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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (date of earliest event) January 28, 1994
Harsco Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction)
1-3970
(Commission File Number)
23-1483991
(I.R.S. Employer Identification Number)
Camp Hill, Pennsylvania 17001-8888
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (717) 763-7064
ITEM 2. Acquisition or Disposition of Assets.
On January 28, 1994, FMC Corporation and Harsco Corporation completed
the formation of the joint venture, which was first announced in
December 1992, to combine FMC's Defense Systems Group and Harsco's
BMY-Combat Systems Division. The joint venture, which has an effective
date of January 1, 1994, operates as a limited partnership known as
United Defense, L.P. (the "Partnership"), and is jointly owned, with FMC
holding an interest of 60 percent and Harsco holding 40 percent. FMC is
the managing general partner, and Harsco is a limited partner.
The Partnership has an Advisory Committee, comprised of ten individuals,
six appointed by FMC and four appointed by Harsco, which considers and
discusses Partnership issues. FMC, as the managing general partner,
exercises management control over the Partnership subject to Harsco's
right to consent to certain actions delineated in the Partnership
Agreement. Additionally, the Partnership Agreement contains certain
exit rights for both partners at any time more than 25 months after
January 1, 1994, including the right of Harsco to sell its interest to
the Partnership (payable by a senior promissory note from the
Partnership) based upon a calculation of 95% of appraised value, and the
right of FMC or the Partnership to buy Harsco's interest (payable in
cash) based upon a calculation of 110% of appraised value. Appraised
value is substantially the fully distributed public equity trading value
of the Partnership as determined by three investment banking firms in
accordance with certain contractual stipulations, multiplied by Harsco's
percentage interest in the Partnership. The Partnership Agreement
provides for certain special capital account allocations and cash
distributions and otherwise allocates and distributes income in
proportion to the partners' percentage ownership.
Harsco contributed to the Partnership substantially all of the assets
and liabilities of its BMY-Combat Systems Division (other than accounts
receivable of $38,506,000), and $5,200,000 in cash, in return for its
40% interest in the Partnership. In addition to the excluded accounts
receivable, Harsco retained the rights and any liabilities associated
with certain pending major claims between Harsco and the U.S.
Government, and Harsco and the government of Iran. The book value of
the net assets contributed by Harsco as of December 31, 1993 was
$29,600,000. FMC contributed substantially all of the assets and
liabilities of its Defense Systems Group and $14,800,000 in cash in
return for its 60% interest in the Partnership. The book value of the
net assets contributed by FMC as of December 31, 1993 was $125,237,000
(net of the LIFO Reserve of $13,363,000).
BMY-Combat Systems Division was a material part of Harsco Corporation in
1993. The Division accounted for approximately 25% of revenues
($347,958,000), 47% of income before taxes and the cumulative effect of
accounting changes ($64,642,000), and 6% of the net book value of the
Company ($29,600,000). The Partnership is expected to achieve annual
sales of about $1 billion in 1994 with Harsco holding a 40% interest.
Harsco Corporation will account for its 40% interest in the Partnership
on the equity method of accounting.
The Partnership will primarily produce the Bradley Fighting Vehicle,
Armored Gun System, M109 Paladin self-propelled howitzer, Multiple
Launch Rocket System, M88A1 and M88IRV Recovery Vehicles, M9 Armored
Combat Earthmover, M992 Field Artillery Ammunition Support Vehicle, the
Breacher and M113 Armored Personnel Carrier. The Partnership will also
make naval guns and launching systems, military track for armored
vehicles, and provide overhaul and conversion, as well as coproduction,
training and logistics support.
ITEM 5. Other Events.
In January 1992, the Board of Directors authorized the purchase over a
two-year period of up to 4,000,000 shares of the Company's common stock
in unsolicited open market or privately negotiated transactions at
prevailing market prices. This authorization expired in January 1994.
In the course of that two year program, the Company repurchased
2,064,555 shares of its common stock. Following the expiration of this
program, the Board on January 25, 1994 authorized the repurchase of
additional shares of common stock from time to time during the next year
at management's discretion in unsolicited open market or privately
negotiated transactions at prevailing market prices, but not to exceed
500,000 shares in the aggregate.
ITEM 7. Financial Statements and Exhibits
(a) Consolidated Financial Statements of FMC's Defense Systems Group
It is impracticable to provide the required financial statements at the
time of filing this Form 8-K. The required financial statements will be
filed under cover of Form 8-K/A as soon as practicable, but not later
than April 15, 1994.
(b) Pro Forma Financial Information (unaudited) to reflect Harsco's
acquisition of an interest in United Defense, L.P., formed to hold FMC's
Defense Systems Group and Harsco's BMY-Combat Systems Division.
It is impracticable to provide the required financial information at the
time of filing this Form 8-K because the financial statements for FMC's
Defense Systems Group are not available yet. The required financial
information will be filed on Form 8-K/A as soon as practicable, but not
later than April 15, 1994.
(c) Pro Forma Financial Information (unaudited) to reflect Harsco's
material disposition of assets resulting from its contribution to United
Defense, L.P. of its BMY-Combat Systems Division.
It is not meaningful to provide the required financial information at
the time of filing this Form 8-K because the pro forma financial
information should also reflect the acquisition by Harsco of a 40%
interest in United Defense, L.P. The required financial information
will be filed under the cover of Form 8-K/A as soon as practicable, but
not later than April 15, 1994.
(d) Exhibits
2.1 Participation Agreement, dated as of January 1, 1994, among FMC,
Harsco, Harsco Defense Holding, Inc. and United Defense, L.P. (with a
list of omitted Exhibits and Schedules thereto).
2.2 Partnership Agreement, dated as of January 1, 1994, among FMC,
Harsco Defense Holding, Inc. and United Defense, L.P. (with a list of
omitted Exhibits and Schedules thereto).
2.3 Annex A (Definitions relating to Participation Agreement and
Partnership Agreement) dated as of January 1, 1994.
2.4 Registration Rights Agreement, dated as of January 1, 1994, among
FMC, Harsco Defense Holding, Inc. and United Defense, L.P.
HARSCO CORPORATION
(Registrant)
Date: February 14, 1994 By: /S/ Leonard A. Campanaro
Leonard A. Campanaro
Senior Vice President
and Chief Financial Officer
PARTICIPATION AGREEMENT
AMONG
FMC CORPORATION,
HARSCO CORPORATION,
HARSCO DEFENSE HOLDING, INC.
AND
UNITED DEFENSE, L.P.
DATED AS OF JANUARY 1, 1994
This PARTICIPATION AGREEMENT (this "Agreement") is made as of January 1,
1994, by and among FMC CORPORATION, a Delaware corporation ("FMC"),
HARSCO CORPORATION, a Delaware corporation ("Harsco"), HARSCO DEFENSE
HOLDING, INC., a Delaware corporation ("Harsco L.P.") and UNITED
DEFENSE, L.P., a Delaware limited partnership ("Partnership").
WHEREAS, FMC and Harsco each possess distinctive competencies relating
to the manufacturing, marketing, selling, and servicing of defense
products and systems; and
WHEREAS, FMC and Harsco desire to create a limited partnership for the
manufacture and sale of defense-related products as generally provided
for in this enabling agreement and as further described in the Operative
Documents (as defined herein).
NOW, THEREFORE, in consideration of the mutual covenants, and subject to
the terms and conditions, contained herein, the parties hereby agree
that:
ARTICLE I
SECTION 1.1 DEFINITIONS. Except as otherwise defined herein, terms
used herein in capitalized form shall have the meanings attributed to
them in Annex A to this Agreement.
ARTICLE II
SECTION 2.0 CLOSING.
2.1 Actions at Closing. At or prior to the Closing, in reliance upon
the representations and warranties set forth herein and subject to the
satisfaction (or waiver by the applicable party) of the conditions set
forth herein, FMC and Harsco shall (or shall cause their respective
Affiliates to) accomplish the following actions and consummate the
following transactions:
2.1.1 A Certificate of Good Standing shall have issued by the Delaware
Secretary of State with respect to FMC. An appropriate Certificate of
Incorporation for Harsco L.P. shall have been filed with the Secretary
of State of the State of Delaware. A Certificate of Good Standing shall
have issued by the Delaware Secretary of State with respect to Harsco
L.P. and appropriate By-Laws shall have been adopted. FMC and Harsco
L.P. shall have executed and filed in the Office of the Secretary of
State of Delaware a Certificate of Limited Partnership, thereby forming
a Delaware limited partnership to be known as United Defense, L.P.; and
2.1.2 Except for the Novation Agreement, the Operative Documents not
theretofore executed and delivered shall be executed and delivered.
Those agreements which have been attached hereto as Exhibits at the
Signing Date shall be executed and delivered substantially in the
respective forms attached to this Agreement, and those agreements which
have not been attached hereto as Exhibits at the Signing Date shall be
in form and substance satisfactory to the parties when executed; and
2.1.3 Except as otherwise agreed by the parties in writing, FMC shall
transfer, or cause to be transferred, to the Partnership the FMC Assets
and the FMC Liabilities (provided, that FMC may elect not to transfer
accounts receivable equal to its estimate of the excess, if any, of the
Net Book Value of the FMC Assets and FMC Liabilities (with such accounts
receivable included) over FMC's Target Net Asset Value); and
2.1.4 Except as otherwise agreed by the parties in writing, Harsco
shall transfer, or cause to be transferred, to the Partnership the
Harsco Assets and the Harsco Liabilities (provided, that Harsco may
elect not to transfer accounts receivable equal to its estimate of the
excess, if any, of the Net Book Value of the Harsco Assets and Harsco
Liabilities (with such accounts receivable included) over Harsco L.P.'s
Target Net Asset Value); and
2.1.5 If the estimated Net Book Value of the transfer under 2.1.3 or
2.1.4 above is less than the Target Net Asset Value for the affected
party, such party shall transfer or cause to be transferred to the
Partnership an amount of additional cash or a demand note in the form of
Exhibit A equal to the difference between such estimated Net Book Value
and such Target Net Asset Value. The aggregate transfers by or on
behalf of each of FMC and Harsco L.P. pursuant to Sections 2.1.3, 2.1.4
and 2.1.5 shall constitute each party's Initial Capital Contribution
subject to adjustment pursuant to Section 2.3.3; and
2.1.6 The Partnership shall execute the Assumption Agreement (or
Agreements), substantially in the form of Exhibit B hereto, necessary to
assume the Liabilities.
2.2 Time and Place of Closing. The Closing shall take place at the
offices of FMC, 200 East Randolph Drive, Chicago, Illinois. The parties
intend to Close effective as of 12:01 A.M. Chicago time on January 1,
1994. The parties agree that if the Closing has not occurred by
February 1, 1994 or such later date as the parties mutually agree,
either Parent may by written notice to the other Parent, advise the
other Parent of its intention not to proceed with the transactions
contemplated herein and in the other Operative Documents, without any
penalty or any obligation of any sort owed to any other party other than
any ongoing obligations of confidentiality contained in the
Confidentiality Agreement, attached hereto as Exhibit C, other than any
liability for prior breach of this Agreement and other than any
liability under Section 5.17 or Section 7.11.
In order to effectuate the foregoing intent to Close effective as of
12:01 A.M. Chicago time on January 1, 1994 if all conditions to Closing
(other than those set forth in Sections 3.2, 3.5, 3.7 and 3.14 to 3.18)
have not been met or waived by such date, each Parent agrees (i) to
close the financial books of its Defense Business as of December 31,
1993 and (ii) to calculate, within fifteen Business Days following the
actual date of Closing, the amount of cash flow of its Defense Business
from January 1, 1994 to the actual date of Closing and to remit such
amount to the Partnership by such fifteenth Business Day; provided,
however, that if either Parent's Defense Business has negative cash flow
during such period, the Target Net Asset Value of such Parent's Partner
shall be reduced by the amount of such negative cash flow. It is the
parties' intention (i) to close on January 28, 1994, (ii) that the
Partnership will assume all Liabilities and the Parents will transfer
all Assets on the actual date of Closing and (iii) that the Preliminary
Closing Balance Sheets will be audited as of January 1, 1994 based on
the Assets and Liabilities that would have been contributed or
transferred to the Partnership if the actual date of Closing had been
January 1, 1994. The Accountants shall review the Partners' respective
cash flow calculations to determine whether such calculations are
consistent with the cash flow that the Partnership would have received
had the Closing occurred on January 1, 1994. In the event that the
Accountants determine that there is an inconsistency in any Partner's
calculation, such Partner shall make an adjustment to the amount of cash
flow remitted by it in accordance with the Accountants' determination.
2.3 Post-Closing Adjustments.
2.3.1 Preliminary Closing Balance Sheets. As soon as practicable, but
in no event more than 45 days, after the actual date of Closing, each
Parent will prepare (and the Partnership will assist and cooperate in
such preparation at no cost to the Parents) a balance sheet as of
January 1, 1994 for its Defense Business which reflects the Assets and
Liabilities which would have been contributed or transferred to the
Partnership at the Closing had the Closing occurred on January 1, 1994
(the "Preliminary Closing Balance Sheet"). Each of the Preliminary
Closing Balance Sheets (i) will be audited and reported on by such
Parent's certified public accountants as being in accordance with GAAP
and the Principal Accounting Procedures, prepared on a basis consistent
with the appropriate Pro Forma Balance Sheet, except as set forth on
Schedule 2.3.1 and (ii) will reflect the types of Assets and Liabilities
reflected on the Pro Forma Balance Sheet and the cash and any demand
note contributed or transferred to the Partnership by such Parent and
its Affiliates (and no other assets or liabilities). Each Parent and
its representatives will be entitled to review such Preliminary Closing
Balance Sheet and all relevant books, records and workpapers of the
other Parent and its accountants.
2.3.2 Final Closing Balance Sheets. Within 30 days after its receipt
of the other Parent's Preliminary Closing Balance Sheet, each Parent
shall notify the other whether it accepts or disputes the accuracy of
the Preliminary Closing Balance Sheet. If such reviewing Parent accepts
the preparing Parent's Preliminary Closing Balance Sheet, such
Preliminary Closing Balance Sheet shall be deemed to be the final
balance sheet as of the end of business on the Closing Date ("Final
Closing Balance Sheet"). If the reviewing Parent disputes the accuracy
of the Preliminary Closing Balance Sheet, it will in the notice of such
dispute set forth in reasonable detail those items that it believes are
not fairly presented and the reasons for its opinion. The parties shall
then meet and in good faith use all reasonable efforts to resolve their
disagreements over the disputed items on such Preliminary Closing
Balance Sheet. If the parties resolve their disagreements in accordance
with the foregoing sentence, the Preliminary Closing Balance Sheets with
those modifications to which the parties will have agreed shall be
deemed to be the Final Closing Balance Sheets. If the parties have not
resolved their disagreements over the disputed items on the Preliminary
Closing Balance Sheets within 20 days after notice of the dispute was
given, the parties shall jointly select an independent accounting firm
of national reputation, and such firm will make, within 30 days after
its engagement, a binding determination of those disputed items in
accordance with the terms of this Participation Agreement. The
Preliminary Closing Balance Sheets with such modifications as determined
by such independent accounting firm to be appropriate will be deemed to
be the Final Closing Balance Sheets. The fees and expenses of each
Parent in connection with the preparation of its Preliminary and Final
Closing Balance Sheets will be paid by such Parent, and the fees and
expenses of any independent accounting firm will be shared equally by
the Parents.
2.3.3 Post-Closing Payment If either Partner's estimated Initial
Capital Contribution pursuant to Sections 2.1.3, 2.1.4 and 2.1.5 as
shown on its Final Closing Balance Sheet is less than such Partner's
Target Net Asset Value, then FMC or Harsco L.P., or both, as the case
may be, will, within three Business Days of the final determination of
such Final Closing Balance Sheet, pay to the Partnership cash or assign
to the Partnership accounts receivable of its Defense Business equal to
such difference. Any such payment or assignment required to be made to
the Partnership by FMC or Harsco L.P. shall bear interest at the rate of
three month LIBOR at the actual date of Closing, plus 100 basis points,
from the actual date of Closing through the date such payment is made.
If accounts receivable are assigned in lieu of cash, the assigning
Partner shall pay interest, at the rate of three month LIBOR at the
actual date of Closing, plus 100 basis points, on such receivables from
the actual date of Closing to the earlier of the date on which such
account receivable is collected in full or the date on which such
account receivable is repurchased in its entirety by the assigning
Partner pursuant to Section 5.14. If either Partner's estimated Initial
Capital Contribution pursuant to Sections 2.1.3, 2.1.4 and 2.1.5 as
shown on its Final Closing Balance Sheet is greater than such Partner's
Target Net Asset Value, then the Partnership will within three Business
Days of the final determination of such Final Closing Balance Sheets
transfer to FMC or Harsco L.P., as the case may be, an amount in
accounts receivable or demand notes contributed by such Partner equal to
such excess. If there are insufficient accounts receivable and demand
notes for this purpose, the Partnership shall issue a one-year
promissory note to such Partner for the remainder of such excess
estimated Initial Capital Contribution. Such Promissory Note shall be
in the form attached hereto as Exhibit D and shall be repaid in full
prior to making any distributions to any Partner other than
distributions pursuant to Sections 6.1, 6.2 and 6.3 of the Partnership
Agreement. Any such payment in accounts receivable or demand notes
required to be made by the Partnership to FMC or Harsco L.P. shall bear
interest at the rate of one year LIBOR at the actual date of Closing,
plus 100 basis points, from the actual date of Closing through the date
such payment is made. Any one-year promissory note delivered by the
Partnership to either FMC or Harsco L.P. shall bear interest from the
actual date of Closing at the rate of one year LIBOR at the actual date
of Closing, plus 100 basis points.
ARTICLE III
SECTION 3.0 CONDITIONS PRECEDENT TO CLOSING. The obligation of a party
hereto (a "Closing Party") to complete the transactions contemplated
hereunder ("Close") is subject to the fulfillment or waiver at or before
the Closing of the conditions set forth in this Article III. The
Closing of the transactions contemplated hereby constitutes a waiver by
each party hereto of any nonfulfillment of a condition set forth below
solely for purposes of its obligation to Close.
3.1 Performance. Each other Closing Party and each other party to any
other Operative Documents which is not an Affiliate of such other
Closing Party (the "Condition Party") shall have performed and complied
with each agreement and condition in each Operative Document required to
be performed or complied with by such Condition Party at or before the
Closing, except for the Novation Agreement which will be entered into
following the Closing and except to the extent that such noncompliance
by any other Condition Party would not have a Material Adverse Effect on
the Partnership.
3.2 Authorization, Execution and Delivery of Operative Documents.
Except for the Novation Agreement, each Operative Document shall have
been duly authorized, executed and delivered by each Condition Party
which is a party thereto and executed and delivered by the Partnership
and an executed counterpart shall have been delivered to such Closing
Party. The Partnership Agreement shall have been duly authorized,
executed and delivered by the Partners, a Certificate of Limited
Partnership shall have been filed with the Secretary of State of
Delaware and the Registration Rights Agreement shall have been duly
authorized, executed and delivered by the respective parties thereto.
3.3 Governmental and Private Actions; Burdensome Governmental
Conditions. There shall be no pending or threatened Burdensome
Governmental Condition with respect to the transactions contemplated
hereby and no known DOJ or FTC antitrust investigation pending or in
progress with respect to such transactions. Except for execution and
delivery of the Novation Agreement, all Governmental Actions (other than
routine qualifications and permits to do business intended to be
obtained as needed and other than employee pension and thrift plan
approvals) and all Private Actions (except for third-party Consents to
Restricted Contracts, which are governed by Section 5.11 hereof)
required to be taken, given or obtained that are necessary in connection
with the transactions contemplated by any Operative Document shall (i)
have been taken, given or obtained on terms reasonably satisfactory to
each Parent, (ii) be in full force and effect as of the Closing and
(iii) not be subject to any Burdensome Governmental Condition.
3.4 Governmental Rules. No Governmental Rule shall have been
instituted or issued to set aside, restrain, enjoin or prevent the
consummation of the transactions contemplated by any Operative Document.
No change shall have occurred since the Signing Date in any Governmental
Rule that, in such Closing Party's reasonable opinion, would make it
illegal for such Closing Party, any Affiliate of such Closing Party or
the Partnership to consummate the transactions contemplated by the
Operative Documents or subject such Closing Party, any Affiliate of such
Closing Party or the Partnership to any substantial penalty or other
substantial liability under or pursuant to any existing Governmental
Rule.
3.5 Standard Closing Documents. Such Closing Party shall have
received, with respect to each other Closing Party:
3.5.1 a certificate or certificates dated the Closing Date of a senior
corporate officer, secretary or other appropriate authorized signatory
of such Closing Party certifying as to:
3.5.1.1 the corporate charter and bylaws, recently certified, in the
case of the charter, by the secretary of state or similar Governmental
Authority of the jurisdiction in which such Closing Party is
incorporated, or the equivalent for a partnership, to the extent that
such certification legally exists;
3.5.1.2 the absence of amendments since the date of the last amendment
shown on the official evidence as to such charter furnished pursuant to
this Section 3.5.1;
3.5.1.3 resolutions, delegations or other written evidence of corporate
or other action of the appropriate authority within such Closing Party
and, if applicable, the stockholders or partners of such Closing Party
duly authorizing or ratifying its execution, delivery and performance of
each Operative Document to which it is or is to be party and the absence
of other resolutions, delegations or such other corporate action
relating thereto;
3.5.1.4 the absence of proceedings for the merger, consolidation, sale
of all or substantially all assets, dissolution, liquidation or similar
proceedings with respect to such Closing Party; and
3.5.1.5 the incumbency and signatures of the individuals authorized to
execute and deliver documents on such Closing Party's behalf;
3.5.2 recent official evidence from appropriate Governmental
Authorities as to (A) charter documents on file and good standing in
such Closing Party's jurisdiction of organization and (B) in the case of
the Partners, qualification to do business in each jurisdiction in which
its Defense Business is required to be qualified, which shall be at
least one jurisdiction; and
3.5.3 an opinion of counsel to such Closing Party with respect to the
matters set forth in Exhibit E hereto, dated as of the actual date of
Closing.
3.6 Representations and Warranties. The representations and warranties
of each Closing Party in Article IV shall be true and correct at and as
of the Signing Date and the actual date of Closing, in each case in all
material respects, except as otherwise contemplated by this Agreement.
3.7 Officer's Certificates.
3.7.1 Each Closing Party shall have received an officer's certificate
(or a similar certificate) from the Secretary (or more senior officer)
of each of the other Closing Parties (other than the Partnership) dated
the Closing Date certifying that the conditions set forth in Sections
3.1, 3.2, 3.3, 3.4, 3.6 and 3.8 have been satisfied as to such Closing
Party.
3.7.2 FMC shall have received a Secretary's Certificate from the
Corporate Secretary of Harsco certifying to the fact that as of both the
Signing Date and the actual date of Closing, Harsco L.P. was and is a
wholly-owned Subsidiary of Harsco.
3.8 No Material Adverse Change. Since the Signing Date, there shall
not have occurred any material adverse change in (i) the assets,
liabilities, operations, financial condition or prospects of either
Defense Business or (ii) the financial condition of either Parent, on a
consolidated basis together with its Affiliates.
3.9 Insurance. All insurance policies and programs reflected on
Exhibit A to the Partnership Agreement shall be in full force and effect
on the actual date of Closing and all premiums, commissions and fees
then due thereon shall have been paid (or arrangements, reasonably
satisfactory to Harsco, shall have been made for such payment).
3.10 Due Diligence. The results of any due diligence investigation by
each Closing Party shall not have revealed any event or condition not
disclosed to such Closing Party prior to the Signing Date that would
have a Material Adverse Effect on the Partnership.
3.11 Proceedings, Opinions and Documents. All opinions, certificates
and other documents to be delivered to such Closing Party pursuant to
Section 2.0 and this Article III and all proceedings in connection with
the transactions contemplated by Section 2.0 and this Article III shall
be reasonably satisfactory to such Closing Party. Such Closing Party
shall have received (i) evidence reasonably satisfactory to it that each
condition set forth in this Article III has been satisfied and (ii)
copies of all other documents and other evidence as it may reasonably
request, in form and substance reasonably satisfactory to it, with
respect to such transactions and the taking of all necessary corporate
or other proceedings in connection therewith.
3.12 Partnership Capitalization. The Parents shall have paid or caused
to be paid their respective portions of initial cash contributions
required to be made by the Closing Date pursuant to Sections 2.1.3,
2.1.4 and 2.1.5 of this Agreement as of the actual date of Closing.
3.13 Novation Agreement. There shall have been no written statements
from DOD that it will only novate the Contracts to which it is a party
on terms that would have an adverse effect on the Partnership or any
Parent or that it will not approve novation of such Contracts.
3.14 Intellectual Property Agreements. FMC and Harsco shall have each
entered into Intellectual Property Agreements with the Partnership,
substantially in the forms of Exhibits F-1 and F-2 hereto, and Limited
Non-Exclusive Licenses with the Partnership.
3.15 Lease Agreement. FMC and the Partnership shall have entered into
the Lease Agreement, substantially in the form of Exhibit G hereto.
3.16 Management Services Agreement. FMC shall have entered into a
Management Services Agreement with the Partnership, substantially in the
form of Exhibit H hereto.
3.17 Partnership Agreement. FMC and Harsco L.P. shall have entered
into the Partnership Agreement, substantially in the form of Exhibit I.
3.18 Registration Rights Agreement. FMC, Harsco and the Partnership
shall have entered into the Registration Rights Agreement, substantially
in the form of Exhibit J hereto.
3.19 Effects Bargaining. To the best of each Closing Party's
Knowledge, any "effects bargaining" by Harsco and FMC with their
respective Defense Business collective bargaining representatives shall
not have resulted in claims or demands by either collective bargaining
representative which would have a reasonable likelihood of resulting in
a Material Adverse Effect on the Partnership.
3.20 Title Insurance. Each of FMC and Harsco shall have delivered to
the Partnership (i) at least ten Business Days prior to the actual date
of Closing, a commitment, issued by a title insurance company reasonably
acceptable to the other Parent, to insure the Owned Property contributed
by it to the Partnership, showing title to such property in such
contributing Parent, (ii) an ALTA owner's title insurance policy (4-6-90
version or the most recent version in use in the state where any
particular parcel of Owned Property is located) in the amount of
$7,821,000 in the case of FMC's Owned Property and $12,700,000 in the
case of Harsco's Owned Property, containing no exceptions other than
those listed (or not required to be listed) on Schedule 4.8.2A or 4.8.2B
and insuring fee simple title to all Owned Property contributed by it to
the Partnership (the cost of which policy shall be paid for or
reimbursed by the Partnership after the Closing) and (iii) limited
warranty deeds in recordable form conveying to the Partnership such
Owned Property.
ARTICLE IV
SECTION 4.0 REPRESENTATIONS AND WARRANTIES. Each of the Parents
represents and warrants to the other Parent and the Partnership, and,
with respect to Sections 4.1 through 4.4, the Partnership represents and
warrants to both Parents, at and as of the Signing Date and the actual
date of Closing that:
4.1 Organization; Ownership; Interest, Etc. It and each of its Defense
Affiliates is, or will be by the actual date of Closing, in the case of
its Defense Affiliates, duly organized or established, validly existing
and in good standing under the laws of its jurisdiction of organization
or establishment and it and each of its Defense Affiliates has, or will
have by the actual date of Closing, in the case of its Defense
Affiliates, the power and authority to carry on its business as then
conducted, to own or hold under lease its properties and to enter into
and perform its obligations under each Operative Document to which it is
or is to be a party.
It and each of its Defense Affiliates is or, in the case of its Defense
Affiliates, will be in timely fashion duly organized, qualified to own
or lease its properties and generally to conduct business as currently
or proposed to be conducted in each jurisdiction necessary for purposes
of the transactions contemplated by the Operative Documents. All of the
ownership interest in Harsco L.P. will be held by Harsco free from any
Liens on the actual date of Closing.
4.2 Authorization; No Conflict. It and each of its Defense Affiliates
has or, in the case of its Defense Affiliates, will have by the actual
date of Closing, duly authorized by all necessary action the execution,
delivery and performance of each Operative Document to which it is or is
to be a party, and, except as set forth on Schedule 4.2, neither its
execution and delivery thereof nor its consummation of the transactions
contemplated thereby nor its compliance therewith does or will (i)
require any approval of its stockholders not theretofore obtained or any
approval or consent of any trustee or holders of any of its Debt or
obligations, (ii) contravene any Governmental Rule applicable to or
binding on it or any of its properties, (iii) contravene or result in
any breach of or constitute any default under, or result in the creation
of any Lien (other than Permitted Liens) upon any of its property under,
any indenture, mortgage, chattel mortgage, deed of trust, conditional
sales contract, loan or credit agreement, charter, bylaw or other
agreement or document to which it is a party or by which it or any of
its properties is bound or affected or (iv) require the taking of any
Governmental Action or any Private Action, in each case except such as
have been, or by the actual date of Closing will be, duly obtained,
made, taken or waived (except, in the cases of clauses (ii), (iii) and
(iv), as would not have a Material Adverse Effect on such Parent, its
Defense Business or the Partnership).
4.3 Enforceability. It and each of its Affiliates, as applicable, have
duly executed and delivered this Agreement, and this Agreement
constitutes, and each other Operative Document to which it and each of
its Defense Affiliates, as applicable, are or are to be parties upon
execution and delivery thereof by it or the applicable Defense Affiliate
will constitute, its or the applicable Defense Affiliate's legal, valid
and binding obligation, enforceable against it or the applicable Defense
Affiliate in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization and similar laws affecting
creditors generally and by the availability of equitable remedies.
4.4 Proceedings. Except as set forth on Schedule 4.4, there are no
actions or proceedings pending or, to its Knowledge, threatened, before
any Governmental Authority that, if adversely determined against it,
would have a Material Adverse Effect on such Parent, its Defense
Business or the Partnership.
4.5 Special Purpose Representation as to Partners. In the case of any
Affiliate that will become a Partner in the Partnership, such Partner on
the actual date of Closing: (i) will be duly incorporated and
sufficiently capitalized to meet its then current obligations to make
contributions to the Partnership; (ii) will not have conducted any
business other than to enter into and perform its obligations under the
Operative Documents; (iii) will have no outstanding Debt or other
obligations other than Debt owed to its Parent or pursuant to the
Operative Documents and Contracts to which it is a party; and (iv) will
not be a party to or be bound by any contract or other document other
than such Operative Documents to which it is a party, its organizational
documents, and such other documents, agreements and contracts between
it, its Parents and Affiliates of its Parents necessary and desirable to
enable it fully to perform the functions and activities contemplated by
this Agreement and the other Operative Documents.
4.6 No Defaults; Operative Documents and Contracts. It has not
received any notification to the effect that any material Contract is
not in full force and effect or will not be immediately after the
Closing, and it has not received any notification of default,
repudiation or disaffirmance from any other party thereto and has no
reason to believe that any material Contract will not be in full force
and effect immediately after the Closing, except to the extent that such
event or condition as would not have a Material Adverse Effect on such
Parent, its Defense Business or the Partnership.
4.7 No Outstanding Rights. There are no outstanding rights, options,
agreements or other commitments and on the actual date of Closing,
except as provided in the Operative Documents or the Schedules attached
thereto, there will be no outstanding rights, options, agreements or
other commitments, giving any Person any current or future right to
require such Partner, its Parent or any of their Affiliates (or,
following the actual date of Closing, the Partnership) to transfer to
any Person any ownership or possessory interests in any Assets,
Contracts and Liabilities of such Partner, its Parent or any of their
Affiliates.
