certificate of good standing
of the US Purchaser issued by the appropriate authority
of the state of its incorporation and the State of
Michigan;
4.4.8 deliver to the Vendors a certified copy of (i) the
Articles of Incorporation of the US Purchaser as in
effect on the date hereof , (ii) the By laws of the US
Purchaser as in effect on the date hereof (iii) the
Memorandum of Association of the UK Purchaser and (iv)
the resolutions duly adopted by the Board of Directors
of the Guarantor and each of the Purchasers authorising
its execution, delivery and performance of this
Agreement and the Sale Agreements to which it is a
party and
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authorising the consummation by the Guarantor and the
Purchasers of the transactions contemplated thereby;
4.4.9 deliver to the Vendor the opinion of Dickstein Shapiro
Morin & Oshinsky LLP counsel to the US Purchaser, dated
the date hereof and addressed to the Vendors,
substantially to the effect that:-
(i) each of the Guarantor and the US Purchaser is a
corporation duly organised, validly existing and
in good standing under the laws of its
jurisdiction of incorporation and the US
Purchaser is duly qualified to transact business
as a foreign corporation in and is in good
standing under the laws of the State of Michigan;
(ii) each of the Guarantor and the US Purchaser has
all requisite corporate power and authority to
own, lease and operate its properties and
business as presently conducted and to enter into
and perform its obligations hereunder;
(iii) the execution, delivery and performance of this
Agreement by the Guarantor and the US Purchaser
and the consummation by the Guarantor and the US
Purchaser of the transactions contemplated hereby
have been duly authorised by all requisite
corporate action on the part of the Guarantor and
the US Purchaser; and
(iv) this Agreement has been duly executed and
delivered by the Guarantor and the US Purchaser
and the US Sale Agreement has been duly executed
and delivered by the US Purchaser and each such
agreement constitutes the legal, valid and
binding obligation of the US Purchaser and the
Guarantor, enforceable against them in
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accordance with their terms, except to the extent
that enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' rights generally
and subject to general principles of equity (it
being agreed that such counsel may assume for the
purposes of such opinion that the internal laws
of England and Michigan are the same as the
internal laws of the District of Columbia).
4.5 Effective Completion will take place immediately upon:-
4.5.1 all matters and things required to be done on
Completion pursuant to each of the English Sale
Agreement and the US Sale Agreement being done; and
4.5.2 the provisions of clauses 4.3 and 4.4 being complied
with (subject to the escrow arrangements referred to in
clause 4.2); and
4.5.3 the condition contained in clause 16 of the German Sale
Agreement being satisfied
whereupon this Agreement and the Sale Agreements and all
documents delivered and payments made pursuant thereto shall be
released to the recipient and this Agreement and the Sale
Agreements and such other documents will come into full force and
effect in accordance with their terms.
4.6 If any of the Sale Agreements is not completed in accordance with
its terms and in accordance with this Agreement none of the
parties to such documents shall be obliged to complete any of
them and the provisions of clause 16 shall apply.
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5. WARRANTIES AND INDEMNITIES
5.1 The English Vendor hereby warrants and represents to the
Purchasers in the terms of the General Warranties and the English
Warranties, the English Vendor and the US Vendor hereby jointly
and severally warrant and represent to the Purchasers with regard
to the US Activity in the terms of the US Warranties and the
English Vendor and the German Vendor hereby jointly and severally
warrant and represent to the Purchasers with regard to the German
Activity in the terms of the German Warranties.
5.2 The Vendors agree that the Guarantor and the Purchasers are
entering into this Agreement and the relevant Sale Agreements in
reliance on the Warranties but the provisions of this clause
shall not imply that any Vendor gives any warranty or
representation apart from the Warranties.
5.3 The Vendors shall be released from the effect of the Warranties
to the extent of the disclosures contained in the Disclosure
Letter and to the extent that any Purchaser was aware of any
other matters, events or circumstances (whether revealed by any
investigation or enquiry made by or on behalf of the Purchasers
into the Activities or otherwise) which would constitute a breach
of any of the Warranties but for the provisions of this clause
5.3. For the purposes of this clause 5.3 the Purchasers'
awareness shall be limited to matters, events or circumstances of
which any of John Logan, Dick Glennan, Eugene Haffely, Bruce
Erdel, Steve Gore, Marilyn Pummell or Jim Cooper was actually
aware.
5.4 Any claim the Purchasers may have in respect of the Warranties or
the Indemnities shall sound in damages only, subject to the
provisions of this clause 5, and accordingly neither the
Guarantor nor the Purchasers shall have the right to rescind this
Agreement or any of the Sale Agreements or treat any of them as
having been repudiated by the Vendors if there shall have been
any breach of such Warranties (except in the case of fraud on the
part of the Vendors).
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5.5 The Guarantor and the Purchasers hereby agree and acknowledge
that notwithstanding anything to the contrary contained in this
Agreement the Warranties and the Indemnities (where applicable)
are subject to the following:-
5.5.1 no claim in respect of the Warranties shall be capable
of being made unless it shall be notified in writing to
the English Vendor
5.5.1.1 within eighteen months from the date hereof;
or
5.5.1.2 in the case only of the Warranties contained
in paragraphs 1.1 of Part A of Schedule 4
(Title to Assets) and 18 of Part A of
Schedule 4 (Broker's fees) within three years
from the date hereof; or
5.5.1.3 in the case only of the Warranties contained
in paragraphs 4 to 6 of Part B of Schedule 4,
paragraph 4 of Part C of Schedule 4 and
paragraph 3 of Part D of Schedule 4 (Tax
Matters) within three years from the date
hereof;
5.5.2 any such claim in respect of the Warranties which may
be made shall (if it has not been previously satisfied
settled or withdrawn) be deemed to be withdrawn at the
expiration of 9 months from the date upon which such
notice is received by the English Vendor pursuant to
clause 5.5.1 unless prior to such expiration legal
proceedings in respect thereof shall have been issued
and served on the Vendors;
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5.5.3 the aggregate liability of the Vendors in respect of
all breaches of the Warranties shall not exceed a sum
equal to fifty per cent of the Consideration;
5.5.4 the Vendors shall not be liable in respect of any
single claim brought by the Purchasers for a breach of
the Warranties arising out of a single event if the
liability in respect of such claim would not exceed
(pound)25,000 (twenty five thousand pounds). The
Vendors or the relevant Vendor shall be liable in
respect of any claim for a breach of the Warranties in
respect of which the liability of the Vendors or a
Vendor exceeds (pound)25,000 (twenty five thousand
pounds) only if the liability of the Vendors or any
Vendor for that claim and all other such claims
exceeding (pound)25,000 (twenty five thousand pounds)
would in aggregate exceed (pound)300,000 (three hundred
thousand pounds) and in that event the Vendors shall
only be liable for the excess;
5.5.5 if any matter arises or gives rise to any claim under
the Warranties or the Indemnities the Purchasers shall
as soon as reasonably practicable give notice in
writing to the English Vendor giving full details of
the matter in respect of which the claim is made and
the bona fide estimated liability in respect thereof
and where the claim arises by reason of a claim made
against any Purchaser by a third party that Purchaser
shall not seek to settle or compromise the same without
the written consent of the English Vendor (such consent
not to be unreasonably withheld or delayed) and shall
take such action as the English Vendor may reasonably
require to avoid, resist, contest or compromise any
such claim on the basis that the English Vendor shall
indemnify that Purchaser on a current basis against all
reasonable legal costs and related out of
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pocket expenses incurred by or awarded against it as a
direct result thereof;
5.5.6 no claim in respect of any breach or breaches of any of
the Warranties or under the Indemnities shall be made
to the extent that (a) provision or reserve therefor
has been made and is reflected in the Net Current
Assets Value or (b) the subject matter thereof is
otherwise taken account of, or reflected, in the
calculation of the Net Current Assets Value;
5.5.7 the Vendors shall have no liability in respect of any
claim under the Warranties or the Indemnities:-
5.5.7.1 if and to the extent that it would not have
arisen but for anything voluntarily done or
omitted to be done outside the ordinary
course of business after Completion by any of
the Purchasers or its employees, agents or
successors in title and which that Purchaser
was not required to do in order to comply
with any applicable laws or with the terms of
any of the Contracts assumed by the
Purchaser; or
5.5.7.2 to the extent that it relates to any loss for
which any of the Purchasers is indemnified by
insurance (but only to the extent of the
amount of the proceeds actually received from
the applicable insurance coverage) or to the
extent that it relates to any loss for which
it would have been so indemnified if at the
relevant time there had been in existence
valid and adequate insurance cover of a type
and level of cover disclosed in the
Disclosure
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Letter as being held by the Vendor of the
Activity concerned at the date hereof.
5.6 Where any Purchaser is at any time entitled to recover from some
other person any sum in respect of any matter giving rise to a
claim under the Warranties or the Indemnities or under any of the
other provisions of this Agreement that Purchaser undertakes to
take all reasonable steps to enforce, prior to taking any action
(other than notifying the English Vendor of the claim) against
the Vendors or any of them, any rights of recovery that such
Purchaser may have against any third party in respect of the
subject matter of the claim, subject to being indemnified on a
current basis by the Vendors against all reasonable legal costs
incurred by it in doing so and provided that it shall not in any
circumstances be required to institute legal proceedings against
any third party (other than any insurer) if this would have a
material adverse effect on the Activities taken as a whole. In
the event that such Purchaser shall recover any amount from such
third party, the amount of the claim against the Vendors shall be
reduced by the amount recovered.
5.7 If the Vendors or any of them pay at any time to any Purchaser an
amount pursuant to a claim in respect of the Warranties or under
the Indemnities or under any of the other provisions of this
Agreement and the Purchasers or any of them subsequently become
entitled to recover from some other person any sum in respect of
any matter giving rise to such claim the Purchasers or the
relevant one of them shall take all reasonable steps to enforce
such recovery, subject to being indemnified on a current basis by
the Vendors against all reasonable legal costs incurred by it in
doing so and provided that it shall not in any circumstances be
required to institute legal proceedings against any third party
(other than any insurer) if this would have a material adverse
effect on the Activities taken as a whole. The Purchasers shall
forthwith upon making any such recovery repay to the Vendors so
much of the amount paid by the Vendors or any of them to the
Purchasers as does not exceed the sum recovered from such other
person.
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5.8 Without prejudice to the foregoing provisions of this clause 5,
before any Purchaser makes any payment or offers any other remedy
in respect of any matters for which it is entitled to an
indemnity from the Vendors or any of them under the provisions of
this Agreement or any of the Transaction Documents, it shall give
a reasonable opportunity and reasonable assistance to the Vendors
to verify and, if appropriate, remedy the defect, default or
omission or other matter giving rise to the claim for the
indemnity in question.
5.9 Nothing in this Agreement shall operate to diminish the
Purchaser's common law duty to mitigate its loss in respect of
the matters dealt with in this Agreement.
5.10 The failure to provide notice of any matter giving rise to a
claim under the Warranties or the Indemnities as soon as
reasonably practicable in accordance with clause 5.5.5 or to
afford the Vendors a reasonable opportunity and assistance to
verify or remedy any matter giving rise to a claim as
contemplated by clause 5.8 shall not preclude the Purchasers from
making any such claim, but any claim shall be reduced by the
damages or losses resulting from the Purchasers' delay or failure
to provide such required notice or opportunity and assistance to
remedy the relevant matter.
5.11 For the purposes only of determining the applicability of the
monetary thresholds contained in clauses 5.5.3 and 5.5.4, any
claim under the Warranties which is denominated in US dollars or
Deutschmarks shall be converted into (pound)sterling at the
Exchange Rates.
6. PURCHASER ASSURANCES
6.1 Each of the Guarantor and the Purchasers warrants and represents
to the Vendors and each of them that the Guarantor and the
Purchasers have the necessary corporate power and authority, and
all authorisations approvals consents and licences required by
the Guarantor and Purchasers have been unconditionally and
irrevocably obtained and are in full force and effect, to
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permit the Guarantor and Purchasers to enter into and perform the
Transaction Documents and the arrangements therein contemplated
and the Transaction Documents have been duly approved by the
directors of the Guarantor and the Purchasers at a duly convened
meeting of those directors and constitute legally binding
obligations of the Guarantor and the Purchasers (as the case may
be).
6.2 The Guarantor and the Purchasers acknowledge to and agree with
each of the Vendors (both for themselves and in each case as
trustees for each other member of the Lucas Group and for the
benefit of each of their respective officers employees and
advisers and as trustee for such officers, employees and
advisers) that:-
6.2.1 the invitation to them by or on behalf of the Vendors
to consider the purchase of the Activities and the
provision of information relating to the Activities,
their respective financial positions or prospects was
made by or on behalf of the Vendors and accepted by the
Guarantor and the Purchasers and this Agreement was
entered into on the basis that none of the Vendors nor
any member of the Lucas Group nor any of the Vendors'
or any member of the Lucas Group's officers employees
and advisers have made or makes any representation or
warranty (other than as set out in the Warranties) as
to the accuracy or completeness of such information or
accepts any duty of care in relation to the Guarantor
and the Purchasers in respect of the provision of such
information and, save as contemplated by the Warranties
or Indemnities or in the case of representations made
fraudulently by the Vendors, none of such persons shall
be under any liability to the Guarantor and the
Purchasers in the event that, for whatever reason, such
information is or becomes inaccurate incomplete or
misleading in any particular; and
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6.2.2 the Guarantor and the Purchasers have had independent
legal and financial advice relating to the purchase of
the Assets and to the terms of this Agreement and each
Sale Agreement and the documents to be executed
pursuant to them including the terms of this clause.
6.3 Subject to clause 6.4 and to such rights as the English Purchaser
has under the LAO Agreement, the Purchasers undertake to the
Vendors to procure that none of the Activities will at any time
after Completion hold itself out as a Subsidiary of or otherwise
connected with the Lucas Group or use in connection with any
business the name or mark "Lucas" and/or "LucasVarity" and/or the
Lucas Group diagonal flash or any colourable imitation thereof
and (without limiting the foregoing) to procure that all of the
same are deleted from all printed material including (without
limitation) stationery, compliment slips, invoices, business
cards, CE Certificates, Calibration Certificates, Electrical
Safety Test Certificates, catalogues, brochures, sales material
and (if relevant) from electronic media such as internet sites
and telephone listings and (if relevant) from signage at the
Property and the US Leased Property and from motor vehicles and
other tangible assets used by the Activities and acquired by the
Purchasers as soon as reasonably practicable and in any event
within 30 days from Completion or, in the case only of Serial
Plates for M/C's and Name Plates for M/C's, within 45 days from
Completion.
6.4 During the 30 or 45 day periods referred to in clause 6.3 (as the
case may be) and pending deletion of the name or mark "Lucas"
and/or "LucasVarity" and/or the Lucas Group diagonal flash or any
colourable imitation thereof as specified in clause 6.3 the
Purchasers may use the same in connection with the Activities as
envisaged by clause 6.3 provided that the Purchasers agree to
indemnify and hold harmless the Vendors against all claims,
proceedings, losses, damages, liabilities, costs and expenses
suffered or incurred by any of the Vendors directly or indirectly
as a result of or in connection with the use by any Purchaser
following Completion of the
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names and/or mark "Lucas" or "LucasVarity" and/or the Lucas Group
diagonal flash. This clause is also subject to such rights as the
Purchaser has under the LAO Agreement.
6.5 The Purchasers acknowledge to each Vendor the ownership by the
Lucas Group of the names and/or mark "Lucas" or "LucasVarity"
and/or the Lucas Group diagonal flash in relation to the goods or
services in respect of which such names, marks or logo are
registered and/or are used by any member of the Lucas Group and
hereby acknowledge that notwithstanding any arrangements
operating between the Vendors and the Purchasers in respect of
the period following Completion all and any goodwill in the names
of Lucas and/or LucasVarity belongs to and remains vested in the
Lucas Group in relation to such goods and services.
6.6 The Guarantor and the Purchasers hereby covenant with the Vendors
and each of them that except to the extent (if any) required by
law the Guarantor and the Purchasers will not and will procure
that no Subsidiary of the Guarantor will at any time within the
period of five years from Completion disclose or make public any
secret or confidential or professional or financial or commercial
information concerning the Lucas Group and not relating to the
Activities which it has learned by reason of the Activities or
any of them being owned by the Vendors and will not and will
procure that no Subsidiary of the Guarantor will use to the
detriment of any member of the Lucas Group any information which
the Activities have obtained in confidence in the course of or as
a result of such ownership provided always that the provisions of
this clause 6.6 shall cease to apply to any information which is
already or which falls into the public domain otherwise than by
reason of a breach of this provision.
6.7 The Purchasers and the Guarantor hereby warrant and represent to
the Vendors in the terms of Schedule 5.
6.8 The Purchasers' liability in respect of any claim under any
indemnities given by any Purchaser under this or any of the Sale
Agreements (excluding
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any liability under or in respect of the provisions of clauses 10
of the English Sale Agreement and the US Sale Agreement and
clause 11 of the German Sale Agreement (Product Liability and
Product Warranty)) shall be reduced to the extent that it relates
to any loss for which the Vendors or relevant members of the
Lucas Group are indemnified by insurance (but only to the extent
of the proceeds actually received from the applicable insurance
coverage).
6.9 All undertakings, covenants, indemnities and acknowledgements
given to or made with any member of the Lucas Group under any of
the Transaction Documents are given to or made with the Vendors
and each of them for themselves and (as a separate undertaking,
covenant, indemnity or acknowledgement) to or with each Vendor as
trustee for each other member of the Lucas Group.
7. INTEREST
Save where otherwise contemplated by any other provision of this or any
Sale Agreement, if any sum shall at any time be due and outstanding from
any Purchaser to the Vendors or any of them or from any Vendor to the
Purchasers or any of them (as the case may be) pursuant to the terms of
this or any Sale Agreement interest shall be payable thereon at the rate
per annum of 2% above Barclays Bank plc's base lending rate from time to
time, such interest to accrue from day to day and to be payable from the
due date until payment whether before or after judgment.
8. WAIVER
No waiver by any party to this or any Sale Agreement of any of the
requirements of this or any Sale Agreement or any of its rights hereunder
or thereunder shall have effect unless given in writing and signed by or on
behalf of the party giving the waiver and no delay by any party in
exercising any of its rights hereunder shall impair the same. No single or
partial exercise of any right or remedy shall preclude any further exercise
thereof or the exercise of any other right.
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9. NOTICES
9.1 The addresses for service of the parties to this Agreement and
each Sale Agreement shall be:-
9.1.1 in the case of the Vendors and each of them:-
The Legal Director - Lucas Aftermarket Operations,
Stratford Road, Solihull, B90 4LA England; and
9.1.2 in the case of each of the Guarantor and the
Purchasers:-
Chief Executive Officer, DT Industries, Inc., Corporate
Centre, Suite 2-300, 1949 East Sunshine, Springfield,
MO 65804
9.2 Any notice will be deemed well served on the party to whom it is
addressed if it be served personally or by courier delivery
addressed to such party at its address for service and such
service shall be deemed to be effective upon such personal or
courier delivery taking place.
9.3 Any notices or statements to be served pursuant to clause 3 of
this Agreement may be sent by facsimile process:-
9.3.1 in the case of notices to the Vendors or any of them,
to the Legal Director-Lucas Aftermarket Operations,
Fax: 0121 627 4417; and
9.3.2 in the case of notices to the Guarantor and the
Purchasers or any of them, to the Chief Executive
Officer, DT Industries, Inc., Fax: 417 890 0525
9.4 Any notice or statement so sent by facsimile process shall be
deemed to have been served at the expiration of 2 hours after the
time of despatch, if despatched before 3.00 pm (local time at the
place of destination) on any Business Day, and in any other case
at 10.00 am (local time at the place of destination) on the
Business Day following the date of despatch, provided
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that it is followed by a hard copy of the notice or statement
served on the recipient in accordance with clause 9.2.
9.5 A copy of any notice served on the Guarantor or the Purchasers
pursuant to clause 9.3 shall also be sent to Price Waterhouse,
One Nations Bank Plaza, St. Louis, MO 63101 (for the attention of
Steven Ditman) and a copy of any other notice served on the
Guarantor or the Purchasers under this or any Sale Agreement
shall also be sent to the US Purchaser's Solicitors (for the
attention of Ira Polon).
10. COSTS
Save as otherwise provided in this and the Sale Agreements each party
hereto shall bear its own costs and expenses in connection with this
Agreement and each Sale Agreement and the negotiations leading thereto.
11. ENTIRE AGREEMENT
The Transaction Documents contain the whole agreement between the parties
to this Agreement relating to the transactions contemplated by the
Transaction Documents and supersede all previous agreements between the
parties relating to these transactions. Each of the parties to this
Agreement acknowledges that in agreeing to enter into the Transaction
Documents it has not relied on any pre-contractual representations or
warranties or other assurances save as set out in the Transaction
Documents. Nothing in this clause 11 shall relieve any member of the Lucas
Group from any liability for representations made fraudulently.
12. SURVIVAL OF CERTAIN PROVISIONS
This Agreement and each Sale Agreement shall remain in force and effect
after Completion in respect of any matters covenants or conditions which
shall not have been done observed or performed prior thereto and all
representations warranties obligations of and indemnities given by the
parties shall (except for any obligations fully performed) continue in full
force and effect notwithstanding Completion.
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13. GOVERNING LAW
This Agreement shall be governed by English law and the parties hereby
submit to the non-exclusive jurisdiction of the English courts.
14. ANNOUNCEMENTS
No announcement concerning the transactions contemplated by this Agreement
or any Sale Agreement or any matter ancillary to them and no disclosure of
the terms or contents of this or any Sale Agreement shall (save as required
by law or the regulations of the London Stock Exchange or the New York
Stock Exchange) be made by any party except with the prior written approval
of the English Vendor and the Guarantor (such approval not to be
unreasonably withheld or delayed). Each of the Vendors and the Purchasers
agree to procure that each of their respective advisers and representatives
complies with the provisions of this clause as if such persons were parties
to this Agreement.
15. COUNTERPARTS
This Agreement and any other documents to be delivered pursuant to clause 4
may be executed in any number of counterparts and by the several parties
hereto on separate counterparts each of which when so executed and
delivered shall be an original but all the counterparts shall together
constitute one document.
16. TERMINATION
In the event that all of the Sale Agreements are not entered into and
exchanged in accordance with clause 2 or that the English Sale Agreement
and the US Sale Agreement are not completed in accordance with clause 4:-
16.1 the parties thereto shall not be obliged to complete any of the
Sale Agreements and each of the documents referred to above shall
lapse and become null and void and all rights and obligations in
respect thereof shall cease to have effect immediately save as
may be expressly provided therein;
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16.2 the parties to all such documents shall immediately return any
signed copies of the same held by them and all other documents
delivered to them thereunder to the party delivering the same and
shall immediately repay all payments received by them thereunder
to the party making the same.
17. ASSIGNMENT
The benefit of this Agreement may not be assigned by any of the Vendors or
by Lucas Industries plc or Lucas Automation & Control Engineering Limited
without the prior written consent of the Guarantor or by the Guarantor or
the Purchasers without the prior written consent of the English Vendor save
that any party may assign the benefit of this Agreement to any Subsidiary
or Holding Company of it or to any other Subsidiary of its Holding Company
if such assignment does not increase the liability of any party under this
Agreement. If at any time thereafter such assignee shall cease to be so
connected with such assignor it shall prior to so ceasing re-assign the
benefit of this Agreement to such assignor.
18. GUARANTEE
In consideration of the Vendors entering into this and each Sale Agreement
at the request of the Guarantor, the Guarantor irrevocably and
unconditionally:-
18.1 guarantees to the Vendors and each of them the due and punctual
payment observance and performance by the Purchasers of all their
liabilities and obligations whether present or future, express or
implied, actual or contingent under or arising out of each of the
Transaction Documents (including any liability or obligation to
pay damages);
18.2 undertakes with the Vendors and each of them that whenever any of
the Purchasers fail to pay or perform when due any of the
liabilities or obligations referred to in clause 18.1 it will on
demand by any Vendor from time to time pay, perform or procure
the performance of any and all of the same; and
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18.3 in addition to the obligations contained in clauses 18.1 and 18.2
and separate from them agrees to indemnify the Vendors and each
of them in full on demand against any loss or damage or any
liability (which liability will include all losses or costs
claims expenses or damages including legal and other professional
fees and expenses) which the Vendors or any of them may suffer or
incur directly or indirectly arising out of or as a result of or
in connection with any failure for any reason of the Purchasers
to pay, observe or perform any of the obligations referred to in
clause 18.1 when due.
19. None of the Vendors will be obliged before exercising any of the rights
powers or remedies conferred upon it and them in respect of the Guarantor
under the Guarantee or by law:-
19.1 to make demand of the Purchasers or any of them; or
19.2 to enforce or seek to enforce any claim right or remedy against
any Purchaser or any other person; or
19.3 to make or file any claim in connection with the insolvency of
any Purchaser or any other person; or
19.4 to take any action or obtain judgement in any court against any
Purchaser or any other person; or
19.5 to enforce or seek to enforce any other security, indemnity,
guarantee or lien taken in respect of any of the obligations of
the Guarantor under the Guarantee.
20. Neither the liability of the Guarantor under the Guarantee nor the rights
powers and remedies conferred on the Vendors under the Guarantee or by law
will in any way be released prejudiced diminished or affected by any of the
following:-
20.1 the granting of time or indulgence to or any compromise with or
agreement not to sue the Purchasers, the Guarantor or any other
person or the Vendors abstaining from proving or enforcing
payment of any dividend or composition;
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20.2 the Vendors not giving the Guarantor notice of any default by any
Purchaser or of any action taken by the Vendors;
20.3 any variation made in any of the terms of this or any Sale
Agreement whether the same is made with or without the assent or
knowledge of the Guarantor;
20.4 the Vendors obtaining or failing to obtain or perfect any other
guarantee or security (whether contemporaneously with this or any
Sale Agreement or not) or the modification, variation, renewal,
release, termination or discharge by the Vendors of any security
or guarantee now or hereafter held from any Purchaser or any
other person (including any signatory to this or any Sale
Agreement) in respect of the liabilities and obligations referred
to in clause 18.1;
20.5 any defect in or the unenforceability of any security or
guarantee given by or on behalf of any Purchaser or any other
person in respect of any of the liabilities and obligations
referred to in clause 18.1;
20.6 any invalidity, illegality, unenforceability, irregularity or
frustration in any respect of any of the liabilities or
obligations referred to in clause 18.1; and
20.7 any act omission or circumstances which but for this clause 20
might operate to prejudice, affect or otherwise diminish the
liability of the Guarantor under clause 18 or any of the rights
powers or remedies conferred upon the Vendors or any of them
under clause 18 or by law.
21. The Guarantee is a continuing guarantee and will remain in full force and
effect until all the liabilities and obligations referred to in clause 18
have been irrevocably paid and satisfied in full.
22. Without prejudice to the Vendors' rights against the Purchasers as
principal debtor the Guarantor agrees as a separate and independent
stipulation that any liabilities or obligations referred to in clause 18.1
which may not be recoverable on the footing of a guarantee (whether by
reason of any legal limitation, disability or incapacity on or of
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any Purchaser or any other fact or circumstance) or which are or become
illegal, voidable, unenforceable, discharged by any insolvency or
irrecoverable (and whether or not known to the Vendors or the Guarantor or
any other person) will nevertheless be recoverable from and enforceable
against the Guarantor as sole or principal debtor in respect thereof and
will be paid or performed by the Guarantor on demand.
23. NO THIRD PARTY BENEFICIARY
Except as otherwise provided in this Agreement, this Agreement is intended
and agreed to be solely for the benefit of the parties hereto and their
permitted assigns and no third party shall accrue any benefit, claim or
right of any kind whatsoever pursuant to, under, by or through this
Agreement.
24. EC NOTIFICATION
As soon as is practicable after the execution of the Transaction Documents
the parties shall procure that the Transaction Documents are notified to
the Commission of the European Community in accordance with Regulation 17
of 1962 of the Council of the European Communities. Lucas shall have
primary responsibility for completing and submitting the necessary forms
and the Purchasers and the Guarantor shall provide the required information
relating to their group and markets to enable Lucas to do so. Lucas shall
prior to notification to the Commission submit the forms to the Purchasers
and Guarantor for approval and allow a reasonable time for comments. Lucas
will not unreasonably refuse to incorporate such comments provided that if
any disagreement arises between the parties over the form of such
notification each party shall be entitled to make its own submission to the
Commission. Each party shall bear its own costs and expenses in relation to
any such notification and any enquiries made by the Commission in relation
thereto.
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SCHEDULE 1
PART 1
DETAILS OF THE VENDORS
(1) Lucas Limited whose registered office is at Stratford Road, Solihull,
West Midlands, England
(2) Lucas Automation & Control Engineering, Inc., a Virginia corporation
whose executive offices are located at 1000 Lucas Way, Hampton,
Virginia, USA
(3) Lucas Automation and Control Engineering GmbH of Karl-Mand Strasse
2a, 56070 Koblenz, Germany, registered with the Commercial Register
of the County Court of Koblenz under registration number HRB 5258
PART 2
DETAILS OF THE PURCHASERS
(1) Assembly Technology & Test Limited whose registered office is at
Beaufort House, 15 St Botolph Street, London EC3A 7NJ
(2) Assembly Technology & Test, Inc., of Corporate Centre, Suite 2-300,
1949 East Sunshine, Springfield, MO 65804
(3) Assembly Technologie & Automation GmbH of Karl-Mand Str. 2, D-56070
Koblenz-Rheinhafen
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SCHEDULE 2 (OMITTED)
ACCOUNTING PRINCIPLES
Pages 51 - 58
<PAGE>
SCHEDULE 3 (OMITTED)
Part 1
PROFORMA DRAFT COMPLETION STATEMENTS AND AGGREGATION STATEMENT
Part 2
ALLOCATION OF PURCHASE PRICE
Pages 59 - 62
<PAGE>
SCHEDULE 4
REPRESENTATIONS AND WARRANTIES OF VENDORS
DEFINITIONS AND INTERPRETATION
1. Words and expressions used in this Schedule shall unless the context
otherwise requires have the same meanings (if any) as are given to them in
this Agreement.
2. Where any of the Warranties are qualified by words such as "the Vendors are
not aware" or "the Vendors believe" or "to the best of the Vendors"
knowledge" or any similar qualification, the Vendors' awareness or belief
or knowledge shall (unless specified otherwise in Schedule 4) be determined
by reference only to the awareness or belief or knowledge of the persons
whose names are listed in the left hand column below and whose position is
stated opposite his name in the right hand column below, of whom enquiry
has been made by the Vendors and the Vendors shall not be liable for breach
of representation and/or warranty should the fact or circumstance which
would otherwise be a breach of the Warranties be known to any other
employee or officer of any member of the Lucas Group.
Name of Person Position Held
-------------- -------------
Chris Long-Leather Programme Director - Business Development
Geoff Wyatt Finance Director - Lucas Aftermarket Operations
David Watkins Managing Director of the Activities
Wayne Schultz Vice President (Finance) - the Activities
Graham Plumley Human Resources Director - Lucas Aftermarket
Operations
Tim Bridgman Divestment Project Manager
Richard Peachey Legal Director - Lucas Aftermarket Operations
Eddie Earle Group Property Manager
Mike McKiernan Group Director - Health, Safety and Environment
3. In relation to any of the Warranties which are qualified by reference to
materiality, the materiality of any matter which may constitute a breach of
any such Warranty shall be
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determined by reference to and in the context of the Activities taken as a
whole and not any one of them.
4. With regard to the different Parts of this Schedule:-
4.1 the Warranties contained in Part A of this Schedule are made by
the English Vendor in relation to each of the Activities;
4.2 the Warranties contained in Part B of this Schedule are made by
the English Vendor in relation to the English Activity only and
nothing contained in Part B shall affect the application or
interpretation of the Warranties contained in the remainder of
this Schedule. References in such Part B to the Vendor or the
Purchaser shall be deemed to be to the English Vendor or the
English Purchaser (as the case may be) and references to the
Activity shall be deemed to be to the English Activity;
4.3 the Warranties contained in Part C of this Schedule are made by
the English Vendor and the US Vendor in relation to the US
Activity only and nothing contained in Part C shall affect the
application or interpretation of the Warranties contained in the
remainder of this Schedule. References in such Part C to the
Vendor or the Purchaser shall be deemed to be to the US Vendor or
the US Purchaser (as the case may be) and references to the
Activity shall be deemed to be to the US Activity; and
4.4 the Warranties contained in Part D of this Schedule are made by
the English Vendor and the German Vendor in relation to the
German Activity only and nothing contained in Part D shall affect
the application or interpretation of the Warranties contained in
the remainder of this Schedule. References in such Part D to the
Vendor shall be deemed to be to the German Vendor and references
to the Activity shall be deemed to be to the German Activity.
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PART A. GENERAL
1. The Assets
1.1 The Vendors have good and marketable title to the Assets other
than:-
1.1.1 the English Property and the German Property (which are
dealt with in the English Sale Agreement and the German
Sale Agreement) and the US Leased Property;
1.1.2 the Intellectual Property (which is dealt with in
paragraph 10 of Part A of this Schedule); and
1.1.3 the Leased Assets,
free and clear of any outstanding mortgage, charge, pledge,
security interest (including blanket security interest), lien,
conditional sale, credit sale, hire-purchase or lease agreements
or any encumbrances of any nature whatsoever (excluding retention
of title claims by unpaid suppliers) or any option or agreement
for purchase in favour of any person.
1.2 The Assets (together with any right to use the intellectual
property rights granted pursuant to this Agreement and the Sale
Agreements) comprise all the assets of material importance to
enable the Vendors to carry on the Activities as now carried on.
1.3 The Disclosure Letter contains a list of all material assets
leased by the Vendors and used in the Activities.
2. The Activities
Since the Accounting Date:-
2.1 the Activities have been carried on in the ordinary and usual
course in similar manner as in the financial year of the Vendors
ending on the Accounting Date and all of the Assets acquired by
the Vendors in respect of
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the Activities since the Accounting Date have been acquired in
the ordinary course of business;
2.2 there has been no disposal of significant assets other than in
the ordinary course of trading;
2.3 the Activities taken together have not suffered any change in
their financial condition or business which in the aggregate had
or has a material adverse effect on the Activities as a whole;
and
2.4 the Vendors have not in relation to the Activities:-
2.4.1 sold, assigned, encumbered, licensed, pledged,
abandoned or otherwise transferred (a) any Registered
Intellectual Property or (b) save in the ordinary
course of the Activities, any other intellectual
property or other intangible assets;
2.4.2 made any change in any method of accounting or
accounting principle or practice;
2.4.3 granted any general increase in the remuneration
payable or to become payable to their officers or
employees (including any such increase pursuant to any
bonus, pension, profit-sharing or other plan or
commitment) or any special increase in the remuneration
payable or to become payable to any officer or
employee, except for normal merit and cost of living
increases in the ordinary course of business and in
accordance with past practice;
2.4.4 made capital expenditures or commitments in excess of
the amounts contained in the budget for the Activities
for the period ending 31 January 1998, a copy of which
is annexed to the Disclosure Letter ;
2.4.5 made or guaranteed any loans to any customer or
distributor of the Activities;
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2.4.6 entered into any factoring or invoice discounting
arrangements with respect to their debts;
2.4.7 permitted any material insurance policy to be
terminated or cancelled; or
2.4.8 agreed to do any of the foregoing things.
3. General Legal Compliance
3.1 None of the Vendors has received notice (with which it has not
complied) alleging that it is in default, and so far as the
Vendors are aware they are not in any default, under any laws,
regulations or orders affecting the operations of the Activity
concerned or any of the Assets (excluding any laws, regulations
or orders referred to in Parts B, C or D of this Schedule or any
other laws, regulations or orders relating to taxation or
relating to the Property or to the environment (as defined in the
Environmental Protection Act 1990) or pollution of the
environment or to the health and safety of the Transferring
Employees) which will have a material adverse effect on the
Activities taken as a whole. So far as the Vendors are aware such
of the Records as are required by statute or regulation to be
kept are up to date or are not misleading in any material
respect.
3.2 None of the Vendors has received any notice, with which it has
not complied, alleging that it does not hold all necessary
licences and consents for the proper carrying on of the Activity
concerned. The Disclosure Letter contains a list of all material
licences or governmental approvals held by the Vendors for the
purpose of carrying on the Activities.
4. Stock and Backlog
The Stock taken as a whole is sufficient for the normal requirements of the
Activities and taken as a whole is at its normal level having regard to
current orders and to orders reasonably anticipated from customers of the
Vendors in relation to the
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Activities. At 31 May 1997, the project backlog from firm orders from
customers of the Activities was approximately (pound)40,000,000.
5. Plant Machinery and Equipment
All of the material Plant Machinery and Equipment is in all material
respects in operating condition subject to ordinary wear and tear.
6. Contracts
For the purposes of this paragraph 6 a "Material Contract" means a contract
relating to or affecting the Activities which has been entered into by any
of the Vendors, has not yet been completed by the supply of all goods or
services due thereunder and which during the life of the contract will
require, or is anticipated to require, any party to it to pay in aggregate
a sum of at least (pounds)500,000, US $750,000 or dm 1,000,000 to the other
party or parties.
6.1 All Material Contracts and all Contracts with the Major Customers
(as defined in paragraph 7.2 below) and the Major Suppliers (as
defined in paragraph 7.2 below) which have not yet been completed
by the supply of all goods or services due thereunder are listed
in the Disclosure Letter.
6.2 None of the Vendors is a party to any of the following Contracts
which is not a Material Contract or a Contract with a Major
Customer or Major Supplier:-
6.2.1 any partnership, joint venture, consortium or similar
contract relating to any of the Activities;
6.2.2 any contract requiring any Vendor to pay any royalty,
commission or like payment in relation to the
Activities;
6.2.3 any contract for the supply of goods and/or services by
or to any Vendor in relation to the Activities on terms
under which retrospective or future discounts, price
reductions or other
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financial incentives are given by or to any Vendor
dependent on the level of purchases or any other
criteria;
6.2.4 any agency or distributorship agreement;
6.2.5 any contract outside the normal course of the
Activities which restricts the Vendors from supplying
or taking goods or services to any customer (or
prospective customer) of the Activities or from any
supplier (or prospective supplier) to the Activities;
6.2.6 any agreement for the sharing or passing on of
confidential information which is outside the normal
course of the Activities (excluding any confidentiality
agreements entered into by prospective purchasers of
the Activities from the Vendors);
6.2.7 any contract for the purchase of land; or
6.2.8 any contract for the acquisition of the share capital
of another company or the business or undertaking of
another company.
6.3 None of the Contracts has been entered into other than on an
arm's length basis.
6.4 None of the Vendors is aware of the invalidity of or grounds for
rescission avoidance or repudiation of any agreement which the
Purchasers are required to take over hereunder or under any of
the Sale Agreements.
6.5 None of the Vendors has received any written indication that the
Contracts are not enforceable in accordance with their terms.
6.6 So far as the Vendors are aware:-
6.6.1 neither the Vendors nor any other party to any of the
Material Contracts has failed to perform in any
material respect its
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obligations required to be performed under any of the
Material Contracts;
6.6.2 neither the Vendors nor any other party to any of the
Material Contracts is in receipt of any written claim
of a material default under any of the Material
Contracts; and
6.6.3 they are not in breach of any of their obligations
under any of the other Contracts which would,
individually or in the aggregate, have a material
adverse effect on the Activities taken as a whole
save to the extent that the sale of the Activities to the
Purchasers or the execution and completion of this and the Sale
Agreements may constitute a breach by the Vendors of any of the
Contracts.
6.7 The Vendors are not party to, or bound by the provisions of, any
Contract (including purchase orders, blanket purchase orders and
agreements and delivery orders) with the United States Government
or any department, agency or instrumentality thereof or any state
or local governmental agency or authority with respect to the
Activities.
6.8 The Disclosure Letter sets out details of all bids made for the
sale or supply of goods or services by the Activities before 27
June 1997 which remain open at Completion and all such bids made
after that date which remain open at Completion have been made in
the normal course of the Business.
6.9 The Schedules to the Sale Agreements include brief details of all
Memoranda of Understanding to which the Vendors are party in
relation to the Activities at 27 June 1997 and all other
Memoranda of Understanding to be assumed by the Purchasers under
the Sale Agreements were entered into in the normal course of the
Activities.
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7. Trading Matters
7.1 There is attached to the Disclosure Letter an up-to-date copy of
each of the Vendor's various current standard terms and
conditions of trading as used by the Activities.
7.2 The Disclosure Letter lists:-
7.2.1 the top ten suppliers (a "Major Supplier") by value
(net invoice value) to the Vendors in respect of the
Activities in the twelve months immediately preceding
the Accounting Date; and
7.2.2 the top ten customers (a "Major Customer") by value
(net invoice value) of the Vendors in respect of the
Activities in the twelve months immediately preceding
the Accounting Date.
7.3 None of the Major Customers or Major Suppliers have since the
Accounting Date refused to continue to do business with the
Vendors and the Vendors have not received any written notice from
any of them indicating it would be subsequently materially
reducing its level of business with the Activities.
7.4 So far as the Vendors are aware, neither the Diesel Systems
division nor the Light Vehicle Braking Systems division of
LucasVarity has any present intention to discontinue its trading
relationship with the Activities after Completion.
7.5 All trade names under which the Vendors currently carry on the
Activities are listed in the Disclosure Letter.
8. Product Defaults
8.1 The Disclosure Letter contains a list of any product warranty
claim exceeding (pound)50,000 for which the Vendors have accepted
liability in the two years preceding Completion and any product
liability claim exceeding (pound)50,000 for which the Vendors or
their insurers have accepted liability in the two years preceding
Completion.
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8.2 None of the Vendors has been required to file, nor has filed, a
notification or other report with the United States Consumer
Product Safety Commission concerning any actual or potential
hazards with any product manufactured or sold by it.
9. Litigation and disputes
9.1 None of the Vendors is involved, whether as plaintiff, defendant
or any other party, in any civil, criminal, tribunal or
arbitration proceedings in respect of the Activities or the
Assets and so far as the Vendors are aware no such proceedings
are pending or have been threatened in writing.
9.2 None of the Vendors has been involved in any civil, criminal,
tribunal or arbitration proceedings relating to the Activities in
the two years immediately preceding Completion in which the
amount claimed by or against the Vendors exceeded (pound)50,000.
9.3 There are no judgments or orders against any Vendor affecting its
rights to sell any of the Assets or carry on the Activity
concerned.
9.4 There is no outstanding dispute between any Vendor and any Major
Customer or Major Supplier or with any federal, state or local
governmental agency or authority which is having a material
adverse effect, or so far as the Vendors are aware is reasonably
expected to have a material adverse effect, on the Activities
taken as a whole.
10. Intellectual Property
10.1 The Lucas Group is the beneficial owner of the Intellectual
Property
10.2 The Vendors have not received any written notice alleging that
any of the Intellectual Property is not valid and enforceable.
10.3 None of the Vendors has received any written notice, with which
it has not complied, alleging that any of the goods and/or
services supplied in the course of the Activities or any of the
processes employed in the Activities or
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any other aspect of the carrying on of the Activities infringes
any intellectual property rights of any nature of any third
party.
10.4 The Vendors have not received any written notice that any person
is currently infringing any of the Intellectual Property.
10.5 The Lucas Group has not entered into any subsisting licence with
any person under which:-
10.5.1 the Lucas Group licenses any of the Intellectual
Property to that person; or
10.5.2 that person licenses any intellectual property rights
to the Lucas Group for the purpose of the Activities.
10.6 So far as the Vendors are aware none of the past or present
employees of the Vendors engaged in the Activities has any
material rights in relation to the Registered Intellectual
Property.
10.7 So far as the Vendors are aware completion of this Agreement and
the sale of the Activities contemplated hereby will not
materially alter or impair the Registered Intellectual Property.
11. Employees
11.1 The particulars contained in the Schedule annexed to the
Disclosure Letter relating to the Transferring Employees are true
and accurate in all material respects.
11.2 The Vendors are not under any contractual obligation:-
11.2.1 to make any increase in the rates of remuneration of or
other similar payment to any of the Transferring
Employees;
11.2.2 to make any change in the terms and conditions of
employment of the Transferring Employees.
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11.3 The Employee Pack referred to in and annexed to the Disclosure
Letter discloses all material agreements or arrangements with
trades unions, staff associations or other associations of
employees relating to the Transferring Employees.
11.4 The written terms of employment of those Transferring Employees
whose basic salary exceeds (pound)30,000 per annum or to whom any
Vendor is required to give more than three months' notice to
terminate the employment without cause are annexed to the
Disclosure Letter. In relation to all other Transferring
Employees a pro forma pack incorporating standard form statements
of particulars of employment and other written statements of
employment benefits is annexed to the Disclosure Letter, the
salary or wages of such other Transferring Employees being shown
in the Schedule referred to in paragraph 11.1 above.
11.5 No employee employed in a managerial or senior technical or
senior sales position has since 1st July 1996 terminated his
employment or had such employment terminated and no such employee
has given or has been given notice to terminate his employment.
11.6 Within the last year the Vendors have not experienced any labour
disputes or any work stoppage or slow-down due to labour
disagreements which have had a material adverse effect on the
Activities.
11.7 There are no loans outstanding from the Vendor or the Lucas Group
to any of the Transferring Employees or from any of the
Transferring Employees to the Vendor or the Lucas Group.
11.8 The Vendors have not operated a severance policy in respect of
the US Activity providing for payments to be made to employees of
the US Activity where their employment is transferred to a
purchaser of a US business or part thereof.
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12. Financial Statements
12.1 The summary profit and loss accounts, cash flows and balance
sheets of the Vendors in relation to the Activities for the year
ended 31 July 1996 and the 6 months ended on the Accounting Date,
as described in certificates issued by Ernst & Young to
LucasVarity on 13th February 1997 and 9th April 1997
respectively:-
12.1.1 fairly present in all material respects the financial
position and assets and liabilities of the Vendors in
relation to the Activities as at 31st July 1996 and
31st January 1997 (as the case may be) and the summary
profit and loss accounts and cash flows of the
Activities for the respective periods then ended; and
12.1.2 have been prepared in all material respects in
accordance with United Kingdom generally accepted
accounting policies.
12.2 The audited financial statements of Lucas Limited, which is an
indirect Subsidiary of Lucas Industries plc, for the period ended
31st July 1996 (a copy of which is attached to the Disclosure
Letter) give a true and fair view of the state of affairs of
Lucas Limited as at 31st July 1996 and the net asset value of
Lucas Limited as at 31 January 1997 was not less than (pound)54
million.
13. Grants
No governmental or other material grants have been made in the last six
years to any Vendor in relation to the Activities which are repayable.
14. Insurance
14.1 Brief particulars of all the Vendors" insurances relating to the
Activities are set out in the Disclosure Letter.
14.2 There is no insurance claim (excluding employee welfare claims
and employer's liability claims) made by any Vendor pending or
outstanding relating to the Assets or the Transferring Employees.
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15. Insolvency
15.1 No petition has been presented, no order has been made and no
resolution has been passed for the winding-up of the Vendors, no
administrative receiver, receiver and/or manager has been
appointed of the whole or any part of the property of the Vendors
relating to the Activities, no administration order has been made
appointing an administrator or trustee in respect of the Vendors
and no petition has been presented for an administration order or
filed under the U.S. Bankruptcy Code or any other insolvency law
in respect of the Vendors.
15.2 None of the Assets which is material to the Activities has been
acquired by the English Vendor, Lucas Industries plc or Lucas
Automation & Control Engineering Limited in the 2 years preceding
Completion from another member of the Lucas Group or from another
Business Unit at an undervalue.
16. Vendors capacity and organisation
16.1 The Vendors have taken all necessary action, corporate or
otherwise, to enter into this Agreement and the Sale Agreements
and to complete the sale of the Activities contemplated thereby.
This Agreement has been duly and validly executed and delivered
by the Vendors and constitutes a valid and binding agreement of
the Vendors, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganisation or similar laws relating
to creditors' rights generally. The Sale Agreements will be
validly executed and delivered by the relevant Vendors and, when
delivered, will constitute binding agreements of the relevant
Vendors, enforceable as aforesaid.
16.2 Each Vendor is a corporation duly organised, validly existing and
in good standing under the laws of the jurisdiction in which each
Vendor was incorporated and has the requisite corporate authority
and power to carry on the relevant Activity as currently
conducted by that Vendor.
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16.3 Neither the execution and delivery of this Agreement and the Sale
Agreements nor the sale of the Activities thereunder will:-
16.3.1 violate or conflict with any provisions of the Articles
of Association, Articles of Incorporation or Bylaws, or
such equivalent thereof, of the Vendors, or any
statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to the
Vendors (other than any requiring consent or approval
to the sale of the Activities to the Purchaser to be
obtained from any governmental body or authority); or
16.3.2 violate, or conflict with, or result in a breach in any
provision of, or constitute a default under any
contract to which the Vendors are party (excluding the
Contracts) or result in the creation of any lien,
security interest, charge or other encumbrance upon any
of the properties or assets of the Vendors
which would in any such case materially affect the ability of the
Vendors to perform their obligations under this Agreement and the
Sale Agreements.
17. Consents
To the best of the Vendors' knowledge no consent, approval or authorisation
of, or declaration or filing with, any governmental authority is required
on the part of the Vendors in connection with the execution, delivery or
performance of this Agreement, except for :-
17.1 filings with the Federal Trade Commission and the Antitrust
Division of the Department of Justice pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;
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17.2 Post-Merger Notification with the Federal Cartel Office
(Bundeskartellamt) in Berlin pursuant to the Act against
Restraint on Competition (Antitrust Act; Gesetz gegen
Wettbewerbsbeschrankungen of 1957 as amended); and
17.3 local recordings of deeds.
18. Broker's or Finder's Fee
Except for the fees payable to Coopers & Lybrand for acting on behalf of
the Lucas Group in the sale of the Activities, no agent, broker, investment
banker or firm acting on behalf of the Vendors or under the authority of
the Vendors is or will be entitled to any broker's or finder's fee or any
other commission or similar fee from any of the Vendors in connection with
any of the transactions contemplated hereby.
19. Related Party Transactions
Neither the Lucas Group, nor any director or officer of the Lucas Group, is
currently a party to any transaction with the Vendors (other than for
services as employees, officers and directors), including without
limitation any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from, the
Vendors in connection with the operation of the Activities, save for any
transaction, contract, agreement or other arrangement which is not material
to the Activities taken as a whole and for the Group Sharing Arrangements
(as defined in the Sale Agreements).
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PART B. THE ENGLISH ACTIVITY
1. Pensions
1.1 The Vendor is under no legal liability or voluntary commitment to
pay or make provision for payment of any pension, superannuation,
death benefit or other similar benefit in respect of any English
Transferring Employee or to contribute to a pension,
superannuation or life assurance scheme other than the Lucas
Pension Scheme in respect of any English Transferring Employee.
1.2 No proposal has been announced or made to amend the Lucas Pension
Scheme in any way that could affect any of the English
Transferring Employees or to enter into any legal liability or
voluntary commitment of the type described in paragraph 1.1
above.
1.3 Full and accurate details of the Lucas Pension Scheme (to the
extent that it relates to the English Transferring Employees)
have been given to the Purchaser, including the following:-
1.3.1 copies of all current formal documentation governing or
relating to that scheme;
1.3.2 a copy of the current members booklet and of all
announcements the terms of which are not fully and
accurately incorporated into the documents provided
under paragraph 1.3.1 above;
1.3.3 copies of the most recent trustees report and accounts;
1.3.4 all data necessary for ascertaining the current
liabilities of the Lucas Pension Scheme in respect of
the Members including (without limitation) their names,
ages, sexes, pensionable salaries and pensionable
service (actional or notional), details of any transfer
credits and special or augmented benefits and
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details of any agreed or proposed transfer payments
into or out of the Lucas Pension Scheme that relate to
any of the Members;
1.3.5 details of any other benefits of which the Vendor or
the Lucas Pension Scheme has been made aware and which
are or may be relevant to the calculation of any
statutory limitation of benefits in respect of any of
the Transferring Employees;
1.3.6 details of all contributions and premiums currently
payable or being paid by and in respect of the Members;
1.3.7 copies of current contracting-out certificates; and
1.3.8 copies of written confirmation from the Pension Schemes
Office for the Inland Revenue of the Lucas Pension
Scheme's status as an exempt-approved scheme within the
meaning of section 592 of the Income and Corporation
Taxes Act 1988.
1.4 No discretion or power has been exercised under or in relation to
the Lucas Pension Scheme to:-
1.4.1 augment the benefits for or in respect of any Member;
and
1.4.2 provide any benefits in relation to any Member which
are different from those provided for in the
documentation disclosed under paragraph 1.3 above.
1.5 There are no actions, suits, claims investigations or Pension
Ombudsman complaints (apart from routine claims for benefits
arising otherwise than under Article 119 of the Treaty of Rome)
outstanding, pending or threatened against the Lucas Pension
Scheme or against the Vendor or any connected person or any other
participating employer in the Lucas Pension Scheme in relation to
any English Transferring Employee and in respect of any act,
event, omission or other matter arising out of or in connection
with the Lucas Pension Scheme and so far as the Vendor is aware,
there are no
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circumstances which may give rise to any such action, suit, claim
investigation or Pensions Ombudsman complaint.
1.6 There are no contributions or premiums due to the Lucas Pension
Scheme in relation to any of the Members which have fallen due
but are unpaid.
1.7 The Lucas Pension Scheme is an exempt approved scheme within the
meaning of section 592 of the Income and Corporation Taxes Act
1988 and is a contracted-out scheme (as defined in section 7(3)
of the Pension Schemes Act 1993) and the Vendor is not aware of
any reason why such exempt approval may or could be withdrawn or
which may or will result in the Lucas Pension Scheme ceasing to
be a contracted-out scheme or in the surrender or variation of
any contracting-out certificate which relates to the Members.
1.8 There are no English Transferring Employees who would, had their
contractual hours of employment been different at any time, been
eligible for the membership of the Lucas Pension Scheme.
1.9 In this paragraph 1 "Member" has the same meaning as in Schedule
7 to the English Sale Agreement.
2. Property and environment
To the best of the Vendor's knowledge and belief the replies given on the
Vendor's behalf by the Vendors' UK Solicitors to the pre-contract enquiries
in respect of the English Property and the pre-contract enquiries in
respect of environmental issues affecting the English Property (copies of
which are annexed to the Disclosure Letter) are correct in all material
respects.
3. Fair Trading
3.1 No agreement, transaction, practice or arrangement entered into
or carried on, or proposed to be entered into or carried on, by
the Vendor in respect of the Activity:-
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3.1.1 is being or has been registered by the Vendor, nor as
far as the Vendor is aware by any third party, in
accordance with the provisions of the Restrictive Trade
Practices Acts 1976 and 1977;
3.1.2 is being or has been notified by the Vendor, nor as far
as the Vendor is aware by any third party, to the EC
Commission ("the Commission") by reason of Article 85
of the Treaty establishing the European Economic
Community; or
3.1.3 so far as the Vendor is aware, is or has been the
subject of an enquiry, investigation, reference or
report under the Fair Trading Act 1973, the Competition
Act 1980, Article 85 or 86 of the Treaty establishing
the European Economic Community or by the Commission or
any other regulatory or judicial authority, whether in
the United Kingdom or elsewhere.
3.2 The Vendor has not in relation to the Activity given any
assurances or undertaking to the Restrictive Practices Court, the
Director General of Fair Trading, the Secretary of State for
Trade and Industry, the Commission or Court of First Instance or
Court of Justice of the European Communities, or any other court
or similar person or body.
4. General Taxation Matters
4.1 The Vendor is not in relation to the Activity liable as agent or
lessee for any taxation liability of another person.
4.2 No taxation authority has agreed to operate any special
arrangement (being an arrangement which is not based on a strict
and detailed application of the relevant legislation or on
generally published statements of practice or generally published
extra-statutory concessions) in relation to the Activity.
4.3 There is set out in the Disclosure Letter with express reference
to this Warranty the aggregate residue of expenditure or
written-down value
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attributable to such of the Assets on which an entitlement to
industrial building allowances has arisen under the Capital
Allowances Act 1968 or the Capital Allowances Act 1990.
4.4 None of the English Assets are long life assets as defined in
section 38A of the Capital Allowances Act 1990.
4.5 None of the English Assets is subject to an outstanding Inland
Revenue charge as defined in section 237 Inheritance Tax Act
1984.
4.6 No circumstances exist, or but for section 204(6) Inheritance Tax
Act 1984 would exist, such that a power of sale could be
exercised in relation to any of the English Assets pursuant to
section 212 Inheritance Tax Act 1984 (contingent liability of
transferee for unpaid capital transfer tax or inheritance tax).
4.7 The Vendor is not liable to taxation in respect of the Activity
in any country other than the United Kingdom.
5. Value Added Tax
5.1 The Vendor is a registered and taxable person for the purposes of
the Value Added Tax Act 1994.
5.2 The Vendor has not made any supplies in respect of the Activity
in the last 3 years that are exempt supplies.
5.3 The Vendor is not approved for the purposes of the Customs Duties
(Deferred Payment) Regulations 1976 (deferral of duty on
imports).
5.4 There is set out in the Disclosure Letter with express reference
to this Warranty full details of each of the English Assets to
which Regulations 112-116 of Part XV of the Value Added Tax
Regulations 1995 (adjustments to the deductions of input tax on
capital items) apply or will apply, including in particular:-
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5.4.1 a description (including in the case of land or a
building or part of a building, the nature of the
tenure and the time it has to run), the date the first
interval commenced and the input tax on the capital
items; and
5.4.2 the proportion of input tax for which credit has been
claimed (whether provisionally or finally in a tax year
and stating which).
5.5 The Vendor has not exercised the election to waive exemption
under paragraph 2 of Schedule 10 Value Added Tax Act 1994 in
respect of the English Property.
6. Taxation and Employees
6.1 The Vendor has received no notifications or notices under section
166 ICTA 1988 (benefits in kind: notices of nil liability) in
relation to the Activity.
6.2 The Vendor does not operate any scheme registered under Chapter
III of Part V ICTA 1988 (profit related pay).
6.3 No officer or employee of the Vendor who is engaged in the
Activity participates in any scheme approved under Schedule 9
ICTA 1988 (approved share option and profit sharing schemes) or
is a beneficiary or potential beneficiary of a qualifying
employee share ownership trust as defined in Schedule 5 Finance
Act 1989 (employee share ownership trusts).
6.4 The Vendor has properly operated the PAYE system deducting income
tax and national insurance contributions as required from all
payments to or treated as made to the English Transferring
Employees and has punctually accounted to the Inland Revenue and
the Department of Social Security for all taxation deducted. The
Vendor has maintained and retained such books and records
relating to PAYE and to national insurance contributions as it is
required to maintain and retain.
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PART C. THE US ACTIVITY
1. Employee Benefit Plans
1.1 The Disclosure Letter contains a true and complete list of all
material written and oral, formal and informal, annuity, bonus,
cafeteria, stock option, stock purchase, profit sharing, savings,
pension, retirement, incentive, group insurance, disability,
employee welfare, prepaid legal, non-qualified deferred
compensation including, without limitation, excess benefit plans,
top-hat plans, deferred bonuses, rabbi trusts, secular trusts,
non-qualified annuity contracts, insurance arrangements,
non-qualified stock options, phantom stock plans, or golden
parachute payments or other similar fringe benefit plans, and all
other employee benefit finds or programs (within the meaning of
Section 3(3) of ERISA), covering employees, former employees or
directors of the Vendor with respect to the Activity (the
"Plans"). Except as set out in the Disclosure Letter, the Vendor
is not a party to any material employee agreement, understanding,
plan, policy, procedure or arrangement, whether written or oral,
which provides compensation or fringe benefits to its employees
engaged or formerly engaged in the operation of the Activity or
which applied to former employees of Vendor who were engaged in
the Activity, and the Vendor is in compliance with its respective
obligations under all such Plans. Except for changes required by
applicable law, there are no negotiations, demands, commitments
or proposals that are pending or that have been made that concern
matters now covered, or that would be covered by the type of
agreements described on the Disclosure Letter or this paragraph
1.1. The Vendor has no direct or indirect, actual or contingent,
material liability for any Plan, other than to make payments for
contributions, premiums or benefits when due, all of which
payments have been timely made. None of the US Assets are subject
to any lien or security interest under Section
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302(f), 306(a), 307(a) or 4068 of ERISA or Section 401(a)(29),
412(n) or 6321 of the Code.