4.8 Title and Liens.
4.8.1 Title to Assets Other Than Real Property. Such Partner or one of
its Affiliates has, and at the Closing, the Partnership shall receive,
good title to all tangible Assets other than Real Property that are
purportedly owned, free and clear of all Liens, other than Permitted
Liens.
4.8.2 Title to Real Property. Schedules 4.8.2A and 4.8.2B set forth a
complete list of all real property and interests in real property owned
in fee by the FMC Defense Business and the Harsco Defense Business,
respectively, that will be transferred to the Partnership at Closing
(individually, an "Owned Property"). Schedules 4.8.2A and 4.8.2B also
set forth a complete list of all real property and interests in real
property owned or leased by the FMC Defense Business and the Harsco
Defense Business, respectively, that will be leased by the Partnership
as the tenant or lessee thereof after the Closing (individually, a
"Leased Property") and identify any material leases relating thereto.
Except as set forth on Schedule 4.8.2A or 4.8.2B, each Parent has (i)
good and marketable fee title to all Owned Property and (ii) good and
valid title to the leasehold estates in all Leased Property, including
subleases, in each case free and clear of all mortgages, liens, leases,
security interests, easements, covenants, rights-of-way and other
similar restrictions or encumbrances of any nature whatsoever, except
(a) Permitted Liens, (b) easements, covenants, rights-of-way and other
similar restrictions or encumbrances of record and (c) (i) zoning,
building and other similar restrictions, (ii) mortgages, liens, leases,
security interests or encumbrances that have been placed by any
developer, landlord or other third party on property over which either
Defense Business has easement rights appurtenant to or used in
connection with any Owned Property or on any Leased Property and
subordination or similar agreements relating thereto and (iii)
unrecorded easements and rights-of-way, encroachments and discrepancies
in area or boundary lines, none of which items set forth in clauses (b)
and (c) above, individually or in the aggregate, materially impair the
continued use and operation in either Defense Business, as presently
conducted, of the property to which they relate and the improvements
located on such property.
4.9 Assets in Good Condition and Working Order. To its Knowledge, all
property, plant, equipment and inventories included in each Parent's
Assets are in normal working order, except for ordinary wear and tear,
retirements in the ordinary course of business, normal maintenance and
repair and breakdowns that do not significantly affect normal
operations. All inventories included in each Parent's Assets are
accurately valued and carried on an average cost basis and, except for
such inventories that constitute Slow-Moving Inventory (i) are usable or
saleable in the normal course of the Parent's Defense Business; (ii) at
the actual date of Closing, will not be excessive in kind or amount in
light of prior inventory levels at comparable periods and anticipated
sales; and (iii) are reasonably adequate and sufficient in kind and
amount with respect to actual sales commitments as of the date hereof
and anticipated sales commitments, in light of historic rates of
inventory turnover. Except as shown on Schedules 4.9A and 4.9B, there
is not, with respect to such Partner's accounts receivable, any known
existing default or any receivable that such Partner does not reasonably
expect to collect within six months of the actual date of Closing,
except as would not, individually or in the aggregate, have a Material
Adverse Effect on the Partnership. Attached hereto as Schedules 4.9A
and 4.9B are schedules of aged accounts receivable of the FMC Defense
Business and the Harsco Defense Business, respectively. On the actual
date of Closing, each Parent will submit to the Partnership an updated
list of aged receivables being transferred to the Partnership.
4.10 Contracts, Etc. Set forth on Schedule 4.10 are lists of all
contracts, agreements, licenses and commitments relating to its Defense
Business which: (a) provide for the sale or other disposition of
products or services to customers of, or for the purchase of raw
materials, products or services from suppliers to, such Defense Business
(excluding consulting contracts, sales representative agreements,
marketing agreements and lobbying agreements), other than contracts,
agreements, licenses and commitments which individually (i) do not
involve future payments or receipts of more than $1,000,000 or (ii)
permit cancellation by either Parent or any Defense Affiliate thereof
upon 90 or fewer days' notice without any liability, penalty or premium
in excess of $100,000; (b) provide the terms and conditions pursuant to
which distributors, distributor branches, service dealers and direct
dealers (foreign and domestic) provide Defense Business products,
service and parts to end user customers or relating to the compensation
of or termination of arrangements with such persons or entities by
either Defense Business; (c) set forth the terms of any material
subcontracts, joint ventures, teaming arrangements, collective
bargaining agreements, leases, employment, confidentiality or
non-competition agreements, related party transactions or arrangements,
guarantees, debt instruments, off-sets with foreign governments or
intellectual property agreements; (d) are otherwise material to the
business, operations, financial condition or prospects of the
Partnership; or (e) provide for the procurement by either Parent of
consulting, sales representative, marketing or lobbying services,
regardless of the amount involved in each such contract. The list of
Contracts set forth on Schedule 4.10 shall indicate those Contracts for
which a novation agreement or consent to assignment of contract may be
required and shall be separated into the following categories: (i)
government contracts; (ii) consulting contracts; (iii) sales
representative contracts; (iv) lobbying contracts; (v) supply, services,
and vendor contracts; and (vi) other contracts. True and complete
copies (or originals, if available) of all Contracts that are listed on
Schedule 4.10 shall be made available, as requested, to the other Parent
for review as soon as practically possible. There are no known
liabilities in excess of $100,000 in the aggregate with regard to all
classified U.S. Government contracts to which such Partner is a party.
Each contract providing for the provision of products and services to
customers by either Parent shall be designated as either an Active
Contract or an Inactive Contract on Schedule 4.10. Except as set forth
in Schedule 4.10, to its Knowledge, there is not, with respect to the
Contracts, any existing default, or an event of default, or event which
with due notice or lapse of time or both would constitute a default or
an event of default, on the part of FMC or Harsco, as the case may be,
or the other party thereto, except such defaults, events of default and
other events which would not, individually or in the aggregate, have a
Material Adverse Effect on the Partnership. Except as disclosed in
Schedule 4.10 (or as not required to be disclosed), no other contract
exists which would bind the Partnership or which would restrict the
ability of the Partnership to consummate the transactions contemplated
hereby or engage in any business within its Scope of Activity.
4.11 Legal Matters. Except as set forth on Schedule 4.11 and except
for provisions in any contract with the U.S. Government that permit the
U.S. Government to terminate such contract for its convenience, neither
Parent nor any Subsidiary thereof is subject to any Governmental Rule,
Private Action or contract or agreement that may have a Material Adverse
Effect on the Partnership. There are no material legal impediments to
the operation of such business activity within the Scope of Activity in
the ordinary course. Except as set forth in Schedule 4.11, there is no
governmental or private litigation, arbitration or other proceeding or
investigation by any Governmental Authority pending or, to the Knowledge
of such Parent, threatened against such Parent or any Subsidiary thereof
that would materially and adversely affect the Assets or Contracts
(including their transfer to or use by the Partnership), the Liabilities
or the continued operation of such Assets or Contracts by the
Partnership in the manner in which they have been operated by each of
the Parents to date or have a Material Adverse Effect on the
Partnership. Further, except as set forth on Schedule 4.11, there
currently exist no judgments unsatisfied against either Parent or any of
its Affiliates in connection with its Defense Business, nor any consent
decree or injunction to which it is subject. Except as set forth in
Schedule 4.11, neither FMC nor Harsco is aware of any unfair labor
practice on its part or any acts or omissions on its part which are
reasonably expected to constitute an unfair labor practice under the
National Labor Relations Act.
4.12 Liabilities. Except for liabilities of the types and in the
amounts set forth on the Pro Forma Balance Sheet or the Final Closing
Balance Sheet and liabilities otherwise disclosed on Schedule 4.12 or on
any other Schedule to this Agreement, there are no liabilities or
obligations of any kind (absolute, accrued, contingent or otherwise),
including, but not limited to, liabilities or obligations relating to or
arising out of the operation of either Defense Business, that are
reasonably expected, individually or in the aggregate, to have a
Material Adverse Effect on such Parent's Defense Business or the
Partnership.
4.13 No Broker's or Finder's Fees. Neither Parent nor any Subsidiary
has incurred any liability for any broker's or finder's fees or
commissions or similar payments in connection with any of the
transactions contemplated hereby which will, directly or indirectly,
become the responsibility of, or be borne by, the Partnership or the
other Parent or any Affiliate thereof.
4.14 Financial Information. Attached hereto as Schedule 4.14A or
4.14B, as the case may be, is such Partner's good faith estimate at the
time of preparation thereof, based on reasonable assumptions, of the
projected September 30, 1993 balance sheets (each a "Pro Forma Balance
Sheet") of its Defense Business, except as noted therein. Each Pro
Forma Balance Sheet has been prepared in accordance with GAAP and such
Parent's historical accounting procedures with respect to its Defense
Business, except as noted therein.
4.15 Events Subsequent to December 31, 1992. Except as indicated in
Schedule 4.15 with respect to it, from and after December 31, 1992,
neither Parent, with respect to its Defense Business, has: (i) suffered
or experienced any material adverse change in its financial condition,
Assets, Liabilities, business, results of operations, net worth or
prospects, other than changes in the ordinary course of business, none
of which (individually or in the aggregate) has been materially adverse
to its financial condition, Assets, Liabilities, business, results of
operation, net worth or prospects; (ii) suffered any damage, destruction
or loss, whether or not covered by insurance, which adversely affects
its properties, Assets or business in any material respect; (iii) made
or granted any increase in the compensation payable or to become payable
to any employees, or any increase in any bonus, insurance, pension or
other employee benefit arrangement to, for or with any such employees,
other than in the ordinary course of business or terminated, given
notice of termination to or received notice of the resignation of any
key employee; (iv) mortgaged, pledged, hypothecated or otherwise
encumbered any of its material assets; (v) sold, licensed or
transferred, or agreed to sell, license or transfer, any of its assets,
other than in the ordinary course of business; (vi) sold or transferred,
or agreed to sell or transfer, any material patents, trademarks, trade
names, copyrights, licenses, rights to special processes or other
intangible assets previously used in its operations; (vii) agreed to any
material amendment to or termination of a Contract, or entered into,
accelerated, terminated or modified any Contract, lease, sublease,
rental agreement or license, in any such case involving more than
$1,000,000; (viii) incurred any new commitment (through negotiations or
otherwise) or liability to any labor organization; (ix) entered or
agreed to enter into any agreement or arrangement granting preemptive
rights, preferential rights or rights of first refusal with respect to
its Assets; (x) delayed or postponed beyond its normal and usual
practice the payment of any accounts payable and other liabilities; (xi)
canceled, compromised, waived, settled or released outside of the
ordinary course of business any right or claim (or series of related
rights and claims) involving more than $1,000,000; or (xii) entered into
any other material transaction other than in the ordinary course of
business as theretofore conducted.
4.16 Consents. No consent, authorization, order or approval of, or
filing or registration with, any Governmental Authority is required for
or in connection with the consummation by each Parent of the
transactions contemplated hereby, except for: (i) those that have been
obtained, (ii) the Novation Agreement, (iii) circumstances where the
failure to obtain such consent, authorization, order or approval would
not have a Material Adverse Effect on such Parent's Defense Business or
the Partnership and (iv) those set forth in Schedule 4.16.
4.17 Notice of Governmental Authorization and Compliance With Laws.
Since January 1, 1988, except as set forth on Schedule 4.17, with
respect to its Assets and its Defense Business, it has not received any
written notification of any asserted present or past failure to comply
in any material respect with any applicable laws, regulations or other
requirements of any Governmental Authority having jurisdiction over it,
except for such noncompliance as would reasonably be expected not to
have a Material Adverse Effect on such Parent's Defense Business or the
Partnership. With respect to its Assets and its Defense Business, it
has obtained all material permits, certificates, licenses, approvals and
other authorizations (other than pursuant to the Novation Agreement)
required in connection with its present operations, none of which will
lapse, expire, terminate, be revoked or rescinded or otherwise become
lost or unavailable to the Partnership by reason of the transactions
contemplated by this Agreement. To the best of its Knowledge, the
Assets and the Defense Business have been operated in compliance in all
material respects with all terms and conditions of any and all material
permits, licenses and authorizations. Since January 1, 1988, except as
set forth on Schedule 4.17, there has been no (a) criminal proceeding
(whether regarding a felony or misdemeanor offense) threatened in
writing or commenced with respect to its Defense Business, however
resolved, (b) suspension or debarment proceeding threatened in writing
or commenced by any Governmental Authority, (c) civil proceeding under
the False Claims Act, as amended, commenced with respect to its Defense
Business, however resolved, or (d) claim made or threatened in writing
by any Governmental Authority under the Truth in Negotiations Act or
under the Foreign Corrupt Practices Act of 1977, each as amended.
4.18 Government Contracts. Except as set forth in Schedule 4.18, it
has not received, with respect to its Assets, notice of any default
under or notice of any violation of the terms of any government contract
which relates to its Defense Business, either directly or as a
subcontractor, consultant or otherwise. Except for routine audits in
the ordinary course of business and as set forth in Schedule 4.18, it is
not participating in any investigation by any Governmental Authority
relating to its government contracts, billings, claims or business
practices that could lead to criminal or civil penalties, and, to its
Knowledge, it is not the subject of any such investigation relating to
its Defense Business. Except as set forth in Schedule 4.18, since
January 1, 1983 it has not been and is not debarred or suspended by any
Governmental Authority from bidding for or obtaining any government
contract (including as a result of any listing proceeding under 40
C.F.R. Part 15), and no such proceeding is pending, or to its Knowledge,
threatened, which could result in the debarment or suspension of it or
any part of its Defense Business.
4.19 Capital Stock and Equity Interests of Defense Affiliates and
Defense Subsidiaries. Schedule 4.19 sets forth for each Defense
Affiliate and Defense Subsidiary, as applicable, the amount of its
authorized capital stock, the amount of its outstanding capital stock,
the record owners of its outstanding capital stock, or the record owners
of its partnership interests and such record owners' percentage
ownership. All the outstanding shares of capital stock of each Defense
Affiliate and Defense Subsidiary have been duly authorized and validly
issued and are fully paid and nonassessable. Except as set forth on
Schedule 4.19, the shares of capital stock or partnership interests of
any Defense Affiliate or Defense Subsidiary have not been issued in
violation of, and none of such shares of capital stock or partnership
interests is subject to, any preemptive or subscription rights. Except
as set forth on Schedule 4.19, there are no shares of capital stock or
other equity securities or partnership interests of any Defense
Affiliate or Defense Subsidiary outstanding. Except as set forth on
Schedule 4.19, there are no outstanding warrants, options, "phantom"
stock rights, agreements, convertible or exchangeable securities or
other commitments (other than this Agreement or any other Operative
Document) pursuant to which the Partnership is or may become obligated
to issue, sell, purchase, return or redeem any shares of capital stock
or other securities of any Defense Affiliate or Defense Subsidiary, and
there are not any equity securities of any Defense Affiliate or Defense
Subsidiary reserved for issuance for any purpose. Except as set forth
on Schedule 4.19, each Parent directly or through one or more
wholly-owned subsidiaries has good and valid title to all the
outstanding shares of capital stock or partnership interests of each
Defense Subsidiary, free and clear of any liens, claims, encumbrances,
security interests, options, charges and restrictions whatsoever, and
all outstanding shares of capital stock are duly authorized and validly
issued and outstanding, fully paid and nonassessable. Except as set
forth on Schedule 4.19, neither Defense Business directly or indirectly
owns any capital stock of or other equity interests in any corporation,
partnership or other entity.
4.20 Intellectual Property Rights.
4.20.1 The Transferred Intellectual Property Rights, Licensed
Intellectual Property and Licensed Third Party Rights comprise all of
the intellectual property rights necessary for the operation of its
Defense Business as currently conducted or proposed to be conducted; it
owns, possesses with the right to use or has a valid and enforceable
license with respect thereto free and clear of all liens, security
interests, encumbrances and other restrictions and no claim by any third
party contesting the validity, enforceability, use, possession or
ownership of any of the Transferred Intellectual Property Rights or
Licensed Intellectual Property is currently outstanding or known to be
threatened.
4.20.2 Schedule 4.20 sets forth a complete and correct list of its
Statutory Rights and Marks constituting Transferred Intellectual
Property Rights and Licensed Intellectual Property and all licenses or
other agreements (including teaming agreements) to which it is a party
relating to Licensed Third Party Rights and/or Transferred Intellectual
Property Rights or Licensed Intellectual Property. The Transferred
Intellectual Property Rights will be transferred and/or assigned to the
Partnership at the Closing.
4.20.3 The loss or expiration of any Statutory Right or Mark or related
group of Statutory Rights or Marks would not have a Material Adverse
Effect and no such loss or expiration is threatened, pending or
reasonably foreseeable; neither Parent (or any of its Defense
Affiliates) has received any notice of, nor is aware of any facts which
indicate a likelihood of, any infringement or misappropriation by, or
conflict with, any third party with respect to any of its Data Rights,
Statutory Rights, Marks or Licensed Third Party Rights (including,
without limitation, any demand or request that such Parent or its
Defense Affiliates license any rights from a third party).
4.20.4 The transactions contemplated by this Agreement will have no
material adverse impact on the right, title and interest in the
Transferred Intellectual Property Rights or Licensed Intellectual
Property or the licenses and other agreements relating to the Licensed
Third Party Rights. It has taken the necessary action to maintain and
protect the Statutory Rights and Marks prior to Closing.
4.21 Employee Benefits and Contracts. With respect to employee benefit
programs and contracts applicable to Plan Participants or other persons:
4.21.1 Except as set forth on Schedule 4.21.1, neither Parent, with
respect to its Defense Business, maintains, contributes to or is a party
to any (i) nonqualified deferred compensation, bonus or retirement plans
or arrangements, (ii) qualified defined contribution or defined benefit
plans or arrangements which are employee pension benefit plans (as
defined in Section 3(2) of ERISA), (iii) employee welfare benefit plans
(as defined in Section 3(1) of ERISA) or fringe benefit plans or
programs, (iv) invention and disclosure agreements and secrecy
agreements, or (v) employment contracts, letters of employment,
competition agreements, compensation, commission, bonus, fee or profit
sharing agreements or stock purchase agreements. Unless stated
otherwise, when used in this Section 4.21, the terms "Pension Plan" and
"Welfare Plan" refer to such respective pension and welfare plans of
Harsco and FMC as listed on Schedule 4.21.1.
4.21.2 Neither Parent, with respect to its Defense Business, within the
last five years, has contributed to any multiemployer pension plan (as
defined in Section 3(37) of ERISA). Neither Parent, with respect to its
Defense Business, is aware of any circumstances which would or could
subject it or any successor to withdrawal liability pursuant to the
Multiemployer Pension Plan Amendments Act.
4.21.3 Neither Parent, with respect to its Defense Business, maintains
or contributes to any plan which provides health, accident or death
benefits to former employees, their spouses or dependents, other than in
accordance with Section 4980B of the Code or as disclosed on Schedule
4.21.1.
4.21.4 To each Parent's Knowledge, each Pension Plan and Welfare Plan
(and related trust and insurance contract) complies in form and in
operation in all material respects with the applicable requirements of
ERISA, the Code and Federal securities laws; and, with the exception of
the Nonqualified Plans listed on Schedule 4.21.1 and identified as such,
the Pension Plans meet the requirements of "qualified plans" under
Section 401(a) of the Code, each trust related thereto has been
determined to be exempt from tax pursuant to section 501(a) of the Code,
each such Pension Plan has received a favorable determination letter
from the Internal Revenue Service, and neither FMC nor Harsco is aware
of any event that has occurred since the date of such determination,
including changes in laws or regulations or modifications to such
Pension Plans, that would adversely affect such qualification or tax
exempt status with respect to their respective Pension Plans.
4.21.5 To each Parent's Knowledge, all required reports and
descriptions (including, but not limited to, Form 5500 Annual Reports,
Summary Annual Reports, PBGC-1s and Summary Plan Descriptions) with
respect to each Pension Plan and Welfare Plan have been properly filed
with the appropriate Governmental Authority and/or distributed to
participants or other interested parties, and each of FMC and Harsco has
complied with the requirements of Section 4980B of the Code.
4.21.6 With respect to each Pension Plan, all contributions which are
due (including all employer contributions and employee salary reduction
contributions) have been paid to such Pension Plan and benefits which
are payable from such Pension Plan have been paid or adequate provision
therefore has been made. With respect to each Welfare Plan, all
premiums, contributions or other payments and all benefits which are due
have been paid.
4.21.7 No Pension Plan has been completely or partially terminated nor
has it been the subject of a "reportable event" as that term is defined
in Section 4043 of ERISA as to which notices would be required to be
filed with the PBGC; and no proceeding by the PBGC to terminate any such
Pension Plan has been instituted or threatened. To its Knowledge,
neither FMC nor Harsco has incurred any liability to the PBGC, the IRS,
the Department of Labor, any multiemployer plan or otherwise with
respect to any Pension Plan or Welfare Plan currently or previously
maintained by members of their respective controlled group or their
affiliated service group of companies (as defined in Sections 414(b) and
(c) and (m) of the Code, the "Controlled Group")that has not been
satisfied in full, and no condition exists under any Pension Plan or
Welfare Plan that presents a material risk to either FMC or Harsco or
any member of FMC's or Harsco's respective Controlled Group of incurring
such a liability, other than liability for premiums due the PBGC.
4.21.8 The Accumulated Benefit Obligation (as defined in Statement of
Financial Accounting Standards No. 87 as to (i), (ii), (iii) and (iv)
below) and the Accumulated Postretirement Benefit Obligation (as defined
in Statement of Accounting Standards No. 106 as to (v) and (vi) below)
as of December 31, 1993 associated with Plan Participants under the (i)
Qualified Pension Plans maintained by FMC is estimated to be
$154,472,000 using FMC's actuarial assumptions shown on Schedule 4.21.8,
and the corresponding Fair Market Value of assets (determined in
accordance with Section 5.9.5.2 is estimated to be $216,118,000; (ii)
Qualified Pension Plans maintained by Harsco is estimated to be
$34,700,000 using Harsco's actuarial assumptions shown on Schedule
4.21.8, and the corresponding Fair Market Value of assets (determined in
accordance with Section 5.9.5.2 is estimated to be $44,783,000;
(iii) Nonqualified Plans maintained by FMC is estimated to be $1,375,000
using FMC's actuarial assumptions shown on Schedule 4.21.8, and the
corresponding Fair Market Value of assets (determined in accordance with
Section 5.9.8) is estimated to be $0; (iv) Postretirement Benefit Plans
maintained by FMC is estimated to be $60,858,000 using FMC's actuarial
assumptions shown on Schedule 4.21.8, and the corresponding Fair Market
Value of assets (determined in accordance with Section 5.9.7) is
estimated to be $20,795,000; and (v) Postretirement Benefit Plans
maintained by Harsco is estimated to be $4,330,000, using Harsco's
actuarial assumptions shown on Schedule 4.21.8, and the corresponding
Fair Market Value of assets (determined in accordance with Section
5.9.7) is estimated to be $0. The assets of each Pension Plan described
in clauses (i) and (ii) above will on the actual date of Closing exceed
the respective Accumulated Benefit Obligation (as defined in Statement
of Financial Accounting Standards No. 87) under such plan.
4.21.9 With respect to each Pension Plan and each Welfare Plan, (i)
there have been no known prohibited transactions as defined in Section
406 of ERISA or Section 4975 of the Code, (ii) there has not been
asserted against any fiduciary (as defined in Section 3(21) of ERISA) or
any disqualified person (as defined in Section 4975 of the Code) any
claim for liability for breach of fiduciary duty or any other failure to
act or comply in connection with the administration of the plan or the
investment of the assets of such plan, and (iii) no actions,
investigations, suits, claims or any similar matters (other than routine
claims for benefits) are pending or threatened against such plan or its
respective sponsor, and neither FMC nor Harsco has Knowledge of any
facts which would give rise to or could reasonably be expected to give
rise to any such actions, suits or claims.
4.21.10 With respect to each Pension Plan and each Welfare Plan, each
of FMC and Harsco has furnished to the other true and complete copies of
(i) the most recent plan documents, summary plan descriptions and
summaries of material modifications, (ii) the most recent determination
letter received from the Internal Revenue Service, where applicable,
(iii) the most recent Form 5500 Annual Report, actuarial valuation
report, and accountant's opinion where applicable, (iv) any related
trust agreements, insurance contracts or other funding agreements which
implement such plans and (v) Part VII of the most recent CASB Disclosure
Statement.
4.21.11 Except as set forth on Schedule 4.21.11 or otherwise disclosed
in writing on January 24, 1994, (i) there are no employee benefit cost
disallowances pending or threatened by any agency of the U.S. Government
and neither FMC nor Harsco has Knowledge of any facts which would give
rise to or could reasonably be expected to give rise to any such actions
and (ii) all employee benefit costs have been properly determined and,
with respect to Qualified Pension Plans, funded in a timely manner in
accordance with any applicable CAS or FAR and any such determination is
consistent with the CASB Disclosure Statement and established practices
of FMC or Harsco.
4.22 Bargaining Agents. Schedule 4.22 lists each bargaining agent
representing or purporting to represent any Transferred Employees
(whether or not recognized by such Parent as the recognized collective
bargaining agent) and each collective bargaining agreement currently
applicable to any Transferred Employee to which such Parent is a party,
and such Parent has furnished to the other Parent and to the Partnership
true and complete copies of each such agreement.
4.23 Impact of Transaction. To its Knowledge, except as contemplated
by this Agreement, no Transferred Employee of such Parent will become
entitled to any compensation, bonus, retirement, severance, job security
or similar benefit or enhanced benefit solely as a result of the
transactions contemplated by this Agreement, including the transfer of
Transferred Employees hereunder.
4.24 Employment Contracts and Benefits. Except as set forth on
Schedule 4.24, neither such Parent nor its directors, officers,
shareholders or employees has made any binding commitments, promises or
representations, including in connection with any "effects bargaining"
required by Section 8(a)(5) of the National Labor Relations Act, to the
employees of its Defense Business with respect to any change in the
terms and conditions of employment, either before or after the Closing.
4.25 Labor Controversies; Affirmative Action. There are no
controversies, pending or threatened, between such Parent and any
employees or any employee benefit plan which may have a Material Adverse
Effect on such Parent's Defense Business and, to such Parent's
Knowledge, no action has been taken, or has failed to have been taken,
which would provide a reasonable basis for such a controversy. To its
Knowledge, such Parent has complied in all material respects with all
laws relating to the employment of labor, including any provisions
relating to wages, hours, collective bargaining, occupational safety and
health, affirmative action and the payment of vacations, retirement,
social security and similar taxes or benefits with respect to their
respective Defense Businesses. Such Parent has no Knowledge of any
activities or proceedings of any labor union (or representatives of
labor unions) to organize any unorganized employees of its Defense
Business, or of any work stoppages, or threats thereof, by or with
respect to those employees. During the twelve month period preceding
the date of this Agreement, there has not been any significant labor
dispute involving employees of its Defense Business except as listed in
Schedule 4.25. Such Parent does not have has any affirmative action
plans and is not operating under any compliance commitments with any
equal employment opportunity governmental agency or bureau with respect
to its Defense Business, except those listed on Schedule 4.25.
4.26 Disclosure. The representations and warranties contained in this
Article IV, and all written information given by it or any of its
Affiliates to another party pursuant to the terms of this Agreement, do
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements made, in the light of the
circumstances under which they were made, not misleading.
4.27 Operation of Schedule Disclosures. To the extent that an item is
disclosed on one of the Schedules hereto, and the applicability of such
item to another Schedule is reasonably apparent by reference to the
provisions of this Agreement and/or such other Schedule, such item shall
be deemed to be incorporated into such other Schedule and disclosed
thereon.
4.28 Postemployment Benefits. Harsco's obligations with respect to its
Defense Business for postemployment benefits, as defined in SFAS 112 but
as modified below, on the actual date of Closing will not exceed $2
million in the aggregate and FMC's obligations with respect to its
Defense Business for postemployment benefits, as defined in SFAS 112 but
as modified below, will not exceed $3 million. For purposes of this
Section 4.28, obligations for postemployment benefits as defined in SFAS
112 exclude severance and salary continuation benefits and exclude
workers' compensation benefits and obligations; provided, however, that,
as to FMC, such severance and salary continuation benefits satisfy the
following conditions: (i) FMC has currently on reserve approximately
$525,000 for severance and salary continuation benefits with respect to
its Armament Systems Division and such reserve will be reflected in
FMC's Final Closing Balance Sheet and (ii) substantially all severance
and salary continuation benefits that do not constitute Consolidation
Costs with respect to the Ground Systems Division's Bradley contract
are, to FMC's knowledge, reimbursable by the U.S. Government.
ARTICLE V
SECTION 5.0 COVENANTS.
5.1 Covenants of Parents. Each Parent covenants to the other Parent,
on behalf of itself and its Defense Affiliates, that:
5.1.1 Conduct of Businesses. Until the Closing:
5.1.1.1 Ordinary Course. It shall carry on, or cause to be carried on,
its normal and usual activities and business in connection with the
design, development, manufacture, marketing, sale, maintenance and
support of FMC Assets or Harsco Assets, as the case may be, in the
usual, regular and ordinary course and, except in connection with any
reversal of reserves which will not be reflected on the Final Closing
Balance Sheets, shall refrain from taking any action to accelerate the
receipt of revenues or the recognition of income beyond its usual,
regular and ordinary practices as engaged in prior to September 30,
1993; use, or cause to be used, efforts no less diligent than heretofore
conducted to preserve intact the activities of its Defense Business; use
all reasonable efforts to keep available the services of present
officers and key employees employed in its Defense Business; and use all
reasonable efforts to preserve relationships with customers, suppliers
and others having business dealings with such Business consistent with
its obligations hereunder. It shall not engage in (i) any activities
outside the ordinary course of the its Defense Business, including, but
not limited to, the acquisition of, merger with or into or consolidation
with another business operating in the defense industry and (ii) any
activity described in Section 4.15 above.
5.1.1.2 Access to Information. It shall provide the other Parent, as
reasonably requested, financial information relating to its Assets and
Liabilities and will provide the other Parent with reasonable
opportunities to physically inspect its books and records and principal
properties and facilities, to review permits and licenses,
correspondence and other documents issued by or submitted to any
Governmental Authority, including any agency with jurisdiction relative
to Environmental Requirements, and to interview and obtain information
from current employees, provided that such inspection and information
relate primarily to its Defense Business.
5.1.1.3 Advice of Changes. It shall promptly notify the other Parent
of any change or event having, or which, insofar as can reasonably be
foreseen, would have, a Material Adverse Effect on the Partnership, or
which would result in any material inaccuracy in any representation or
warranty at Closing.
5.1.1.4 Revisions to Contracts. In the event that it or its
Subsidiaries enters into contracts in the ordinary course of business
after the Signing Date and prior to Closing and such contracts are of
the type which would have constituted Contracts if held by such Parent
(or any Defense Affiliate or Defense Subsidiary) on the Signing Date,
Schedule 4.10 will be amended on or prior to the actual date of Closing
to include such contracts as Contracts. In addition, such Schedules
shall be amended to delete Contracts completed or terminated after the
Signing Date in the ordinary course of business in connection with the
business. If there are any contracts which are to be added to Schedule
4.10 pursuant to this Section, it shall use reasonable efforts to cause
such additional contracts to be freely transferable to its appropriate
Defense Affiliate and then to the Partnership.
5.1.2 Other Agreements. Prior to or at the Closing, it will enter
into, or cause its Defense Subsidiaries that will be parties to any
Operative Document to enter into, the other Operative Documents.
5.1.3 Planning Information. Subject to any restrictions set forth in
this Agreement or in the Partnership Agreement, it recognizes the need
for on-going communication with the Partnership. Therefore, from time
to time in its sole discretion, it intends to disclose to the
Partnership planning and product trend information which may be relevant
and reasonably necessary to the Scope of Activity of the Partnership.
5.1.4 Taxes; Charges; Laws. It shall, and shall cause its Defense
Subsidiaries that are parties to Operative Documents to (i) unless being
contested by appropriate proceedings, promptly pay all applicable Taxes
and other governmental charges allocable and taxable to it or them under
applicable federal, foreign, state and local tax laws, which relate to
the business of the Partnership; (ii) report, subject to any obligations
of notification and consultation set forth in the Partnership Agreement,
its allocable share of income, loss or other Partnership items
consistent with the manner in which such items are reported by the
Partnership to such Partner on Federal Form 1065, Schedule K-1, or
disclose any inconsistency in the treatment of such items on its Federal
income Tax returns; (iii) use all reasonable efforts to comply with all
Governmental Rules; (iv) preserve and keep, free of charge, all books,
papers and records, which relate to the Assets and Liabilities
contributed by such Parent or its Partner to the Partnership (which
Parent or Partner shall provide access to the Partnership to such books
and records as reasonably requested by the Partnership); and
(v) cooperate with and provide such information to the Partnership, as
reasonably requested by the Partnership.
5.1.5 Liens. Prior to the Closing, it shall not create or otherwise
allow any Lien to attach to or otherwise to affect any of its Assets or
Contracts to be transferred by it or its Subsidiaries, except Permitted
Liens and those otherwise permitted or required pursuant to the
Operative Documents.
5.1.6 No Solicitation. Except as permitted under Section 5.1.1.1,
prior to the Closing or the earlier termination of this Agreement, none
of the Parents and their Affiliates will, directly or indirectly,
through any officer, director, employee, agent or otherwise, solicit,
initiate or encourage submission of proposals, offers or other
indications of interest from any Person relating to any acquisition,
purchase, new joint venture or other extraordinary transaction involving
the disposition of either Defense Business or participate in any
negotiations or other discussions regarding, or furnish to any other
Person any information with respect to, or otherwise cooperate in any
way with, or assist, participate in, facilitate or encourage, any effort
or attempt by any other Person to do or seek any of the foregoing.
5.1.7 Environmental Permits, Licenses and Other Authorizations. Prior
to or after Closing, each Parent shall, at its own cost, use all
reasonable efforts to arrange transfer or reissuance, as necessary and
appropriate, of any permits, licenses and other authorizations issued
pursuant to Environmental Requirements with respect to the Real Property
and other Assets transferred to the Partnership by such Parent. Such
Parent shall use all reasonable efforts to complete such transfer or
reissuance in a manner which maximizes the operational flexibility of
the Partnership and minimizes ongoing capital and operating costs and
other burdens. In the event such transfer or reissuance could, in the
judgment of such Parent, result in material impediments to ongoing
operations, in material capital or operating costs to the Partnership or
in the existence of any Burdensome Governmental Condition, such Parent
shall so notify the other Parent promptly.
5.2 Transfer and Deliveries at Closing; Deferrals of Transfer and
Assumption.
5.2.1 Transfer and Deliveries. At or before the Closing, FMC shall
transfer or cause to be transferred to the Partnership and Harsco shall
transfer or cause to be transferred to the Partnership, their respective
Assets, Liabilities, Active Contracts and, subject to Sections 5.3.2 and
6.1(c), Inactive Contracts. Such transfers shall be pursuant to the
applicable Operative Documents and other duly executed deeds,
assignments of leases, bills of sale and other documents of transfer, in
form and substance reasonably satisfactory to the other Parent. Without
limiting the foregoing, deeds conveying Owned Property shall, pursuant
to Section 3.20 above, be limited warranty deeds containing covenants of
warranty of title against the claims of all persons claiming by, through
or under the grantor but not claiming otherwise.
5.2.2 Deferrals. Notwithstanding any other provision in any Operative
Document, the transfer of any Assets and Contracts and the assumption of
related Liabilities for which a Consent is required shall be deferred
until such Consent is legally obtained pursuant to the procedures set
forth in Section 5.11.
5.3 Further Assurances.
5.3.1 Pre-Closing. Prior to Closing, each party shall take all
reasonable actions necessary to obtain (and shall cooperate with the
others in obtaining) any Governmental Action (including preliminary
arrangements to obtain the Novation Agreement) or Private Action
(including Consents, but subject to Section 5.11) required to be
obtained or made by it in connection with any of the transactions
contemplated by this Agreement, except that it shall not be required to
accept any Burdensome Governmental Condition.
5.3.2 Post-Closing. From and after Closing, except as otherwise
provided herein or in the other Operative Documents, each party shall,
at its own cost, do, execute and perform all such other acts, deeds and
documents as the other parties or the Partnership may from time to time
reasonably require in order to consummate the transactions contemplated
by this Agreement, including using its best efforts to enter into the
Novation Agreement as soon as practicable following the Closing
(provided, that no party shall be required to novate any Inactive
Contract if the conditions of such novation would, in the judgment of
such party, impose an unacceptable financial burden on such party).
5.4 Parent Undertaking as to Partner Obligations. Each Parent agrees
with the other Parent that it shall take no action which would interfere
with the full and faithful performance or observance by such Parent's
Affiliates of all covenants, conditions, representations, warranties and
agreements under the Operative Documents to which such Parent's
Affiliates are parties. Each Parent will exercise, and will cause its
affiliate Partner to exercise, good faith, fairness and integrity either
in connection with, or in the conduct of, the business and affairs of
the Partnership.
5.5 Transfer of or Liens on Ownership Interests of Partners.
5.5.1 General Rule. For so long as the Partnership Agreement (or any
successor agreement or agreements) is in effect, a Parent may not
transfer or subject to any Liens (other than Permitted Liens), or suffer
to exist any such Liens on, all or any part of its ownership interest in
any of its Affiliates which is a Partner or all or any part of the
partnership interest held by such Parent or its Partner, as applicable,
except with the consent of the other Parent (which may be withheld in
its sole discretion) or as otherwise permitted by this Agreement, the
Partnership Agreement or the Registration Rights Agreement, and any
attempt to do so shall be void.
5.5.2 Intra-Parent Exception. Without being deemed to have violated
Section 5.5.1, a Parent may, upon 30 days' prior written notice to the
other Parent, transfer all, but not less than all, of its ownership
interest in the Partnership held by the Partner or by it, as applicable,
or in any Affiliate which is a Partner to another corporation (i)
incorporated in a domestic jurisdiction and (ii) 100% directly or
indirectly owned by such Parent, provided that such transfer does not
have a Material Adverse Effect on the Partnership, and provided further
that such Parent shall not thereafter transfer or permit to be
transferred the stock of such transferee corporation to a third party,
except as otherwise permitted under this Agreement, the Partnership
Agreement or the Registration Rights Agreement. In no event shall the
transferring Parent or Partner be relieved of any obligations for which
such transferring Parent or Partner would otherwise be liable hereunder
in the absence of such a transfer.
5.6 Public Announcements. No party shall, without the consent of the
other Parent prior to the actual date of Closing, issue any press
release or make any written public announcement with respect to this
Agreement and the transactions contemplated hereby, except as may be
required by Governmental Rule (and, if so required, such party shall
give such Parent a reasonable opportunity to comment thereon). For
purposes of the foregoing, no periodic report filed with the U.S.
Securities and Exchange Commission shall be deemed to be a public
announcement. After the actual date of Closing, each Parent shall use
reasonable endeavors to coordinate the dissemination of material public
information concerning the Partnership and its business.
5.7 Certain Taxes. The Partnership will pay up to $400,000 per Parent
in any Transfer Taxes payable in connection with the formation of the
Partnership with respect to the Assets and Liabilities transferred by
either Parent to its Partner and by either Parent or its Partner to the
Partnership. The Partnership will not assume or pay any other Taxes of
a Parent or its Partner except to the extent such Taxes are accrued on
such Parent's Final Closing Balance Sheet or otherwise provided for in
the Partnership Agreement.
5.8 Confidential Information. No employee of the Partnership or
employee made available to the Partnership while remaining an employee
of a Parent or an Affiliate shall be obligated to reveal confidential or
proprietary information belonging to either Parent (or either Parent's
Affiliates) without the consent of such Parent. All secrecy agreements
between Harsco and employees of Harsco who, as of the Closing Date, will
become Transferred Employees and all secrecy agreements between FMC and
employees of FMC who, as of the Closing Date, will become Transferred
Employees will, if necessary and to the extent feasible, be amended by
the actual date of Closing so as to protect the confidentiality of
information relating to the businesses of Harsco, FMC and the
Partnership. Each Parent will use all reasonable efforts to cause any
such agreement necessary to be entered into in order to protect such
information to be entered into by the actual date of Closing.
Subject to the Intellectual Property Agreements, Harsco shall, and shall
cause its Affiliates, directors, officers, employees, advisors and
agents to, keep all proprietary or confidential information in its
possession from and after the Closing which in any way relates to the
business or properties of the Partnership confidential and not use any
such information which is proprietary in nature for any commercial
purpose other than as is required to monitor its investment in the
Partnership, to familiarize any prospective purchaser of all or any
portion of Harsco L.P.'s partnership interest in the Partnership upon
such prospective purchaser's signing a form of confidentiality agreement
reasonably acceptable to the Partnership, in connection with the
preparation of Harsco's periodic reports filed with the SEC or in the
defense or prosecution of litigation (so long as Harsco uses reasonable
efforts to obtain a protective court order relating to such
information); provided, however, that (i) this covenant shall not apply
to any information which (A) is or shall come into the public domain
other than by reason of a breach of this Section 5.8, (B) becomes
available on a non-confidential basis from a source that, to the
Knowledge of Harsco, is not bound by a confidentiality agreement
protecting such information, (C) is or was independently developed by
Harsco without violating this Section 5.8 or other confidentiality
agreement which, to the Knowledge of Harsco, protects such information,
(D) is required to be disclosed to a Governmental Authority under any
applicable Governmental Rule or (E) is disseminated to the public in the
manner contemplated by Section 5.6; and (ii) the right of any
prospective purchaser of all or any portion of Harsco L.P.'s partnership
interest in the Partnership which competes with the Partnership or any
of its Subsidiaries in any material way within the Scope of Activity to
receive (and the right of Harsco to provide), upon, after or prior to
such purchase of such interest, any proprietary or confidential
information required to be provided or made available pursuant to the
terms of this Agreement or the Partnership Agreement shall be subject to
such prospective purchaser's signing of a separate form of
confidentiality agreement, which shall be reasonably satisfactory to the
Partnership and which shall contain appropriate restrictions on
disclosure of competitively sensitive information to such prospective
purchaser (which will permit disclosure of such information to an
independent third party agent of such prospective purchaser in lieu of
such prospective purchaser to permit such agent to evaluate and monitor
the investment characteristics of the Partnership).
5.9 Employee and Employee Benefits Matters.
5.9.1 Offers of Employment. Upon consummation of the Closing and
effective as of the Closing Date, the Partnership will make employment
available to all people listed on Schedule 5.9.1 (which Schedule shall
be updated by each Parent on the first day of every month between the
Signing Date and the actual date of Closing and delivered to the other
Parent promptly thereafter). Schedule 5.9.1 shall include those people
employed by FMC in the FMC Defense Business and those people employed by
Harsco in the Harsco Defense Business, but shall exclude any employee of
either Parent with the consent of the other Parent. FMC or Harsco may
with the consent of the other list additional people on Schedule 5.9.1.
All people listed on Schedule 5.9.1 who accept employment with the
Partnership will be deemed the "Transferred Employees." The Transferred
Employees shall include all employees on approved leaves of absence,
including those on long-term or short-term disability or on lay-off, and
Schedule 5.9.1 shall identify those employees on leave of absence,
disability or lay-off. Unless otherwise provided in this Agreement or
otherwise agreed by the Parents prior to the Closing, the Partnership
will make employment available to the Transferred Employees at the
salaries and other compensation, with the benefits (excluding the stock
option and long term incentive plans described in Sections 5.9.14 and
5.9.15), and subject to the terms of all contracts (including collective
bargaining agreements) applicable to them, and under the employment
practices and policies applicable to them, agreed to or provided or
adopted by the respective Parent immediately prior to the Closing Date;
provided, however, that this provision is not intended to create any
contractual right to employment or to any term of employment for any
Transferred Employee, except as otherwise expressly provided in
applicable collective bargaining agreements. Notwithstanding the
foregoing, the unwillingness of any collective bargaining representative
to concur in the applicability of the terms of any collective bargaining
agreement to any Transferred Employees after the Closing shall not be
construed as a failure by either Parent to fulfill its obligations under
this Section 5.9.1. After the Closing Date, the Partnership shall have
the same rights as the respective Parent would have had, should
employment of Transferred Employees have continued with the Parent, to
change or terminate such salaries and compensation, benefits, contracts
and employment practices and policies and all employees of the
Partnership, whether employed pursuant to this provision or otherwise,
will be employed at will by the Partnership.
5.9.2 Transition Benefit Plans. The Partnership shall establish and
administer certain benefit plans for the Transferred Employees and other
Plan Participants. The Partnership intends to adopt competitive
compensation plans for its executive and senior management personnel to
replace the stock option plans and long term incentive plans (described
in Sections 5.9.14 and 5.9.15) which shall not form a part of the
Transition Plans described herein. Subject to the preceding sentence
and Section 5.9.1 hereof, as of the Closing Date, the Partnership shall,
to the extent permitted by applicable law, establish or adopt, and
assume obligations under, the same benefit plans for the Transferred
Employees and other Plan Participants which their respective Parent
maintained for and applied to them immediately prior to the Closing Date
("Transition Benefit Plans"), each of such plans to be identified on
Schedule 4.21.1. Such obligations shall include, without limitation,
obligations which a Parent may have relating or attributable to periods
of service prior to the Closing Date (but excluding severance
obligations for employees who terminated prior to the Closing Date), but
only if such obligations are reflected on the Final Closing Balance
Sheet of the Parent or are not so reflected and would be considered
obligations for postemployment benefits (other than pre-closing workers'
compensation obligations described in Section 5.15) of the type
described in SFAS 112. For purposes of this entire Section 5.9 and
Section 6.3, where any such reflected item represents the Parent's
estimate of its obligation, such Parent shall have no further liability
with respect to such obligation once it is assumed by the Partnership;
provided, however, that the estimate was based upon reasonable actuarial
assumptions consistent where applicable with those set forth on Schedule
4.21.8 and calculated in recognition of all material facts. Harsco and
FMC shall each transfer to the Transition Benefit Plans, as hereinafter
described, assets to fund certain obligations assumed by the Partnership
under the Transition Benefit Plans. Unless otherwise indicated herein,
the Transition Benefit Plans shall, to the extent permitted by
applicable law, credit Transferred Employees and other Plan Participants
with years of service with FMC or Harsco, as the case may be, and with
predecessor employers to the extent recognized by FMC or Harsco, as the
case may be, for the purpose of vesting, accrual of benefits and meeting
eligibility or other service requirements. All employees, other than
the Transferred Employees, hired by the Partnership following the
Closing Date and prior to the Partnership's establishment of the
Partnership Benefit Plans described in Section 5.9.3 will be eligible
for coverage under the Transition Benefit Plans applicable to employees
at the location of the employment of such new hires.
5.9.3 Partnership Benefit Plans. The Partnership shall use its
reasonable best efforts to adopt, on or before July 1, 1994, benefit
plans ("Partnership Benefit Plans") which shall be effective as of the
Closing Date or as soon as practicable thereafter in the discretion of
the Partnership. Subject to the Partnership's right to change or
terminate the Transition Benefit Plans, as described in Section 5.9.1
hereof, the Partnership Benefit Plans shall replace the Transition
Benefit Plans in any reasonable manner deemed appropriate by the
Partnership; provided, however, that the Partnership, in establishing
the Partnership Benefit Plans, shall not cause any Plan Participant to
lose or be denied any vested benefit, right or feature with respect to
benefits accrued under any Transition Benefit Plan which is the
successor to a Pension Plan (as defined in Section 4.21.1). The
Partnership shall establish one or more Qualified Pension Plans for all
employees not covered under a collective bargaining agreement
("Partnership Nonunion Pension Plans") and such Partnership Nonunion
Pension Plans shall provide comparable levels of future benefit accruals
for all covered employees, making no distinction with respect to any
such employee on the basis of his or her former employment, except as
otherwise required by applicable law. The preceding sentence shall be
interpreted in a manner consistent with any applicable example in
Schedule 5.9.3 which provides for future benefit accruals based on past
and future benefit service. The Partnership shall fund all of the
Partnership Nonunion Pension Plans in accordance with reasonably similar
funding policies and fund earnings assumptions, except to the extent
different policies or assumptions may be necessitated by government
contract cost reimbursement considerations; provided, however, that such
plans shall be merged into one Partnership Nonunion Pension Plan at such
time as the Partnership decides that such a merger will not result in a
material disadvantage to the Partnership or its Parents.
5.9.4 Development of Partnership Benefit Plans and Policies. As soon
as practicable after the Closing Date, the Parents shall use reasonable
efforts to provide the Partnership with such information as may
reasonably be required in connection with the Partnership's development
or implementation of the Partnership Benefit Plans, employment practices
and policies. The Parents shall make available to the Partnership their
human resources staffs and other employees, agents and representatives
to assist in such planning, development and implementation. The
Partnership shall take into consideration the differences in benefit
structures and policies of each of the Parents and shall endeavor to
reconcile those differences, wherever possible, including the offering
of Harsco stock as an ongoing investment option under 401(k) plans;
provided, however, that no additional purchases of Harsco stock shall be
made under the Transition Benefit Plans or the Partnership Benefit Plans
unless a favorable interpretive letter ruling is obtained from the
Department of Labor to the effect that Harsco stock is not an employer
security or is a qualifying employer security with respect to such plans
or unless an opinion is received from legal counsel selected by the
Partnership indicating that such purchases would not be a prohibited
transaction. Where appropriate or required to fulfill the terms of this
Agreement, FMC, Harsco and the Partnership shall each make such filings
and submissions in connection with the Partnership Benefit Plans to the
appropriate governmental agencies.
5.9.5 Qualified Pension Plans. As described herein, each of FMC and
Harsco shall transfer all Qualified Pension Plan assets and obligations
associated with its Defense Business to the appropriate Transition
Benefit Plans designated by the Partnership, which assets shall be
invested in the FMC Master Trust. The Partnership shall take all
necessary action to ensure that each such Transition Benefit Plan
satisfies the applicable provisions of the Code. Assets segregated
pursuant to Section 401(h) of the Code are not considered as Qualified
Pension Plan assets for purposes of this Section 5.9.5.
5.9.5.1 Transfer of Obligations. Obligations associated with the
accrued benefits of each Plan Participant in any Qualified Pension Plan
maintained by FMC or Harsco in connection with its respective Defense
Business shall be assumed by a Transition Benefit Plan designated by the
Partnership, and assets with respect to such obligations shall be
transferred in accordance with the provisions hereunder.
5.9.5.2 Amount of Pension Assets to be Transferred. Qualified Pension
Plan assets associated with the accrued benefit obligations transferred
to a Transition Benefit Plan pursuant to Section 5.9.5.1 shall be
transferred to the FMC Master Trust, which shall form a part of such
Transition Benefit Plan. If an entire Qualified Pension Plan of FMC or
Harsco is adopted by the Partnership as a Transition Benefit Plan, then
all assets associated with such Qualified Pension Plan shall likewise be
transferred to the FMC Master Trust with respect to such Transition
Benefit Plan. If a portion of a Qualified Pension Plan of FMC or Harsco
is adopted by the Partnership as a Transition Benefit Plan, the amount
of assets to be transferred shall be determined in accordance with, and
shall equal the minimum amount necessary to satisfy, the applicable
provisions of CAS 413 and any other CAS and FAR provisions which the
government may deem applicable; provided, however, that if the
requirements of Code section 414(l) require that a greater amount of
assets be transferred, then such greater amount shall be transferred.
With regard to the Harsco Employees Pension Plan, FMC and Harsco agree
that based on the information provided to both parties prior to the
Closing, the amount of assets allocated to the Harsco Defense Business
under the applicable provisions of CAS 413 is estimated to be
approximately $22,000,000 and such amount of assets, when transferred,
will be in excess of the amount required under Code section 414(l);
provided, however, that such agreement shall not alter the
responsibility of the Harsco Employees Pension Plan to transfer any
additional amount which, pursuant to a final non-appealable decision,
may be required under Code section 414(l).
5.9.5.3 Investment of Pension Assets. FMC and Harsco intend that
assets transferred with respect to the Transition Benefit Plans
designated by the Partnership in accordance with Section 5.9.5.2 shall
be commingled for investment purposes in the FMC Master Trust; however,
separate accounting shall be maintained within the FMC Master Trust for
all such Transition Benefit Plans. Such separate accounting shall also
apply to any Partnership Benefit Plan which replaces a Transition
Benefit Plan.
5.9.5.4 Initial Asset Transfers. As of the Closing Date, FMC and
Harsco shall cause the trustees of their respective Qualified Pension
Plans to take the following steps:
(i) All assets associated with the following plans shall continue to be
held under the FMC Master Trust, and the sponsorship of such plans shall
be transferred from FMC to the Partnership: Retirement Plan for Hourly
Employees of FMC Corporation, San Jose, California; Retirement Plan for
Hourly Employees of FMC Corporation, Steel Products Divisions, Anniston,
Alabama; FMC Corporation Northern Ordnance Division Pension Plan for
Hourly Employees; and FMC Corporation Northern Ordnance Division Pension
Plan for Certain Employees.
(ii) In conjunction with the change of sponsorship of the portion of
the plan allocable to the obligations to FMC Transferred Employees under
the FMC Corporation Salaried Employees' Retirement Plan, FMC shall cause
the trustee of the FMC Corporation Salaried Employees' Retirement Plan
to continue to hold in cash or in securities with a readily determinable
market value an amount equal to $74,851,000 in the FMC Master Trust with
respect to such portion of such plan. An additional amount, if
necessary, shall be allocated to such portion at a later time as
described below.
(iii) All assets associated with the Bowen-McLaughlin-York Hourly
Employees Pension Plan shall be transferred to the FMC Master Trust, and
sponsorship of such Plan shall be transferred from Harsco to the
Partnership. Such assets shall be in the form of cash or securities
with a readily determinable market value.
(iv) In conjunction with the transfer of pension obligations from the
Harsco Employees Pension Plan to a Transition Benefit Plan designated by
the Partnership, Harsco shall cause the trustee of such Plan to transfer
to the FMC Master Trust in cash or in securities with a readily
determinable market value an amount equal to $21,889,000 with respect to
the Harsco Employees Pension Plan. An additional amount, if necessary,
shall be transferred at a later time as described below.
5.9.5.5 Follow-up Asset Transfers. As soon as practical after the
Closing Date, but in no event later than six months after said Closing
Date, FMC and Harsco shall complete the asset transfers described in
Sections 5.9.5.4(ii) and 5.9.5.4(iv) above with regard to the FMC
Corporation Salaried Employees' Retirement Plan and the Harsco Employees
Pension Plan. The parties shall determine the difference, if any,
between (A) the assets which should have been Transferred as of the
Closing Date pursuant to Section 5.9.5.2 and (B) the amounts that were
transferred on the Closing Date pursuant to Sections 5.9.5.4(ii) and
5.9.5.4(iv). FMC and Harsco will cause such difference to be
transferred in the same manner described in Section 5.9.5.4 or, if the
amount transferred exceeded the amount which should have been
transferred, FMC and Harsco shall cause such difference to be returned
to the transferror that transferred an excess amount; provided that the
amount so transferred shall reflect an adjustment for any interim
benefit payments as appropriate and shall include interest from the
Closing Date to the date of the final transfer at the 90-day Treasury
Bill rate on the auction date immediately preceding the Closing Date.
5.9.5.6 Verification. FMC and Harsco each agrees to provide an actuary
designated by the other party with all information necessary to verify
the calculations required by this Section 5.9.
5.9.6 401(k) Plans. The Partnership shall establish, as one of its
Partnership Benefit Plans, a 401(k) Plan which shall be a qualified plan
under Section 401(a) of the Code ("Partnership 401(k) Plan"). As soon
as practicable after the establishment of the Partnership 401(k) Plan,
subject to the receipt of all appropriate Governmental Actions, FMC and
Harsco respectively shall cause the trustee of its 401(k) Plan(s) to
transfer to a Partnership Master Trust established in connection with
the Partnership 401(k) Plan (i) the number of shares of FMC or Harsco
stock held under its 401(k) Plan for Plan Participants and (ii) cash,
cash equivalents or other securities with a readily determinable market
value such that the total of (i) and (ii) shall equal the Fair Market
Value of the assets of the respective FMC and Harsco 401(k) Plans
representing the account balances of Plan Participants as of the date
such assets are transferred. The Partnership 401(k) Plan shall provide
or arrange for the proper procedures to continue the status of
"securities of the employer corporation" of the FMC and Harsco stock
transferred hereunder so as to preserve certain tax advantages to Plan
Participants when such stock is distributed to them. Subject to Section
5.9.4, the Partnership 401(k) Plan shall also allow Plan Participants
the right to invest their before- and after-tax contributions in any
investment option offered under the plan (including FMC or Harsco
stock), and to have their Partnership matching contributions (which
shall be made in cash) invested in FMC or Harsco stock, to the extent
such rights are in accordance with applicable law.
5.9.7 Postretirement Benefit and Other Plans. As described herein, FMC
and Harsco shall transfer all Postretirement Benefit Plan assets and
obligations associated with Plan Participants to the Partnership. FMC
and Harsco plan assets segregated pursuant to Section 401(h) of the Code
are considered Postretirement Benefit Plan assets for purposes of this
Section 5.9.7.
5.9.7.1 Transfer of Obligations. Obligations associated with each Plan
Participant in any Postretirement Benefit Plan maintained by FMC or
Harsco in connection with its respective Defense Business shall be
assumed by the Partnership, but only to the extent such obligations are
reflected on FMC's or Harsco's Final Closing Balance Sheet, as
applicable.
5.9.7.2 Postretirement Benefit Plan Assets Segregated under Code
Section 401(h). All assets accumulated pursuant to Section 401(h) of
the Code under Postretirement Benefit Plans sponsored by FMC or Harsco
that are attributable to Plan Participants shall be transferred to the
FMC Master Trust; provided that such amounts shall be accounted for
separately. If the amount of such assets attributable to Plan
Participants has not been separately accounted for historically, FMC and
Harsco will agree on a reasonable allocation basis.
5.9.7.3 Postretirement Benefit Plan and Other Trusts Described in Code
Section 501(c)(9) to be Transferred in their Entirety. All trusts
described in Section 501(c)(9) of the Code under Postretirement Benefit
Plans or other plans sponsored by FMC or Harsco maintained solely for
the benefit of Plan Participants shall be transferred to a trustee
designated by the Partnership on the Closing Date.
5.9.7.4 Postretirement Benefit Plan and Other Trusts Described in Code
Section 501(c)(9) not to be Transferred in their Entirety. The portion
of the assets held in trusts described in Section 501(c)(9) of the Code
that are attributable to Plan Participants under Postretirement Benefit
Plans or other plans sponsored by FMC or Harsco that also cover
individuals other than Plan Participants shall be transferred to a
trustee designated by the Partnership on the Closing Date. If the
amount of such assets attributable to Plan Participants has not been
separately accounted for historically, FMC and Harsco will agree on a
reasonable allocation basis.
5.9.8 Nonqualified Plans. FMC and Harsco shall transfer to the
Partnership all obligations with respect to Plan Participants under
Nonqualified Plans maintained by FMC or Harsco in connection with its
respective Defense Business, but only to the extent such obligations are
reflected on FMC's or Harsco's Final Closing Balance Sheet, as
applicable. FMC and Harsco shall transfer to the Partnership any assets
associated with such Nonqualified Plans.
5.9.9 Other Benefit Plans. FMC and Harsco shall transfer to the
Partnership all obligations with respect to Plan Participants under all
other benefit plans not described in Sections 5.9.5 - 5.9.8 hereof
maintained by FMC or Harsco in connection with its respective Defense
Business, but only to the extent such obligations are reflected on FMC's
or Harsco's Final Closing Balance Sheet, as applicable, or are not so
reflected and would be considered obligations for post employment
benefits (other than pre-closing workers' compensation obligations
described in Section 5.15) of the type described in SFAS 112. FMC and
Harsco shall transfer to the Partnership any assets associated with such
other benefit plans.
5.9.10 Collective Bargaining Agreements. The Partnership shall
expressly recognize any collective bargaining representative recognized
by FMC or Harsco as of the Closing Date for those units that include
Transferred Employees and shall expressly assume any and all of FMC's
and Harsco's obligations under any collective bargaining agreements
existing on the Closing Date with respect to the Transferred Employees;
provided, however, that neither FMC nor Harsco shall have any liability
after the actual date of Closing for any claims by any such collective
bargaining representative arising as a result of the consummation of the
transactions contemplated hereby.
5.9.11 No Rights. Except with respect to any assumed collective
bargaining agreements, nothing herein expressed or implied shall confer
upon any of the employees of the Partners or their Affiliates or legal
representatives thereof, any rights or remedies, including, without
limitation, any right to employment or continued employment for any
specified period of any nature or kind whatsoever or to any specific
kind or level of compensation or benefit under or by reason of this
Agreement.
5.9.12 FICA. The standard procedure established in Section 4 of
Revenue Procedure 84-77, 1984-2 C.B. 753, relating to employment tax
returns and statements shall be adopted by FMC, Harsco and the
Partnership for Transferred Employees. In timely fashion, FMC and
Harsco will furnish the Partnership with information they have which the
Partnership needs to comply with this procedure. The Partnership, as to
each Parent, will be the "successor employer" for FICA/FUTA purposes.
5.9.13 NSD Decree. The Partnership shall be bound by the terms of the
Settlement Agreement and Consent Decree entered into by FMC with respect
to its Naval Systems Division in the so-called Smith/Cappellupo
litigation, Civil Action Nos. 4-85-1239, 4-86-945, and 4-89-1044 in the
United States District Court for the District of Minnesota.
5.9.14 Stock Option Plans. The Partnership shall not assume any
responsibility or obligation to any former employee of either Parent
with respect to stock options held by any such employees, including,
without limitation, options which may terminate or expire as a
consequence of leaving the employment of such Parent and becoming an
employee of the Partnership.
5.9.15 Long-term Incentive Compensation. The Partnership shall not
assume any responsibility or obligation to any former employee of either
Parent with respect to any long-term incentive compensation or
multi-year cash bonus.
5.10 Lack of Consents. To the extent that it is either legally or
factually impossible or impracticable for one party to assign or
otherwise transfer either a Contract or any Asset to the Partnership,
such transferring party hereby undertakes to otherwise provide the
Partnership with a substantially similar economic benefit, which, in the
case of Assets, shall require the transferring party to contribute in
lieu of the Asset additional cash in an amount equal to the net Book
Value of such Asset and, in the case of Contracts, shall require the
transferring party to comply with the provisions of Section 5.11.