1.2 With respect to each employee benefit plan listed in the
Disclosure Letter, true and complete copies of (i) all Plan
documents (including all amendments and modifications thereof)
and related agreements including without limitation, the trust
agreement and amendments thereto, insurance contracts and
investment management agreements; (ii) the last three filed Form
5500 series and Schedules A, B, C, P and/or SSA, as applicable,
and Forms PBGC-1, if any; (iii) summary plan descriptions; (iv)
summary of material modifications, if any; (v) the most recent
auditor's report, if any, and copies of any and all tax
qualification correspondence including without limitation,
private letter rulings, applications for determination and
determination letters issued with respect to the Plans; and (vi)
the most recent annual and periodic accounting of related Plan
assets, have also been delivered to the Purchaser.
1.3 With respect to the Plans listed in the Disclosure Letter which
are subject to ERISA:
1.3.1 none of the Plans is a "multiemployer plan" as that
term is defined in Section 3(37) of ERISA and Section
411(f) of the Code, nor a plan maintained by more than
one employer (hereinafter referred to as an "multiple
employer plan"), nor a single employer plan under a
multiple controlled group within the meaning of Section
4063 of ERISA, and neither of the Vendor nor any entity
required to be aggregated with the Vendor under Section
414(b), (c), (m) or (o) of the Code has incurred any
withdrawal liability with respect to any single plan,
multiemployer or multiple employer plan, which
liability could constitute a liability of the
Purchaser; and
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1.3.2 no benefit claims (except those submitted in the
ordinary course of administration of such Plan) are
currently pending against any Plan.
2. Real Property
2.1 Schedule 3 to the US Sale Agreement contains a correct and
complete list of all real property that is owned by the Vendor in
connection with the conduct of the Activity. Such real property
is hereinafter referred to the "US Real Property" and the
improvements and fixtures thereon are hereinafter referred to as
the "Improvements". The Disclosure Letter sets forth the most
recent title commitments and ALTA survey with respect to the US
Real Property.
2.2 The Disclosure Letter contains a correct and complete list of the
real property that the Vendor leases (as lessee) in connection
with the Activity. Such leased real property is hereinafter
referred to as the "US Leased Property", and the improvements and
fixtures therein owned by the landlord of each US Leased Property
are hereinafter referred to as the "Leased Improvements".
2.3 Except as set out in the Disclosure Letter, the Vendor is the
sole legal and equitable owner of the US Real Property, the
Improvements and all interests therein and possesses good and
marketable title to the US Real Property and the Improvements
good of record and in fact, free and clear of all conditions,
exceptions, reservations, liens, restrictions, rights of way,
easements, encumbrances and other matters affecting title except
such matters which could in no way adversely affect the use of
the Real Property. Except as set out in the Disclosure Letter,
the Vendor is the sole legal and equitable owner of the leasehold
interest in the Leased Property and the Leased Improvements. To
the best of the Vendor's knowledge (without enquiry or
investigation) and except as set forth in the Disclosure Letter,
the Vendor possesses valid leasehold interest and leasehold title
to the US Leased Property and the Leased Improvements. The Vendor
has received
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no notice of default under the leases of the US Leased Property
or notice of a defect in title to its leasehold tenancy or notice
of any conditions, exceptions, reservations, liens, restrictions,
rights of way, easements, encumbrances and other matters
affecting title to such leasehold that could impair the ability
of the Vendor to realise the benefits of the rights provided to
it under its lease as such rights are currently utilised in the
conduct of the business of the Vendor consistent with past
practice.
2.4 There are no adverse or other parties in possession of the US
Real Property, the Improvements or any portion or portions
thereof, and on the Completion Date the US Real Property and the
Improvements will be free and clear of any and all leases,
licensees, occupants or tenants except as set out in the
Disclosure Letter. To the best of the Vendor's knowledge, there
are no adverse parties in possession of the US Leased Property or
the Leased Improvements, and on the Completion Date the leasehold
interest in the US Leased Property and the Leased Improvements
will be free and clear of any and all leases, licences, occupants
or tenants except as set forth in the Disclosure Letter. To the
knowledge of the Vendor (without enquiry or investigation), there
are no pending or threatened condemnation, eminent domain or
similar proceedings, or litigation or other proceedings affecting
the US Real Property, the Improvements or any portion or portions
thereof. To the knowledge of the Vendor (without enquiry or
investigation), there are no pending requests, applications or
proceedings to alter or restrict any zoning or other use
restrictions applicable to the US Real Property or the
Improvements that would interfere with the conduct of the
Activity or the use of the US Assets consistent with
past-practice, which interference would have a material adverse
effect on the Activity. Except as set out in the Disclosure
Letter, to the knowledge of the Vendor (without enquiry or
investigation), all water, sewer, gas, electric, telephone,
drainage and other utility equipment, facilities and services
required by law or necessary for the operation of the
Improvements are installed and connected pursuant to valid
permits and no notice has been received by the Vendor regarding
the termination or material impairment of
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any such service. All necessary easements exist and are in full
force and effect. The US Real Property has access, in accordance
with past practice, to and from a public right of way or road
dedicated for public use and no notice has been received by the
Vendor relating to the termination or impairment of such
access(including applicable parking requirements).
3. Environmental Matters
As used in this Part C of this Schedule "Hazardous Material" shall mean:
(i) any "hazardous substance" as now defined pursuant to the CERCLA, 42
U.S.C. S. 9601(14), or any substance listed or identified by any
characteristic in any regulation adopted pursuant to any statute referred
to or incorporated into such definition, all as in effect on the date
hereof; (ii) any petroleum, including crude oil and any fraction thereof;
(iii) natural gas, natural gas liquids, liquefied natural gas, or synthetic
gas useable for fuel; (iv) any "hazardous chemical" as defined pursuant to
29 C.F.R. Part 1910; and (v) any asbestos, polychlorinated biphenyl
("PCB"), or isomer of dioxin.
3.1 There is no Hazardous Material in, under or migrating from the US
Real Property which would be reasonably likely to result in any
material liabilities under Environmental Laws (as defined in
paragraph 3.2 below).
3.2 The Vendor has no material liability, matured or not matured,
absolute or contingent, assessed or unassessed, imposed or based
upon any provision under any foreign, federal, state or local
law, rule, or regulation or common law, or under any code, order,
decree, judgment or injunction applicable to the Vendor in
connection with the Activity, nor in connection with the Activity
has the Vendor received any notice, or request for information
issued, promulgated, approved or entered thereunder, or under the
common law, or any tort, nuisance or absolute liability theory,
relating to public health or safety, worker health or safety, or
pollution, damage to or protection of the environment including
without limitation, laws relating to emissions, discharges,
releases or threatened releases of Hazardous Material into the
environment (including without limitation, ambient air, surface
water, groundwater, land surface or subsurface) or otherwise
relating to the
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manufacture, processing, distribution, use, treatment, storage,
generation, disposal, transport or handling of any Hazardous
Material (hereinafter collectively referred to as "Environmental
Laws"), which notice or request for information would have a
material adverse effect on the Vendor or the Activity.
3.3 The Vendor possesses and is in compliance in all material
respects with all permits, licenses, certificates, franchises and
other authorisations relating to the Environmental Laws necessary
to conduct the Activity or otherwise required by environmental
regulations in connection with the Activity.
3.4 The Vendor has not, in connection with the Activity during the
past five (5) years, been subject to any material civil, criminal
or administrative action, suit, claim, hearing, notice of
violation, investigation, inquiry or proceeding for failure to
comply with, or received notice of any material violation or
potential material liability under the Environmental Laws, nor is
the Vendor aware of any information, whether or not confirmed or
reported, which could give rise to any such potential liability.
3.5 No real property, site or facility (as defined in CERCLA, 42
U.S.C. S.9601(9)) owned or operated by the Vendor in connection
with the Activity is (i) listed or proposed for listing on the
National Priority List (or (ii) listed on the Comprehensive
Environmental Response, Compensation, Liability Information
System List ("CERCLIS") promulgated pursuant to CERCLA, or any
comparable list maintained by any foreign, state or local
government authority.
3.6 There are no underground storage tanks owned or operated by the
Vendor in connection with the Activity which are not in
substantial compliance with Environmental Laws, and any prior use
and operation of underground storage tanks owned or operated by
the Vendor in connection with the Activity has been in compliance
with all Environmental Laws.
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3.7 The Vendor has provided to the Purchaser an opportunity to
inspect its facilities, review and copy documents, and the Vendor
has delivered to the Purchaser true, complete and correct copies
of results of any reports, together with supporting studies,
analyses and tests in the possession of or initiated by the
Vendor pertaining to the existence of Hazardous Material and any
other environmental concerns relating to any of their facilities,
on sites or real property owned, leased, operated, used or
controlled by the Vendor in connection with the Activity, or
concerning compliance with or liability under the Environmental
Laws.
3.8 There are no PCBs in or at any premises owned, leased, operated
or controlled by the Vendor in connection with the Activity which
are in violation of any Environmental Laws, and the Vendor's
prior use, handling, storage, transport or disposal of PCBs has
been in compliance with all Environmental Laws.
3.9 There is no friable asbestos or asbestos containing materials on
or in the properties and assets owned, leased, operated or
controlled by the Vendor in connection with the Activity which is
in violation of any Environmental Laws and the facilities on such
properties are in substantial compliance with the Environmental
Laws including but not limited to, Occupational Safety and Health
Act regulations with respect to ambient air exposure to asbestos.
3.10 The Vendor has not, by contract, agreed to assume the liability
of any other person or entity pursuant to any of the
Environmental Laws.
4. Tax Matters
4.1 There have been timely filed by the Vendor with the appropriate
Taxing Authority all Tax Returns required to be filed on or
before the Completion Date, and all such Tax Returns were correct
and complete in all respects.
4.2 The Vendor has paid in full all Taxes, if any, shown to be due on
any Tax Return required to be filed on or before the Completion
Date or otherwise has reserved for or paid all other Taxes due
for all periods up to and
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including the date hereof, and at the Completion Date shall have
paid or reserved for all Taxes allocable to periods or portions
thereof ending on or before the Completion Date. All Taxes for
the periods covered by the Tax Returns filed or to be filed by
the Vendor, or if not covered by a Tax return but required to be
paid, have been or will be paid when due.
4.3 The representations and warranties set forth in subsections 4.1
and 4.2 of this paragraph 4 are not applicable to the extent the
US Assets and Activity cannot be made subject to tax liens and
the Purchaser cannot be made liable for Taxes relating to the
matters constituting breaches of such representations and
warranties.
4.4 There are no liens for Taxes upon the Activity or any of the US
Assets except liens for current Taxes not yet due and payable.
4.5 None of the US Assets is property which is required to be treated
as being owned by any other person pursuant to the so called
"safe harbor lease" provisions of former Section 168(f)(8) of the
Code.
4.6 None of the US Assets are currently financed directly or
indirectly by any tax exempt bonds.
4.7 None of the US Assets is "tax exempt use property" within the
meaning of Section 168(h) of the Code.
4.8 Neither the Vendor nor any of the stockholders of the Vendor are
foreign persons within the meaning of Section 1445 of the Code.
4.9 There is no material action, suit, proceeding, investigation,
audit or claim now pending, proposed or threatened against the
Vendor with respect to the Activity or any of the US Assets in
respect of any Tax, and no matter under discussion with any
Taxing Authority relating to any material Tax or assessment or
any claim for additional Tax, asserted by any such Authority
against the Vendor with respect to the Activity or any of the US
Assets.
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4.10 All Taxes that are required to be withheld or collected with
respect to the Activity have been duly withheld and collected
and, to the extent required, have been properly paid or deposited
as required by applicable laws.
4.11 The Vendor has no liability for the Taxes of any other person
under Treas. Reg. S. 1.1502-6 (or similar provision of state,
local, or foreign law), as a transferee or successor, by
contract, or otherwise, including indemnification obligations.
4.12 The Vendor is not a party to any tax allocation or sharing
agreement, other than the deemed tax sharing arrangement arising
from the fact that the Vendor files a consolidated tax return
with its parent.
4.13 As used in this Part C of this Schedule, "Tax" means any of the
Taxes and "Taxes" means (i) all income taxes (including any tax
on or based upon net income, or gross income, or income as
specially defined, or earnings, or profits, or selected items of
income, earnings or profits) and all gross receipts, estimated,
sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property or windfall profit taxes,
environment, alternative or add-on minimum taxes, custom duties
or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any Taxing
Authority whether disputed or not and (ii) any liability for the
payment of any amount of the Tax described in the immediately
preceding clause (I) as a result of being a "transferee" (within
the meaning of Section 6901 of the Code or any other applicable
law) of another person or successor, by contract, or otherwise,
or a member of an affiliated, consolidated, unitary or combined
group.
4.14 As used in this Part C of this Schedule, "Tax Return" is defined
as any return, report, information return or other document
(including any related or supporting information) filed or
required to be filed with any federal, state, local or foreign
governmental entity or other authority (individually or
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collectively a "Taxing Authority") in connection with the
determination, assessment or collection of any Tax (whether or
not such Tax is imposed on the Vendor) or the administration of
any laws, regulations or administrative requirements relating to
any Tax.
5. Absence of Questionable Payments
To the knowledge of the Vendor, neither the Vendor nor any of its
respective directors, officers, agents, employees or any other persons
acting on their behalf has, in connection with the operation of the
Activity:-
5.1 used any corporate or other funds for unlawful contributions,
payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government
officials or others or established or maintained any unlawful or
unrecorded funds in violation of Section 104 of the Foreign
Corrupt Practices Act of 1977, as amended, or any other
applicable foreign, federal or state law; or
5.2 accepted or received any unlawful contributions, payments,
expenditures or gifts.
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PART D. THE GERMAN ACTIVITY
1. Pensions
The Vendor is under no legal liability or voluntary commitment to pay or
make provision for payment of any pension, superannuation, death benefit or
other similar benefit in respect of any German Transferring Employee or to
contribute to a pension, superannuation or life assurance scheme other than
the pension promises in their individual agreements of employment as well
as the statutory social security contributions for pensions in respect of
any German Transferring Employee.
2. Fair Trading
2.1 No agreement, transaction, practice or arrangement entered into
or carried on, or proposed to be entered into or carried on, by
the Vendor in respect of the Activity:-
2.1.1 is being or has been notified by the Vendor, nor as far
as the Vendor is aware by any third party, to the EC
Commission ("the Commission") by reason of Article 85
of the Treaty establishing the European Economic
Community;
2.1.2 so far as the Vendor is aware, is or has been the
subject of an enquiry, investigation, reference or
report under the Trading Act, ("Gesetz gegen den
unlauteren Wettbewerb") the Competition Act ("Gesetz
gegen Wettbewerbsbeschran-kungen") or by the Commission
or any other regulatory authority.
2.2 The Vendor has not in relation to the Activity given any
assurances or undertaking to the Commission or Court or First
Instance or Court of Justice of the European Communities, or any
other court or similar person or body.
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3. Taxation
3.1 The Vendor has filed or caused to be filed all federal, state,
local and foreign tax returns which are required to be filed by
it especially as far as trade tax, corporate tax, wage tax and
VAT is concerned and it has paid or caused to be paid all taxes
as shown on the said returns for any assessments received by it
to the extent that such tax would have become due.
3.2 The Vendor has filed or caused to be filed all returns with
regard to social security contributions and has withheld and paid
all respective amounts as shown on the said returns.
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SCHEDULE 5
PURCHASER'S AND GUARANTOR'S WARRANTIES
1. Organisation
Each of the Purchasers and the Guarantor is a corporation duly organised
and validly existing and has all requisite corporate power and authority to
own, lease and operate its properties and business as presently conducted
and to enter into and perform its obligations under the Transaction
Documents. The US Purchaser is in good standing under the laws of the State
of Michigan.
2. Corporate Authority
The execution, delivery and performance of the Transaction Documents
by the Guarantor and the Purchasers and the consummation by the
Guarantor and the Purchasers of the transactions contemplated
thereby have been duly authorised by all requisite corporate action
on the part of the Purchasers and the Guarantor. The Transaction
Documents have been or will be duly executed and delivered by the
Guarantor and the Purchasers where they are party to the same and
constitute the legal, valid and binding obligation of the Guarantor
and the Purchasers party thereto, enforceable against the Guarantor
and the Purchasers in accordance with their terms, except to the
extent that enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally and subject to general principles of equity.
3. Qualification
Each of the Guarantor and the Purchasers is entitled to do business as a
foreign corporation in and is in good standing under the laws of each
jurisdiction in which the conduct of its business or the ownership of its
assets requires such qualification, except where the failure so to qualify
would not have a material adverse effect on its business, assets or
financial condition.
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4. No Conflict
Neither the execution or the delivery of any of the Transaction Documents
by the Guarantor and/or the Purchasers nor the consummation of the
transactions contemplated thereby will conflict with or result in a breach
of any of the provisions of, or constitute a default under, the charter,
by-laws or Memorandum or Articles of Association of the Guarantor and/or
Purchasers, as amended to date, or any agreement, mortgage, indenture,
lease or other instrument to which any of the Guarantor and/or the
Purchasers is a party or by which any of the Guarantor or the Purchasers or
its property is bound, or result in the violation of any law, rule,
regulation, order, judgment or decree to which any of the Guarantor or the
Purchasers or its property is subject.
5. Consents
To the best of the knowledge of the Guarantor and the Purchasers, no
consent, approval or authorisation of, or declaration or filing with, any
governmental authority is required on the part of the Guarantor or the
Purchasers in connection with the execution, delivery or performance of the
Transaction Documents by them, except for filings with the Federal Trade
Commission and the Department of Justice under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976. No approval, consent or authorisation
of any lender, lessor or other person is required in order for the
Guarantor or the Purchasers to consummate the transactions contemplated by
the Transaction Documents.
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SCHEDULE 6 (OMITTED)
INTELLECTUAL PROPERTY AGREEMENTS
99
<PAGE>
SCHEDULE 7 (OMITTED)
THIRD PARTY CONSENTS
100
<PAGE>
SIGNED by /s/ James Zigel
--------------------
for and on behalf of LUCAS LIMITED
in the presence of:- Mary K. Krigbaum
SIGNED by /s/ James Zigel
--------------------
for and on behalf of LUCAS AUTOMATION &
CONTROL ENGINEERING INC.
in the presence of:- Mary K. Krigbaum
SIGNED by /s/ James Zigel
--------------------
for and on behalf of LUCAS AUTOMATION
AND CONTROL ENGINEERING GmbH
in the presence of:- Mary K. Krigbaum
SIGNED by /s/ James Zigel
--------------------
for and on behalf of LUCAS INDUSTRIES plc
in the presence of:- Mary K. Krigbaum
SIGNED by /s/ James Zigel
--------------------
for and on behalf of LUCAS AUTOMATION
& CONTROL ENGINEERING LIMITED
in the presence of:- Mary K. Krigbaum
SIGNED by /s/ Bruce P. Erdel
--------------------
for and on behalf of ASSEMBLY
TECHNOLOGY & TEST LIMITED
in the presence of:- Rita Deckard
SIGNED by /s/ Bruce P. Erdel
--------------------
for and on behalf of ASSEMBLY
TECHNOLOGY & TEST, INC.
in the presence of:- Rita Deckard
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SIGNED by /s/ Bruce P. Erdel
--------------------
for and on behalf of ASSEMBLY
TECHNOLOGIE & AUTOMATION GmbH
in the presence of:- Rita Deckard
SIGNED by /s/ Bruce P. Erdel
--------------------
for and on behalf of DT INDUSTRIES, INC.
in the presence of:- Rita Deckard
102
<PAGE>
The following page contains a list of Schedules which have been
intentionally omitted by the Registrant pursuant to Item 601(b)(2) of Regulation
S-K.
A copy of any omitted Schedule will be provided to the Securities and
Exchange Commission upon request.
<PAGE>
SCHEDULE 2 Accounting Principles
SCHEDULE 3 PART 1 Pro-forma draft Completion Statements and Aggregation
Statement
PART 2 Allocation of purchase price
SCHEDULE 6 Intellectual Property Agreements
SCHEDULE 7 Third Party Consents
DATED: July 29, 1997
(1) LUCAS AUTOMATION & CONTROL ENGINEERING, INC.
(2) LUCAS INDUSTRIES plc
(3) ASSEMBLY TECHNOLOGY & TEST, INC.
A G R E E M E N T
relating to the
Sale and Purchase of the United States Assets of
Lucas Assembly & Test Systems
Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, Illinois 60601-1293
Tel: (312) 368-2181
Fax: (312) 236-7516
Attention: Mary K. Krigbaum
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS ................................................. 2
1.1 Specific Terms ..................................... 2
1.2 Statutory References ............................... 20
1.3 Interpretation ..................................... 20
2. SALE AND PURCHASE OF THE BUSINESS ........................... 21
2.1 The Assets ......................................... 21
2.2 Real Property; Intellectual Property and Know-How .. 23
2.3 Consigned Inventory ................................ 23
2.4 Payment of Payables by Purchaser ................... 24
2.5 Excluded Assets .................................... 24
2.6 Performance by Other Members of Lucas Group ........ 26
2.7 Third Party Tooling ................................ 27
2.8 Assets with Proprietary Markings ................... 27
2.9 Limited Use of Name ................. .............. 27
2.10 Waiver of Compliance with Bulk Sales Laws .......... 27
3. THE CONSIDERATION ........................................... 28
3.1 Purchase Price ..................................... 28
3.2 Allocation of Purchase Price ....................... 28
3.3 Sales Tax .......................................... 28
4. CLOSING ..................................................... 28
5. FURTHER ASSURANCE AND THE CONTRACTS ......................... 29
5.1 Further Assurances ................................. 29
5.2 Performance and Indemnification re Contracts ....... 29
5.3 Contracts Requiring Novation or Consent ............ 29
5.4 Sub-Contractors .................................... 30
5.5 Expenses of Assignment ............................. 31
5.6 Letters of Credit .................................. 31
5.7 Assignment of MOUs ................................. 32
6. RECEIVABLES ................................................. 32
6.1 Collection of Receivables .......................... 32
6.2 Remittance of Receivables Collected by Seller ...... 32
7. THE TRANSFERRING EMPLOYEES .................................. 32
7.1 Offer of Employment ................................ 32
7.2 Welfare Benefit Plans .............................. 33
7.3 Indemnification for Severance Obligations .......... 33
i
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7.4 Records of Transferring Employees .................. 33
7.5 Workers Compensation Claims ........................ 33
8. COSTS AND EXPENSES .......................................... 34
9. INDEMNITY AND LIABILITIES ................................... 35
9.1 Assumption of Liabilities .......................... 35
9.2 Excluded Liabilities ............................... 38
9.3 Environmental Liability ............................ 40
9.4 Indemnity by Purchaser ............................. 42
9.5 Release from Guarantees ............................ 42
9.6 Indemnity by Seller ................................ 42
9.7 Procedure .......................................... 43
9.8 Special Provision Regarding Taxes .................. 43
10. PRODUCT LIABILITY AND PRODUCT WARRANTY ...................... 43
10.1 Assumption of Obligations .......................... 43
10.2 Indemnification .................................... 44
11. POST CLOSING COVENANTS ...................................... 45
11.1 Non-Competition; Non-Solicitation;
Non-Interference ................................... 45
11.2 Exceptions ......................................... 47
11.3 Modification ....................................... 49
11.4 Severability ....................................... 49
11.5 Description of Competitive Goods ................... 49
12. LICENSE OF LICENSED INTELLECTUAL PROPERTY ................... 49
12.1 Grant of License ................................... 49
12.2 No Assignment Without Consent ...................... 50
12.3 Termination of License ............................. 50
12.4 Effect of Termination .............................. 50
12.5 Infringement of Licensed Intellectual Property ..... 50
12.6 Subsequent Licenses of Licensed Intellectual
Property ........................................... 51
13. RISK OF LOSS AND TITLE ...................................... 52
13.1 General ............................................ 52
13.2 Tornado Damage ..................................... 52
14. EXCLUSIONS .................................................. 53
15. COMPLIANCE WITH HSR ACT ..................................... 53
ii
<PAGE>
16. INSPECTION OF DOCUMENTS ..................................... 54
17. ASSIGNMENT PROHIBITED ....................................... 54
18. SURVIVAL OF CERTAIN PROVISIONS .............................. 54
19. GOVERNING LAW ............................................... 55
20. COUNTERPARTS ................................................ 55
21. SEVERABILITY ................................................ 55
22. NOTICES AND OTHER COMMUNICATIONS ............................ 56
23. NO THIRD PARTY BENEFICIARIES ................................ 56
24. MODIFICATION ................................................ 56
25. WAIVER OF PROVISIONS ........................................ 56
SCHEDULES
SCHEDULE 1 - The Leased Assets
SCHEDULE 2 - The Machinery and Equipment
SCHEDULE 3 - The Real Property
SCHEDULE 4 - Transferring Employees
SCHEDULE 5 - Intellectual Property Agreements
SCHEDULE 6 - Intentionally Omitted
SCHEDULE 7 - Pensions
SCHEDULE 8 - Registered Intellectual Property
SCHEDULE 9 - Part 1: Trade Mark Assignment
Part 2: Patent Assignment
Part 3: Assignment of Unregistered Intellectual
Property
Part 4: Assignment of Know-How
SCHEDULE 10 - Forward Exchange Currency Contracts
SCHEDULE 11 - Bills of Exchange
SCHEDULE 12 - Letters of Credit
SCHEDULE 13 - Bonds, Guarantees and Indemnities
SCHEDULE 14 - Memoranda of Understanding
SCHEDULE 15 - Expired Patents
SCHEDULE 16 - Competing Activities
iii
<PAGE>
AGREEMENT
THIS AGREEMENT is made on July 29, 1997, BETWEEN LUCAS AUTOMATION & CONTROL
ENGINEERING, INC., a Virginia corporation ("Seller"), whose executive offices
are located at 1000 Lucas Way, Hampton, Virginia, ASSEMBLY TECHNOLOGY & TEST,
INC., a Delaware corporation ("Purchaser"), whose executive offices are located
at Corporate Centre, Suite 2-300, 1949 East Sunshine, Springfield, Missouri, and
LUCAS INDUSTRIES plc, whose registered office is at Stratford Road, Solihull,
B90 4LA England ("Lucas").
RECITALS:
A. The Seller carries on the Business at the Real Property and Leased
Real Property (as each such term is defined below).
B. Members of the Lucas Group (as defined below) carry on businesses
similar to that of the Business in Germany and England.
C. Members of the Lucas Group are to sell the businesses referred to in
(B) above to the Purchaser or members of the Purchaser's Group (as defined
below) on terms similar to those contained in this Agreement.
D. The Seller has agreed to sell the Business and the Assets (as defined
below) to the Purchaser on the terms and conditions hereinafter appearing and in
the Umbrella Agreement (as defined below).
E. Lucas enters into this Agreement for the sole purpose of making the
covenants set forth in Section 11 of this Agreement.
<PAGE>
F. The Umbrella Agreement regulates the terms and conditions on which the
Business and the businesses referred to in (B) above are to be sold.
G. The Purchaser is acquiring substantially all the assets of the
Business, which assets comprise more than 75% of the Business. The Purchaser
intends to continue to operate the Business as a going concern.
AGREEMENTS
In consideration of the mutual covenants and agreements of the parties and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:-
1. DEFINITIONS.
1.1. Specific Terms. In this Agreement (which term shall include the
Recitals of and Schedules to this Agreement), except where inconsistent with the
subject matter or context, the following words and expressions shall have the
following meanings respectively:
"the Accruals" Any liability of the Seller relating
to the Business which is to be
settled after the Closing Date in
the course of carrying on the
Business in respect of a period of
time which commences before the
Closing Date and ends after such
date
"the Amounts Recoverable on Contracts" The amounts recoverable by the
Seller on the Customer Contracts
in accordance with their respective
terms together with the
2
<PAGE>
work-in-progress which is the
subject of the Customer Contract in
question in respect of which the
amount is recoverable, as at the
Closing Date
"the Assets" The assets specified in clause 2.1,
the Real Property to be sold and
purchased or otherwise dealt with in
accordance with this Agreement, and
the Intellectual Property and the
Know-How to be dealt with in
accordance with this Agreement
"Assumed Liabilities" The obligations and liabilities to
be assumed by Purchaser as described
in clause 9.1
"Bids" Any and all bids or tenders for the
sale of goods services of the
Business which are open as at the
Closing Date
"the Business" The business of the design, manu-
facture and implementation of
assembly line and testing equipment
with associated materials handling
and production control systems (and
the provision of services related
thereto) primarily for the
automotive components industry car-
ried on by the Seller at or from the
Real Property and the Leased Real
Property
3
<PAGE>
"Business Unit" Any part of a member of the Lucas
Group or the activities of such a
member in either case in respect of
which separate financial statements
have customarily been prepared by
the Lucas Group or the relevant
member
"Closing" Consummation of the sale and pur-
chase contemplated hereunder pur-
suant to clause 4 and "the Closing
Date" shall be construed as the
opening of business on the date on
which Closing takes place
"the Code" The Internal Revenue Code of 1986,
as amended
"Competitor" Any of the following companies or
any Subsidiary or Holding Company of
any of them or any other Subsidiary
of such Holding Company, namely:
Aixin Seiki Co Limited, Robert Bosch
GmbH, GM's Delphi Automotive
Systems, ITT Industries,
Nippondenso, Siemens, Stanadyne,
Zexel, Sundstrand, Parker Hannifin,
Allied Signal, Moog, Hamilton
Standard, Rolls-Royce, Valeo, Delco,
Motorola and Denso
"Completed Contract" Any contract or arrangement for the
supply of goods or services by the
Seller or any
4
<PAGE>
previous owner of the Business in
relation to the Business:
(i) pursuant to which the supply
of the relevant goods or
services was completed within
the two years immediately
preceding the Closing Date and
in respect of which any
warranty, guarantee, main-
tenance or similar obligation,
liability or commitment (a
"Warranty") given by the
Seller (or such previous
owner) remains outstanding and
has not expired by the Closing
Date; or
(ii) pursuant to which the supply
of the relevant goods or
services has been completed
and under which the customer
has prior to the Closing Date
made a claim under any
Warranty relating to such
goods or services
"the Consideration" The consideration for the Assets
hereby agreed to be sold as
determined in accordance with the
Umbrella Agreement
"the Contracts" Any and all current contracts and
arrangements of the Seller or any
member of the Lucas Group (in-
cluding, without
5
<PAGE>
limitation, current contracts
assumed by the Seller or any other
member of the Lucas Group to which
any previous owner of the Business
is a party) relating wholly to the
Business (or where any current con-
tracts and arrangements of the
Seller or any other member of the
Lucas Group relate only in part to
the Business then such part shall be
deemed to be included within the
definition) entered into before the
Closing Date (including, without
limitation, the Customer Contracts,
the Supplier Contracts, the agree-
ments relating to the Leased Assets
and Leased Real Property, and
forward exchange currency contracts
referred to in Schedule 10) and
which then remain (in whole or in
part) to be performed by the Seller
or any other member of the Lucas
Group, including without limitation,
the Completed Contracts and those
current contracts where any war-
ranty, guarantee, maintenance or
other similar obligation, liability
or commitment remains to be carried
out by any member of the Lucas Group
or where any payment obligations of
any member of the Lucas Group have
not been satisfied; provided, how-
ever, excluded from this definition
are:
6
<PAGE>
(i) contracts or arrangements to
the extent they relate to the
Excluded Assets or to the
Excluded Liabilities (other
than the Excluded Liabilities
referred to in clause 9.2(j)
and (k));
(ii) Group Sharing Arrangements;
and
(iii) contracts of employment of any
employees of any member of the
Lucas Group
"control" The possession, direct or indirect,
of the power to direct or cause the
direction of the management and
policies of a company, whether
through the ownership of voting
securities, by contract or otherwise
"the Customer Contracts" Any and all uncompleted purchase
orders from customers which were
accepted by the Seller prior to the
Closing Date which relate to the
Business and which then remain to be
performed in whole or in part
"DTI Competitor" Any of the following companies or
any Subsidiary or Holding Company of
any of them or any other Subsidiary
of such Holding Company, namely:
Giddings & Lewis, Thyssen, Bosch,
Western Atlas, B&K, Elcon, ABB,
Ingersoll Rand,
7
<PAGE>
Mohwald, Meidenscha, Mecelec, Stiwa,
Teim Techneck and Knoell
"Economic Value Added Bonus Scheme" The bonus scheme operated by the
Seller in respect of the Business,
details of which are contained in
Section 2 of Annex 3 to the
Disclosure Letter
"the Disclosure Letter" has the meaning given to that term
in the Umbrella Agreement
"ERISA" The Employee Retirement Income
Security Act of 1974, as amended
"the Excluded Assets" The assets, rights, claims and
benefits excluded from the sale to
the Purchaser as set out in clause
2.5
"the Excluded Liabilities" The liabilities to be retained by
the Seller as set out in clause 9.2
"Expired Patent" A granted patent (a) which at the
Closing Date has lapsed and cannot
be revived or (b) of which at the
Closing Date the term has expired
and cannot be extended, and which in
either case is listed as an expired
patent in Schedule 14
8
<PAGE>
"Final Completion Statement" Shall have the meaning given to that
expression in the Umbrella Agreement
"the Goodwill" The goodwill and going concern value
of the Seller in connection with the
Business
"Group Sharing Arrangements" Any and all contracts or arrange-
ments relating to the supply of
goods or services to the Seller in
respect of the Business and the
supply of the same or similar goods
or services to another member of the
Lucas Group or another Business Unit
from the same supplier
"the Guarantor" DT Industries, Inc., of Corporate
Centre, Suite 2-300, 1949 East
Sunshine, Springfield, Missouri
65804
"Holding Company" holding company as defined in
Section 736 of the Companies Act
1985
"Intellectual Property" The Registered Intellectual Property
and the Unregistered Intellectual
Property
"Intellectual Property Agreements" The licenses briefly described in
Schedule 5 in the Agreed Terms which
are to be entered into on Closing
"Intellectual Property Assignments" Assignments of the Intellectual
Property and
9
<PAGE>
Know-How set forth in the form or
forms set forth in Parts 1 to 4 of
Schedule 9
"the Inventory" All inventory, including raw
materials and components, spare
parts, operating supplies, main-
tenance and non-product stock,
finished goods, packaging materials,
packages and products in inter-
mediate stages of completion (except
where the same constitutes Amounts
Recoverable under Contracts) owned
by the Seller for use or sale in
connection with the Business at the
Closing Date
"Know How" All inventions, designs, techniques,
formulas, technical drawings and
specifications, market studies, con-
sultants' reports, competitive
samples, competitive samples,
engineering prototypes, trade
secrets, secret processes and other
confidential information which are
owned by the Lucas Group and which:
(i) relate exclusively to the
Business and which are not
used by any other member of
the Lucas Group or any
Business Unit other than the
Business; or
(ii) are to be licensed to the
Lucas Group at or following
Closing
10
<PAGE>
pursuant to the terms of the
Intellectual Property Agree-
ments
but excluding any of the same which
are expressly retained by any member
of the Lucas Group under the LAO
Agreement or the Intellectual
Property Agreements and excluding
the Unregistered Intellectual
Property
"the LAO Agreement" The agreement in the Agreed Terms
between Lucas Aftermarket Operations
and Assembly Technology & Test
Limited relating to the relationship
which will exist between those
parties after Completion
"the Leased Assets" Those Assets not owned by the Seller
which are used in the Business and
which are the subject of a lease
(whether a true lease or a financing
lease), which are listed in Schedule
1, excluding the Leased Real
Property
"the Leased Real Property" The real property commonly known as
12841 Stark Road, Livonia, Michigan,
12921 Stark Road, Livonia, Michigan,
and the parking lot adjacent to the
Real Property leased from the City
of Saginaw, Michigan
"the Letters of Credit" The letters of credit listed in
Schedule 12
11
<PAGE>
"License" The license of the Licensed
Intellectual Property granted by the
Seller to the Purchaser on Closing
pursuant to clause 12
"Licensed Intellectual Property" The unregistered trade marks, design
rights, copyright, know how and
other intellectual property rights
which are owned by the Lucas Group
and which:
(i) do not relate exclusively to
the Business in that they are
used by another member of the
Lucas Group or any Business
Unit but immediately prior to
Closing have to some extent
also been used by the Seller
in connection with the
Business; and
(ii) the Purchaser will require use
of in order to carry on the
Business in the same manner
after Closing as that carried
on by the Seller immediately
prior to Closing; and
(iii) which are not the subject
matter of the Intellectual
Property Agreements or the LAO
Agreement
"Lucas Central Treasury" The LucasVarity Treasury Department
presently based at 672 Delaware
Avenue, Buffalo, New York
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"the Lucas Group" LucasVarity and any company which is
a Subsidiary or Subsidiary Under-
taking of LucasVarity for the time
being and from time to time
"Lucas Internal Funding" All monies due to or from the
Business from or to Lucas Central
Treasury which is either quasi
capital or otherwise owed on capital
account or which had the Lucas
Central Treasury been a bank would
have amounted to an overdraft
"LucasVarity" LucasVarity plc, registered number
3207774
"the Machinery and Equipment" The fixed and moveable machinery,
tooling, computer equipment and
equipment (including vehicles)
owned by the Seller with an original
cost per item in excess of (pound)
5,000 which are used in the Business
and which are set forth in Schedule
2 and such other machinery, tooling,
furniture and equipment owned by the
Seller located at the Real Property
or the Leased Real Property and used
exclusively or primarily in the
Business
"MOUs" The memoranda of understanding
entered into by the Seller in
respect of the Business,
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including without limitation, those
listed in Schedule 14
"Net Current Asset Value" shall have the meaning given to that
expression in the Umbrella Agreement
"the Payables" The book and other debts owing by
the Seller in connection with the
Business to or in respect of trade
creditors, trade bills payable and
any other amounts owing to any
creditors of the Seller in respect
of the Business at the Closing Date
(whether or not then due and
payable), including without
limitation:
(i) the Accruals;
(ii) any amounts owed by the Seller
to any member of the Lucas
Group in respect of the
Business, or by the Business
to another Business Unit (in
each and any case on current
account), but excluding any
Lucas Internal Funding; and
(iii) any amounts owing to creditors
under the Group Sharing
Arrangements to the extent
they relate to the Business
"Person" An individual, partnership,
corporation,
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joint stock company, trust or
unincorporated organization
"the Prepayments" Each of the payments made in advance
by or on behalf of the Seller prior
to the Closing Date in the course of
conducting the Business in respect
of a period of time which commences
before the Closing Date and ends
after such date, but excluding (a)
any such payment to the extent the
Purchaser does not acquire the
benefit thereof or otherwise benefit
from such payment following Closing,
and (b) any such payment to the
extent it is not reflected in the
Net Current Assets Value
"the Project Prepayments" Any advance payments or deposits on
any Contracts made or paid by a
customer to the Seller
"the Purchaser's Attorney's" Dickstein Shapiro Morin & Oshinsky
LLP, 2101 L Street, N.W.,
Washington, D.C. 20037-1526
"the Purchaser's Group" The Guarantor and any company:
(i) which is a Subsidiary of the
Guarantor; or
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<PAGE>
(ii) over which the Guarantor has
control within the meaning
defined in this Agreement
for the time being and from
time to time
"the Real Property" The three parcels of real estate
described in Schedule 3, Part 1, and
the improvements thereon
"the Receivables" The accounts receivable and other
debts owing to the Seller in con-
nection with the Business by or in
respect of account debtors, trade
bills receivable (including without
limitation those bills of exchange
listed in Schedule 11) and any other
amounts owing to the Seller by
debtors in connection with the
Business at the Closing Date
(whether or not then due and pay-
able) including (without limitation)
any amounts owed by any member of
the Lucas Group to the Seller in
respect to the Business or owed to
the Business by another Business
Unit (in each and any case on
current account), but excluding any
Lucas Internal Funding
"the Records" All such records, lists of customers
and suppliers, accounts and other
documents relating exclusively to
the Business to enable
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<PAGE>
the Purchaser effectively to carry
on the same in succession to the
Seller
"Registered Intellectual Property" All registered patents and reg-
istered trade marks and applications
for the same specified in Schedule 8
owned by the Lucas Group
"the Seller's Attorneys" Rudnick & Wolfe, 203 North LaSalle
Street, Chicago, Illinois 60601
"the Specified Shared IP" All management manuals, instruction
manuals, Health and Safety manuals,
disaster recovery procedures, Pro-
ject Introduction Management systems
and other similar manuals and the
copyright and know how therein owned
by the Lucas Group and used in the
Business and by any other Business
Unit or member of the Lucas Group,
but specifically excluding any tech-
nical information contained therein
used in the design, manufacture and
implementation of assembly line and
testing equipment
"Subsidiary" subsidiary as defined in Section 736
of the Companies Act 1985
"Subsidiary Undertaking" subsidiary undertaking as defined in
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<PAGE>
Section 258 of the Companies Act
1985
"the Supplier Contracts" Any and all contracts and arrange-
ments which were entered into before
the Closing Date by or on behalf of
the Seller with suppliers for the
supply to the Seller of goods or
services in connection with the
Business which then remain to be
performed, in whole or in part, but
excluding the Group Sharing Arrange-
ments
"Taxes" Any tax and any duty, impost, levy
or governmental charge in the nature
of tax whether domestic or foreign
and any fine, penalty or interest
connected therewith including
corporation tax, advance corporation
tax, income tax, capital gains tax,
inheritance tax, capital transfer
tax, development land tax, value
added tax, customs, excise and
import duties, stamp duty and stamp
duty reserve tax and any other
payment whatsoever which the Seller
is or may be or become bound to make
to any person as a result of any
enactment relating to any of the
foregoing
"the Transferring Employees" Those employees of the Seller who
are employed in connection with the
Business at close of business on the
Closing Date whose
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<PAGE>
names and positions are set forth
in Schedule 4 and any other person
who is actively engaged as an
employee of the Seller and working
exclusively in the Business at
Closing and whose remuneration was
paid by the Business in the period
up to Closing (but excluding any
person whom the Seller or any other
member of the Lucas Group has
treated as a consultant or con-
tractor)
"the Umbrella Agreement" An agreement in the Agreed Terms
entered into on the same date as
this Agreement between the parties
hereto and certain other members of
the Lucas Group and the Purchaser's
Group
"Unregistered Intellectual Property" The unregistered trade marks, ser-
vice marks, design rights, copyright
and other intellectual property
rights which are owned by the Lucas
Group and which:
(i) are to be licensed to the
Lucas Group at or following
Closing pursuant to the terms
of the Intellectual Property
Agreements; or
(ii) relate exclusively to the
Business and are not used by
any other member of the Lucas
Group or any Business Unit
other than the Activity,
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<PAGE>
but excluding any such
intellectual property rights
which are expressly retained
by any member of the Lucas
Group under the LAO Agreement
or the Intellectual Property
Agreements and excluding the
Know How
1.2. Statutory References. References in this Agreement to statutes or
any statutory provisions shall include any statutory amendment, modification,
re-enactment or extension thereof and any orders, regulations, instruments or
other subordinate legislation made thereunder, in each case in force at the date
of this Agreement.
1.3. Interpretation.
(a) In this Agreement:
(i) the masculine gender shall include the feminine and neuter
and the singular number shall include the plural and vice versa;
(ii) references to persons shall include individuals,
unincorporated associations, partnerships, corporations, limited
liability companies, trusts or other entities;
(iii) the expression "the Seller" shall include its successors in
title; and
(iv) the headings contained in this Agreement are inserted for
convenience only and shall not affect its construction.
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<PAGE>
(b) Whenever a document is referred to as being "in the Agreed
Terms", it shall be in the form agreed and initialled by or on behalf of
the Seller and the Purchaser.
(c) Except where the contrary is stated, any reference herein to a
clause or Schedule or party is to a clause of or Schedule or party to this
Agreement and any reference within a clause or Schedule to a sub-clause,
paragraph or other sub-division is a reference to such sub-clause,
paragraph or other sub-division so numbered or lettered in that clause or
Schedule. The Schedules form part of this Agreement and shall have the same
force and effect as if expressly set forth in the body of this Agreement.
2. SALE AND PURCHASE OF THE BUSINESS.
2.1. The Assets. The Seller shall sell, free from all charges, liens,
other encumbrances or third party claims, and the Purchaser shall purchase as at
and with effect from Closing all of the Seller's right, title and interest in
and to the Business on a going concern basis consisting of only the following in
addition to the assets referred to in clause 2.2:
(a) the benefit of the Contracts (subject to the burden attaching
thereto);
(b) the benefit of the Amounts Recoverable under Contracts;
(c) the Goodwill;
(d) the Machinery and Equipment;
(e) the Records;
(f) the Inventory;
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<PAGE>
(g) the Receivables and the benefit of the Prepayments;
(h) all sales data, catalogues, brochures, literature, forms, mailing
lists, art work, photographs and advertising material, in whatever form or
media, owned by the Seller and relating exclusively to the Business (but
subject to the provisions of clause 6 of the Umbrella Agreement);
(i) all telephone, facsimile, telex, e-mail, Internet and post office
box numbers and addresses owned by the Seller and relating exclusively to
the Business (but only to the extent that the same are assignable by the
Seller without any third party's consent; and subject to the provisions of
clause 6 of the Umbrella Agreement);
(j) all permits, approvals and qualifications issued by any
governmental unit, agency, board, body or instrumentality held by the
Seller and relating exclusively to the Business (but only to the extent
that the same are assignable by the Seller without any third party's
consent);
(k) all other tangible and intangible assets of whatsoever nature
owned by the Seller and which are exclusively used in the Business at the
Closing and not used by any member of the Lucas Group or any Business Unit
other than the Business and which do not form part of the Excluded Assets
and all other assets owned by the Seller to the extent that they are
reflected in the Final Completion Statement and the value thereof is
included in the Net Current Assets Value; and
(l) the benefit of all the Seller's rights against third parties
(including any claims, causes of action, choses in action, rights of
recovery and rights of set-off) (i) in connection with guarantees,
warranties (express or implied), covenants and representations given by
such third parties concerning the Business and any of the Assets and to the
extent only that such rights relate to liabilities assumed, or the
Machinery and
22
<PAGE>
Equipment or Inventory acquired, by the Purchaser hereunder, (ii) under
completed or other operative contracts save to the extent that those rights
are required in order to defend, mitigate or perform any of the Excluded
Liabilities or any matter in respect of which the Lucas Group has retained
liability or responsibility, and (iii) in respect of infringement of the
Expired Patents before the date of expiration or lapse of the same, in each
case insofar as such benefit is capable of assignment
except to the extent any of the foregoing are included within the Excluded
Assets.
2.2. Real Property; Intellectual Property and Know-How. With regard to
the Property, the Intellectual Property and the Know-How:
(a) the Seller shall sell, by Corporate Warranty Deed, and the
Purchaser shall buy the Real Property subject to the terms hereof and the
conditions of sale set out in Schedule 3, Part 2; and
(b) the Seller shall sell and the Purchaser will buy the Intellectual
Property and the Know-How pursuant to the Intellectual Property
Assignments, but without prejudice to such rights as are granted to the
Purchaser in relation thereto under this Agreement and/or the Umbrella
Agreement, including without limitation in respect of the US Warranties (as
defined in the Umbrella Agreement),
and in case of any conflict between the conditions referred to in Schedule 3 and
the other provisions of this Agreement, the provisions of Schedule 3 shall
control.
2.3. Consigned Inventory. At the Closing, the Seller shall deliver
possession to the Purchaser of any inventory held by the Seller on consignment
from others solely for the purposes of, or which is used exclusively in, the
Business. The Purchaser shall assume all the Seller's obligations with respect
to such consigned inventory.
23
<PAGE>
2.4. Payment of Payables by Purchaser. The Purchaser shall pay the
Payables in accordance with Seller's normal business practice in relation to the
Business and in any event within 90 days after Closing, without any deduction or
set off for whatsoever reason unless the Purchaser has a bona fide and genuine
reason for disputing whether a particular debt is due or delaying payment
thereof and gives notice thereof and of the reasons for disputing or delaying
payment to the Seller as soon as reasonably practicable. The Purchaser shall
indemnify the Seller against any and all expenses, costs, loss, damage and
liability incurred by the Seller as a result of or related to any failure or
delay by the Purchaser in paying the Payables.
2.5. Excluded Assets. It is agreed that this Agreement does not include
the sale of any assets or rights of the Seller, nor any assets or rights of any
other member of the Lucas Group other than those specifically referred to in
clauses 2.1 and 2.2 or rights expressly referred to elsewhere in this Agreement
as being sold hereunder. Without limiting the generality of the foregoing, the
following shall be expressly excluded and excepted from the said sale and
purchase (and nothing in this Agreement shall operate to transfer) any of the
following:
(a) the benefit to the Seller of this Agreement;
(b) ownership of the Leased Assets and Leased Real Property;
(c) any trademarks, trade names, products' names, patents, copy-
rights, registered designs and any other intellectual property rights of
the Seller or any other member of the Lucas Group or Business Unit or
(except as expressly permitted by this Agreement, the Intellectual Property
Agreements, the Umbrella Agreement or the LAO Agreement) any rights to use
the same, other than the Intellectual Property and the Know-How;
24
<PAGE>
(d) any right to use the names "Lucas" or "LucasVarity" or the Lucas
Group diagonal flash or any other similar trade mark or other distinctive
Lucas Group insignia except as provided herein, in the Umbrella Agreement
or in the LAO Agreement;
(e) the cash received in respect of the Project Prepayments and all
cash and cash equivalents in the Lucas Group's hand or any cash in Lucas
Group's bank accounts at Closing and the benefit of any payments in advance
made by the Seller in relation to the Business which are excluded from the
Prepayments;
(f) all checks and negotiable instruments issued in favor of any
member of the Lucas Group prior to Closing (except to the extent that any
such check or negotiable instrument constitutes part payment for any of the
Receivables sold hereunder appearing as an asset in the Final Completion
Statement and is taken into account in calculating the Net Current Assets
Value;
(g) the insurance claim with respect to the damage to the Leased Real
Properties in Livonia, Michigan caused by the storm or tornado in early
July, 1997, and any other insurance claim made by or available to the Lucas
Group and all unearned premiums under insurance policies or other rights to
refunds thereunder attributable to any period of time, except to the extent
reflected in the Final Completion Statement and the Net Current Assets
Value or reflected in the values agreed and allocated to the fixed assets
as shown in Part 2 of Schedule 3 to the Umbrella Agreement;
(h) any other claim made by or available to the Lucas Group in
respect of an event occurring prior to Closing other than those being sold
to the Purchaser pursuant to clause 2.1(l) hereof;
(i) corporation tax losses and the benefit of any claims made or to
be made for refunds of income taxes or any other taxes or tax allowance of
the Seller or any other
25
<PAGE>
member of the Lucas Group in relation to the Business for any period ending
on or prior to Closing except to the extent that the same are reflected in
the Net Current Assets Value;
(j) any Lucas Internal Funding; and
(k) the benefit of all contracts and arrangements excluded from the
definition of "the Contracts" pursuant to clause 1.1 (other than those
relating to the Transferring Employees).
2.6. Performance by Other Members of Lucas Group. If any of the Assets to
be sold hereunder by the Seller are owned by any other member of the Lucas Group
or any of the Transferring Employees is employed by any such other member, or
there is any other obligation of the Seller hereunder which is only capable of
being satisfied by or with the assistance of any such other member, the Seller
shall not be deemed to be in breach of this Agreement provided that the Seller
obtains, to the extent necessary, compliance by such other member with the terms
and conditions of this Agreement which the Seller hereby undertakes to do. Such
other member and, where appropriate, its employees, shall have the benefit of
any exclusions of liability contained herein in relation to the Assets and any
indemnity given by the Purchaser herein to the Seller in relation to the Assets,
the Business or the Transferring Employees. If any member of the Lucas Group
other than the Seller is or was party to any of the Contracts, the Completed
Contracts or the MOUs, the relevant provisions of clauses 5 and 9 shall apply to
such Contract, Completed Contract or MOU (as the case may be) as if the Seller
were party thereto and references in those clauses to the Seller shall, where
appropriate, be construed as references to the relevant member of the Lucas
Group. Accordingly, the relevant member of the Lucas Group shall be entitled to
benefit from the obligations undertaken and indemnities given by the Purchaser
in relation to that Contract, Completed Contract or MOU under those clauses.
26
<PAGE>
2.7. Third Party Tooling. Insofar as tooling used in the Business is owned
by a third party (and title to which accordingly does not pass to the Purchaser
hereunder), the Seller assigns to the Purchaser effective at Closing whatever
right, title or interest (if any) it may have in such tooling to the extent same
is assignable. A complete and accurate list of all such third party tooling
arrangements is set out in the Disclosure Letter.
2.8. Assets with Proprietary Markings. Where any of the Assets (including
packaging included in the Inventory) to be sold hereunder by the Seller contain
advertising, promotional or other written material bearing the "Lucas" and/or
"LucasVarity" name or the Lucas Group diagonal mark or other similar trade mark
or other distinctive Lucas Group trade dress, the provisions of the Umbrella
Agreement regarding the same shall apply.
2.9. Limited Use of Name. The Seller agrees that the Purchaser may (to the
extent that the Seller can grant any such right) for a period of twelve months
after Closing represent itself as carrying on the Business in succession to the
Seller but this agreement shall not grant or imply (and shall specifically
exclude) any right on the part of the Purchaser (save to the extent granted
herein, in the Umbrella Agreement or in the LAO Agreement) in the names or mark
"Lucas" or "LucasVarity" or in the Lucas Group diagonal flash or any other
similar trademark or other distinctive Lucas Group trade dress or in the
goodwill attaching thereto.
2.10. Waiver of Compliance with Bulk Sales Laws. The parties hereby waive
compliance with the provisions of any applicable bulk sales law in connection
with the transfer of the Assets hereunder. The Seller shall indemnify and hold
Purchaser harmless from and against any liabilities and expenses which may be
asserted by third parties against the Purchaser as a result of non-compliance
with such provisions (excluding, however, any liabilities which have been
specifically assumed pursuant to clause 9.1).
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<PAGE>
3. THE CONSIDERATION.
3.1. Purchase Price. The purchase price for the Assets shall be determined
in accordance with the Umbrella Agreement.
3.2. Allocation of Purchase Price. The Consideration and the Assumed
Liabilities shall be allocated for tax purposes to and among the Assets and the
covenants in a manner set forth in the Umbrella Agreement. The parties shall
report this transaction for federal, state, local and foreign tax purposes in
accordance with the provisions of the Umbrella Agreement, and shall not take any
position or action inconsistent therewith upon examination of any tax return, in
any refund claim, in any litigation, investigation or otherwise; provided,
however, that if, in any audit of any tax return of the Seller or the Purchaser
by a taxing authority, the allocations are finally determined to be different
from the allocation determined pursuant to the Umbrella Agreement, the Purchaser
and the Seller may (but shall not be obligated to) take any position or action
consistent with the allocations as finally determined in such audit.
3.3. Sales Tax. The Purchaser shall furnish the Seller with a resale
exemption certificate prior to the Closing so that the Seller is not required to
remit sales tax with respect to the Inventory and any other goods held for
resale. If the Purchaser fails to furnish such certificate to the Seller prior
to the Closing, the Purchaser shall pay to the Seller at the Closing all sales
taxes which are owed with respect to the sale to the Purchaser of any of the
Assets held for resale. The Purchaser and the Seller shall each bear 50% of the
first $10,000 of any other sales tax and all transfer taxes due with respect to
the purchase of the Assets. Any such sales taxes and transfer taxes in excess of
$10,000 shall be borne solely by the Purchaser.
4. CLOSING.
The Closing of the transactions contemplated pursuant to this Agreement
shall be determined in accordance with the Umbrella Agreement.
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<PAGE>
5. FURTHER ASSURANCE AND THE CONTRACTS.
5.1. Further Assurances. The Seller hereby agrees and declares that it
will, after and notwithstanding the Closing, execute and deliver any other
documents and take any other steps as may be reasonably required from time to
time by the Purchaser, at the Purchaser's expense, to vest in the Purchaser, or
as it may direct, the Assets (other than the Real Property which is governed by
the provisions of Schedule 3 and the Intellectual Property and Know How which
are governed by the Intellectual Property Assignments) on the terms of this
Agreement.
5.2. Performance and Indemnification re Contracts. Except to the extent
otherwise provided in clause 10.1(b), the Purchaser shall at and from the
Closing, at its own expense, assume and undertake to perform and discharge when
due or when required to be performed the liabilities and obligations of Seller
or any other member of the Lucas Group under the Contracts and shall be bound by
all the terms, conditions, obligations and liabilities arising from, in
connection with or related to the Contracts and the Purchaser shall keep the
Lucas Group indemnified against all expenses, costs, loss, damage, and liability
arising therefrom. For purposes of this Agreement, all Bids which are accepted
by customers after the Closing shall be deemed to be Contracts.
5.3. Contracts Requiring Novation or Consent. In the event that any of the
Contracts are not assignable by the Seller to the Purchaser except by way of an
agreement of novation with or consent to the assignment from any party thereto:
(a) the Seller and the Purchaser shall cooperate and use their
reasonable efforts to procure that the Contracts be novated or assigned as
soon as reasonably practicable;
(b) in connection with every novation or consent as aforesaid the
Purchaser shall indemnify and hold the Seller harmless from and against all
expenses, costs, loss,
29
<PAGE>
damage and liability arising by reason of or in connection with the
non-performance or the defective or negligent performance by the Purchaser
of such Contracts;
(c) unless and until all such Contracts have been novated or assigned
as aforesaid:
(i) the Seller shall continue its corporate existence and shall
hold the benefit of every such Contract which requires to be novated
or assigned but which has not yet been novated or assigned, in trust
for the Purchaser from Closing and shall account to the Purchaser
accordingly (whether in respect of any sums or other benefits
received by it in respect thereof) and otherwise act at the
reasonable direction of the Purchaser and as its agent in all matters
relating thereto subject to the Purchaser securing the Seller, to its
reasonable satisfaction and indemnifying and holding the Seller
harmless against, any expenses, costs, loss, damage, or liability,
which it may be brought against it or which it may suffer or incur as
a result or consequence, but subject to clause 5.5; and
(ii) the Purchaser shall, at its own cost and expense with
effect from the Closing, carry out, perform and complete all of the
Seller's obligations under every such Contract which has not been
novated or assigned as a subcontractor of the Seller and, where
subcontracting is not possible, the Purchaser shall perform the
contracts in accordance with their terms and conditions as agent for
the Seller.
5.4. Sub-Contractors. If the Seller has before the Closing sub-contracted
the performance of any Contracts to any Person, the Purchaser shall on Closing
assume responsibility for the relevant sub-contract and on behalf of the
relevant customer seek or accept delivery or performance from such person of the
goods or other products or services in respect
30
<PAGE>
of which such Contract was made and shall make the same available for collection
by such customer.
5.5. Expenses of Assignment. Any fee, charge or financial penalty levied
by a third party in respect of a novation or assignment of any Contract or in
connection with the termination of any existing Contract in order to permit
novation shall be shared equally by the Seller and the Purchaser; provided that
neither the Seller nor the Purchaser shall agree to pay any such fee, charge or
financial penalty without the prior written consent of the other of them (such
consent not to be unreasonably withheld or delayed). The Purchaser shall obtain
the execution of any guarantees by any member of the Purchaser's Group required
by such third party as a condition of any such novation or assignment. If any
other party to a Contract makes a claim against the Seller or the Purchaser
alleging that the sale of the Business to the Purchaser or the provisions of
this Agreement constitute a breach of such Contract, the Seller and the
Purchaser shall consult with regard to such claim and neither of them shall
accept the claim without the prior written consent of the other (not to be
unreasonably withheld or delayed). Any liability, costs and expenses incurred by
the Seller or the Purchaser as a result of any such claim shall be borne equally
by the Seller and the Purchaser.
5.6. Letters of Credit. The Seller has previously obtained the issuance of
letters of credit, including the Letters of Credit, to customers of the Business
to secure the repayment of deposits and Project Prepayments made by customers
with Seller in the event Seller does not fulfill its obligations to such
customers and to suppliers for purchase of inventory made in the ordinary course
of business. If any of such letters of credit are outstanding on the Closing
Date ("Seller's L/C's"), the Purchaser will provide to the Seller at the Closing
a back-to-back letter of credit issued by a bank reasonably acceptable to the
Seller in the same amount as the undrawn portion of Seller's L/C's providing
that the Seller may draw against such letter of credit from time to time at any
time after any Seller L/C's are drawn upon and in the same aggregate amount as
the draws on such Seller's L/C's.
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5.7. Assignment of MOUs. The Seller shall assign to the Purchaser all
right, title and interest which the Seller has (if any) in respect of the MOUs
and the Purchaser agrees to perform and discharge all obligations and
liabilities which the Seller has (if any) in respect of the MOUs. Accordingly,
the Purchaser agrees that the provisions of clauses 5.2 to 5.5 shall apply
mutatis mutandis in respect of such MOUs as if they were Contracts.
6. RECEIVABLES.
6.1. Collection of Receivables. The Purchaser will collect the Receivables
in a manner consistent with the way in which the receivables of the Business
were collected by the Seller prior to Closing and Purchaser shall not institute
proceedings for recovery of any of the Receivables without first giving the
Seller 7 days prior written notice and, if required by the Seller, the Purchaser
will re-assign to the Seller, at the Seller's sole cost and expense, the benefit
of any Receivables for an amount equal to the face value of such Receivable
(less any specific provision or reserve included in the Final Completion
Statement in respect of such Receivable).
6.2. Remittance of Receivables Collected by Seller. Any sums received by
the Seller after the Closing Date in relation to any of the Receivables (other
than any Receivables reassigned to the Seller pursuant to Section 6.1) shall
belong to the Purchaser and the Seller shall pay the same to the Purchaser as
soon as practicable and in any event within 7 days after receipt of the same by
Seller.
7. THE TRANSFERRING EMPLOYEES.
7.1. Offer of Employment. The Purchaser will offer continued employment to
all Transferring Employees at the same or better salary or wage rates and with
benefits as set forth on Schedule 7.1. This provision is not meant to create a
contract of employment, and, except as otherwise expressly provided in this
Agreement, the Purchaser may terminate the employment
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<PAGE>
or change the terms and conditions of employment of any employee at such time
and under such circumstances as the Purchaser deems appropriate.
7.2. Welfare Benefit Plans. The Purchaser shall provide employee welfare
benefit plans to the Transferring Employees of the Business who accept
employment with the Purchaser with benefits as set forth on Schedule 7.1 without
such Transferring Employees being subject to any waiting period or any exclusion
for pre-existing conditions.
7.3. Indemnification for Severance Obligations. The Purchaser shall
indemnify and hold the Seller and every member of the Lucas Group harmless
against (a) any liability or claim for severance arising in connection with the
termination of the employment of any of the Transferring Employees by the Seller
or the Purchaser (including severance claims in any way relating to or based
upon constructive termination of employment), (b) any damages arising in
connection with the termination of the employment of any of the Transferring
Employees by the Purchaser (including liabilities or claims in any way relating
to or based upon constructive termination of employment), and (c) all costs and
expenses reasonably incurred by the Seller in settling, contesting or dealing
with any such liability or claim.
7.4. Records of Transferring Employees. The Purchaser shall, for a period
of 12 months after the Closing and at Seller's request, make available to the
Seller and allow the Seller to copy those Records which relate to the
Transferring Employees' employment prior to the Closing. The Seller will for a
period of 12 months after Closing provide the Purchaser with copies of such
information and documents not comprised within the Records as the Purchaser may
reasonably require in relation to the Transferring Employees' employment prior
to Closing (but excluding any information or documents relating to any pension,
retirement and/or death benefits of the Transferring Employees).
7.5. Workers Compensation Claims. The Purchaser shall cooperate with the
Seller in resolving the Seller's Workers Comp Claims (as defined in Section
9.2(h)) on an efficient and
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economic basis. Such cooperation shall include, but not by way of limitation,
making employees of the Purchaser available in order to investigate, defend and
resolve the Seller's Workers Comp Claims, deal with the persons making such
Claims and working with the Seller's workers compensation insurance carrier, all
subject to the Seller's supervision and control.
7.6. Vesting Under Qualified Retirement Plans. Effective as of the Closing
Date, participants in either the Lucas Industries, Inc. Savings Plan ("Savings
Plan") or the Lucas Industries Retirement Account Plan For Hourly Employees
("Hourly Plan") who become employees of the Purchaser or an affiliate of the
Purchaser after Closing will become fully vested in their accrued retirement
benefits under the Hourly Plan or the Savings Plan. Participants in the Lucas
Industries Retirement Account Plan (the "Salaried Plan") will receive forward
service credit for purposes of vesting under the terms of the Salaried Plan for
the continuous period of service with the Purchaser or an affiliate of the
Purchaser beginning as of the Closing Date.
7.7. Provision of Records. For a period of five years from the Closing,
Purchaser shall provide the administrator of the Salaried Plan with records
relating to the period of employment of any participant in the Savings Plan who
is entitled to receive forward service credit for purposes of vesting under
Section 7.6.
7.8. No Additional Covenants. Seller makes no additional covenants
regarding the treatment of employees under the terms of any other employee
benefit plan disclosed to Purchaser pursuant to the Disclosure Letter.
8. COSTS AND EXPENSES.
Except as otherwise expressly provided in this Agreement, each party to
this Agreement shall bear its own costs and expenses in connection with this
Agreement and the negotiations leading thereto.
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9. INDEMNITY AND LIABILITIES.
9.1. Assumption of Liabilities. As additional consideration for the
purchase of the Assets, at the Closing, the Purchaser shall assume and undertake
to pay, perform and discharge when due or when required to be performed the
following:
(a) the Payables in accordance with Section 2.4;
(b) the Contracts, the Bids and the MOU's in accordance with clause 5
and any liabilities or obligations of the Seller arising out of any
Completed Contract (including, without limitation, any obligations or
liabilities arising out of a breach by the Seller prior to Closing of any
of its obligations under any such Contracts, MOU's or other Completed
Contracts);
(c) all the Seller's obligations to return any Project Prepayments to
customers of the Business;
(d) bills for real estate taxes on the Real Property rendered after
the Closing;
(e) federal, state and local income tax withholding, social security
tax contributions (both by employer and employee) and unemployment tax
contributions with respect to wages and salaries earned on or prior to the
Closing Date but not payable until after the Closing Date to the extent
such withholding and contributions are reflected or included in the
determination of the Net Current Assets Value and in the Final Completion
Statement;
(f) the Seller's obligations in respect of goods sold, leased or
otherwise disposed of or manufactured (in whole or in part only) by the
Seller (or any previous
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owner of the Business) or services performed by the Seller (or any previous
owner of the Business) in relation to the Business prior to Closing in
accordance with clause 10;
(g) the Seller's obligations in respect of the Transferring Employees
in accordance with clause 7, and the liabilities of the Seller for unpaid
accrued holiday pay to the Transferring Employees and any and all of the
Seller's obligations for the financial year of the Seller in which Closing
occurs with respect to the Economic Value Added Bonus Scheme;
(h) any liabilities of the Seller relating to the Business
(including, without limitation, any liability relating to Taxes) to the
extent that (i) provision or reserve therefor has been made and is
reflected in the Net Current Assets Value, or (ii) the subject matter
thereof is otherwise taken account of, or reflected in, the calculation of
the Net Current Assets Value; and
(i) any obligations, liabilities, losses, damages, claims, costs and
expenses arising from or relating to the matters referred to in the
following paragraphs of the Disclosure Letter:
(A) Part A paragraph 6.2 (the Toyota letter of intent);
(B) Part A paragraph 9 (Litigation) regarding only the problems
encountered in the Philippines with Hartridge smoke meters;
(C) Part A paragraph 10.2 (Action by Robert Bosch GmbH);
(D) Part A paragraph 14.2 (Liabilities relating to Joseph
Spalding); and
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(E) Part A paragraph 14.2 (Tornado damage to Livonia premises)
on the basis that the cost of effecting the repairs will be included
in the Final Completion Statement as a liability without taking into
account any insurance proceeds receivable with respect thereto;
(j) any liabilities of Seller under Article IV of the Agreement for
the Sale and Purchase of Assets dated June 11, 1991 between Lucas
Industries Inc., a Michigan corporation, and The Allen Group Inc., a
Delaware corporation now known as Allen Telecom Inc., Lucas Industries Inc.
having assigned all its rights and obligations under said Agreement to the
Seller;
(k) any liabilities of Seller under the following license agreements:
(i) Know-How and License Agreement dated December 31, 1988
originally made between Translift AG and The Allen Group
Inc., and currently in the names of Digitron AG and Lucas
Industries Inc.;
(ii) the Agreements dated February 26 and 28, 1991 originally
made between FrigoFrance, The Allen Group Inc. and Rapidfil
Corporation; and
(iii) the Monorail License dated February 16, 1996 between Riley
& Associates and Lucas Industries Inc.;
(l) any other liabilities or obligations of the Seller or any other
member of the Lucas Group relating to the Business agreed to be assumed by
the Purchaser under this Agreement or the Umbrella Agreement
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(hereinafter collectively referred to as the "Assumed Liabilities").
9.2. Excluded Liabilities. The Purchaser shall not assume, and the Seller
shall remain responsible for, the following liabilities arising out of the
conduct of the Business by the Seller or any other member of the Lucas Group
before Closing:
(a) any liability of the Seller for borrowed money (other than in
respect of the Leased Assets);
(b) any Lucas Internal Funding;
(c) any liability of the Seller with respect to Taxes in respect of
the Business except to the extent the same is included within the Assumed
Liabilities or is otherwise agreed to be discharged by the Purchaser under
this Agreement or the Umbrella Agreement;
(d) any liability or obligation of the Seller with respect to any
employee benefit plan (within the meaning of Section 3(3) of ERISA),
employment, severance or other similar contract, stock purchase plan, stock
option plan, stock appreciation plan, fringe benefit plan, bonus plan or
any other deferred compensation agreement, plan, policy or other funding
arrangement sponsored, maintained or contributed to by the Seller, other
than the bonus plan included in the Assumed Liabilities and except as
otherwise provided in Section 7.3;
(e) federal, state and local income tax withholding, social security
tax contributions (both by employer and employee) and unemployment tax
contributions with respect to (i) wages and salaries paid on or prior to
the Closing Date, and (ii) wages and salaries earned on or prior to the
Closing Date which are payable after the Closing Date,
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to the extent such withholding and contributions are not reflected or
included on the Final Completion Statement as an Assumed Liability;
(f) employee discrimination, wrongful discharge and unfair labor
practice claims arising out of the conduct of the Business by the Seller
prior to the Closing Date;
(g) any liability of the Seller in respect of defective goods sold or
services supplied by the Seller which is to be retained by the Seller in
accordance with clause 10.1(b);
(h) any and all liability relating to or arising out of workers
compensation claims relating to the Business to the extent such claims
result from or arise out of occurrences prior to the Closing (whether or
not such claims are filed prior to the Closing) (the "Seller's Workers Comp
Claims");
(i) any criminal liability of the Seller arising out of a breach of
statutory duty or laws applicable to the Business by the Seller prior to
the Closing Date;
(j) any liabilities arising from a breach of laws applicable to the
Business by the Seller or other members of the Lucas Group prior to Closing
which:
(i) automatically attach to the Purchaser by operation of law;
and
(ii) are material in the context of the Activities (as defined
in the Umbrella Agreement) taken as a whole;
(iii) are not Assumed Liabilities; and
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(iv) do not relate to environmental matters (which are dealt
with in clause 9.3),
but excluding any such liabilities incurred by the Purchaser as a result of
or relating to any act or omission of any member of the Purchaser's Group
following Closing; and
(k) any other liabilities of the Seller or any other member of the
Lucas Group arising out of the conduct of the Business by the Seller or any
other member of the Lucas Group before Closing and which:
(i) are not comprised within the Assumed Liabilities; and
(ii) do not relate to any breach of laws to the extent such
liabilities are dealt with in clause 9.2(i); and
(iii) do not relate to environmental matters (which are dealt
with in clause 9.3).
9.3. Environmental Liability. The Purchaser shall not assume, and the
Seller shall indemnify the Purchaser against any and all expenses, costs, loss,
damages and liability (excluding consequential or economic loss) arising out of
(i) any claims made by any unaffiliated third party seeking damages or
injunctive relief relating to environmental matters affecting the Real Property
or the Leased Real Property under applicable Environmental Laws (as defined in
the Umbrella Agreement) or the common law, or (ii) any orders or other official
actions of any federal, state or other government body or authority regarding
correction, removal, abatement, remediation or clean-up in respect of the Real
Property or Leased Real Property under the Environmental Laws, if and only to
the extent that such claims, orders or official actions result from and relate
to the conduct of the Business prior to Closing or the condition of the Real
Property or Leased Real Property at the Closing Date, PROVIDED THAT:
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(a) the total amount payable by the Seller under this clause in
respect of any such claims, orders or official actions to the
extent they result from or relate to the condition of the Real
Property or Leased Real Property before it was acquired or leased
by the Lucas Group or arise from or relate to any act or omission
of any previous owner of the Business before the Lucas Group (a
"Predecessor's Liability") shall (when aggregated with any
payments made for breach of the Warranties (as defined in the
Umbrella Agreement) and any payments made pursuant to equivalent
clauses in the other Sale Agreements (as defined in the Umbrella
Agreement)) not exceed fifty percent of the Consideration; and
(b) the Seller shall not be liable to the Purchaser pursuant to this
Agreement in respect of any such claims, orders or official
actions relating to or resulting from a Predecessor's Liability
unless written notice of the claim, order or official action
(together with reasonable details thereof) is given by the
Purchaser to the Seller within the three years immediately
following the Closing Date and any proceedings, orders or
official actions against the Seller in respect thereof are issued
and served on the Seller within 9 months after such notice has
been so given; and
(c) the liability of the Seller under this clause shall not be
increased as a result of any change in law of any federal, state
or other governmental body or authority occurring after the
Closing Date; and
(d) the Seller shall not be liable in respect of any claim brought by
the Purchaser under this clause 9.3 unless the liability of the
Seller in relation thereto shall (when added to the liability of
Lucas Limited in respect of claims made under the equivalent
provisions of the English Sale Agreement (as defined in the
Umbrella Agreement)) exceed (pound)25,000.
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9.4. Indemnity by Purchaser. The Purchaser hereby undertakes to indemnify
and hold the Lucas Group harmless from and against any and all expenses, costs,
loss, damage and liability which the Lucas Group may suffer or incur directly or
indirectly in respect of or arising out of:
(a) the Assumed Liabilities or the failure or delay by the Purchaser
in paying, performing or discharging the Assumed Liabilities;
(b) the operation of the Business after the Closing Date; or
(c) the Purchaser's failure to comply with any applicable provisions
of the Worker Adjustment and Retraining Notification Act.
9.5. Release from Guarantees. The Purchaser will use all reasonable
efforts (including procuring the giving of guarantees by the Guarantor where
required) to procure that on or as soon as practical after Closing each member
of the Lucas Group is released from its liability (whether actual or contingent)
in respect of those bonds, guarantees and indemnities given by any of them
before Closing in respect of the Business which are listed in Schedule 13 or
which are identified in the Disclosure Letter. The Purchaser will indemnify the
Lucas Group against any and all expenses, costs, loss, damage and liability
which the Lucas Group may suffer or incur directly or indirectly in respect of
or otherwise arising out of any claim or other demand made on the Lucas Group
(whether made before or after Closing) in respect of the bonds, guarantees or
indemnities given by any member of the Lucas Group before Closing in respect of
the Business and listed in Schedule 13 or identified in the Disclosure Letter or
in respect of any other bonds, guarantees or indemnities given by the Lucas
Group but in their case only to the extent the underlying obligation constitutes
an Assumed Liability.
9.6. Indemnity by Seller. The Seller hereby undertakes to indemnify and
hold harmless the Purchaser against any and all expenses, costs, loss, damage
and liability which the
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Purchaser may suffer or incur directly or indirectly in respect of or arising
out of the Excluded Liabilities or the failure or delay by the Seller in paying,
performing or discharging the Excluded Liabilities in accordance with clause
9.2.
9.7. Procedure. Before any party makes any payment or offers any other
remedy to a third party or takes any other remedial or corrective action in
respect of matters for which it is entitled to an indemnity from any other party
hereto under the terms of this clause 9 or otherwise under this Agreement it
shall give a reasonable opportunity to such other party to verify and, if
appropriate, remedy the default, defect, omission or other matter giving rise to
the claim in question subject always to such third party allowing the same.
9.8. Special Provision Regarding Taxes. In the event that this Agreement
requires or entitles any party to pay or receive a payment of or in respect of
Taxes and the relevant legislation provides that payment must be made to or by
another party to this Agreement, the relevant parties shall make such adjusting
payments between themselves and at such times as are necessary to give effect to
the intention expressed in this Agreement.
10. PRODUCT LIABILITY AND PRODUCT WARRANTY.
10.1. Assumption of Obligations. Without limiting the generality of any
other provision of this Agreement, the Purchaser shall be liable:
(a) (except in relation to products the subject of the LAO Agreement
which shall be governed by the terms of that agreement) to carry out, in
accordance with its terms, any warranty, guarantee or other similar
obligation or commitment ("Warranty Work" which expression includes any
materials supplied, labor involved and any other costs and expenses
incurred):
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(i) given or undertaken by the Seller (or any previous owner of
the Business) in respect of any goods sold, leased or otherwise
disposed of, or in respect of any services performed, under any
contract entered into or assumed by the Seller (or any previous owner
of the Business) prior to the Closing Date in connection with or
related to the Business; or
(ii) given or undertaken by the Purchaser in respect of goods
sold, leased or otherwise disposed of, or in respect of services
performed, by the Purchaser following the Closing Date which
incorporate products manufactured or purchased by the Seller prior
thereto or work in progress of the Seller at Closing; and
(b) for all loss, damage or liability (other than Warranty Work)
arising out of any defective goods sold, leased or otherwise disposed of or
defective or negligent services provided by the Seller (or any previous
owner of the Business) in connection with the Business prior to the Closing
whether under any Contract or any other contract entered into by the Seller
(or any previous owner of the Business) prior to the Closing in relation to
or in contemplation of the Business or arising out of defective goods
bought in or manufactured (in whole or in part) by the Seller (or any
previous owner of the Business) and sold subsequently by the Purchaser and
whether or not the claim is made against the Lucas Group or the Purchaser,
unless the event or incident (which for the avoidance of doubt shall not
include the actual sale, lease, disposal or provision of goods or services
by the Seller (or any previous owner of the Business)) giving rise to any
such liability occurred before the Closing Date in which event such loss,
liability or damage shall be borne by the Seller.
10.2. Indemnification. The Purchaser shall indemnify the Lucas Group
against all costs, expenses, loss, damage or liability arising out of any breach
by the Purchaser of the provisions of clause 10.1. The Seller shall indemnify
the Purchaser's Group against all costs,
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expenses, loss, damage or liability arising out of a failure by the Seller to
discharge its obligations under clause 10.1(b).
11. POST CLOSING COVENANTS.
11.1. Non-Competition; Non-Solicitation; Non-Interference.
(a) For the purposes of assuring to the Purchaser the full benefit of
the Business and the Goodwill and in consideration of the agreement of the
Purchaser to buy the Assets on the terms of this Agreement and the Umbrella
Agreement, Lucas hereby undertakes to the Purchaser that it will not and it
agrees to procure that no other member of the Lucas Group will, either
alone or in conjunction with or on behalf of any other person:
(i) anywhere in the world for the period from Closing to
December 31, 2000 be engaged or (save as the holder of shares or
other securities in any company which are quoted, listed or otherwise
dealt in on a recognized stock exchange or other securities market
which confer not more than 5% of the votes which could be cast at a
general meeting of the company concerned) directly or indirectly be
concerned or interested in any trade or business which involves the
sale or distribution of goods which are competitive as specified in
clause 11.5 or the provision of services in relation to the design,
installation or use of such competitive goods ("Competing Services")
to a Person who is not a member of the Lucas Group and which in any
such case actually competes with the Business as it is carried on at
Closing;
(ii) for a period of one year from Closing without the prior
written consent of the Guarantor make any offer of employment to any
engineer, designer, assembler or other senior employee included
within the Transferring
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Employees while such employee remains employed by any member of the
Purchaser's Group;
(iii) for a period of three years from Closing without the prior
written consent of the Guarantor solicit the services of (whether as
an employee or otherwise) or attempt to entice away any engineer,
designer, assembler or other senior employee included within the
Transferring Employees while such employee remains employed by any
member of the Purchaser's Group;
(iv) for the period from Closing to December 31, 2000 either
personally or by any agent directly or indirectly either on its own
account or for any other person solicit in competition with the
Business the custom of any person who is not a member of the Lucas
Group in respect of goods which are competitive as specified in
clause 11.5 or in respect of Competing Services if such person was
within twelve months prior to or at the Closing Date a customer of
the Seller in respect to the Business;
(v) for the period from Closing to December 31, 2000 interfere
or seek to interfere with the continuance of supplies to the
Purchaser (or in the terms relating to such supplies) from any
persons who had been supplying materials or services to the Seller
in respect of the Business within the twelve months prior to the
Closing Date; or
(vi) save as may be required by law or the regulations of the
New York Stock Exchange or the London Stock Exchange Limited for a
period of five years from Closing reveal to any person any of the
trade secrets, secret or confidential operations, processes or
dealings or any other confidential information concerning the Assets
or the Business including (without limitation) customer lists and
names, sales targets and statistics, market share statistics, surveys
and reports so far as
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the same have come to the Seller's knowledge before the Closing Date
but so that this restriction shall cease to apply to information
which otherwise than through default of any member of the Lucas
Group becomes available to the public generally.
11.2. Exceptions. Nothing in clause 11.1 shall prevent the Lucas Group or
any member of it:
(a) from continuing to carry on or developing its business known as
the Lake Center Model Shop or from continuing or developing any of its
other existing businesses provided they do not actually compete with the
Business as it is carried on at Closing or from operating in-house
engineering and testing facilities for any member of the Lucas Group;
(b) from providing consulting and other services in relation to the
design, manufacture and/or use of engine or engine fuel systems testing or
assembly equipment to its own customers or third parties licensed by the
Lucas Group (excluding the Activities) to manufacture product;
(c) from selling or supplying assembly or testing equipment in support
of products designed, developed or distributed by the Lucas Group to any
customer in connection with an agreement for the supply of a product by the
Lucas Group or to a licensed manufacturer of Lucas Group products to whom
any member of the Lucas Group is providing technical assistance;
(d) from acquiring, holding or operating any business or the shares or
other securities of any company (including, without limitation, shares
which are quoted, listed or otherwise dealt in on a recognized stock
exchange or other securities market) or group of companies or participating
in any joint venture:
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(i) where an incidental part of the activities of such
business, company, group of companies, or joint venture comprises a
business which either supplies competitive goods (as described in
clause 11.5) or which provides Competing Services and which actually
competes with the Business as it is carried on at Closing; and
(ii) where the principal purpose of such acquisition or
participation is not to acquire or participate in a business which is
competitive as so described;
provided that the relevant member of the Lucas Group shall within 12 months
after acquiring any such business, company or group of companies offer to
sell to the Guarantor such incidental part which competes with the Business
and the Guarantor and such member of the Lucas Group shall negotiate in
good faith with a view to agreeing upon the terms for such sale (but shall
not be obligated to close such sale if mutually acceptable terms cannot be
agreed upon); or
(e) from carrying on any of the activities contemplated by the LAO
Agreement or by the Intellectual Property Agreements or from enjoying or
exercising any benefits or rights granted to any member of the Lucas Group
pursuant thereto;
Nothing in clause 11.1 shall prevent:
(i) Lucas Electrical and Electronic Systems AVSD facility or any
successor to its business or Varity Perkins Limited or any successor to its
business from providing testing services to third parties in relation to
engine or engine fuel systems; or
(ii) Lucas TVS Limited or any member of the Lucas Group other than
the Business from operating under any licenses or agreements which have
been entered into before the date hereof and are referred to in the
Disclosure Letter; or
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(iii) the companies or Business Units listed in column 1 of Schedule
16 from distributing the products listed in column 2 of Schedule 16 on
behalf of the entities listed in column 3 of Schedule 16.
11.3. Modification. Lucas hereby agrees that each of the restrictions
contained in clause 11.1 above is reasonable but if any such restriction shall
be found to be void but would be valid if some part thereof were deleted or the
period or the area of application reduced such restriction shall apply with such
modification as may be necessary to make it valid and effective.
11.4. Severability. Each undertaking contained in clause 11.1 shall be
construed as a separate undertaking and if any one or more of such undertakings
is held to be against the public interest or unlawful or in any way an
unreasonable restraint of trade the remaining undertakings shall continue in
full force and effect and shall bind Lucas.
11.5. Description of Competitive Goods. For the purposes of the foregoing
provisions of this clause 11 goods referred to as being competitive shall mean
equipment designed to carry out any of the following: internal combustion engine
assembly or testing, motor vehicle transmission assembly, motor vehicle
transmission testing, internal combustion engine fuel systems assembly or
testing and assembly or testing of automotive brake components and automotive
air conditioning compressors.
12. LICENSE OF LICENSED INTELLECTUAL PROPERTY.
12.1. Grant of License. On Closing the Seller grants to the Purchaser (so
far as it is able to grant the same and subject to clause 12.3) a perpetual,
irrevocable, non-exclusive, worldwide license, free of royalty, to use the
Licensed Intellectual Property (including, without limitation, the Specified
Shared IP) for the purpose of enabling the Purchaser to continue with the
Business after Closing in the same manner as carried on by the Seller
immediately prior to Closing.
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12.2. No Assignment Without Consent. Subject to clause 12.3, the Purchaser
may assign or sub-license any of the rights granted under this clause 12 to any
Person PROVIDED THAT any assignee first enters into a direct covenant with the
Seller agreeing to be bound by the provisions of this clause 12 in respect of
the License. Accordingly, references in this clause to the Purchaser shall be
construed as being references to any such assignee following any such
assignment.
12.3. Termination of License. The License shall immediately terminate with
respect only to the Specified Shared IP if within three years immediately
following Closing:
(a) there is a change of control of the Purchaser or any Holding
Company of the Purchaser to a Competitor; or
(b) the Purchaser or any receiver, trustee, administrator or
liquidator of the Purchaser sells the whole or substantially the whole or
the Business to a Competitor; or
(c) the Purchaser purports to assign or sub-license any of the rights
granted under the License to a Competitor.
12.4. Effect of Termination. Upon termination of the License with respect
to the Specified Shared IP, the Purchaser or any relevant assignee shall cease
to be authorized to use the Specified Shared IP and shall forthwith return to
the Seller all originals and copies of all documents and other information (in
whatever form) comprising, relating to or recording the Specified Shared IP.
12.5. Infringement of Licensed Intellectual Property. The Purchaser shall
notify the Seller in writing before commencing any proceedings against any
infringer of the Licensed Intellectual Property but shall not be required to
obtain the Seller's consent to the commencement of any such proceedings except
to the extent that under applicable law the Seller
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is required to be joined as a party to such proceedings and if the Vendor is so
required the following provisions shall apply:
(a) the Seller's prior written consent to being joined as a party
shall be required, which consent shall not be unreasonably
withheld or delayed;
(b) the Purchaser shall have full conduct of such proceedings at its
own expense and shall keep the Seller informed of all material
developments in relation thereto;
(c) the Purchaser shall indemnify the Seller against all costs,
expenses, damages or other liability incurred or suffered by or
awarded against the Seller as a result of or in connection with
such proceedings; and
(d) subject to compliance by the Purchaser with the provisions of
clause 12.5.(c), all damages or other relief obtained from such
proceedings shall belong to or be for the benefit of the
Purchaser.
12.6. Subsequent Licenses of Licensed Intellectual Property. If at any
time after Closing the Seller grants a license of any Licensed Intellectual
Property to a DTI Competitor which will enable such DTI Competitor to compete
with the Purchaser in respect of the Business and such DTI Competitor does so
compete, the Seller and the Purchaser will negotiate in good faith a reasonable
royalty to be paid by the Seller to the Purchaser having regard (inter alia) to
the extent to which such DTI Competitor does so compete and to the contribution
which prior to Closing the Business Unit known as LATS made to the creation of
the Licensed Intellectual Property in question.
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13. RISK OF LOSS AND TITLE.
13.1. General. Upon Closing, the Seller shall cease to hold insurance
coverage for the Assets, the Leased Assets, the Leased Real Property and the
Business and risk of damage to, loss or destruction of the Assets, the Leased
Real Property and the Leased Assets shall pass to the Purchaser at the Closing
Date. All of Seller's right, title and interest in the Assets (except for the
Real Property, which is dealt with in Schedule 3) shall pass to the Purchaser on
the terms of the Agreement at the Closing Date.
13.2. Tornado Damage.
(a) As provided in clause 9.1, the Purchaser assumes and agrees to
perform all obligations which the Seller may have under the leases of the
Leased Real Property in Livonia, Michigan (the "Affected Properties") in
respect of damage caused by the storm or tornado which occurred in early
July 1997. The Purchaser undertakes to effect such repairs as required by
such leases in a cost efficient manner.
(b) The cost of effecting such repairs shall be included as a
liability in the Final Completion Statement as provided in clause
9.1(i)(E).
(c) The Purchaser shall cooperate with the Seller in pursuing the
claim for insurance for effecting such repairs to the Affected Properties
and the related loss of business claim and shall make the Purchaser's
employees available after Closing, without charge to the Seller, for the
purpose of assisting the Seller in completing and compiling such
information as may be requested by the insurance carrier with respect to
such claims. The Purchaser shall permit the Seller and its insurance
carrier and any insurance adjuster involved in evaluating the casualty
claim access to the Affected Properties to assess the damage thereto. Any
amounts recovered by the Seller in respect of the cost of repairs to the
Affected Properties or loss of business under such insurance claims shall
be retained by the Seller.
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<PAGE>
14. EXCLUSIONS.
Except as otherwise specifically provided in this Agreement or the Umbrella
Agreement, the Lucas Group will not be liable under this Agreement for any
personal injury, death, loss or damage of any kind whatsoever (other than death
or personal injury resulting from its negligence) whether consequential or
otherwise (including, but not limited to loss of profits) arising from any
defect in the Assets. Except as provided in the Umbrella Agreement, the Seller
makes no representations or warranties regarding the Assets and the Business.
Except as otherwise provided in this Agreement, Purchaser understands, agrees
and acknowledges that the Assets and the Business are being purchased and sold
on an "AS IS, WHERE IS" basis. ALL IMPLIED WARRANTIES EXISTING UNDER ANY
APPLICABLE LAW WITH RESPECT TO THE ASSETS OR TO THE SALE THEREOF ARE HEREBY
EXPRESSLY DISCLAIMED AND NEGATED BY THE SELLER. PARTICULARLY, BUT WITHOUT
LIMITING THE FOREGOING, THE SELLER HEREBY NEGATES AND DISCLAIMS ANY IMPLIED
WARRANTY OF MERCHANTABILITY AND ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE AND ANY IMPLIED WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MODELS.
PURCHASER AND THE SELLER AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO
BE EFFECTIVE, THE DISCLAIMERS OF IMPLIED WARRANTIES CONTAINED IN THIS SECTION
ARE "CONSPICUOUS" DISCLAIMERS FOR THE PURPOSES OF ANY APPLICABLE LAW, RULE OR
ORDER.
15. COMPLIANCE WITH HSR ACT.
The Seller and the Purchaser have filed Notification and Report Forms under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") with
the Federal Trade Commission ("FTC") and the Department of Justice ("DOJ"). The
fees for filing such Notification and Report Forms were paid and shall be borne
by the Purchaser. All waiting
53
<PAGE>
periods, including any extensions thereof, applicable to the transactions
contemplated by this Agreement under the HSR Act have expired or been waived or
otherwise terminated.
16. INSPECTION OF DOCUMENTS.
The Seller shall for a period of three years after the Closing afford to
the authorized representatives of the Purchaser all reasonable facilities to
inspect records held or retained by the Seller or its professional advisers
(excluding any privileged records) relating exclusively to the Business and to
make copies of the same or extracts therefrom at the Purchaser's cost and
expense. The Purchaser agrees to maintain at its principal executive office
within the United States, and allow the Seller at its cost and expense at all
reasonable times access to and permit the Seller to make copies of the Records
insofar as such Records relate to the period prior to the Closing for a period
of 6 years from the Closing.
17. ASSIGNMENT PROHIBITED.
The benefit of this Agreement may not be assigned by the Seller without the
prior written consent of the Purchaser or by the Purchaser without the prior
written consent of the Seller save that any party may assign the benefit of this
Agreement to any Subsidiary or Holding Company or to any other Subsidiary of its
Holding Company if any assignment does not increase the liability of any party
under this Agreement. If at any time thereafter such assignee shall cease to be
so connected with such assignor, it shall prior to so ceasing reassign the
benefit of the Agreement to such assignor.
18. SURVIVAL OF CERTAIN PROVISIONS.
This Agreement shall remain in force and effect after the Closing Date in
respect of any matters, covenants or conditions which shall not have been done,
observed or performed prior thereto and all representations, warranties,
obligations of and any indemnities given by the
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<PAGE>
parties shall survive (except for any obligations fully performed) and continue
in full force and effect notwithstanding Closing, subject to the provisions of
the Umbrella Agreement.
19. GOVERNING LAW.
The validity, construction and enforceability of this Agreement shall be
governed in all respects by the laws of England without regard to its conflict
of laws rules except that the provisions of this Agreement regarding the
transfer of the Real Property and the provisions of Sections 7 and 11 shall be
governed by the laws of the State of Michigan (or, where relevant, ERISA and the
Code) without regard to its conflict of laws rules. The parties hereby submit to
the non-exclusive jurisdiction of the courts of Michigan.
20. COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by the
several parties hereto on separate counterparts each of which when so executed
and delivered shall be an original but all such counterparts shall together
constitute one document.
21. SEVERABILITY.
The parties expressly agree that it is not the intention of any party to
violate any public policy, statutory or common laws, rules, regulations,
treaties or decisions of any government or agency thereof. If any provision of
this Agreement is judicially or administratively interpreted or constructed as
being so in violation, such provision shall be inoperative and the remainder of
this Agreement shall remain binding upon the parties hereto.
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<PAGE>
22. NOTICES AND OTHER COMMUNICATIONS.
All notices, demands or requests provided for or permitted to be given
pursuant to this Agreement must be in writing and shall be given in accordance
with the Umbrella Agreement.
23. NO THIRD PARTY BENEFICIARIES.
Except as otherwise provided in this Agreement and the Umbrella Agreement,
nothing in this Agreement, expressed or implied, is intended to confer upon any
person, other than the parties hereto and their successors and permitted
assigns, any rights or remedies under or by reason of this Agreement.
24. MODIFICATION.
The parties to this Agreement may, by mutual written consent executed by
the authorized officers of the Purchaser and the Seller, modify or supplement
this Agreement in such manner as may be mutually agreed upon by them in writing.
25. WAIVER OF PROVISIONS.
The terms, covenants, representations, warranties and conditions of this
Agreement may be waived only by a written instrument executed by the party
waiving compliance. The failure of either party at any time to require
performance of any provisions hereof shall in no manner affect the right at a
later date to enforce the same. No waiver by either party of any condition, or
breach of any provision, term, covenant, representation or warranty contained in
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be or construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
56
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives on or as of the day and year first
above written.
SELLER:
LUCAS AUTOMATION & CONTROL ENGINEERING,
INC., a Virginia corporation
By: /s/ James Zigel
------------------------------------
James Zigel, Secretary
PURCHASER:
ASSEMBLY TECHNOLOGY & TEST, INC.
By: /s/ Bruce P. Erdel
------------------------------------
Name: Bruce P. Erdel
Its: Director
LUCAS INDUSTRIES plc
By: /s/ James Zigel
------------------------------------
Name: James Zigel
Its: duly appointed attorney for
and on behalf of the Company
57
<PAGE>
The following page contains a list of Exhibits and Schedules which have
been intentionally omitted by the Registrant pursuant to Item 601(b)(2) of
Regulation S-K.
A copy of any omitted Exhibit or Schedule will be provided to the
Securities and Exchange Commission upon request.
<PAGE>
Schedule 1 - The Leased Assets
Schedule 2 - The Machinery and Equipment
Schedule 3 - The Real Property
Schedule 4 - Transferring Employees
Schedule 5 - Intellectual Property Agreements
Schedule 6 - Intentionally Omitted
Schedule 7 - Purchaser's Employee Benefit and Welfare Plans
Schedule 8 - Registered Intellectual Property
Schedule 9 - Part 1: Trade Mark Assignment
Part 2: Patent Assignments
Part 3: Assignment of Unregistered Intellectual Property
Part 4: Assignment of Know-How
Schedule 10 - Foward Exchange Currency Contracts
Schedule 11 - Bills of Exchange
Schedule 12 - Letters of Credit
Schedule 13 - Bonds, Guaranties and Indemnities
Schedule 14 - Memoranda of Understanding
Schedule 15 - Expired Patents
Schedule 16 - Competing Activities
DATED July 29 1997
--------------------------------------
(1) LUCAS LIMITED
(2) ASSEMBLY TECHNOLOGY & TEST LIMITED
(3) LUCAS INDUSTRIES PLC
(4) LUCAS AUTOMATION & CONTROL ENGINEERING LIMITED
A G R E E M E N T
relating to the
Sale and Purchase of the English Assets of
Lucas Assembly & Test Systems
Eversheds
10 Newhall Street
Birmingham B3 3LX
Tel: 0121 233 2001
Fax: 0121 236 1583
BIRCORP/53010
<PAGE>
CONTENTS
1. Definitions
2. Sale and Purchase of the Activity
3. Consideration
4. Completion
5. Further Assurance and the Contracts
6. Debtors
7. The Transferring Employees
8. Costs and Expenses
9. Indemnity and Liabilities
10. Product Liability and Product Warranty
11. Post Completion Covenants
12. Licence of Licensed Intellectual Property
13. Risk Property and Title
14. Exclusions
15. Inspection of Documents
16. Assignment Prohibited
17. Survival of Certain Provisions
18. Governing Law
19. Counterparts
20. Severability
21. Notices and other Communications
22. No Third Party Beneficiary
23. Modification
24. Waiver of Provisions
<PAGE>
SCHEDULE 1 The Leased Assets
SCHEDULE 2 The Plant, Machinery and Equipment
SCHEDULE 3 The Property
SCHEDULE 4 Transferring Employees
SCHEDULE 5 Intellectual Property Agreements
SCHEDULE 6 Assignment of Debtors
SCHEDULE 7 Pensions
SCHEDULE 8 Registered Intellectual Property
SCHEDULE 9 Part 1: Trade Mark Assignment by Lucas
Part 2: Trade Mark Assignment by LACE
Part 3: Patent Assignment by Lucas
Part 4: Patent Assignment by LACE
Part 5: Assignment of Patent Application by Lucas into
joint names
Part 6: Assignment of Unregistered Intellectual Property
SCHEDULE 10 Forward Exchange Currency Contracts
SCHEDULE 11 Bills of Exchange
SCHEDULE 12 Bonds, Guarantees and Indemnities
SCHEDULE 13 Memoranda of Understanding
SCHEDULE 14 Expired Patents
SCHEDULE 15 Competing Activities
<PAGE>
THIS AGREEMENT is made on July 29, 1997
BETWEEN
(1) THE VENDOR Lucas Limited whose registered office is at Stratford Road
Solihull B90 4LA England
(2) THE PURCHASER Assembly Technology & Test Limited whose registered office is
at 15 St Botolph Street, London EC3A 7NJ
(3) LUCAS Lucas Industries plc whose registered office is at Stratford Road
Solihull B90 4LA England
(4) LACE Lucas Automation & Control Engineering Limited whose registered office
is at Stratford Road, Solihull B90 4LA England
RECITALS
(A) The Vendor carries on the Activity at the Property (as each such expression
is defined below).
(B) Members of the Lucas Group (as defined below) carry on businesses similar
to that of the Activity in Germany and the United States of America.
(C) Members of the Lucas Group are to sell the businesses referred to in (B)
above to the Purchaser or members of the Purchaser's Group (as defined
below) on terms similar to those contained in this Agreement.
(D) The Vendor has agreed to sell the Activity and the Assets (as defined
below) to the Purchaser on the terms and conditions hereinafter appearing
and in the Umbrella Agreement (as defined below).
(E) Lucas enters into this Agreement for the purposes of selling the Property
and part of the Registered Intellectual Property and LACE enters into this
Agreement for the purpose of selling part of the Registered Intellectual
Property.
(F) The Umbrella Agreement regulates the terms and conditions on which the
Activity and the businesses referred to in (B) above are to be sold.
1
<PAGE>
NOW THIS AGREEMENT WITNESSES as follows:-
1. DEFINITIONS
In this Agreement (which expression shall include the Recitals of and
Schedules to this Agreement) except where inconsistent with the subject
matter or context:-
1.1 The following words and expressions shall bear the following
meanings respectively:-
"the Accruals" Any liability of the Vendor
relating to the Activity which
falls to be settled after the
Completion Date in the course of
carrying on the Activity in
respect of a period of time which
commences before the Completion
Date and ends after such date
"the Activity" The business of the design
manufacture and implementation of
assembly line and testing
equipment with associated
materials handling and production
control systems (and the provision
of services related thereto)
primarily for the automotive
components industry carried on by
the Vendor at or from the Property
"the Amounts Recoverable The amounts recoverable by the
on Contracts" Vendor on the Customer Contracts
in accordance with their
respective terms together with the
work-in-progress which is the
subject of
2
<PAGE>
the Customer Contract in question
in respect of which the amount is
recoverable, as at the Completion
Date
"the Asnu Licence" The Asnu Licence Agreement dated
25 May 1993 made between High-Tech
Auto Tools Pty Limited and Lucas
"the Assets" The assets specified in clause
2.1, the Property to be sold and
purchased hereunder or otherwise
dealt with in accordance with this
Agreement and the Intellectual
Property and the Know How to be
dealt with in accordance with this
Agreement
"Assumed Liabilities" The obligations and liabilities to
be assumed by the Purchaser as
described in clause 9.1
"Bids" Any and all bids or tenders for
the sale of goods or services of
the Activity which are open as at
the Completion Date
"Business Unit" Any part of a member of the Lucas
Group or the activities of such a
member in either case in respect
of which separate management
accounts have customarily been
3
<PAGE>
prepared by the Lucas Group or the
relevant member
"Competitor" Any of the following companies or
any Subsidiary or Holding Company
of any of them or any other
Subsidiary of such Holding
Company, namely:-
Aixin Seiki Co Limited, Robert
Bosch GmbH, GM's Delphi Automotive
Systems, ITT Industries,
Nippondenso, Siemens, Stanadyne,
Zexel, Sundstrand, Parker
Hannifin, Allied Signal, Moog,
Hamilton Standard, Rolls-Royce,
Valeo, Delco, Motorola and Denso
"Completed Contract" Any contract or arrangement for
the supply of goods or services by
the Vendor or any previous owner
of the Activity in relation to the
Activity:-
(i) pursuant to which the supply
of the relevant goods or
services was completed within
the two years immediately
preceding the Completion Date
and in respect of which any
warranty, guarantee,
4
<PAGE>
maintenance or similar
obligation, liability or
commitment (a "Warranty")
given by the Vendor (or such
previous owner) remains
outstanding and has not
expired by the Completion
Date; or
(ii) pursuant to which the supply
of the relevant goods or
services has been completed
and under which the customer
has prior to the Completion
Date made a claim under any
Warranty relating to such
goods or services
"Completion" Completion of the sale and purchase
hereby agreed in accordance with
clause 4 and "the Completion Date"
shall be construed as the opening
of business on the date on which
completion takes place
"the Consideration" The consideration for the Assets
hereby agreed to be sold as
determined in accordance with the
Umbrella Agreement
"the Contracts" Any and all current contracts and
arrangements of the Vendor or any
5
<PAGE>
member of the Lucas Group
(including, without limitation,
current contracts assumed by the
Vendor or any other member of the
Lucas Group to which any previous
owner of the Activity is party)
relating wholly to the Activity (or
where any current contracts and
arrangements of the Vendor or any
other member of the Lucas Group
relate in part only to the Activity
then such part shall be deemed to
be included within the definition)
entered into before the Completion
Date (including, without
limitation, the Customer Contracts,
the Supplier Contracts, the
agreements relating to the Leased
Assets and the forward exchange
currency contracts referred to in
Schedule 10) and which then remain
(in whole or in part) to be
performed by the Vendor or any
other member of the Lucas Group,
including, without limitation, the
Completed Contracts and those
current contracts where any
warranty, guarantee, maintenance or
other similar obligation, liability
or commitment remains to be carried
out by any member of the Lucas
6
<PAGE>
Group or where any payment
obligations of any member of the
Lucas Group have not been
satisfied; provided always that
this definition excludes:-
(i) contracts or arrangements to
the extent they relate to
the Excluded Assets or to
the Excluded Liabilities
(other than Excluded
Liabilities referred to in
clauses 9.2.9 and 9.2.10);
(ii) Group Sharing Arrangements;
(iii) the Asnu Licence; and
(iv) contracts of employment of
any employees of any member
of the Lucas Group
"control" The possession, direct or indirect,
of the power to direct or cause the
direction of the management and
policies of a company, whether
through the ownership of voting
securities, by contract or
otherwise
"the Creditors" The book and other debts owing by
the Vendor in connection with the
Activity to or in respect of trade
creditors, trade bills payable and
any other amounts owing to
7
<PAGE>
creditors of the Vendor in respect
of the Activity at the Completion
Date (and whether or not then due
and payable) including without
limitation:
(i) the Accruals;
(ii) any amounts owed by the
Vendor to any member of the
Lucas Group in respect of the
Activity or by the Activity
to another Business Unit (in
each and any such case on
current account) but
excluding (for the avoidance
of doubt) any Lucas Internal
Funding; and
(iii) any amounts owing to
creditors under the Group
Sharing Arrangements to the
extent they relate to the
Activity
"the Customer Any and all uncompleted purchase
Contracts" orders from customers which were
accepted by the Vendor prior to the
Completion Date which relate to the
Activity and which then remain to
be performed in whole or in part
"the Debtors" The book and other debts owing to
8
<PAGE>
the Vendor in connection with the
Activity by or in respect of trade
debtors, trade bills receivable
(including without limitation those
bills of exchange listed in
Schedule 11) and any other amounts
owing to the Vendor by debtors in
connection with the Activity at the
Completion Date (whether or not
then due and payable), including
(without limitation) any amounts
owed by any member of the Lucas
Group to the Vendor in respect of
the Activity or owed to the
Activity by another Business Unit
(in each and any such case on
current account) but excluding (for
the avoidance of doubt) any Lucas
Internal Funding
"the Disclosure Letter" has the meaning given to that
expression in the Umbrella
Agreement
"DTI Competitor" Any of the following companies or
any Subsidiary or Holding Company
of any of them or any other
Subsidiary of such Holding Company,
namely:-
Giddings & Lewis, Thyssen, Bosch,
Western Atlas, B&K,
9
<PAGE>
Elcon, ABB, Ingersoll Rand,
Mohwald, Meidenscha, Mecelec,
Stiwa, Teim Techneck and Knoell
"Economic Value Added The bonus scheme operated by the
Bonus Scheme" Vendor in respect of the Activity,
details of which are contained in
section 2 of Annex 3 to the
Disclosure Letter
"the Excluded Assets" The assets, rights, claims and
benefits excluded from the sale to
the Purchaser as set out in clause
2.5
"the Excluded The liabilities to be retained by
Liabilities" the Vendor as set out in clause 9.2
"Expired Patent" A granted patent (a) which at the
Completion Date has lapsed and
cannot be revived or (b) of which
at the Completion Date the term has
expired and cannot be extended, and
which in either case is listed as
an expired patent in Schedule 14
"Final Completion shall have the meaning given to
Statement" that expression in the Umbrella
Agreement
"the First Property" The freehold property described in
Part 1 of Schedule 3
"the Goodwill" The goodwill of the Vendor in
10
<PAGE>
connection with the Activity
"Group Sharing Any and all contracts or
Arrangements" arrangements relating to the supply
of goods or services to the Vendor
in respect of the Activity and the
supply of the same or similar goods
or services to another member of
the Lucas Group or another Business
Unit from the same supplier, but
excluding the Master Lease
"the Guarantor" DT Industries, Inc. of Corporate
Centre, Suite 2-300, 1949 East
Sunshine, Springfield, MO 65804
"Holding Company" holding company as defined in
Section 736 of the Companies Act
1985
"Intellectual Property" The Registered Intellectual
Property and the Unregistered
Intellectual Property
"Intellectual Property The licences briefly described in
Agreements" Schedule 5 in the Agreed Terms
which are to be entered into on
Completion
"Intellectual Property Assignments of the Intellectual
Assignments" Property and the Know How in the
form or forms set out in Parts 1 to
6 of Schedule 9
11
<PAGE>
"Know How" All inventions, designs,
techniques, formulas, technical
drawings and specifications, market
studies, consultants' reports,
competitive samples, engineering
prototypes, trade secrets, secret
processes and other confidential
information which are owned by the
Lucas Group and which:-
(i) relate exclusively to the
Activity and which are not
used by any other member of
the Lucas Group or any
Business Unit other than the
Activity; or
(ii) are to be licensed to the
Lucas Group at or following
Completion pursuant to the
terms of the Intellectual
Property Agreements,
but excluding any of the same which
are expressly retained by any
member of the Lucas Group under the
LAO Agreement or the Intellectual
Property Agreements and excluding
the Unregistered Intellectual
Property
"the LAO Agreement" The agreement in the Agreed Terms
between Lucas Aftermarket
12
<PAGE>
Operations and the Purchaser
relating to the relationship which
will exist between those parties
after Completion
"the Leased Assets" Those assets not owned by the
Vendor which are used in the
Activity which are the subject of
hire or hire purchase or leasing
agreements brief particulars of
which assets and agreements are
listed in Schedule 1
"Licence" The licence of the Licensed
Intellectual Property granted by
the Vendor to the Purchaser on
Completion pursuant to clause 12
"Licensed Intellectual The unregistered trade marks,
Property" design rights, copyright, know how
and other intellectual property
rights which are owned by the Lucas
Group and which:
(i) do not relate exclusively to
the Activity in that they
are used by another member
of the Lucas Group or any
Business Unit but
immediately prior to
Completion have to some
extent also been used by the
Vendor in connection with
13
<PAGE>
the Activity; and
(ii) the Purchaser will require
use of in order to carry on
the Activity in the same
manner after Completion as
that carried on by the
Vendor immediately prior to
Completion; and
(iii) which are not the subject
matter of the Intellectual
Property Agreements or the
LAO Agreement
"Lucas Aftermarket Lucas Limited trading as "Lucas
Operations" Aftermarket Operations"
"the Lucas Central The LucasVarity Treasury Department
Treasury" presently based at Larden Road,
Acton, England
"the Lucas Group" LucasVarity and any company which
is a Subsidiary or Subsidiary
Undertaking of Lucas Varity for the
time being and from time to time
"Lucas Internal Funding" All monies due to or from the
Activity from or to the Lucas
Central Treasury which is either
quasi capital or otherwise owed on
capital account or which had the
14
<PAGE>
Lucas Central Treasury been a bank
would have amounted to an overdraft
"LucasVarity" LucasVarity plc, registered number
3207774
"Magasa Action" Legal proceedings between Lucas and
Construcciones Magasa, SL in
relation to Patent No. 502112
"Master Lease" The Master Hiring Agreement (Number
51986) dated 26th July 1993 and
made between (1) Lucas and (2) Lex
Vehicle Leasing Limited relating to
(inter alia) the vehicles listed in
Schedule 1
"MOUs" The memoranda of understanding
entered into by the Vendor or any
other member of the Lucas Group in
respect of the Activity including
without limitation those listed in
Schedule 13
"Net Current Assets shall have the meaning given to
Value" that expression in the Umbrella
Agreement
"the Plant, Machinery The fixed and moveable plant and
and Equipment" machinery, tooling, computer
equipment and equipment (including
vehicles) owned by the
15
<PAGE>
Vendor with an original cost per
item in excess of (pound)5,000
which are used in the Activity and
which are listed in Schedule 2 and
such other machinery tooling
furniture and equipment owned by
the Vendor located at the Property
and used exclusively or primarily
in the Activity
"the Prepayments" Each of the payments made in
advance by or on behalf of the
Vendor prior to the Completion Date
in the course of carrying on the
Activity in respect of a period of
time which commences before the
Completion Date and ends after such
date but excluding (a) any such
payment to the extent the Purchaser
does not acquire the benefit
thereof or otherwise benefit from
such payment following Completion
and (b) any such payment to the
extent it is not reflected in the
Net Current Assets Value
"the Project Any advance payments or deposits on
Prepayments" any Contracts made or paid by a
customer to the Vendor
"the Property" The First Property and the Second
Property
16
<PAGE>
"the Purchaser's UK Barlow Lyde & Gilbert of Beaufort
Solicitors" House, 15 St. Botolph Street,
London EC3A 7NJ
"the Purchaser's Group" The Guarantor and any company:-
(i) which is a Subsidiary of the
Guarantor; or
(ii) over which the Guarantor has
control within the meaning
defined in this Agreement
for the time being and from time to
time
"the Records" All such records, lists of
customers and suppliers, accounts
and other documents relating
exclusively to the Activity to
enable the Purchaser effectively to
carry on the same in succession to
the Vendor
"Registered All registered patents and
Intellectual Property" registered trade marks and
applications for the same specified
in Schedule 8 and owned by the
Lucas Group
"the Regulations" The Transfer of Undertakings
(Protection of Employment)
Regulations 1981 as amended
17
<PAGE>
"the Second Property" The freehold property described in
Part 2 of Schedule 3
"the Specified Shared All management manuals, instruction
IP" manuals, Health and Safety manuals,
disaster recovery procedures,
Project Introduction Management
systems and other similar manuals
and the copyright and know how
therein owned by the Lucas Group
and used in the Activity and by any
other Business Unit or member of
the Lucas Group, but specifically
excluding any technical information
contained therein used in the
design, manufacture or
implementation of assembly line and
testing equipment
"the Stock" All stocks, including raw materials
and components, spare parts,
operating supplies, maintenance and
non product stock, finished goods,
bought-in-goods, packaging
materials, packages and products in
intermediate stages of completion
(save where the same constitutes
Amounts Recoverable under
Contracts) owned by the Vendor for
use or sale in connection with the
Activity and any of the same which
are or
18
<PAGE>
incorporate goods or materials
supplied by a supplier subject to
reservation of title in each case
at the Completion Date
"Subsidiary" subsidiary as defined in section
736 of the Companies Act 1985
"Subsidiary Undertaking" subsidiary undertaking as defined
in section 258 Companies Act 1985
"the Supplier Contracts" Any and all contracts and
arrangements which were entered
into before the Completion Date by
or on behalf of the Vendor with
suppliers for the supply to the
Vendor of goods or services in
connection with the Activity which
then remain to be performed, in
whole or in part, but excluding the
Group Sharing Arrangements
"Taxation" Any tax and any duty, impost, levy
or governmental charge in the
nature of tax whether domestic or
foreign and any fine, penalty or
interest connected therewith
including corporation tax, advance
corporation tax, income tax,
capital gains tax, inheritance tax,
capital transfer tax, development
land tax, value added tax, customs,
19
<PAGE>
excise and import duties, stamp
duty and stamp duty reserve tax and
any other payment whatsoever which
the Vendor is or may be or become
bound to make to any person as a
result of any enactment relating to
any of the foregoing
"the Transferring Those employees of the Vendor who
Employees" are employed in connection with the
Activity at close of business on
the Completion Date whose names and
positions are set out in Schedule 4
and any other person who is
actively engaged as an employee of
the Vendor and working exclusively
in the Activity at Completion and
whose remuneration was paid by the
Activity in the period up to
Completion (but excluding for the
avoidance of doubt any person whom
the Vendor or any other member of
the Lucas Group has treated as a
consultant, agency worker or
contractor)
"the Umbrella Agreement" An agreement in the Agreed Terms
entered into on the same date as
this Agreement between the parties
hereto and certain other members of
the Lucas Group and
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the Purchaser's Group
"Unregistered The unregistered trade marks,
Intellectual Property" service marks, design rights,
copyright and other intellectual
property rights which are owned by
the Lucas Group and which:-
(i) are to be licensed to the
Lucas Group at or following
Completion pursuant to the
terms of the Intellectual
Property Agreements; or
(ii) relate exclusively to the
Activity and are not used by
any other member of the Lucas
Group or any Business Unit
other than the Activity,
but excluding any such intellectual
property rights which are expressly
retained by any member of the Lucas
Group under the LAO Agreement or
the Intellectual Property
Agreements and excluding the Know
How
"the Vendor's Eversheds of 10 Newhall Street,
Solicitors" Birmingham
1.2 References in this Agreement to statutes or any statutory
provision shall include any statutory modification, re-enactment
or extension thereof and any orders, regulations, instruments or
other subordinate legislation made thereunder, in each case in
force at the date of this Agreement.
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1.3 In this Agreement:-
1.3.1 the masculine gender shall include the feminine and
neuter and the singular number shall include the plural
and vice versa
1.3.2 references to persons shall include bodies corporate,
unincorporated associations and partnerships
1.3.3 the expression "the Vendor" shall include its
successors in title
1.3.4 the headings contained in this document are inserted
for convenience only and shall not affect its
construction
1.4 Whenever a document is referred to as being "in the Agreed Terms"
it shall be in the form agreed and initialled by or on behalf of
the Vendor and the Purchaser
1.5 Except where the contrary is stated, any reference herein to a
clause or Schedule or party is to a clause of or Schedule or
party to this Agreement and any reference within a clause or
Schedule to a sub-clause, paragraph or other sub-division is a
reference to such sub-clause, paragraph or other sub-division so
numbered or lettered in that clause or Schedule. The Schedules
form part of this Agreement and shall have the same force and
effect as if expressly set out in the body of this Agreement
2. SALE AND PURCHASE OF THE ACTIVITY
2.1 The Vendor shall sell free from all charges, liens, other
encumbrances or third party claims (except reservation of title
claims by suppliers) and the Purchaser shall purchase as at and
with effect from Completion the Activity on a going concern basis
comprising (in addition to the assets referred to in clause 2.2)
only:-
2.1.1 the benefit of the Contracts (subject to the burden
attaching thereto);
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2.1.2 the benefit of the Amounts Recoverable under Contracts;
2.1.3 the Goodwill;
2.1.4 the Plant, Machinery and Equipment;
2.1.5 the Records;
2.1.6 the Stock;
2.1.7 the Debtors and the benefit of the Prepayments;
2.1.8 all sales data, catalogues, brochures, literature,
forms, mailing lists, art work, photographs and
advertising material, in whatever form or media, owned
by the Vendor and relating exclusively to the Activity
(but subject to the provisions of clause 6 of the
Umbrella Agreement);
2.1.9 all telephone, facsimile, telex, e-mail, Internet and
post office box numbers and addresses owned by the
Vendor and relating exclusively to the Activity (but
only to the extent that the same are assignable by the
Vendor without any third party's consent and subject to
the provisions of clause 6 of the Umbrella Agreement);
2.1.10 all permits, approvals, and qualifications issued by
any governmental unit, agency, board, body or
instrumentality held by the Vendor and relating
exclusively to the Activity (but only to the extent
that the same are assignable by the Vendor without any
third party's consent);
2.1.11 all other tangible and intangible assets of whatsoever
nature owned by the Vendor and which are exclusively
employed in the Activity at Completion and not used by
any member of the Lucas Group or any Business Unit
other than the Activity and which do not form part of
the Excluded Assets and all other
23
<PAGE>
assets owned by the Vendor to the extent that they are
reflected in the Final Completion Statement and the
value thereof is included in the Net Current Assets
Value; and
2.2.12 the benefit of all the Vendor's rights against third
parties (including any claims, causes of action, choses
in action, rights of recovery and rights of set-off)
(a) in connection with guarantees, warranties (express
or implied), covenants and representations given by
such third parties concerning the Activity and any of
the Assets to the extent only that such rights relate
to liabilities assumed, or the Plant Machinery and
Equipment or the Stock acquired, by the Purchaser
hereunder (b) under completed or other operative
contracts save to the extent that those rights are
required in order to defend, mitigate or perform any of
the Excluded Liabilities or any matter in respect of
which the Lucas Group has retained liability or
responsibility and (c) in respect of infringement of
the Expired Patents before the date of expiry or lapse
of the same, in each case in so far as such benefit is
capable of assignment
save to the extent that any of the same are comprised within the
Excluded Assets.