5.11 Third Party Consent Procedures. To the extent that any rights
under any Contract (other than a Contract with the U.S. Government to be
novated pursuant to the terms of the Novation Agreement) to be assigned
under the Operative Documents may not be assigned without the consent of
another Person which such Person will not provide, this Agreement shall
not constitute an agreement to assign such Contract if such assignment
would constitute a breach thereof or be unlawful or impracticable. Such
Contracts are referred to herein as the "Restricted Contracts." The
Partner with an obligation to transfer a Restricted Contract (the
"Transferring Partner") shall take the following actions with respect
thereto:
5.11.1 At the Partnership's request, such Partner shall, with the
cooperation of the Partnership, take the actions described in Schedule
5.11 to obtain all required Consents to all Restricted Contracts as soon
as practical after the execution and delivery hereof and shall promptly
notify the Partnership as such consents are received. Upon receipt of
such Consents, such Restricted Contracts shall be deemed assigned to the
Partnership on the Closing Date, regardless of whether any
subcontracting arrangement has been entered into pursuant to Section
5.11.2 below. If a subcontracting arrangement has been entered into
with respect to a Restricted Contract for which a Consent to assignment
is received, such subcontracting arrangement shall, unless otherwise
agreed between the Partners, terminate automatically without further
action by the Partner or the Partnership.
5.11.2 As soon as practical after the Closing, a Transferring Partner
shall enter into a subcontracting relationship with the Partnership with
respect to each of such Partner's Restricted Contracts for which the
required Consent to assignment has not been received and which do not,
by their terms, require consent to subcontracting. Such subcontracting
arrangements shall provide for terms which will reasonably achieve for
the Partnership the economic benefit which it would have achieved
through an assignment of such Restricted Contract. As between the
Transferring Partner and the Partnership, the Restricted Contract shall
be treated to the maximum extent possible as if it had been assigned to
the Partnership, i.e., all terms and conditions, including price, of
such Restricted Contracts shall be binding on the Partnership, and the
Partnership shall bear any liabilities arising from events occurring
after the Closing Date thereunder, and with respect to such Restricted
Contracts, all revenues invoiceable for work performed after the Closing
Date shall be for the account of the Partnership and the risk of
uncollectibility shall be borne solely by the Partnership. The
Partnership and the Transferring Partner shall cooperate and use all
reasonable efforts to achieve the above-described results. In addition,
the Partnership agrees that if, as a condition to securing the Consent
to the assignment of any Contract, a Parent is required to guarantee the
performance by the Partnership of any obligation under that Contract,
the Partnership shall indemnify and defend such Parent against, and hold
such Parent harmless from, any liability with respect to the failure by
the Partnership, for whatever reason, to perform any such obligation.
At the Closing, each Partner shall advise the Partnership in writing as
to such Partner's Restricted Contracts and the steps which each Partner
proposes to take with respect thereto. Notwithstanding the foregoing
provisions of this Section 5.11.2 relating to subcontracting
arrangements, unless objected to by the other Partner, a Partner may
propose to become subject to the terms of this Section 5.11.2 with
respect to any or all of such Restricted Contracts and to dispense with
any further subcontracting arrangements with respect to each such
designated Restricted Contracts, so long as such Partner fully complies
with the obligations on its part set forth herein with respect to such
Restricted Contracts.
5.11.3 If any Restricted Contract also requires a Consent of a third
party to the valid subcontracting of all rights and obligations of the
Transferring Partner thereunder and if a Consent to assignment has been
refused by such third party, then after the Closing, the Transferring
Partner shall, with the cooperation of the Partnership, take the actions
described on Schedule 5.11 to obtain all such Consents to subcontracting
as soon as practical after the Closing and shall promptly notify the
Partnership upon receipt of such Consent. If such Consent is so
received, the Restricted Contract shall be subcontracted by the
Transferring Partner to the Partnership as contemplated by Section
5.11.2 above.
5.11.4 In the event that a Transferring Partner is unable to secure any
required Consent to assignment or subcontracting with respect to a
Restricted Contract, the Parent of the Transferring Partner and the
Partnership shall negotiate and enter into such agreements as are
necessary so that as closely as possible the result will be to
reasonably provide the equivalent economic benefit which the Partnership
would have enjoyed had such Restricted Contract been assigned to the
Partnership. In order to effect this, such agreements may call for the
Transferring Partner to contract with the Partnership for the provision
of personnel and/or services of the Partnership. It is expected that
all benefits and obligations under such Restricted Contract which would
have been transferred to the Partnership (including, without limitation,
the obligation to perform all work and services required under such
Restricted Contract and to provide all materials, equipment and products
required pursuant to such contracts), shall be assumed and performed by
the Partnership. The Partnership shall provide the personnel to perform
the work and services under such Restricted Contract to the Transferring
Partner, and the Partnership shall receive all revenues paid to the
Transferring Partner by such customers as consideration for the
provision of the Partnership's personnel.
5.12 Non-Dissolution. Neither Parent shall, or shall allow its
Subsidiaries to, petition any court for the involuntary dissolution of
the Partnership in the event that any party to the Operative Documents
defaults on its obligations under an Operative Document, and the
remedies for any such default shall be solely those set forth in the
Partnership Agreement, or other Operative Document, as the case may be.
5.13 Santa Clara Properties. Notwithstanding that FMC is expressly not
transferring to the Partnership its title to and ownership interest in
the Santa Clara Properties, FMC shall lease the Santa Clara Properties
to the Partnership for the Partnership's exclusive use, on the terms set
forth in the Lease Agreement, attached hereto as Exhibit G. To the
extent that the Fair Market Value (excluding any costs relating to the
remediation of any FMC Environmental Liability Event) of the Santa Clara
Properties to FMC at the termination of the Lease Agreement shall have
increased from the Fair Market Value (excluding any costs relating to
the remediation of any FMC Environmental Liability Event) of such
properties to FMC as of the Closing Date as a result of capital
improvements made thereon by the Partnership, FMC shall, upon the
termination of the Lease Agreement, reimburse the Partnership for the
unamortized, unrecovered and unrecoverable cost to the Partnership of
such capital improvements (to the extent such costs have not been
otherwise recovered by the Partnership through insurance proceeds).
Upon termination of the Lease Agreement, the Partnership shall indemnify
FMC and hold FMC harmless from and against any unpaid taxes relating to
such properties which the Partnership is obligated to pay under the
Lease Agreement and which accrued during the lease term. As used in
this Section 5.13, "capital improvements" shall not include any
expenditure, however characterized elsewhere, regarding environmental
matters, it being the parties' intention that their respective rights
and obligations regarding environmental expenditures be governed solely
by Sections 5.22 and 6.2 below.
5.14 Buyback of Accounts Receivable. In the event that any account
receivable (including all VLS Receivables, the due dates of which are
set forth on Schedule 5.14) assigned to the Partnership by either Parent
is not fully paid within ninety (90) days after its due date, the Parent
that assigned such account receivable covenants and agrees promptly to
repurchase such account receivable for cash, and the Partnership shall,
upon the request of the repurchasing Parent, act as the Parent's agent
for collection of the repurchased receivable. Neither Parent will
contribute at Closing any receivable that is more than 90 days past due.
5.15 Pre-Closing Workers' Compensation. Except as provided in the
following paragraph, it is agreed that subsequent to the Closing each
Parent will be responsible for, and will reimburse the Partnership with
respect to, all payments made by the Partnership to any of such Parent's
former employees for workers' compensation relating to pre-closing
occurrences. These obligations on the part of FMC and Harsco to make
such payments shall continue for as long as any such payments become due
to any former employee of either Parent. With respect to any workers'
compensation claim based upon conditions arising out of facts and
circumstances occurring both before and after the Closing, the
obligations of FMC or Harsco, as the case may be, shall be determined in
accordance with applicable Governmental Rules governing the
apportionment of responsibility for workers' compensation between
predecessor and successor employers.
5.16 Slow-Moving Inventory. The Partnership shall use reasonable
efforts to use all Assets contributed at the Closing which are
Slow-Moving Inventory (as identified on Schedule 5.16 hereto) in the
ordinary course of the Partnership's business. All such Slow-Moving
Inventory that is held by the Partnership on the second anniversary of
the Closing Date shall as soon thereafter as practicable be disposed of
by the Partnership. At such time, the Parent that contributed such
Slow-Moving Inventory will make a payment to the Partnership equal to
the excess, if any, of the book value of such Slow-Moving Inventory, as
reflected on the applicable Final Closing Balance Sheet, over the sum of
any reserve on such Final Closing Balance Sheet which was applicable to
such Slow-Moving Inventory and any amounts realized upon disposition of
such Slow-Moving Inventory.
5.17 Consultant and Audit Costs. Whether or not the transaction
contemplated hereby shall be consummated, FMC shall bear 60% and Harsco
shall bear 40% of (i) the costs, not to exceed $1,700,000, of the study
performed prior to December 31, 1993 in connection with the combination
of the FMC Defense Business and the Harsco Defense Business by Booz,
Allen & Hamilton and (ii) the costs for the audits referred to in the
last sentence of Section 5.3 of the Partnership Agreement, not to exceed
$400,000 in the case of the FMC audit and $70,000 in the case of the
Harsco audit. If either party's audit costs exceed the amount above
stated, such party shall be responsible for such excess.
5.18 Post-Closing Cash Advances. After the Closing Date and prior to
the second anniversary of the Closing Date, FMC and Harsco agree to make
to the Partnership at any time and from time to time, upon 3 Business
Days' notice, such cash advances, pro rata in accordance with their
respective Share Percentages, as the Managing General Partner deems
necessary or advisable to meet the Partnership's short-term cash
requirements; provided, however, that (i) such cash advances be in the
aggregate amount of not less than $1,000,000, (ii) in no event shall the
aggregate amount of such advances outstanding at any time from any
Parent exceed $12,000,000 in the case of FMC and $8,000,000 in the case
of Harsco, (iii) in no event shall such cash advances be used to finance
business activities outside the Scope of Activity and (iv) in no event
shall such cash advances be available to the Partnership until the
credit facility described in the following sentence is exhausted or
otherwise unavailable in accordance with its terms. In addition, from
and after the Closing Date, FMC agrees to make to the Partnership at any
time and from time to time, upon 3 Business Days' notice, such cash
advances as the Managing General Partner deems necessary or advisable to
meet the Partnership's short-term cash requirements; provided, however,
that such cash advances shall not at any one time exceed an amount equal
to the difference between (i) the aggregate amount of VLS Receivables
and (ii) the aggregate amount, if any, of such VLS Receivables that have
at such time been collected by the Partnership or repurchased by FMC in
accordance with the terms of this Agreement. As such accounts
receivable are collected or repurchased, the Partnership shall promptly
repay to FMC the portion, if any, of such cash advances which exceeds
the aggregate amount of such accounts receivable that have at such time
not been collected or repurchased in accordance with the terms of this
Agreement, and such amounts repaid shall not be subject to reborrowing.
Such advances will be evidenced by a senior promissory note maturing on
the second anniversary of the Closing Date (or, in the case of advances
pursuant to the immediately preceding sentence, as and when the VLS
Receivables are repurchased or collected) and bearing interest at a
floating rate (to be recalculated monthly) equal to the one year LIBOR
in effect on the first Business Day of such month plus 100 basis points
and may be repaid (pro rata in the case of advances pursuant to the
first sentence of this Section) at any time (subject to reborrowing)
without penalty or premium. The Parents acknowledge that these
facilities are intended to be available to provide for short-term
working capital and are not intended to provide a two-year financing
source. The Partnership shall repay any cash advance made pursuant to
this Section 5.18 before it makes any voluntary or optional prepayment
on any other debt outstanding.
5.19 Responsibility for Inactive Contracts. Upon the final close-out
or other settlement and any interim settlements with the U.S. Government
of any Partner's Inactive Contract (which settlement shall be subject to
the approval of such Partner), (i) if such settlement requires a payment
by the Partnership to the U.S. Government, the Parent which contributed
such Inactive Contract to the Partnership shall promptly deliver to the
Partnership an amount in cash equal to the amount of such payment or
(ii) if such settlement results in a payment from the U.S. Government to
the Partnership, the Partnership shall promptly deliver to the Parent
which contributed such Inactive Contract an amount in cash equal to such
payment. The Partnership shall be responsible for the administration of
the settlement of such Inactive Contracts.
5.20 Accounts Receivable. Except in respect of accounts receivable (i)
withheld from the Partnership pursuant to Section 2.1.3 or Section 2.1.4
(and not subsequently assigned to the Partnership pursuant to Section
2.3.3), (ii) transferred to a Parent pursuant to Section 2.3.3 and
(iii) withheld or repurchased from the Partnership by a Parent pursuant
to Section 5.14, each Parent shall promptly forward or cause to be
forwarded to the Partnership any and all proceeds from accounts
receivable relating to its Defense Business that are received by such
Parent after the Closing Date and that were outstanding as of the
Closing Date. With respect to accounts receivable (i) withheld from the
Partnership pursuant to Section 2.1.3 or 2.1.4 (and not subsequently
assigned to the Partnership pursuant to Section 2.3.3), (ii) transferred
to a Parent pursuant to Section 2.3.3 and (iii) withheld or repurchased
from the Partnership by a Parent pursuant to Section 5.14, the
Partnership shall promptly forward to the appropriate Parent any and all
proceeds relating to such accounts receivable received by the
Partnership after the Closing Date.
5.21 Responsibility for Pre-Closing Letters of Credit, Etc. The
parties hereto agree that any letter of credit, performance bond or bid
bond relating to any Active Contract that is issued by either Parent
prior to the Closing Date shall be the responsibility of the Partnership
after the Closing Date and shall be assumed by the Partnership on the
Closing Date. The Partnership agrees to reimburse the appropriate
Parent in cash within three Business Days for any draw or claim against
any such letter of credit, performance bond or bid bond made on or after
the Closing Date.
5.22 Environmental Matters.
5.22.1 Payments by Parents to Account for Losses Resulting from
Remedial Expenditures. The parties believe that each of them, with
respect to its Defense Business as conducted prior to the Closing, and
the Partnership, with respect to its business conducted after the
Closing, is legally entitled to include all Remedial Expenditures in its
pricing under customer contracts arising in such business. However, in
the event that circumstances result in an inability on the part of the
Partnership to obtain inclusion of such Remedial Expenditures in the
ordinary course of business in conjunction with the incurrence of such
Remedial Expenditures, the parties agree that a mechanism should exist
to limit the degree to which returns otherwise payable to either Parent
from the operations of the Partnership would be impaired as a result of
the Partnership's inability at any point in time to obtain such
inclusion with respect to the other Parent's prior conduct of its
Defense Business. In furtherance of the foregoing, each Parent agrees
that:
(i) in the event that an Environmental Realization Status Report
delivered pursuant to Section 5.22.3.1 shows that, during the relevant
Fiscal Quarter, the Partnership has incurred any FMC Unrealized Remedial
Expenditures or Harsco Unrealized Remedial Expenditures (including as a
result of any FRA determination during such Fiscal Quarter), then a
special allocation (an "Environmental Special Allocation") of such
incurrences shall be made in accordance with Section 4.3(c)(vi) of the
Partnership Agreement to the Partner of the Parent to which such
Unrealized Remedial Expenditures relate in an amount equal to 100% of
such Unrealized Remedial Expenditures;
(ii) in the event that an Environmental Realization Status Report
delivered pursuant to 5.22.3.1 shows that, during the relevant Fiscal
Quarter, the Partnership has Realized (including as a result of any FRA
determination during such Fiscal Quarter) FMC Qualifying Realized
Remedial Expenditures or Harsco Qualifying Realized Remedial
Expenditures which were previously reported under Section 5.22.3.1 as
Unrealized Remedial Expenditures, then an Environmental Special
Allocation of such Realization shall be made in accordance with Section
4.3(c)(iv) and (v) of the Partnership Agreement to the Partner of the
Parent to which such Realized Remedial Expenditure relates in an amount
equal to 100% of such Realized Remedial Expenditure.
5.22.2 Presumptions Regarding Environmental Liability Events.
5.22.2.1 It shall be conclusively presumed for purposes of this Section
5.22 that all environmental matters set forth on Schedule 5.22.2 are FMC
Environmental Liability Events or Harsco Environmental Liability Events
as indicated on such Schedule.
5.22.2.2 There shall be a rebuttable presumption, for purposes of this
Section 5.22, that any Environmental Liability Event not set forth on
Schedule 5.22.2 and pertaining either to the past conduct by FMC of its
Defense Business or to the ownership, operation or use of any facility
or property now or previously owned, operated or used in FMC's Defense
Business is an FMC Environmental Liability Event.
5.22.2.3 There shall be a rebuttable presumption, for purposes of this
Section 5.22, that any Environmental Liability Event (i) not set forth
on Schedule 5.22.2, (ii) pertaining either to the past conduct by Harsco
of its Defense Business or the ownership, operation or use of any
facility or property now or previously owned, operated or used in
Harsco's Defense Business and (iii) discovered and reported in writing
to the Advisory Committee on or before the first to occur of the fifth
anniversary of the Closing Date or the date on which FMC purchases
Harsco's ownership interest in the Partnership under its call option
pursuant to Section 7.2(a) of the Partnership Agreement is a Harsco
Environmental Liability Event. Any Environmental Liability Event
pertaining to the ownership, operation or use of any facility or
property now or previously owned, operated or used in Harsco's Defense
Business which is not subject to the conclusive presumption established
by Section 5.22.2.1 or the rebuttable presumption established by the
preceding sentence of this Section 5.22.2.3 (including any Environmental
Liability Event discovered and reported in writing to the Advisory
Committee after the date on which FMC purchases Harsco's ownership
interest in the Partnership under its call option pursuant to Section
7.2(a) of the Partnership Agreement) shall not be presumed to be a
Harsco Environmental Liability Event.
5.22.2.4 If the Partnership believes any environmental matter, which is
not subject either to a conclusive or a rebuttable presumption, to be a
Harsco Environmental Liability Event, the Partnership shall provide
Harsco with a reasonably detailed written notice setting forth the facts
and circumstances pertaining to such matter, the reasons leading the
Partnership to conclude that such environmental matter constitutes a
Harsco Environmental Liability Event and the data relied upon by the
Partnership in reaching such conclusion. The Partnership shall promptly
provide any additional information related to such environmental matter
as Harsco may reasonably request. Within sixty (60) days after receipt
of such notification and information, Harsco shall notify the
Partnership in writing whether Harsco agrees with the Partnership's
conclusion or disagrees in whole or in part with such conclusion. If
Harsco disagrees in whole or in part with the Partnership's conclusion,
Harsco shall set forth in its notification the reasons for its
conclusion and any data relied upon by Harsco in reaching such
conclusion.
5.22.2.5 Any rebuttable presumption under Section 5.22.2.2 or 5.22.2.3
can be rebutted on the basis of clear and convincing evidence to the
contrary in a judicial proceeding culminating in a final, non-appealable
order (unless otherwise resolved by the parties). Until any such
rebuttable presumption has been so rebutted, the Environmental Liability
Event that is subject to such presumption shall be treated, for purposes
of this Section 5.22, as an FMC Environmental Liability Event or a
Harsco Environmental Liability Event, as appropriate.
5.22.3 Quarterly Status Reports.
5.22.3.1 On or before the 30th day after the end of each Fiscal
Quarter, the Partnership shall send to each Parent an "Environmental
Realization Status Report." The Environmental Realization Status Report
shall set forth, in reasonable detail, all Remedial Expenditures (i)
planned, (ii) accrued as a liability or (iii) expended, in each case
during such Fiscal Quarter. Such Environmental Realization Status
Report shall also set forth in reasonable detail all Realizations of
Remedial Expenditures during such Fiscal Quarter. For purposes of such
Environmental Realization Status Reports, a planned Remedial Expenditure
shall be any such expenditure included in the forward pricing with
respect to any contract with a vendee.
5.22.3.2 The Partnership shall diligently pursue its right to cost
inclusion under customer contracts and to reimbursement from all other
Persons (except the Parents, the Partners and the directors, officers
and employees of each of them) having liability under applicable law
(whether pursuant to CERCLA or otherwise) with respect to all Qualifying
Remedial Expenditures, in each case together with any legally available
interest thereon. The Partnership shall have sole control and
management authority over any claim, litigation or other proceeding or
matter covered by the preceding sentence or the Partnership
indemnification set forth in Section 6.2, including the right to
negotiate and enter into settlements with interested Persons with
respect thereto and to defend or prosecute with counsel of its selection
any claim, litigation or other proceeding with respect thereto;
provided, however, that the Partnership shall not enter into any such
settlement which would give rise to Qualifying Remedial Expenditures
without the prior consent of the Parent to which such Qualifying
Remedial Expenditures relate (which will not be unreasonably withheld or
delayed).
5.22.4 Recordkeeping; Resolution of Amount of Realization.
5.22.4.1 The Partnership shall maintain, and make available to each
Parent for inspection as reasonably requested, books and records which
present in reasonable detail (i) information pertaining to the past
conduct by each Parent of its Defense Business (including forward
pricing rates) and the ownership, operation or use by each such Parent
of any facility or property now or previously owned, operated or used in
its Defense Business, as such information would bear on any
determination of whether a Remedial Expenditure is a Qualifying Remedial
Expenditure, a Realized Remedial Expenditure or an Unrealized Remedial
Expenditure; (ii) all relevant supporting data in connection with
contract-based claims or requests for reimbursement of Remedial
Expenditures; and (iii) all U.S. Government and other customer reports,
letters, requests for information or other pertinent information
submitted to the Partnership by the U.S. Government and other customers
regarding the Partnership's inclusion of Remedial Expenditures in its
contract pricing. In addition, the Partnership shall establish not less
frequently than annually and periodically submit to the DOD forward
pricing rates with respect to its costs, including Remedial Expenditures
to be incurred by the Partnership, which costs shall be identified in
sufficient detail to permit the Partnership to calculate FMC Qualifying
Remedial Expenditures, Harsco Qualifying Remedial Expenditures and other
Remedial Expenditures. Subject to applicable Governmental Rules, such
forward pricing rates, as they relate to Remedial Expenditures, will be
determined on the basis of the Partnership's best judgment as to the
Remedial Expenditures the Partnership will incur and the volume of
business the Partnership will transact during the relevant period.
These forward pricing rates will also be used (and appropriate records
shall be maintained by the Partnership) to identify Realized Remedial
Expenditures attributable to contracts with commercial customers
(including Major SPD Contracts) which are not subject to government
accounting and auditing procedures.
5.22.4.2 The Partnership shall maintain, and make available quarterly
to each Parent for inspection, a memo account (and sub-accounts for each
of FMC, Harsco and the Partnership) reflecting all Remedial Expenditure
costs and Realizations (the "Remedial Costs Account") to which shall be
charged or credited, as applicable, the following: (i) all
environmental reserves for Remedial Expenditures reflected on the Final
Closing Balance Sheets of FMC and Harsco, which reserves shall be
allocated as a credit to the Parent that contributed the reserve; (ii)
all receipts from vendees of either Parent or the Partnership (including
commercial customers as contemplated by Section 5.22.4.1 above)
attributable to the Realization of Remedial Expenditures pursuant to
Existing Contracts, which receipts shall be allocated as a credit to the
Parent that contributed the Existing Contracts; (iii) all receipts from
vendees of either Parent or the Partnership (including commercial
customers as contemplated by Section 5.22.4.1 above) attributable to the
Realization of Remedial Expenditures pursuant to New Contracts, which
receipts shall be allocated as a credit among FMC, Harsco and the
Partnership sub-accounts in accordance with Section 5.22.4.3 below; (iv)
receipts, if any, from such vendees attributable to the Realization by
the Partnership of FMC Qualifying Remedial Expenditures or Harsco
Qualifying Remedial Expenditures by means other than the Realization
thereof under procurement contracts between the Partnership and its
vendees, and all receipts from sources other than vendees, which
receipts shall be allocated as a credit to the sub-account of FMC or
Harsco, as the case may be, and all such receipts attributable to
post-Closing Environmental Liability Events, which receipts shall be
allocated as a credit to the Partnership; (v) all FMC Qualifying
Remedial Expenditures or Harsco Qualifying Remedial Expenditures
incurred by the Partnership (including, for this purpose, Remedial
Expenditures that are reflected in reserves assumed by the Partnership),
which Qualifying Remedial Expenditures shall be allocated as a charge to
the sub-account of FMC or Harsco, as the case may be, and all other
Remedial Expenditures attributable to post-Closing Environmental
Liability Events, which Remedial Expenditures shall be allocated as a
charge to the sub-account of the Partnership; (vi) all Environmental
Special Allocations under Section 4.3(c)(vi) of the Partnership
Agreement to each Parent's Partner of Unrealized Remedial Expenditures,
which Environmental Special Allocations shall be reflected as a charge
to the sub-account of the Parent to which such allocations were made;
(vii) all Environmental Special Allocations under Section 4.3(c)(iv) and
(v) of the Partnership Agreement to each Parent's Partner of
Realizations of Remedial Expenditures previously reported under Section
5.22.3.1 as Unrealized Remedial Expenditures, which Environmental
Special Allocations shall be reflected as a credit in the sub-account of
the Parent to which such allocations were made; (viii) any special
capital contributions made by a Parent to the Partnership pursuant to
Section 5.22.5, which capital contribution shall be reflected as a
credit in the sub-account of such Parent; (ix) any adjustment calculated
as a result of a rebuttal of a presumption with respect to a presumed
Qualifying Remedial Expenditure, which adjustment shall be reflected as
a credit to the sub-account of the Parent that rebutted the presumption;
(x) any special distribution made by the Partnership to a Parent's
Partner pursuant to Section 6.4 of the Partnership Agreement, which
distribution shall be reflected as a charge in the sub-account of such
Parent; (xi) any payment under Section 6.2 in respect of Qualifying
Remedial Expenditures shall be reflected as a charge to the sub-account
of the Parent with respect to which such payment is made; (xii) Major
Contract FRAs, which shall be allocated as a credit or a charge to the
sub-account of the Partnership, FMC and Harsco in accordance with
Section 5.22.4.4 below; (xiii) any Environmental Cash Flow Loan made by
a Parent to the Partnership pursuant to Annex B, which loan shall be
reflected as a credit in the sub-account of such Parent; and (xiv) any
repayment of an Environmental Cash Flow Loan to a Partner pursuant to
Annex B, which repayment shall be reflected as a charge in the
sub-account of such Parent.
5.22.4.3 With respect to each Fiscal Quarter of the Partnership in
which receipts from vendees under New Contracts attributable to
Realization of Remedial Expenditures are received, such receipts shall
be allocated among the Parents and the Partnership in proportion to the
actual expenditures by the Partnership for Remedial Expenditures
attributable to FMC, Harsco or the Partnership since the inception of
the Partnership on a cumulative basis. By way of example, if 50% of the
Remedial Expenditures of the Partnership in its first Fiscal Quarter
were expended with respect to FMC Environmental Liability Events, 25%
with respect to Harsco Environmental Liability Events and 25% with
respect to post-Closing Environmental Liability Events, all receipts
representing Realizations from vendees under New Contracts of Remedial
Expenditures in that Fiscal Quarter would be allocated 50% to the FMC
sub-account, 25% to the Harsco sub-account and 25% to the Partnership
sub-account. In each subsequent Fiscal Quarter of the Partnership,
these percentages will be recomputed on a cumulative basis of actual
expenditures since the Closing Date, and all Realizations from vendees
of Remedial Expenditures during such Fiscal Quarter will be allocated to
the three sub-accounts in accordance with the then applicable cumulative
percentage factors.
5.22.4.4 The amount of Realization of Remedial Expenditures from
purchasers of goods and services from the Partnership shall be
determined as follows: (i) with respect to each production contract
other than a Major Contract, and each other contract other than a Major
Contract, regardless of amount, the amount of Realization of Remedial
Expenditures shall be the amount provided for Remedial Expenditures in
the contract price based upon the Parent's or Partnership's forward
pricing rate used in such bid or proposal as determined in accordance
with Section 5.22.4.1 and shall be allocated to the appropriate
sub-account of the Remedial Costs Account proportionately as each unit
of production or other deliverable is paid for by the vendee as provided
in Section 5.22.4.3 above, and no further adjustment shall be made with
respect to any such contract, irrespective of any payments made to or by
the vendee in connection with contract close-out; (ii) with respect to
each Major Contract, the Tentative Remedial Expenditure Realization
shall be the Remedial Expenditure amount included in the data used by
the Partnership in its forward pricing rate to establish the contract
price as determined in accordance with Section 5.22.4.1 and the
Tentative Remedial Expenditure Realization shall be allocated to the
appropriate sub-account of the Remedial Costs Account proportionately as
each unit of production or other deliverable is paid for by the vendee
as provided in Section 5.22.4.3 above. The Tentative Remedial
Expenditure Realizations with respect to each Major Contract shall be
adjusted to reconcile any previously recorded Realization with a revised
Realization calculated in accordance with the following methodology:
A "Normative Fee" is hereby established for each category of Major
Contracts as follows:
Normative Fee
Major Contract Category GSD/CSD ASD SPD
Competitive Contract
(U.S., FMS and direct foreign) 8% 7% 7%
Sole source negotiated contract
(U.S. and FMS) 12% 10% 10%
Direct foreign sole source contract 15% 15% 15%
The Actual Fee (determined in the manner provided below) shall be
compared to the Normative Fee. If the Actual Fee exceeds or is less
than the Normative Fee applicable to the Major Contract, then the
Tentative Remedial Expenditure Realization shall be adjusted as follows
(such adjustment being referred to hereinafter as the Final Remedial
Adjustment or "FRA"):
ARER = AF x TRER
NF
where ARER = Adjusted Remedial Expenditure Realization;
AF = Actual Fee;
TRER = Tentative Remedial Expenditure Realization; and
NF = Normative Fee;
provided, that no such adjustment shall cause the final adjusted
Remedial Expenditure Realization to be less than zero or more than 200%
of the tentative Remedial Expenditure Realization.
For purposes of the foregoing calculations, the "Contract Price" shall
be the total revenues payable to the Partnership under the Major
Contract, the "Actual Cost" of performing the Major Contract shall be
the total costs incurred by the Partnership in the performance of the
Major Contract, including all direct costs and a fully allocated portion
of the Partnership's general and administrative and other indirect
costs, in each case determined in accordance with government contract
accounting policies and procedures applicable to the Partnership and the
"Actual Fee" shall be determined as follows:
Actual Fee = Contract Price - 1
Actual Cost
The following examples are intended to be illustrative:
Assume the Contract Price is $108, the Normative Fee is 8% and the
tentative Remedial Expenditure recognition is $4.
(1) If the Actual Cost of performing the Major Contract is $102, TRER
shall be
adjusted to $2.94.
(i.e., ARER = (((108/102) - 1)/.08) x 4 = $2.94.)
(2) If the Actual Cost of performing the Major Contract is $98, TRER
shall be
increased to $5.10.
(i.e., ARER = (((108/98) - 1)/.08) x 4 = $5.10.)
(3) If the Actual Cost of performing the Major Contract is $100, there
is no
adjustment.
(i.e., ARER = (((108/100) - 1)/.08) x 4 = $4.00.)
The Partnership shall make a FRA determination with respect to a Major
Contract within ninety days after the end of the Fiscal Year in which
the last deliverable under such contract has been received by the
customer or the billing has been sent to the customer with respect to
such last deliverable, whichever is later, and shall include the results
of such determination in the next Environmental Realization Status
Report delivered to the Parents pursuant to Section 5.22.3.1.
5.22.5 Contributions to Capital. The provisions hereof and of the
Partnership Agreement providing for Environmental Special Allocations
are based upon the Partnership's anticipated levels of Qualifying
Remedial Expenditures and Realizations. In order to protect the
Partnership against extraordinary cash flow disruptions, the Parents
agree that, in the event that the Cumulative Remedial Balance of FMC at
any time exceeds $10,000,000 or the Cumulative Remedial Balance of
Harsco at any time exceeds $6,666,667, then such Parent shall promptly
contribute or cause its Partner to contribute to the capital of the
Partnership an amount in cash equal to such excess; provided, however,
that during any period in which there shall be outstanding any cash
advances to the Partnership pursuant to the first sentence of Section
5.18, then FMC shall make such contribution to the capital of the
Partnership at any time that its Cumulative Remedial Balance exceeds
$5,000,000 and Harsco shall make such contribution to the capital of the
Partnership at any time that its Cumulative Remedial Balance exceeds
$3,333,333.