2.2 With regard to the Property, the Intellectual Property and the
Know How:-
2.2.1 Lucas will sell and the Purchaser will buy the Property
upon the terms hereof and the conditions of sale set
out in Schedule 3 Part 3; and
2.2.2 the Vendor, Lucas and LACE will sell and the Purchaser
will buy the Intellectual Property and the Know How on
the terms of the Intellectual Property Assignments, but
without prejudice to such rights as are granted to the
Purchaser in relation thereto under this Agreement
and/or the Umbrella Agreement, including without
limitation in respect of the English
24
<PAGE>
Warranties and the General Warranties relating to the
English Activity (as each expression is defined in the
Umbrella Agreement)
and in case of any conflict between the conditions referred to in
Schedule 3 and the other provisions of this Agreement the
provisions of Schedule 3 shall prevail.
2.3 At Completion the Vendor shall deliver possession to the
Purchaser of any stocks held by the Vendor on consignment from
others solely for the purposes of, or which is used exclusively
in, the Activity. The Purchaser shall assume all the Vendor's
obligations with respect to such consignment stock.
2.4 The Purchaser shall pay the Creditors in accordance with the
Vendor's normal business practice in relation to the Activity and
in any event within 90 days immediately following Completion
without any deduction or set off for whatsoever reason, unless
the Purchaser has a bona fide and genuine reason for disputing
whether a particular debt is due or delaying payment thereof and
gives notice thereof and of the reasons for disputing or delaying
payment to the Vendor as soon as reasonably practicable. The
Purchaser shall indemnify the Vendor against all expenses costs
loss damage and liability incurred by the Vendor as a result of
any failure or delay by the Purchaser in paying the Creditors.
2.5 It is agreed that this Agreement does not include the sale of any
assets or rights of the Vendor nor any assets or rights of any
other member of the Lucas Group other than those specifically
referred to in clauses 2.1 and 2.2 or those assets or rights
expressly referred to elsewhere in this Agreement as being sold
hereunder and without limiting the generality of the foregoing
there shall be expressly excluded and excepted from the said sale
and purchase (and nothing in this Agreement shall operate to
transfer) any of the following:-
25
<PAGE>
2.5.1 the benefit to the Vendor of this Agreement;
2.5.2 ownership of the Leased Assets;
2.5.3 any trademarks, trade names, products' names, patents,
copyrights, registered designs and any other
intellectual property rights of the Vendor or any other
member of the Lucas Group or Business Unit or (save as
expressly permitted by this Agreement, the Intellectual
Property Agreements, the Umbrella Agreement or the LAO
Agreement) any rights to use the same, other than the
Intellectual Property and the Know How;
2.5.4 any right to use the names "Lucas" or "LucasVarity" or
the Lucas Group diagonal flash or any other similar
trade mark or other distinctive Lucas Group get-up save
as provided herein, in the Umbrella Agreement or the
LAO Agreement;
2.5.5 the cash received in respect of the Project Prepayments
and all cash and cash equivalents in the Lucas Group's
hands or any cash in the Lucas Group's bank accounts at
Completion and the benefit of any payments in advance
made by the Vendor in relation to the Activity which
are excluded from the Prepayments;
2.5.6 all cheques and negotiable instruments issued in favour
of the Lucas Group prior to Completion (save to the
extent that any such cheque or negotiable instrument
constitutes payment for any of the Debtors sold
hereunder which appears as an asset in the Final
Completion Statement and is taken into account in
calculating the Net Current Assets Value);
2.5.7 any insurance claim made by or available to the Lucas
Group and all unearned premiums under insurance
policies or other rights to refunds thereunder
attributable to any period of time
26
<PAGE>
except to the extent reflected in the Final Completion
Statement and the Net Current Assets Value or reflected
in the values agreed and allocated to the fixed assets
as shown in Part 2 of Schedule 3 to the Umbrella
Agreement;
2.5.8 any other claim made by or available to the Lucas Group
in respect of an event occurring prior to Completion
other than those the benefit of which is sold to the
Purchaser by clause 2.1.12;
2.5.9 corporation tax losses and the benefit of any claims
made or to be made for repayment of any taxation or tax
allowance of the Vendor or any other company in the
Lucas Group in relation to the Activity in respect of
the period prior to Completion except to the extent
that the same are reflected in the Net Current Assets
Value;
2.5.10 any Lucas Internal Funding;
2.5.11 the benefit of all contracts or arrangements excluded
from the definition of "the Contracts" pursuant to
clause 1.1 (other than those relating to the
Transferring Employees); and
2.5.12 the benefit of the Magasa Action (and notwithstanding
the terms of the Intellectual Property Assignments the
Purchaser acknowledges that the Vendor may settle the
Magasa Action on such terms as the Vendor shall in its
absolute discretion think fit provided that any such
settlement does not affect the validity of the patent
the subject of the Magasa Action).
2.6 If any of the Assets to be sold hereunder by the Vendor are owned
by any other member of the Lucas Group or any of the Transferring
Employees is employed by any such other member or there is any
other obligation of the Vendor hereunder which is only capable of
being satisfied by or with the assistance of any such other
member, the Vendor shall not be deemed to be
27
<PAGE>
in breach of this Agreement so long as the Vendor procures, to
the extent necessary, compliance by such other member with the
terms and conditions of this Agreement which the Vendor hereby
undertakes to do. Such other member and, where appropriate, its
employees, shall have the benefit of any exclusions of liability
contained herein in relation to the Assets and any indemnity
given by the Purchaser herein to the Vendor in relation to the
Assets, the Activity or the Transferring Employees. If any member
of the Lucas Group other than the Vendor is or was party to any
of the Contracts, the Completed Contracts or the MOUs the
relevant provisions of clauses 5 and 9 shall apply to such
Contract, Completed Contract or MOU (as the case may be) as if
the Vendor were party thereto and references in those clauses to
the Vendor shall, where appropriate, be construed as references
to the relevant member of the Lucas Group. Accordingly, the
relevant member of the Lucas Group shall be entitled to benefit
from the obligations undertaken and indemnities given by the
Purchaser in relation to that Contract, Completed Contract or MOU
under those clauses.
2.7 Insofar as tooling used in the Activity is owned by a third party
(and title to which accordingly does not pass to the Purchaser
hereunder) the Vendor assigns to the Purchaser effective at
Completion whatever right title or interest (if any) it may have
in such tooling to the extent the same is assignable. A complete
and accurate list of all such third party tooling arrangements is
set out in the Disclosure Letter
2.8 Where any of the Assets (including packaging comprised within the
Stock) to be sold hereunder by the Vendor comprise advertising,
promotional and other written material bearing the "Lucas" and/or
"LucasVarity" name or the Lucas Group diagonal mark or other
similar trade mark or other distinctive Lucas Group get up the
provisions the Umbrella Agreement regarding the same shall apply.
2.9 The Vendor agrees that the Purchaser may (to the extent that the
Vendor can grant any such right) for a period of twelve months
after Completion represent itself as carrying on the Activity in
succession to the Vendor but
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<PAGE>
this agreement shall not grant or imply (and shall specifically
exclude) any right on the part of the Purchaser (save to the
extent granted herein, in the Umbrella Agreement or the LAO
Agreement) in the names or mark "Lucas" or "LucasVarity" or in
the Lucas Group diagonal flash or any other similar trademark or
other distinctive Lucas Group get-up or in the goodwill attaching
thereto.
3. THE CONSIDERATION
3.1 The purchase price for the Assets shall be determined in
accordance with the Umbrella Agreement.
3.2 The parties hereto intend that Section 49(1) of the Value Added
Tax Act 1994 and paragraph 5 of the Value Added Tax (Special
Provisions) Order 1995 S.I. No. 1268 shall apply to the transfer
of the Activity and the Property hereunder and accordingly:-
3.2.1 the Vendor and the Purchaser shall each give notice of
such transfer to H.M. Customs & Excise;
3.2.2 the Vendor shall at Completion deliver to the Purchaser
all records referred to in the said Section 49 and
shall not thereafter make any request to H.M. Customs &
Excise for such records to be taken out of the custody
of the Purchaser and the Purchaser hereby undertakes to
preserve such records for such periods as may be
required by law;
3.2.3 the Vendor and the Purchaser shall use all reasonable
endeavours to secure that pursuant to the provisions
referred to above the sale of the Activity and the
Property hereunder is treated as neither a supply of
goods nor a supply of services for the purposes of
Value Added Tax;
3.2.4 if Value Added Tax is chargeable on the sale hereunder
or any part thereof then the Purchaser agrees that such
Value Added
29
<PAGE>
Tax shall be in addition to the Consideration and the
Purchaser shall (against production of tax invoices in
respect thereof and a written ruling from HM Customs &
Excise that Value Added Tax is so chargeable) pay the
amount of any such Value Added Tax and any penalty or
interest incurred by the Vendor for late payment
thereof (provided that in respect of any penalty or
interest only the reason such Value Added Tax was
payable was due to an act, omission or intention of, or
the circumstances of, the Purchaser), such payment by
the Purchaser to be made forthwith on request by the
Vendor or if sooner on delivery by the Vendor to the
Purchaser of tax invoices in respect thereof. The
Purchaser shall have no liability in respect of
penalties and interest relating to Value Added Tax to
the extent they arise due to an unreasonable delay (in
any case not exceeding 2 Business Days (as defined in
the Umbrella Agreement)) in passing on to HM Customs &
Excise a payment made by the Purchaser in respect of
Value Added Tax; and
3.2.5 the Purchaser confirms that it has validly waived
exemption from Value Added Tax under paragraph 2
Schedule 10 VATA 1994 in respect of the Property and
has validly notified HM Customs & Excise of such
election.
3.3 With regard to the operation of the Activity by the Vendor:-
3.3.1 all Value Added Tax payable in respect of goods and
services supplied or deemed to be supplied by the
Vendor before the Completion Date and all interest
payable thereon and penalties attributable thereto
shall be paid to H.M. Customs & Excise by the Vendor
and the Vendor shall be entitled to receive and to
retain for its own benefit all reimbursement or credit
from H.M. Customs & Excise for Value Added Tax borne by
the Vendor on goods and services supplied to the Vendor
prior
30
<PAGE>
thereto and any payments received in respect of Value
Added Tax overpaid to H.M. Customs & Excise prior
thereto; and
3.3.2 without prejudice to the provisions of this Agreement
as to discharge of the relevant liability the Purchaser
shall give to the Vendor all necessary and reasonable
co-operation for the purposes of preparing any VAT or
Customs Duty Relief return relating to the Activity in
respect of any prescribed accounting period of the
Vendor beginning before the Completion Date or for the
purpose of determining the Vendor's liability to HM
Customs and Excise in respect of the Activity or for
the purpose of answering any questions raised by HM
Customs and Excise for the period prior to the
Completion Date, such co-operation to include providing
reasonable access to or (at the Vendor's expense)
copies of relevant documentation (which the Vendor
shall be permitted to use and divulge to the extent
that it is required so to do so as to enable the Vendor
to comply with its obligations to HM Customs and
Excise) and allowing reasonable access to the
Transferring Employees. In the event that the Purchaser
should transfer the Activity to another person the
Purchaser shall procure (or, if the transfer takes
place more than three years after the date of this
Agreement, shall use reasonable endeavours to procure)
that the person to whom the Activity is transferred
enters into a similar obligation to provide reasonable
co-operation and assistance to the Vendor (either
directly or indirectly through the Purchaser) as is set
out in this clause. The Purchaser shall have no
obligations under this clause after the sixth
anniversary of this Agreement or in respect of records
which have not been retained because they are more than
six years old.
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<PAGE>
3.4 The Purchaser warrants to the Vendor that it is a taxable person
for the purposes of Section 3 Value Added Tax Act 1994.
4. COMPLETION
Completion of this Agreement shall be determined in accordance with the
Umbrella Agreement
5. FURTHER ASSURANCE AND THE CONTRACTS
5.1 The Vendor hereby agrees and declares that it will after and
notwithstanding Completion execute and deliver any other
documents and take any other steps as shall reasonably be
required from time to time by the Purchaser, at the Purchaser's
expense, to vest in the Purchaser, or as it may direct, the
Assets (other than the Property which is governed by the
provisions of Schedule 3, the Intellectual Property and the Know
How which is governed by the Intellectual Property Assignments
and the Debtors which are governed by clause 6.1) on the terms of
this Agreement.
5.2 Save to the extent otherwise provided in clause 10.1.2 the
Purchaser will at and from Completion at its own expense assume
and undertake to perform and discharge when due or when required
to be performed the Vendor's liabilities and obligations under
the Contracts and shall be bound by all the terms, conditions,
obligations and liabilities arising from, in connection with or
related to the Contracts and the Purchaser shall keep the Lucas
Group indemnified against all expenses, costs, loss, damage, and
liability arising therefrom. For the purposes of this Agreement,
all Bids which are accepted by customers after Completion shall
be deemed to be Contracts.
5.3 Insofar as the benefit (subject to the burden) of the Contracts
cannot effectively be transferred by the Vendor to the Purchaser
except by way of an agreement of novation with or consent to the
assignment from the person, firm or company concerned:-
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<PAGE>
5.3.1 the Vendor and the Purchaser shall co-operate and use
their reasonable efforts to procure that the Contracts
be novated or assigned as aforesaid as soon as
reasonably practicable;
5.3.2 in every novation or assignment as aforesaid the
Purchaser shall undertake to indemnify the Vendor
against all expenses, costs, loss, damage and liability
arising by reason of or in connection with the
non-performance or the defective or negligent
performance by the Purchaser of the Contracts;
5.3.3 unless and until all such Contracts shall be novated or
assigned as aforesaid:-
5.3.3.1 the Vendor shall continue its corporate
existence and shall hold the benefit of every
such Contract which requires to be novated or
assigned but which has not been novated or
assigned, in trust for the Purchaser as from
Completion and shall account to the Purchaser
accordingly (whether in respect of any sums
or other benefits received by it in respect
thereof) and otherwise act at the reasonable
direction of the Purchaser and as its agent
in all matters relating thereto subject to
the Purchaser securing the Vendor to its
reasonable satisfaction, and indemnifying and
holding the Vendor harmless against, any
expenses, costs, loss, damage, or liability,
which it may have brought against it or
suffer or incur as a consequence, but subject
to clause 5.5; and
5.3.3.2 the Purchaser shall at its own cost and
expense with effect from Completion carry
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out perform and complete all of the Vendor's
obligations under every such Contract which
has not been novated or assigned as a
subcontractor of the Vendor and where sub
contracting is not possible the Purchaser
shall perform the contracts in accordance
with their terms and conditions as agent for
the Vendor.
5.4 If the Vendor has before Completion sub-contracted the
performance of any Contracts to any person, the Purchaser shall
on Completion assume responsibility for the relevant sub-contract
and on behalf of the relevant customer seek or accept delivery or
performance from such person of the goods or other products or
services in respect of which such contract was made and shall
make the same available for collection by such customer.
5.5 Any fee, charge or financial penalty levied by a third party in
respect of a novation or assignment of any Contract or in
connection with the termination of any existing Contract to
permit novation or assignment to take place will be shared
equally by the Vendor and the Purchaser provided that neither the
Vendor nor the Purchaser shall agree to pay any such fee, charge
or financial penalty without the prior written consent of the
other of them (such consent not to be unreasonably withheld or
delayed). The Purchaser shall procure the execution of any
guarantees by any member of the Purchaser's Group required by
such third party as a condition of any such novation or
assignment. If any other party to a Contract makes a claim
against the Vendor or the Purchaser alleging that the sale of the
Activity to the Purchaser or the provisions of this Agreement
constitute a breach of such Contract, the Vendor and the
Purchaser shall consult with regard to such claim and neither of
them shall accept the claim without the prior written consent of
the other (not to be unreasonably withheld or delayed). Any
liability, costs and expenses incurred by the Vendor or the
Purchaser as a result of any such claim shall be borne equally by
the Vendor and the Purchaser.
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5.6 Lucas and the Purchaser shall co-operate and use their reasonable
efforts to procure that as soon as practicable following
Completion Lex Vehicle Leasing Limited ("Lex") enters into a new
lease directly with the Purchaser on the same or similar terms as
the Master Lease in respect of the vehicles listed in Schedule 1
and that such vehicles are thereby excluded from the Master
Lease. If required by Lex, the Purchaser shall procure that the
Guarantor and any other member of the Purchaser's Group enters
into an agreement with Lex to guarantee the Purchaser's
obligations under such new lease. Prior to such new lease being
granted:-
5.6.1 Lucas shall hold the benefit of the Master Lease in
trust for the Purchaser to the extent it relates to the
vehicles listed in Schedule 1; and
5.6.2 the Purchaser shall at its own cost and expense perform
Lucas' obligations under the Master Lease with respect
to those vehicles as agent for Lucas and shall
indemnify and hold Lucas harmless against all charges,
payments, penalties, costs, expenses, liabilities or
losses which Lucas may incur or suffer under the Master
Lease following the Completion Date with respect to
those vehicles, but subject to clause 5.5.
5.7 The Vendor agrees to assign to the Purchaser all right title and
interest which the Vendor has (if any) in respect of the MOUs and
the Purchaser agrees to perform and discharge all obligations and
liabilities which the Vendor has (if any) in respect of the MOUs.
Accordingly, the Purchaser agrees that the provisions of clauses
5.2 to 5.5 shall mutatis mutandis apply in respect of such MOUs
as if they were Contracts.
6. DEBTORS
6.1 The Vendor shall when the Consideration has been paid pursuant to
the terms of the Umbrella Agreement if requested by the Purchaser
and at the Purchaser's cost assign to the Purchaser the benefit
of the Debtors (or any of them) in the form of the assignment set
out in Schedule 6.
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<PAGE>
6.2 The Purchaser will collect the Debtors in a manner consistent
with the way in which debts of the Activity were collected by the
Vendor prior to Completion and will not issue proceedings for
recovery of any of the Debtors without first giving the Vendor 7
days prior written notice and, if required by the Vendor, the
Purchaser will re-assign to the Vendor at the Vendor's expense
the benefit of any Debtor for an amount equal to the face value
of such Debtor (less any specific provision or reserve included
in the Final Completion Statement in respect of such Debtor).
6.3 Any sums received by the Vendor after the Completion Date in
relation to any of the Debtors (other than any Debtors
re-assigned to the Vendor pursuant to clause 6.2) shall belong to
the Purchaser and the Vendor shall pay the same to the Purchaser
as soon as practicable and in any event within 7 days of receipt
of the same by the Vendor.
7. THE TRANSFERRING EMPLOYEES
7.1 With regard to the Transferring Employees:-
7.1.1 the parties acknowledge and agree that pursuant to the
Regulations, the contracts of employment of the
Transferring Employees (save insofar as such contracts
relate to any occupational pension scheme) will have
and be deemed to have had effect after Completion as if
originally made between the Purchaser and the
Transferring Employees; and
7.1.2 upon or as soon as practicable after Completion the
Vendor and the Purchaser will make a joint announcement
to the Transferring Employees in the Agreed Terms
regarding the transfer of their contracts of employment
as referred to in clause 7.1.1
7.2 The Vendor shall indemnify and keep indemnified the Purchaser
against any liability or claim (whether for redundancy payments,
protective awards, damages for wrongful dismissal or compensation
for unfair dismissal or
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<PAGE>
otherwise howsoever) against the Purchaser in connection with any
act or omission of the Vendor or any other member of the Lucas
Group relating to the employment of any of the Transferring
Employees prior to the Completion Date or the termination of the
employment of any of the Transferring Employees by the Vendor or
any other member of the Lucas Group prior to the Completion Date
and for which the Purchaser is liable by virtue of the
Regulations and for all costs and expenses reasonably incurred by
the Purchaser in settling, contesting or dealing with any such
liability or claim PROVIDED THAT such indemnity shall not apply
to any such liability, claim, costs or expenses to the extent
that they are provided for in the Net Current Assets Value.
7.3 Save as provided in clause 7.2 the Purchaser shall indemnify and
keep indemnified the Vendor and every company in the Lucas Group
against:-
7.3.1 any liability or claim by a Transferring Employee
(whether for redundancy payments, protective awards,
damages for wrongful dismissal or compensation for
unfair dismissal or otherwise howsoever) in connection
with the employment of the Transferring Employees or
the termination of their employment by the Purchaser
following the Completion Date;
7.3.2 all liabilities and claims incurred by the Lucas Group
or made against the Lucas Group in connection with the
termination of the employment of any Transferring
Employee who refuses to transfer with the Activity to
the Purchaser on Completion or arising as a result of
any constructive dismissal claim by any of the
Transferring Employees following an objection by any
such employee to the identity of the Purchaser; and
7.3.3 all costs and expenses reasonably incurred by the
Vendor in settling, contesting or dealing with any such
claim.
7.4 The provisions of Schedule 7 relating to Pensions shall apply and
have effect as part of this Agreement.
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7.5 The Purchaser shall for a period of 12 months from Completion at
the Vendor's request make available to the Vendor and allow the
Vendor to take copies of those of the Records which relate to the
Transferring Employees' employment prior to Completion. The
Vendor will for a period of 12 months after Completion provide
the Purchaser with copies of such information and documents not
comprised within the Records as the Purchaser may reasonably
require in relation to the Transferring Employees' employment
prior to Completion (but excluding any information or documents
relating to any pension, retirement and/or death benefits of the
Transferring Employees which are dealt with in Schedule 7).
7.6 The Purchaser covenants with the Vendor for itself and as trustee
for each Transferring Employee that should the Purchaser dismiss
any of the Transferring Employees for reasons of redundancy
within 12 months after Completion, the Purchaser will make
payments to each of the Transferring Employees so dismissed which
are no less favourable to such employee than those set out in the
Severance Policy section of the pack of employment particulars
annexed to the Disclosure Letter.
7.7 The Vendor confirms that it has complied with the provisions of
the Regulations as to notification and consultation with the
Transferring Employees and the Purchaser confirms that it has
complied with the provisions of Regulation 10(3) of the
Regulations.
7.8 The Vendor shall indemnify the Purchaser from and against any
claims, demands, liabilities, damages, awards, costs, losses and
expenses brought or made against or incurred by the Purchaser as
a result of the Regulations applying to the employment contracts
of any employees of the Vendor or any other member of the Lucas
Group who are not Transferring Employees or otherwise howsoever
arising in respect of such employees.
8. COSTS AND EXPENSES
Each party to this Agreement shall bear its own costs and expenses in
connection with this Agreement and the negotiations leading thereto. For
the avoidance of doubt the
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Purchaser shall pay all stamp duty payable in connection with this
Agreement, any instrument executed pursuant hereto or to the Umbrella
Agreement and the purchase by it of the Assets and the Activity and will
indemnify the Vendor against any stamp duty and related penalties and
interest (if any) it has to pay in connection with this Agreement or any
instrument executed pursuant hereto before enforcing its rights thereunder.
9. INDEMNITY AND LIABILITIES
9.1 The Purchaser agrees that it will assume and undertakes to pay,
perform and discharge when due or required to be performed:-
9.1.1 the Creditors in accordance with clause 2.4;
9.1.2 the Contracts, the Bids and the MOU's in accordance
with clause 5 and any liabilities or obligations of the
Vendor arising out of any Completed Contract
(including, without limitation, any obligations or
liabilities arising out of a breach by the Vendor prior
to Completion of any of its obligations under any such
Contracts, MOU's or Completed Contracts);
9.1.3 all the Vendor's obligations to return any Project
Prepayments to customers of the Activity;
9.1.4 the Vendor's obligations in respect of goods sold,
leased or otherwise disposed of or manufactured (in
whole or in part only) by the Vendor (or any previous
owner of the Activity) or services performed by the
Vendor (or any previous owner of the Activity) in
relation to the Activity prior to Completion in
accordance with clause 10;
9.1.5 the Vendor's obligations in respect of the Transferring
Employees in accordance with clause 7, including
(without limitation) the liabilities of the Vendor for
unpaid accrued holiday pay to the Transferring
Employees and any and all of
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the Vendor's obligations for the financial year of the
Vendor in which Completion occurs with respect to the
Economic Value Added Bonus Scheme;
9.1.6 any liabilities of the Vendor relating to the Activity
(including, without limitation, any liability relating
to Taxation) to the extent that (a) provision or
reserve therefor has been made and is reflected in the
Net Current Assets Value or (b) the subject matter
thereof is otherwise taken account of, or reflected, in
the calculation of the Net Current Assets Value;
9.1.7 any obligations, liabilities, losses, damages, claims,
costs and expenses arising from or relating to the
matters referred to in the following paragraphs of the
Disclosure Letter:-
9.1.7.1 Part A paragraph 9 (Litigation) regarding
only the problems encountered in the
Philippines with Hartridge smoke meters; and
9.1.7.2 Part A paragraph 10.2 (Action by Robert Bosch
GmbH); and
9.1.8 any other liabilities or obligations of the Vendor or
any other member of the Lucas Group relating to the
Activity agreed to be assumed by the Purchaser under
this Agreement or the Umbrella Agreement
9.2 The Purchaser shall not assume, and the Vendor shall remain
responsible for, the following liabilities arising out of the
conduct of the Activity by the Vendor or any other member of the
Lucas Group before Completion:-
9.2.1 any liability of the Vendor for borrowed money (other
than in respect of the Leased Assets);
9.2.2 any Lucas Internal Funding;
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9.2.3 any liability of the Vendor to Taxation in respect of
the Activity save to the extent the same is included
within the Assumed Liabilities or is otherwise agreed
to be discharged by the Purchaser under this Agreement
or the Umbrella Agreement;
9.2.4 any liability of the Vendor arising under clause 7.2 in
respect of the Transferring Employees and the liability
of the Lucas Group to pay any divestment bonus to any
Transferring Employees in connection with the sale of
the Activity hereunder;
9.2.5 any liability of the Vendor in respect of defective
goods sold or services supplied by the Vendor which is
to be retained by the Vendor in accordance with clause
10.1.2;
9.2.6 any criminal liability of the Vendor arising out of a
breach of statutory duty or laws applicable to the
Activity by the Vendor prior to the Completion Date;
9.2.7 any liabilities relating to the Magasa Action;
9.2.8 any liabilities arising under the Asnu Licence;
9.2.9 any liabilities arising from a breach of laws
applicable to the Activity by the Vendor or other
members of the Lucas Group prior to Completion which:-
(a) automatically attach to the Purchaser by operation
of law; and
(b) are material in the context of the Activities (as
defined in the Umbrella Agreement) taken as a
whole; and
(c) are not Assumed Liabilities; and
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(d) do not relate to the Transferring Employees (who
are dealt with in clause 7) or to environmental
matters (which are dealt with in clause 9.3),
but excluding (for the avoidance of doubt) any such
liabilities incurred by the Purchaser as a result of or
relating to any act or omission of any member of the
Purchaser's Group following Completion; and
9.2.10 any other liabilities of the Vendor or any other member
of the Lucas Group arising out of the conduct of the
Activity by the Vendor or any other member of the Lucas
Group before Completion and which:-
(a) are not comprised within the Assumed Liabilities;
and
(b) do not relate to any breach of laws to the extent
such liabilities are dealt with in clause 9.2.9;
and
(c) do not relate to environmental matters (which are
dealt with in clause 9.3)
9.3 The Purchaser shall not assume, and the Vendor shall indemnify
the Purchaser against, any and all expenses, costs, loss, damages
and liability (excluding consequential or economic loss) arising
out of any claims made by any unaffiliated third party seeking
damages or injunctive relief relating to environmental matters
affecting the Property under the common law or any notifications
or notices made by any government authority regarding correction,
removal, abatement, remediation or clean-up in respect of the
Property under environmental laws, including Section IIA of the
Environmental Protection Act 1990 ("EPA") or Sections 161 to 161D
of the Water Resources Act 1991 ("WRA") and all rules,
regulations, orders or statutory guidance made thereunder
relating to the environment (as defined in the EPA ) if and to
the extent only that such claims, notifications or notices result
from and relate to the conduct of the Activity prior to
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Completion or the condition of the Property at the Completion
Date PROVIDED THAT:-
9.3.1 the total amount payable by the Vendor under this
clause in respect of any such claims, notices or
notifications to the extent they result from or relate
to the condition of the Property before it was acquired
by the Lucas Group or arise from or relate to any act
or omission of any previous owner of the Activity
before the Lucas Group (a "Predecessor's Liability")
shall (when aggregated with any payments made for
breach of the Warranties (as defined in the Umbrella
Agreement) and any payments made pursuant to equivalent
clauses in the other Sale Agreements (as defined in the
Umbrella Agreement)) not exceed fifty per cent of the
Consideration; and
9.3.2 the Vendor shall not be liable to the Purchaser
pursuant to this Agreement in respect of any such
claims, notices or notifications relating to or
resulting from a Predecessor's Liability unless written
notice of the claim, notice or notification (together
with reasonable details thereof) is given to the Vendor
within the three years immediately following the
Completion Date and any proceedings against the Vendor
in respect thereof are issued and served on the Vendor
within 9 months after such notice has been so given;
and
9.3.3 the liability of the Vendor under this clause shall not
be increased as a result of any change in law or in
practice of any federal, state or other governmental
body or authority occurring after the Completion Date
provided that:-
(a) the subsequent coming into force of Section IIA of
the EPA and Sections 161A to 161D of the WRA shall
not be regarded as a change in law for these
purposes; and
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(b) the coming into force after Completion of
statutory guidance and regulations issued under
the EPA which are substantially in the same form
as the statutory guidance and regulations issued
under the EPA in draft form in September and
November 1996 shall not be regarded as a change in
law for these purposes; and
(c) the coming into force after Completion of the
regulations under the WRA shall not be regarded as
a change in law for these purposes provided that
they do not increase the scope or extent of the
liability of the Vendor under this clause; and
9.34 the Vendor shall not be liable in respect of any claim
brought by the Purchaser under this clause 9.3 unless
the liability of the Vendor in relation thereto shall
(when added to the liability of Lucas Automation &
Control Engineering Inc in respect of claims made under
the equivalent provisions of the US Sale Agreement (as
defined in the Umbrella Agreement)) exceed
(pound)25,000.
9.4 The Purchaser hereby undertakes to indemnify and hold harmless
the Lucas Group from and against any and all expenses, costs,
loss, damage and liability which the Lucas Group may suffer or
incur directly or indirectly in respect of or arising out of:-
9.4.1 the Assumed Liabilities or the failure or delay by the
Purchaser in paying, performing or discharging the
Assumed Liabilities; or
9.4.2 the operation of the Activity by the Purchaser after
the Completion Date
9.5 The Purchaser will use all reasonable endeavours (including
procuring the giving of guarantees by the Guarantor where
required) to procure that on or
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as soon as practical after Completion each member of the Lucas
Group is released from its liability (whether actual or
contingent) in respect of those bonds, guarantees and indemnities
given by any of them before Completion in respect of the Activity
which are listed in Schedule 12 or which are identified in the
Disclosure Letter. The Purchaser will indemnify the Lucas Group
against any and all expenses, costs, loss, damage and liability
which the Lucas Group may suffer or incur directly or indirectly
in respect of or otherwise arising out of any claim or other
demand made on the Lucas Group (whether made before or after
Completion) in respect of the bonds, guarantees or indemnities
given by any member of the Lucas Group before Completion in
respect of the Activity and listed in Schedule 12 or identified
in the Disclosure Letter or in respect of any other bonds,
guarantees or indemnities given by the Lucas Group but in their
case only to the extent that the underlying obligation
constitutes an Assumed Liability.
9.6 The Vendor hereby undertakes to indemnify and hold harmless the
Purchaser against any and all expenses, costs, loss, damage and
liability which the Purchaser may suffer or incur directly or
indirectly in respect of or arising out of the Excluded
Liabilities or the failure or delay by the Vendor in paying,
performing or discharging the Excluded Liabilities in accordance
with clause 9.2
9.7 Before any party makes any payment or offers any other remedy to
a third party or takes any other remedial or corrective action in
respect of matters for which it is entitled to an indemnity from
any other party hereto under the terms of this clause 9 or
otherwise under this Agreement it shall give a reasonable
opportunity to such other party to verify and, if appropriate,
remedy the default, defect, omission or other matter giving rise
to the claim in question, subject always to such third party
allowing the same.
9.8 In the event that this Agreement requires or entitles any party
to pay or receive a payment of or in respect of Taxation and the
relevant legislation provides that payment must be made to or by
another party to this Agreement the relevant parties shall make
such adjusting payments between
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themselves and at such times as are necessary to give effect to
the intention expressed in this Agreement.
10. PRODUCT LIABILITY AND PRODUCT WARRANTY
10.1 Without prejudice to the generality of any other provision of
this Agreement the Purchaser shall be liable:-
10.1.1 (save in relation to products the subject of the LAO
Agreement which shall be governed by the terms of that
agreement) to carry out in accordance with its terms
any warranty, guarantee or other similar obligation or
commitment ("Warranty Work" which expression includes
any materials supplied, labour involved and any costs
or other expenses incurred):-
10.1.1.1 given or undertaken by the Vendor (or any
previous owner of the Activity) in respect of
any goods sold, leased or otherwise disposed
of, or in respect of any services performed,
under any contract entered into or assumed by
the Vendor (or any previous owner of the
Activity) prior to the Completion Date in
relation to or in contemplation of the
Activity; or
10.1.1.2 given or undertaken by the Purchaser in
respect of goods sold, leased or otherwise
disposed of, or in respect of services
performed, by the Purchaser following the
Completion Date which incorporate products
manufactured or purchased by the Vendor (or
any previous owner of the Activity) prior
thereto or work in progress of the Vendor at
Completion; and
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10.1.2 for all loss damage or liability (other than Warranty
Work) arising out of any defective goods sold leased or
otherwise disposed of or defective or negligent
services provided by the Vendor (or any previous owner
of the Activity) in respect of the Activity prior to
Completion whether under any Contract or any other
contract entered into by the Vendor prior to Completion
in relation to or in contemplation of the Activity or
arising out of defective goods bought in or
manufactured (in whole or in part) by the Vendor (or
any previous owner of the Activity) and sold
subsequently by the Purchaser and whether or not the
claim is made against the Lucas Group or the Purchaser,
unless the event or incident (which for the avoidance
of doubt shall not include the actual sale, lease,
disposal or provision of goods or services by the
Vendor (or any previous owner of the Activity)) giving
rise to any such liability occurred before the
Completion Date in which event such loss, liability or
damage shall be borne by the Vendor.
10.2 The Purchaser shall indemnify the Lucas Group against all costs,
expenses, loss, damage or liability arising out of any breach by
the Purchaser of the provisions of clause 10.1. The Vendor shall
indemnify the Purchaser's Group against all costs, expenses,
loss, damage or liability arising out of a failure by the Vendor
to discharge its obligations under clause 10.1.2.
11. POST COMPLETION COVENANTS
11.1 For the purposes of assuring to the Purchaser the full benefit of
the Activity and the Goodwill and in consideration of the
agreement of the Purchaser to buy the Assets on the terms of this
Agreement and the Umbrella Agreement Lucas hereby undertakes to
the Purchaser that it will not and it agrees to procure that no
other member of the Lucas Group will, either alone or in
conjunction with or on behalf of any other person:-
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11.1.1 anywhere in the world for the period from Completion to
31 December 2000 be engaged or (save as the holder of
shares or other securities in any company which are
quoted, listed or otherwise dealt in on a recognised
stock exchange or other securities market which confer
not more than 5% of the votes which could be cast at a
general meeting of the company concerned) directly or
indirectly be concerned or interested in any trade or
business which involves the sale or distribution of
goods which are competitive as specified in clause 11.7
or the provision of services in relation to the design,
installation or use of such competitive goods
("Competing Services") to a person who is not a member
of the Lucas Group and which in any such case actually
competes with the Activity as it is carried on at
Completion;
11.1.2 for a period of one year from Completion without the
prior written consent of the Guarantor make any offer
of employment to any engineer, designer, assembler or
other senior employee included within the Transferring
Employees while such employee remains employed by any
member of the Purchaser's Group;
11.1.3 for a period of three years from Completion without the
prior written consent of the Guarantor solicit the
services of (whether as an employee or otherwise) or
attempt to entice away any engineer, designer,
assembler or other senior employee included within the
Transferring Employees while such employee remains
employed by any member of the Purchaser's Group;
11.1.4 for the period from Completion to 31 December 2000
either personally or by any agent directly or
indirectly either on its own account or for any other
person solicit in competition with the Activity the
custom of any person who is not a member of
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the Lucas Group in respect of goods which are
competitive as specified in clause 11.7 or in respect
of Competing Services if such person was within twelve
months prior to or at the Completion Date a customer of
the Vendor in respect of the Activity;
11.1.5 for the period from Completion to 31 December 2000
interfere or seek to interfere with the continuance of
supplies to the Purchaser (or in the terms relating to
such supplies) from any persons who had been supplying
materials or services to the Vendor in respect of the
Activity within the twelve months prior to the
Completion Date; or
11.1.6 save as may be required by law or the regulations of
the New York Stock Exchange or the London Stock
Exchange Limited for a period of five years from
Completion reveal to any person any of the trade
secrets, secret or confidential operations, processes
or dealings or any other confidential information
concerning the Assets or the Activity including
(without limitation) customer lists and names, sales
targets and statistics, market share statistics,
surveys and reports so far as the same have come to the
Vendor's knowledge before the Completion Date but so
that this restriction shall cease to apply to
information which otherwise than through default of any
member of the Lucas Group becomes available to the
public generally.
11.2 Nothing in clause 11.1 shall prevent the Lucas Group or any
member of it:-
11.2.1 from continuing to carry on or developing its business
known as the Lake Center Model Shop or from continuing
or developing any of its other existing businesses
provided they do not actually compete with the
Activities as they are carried
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on at Completion or from operating in-house engineering
and testing facilities for any member of the Lucas
Group;
11.2.2 from providing consultancy and other services in
relation to the design, manufacture and/or use of
engine or engine fuel systems testing or assembly
equipment to its own customers or third parties
licensed by the Lucas Group (excluding the Activities)
to manufacture product;
11.2.3 from selling or supplying assembly or testing equipment
in support of products designed, developed or
distributed by the Lucas Group to any customer in
connection with an agreement for the supply of product
by the Lucas Group or to a licensed manufacturer of
Lucas Group products to whom any member of the Lucas
Group is providing technical assistance;
11.2.4 from acquiring, holding or operating any business or
the shares or other securities of any company
(including, without limitation, shares which are
quoted, listed or otherwise dealt in on a recognised
stock exchange or other securities market) or group of
companies or participating in any joint venture:-
11.2.4.1 where an incidental part of the activities of
such business, company, group of companies or
joint venture comprises a business which
either supplies competitive goods (as
described in clause 11.7) or which provides
Competing Services and which actually
competes with the Activity as it is are
carried on at Completion; and
11.2.4.2 where the principal purpose of such
acquisition or participation is not to
acquire or participate in a business which is
competitive as so described,
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provided that the relevant member of the Lucas Group
shall within 12 months after acquiring any such
business, company or group of companies offer to sell
to the Guarantor such incidental part which competes
with the Activity and the Guarantor and such member of
the Lucas Group shall negotiate in good faith with a
view to agreeing terms for such sale (but shall not be
obliged to conclude such sale if mutually acceptable
terms cannot be agreed); or
11.2.5 from carrying on any of the activities contemplated by
the LAO Agreement or by the Intellectual Property
Agreements or from enjoying or exercising any benefits
or rights granted to any member of the Lucas Group
pursuant thereto.
11.3 Nothing in clause 11.1 shall prevent:-
11.3.1 Lucas Electrical and Electronic Systems AVSD facility
or any successor to its business or Varity Perkins
Limited or any successor to its business from providing
testing services to third parties in relation to engine
or engine fuel systems; or
11.3.2 Lucas TVS Limited or any member of the Lucas Group
(other than the Activity) from operating under any
licences or agreements which have been entered into
before the date hereof and are referred to in the
Disclosure Letter; or
11.3.3 the companies or Business Units listed in column 1 of
Schedule 15 from distributing the products listed in
column 2 of Schedule 15 on behalf of the entities
listed in column 3 of Schedule 15.
11.4 Lucas hereby agrees that each of the restrictions contained in
clause 11.1 above is reasonable but if any such restriction shall
be found to be void but would be valid if some part thereof were
deleted or the period or the area of
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application reduced such restriction shall apply with such
modification as may be necessary to make it valid and effective.
11.5 Each undertaking contained in clause 11.1 shall be construed as a
separate undertaking and if any one or more of such undertakings
is held to be against the public interest or unlawful or in any
way an unreasonable restraint of trade the remaining undertakings
shall continue in full force and effect and shall bind Lucas.
11.6 Any provision of this Agreement or any agreement or arrangement
of which it forms part which is subject to registration under the
Restrictive Trade Practices Act 1976 shall not take effect until
48 hours after particulars thereof have been furnished to the
Director General of Fair Trading pursuant to the terms of section
24 of the Restrictive Trade Practices Act 1976.
11.7 For the purposes of the foregoing provisions of this clause 11
goods referred to as being competitive shall mean equipment
designed to carry out any of the following: internal combustion
engine assembly or testing, motor vehicle transmission assembly,
motor vehicle transmission testing, internal combustion engine
fuel systems assembly or testing and assembly or testing of
automotive brake components and automotive air conditioning
compressors.
12. LICENCE OF LICENSED INTELLECTUAL PROPERTY
12.1 On Completion the Vendor grants to the Purchaser (so far as it is
able to grant the same and subject to clause 12.3) a perpetual,
irrevocable, non-exclusive, worldwide licence, free of royalty,
to use the Licensed Intellectual Property (including, without
limitation, the Specified Shared IP) for the purpose of enabling
the Purchaser to continue with the Activity after Completion in
the same manner as carried on by the Vendor immediately prior to
Completion.
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12.2 Subject to clause 12.3, the Purchaser may assign or sub-licence
any of the rights granted under this clause 12 to any person
PROVIDED THAT any assignee first enters into a direct covenant
with the Vendor agreeing to be bound by the provisions of this
clause 12 in respect of the Licence. Accordingly, references in
this clause to the Purchaser shall be construed as being
references to any such assignee following any such assignment.
12.3 The Licence shall immediately terminate with respect only to the
Specified Shared IP if within the three years immediately
following Completion:-
12.3.1 there is a change of control of the Purchaser or any
Holding Company of the Purchaser to a Competitor; or
12.3.2 the Purchaser or any receiver, manager, administrator,
administrative receiver or liquidator of the Purchaser
sells the whole or substantially the whole of the
Activity to a Competitor; or
12.3.3 the Purchaser purports to assign or sub-licence any of
the rights granted under the Licence to a Competitor.
12.4 Upon termination of the Licence with respect to the Specified
Shared IP the Purchaser or any relevant assignee shall cease to
be authorised to use the Specified Shared IP and shall forthwith
return to the Vendor all originals and copies of all documents
and other information (in whatever form) comprising, relating to
or recording the Specified Shared IP.
12.5 The Purchaser shall notify the Vendor in writing before
commencing any proceedings against any infringer of the Licensed
Intellectual Property but shall not be required to obtain the
Vendor's consent to the issue of any such proceedings except to
the extent that under applicable law the Vendor is required to be
joined as a party to such proceedings and if the Vendor is so
required the following provisions will apply:-
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12.5.1 the Vendor's prior written consent to being joined as a
party shall be required which consent shall not be
unreasonably withheld or delayed;
12.5.2 the Purchaser shall have the full conduct of such
proceedings at its own expense and shall keep the
Vendor informed of all material developments in
relation thereto;
12.5.3 the Purchaser shall indemnify the Vendor against all
costs, expenses, damages or other liability incurred or
suffered by or awarded against the Vendor as a result
of or in connection with such proceedings; and
12.5.4 subject to compliance by the Purchaser with the
provisions of clause 12.5.3, all damages or other
relief obtained from such proceedings shall belong to
or be for the benefit of the Purchaser.
12.6 If at any time after Completion the Vendor grants a licence of
any Licensed Intellectual Property to a DTI Competitor which will
enable such DTI Competitor to compete with the Purchaser in
respect of the Activity and such DTI Competitor does so compete,
the Vendor and the Purchaser will negotiate in good faith a
reasonable royalty to be paid by the Vendor to the Purchaser
having regard (inter alia) to the extent to which such DTI
Competitor does so compete and to the contribution which prior to
Completion the Business Unit known as LATS made to the creation
of the Licensed Intellectual Property in question.
13. RISK PROPERTY AND TITLE
At Completion the Vendor shall cease to hold insurance coverage for the
Assets, the Leased Assets and the Activity and risk in the Assets and the
Leased Assets shall pass to the Purchaser at the Completion Date. The
property in and title to the Assets (save for the Property which is dealt
with in Schedule 3) shall pass to the Purchaser on the terms of this
Agreement at the Completion Date.
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14. EXCLUSIONS
Except as otherwise specifically provided in this Agreement or the Umbrella
Agreement the Lucas Group will not be liable under this Agreement for any
personal injury, death, loss or damage of any kind whatsoever (other than
death or personal injury resulting from its negligence) whether
consequential or otherwise (including but not limited to loss of profits)
arising from any defect in the Assets and save as provided in the Umbrella
Agreement the Vendor hereby excludes in relation to the Assets and the
Activity all conditions, warranties, representations, guarantees and
stipulations express or implied, statutory, customary or otherwise which
but for such exclusion would or might subsist in favour of the Purchaser
except that such exclusion will not apply to any implied condition that the
Vendor has or will have the right to sell any goods being sold by the
Vendor when the property is to pass, subject to any retention of title in
favour of a third party or to any statements made fraudulently.
15. INSPECTION OF DOCUMENTS
The Vendor shall for a period of three years after Completion afford to the
authorised representatives of the Purchaser all reasonable facilities to
inspect records held or retained by the Vendor or its professional advisers
(which are not privileged) relating exclusively to the Activity and to make
copies of the same or extracts therefrom at the Purchaser's cost and
expense. The Purchaser agrees to maintain at one of its offices within the
United Kingdom and allow the Vendor at its cost and expense at all
reasonable times access to and to take copies of, the Records insofar as
they relate to the period prior to Completion for a period of 6 years from
Completion.
16. ASSIGNMENT PROHIBITED
The benefit of this Agreement may not be assigned by the Vendor without the
prior written consent of the Purchaser or by the Purchaser without the
prior written consent of the Vendor save that any party may assign the
benefit of this Agreement to any Subsidiary or Holding Company of it or to
any other Subsidiary of its Holding Company if any assignment does not
increase the liability of any party under this Agreement. If at any time
thereafter such assignee shall cease to be so connected with
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such assignor, it shall prior to so ceasing re-assign the benefit of the
Agreement to such assignor.
17. SURVIVAL OF CERTAIN PROVISIONS
This Agreement shall remain in force and effect after the Completion Date
in respect of any matters covenants or conditions which shall not have been
done observed or performed prior thereto and all representations warranties
obligations of and indemnities given by the parties shall (except for any
obligations fully performed) continue in full force and effect
notwithstanding Completion, subject to the provisions of the Umbrella
Agreement
18. GOVERNING LAW
This Agreement shall be governed by English law and the parties hereby
submit to the non-exclusive jurisdiction of the English courts
19. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the
several parties hereto on separate counterparts each of which when so
executed and delivered shall be an original but all the counterparts shall
together constitute one document.
20. SEVERABILITY
The parties expressly agree that it is not the intention of any party to
violate any public policy, statutory or common laws, rules, regulations,
treaties or decisions of any government or agency thereof. If any provision
of this Agreement is judicially or administratively interpreted or
constructed as being so in violation, such provision shall be inoperative
and the remainder of this Agreement shall remain binding upon the parties
hereto.
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21. NOTICES AND OTHER COMMUNICATIONS
All notices, demands or requests provided for or permitted to be given
pursuant to this Agreement must be in writing and shall be given in
accordance with the Umbrella Agreement.
22. NO THIRD PARTY BENEFICIARY
Except as otherwise provided in this Agreement and the Umbrella Agreement,
this Agreement is intended and agreed to be solely for the benefit of the
parties hereto and their permitted assigns and no third party shall accrue
any benefit, claim or right of any kind whatsoever pursuant to, under, by
or through this Agreement.
23. MODIFICATION
The parties to this Agreement may, by mutual written consent executed by
the authorised officers of the Purchaser and the Vendor, modify or
supplement this Agreement in such manner as may be mutually agreed upon by
them in writing.
24. WAIVER OF PROVISIONS
The terms, covenants, indemnities and conditions of this Agreement may be
waived only by a written instrument executed by the party waiving
compliance. The failure of any party at any time to require performance of
any provisions hereof shall in no manner affect the right at a later date
to enforce the same. No waiver by any party of any condition, or the breach
of any other provision, term, covenant or indemnity of this Agreement
whether by conduct or otherwise, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant or
indemnity of this Agreement.
AS WITNESS the hands of the duly authorised representatives of the parties
to this Agreement the day and year first above written.
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SCHEDULE 1 (OMITTED)
THE LEASED ASSETS
Pages 58 and 59
<PAGE>
SCHEDULE 2 (OMITTED)
THE PLANT, MACHINERY AND EQUIPMENT
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SCHEDULE 3
THE PROPERTY
Part 1
Description of First Property
1. The freehold land and premises on the east side of Buckingham Road Gawcott
Buckingham registered at HM Land Registry under title number BM107164
Part 2
Description of the Second Property
The freehold factory at Tingewick Road and Bath Lane Buckingham which is:-
(i) as to part comprised in a Conveyance dated 27th August 1954 and made
between Leslie Hartridge (1) and Leslie Hartridge Limited (2);
(ii) as to a further part comprised in a Conveyance dated 22nd July 1965
and made between Charles Leslie Kibble and Mary Agnes Kibble (1) and
Leslie Hartridge Limited (2) ("the 1965 Conveyance");
(iii) as to a further part comprised in a Conveyance dated 12th July 1966
and made between the same parties as the 1965 Conveyance;
(iv) as to the remainder registered or in the course of registration at
HM Land Registry with Possessory Title under Title No. BM221542
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Part 3
Conditions of Sale
1. In this Part of this Schedule the following words and expressions shall
have the following meanings:-
Words & Expressions Meanings
------------------- --------
1.1 "the Contract Rate" 4% per annum above the base lending
rate from time to time of Barclays
Bank plc
1.2 "the General Conditions" the Standard Conditions of Sale (Third
Edition)
1.3 "the Possessory Title Land" that part of the Second Property
referred to in paragraph (iv) of Part
2 of this Schedule
2. Lucas agrees to sell and the Purchaser agrees to purchase:-
2.1 the First Property for the sum of (pound)739,000;and
2.2 the Second Property for the sum of (pound)3,074,000
3. Completion of the sale and purchase of the Property and the payment of the
purchase prices and any other sums payable under this Part of this Schedule
is to take place on the Completion Date
4. Lucas sells with full title guarantee.
5. With regard to title to the Property:-
5.1 title to the Property having been deduced to the Purchaser (save as
mentioned in paragraph 5.2) the Purchaser is deemed to purchase with
full knowledge thereof and is not entitled to raise any objections or
requisitions in relation to it
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5.2 the Purchaser is aware that the title deeds in respect of the
Possessory Title Land have been lost
5.3 without prejudice to the generality of the provisions of paragraph 5.1
Lucas will procure that LACE will pursue the application which it has
submitted to HM Land Registry for the registration of possessory title
to the Possessory Title Land and shall use its best endeavours to
supply any further information required by and to answer any
requisitions raised by HM Land Registry whether before or after
completion of the sale to the Purchaser and will keep the Purchaser
notified of progress with the registration and will supply copies of
all correspondence with and requisitions raised by HM Land Registry
and any replies given as soon as possible
5.4 Lucas will on Completion provide a Defective Title Indemnity Policy in
respect of the Possessory Title Land capable of benefiting the
Purchaser issued by Norwich Union in the sum of (pound)3,100,000.
6. Matters affecting the First Property
The Property is sold subject to:-
6.1 any registered Local Land Charge and matters registerable as such
affecting or relating to the Property or to any part of it whether
general or specific and to any notice order proposal or requirement
whatsoever affecting or relating to the Property or to any part of it
given or made by a Government Department or by any Public or Local
Authority or statutory undertaker or other competent body or person
6.2 all charges orders proposals restrictions agreements notices or other
matters whatsoever affecting or relating to the Property or to any
part of it arising under the legislation relating to Town and Country
Planning or under any order or regulation made pursuant to such
legislation for the time being in force or any other legislation
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6.3 all public or private rights of way water light air support sewerage
and drainage and other rights and easements or quasi-easements (if
any) and to any wayleaves pipes cables wires stays and poles whether
or not apparent and without obligation on the part of Lucas to define
any such
6.4 all rates charges and other outgoings which affect or are charged on
the Property except for any mortgage or legal charge relating to money
secured on the Property
6.5 any overriding interests (or, where title to the Property is
unregistered, matters which would be overriding interests if title to
the Property were registered) and all matters which either are
revealed or would reasonably be expected to be revealed by inspection
and by the searches and enquiries usually made by a prudent purchaser
and the First Property is also sold subject to:-
6.6 the matters contained or referred to on the Registers of title number
BM107164
6.7 a Wayleave Consent dated 4 June 1974 and made between (1) Wagland
Limited and (2) East Midlands Electricity Board
6.8 a Wayleave Consent dated 6 June 1974 and made between (1) F A Tutt and
Mr Wagland and (2) East Midlands Electricity Board
insofar as the same are still subsisting and capable of taking effect
7. The General Conditions
This Agreement incorporates the General Conditions so far as they are
applicable to this sale and to the extent that they are not varied by or
inconsistent with the terms of this Agreement (including these special
conditions) or the terms of the Umbrella Agreement but subject to the
following amendments:
7.1 GENERAL CONDITION 2.2 is deleted
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7.2 in GENERAL CONDITION 4.2.3 the obligation on the Seller to produce
documents extends only to documents in the possession of the Seller or
the Seller's mortgagee
7.3 GENERAL CONDITION 4.3.2 is deleted
7.4 GENERAL CONDITIONS 5.1.1 and 5.1.2 are deleted and in GENERAL
CONDITION 5.2.2 the following is added:
"(i) must not change the use of the Property nor infringe any
statutory provisions affecting the Property"
7.5 GENERAL CONDITION 6.5.1 reads:
"The Seller is not to retain the documents of title after the Buyer
has tendered the amount payable under condition 6.4 unless the Buyer
is in material breach of this agreement and the Seller refuses
completion for that reason"
7.6 GENERAL CONDITION 6.7 (a) is deleted
7.7 the final sentence of GENERAL CONDITION 7.3.4 is deleted and a new
GENERAL CONDITION 7.3.5 is added as follows:
"7.3.5 if the Buyer is in default or, both parties being in
default, the total period of the Buyer's default is greater the Seller
is entitled to both compensation and income from the Property in
respect of the same period"
8. Insurance
8.1 The Property is at the Purchaser's sole risk until completion
8.2 If the Property is damaged or destroyed before actual completion, and
the proceeds of any insurance policy effected by or for the Purchaser
are reduced because of the existence of any policy effected by or for
Lucas the purchase price is to be abated by the amount of such
reduction unless the
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proceeds of any such policy are applied towards the reinstatement of
the Property under any contractual or statutory obligation.
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SCHEDULE 4 (OMITTED)
TRANSFERRING EMPLOYEES
67
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SCHEDULE 5 (OMITTED)
INTELLECTUAL PROPERTY AGREEMENTS
68
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SCHEDULE 6 (OMITTED)
ASSIGNMENT OF DEBTORS
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SCHEDULE 7
PENSIONS
1. This schedule is construed as follows:-
"Actuary's Letter" means the letter from the Lucas Actuary to the
Purchaser's Actuary dated 21 July 1997, a copy of which is appendix B.
"Agreed Rate" means a rate per annum equal to Lloyds Bank plc's base rate
from time to time compounded monthly.
"AVCs" means additional voluntary contributions paid by Members to the
Lucas Scheme.
"Consenting Member" means a Member:
(a) who is admitted to membership of the Purchaser's DB Scheme as of the
Completion Date; and
(b) from whom the Lucas Scheme receives, by the date specified in the
notice given to the Member in accordance with paragraph 9, an option
form properly completed requesting the Lucas Scheme to make a transfer
payment to the Purchaser's DB Scheme in respect of his rights in the
Lucas Scheme and who does not withdraw the request or lose his right
to the cash equivalent in accordance with the Pension Schemes Act
1993.
"Contracted-out scheme" and "contracting-out certificate" have the same
meanings as in the Pension Schemes Act 1993.
"Final Transfer Amount" means, subject to paragraph 4(b), the Unadjusted
Transfer Amount increased or decreased by the Investment Return and
increased by interest at the Agreed Rate from the last date on which the
Investment Return applies to the Payment Date (both dates exclusive).
References to the "estimated Final Transfer Amount" are to the amount
calculated under paragraph 4(a) on the basis that the date of calculation
is the
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Payment Date. In paragraphs 2 and 8(iii) references to the Final Transfer
Amount exclude any amount deducted (if relevant) under paragraph 6(b)(i) in
relation to the percentage rate of corporation tax but include any further
amount due under paragraph 6(b)(iv) and any adjustment by the Investment
Return as mentioned in paragraph 6(b) in determining the amount payable
under that paragraph in circumstances where it comes into operation.
"Investment Return" means the proportionate change between the Completion
Date and the date which falls 7 days before the Payment Date in an index
comprising as at the Completion Date as to 90 per cent. the FT-Actuaries
All-Share Index (assuming notional gross dividend income is reinvested in
the same index at the end of each calendar month) and as to 10 per cent.
the FT-Actuaries index of prices for British Government stocks of over 15
years (assuming notional gross interest is reinvested in the same index at
the end of each calendar month). For this purpose such proportionate change
is calculated by comparing the level of the index at close of business on
the Completion Date with the level of the index at close of business on the
date which falls 7 days before the Payment Date or, if either of these
dates is not a date in respect of which the index is quoted, the level of
the index at the close of business on the next day for which they are
quoted shall be used.
"Lucas Actuary" means Hymans Robertson
"Lucas Scheme" means the Lucas Pension Scheme. Where the context requires
it includes the trustees thereof.
"Member" means a Transferring Employee who is an active member of the Lucas
Scheme immediately before the Completion Date. "Active Member" for this
purpose means a member of the Lucas Scheme who is in pensionable service
and is accruing benefits under the Lucas Scheme and it includes a person
who is a member of the Lucas Scheme under its provisions relating to
temporary absence from duty or maternity leave but it excludes any person
whose membership is restricted to death in service benefits.
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"Payment Date" means the date which is the later of:-
(a) six months after the Completion Date; and
(b) 30 days after the later of (i) the date on which the Unadjusted
Transfer Amount and the Final Transfer Amount have been calculated by
the Lucas Actuary and checked and agreed by the Purchaser's Actuary
(as mentioned in paragraphs 4 and 5) or certified by the independent
actuary under paragraph 5(c) and (ii) the date on which all of the
Transfer Conditions have been and remain satisfied.
"Purchaser's Actuary" means Buck Consultants.
"Purchaser's Associates" means (i) any company controlled by the Purchaser
or by its parent company and (ii) the Purchaser's Scheme.
"Purchaser's DB Scheme" means the defined benefit section of the
Purchaser's Scheme referred to in paragraph 2. Where the context requires
it includes the trustees thereof.
"Purchaser's DC Scheme" means the defined contribution section of the
Purchaser's Scheme referred to in paragraph 2. Where the context requires
it includes the trustees thereof.
"Purchaser's Group" means the Guarantor and any company:-
(i) which is a Subsidiary of the Guarantor;
(ii) which is the Holding Company of the Guarantor or any Subsidiary of
such Holding Company; or
(iii) over which the Guarantor or any such Holding Company has control
within the meaning defined in this Agreement
for the time being and from time to time.
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"Purchaser's Scheme" means the Purchaser's DB Scheme and the Purchaser's DC
Scheme. References to the Purchaser's Scheme refer to each such section
separately and, where the context requires, includes the trustees thereof.
"Transfer Conditions" means all of the following:
(a) The written approval of the Inland Revenue has been received to the
transfer of assets from the Lucas Scheme to the Purchaser's DB Scheme.
(b) Evidence is produced to the Lucas Scheme that the Purchaser's DB
Scheme is a contracted-out scheme with a contracting-out certificate
which can cover the employments of the Members.
(c) The Lucas Scheme receives an option form properly completed from each
of the Consenting Members.
(d) The written agreement of the Purchaser's DB Scheme in the form set out
in appendix A (with the information and annexes to be completed as
therein indicated) is given to the Lucas Scheme.
(e) The written confirmation of the Lucas Actuary (or the independent
actuary under paragraph 5(c) that, having reviewed the documents
governing the Purchaser's DB Scheme, he is satisfied that the
Purchaser's DB Scheme meets the requirements of paragraph 2.