The parties intend that the obligation to make contributions to capital
pursuant to this Section 5.22.5 shall be recognized as a contractual
obligation treated as an account receivable included as an asset
(matched as to the current or long term status of the related liability)
in the financial statements prepared by the Partnership and reported on
by the Accountants to the extent that the Partnership determines that it
is required by GAAP to accrue for Remedial Expenditures. Each Parent
agrees that it shall take such steps as may be reasonably required by
the Accountants, including as to the Managing General Partner obtaining
a standby letter of credit with rights of enforcement vested in the
Limited Partner (as long as the Limited Partner has a 20% or greater
Share Percentage) and as to the Limited Partner obtaining a standby
letter of credit with rights of enforcement vested in the Managing
General Partner (provided that all such rights of enforcement are
available only to the extent required to make contributions to capital
under this Section 5.22.5), to support the contractual obligation set
forth in this Section 5.22.5 and to permit the recognition by the
Partnership of this contractual obligation as set forth above.
For GAAP purposes, accrued Qualifying Remedial Expenditures will be
specially allocated to the earnings share of the responsible Partner.
5.22.6 Monitoring by Harsco. Harsco shall have the right to inspect,
sample and monitor at the premises formerly utilized by the Harsco
Defense Business at all reasonable times and without unreasonable
interference with the Partnership's operations for a period of five
years following the Closing Date or the date on which FMC purchases
Harsco's ownership interest in the Partnership under its call option
pursuant to Section 7.2(a) of the Partnership Agreement, whichever is
the first to occur. The Partnership shall promptly undertake and
diligently pursue to conclusion such further environmental studies with
respect to the premises formerly utilized by the Harsco Defense Business
as Harsco may specify; provided, however that (i) except as required by
law or by any Governmental Authority, the Partnership shall not be
obligated to proceed with any aspect of such further studies at a time
and place which would unreasonably interfere with the Partnership's
conduct of its business and (ii) such obligation shall not limit the
Partnership's right to undertake such environmental studies of such
premises as the Partnership shall determine.
5.22.7 Examples. Attached hereto as Schedule 5.22.7 are examples
intended to illustrate the manner in which the foregoing provisions of
this Section 5.22 would operate in practice. In the event of any
discrepancy, or conflict in interpretation, between Schedule 5.22.7 and
the provisions of this Agreement and the Partnership Agreement, the
provisions of Schedule 5.22.7 shall control.
In the event of any of (i) the incorporation of the Partnership pursuant
to the Registration Rights Agreement, (ii) the acquisition by FMC of
the entire interest of Harsco L.P. in the Partnership as a result of the
exercise by FMC of its right of first refusal pursuant to Section 7.1(a)
of the Partnership Agreement, (iii) the closing pursuant to the exercise
by FMC of the call option pursuant to Section 7.2(a) of the Partnership
Agreement, (iv) the closing pursuant to the exercise by Harsco L.P. of
the put option pursuant to Section 7.2(b) of the Partnership Agreement,
(v) the sale by Harsco L.P. of its entire interest in the Partnership as
a result of and in conjunction with the sale by FMC of its entire
interest in the Partnership pursuant to Section 7.1(a) of the
Partnership Agreement or (vi) the sale by Harsco L.P. of its entire
interest in the Partnership in a private sale pursuant to Section 7.1(a)
of the Partnership Agreement, the parties hereto shall be subject to the
terms of Annex B hereto.
5.23 Goodyear Litigation.
5.23.1 The Partnership agrees to perform after the Closing under the
terms of the contract that is the subject of the Goodyear Litigation.
FMC shall continue to prosecute the Goodyear Litigation, at its own
expense, with counsel of its choice, and shall, on a quarterly basis,
reimburse the Partnership for any and all legal and other expenses
incurred by the Partnership in connection with such litigation. FMC
shall indemnify the Partnership against, and shall hold it harmless
from, any Loss as incurred (payable promptly upon request), for or on
account of or arising from or in connection with or otherwise with
respect to the Goodyear Litigation. The Partnership will provide
assistance to FMC in connection with the Goodyear Litigation in the
manner, and subject to the terms and conditions, set forth in Section
5.8 of the Partnership Agreement.
5.23.2 In the event that a resolution of the Goodyear Litigation
(whether by settlement agreement or judicial determination) determines
that the price to be paid to The Goodyear Tire & Rubber Company
("Goodyear") under such contract is lower than the price set forth in
the provisional agreement under which Goodyear and FMC are currently
operating, the parties hereto agree that the amount to be repaid by
Goodyear under such contract shall be remitted to FMC and not to the
Partnership. In the event that such resolution determines that the
price to be paid to Goodyear under such contract is higher than the
price set forth in such provisional agreement, FMC, and not the
Partnership, shall be responsible for remitting to Goodyear an amount
equal to such excess. The parties agree that, to the extent that
notwithstanding the above any remittances referred to in the preceding
two sentences are made by or to the Partnership, such remittances shall
be deemed to have been made to or by the Partnership as agent for FMC,
and the benefits and burdens of such remittances shall at all times
remain with FMC.
ARTICLE VI
SECTION 6.0 INDEMNITIES.
6.1 General. Subject to this Article, each Parent shall indemnify the
other Parent, such other Parent's Partner, the Partnership and their
officers, directors and employees (collectively the "Indemnified
Parties") against, and shall hold them harmless from, any Loss as
incurred (payable promptly upon request), for or on account of or
arising from or in connection with or otherwise with respect to any (a)
breach on the part of the indemnifying party or any of its Affiliates of
any surviving representation or warranty contained in any Operative
Document, (b) breach on the part of the indemnifying party or any of its
Affiliates of any covenant contained in this Agreement requiring
performance after the Closing Date, (c) Excluded Liability or any other
liability of such Parent or any of its Affiliates other than its Defense
Affiliates not expressly assumed by the Partnership under any of the
Operative Documents, (d) liability of any Defense Affiliate of such
indemnifying party listed on Schedule B to Annex A hereto that is not
taken into account in determining the amount by which such indemnifying
party's investment in such Defense Affiliate is recorded on such
indemnifying party's Final Closing Balance Sheet or (e) accrued
pre-Closing Liabilities of the types set forth for such Parent on its
Final Closing Balance Sheet (excluding those Liabilities of the types
set forth on Schedule 6.1) in excess of the amount reflected for such
Liabilities on such Parent's Final Closing Balance Sheet, provided no
Parent or its Partner shall recover any amount for any diminution in
value of its interest in the Partnership to the extent that the
Partnership is entitled to be indemnified and obtains full
indemnification for the underlying Loss.
Indemnification under clauses (a) and (e) of this Section 6.1 shall be
unavailable to any Indemnified Party until all amounts to which such
Indemnified Party is entitled exceed $1 million in the aggregate,
whereupon only the amount of such excess shall be available.
Indemnification shall be unavailable with respect to any claim for a
breach of a representation or warranty made in any applicable agreement
between the parties hereto and their Affiliates, as of a date on or
prior to Closing, if the claim is made or notice of possible claim of
reasonable specificity is received after the survival period for such
representation or warranty set forth in Section 7.12.
6.2 Liability for Environmental Matters.
Pursuant to the Assumption Agreement referred to in Section 2.1.6, the
Partnership shall assume all liabilities and obligations relating to
Environmental Liability Events. Subject to Section 6.1, the Partnership
shall be solely responsible for post-Closing compliance with
Environmental and Safety Requirements applicable to its operations and
facilities. Subject to the procedures, limitations and qualifications
set forth in Sections 6.5, 6.6, 6.7 and 6.8, the Partnership shall
indemnify and defend each Parent, such Parent's Partner, and their
officers, directors and employees against, and hold them harmless from,
any Loss as incurred (payable promptly upon request) for or on account
of or arising from or in connection with or otherwise with respect to
any Environmental Liability Event, whenever arising or caused, but only
to the extent that such Loss, or any portion thereof, is not paid by
such Parent's insurers under general liability insurance policies (or
any other applicable insurance policy). Notwithstanding anything to the
contrary in this Section 6.2, each Parent shall be obligated to seek
payment under its general liability policies only for all such Losses
and shall retain any liability or obligation relating to Environmental
Liability Events to the extent necessary to maintain its right to pursue
and obtain payment under its general liability policies. The
Partnership shall be entitled to receive all sums reimbursed to,
Realized by or otherwise paid to each Parent under its general liability
policies (or any other applicable insurance policy) for costs incurred
by the Partnership in connection with Environmental Liability Events
pursuant to this Section 6.2, less the cost of collection (including
attorneys' and consultants' fees). It is acknowledged by the parties
that the inclusion of costs incurred in connection with Environmental
Liability Events in pricing customer contracts are (i) in advance of
potential Realization from a Parent's general liability insurers, (ii)
not in lieu of such Realization and (iii) not designed to permit double
payment for costs to the Partnership or either Parent. This Section 6.2
is not intended to limit, reduce, define or otherwise restrict either
Parent's rights to recovery under its general liability policies in
connection with Environmental Liability Events.
6.3 Indemnification for Pension, Retiree Medical and Other Employee
Benefits Subject to the procedures and limitations set forth in
Sections 6.5, 6.6, 6.7 and 6.8, each Parent agrees to indemnify and
defend the Indemnified Parties against, and hold them harmless from, any
Loss for or on account of or arising from or in connection with or
otherwise with respect to any liability relating to a pension benefit
plan, retiree medical benefit plan or any other employee benefit plan
caused by or attributable to employment service with or the funding of
such plans by the Parent prior to the Closing Date, and not as part of
this transaction, either (i) funded through the transfer of assets or
(ii) assumed by the Partnership as an unfunded liability either (A)
reflected on the Parent's Final Closing Balance Sheet or (B) not so
reflected if such liability is an obligation for post employment
benefits (other than pre-closing workers' compensation) of the type
described in SFAS 112; provided, however, that no such indemnity shall
apply to any pension, retiree medical or other employee benefit provided
for in a Partnership benefit plan to the extent that such plan confers
different or greater benefits than the predecessor plans of either
Parent (it being understood that neither Parent assumes any
responsibility for any Partnership benefit attributable to pre-Closing
employment service in an amount greater than such Parent would have been
responsible for under the terms of its pre-Closing benefit plans); and
provided further that (i) FMC shall indemnify the Indemnified Parties to
the extent that the proviso in Section 4.28 above is inaccurate and (ii)
Harsco shall indemnify the Indemnified Parties to the extent that the
representation in Section 4.21.11 is inaccurate with respect to Harsco,
disregarding the information disclosed pursuant to the exception to such
Section 4.21.11. Each such Parent further agrees to indemnify and
defend the Indemnified Parties against, and hold them harmless from, any
Loss on account of any final non-appealable decision that the transfer
(or failure to transfer) of pension assets from such Parent's Qualified
Pension Plan to the Qualified Pension Plan of the Partnership as
described in Section 5.9.5 does not comply with applicable Governmental
Rules. In such event, the legally-required amount of additional assets
shall be transferred to the appropriate Qualified Pension Plan of the
Partnership, increased by the actuarial rate of earnings from the period
since the Closing Date. In addition, and subject to the foregoing
procedures and limitations, FMC agrees to indemnify and defend Harsco or
the Partnership, as applicable, and to hold it harmless, for any Loss
for or on account of or arising from or in connection with or otherwise
with respect to any liability relating to (a) benefit reductions
continued through the Partnership's adoption and implementation of a
retiree medical benefit plan which continues certain benefit reductions,
with respect to former FMC employees, initiated by FMC in 1993
(including, without limitation, an employer cost limitation scheduled to
take effect in 1996) and (b) the Partnership's being part of the
"controlled group" which includes FMC or under "common control" with FMC
as those terms are defined or used in ERISA and/or the Code.
Notwithstanding the foregoing provisions of Section 6.3, no Parent or
its Partner shall recover any amount for any diminution in value of its
interest in the Partnership to the extent that the Partnership is
entitled to be indemnified and obtains full indemnification for the
underlying Loss.
6.4 Indemnification for Demolition Costs. FMC shall indemnify the
Partnership against, hold it harmless from, and promptly reimburse it
with respect to any and all liability for costs and expenses relating
to, arising out of or incurred in connection with the demolition of any
buildings located on the Santa Clara Properties ("Demolition Costs"),
but only to the extent that such Demolition Costs were not incurred in
furtherance of a valid business purpose of the Partnership.
6.5 Procedures. With respect to any indemnification under this Article
VI in respect of, arising out of or involving a claim made by any Person
against an Indemnified Party (the "Third Party Claim"), such Indemnified
Party must notify the indemnifying party of the Third Party Claim within
a reasonable time after receipt by such Indemnified Party of written
notice of the Third Party Claim; provided, however, that the failure of
any Indemnified Party to give such notice shall not relieve the
indemnifying party of its obligations under this Article VI except to
the extent that the indemnifying party is actually prejudiced by such
failure to give notice. Thereafter, the Indemnified Party shall deliver
to the indemnifying party, within ten (10) Business Days after the
Indemnified Party's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to
the Third Party Claim.
6.6 Defense of Third Party Claims. If a Third Party Claim is made
against an Indemnified Party, the indemnifying party shall be entitled
to participate in the defense thereof and, if it so chooses, to assume
the defense thereof with counsel selected by the indemnifying party, if
(a) such counsel is not reasonably objected to by the Indemnified Party
within five days of the Indemnified Party's having knowledge of such
counsel's identity and (b) the indemnifying party first admits in
writing that the claim is of the kind that is covered by this Article.
Should the indemnifying party so elect to assume the defense of a Third
Party Claim, the indemnifying party shall not be liable to the
Indemnified Party for any legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof. If the
indemnifying party elects to assume the defense of a Third Party Claim,
the Indemnified Party shall (a) cooperate in all reasonable respects
with the indemnifying party in connection with such defense and (b) not
admit any liability with respect to, or settle, compromise or discharge
("Settle"), such Third Party Claim without the indemnifying party's
prior written consent. If the indemnifying party assumes the defense of
any Third Party Claim, the Indemnified Party shall be entitled to
observe such defense with its own counsel at its own expense. If the
indemnifying party does not assume the defense of any such Third Party
Claim, the Indemnified Party may defend the same in such manner as it
may deem appropriate, including Settling such claim or litigation after
giving reasonable notice to the indemnifying party of the terms of such
settlement, and the indemnifying party shall promptly, upon request of
the Indemnified Party, advance funds to the Indemnified Party in the
amount of any legal and other expenses reasonably incurred by the
Indemnified Party in connection with investigating, defending or
settling any such Third Party Claim unless there is a bona fide question
of whether the claim in question is one requiring the indemnifying party
in fact to indemnify the other. However, the indemnifying party shall
not be entitled to assume the defense of any Third Party Claim if the
Third Party Claim seeks an order, injunction or other specific equitable
relief or specific relief for other than money damages against the
Indemnified Party; but in its defense of such Third Party Claim, the
Indemnified Party shall neither Settle any portion thereof that seeks
money damages without the indemnifying party's prior written consent,
which shall not be unreasonably withheld, nor Settle any other portion
thereof that seeks a remedy against the Indemnified Party without such
prior written consent.
6.7 Indemnification Payments.
(a) Indemnification payments under this Article VI shall be reduced by
(i) any insurance payments or judgments against or settlements with
third parties that have been recovered by the Indemnified Party and (ii)
any Tax Benefits. For purposes of this Section 6.7, "Tax Benefits"
shall mean the present value of any tax benefits available to the
Indemnified Party (or any consolidated, combined or unitary group of
which it is a member) under federal, state, local or foreign Tax law
attributable to any indemnified loss, liability, claim, damage, or
expense. For purposes of determining Tax Benefits (i) present value
shall be determined using a discount rate equal to the appropriate
Applicable Federal Rate under Section 1274 of the Code in effect for the
month in which the indemnification payment is made, (ii) all deductions
and losses shall be determined on the assumption that all such items are
useable at the maximum Federal marginal income Tax rate applicable to a
corporation under Section 11 of the Code in effect for the taxable year
in which such deduction or loss may be claimed, plus 5 percentage
points, and (iii) no benefit shall be taken into account for any item
that increases the basis of property not subject to depreciation or
amortization. If the Indemnified Party is the Partnership, no Tax
Benefit shall be taken into account to the extent that any Tax loss or
deduction attributable to any indemnified loss, liability, claim,
damage, or expense is allocated to the indemnifying Parent or its
Partner under Sections 4.3(c)(iii) and 4.4 of the Partnership Agreement.
(b) The indemnifying party shall indemnify the Indemnified Party (and
the other Parent if the Indemnified Party is the Partnership) against
any Taxes imposed on any payment under this Article VI (including any
payment pursuant to this sentence).
(c) The Indemnified Party shall make repayments to the indemnifying
party with respect to indemnification payments received by the
Indemnified Party pursuant to this Article VI hereof but only to the
extent that the Indemnified Party has received (A) any insurance
payments or the proceeds of judgments against or settlements with third
parties ("Recovery Items") or (B) Tax Benefits not taken into account
pursuant to Section 6.7(a). The repayments hereunder shall not exceed
the excess, if any, of the sum of the indemnification payments, the
Recovery Items received by the Indemnified Party and such Tax Benefits,
over the liability imposed on the Indemnified Party. For purposes of
such calculation, Recovery Items shall not be taken into account to the
extent that Recovery Items have been allocated or distributed to the
indemnifying party or its affiliate pursuant to Article IV or Article VI
of the Partnership Agreement, or otherwise. Tax Benefits shall be
calculated by taking into account any tax liability associated with the
receipt of any indemnification payments or Recovery Items. Tax Benefits
shall not include any item that increases the basis of property not
subject to depreciation or amortization. Repayments, if any, under this
Section 6.7(c) shall be made promptly after the Indemnified Party's
receipt of a Recovery Item and, in the case of Tax Benefits, promptly
after the closing of the period of limitations on assessments with
respect to the Indemnified Party's taxable year to which the Tax
Benefits pertain. Such repayment with respect to Tax Benefits shall
bear interest at the rate of twelve month LIBOR prevailing on the
repayment date, plus 100 basis points, for the period between the filing
date of the Indemnified Party's federal income tax return on which such
Tax Benefits are claimed and the date of the repayment.
6.8 Limitations and Exclusions. All losses, damages, claims and
expenses subject to indemnification under this Article VI shall be
limited to actual, direct damages, losses, expense, or costs. ALL
CONSEQUENTIAL AND PUNITIVE DAMAGES ARE HEREBY EXCLUDED.
Third party claims subject to indemnification shall not be deemed to be
consequential or punitive damages but shall be considered actual damages
once liquidated and the subject of a court enforced judgment, provided
that the indemnifying party has been offered a reasonable opportunity to
defend such third party claim.
6.9 Liability of Partnership. Any liability of the Partnership under
any Operative Document to any party hereto shall be the sole obligation
of the Partnership and shall be explicitly nonrecourse to FMC, Harsco,
Harsco L.P. and the Affiliates (other than the Partnership) of each of
them.
ARTICLE VII
SECTION 7.0 MISCELLANEOUS.
7.1 Notices. All notices, demands and other communications required or
permitted by the terms of this Agreement to be given to any Person shall
be in writing, and shall be given by personal delivery, by mail or
overnight courier or by electronic means of communication. Any such
item shall deemed effective (i) five Business Days after being deposited
in the mails, certified or registered, with appropriate postage prepaid
and return receipt requested, (ii) when received, if delivered by hand
or courier or overnight service that provides for a signed receipt upon
delivery or (iii) when received, in the form of a telex, telegram or
telecopy. Such item shall be directed to the address, telex number or
telecopy number of such Person set forth in Schedule 7.1 to this
Agreement, or at such other address, telex number or telecopy number as
such Person shall designate by like notice to the other parties.
7.2 Severability. In case any one or more of the provisions contained
in this Agreement or any Annex or Exhibit hereto shall, for any reason,
be held to be invalid, illegal, or unenforceable in any respect, all
other provisions of this Agreement or any Annex or Exhibit hereto shall
nevertheless remain in full force and effect, but if the economic or
legal substance of the transactions contemplated hereby is affected in a
manner materially adverse to either party as a result of the
determination that a provision is invalid, illegal or unenforceable, the
parties hereto agree to negotiate in good faith to modify this Agreement
and, if appropriate the Annexes and Exhibits hereto, so as to effect the
original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
7.3 Entire Agreement; Amendment and Waiver; Remedies. This Agreement,
together with the other Operative Documents and other documents referred
to herein, constitutes the entire agreement of the parties hereto or
thereto with respect to the subject matter hereof or thereof and
supersedes all prior written and oral agreements (including the parties'
letter of understanding dated November 23, 1992) and understandings with
respect to such subject matter. Neither this Agreement nor any of the
terms hereof may be terminated, amended, supplemented, waived or
modified orally, but only by a document in writing signed by the party
against which the enforcement of the termination, amendment, supplement,
waiver or modification is sought. No failure or delay of any party
hereto in exercising any power or right under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps
to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. Except as
otherwise provided herein, neither party hereto may assign this
Agreement without the prior written consent of the other party.
7.4 Limitations. IN ANY ACTION FOR DAMAGES OR ENFORCEMENT RELATING TO
THIS AGREEMENT, NO PARTY HERETO SHALL BE ENTITLED TO CONSEQUENTIAL OR
PUNITIVE DAMAGES, BUT THE PREVAILING PARTY IN ANY SUCH PROCEEDING SHALL
BE ENTITLED TO RECEIVE ALL OF ITS COSTS AND EXPENSES (INCLUDING
REASONABLE COUNSEL FEES). THIS PROVISION IS INTENDED EXCLUSIVELY FOR
THE BENEFIT OF THE PARTIES HERETO AND SHALL NOT BE CONSTRUED TO GIVE
RISE TO ANY THIRD PARTY BENEFICIARY RIGHTS.
Third party claims subject to indemnification shall not be deemed to be
consequential or punitive damages but shall be considered actual damages
once liquidated and the subject of a court enforced judgment, provided
that the indemnifying party has been offered a reasonable opportunity to
defend such third party claim.
7.5 Table of Contents; Headings. The table of contents and headings of
the articles, sections and other subdivisions of this Agreement are for
convenience of reference only and shall not modify, define or limit any
of the terms or provisions of this Agreement.
7.6 Parties in Interest; Limitation on Rights of Others. The terms of
this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their successors and permitted assigns. Nothing in
this Agreement, whether express or implied, shall be construed to give
any Person (other than the parties hereto and their successors and
assigns and as expressly provided herein) any legal or equitable right,
remedy or claim under or in respect of this Agreement or any covenants,
conditions or provisions contained herein. No assignment or transfer of
this Agreement or a party's interest in the Partnership or its Partner
shall relieve such party from its obligations hereunder or under any
other Operative Document.
7.7 Binding Effect. Although the parties intend that each of the
Partnership and Harsco L.P. shall duly authorize, execute and deliver
this Agreement upon its formation on or before the Closing Date, this
Agreement shall be binding upon the Parents when executed and delivered
by each Parent.
7.8 Governing Law. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of Delaware, without
giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the
State of Delaware. In furtherance of the foregoing, the internal law of
the State of Delaware shall control the interpretation and construction
of this Agreement, even though under that jurisdiction's choice of law
or conflict of law analysis, the substantive law of some other
jurisdiction would ordinarily apply.
7.9 Jurisdiction; Court Proceedings. Any suit, action or proceeding
against any party hereto arising out of or relating to this Agreement or
under any other Operative Document, any transaction contemplated hereby
or any judgment entered by any court in respect of any such suit, action
or proceeding may be brought in any Federal or State court located in
the state of the principal place of business of the Partnership or such
other district as may contain the Partnership's principal place of
business, and each party hereto hereby submits to the jurisdiction of
such courts for the purpose of any such suit, action or proceeding. To
the extent that service of process by mail is permitted by applicable
law, each such party irrevocably consents to the service of process in
any such suit, action or proceeding in such courts by the delivery of
such process by mail, at its address for process provided for in
Schedule 8.1 to this Agreement, and no such service shall be effective
until such delivery is made. Each such party irrevocably agrees not to
assert any objection which it may ever have to the laying of venue of
any such suit, action or proceeding in any Federal or State court
located in any state which contains the Partnership's principal place of
business, and any claim that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum.
7.10 Termination. This Agreement may be terminated at any time before
Closing:
(a) by consent of both Parents;
(b) by either Parent if there has been a material breach of any
representation, warranty, covenant or agreement on the part of the other
Parent or its Affiliates set forth in this Agreement and material to the
transactions contemplated hereby and, if it is susceptible of cure, it
is not cured within 10 days after written notice to such Parent; or
(c) by either Parent if the Closing has not occurred by February 1,
1994, subject to Section 2.2 hereof.
7.11 Expenses. Except as otherwise stated herein, each party shall
bear its own expenses incurred prior to Closing in connection herewith.
7.12 Survival. All of the representations and warranties of the
parties contained in this Agreement shall survive until the close of
business on March 31, 1996, regardless of whether such party continues
to hold an ownership interest in the Partnership or any corporate
successor (other than Section 4.8, which shall survive indefinitely).
All of the indemnities and covenants of the parties contained in this
Agreement shall, unless otherwise provided herein, survive indefinitely
or for the period set forth in any applicable statute of limitations;
provided, however, that upon the purchase of Harsco's interest in the
Partnership under the call provided for in Section 7.2 of the
Partnership Agreement, the indemnity set forth in Section 6.1(a) and, in
the event of a Change in Control of FMC, the covenants set forth in
Sections 5.6 and 5.12 on the part of Harsco shall be extinguished.
7.13 Advice of Legal Counsel. Each party hereto acknowledges and
represents that, in executing this Agreement, it has had the opportunity
to seek advice as to its legal rights from legal counsel and that the
person signing on its behalf has read and understood all of the terms
and provisions of this Agreement. This Agreement shall not be construed
against any party hereto by reason of the drafting or preparation
thereof.
7.14 Noncompetition. Each Parent agrees that, until such time as the
Share Percentage of such Parent's Partner (or equivalent common equity
interest in any corporate successor to the Partnership) falls below 20%
and for an additional period of three (3) years thereafter, it will not
engage, directly or indirectly, anywhere in the world in any line of
business within the Scope of Activity; provided, however, that (i)
Harsco shall be entitled to continue to engage in the development,
manufacture, retrofit, installation, repair, overhaul, engineer, design,
service, sale and marketing of wheeled trucks (whether armed or
unarmed), trailers, busses, armor and armor kits for sale to the
military and other customers and (ii) either Parent shall be entitled to
continue to engage in the development, manufacture, retrofit,
installation, repair, overhaul, engineer, design, service, sale and
marketing of any component part or subsystem of military vehicle systems
or weapon stations which are similar to classes of products or services
that primarily are commercially sold by such Parent for non-military
uses. If any court of competent jurisdiction shall finally hold that
the time, territory or any other provision set forth in this Section
7.14 constitutes an unreasonable restriction, such provision shall not
be rendered void, but shall apply as to such time, territory or to such
other extent as such court may determine constitutes a reasonable
restriction under the circumstances involved. Each Parent acknowledges
that the restrictions contained in this Section 7.14 are reasonable and
necessary to protect the legitimate interests of the Parents and the
Partnership and that any breach by either Parent of any provision hereof
will result in irreparable injury to the Partnership. Each Parent
acknowledges that, in addition to all remedies available at law, the
Partnership or a Parent shall be entitled to equitable relief, including
injunctive relief, and an equitable accounting of all losses and
damages, including consequential damages, arising from such breach. Any
Parent and any of its Affiliates may engage in other business ventures
and dealings within or without the Partnership's Scope of Activity,
except to the extent that such ventures and dealings are prohibited by
this Section 7.14.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first above written.
FMC CORPORATION
By: /S/ Robert N. Burt
Its: Chairman & CEO
HARSCO CORPORATION
By: /S/ Derek C. Hathaway
Its: President & Chief Executive Officer
HARSCO DEFENSE HOLDING, INC.
By: /S/ Leonard A. Campanaro_
Its: Treasurer
With respect only to the obligations of it
expressly set forth herein:
UNITED DEFENSE, L.P.
By: FMC CORPORATION
its general partner
By: /S/ Robert N. Burt
Its: Chairman & CEO
List of Omitted Exhibits and Schedules to Participation Agreement
Annex B Terms of Contingent Rights and Obligations of FMC
and Harsco
Schedule 2.3.1 Adjustments
Schedule 4.2 Authorization; No Conflict
Schedule 4.4 Proceedings
Schedule 4.8.2A Real Property Transferred or Leased by FMC
Schedule 4.8.2B Real Property Transferred or Leased by Harsco
Schedule 4.9A FMC Aged Receivables
Schedule 4.9B Harsco Aged Receivables
Schedule 4.10 Certain Existing Contracts and Defaults
Schedule 4.11 Litigation, Investigations and/or Other Proceedings
Schedule 4.12 Liabilities
Schedule 4.14A FMC Pro Forma Balance Sheet
Schedule 4.14B Harsco Pro Forma Balance Sheet
Schedule 4.15 Events Subsequent to December 31, 1992
Schedule 4.16 Consents
Schedule 4.17 Notice of Governmental Authorizations and
Compliance
with Laws
Schedule 4.18 Government Contracts
Schedule 4.19 Capital Stock and Equity Interests of Defense
Affiliates and Defense Subsidiaries
Schedule 4.20 Intellectual Property
Schedule 4.21.1 Employee Benefits and Contracts
Schedule 4.21.8 Actuarial Assumptions
Schedule 4.21.11 Employee Benefit Cost Disallowances
Schedule 4.22 Bargaining Agents
Schedule 4.24 Binding Commitments, Promises and Representations
to Employees
Schedule 4.25 Labor Controversies; Affirmative Action
Schedule 5.9.1 Transferred Employees
Schedule 5.9.3 Partnership Nonunion Pension Plans
Schedule 5.11 Procedure for Obtaining Consents
Schedule 5.14 VLS Receivables
Schedule 5.16 Slow-Moving Inventory
Schedule 5.22.2 Environmental Liability Events
Schedule 5.22.7 Examples
Schedule 6.1 Accrued Liabilities
Schedule 7.1 Notices, Addresses, Fax Numbers, Etc.
Exhibit A Demand Note
Exhibit B Assumption Agreement
Exhibit C Confidentiality Agreement
Exhibit D Promissory Note
Exhibit E Opinions of Counsel
Exhibit F Intellectual Property Agreements
Exhibit G Lease Agreement
Exhibit H Management Services Agreement
Harsco Corporation will furnish supplementally a copy of any omitted
exhibit or schedule to the Commission upon request.
PARTNERSHIP AGREEMENT
BY AND AMONG
FMC CORPORATION,
HARSCO DEFENSE HOLDING, INC.
AND
UNITED DEFENSE, L.P.
DATED AS OF JANUARY 1, 1994
THIS PARTNERSHIP AGREEMENT is entered into as of January 1, 1994 by and
among FMC Corporation, a Delaware corporation ("Managing General
Partner"), Harsco Defense Holding, Inc., a Delaware corporation
("Limited Partner"), which is a direct wholly-owned subsidiary of Harsco
Corporation, a Delaware corporation ("Harsco"), and United Defense,
L.P., a Delaware limited partnership ("the Partnership"). Each of
Managing General Partner and Limited Partner is sometimes referred to
herein as "Partner," and collectively they are sometimes referred to as
"Partners" or "Parties."
WHEREAS, the Managing General Partner and Harsco have entered into a
Participation Agreement dated as of January 1, 1994, as amended from
time to time in accordance with its terms (the "Participation
Agreement"), setting forth certain representations and warranties,
conditions and agreements dealing with their relationships and certain
relationships of their Affiliates and Subsidiaries and the establishment
and operation of this Partnership;
NOW, THEREFORE, in consideration of the mutual covenants, and subject to
the terms and conditions, contained herein, the Partners hereby form and
create the Partnership under and pursuant to the Delaware Revised
Uniform Limited Partnership Act, as amended or its successor, Title 6,
Chapter 17 of the Civil Code of the State of Delaware, for the purposes
and upon the terms, provisions and conditions as hereinafter set forth.
ARTICLE I
DEFINITIONS
1.1 Definitions. Except as otherwise defined herein, terms used herein
in capitalized form shall have the meanings attributed to them in Annex
A to this Partnership Agreement.
ARTICLE II
ORGANIZATION
2.1 Formation and Term of the Partnership.
(a) Formation; Compliance. As of the date hereof, the Partners enter
into and form the Partnership as a limited partnership under the laws of
the State of Delaware. The Partnership shall promptly file with the
appropriate Governmental Authorities all documents in connection with
the formation and operation of the Partnership as may be required or
appropriate under the laws of the State of Delaware (including, but not
limited to, the Delaware Revised Uniform Limited Partnership Act) or any
other jurisdiction in which the Partnership proposes to carry on
business. The Partnership shall provide to each Partner upon request a
copy of each such document as filed.
(b) Business Names. The activities and business of the Partnership
shall be conducted under the name United Defense, L.P. The Partnership
may also do business under other names agreed to by both of the
Partners. If required by an applicable Governmental Rule, (i) the
Partnership shall cause appropriate partnership certificates or
fictitious business name certificates to be filed with the appropriate
Governmental Authorities and (ii) the Managing General Partner shall as
expeditiously as reasonably possible register the Partnership to do
business as a foreign limited partnership in all appropriate
jurisdictions.
(c) Principal Office. The "Principal Office" of the Partnership shall
be in or around Arlington, Virginia. Other offices may be established,
and the location of any office of the Partnership (including the
Principal Office) may be changed by the Managing General Partner or, if
other than the Principal Office, by the CEO, at any time and from time
to time.
(d) Partnership Term. The term of the Partnership shall commence as of
the date hereof and shall continue until dissolved as hereinafter
provided in Article IX hereof.
2.2 Scope of Activity. The "Scope of Activity" of the Partnership
shall be to engage in the development, manufacture, retrofit,
installation, overhaul, repair, engineering, design, service, sale and
marketing of any military vehicle system (excluding trucks and busses)
or weapon station, including any component part or subsystem thereof.
2.3 Property Ownership. Except as provided in the Operative Documents
or any other contract to which the Partnership is or becomes a party,
(i) all assets and property, whether real, personal or mixed, tangible
or intangible, including contractual rights, owned or possessed by the
Partnership shall be held or possessed in the name of the Partnership,
(ii) all such assets, property and rights shall be deemed to be owned or
possessed by the Partnership as an entity and (iii) none of the Partners
individually shall have any separate ownership in such assets, property
or rights.
2.4 Business Dealings with the Partnership. Subject to any approvals
required pursuant to Sections 3.1 or 3.3 and subject to Section 3.4(b)
hereof, whichever may apply, a Partner or any Affiliate thereof may
enter into contracts or agreements with the Partnership on an
arms-length and commercially reasonable basis and derive and retain
profits therefrom. Subject to the requirements of Section 3.1 hereof,
the validity of any such contract, agreement, transaction or dealing or
any payment or profit related thereto or derived therefrom shall not be
affected by any relationship between the Partnership and such Partner or
any of its Affiliates.
2.5 Confidential Information. No member of the Advisory Committee,
employee of the Partnership or employee made available to the
Partnership by a Partner or an Affiliate of such Partner shall be
obligated to reveal confidential or proprietary information belonging to
either Partner, or either Partner's Affiliate, without the consent of
such Partner or Partner's Affiliate.
2.6 Powers. Subject to and modified by the terms, conditions and
stipulations provided in Sections 3.1 and 3.3 below and any other terms,
conditions and stipulations of this Agreement, the Participation
Agreement or any other Operative Document, as applicable, the
Partnership may exercise all of the powers and privileges granted by
this Agreement and by law, together with any other powers incidental
thereto, including, but not limited to, the power and privilege to:
(a) Receive by contribution, purchase, lease or otherwise acquire,
employ, use or otherwise deal in and with real or personal property, or
any interest therein, wherever situated, and subject to the terms of
this Agreement, sell, convey, lease, exchange, transfer or otherwise
dispose of, mortgage or pledge, all or any of its property and assets,
or any interest therein, wherever situated;
(b) Appoint such managers, employees and agents as deemed appropriate
and pay or otherwise provide for them suitable compensation;
(c) Participate with others in any transaction, undertaking or
arrangement which the Partnership by itself would have the power to
conduct within the Scope of Activity, whether or not such participation
involves sharing or delegation of control of such activity with or to
others;
(d) Make contracts, including contracts of guaranty and suretyship,
incur liabilities, borrow money, issue its notes, bonds and other
obligations, and secure any of its obligations by mortgage, pledge or
other encumbrance of all or part of its property, franchises and income;
(e) Lend money for Partnership purposes, invest and reinvest its funds,
and take, hold and deal with real and personal property as security for
the payment of funds so loaned or invested;
(f) Sue and be sued in all courts and participate, as a party or
otherwise, in any judicial, administrative, arbitrative or other
proceedings, in its Partnership name;
(g) Establish and carry out employment policies, including, but not
limited to, policies regarding hours of work, vacation, discipline and
termination, and pension, profit sharing, retirement, benefit, incentive
and compensation plans and trusts;
(h) Establish and maintain a risk management program (including
insurance) for (i) all assets and properties of the Partnership, (ii)
all potential legal liabilities arising out of Partnership activities,
(iii) all statutory responsibilities regarding employees, and (iv) any
other possible exposures of the Partnership;
(i) Execute and deliver the Operative Documents to which it is to be a
party;
(j) Adopt: (i) forms of agreements and employment policies with respect
to the protection of confidential information and (ii) business plans;
and
(k) Exercise such additional powers and privileges as are otherwise
permitted to be exercised by the Delaware Revised Uniform Limited
Partnership Act.
ARTICLE III
GOVERNANCE AND ADMINISTRATION
3.1 Matters Requiring the Consent of the Limited Partner. The
following is a list of actions which may not be taken by the Partnership
without the written consent of the Limited Partner, so long as the
Limited Partner's Share Percentage is at least 20%:
(a) Subject to Section 12.1, any changes to or amendments of this
Agreement; or in the event of the incorporation of the Partnership
pursuant to Section 2 of the Registration Rights Agreement, the adoption
of the initial certificate of incorporation and by-laws of the successor
corporation and any subsequent amendments to its certificate of
incorporation and by-laws;
(b) (i) Except as otherwise expressly permitted by this Agreement, the
Registration Rights Agreement or any other Operative Document, the
voluntary winding up, dissolution or liquidation of the Partnership, the
filing of a petition in bankruptcy, or for the reorganization or
rehabilitation under the Federal bankruptcy law or any state law, for
the relief of debtors, consenting to an order for relief entered against
it under any Federal bankruptcy law or otherwise consenting to having
the Partnership adjudicated bankrupt or insolvent, the making of an
assignment for the benefit of creditors or the suffering beyond 90 days
of the appointment of a receiver, trustee or custodian for a substantial
portion of its business or properties by virtue of an allegation of
insolvency, (ii) any similar action under any foreign law or (iii) the
decision not to oppose any filing or petition which seeks to have the
Partnership declared bankrupt or insolvent under any such law;
(c) The sale of all or a substantial part of the assets of the
Partnership;
(d) The making of any distribution to a Partner by the Partnership in
contravention of Article VI hereof, or any repurchase, redemption or
acquisition of the equity of the Partnership not in proportion to the
Partners' respective Share Percentages;
(e) The entry by the Partnership into any business activity outside the
Scope of Activity, except that the Partnership shall be entitled to
engage in the business of developing, manufacturing, retrofitting,
overhauling, repairing, engineering, designing, servicing, selling and
marketing of forgings, castings and fabrications for commercial
customers as such business is engaged in by the FMC Defense Business
immediately prior to the Closing Date and as such business may be
subsequently modified, extended or developed by the Partnership so long
as such modification, extension or development is financed solely with
internally generated funds and does not occasion a capital call;
(f) The replacement of the Accountants for the Partnership;
(g) (i) The issuance of additional general Partnership interests to any
Person other than the Managing General Partner pursuant to Section 4.5
or clause (ii) below and (ii) the issuance for cash of additional
limited or general Partnership interests unless the Partnership shall
first have offered to sell to each holder of Partnership interests, on
the same terms (which terms shall be reasonably determined by the
Managing General Partner), a percentage portion of such newly issued
limited Partnership interests (or general Partnership interests if
offered to the Managing General Partner) equal to such holder's Share
Percentage;
(h) Any dilution of the Limited Partner's Share Percentage below 20%;
(i) Any change in the name of the Partnership;
(j) Any Related Party Transaction consisting of (i) the provision of
management services for value (other than management services covered by
Section 4(b) of the Management Services Agreement) by the Managing
General Partner or any of its Affiliates to the Partnership; (ii) all
sales of products or services (other than services covered by clause (i)
above) by the Managing General Partner or any of its Affiliates to the
Partnership in any Fiscal Year in excess of an aggregate of $500,000; or
(iii) the purchase of products by the Managing General Partner or any of
its Affiliates from the Partnership or the entry into any other
agreements between the Partnership and the Managing General Partner or
any of its Affiliates which, in any such case, involves the payment of
money or the assumption or release of any reasonably estimable liability
that individually exceeds $100,000 or collectively in any Fiscal Year
exceeds $1,000,000 in the aggregate. The "A Services" performed
pursuant to Section 4(a) of the Management Services Agreement by FMC and
its Affiliates will be subject to the annual consent of the Limited
Partner under this Section 3.1(j), which annual consent has been given
with respect to Fiscal Year 1994. Such annual consent shall constitute
the Limited Partner's consent with respect to such A Services. If the
Limited Partner's consent is not obtained with respect to any such A
Services to be obtained from FMC in any Fiscal Year subsequent to the
Fiscal Year ended December 31, 1994, no such A Services shall be
provided unless and until an arbitration proceeding pursuant to Section
3.12 shall have been concluded; provided, however, that any such
nonapproved A Services may continue to be provided only to the extent
permitted by Section 4(d) of the Management Services Agreement.
Thereafter any such A Services shall be provided only if the Arbitrator
has determined that Harsco's consent to the provision of such services
was unreasonably withheld. All Related Party Transactions shall be
generally consistent with normal commercial practices by providers of
similar products and services in arm's-length transactions and all sales
of products and services pursuant to clause (ii) above shall be
consistent with the normal profit margins of the Managing General
Partner or its Affiliates. The parties hereby agree that (i) any
subcontract between the Partnership and FMC's Corporate Technology
Center providing for work which relates to any Partnership engineering
contract or other contract which requires the submission of certified
cost or pricing data, (ii) any cash advances made to the Partnership
pursuant to Section 5.18 of the Participation Agreement, (iii) any
transaction that is limited to a direct pass-through of amounts billed
by an unaffiliated third party and (iv) any capital contributed to the
Partnership pursuant to Section 4.5 of this Agreement or Sections 2.1.3,
2.1.4, 2.1.5 or 2.3.3 or Article VI of the Participation Agreement shall
not constitute Related Party Transactions for purposes of this Section
3.1(j).
(k) Determining the share of Profits and Losses under Section
4.3(c)(vii); and
(l) Any amendment to the Lease Agreement.
Whenever the Managing General Partner wishes to propose any action by
the Partnership requiring the consent of the Limited Partner, the
Managing General Partner shall provide such a proposal to the Designated
Representative of the Limited Partner not less than ten Business Days in
advance of the proposed implementation of such proposal. The proposal
shall be in writing and shall set forth, in reasonable detail, the
reasons for the proposed action, the anticipated consequences thereof
and any appropriate background information needed by the Limited Partner
to evaluate the proposal. If the Limited Partner reasonably concludes
that additional information is needed in order to reach its conclusion,
the Designated Representative of the Limited Partner shall so advise the
Managing General Partner, in a writing specifying in reasonable detail
the requested additional information, within ten Business Days after
receipt of the Proposal and the Managing General Partner shall provide
the requested information as expeditiously as reasonably possible. If
no request is made for additional information, the Limited Partner
through its Designated Representative shall advise the Managing General
Partner in writing whether the consent is given within ten Business Days
after receipt of the proposal. If additional information is requested,
the Designated Representative of the Limited Partner shall respond
within ten Business Days after receipt of the requested information.
Nothing herein shall require the Managing General Partner to provide
information that cannot be obtained with reasonable effort.
Because the breach by the Managing General Partner of any of its
obligations under this Section 3.1 would cause irreparable harm to the
Limited Partner that would be difficult to quantify and would not be
compensable by damages alone and because the Limited Partner would not
have entered into this agreement in the absence of Section 3.1, the
Managing General Partner expressly agrees that the Limited Partner will
have the right to enforce Section 3.1 by injunction, specific
performance or other equitable relief without prejudice to any other
rights and remedies the Limited Partner may have with respect to the
breach of any provision of Section 3.1 by the Managing General Partner.
The reference to specific performance in this Section is not a waiver of
either party's rights to seek equitable relief for breaches of other
sections of this Agreement.
3.2 Reports to the Limited Partner. The Partnership shall deliver to
the Limited Partner on a timely basis such information as is reasonably
requested by the Limited Partner in order to fulfill financial reporting
and other legal requirements, in addition to that information listed on
Schedule 3.2.
3.3 Restrictions on Partners. Except as specified in this Agreement,
neither Partner may, without the written consent of the other Partner:
(a) make any agreement with any third party on behalf of or otherwise
purport to bind the other Partner or do any act in contravention of this
Agreement; or
(b) release a Partner from any obligation under this Agreement or, to
the extent it relates to the Partnership, any Operative Document.
3.4 Managing General Partner.
(a) The Managing General Partner will act as Managing General Partner
of the Partnership. The Managing General Partner shall have the right
to exercise, on behalf of the Partnership, all the powers not requiring
the consent of the Limited Partner pursuant to Section 3.1 above.
Subject to the provisions of this Agreement, the Managing General
Partner shall have the sole power and authority to represent and to act
for the Partnership and to bind the Partnership with respect to
Partnership property and affairs. Without limiting the foregoing, the
Managing General Partner, acting through those of its officers,
employees and agents as it shall designate in writing from time to time,
shall, in addition to the officers of the Partnership, have the
authority to certify claims against the U.S. Government on behalf of UDS
for purposes of Section 6(c) of the Contract Dispute Act, 41 U.S.C.
Subsection 605(c), as amended. The Limited Partner will take no part in
the control, management, direction or operation of the affairs of the
Partnership and will have no power to bind the Partnership. The Limited
Partner will not be personally liable for any obligations of the
Partnership and will have no obligation to make contributions to the
Partnership in excess of those specified in this Agreement or Articles
II, and VI and Section 5.22.5 of Article V of the Participation
Agreement except to the extent set forth under the laws of the State of
Delaware.
(b) The Managing General Partner shall at all times act in a fiduciary
manner with respect to the Partnership and the Partners, shall have
fiduciary responsibility for the safekeeping and use of all funds and
assets of the Partnership, whether or not in its immediate possession or
control, and shall exercise good faith and integrity in all aspects of
its handling of the affairs of the Partnership; provided, however, that,
except as expressly provided in the Management Services Agreement, in no
event shall the Managing General Partner have any liability to the
Partnership or any other Partner for simple negligence in an action for
an alleged breach of the duty of care. The Managing General Partner
shall not employ, or allow any other Person to employ, such funds or
assets, in any manner except in any manner which the Managing General
Partner reasonably believes in good faith to be in or not opposed to the
best interests of the Partnership. Notwithstanding any Delaware
judicial precedent to the contrary and without in any way limiting its
rights under Delaware law, the Limited Partner shall be entitled to
bring an action against the Managing General Partner, its Affiliates or
the directors, officers or employees of any of them in the right of the
Partnership under Section 17-1001 of the Delaware Corporation Law or any
other applicable provision of Delaware law to recover a judgment in the
Partnership's favor if the Managing General Partner has refused to bring
the action within ninety (90) days after the receipt by the Partnership
of the Limited Partner's demand that such action be commenced.
(c) Except as caused by actions which are otherwise expressly
contemplated by this Agreement, the Registration Rights Agreement or any
other Operative Document, while conducting the business of the
Partnership, the Managing General Partner will use all reasonable
efforts not to act in any manner which will (i) cause the termination of
the Partnership for federal income tax purposes or (ii) cause the
Partnership to be treated for federal income tax purposes as an
association taxable as a corporation.
(d) The Managing General Partner shall use reasonable efforts to cause
to be prepared and timely filed with appropriate Governmental
Authorities all material reports required to be filed with such entities
under then current applicable laws, rules and regulations and to cause
such reports to be prepared on substantially the accounting or reporting
basis required by such Governmental Authorities. Upon request, the
Managing General Partner shall promptly provide the Limited Partner with
a copy of any such report.
(e) The Managing General Partner shall use reasonable efforts to take
all actions reasonably required by the Limited Partner and necessary,
appropriate or desirable for the continuation of the Partnership's valid
organization and existence as a limited partnership affording limited
liability to the Limited Partner under the laws of the State of
Delaware. The Managing General Partner shall not be responsible or
liable for any action taken by the Limited Partner that is deemed to be
or interpreted as an action on behalf of the Partnership or involving
participation in the control or management of the Partnership's
business.
3.5 The Advisory Committee.
(a) General. To facilitate the exercise by the Managing General
Partner of its powers and responsibilities under this Agreement, the
Partnership shall have a committee, comprised of ten individuals
designated in the manner described below (the "Advisory Committee" or
"Committee"), which will consider and discuss any or all matters
regarding the direction and control of the Partnership.
(b) Members, etc. The Managing General Partner shall designate six
members of the Advisory Committee and the Limited Partner shall
designate four members of the Advisory Committee. Upon any adjustment
of the Share Percentages, the number of members of the Advisory
Committee designated by each Partner shall, if necessary, also be
adjusted so that such number shall be the whole number closest to
one-tenth of such Partner's Share Percentage; provided, that, if the
Share Percentages are whole numbers ending in five, then the General
Partner shall round its Share Percentage to the next highest multiple of
ten, and the Limited Partner shall round its Share Percentage to the
next lowest multiple of ten, to determine their respective numbers of
Designees. Each such Designee shall serve at the pleasure of the
Partner which designated such Designee. Each Partner may appoint one or
more alternate Designees to replace at any meeting of the Committee any
of its Designees who may be disqualified or absent. Each Partner shall
bear the cost incurred by its Designees in their capacities as such, and
no Committee member or alternate shall be entitled to compensation from
the Partnership for serving in such capacity. Subject to applicable
Governmental Rules, each member of the Advisory Committee shall be
entitled to review classified information of the Partnership.
(c) Initial Committee Members. The initial Committee Designees are:
(i) for the Managing General Partner:
Robert N. Burt
Larry D. Brady
Francis A. Riddick
Randy S. Ellis
Edward C. Meyer
Robert L. Day
(ii) for the Limited Partner:
Leonard A. Campanaro
Derek C. Hathaway
Barrett W. Taussig
Robert L. Kirk
(d) Changes to Members. Each Partner shall notify the Partnership and
the other Partner of any change to the business address and business
telephone and telecopy numbers of each Designee designated by such
Partner. Each Partner shall promptly notify the Partnership and the
other Partner of any change in such Partner's Designees to the Committee
which notice shall include the name of the Designee being replaced with
a new Designee and the name, address, telephone and telecopy numbers for
the such new Designee. Each Partner's Designees to the Committee shall
remain in effect until the Partner making such appointment notifies the
Partnership and the other Partner of a change in such appointment in
accordance with (b) above or such Designee notifies the Partnership of
his or her resignation as a member of the Committee.
(e) Meetings, etc. Meetings of the Advisory Committee shall be held at
the Principal Offices of the Partnership or at such other place as may
be determined by the Advisory Committee. Regular meetings of the
Advisory Committee shall be held six times per year (including within a
reasonable period of time after the end of each Fiscal Quarter) until
the second anniversary of the Closing Date and four times per year
thereafter on such dates and at such times as shall be determined by the
Advisory Committee. Special meetings of the Advisory Committee may be
called by the CEO or either Partner for any reason on at least (i) five
Business Days' prior written notice by U.S. first class mail, (ii) three
Business Days' actual telephonic notice to each Designee personally for
a meeting other than a telephonic meeting or (iii) 36 hours' prior
written or telephonic notice for a telephonic meeting. The actions
taken by the Advisory Committee at any meeting, however called and
noticed, shall be as valid as though taken at a meeting duly held after
regular call and notice if (but not until), either before, at or after
such meeting, the Designee as to whom it was improperly noticed, if any,
signs, (i) a written waiver of notice, (ii) a consent to the holding of
such meeting or (iii) an approval of the minutes thereof. A meeting of
the Advisory Committee may be held by conference telephone or similar
communications equipment by means of which all individuals participating
in the meeting can be heard simultaneously by all other participants and
each can speak to all others.
(f) Meeting Rules. The Managing General Partner shall prepare and
provide to the Limited Partner a proposed agenda not less than ten
Business Days before each regularly scheduled meeting of the Advisory
Committee. Upon the written request of the Limited Partner made at
least five Business Days before a regularly scheduled meeting of the
Advisory Committee, the proposed agenda shall be expanded to include any
additional agenda items suggested by the Limited Partner. At each
regular meeting of the Advisory Committee, officers of the Partnership
shall update the Committee with respect to financial and operational
matters and the status of all material claims and indemnification
matters. Such officers shall also report on such other matters as may
be reasonably requested by the Limited Partner. The Advisory Committee
may establish reasonable rules and regulations to (i) require the
Partnership to call meetings and perform other administrative duties,
(ii) place reasonable limits on the number and participation of
observers and to require such observers to observe confidentiality
obligations and (iii) otherwise provide for the keeping of minutes.
(g) Discussion of Matters Requiring the Limited Partner's Consent. At
the request of either the Managing General Partner or the Limited
Partner, any proposed action by the Partnership requiring the consent of
the Limited Partner may be considered and discussed at a regular or
special meeting of the Advisory Committee, but no such action may be
taken without the consent of the Limited Partner.
(h) Dispute Resolution. At the request of either the Managing General
Partner or the Limited Partner, the Advisory Committee shall attempt in
good faith to resolve any dispute between such Partners (other than
matters covered by Sections 3.1 or 3.12 hereof) before either such party
may invoke the dispute resolution mechanism set forth in Section 12.11.
If the Advisory Committee does not resolve the dispute to the
satisfaction of both parties within 60 days after the Advisory Committee
receives notice of such dispute, then either party may invoke the
dispute resolution mechanism set forth in Section 12.11.
(i) Notwithstanding anything to the contrary herein provided, the
Advisory Committee shall have no responsibility or authority to manage
the affairs of the Partnership.
3.6 Officers.
(a) General. The officers of the Partnership shall be a Chief
Executive Officer (sometimes referred to as the "CEO") and such other
officers as may be set forth in this Agreement or any other Operative
Document or determined by the Managing General Partner from time to time
to be necessary or advisable for the conduct of the business and affairs
of the Partnership. All officers of the Partnership shall be appointed
by the Managing General Partner and shall be subject to removal with or
without cause by the Managing General Partner. Any individual may hold
more than one office. All officers of the Partnership shall (i) report
to the Chief Executive Officer, who shall report to the Managing General
Partner, (ii) have the powers and duties set forth in this Section 3.6
or as otherwise prescribed by the Managing General Partner or, in the
case of officers other than the CEO, the CEO and (iii) serve for the
term designated by this Agreement or the Managing General Partner,
subject to removal as provided above.
(b) Chief Executive Officer. The initial Chief Executive Officer shall
be Thomas W. Rabaut. Subsequent CEOs shall be selected by the Managing
General Partner. Subject to the powers of the Managing General Partner
and the provisions of Section 3.1 hereof, he or she shall be in the
general and active charge of the entire business, affairs and property
of the Partnership, shall be its chief policy making officer and have
control over its officers, agents and employees; and shall see that all
orders and resolutions of the Managing General Partner or the Partners
are carried into effect, including compliance with the terms and
conditions of any consent by the Limited Partner pursuant to Section
3.1. Subject to Sections 3.1 and 3.3 above, he or she may execute
bonds, mortgages and other contracts within the powers set forth in
Section 2.6 above or as delegated by the Managing General Partner, as
appropriate, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof
shall be expressly delegated by the Managing General Partner or the CEO
to some other officer or agent of the Partnership. The Chief Executive
Officer may vote or execute written consents with respect to the capital
stock of each Subsidiary of the Partnership in accordance with this
Agreement.
(c) Chief Financial Officer. The Chief Financial Officer shall be
selected by the CEO, subject to the approval of the Managing General
Partner. The Chief Financial Officer of the Partnership shall, under
the direction of the Managing General Partner and the Chief Executive
Officer, be responsible for all financial and accounting matters and for
the direction of the office of treasurer. The Chief Financial Officer
shall have such other powers and perform such other duties as may be
prescribed by the Chief Executive Officer or the Managing General
Partner or as may be provided in this Agreement.
(d) Vice-Presidents. The vice-president, or if there shall be more
than one, the vice-presidents shall act with all of the powers and be
subject to all the restrictions as authorized by the CEO and approved by
the Managing General Partner. The vice-presidents shall also perform
such other duties and have such other powers as the Managing General
Partner, the Chief Executive Officer or this Agreement may, from time to
time, prescribe.
(e) The Secretary. The Secretary shall attend all meetings of the
Advisory Committee and record all the proceedings of the meetings in a
book or books to be kept for that purpose. Under the Chief Executive
Officer's supervision, the Secretary shall give, or cause to be given,
all notices required to be given by the Partnership under this
Agreement; shall have such powers and perform such duties as the
Managing General Partner, the Chief Executive Officer or this Agreement
may, from time to time, prescribe.
(f) Other Officers and Agents. Officers, assistant officers and
agents, if any, other than those whose duties are provided for in this
Agreement, shall have such authority and perform such duties as may from
time to time be prescribed by the CEO or the Managing General Partner.
3.7 Insurance. The Partnership's initial insurance coverages shall be
substantially as set forth in Exhibit A hereto. The Partnership may
change any such coverages in any manner (and may self-insure as the
Managing General Partner reasonably determines) and may maintain
insurance coverages against such other liabilities and risks associated
with the conduct by the Partnership of its operations and in such
amounts as are generally maintained by companies engaged in a business
similar to that of the Partnership.
3.8 Employee and Officer Confidentiality Agreements. Each officer of
the Partnership and each member of the Advisory Committee, upon assuming
office, shall enter into a confidentiality agreement in the form of
Exhibit B hereto. Each Partner shall assign to the Partnership, if
assignable, any confidentiality agreements with its employees who accept
employment by the Partnership. Each prospective employee of the
Partnership not otherwise bound by a confidentiality agreement, whose
job exposes such employee to confidential information shall, upon
accepting employment by the Partnership, enter into a confidentiality
agreement in the form of Exhibit C hereto.
3.9 Consolidation Costs. No material Consolidation Cost shall be
incurred, and no commitment for the incurrence of a material
Consolidation Cost shall be entered into, by the Partnership unless the
Managing General Partner shall have made a good faith determination and
reported in writing to the Limited Partner that:
(i) a projection of the cost savings to be achieved as a result of the
incurrence of the Consolidation Cost in question reflects that such
Consolidation Cost will be offset by cost savings which will be realized
by the Partnership in the twenty-four month period following the
incurrence of such Consolidation Cost; or
(ii) the Partnership has entered into an Advance Agreement with the DOD
(or any agency or department thereof) which permits future recognition
or recovery of the Consolidation Cost in question as an allowable cost
or retention by the Partnership of at least equivalent future cost
savings resulting from the consolidation; or
(iii) such Consolidation Cost can be recognized or recovered as an
allowable cost under one or more of the Partnership's customer
contracts; or
(iv) such Consolidation Cost can be offset, recognized or recovered
through a combination of the sources referred to in clauses (i) through
(iii) above.
3.10 Other Business. Each Partner's interest in the business endeavor
of the other Partner is limited to its interest in the Partnership, and,
except as provided in Section 7.14 of the Participation Agreement, no
Partner's future business activities are restricted. Accordingly, in
addition to the business of the Partnership, each Partner may, subject
to Section 7.14 of the Participation Agreement, invest or engage in any
other business activity for which it is lawfully organized.
3.11 Revolving Credit. Notwithstanding anything in Section 5.18 of the
Participation Agreement, the Partnership will use reasonable efforts to
establish an independent revolving line of credit sufficient to meet the
liquidity requirements of the Partnership as soon as practicable after
the Closing Date (it being understood that the obligations of the
Partnership under such line of credit shall be nonrecourse to the
Managing General Partner).
3.12 Dispute Resolution on A Services. In the event that the Managing
General Partner believes that the Limited Partner has unreasonably
withheld its consent to the Partnership's procurement of A Services from
the Managing General Partner in any Fiscal Year subsequent to the Fiscal
Year ending December 31, 1994, then, in lieu of the dispute mechanism
set forth in Section 12.11, the following provision shall apply. The
Managing General Partner may commence arbitration hereunder within forty
(40) Business Days after the Managing General Partner's receipt of
written notice of the Limited Partner's withholding of its consent to
the Partnership's procurement of A Services from the Managing General
Partner for the given year by delivering to the Limited Partner a notice
of arbitration (a "Notice of Arbitration"), and any failure by the
Managing General Partner to commence an arbitration within such period
shall constitute an absolute bar to the commencement of any such
arbitration proceeding and a waiver of all claims relating to the
reasonableness of such withholding of consent. Such Notice of
Arbitration shall specify the matters as to which arbitration is sought,
the nature of any dispute and any other matters required to be included
therein by the Rules and Commentary for Non-Administered Arbitration of
Business Disputes, as in effect from time to time (the "Rules"), of the
Center for Public Resources, Inc. ("CPR"). A partner of Ernst & Young
or Price Waterhouse, whichever is not the Accountants, to be selected by
such accounting firm and not by either Partner, shall be the arbitrator
(the "Arbitrator"); provided, however, that, in the event that the
Arbitrator for any reason withdraws or is disqualified from serving in
that capacity and cannot be replaced by another qualified partner of
such accounting firm because of such accounting firm's withdrawal or
disqualification, CPR shall select as a substitute Arbitrator a person
who is or has been actively employed in an executive or managerial
capacity in the private-sector defense industry or with an independent
public accounting firm having expertise in that area.
The Arbitrator will determine the allocation of the costs and expenses
of arbitration (except for fees and expenses of legal counsel, if any,
selected by a party, which shall be borne by such party) as well as the
resolution of any dispute governed by this Section 3.12. The
arbitration shall be conducted in Arlington, Virginia under the Rules,
except as modified by the agreement of all of the parties to this
Agreement. In any arbitration under this Section 3.12, there shall be a
rebuttable presumption that the withholding of consent by the Limited
Partner to the Partnership's procurement of A Services from the General
Managing Partner was reasonable, and the Managing General Partner shall
have the burden of rebutting that rebuttable presumption by a
preponderance of the evidence. The pendency of any arbitration under
this Section 3.12 shall not in any way relieve the Managing General
Partner or the Partnership of the obligation to discontinue, within the
transition periods set forth on Schedule A to the Management Services
Agreement, the provision of any A Service or Services not consented to
by the Limited Partner.