"Unadjusted Transfer Amount" means the unadjusted transfer amount
calculated in accordance with the Actuary's Letter.
"the Vendor's Group" means LucasVarity and any company which is a
Subsidiary or Subsidiary Undertaking of LucasVarity for the time being and
from time to time.
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2. Purchaser's Scheme
(a) On or before the Completion Date the Purchaser will establish or
nominate an occupational pension scheme (incorporating two sections,
the Purchaser's DB Scheme and the Purchaser's DC Scheme) which is
designed so as to be capable of being, as of the Completion Date, a
contracted-out scheme and approved by the Board of Inland Revenue as
an exempt approved scheme under Chapter 1 of Part XIV of the Income
and Corporation Taxes Act 1988 and which is to be administered wholly
in the United Kingdom. The Purchaser will procure that:-
(i) each Member is offered membership of the Purchaser's Scheme
with effect from the Completion Date on the basis that only
those Members who comply with sub-paragraph (b) of the
definition of Consenting Member in paragraph 1 will be eligible
for membership of the Purchaser's DB Scheme. All other Members
will be eligible only for membership of the Purchaser's DC
Scheme;
(ii) subject to paragraph 2(c) the Purchaser's DB Scheme provides
benefits in respect of the pensionable service after the
Completion Date of each Consenting Member which, overall, are
of equivalent value to the benefits that such Member could have
accrued had he remained an active member of the Lucas Scheme in
accordance with its terms immediately before the Completion
Date;
(iii) subject to paragraph 2(c) the Purchaser's DB Scheme, in
consideration of and subject to the transfer of the Final
Transfer Amount, credits each Consenting Member with a period
of pensionable service in the Purchaser's DB Scheme which is
equal to that Consenting Member's pensionable service in the
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Lucas Scheme prior to the Completion Date and provides benefits
in respect of each Consenting Member for his credited
pensionable service which, overall, are of equivalent value to
the benefits that would have been provided for and in respect
of him under the Lucas Scheme for such pensionable service had
he remained an active member of the Lucas Scheme (and subject
to the terms of the Lucas Scheme in force immediately prior to
the Completion Date) until his active membership of the
Purchaser's DB Scheme ceases;
(iv) the Purchaser's DB Scheme will include in its trust deeds and
rules as of the Completion Date (and in any replacement trust
deed or rules thereafter) the following provisions which shall
be effective only if the Purchaser's Scheme or the Purchaser
has received the Final Transfer Amount:-
(1) a power of amendment which prohibits (without a Consenting
Member's consent) the making of any amendment to the
Purchaser's DB Scheme that would prejudice the benefits
accrued for that Consenting Member in respect of the
pensionable service credited to him under paragraph
2(a)(iii) above; such benefits for this purpose to be
calculated on the basis of the Consenting Member's final
pensionable earnings at the date on which his pensionable
service with the principal employer of or any
participating employer in the Purchaser's Scheme ends;
(2) provisions which shall prevent the transfer into the
Purchaser's DB Scheme of the benefits of a group of
members of any other occupational pension scheme on any
basis that would result in the Purchaser's DB Scheme after
the transfer being (in the reasonable opinion of the
actuary
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to that scheme) insufficiently funded on an ongoing basis
to provide in full the benefits in respect of Consenting
Members that are referred to in paragraph 2(a)(iii) above
unless either:-
(aa) the written agreement of the Consenting Members is
obtained; or
(bb) the Purchaser and/or any other participating
employer in the Purchaser's DB Scheme agrees to pay
such additional contributions to that scheme as its
trustees may reasonably require for the purpose of
providing the said benefits in full on an ongoing
basis.
(b) The Purchaser's DB Scheme will offer facilities for AVCs and will
procure that the Purchaser's DB Scheme will provide under such
facilities, in respect of any Consenting Member's AVCs transferred to
the Purchaser's Scheme as mentioned in paragraph 7, benefits which are
at least equal in value at the date of transfer to the value so
transferred.
(c) Nothing in this paragraph 2 or otherwise in this schedule shall
prevent the Purchaser from amending, terminating or otherwise dealing
with the Purchaser's DB Scheme in any manner which does not prejudice
the benefits referred to in and calculated as specified in paragraphs
2(a)(iv)(1) and 2(b) which is in accordance with the provisions of the
Purchaser's DB Scheme and which complies with any relevant
legislation.
(d) Subject to the receipt by the Purchaser's Scheme or the Purchaser of
the Final Transfer Amount, the Purchaser undertakes that, in the event
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of the future sale by the Purchaser of any company for which or any
business in which Consenting Members work, and the purchaser of such
company or business not offering the Consenting Members membership of
an occupational pension scheme which will provide the benefits
described in paragraph 2(a)(iii) in respect of the credited
pensionable service referred to in that paragraph, the Purchaser shall
procure that the Purchaser's Scheme provides benefits for that service
in respect of any Consenting Member who chooses to retain his deferred
benefits in the Purchaser's DB Scheme that are calculated on the basis
of the Consenting Members' final pensionable earnings at the date on
which his pensionable service with the principal employer of or any
participating employer in the Purchaser's Scheme ends.
3. Production of information
The Purchaser shall promptly provide the Vendor with such documents and
information in the Purchaser's possession or control in connection with the
calculation of the Unadjusted Transfer Amount as the Vendor (or the Lucas
Actuary) may reasonably require to facilitate the calculation of the
Unadjusted Transfer Amount. In particular, the Purchaser shall promptly
notify the Vendor of any Member who, having completed an option form
requesting the Lucas Scheme to make a transfer payment to the Purchaser's
DB Scheme in respect of him, leaves the employment of the Purchaser or
withdraws that request or dies or otherwise loses his right to the cash
equivalent before the Payment Date.
4. Transfer Amount
(a) Within 30 days after the latest of (i) four months after the
Completion Date, (ii) the date on which the Vendor has received an
option form properly completed by and bearing the signature of each of
the Consenting Members and (iii) the date on which the Vendor or the
Lucas Actuary has received all such documents and information
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requested as mentioned in paragraph 3, the Lucas Actuary shall
calculate the Unadjusted Transfer Amount and (as if the date of
calculation was the Payment Date) the estimated Final Transfer Amount.
(b) If the Lucas Scheme makes a payment on account of the Final Transfer
Amount before the Payment Date the adjustment mentioned in paragraph 5
of the Actuary's Letter and in the above definition of Final Transfer
Amount by reference to the Investment Return shall apply to the full
amount of the Unadjusted Transfer Amount until the date of the on
account payment and thereafter the adjustment is applied to the
balance and will be calculated by reference to the Investment Return
until the last date on which it applies and thereafter by reference to
interest at the Agreed Rate until Payment Date (both dates exclusive).
5. Verification of Transfer Amount
(a) The Vendor will procure that (within the 30 days following the date on
which the Purchaser's Actuary is notified of the Lucas Actuary's
calculations of the Unadjusted Transfer Amount and the estimated Final
Transfer Amount) the Lucas Actuary allows the Purchaser's Actuary such
access to the calculations and the data on which they are based as is
reasonably necessary to enable the Purchaser's Actuary to check that
the calculations are correctly made in accordance with the terms of
this schedule and the Actuary's Letter. The Purchaser will procure
that the Purchaser's Actuary shall, within 30 days of receipt of the
calculations and the data reasonably required by him under this
paragraph, notify the Lucas Actuary in writing of his agreement to the
calculations (in which case the calculation of the Unadjusted Transfer
Amount and the method of calculating the Final Transfer Amount shall
become final and binding on the parties) or of the particulars of his
objection that any calculation is incorrect.
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(b) Within 30 days of the Purchaser's Actuary notifying the Lucas Actuary
of any objection to the calculation of the Unadjusted Transfer Amount
and/or the estimated Final Transfer Amount, the Lucas Actuary shall
notify the Purchaser's Actuary in writing either that he does or that
he does not accept and agree with the Purchaser's Actuary's
objections. If the Lucas Actuary does not accept and agree with all of
the Purchaser's Actuary's objections, the dispute between the Lucas
Actuary and the Purchaser's Actuary shall be referred by either the
Vendor or the Purchaser to an independent actuary as described in
sub-paragraph (c) below.
(c) The independent actuary shall be a Fellow of the Institute of
Actuaries or the Faculty of Actuaries in Scotland agreed by the Vendor
and the Purchaser or, if they cannot agree, appointed by the President
for the time being of the Institute of Actuaries. The independent
actuary shall:-
(i) determine each issue which is the subject of the disagreement
between the Lucas Actuary and the Purchaser's Actuary;
(ii) act as an expert and not as an arbitrator;
(iii) direct whether his costs are to be borne by the Vendor or the
Purchaser or how they are to be divided between them; and
(iv) sign a certificate specifying the Unadjusted Transfer Amount
and the method of calculating the Final Transfer Amount.
6. Payment of Transfer Amount
(a) The Vendor will use all reasonable endeavours to procure that the
Lucas Scheme transfers by the Payment Date to the Purchaser's DB
Scheme in respect of the Consenting Members an amount in cash equal to
the Final Transfer Amount.
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(b) Payments by Vendor and Purchaser
(i) If the Final Transfer Amount is not transferred in full to the
Purchaser's Scheme within one month after the Payment Date, the
Vendor shall, subject to (ii), (iii) and (iv) below, not later
than one month after receipt of a written demand from the
Purchaser, pay to the Purchaser, by way of an adjustment of the
Consideration such percentage as equals, 100 percent, less the
percentage rate of corporation tax applying to the Purchaser on
the Payment Date of the amount by which the Final Transfer
Amount (calculated as at the Payment Date or, if some assets
have been transferred after the Payment Date, calculated as at
the date on which those assets were transferred as if that date
was the Payment Date for the purpose of the Investment Return)
exceeds the greater of:-
(a) the amount transferred (if any); and
(b) the aggregate of the cash equivalents of the Consenting
Members having a statutory right (under the Pension
Schemes Act 1993) to a cash equivalent, plus the amount of
any refund of contributions from the Lucas Scheme to which
a Consenting Member not having the said statutory right is
entitled.
The excess so determined shall be adjusted by the
Investment Return from (and including) the Payment Date
or, if some assets have been transferred after the Payment
Date, the date of that transfer up to (but excluding) the
date of payment by the Vendor pursuant to this
sub-paragraph.
The amount described above (before the reduction by reference
to corporation tax) is referred to below as "the Shortfall".
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If by the date that is one month after the Payment Date the
total amount that has been received by the Purchaser's Scheme
pursuant to this Schedule is less than the amount referred to
in (i)(b) of this paragraph 6(b) above the Purchaser can refuse
to accept any subsequent payments from the Vendor made pursuant
to (i) above, in which case the Vendor shall have no further
liability under this paragraph 6(b).
(ii) If either of the Transfer Conditions (a) or (b) ceases to be
fulfilled or effective at any time after the Payment Date and
before the full payment due under (i) above has been made, the
Purchaser shall not demand payment pursuant to (i) above and
the time limit referred to in (i) above will not commence, or
(if either of those Transfer Conditions cease to be fulfilled
or effective after the time limit has started to run) will be
suspended, until the Transfer Condition is again fulfilled and
effective.
(iii) No payment shall be due from the Vendor pursuant to (i) above:-
(1) if the reason for the Final Transfer Amount (or part of
it) not having been transferred to the Purchaser's Scheme
by the expiry of the time limit referred to above is the
failure of the Purchaser's Scheme for whatever reason to
accept the whole or any part of the Final Transfer Amount
or if the reason is any other reason outside the control
of the Lucas Scheme or the Vendor (save for any reason
relating to the funding level of the Lucas Scheme) but, if
no payment is due from the Vendor because of any such
other reason outside the control of the Lucas Scheme,
payment will become due (subject to the other provisions
of this paragraph 6) if and when
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such reason ceases to exist and the amount due shall be
calculated in accordance with (i) above;
(2) unless the Purchaser undertakes in writing to the Vendor
to pay any amount received pursuant to (i) above forthwith
to the Purchaser's Scheme and to procure that such amount
be applied by the Purchaser's Scheme to provide benefits
for the Consenting Members in respect of their pensionable
service in the Lucas Scheme before Completion.
(iv) If the Vendor pays to the Purchaser an amount (the "Payment")
equal to the percentage referred to in (i) above of the
Shortfall then:
(1) forthwith following the Vendor making payment pursuant to
(i) above an amount equal to the Shortfall shall be
contributed to the Purchaser's Scheme; and
(2) provided that the Purchaser and all members of the
Purchaser's Group have taken all reasonable steps
(including the claiming of any relevant deduction from
profits and any repayment of tax and the obtaining of
approval of the Purchaser's Scheme as an Exempt Approved
Scheme) to maximise the Aggregate Tax Benefit, the Vendor
shall, on the later of the fifth anniversary of the
Completion Date and 2 days after receipt of written notice
from the Purchaser that the Aggregate Tax Benefit has been
finally determined by the Inland Revenue, pay to the
Purchaser, by way of adjustment to the Consideration, an
amount equal to the excess of the Shortfall over the sum
of the Payment and the Aggregate Tax Benefit, adjusted by
the Investment
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Return from (and including) the date on which the Payment
was made up to (but excluding) the date of payment of that
excess; however, the conditions for payment in this
proviso shall not apply if the reason for the Shortfall
becoming payable is delay within the control of the Vendor
or the Lucas Scheme.
In this sub-paragraph:
"Tax Benefit" means the aggregate of the amount by which
the relevant company's liability to pay corporation tax is
reduced and the amount of any repayment of corporation tax
to which the relevant company is entitled, which, in
either case, arises as a result of the contribution
referred to in (1) above (including any such reduction or
right which is attributable to a surrender by way of group
relief or consortium relief under sections 402 to 413
Taxes Act 1988 of a loss which arises as a result of the
payment of the contribution); and
"Aggregate Tax Benefit" means the aggregate of any Tax
Benefits arising to the Purchaser and the Purchaser's
Group in respect of all accounting periods on or before
the fifth anniversary of the date of Completion.
(v) If, for a reason outside the Vendor's control, the value of the
aggregate of the assets transferred by the Lucas Scheme to the
Purchaser's Scheme and the assets transferred by the Vendor to
the Purchaser under this paragraph 6 exceeds the Final Transfer
Amount, the Purchaser shall, within one month of such an excess
having been transferred, pay to the Vendor, by way of an
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adjustment of the Consideration, a sum in cash equal to such
excess adjusted by the Investment Return from (and including)
the date of transfer of the excess to the Purchaser's Scheme up
to (but excluding) the date of payment of the excess by the
Purchaser to the Vendor.
(vi) In the event that the total amount received by the Purchaser
and the Purchaser's Scheme by the due date for payment in
accordance with paragraph 6(b) is less than the Final Transfer
Amount (less, if applicable, the amount deducted in relation to
the percentage rate of corporation tax as mentioned in (i)
above but subject to payment of any further amount if and when
due in accordance with (iv) above), the Vendor will indemnify
the Purchaser, the Purchaser's Scheme and each member of the
Purchaser's Group against any liability (as defined in
paragraph 8(i)) arising out of or in connection with any claim
brought against all or any of them by any Consenting Member or
any spouse or dependant of the Consenting Member in relation to
that Consenting Member's service in the Lucas Scheme; provided
that this indemnity shall not apply if:-
(a) the Purchaser or the Purchaser's Scheme or any member of
the Purchaser's Group has encouraged, or assisted in
bringing, any such claim;
(b) the Purchaser and the Purchaser's Scheme have not complied
with paragraph 2 (conditionally on receiving the Final
Transfer Amount).
7. Cash Accumulation AVCs
The Vendor will use all reasonable endeavours to procure that on the
Payment Date the Lucas Scheme shall transfer to the Purchaser's DB Scheme
any sums which relate to a Consenting Member's cash accumulation AVCs or
any
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amounts not included in the Final Transfer Amount representing a transfer
payment made to the Lucas Scheme in respect of a Consenting Member and
which provide benefits on a money-purchase basis.
8. Indemnity
(i) In this paragraph:-
"liability" includes any compensation, damage, loss or requirement
of any court or industrial tribunal order or award, and costs and
expenses properly incurred.
"Claim" means a claim brought against the Vendor or any member of
the Vendor's Group or the Lucas Scheme relating to the Claimant not
being provided with the whole or any part of any benefit under an
occupational pension scheme (whether in relation to employment
before or after Completion) or relating to the cost of the benefit
but excluding (save to the extent that such claim arises out of a
breach by the Purchaser of paragraph 2 of this Schedule) any claim
arising out of (i) a breach of contract by the Vendor (including any
breach by the Vendor of the terms of this Schedule but otherwise
excluding a breach of any other provision of this Agreement) or (ii)
a breach of trust by the Lucas Scheme or (iii) failure of the Lucas
Scheme or the Vendor to comply with any statutory or regulatory
requirement.
"Claimant" means a Transferring Employee or any spouse or dependant
of a Transferring Employee.
(ii) The Purchaser will indemnify the Vendor, each member of the Vendor's
Group and the Lucas Scheme against any liability arising out of or
in connection with a Claim by a Claimant save to the extent that the
facts on which any claim is based are inconsistent with any of the
Warranties.
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<PAGE>
(iii) To the extent that a Claim relates to a period of employment before
the Completion Date, this indemnity is subject to payment of the
Final Transfer Amount.
(iv) The Purchaser agrees that neither it nor any member of the
Purchaser's Group will take any action or provide any assistance
(save as required by statute or by any competent authority) to any
person (direct or indirect) which might or would result in a Claim
or in the Lucas Scheme transferring a larger amount than the Final
Transfer Amount to the Purchaser's DB Scheme.
(v) When the Final Transfer Amount has been transferred or paid as
mentioned in this schedule (whether by the Lucas Scheme or the
Vendor), the Purchaser will indemnify the Lucas Scheme, the Vendor
and any member of the Vendor's Group against any liability
(including legal and other expenses) arising out of a claim brought
against any of them relating to the amount or nature of the benefits
provided by the Purchaser's Scheme as it relates to each of the
Consenting Members save to the extent that such claim arises from
the failure to take account in the calculation of the Unadjusted
Transfer Amount of any liability to provide any benefit for or in
respect of a Consenting Member other than any liability which there
may be in respect of any difference as between a man and a woman
relating to the guaranteed minimum pension (any such liability to be
met by the Purchaser or the Purchaser's Scheme).
(vi) To the extent that the indemnities in this paragraph relate to a
member of the Vendor's Group (other than the Vendor) or the Lucas
Scheme, the Vendor holds the benefit of an indemnity as trustee for
that member or, as the case may be, the Lucas Scheme. Without
prejudice to the ability of that person to enforce the indemnity,
the indemnity may be enforced by the Vendor as trustee for him or,
as the case may be, the Lucas Scheme.
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9. Notices
(a) Forthwith after Completion the Purchaser will issue a notice to each
Member in the form set out in Appendix C.
(b) Within 15 days of the Lucas Actuary confirming under paragraph 10 or
the independent actuary certifying that the Purchaser's Scheme meets
the requirements of paragraph 2, the Purchaser will issue a notice to
each Member, in terms approved by the Lucas Scheme (whose approval
shall not be unreasonably withheld or delayed), explaining the options
available to him in respect of his accrued benefits under the Lucas
Scheme (including, without limitation, the option for each Member to
request a transfer payment from the Lucas Scheme to the Purchaser's
Scheme calculated on the basis described in this Schedule), offering
him membership of the Purchaser's Scheme and enclosing an option form,
in terms approved by the Lucas Scheme (such approval not to be
unreasonably withheld or delayed), for him to return notifying (within
one month of the date of the issue of the notice) the Lucas Scheme and
the Purchaser of his choice of option. The Purchaser will also cause
to be issued to the Member notices to enable them to become
contracted-out under the Purchaser's Scheme. The Purchaser must also
supply to the Vendor a copy of each notice issued to the Members.
The Vendor shall procure that the Lucas Scheme complies with its
obligations as regards the issue of a statement of entitlement under
section 93A of the Pension Schemes Act 1993 to each Member who is
entitled to receive one and, if the Member agrees, provides a copy of
each statement to the Purchaser or the Purchaser's Actuary. The Vendor
shall not and shall procure that the Lucas Scheme does not issue any
notices or make any statements to any Transferring Employee about the
benefits to be provided under the Purchaser's Scheme save
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with the consent of the Purchaser which shall not be unreasonably
withheld or delayed.
10. Copies of Purchaser's Scheme's documents
As soon after Completion as is reasonably practicable the Purchaser will
provide to the Vendor a copy of the deeds or other documents governing the
Purchaser's DB Scheme. The Purchaser shall also provide to the Vendor or
the Lucas Actuary all such documents and information relating to the
Purchaser's DB Scheme as the Lucas Actuary may reasonably require in order
to check that the Purchaser's DB Scheme meets the requirements of paragraph
2 and the Purchaser shall immediately notify the Vendor of any matter or
circumstance prior to the Payment Date which causes any document or
information previously provided to be altered or no longer applicable in
any material respect.
The Lucas Actuary shall notify the Purchaser's Actuary within 30 days of
receiving all of the deeds, documents and other information referred to
above whether the Purchaser's DB Scheme meets the requirements of paragraph
2. If the Lucas Actuary notifies the Purchaser's Actuary that the
Purchaser's DB Scheme does not meet any requirement of paragraph 2 and the
Purchaser's Actuary and the Lucas Actuary are unable to resolve this
dispute within 30 days of the Lucas Actuary's notification, the dispute
shall be referred to the independent Actuary under paragraph 5(c).
11. Provision of information
The Vendor and the Purchaser shall promptly provide to each other such
documents and information as are reasonably required to enable the Lucas
Scheme and the Purchaser's DB Scheme to obtain the approval of the Board of
Inland Revenue to the transfer referred to in paragraph 6 and shall each
use all reasonable endeavours to obtain such approval in writing as soon as
reasonably practicable.
88
<PAGE>
12. Indemnities - General
If the Vendor or the Purchaser becomes aware of any matter which might give
rise to a claim for an indemnity under paragraph 6 (b)(vi) or 8 from the
other party, the following provisions shall apply:-
(1) The relevant party shall immediately give written notice to the other
party of the matter in respect of which the indemnity is being claimed
(stating in reasonable detail the nature of the matter and, so far as
practicable, the amount claimed) and shall consult with the other
party with respect to the matter. If the matter has become the subject
of any proceedings the relevant party shall give the notice within
sufficient time to enable the other party to contest the proceedings
before any first instance judgment in respect of such proceedings is
given.
(2) The relevant party shall:-
(a) take such action and institute such proceedings, and give such
information and assistance, as the other party or its insurers
may reasonably request to dispute, resist, appeal, compromise,
defend, remedy or mitigate the matter or enforce against any
person (other than the other party) the rights of the relevant
party or its insurers in relation to the matter; and
(b) not admit liability in respect of or settle the matter without
the prior written consent of the other party such consent not to
be unreasonably withheld or delayed.
89
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APPENDIX A (OMITTED)
TRANSFER AGREEMENT
Pages 90 - 92
<PAGE>
APPENDIX B (OMITTED)
Actuary's Letter
93
<PAGE>
APPENDIX C (OMITTED)
94
<PAGE>
SCHEDULE 8 (OMITTED)
INTELLECTUAL PROPERTY
Pages 95 - 99
<PAGE>
SCHEDULE 9 (OMITTED)
INTELLECTUAL PROPERTY ASSIGNMENTS
Pages 100 - 133
<PAGE>
SCHEDULE 10 (OMITTED)
FORWARD EXCHANGE CURRENCY CONTRACTS
Pages 134 - 135
<PAGE>
SCHEDULE 11 (OMITTED)
BILLS OF EXCHANGE
136
<PAGE>
SCHEDULE 12 (OMITTED)
BONDS, GUARANTEES AND INDEMNITIES
137
<PAGE>
SCHEDULE 13 (OMITTED)
MEMORANDA OF UNDERSTANDING
Pages 138 - 139
<PAGE>
SCHEDULE 14 (OMITTED)
EXPIRED PATENTS
140
<PAGE>
SCHEDULE 15 (OMITTED)
COMPETING ACTIVITIES
Pages 141 - 142
<PAGE>
SIGNED by /s/ James Zigel
--------------------
for and on behalf of LUCAS LIMITED
in the presence of:- /s/ Mary K. Krigbaum
SIGNED by /s/ Bruce P. Erdel
--------------------
for and on behalf of the ASSEMBLY TECHNOLOGY
& TEST LIMITED
in the presence of:- /s/ Rita Deckard
SIGNED by /s/ James Zigel
--------------------
for and on behalf of LUCAS INDUSTRIES PLC
in the presence of:- /s/ Mary K. Krigbaum
SIGNED by /s/ James Zigel
--------------------
for and on behalf of LUCAS AUTOMATION &
CONTROL ENGINEERING LIMITED
in the presence of:- /s/ Mary K. Krigbaum
143
<PAGE>
The following page contains a list of Schedules and Appendices which have
been intentionally omitted by the Registrant pursuant to Item 601(b)(2) of
Regulation S-K.
A copy of any omitted Exhibit or Appendix will be provided to the
Securities and Exchange Commission upon request.
<PAGE>
SCHEDULE 1 The Leased Assets
SCHEDULE 2 The Plant, Machinery and Equipment
SCHEDULE 4 Transferring Employees
SCHEDULE 5 Intellectual Property Agreements
SCHEDULE 6 Assignment of Debtors
SCHEDULE 8 Registered Intellectual Property
SCHEDULE 9 Part 1: Trade Mark Assignment by Lucas
Part 2: Trade Mark Assignment by LACE
Part 3: Patent Assignment by Lucas
Part 4: Patent Assignment by LACE
Part 5: Assignment of Patent Application by Lucas into
joint names
Part 6: Assignment of Unregistered Intellectual Property
SCHEDULE 10 Forward Exchange Currency Contracts
SCHEDULE 11 Bills of Exchange
SCHEDULE 12 Bonds, Guarantees and Indemnities
SCHEDULE 13 Memoranda of Understanding
SCHEDULE 14 Expired Patents
SCHEDULE 15 Competing Activities
APPENDICES TO SCHEDULE 7
APPENDIX A Transfer Agreement
APPENDIX B Actuary's Letter
APPENDIX C Notice to Employees Concerning Pension Arrangements
DATED 29 JULY 1997
(1) LUCAS Automation and Control Engineering GmbH
(2) ASSEMBLY TECHNOLOGIE & AUTOMATION GMBH
(3) LUCAS Industries plc
A G R E E M E N T
relating to the
Sale and Purchase of the German Assets of
Lucas Assembly & Test Systems
BOESEBECK DROSTE
Rechtsanwalte
Berliner Allee 48
40212 Dusseldorf
Tel. 0211-13680
Fax 0211-324439
1
<PAGE>
CONTENTS
1. Definitions
2. Sale of the Activity
3. Transfer of the Assets
4. The Consideration
5. Further Assurance and the Contracts
6. Debtors
7. The Transferring Employees
8. Costs and Expenses
9. Warranties
10. Indemnity and Liabilities
11. Product Liability and Product Warranty
12. Post Completion Covenants
13. Licence of Licensed Intellectual Property
14. Risk
15. Exclusions
16. Condition Precedent
17. Merger Control
18. Continuing Services and Subrent
19. Inspection of Documents
20. Assignment Prohibited
21. Survival of Certain Provisions
22. Governing Law
23. Counterparts
24. Severability
25. Notices and other Communications
26. No Third Party Benefits
27. Modification
28. Waiver of Provisions
2
<PAGE>
SCHEDULE 1 The Leased Assets
SCHEDULE 2 The Plant, Machinery and Equipment
SCHEDULE 3 The Property
SCHEDULE 4 Transferring Employees
SCHEDULE 5 Intellectual Property Agreements
SCHEDULE 6 Assignment of Debtors
SCHEDULE 7 Bonds, Guarantees and Indemnities
SCHEDULE 8 Memoranda of Understanding
SCHEDULE 9 Competing Activities
3
<PAGE>
THIS AGREEMENT is made on 29 July 1997
BETWEEN
(1) THE VENDOR LUCAS Automation and Control Engineering GmbH, Karl-Mand-Strasse
2a, 56070 Koblenz, Germany, registered with the Commercial Register of the
County Court of Koblenz under registration number HRB 5258
(2) THE PURCHASER ASSEMBLY TECHNOLOGIE & AUTOMATION GMBH whose registered
office is at Karl-Mand-Strasse 2, 56070 Koblenz-Rheinhafen
(3) LUCAS Industries plc, whose registered office is at Stratford, Solihull
B90 4LA, England
RECITALS
(A) The Vendor carries on the Activity at the Property (as each such expression
is defined below)
(B) Members of the Lucas Group (as defined below) carry on businesses similar
to that of the Activity in England and the United States of America.
(C) Members of the Lucas Group are to sell the businesses referred to in (B)
above to the Purchaser or members of the Purchaser's Group (as defined
below) on terms similar to those contained in this Agreement.
(D) The Vendor has agreed to sell the Activity and the Assets (as defined
below) to the Purchaser on the terms and conditions hereinafter appearing
and in the Umbrella Agreement (as defined below).
(E) Lucas Industries plc enters into this Agreement for giving jointly with the
Vendor the restrictive covenants in addition to the Vendor
4
<PAGE>
(F) The Umbrella Agreement regulates the terms and conditions on which the
Activity and the businesses referred to in (B) above are to be sold.
5
<PAGE>
NOW THIS AGREEMENT WITNESSES as follows:-
1. DEFINITIONS
In this Agreement (which expression shall include the Recitals of and
Schedules to this Agreement) except where inconsistent with the subject
matter or context:-
1.1 The following words and expressions shall bear the following meanings
respectively:-
"the Accruals" Any liability of the Vendor relating to
the Activity which falls to be settled
after the Completion Date in the course
of carrying on the Activity in respect
of a period of time which commences
before the Completion Date and ends
after such Date
"the Activity" The business of the design manufacture
and implementation of assembly line and
testing equipment with associated
materials handling and production con-
trol systems (and the provision of ser-
vices related thereto) primarily for the
automotive components industry carried
on by the Vendor at or from the Property
"the Amounts Recoverable Any and all amounts recoverable on the
on Contracts" Customer Contracts in accordance with
their respective terms together with the
work-in-
6
<PAGE>
progress which is the subject of the
Customer Contract in question in respect
of which the amount is recoverable, as
at the Completion Date
"the Assets" The assets specified in clause 2.1 and
the Intellectual Property and the Know
How
"Assumed Liabilities" The obligations and liabilities to be
assumed by the Purchaser as described in
clause 10.1
"Bids" Any and all bids or tenders for the sale
of goods or services of the Activity
which are open as at the Completion Date
"Business Unit" Any part of a member of the Lucas Group
or the activities of such a member in
either case in respect of which separate
management accounts have customarily
been prepared by the Lucas Group or the
relevant member
"Competitor" Any of the following companies or any
Subsidiary or Holding Company of any of
them or any other Subsidiary of such
Holding Company, namely:-
Aixin Seiki Co. Limited, Robert
7
<PAGE>
Bosch GmbH, GM's Delphi Automotive
Systems, ITT Industries, Nippondenso,
Siemens, Stanadyne, Zexel, Sundstrand,
Parker Hannifin, Allied Signal, Moog,
Hamilton Standard, Rolls-Royce, Valeo,
Delco, Motorola and Denso
"Completed Contract" Any contract or arrangement for the
supply of goods or services by the
Vendor or any previous owner of the
Activity in relation to the Activity:-
(i) pursuant to which the supply of
the relevant goods or services was
completed within the two years
immediately preceding the Completion
Date and in respect of which any
warranty, guarantee, maintenance or
similar obligation, liability or com-
mitment (a "Warranty") given by the
Vendor (or such previous owner) remains
outstanding and has not expired by
the Completion Date; or
(ii) pursuant to which the supply of
the relevant goods or services has been
completed and under which the customer
has prior to the Completion Date made a
claim under any Warranty relating to
8
<PAGE>
such goods or services
"Completion" Completion of the Umbrella Agreement and
the English Sale Agreement (as defined
in the Umbrella Agreement) and the US
Sale Agreement (as defined in the
Umbrella Agreement) and "the Completion
Date" shall be construed in the same
manner as in the English Sale Agreement
(as so defined)
"the Consideration" The consideration for the Assets hereby
agreed to be sold as determined in
accordance with the Umbrella Agreement
"the Contracts" Any and all current contracts and
arrangements of the Vendor or any member
of the Lucas Group (including, without
limitation, current contracts assumed by
the Vendor or any other member of the
Lucas Group to which any previous owner
of the Activity is party) relating
wholly to the Activity (or where any
current contracts and arrangements of
the Vendor or any other member of the
Lucas Group relate in part only to the
Activity then such part shall be deemed
to be included within the definition)
entered into before
9
<PAGE>
the Completion Date (including, without
limitation, the Customer Contracts, the
Supplier Contracts, and the agreements
relating to the Leased Assets) and which
then remain (in whole or in part) to be
performed by the Vendor, or any other
member of the Lucas Group, including,
without limitation, the Completed Con-
tracts and those contracts where any
warranty, guarantee, maintenance or
other similar obligations, liability or
commitment remains to be carried out by
any member of the Lucas Group, or where
any payment obligations of any member of
the Lucas Group have not been satisfied
provided always that this definition
excludes:-
(i) contracts or arrangements to the
extent they relate to the Excluded
Assets or to the Excluded Liabilities
(other than the Excluded Liabilities
referred to in clauses 10.2.9 and
10.2.10);
(ii) Group Sharing Arrangements; and
(iii) contracts of employment of any
employees of any member of
10
<PAGE>
the Lucas Group
"control" The possession, direct or indirect, of
the power to direct or cause the
direction of the management and
policies of a company, whether through
the ownership of voting securities, by
contract or otherwise
"the Creditors" The book and other debts owing by the
Vendor in connection with the Activity
to or in respect of trade creditors,
trade bills payable and any other
amounts to creditors of the Vendor in
respect of the Activity at the
Completion Date (and whether or not then
due and payable) including without
limitation:
(i) the Accruals;
(ii) any amounts owed by the Vendor to
any member of the Lucas Group in
respect of the Activity or by the
Activity to another Business Unit (in
each and any such case on current
account) but excluding (for the avoid-
ance of doubt) any Lucas Internal
Funding, and
(iii) any amounts owing to creditors
under the Group Sharing Arrangements to
the extent they
11
<PAGE>
relate to the Activity
"the Customer Contracts" Any and all uncompleted purchase orders
from customers which were accepted by
the Vendor prior to the Completion Date
which relate to the Activity and which
then remain to be performed in whole or
in part
"the Debtors" The book and other debts owing to the
Vendor in connection with the Activity
by or in respect of trade debtors, and
any other amounts owing to the Vendor by
debtors in connection with the Activity
at the Completion Date (whether or not
then due and payable) including without
limitation any amounts owed by any
member of the Lucas Group to the Vendor
in respect of the Activity or owed to
the Activity by another Business Unit
(in each and any such case on current
account) but excluding (for the
avoidance of doubt) any Lucas Internal
Funding
"the Disclosure Letter" has the meaning given to that expression
in the Umbrella Agreement
"DTI Competitor" Any of the following companies or any
Subsidiary or Holding
12
<PAGE>
Company of any of them or any other
Subsidiary of such Holding Company,
namely:-
Giddings & Lewis, Thyssen, Bosch,
Western Atlas, B&K, Elcon, ABB,
Ingersoll Rand, Mohwald, Meidenscha,
Mecclec, Stiwa, Teim Techneck and Knoell
"the Excluded Assets" The assets, rights, claims and benefits
excluded from the sale to the Purchaser
as set out in clause 2.5
"the Excluded Liabilities" The liabilities to be retained by the
Vendor as set out in clause 10.2
"Final Completion Statement" shall have the meaning given to that
expression in the Umbrella Agreement
"the Goodwill" The goodwill of the Vendor in connection
with the Activity
"Group Sharing Arrangements" Any and all contracts or arrangements
relating to the supply of goods or
services to the Vendor in respect of the
Activity and the supply of the same or
similar goods or services to another
member of the Lucas Group or another
Business Unit from the same supplier,
but excluding the Master Lease
13
<PAGE>
"the Guarantor" DT Industries, Inc. of Corporate Centre,
Suite 2-300, 1949 East Sunshine,
Springfield, MO 65804
"Holding Company" Holding Company as defined in Section
736 of the Companies Act 1985
"Intellectual Property The licenses briefly described in
Agreements" Schedule 5 in the agreed terms which
are to be entered into on Completion
"Know How" All inventions, designs, techniques,
formulas, technical drawings and
specifications, market studies,
consultants' reports, competitive
samples, engineering prototypes, trade
secrets, secret processes and other
confidential information which are owned
by the Lucas Group and which:-
(i) relates exclusively to the
Activity and which are not used by any
other member of the Lucas Group or any
Business Unit other than the Activity;
or
(ii) are to be licensed to the Lucas
Group at or following Completion
pursuant to the terms of the
Intellectual Property Agreements,
but excluding any of the same
14
<PAGE>
which are expressly retained by any
member of the Lucas Group under the
LAO Agreement or the Intellectual
Property Agreements or sold pursuant
to the English Sale Agreement or the US
Sale Agreement (as defined in the
Umbrella Agreement) and excluding the
Unregistered Intellectual Property
"the LAO Agreement" The agreement in the Agreed Terms
between Lucas Limited trading as "Lucas
Aftermarket Operations" and Assembly
Technology & Test Limited relating to
the relationship which will exist
between those parties after Completion
"the Leased Assets" Those assets not owned by the Vendor
which are used in the Activity which are
the subject of hire or hire purchase or
leasing agreements brief particulars of
which assets and agreements are listed
in Schedule 1
"Licence" The licence of the Licensed Intellectual
Property granted by the Vendor to the
Purchaser on Completion pursuant to
clause 13
"Licensed Intellectual The unregistered trade marks,
15
<PAGE>
Property" design rights, copyrights, know how and
other intellectual property rights which
are owned by the Lucas Group and which:
(i) do not relate exclusively to the
Activity in that they are used by
another member of the Lucas Group or
any Business Unit but immediately prior
to Completion have to some extent also
been used by the Vendor in connection
with the Activity; and
(ii) the Purchaser will require use of
in order to carry on the Activity in the
same manner after Completion as that
carried on by the Vendor immediately
prior to Completion; and
(iii) are not the subject matter of the
Intellectual Property Agreements or the
LAO Agreement
"Lucas Aftermarket Lucas Limited trading as "Lucas After-
Operations" market Operations"
"the Lucas Central Treasury" The Lucas Automotive GmbH Treasury
Department, Carl-Spaeter-Strasse 8,
56070 Koblenz
"the Lucas Group" Lucas Varity and any company which is a
Subsidiary or Subsidiary
16
<PAGE>
Undertaking of Lucas Varity for the time
being and from time to time
"Lucas Internal Funding" All monies due to or from the Activity
from or to the Lucas Central Treasury
which is either quasi capital or
otherwise owed on capital account or
which had the Lucas Central Treasury
been a bank would have amounted to an
overdraft
"LucasVarity" LucasVarity plc, registered number
3207774
"Master Lease" The Master Hiring Agreement (Number 139)
dated 17 February 1997 and made between
(1) Lucas Deutschland GmbH, (2) Lucas
Automotive GmbH, (3) LACE GmbH, (4)
Lucas Kfz Ausrustung GmbH and (5) Lease
Plan Deutschland GmbH relating to (inter
alia) the vehicles listed in Schedule 1
"MOUs" The Memoranda of Understanding entered
into by the Vendor or any other member
of the Lucas Group in respect of the
Activity including without limitation
those listed in Schedule 8
17
<PAGE>
"Net Current Assets Value" shall have the meaning given to that
expression in the Umbrella Agreement
"the Plant, Machinery The fixed and moveable plant and
and Equipment" machinery, tooling computer equipment
and equipment (including vehicles) owned
by the Vendor with an original cost per
item in excess of (pound)5,000 which
is/are used in the Activity and which
are listed in Schedule 2 and such other
machinery tooling furniture and equip-
ment owned by the Vendor located at the
Property and used primarily in the
Activity
"the Prepayments" Each of the payments made in advance by
or on behalf of the Vendor prior to the
Completion Date in the course of
carrying on the Activity in respect of a
period of time which commences before
the Completion Date and ends after such
Date but excluding (a) any such payment
to the extent the Purchaser does not
acquire the benefit thereof or otherwise
benefit from such payment following
Completion and (b) any such payment to
the extent it is not reflected in the
Net Current Assets Value
18
<PAGE>
"the Project Prepayments" Any advance payments or deposits on any
contracts costs made or paid by a
customer to the Vendor
"the Property" The properties described in Schedule 3
Part 1
"the Property Lease The Property Lease Agreement contained
Agreement" in Schedule 3, Part 2
"the Purchaser's German Fiedler & Forster, Opernplatz 2, 60313
Solicitors" Frankfurt am Main
"the Purchaser's Group" The Guarantor and any company:-
(i) which is a Subsidiary of the
Guarantor; or
(ii) over which the Guarantor has con-
trol within the meaning defined in
this Agreement
for the time being and from time to time
"the Records" All such records, lists of customers and
suppliers, accounts and other documents
relating exclusively to the Activity to
enable the Purchaser effectively to
carry on the same in succession to the
Vendor
"the Specified Shared IP" All management manuals, instruction
manuals, Health and Safety manuals,
disaster recovery
19
<PAGE>
procedures, Project Introduction Manage-
ment systems and other similar manuals
and the copyright and know how therein
owned by the Lucas Group and used in the
Activity and by any other Business Unit
or member of the Lucas Group, but
specifically excluding any technical
information contained therein used in
the design, manufacture or implementa-
tion of assembly line and testing equip-
ment
"the Stock" All stocks, including raw materials and
components, spare parts, operating
supplies, maintenance and non product
stock, finished goods, bought-in-goods,
packaging materials, packages and
products in intermediate stages of
completion (save where the same
constitutes Amounts Recoverable under
Contracts) owned by the Vendor for use
or sale in connection with the Activity
and any of the same which are or
incorporates goods or materials supplied
by a supplier subject to reservation of
title in each case at the Completion
Date
"Subsidiary" subsidiary as defined in section 736
20
<PAGE>
of the English Companies Act 1985
"Subsidiary Undertaking" subsidiary undertaking as defined in
section 258 Companies Act 1985
"the Supplier Contracts" Any and all contracts and arrangements
which were entered into before the
Completion Date by or on behalf of the
Vendor with suppliers for the supply to
the Vendor of goods or services in
connection with the Activity which then
remain to be performed, in whole or in
part, but excluding the Group Sharing
Arrangements
"Taxation" Any tax and any duty, impost levy or
governmental charge in the nature of tax
whether domestic or foreign and any
fine, penalty or interest connected
therewith including corporation tax,
income tax, trade tax, value added tax,
customs, excise and import duties, stamp
duty and any other payment whatsoever
which the Vendor is or may be or become
bound to make to any person as a result
of any enactment relating to any of the
foregoing
"the Transferring Employees" Those employees of the Vendor
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who are employed in connection with the
Activity at the Completion Date whose
names and positions are set out in
Schedule 4 and any other person who is
actively engaged as an employee of the
Vendor and working exclusively in the
Activity at Completion and whose
remuneration was paid by the Activity in
the period up to Completion (but
excluding for the avoidance of doubt any
person whom the Vendor or any other
member of the Lucas Group has treated as
a consultant, agency worker or con-
tractor)
"the Umbrella Agreement" An agreement in the Agreed Terms entered
into on the same date as this Agreement
between the parties hereto and certain
other members of the Lucas Group and the
Purchaser's Group
"Unregistered Intellectual The unregistered trade marks, service
Property" marks, design rights, copyright and
other intellectual property rights which
are owned by the Lucas Group and which:-
(i) are to be licensed to the Lucas
Group at or following Completion
pursuant to the terms of the Int-
22
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ellectual Property Agreements; or
(ii) relate exclusively to the
Activity and are not used by any other
member of the Lucas Group or any
Business Unit other than the Activity,
but excluding any such intellectual
property rights which are expressly
retained by any member of the Lucas
Group under the LAO Agreement or the
Intellectual Property Agreements or
sold pursuant to the English Sale
Agreement or the US Sale Agreement (as
defined in the Umbrella Agreement) and
excluding the Know How
"the Vendor's Solicitors" BOESEBECK DROSTE Rechtsanwalte of
Berliner Allee 48, 40212 Dusseldorf
1.2 References in this Agreement to statutes or any statutory provision
shall include any statutory modification, re-enactment or extension
thereof and any orders, regulations, instruments or other subordinate
legislation made thereunder, in each case in force at the date of this
Agreement.
1.3 In this Agreement:-
1.3.1 the masculine gender shall include the feminine and neuter and
the singular number shall include the plural and vice versa
1.3.2 references to persons shall include bodies corporate, unincorp-
orated associations and partnerships
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1.3.3 the expression "the Vendor" shall include its successors in
title; and
1.3.4 the headings contained in this document are inserted for con-
venience only and shall not affect its construction
1.4 Whenever a document is referred to as being "in the Agreed Terms" it
shall be in the form agreed and initialled by or on behalf of the
Vendor and the Purchaser
1.5 Except where the contrary is stated, any reference herein to a clause
or Schedule or party is to a clause of or Schedule or party to this
Agreement and any reference within a clause or Schedule to a
sub-clause, paragraph or other sub-division is a reference to such
sub-clause, paragraph or other sub-division so numbered or lettered in
that clause or Schedule. The Schedules form part of this Agreement and
shall have the same force and effect as if expressly set out in the
body of this Agreement
2. SALE AND PURCHASE OF THE ACTIVITY
2.1 The Vendor shall sell free from all charges, liens, other encumbrances
or third party claims (except reservation of title claims by
suppliers) and the Purchaser shall purchase as at and with effect from
Completion the Activity on a going concern basis comprising (in
addition to the assets referred to in clause 2.2) only:-
2.1.1 the benefit of the Contracts (subject to the burden attaching
thereto);
2.1.2 the benefit of the Amounts Recoverable under Contracts;
2.1.3 the Goodwill;
2.1.4 the Plant, Machinery and Equipment;
2.1.5 the Records;
2.1.6 the Stock;
2.1.7 the Debtors and the benefit of the Prepayments;
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<PAGE>
2.1.8 the Know How and the Unregistered Intellectual Property;
2.1.9 all sales data, catalogues, brochures, literature, forms,
mailing lists, art work, photographs and advertising material,
in whatever form or media, owned by the Vendor and relating
exclusively to the Activity (but subject to the provisions of
clause 6 of the Umbrella Agreement);
2.1.10 all permits, approvals, and qualifications issued by any
governmental unit, agency, board, body or instrumentality
held by the Vendor and relating exclusively to the Activity
(but only to the extent that the same are assignable by the
Vendor without any third party's consent)
2.1.11 all other tangible and intangible assets of whatsoever nature
owned by the Vendor and exclusively employed in the Activity at
Completion and not used by any member of the Lucas Group or any
Business Unit other than the Activity and which do not form
part of the Excluded Assets; and all other assets owned by the
Vendor to the extent that they are reflected in the Final
Completion Statement and the value thereof is included in the
Net Current Assets Value; and
2.1.12 the benefit of all the Vendor's rights against third parties
(including any claims, causes of action, chosen in action,
rights of recovery and rights of set-off) (a) in connection
with guarantees, warranties (express or implied), covenants
and representations given by such third parties concerning
the Activity and any of the Assets to the extent only that
such rights relate to liabilities assumed or the Plant
Machinery and Equipment or the Stock acquired by the Purchaser
hereunder and (b) under completed or other operative contracts
save to the extent that those rights are required in order to
defend, mitigate or perform any of the Excluded Liabilities
or any matter in respect of which the Lucas Group has retained
liability or responsibility, in each case insofar as such
benefit is capable of assignment
save to the extent that any of the same are comprised within
the Excluded Assets.
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2.2 With regard to the Property, the Vendor herewith assigns to the
accepting Purchaser the Property Lease Agreement set out in Schedule 3
Part 1 and 2. In case of any conflict between the conditions referred
to in Schedule 3 and the other provisions of this Agreement the
provisions of Schedule 3 shall prevail.
2.3 At Completion the Vendor shall deliver possession to the Purchaser of
any stocks held by the Vendor on consignment from others solely for
the purpose of, or which is used exclusively in, the Activity. The
Purchaser shall assume all the Vendor's obligations with respect to
such consignment stock.
2.4 The Purchaser shall pay the Creditors in accordance with the Vendor's
normal business practice in relation to the Activity and in any event
within 90 days immediately following Completion, without any deduction
or set off for whatsoever reason, unless the Purchaser has a bona fide
and genuine reason for disputing whether a particular debt is due or
delaying payment thereof and gives notice thereof and of the reasons
for disputing or delaying payment to the Vendor as soon as reasonably
practicable. The Purchaser shall indemnify the Vendor against all
expenses costs loss damage and liability incurred by the Vendor as a
result of any failure or delay by the Purchaser in paying the
Creditors.
2.5 It is agreed that this Agreement does not include the sale of any
assets or rights of the Vendor nor any assets or rights of any other
member of the Lucas Group other than those specifically referred to in
clause 2.1, the Property, or those assets or rights expressly referred
to elsewhere in this Agreement as being sold hereunder and without
limiting the generality of the foregoing there shall be expressly
excluded and excepted from the said sale and purchase (and nothing in
this Agreement shall operate to sell or transfer) any of the
following:-
2.5.1 the benefit to the Vendor of this Agreement;
2.5.2 ownership of the Leased Assets;
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<PAGE>
2.5.3 any trademarks, trade names, products' names, patents,
copyrights, registered designs and any other intellectual
property rights of the Vendor or any other member of the Lucas
Group or Business Unit or (save as expressly permitted by this
Agreement, the Intellectual Property Agreements, the Umbrella
Agreement or the LAO Agreement) any rights to use the same,
other than the Unregistered Intellectual Property and the Know
How;
2.5.4 any right to use the names "Lucas" or "LucasVarity" or the
Lucas Group diagonal flash or any other similar trade mark
or other distinctive Lucas Group get-up save as provided
herein and in the Umbrella Agreement or the LAO Agreement;
2.5.5 the cash received in respect of the Project Prepayments and
all cash and cash equivalents in the Lucas Group's hands or
any cash in the Lucas Group's bank accounts at Completion and
the benefit of any payments in advance made by the Vendor in
relation to the Activity which are excluded from the Prepay-
ments;
2.5.6 all cheques and negotiable instruments issued in favour of
the Lucas Group prior to Completion (save to the extent that
any such cheque or negotiable instrument constitutes payment
for any of the Debtors sold hereunder which appears as an asset
in the Final Completion Statement and is taken into account in
calculating the Net Current Assets Value);
2.5.7 any insurance claim made by or available to the Lucas Group and
all unearned premiums under insurance policies or other rights
to refunds thereunder attributable to any period of time except
to the extent reflected in the Final Completion Statement and
the Net Current Assets Value or reflected in the values agreed
and allocated to the fixed assets as shown in Part 2 of
Schedule 3 to the Umbrella Agreement;
2.5.8 the benefit of the insurance policy held by Lucas Deutschland
GmbH relating to employees' pension entitlements;
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<PAGE>
2.5.9 any other claim made by or available to the Lucas Group in
respect of an event occurring prior to Completion other than
those the benefit of which is sold to the Purchaser by clause
2.1.12;
2.5.10 any telephone, facsimile, telex, e-mail, Internet, shared
network and related facilities, post office box numbers and
addresses owned by the Vendor and relating to the Activity
2.5.11 corporation tax losses and the benefit of any claims made or
to be made for repayment of any taxation or tax allowance of
the Vendor or any other company in the Lucas Group in
relation to the Activity in respect of the period prior to
Completion except to the extent that the same are reflected
in the Net Current Assets Value;
2.5.12 any Lucas Internal Funding;
2.5.13 the benefit of all contracts or arrangements excluded from
the definition of "the Contracts" pursuant to clause 1.1.
(other than those relating to the Transferring Employees).
2.6 If any of the Assets to be sold hereunder by the Vendor are owned by
any other member of the Lucas Group or any of the Transferring
Employees is employed by any such other member or there is any other
obligation of the Vendor hereunder which is only capable of being
satisfied by or with the assistance of any such other member, the
Vendor shall not be deemed to be in breach of this Agreement so long
as the Vendor procures, to the extent necessary, compliance by such
other member with the terms and conditions of this Agreement which the
Vendor hereby undertakes to do. Such other member and, where
appropriate, its employees, shall have the benefit of any exclusions
of liability contained herein in relation to the Assets and any
indemnity given by the Purchaser herein to the Vendor in relation to
the Assets, the Activity or the Transferring Employees. If any member
of the Lucas Group other than the Vendor is or was party to any of the
Contracts, the Completed Contracts or the MOUs the relevant provisions
of clauses 5 and 9 shall apply to such Contract,
28
<PAGE>
Completed Contract or MOU (as the case may be) as if the Vendor were
party thereto and references in those clauses to the Vendor shall,
where appropriate, be construed as references to the relevant member
of the Lucas Group. Accordingly, the relevant member of the Lucas
Group shall be entitled to benefit from the obligations undertaken and
indemnities given by the Purchaser in relation to that Contract,
Completed Contract or MOU under those clauses.
2.7 Insofar as tooling used in the Activity is owned by a third party (and
title to which accordingly does not pass to the Purchaser hereunder)
the Vendor assigns to the this accepting Purchaser effective at
Completion whatever right title or interest (if any) it may have in
such tooling to the extent the same is assignable. (A complete and
accurate list of all such third party tooling arrangements is set out
in the Disclosure Letter)
2.8 Where any of the Assets (including packaging comprised within the
Stock) to be sold hereunder by the Vendor comprise advertising,
promotional and other written material bearing the "Lucas" and/or
"LucasVarity" name or the Lucas Group diagonal mark or other similar
trade mark or other distinctive Lucas Group get up the provisions of
the Umbrella Agreement regarding the same shall apply.
2.9 The Vendor agrees that the Purchaser may (to the extent that the
Vendor can grant any such right) for a period of twelve months after
Completion represent itself as carrying on the Activity in succession
to the Vendor but this agreement shall not grant or imply (and shall
specifically exclude) any right on the part of the Purchaser (save to
the extent granted herein or in the Umbrella Agreement or the LAO
Agreement) in the names or mark "Lucas" or "LucasVarity" or in the
Lucas Group diagonal flash or any other similar trademark or other
distinctive Lucas Group get-up or in the goodwill attaching thereto.
3. TRANSFER OF THE ASSETS
3.1 The Vendor and the Purchaser agree that the ownership of the Assets
shall be transferred to the Purchaser as at and with effect from
Completion Date.
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<PAGE>
3.2 In the event that the legal effective transfer of the Assets is not
possible to be effective on Completion Date for whatever reason, then
it is agreed as between the parties that all transfers shall be deemed
to have occurred upon Completion Date, provided, however, that nothing
contained in this Agreement sets forth anything to the contrary.
Clause 3.7 and clause 3.8 remain unaffected.
3.3 Insofar as the Assets to be sold concern rights these shall be
assigned by the Vendor to the Purchaser, who accepts such assignment
effective as of Completion Date.
3.4 Insofar as there are retentions of title, then it is agreed that
transfer shall be effected not of the ownership, but of the future
interest rights to acquire ownership effective as of Completion Date.
3.5 Transfer of ownership shall be effective on Completion Date. Insofar
as the Purchaser does not receive Assets in whole or in part on
Completion Date, then it shall be entitled to take any such items into
possession.
3.6 Insofar as items sold are not in the direct possession of the Vendor,
the transfer is substituted by the Vendor surrendering all rights to
regain possession of the property in favour of the Purchaser effective
as of Completion Date. In particular the right to possession regarding
the Assets being in possession of customers or Transferred Employees
and title to such Assets is transferred to the Purchaser.
3.7 Insofar as the Vendor receives or has received Assets after Completion
Date, it receives them on behalf and on account of the Purchaser. It
is agreed that title to such goods shall immediately pass on to the
Purchaser. The Vendor will keep such goods separated and will direct
all deliveries to the Purchaser or as the Purchaser may otherwise
specify.
3.8 The parties are obliged to take any steps and give all assistance
necessary or required to allow the timely execution of the transfer of
the Assets within the scope of this Agreement. In the event the timely
execution of such transfer is for whatever reason impossible the
parties are obliged to take any steps and to
30
<PAGE>
give all assistance necessary to complete and execute such transfer as
soon as practically possible.
4. THE CONSIDERATION
4.1 The purchase price for the Assets shall be determined in accordance
with the Umbrella Agreement.
4.2 The parties hereto intend that Section 1 para. 1a of the German Value
Added Tax Act shall apply to the transfer of the Activity hereunder
and accordingly:-
4.2.1 the Vendor and the Purchaser shall each give notice of such
transfer to the tax authorities (Finanzbehorden);
4.2.2 the Vendor shall on or as soon as practicable after the
Completion Date deliver to the Purchaser an invoice evidencing
the Fixed Price Element and the Net Current Assets Value (as
defined in the Umbrella Agreement) insofar as they relate to
the Activity without charging value added tax;
4.2.3 the Vendor and the Purchaser shall use all reasonable
endeavours to secure that pursuant to the provisions referred
to above the sale of the Activity hereunder is treated as
neither a supply of goods nor a supply of services for the
purposes of Value Added Tax;
4.2.4 if Value Added Tax is chargeable on the sale hereunder or any
part thereof then the Purchaser agrees that such Value Added
Tax shall be in addition to the Consideration and the Purchaser
shall (against production of tax invoices in respect thereof)
and a written ruling from the tax authorities (Steuerbehorden)
that Value Added Tax is so chargeable pay the amount of any
such Value Added Tax and any penalty or interest incurred by
the Vendor for late payment thereof (provided that in respect
of any penalty or interest only the reason such Value Added Tax
was payable was due to an act, omission or intention of, or the
circumstances of the Purchaser, such payment by the Purchaser
to be made forthwith on request by the Vendor or if sooner
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<PAGE>
delivery by the Vendor to the Purchaser of tax invoices in
respect thereof. The Purchaser shall have no liability in
respect of penalties and interest relating to Value Added Tax
to the extent they arise due to an unreasonable delay (in any
case not exceeding 2 Business Days (as defined in the Umbrella
Agreement)) in passing on to the German tax authorities
(Steuerbehorden) a payment made by the Purchaser in respect of
Value Added Tax.
4.3 With regard to the operation of the Activity by the Vendor:-
4.3.1 all Value Added Tax payable in respect of goods and services
supplied or deemed to be supplied by the Vendor before the
Completion Date and all interest payable thereon and penalties
attributable thereto shall be paid to the tax authorities by
the Vendor and the Vendor shall be entitled to receive and to
retain for its own benefit all reimbursement or credit from the
tax authorities for Value Added Tax borne by the Vendor on
goods and services supplied to the Vendor prior thereto and any
payments received in respect of Value Added Tax overpaid to the
tax authorities (Steuerbehorden) prior thereto; and
4.3.2 without prejudice to the provisions of this Agreement as to
discharge of the relevant liability the Purchaser shall give to
the Vendor all necessary and reasonable co-operation for the
purposes of preparing any VAT return relating to the Activity
in respect of any prescribed accounting period of the Vendor
beginning before the Completion Date or for the purpose of
determining the Vendor's liability to the tax authorities in
respect of the Activity or for the purpose of answering any
questions raised by the tax authorities for the period prior to
the Completion Date, such co-operation to include providing
reasonable access to or at the Vendor's expense copies of
relevant documentation (which the Vendor shall be permitted to
use and divulge to the extent that it is required so to do so
as to enable the Vendor to comply with its obligations to the
tax authorities) and allowing reasonable access to the
Transferring Employees. In the event that the Purchaser should
transfer
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<PAGE>
the Activity to another person the Purchaser shall procure (or,
if the transfer takes place more than three years after the
date of this Agreement, shall use reasonable endeavours to
procure that the person to whom the Activity is transferred
enters into a similar obligation to provide reasonable
co-operation and assistance to the Vendor (either directly or
indirectly through the Purchaser) as is set out in this clause.
4.4 The Purchaser warrants to the Vendor that it is duly registered for
the purposes of value added tax under the Value Added Tax Act.
5. FURTHER ASSURANCE AND THE CONTRACTS
5.1 The Vendor hereby agrees and declares that it will after and
notwithstanding Completion execute and deliver any other documents and
take any other steps as shall reasonably be required from time to time
by the Purchaser, at the Purchaser's expense, to vest in the
Purchaser, or as it may direct, the Assets (other than the Property
which is governed by the provisions of Schedule 3 and the Debtors
which are governed by clause 6.1) on the terms of this Agreement.
5.2 Save to the extent otherwise provided in clause 11.1.2 the Purchaser
will at and from Completion at its own expense assume and undertake to
perform and discharge when due or when required to be performed the
Vendor's liabilities and obligations under the Contracts and shall be
bound by all the terms, conditions, obligations and liabilities
arising from, in connection with or related to the Contracts and the
Purchaser shall keep the Lucas Group indemnified against all expenses,
costs, loss, damage, and liability arising therefrom. For the purpose
of this Agreement, all Bids which are accepted by customers after
Completion shall be deemed to be Contracts.
5.3 Insofar as the benefit (subject to the burden) of the Contracts cannot
effectively be transferred by the Vendor to the Purchaser except by
way of an agreement of novation with or consent to the assignment from
the person, firm or company concerned:-
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5.3.1 the Vendor and the Purchaser shall co-operate and use their
reasonable efforts to procure that the Contracts be novated or
assigned as aforesaid as soon as reasonably practicable;
5.3.2 in every novation or assignment as aforesaid the Purchaser
shall undertake to indemnify the Vendor against all expenses,
costs, loss, damage and liability arising by reason of or in
connection with the non-performance or the defective or
negligent performance by the Purchaser of the Contracts;
5.3.3 unless and until all such Contracts shall be novated or
assigned as aforesaid:
5.3.3.1 the Vendor shall continue its corporate existence and
shall hold the benefit of every such Contract which
requires to be novated or assigned but which has not
been novated or assigned, in trust for the Purchaser
as from Completion and shall account to the Purchaser
accordingly (whether in respect of any sums or other
benefits received by it in respect thereof) and other-
wise act at the reasonable direction of the Purchaser
and as its agent in all matters relating thereto
subject to the Purchaser securing the Vendor to its
reasonable satisfaction, and indemnifying and holding
the Vendor harmless against, any expenses, costs,
loss, damage, or liability, which it may have brought
against it or suffer or incur as a consequence, but
subject to clause 5.5 and;
5.3.3.2 the Purchaser shall at its own cost and expense with
effect from Completion carry out perform and complete
all of the Vendor's obligations under every Contract
which has not been novated or assigned as a sub-
contractor of the Vendor and where sub contracting is
not possible the Purchaser shall perform the contracts
in accordance with their terms and conditions as agent
for the Vendor.
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5.4 If the Vendor has before Completion sub-contracted the performance of
any Contracts to any person, the Purchaser shall on Completion assume
responsibility for the relevant sub-contract and on behalf of the
relevant customer seek or accept delivery or performance from such
person of the goods or other products or services in respect of which
such contract was made and shall make the same available for
collection by such customer.
5.5 Any fee, charge or financial penalty levied by a third party in
respect of a novation or assignment of any Contract or in connection
with the termination of any existing Contract to permit novation or
assignment to take place will be shared equally by the Vendor and the
Purchaser provided that neither the Vendor nor the Purchaser shall
agree to pay any such fee, charge or financial penalty without the
prior written consent of the other of them (such consent not to be
unreasonably withheld or delayed). The Purchaser shall procure the
execution of any guarantees by any member of the Purchaser's Group
required by such third party as a condition of any such novation or
assignment. If any other party to a Contract makes a claim against the
Vendor or the Purchaser alleging that the sale of the Activity to the
Purchaser or the provision of this Agreement constitute a breach of
such contract, the Vendor and the Purchaser shall consult with regard
to such claim and neither of them shall accept the claim without the
prior written consent of the other (not to be unreasonably withheld or
delayed). Any liability, costs and expenses incurred by the Vendor or
the Purchaser as a result of any such claim shall be borne equally by
the Vendor and the Purchaser.
5.6 Lucas and the Purchaser shall co-operate and use their reasonable
efforts to procure that as soon as practicable following Completion
Lease Plan Deutschland GmbH ("Lease Plan") enters into a new lease
directly with the Purchaser on the same or similar terms as the Master
Lease in respect of the vehicles listed in Schedule 1 and that such
vehicles are thereby excluded from the Master Lease. If required by
Lease Plan, the Purchaser shall procure that the Guarantor and any
other member of the Purchaser's Group enters into an agreement with
Lease Plan to guarantee the Purchaser's obligations under such new
lease. Prior to such new lease being granted:-
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<PAGE>
5.6.1 Lucas shall hold the benefit of the Master Lease in trust for
the Purchaser to the extent it relates to the vehicles listed
in Schedule 1; and
5.6.2 the Purchaser shall at its own cost and expense perform Lucas'
obligations under the Master Lease with respect to those
vehicles as agent for Lucas and shall indemnify and hold Lucas
harmless against all charges, payments, penalties, costs,
expenses, liabilities or losses which Lucas may incur or suffer
under the Master Lease following the Completion Date with
respect to those vehicles, but subject to clause 5.5.
5.7 The Vendor agrees to assign to the Purchaser all right title and
interest which the Vendor has (if any) in respect of the MOUs and the
Purchaser agrees to perform and discharge all obligations and
liabilities which the Vendor has (if any) in respect of the MOUs.
Accordingly, the Purchaser agrees that the provisions of clauses 5.2
to 5.5 shall mutatis mutandis apply in respect of such MOUs as if they
were Contracts.
6. DEBTORS
6.1 The Vendor shall when the Consideration has been paid pursuant to the
terms of the Umbrella Agreement if requested by the Purchaser and at
the Purchaser's cost assign to the Purchaser the benefit of the
Debtors (or any of them) in the form of the assignment set out in
Schedule 6
6.2 The Purchaser will collect the Debtors in a manner consistent with the
way in which debts of the Activity were collected by the Vendor prior
to Completion and will not issue proceedings for recovery of any of
the Debtors without first giving the Vendor 7 days prior written
notice and, if required by the Vendor, the Purchaser will re-assign to
the Vendor at the Vendor's expense the benefit of any Debtor for an
amount equal to the face value of such Debtor (less any specific
provision or reserve included in the Final Completion Statement in
respect of such Debtor).
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6.3 Any sums received by the Vendor after the Completion Date in relation
to any of the Debtors (other than any Debtors re-assigned to the
Vendor pursuant to clause 6.2) shall belong to the Purchaser and the
Vendor shall pay the same to the Purchaser as soon as practicable and
in any event within 7 days of receipt of the same by the Vendor.
7. THE TRANSFERRING EMPLOYEES
7.1 With regard to the Transferring Employees:-
7.1.1 The parties acknowledge and agree that pursuant to section 613a
of the German Civil Code the contracts of employment of the
Transferring Employees will be transferred and have effect
after Completion as if originally made between the Purchaser
and the Transferring Employees; and
7.1.2 upon or as soon as practicable after Completion the Vendor and
the Purchaser will make a joint announcement to the Transfer-
ring Employees in the Agreed Terms regarding the transfer of
their contracts of employment as referred to in clause 7.1.1
such announcements shall contain a time period during which the
Transferring Employees shall notify should they object to the
transfer of their employment relationship.
7.2 The Vendor shall indemnify and keep indemnified the Purchaser against
any liability or claim (whether for redundancy payments, protective
awards, damages for wrongful dismissal or compensation for unfair
dismissal, salary or otherwise howsoever) against the Purchaser in
connection with any act or omission of the Vendor or any other member
of the Lucas Group relating to the employment of any of the
Transferring Employees prior to the Completion Date or the termination
of the employment of any of the Transferring Employees by the Vendor
or any other member of the Lucas Group prior to the Completion Date
and for which the Purchaser is liable and for all costs and expenses
reasonably incurred by the Purchaser in settling, contesting or
dealing with any such liability or claim PROVIDED THAT such indemnity
shall not
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apply to any such liability, claim, costs or expenses to the extent
that they are provided for in the Net Current Assets Value.
7.3 Save as provided in clause 7.2 the Purchaser shall indemnify and keep
indemnified the Vendor and every company in the Lucas Group against:-
7.3.1 any liability or claim by a Transferring Employee whether for
redundancy payments protective awards, pension or retirement
and/or death benefits, damages for wrongful dismissal or
compensation for unfair dismissal (including claims in any way
relating to or based upon pension, retirement and/or death
benefits) or otherwise howsoever in connection with the
employment of the Transfering Employees, any objection of any
of the Transferring Employees to the transfer of his employment
or the termination of his employment by the Purchaser
following the Completion Date;
7.3.2 all liabilities and claims incurred by the Vendor or the Lucas
Group or made against the Vendor or the Lucas Group in
connection with the termination of the employment of any
Transferring Employee who refuses to transfer with the
Activity to the Purchaser on Completion or arising as a result
of any constructive dismissal claim by any of the Transferring
Employees following an objection of any such employee to the
identity of the Purchaser; and
7.3.3 all costs and expenses reasonably incurred by the Vendor in
settling, contesting or dealing with any such claim.
7.4 The Purchaser enters into all pension expectancy rights of the
Transferring Employees. The Vendor represents that the pension schemes
of Lucas Automotive GmbH attached to the Disclosure Letter are the
only pension schemes - except for the statutory pension contributions
to the German state authorities - applicable and existing in favour of
the Transferring Employees. The Vendor shall instruct "Deutsche Herold
AG" to work out within 28 days the amount of a provision for accrued
pension expectancy rights of Transferring Employees prior to the
Completion Date for insertion in the Final
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Completion Statement. Unless the Purchaser shall notify the Vendor
within 30 days after its receipt of the amount determined by "Deutsche
Herold AG" that it does not accept and agree with the amount it will
become binding in accordance with clause 3.4 to clause 3.9 of the
Umbrella Agreement. If within the aforesaid period of 30 days the
Purchaser shall notify the Vendor that it does not accept and agree
with the amount determined by "Deutsche Herold AG" then the parties
shall instruct Gradmann & Holler GmbH, Dusseldorf, as third pension
expert to decide the procedure and the amount inserted in the Final
Completion Statement as provision for pension expectancy rights for
the Transferring Employees finally and binding for all parties. The
costs of Gradmann & Holler GmbH shall be shared in accordance with the
respective prevailing of the parties.
7.5 The Purchaser shall for a period of 12 months from Completion at the
Vendor's request make available to the Vendor and allow the Vendor to
take copies of those of the Records which relate to the Transferring
Employees' employment prior to Completion. The Vendor will for a
period of 12 months after Completion provide the Purchaser with copies
of such information and documents not comprised within the Records as
the Purchaser may reasonably require in relation to the Transferring
Employees' employment prior to Completion.
7.6 The Purchaser covenants with the Vendor for the benefit of each
Transferring Employee that should the Purchaser dismiss any of the
Transferring Employees for reasons of redundancy until 31 December
1998, the Purchaser will make payments to each of the Transferring
Employees so dismissed which are no less favourable to such Employee
than those set out in the Severance Policy section of the pack of
employment particulars annexed to the Disclosure Letter.
8. COSTS AND EXPENSES
Each party to this Agreement shall bear its own costs and expenses in
connection with this Agreement and the negotiations leading thereto. For
the avoidance of doubt the Purchaser shall pay all stamp duty payable in
connection with this Agreement, any
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instrument executed pursuant hereto or to the Umbrella Agreement and the
purchase by it of the Assets and the Activity and will indemnify the Vendor
against any stamp duty and related penalties and interests (if any) it has
to pay in connection with this Agreement or any instrument executed
pursuant hereto before enforcing its rights thereunder.
9. WARRANTIES
The Vendor and the Purchaser agree that the provisions of the Umbrella
Agreement shall apply with regard to the Warranties (as defined in the
Umbrella Agreement) and shall be the only remedy of the Purchaser. The
right to withdraw is excluded for the Purchaser.
10. INDEMNITY AND LIABILITES
10.1 The Purchaser agrees that it will assume and undertakes to pay,
perform and discharge when due or required to be performed:-
10.1.1 the Creditors in accordance with clause 2.4;
10.1.2 the Contracts, and the Bids in accordance with clause 5 and any
liabilities or obligations of the Vendor arising out of any
Completed Contract (including, without limitation, any
obligations or liabilities arising out of a breach by the
Vendor prior to Completion of any of its obligations under any
such Contracts, MOU's or Completed Contracts);
10.1.3 all the Vendor's obligations to return any Project Prepayments
to customers of the Activity;
10.1.4 the Vendor's obligations in respect of goods sold, leased or
otherwise disposed of or manufactured (in whole or in part
only) by the Vendor (or any previous owner of the Activity) or
services performed by the Vendor (or any previous owner of the
Activity) in relation to the Activity prior to Completion in
accordance with clause 11;
10.1.5 the Vendor's obligations in respect of the Transferring
Employees in accordance with clause 7, including (without
limitation) the liabilities of
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the Vendor for unpaid accrued holiday pay to the Transferring
Employees;
10.1.6 any liabilities of the Vendor relating to the Activity
(including, without limitation, any liability relating to
Taxation) to the extent that (a) provisions or reserve therefor
has been made and is reflected in the Net Current Assets Value
or (b) the subject matter thereof is otherwise taken account
of, or reflected, in the calculation of the Net Current Assets
Value;
10.1.7 any obligations, liabilities, losses, damages, claims, costs
and expenses arising from or relating to the matters referred
to in the following paragraphs of the Disclosure Letter:-
10.1.7.1 Part A paragraph 9 (Litigation) regarding only the
problems encountered in the Philippines with Hartridge
smoke meters;
10.1.7.2 Part A paragraph 10.2 (Action by Robert Bosch GmbH);
and
10.1.8 any other liabilities or obligations of the Vendor or any other
member of the Lucas Group relating to the Activity agreed to be
assumed by the Purchaser under this Agreement or the Umbrella
Agreement
10.2 The Purchaser shall not assume, and the Vendor shall remain
responsible for, the following liabilities arising out of the conduct
of the Activity by the Vendor or any other member of the Lucas Group
before Completion:
10.2.1 any liability of the Vendor for borrowed money (other than in
respect of the Leased Assets);
10.2.2 any Lucas Internal Funding;
10.2.3 any liability of the Vendor to Taxation in respect of the
Activity save to the extent the same is included within the
Assumed Liabilities or is otherwise agreed to be discharged by
the Purchaser under this Agreement or the Umbrella Agreement;
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10.2.4 any liability of the Vendor arising under clause 7.2 in respect
of the Transferring Employees and the liability of the Lucas
Group to pay any divestment bonus to any Transferring Employees
in connection with the sale of the Activity hereunder;
10.2.5 any liability of the Vendor in respect of defective goods sold
or services supplied by the Vendor which is to be retained by
the Vendor in accordance with clause 11.1.2;
10.2.6 any criminal liability of the Vendor arising out of a breach of
statutory duty or laws applicable to the Activity by the Vendor
prior to the Completion Date;
10.2.7 any liability of the Purchaser for which the Vendor is held
liable in accordance with section 419 of the German Civil Code;
10.2.8 any liability of the Vendor for social security contributions
save to the extent provided for within the Net Current Assets
Value;
10.2.9 any liabilities arising from a breach of laws applicable to the
Activity by the Vendor or other members of the Lucas Group
prior to Completion which:-
(a) automatically attach to the Purchaser by operation of
law; and
(b) are material in the context of the Activities (as
defined in the Umbrella Agreement) taken as a whole;
and
(c) are not Assumed Liabilities; and
(d) do not relate to the Transferring Employees (who are
dealt with in clause 7).
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but excluding (for avoidance of doubt) any such
liabilities incurred by the Purchaser as a result of or
relating to any act or omission of any member of the
Purchaser's Group following Completion; and
10.2.10 any other liabilities of the Vendor or any other member of
the Lucas Group arising out of the conduct of the Activity
by the Vendor or any other member of the Lucas Group before
Completion and which:
(a) are not comprised within the Assumed Liabilities and
(b) do not relate to any breach of laws to the extent such
liabilities are dealt with in clause 10.2.9.
10.3 The Purchaser hereby undertakes to indemnify and hold harmless the
Lucas Group from and against any and all expenses, costs, loss, damage
and liability which the Lucas Group may suffer or incur directly or
indirectly in respect of or arising out of:-
10.3.1 the Assumed Liabilities or the failure or delay by the
Purchaser in paying, performing or discharging the Assumed
Liabilities; or
10.3.2 the operation of the Activity by the Purchaser after the
Completion Date.
10.4 The Purchaser will use all reasonable endeavours (including procuring
the giving of guarantees by the Guarantor where required) to procure
that on or as soon as practical after Completion each member of the
Lucas Group is released from its liability (whether actual or
contingent) in respect of those bonds, guarantees, guarantees and
indemnities given by any of them before Completion in respect of the
Activity which are listed in Schedule 7 or which are identified in the
Disclosure Letter. The Purchaser will indemnify the Lucas Group in
full against any and all expenses, costs, loss, damage and liability
which the Lucas Group may suffer or incur directly or indirectly in
respect of
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or otherwise arising out of any claim or other demand made on the
Lucas Group (whether made before or after Completion) in respect of
the bonds, guarantees or indemnities given by any member of the Lucas
Group before Completion in respect of the Activity and listed in
Schedule 7 or identified in the Disclosure Letter or in respect of any
other bonds, guarantees or indemnities given by the Lucas Group, but
in their case only to the extent that the underlying obligation
constitutes an Assumed Liability.
10.5 The Vendor hereby undertakes to indemnify and hold harmless the
Purchaser against any and all expenses, costs, loss, damage and
liability which the Purchaser may suffer or incur directly or
indirectly in respect of or arising out of the Excluded Liabilities or
failure or delay by the Vendor in paying, performing or discharging
the Excluded Liabilities in accordance with clause 10.2
10.6 Before any party makes any payment or offers any other remedy to a
third party or takes any other remedial or corrective action in
respect of matters for which it is entitled to an indemnity from any
other party hereto under the terms of this clause 10 it shall give a
reasonable opportunity to such other party, to verify and, if
appropriate, remedy the default, defect, omission or other matter
giving rise to the claim in question subject always to such third
party allowing the same.
10.7 In the event that this Agreement requires or entitles any party to pay
or receive a payment of or in respect of Taxation and the relevant
legislation provides that payment must be made to or by another party
to this Agreement the relevant parties shall make such adjusting
payments between themselves and at such times as are necessary to give
effect to the intention expressed in this Agreement.
11. PRODUCT LIABILITY AND PRODUCT WARRANTY
11.1 Without prejudice to the generality of any other provision of this
Agreement the Purchaser shall be liable:-
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11.1.1 (save in relation to products the subject of the LAO Agreement
which shall be governed by the terms of that agreement) to
carry out in accordance with its terms any warranty, guarantee
or other similar obligation or commitment ("Warranty Work"
which expression includes any materials supplied, labour
involved and any costs or other expenses incurred):-
11.1.1.1 given or undertaken by the Vendor (or any previous
owner of the Activity) in respect of any goods sold,
leased or otherwise disposed of, or in respect of any
services performed, under any contract entered into or
assumed by the Vendor (or any previous owner of the
Activity) prior to the Completion Date in relation to
or in contemplation of the Activity; or
11.1.1.2 given or undertaken by the Purchaser in respect of
goods sold, leased or otherwise disposed of, or in
respect of services performed, by the Purchaser
following the Completion Date which incorporate
products manufactured or purchased by the Vendor (or
any previous owner of the Activity) prior thereto or
work in progress of the Vendor at Completion; and
11.1.2 for all loss damage or liability (other than Warranty Work)
arising out of any defective goods sold leased or otherwise
disposed of or defective or negligent services provided by the
Vendor (or any previous owner of the Activity) in respect of
the Activity prior to Completion whether under any Contract or
any other contract entered into by the Vendor prior to
Completion in relation to or in contemplation of the Activity
or arising out of defective goods bought in or manufactured
(in whole or in part) by the Vendor and sold subsequently by
the Purchaser and whether or not the claim is made against
the Lucas Group or the Purchaser, unless the event or incident
(which for the avoidance of the doubt shall not include the
actual sale, lease, disposal or provision of
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goods or services by the Vendor (or any previous owner of the
Activity)) giving rise to any such liability occured before the
Completion Date in which event such loss, liability or damage
shall be borne by the Vendor.
11.2 The Purchaser shall indemnify the Lucas Group against all costs,
expenses, loss, damage or liability arising out of any breach by the
Purchaser of the provisions of clause 11.1. The Vendor shall indemnify
the Purchaser's Group against all costs, expenses, loss, damage or
liability arising out of a failure by the Vendor to discharge its
obligations under clause 11.1.2.
12. POST COMPLETION COVENANTS
12.1 For the purposes of assuring to the Purchaser the full benefit of the
Activity and the Goodwill and in consideration of the Agreement of the
Purchaser to buy the Assets on the terms of this Agreement and the
Umbrella Agreement Lucas hereby undertakes to the Purchaser that they
will not and agree to procure that no other member of the Lucas Group
will, either alone or in conjunction with or on behalf of any other
person:-
12.1.1 anywhere in the world for the period from Completion to 31
December 2000 be engaged or (save as the holder of shares or
other securities in any company which are quoted, listed or
otherwise dealt in on a recognised stock exchange or other
securities market which confer not more than 5% of the votes
which could be cast at a general meeting of the company
concerned) directly or indirectly be concerned or interested in
any trade or business which involves the sale or distribution
of goods which are competitive as specified in clause 12.4 or
the provision of services in relation to the design, installa-
tion or use of such competitive goods ("Competing Services") to
a person who is not a member of the Lucas Group and which in
any such case actually competes with the Activity as it is
carried on at Completion;
12.1.2 for a period of one year from Completion without the prior
written consent of the Guarantor make any offer of employment
to any
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engineer, designer, assembler or other senior employee included
within the Transferring Employees while such employee remains
employed by any member of the Purchaser's Group;
12.1.3 for a period of three years from Completion without the prior
written consent of the Guarantor solicit the services of
(whether as an employee or otherwise) or attempt to entice
away any engineer, designer, assembler or other senior employee
included within the Transferring Employees while such employee
remains employed by any member of the Purchaser's Group;
12.1.4 for the period from Completion to 31 December 2000 either
personally or by any agent directly or indirectly either on its
own account or for any other person solicit in competition with
the Activity the custom of any person who is not a member of
the Lucas Group in respect of goods which are competitive as
specified in clause 12.4 or in respect of Competing Services if
such person was within twelve months prior to or at the
Completion Date a customer of the Vendor in respect of the
Activity;
12.1.5 for the period from Completion to 31 December 2000 interfere or
seek to interfere with the continuance of supplies to the
Purchaser (or in the terms relating to such suppliers) from any
persons who had been supplying materials or services to the
Vendor in respect of the Activity within the twelve months
prior to the Completion Date; or
12.1.6 save as may be required by law or the regulations of the New
York Stock Exchange or the London Stock Exchange Limited for a
period of five years from Completion reveal to any person any
of the trade secrets, secret or confidential operations,
processes or dealings or any other confidential information
concerning the Assets or the Activity including (without
limitation) customer lists and names, sales targets and
statistics, market share statistics, surveys and reports so far
as the same have come to the Vendor's knowledge before the
Completion
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Date but so that this restriction shall cease to apply to
information which otherwise than through default of any member
of the Lucas Group becomes available to the public generally.
12.2 Nothing in clause 12.1 shall prevent the Lucas Group or any member of
it:-
12.2.1 from continuing to carry on or developing its business known as
the Lake Center Model Shop or from continuing or developing any
of its other existing businesses provided they do not actually
compete with the Activities as they are carried on at
Completion or from operating in-house engineering and testing
facilities for any member of the Lucas Group;
12.2.2 from providing consultancy and other services in relation to
the design, manufacture and/or use of engine or engine fuel
systems testing or assembly equipment to its own customers or
third parties licensed by the Lucas Group (excluding the
Activities) to manufacture product;
12.2.3 from selling or supplying assembly or testing equipment in sup-
port of products designed, developed or distributed by the
Lucas Group to any customer in connection with an agreement for
the supply of product by the Lucas Group or to a licensed
manufacturer of Lucas Group products to whom any member of the
Lucas Group is providing technical assistance;
12.2.4 from acquiring, holding or operating any business or the shares
or other securities of any company (including, without
limitation, shares which are quoted, listed or otherwise dealt
in on a recognised stock exchange or other securities market)
or group of companies or participating in any joint venture:-
12.2.4.1 where an incidental part of the activities of such
business company, group of companies or joint venture
comprises a business which either supplies is
competitive goods (as described in clause 12.4) or
which provides Competing
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Services and which actually competes with the Activity
as it is carried on at Completion; and
12.2.4.2 where the principal purpose of such acquisition or
participation is not to acquire or participate in a
business which is competitive as so described;
provided that the relevant member of the Lucas Group
shall within 12 months after acquiring any such
business, company or group of companies offer to sell
to the Guarantor such incidental part which competes
with the Activity and the Guarantor and such member of
the Lucas Group shall negotiate in good faith with a
view to agreeing terms for such sale (but shall not
be obliged to conclude such sale if mutually accept-
able terms cannot be agreed); or
12.2.5 from carrying on any of the activities contemplated by the LAO
Agreement or by the Intellectual Property Agreements or from
enjoying or exercising any benefits or rights granted to any
member of the Lucas Group pursuant thereto.
12.3 Nothing in clause 12.1 shall prevent:-
12.3.1 Lucas Electrical and Electronic Systems AVSD facility or any
successor to its business or Varity Perkins Limited or any
successor to its business from providing testing services to
third parties in relation to engine or engine fuel systems; or
12.3.2 Lucas TVS Limited or any member of the Lucas Group from
operating under any licenses or agreements which have been
entered into before the date hereof and are referred to in the
Disclosure Letter; or
12.3.3 the companies or Business Units listed in column 1 of Schedule
9 from distributing the products listed in column 2 of
Schedule 9 on behalf of the entities listed in column 3 of
Schedule 9.
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12.4 For the purposes of the foregoing provisions of this clause 12 goods
referred to as being competitve shall mean equipment designed to carry
out any of the following: internal combustion engine assembly or
testing, motor vehicle transmission assembly, motor vehicle
transmission testing, internal combustion engine fuel systems assembly
or testing and assembly or testing of automotive brake components and
automotive air conditioning compressors.
13. LICENCE OF LICENSED INTELLECTUAL PROPERTY
13.1 On Completion the Vendor grants to the Purchaser (so far as it is able
to grant the same and subject to clause 12.3) a perpetual,
irrevocable, non-exclusive, worldwide licence, free of royalty, to use
the Licensed Intellectual Property (including, without limitation, the
Specified Shared IP) for the purpose of enabling the Purchaser to
continue with the Activity after Completion in the same manner as
carried on by the Vendor immediately prior to Completion.
13.2 Subject to clause 13.3 the Purchaser may assign or sub-licence any of
the rights granted under this clause 13 to any person PROVIDED THAT
any assignee first enters into a direct covenant with the Vendor
agreeing to be bound by the provisions of this clause 13 in respect of
the Licence. Accordingly, references in this clause to the Purchaser
shall be construed as being references to any such assignee following
any such assignment.
13.3 The Licence shall immediately terminate with respect only to the
Specified Shared IP if within the three years immediately following
Completion:-
13.3.1 there is a change of control of the Purchaser or any Holding
Company of the Purchaser to a Competitor; or
13.3.2 the Purchaser or any receiver, manager, administrator, admin-
istrative receiver or liquidator of the Purchaser sells the
whole or substantially the whole of the Activity to a
Competitor; or
13.3.3 the Purchaser purports to assign or sub-licence any of the
rights granted under the Licence to a Competitor.
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13.4 Upon termination of the Licence with respect to the Specified Shared
IP the Purchaser or any relevant assignee shall cease to be authorised
to use the Specified Shared IP and shall forthwith return to the
Vendor all originals and copies of all documents and other information
(in whatever form) comprising, relating to or recording the Specified
Shared IP.
13.5 The Purchaser shall notify the Vendor in writing before commencing any
proceedings against any infringer of the Licensed Intellectual
Property but shall not be required to obtain the Vendor's consent to
the issue of any such proceedings except to the extent that under
applicable law the Vendor is required to be joined as a party to such
proceedings and if the Vendor is so required the following provisions
will apply:-
13.5.1 the Vendor's prior written consent to being joined as a party
shall be required which consent shall not be unreasonably
withheld or delayed;
13.5.2 the Purchaser shall have the full conduct of such proceedings
at its own expense and shall keep the Vendor informed of all
material developments in relation thereto;
13.5.3 the Purchaser shall indemnify the Vendor against all costs,
expenses, damages or other liability incurred or suffered by or
awarded against the Vendor as a result of or in connection with
such proceedings; and
13.5.4 subject to compliance by the Purchaser with the provisions of
clause 13.5.3 all damages or other relief obtained from such
proceedings shall belong to or be for the benefit of the
Purchaser.
13.6 If at any time after Completion the Vendor grants a licence of any
Licensed Intellectual Property to a DTI Competitor which will enable
such DTI Competitor to compete with the Purchaser in respect of the
Activity and such DTI Competitor does so compete, the Vendor and the
Purchaser will negotiate in good faith a reasonable royalty to be paid
by the Vendor to the Purchaser having regard (inter alia) to the
extent to which such DTI Competitor does so compete and to the
contribution which prior to Completion the Business Unit
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known as LATS made to the creation of the Licensed Intellectual
Property in question.
14. RISK
At Completion the Vendor shall cease to hold insurance coverage for the
Assets, the Leased Assets and the Activity and risk in the Assets and the
Leased Assets shall pass to the Purchaser at the Completion Date.
15. EXCLUSIONS
Except as otherwise specifically provided in this Agreement or the Umbrella
Agreement the Lucas Group will not be liable under this Agreement for any
personal injury, death, loss or damage of any kind whatsoever (other than
death or personal injury resulting from its negligence) whether
consequential or otherwise (including but not limited to loss of profits)
arising from any defect in the Assets and save as provided in the Umbrella
Agreement the Vendor hereby excludes in relation to the Assets and the
Activity all conditions, warranties, representations, guarantees and
stipulations express or implied, statutory, customary or otherwise which
but for such exclusion would or might subsist in favour of the Purchaser
except that such exclusion will not apply to any implied condition that the
Vendor has or will have the right to sell any goods being sold by the
Vendor when the property is to pass, subject to any retention of title in
favour of a third party or to any statements made fraudulently.
16. CONDITION PRECEDENT
This Agreement will become binding forthwith upon the English Sale
Agreement (as defined in the Umbrella Agreement) and the US Sale Agreement
(as defined in the Umbrella Agreement) being completed in escrow in
accordance with their terms and the terms of the Umbrella Agreement.
17. MERGER CONTROL
The Purchaser has established that only a post-merger notification with the
Federal Cartel Office (Bundeskartellamt) is required. The parties will use
their best endeavours to prepare all information required to enable the
Purchaser to file the notification.
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18. CONTINUING SERVICES AND SUBRENT
18.1 The Vendor will procure that Lucas Car Braking Systems (LCBS) will
continue to provide services such as purchasing, telephone,
switchboard, salaries, personal administration, IT/IS, etc. at the
current level of charges of DM 10,500.00 plus statutory VAT per month
until 31 December 1998. Payments are to be made by the Purchaser on a
monthly basis.
18.2 The Vendor furthermore procures that LCBS will continue to subrent the
existing TEC facilities at the current rent of DM 9,900.00 plus
statutory VAT, in case LCBS has opted for VAT, until 31 December 1998.
Payments are to be made by the Purchaser on a monthly basis. The
provision of section 568 of the German Civil Code is expressly
excluded should the Purchaser continue to use the facilities after 31
December 1998. The monthly rent of DM 9,900.00 shall increase should
the rental costs for LCBS for "Hall 5" be increased in the same
proportion as the rental costs for LCBS increase.
19. INSPECTION OF DOCUMENTS
The Vendor shall for a period of three years after Completion afford to the
authorised representatives of the Purchaser all reasonable facilities to
inspect records held or retained by the Vendor or its professional advisers
(which are not privileged) relating exclusively to the Activity and to make
copies of the same or extracts therefrom at the Purchaser's cost and
expense. The Purchaser agrees to maintain at the registered office of the
Purchaser, and allow the Vendor at its costs and expenses at all reasonable
times access to and to take copies of the Records insofar as they relate to
the period prior to Completion, for a period of 6 years from Completion.
20. ASSIGNMENT PROHIBITED
The benefit of this Agreement may not be assigned by the Vendor without the
prior written consent of the Purchaser or by the Purchaser without the
prior written consent of the Vendor save that any party may assign the
benefit of this Agreement to any Subsidary or Holding company of it or to
any other Subsidary of its Holding Company if any assignment does not
increase the liability of any party under this Agreement. If at
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any time thereafter such assignee shall cease to be so connected with such
assignor, it shall prior to so ceasing re-assign the benefit of the
Agreement to such assignor.
21. SURVIVAL OF CERTAIN PROVISIONS
This Agreement shall remain in force and effect after the Completion Date
in respect of any matters covenants or conditions which shall not have been
done observed or performed prior thereto and all representations warranties
obligations of and indemnities given by the parties shall (except for any
obligations fully performed) continue in full force and effect
notwithstanding Completion, subject to the provisions of the Umbrella
Agreement.
22. GOVERNING LAW
22.1 This Agreement shall be governed by English Law except for clauses 3,
and 12 as well as the transfer of the Transferring Employees and their
pension expectancy rights which shall be governed by German law.
22.2 The parties hereby submit to the non-exclusive jurisdiction of the
English Courts.
23. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the
several parties hereto on separate counterparts each of which when so
executed and delivered shall be an original but all the counterparts shall
together constitute one document.
24. SEVERABILITY
The parties expressly agree that it is not the intention of any party to
violate any public policy, statutory or common laws, rules, regulations,
treaties or decisions of any government or agency thereof. If any provision
of this Agreement is judicially or administratively interpreted or
constructed as being so in violation, such provision shall be inoperative
and the remainder of this Agreement shall remain binding upon the parties
thereto.
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25. NOTICES AND OTHER COMMUNICATIONS
All notices, demands or requests provided for or permitted to be given
pursuant to this Agreement must be in writing and shall be given in
accordance with the Umbrella Agreement.
26. NO THIRD PARTY BENEFITS
Except as otherwise provided in this Agreement and the Umbrella Agreement,
this Agreement is intended and agreed to be solely for the benefit of the
parties hereto and their permitted assigns and no third party shall accrued
any benefit, claim or right of any kind whatsoever pursuant to, under, by
or through this Agreement.
27. MODIFICATION
The parties to this Agreement may, by mutual written consent executed by
the authorised officers of the Purchaser and the Vendor, modify or
supplement this Agreement in such manner as may be mutually agreed upon by
them in writing.
28. WAIVER OF PROVISION
The terms, covenants, indemnities and conditions of this Agreement may be
waived only by a written instrument executed by the party waiving
compliance. The failure of any party at any time to require performance of
any provisions hereof shall in no manner affect the right at a later date
to enforce the same. No waiver by any party of any condition, or the breach
of any other provision, term, covenant or indemnity of this Agreement
whether by conduct or otherwise, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant or
indemnity of this Agreement.
AS WITNESS the hands of the duly authorised representatives of the parties
to this Agreement the day and year first above written
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The following page contains a list of Exhibits and Schedules which have
been intentionally omitted by the Registrant pursuant to Item 601(b)(2) of
Regulation S-K.
A copy of any omitted Exhibit or Schedule will be provided to the
Securities and Exchange Commission upon request.
<PAGE>
SCHEDULE 1 - THE LEASED ASSETS
SCHEDULE 2 - THE PLANT, MACHINERY AND EQUIPMENT
SCHEDULE 3 - THE PROPERTY
SCHEDULE 4 - TRANSFERRING EMPLOYEES
SCHEDULE 5 - INTELLECTUAL PROPERTY AGREEMENTS
SCHEDULE 6 - ASSIGNMENT OF DEBTORS
SCHEDULE 7 - BONDS, GUARANTEES AND INDEMNITIES
SCHEDULE 8 - MEMORANDA OF UNDERSTANDING
SCHEDULE 9 - COMPETING ACTIVITIES
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SIGNED by /s/ James Zigel
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for and on behalf of LUCAS AUTOMATION
& CONTROL ENGINEERING GmbH
in the presence of:- /s/ Mary K. Krigbaum
SIGNED by /s/ James Zigel
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for and on behalf of the LUCAS INDUSTRIES PLC
in the presence of:- /s/ Mary K. Krigbaum
SIGNED by /s/ Bruce P. Erdel
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for and on behalf of ASSEMBLY TECHNOLOGIE
& AUTOMATION GmbH
in the presence of:- /s/ Rita Deckard
INDUSTRIAL BUILDING LEASE
LANDLORD: THE ALLEN GROUP INC.
TENANT: LUCAS HARTRIDGE, INC.
LEASED PREMISES: 12841 Stark Road
Livonia, Michigan
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TABLE OF CONTENTS
Section Page
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1. GRANT, TERM, DEFINITIONS AND BASIC LEASE PROVISIONS. . . . . . . . 1
1.0 Grant. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Termination. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. POSSESSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
4. RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.0 Monthly Rent . . . . . . . . . . . . . . . . . . . . . . . . 2
4.1 Interest on Late Payments. . . . . . . . . . . . . . . . . . 2
5. IMPOSITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
5.0 Payment by Tenant. . . . . . . . . . . . . . . . . . . . . . 2
5.1 Alternative Taxes. . . . . . . . . . . . . . . . . . . . . . 2
5.2 Evidence of Payment. . . . . . . . . . . . . . . . . . . . . 3
5.3 Right to Contest . . . . . . . . . . . . . . . . . . . . . . 3
6. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6.0 Kinds and Amounts. . . . . . . . . . . . . . . . . . . . . . 3
6.1 Form of Insurance. . . . . . . . . . . . . . . . . . . . . . 4
6.2 Fire Protection. . . . . . . . . . . . . . . . . . . . . . . 4
6.3 Mutual Waiver of Subrogation Rights. . . . . . . . . . . . . 4
7. DAMAGE OR DESTRUCTION. . . . . . . . . . . . . . . . . . . . . . . 4
7.0 Obligation to Rebuild. . . . . . . . . . . . . . . . . . . . 5
7.1 Preconditions to Rebuilding. . . . . . . . . . . . . . . . . 5
7.2 Payment for Rebuilding . . . . . . . . . . . . . . . . . . . 5
7.3 Excess Receipts by Landlord. . . . . . . . . . . . . . . . . 5
7.4 Failure to Rebuild . . . . . . . . . . . . . . . . . . . . . 5
8. CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.0 Taking of Whole. . . . . . . . . . . . . . . . . . . . . . . 6
8.1 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . 6
9. MAINTENANCE 6 AND ALTERATIONS. . . . . . . . . . . . . . . . . . . 6
9.0 Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . 6
9.1 Alterations. . . . . . . . . . . . . . . . . . . . . . . . . 7
10. ASSIGNMENT AND SUBLETTING. . . . . . . . . . . . . . . . . . . . . 7
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Section Page
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11. LIENS AND ENCUMBRANCES . . . . . . . . . . . . . . . . . . . . . . 8
11.0 Encumbering Title. . . . . . . . . . . . . . . . . . . . . . 8
11.1 Liens and Right to Contest . . . . . . . . . . . . . . . . . 8
12. UTILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
13. INDEMNITY AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . 8
13.0 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . 8
13.1 Waiver of Certain Claims . . . . . . . . . . . . . . . . . . 9
13.2 Environmental Matters. . . . . . . . . . . . . . . . . . . . 9
14. RIGHTS RESERVED TO LANDLORD. . . . . . . . . . . . . . . . . . . . 9
15. QUIET ENJOYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 10
16. SUBORDINATION OR SUPERIORITY . . . . . . . . . . . . . . . . . . . 10
17. SURRENDER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
17.0 Surrender. . . . . . . . . . . . . . . . . . . . . . . . . . 10
17.1 Removal of Tenant's Property . . . . . . . . . . . . . . . . 11
17.2 Holding Over . . . . . . . . . . . . . . . . . . . . . . . . 11
18. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
18.0 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . 12
18.1 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 13
18.2 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . 14
18.3 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . 14
19. OPTION TO PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . 14
19.0 Option to Purchase . . . . . . . . . . . . . . . . . . . . . 14
19.1 Terms of Purchase. . . . . . . . . . . . . . . . . . . . . . 14
20. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
20.0 Estoppel Certificates. . . . . . . . . . . . . . . . . . . . 15
20.1 Landlord's Right to Cure . . . . . . . . . . . . . . . . . . 15
20.2 Amendments Must Be in Writing. . . . . . . . . . . . . . . . 15
20.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
20.4 Relationship of Parties. . . . . . . . . . . . . . . . . . . 16
20.5 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . 16
20.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . 16
20.7 Law Applicable . . . . . . . . . . . . . . . . . . . . . . . 16
20.8 Covenants Binding on Successors. . . . . . . . . . . . . . . 16
20.9 Landlord Means Owners. . . . . . . . . . . . . . . . . . . . 16
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INDUSTRIAL BUILDING LEASE
THIS LEASE is made this _____ day of July, 1991, by and between THE ALLEN
GROUP INC., a Delaware corporation ("Landlord"), and LUCAS HARTRIDGE, INC., a
Virginia corporation ("Tenant"), who hereby mutually covenant and agree as
follows:
1. GRANT, TERM, DEFINITIONS AND BASIC LEASE PROVISIONS
1.0 Grant. Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, the real estate commonly known as 12841 Stark Road, Livonia,
Michigan and legally described on Exhibit "A"' attached hereto and made a part
hereof, together with all improvements now located thereon or to be located
thereon during the term of this Lease (the "Leased Premises").
1.1 Term. The initial term of this Lease shall commence on the date
hereof (hereinafter sometimes referred to as "Commencement Date"), and shall end
on July 31, 1993, and shall thereafter be renewed automatically from year to
year unless terminated as herein set forth.
1.2 Termination. Landlord and Tenant shall each have the right to
terminate this Lease as of July 31, 1993 or at any time thereafter by giving at
least six months' prior written notice thereof to the other party (which shall
be delivered in the manner set forth in Section 20.3 hereof), in which event the
term of this Lease shall be deemed to have expired on the effective date set
forth in said notice.
1.3 Basic Rent. The basic rent for the period from the Commencement Date
through July 31, 1992 shall be $20,203 per month. The basic monthly rent for
each twelve-month period shall be adjusted as of August 1 of each year,
commencing August 1, 1992, to an amount equal to (a) the sum of (i) simple
interest on the principal amount of $2,064,000 at the Prime Rate (as hereinafter
defined) which was in effect on the last business day of July of such year, plus
(ii) $67,000, (b) divided by twelve. As used herein, "Prime Rate" means a rate
per annum equal to the rate of interest announced by Harris Trust and Savings
Bank or its successors as its prime (or equivalent) rate of interest.
2. POSSESSION
Landlord shall deliver, and Tenant shall accept, possession of the Leased
Premises on the Commencement Date in their condition as of the date hereof.
3. PURPOSE
The Leased Premises may be used and occupied for any lawful purpose other
than a use which would render the insurance on the Leased Premises void.
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4. RENT
4.0 Monthly Rent. Beginning with the Commencement Date, Tenant shall pay
Monthly Rent as set forth in Section 1.3 hereof payable in advance on the first
day of each month as set forth in said Section, except that the first month's
rent shall be for the Period from the Commencement Date through August 31, 1991.
If the term of this Lease shall expire on a day other than the last day of a
calendar month, Monthly Rent shall be prorated for the portion of such month in
which the term falls. Monthly Rent shall be paid to or upon the order of
Landlord at Landlord's address set forth in Section 20.3.
4.1 Interest on Late Payments. Any rent or other charges hereunder which
are not paid within ten (10) days of the date due shall bear interest from the
due date paid in full at a rate per annum equal to the rate of interest
announced from time to time by Harris Trust and Savings Bank as its prime (or
equivalent) rate of interest plus 3%, said rate changing with each change in
such announced prime (or equivalent) rate.
5. IMPOSITIONS
5.0 Payment by Tenant. As additional rent for the Leased Premises, Tenant
shall pay on or before the date when first due and payable or, in the event
Landlord has paid the same, reimburse Landlord for all taxes and assessments,
general and special, water rates and all other impositions, ordinary and
extraordinary, of every kind and nature whatsoever which may be levied or
assessed with respect to the term of the Lease upon the Leased Premises, or any
part thereof, or upon any improvements at any time situated thereon
("Impositions"); provided, however, that Impositions levied against the Leased
Premises shall be prorated between Landlord and Tenant as of the Commencement
Date for the first year of the Lease term and as of the expiration date of the
Lease term for the last year of the Lease term on the basis of the most recent
ascertainable tax and assessment bills. Impositions shall also include fees and
costs incurred by Landlord during the Lease term for the purpose of contesting
or protesting tax assessments or rates, to the extent such fees and costs relate
to savings realized during the term of the Lease and any extension thereof.
Tenant may take the benefit of the provisions of any statute or ordinance
permitting any assessment to be paid over a period of years and Tenant shall not
be responsible for any portion of such assessment with respect to a period after
the termination of this Lease.
5.1 Alternative Taxes. If at any time during the term of this Lease the
method of taxation prevailing at the Commencement Date shall be altered so that
any new tax, assessment, levy, imposition or charge, or any part thereof, shall
be measured by or be based in whole or in part upon the Lease, or the Leased
Premises, or the rent, additional rent or other income therefrom and shall be
imposed upon the Landlord, then all such taxes, assessments, levies,
impositions, or charges, or the part thereof, to the extent that they are so
measured or based, shall be deemed to be included within the term Impositions
for the purposes hereof to the extent that such Impositions would be payable if
the Leased Premises were the only property of Landlord subject to such
Impositions, and Tenant shall pay and discharge the same as provided herein for
the payment of Impositions. Impositions shall not include federal income taxes,
state
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and local income taxes, federal excess profit taxes or franchise or capital
stock taxes of Landlord.
5.2 Evidence of Payment. Tenant shall pay all Impositions directly to the
appropriate authority, and shall deliver to Landlord duplicate receipts or
photostatic copies thereof showing the payments of all Impositions within thirty
(30) days after payment, but in no event later than the due date therefor.
5.3 Right to Contest. Tenant shall not be required to pay any Imposition
or charge upon or against the Leased Premises, or any part thereof, or the
improvements at any time situated thereon, so long as the Tenant shall, in good
faith and with due diligence, contest the same or the validity thereof by
appropriate legal proceedings which have the effect of suspending the payment of
such Imposition or charge, provided that neither the Leased Premises nor any
interest therein is in danger of being sold or otherwise forfeited and further
provided that Tenant bonds over such Imposition or provides Landlord with other
security reasonably satisfactory to Landlord.
6. INSURANCE
6.0 Kinds and Amounts. As additional rent for the Leased Premises, Tenant
shall procure and maintain the following policies of insurance at its own cost
and expense:
(a) Fire and Extended Coverage Insurance insuring the building and
other improvements at any time situated upon the Leased Premises against
loss or damage by fire, lightning, windstorm, hail, aircraft, vehicles,
smoke, explosion, earthquake, riot or civil commotion and all other risks
of direct physical loss as insured against under a Special Extended
Coverage Endorsement. The insurance coverage shall be for not less than
100% of the full replacement cost of such improvements with agreed amount
endorsement. Tenant, Landlord, and Landlord's mortgagees and/or ground
lessors shall be named as additional insureds and all proceeds of
insurance shall be payable to Landlord. The full replacement cost of
improvements shall be designated annually by Landlord in its good faith
judgment. In the event that Tenant does not agree with Landlord's
designation, Tenant shall have the right to submit the matter to an
insurance appraiser reasonably selected by Landlord and paid for by
Tenant. The insurance appraiser shall submit a written report of his
appraisal and if said report discloses that the improvements are not
insured as therein required, Tenant shall promptly obtain the insurance
required.
(b) Commercial General Public Liability Insurance insuring against
all claims, demands or actions made by, or on behalf of, any person or
persons, firm or corporation and arising from, related to or connected
with the Leased Premises, for injury to or death of any person in an
amount not less than $2,000,000 per occurrence and for damage to property
in an amount of not less than $500,000 per occurrence, naming Landlord and
Tenant as insureds thereunder. Said insurance shall include broad form
contractual liability coverage which insures contractual liability under
the indemnity set forth in Section 13.0(a) hereof.
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(c) Insurance insuring against loss or damage from external
explosion or breakdown of boilers, air conditioning equipment and
miscellaneous electrical apparatus, if any, on the Leased Premises in an
amount satisfactory to Landlord, naming Landlord and Tenant as insureds
thereunder.
(d) Flood insurance whenever, in the judgment of Landlord, such
protection is necessary and it is available.
In addition, Tenant shall reimburse Landlord, within ten (10) days after
receipt of Landlord's statement therefor, for premiums paid by Landlord for
Business Interruption Insurance insuring Landlord from loss of rents and
Impositions during any period the Leased Premises are untenantable due to fire
or other casualty, or explosion or breakdown of boilers, air conditioning
equipment and miscellaneous electrical apparatus (for a period of not less than
one (1) year).
6.1 Form of Insurance. The aforesaid insurance to be maintained by Tenant
shall be written by companies and in form, substance and amount (where not
stated above) reasonably satisfactory from time to time to Landlord. The
aforesaid insurance shall unconditionally provide that it is not subject to
cancellation without at least thirty (30) days' prior written notice to Landlord
except for nonpayment of premiums in which event ten (10) days' prior written
notice shall be given to Landlord. Certificates of insurance evidencing
compliance with Section 6.0 shall be deposited with Landlord promptly after the
Commencement Date, and certificates evidencing renewals or replacement thereof
shall be delivered to Landlord promptly after expiration of such coverage.
6.2 Fire Protection. Tenant shall conform with all applicable fire codes
of any governmental authority having jurisdiction over the Leased Premises
except where such conformance requires alterations to the Leased Premises of a
capital nature.
6.3 Mutual Waiver of Subrogation Rights. Whenever (a) any loss, cost,
damage or expense resulting from fire, explosion or any other or casualty or
occurrence is incurred by either Landlord or Tenant, or anyone claiming by,
through, or under it in connection with the Leased Premises, and (b) such party
is then covered in whole or in part by insurance with respect to such loss,
cost, damage or expense or is required under this Lease to be so insured, then
the party so insured (or so required to be insured) hereby releases the other
party from any liability the other party may have on account of such loss, cost,
damage or expense to the extent of any amount by reason of such insurance (or
which could have been recovered had such insurance been carried as so required)
and waives any right of subrogation which might otherwise exist in or accrue to
any person on account thereof, provided that such release of liability and
waiver of the right of subrogation shall not be operative in any case where the
effect thereof is to invalidate such insurance coverage or increase the cost
thereof (except that in the case of cost, the other party shall have the right,
within thirty (30) days following written notice, to pay such increased cost,
thereby keeping such release and waiver in full force and effect).
7. DAMAGE OR DESTRUCTION
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7.0 Obligation to Rebuild. In the event of damage to or destruction of
any improvements on the Leased Premises by fire or other casualty, the party who
is required to maintain insurance under Article VI shall promptly, at its
expense, repair, restore or rebuild the same to the condition existing prior to
the happening of such fire or other casualty (the "Work"), provided, however,
that if the damage or destruction exceeds twenty percent (20 %) of the value of
the whole of the Leased Premises, either Landlord or Tenant may terminate this
Lease, effective on the date of such damage or destruction, by giving written
notice thereof to the other within sixty (60) days after the event causing the
damage or destruction, in which event all insurance proceeds shall be paid to
Landlord and neither party shall be obligated to repair, restore or rebuild the
Leased Premises. Tenant shall have no liability for Rent during the period of
such repair, restoration or rebuilding to the extent the Leased Premises are
rendered untenantable, and Landlord shall look solely to its business
interruption insurance for such rent.
7.1 Precondition to Rebuilding. If Tenant is required to rebuild the
Premises pursuant to the terms hereof, before Tenant commences any Work, plans
and specifications therefor, prepared by a licensed architect satisfactory to
Landlord, shall be submitted to Landlord (which plans shall require Landlord's
approval if the Work involves an estimated cost of more than Fifty Thousand
Dollars ($50,000)) and Tenant shall furnish to Landlord (a) an estimate of the
cost of the proposed Work, certified to by said architect; and (b) satisfactory
evidence of sufficient contractor's comprehensive general liability insurance
covering Landlord, builder's risk insurance, and worker's compensation
insurance.
7.2 Payment for Rebuilding. If this Lease is not terminated pursuant to
Section 7.0 and provided that the insurer does not deny liability as to all of
the insureds, and provided Tenant is not then in default hereunder, all sums
arising by reason of loss under the insurance referred to in Section 6.0(a),
shall be held by Landlord to be available for the Work. The party obligated to
perform the Work shall diligently pursue the repair or rebuilding of the
improvements in a good and workmanlike manner. Landlord shall pay out
construction funds from time to time on the written direction of the architect
provided that Landlord shall first be furnished with waivers of lien,
contractors, and subcontractors sworn statements and other evidence of cost and
payments so that Landlord can verify that the amounts disbursed from time to
time are represented by completed and in-place Work, and that said Work is free
and clear of possible mechanics liens. No payment made prior to the final
completion of the Work shall exceed ninety per cent (90%) of the value of the
work completed and in place from time to time.
7.3 Excess Receipts by Landlord. Any insurance remaining with Landlord
after payment in full for the Work shall be paid to Landlord.
7.4 Failure to Rebuild. If this Lease is not terminated pursuant Section
7.0 and if the party obligated to perform the Work does not commence the Work
within sixty (60) days after the date the damage or destruction occurred, or
does not prosecute same thereafter with such dispatch as may be necessary to
complete the same within a reasonable period after the date said damage or
destruction occurred, then, in addition to whatever other remedies the other
party may have under this Lease, or at law or in equity, such other party may
terminate this Lease.
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8. CONDEMNATION
8.0 Taking of Whole. If the whole of the Leased Premises is taken or
condemned for a public or quasi-public use or purpose by a competent authority,
or if such a portion of the Premises is taken so that the balance cannot be used
for the same purpose and with substantially the same utility to Tenant is
immediately prior to such taking and Landlord or Tenant elects to terminate this
Lease, which election shall be made by giving written notice thereof to the
other party within thirty (30) days after delivery of possession to the
condemning authority, then in any of such events, the Lease term shall terminate
upon delivery of possession to the condemning authority, and any award,
compensation or damages (hereinafter sometimes called the "Award") shall be paid
to and be the sole property of Landlord, whether the Award shall be made as
compensation for diminution of the value of the leasehold estate or the fee of
the Leased Premises or otherwise. Tenant hereby assigns to Landlord all of
Tenant's right, title and interest in and to any and all of the Award. Tenant
shall continue to pay rent and other charges hereunder until the Lease is
terminated and any Impositions and insurance premiums prepaid by Tenant or any
unpaid Impositions or other charges which accrue prior to the termination, shall
be adjusted between the parties. Nothing in this Section 8.0 shall prohibit
Tenant from making separate claims to the condemning authority for furnishings,
equipment and fixtures and Tenant's leasehold interest, if permitted under
applicable law, that may be taken in connection with any such condemnation.
8.1 Partial Taking. If only a part of the Leased Premises is taken or
condemned and the Lease is not terminated pursuant to Section 8.0 hereof,
Landlord, at its sole cost and expense, shall repair and restore the Leased
Premises and all improvements thereon. If a portion of the building located on
the Leased Premises is taken, Monthly Rent shall abate in proportion to the
floor area so taken from and after the date possession of such portion of the
Leased Premises is surrendered to the condemning authority. If Landlord does not
make a complete architectural unit of the remainder of the improvements within a
reasonable period after such taking or condemnation, or if, in Tenant's
judgment, the portion of the Leased Premises (including the improvements
thereon) is inadequate for the conduct of Tenant's normal business operations,
Tenant may elect to terminate this Lease by giving written notice thereof to
Landlord. Any portion of the Award not expended for such repairing or
restoration shall be retained by Landlord.
9. MAINTENANCE AND ALTERATIONS
9.0 Maintenance. Tenant, at its sole cost and expense, shall (a) perform
routine maintenance and repair of the Leased Premises, other than structural
repairs (including the roof), for which the Landlord shall be responsible, and
(b) perform routine maintenance of the heating, ventilating, air conditioning
and other mechanical systems in the Leased Premises excluding any repairs,
rebuilding or replacement which increase the value of the Leased Premises, which
shall be borne by the Landlord (such costs to be borne by Landlord described in
this paragraph (b) being referred to as the "Mechanical Upgrades"). Tenant shall
further keep and maintain the Leased Premises, the parking area and all
sidewalks and areas adjacent thereto safe, secure, clean and sanitary (including
without limitation, snow and ice clearance, and necessary interior painting and
carpet cleaning at least once each year), and in compliance with all material
respects with all
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health, safety and police regulations in force other than those requiring
structural alteration or repair, a Mechanical Upgrade or those requiring
expenditures which would constitute Clean-Up Costs (as hereinafter defined). As
used herein, "Clean-Up Costs" mean the costs, expenses, losses, damages and
other liabilities incurred in connection with compliance with any Federal, state
or local law, rule, regulation or policy governing environmental matters
relating to the condition of the Leased Premises as of the Commencement Date or
the business conducted on the Leased Premises prior to the Commencement Date for
which Landlord is responsible pursuant to Section 13.2 hereof.
9.1 Alterations.
(a) Tenant shall not make any additions, improvements and
alterations (hereinafter "Alterations") to the Leased Premises without the prior
written consent of Landlord, which consent shall not be unreasonably withheld.
(b) As to any Alterations which Tenant desires to perform and to
which Landlord consents and which cost in excess of $10,000.00, and as to any
replacements whatsoever, such work shall be performed with new materials, in a
good and workmanlike manner, strictly in accordance with plans and
specifications therefor first approved in writing by Landlord and in accordance
with all applicable laws and ordinances. Upon completion of any such work by or
on behalf of Tenant, Tenant shall provide Landlord with such documents as
Landlord may require (including, without limitation, sworn contractors'
statements and supporting lien waivers) evidencing payment in full for such
work, and "as built" working drawings. In the event Tenant performs any work not
in compliance with the provisions of this Section 9.1(b), Tenant shall, upon
written notice from Landlord, immediately remove such work and restore the
Leased Premises to their condition immediately prior to the performance thereof.
If Tenant fails so to remove such work and restore the Lease Premises as
aforesaid, Landlord may, at its option, and in addition to all other rights or
remedies of Landlord under this Lease, at law or in equity, enter the Leased
Premises and perform said obligation of Tenant and Tenant shall reimburse
Landlord for the cost to the Landlord thereof, immediately upon being billed
therefor by Landlord. Such entry by Landlord shall not be deemed an eviction or
disturbance of Tenant's use or possession of the Leased Premises nor render
Landlord liable in any manner to Tenant.
10. ASSIGNMENT AND SUBLETTING
Tenant shall not (i) assign, convey or mortgage this Lease or any interest
in this Lease; (ii) allow any transfer thereof or any lien upon Tenant's
interest in this Lease by operation of law; (iii) sublet the Leased Premises or
any part thereof; or (iv) permit the use or occupancy of the Leased Premises or
any part thereof by anyone other than Tenant. Notwithstanding the foregoing,
Tenant may, without Landlord's consent, assign this Lease to any entity which is
directly or indirectly controlled by Lucas Industries, Inc., a Michigan
corporation ("Parent"), provided that (a) such assignment shall not relieve
Tenant of its obligations hereunder, and (b) Parent confirms in writing to
Landlord that Parent's guaranty of the obligations of Tenant hereunder remains
in full force and effect notwithstanding such assignment.
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11. LIENS AND ENCUMBRANCES
11.0 Encumbering Title. Tenant shall not do any act which encumbers the
title of Landlord to the Leased Premises, nor shall the interest or estate of
Landlord in the Leased Premises in any way be subject to any claim by way of
lien or encumbrance, whether by operation of law or by virtue of any express or
implied contract, by Tenant. Any claim to, or lien upon, the Leased Premises
arising from any act or omission of Tenant shall accrue only against the
leasehold estate of Tenant and shall be subject and subordinate to the paramount
title and rights of Landlord in and to the Leased Premises.
11.1 Liens and Right to Contest. Tenant shall not permit the Leased
Premises to become subject to any mechanics', laborers' or materialmen's lien on
account of labor or material furnished to Tenant or claimed to have been
furnished to Tenant in connection with work of any character performed or
claimed to have been performed on the Leased Premises by, or at the direction of
sufferance of Tenant; provided, however, that Tenant shall have the right to
contest, in good faith and by appropriate proceedings, the validity of any such
lien or claimed lien; provided that Tenant bonds over such lien or provides
Landlord with other adequate security therefor and provided further, that on
final determination of the lien or claim for lien, Tenant shall immediately pay
any judgment rendered, with all proper costs and charges, and shall have the
lien released and any judgment satisfied.