Evidentiary hearings, if any, shall not exceed 3 Business Days. The
Arbitrator shall conduct the arbitration so that a final result,
determination, finding or judgment (the "Final Determination") is made
or rendered as soon as practicable, but in no event later than 50
Business Days after the receipt by the Limited Partner of the Notice of
Arbitration nor later than 10 Business Days following the completion of
all other aspects of the arbitration.
The Final Determination shall be signed by the Arbitrator, and shall be
limited to a decision that the withholding by the Limited Partner of its
consent to the Partnership's procurement of A Services from FMC for the
given year was either reasonable or unreasonable. In the event that the
Final Determination states that the Limited Partner's consent was
unreasonably withheld, the Managing General Partner may provide such A
Services on the terms originally proposed by it. The Final
Determination shall be final and binding on all parties (but shall have
no bearing upon any withholding of consent by the Limited Partner in or
with respect to any subsequent year), and there shall be no appeal or
reexamination of the Final Determination, except as provided in Sections
10 and 11 of the Federal Arbitration Act, 9 U.S.C. Subsection 1 et seq.
Either Partner may enforce any Final Determination in any state or
federal court having jurisdiction over the dispute. For the purpose of
any action or proceeding instituted with respect to any Final
Determination, each party hereto irrevocably consents to the service of
process by registered mail or personal service and hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it
may have or hereafter have as to personal jurisdiction, the laying of
the venue of any such action or proceeding brought in any such court and
any claim that any such action or proceeding brought in any court has
been brought in an inconvenient forum.
ARTICLE IV
CONTRIBUTIONS, CAPITAL ACCOUNTS, ALLOCATIONS
Except as otherwise provided in this Article IV, the provisions of this
Article IV relate solely to allocations of income, gain, loss,
deduction, and credit for Federal income tax purposes and to the
maintenance of capital accounts for purposes of Section 704(b) of the
Code and corresponding Treasury Regulations (and do not relate to
accounts maintained for GAAP or other purposes).
4.1 Capital Accounts. (a) The Partnership shall maintain a capital
account ("Capital Account") for each Partner. The Managing General
Partner agrees to contribute capital to the Partnership as provided in
Article II of the Participation Agreement. The Limited Partner agrees
to contribute capital to the Partnership as provided in Article II of
the Participation Agreement. The Partners agree that, based on their
arm's-length negotiations (i) the Fair Market Value of the contribution
agreed to be made by the Managing General Partner is $138,600,000 and
(ii) the Fair Market Value of the contribution agreed to be made by the
Limited Partner is $92,400,000. The Partners have agreed that the Fair
Market Value of the contribution of the Managing General Partner shall
be allocated among the FMC Assets, the FMC Liabilities and cash in the
manner prescribed on Schedule 4.1 and that the Fair Market Value of the
contribution of the Limited Partner shall be allocated among the Harsco
Assets, the Harsco Liabilities and cash in the manner prescribed on
Schedule 4.1.
(b) After giving effect to the contributions and distributions
described in Section 4.1(a), the Capital Accounts shall be
(i) increased by:
(A) any amount of cash transferred to the Partnership by such Partner
as a capital contribution;
(B) the Fair Market Value (determined in accordance with Section 12.16
below) of any property (other than cash) transferred to the Partnership
by the Partner as a capital contribution (net of liabilities secured by
such property); and
(C) the amount of any Profits allocated to such Partner pursuant to
Section 4.3; and
(ii) decreased by:
(A) the amount of cash distributed to the Partner by the Partnership
pursuant to this Agreement;
(B) the Fair Market Value (determined in accordance with Section 12.16
below) of any property (other than cash) distributed to the Partner by
the Partnership pursuant to this Agreement (net of liabilities secured
by such property); and
(C) the amount of any Losses allocated to such Partner pursuant to
Section 4.3.
(c) Any indemnification payment made by a Partner or a Parent of the
Partner to the Partnership pursuant to Article VI of the Participation
Agreement shall be treated as cash transferred to the Partnership by
such Partner as a capital contribution.
(d) (i) Subject to the provisions of clause (ii) of this Section
4.1(d), the Managing General Partner may cause the Capital Accounts to
be increased or decreased in accordance with Treasury Regulations
Section 1.704-1(b)(2)(iv)(f) based on the Fair Market Value of the
Partnership's property (determined in accordance with Section 12.16
below).
(ii) In the case of a Significant Event, the Managing General Partner
shall cause the Capital Accounts to be increased or decreased in
accordance with Treasury Regulations Section 1.704(b)(2)(iv)(f) based on
the Fair Market Value of the Partnership's property (determined in
accordance with Section 12.16 below). For purposes of this Section
4.1(d), the term "Significant Event" means the contribution by a new or
existing Partner of more than $10 million in the form of money or
property to the Partnership in exchange for a Partnership interest or
the distribution by the Partnership of more than $10 million in the form
of money or property to a Partner in exchange for a Partnership
interest.
(iii) Any adjustments to Capital Accounts pursuant to this Section
4.1(d) shall reflect the manner in which any income, gain, loss or
deduction inherent in such property would have been allocated to the
Partners if such property had been sold at such time in a taxable
transaction at Fair Market Value.
(e) A transferee of a Partnership Interest shall succeed to that
portion of the Capital Account of the transferor relating to the
Partnership Interest transferred to the extent provided in Treasury
Regulation Section 1.704-1(b)(2)(iv)(1). However, if the transfer
causes a termination of the Partnership under Section 708(b)(1)(B) of
the Code, the Partnership properties shall, except for purposes of
distributions made pursuant to Article VI, be deemed to have been
distributed in liquidation of the Partnership to the Partners (including
the transferee of a Partnership Interest) and deemed recontributed by
such Partners and transferees in reconstitution of the Partnership.
(f) The amount of any reserve for contract closeouts shall, for
purposes of this Section 4.1, be treated as a liability with a Fair
Market Value equal to the amount of such reserve.
(g) The amount of any environmental reserves contributed by a Partner
shall, for purposes of this Section 4.1, be treated as a liability with
a Fair Market Value equal to the amount of such reserve.
(h) The provisions of this Agreement relating to Capital Accounts are
intended to comply with Treasury Regulation Section 1.704-1(b)(2)(iv).
With respect to the treatment of liabilities under Treasury Regulation
Section 1.704-1(b)(2)(iv), the amount of any liability shall be its Fair
Market Value.
(i) Any distribution or transfer required by Section 6.3 hereof shall
be treated as cash transferred to the Partner by the Partnership as a
distribution.
4.2 Partnership Profits and Losses.
(a) "Profits" shall mean items of Partnership income and gain
determined according to Section 4.2(b). "Losses" shall mean items of
Partnership loss and deduction determined according to Section 4.2(b).
(b) For purposes of computing the amount, character and source of any
item of income, gain, deduction, loss, credit and basis included in
Profits or Losses, the determination, recognition and classification of
any such item shall be the same as its determination, recognition and
classification for Federal income tax purposes; provided that:
(i) Depreciation, amortization and cost recovery shall be calculated
using the Partnership's method for Federal income tax purposes;
provided, however, that if an asset has a zero adjusted tax basis, the
Partnership shall select a method of depreciation, amortization or cost
recovery recommended by the Accountants as a method which will not
disproportionately advantage or disadvantage either Partner. Any
deductions for depreciation, cost recovery or amortization attributable
to property contributed to the Partnership by a Partner shall be
determined as if the adjusted basis of such property on the date it was
acquired by the Partnership were equal to the Fair Market Value
(determined in accordance with Section 12.16 below) of such property at
such time. If Capital Accounts are restated pursuant to Section 4.1(d),
subsequent deductions for depreciation, cost recovery or amortization
attributable to property owned by the Partnership at the time of the
restatement shall be determined as if the adjusted basis of such
property on the date of such restatement were equal to the Fair Market
Value of such property at such time.
(ii) Any income, gain or loss attributable to the taxable disposition
of any property shall be determined as if the adjusted basis of such
property as of the date of such disposition were equal in amount to the
Partnership's Carrying Value with respect to such property as of such
date.
(iii) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for Federal income tax purposes pursuant to
Section 50(c) of the Code (or any analogous provisions), the amount of
such reduction shall, solely for purposes hereof, be deemed to be an
additional item of depreciation or cost recovery deduction in the year
such property is placed in service. Any restoration of such basis
pursuant to Section 50(a) (or any analogous provisions) of the Code
shall be allocated in the same manner as the deemed deduction was
allocated.
(iv) All fees and other expenses incurred by the Partnership to promote
the sale of (or to sell) a Partnership interest that can neither be
deducted nor amortized under Section 709 of the Code shall be treated as
an item of deduction and shall be allocated pursuant to Section 4.3.
(v) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss
and deduction shall be made without regard to any election under Section
754 of the Code which may be made by the Partnership.
(vi) Items of income and gain exempt from Federal income tax shall be
included as items of income and gain.
(vii) Partnership expenditures that are not deductible for Federal
income tax purposes and are not chargeable to capital and any losses on
Partnership property sold to a related person that are disallowed for
Federal income tax purposes shall be treated as items of loss or
deduction.
(viii) If Partnership property is distributed to a Partner, such
property shall be treated as if it were first sold for an amount equal
to its Fair Market Value (determined in accordance with Section 12.16
below). Any income, gain, loss or deduction resulting from such deemed
sale shall be allocated to the Partners pursuant to Section 4.3.
(ix) To the extent that any payment described in Section 4.1(c) relates
to a loss, liability, claim, damage or expense for which a Partner or
the Partner's Parent makes, has made or is obligated to make an
Indemnification Payment to the Partnership under Article VI of the
Participation Agreement that does not otherwise result in an item of
loss or deduction or capitalized basis or cost to be allocated under
Section 4.3(c)(iii), such payment shall be treated as an item of loss or
deduction under Section 4.2(b)(vii) at the time it is made.
(x) Losses shall not include any items of loss or deduction which
result from the satisfaction of a liability (including any contributed
environmental reserves) that reduced a Partner's Capital Account under
Section 4.1 except to the extent that the amount of such items exceeds
such reduction.
(xi) Any Qualifying Remedial Expenditure of the Partnership which has
not been charged against any environmental reserves (which reserves were
contributed by a Partner to the Partnership as part of its Initial
Capital Contribution) shall be treated as an item of loss or deduction
in computing Losses in accordance with the preceding provisions of this
Section 4.2(b). Notwithstanding the foregoing, to the extent that a
Qualifying Remedial Expenditure results in the capitalization of an
asset for Federal Income Tax purposes, then the amount which shall be
treated as an item of loss or deduction in computing Losses pursuant to
this Section 4.2(b)(xi) shall be equal to the amount of depreciation,
amortization or other basis recovery which is allowed or allowable for
such Fiscal Year with respect to such asset.
(xii) The amount of Realization of Qualifying Remedial Expenditures (as
determined under Section 5.22.4.4(i) of the Participation Agreement)
shall be treated as an item of income in computing Profits in accordance
with the preceding provisions of this Section 4.2(b).
(xiii) An amount equal to the TRER on each Major Contract shall be
treated as an item of income in computing Profits in accordance with the
preceding provisions of this Section 4.2(b).
4.3 Allocation of Profits and Losses.
(a) Except as otherwise provided herein, the Profits of the Partnership
for each Fiscal Year shall be allocated as follows:
(i) First, to the Limited Partner, an amount equal to the sum of (x)
the lesser of the Limited Partner Allocation or the Profits of the
Partnership for such Fiscal Year plus (y) the Carryover Amount. In the
case of a Fiscal Year (other than Fiscal Year 1994) consisting of less
than 365 days, the dollar amount specified in the preceding sentence
shall be equal to the product of the Limited Partner Allocation times a
fraction, the numerator of which is the number of days in the Fiscal
Year and the denominator of which is 365. For purposes of this Section
4.3(a)(i), the term "Carryover Amount" shall be the sum of (x) the
amount, if any, by which the aggregate amount of Profits allocated to
the Limited Partner for all prior Fiscal Years under this Section
4.3(a)(i) is less than the aggregate amount of Profits that would have
been allocated to the Limited Partner had the Profits of the Partnership
in each fiscal period been equal to or greater than the Limited Partner
Allocation for such fiscal period plus (y) interest on such amount for
the period of time beginning on the last day of the earliest prior
Fiscal Year for which the Carryover Amount allocated in the present
Fiscal Year could not be allocated because of insufficient Profits and
ending on the last day of the Fiscal Year for which the Carryover Amount
is allocated, such interest to be calculated at rate of twelve month
LIBOR prevailing on the first day of such period of time plus 100 basis
points; provided, however, that in calculating such product the dollar
amount specified in this sentence for any short Fiscal Year shall be
equal to the product of the Limited Partner Allocation times a fraction,
the numerator of which is the number of days in the Fiscal Year and the
denominator of which is 365. Notwithstanding the foregoing provisions
of this clause (i) or any other provision of the Operative Documents,
the Limited Partner shall not be entitled to any further allocations
under this clause (i) or otherwise in respect of the Limited Partner
Allocation (except to the extent of any remaining Carryover Amounts)
with respect to any period in which FMC or its permitted successor in
interest is not entitled, whether due to termination, resignation or
replacement as Managing General Partner, breach or any other cause, to
receive its Annual Fee under Section 4(b) of the Management Services
Agreement. In the event that the Limited Partner is entitled to a
distribution of Limited Partner Allocation Late Payment Interest under
Section 6.1 hereof, then the allocation of Profits under this Section
4.3(i) shall be increased by an amount equal to the amount of such
Limited Partner Allocation Late Payment Interest.
(ii) Second, to the Limited Partner and the Managing General Partner,
an amount equal to the sum of (x) the product of (1) the quotient of (A)
such Partner's Share Percentage and (B) 1 minus such Partner's Share
Percentage and (2) the other Parent's respective CRB Carrying Costs for
such Fiscal Year and (y) the CRBCC Carryover Amount, pro rata based on
each Partner's percentage of the aggregate amount allowable to both
Partners. For purposes of this Section 4.3(a)(ii), the term "CRBCC
Carryover Amount" shall be the amount, if any, by which the aggregate
amount of Profits allocated to either Partner for all prior Fiscal Years
under this Section 4.3(a)(ii) is less than the aggregate amount of
Profits that would have been allocated to such Partner had the Profits
of the Partnership in each fiscal period been equal to or greater than
the sum of the Limited Partner Allocation and all CRB Carrying Costs
allocable hereunder for such fiscal period.
(iii) Third, the balance of the Profits to the Partners in proportion
to the Share Percentages in effect for the Fiscal Year, as adjusted from
time to time, in which such Profits are recognized.
(b) Except as otherwise provided herein, the Losses of the Partnership
for each Fiscal Year shall be allocated to the Partners in proportion to
the Share Percentages in effect for the Fiscal Year, as adjusted from
time to time, in which such Losses are recognized.
(c) The following special allocations shall be made:
(i) If, and to the extent that, any Partner is deemed to receive a
distribution or recognize income (or is denied a deduction) as a result
of any transaction between such Partner and the Partnership pursuant to
Sections 1272-1274, Section 7872, Section 83, Section 61, Section 446 or
Section 482 or 483 of the Code, or any other similar rule now or
hereafter in effect, any corresponding resulting loss or deduction of
the Partnership shall be allocated to the Partner who was charged with
such income if, and to the extent, that such allocation is necessary to
avoid consequences that were not anticipated by the parties at the time
of the transaction.
(ii) Items of loss or deduction attributable to partner nonrecourse
debt (as defined in Treasury Regulation Section 1.704-2(b)(4)) shall be
allocated in the manner required by Treasury Regulation Section
1.704-2(i). If there is a net decrease in partnership minimum gain
(determined pursuant to Treasury Regulation Section 1.704-2(d)) or
partner nonrecourse debt minimum gain (as defined in Treasury Regulation
Section 1.704-2(i)(3)) during any calendar year, each Partner shall be
allocated items of income and gain for amounts and of such character to
the extent required by Treasury Regulation Section 1.704-2(f) and
(i)(4), respectively. This Section 4.3(c)(ii) is intended to be a
minimum gain chargeback provision that complies with the requirements of
Treasury Regulation Section 1.704-2(f) and (i).
Allocations made pursuant to this Section 4.3(c)(ii) shall be made
before any other allocation of Partnership items is made pursuant to
this Section 4.3(c). To the extent possible without violating the
provisions or purposes of Code Section 704 or the Treasury Regulations
thereunder, the Partnership's subsequent income, gains, losses,
deductions and credits shall be allocated so as to achieve as nearly as
possible the results that would have been achieved if this Section
4.3(c)(ii) were not in this Agreement.
(iii) Any item of deduction or loss (including items treated as an item
of loss or deduction under Section 4.2(b) (vii) and Section 4.2(b)(ix)
and including any basis or cost recovery or other reduction of income)
attributable to a loss, liability, claim, damage or expense for which a
Partner or a Parent of a Partner makes, has made or is obligated to make
an indemnification payment to the Partnership under Article VI of the
Participation Agreement shall be allocated to, and reduce the Capital
Account of, such Partner to the extent of the indemnification payment or
obligation.
(iv) An amount equal to the Realization described in Section
4.2(b)(xii) shall be allocated to, and increase the Capital Account of,
the Partner of the Parent to which such Realization relates.
(v) An amount equal to each Partner's share of the TRER (as determined
under Section 5.22.4.4(ii) of the Participation Agreement and treated as
an item of income under Section 4.2(b)(xii) hereof) shall be allocated
to and increase the Capital Account of the Partner of the Parent to
which such amount relates.
(vi) Any Qualifying Remedial Expenditure which has been treated as an
item of loss or deduction in computing Losses under Section 4.2(b)(xi)
shall be allocated to, and decrease the Capital Account of, the Partner
of the Parent to which such Qualifying Remedial Expenditure relates. If
an amount of any Qualifying Remedial Expenditure has not been so charged
against the aforesaid environmental reserves and at the time of
liquidation of the Partnership under Section 9.4 such amount has not
been treated as an item of loss or deduction under Section 4.2(b)(xi)
but is carried on the Partnership's tax books as an asset, such asset
shall be deemed to be distributed in liquidation to and reduce the
Capital Account of the Partner of the Parent to which such Qualifying
Remedial Expenditure relates and shall be valued at no less than its
adjusted tax basis for such purposes.
(vii) In determining the share of Profits and Losses allocated to a
Partner whose interest varies during any Fiscal Year, the parties hereby
agree to use the pro rata method described in Treasury Regulations
Section 1.706-1(c)(2)(ii), except to the extent a different method is
agreed to in accordance with Section 3.1(k) above.
4.4 Allocation of Taxable Income and Loss.
(a) (i) Except as otherwise provided herein, the amount, character and
source of all items of taxable income, gain, loss, deduction, credit and
basis for each Fiscal Year shall be allocated for tax purposes to the
Partners in accordance with the allocation of any such item as provided
in Section 4.3.
(ii) Notwithstanding any other provision of this Agreement, any item of
taxable income, loss or deduction resulting from any Qualified Remedial
Expenditure which reduced any contributed environmental reserve shall be
specifically allocated to the Partner who contributed such reserve.
(b) (i) As required by Section 704(c) of the Code, in the case of
property contributed to the Partnership by a Partner as a capital
contribution, items of income, gain, loss and deduction attributable
thereto shall be allocated among the Partners for Federal income tax
purposes in a manner that takes into account the variation between the
Fair Market Value (determined in accordance with Schedule 4.1) of such
property and its adjusted tax basis at the time of contribution.
(ii) To the extent not otherwise subject to the provisions of clause
(i) of this Section 4.4(b), any item of income attributable to a
decrement in any LIFO reserve or to a difference between the amount
allocated to inventory pursuant to Schedule 4.1 and the tax basis of
such inventory at the time of contribution shall be allocated to the
Partner that contributed such inventory to the Partnership.
(iii) If Capital Accounts are adjusted pursuant to Section 4.1(d),
items of income, gain, loss and deduction attributable thereto shall be
allocated among the Partners for Federal income tax purposes in a manner
that takes into account the variation between the Fair Market Value
(determined in accordance with Section 12.16 below) of such property and
its adjusted tax basis at the time of such adjustment.
(c) Except to the extent attributable to Partner nonrecourse debt, tax
credits shall be allocated according to the Partners' Share Percentages
for the Fiscal Year in which the credits arise. Tax credits
attributable to Partner nonrecourse debt shall be allocated to the
Partner who bears the economic risk of loss for such nonrecourse
financing. Any recapture of such tax credits shall be allocated pro
rata to those Partners who were allocated the original credits based on
their relative shares of such original credits.
(d) All items of income, gain, loss, deduction, credit and basis
allocation recognized by the Partnership for Federal income tax purposes
and allocated in accordance with the provisions hereof shall be
determined without regard to any election under Section 754 of the Code
which may be made by the Partnership; provided, however, such
allocations, once made, shall be adjusted, as necessary or appropriate,
to take into account those adjustments permitted by Sections 734 and 743
of the Code.
(e) Allocations under this Section 4.4 are for tax purposes only and
shall not be taken into account in determining Capital Accounts.
4.5 Additional Capital Contributions. Except as otherwise provided in
this Agreement and in Sections 2.3.3 or 5.22.5 or Article VI of the
Participation Agreement, neither Partner shall have any obligation to
make any additional capital contribution to the Partnership. In the
event that the Managing General Partner requests additional capital
contributions from the Partners to meet the Partnership's anticipated
cash requirements, investment opportunities within the Scope of Activity
and other cash requirements (as deemed necessary or advisable by the
Managing General Partner), the Partners may, at their option, make cash
contributions to the Partnership in proportion to their Share
Percentages. If any Partner declines to make such a contribution within
40 Business Days (or 20 Business Days for the Limited Partner if the
capital contribution requested is less than $2 million and for the
Managing General Partner if the capital contribution requested is less
than $5 million) of the Managing General Partner's request, the other
Partner may elect to make such declining Partner's additional capital
contribution (or any portion thereof). In the event that a Partner
declines to make such a contribution, and regardless of whether or to
what extent the contributing Partner elects to make additional capital
contributions requested from the declining Partner, the contributing
Partner may, at its option, treat its entire additional capital
contribution as either (i) a senior unsecured loan to the Partnership
bearing interest at 100 basis points (1.0%) above the U.S. Treasury rate
then applicable to the term of repayment (which shall be determined by
the contributing Partner) or (ii) an equity contribution to the
Partnership. In the event that such contributing Partner elects to
treat such additional capital contribution as an equity contribution to
the Partnership, then (i) the Partnership shall promptly determine, at
its expense, the Appraised Value of the Partnership in the manner
prescribed in Section 7.2(c) below, (ii) the contributing Partner's
Share Percentage will be increased such that its Share Percentage after
such contribution will equal (a) the sum of (x) the amount of such
contribution plus (y) the product of its Share Percentage prior to such
contribution and the Appraised Value of the Partnership prior to such
contribution divided by (b) the sum of (x) the Appraised Value of the
Partnership prior to such contribution plus (y) the amount of such
contribution and (iii) each non-contributing Partner's Share Percentage
will be reduced (subject to the limitation contained in Section 3.1(h)
above) such that (A) its Share Percentage after such contribution will
be in the same relative proportion to the total Share Percentages of all
non-contributing Partners and (B) the total of all Partners' Share
Percentages will equal 100%.
4.6 Loss Limitation and Special Allocation.
(a) No allocation of Losses shall be made to the Limited Partner if
such allocation will cause or increase an Adjusted Capital Account
Deficit with respect to such Limited Partner taking into account the
adjustments, allocations and distributions described in Treasury
Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). Any losses
not allocated to the Limited Partner under this Section 4.6(a) shall be
allocated to the Managing General Partner and to its Reallocated Loss
Account. In the event a Limited Partner unexpectedly receives any such
adjustments, allocations or distributions described in said Treasury
Regulations that cause or increase an Adjusted Capital Account Deficit
with respect to the Limited Partner, items of Partnership income and
gain shall be specially allocated to such Limited Partner in amounts and
manner sufficient to eliminate the Adjusted Capital Account Deficit as
quickly as possible. To the extent such items of Partnership income and
gain are specially allocated to the Limited Partner pursuant to the
preceding sentence, subject to the provisions of the first sentence of
this section 4.6(a), subsequent allocations to the Managing General
Partner shall be made so as to put the Managing General Partner and the
Limited Partner in the same position they would have been in had such
allocation to the Limited Partner not been made. For purposes of this
Section 4.6(a), "Adjusted Capital Account Deficit" means with respect to
a Limited Partner, the deficit balance, if any, in such Limited
Partner's Capital Account as of the end of the relevant Fiscal Year,
after crediting to such Capital Account any amount such Limited Partner
is deemed to be obligated to restore under the Treasury Regulations and
debiting to such Capital Accounts the adjustments, allocations and
distributions described in Treasury Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6).
(b) Notwithstanding any other provision of this Agreement, to the
extent there is outstanding at any time a Reallocated Loss Amount, then
an amount of Adjusted Profits of the Partnership shall be allocated to
the Managing General Partner in an amount equal to its Reallocated Loss
Amount. No allocation of Adjusted Profits shall be made to the Limited
Partner until such time as the Reallocated Loss Account (including any
Losses allocated to the Managing General Partner pursuant to Section
4.6(a) covering the current Fiscal Year) is reduced to zero. For
purposes of this Section 4.6(b), "Adjusted Profits" means with respect
to a Fiscal Year the excess of any of the Profits of the Partnership for
such Fiscal Year determined according to Section 4.2(b) over the amount
allocated to the Limited Partner pursuant to Section 4.3(a)(i) and (ii).
4.7 No Interest. No interest shall be payable to the Partners on the
balances in their Capital Accounts or otherwise in respect of the
capital of the Partnership.
4.8 No Withdrawal. No Partner shall be entitled to withdraw any part
of its capital contribution or Capital Account or to receive any
distribution from the Partnership, except as provided in Article VI and
Article IX and in Section 2.3.3 of the Participation Agreement.
4.9 Loans From Partners. Loans by a Partner to the Partnership shall
not be considered capital contributions.
4.10 Loans to Partners. The Partnership shall not make loans to
Partners or Affiliates of Partners.
4.11 No Deficit Capital Account Make-Up Obligation. Except as may
otherwise be required by Delaware law, in no event shall a Partner be
obligated to contribute capital at any time, including upon dissolution,
to the Partnership for the purpose of eliminating a negative balance in
its Capital Account.
ARTICLE V
FISCAL MATTERS.
5.1 Fiscal Years and Fiscal Quarters. The Fiscal Year of the
Partnership shall end on December 31 of each year and the Fiscal
Quarters shall be the calendar quarters ending March 31, June 30,
September 30 and December 31. The Partnership's first Fiscal Year shall
end December 31, 1994.
5.2 Location of Books of Account. The books of account for the
Partnership shall be kept and maintained at the Principal Office or at
such other place as the Managing General Partner shall determine.
5.3 Books and Records. For financial reporting purposes (and not for
purposes of maintaining Capital Accounts or determining taxable income
or loss), the books of account shall be maintained on an accrual basis
in accordance with GAAP, consistently applied except as otherwise
permitted by Section 5.9, with reference to all Partnership
transactions. The books and records shall include the designation and
identification of any property in which the Partnership owns an
interest; such records shall also include, but shall not be limited to,
the ownership of property (real, personal, and mixed). The Partnership
shall keep full and complete books of account, which shall be maintained
in a manner that provides sufficient assurance that transactions of the
Partnership are recorded so as to comply with all applicable laws and to
permit (a) the preparation of the Partnership's financial statements in
accordance with GAAP; (b) the Partners to account for their interests in
the Partnership in accordance with GAAP; and (c) the Partners to
facilitate compliance with the public reporting obligations of their
respective Parents. For financial reporting purposes, allocations of
items described in Section 4.4(b) shall be consistent with the
allocations made for tax purposes. Each Partner shall prepare and
provide to the other Partner such audited financial statements relating
to pre-Closing periods as reasonably requested by the other Partner in
order to facilitate the compliance by such Partner's Parent with the
financial statement filing requirements, as applicable, of Regulation
S-X, 17 C.F.R. Subsection 210.3-05 et seq.
5.4 Annual Financial Statements. As soon as practicable following the
end of each Fiscal Year and the review and approval of the Accountants
referred to below (but not later than 16 Business Days after the end of
such Fiscal Year), the Partnership shall prepare and deliver to each
Partner such financial data as may be reasonably requested by such
Partner for use in preparation of annual earnings releases, which data
shall have been (or have been derived from) data that has been reviewed
and approved by the Accountants as reflecting all necessary year-end
audit adjustments. Following the completion and audit of the
Partnership's annual audited financial statements in the normal course
(but not later than 30 Business Days after the end of such Fiscal Year),
or on such other date as may be agreed upon by the parties hereto in the
event of any change in any Parent's earnings reporting requirements, the
Partnership shall prepare and deliver to each Partner and the members of
the Advisory Committee, a balance sheet of the Partnership as of the end
of such Fiscal Year and the related statements of operations, changes in
Partners' equity and cash flow of the Partnership for such Fiscal Year,
together with appropriate notes to such financial statements, and a
balance sheet as of the end of such prior Fiscal Years and related
statements for such number of additional fiscal years as may be
reasonably requested by a Partner in order for such Partner to comply
with Regulation S-X, 17 C.F.R. subsection 210.3-09 et seq. These
statements shall reflect all of the Partnership's expenses and
contingent liabilities as if the Partnership were a stand-alone entity
consistent with GAAP. These financial statements shall also comply with
the other relevant provisions of Regulation S-X, 17 C.F.R. Subsection
210, and shall be audited and reported on by the Accountants. At the
same time, the Partnership shall deliver (at its expense) to each
Partner a report indicating a reasonable estimate of such Partner's
share of all items of income, gain, loss, deduction and credit of the
Partnership for such Fiscal Year and any other financial information
related to the Partnership which is reasonably requested by either
Partner for Federal, national, state, local or foreign income or
franchise tax purposes or for financial reporting purposes.
5.5 Interim Financial Statements and Other Information. As soon as
practicable following the end of each month (and in any event, with
respect to each month other than the last month of the Partnership's
Fiscal Year, not later than the 8th Business Day after the end of each
such month during the Partnership's first Fiscal year or the 6th
Business Day after the end of each such month during each subsequent
Fiscal Year), the Partnership shall prepare and deliver to each Partner
such financial data as may be reasonably requested by such Partner for
use in preparation of internal monthly financial statements and
quarterly earnings releases and whatever regularly prepared reports the
Partnership delivers to the Managing General Partner at such time as
such reports are delivered to the Managing General Partner. Such
financial information and reports shall reflect all adjustments
necessary to a fair presentation, all of which adjustments shall be of a
normal, recurring nature, except as indicated otherwise.
5.6 Estimated Tax Information. The Partnership shall prepare and
deliver to each Partner such information and at such times as reasonably
requested by either Partner to aid it in meeting its obligation to make
returns of estimated Taxes to Federal, national, state, local and
foreign income taxing jurisdictions.
5.7 Tax Return Information. The Partnership shall prepare and deliver
to each Partner such information and at such times as reasonably
requested by either Partner to aid it in meeting its obligation to make
returns of Taxes to Federal, state, local and foreign income taxing
jurisdictions. Notwithstanding the foregoing, the Partnership shall
prepare and deliver to each Partner its copy of Form K-1 for each
taxable year of the Partnership on or before July 15 next following the
end of such taxable year.