12. UTILITIES
Tenant shall pay for all services to the Leased Premises. Landlord shall
have no obligation to furnish utilities to the Leased Premises and makes no
representation or warranty with respect to the continued availability of such
services.
13. INDEMNITY AND WAIVER
13.0 Indemnity. To the extent permitted by applicable law and subject to
Section 13.2, Tenant will protect, indemnify and save harmless Landlord,
Landlord's mortgagee and/or ground lessor and their respective agents,
shareholders, directors, officers, and employees from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses (including without limitation, reasonable attorneys' fees and
expenses) imposed upon or incurred by or asserted against Landlord by reason of
(a) any accident, injury to or death of persons or loss of or damage to property
occurring on or about the Leased Premises or any part thereof or the adjoining
sidewalks, curbs, streets or ways, or resulting from any act or omission of
Tenant or anyone claiming by, through or under Tenant; (b) any failure on the
part of Tenant to perform or comply with any of the terms of this Lease; or (c)
performance of any labor or services or the furnishing of any materials or other
property in respect of the Leased Premises or any part thereof at the request of
Tenant. In case any action, suit or proceeding is brought against Landlord by
reason of any such occurrence, Tenant will, at Tenant's expense, defend such
action, suit or proceeding, or cause the same to be defended by counsel
satisfactory to Landlord.
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13.1 Waiver of Certain Claims. All property belonging to Tenant shall be
kept at the Leased Premises at the risk of Tenant, and Landlord shall not be
liable for any damage thereto or for the theft or misappropriation thereof.
Tenant waives all claims it may have against Landlord for damage or injury to
property sustained by Tenant or any persons claiming through Tenant resulting
from any part of the Leased Premises or any of its improvements, equipment or
appurtenances being out of repair, or resulting from any accident on or about
the Leased Premises, or resulting directly or indirectly from any act or neglect
of any person, including Landlord to the extent permitted by law. This Section
13.1 shall include, but not by way of limitation, damage caused by water, snow,
frost, steam, excessive heat or cold, sewage, gas, odors, or noise, or caused by
bursting or leaking of pipes or plumbing fixtures, and shall apply equally
whether any such damage results from the act or neglect of Tenant or any other
person, including Landlord to the extent permitted by law, and whether such
damage be caused by or result from any thing or circumstance above mentioned or
referred to, or to any other thing or circumstance whether of a like nature or
of a wholly different nature.
13.2 Environmental Matters. The obligations of Landlord and Tenant with
respect to environmental matters shall be governed by the Agreement for the Sale
and Purchase of Assets dated June 11, 1991 between landlord and Parent, as
amended by Amendment No. 1 thereto dated July 19, 1991 and Amendment No. 2
thereto dated July 26, 1991 (the "Purchase Agreement"), Parent having assigned
all its rights and obligations thereunder to Tenant.
14. RIGHTS RESERVED TO LANDLORD
Without limiting any other rights reserved or available to Landlord under
this Lease, at law or in equity, Landlord, reserves the following rights to be
exercised at Landlord's election and, except as provided in Section 9.0,
Landlord's expense:
(a) To change the street address of the Leased Premises;
(b) To inspect the Leased Premises and to make repairs, additions
or alterations to the Leased Premises provided the same do not materially
interfere with Tenant's business operations at the Leased Premises;
(c) To cause any tests (including tests of soil and ground water)
to be conducted on the Leased Premises and to effect any environmental
remediation of the Leased Premises which Landlord deems necessary or
desirable, provided that such testing and remediation does not materially
interfere with Tenant's business operations at the Leased Premises;
(d) To show the Leased Premises to prospective purchasers,
mortgagees, or other persons having a legitimate interest in viewing the
same, and, at any time within six months prior to the expiration of the
Lease term to persons wishing to rent the Leased Premises;
(e) During the last six months of the Lease term, to place and
maintain the usual "For Rent" sign in or on the Leased Premises;
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(f) During the last ninety (90) days of the Lease term, if during
or prior to that time Tenant vacates the Premises, to decorate, remodel,
repair, alter otherwise prepare the Leased Premises for new occupancy; and
(g) To place and maintain "For Sale" signs on the Leased Premises
and on the exterior of the building on the Leased Premises.
Landlord may enter upon the Leased Premises for any and all of said purposes and
may exercise any and all of the foregoing rights hereby reserved, during normal
business hours unless an emergency exists, or at any time an emergency exists,
without being deemed guilty of any eviction or disturbance of Tenant's use or
possession of the Leased Premises, and without being liable in any manner to
Tenant.
15. QUIET ENJOYMENT
So long as Tenant is not in default under the covenants and agreements of
this Lease, Tenant's quiet and peaceable enjoyment of the Leased Premises shall
not be disturbed or interfered with by Landlord or by any person claiming by,
through or under Landlord.
16. SUBORDINATION OR SUPERIORITY
If the mortgagee or trustee named in any first mortgage or first trust
deed hereafter made shall agree that, if it becomes the owner of the Leased
Premises by foreclosure or deed in lieu of foreclosure, it will recognize the
rights and interest of Tenant under the Lease and not disturb Tenant's use and
occupancy of the Lease Premises if and so long as Tenant is not in default under
the Lease (which agreement may, at such mortgagee's option, require attornment
by Tenant), then all or a portion of the rights and interests of Tenant under
this Lease shall be subject and subordinate to such first mortgage or first
trust deed and to any and all advances to be made thereunder, and to the
interest thereon, and all renewals, replacements and extensions thereof. Any
such mortgagee or trustee may elect that, instead of making this Lease subject
and subordinate to its first mortgage or first trust deed, the rights and
interest of Tenant under this Lease shall have priority over the lien of its
mortgage or trust deed. Tenant agrees that it will, within ten (10) days after
demand in writing, execute and deliver whatever instruments may be reasonably
required, either to make the Lease subject and subordinate to such a mortgage or
trust deed, or to give the Lease priority over the lien of the mortgage or trust
deed, whichever alternative may be elected by the mortgagee or trustee. If
Tenant fails to execute and deliver any such instrument, Tenant does hereby make
constitute and irrevocably appoint Landlord as its attorney in fact, in its
name, place and stead so to do.
17. SURRENDER
17.0 Surrender. Upon the termination of this Lease, whether by
forfeiture, lapse of time or otherwise, or upon of Tenant's right to possession
of the Leased Premises, Tenant will at once surrender and deliver up the Leased
Premises together with all
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<PAGE>
improvements thereon, to Landlord, broom swept, in good condition and repair,
reasonable wear and tear excepted. Conditions existing because of Tenant's
failure to perform maintenance and repairs as required herein shall not be
deemed "reasonable wear and tear". Tenant shall deliver to Landlord all keys to
all doors of the Leased Premises. As used herein, the term "improvements" shall
include, without limitation, all plumbing, lighting, electrical, heating,
cooling and ventilating fixtures and equipment, and all Alterations (as said
term is defined in Section 9.1 hereof) whether or not permitted under Section
9.1. All Alterations, temporary or permanent, made in or upon the Leased
Premises by Tenant shall become Landlord's property and shall remain upon the
Leased Premises on any such termination without compensation, allowance or
credit to Tenant, provided, however, that Landlord shall have the right to
require Tenant to remove any Alterations and restore the Leased Premises to
their condition prior to the making of such Alterations, repairing any damage
occasioned by such removal and restoration. Said right shall be exercised by
Landlord's giving written notice thereof to Tenant at least ten (10) days prior
to such termination. If Landlord requires removal of any Alterations and Tenant
does not make such removal in accordance with this Section at the time of such
termination, Landlord may remove the same (and repair any damage occasioned
thereby), and dispose thereof or, at its election, deliver the same to any other
place of business of Tenant or warehouse the same. Tenant shall pay the costs of
such removal, repair, delivery and warehousing to Landlord on demand.
17.1 Removal of Tenant's Property. Upon the termination of this Lease by
lapse of time or otherwise, Tenant shall remove Tenant's articles of personal
property incident to Tenant's business ("Trade Fixtures"); provided, however,
that Tenant shall repair any injury or damage to the Leased Premises which may
result from such removal, and shall restore the Leased Premises to the same
condition as prior to the installation thereof. If Tenant does not remove
Tenant's Trade Fixtures from the Leased Premises on or before the expiration or
earlier termination of the Lease term, Landlord may, at its option, remove and
dispose of the same (and repair any damage occasioned thereby) or deliver the
same to any other place of business of Tenant, or warehouse the same, and Tenant
shall pay the cost of such removal, disposal, repair, delivery and warehousing
to Landlord on demand, or Landlord may treat such Trade Fixtures as having been
conveyed to Landlord with this Lease as a Bill of Sale, without further payment
or credit by Landlord to Tenant.
17.2 Holding Over. Tenant shall have no right to occupy the Leased
Premises or any portion thereof after the expiration of the Lease or after
termination of the Lease or of Tenant's right to possession pursuant to Section
18.0 hereof. In the event Tenant or any party claiming by, through or under
Tenant holds over, Landlord may exercise any and all remedies available to it at
law or in equity to recover possession of the Leased Premises, and for damages.
For each and every month or partial month that Tenant or any party claiming by,
through or under Tenant remains in occupancy of all or any portion of the Leased
Premises after the expiration of the Lease or after termination of the Lease or
Tenant's right to possession, Tenant shall pay, as minimum damages and not as a
penalty, monthly rental at a rate equal to double the rate of rent and other
charges payable by Tenant hereunder immediately prior to the expiration or other
termination of the Lease or of Tenant's right to possession. The acceptance by
Landlord of any lesser sum shall be construed as a payment on account and not in
satisfaction of damages for such holding over.
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18. REMEDIES
18.0 Defaults. Any one or more of the following events shall be
considered events of default as said term is used herein:
(a) Tenant shall be adjudged an involuntary bankrupt, or a decree
or order approving, as properly filed, a petition or answer filed against
Tenant asking reorganization of Tenant under the Federal bankruptcy laws
as now or hereafter amended, or under the laws of any state, shall be
entered, and any such decree or judgment or order shall not have been
vacated or set aside within sixty (60) days from the date of the entry or
granting thereof; or
(b) Tenant shall file any petition in bankruptcy or any petition
pursuant or purporting to be pursuant to the Federal bankruptcy laws as
now or hereafter amended, or Tenant shall institute any proceeding or
shall give its consent to the institution of any proceedings for any
relief of Tenant under any bankruptcy or insolvency laws or any laws
relating to the relief of debtors, readjustment or indebtedness,
reorganization, arrangements, composition or extension; or
(c) Tenant shall make any assignment for the benefit of creditors
or shall apply for consent to the appointment of a receiver for Tenant or
any of the property of Tenant; or
(d) The Leased Premises are levied upon by any revenue officer or
similar officer; or
(e) A decree or order appointing a receiver of the property of
Tenant shall be made and such decree or order shall not have been vacated
or set aside within thirty (30) days from the date of entry or granting
thereof; or
(f) Tenant shall abandon the Leased Premises or vacate the same
during the term hereof; or
(g) Tenant shall default in any payment of rent or in any other
payment required to be made by Tenant hereunder when due as herein
provided, and any such default shall continue for ten (10) days after
notice thereof in writing to Tenant; or
(h) Tenant shall fail to contest the validity of any lien or
claimed lien, or, having commenced to contest the same, shall fail to
prosecute such contest with diligence, or shall fail to have the same
released and satisfy any judgment rendered thereon, or shall otherwise
fail to comply with Article XI, and such default continues for ten (10)
days after notice thereof in writing to Tenant; or
(i) Tenant shall default in keeping, observing or performing any of
the other covenants or agreements herein contained to be kept, observed
and performed by Tenant, and such default shall continue for thirty (30)
days after notice thereof in writing to Tenant.
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18.1 Remedies. Upon the occurrence of any one or more of such events of
default, Landlord may at its election terminate this Lease or terminate Tenant's
right to possession only, without terminating the Lease. Upon termination of the
Lease, or upon any termination of the Tenant's right to possession without
termination of the Lease, the Tenant shall surrender possession and vacate the
Leased Premises immediately, and deliver possession thereof to the Landlord, and
hereby grants to the Landlord the full and free right, without demand or notice
of any kind to Tenant (except as hereinabove expressly provided for), to enter
into and upon the Leased Premises in such event with or without process of law
and to repossess the Leased Premises as the Landlord's former estate and to
expel or remove the Tenant without being deemed in any manner guilty of
trespass, eviction, or forcible entry or detainer without incurring any
liability for any damage resulting therefrom and without relinquishing the
Landlord's rights to rent or any other right given to the Landlord hereunder or
by operation of law. If the Landlord elects to terminate the Tenant's right to
possession only without terminating the Lease, the Landlord may, at the
Landlord's option, enter into the Leased Premises, remove the Tenant's signs and
other evidences of tenancy, and take and hold possession thereof as hereinabove
provided, without such entry and possession terminating the Lease or releasing
the Tenant, in whole or in part, from the Tenant's obligations to pay the rent
hereunder for the full term or from any other of its obligations under this
Lease. Landlord may relet all or any part of the Leased Premises for such rent
and upon such terms as shall be satisfactory to Landlord (including the right to
change the character or use made of the Premises). For the purpose of such
reletting, Landlord may decorate or make any repairs, changes, alterations or
additions in or to the Leased Premises that may be necessary or convenient. If
Landlord does not relet the Leased Premises, Tenant shall pay to Landlord on
demand damages equal to the amount of the rent, and other sums provided herein
to be paid by Tenant for the remainder of the Lease term. If the Leased Premises
are relet and a sufficient sum shall not be realized from such reletting after
paying all of the expenses of such decorations, repairs, changes, alterations,
additions, the expenses of such reletting and the collection of the rent
accruing therefrom (including, but not by way of limitation, attorneys' fees and
brokers' commissions), to satisfy the rent and other charges herein provided to
be paid for the remainder of the Lease term, Tenant shall pay to Landlord on
demand any deficiency and Tenant agrees that Landlord may file suit to recover
any sums falling due under the terms of this Section from time to time. Landlord
shall use all diligent efforts to mitigate, its damages arising out of Tenant's
default; Landlord shall not be deemed to have failed to use such diligent
efforts by reason of the fact that Landlord has sought to relet the Leased
Premises at a rental rate higher than that payable by Tenant under the Lease
(but not in excess of the then current market rental rate). If Tenant shall
default under Section 18.0(i) and if such default cannot with due diligence be
cured within said period of thirty (30) days after notice in writing shall have
been given to Tenant, and if Tenant promptly commences to eliminate the causes
of such default, then Landlord shall not have the right to declare said term
ended by reason of such default or to repossess without terminating the Lease so
long as Tenant is proceeding diligently and with reasonable dispatch to take all
steps and do all work required to cure such default, and does so cure such
default, provided, however, that the curing of any default in such manner shall
not be construed to limit or restrict the right of Landlord to declare the said
term ended or to repossess without terminating the Lease, and to enforce all of
its rights and remedies for any other default not timely cured.
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18.2 Remedies Cumulative. No remedy hereunder or otherwise conferred upon
or reserved to Landlord shall be considered to exclude or suspend any other
remedy but the same shall be cumulative and shall be in addition to every other
remedy given hereunder or existing at law or in equity ad every power and remedy
given by this Lease to Landlord may be exercised from to time and so often as
occasion may arise or as may be deemed expedient.
18.3 No Waiver. No delay or omission of Landlord to exercise any right or
power arising from any default shall impair any such right or power or be
construed to be a waiver of any such default or any acquiescence therein. No
waiver of any breach of any of the covenants of this Lease shall be construed,
taken or held to be a waiver of any other breach, or as a waiver, acquiescence
in or consent to any further or succeeding breach of the same covenant. The
acceptance by Landlord of any payment of rent or other charges hereunder after
the termination by Landlord of this Lease or of Tenant's right to possession
hereunder shall not, in the absence of agreement in writing to the contrary by
Landlord, be deemed to restore this Lease or Tenant's right to possession
hereunder, as the case may be, but shall be construed as a payment on account,
and not in satisfaction of damages due from Tenant to Landlord.
19. OPTION TO PURCHASE
19.0 Grant. Landlord hereby grants to Tenant the option to purchase (the
"Option") the Leased Premises at the expiration of the term of this Lease at a
price equal to the then Book Value of the Leased Premises. Said option may be
exercised at any time during the term of this Lease (other than at such time as
exists a default or a condition which with the passage of time, the giving of
notice or both would constitute a default hereunder) by delivery of written
notice to Landlord by Tenant in the manner provided in Section 20.3 hereof. If
Tenant exercises the Option, the Leased Premises shall be purchased and accepted
by Tenant "as is", and Landlord shall have no liability whatsoever to Tenant
under Section 15.1(c) or 15.1(d) of the Purchase Agreement, even as to claims
made prior to the time Tenant exercised the Option.
19.1 Terms of Purchase. Within ten (10) days after Tenant's exercise of
the Option, Landlord and Tenant shall enter into a written agreement for the
sale of the Leased Premises (the "Contract") for a purchase price equal to the
Book Value as of the Closing. Unless otherwise agreed to by the parties, the
Contract shall provide for (1) an escrow closing at the office of the title
insurer issuing the title insurance policy specified below on a date no later
than the earlier of (i) six months after the exercise of the Option or (ii) the
expiration date of the term of this Lease; (2) payment by Tenant to Landlord of
the purchase price in cash at the closing; (3) delivery by Landlord to Tenant of
good title to the Leased Premises by a Quitclaim Deed, subject only to (a) the
Permitted Exceptions set forth on Exhibit "B" hereto, and (b) general real
estate taxes or special assessments not yet due and payable; (4) the delivery by
Landlord to Tenant, at Landlord's expense, of a ALTA Form B owner's title
insurance policy issued by a title insurer acceptable to both Landlord and
Tenant subject only to those exceptions stated above; (5) the delivery by the
appropriate party of all documentation necessary for the title insurance company
to insure Tenant's fee simple interest in the Leased Premises; and (6) the
payment of all prorations, transfer taxes, title insurance charges, escrow fees,
recording fees, and other expenses, fees and charges by the party from whom such
payment is due in accordance with statutory requirements or in accordance with
the custom at the time of the
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closing for sales of properties similar to the Leased Premises, but in any case,
subject to Section 18.16 of the Purchase Agreement.
20. MISCELLANEOUS
20.0 Estoppel Certificates. Tenant shall at any time and from time to
time upon not less than ten (10 ) days prior written request from Landlord,
execute, acknowledge and deliver to Landlord, in form reasonably satisfactory to
Landlord and/or Landlord's mortgagee, a written statement certifying (if true)
that Tenant has accepted the Leased Premises, that this Lease is unmodified and
in full force and effect (or, if there have been modifications, that the same is
in full force, and effect as modified and stating the modifications), that
Landlord is not in default hereunder, the date to which the rental and other
charges have been paid in advance, if any, and such other certifications as may
reasonably be required by Landlord, agreeing to give copies to any mortgagee of
Landlord of all notices by Tenant to Landlord and agreeing to afford Landlord's
mortgagee a reasonable opportunity to cure any default of Landlord. It is
intended that any such statement delivered pursuant to this subsection may be
relied upon by any prospective purchaser or mortgagee of the Leased Premises and
their respective successors and assigns.
20.1 Landlord's Right to Cure. Landlord may, but shall not be obligated
to, cure any default by Tenant (specifically including, but not by way of
limitation, Tenant's failure to obtain insurance, make repairs, or satisfy lien
claims); and whenever Landlord so elects, all costs and expenses paid by
Landlord to cure such default, including without limitation reasonable
attorneys' fees, shall be so much additional rent due on the next date that
Monthly Rent is payable after such payment together with interest (except in the
case of said attorneys' fees) at a rate per annum equal to the rate of interest
announced from time to Harris & Trust and Savings Bank as its prime (or
equivalent) rate of interest from the date of the advance to the date of
repayment by Tenant to Landlord.
20.2 Amendments Must Be in Writing. This Lease may not be amended except
by a written instrument duly signed and delivered by both parties.
20.3 Notices. All notices to or demands upon Landlord or Tenant given
under any of the provisions hereof shall be in writing. Any notices or demands
from Landlord to Tenant shall be deemed to have been given if a copy thereof has
been deposited in the United States mail registered or certified, proper postage
prepaid if sent for next business day delivery by a reputable overnight courier
service, to Tenant at 11180 Sunrise Valley Drive, Reston, Virginia 22092 or at
such address as Tenant may theretofore have designated by written notice to
Landlord, and any notices or demands from Tenant to Landlord shall be deemed to
have been duly and sufficiently given if deposited in the United States mail,
registered or certified, proper postage prepaid, or if sent for next business
day delivery by a reputable overnight service, with receipt, to Landlord at 534
Broad Hollow Road, Melville, Long Island, New York 11747, Attn: Secretary, or at
such other address or to such other agent as Landlord may theretofore have
designated by written notice to Tenant. The effective date of any mailed notice
shall be three (3) business days after delivery of the same to the United States
Postal Service. The effective date of any notice sent by courier shall be the
next business day.
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20.4 Relationship of Parties. Nothing contained herein shall be deemed or
construed by the parties hereto, or by any third party, as creating the
relationship of principal and agent or of partnership, or of joint venture, by
the parties hereto, it being understood and agreed that no provision contained
in this Lease nor any acts of the parties hereto shall be deemed to create any
relationship other than the relationship of landlord and tenant.
20.5 Captions. The captions of this Lease are for convenience only and
are not to be construed as part of this Lease and shall not be construed as
defining or limiting in any way the scope or intent of the provisions hereof.
20.6 Severability. If any term or provision of this Lease shall to any
extent be held invalid or unenforceable, the remaining terms and provisions of
this Lease shall not be affected thereby, but each term and provision of this
Lease shall be valid and be enforced to the fullest extent permitted by law.
20.7 Law Applicable. This Lease shall be construed and enforced in
accordance with the laws of the State of Michigan.
20.8 Covenants Binding on Successors. All of the covenants, agreements,
conditions and undertakings contained in this Lease shall extend and inure to
and be binding upon the successors and permitted assigns of the respective
parties hereto, the same as if they were in every case specifically named, and
wherever in this Lease reference is made to either of the parties hereto, it
shall include and apply to, wherever applicable, the successors and permitted
assigns of such party. Nothing herein contained shall be construed to grant or
confer upon any person or persons, firm, corporation or governmental authority,
other than the parties hereto, their successors and assigns, any right, claim or
privilege by virtue of any covenant, agreement, condition or undertaking in this
Lease contained. The foregoing shall not be deemed to permit any assignment by
Tenant in contravention of Article X hereof.
20.9 Landlord Means Owners. The term "Landlord" as used in this Lease
shall be limited to mean and include only the owner or owners at the time in
question of the fee of the Leased Premises, and in the event of any transfer or
transfers of the title to such fee, the Landlord herein named (and in case of
any subsequent transfer or conveyances, the then grantor) shall be automatically
freed and relieved, from and after the date of such transfer or conveyance, from
all liability for the performance of any covenants or obligations on part of
Landlord contained in this Lease thereafter to be performed; provided that any
funds in the hands of such Landlord or the then grantor at the time of such
transfer, in which Tenant has an interest, shall be turned
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over to the grantee, and any amount then due and payable to Tenant by Landlord
or the then grantor under any provisions of this Lease shall be paid to Tenant
and provided that the grantee expressly assumes in writing the obligations of
the Landlord hereunder.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the day
and year first above written.
LANDLORD:
THE ALLEN GROUP, INC. a Delaware
corporation
By: /s/ Stephen E. Gildrudey
---------------------------------------
Its: Vice President
-----------------------------------
TENANT:
LUCAS HARTRIDGE, INC., a Virginia
corporation
By: /s/ [Signature illegible]
---------------------------------------
Its: Secretary
-----------------------------------
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The following page contains a list of Exhibits and Schedules which have
been intentionally omitted by the Registrant.
A copy of any omitted Exhibit or Schedule will be provided to the
Securities and Exchange Commission upon request.
<PAGE>
Exhibit A - Legal Description
Exhibit B - Permitted Exceptions
DT INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
Fiscal Year Ended
June 29, June 30,
1997 1996
---------- ----------
Income before extraordinary loss $ 26,381 $ 13,491
Extraordinary loss 324
---------- ----------
Net income $ 26,057 $ 13,491
========== ==========
Primary:
Weighted average number of shares outstanding 10,349 9,000
Add dilutive effect of stock options based on
treasury stock method using average market
price 425 65
Add shares contingently issuable to the former
owner of Kalish assuming maintenance of
current earnings 121
---------- ----------
Primary weighted average number of common and
common equivalent shares outstanding 10,895 9,045b
========== ==========
Primary earnings per common and common
equivalent share:
Income before extraordinary loss $ 2.42 $ 1.49c
Extraordinary loss 0.03
---------- ----------
Net income $ 2.39 $ 1.49c
========== ==========
Fully Diluted:
Weighted average number of shares outstanding 10,349 9,000
Add dilutive effect of stock options based
on treasury stock method using ending market
price 472 164
Add shares contingently issuable to the former
owner of Kalish assuming maximum future earnings 121 --
Shares issuable upon assumed conversion of the
Mandatorily Redeemable Convertible Preferred
Securities 80 --
---------- ----------
Fully diluted weighted average number of common
and common equivalent shares outstanding 11,022a 9,164b
========== ==========
Net income $ 26,057 $ 13,491
Interest expense on Mandatorily Redeemable
Convertible Preferred Securities, net of
applicable income taxes 151 --
---------- ----------
Net income, adjusted $ 26,208 $ 13,491
========== ==========
Fully diluted earnings per common and
common equivalent share:
Income before extraordinary loss $ 2.41a $ 1.47c
Extraordinary loss 0.03 --
---------- ---------
Net income $ 2.38a $ 1.47c
========== ==========
a Fully diluted weighted average number of common and common equivalent
shares outstanding and fully diluted earnings per share are not presented
on the consolidated statement of operations as the impact is not
materially different from primary earnings per share.
b The effect of common stock equivalents and/or other dilutive securities was
not material in this period; therefore, presentation on the income
statement was not considered necessary.
c As all potentially dilutive securities are considered common stock
equivalents, fully diluted earnings per share is not materially different
from primary earnings per share.
DT INDUSTRIES, INC.
Report and Consolidated
Financial Statements
June 29, 1997
<PAGE>
Selected Consolidated Financial Data
(In thousands, except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fiscal year ended
June 29, June 30, June 25, June 26, June 30,
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Statement of operations data
Net sales $ 396,110 $ 235,946 $ 147,369 $ 107,499 $ 50,628
Cost of sales 285,044 172,568 109,678 79,555 40,066
---------- ---------- ---------- ---------- ----------
Gross profit 111,066 63,378 37,691 27,944 10,562
Selling, general and administrative
expenses 54,367 35,445 21,428 13,875 6,147
---------- ---------- ---------- ---------- ----------
Operating income 56,699 27,933 16,263 14,069 4,415
Interest expense, net 11,088 4,799 1,849 3,506 2,583
Dividends on Company-obligated,
mandatorily redeemable convertible
preferred securities of subsidiary DT
Capital Trust holding solely parent's
convertible subordinated debentures 251 --- --- --- ---
---------- ---------- ---------- ---------- ----------
Income before income taxes and
extraordinary loss 45,360 23,134 14,414 10,563 1,832
Provision for income taxes 18,979 9,643 5,964 4,570 1,000
---------- ---------- ---------- ---------- ----------
Income before extraordinary loss 26,381 13,491 8,450 5,993 832
Extraordinary loss, net(1) 324 --- --- 179 428
---------- ---------- ---------- ---------- ----------
Net income $ 26,057 $ 13,491 $ 8,450 $ 5,814 $ 404
---------- ---------- ---------- ---------- ----------
Primary earnings per share
before extraordinary loss $ 2.42 $ 1.50 $ 0.94 $ 1.10 $ 0.19
========== ========== ========== ========== ==========
Primary earnings per share $ 2.39 $ 1.50 $ 0.94 $ 1.07 $ 0.09
========== ========== ========== ========== ==========
Weighted average number of common and
common equivalent shares outstanding 10,895 9,000 9,000 5,458 4,481
========== ========== ========== ========== ==========
Balance sheet data
Working capital $ 90,981 $ 26,161 $ 16,791 $ 8,846 $ 464
Total assets 395,196 233,843 159,263 97,628 62,779
Total debt 48,505 79,327 37,353 432 31,047
Company-obligated, mandatorily
redeemable convertible preferred
securities of subsidiary
DT Capital Trust holding solely
parent's convertible subordinated
debentures 70,000 --- --- --- ---
Stockholders' equity 185,267 87,884 75,020 67,234 6,054
</TABLE>
1 Reflects costs incurred of $540, less applicable income tax benefits of
$216 in the fiscal year ended June 29, 1997, costs incurred of $314, less
applicable income tax benefits of $135 in the fiscal year ended June 26,
1994, and costs incurred of $684, less applicable income tax benefits of
$256 in the fiscal year ended June 30, 1993, related to the extinguishment
and refinancing of debt by the Company.
10
<PAGE>
OVERVIEW
The Company was formed through a series of acquisitions beginning with the
initial acquisitions of Detroit Tool Group, Inc. and the Peer Division of
Teledyne, Inc. in 1992. Subsequent to those transactions, the Company or its
subsidiaries completed a number of acquisitions for the Special Machines and
Components segments. The acquisitions are elements of a strategic plan to
acquire companies with proprietary products and manufacturing capabilities which
have strong market and technological positions in the niche markets they serve
and to accelerate the Company's goal of providing customers a full range of
integrated automated systems. The Company believes that emphasis on
complementary acquisitions of companies serving target markets has allowed it to
broaden its product offerings and to provide customers a single source for
complete integrated automation systems. The acquisitions have expanded the
Company's base of customers and markets, creating greater opportunities for
cross-selling among the various divisions of the Company.
The Company has made the following acquisitions in the past three years which
affected the results of operations:
August 1994 Advanced Assembly Automation, Inc. (AAA)
February 1995 Lakso Division of Package Machinery Company (Lakso)
February 1995 Armac Industries, Ltd. (Armac)
August 1995 H. G. Kalish Inc. (Kalish)
September 1995 Arrow Precision Elements, Inc. (Arrow)
November 1995 Swiftpack Automation Ltd. (Swiftpack)
January 1996 Assembly Machines, Inc. (AMI)
July 1996 Mid-West Automation Enterprises, Inc. (Mid-West)
September 1996 Hansford Manufacturing Corporation (Hansford)
July 1997 Lucas Assembly and Test Systems (LATS)
On July 29, 1997, after the close of fiscal 1997, the Company completed the
acquisition of certain of the net assets of Lucas Assembly and Test Systems
(LATS), a division of LucasVarity plc of England, for approximately $49 million.
LATS, which has been renamed Assembly Technology and Test (ATT), is a designer
and manufacturer of integrated assembly and testing systems for automotive OEMs
and their tier-one suppliers with manufacturing facilities in the United States,
the United Kingdom and Germany. As part of LucasVarity plc, LATS recorded sales
of approximately $112 million for the year ended January 31, 1997. The
acquisition of LATS will be accounted for as a purchase, with the results of
operations of LATS included with those of the Company for periods subsequent to
the date of acquisition.
For a better understanding of the significant factors that influenced the
Company's performance during the past three years, the following discussion
should be read in conjunction with the consolidated financial statements and
notes thereto appearing elsewhere in this Annual Report.
The Company operates in two business segments, Special Machines, including the
Automation and Packaging Groups, and Components. The Special Machines segment
designs and builds integrated automation systems, custom equipment and
proprietary machines which assemble, test or package industrial and consumer
products. The Components segment stamps and fabricates a range of standard and
custom metal components for the transportation, agricultural equipment,
appliance, heavy equipment, and electrical industries as well as wear parts for
the textile industry.
Gross margins of the Special Machines segment may vary from year to year as a
result of the variations in profitability of contracts for large orders of
automated production systems or special machines. In addition, changes in the
product mix in a given period affect gross margins for the Special Machines
segment. Margins on revenues of ATT, acquired after the fiscal year end, are
expected to be lower than the Special Machines segment's historical margins.
The percentage of completion method of accounting is used by the Company's
Special Machines segment to recognize revenues and related costs. Under the
percentage of completion method, revenues for customer contracts are measured
based on the ratio of engineering and manufacturing labor hours incurred to date
compared to total estimated engineering and manufacturing labor hours or, for
certain customer contracts, the ratio of total costs incurred to date to total
estimated costs. Any revisions in the estimated total costs or values of the
contracts during the course of the work are reflected when the facts that
require the revisions become known. Revenue from the sale of products
manufactured by the Company's Components segment is recognized upon shipment to
the customer.
Costs and related expenses to manufacture the products are recorded as cost of
sales when the related revenue is recognized. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined.
11
<PAGE>
Set forth below is certain financial data relating to each business segment (in
thousands):
Fiscal year ended
June 29, June 30, June 25,
1997 1996 1995
---------- ---------- ----------
Net sales:
Special Machines
DTI Automation $ 248,213 $ 106,217 $ 67,119
DTI Packaging 100,435 87,667 45,051
---------- ---------- ----------
Total Special Machines 348,648 193,884 112,170
Components 47,462 42,062 35,199
---------- ---------- ----------
Total $ 396,110 $ 235,946 $ 147,369
---------- ---------- ----------
Gross profit:
Special Machines $ 100,215 $ 53,299 $ 29,015
Gross margin 28.7% 27.5% 25.9%
Components 10,851 10,079 8,676
Gross margin 22.9% 24.0% 24.6%
---------- ---------- ----------
Total gross profit $ 111,066 $ 63,378 $ 37,691
Total gross margin 28.0% 26.9% 25.6%
========== ========== ==========
Operating income:
Special Machines $ 56,787 $ 26,557 $ 13,857
Operating margin 16.3% 13.7% 12.4%
Components 6,966 6,934 6,676
Operating margin 14.7% 16.5% 19.0%
Corporate (7,054) (5,558) (4,270)
---------- ---------- ----------
Total operating income $ 56,699 $ 27,933 $ 16,263
Total operating margin 14.3% 11.8% 11.0%
========== ========== ==========
Depreciation and amortization expense:
Special Machines $ 8,891 $ 4,683 $ 3,452
Components 1,258 1,038 837
Corporate 904 395 272
---------- ---------- ----------
Total $ 11,053 $ 6,116 $ 4,561
========== ========== ==========
Capital expenditures:
Special Machines $ 7,424 $ 6,145 $ 4,127
Components 3,806 2,138 3,043
Corporate 620 1,966 548
---------- ---------- ----------
Total $ 11,850 $ 10,249 $ 7,718
========== ========== ==========
Identifiable assets:
Special Machines $ 357,337 $ 203,210 $ 135,328
Components 34,812 28,528 23,061
Corporate 3,047 2,105 874
---------- ---------- ----------
Total $ 395,196 $ 233,843 $ 159,263
========== ========== ==========
12
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of net
sales represented by certain items reflected in the Company's consolidated
statement of operations:
Fiscal year ended
June 29, June 30, June 25,
1997 1996 1995
---------- ---------- ----------
Net sales 100.0% 100.0% 100.0%
Cost of sales 72.0 73.1 74.4
---------- ---------- ----------
Gross profit 28.0 26.9 25.6
Selling, general and
administrative expenses 13.7 15.1 14.6
---------- ---------- ----------
Operating income 14.3 11.8 11.0
Interest expense 2.8 2.0 1.2
Dividends on Company-obligated,
mandatorily redeemable convertible
preferred securities of subsidiary
DT Capital Trust holding solely
parent's convertible subordinated
debentures 0.1 --- ---
---------- ---------- ----------
Income before provision for income
taxes and extraordinary loss 11.4 9.8 9.8
Provision for income taxes 4.8 4.1 4.1
---------- ---------- ----------
Income before extraordinary loss
6.6 5.7 5.7
Extraordinary loss on debt
refinancing 0.1 --- ---
---------- ---------- ----------
Net income 6.5 5.7 5.7
========== ========== ==========
FISCAL 1997 COMPARED TO FISCAL 1996
NET SALES
Consolidated net sales increased $160.2 million, or 67.9%, to $396.1 million for
the year ended June 30, 1997 from $235.9 million for the year ended June 30,
1996. Of the $160.2 million increase in sales, $139.3 million was due to the
incremental sales of recently acquired businesses, with the remaining $20.9
million, or 8.8%, relating to increased sales from existing businesses. Recently
acquired businesses include Kalish in August 1995, Arrow in September 1995,
Swiftpack in November 1995, AMI in January 1996, Mid-West in July 1996 and
Hansford in September 1996.
Sales by the Special Machines segment increased $154.8 million and sales by the
Components segment increased $5.4 million. The increase in sales by the Special
Machines segment was due to an increase in sales from existing businesses of
$16.7 million, or 8.6%, over the year ended June 30, 1996 and $138.1 million in
incremental sales from recently acquired businesses. Sales from existing
businesses were up due to the strong growth occurring in assembly systems,
welding systems, foam extrusion equipment and liquid and tablet packaging
systems. The increase in sales of assembly and welding systems reflects
international expansion by certain customers and DTI's increased penetration
into new markets. Foam extrusion equipment sales have grown significantly, led
by a strong international market. The growth in sales of assembly, welding, foam
extrusion and packaging systems was partially offset by a decrease in sales of
custom build-to-print machines. The increase in sales by the Components segment
was due to an increase in sales from existing businesses of $4.2 million, or
9.9%, over the year ended June 30, 1996 and $1.2 million in incremental sales
relating to the Arrow acquisition. The increase in sales of the Components
segment is a result of the sales increases to a large customer in the
agricultural equipment industry and sales to new customers in new markets. These
gains offset the substantial decline in sales to customers in the transportation
industry as a result of the trucking industry downturn.
13
<PAGE>
GROSS PROFIT
Gross profit increased $47.7 million, or 75.2%, to $111.1 million for the year
ended June 29, 1997 from $63.4 million for the year ended June 30, 1996, as a
result of the sales increases discussed above and gross margin improvements. The
gross margin increased to 28.0% from 26.9%. Gross margin exclusive of acquired
operations increased to 27.7%, reflecting a more favorable product mix within
the Special Machines segment. The Components segment gross margin decreased to
22.9% from 24.0% primarily due to decreased productivity resulting from the
increase in new business and the related start up costs.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES
SG&A expenses increased $19.0 million, or 53.4%, to $54.4 million for the year
ended June 29, 1997 from $35.4 million for the year ended June 30, 1996.
Approximately $13.1 million of the increase was due to recently acquired
businesses, with the remaining increase the result of personnel additions,
increased costs related to compensation and incentive programs, consulting fees,
and increased travel and marketing costs, most of which related to the overall
growth of the Company and the development of group operating structures and
systems. As a percentage of consolidated net sales, SG&A expenses decreased to
13.7% from 15.1%. The percentage decrease resulted primarily from lower SG&A
expenses as a percentage of sales associated with recently acquired businesses.
OPERATING INCOME
Operating income increased $28.8 million, or 103.0%, to $56.7 million for the
year ended June 29, 1997 from $27.9 million for the year ended June 30, 1996, as
a result of the factors noted above. The operating margin increased to 14.3%
from 11.8% in the prior year.
INTEREST EXPENSE
Interest expense increased to $11.1 million for the year ended June 29, 1997
from $4.8 million for the year ended June 30, 1996. The increase in interest
expense resulted primarily from the increase in the debt level of the Company to
finance recent acquisitions and meet working capital requirements partially
offset by the net proceeds of an offering of common stock in November 1996. The
Company's sale of Convertible Preferred Securities (as defined below) had little
effect on interest expense for fiscal 1997 as that offering was not completed
until June 1997.
DIVIDENDS ON COMPANY-OBLIGATED, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
SECURITIES OF SUBSIDIARY DT CAPITAL TRUST HOLDING SOLELY PARENT'S CONVERTIBLE
SUBORDINATED DEBENTURES
Dividends on the Company-obligated, mandatorily redeemable convertible preferred
securities of subsidiary DT Capital Trust holding solely parent's convertible
subordinated debentures (Convertible Preferred Securities) were $0.3 million for
the fiscal year ended June 29, 1997. The Convertible Preferred Securities
offering was completed in June 1997.
INCOME TAXES
Provision for income taxes increased to $19.0 million for the year ended June
29, 1997 from $9.6 million for the year ended June 30, 1996, reflecting an
effective tax rate of approximately 42% for each period. This rate differs from
statutory rates due to permanent differences primarily related to non-deductible
goodwill amortization on certain acquisitions.
NET INCOME
Income before extraordinary loss increased to $26.4 million for the year ended
June 29, 1997 from $13.5 million for the year ended June 30, 1996 as a result of
the factors noted above. The Company recognized an extraordinary loss of $0.3
million, or $0.03 per share, attributable to the write-off of $0.5 million
unamortized deferred financing fees, net of related $0.2 million tax benefit,
due to the extinguishment and refinancing of the Company's debt in July 1996. As
a result, net income was $26.1 million, or $2.39 per share. Primary earnings per
share before the extraordinary loss were $2.42 for the year ended June 29, 1997
versus $1.50 for the year ended June 30, 1996. The weighted average common
shares outstanding for the year ended June 29, 1997 were 10.9 million versus 9.0
million for the year ended June 30, 1996. The increase is a result of the
issuance of common stock in November 1996 and the dilutive effect of certain
common stock equivalents, including stock options and the estimated contingent
shares which may be issuable in conjunction with the Kalish acquisition.
14
<PAGE>
FISCAL 1996 COMPARED TO FISCAL 1995
NET SALES
Consolidated net sales increased $88.5 million, or 60.1%, to $235.9 million for
the year ended June 30, 1996, from $147.4 million for the year ended June 25,
1995. The increase in consolidated net sales was a result of a $81.7 million, or
72.8%, increase in sales by the Special Machines segment and a $6.8 million, or
19.5%, increase in sales by the Components segment.
The increase in sales by the Special Machines segment resulted from the
incremental effects of the acquisitions of AAA in August 1994, Armac and Lakso
in February 1995, Kalish in August 1995, Swiftpack in November 1995 and AMI in
January 1996, totalling $46.5 million, with the remaining $35.2 million, or
31.4%, increase relating to sales from existing businesses. Sales from existing
businesses were up substantially, primarily due to increased sales of custom
automated production equipment and packaging equipment. Approximately one-half
of this increase can be attributed to the increase in machine sales to a
significant customer. The remaining increase is a result of several new
substantial projects with customers for integrated production systems. These
increases reflect international expansion projects by certain customers,
increased penetration into new markets and benefits achieved from the Company's
cross-selling program.
The increase in sales by the Components segment is due to an increase in sales
from existing businesses of $4.4 million, or 12.5%, over the year ended June 25,
1995 and $2.4 million in sales related to the Arrow acquisition. The increase in
sales by Components was primarily the result of a new customer outside the
transportation industry obtained in the latter part of fiscal 1995. The new
business has offset the recent reduction in sales resulting from a slowdown in
demand for products provided to the transportation industry. This new business
was made possible through capital investments to expand stamping capacity and
capabilities.
GROSS PROFIT
Gross profit increased $25.7 million, or 68.2%, to $63.4 million for the year
ended June 30, 1996, from $37.7 million for the year ended June 25, 1995, as a
result of the sales increases discussed above and gross profit margin
improvement. Gross profit increased $16.2 million as a result of acquisitions.
Excluding the effect of acquisitions, gross profit increased $9.5 million or
25.2%. The gross profit margin increased to 26.9% from 25.6%. The improvement in
gross margin was due to the higher margins obtained by the acquired businesses.
Gross margin exclusive of acquired operations decreased to 25.2% due primarily
to gross profit margin declines in the Components segment. Gross profit margins,
exclusive of acquired operations, for the Components segment were down from
prior year as a result of start-up costs on new parts business, although such
gross profit margins have improved during fiscal 1996 as production efficiencies
were realized.
SG&A EXPENSES
SG&A expenses increased $14.0 million, or 65.4%, to $35.4 million for the year
ended June 30, 1996, from $21.4 million for the year ended June 25, 1995.
Approximately $10.9 million of the increase is due to the acquisitions discussed
above. The remaining increase of $3.1 million is the result of personnel
additions and related recruiting and relocation fees, increased costs associated
with compensation and incentive programs, increased investment in marketing
activities and increased professional and banking fees.
OPERATING INCOME
Operating income increased $11.6 million, or 71.8%, to $27.9 million for the
year ended June 30, 1996, from $16.3 million for the year ended June 25, 1995,
as a result of the factors noted above. As a percentage of consolidated net
sales, operating income increased to 11.8% from 11.0%.
INTEREST EXPENSE
Interest expense increased to $4.8 million for the year ended June 30, 1996 from
$1.8 million for the year ended June 25, 1995. The increase in interest expense
resulted primarily from the increase in the debt level of the Company to finance
the recently acquired businesses.
INCOME TAXES
Provision for income taxes increased to $9.6 million for the year ended June 30,
1996 from $6.0 million for the year ended June 25, 1995, reflecting effective
tax rates of 41.7% and 41.4%, respectively. These rates differ from statutory
rates due to permanent differences primarily related to non-deductible goodwill
amortization arising from certain acquisitions.
NET INCOME
Net income increased to $13.5 million for the year ended June 30, 1996, an
increase of $5.0 million, or 59.7%, over the prior year as a result of the
factors noted above. Earnings per share increased to $1.50 from $0.94 in the
prior year.
15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1997, net cash used in operating activities was approximately $0.7
million. During fiscal 1996 and 1995, net cash provided by operating activities
was approximately $15.1 million and $1.6 million, respectively. Net income plus
non-cash operating charges provided $40.1 million, $20.7 million and $17.0
million of operating cash flow in fiscal 1997, 1996 and 1995, respectively.
For the fiscal year ended June 29, 1997, net increases in working capital
balances used operating cash of $40.8 million. A substantial portion of the net
increase in working capital reflects the increased level of manufacturing
activity occurring at the Company, particularly in the Special Machines segment.
The Company has experienced a trend towards larger dollar value and longer
lead-time projects. The Special Machines segment received several such contracts
in fiscal 1997, many of which the customer advances or progress payments did not
match the revenue stream under percentage of completion revenue recognition.
These factors combined with the strong level of shipments in the final months of
fiscal year 1997 resulted in a $26.3 million increase in accounts receivable and
a $7.7 million increase in inventory. Other factors contributing to the net
increase in working capital were primarily associated with the Mid-West and
Hansford acquisitions. Acquisition costs paid subsequent to the closings for
both Mid-West and Hansford amounted to approximately $2.0 million. Also, as
anticipated with the Hansford acquisition, the Company has provided
approximately $5.0 million to meet existing working capital requirements.
In fiscal 1996, working capital balances increased $5.6 million primarily due to
the increased investment in current assets as a result of the increased sales
and backlog, a decrease in customer advances due to unusually large advances at
June 25, 1995 and large deposits to certain suppliers at June 30, 1996.
In fiscal 1995, cash provided by operating activities was affected by a $15.4
million increase in net working capital. Strong year-end sales, orders and
backlog resulted in a significant increase in accounts receivable and
inventories at June 25, 1995. An increase in customer advances and accounts
payable partially offset the increase in working capital assets. Accrued
liabilities decreased during the year reflecting reductions in the income tax
payable balance and accrued acquisition costs.
Working capital balances can fluctuate significantly between periods as a result
of the significant costs incurred on individual contracts, and the relatively
large amounts invoiced and collected by the Company for a number of large
contracts, and the amounts and timing of customer advances or progress payments
associated with certain contracts.
During the fiscal year ended June 29, 1997, net cash of $106.9 million was
provided by financing activities and used primarily to fund the acquisitions of
Mid-West and Hansford for $92.8 million, net of cash acquired. The net cash
provided by financing activities was also used to finance capital expenditures
of $11.9 million, pay dividends of $0.8 million and fund working capital
requirements. Financing activities consisted of the renegotiation of the
Company's credit facility and the issuance of common stock and Convertible
Preferred Securities as discussed below. The Company incurred $2.5 million of
financing costs in conjunction with the renegotiation of the credit facility in
July 1996.
During the fiscal year ended June 29, 1997, the Company completed the
acquisitions of Mid-West and Hansford for $75.2 million and $17.6 million,
respectively, net of cash acquired. These acquisitions were financed under the
Second Amended and Restated Credit Facilities Agreement. This credit agreement,
which was replaced in July 1997 with a new multi-currency agreement as discussed
below, provided a total credit line of $210 million, including an $80 million
revolving credit facility, a $50.5 million term loan, a $58.5 million
acquisition facility and a $21 million foreign currency denominated letter of
credit. The term and revolving borrowings were paid down in fiscal 1997 with the
proceeds from the common stock offering in November 1996 and the Convertible
Preferred Securities offering in June 1997. Borrowings under the agreement bore
interest at floating rates based on the lender's base rate or LIBOR (at the
option of DTI) plus a specified percentage based on the ratio of funded debt to
operating cash flow. At June 29, 1997, interest rates on these facilities ranged
from 6.5% to 8.5%. Borrowing availability for the revolver was based on
percentages of the Company's eligible accounts receivable, eligible inventory
and outstanding letters of credit. The credit facility was secured by
substantially all of the assets of DTI and its subsidiaries and contained
certain financial and other covenants and restrictions. In conjunction with
entering into this credit facility, the Company recognized an extraordinary loss
in July 1996 of $0.3 million attributable to the write-off of $0.5 million
unamortized deferred financing fees, net of related $0.2 million tax benefit.
In connection with the acquisition of Swiftpack on November 23, 1995, DT
Industries (UK) Limited (DTUK), a wholly-owned subsidiary, entered into the
Credit Agreement, Specific Counter-Indemnity and Debenture with a foreign bank.
The foreign credit facility which was denominated in Pounds Sterling was used
for the cash portion of the purchase price of Swiftpack and the redemption of
five fixed-rate guaranteed promissory notes (Loan Notes) entered into with
certain of the prior shareholders. The Loan Notes, which bore interest at 5.3%,
were redeemed by the noteholders between November 25, 1996 and December 23,
1996. The aggregate principal amount of the foreign credit facility was
approximately $21.0 million. The facility, which was subsequently replaced in
July 1997 with a new multi-currency agreement as discussed below, bore interest
at a variable rate based upon LIBOR (approximately 8.1% including letter of
credit fees at June 29, 1997). Principal payments were due quarterly with the
remaining principal balance due on August 16, 2000. The foreign credit facility
was secured by the letter of credit facility provided through the Second Amended
and Restated Credit Facilities Agreement.
16
<PAGE>
On November 25, 1996, the Company completed the sale of 2,250,000 shares of its
common stock at a price to the public of $34.50 a share. Net proceeds to the
Company were $73.5 million after deducting issuance costs. In connection with
the offering by the Company, certain selling stockholders sold 2,835,000 shares
for which the Company did not receive any proceeds. The proceeds received by the
Company were used to reduce indebtedness.
On June 12, 1997, the Company completed a private placement to institutional
investors of 1.4 million 7.16% Convertible Preferred Securities (liquidation
preference of $50 per Convertible Preferred Security). The placement was made
through the Company's wholly owned subsidiary, DT Capital Trust (Trust), a
newly-formed Delaware business trust. The securities represent undivided
beneficial ownership interests in the Trust. The sole asset of the Trust is the
$72.2 million aggregate principal amount of the 7.16% Convertible Junior
Subordinated Deferrable Interest Debentures Due 2012 which were acquired with
the proceeds from the offering as well as the sale of Common Securities to the
Company. The Company's obligations under the Convertible Junior Subordinated
Debentures, the Indenture pursuant to which they were issued, the Amended and
Restated Declaration of Trust of the Trust and the Guarantee of DTI, taken
together, constitute a full and unconditional guarantee by DTI of amounts due on
the Convertible Preferred Securities. The Convertible Preferred Securities are
convertible at the option of the holders at any time into the common stock of
DTI at an effective conversion price of $38.75 per share and are redeemable at
DTI's option after June 1, 2000 and mandatorily redeemable in 2012. The net
proceeds of the offering of approximately $67.8 million were used by DTI to
retire indebtedness. A registration statement relating to resales of such
Convertible Preferred Securities was declared effective by the Securities and
Exchange Commission on September 2, 1997.
On July 21, 1997, the Company replaced the Second Amended and Restated Credit
Facilities Agreement and the foreign currency denominated term facility with a
new $175 million multi-currency revolving and term credit facility. The
multi-currency facility will provide a $10 million Canadian term loan and a $165
million revolving credit facility, which will include an approximate $80 million
sublimit for multi-currency borrowings in Pounds Sterling and Deutsche Marks.
Borrowings under the multi-currency facility will bear interest at floating
rates based on the agent bank's base rate or LIBOR (at the option of DTI) plus a
specified percentage based on the ratio of funded debt to operating cash flow
and the ratings of DTI's corporate debt. The agreement is secured by the capital
stock of each of the significant domestic subsidiaries and 65% of the capital
stock of each significant foreign subsidiary of DTI. The agreement contains
certain financial and other covenants and restrictions and matures in July 2002.
In conjunction with entering into the new credit facility, the Company
recognized an extraordinary loss in July 1997 of $1.2 million attributable to
the write-off of $2.0 million of unamortized deferred financing fees, net of
related $0.8 million tax benefit.
On July 29, 1997, the Company completed the acquisition of certain of the net
assets of LATS, a division of LucasVarity plc of England. LATS is a designer and
manufacturer of integrated assembly and testing systems for automotive OEMs and
their tier-one suppliers with manufacturing facilities in the United States, the
United Kingdom and Germany. The purchase price of approximately $49 million was
financed by borrowings under the new multi-currency revolving credit facility.
As part of LucasVarity plc, LATS recorded sales of approximately $112 million
for the year ended January 31, 1997. As the transaction occurred subsequent to
the end of fiscal 1997, LATS' balance sheet and results of operations are
excluded from the fiscal 1997 consolidated balance sheet and results of
operations of DTI.
The Company also maintains revolving credit facilities of approximately $3.0
million through its foreign subsidiaries. At June 29, 1997, total outstanding
indebtedness under such facilities was approximately $1.6 million.
To manage its exposure to fluctuations in interest rates, the Company entered
into an interest rate swap agreement in June 1995 for a notional principal
amount of $30 million, maturing June 29, 1998. Swap agreements involve the
exchange of interest obligations on fixed and floating interest-rate debt
without the exchange of the underlying principal amount. The differential paid
or received on the swap agreement is recognized as an adjustment to interest
expense. The swap agreement requires the Company to pay a fixed rate of 6.06% in
exchange for a floating rate payment equal to the three month LIBOR determined
on a quarterly basis with settlement occurring on specific dates.
Capital expenditures were $11.9 million in fiscal 1997. Management anticipates
that capital expenditures for fiscal 1998 will range from approximately $17
million to $20 million. This includes recurring replacement or refurbishment of
machinery and equipment, and purchases to improve production methods or
processes or to expand manufacturing capabilities, all of which will approximate
fiscal 1997 capital expenditures. Incremental capital expenditures in fiscal
1998 are expected to include the first year costs estimated to be over $4
million of an approximate $12 million four-year implementation of an integrated
financial and operations core business system and will also include adding
additional capacity at certain automation and packaging facilities. Funding for
capital expenditures is expected to be provided by cash from operating
activities and through the Company's credit facilities.
The Company paid quarterly cash dividends of $0.02 per share on September 13,
1996, December 13, 1996, March 14, 1997 and June 13, 1997 to stockholders of
record on August 30, 1996, November 22, 1996, February 28, 1997, and May 30,
1997, respectively.
Based on its ability to generate funds from operations and the availability of
funds under its current credit facilities, the Company believes it will have
sufficient funds available to meet its currently anticipated operating and
capital expenditure requirements.
17
<PAGE>
BACKLOG
The Company's backlog is based upon customer purchase orders the Company
believes are firm. As of June 29, 1997, the Company had $175.5 million of orders
in backlog, which compares to a backlog of approximately $112.2 million as of
June 30, 1996. The acquisitions of Mid-West and Hansford increased the backlog
$60.4 million at June 29, 1997 in comparison to June 30, 1996. Excluding the
effect of these acquisitions, backlog would have been $115.1 million at June 29,
1997, an increase of $2.9 million, or 2.6%, from a year ago.
The backlog for the Special Machines segment at June 29, 1997 was $168.0
million, an increase of $62.0 million from a year ago. Excluding the effect of
acquisitions, the Special Machines backlog increased $1.6 million. The Special
Machines backlog reflects strong packaging orders offset by a drop in orders for
custom build-to-print machines. Backlog for the Components segment was $7.5
million at June 29, 1997, an increase $1.3 million, or 22.4%, from the $6.2
million backlog a year ago.
The level of backlog at any particular time is not necessarily indicative of the
future operating performance of the Company. Additionally, certain purchase
orders are subject to cancellation by the customer upon notification. Certain
orders are also subject to delays in completion and shipment at the request of
the customer. The Company believes most of the orders in the backlog will be
recognized as sales during fiscal 1998.
FOREIGN OPERATIONS
The Company's primary foreign operations are conducted through its subsidiaries
in Canada and the United Kingdom. The acquisition of certain of the net assets
of LATS will provide additional facilities in the United Kingdom and Germany.
The functional currencies of these subsidiaries are the currencies native to the
specific country in which the subsidiary is located. Foreign operations
accounted for approximately 7% and 12% of the Company's net sales and
approximately 9% and 14% of the Company's earnings from operations in fiscal
1997 and 1996, respectively. The Company did not have any foreign operations in
fiscal 1995. The percentage decrease in fiscal 1997 is a result of the
substantial domestic acquisitions in fiscal 1997. Pro forma information for DTI
as if the LATS acquisition had taken place on July 1, 1996 indicates that
foreign operations would have accounted for approximately 15% of the Company's
sales in fiscal 1997. Fluctuations in currency exchange rates can impact
operating results, including net sales and operating expenses, when translations
of the subsidiary financial statements are made. The Company hedges certain of
its balance sheet exposure by borrowing in Pounds Sterling and Canadian dollars
in the United Kingdom and Canada, respectively (see Liquidity and Capital
Resources). The Company does not enter into foreign currency forward exchange
contracts for speculative trading purposes.
SEASONALITY AND FLUCTUATIONS IN QUARTERLY RESULTS
In general, the Company's business is not subject to seasonal variations in
demand for its products. However, because orders for certain of the Company's
products can be several million dollars, a relatively limited number of orders
can constitute a meaningful percentage of the Company's revenue in any one
quarterly period. As a result, a relatively small reduction or delay in the
number of orders can have a material impact on the timing of recognition of the
Company's revenues. Certain of the Company's revenues are derived from fixed
price contracts. To the extent that original cost estimates prove to be
inaccurate, profitability from a particular contract may be adversely affected.
Gross margins in the Special Machines segment may vary between comparable
periods as a result of the variations in profitability of contracts for large
orders of special machines as well as product mix between the various types of
custom and proprietary equipment manufactured by the Company. Accordingly,
results of operations of the Company for any particular quarter are not
necessarily indicative of results that may be expected for any subsequent
quarter or related fiscal year.
NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share," which
will be effective for the Company for the quarter ended December 1997. Had the
Company adopted SFAS 128 as of July 1, 1996, weighted average basic shares
outstanding would have been 10,349,444 and basic earnings per share before the
extraordinary item would have been $2.55 for the fiscal year ended June 29,
1997. Weighted average diluted shares outstanding would have been 11,022,080 and
diluted earnings per share before the extraordinary item would have been $2.41
for the year ended June 29, 1997. Diluted earnings per share reflect the effects
of conversion of the Company's Convertible Preferred Securities and elimination
of the related dividends, net of applicable income taxes.
CAUTIONARY STATEMENTS REGARDING FORWARD LOOKING STATEMENTS
Certain information contained in this report, particularly the information
appearing in the Letter to Shareholders and in this section under the headings
"Results of Operations," "Liquidity and Capital Resources," "Backlog" and
"Foreign Operations" includes forward-looking statements. These statements,
comprising all statements herein which are not historical, are based upon the
Company's interpretation of what it believes are significant factors affecting
its businesses, including many assumptions regarding future events, and are made
pursuant to the safe harbor provisions of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. References to "opportunities," "growth potential," "objectives" and
"goals," the words "anticipate," "believe," "estimate," "expect," and similar
expressions used herein indicate such forward-looking statements. Actual results
could differ materially from those anticipated in any forward-looking statements
as a result of various factors, including economic downturns in industries
served, delays or cancellations of customer orders, delays in shipping dates of
products, significant cost overruns on certain projects, foreign currency
exchange rate fluctuations, delays in achieving anticipated cost savings or in
fully implementing project management systems, and possible future acquisitions
that may not be complementary or additive. Additional information regarding
certain important factors that could cause actual results of operations or
outcomes of other events to differ materially from any such forward-looking
statement appears elsewhere herein, including under the heading "Seasonality and
Fluctuations in Quarterly Results;" and in the Corporation's other filings with
the Securities and Exchange Commission, including its registration statement on
Form S-3 (Registration No. 333-30909) and prospectus dated September 2, 1997,
including the section therein entitled "Risk Factors."
18
<PAGE>
STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of DT Industries, Inc., have
been prepared by management, which is responsible for their integrity and
objectivity. The statements have been prepared in conformity with generally
accepted accounting principles and include amounts based on management's best
estimates and judgements.
Management has established and maintains a system of internal control designed
to provide reasonable assurance that assets are safeguarded and that the
financial records reflect the authorized transactions of the Company. The system
of internal control includes widely communicated statements of policies and
business practices that are designed to require all employees to maintain high
ethical standards in the conduct of Company affairs. The internal controls are
augmented by organizational arrangements that provide for appropriate delegation
of authority and division of responsibility.
The consolidated financial statements have been audited by Price Waterhouse LLP,
independent accountants. As part of their audit of the Company's fiscal 1997
consolidated financial statements, Price Waterhouse LLP considered the Company's
system on internal control to the extent they deemed necessary to determine the
nature, timing and extent of their audit tests.
The Board of Directors pursues its responsibility for the Company's financial
reporting through its Audit Committee, which is composed entirely of outside
directors. The Audit Committee meets periodically with the independent
accountants and management. The independent accountants have direct access to
the Audit Committee, with and without the presence of management
representatives, to discuss the results of their audit work and their comments
on the adequacy of internal accounting controls and the quality of financial
reporting.
/s/ Stephen J. Gore
Stephen J. Gore
President and Chief Executive Officer
/s/ Bruce P. Erdel
Bruce P. Erdel
Vice President, Finance and Secretary
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of DT Industries, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
DT Industries, Inc. and its subsidiaries at June 29, 1997 and June 30, 1996, and
the results of their operations and their cash flows for each of the three
fiscal years in the period ended June 29, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
St. Louis, Missouri
August 8, 1997
19
<PAGE>
DT INDUSTRIES, INC.
Consolidated Balance Sheets
(In thousands, except share and per share data)
June 29, June 30,
1997 1996
---------- ----------
Assets
Current assets:
Cash $ 2,821 $ 1,210
Accounts receivable, net 68,538 32,092
Costs and estimated earnings in excess
of amounts billed ($78,900 and $15,640,
respectively) on uncompleted contracts 51,643 19,130
Inventories, net 42,198 31,403
Prepaid expenses and other 7,051 10,153
---------- ----------
Total current assets 172,251 93,988
Property, plant and equipment, net 51,132 36,713
Goodwill, net 168,401 101,187
Other assets, net 3,412 1,955
---------- ----------
$395,196 $233,843
========== ==========
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $ 1,527 $ 8,481
Accounts payable 31,353 19,621
Customer advances 11,232 13,850
Billings in excess of costs and estimated
earnings ($36,073 and $14,097,
respectively) on uncompleted contracts 7,172 3,351
Accrued liabilities 29,986 22,524
---------- ----------
Total current liabilities 81,270 67,827
---------- ----------
Long-term debt 46,978 70,846
Deferred income taxes 6,435 4,756
Other long-term liabilities 5,246 2,530
---------- ----------
58,659 78,132
---------- ----------
Commitments and contingencies (Notes 3 and 11)
Company-obligated, mandatorily redeemable
convertible preferred securities of
subsidiary DT Capital Trust holding
solely parent's convertible
subordinated debentures 70,000 --
---------- ----------
Stockholders' equity:
Preferred stock, $.01 par value; 1,500,000
shares authorized; no shares issued and
outstanding
Common stock, $.01 par value; 100,000,000
shares authorized; 11,300,875 and
9,001,250 shares issued and outstanding,
respectively 113 90
Additional paid-in capital 133,370 61,255
Retained earnings 51,784 26,539
---------- ----------
Total stockholders' equity 185,267 87,884
---------- ----------
$395,196 $233,843
========== ==========
See accompanying Notes to Consolidated Financial Statements.
20
<PAGE>
Consolidated Statement of Operations
(In thousands, except per share data)
- --------------------------------------------------------------------------------
Fiscal year ended
--------------------------------------------
June 29, June 30, June 25,
1997 1996 1995
---------- ---------- ----------
Net sales $396,110 $235,946 $147,369
Cost of sales 285,044 172,568 109,678
---------- ---------- ----------
Gross profit 111,066 63,378 37,691
Selling, general and
administrative expenses 54,367 35,445 21,428
---------- ---------- ----------
Operating income 56,699 27,933 16,263
Interest expense, net 11,088 4,799 1,849
Dividends on Company-obligated,
mandatorily redeemable
convertible preferred
securities of subsidiary
DT Capital Trust holding
solely parent's convertible
subordinated debentures,
at 7.16% per annum 251 --- ---
---------- ---------- ----------
Income before provision for
income taxes and extraordinary
loss 45,360 23,134 14,414
Provision for income taxes 18,979 9,643 5,964
---------- ---------- ----------
Income before extraordinary loss 26,381 13,491 8,450
Extraordinary loss on debt
refinancing, net of income
tax benefit of $216 324 --- ---
---------- ---------- ----------
Net income $ 26,057 $ 13,491 $ 8,450
========== ========== ==========
Primary earnings per common and
common equivalent share:
Income before extraordinary loss $ 2.42 $ 1.50 $ 0.94
Extraordinary loss .03 --- ---
---------- ---------- ----------
Net income $ 2.39 $ 1.50 $ 0.94
========== ========== ==========
Weighted average number of common
and common equivalent shares
outstanding 10,895 9,000 9,000
========== ========== ==========
<PAGE>
Consolidated Statement of
Changes in Stockholders' Equity
(In thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional
Common paid-in Retained
stock capital earnings Total
------ ---------- -------- ---------
<S> <C> <C> <C> <C>
Balance, June 26, 1994 $ 90 $ 61,106 $ 6,038 $ 67,234
Payments on stock subscriptions receivable 56 56
Dividends declared and paid (720) (720)
Net income 8,450 8,450
------ ---------- -------- ---------
Balance, June 25, 1995 $ 90 $ 61,162 $ 13,768 $ 75,020
------ ---------- -------- ---------
Exercise of stock options and tax benefits
relating thereto 17 17
Payments on stock subscriptions receivable 76 76
Dividends declared and paid (720) (720)
Net income 13,491 13,491
------ ---------- -------- ---------
Balance, June 30, 1996 $ 90 $ 61,255 $ 26,539 $ 87,884
------ ---------- -------- ---------
Issuance of common stock 23 73,474 73,497
Exercise of stock options and tax benefits
relating thereto 678 678
Payments on stock subscriptions receivable 213 213
Issuance costs of Company-obligated,
mandatorily redeemable convertible
preferred securities of subsidiary
DT Capital Trust holding solely parent's
convertible subordinated debentures (2,250) (2,250)
Dividends declared and paid (812) (812)
Net income 26,057 26,057
------ ---------- -------- ---------
Balance, June 29, 1997 $ 113 $ 133,370 $ 51,784 $ 185,267
====== ========== ======== =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
21
<PAGE>
Consolidated Statement of Cash Flows
(In thousands)
- --------------------------------------------------------------------------------
Fiscal year ended
--------------------------------------------
June 29, June 30, June 25,
1997 1996 1995
---------- ---------- ----------
Cash flows from operating activities:
Net income $ 26,057 $ 13,491 $ 8,450
Adjustments to reconcile net
income to net cash (used in)
provided by operating
activities:
Depreciation 5,955 3,411 2,738
Amortization 5,098 2,705 1,823
Deferred income tax provision 2,612 981 3,921
Other 385 116 36
(Increase) decrease in current
assets, excluding the effects
of acquisitions:
Accounts receivable (26,482) 4,274 (13,503)
Costs and earnings in excess
of amounts billed on
uncompleted contract (2,935) (8,520) (2,593)
Inventories (7,212) 3,873 (3,937)
Prepaid expenses and other 3,171 (5,797) (634)
Increase (decrease) in current
liabilities, excluding the
effects of acquisitions:
Accounts payable (3,015) 838 2,444
Accrued liabilities (693) 189 (3,068)
Customer advances (4,300) (3,765) 5,816
Billings in excess of costs
and earnings on uncompleted
contracts 2,115 3,351
Other (1,463) (62) 61
---------- ---------- ----------
Net cash (used in) provided
by operating activities (707) 15,085 1,554
---------- ---------- ----------
Cash flows from investing activities:
Capital expenditures (11,850) (10,249) (7,718)
Acquisition of AAA stock
and net assets of Lakso,
net of cash acquired of $530 (29,181)
Acquisition of Kalish net
assets, Arrow net assets,
Swiftpack stock and AMI stock,
net of cash acquired of $2,484 (29,614)
Acquisition of Mid-West stock
and Hansford stock, net of
cash acquired of $21,573 (92,756)
Other 113
---------- ---------- ----------
Net cash used in investing
activities (104,606) (39,863) (36,786)
---------- ---------- ----------
(continued)
See accompanying Notes to Consolidated Financial Statements.
22
<PAGE>
Consolidated Statement of Cash Flows (Continued)
(In thousands)
- --------------------------------------------------------------------------------
Fiscal year ended
--------------------------------------------
June 29, June 30, June 25,
1997 1996 1995
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from borrowings $ 96,708 $ 37,031 $ 25,000
Payments on borrowings (129,518) (14,063) (1,493)
Net borrowings from revolving loans 918 3,633 13,116
Debt issuance costs (2,510) (632)
Net proceeds from issuance of
Company-obligated, mandatorily
redeemable convertible
preferred securities of
subsidiary DT Capital Trust
holding solely parent's
convertible subordinated
debentures 67,750
Net proceeds from issuance
of common stock 74,175 17
Payments on stock subscriptions
receivable 213 76 56
Dividends paid on common stock (812) (720) (900)
---------- ---------- ----------
Net cash provided by
financing activities 106,924 25,342 35,779
---------- ---------- ----------
Net increase in cash 1,611 564 547
Cash at beginning of period 1,210 646 99
---------- ---------- ----------
Cash at end of period $ 2,821 $ 1,210 $ 646
---------- ---------- ----------
Supplemental disclosures of
cash flow information:
Cash paid during the period for:
Interest $ 10,630 $ 4,280 $ 1,618
Income taxes $ 16,497 $ 6,369 $ 3,282
Supplemental schedule of noncash investing and financing activities:
Fair value of assets acquired $ 55,185 $ 25,447 $ 17,271
Fair value assigned to goodwill 68,226 36,071 25,255
Cash paid (92,756) (29,614) (29,181)
---------- ---------- ----------
Liabilities assumed and seller
financing (see Note 4) $ 30,655 $ 31,904 $ 13,345
========== ========== ==========
The Company purchased Mid-West Automation Enterprises, Inc. (Mid-West) and
Hansford Manufacturing Corporation (Hansford) in fiscal 1997; H.G. Kalish Inc.
(Kalish), Arrow Precision Elements, Inc. (Arrow), Swiftpack Automation Limited
(Swiftpack) and Assembly Machines, Inc. (AMI) in fiscal 1996; and Advanced
Assembly Automation, Inc. (AAA), the Lakso Division of Package Machinery Company
(Lakso) and Armac Industries, Ltd. (Armac) in fiscal 1995. The table above
represents summary information with respect to these acquisitions.
See accompanying Notes to consolidated Financial Statements.
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
Note 1 - Business
DT Industries, Inc. (DTI or the Company) is a leading designer, manufacturer and
integrator of automated production systems used to assemble, test or package
industrial and consumer products. The Company also produces precision metal
components, tools and dies for a broad range of applications. The Company
markets its products through three product groups, DTI Automation and DTI
Packaging comprising the Special Machines segment, and DTI Components
(Components segment). The Company's operations are predominantly located in
North America, but its products are sold throughout the world.
Note 2 - Summary of Significant Accounting Policies
The accounting policies utilized by the Company in the preparation of the
financial statements conform to generally accepted accounting principles, and
require that management make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual amounts could differ from these estimates.
The significant accounting policies followed by the Company are described below.
Revenue recognition
The percentage of completion method of accounting is used by the Company's
Special Machines segment to recognize revenues and related costs. Under the
percentage of completion method, revenues are measured based on the ratio of
engineering and manufacturing labor hours incurred to date compared to total
estimated engineering and manufacturing labor hours or, for certain customer
contracts, the ratio of total costs incurred to date to total estimated costs.
Any revisions in the estimated total costs or values of the contracts during the
course of the work are reflected when the facts that require the revisions
become known. Revenue from the sale of products manufactured by the Company's
Components segment is recognized upon shipment to the customer.
Prior to June 26, 1995, revenues from certain customer contracts of the Special
Machines segment were recognized upon shipment, utilizing the "units of
delivery" modification of the percentage of completion method. The change in
accounting method in fiscal 1996 reflected the trend in the Company's Special
Machines business for increasing engineering services provided on customer
contracts and did not have a material impact on the Company's financial position
and results of operations.
Costs and related expenses to manufacture the products are recorded as cost of
sales when the related revenue is recognized. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined.
Cash deposits received from customers on contracts in progress are reflected as
customer advances in the consolidated balance sheet until the related revenue is
recognized in accordance with the procedures described above. Costs and
estimated earnings in excess of amounts billed on percentage of completion
contracts represents costs incurred and earnings recognized in excess of
customer advances received. Billings in excess of costs incurred and estimated
earnings on uncompleted contracts represent customer advances received in excess
of costs incurred and earnings recognized.
Principles of consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.
Foreign currency translation
The accounts of the Company's foreign subsidiaries are maintained in their
respective local currencies. The accompanying consolidated financial statements
have been translated and adjusted to reflect U.S. dollars on the basis presented
below.
Assets and liabilities are translated into U.S. dollars at year-end exchange
rates. Income and expense items are translated at average rates of exchange
prevailing during the year. Adjustments resulting from the process of
translating the consolidated amounts into U.S. dollars are accumulated in a
separate translation adjustment account, included in stockholders' equity.
Common stock and additional paid-in capital are translated at historical U.S.
dollar equivalents in effect at the date of acquisition. Foreign currency
transaction gains and losses are included in earnings currently. The cumulative
translation adjustment account balance and foreign currency transaction gains
and losses are not material.
24
<PAGE>
Cash and cash equivalents
All highly liquid debt instruments purchased with original maturities of three
months or less are classified as cash equivalents.
Concentrations of credit risk
The Company sells a majority of its special machines to a wide range of
manufacturing companies. Components services are sold to customers primarily in
the transportation, agricultural equipment and textile industries. The Company
performs ongoing credit evaluations of its customers and generally does not
require collateral, although many customers of the Special Machines segment pay
deposits to the Company prior to shipment of its products. The Company maintains
reserves for potential credit losses and historically such losses have been
within management's expectations. At June 29, 1997, the Company had no
significant concentration of credit risk.
Inventories
Domestic inventories are stated at the lower of cost, determined using the
last-in, first-out (LIFO) method, or market, with the exception of raw material
inventories and the material component of work in process inventories at certain
subsidiaries totaling approximately $16,030 which are accounted for using the
first-in, first-out method (FIFO). For various tax and statutory reasons,
inventories of the Company's foreign subsidiaries are stated at FIFO costs. The
effects on financial position and results of operations from applying the FIFO
method for such material inventories and inventories of foreign subsidiaries are
immaterial. For other inventories maintained on a LIFO basis, cost under the
LIFO method approximates the FIFO method. Inventories include the cost of
materials, direct labor and manufacturing overhead.
Obsolete or unsalable inventories are reflected at their estimated realizable
values.
Property, plant and equipment
Property, plant and equipment is recorded at cost and is depreciated using the
straight-line method over the estimated useful lives of the assets which range
from 3 to 39.5 years. Properties held under capital leases are recorded at the
present value of the non-cancelable lease payments over the term of the lease
and are amortized over the shorter of the lease term or the estimated useful
lives of the assets.
Expenditures for repairs, maintenance and renewals are charged to income as
incurred. Expenditures which improve an asset or extend its estimated useful
life are capitalized. When properties are retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the accounts and any
gain or loss is included in income.
Goodwill
The excess of the purchase price over the fair value of net assets acquired in
business combinations (goodwill) is capitalized and amortized on a straight-line
basis over periods ranging from 15 to 40 years. Goodwill amortization charged to
income for the years ended June 29, 1997, June 30, 1996 and June 25, 1995 was
approximately $4,312, $2,386 and $1,660, respectively. Accumulated amortization
at June 29, 1997, and June 30, 1996 was approximately $9,916 and $5,574,
respectively. Including the effect of the acquisitions of Mid-West, Hansford and
the assets of Lucas Assembly and Test Systems acquired on July 29, 1997 as
discussed in Note 16, the Company estimates annual amortization of goodwill to
be approximately $5,150.
The carrying value of goodwill is assessed for recoverability by management
based on an analysis of future expected cash flows from the underlying
operations of the Company. Management believes there has been no impairment at
June 29, 1997.
Environmental liabilities
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and that do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the costs can be
reasonably estimated. Generally, the timing of these accruals coincides with
completion of a feasibility study or the Company's commitment to a formal plan
of action.
Interest rate swap agreement
The Company is a party to an interest rate swap agreement used to hedge interest
rate fluctuations on a portion of its floating rate revolving credit facility
and term loans. This agreement is accounted for on the accrual basis of
accounting. Net cash payments or receipts under the agreement are recorded as an
adjustment to interest expense when such amounts become due or receivable.
Fair value of financial instruments
For purposes of financial reporting, the Company has determined the fair value
of financial instruments approximates book value at June 29, 1997, based on
terms currently available to the Company in financial markets.
25
<PAGE>
Postretirement benefits
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (OPEB or SFAS 106). This standard requires recognition of the cost of
providing postretirement benefits during an employee's period of service. As
part of adopting the standard as of the acquisition of Detroit Tool Group, Inc.
(DTG), the Company recorded an accrual of approximately $1,584 in other
long-term liabilities in its balance sheet representing the discounted present
value of expected future retiree benefits attributed to employees' service
rendered in periods prior to DTI's acquisition (see Note 8).
Income taxes
The Company files a consolidated federal income tax return which includes its
domestic subsidiaries. The Company has adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109). Under SFAS 109, the
current or deferred tax consequences of a transaction are measured by applying
the provisions of enacted laws to determine the amount of taxes payable
currently or in future years. Deferred income taxes are provided for temporary
differences between the income tax bases of assets and liabilities, and their
carrying amounts for financial reporting purposes.
Earnings per share
Primary earnings per share is computed by dividing net income available to
common stockholders by the weighted average number of common and common
equivalent shares outstanding during the period. Common stock equivalents
consist of certain shares subject to stock options and contingent purchase price
payable in common stock related to an acquired business. The common equivalent
shares arising from the effect of outstanding stock options were computed using
the treasury stock method, if dilutive. The effects of conversion of the
Company's Convertible Preferred Securities (as defined in Note 5) was not
dilutive in the computation of fully diluted earnings per share for fiscal 1997.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share," which
will be effective for the Company for the quarter ended December 1997. Had the
Company adopted SFAS 128 as of July 1, 1996, weighted average basic shares
outstanding would have been 10,349,444 and basic earnings per share before the
extraordinary item would have been $2.55 for the fiscal year ended June 29,
1997. Weighted average diluted shares outstanding would have been 11,022,080 and
diluted earnings per share before the extraordinary item would have been $2.41
for the year ended June 29, 1997. Diluted earnings per share reflect the effects
of conversion of the Company's Convertible Preferred Securities and elimination
of the related dividends, net of applicable income taxes.
Employee stock-based compensation
The Company accounts for employee stock options in accordance with Accounting
Principles Board No. 25, "Accounting for Stock Issued to Employees" (APB 25).
Under APB 25, the Company applies the intrinsic value method of accounting. For
employee stock options accounted for using the intrinsic value method, no
compensation expense is recognized because the options are granted with an
exercise price equal to the market value of the stock on the date of grant.
During fiscal 1997, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), became effective for the
Company. SFAS 123 prescribes the recognition of compensation expense based on
the fair value of options or stock awards determined on the date of grant.
However, SFAS 123 allows companies to continue to apply the valuation methods
set forth in APB 25. For companies that continue to apply the valuation methods
set forth in APB 25, SFAS 123 mandates certain pro forma disclosures as if the
fair value method had been utilized. See Note 9 for additional discussion.
Fiscal year
The Company uses a 52-53 week fiscal year that ends on the last Sunday in June.
26
<PAGE>
Note 3 - Acquisitions
The following table summarizes certain information regarding the Company's
acquisitions during the past three years:
NET CASH
PURCHASE
DATE BUSINESS PRICE
- -------------- ------------------------------------------- --------
August 1994 Advanced Assembly Automation, Inc. $ 22,100
February 1995 Lakso Division of Package Machinery Company 7,000
February 1995 Armac Industries, Ltd. ---
August 1995 H.G. Kalish Inc. 16,400
September 1995 Arrow Precision Elements, Inc. 3,000
November 1995 Swiftpack Automation Ltd. 18,400
January 1996 Assembly Machines, Inc. 6,700
July 1996 Mid-West Automation Enterprises, Inc. 75,179
September 1996 Hansford Manufacturing Corporation 17,577
During the past three fiscal years, the Company made nine acquisitions which
have significantly expanded its product lines. These acquisitions were each
accounted for under the purchase method of accounting and financed primarily
through bank borrowings, resulting in an increase in the Company's debt. Results
of operations of each acquired company have been included in the Company's
consolidated financial statements from the date of acquisition. The purchase
price of each acquisition was allocated to the assets and liabilities acquired,
based on their estimated fair value at the date of acquisition. The excess of
purchase price over the estimated fair value of net assets acquired was, in each
instance, recorded as goodwill.
As part of the Kalish, Swiftpack and Hansford acquisitions, DTI has agreed to
made additional payments of up to $3,000, $4,700 and $20,000, respectively, to
the sellers. The amount of the additional purchase prices will be determined by
a formula based on the earnings of the acquired businesses. The additional
purchase price specified within the Kalish agreement, based on earnings three
years after closing of the acquisition, may be paid in DTI stock at the
Company's option. The additional purchase price specified within the Swiftpack
and Hansford agreements is payable in cash. Any additional purchase price paid
is expected to result in additional goodwill related to these acquisitions.
The following table sets forth pro forma information for DTI as if all of the
previously discussed acquisitions had taken place on July 1, 1996 and June 26,
1995, respectively. This information is unaudited and does not purport to
represent actual revenue, net income and earnings per share had the acquisitions
actually occurred on July 1, 1996 and June 26, 1995, respectively.
Fiscal Year Ended
Pro Forma Information June 29, June 30,
(unaudited) 1997 1996
- -------------------------------------- ---------- -----------
Net sales $ 416,789 $ 383,354
Net income $ 27,103 $ 20,364
Primary earnings per common share $ 2.49 $ 2.26
Weighted average number of common and
common equivalent shares outstanding 10,895,497 9,000,257
27
<PAGE>
Note 4 - Financing
During July 1996, the Company entered into a Second Amended and Restated Credit
Facilities Agreement provided by various financial institutions. The agreement,
which was subsequently amended during the fiscal year in September and December
1996 and April and May 1997, provided a total credit line of $210,000, including
an $80,000 revolving credit facility, a $50,500 term loan, a $58,500 acquisition
facility and a $21,000 foreign currency denominated letter of credit, and was to
expire on July 23, 2001. Borrowings under the agreement bore interest at the
agent lender's base rate or LIBOR (at the option of DTI) plus a specified
percentage based on the ratio of funded debt to operating cash flow. At June 29,
1997, interest rates on these facilities ranged from 6.5 percent to 8.5 percent.
Borrowing availability for the revolving credit facility was based on a
percentage of the Company's eligible accounts receivable, eligible inventory and
outstanding letters of credit. The credit facility was secured by substantially
all of the assets of DTI and its subsidiaries and contained certain financial
and other covenants and restrictions. The Company was in compliance with such
covenants and restrictions at June 29, 1997. In conjunction with entering into
this credit facility, the Company recognized an extraordinary loss in July 1996
of $324 attributable to the write-off of $540 unamortized deferred financing
fees, net of related $216 tax benefit.
Long-term debt consisted of the following:
----------------------------
June 29, June 30,
1997 1996
----------------------------
Notes payable to bank under a term and
revolving loan agreement, refinanced
in July 1997:
Term loan $ 10,000 $ 41,550
Revolving loan (including irrevocable
letter of credit) 16,068 14,983
Loan Notes, repaid in November/December 1996 13,974
Foreign currency denominated term facility,
refinanced in July 1997 20,347 6,367
Foreign currency denominated revolving
credit facilities 1,571 1,766
Other long-term debt (including capitalized
leases) maturing at various dates through
fiscal 2002 519 687
----------------------------
48,505 79,327
Less - current portion 1,527 8,481
----------------------------
$ 46,978 $ 70,846
============================
The acquisition of Hansford in September 1996 was financed under the Second
Amended and Restated Credit Facilities Agreement. Of the $17,577 purchase price,
$8,543 was established as an irrevocable letter of credit payable to the former
owner on June 30, 1997. The letter of credit is included in long term debt on
the consolidated balance sheet.
In connection with the acquisition of Swiftpack on November 23, 1995, DT
Industries (UK) Limited (DTUK), a wholly-owned subsidiary, entered into the
Credit Agreement, Specific Counter-Indemnity and Debenture with a foreign bank.
The foreign credit facility denominated in Pounds Sterling was used for the cash
portion of the purchase price of Swiftpack and the redemption of five fixed-rate
guaranteed promissory notes (Loan Notes) entered into with certain of the prior
shareholders. The aggregate principal amount of the Loan Notes denominated in
U.S. dollars was $13,974. The Loan Notes, which bore interest at 5.3%, were
redeemed by the noteholders between November 25, 1996 and December 23, 1996. The
aggregate principal amount of the foreign credit facility was approximately
$21,000. The foreign credit facility bore interest at a variable rate based upon
LIBOR (approximately 8.1% including letter of credit fees at June 29, 1997).
Principal payments thereunder ranging from $320 to $405 were due quarterly with
the remaining principal due August 16, 2000.
In connection with the issuance of the Loan Notes, the Company entered into a
foreign exchange forward contract to offset exchange gains and losses related to
the Loan Notes recorded by the foreign subsidiary. The contract matured on
November 26, 1996 and provided the purchase of the equivalent of $13,974 of
Pounds Sterling at a rate of $1.5457 per Pound Sterling. The contract
effectively hedged any foreign currency exchange fluctuation from the date the
Loan Notes were issued. No foreign currency transaction gains or losses were
recorded.
In addition, the Company has revolving credit facilities through its foreign
subsidiaries of approximately $3,000, of which approximately $1,571 was
outstanding at June 29, 1997.
28
<PAGE>
To manage its exposure to fluctuations in interest rates, on June 28, 1995, the
Company entered into an interest rate swap agreement for a notional principal
amount of $30,000, maturing June 29, 1998. Swap agreements involve the exchange
of interest obligations on fixed and floating interest-rate debt without the
exchange of the underlying principal amount. The differential paid or received
on the swap agreement is recognized as an adjustment to interest expense. The
swap agreement provides a fixed rate of 6.06% with a floating rate payment equal
to the three month LIBOR determined on a quarterly basis with settlement
occurring on specific dates.
A summary of the minimum annual repayments of long-term debt (borrowings
primarily refinanced in July 1997 as discussed in Note 16) as of June 29, 1997
was as follows:
Fiscal year:
1998 $ 1,527
1999 1,420
2000 1,663
2001 16,208
2002 27,687
==========
$ 48,505
==========
The book value of long-term debt at June 29, 1997 approximates fair value.
See Note 16 for information regarding the replacement in July 1997 of the Second
Amended and Restated Credit Facilities Agreement and the foreign currency
denominated term facility with a renegotiated $175,000 multi-currency credit
facility.
Note 5 - Company-Obligated, Mandatorily Redeemable Convertible Preferred
Securities of Subsidiary DT Capital Trust Holding Solely Parent's
Convertible Subordinated Debentures (Convertible Preferred Securities)
On June 12, 1997, the Company completed a private placement to institutional
investors of 1,400,000 7.16% Convertible Preferred Securities (liquidation
preference of $50 per Convertible Preferred Security). The placement was made
through the Company's wholly owned subsidiary, DT Capital Trust (Trust), a
newly-formed Delaware business trust. The securities represent undivided
beneficial ownership interests in the Trust. The sole asset of the Trust is the
$72,165 aggregate principal amount of the 7.16% Convertible Junior Subordinated
Deferrable Interest Debentures Due 2012 which were acquired with the proceeds
from the offering as well as the sale of Common Securities to the Company. The
Company's obligations under the Convertible Junior Subordinated Debentures, the
Indenture pursuant to which they were issued, the Amended and Restated
Declaration of Trust of the Trust and the Guarantee of DTI, taken together,
constitute a full and unconditional guarantee by DTI of amounts due on the
Convertible Preferred Securities. The Convertible Preferred Securities are
convertible at the option of the holders at any time into the common stock of
DTI at an effective conversion price of $38.75 per share and are redeemable at
DTI's option after June 1, 2000 and mandatorily redeemable in 2012. The net
proceeds of the offering of approximately $67,750 were used by DTI to retire
indebtedness. A registration statement relating to resales of such Convertible
Preferred Securities was declared effective by the Securities and Exchange
Commission on September 2, 1997.
29
<PAGE>
Note 6 - Income Taxes
Income before provision for income taxes and extraordinary loss was taxed under
the following jurisdictions:
Fiscal year ended
June 29, June 30, June 25,
1997 1996 1995
---------- ---------- ----------
Domestic $ 42,630 $ 20,539 $ 14,414
Foreign 2,730 2,595 ---
========== ========== ==========
$45,360 $ 23,134 $ 14,414
========== ========== ==========
The provision for income taxes charged to operations was as follows:
Fiscal year ended
June 29, June 30, June 25,
1997 1996 1995
---------- ---------- ----------
Current:
U.S. Federal $ 12,564 $ 6,474 $ 1,641
State 2,789 1,373 402
Foreign 1,014 815 ---
---------- ---------- ----------
Total current 16,367 8,662 2,043
---------- ---------- ----------
Deferred:
U.S. Federal 2,111 734 3,203
State 397 125 718
Foreign 104 122 ---
---------- ---------- ----------
Total deferred 2,612 981 3,921
---------- ---------- ----------
Total Provision $ 18,979 $ 9,643 $ 5,964
========== ========== ==========
The provision for income taxes for the fiscal year ended June 29, 1997 is net of
income tax benefits of $216 related to the extraordinary loss as described in
Note 4.
The provision for income taxes differs from the amount of income tax determined
by applying the applicable U.S. statutory federal income tax rate to pre-tax
income as a result of the following differences:
Fiscal year ended
June 29, June 30, June 25,
1997 1996 1995
---------- ---------- ----------
U.S. statutory rate $ 15,876 $ 8,097 $ 4,901
Increase in rate resulting from:
Non-deductible goodwill amortization 997 410 304
State taxes 2,071 974 739
Other 35 162 20
---------- ---------- ----------
$ 18,979 $ 9,643 $ 5,964
========== ========== ==========
Deferred tax liabilities (assets) are comprised of the following:
June 29, June 30,
1997 1996
---------- ----------
Deferred tax liabilities:
Depreciation $ 5,331 $ 3,995
LIFO inventory and costing capitalization, net 1,157 759
Earnings recognized under percentage of completion 3,207 1,249
Goodwill and intangibles amortization 2,401 1,440
Other 239 347
---------- ----------
Total deferred tax liabilities 12,335 7,790
---------- ----------
Deferred tax assets:
Postretirement benefit accrual (714) (701)
Inventory reserves 1,680) (795)
Product liability reserves (678) (750)
Bad debt reserves (632) (521)
Other accruals (3,435) (2,863)
Other (2,068) (1,394)
---------- ----------
Total deferred tax assets (9,207) (7,024)
---------- ----------
Deferred tax assets valuation allowance 1,029 1,029
---------- ----------
Total net deferred tax liability 4,157 1,795
Current portion included in prepaid expenses
and other 2,278 2,961
---------- ----------
Long-term deferred tax liability $ 6,435 $ 4,756
========== ==========
The deferred tax assets valuation allowance has been recorded to reflect the
potential non-realization of certain deductible temporary differences.
30
<PAGE>
Note 7 - Retirement Plans
The Company offers substantially all of its employees a retirement savings plan
under Section 401(k) of the Internal Revenue Code. Each employee may elect to
enter a written salary deferral agreement under which a maximum of 15% of their
salary, subject to aggregate limits required under the Internal Revenue Code,
may be contributed to the plan. The Company will match a percentage of the
employee's contribution up to a specified maximum percentage of their salary. In
addition, the Company generally is required to make a mandatory contribution and
may make a discretionary contribution from profits. During the fiscal years
ended June 29, 1997, June 30, 1996 and June 25, 1995, the Company made
contributions of approximately $2,377, $1,596 and $1,224, respectively.
Note 8 - Postretirement Benefits
DTI provides health care and life insurance benefits for former DTG employees
who retired prior to September 1, 1992. Management plans to fund the premiums as
incurred, net of reimbursements received by plan participants.
For measurement purposes, a 10% annual rate of increase in health care premiums
was assumed for 1998; this rate was assumed to decrease 1% per year to 6% in
2002 and remain at that level thereafter. An increase in the assumed health care
cost trend rates of 1% in each year would increase the accumulated
postretirement benefit obligation (APBO) as of June 29, 1997 by approximately
$55 and the interest cost comprising the periodic postretirement benefit cost
for the period then ended by approximately $5.
The weighted average discount rate used to determine the accumulated
postretirement benefit obligation was 8% at June 29, 1997 and June 30, 1996.
The periodic postretirement benefit cost for fiscal 1997, 1996 and 1995 charged
to income was approximately $25, $41 and $41, respectively.
The following table sets forth the status of the postretirement plans,
reconciled to the APBO presented in the accompanying consolidated balance
sheets:
June 29, June 30,
1997 1996
---------- ----------
APBO $ 994 $ 1,025
Unrecognized net gain 551 639
---------- ----------
Net APBO $ 1,545 $ 1,664
========== ==========
31
<PAGE>
Note 9 - Stock Option Plans
The Company has three stock option plans: the Employee Stock Option Plan
(Employee Plan), the 1994 Directors Non-Qualified Stock Option Plan (Directors
Plan) and the 1996 Long-Term Incentive Plan (LTIP Plan).
A summary of the status of the Company's stock option plans as of June 29, 1997,
June 30, 1996 and June 25, 1995, and changes during the years then ended are
presented below:
Weighted Average
Shares Exercise Price
-------- ----------------
Fiscal 1997:
Outstanding at beginning of year 662,250 $13.86
Granted 376,950 $23.34
Exercised (49,625) $13.66
Forfeited (49,925) $15.62
--------
Outstanding at end of year 939,650 $17.58
========
Exercisable at end of year 122,625
========
Fiscal 1996:
Outstanding at beginning of year 465,750 $13.71
Granted 239,000 $14.06
Exercised (1,250) $13.50
Forfeited (41,250) $13.36
--------
Outstanding at end of year 662,250 $13.86
========
Exercisable at end of year 88,250
========
Fiscal 1995:
Outstanding at beginning of year 373,000 $13.70
Granted 115,250 $13.70
Exercised
Forfeited (22,500) $13.50
--------
Outstanding at end of year 465,750 $13.71
========
Exercisable at end of year --
========
32
<PAGE>
The Employee Plan provides for the granting of options to the Company's
executive officers and key employees to purchase shares of common stock at
prices equal to the fair market value of the stock on the date of grant. Options
to purchase up to 900,000 shares of common stock may be granted under the
Employee Plan. Options outstanding at June 29, 1997 entitle the holders to
purchase common stock at prices ranging between $10.25 and $33.75. Options
outstanding become exercisable with respect to one-fourth of the shares covered
thereby on each anniversary of the date of grant, commencing on the second
anniversary of the date granted. The right to exercise the options expires ten
years from the date of grant or earlier if an option holder ceases to be
employed by the Company.
The Directors Plan provides for the granting of options to the Company's
directors, who are not employees of the Company, to purchase shares of common
stock at prices equal to the fair market value of the stock on the date of
grant. Options to purchase up to 100,000 shares of common stock may be granted
under the Directors Plan. Options outstanding at June 29, 1997 entitle the
holders to purchase common stock at prices ranging between $13.50 and $30.25 per
share. Options become exercisable with respect to one-fourth of the shares
covered, thereby on each anniversary of the date of grant, commencing on the
second anniversary of such date. All options granted under the Directors Plan
expire ten years from the date of grant or earlier if a director leaves the
board of directors of the Company.
On September 18, 1996, the Board of Directors of the Company adopted the LTIP
Plan. The LTIP Plan became effective on November 11, 1996 upon its approval by
the stockholders at the annual meeting. The LTIP Plan provides for the granting
of four types of awards on a stand alone, combination, or a tandem basis,
specifically, nonqualified stock options, incentive stock options, restricted
shares and performance stock awards. The LTIP Plan provides for the granting of
up to 600,000 shares of common stock, provided that the total number of shares
with respect to which awards are granted in any one year may not exceed 100,000
shares to any individual employee and 200,000 shares in the aggregate, and the
total number of shares with respect to which grants of restricted stock and
performance stock awards are made in any year shall not exceed 50,000 shares to
any individual employee and 100,000 shares in the aggregate. LTIP grants to date
consist only of nonqualified stock options entitling the holders to purchase
common stock at prices ranging between $30.50 and $37.50. Options outstanding
become exercisable with respect to one-fourth of the shares covered thereby on
each anniversary of the date of grant, commencing on the second anniversary of
the date granted. The right to exercise the options expires ten years from the
date of grant or earlier if an option holder ceases to be employed by the
Company.
The following table summarizes certain information for options currently
outstanding and exercisable at June 29, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------- ---------------------------
Weighted Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
- -------- ----------- ---------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$10-14 446,400 7 $13.36 103,713 $13.27
$15-19 362,350 8 $17.26 18,912 $15.76
$20-30 15,900 9 $23.84 --
$31-38 115,000 9 $34.55 --
----------- -----------
939,650 122,625 $13.65
=========== ===========
</TABLE>
33
<PAGE>
Pro Forma Disclosures
The Company applies APB 25 and related interpretations in accounting for its
stock option plans. Accordingly, no compensation cost has been recognized for
the stock options because the options were granted with an exercise price equal
to the stock price on the date of grant. Had compensation costs for the
Company's stock option plans been determined based on the fair value of the
options on the grant dates consistent with the methodology prescribed by SFAS
123, the Company's net income and earnings per share would have been reduced to
the pro forma amounts indicated below. Due to the adoption of the methodology
prescribed by SFAS 123, the pro forma results shown below only reflect the
impact of stock option awards granted in fiscal 1997 and 1996. Because future
stock option awards may be granted, the pro forma impact for fiscal 1997 and
1996 is not necessarily indicative of the impact in future years.
Pro Forma Disclosures Fiscal 1997 Fiscal 1996
- --------------------- ----------- -----------
Net Income:
As reported $26,057 $13,491
Pro forma $25,276 $13,351
Primary earnings
per share:
As reported $ 2.39 $ 1.50
Pro forma $ 2.31 $ 1.46
The fair value of the options granted (which is amortized over the option
vesting period in determining the pro forma impact), is estimated on the date of
grant using the Black-Scholes multiple option-pricing model with the following
weighted average assumptions:
Fiscal 1997 Fiscal 1996
----------- -----------
Expected life of options 5 years 5 years
Risk-free interest rates 6.07 - 6.64% 5.36 - 6.48%
Expected volatility of stock 40% 36%
Expected dividend yield 0.3% 0.5%
The weighted average fair value of options granted during the years ended June
29, 1997 and June 30, 1996 was $10.40 and $5.60 per share, respectively.
Note 10 - Related Parties
Affiliates of Harbour Group Investments II, L.P. (HGI, L.P.) were holders of
approximately 32.2% of the Company's common stock prior to their sale of
2,835,000 shares in a stock offering in November 1996, reducing their holdings
to less than 4.1%.
Under the terms of a management consulting and advisory services agreement, the
Company paid affiliates of HGI, L.P. fees totaling $847, $783 and $459 in fiscal
1997, 1996 and 1995, respectively, related to corporate development services
provided in identifying, negotiating and consummating the Company's
acquisitions. Fees paid to affiliates of HGI, L.P. related to corporate
development services were included in the costs of the related acquisitions.
Under terms of management consulting and advisory services agreements, Harbour
Group Ltd. and Harbour Group Industries, Inc., charge the Company for direct
management and administrative services provided to the Company based on actual,
direct costs of such services. The charges, which are included in selling,
general and administrative expenses in the financial statements, totaled
approximately $393, $285 and $372 for the fiscal years ended June 29, 1997, June
30, 1996 and June 25, 1995, respectively.
The Company issued 443,250 shares of the Company's common stock at prices which
approximated estimated fair value ranging from $1.26 to $2.57 per share to
members of management under agreements which allow management to pay for the
stock with cash and/or recourse notes receivable to the Company. The recourse
notes receivable were issued with interest rates ranging from 5.84% to 6.28% and
become due between September 2003 and January 2004. The notes are reflected as a
reduction to additional paid-in capital in the accompanying consolidated
financial statements.
34
<PAGE>
Note 11 - Commitments and Contingencies
The Company leases land, buildings, machinery, equipment and furniture under
various noncancelable operating lease agreements. At June 29, 1997, future
minimum lease payments under noncancelable operating leases were as follows:
Fiscal year:
1998 $ 5,708
1999 5,009
2000 4,239
2001 3,731
2002 3,629
2003 and thereafter 20,812
----------
$ 43,128
----------
Total lease expense under noncancelable operating leases was approximately
$5,652, $3,103, and $2,098 for the years ended June 29, 1997, June 30, 1996 and
June 25, 1995, respectively. Commitments under capital leases are not
significant to the consolidated financial statements.
The Company is a party to various claims and lawsuits arising in the normal
course of business. It is the opinion of management, after consultation with
legal counsel, that those claims and lawsuits, when resolved, will not have a
material adverse effect on the financial position or results of operations of
the Company.
Note 12 - Dependence on Significant Customers
Total net sales to a customer in the electronics industry were $89,062 and total
net sales to a customer in the automotive industry were $43,179 in fiscal 1997
from the Special Machines segment. Total net sales to a customer in the
agricultural equipment industry were $11,116 and total net sales to a customer
in the transportation industry were $10,023 in fiscal 1997 from the Components
segment.
Total net sales to a customer in the tire industry were $23,653 in fiscal 1996
from the Special Machines segment. Total net sales to a customer in the
transportation industry were $14,754 in fiscal 1995 from the Components segment.
Trade receivables recorded for significant customers at June 29, 1997 and June
30, 1996 were $29,449 and $381, respectively. No other customers accounted for
10% or more of their respective total segment's sales in fiscal 1997, 1996 and
1995.
35
<PAGE>
Note 13 - Supplemental Balance Sheet Information
Fiscal year ended
June 29, June 30,
Supplemental Balance Sheet 1997 1996
- -------------------------- ---------- ----------
Accounts receivable:
Trade receivables $ 70,387 $ 33,336
Less - allowance for doubtful accounts 1,849 1,244
---------- ----------
$ 68,538 $ 32,092
========== ==========
Inventories, net:
Raw materials $ 13,117 $ 14,814
Work in process 22,053 12,145
Finished goods 7,028 4,444
---------- ----------
$ 42,198 $ 31,403
========== ==========
Property, plant and equipment:
Machinery and equipment $ 44,557 $ 28,233
Buildings and improvements 18,599 14,282
Land and improvements 2,348 2,147
Construction-in-progress 1,181 1,759
---------- ----------
66,685 46,421
Less - accumulated depreciation 15,553 9,708
---------- ----------
$ 51,132 $ 36,713
========== ==========
Accrued liabilities:
Accrued employee compensation and benefits $ 11,860 $ 6,030
Taxes payable and related reserves 4,321 5,120
Product liability 1,558 1,711
Other 12,247 9,663
---------- ----------
$ 29,986 $ 22,524
========== ==========
Note 14 - Quarterly Financial Data (unaudited)
Summarized quarterly financial data for fiscal 1997, 1996 and 1995 appears
below:
<TABLE>
<CAPTION>
Net Sales Gross Profit
---------------------------------- ----------------------------------
1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
First quarter $ 82,635 $ 44,788 $ 25,054 $ 22,765 $ 11,241 $ 6,733
Second quarter 100,693 60,143 34,470 27,670 15,157 8,937
Third quarter 103,359 59,866 40,461 29,707 16,434 9,351
Fourth quarter 109,423 71,149 47,384 30,924 20,546 12,670
-------- -------- -------- -------- -------- --------
$396,110 $235,946 $147,369 $111,066 $ 63,378 $ 37,691
-------- -------- -------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
Primary Earnings
Net Income Per Share
---------------------------------- ----------------------------------
1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
First quarter $ 4,549 $ 2,226 $ 1,263 $ .48 $ .25 $ .14
Second quarter 6,038 3,072 1,590 .58 .34 .18
Third quarter 7,216 3,396 1,977 .61 .38 .22
Fourth quarter 8,254 4,797 3,620 .70 .53 .40
-------- -------- --------
$ 26,057 $ 13,491 $ 8,450
-------- -------- --------
</TABLE>
The net income and primary earnings per share for the first quarter of fiscal
1997 include the effect of the extraordinary loss on the refinancing of debt as
described in Note 4.
36
<PAGE>
Note 15 - Segment Information
Worldwide operations data, as required by Statement of Financial Accounting
Standards No. 14, "Financial Reporting for Segments of a Business Enterprise,"
are listed below. Profitability of the Company's foreign operations by
geographic area was determined based on ultimate sales to unaffiliated
customers. Total Company profit was included in the geographic area of the
entity transacting the final sale. Transfers between geographic areas are at
prices established by agreement between the affected parties. The Company's
foreign operations, as discussed in Note 3, were acquired in fiscal 1996 and are
located in Canada and the United Kingdom.
<TABLE>
<CAPTION>
Domestic Foreign Eliminations Consolidated
-------- -------- ------------ ------------
<S> <C> <C> <C> <C>
For the fiscal year ended June 29, 1997:
Net sales to unaffiliated customers $384,619 $ 11,491 $ --- $396,110
Transfers between geographic areas --- 16,473 (16,473) ---
-------- -------- ------------ ------------
Total revenue $384,619 $ 27,964 $(16,473) $396,110
-------- -------- ------------ ------------
Earnings from operations $ 51,334 $ 5,365 --- $ 56,699
-------- -------- ------------ ------------
Identifiable assets $351,104 $ 44,092 --- $395,196
-------- -------- ------------ ------------
For the fiscal year ended June 30, 1996:
Net sales to unaffiliated customers $217,380 $ 18,566 $ --- $235,946
Transfers between geographic areas --- 10,723 (10,723) ---
-------- -------- ------------ ------------
Total revenue $217,380 $ 29,289 $(10,723) $235,946
======== ======== ============ ============
Earnings from operations $ 24,327 $ 3,819 $ (213) $ 27,933
======== ======== ============ ============
Identifiable assets $192,383 $ 41,673 $ (213) $233,843
======== ======== ============ ============
</TABLE>
During fiscal 1997, 1996 and 1995, export revenues included in domestic net
revenues to unaffiliated customers were approximately $108,756, $34,803 and
$14,905, respectively.
37
<PAGE>
The Company operates in two business segments, Special Machines (including the
Automation Group and Packaging Group) and Components. The Special Machines
segment designs and builds custom equipment, proprietary machines and integrated
systems. The Components segment stamps and fabricates a range of standard and
custom metal components.
Financial information by business segment is as follows:
<TABLE>
<CAPTION>
Depreciation
Net sales to Earnings &
unaffiliated from Identifiable Capital amortization
customers operations assets expenditures expense
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Fiscal year ended June 29, 1997
Special Machines $ 348,648 $ 56,787 $ 357,337 $ 7,424 $ 8,891
Components 47,462 6,966 34,812 3,806 1,258
Corporate --- (7,054) 3,047 620 904
------------ ------------ ------------ ------------ ------------
$ 396,110 $ 56,699 $ 395,196 $ 11,850 $ 11,053
============ ============ ============ ============ ============
Fiscal year ended June 30, 1996
Special Machines $ 193,884 $ 26,557 $ 203,210 $ 6,145 $ 4,683
Components 42,062 6,934 28,528 2,138 1,038
Corporate --- (5,558) 2,105 1,966 395
------------ ------------ ------------ ------------ ------------
$ 235,946 $ 27,933 $ 233,843 $ 10,249 $ 6,116
============ ============ ============ ============ ============
Fiscal year ended June 25, 1995
Special Machines $ 112,170 $ 13,857 $ 135,328 $ 4,127 $ 3,452
Components 35,199 6,676 23,061 3,043 837
Corporate --- (4,270) 874 548 272
------------ ------------ ------------ ------------ ------------
$ 147,369 $ 16,263 $ 159,263 $ 7,718 $ 4,561
============ ============ ============ ============ ============
</TABLE>
38
<PAGE>
Note 16 - Subsequent Events
On July 21, 1997, the Company replaced the Second Amended and Restated Credit
Facilities Agreement and the foreign currency denominated term facility with a
new $175,000 multi-currency revolving and term credit facility. The
multi-currency facility provides a $10,000 Canadian term loan and a $165,000
revolving credit facility, which includes an approximate $80,000 sub-limit for
multi-currency borrowings in Pounds Sterling and Deutsche Marks. Borrowings
under the multi-currency facility will bear interest at floating rates based on
the agent bank's base rate or LIBOR (at the option of DTI) plus a specified
percentage based on the ratio of funded debt to operating cash flow and the
ratings of DTI's corporate debt. The facility requires commitment fees of 0.125%
to 0.25% per annum (as determined by the Company's ratio of funded debt to
operating cash flow) payable quarterly on any unused portion of the
multi-currency facility. The agreement is secured by the capital stock of each
of the significant domestic subsidiaries and 65% of the capital stock of each
significant foreign subsidiary of DTI. The agreement contains certain financial
and other covenants and restrictions and matures in July 2002. In conjunction
with entering into the new credit facility, the Company recognized an
extraordinary loss in July 1997 of $1,200 attributable to the write-off of
$2,000 of unamortized deferred financing fees, net of related $800 tax benefit.
On July 29, 1997, the Company completed the acquisition of the assets of Lucas
Assembly and Test Systems (LATS), a division of LucasVarity plc of England. LATS
is a designer and manufacturer of integrated assembly and testing systems for
automotive OEMs and their tier-one suppliers with manufacturing facilities in
the United States, the United Kingdom and Germany. The purchase price of
approximately $49,000 was financed by borrowings under the new multi-currency
credit facility. As part of LucasVarity plc, LATS recorded sales of
approximately $112,000 for the year ended January 31, 1997. As the transaction
occurred subsequent to the end of fiscal 1997, the balance sheet and results of
operations of the LATS business (operated by DTI as the ATT business) are
excluded from the fiscal 1997 consolidated balance sheet and results of
operations of DTI. The pro forma effects of the LATS acquisition on the
Company's fiscal 1997 financial position and results of operations are not
material.
39
<PAGE>
CORPORATE AND INVESTOR INFORMATION
COMMON STOCK INFORMATION
The Company's Common Stock trades on The Nasdaq National Market System under the
symbol "DTII." As of August 29, 1997, the number of record holders of the Common
Stock was 59. The following table sets forth, for the quarters indicated, the
high and low sales prices for the Common Stock as reported by The Nasdaq Stock
Market and the cash dividends per share declared during such periods.
Quarterly
High Low Cash
Sale Price Sale Price Dividends
---------- ---------- ---------
Fiscal 1997
Fourth quarter $ 37 $ 24 5/8 $ 0.02
Third quarter 38 1/4 25 1/2 $ 0.02
Second quarter 42 1/2 32 1/4 $ 0.02
First quarter 34 1/2 17 3/4 $ 0.02
Fiscal 1996
Fourth quarter $ 23 1/4 $ 18 1/4 $ 0.02
Third quarter 19 13 $ 0.02
Second quarter 14 12 3/4 $ 0.02
First quarter 14 10 1/2 $ 0.02
NOTICE OF ANNUAL MEETING
The annual meeting of stockholders of DT Industries, Inc. will be held Monday,
November 10, 1997, 10:00 a.m., at the University Plaza Hotel, 333 John Q.
Hammons Parkway, Springfield, Missouri 65804, (417) 864-7333.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, St. Louis, Missouri.
LEGAL COUNSEL
Dickstein Shapiro Morin & Oshinsky LLP, Washington, D.C.
INVESTOR RELATIONS
The Financial Relations Board, Inc., Chicago, Illinois.
TRANSFER AND DIVIDEND DISBURSING AGENT
ChaseMellon Shareholder Services, L.L.C., 85 Challenger Road, Overpeck Centre,
Ridgefield Park, New Jersey 07660.
FORM 10-K
A copy of the annual report on Form 10-K for the year ended June 29, 1997, as
filed with the Securities and Exchange Commission, may be obtained by any
stockholder of the company at no charge upon request in writing to: Bruce P.
Erdel, DT Industries, Inc., Corporate Centre, Suite 2-300, 1949 E. Sunshine,
Springfield, Missouri 65804.
40
<TABLE>
<CAPTION>
JURISDICTION OF NAMES UNDER WHICH
SUBSIDIARY INCORPORATION SUBSIDIARIES DO BUSINESS
<S> <C> <C>
Advanced Assembly Ohio Advanced Assembly Automation, Inc.
Automation, Inc.
Armac Industries, Co. Delaware Armac Industries, Co.
Assembly Machines, Inc. Pennsylvania Assembly Machines, Inc.
Assembly Technologie Germany Assembly Technology and Test
and Automation GmbH
Assembly Technology Michigan Assembly Technology and Test, Inc.
and Test, Inc.
Assembly Technology England and Assembly Technology and Test Limited
and Test Limited Wales
Detroit Tool and Delaware Detroit Tool and Engineering Company
Engineering Company Peer
Detroit Tool Metal Missouri Detroit Tool Metal Products Co.
Products Co. Arrow Precision Elements, Inc.
F.J. Potter Company
Fred J. Potter Company
DT Canada Inc. New Brunswick, DT Canada Inc.
Canada
DT Capital Trust Delaware DT Capital Trust
DT Industries Foreign Barbados, West DT Industries Foreign Sales Corporation
Sales Corporation Indies
DT Industries (UK) England and DT Industries (UK) Limited
Limited Wales
DT Industries (UK) II England and DT Industries (UK) II Limited
Limited Wales
Hansford Manufacturing New York Hansford Manufacturing Corporation
Corporation
Kalish Canada Inc. New Brunswick, Kalish Canada Inc.
Canada
Pharma Group, Inc. Delaware Stokes-Merrill Corporation
Stokes
Merrill
Lakso
Kalish
Mid-West Automation Illinois Mid-West Automation Enterprises, Inc.
Enterprises, Inc.
Mid-West Automation Illinois Mid-West Automation Systems, Inc.
Systems, Inc.
Sencorp Systems, Inc. Delaware Sencorp Systems, Inc.
Swiftpack Automation England and Swiftpack Automation Limited
Limited Wales
</TABLE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-77882, No. 33-77884, No. 33-77888 and 333-2133),
of DT Industries, Inc. of our report dated August 8, 1997, appearing on page 19
of the fiscal 1997 Annual Report to Shareholders of DT Industries, Inc. (which
report and consolidated financial statements are incorporated by reference in
this Annual Report on Form 10-K). We also consent to the incorporation by
reference of our report on the Financial Statement Schedule, which appears on
page S-1 of this Form 10-K.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
St. Louis, Missouri
September 29, 1997
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints each of Stephen J. Gore and Bruce P. Erdel as his
true and lawful attorney-in-fact and agent, each with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign the 1997 Annual Report on Form 10-K of DT Industries, Inc.,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and ratifying and confirming all that
each said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
/s/ James J. Kerley
----------------------------------------
James J. Kerley
Date: August 18, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints each of Stephen J. Gore and Bruce P. Erdel as his
true and lawful attorney-in-fact and agent, each with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign the 1997 Annual Report on Form 10-K of DT Industries, Inc.,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and ratifying and confirming all that
each said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
/s/ Stephen J. Gore
----------------------------------------
Stephen J. Gore
Date: September 4, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints each of Stephen J. Gore and Bruce P. Erdel as his
true and lawful attorney-in-fact and agent, each with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign the 1997 Annual Report on Form 10-K of DT Industries, Inc.,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and ratifying and confirming all that
each said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
/s/ Bruce P. Erdel
----------------------------------------
Bruce P. Erdel
Date: August 28, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints each of Stephen J. Gore and Bruce P. Erdel as his
true and lawful attorney-in-fact and agent, each with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign the 1997 Annual Report on Form 10-K of DT Industries, Inc.,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and ratifying and confirming all that
each said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
/s/ William H.T. Bush
----------------------------------------
William H.T. Bush
Date: August 1, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints each of Stephen J. Gore and Bruce P. Erdel as his
true and lawful attorney-in-fact and agent, each with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign the 1997 Annual Report on Form 10-K of DT Industries, Inc.,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and ratifying and confirming all that
each said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
/s/ Frank W. Jones
----------------------------------------
Frank W. Jones
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints each of Stephen J. Gore and Bruce P. Erdel as his
true and lawful attorney-in-fact and agent, each with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign the 1997 Annual Report on Form 10-K of DT Industries, Inc.,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and ratifying and confirming all that
each said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
/s/ Graham Lewis
----------------------------------------
Graham Lewis
Date: 1st August, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints each of Stephen J. Gore and Bruce P. Erdel as his
true and lawful attorney-in-fact and agent, each with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign the 1997 Annual Report on Form 10-K of DT Industries, Inc.,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and ratifying and confirming all that
each said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
/s/ Lee M. Liberman
----------------------------------------
Lee M. Liberman
Date: August 15, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints each of Stephen J. Gore and Bruce P. Erdel as his
true and lawful attorney-in-fact and agent, each with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign the 1997 Annual Report on Form 10-K of DT Industries, Inc.,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and ratifying and confirming all that
each said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
/s/ John F. Logan
----------------------------------------
John F. Logan
Date: August 1, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints each of Stephen J. Gore and Bruce P. Erdel as his
true and lawful attorney-in-fact and agent, each with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign the 1997 Annual Report on Form 10-K of DT Industries, Inc.,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and ratifying and confirming all that
each said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
/s/ Donald E. Nickelson
----------------------------------------
Donald E. Nickelson
Date: August 15, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints each of Stephen J. Gore and Bruce P. Erdel as his
true and lawful attorney-in-fact and agent, each with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign the 1997 Annual Report on Form 10-K of DT Industries, Inc.,
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and ratifying and confirming all that
each said attorney-in-fact and agent or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
/s/ Charles F. Pollnow
----------------------------------------
Charles F. Pollnow
Date: Aug 1, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information (in thousands except per
share data) extracted from the Consolidated Balance Sheet as of June 30, 1996
and June 29, 1997 and the Consolidated Statement of Operations for the Fiscal
Year Ended June 25, 1995, June 30, 1996 and June 29, 1997 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-29-1997
<PERIOD-START> JUL-1-1996
<PERIOD-END> JUN-29-1997
<EXCHANGE-RATE> 1
<CASH> 2,821
<SECURITIES> 0
<RECEIVABLES> 70,387
<ALLOWANCES> 1,849
<INVENTORY> 42,198
<CURRENT-ASSETS> 172,251
<PP&E> 66,685
<DEPRECIATION> 15,553
<TOTAL-ASSETS> 395,196
<CURRENT-LIABILITIES> 81,270
<BONDS> 46,978
0
0
<COMMON> 113
<OTHER-SE> 185,154
<TOTAL-LIABILITY-AND-EQUITY> 395,196
<SALES> 396,110
<TOTAL-REVENUES> 396,110
<CGS> 285,044
<TOTAL-COSTS> 285,044
<OTHER-EXPENSES> 54,011
<LOSS-PROVISION> 356
<INTEREST-EXPENSE> 11,339
<INCOME-PRETAX> 45,360
<INCOME-TAX> 18,979
<INCOME-CONTINUING> 26,381
<DISCONTINUED> 0
<EXTRAORDINARY> 324
<CHANGES> 0
<NET-INCOME> 26,057
<EPS-PRIMARY> 2.39
<EPS-DILUTED> 2.39
</TABLE>