5.8 Inspection of Facilities and Records; Partnership Assistance. Each
Partner shall have the right in a reasonable manner at all reasonable
times during usual business hours to inspect the facilities of the
Partnership and to examine all books of account, files, records and
databases of the Partnership, whether in written form or contained on
computer tapes or disks. Such right may be exercised through any agent,
employee or representative of such Partner designated by it or by an
independent public accountant (subject to any confidentiality assurances
that the Partnership may reasonably request). The Partner conducting
such examination or inspection shall bear all costs and expenses
incurred in connection therewith. The Partnership and the Partners
agree (a) to retain all books and records which are relevant to (i) the
determination of the Tax liabilities pertinent to the Assets and the
Partners relating to any pre-Closing Tax period until the expiration of
the applicable statute of limitations and to abide by all record
retention agreements entered into with any taxing authority and (ii) the
support for the items reflected on each Partner's Final Closing Balance
Sheet until the third anniversary of the Closing Date and (b) to give
the other parties reasonable written notice prior to destroying or
discarding any such books and records and, if any of the other parties
so requests, the Partnership or the Partner, as the case may be, shall
allow the other party to take possession of such books and records.
Upon the reasonable request by either Partner, the Partnership will
promptly assist such Partner and its Parent in the prosecution or
defense of any claim, audit or investigation or proceeding by or against
any Governmental Authority or any vendee of the Defense Business of such
Partner. Such assistance shall be provided by the Partnership employee
or employees best qualified to provide the requested assistance
expeditiously; provided, however, that (i) such assistance does not
unreasonably disrupt the conduct of the Partnership's operations and
(ii) the Partnership shall incur no monetary liability to such Parent or
its Partner in connection with the provision of such assistance. Such
assistance shall include, without limitation, to the extent reasonably
practicable, extracting from the files and records of the Partnership
all information relevant to the matter, consultation concerning such
matter, testimony, if necessary, in any proceeding relating to such
matter and assistance with the preparation of any pleadings or other
submissions with respect to such matter. Such requesting Partner shall
reimburse the Partnership for its out-of-pocket expenses and, to the
extent not allowable under any customer contracts, its administrative
costs incurred in connection with such request.
5.9 Principal Accounting Procedures.
The Principal Accounting Procedures to be elected, adopted and followed
by the Partnership for purposes of determining the amount and timing of
items of Partnership income, gain, loss, deduction and credit for
purposes of U.S. federal income taxation and for purposes of financial
reporting as of the Closing Date are set forth on Schedule 5.9 annexed
hereto. No change in any such Principal Accounting Procedure shall be
made without the approval of the Limited Partner, so long as the Limited
Partner's Share Percentage is at least 20 percent, unless such change
(i) is required by law, (ii) is required to comply with GAAP or (iii) is
not material. Any such approval shall be deemed given by the Limited
Partner if such Limited Partner does not notify the Partnership in
writing of an objection to such change within 45 days of its receipt of
notice of such change. For these purposes, a change is not material
only if:
(A) such change would not have resulted in the amount of either the
Partnership's net earnings or sales, as applicable, for the prior Fiscal
Year differing by more than 3 percent or $1,000,000 (whichever is
greater) from the actual amount of the Partnership's net earnings or
sales for such Fiscal Year;
(B) such change would not have resulted in the amount of any Partner's
Capital Account as of the end of the prior Fiscal Year differing by more
than 3 percent or $1,000,000 (whichever is greater) from the actual
amount of the Partner's Capital Account as of such time (provided that
this paragraph (B) shall be applied as if there were no allocations or
distributions to the Limited Partner with respect to its Limited Partner
Allocation);
(C) such change would not have resulted in the amount of the
Partnership's total assets or total liabilities as of the end of the
prior Fiscal Year differing by more than 3 percent or $1,000,000
(whichever is greater) from the actual amount of the Partnership's total
assets or total liabilities as of such time;
(D) such change would not have resulted in (1) the percentage of an
item of Partnership income, gain, loss, deduction or credit reported as
a separate line item on the Partnership's Form K-1 for the prior Fiscal
Year and allocated to a Partner differing by more than 3 percent or
$1,000,000 (whichever is greater) from the actual amount of the
percentage of such item that was allocable to such Partner or (2) the
receipt by a Partner of a percentage of the amount of cash that would
have been distributable to the Partners by the Partnership in the prior
Fiscal Year differing by more than 3 percent from the percentage of cash
actually distributed to such Partner (provided that this paragraph (D)
shall be applied as if there were no allocations or distributions to the
Limited Partner with respect to its Limited Partner Allocation);
(E) such change does not require the consent of the Commissioner of
Internal Revenue; and
(F) in the event the Partnership becomes a registrant, such change will
not require the filing of a preferability letter (of the type described
in Item 601(b)(18) of Regulation S-K) with the SEC.
5.10 1993 Parent Financial Statements. The Partnership shall assist
and cooperate, as reasonably requested by each Parent and at no cost to
such Parent, in such Parent's preparation of its audited financial
statements as of and for the year ended December 31, 1993.
5.11 Retention of Certain Items. Any item of income or gain or any
item of deduction or loss attributable to the final determination of (a)
all reserves with respect to contracts which have been completed as of
the date of Closing and (b) reserves that are not transferred (but that
are maintained by the Partners pursuant to the Principal Accounting
Procedures) with respect to contracts which have not been completed as
of the date of Closing shall not be treated as a Partnership item but
shall be retained by the Partner who maintained the reserve. This
provision shall not apply to allocations provided by Section 4.4(b).
5.12 Responsibilities of Accountants. The parties agree that the
Accountants shall, in accordance with their usual and customary
practices (including practices as to materiality judgments, negative
assurances and reliance on officer certification), provide accounting
and related services to the Partnership which include the following on
an annual basis (except as provided in (d) below):
(a) reviewing the Partnership's U.S. Federal and foreign income tax
return and schedules, confirming that all elections have been properly
made in accordance with this Agreement and the Participation Agreement
and signing such returns as paid preparer;
(b) verifying that each Partner's Capital Account has been properly
maintained and that the Partners' Capital Account balances as of the
close of the Fiscal Year are correctly stated in accordance with this
Agreement and the Participation Agreement;
(c) verifying that tax allocations have been made in accordance with
Section 4.4 of the Partnership Agreement;
(d) confirming (on the basis of a limited review) that the quarterly
"split" of income or loss for book purposes in accordance with GAAP and
for U.S. Federal income tax purposes, including the amount, character
and source of all items of income, gain, loss, deduction, credit and
basis, are allocated between the Partners in compliance with this
Agreement and the Participation Agreement;
(e) confirming that the accounting policies and methods of accounting
used for book purposes in accordance with GAAP and for U.S. Federal
income tax purposes are in compliance with this Agreement and the
Participation Agreement; and
(f) verifying that distributions of cash or property to the Partners
have been made in compliance with this Agreement and the Participation
Agreement.
5.13 State Income Taxes.
(a) The Partnership shall pay the State and local Income Taxes, if any,
attributable to the taxable income of the Partnership whether such
Income Taxes are imposed on the Partnership or on a Partner or the
Partners under applicable tax law. Notwithstanding the foregoing, the
Partnership shall undertake to obtain an Advance Agreement from the DOD
regarding the recoverability of State Income Taxes paid by the Partners.
In the event that the Partnership obtains such an Advance Agreement,
then the Partnership shall no longer be obligated to pay on behalf of
the Partners any State Income Taxes.
(b) The Partners shall be required to provide such information as the
Partnership shall reasonably require in order to comply with the
requirements of the Defense Contract Audit Agency regarding the
recoverability of State Income Taxes paid by the Partnership on behalf
of the Partners. Each of the Partners shall provide the Partnership
with reasonable access to such books and records of such Partner as are
required to meet the requirements of the Defense Contract Audit Agency.
(c) Notwithstanding any other provision of this Agreement, the
Partnership shall not be required to make a payment of State Income
Taxes on behalf of a Partner if the making of such payment by the
Partnership would result in the Partnership's being treated as making a
tax distribution (under Section 6.3(c) hereof) on behalf of such Partner
in an amount greater than the product of (i) such Partner's positive
taxable income (as determined in accordance with Section 6.3(a) hereof)
multiplied by (ii) the maximum Federal marginal income tax rate under
Section 11 of the Code in effect for such Fiscal Year, plus five
percentage points.
ARTICLE VI
DISTRIBUTIONS.
A distribution to a Partner or Partners under this Article VI shall be
made in the same order of priority as the order in which it is set forth
below. Thus, a distribution identified in a Section with a lower number
shall be made in full before any portion of a distribution identified in
a Section with a higher number is made.
6.1 Distribution of Limited Partner Allocation. Subject to applicable
law, the Partnership shall distribute to the Limited Partner, on or
before the 15th day of the third month after the end of the Fiscal Year,
an amount of cash equal to the Profits of the Partnership allocable to
the Limited Partner under Section 4.3(a)(i) for such Fiscal Year in
respect of its Limited Partner Allocation. The Partnership shall make
quarterly estimated distributions of such amount during the
Partnership's Fiscal Year (taking into account any prior distributions
under this Section for such Fiscal Year). Distributions with respect to
the Limited Partner Allocation, including quarterly estimated
distributions with respect thereto, shall bear interest at the rate of
one year LIBOR prevailing on the date the distribution is payable plus
100 basis points for the period between the date the distribution is
payable and the date of the payment of the distribution ("Limited
Partner Allocation Late Payment Interest"). The Limited Partner shall
promptly return to the Partnership, on or before the 15th day of the
third month after the end of the Fiscal Year, any amount distributed
hereunder on an estimated basis to the extent that the total of such
amounts exceeds the amount of Profits allocable to the Limited Partner
under Section 4.3(a)(i).
6.2 Environmental Carrying Cost Distributions. Subject to applicable
law, the Partnership shall distribute to the Limited Partner or the
Managing General Partner, as the case may be, on or before the last
Business Day of the third month after the end of each Fiscal Year, an
amount of cash equal to the Profits of the Partnership allocable to such
Partner under Section 4.3(a)(ii) for such Fiscal Year.
6.3 Tax Distributions.
(a) Subject to applicable law, the Partnership shall make a tax
distribution to each Partner on or before the date on which Federal
income tax payments are due with respect to the Fiscal Year. A
Partner's tax distribution for any particular Fiscal Year shall be equal
to the product of (i) the Partner's positive taxable income from the
Partnership for the Fiscal Year (excluding the items allocated by
Sections 4.3(a)(i), 4.3(a)(ii), 4.3(c)(iv), 4.3(c)(v), 4.3(c)(vi),
4.4(a)(ii), 4.4(b) and 4.6) and (ii) the maximum Federal marginal income
tax rate applicable to a corporation under Section 11 of the Code in
effect for the Fiscal Year, plus five percentage points.
(b) The Partnership shall make estimated distributions under the
principles of (a) above during the Fiscal Year on or before the dates on
which Federal estimated income tax payments must be made by the
Partners. Such estimated tax distributions shall reduce a Partner's
required tax distribution under (a) above and shall be returned to the
Partnership on or before the date on which Federal income tax payments
are due with respect to the Fiscal Year to the extent in excess of a
Partner's required tax distribution under (a) above.
(c) To the extent that the Partnership makes payments on behalf of a
Partner pursuant to Section 5.13 hereof, such payments shall for
purposes of this Section 6.3 be treated as a tax distribution and
therefore reduce such Partner's required tax distribution under Section
6.3(a) hereof.
6.4 Special Distributions. Subject to applicable law, the Partnership
shall, within 30 Business Days after the close of a Fiscal Quarter,
distribute in cash to each Partner the lesser of (i) the amount that
such Partner's Cumulative Remedial Balance would otherwise be reduced
below zero at the end of such Fiscal Quarter or (ii) the amount by which
the cumulative amount of all special contributions made by the Partner
(or its Parent) pursuant to Section 5.22.5 of the Participation
Agreement exceeds the amount of all distributions previously made to
such Partner pursuant to this Section 6.4.
6.5 Additional Cash Distributions. Subject to applicable law and to
(a) and (b) below, at least annually the Partnership shall distribute to
the Partners in proportion to their respective allocations of Profits
under Section 4.3(a)(iii) all cash not reasonably required for (i)
payment of any distribution required by Sections 6.1, 6.2, 6.3 and 6.4
and (ii) the operation of its business, including planned capital
projects and other cash requirements. All such distributions shall be
made by the fifteenth Business Day following the end of the Fiscal Year.
(a) For each of the periods ending on the last day of the fourth full
calendar quarter and the eighth full calendar quarter commencing on or
after the Closing Date, the Partnership shall distribute at least
annually to the Partners in proportion to their respective allocations
of Profits under Section 4.3(a)(iii) an amount of cash (determined as of
the end of each of such periods) which, when added to the amount of all
tax distributions under Section 6.3 made or anticipated to be made in
respect of such period, is equal to not less than 70% and not more than
120% of the Partnership's Modified Taxable Income for that period.
"Modified Taxable Income" shall mean the Partnership's cumulative
taxable income (excluding the items allocated by Sections 4.3(a)(i),
4.3(a)(ii), 4.3(c)(iv), 4.3(c)(v), 4.3(c)(vi), 4.4(a)(ii), 4.4(b) and
4.6) for such period, as estimated by the Partnership. During such
period, the Managing General Partner shall review at least quarterly the
Partnership's cash resources and anticipated requirements and may (but
shall not be obligated to) make distributions under this Section more
frequently than annually. The following example is intended to be
illustrative only:
If the Modified Taxable Income for a given Fiscal Year is $100 and the
aggregate amount of special distributions made pursuant to Section 6.4
is $20, then the amounts to be distributed for such annual period to the
Partners under this Section 6.5(a) are:
at least 70%, and not more than 120%, of ($100)-($20) = $80 in the
aggregate
or
at least $22.40 and not more than $38.40 to Harsco L.P. and at least
$33.60 and not more than $57.60 to FMC.
(b) The Managing General Partner may withhold from distributions
pursuant to this Section 6.5 that amount of cash deemed by the Managing
General Partner to be necessary or advisable to meet the Partnership's
existing cash requirements and investment opportunities; provided,
however, that the Managing General Partner shall not withhold from
distribution cash to fund investment opportunities or capital
investments (other than Permitted Capital Investments) unless (i) in the
case of cash withheld prior to 24 months after the Closing Date, 120% of
the Partnership's Modified Taxable Income shall have been distributed to
the Partners pursuant to this Section 6.5; (ii) the amount of cash
withheld in respect of any Fiscal Year in excess of $20 million does not
exceed an additional $20 million (measured on December 31 in each of the
first two Fiscal Years and on the last Business Day of each Fiscal
Quarter in each subsequent Fiscal Year); and (iii) that any withholding
of cash for such purposes shall only be in such amounts as are necessary
for specifically identified investment opportunities anticipated within
the following twelve months and reported to the Advisory Committee. For
purposes of this Section 6.5(b), investment opportunities and capital
investments refer to the type of out-of-pocket expenditures by the
Partnership that would be reflected in the consolidated statement of
cash flows as cash required by investing activities in the Partnership's
regularly prepared financial statements, excluding changes in the
investment account reflecting earnings or losses during the period for
affiliated companies for that period. The provisions of this Section
6.5(b) are limited to the withholding from distribution of cash balances
of the Partnership and shall not be construed to restrict, or require
any consent or approval of the Limited Partner not otherwise required by
Section 3.1 of this Agreement for, any capital expenditure or investment
of the Partnership or any financing thereof from a source other than
cash balances of the Partnership, whether by capital calls, third-party
borrowings or otherwise.
ARTICLE VII
TRANSFER OF INTERESTS.
7.1 Private Sale.
(a) At any time more than 25 months after the Closing Date, either
Partner may sell or otherwise dispose of its ownership interest in the
Partnership, or any portion thereof which represents a Share Percentage
of at least 10%, to a single, unaffiliated third party; provided, that
(i) any such sale or disposition by the Limited Partner shall include a
ratable share of the Limited Partner Allocation and the allocation to
the Limited Partner of the other Parent's respective CRB Carrying Costs
and shall be subject to the Managing General Partner's right of first
refusal, as described in Section 7.1(b) below, to purchase such interest
at a price the same as that at which the Limited Partner proposes to
make such sale or disposition to a third party and (ii) prior to the
time that 30% of the equity of the Partnership (including the common
equity of any corporate successor thereto) is publicly held, any such
sale or disposition by the Managing General Partner shall be subject to
the Limited Partner's right to include in such sale or disposition a
percentage of its ownership interest in the Partnership equal to that
percentage of the Managing General Partner's ownership interest in the
Partnership which the Managing General Partner wishes to sell or dispose
of (provided that the Limited Partner shall make such reasonable
representations, warranties and covenants, and provide such
indemnifications with respect thereto, to a single, non-affiliated third
party purchaser and otherwise abide by such terms as the Managing
General Partner makes or is subject to in such a sale or disposition,
and provided, further, that if the Limited Partner is not entitled to or
does not elect to include in such sale the Limited Partner's entire
ownership interest in the Partnership, the Limited Partner shall not be
required to sell all or any part of its Limited Partner Allocation and
the Managing General Partner shall not be obligated to require the
purchaser to purchase all or any part of such Limited Partner
Allocation). The parties acknowledge that in the event FMC sells its
entire ownership interest in the Partnership, FMC shall no longer be
entitled to receive any portion of the Annual Fee under the Management
Services Agreement. In the event that either Partner sells or otherwise
disposes of its ownership interest in the Partnership in one or more
related transactions in which such Partner and/or its Affiliates also
sells assets other than such Partnership interest to the same purchaser
or agrees to provide services, the portion of such consideration to be
received by such selling Partner and/or its Affiliates allocable to such
Partnership interest only shall be as mutually agreed by both Partners
(or, if no agreement is reached, shall be deemed to be the Appraised
Value as set forth in Section 7.2(c) below, subject to a right to cancel
in the manner provided in Section 7.2(d)). Except as otherwise
expressly provided above or in the Participation Agreement or
Registration Rights Agreement, neither Partner may, directly or
indirectly, transfer or subject to any Lien all or any part of its
ownership interest in the Partnership. This Section 7.1(a) shall not
apply to any sale of either Partner's ownership interest or any part
thereof to an underwriter in contemplation of a public offering pursuant
to the Registration Rights Agreement.
(b) Prior to making any sale or disposition subject to Section
7.1(a)(i), the Limited Partner will give written notice (the "Sale
Notice") to the Managing General Partner. The Sale Notice will disclose
in reasonable detail the identity of the prospective purchaser, the
amount of its ownership interest to be sold and the terms and conditions
of the proposed sale or disposition. The Managing General Partner may
elect to purchase the amount of the Limited Partner's ownership interest
proposed to be sold upon the same terms and conditions as those set
forth in the Sale Notice by delivering a written notice of such election
to the Limited Partner prior to the thirtieth day following the date the
Sale Notice is given to the Managing General Partner (the "Authorization
Date"); provided, however, that if the terms and conditions set forth in
the Sale Notice provide for other than all cash payment, the Managing
General Partner may exercise its election by paying in cash the Fair
Market Value of the non-cash consideration; provided, further, that the
Managing General Partner can pay in a security having equivalent terms
(including covenants, representations and warranties, rating (if any) by
a nationally recognized rating agency and equivalent value) if part of
the consideration set forth in the Sale Notice was such a security. If
the Managing General Partner elects not to purchase the ownership
interest specified in the Sale Notice, the Limited Partner may sell the
ownership interest specified in the Sale Notice at a price and on terms
no more favorable to the purchaser thereof than specified in the Sale
Notice upon the earlier to occur of (i) the date on which the Managing
General Partner notifies the Limited Partner of its election not to
purchase such ownership interest and (ii) the Authorization Date. If
the sale of the Limited Partner's ownership interest as contemplated in
such Sale Notice is not thereafter consummated within 180 days of the
Authorization Date, then the Limited Partner's ownership interest shall
again be subject to the provisions of this Section 7.1(b) in connection
with any subsequent proposed sale.
(c) Prior to making any sale or disposition subject to Section
7.1(a)(ii), the Managing General Partner will give a Sale Notice to the
Limited Partner. The Managing General Partner Sale Notice will disclose
in reasonable detail the identity of the prospective purchaser, the
amount of its ownership interest to be sold and the terms and conditions
of the proposed sale or disposition. The Limited Partner may elect to
sell the amount of the Limited Partner's ownership interest permitted to
be sold pursuant to Section 7.1(a)(ii) upon the same terms and
conditions as those set forth in the Sale Notice by delivering a written
notice of such election to the Managing General Partner prior to the
thirtieth day following the date the Sale Notice is given to the Limited
Partner (the "Authorization Date"). If the Limited Partner so delivers
such notice of election and the sale of the Managing General Partner's
ownership interest as contemplated in such Sale Notice is not thereafter
consummated within 180 days of the Authorization Date, then the Managing
General Partner's ownership interest shall, subject to the terms of
Section 7.1(a)(ii), again be subject to the provisions of this Section
7.1(c) in connection with any subsequent proposed sale.
(d) The Managing General Partner shall be entitled to assign its right
of first refusal pursuant to Section 7.1(a)(i) above to the Partnership
or to an Affiliate of the Managing General Partner, and such assignee
shall be entitled to all of the rights and subject to all of the
obligations set forth in this Article VII with respect to such right of
first refusal; provided, however, that the Parent of the Managing
General Partner shall be jointly and severally liable for the payment of
the purchase price.
(e) The Managing General Partner shall take all actions necessary to
cause any Person who acquires an ownership interest from the Limited
Partner to be admitted promptly as a limited partner of the Partnership.
7.2 Put and Call Options.
(a) Call Option. At any time more than 25 months after the Closing
Date, the Managing General Partner shall have the option to purchase, or
cause the Partnership to purchase, for cash, upon 60 days' prior written
notice to the Limited Partner (which may be delivered at any time on or
after the sixtieth day preceding the 25-month anniversary of the Closing
Date), the Limited Partner's entire ownership interest in the
Partnership for a price equal to the sum of (x) the product of 110% of
the Appraised Value of the Partnership, determined in accordance with
Section 7.2(c) below, multiplied by the Limited Partner's Share
Percentage plus (y) the Capitalized Limited Partner Allocation;
provided, however, that (i) the Managing General Partner may exercise
such call option at any time following a Change in Control of Harsco or
the Limited Partner, irrespective of the 25-month period referred to
above, and (ii) in the event of such a Change in Control of Harsco or
the Limited Partner, the price shall be the sum of (x) 100% of the
Appraised Value of the Partnership multiplied by the Limited Partner's
Share Percentage plus (y) the Capitalized Limited Partner Allocation;
and provided, further, that if the Limited Partner has delivered a Sale
Notice in respect of 100% of its ownership interest in the Partnership
to the Managing General Partner under Section 7.1(b) prior to
notification by the Managing General Partner with respect to this
Section 7.2(a), then the Managing General Partner may only exercise such
call option at the higher of the amount to be paid under this Section
7.2(a) or the amount to be paid under Section 7.1(b).
(b) Limited Partner Put Option. At any time more than 25 months after
the Closing Date, the Limited Partner shall have the option to require
the Partnership to purchase, upon 60 days' prior written notice to the
Partnership (which may be delivered at any time on or after the sixtieth
day preceding the 25-month anniversary of the Closing Date), the Limited
Partner's entire ownership interest in the Partnership for a price equal
to the sum of (x) the product of 95% of the Appraised Value of the
Partnership, determined in accordance with Section 7.2(c) below,
multiplied by the Limited Partner's Share Percentage plus (y) the
Capitalized Limited Partner Allocation; provided, however, that (i) the
put option may be exercised at any time following a Change in Control of
the Managing General Partner, irrespective of the 25-month period
referred to above and (ii) in the event of such a Change in Control of
the Managing General Partner, the price shall be equal to the sum of (x)
100% of the Appraised Value of the Partnership multiplied by the Limited
Partner's Share Percentage and (y) the Capitalized Limited Partner
Allocation; provided, further, that if the Managing General Partner has
delivered a Sale Notice in respect of 100% of its ownership interest in
the Partnership to the Limited Partner under Section 7.1(c) prior to
notification by the Limited Partner with respect to this Section 7.2(b),
then the Limited Partner may only exercise such put option at the lower
of the amount to be paid under this Section 7.2(b) or the amount to be
paid under Section 7.1(c). The full purchase price payable by the
Partnership will be paid by means of a senior unsecured note without any
right of set-off by the Partnership. Such note shall be in
substantially the form and contain substantially the terms of the form
of note annexed hereto as Exhibit D.
(c) Appraised Value. In order to determine the Appraised Value of any
Partner's ownership interest in the Partnership, each Partner shall,
within 15 days, select a nationally recognized investment bank which is
regularly engaged in the financial valuation of businesses and their
securities, and those two investment banking firms shall, within 15 days
after the engagement of the last to be engaged of such investment banks,
in turn select a third nationally recognized investment bank which is
regularly engaged in the financial valuation of businesses and their
securities. Each of the three investment banks shall independently
estimate the fully distributed public equity trading value of the
Partnership, employing customary investment banking valuation
methodologies, including as appropriate (i) analysis of average public
trading values of comparable companies over the preceding six months
adjusted for all relevant differences between the Partnership and the
respective comparable companies, (ii) comparable block sale transactions
or comparable acquisition transactions without giving recognition to any
control premium or illiquidity discount and (iii) a discounted cash flow
analysis of the Partnership. Under each methodology, the investment
bank will assume (i) the income from the Partnership will be taxed at
corporate income tax rates, (ii) a reasonable capital structure for
comparable businesses, with debt at current market rates as of the date
of the valuation, (iii) the public has access to and knowledge of the
Partnership's long range plan, forecast, future prospects and all other
information provided to the investment banks for the purpose of this
valuation and (iv) that each Partner's Cumulative Remedial Balance has
been funded in accordance with Annex B to the Participation Agreement.
Each of the methodologies will take into account the value of any
non-operating assets and liabilities of the Partnership, provisions of
this Partnership Agreement and other Operative Documents requiring
special allocations or distributions (including, in the case of the
Limited Partner Allocation, treatment of the Limited Partner Allocation
as a recurring operating expense), the future prospects of the
Partnership and the comparable companies used in the valuation and
indemnities to the Partnership. The investment banks will conduct a due
diligence review with each Parent as well as with the Partnership and
will consider each party's input concerning the Partnership's long-range
plan, forecast and future prospects. Each of the three investment banks
shall report its determination to the Partners within thirty days of its
engagement. The three estimates shall be averaged, and the estimate
that deviates furthest from the average shall be ignored. The average
of the remaining two estimates shall be the "Appraised Value" of the
Partnership.
(d) Option to Cancel. At any time within 10 days after the
determination of the Appraised Value, a Partner exercising its put or
call option, as the case may be, may cancel the exercise of such option,
in which case such canceling Partner shall pay, or reimburse the
Partnership for, the cost of determining the Appraised Value (including
the fees of all valuation firms). In the event that the put or call
option is not canceled, each Partner shall pay the fees of the valuation
firm selected by it, and the Partnership shall pay the fees of the third
firm and all other expenses of the appraisal determination process.
(e) The Managing General Partner shall be entitled to assign its call
option pursuant to (a) above to the Partnership or to an Affiliate of
the Managing General Partner, and the Limited Partner shall be entitled
to assign its put option pursuant to (b) above to an Affiliate of the
Limited Partner (in connection with the Limited Partner's assignment of
its Partnership interest to its Affiliate) and such assignee shall be
entitled to all of the rights and subject to all of the obligations set
forth in this Article VII with respect to such call or put option.
(f) The put option provided in (b) above shall not be exercisable (i)
after the occurrence of any event that triggers the dissolution of the
Partnership under Article IX or (ii) while the Partnership is in the
process of winding-up under Section 9.3 or distributing its assets under
Article IX.
(g) In the event that the Partnership purchases the Limited Partner's
ownership interest pursuant to Section 7.2(a) or Section 7.2(b), the
Limited Partner shall make such customary representations and warranties
to the Partnership as to title to the ownership interest purchased and
freedom of such ownership interest from liens or claims of third parties
as the purchaser shall reasonably request.
7.3 Additional Matters.
(a) Accruals and Carryovers of the CRB and the Limited Partner
Allocation. In the event of (i) the exercise by the Limited Partner of
the put option, (ii) the exercise by the Managing General Partner of the
call option, (iii) the incorporation of the Partnership pursuant to the
Registration Rights Agreement, (iv) the sale by the Limited Partner of
its entire interest in the Partnership as a result of and in conjunction
with the sale by the Managing General Partner of its entire interest in
the Partnership pursuant to Section 7.1(a) above, (v) the sale by the
Limited Partner of its entire interest in the Partnership in a private
sale pursuant to Section 7.1(a) above or (vi) the acquisition by the
Managing General Partner of the entire interest of the Limited Partner
in the Partnership as a result of the exercise by the Managing General
Partner of its right of first refusal pursuant to Section 7.1(a) above,
the Partnership will pay, in cash, on the date of the transfer of the
Limited Partner's ownership interest in the Partnership or the date of
incorporation of the Partnership, as the case may be, (A) to the Limited
Partner amounts equal to the aggregate amount on such date of (1) any
accrual of the Limited Partner Allocation, (2) any Carryover Amount of
the Limited Partner Allocation, (3) any accrual of the CRB Carrying
Costs payable to the Limited Partner and (4) any CRBCC Carryover Amount
payable to the Limited Partner and (B) to the Managing General Partner
amounts equal to the aggregate amount on such date of (1) any accrual of
the CRB Carrying Costs payable to the Managing General Partner and (2)
any CRBCC Carryover Amount payable to the Managing General Partner. All
such payments shall be made on the applicable payment date irrespective
of the Partnership's cash position or any limitations on the
Partnership's obligations to make distributions to a Partner or
Partners. To the extent that any amounts referred to in clause (A) or
(B) above are not determinable on the applicable payment date, they
shall be payable to the applicable Partner as soon as such amounts can
be determined (but no later than 30 Business Days after the applicable
payment date) with interest at the rate of one year LIBOR at the
applicable payment date plus 100 basis points from the applicable
payment date through the date such payment is made.
(b) Tax and Additional Cash Distributions. Following any of the events
described in Section 7.3(a)(i) through (vi) above, the Partnership shall
continue to be obligated to make all tax distributions and additional
cash distributions to the Limited Partner to which it is entitled under
(i) Section 6.3 determined in accordance with Section 4.3(c)(vii)
hereof, if applicable, and (ii) with respect to the first eight full
Fiscal Quarters commencing on or after the Closing Date, Section 6.5
hereof through the date of the transfer of the Limited Partner's
ownership interest in the Partnership or the date of incorporation of
the Partnership, as the case may be.
(c) Annex B. Following the occurrence of any of the events described
in Section 7.3(a)(i) through (vi) above, but subject to Section 7.3(b)
above, the provisions of Annex B to the Participation Agreement shall
control, notwithstanding any provisions in Article IV or VI hereof to
the contrary.
ARTICLE VIII
INDEMNIFICATION.
8.1 Indemnification of Partners.
(a) The Partnership shall indemnify any Person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
Partnership) by reason of the fact that such Person is or was the
Managing General Partner or the Limited Partner of the Partnership (but
only if, in the case of the Managing General Partner, any resulting
liability was not caused by conduct that would give rise to liability
under Section 3.4(b) as determined initially by the Managing General
Partner on behalf of the Partnership or thereafter in a judicial
proceeding culminating in a final, non-appealable order (unless
otherwise resolved by the parties)), is or was a director or officer of
the Managing General Partner or the Limited Partner or an officer of the
Partnership or a member of the Advisory Committee or is or was serving
at the request of the Partnership as a director, officer or trustee of
another corporation, partnership, joint venture, trust or other
enterprise (in each case if acting within the scope of such Person's
authority), against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by
such Person in connection with such action, suit or proceeding if such
Person (other than the Managing General Partner, whose conduct shall be
subject to indemnification hereunder only to the extent that such
conduct would not give rise to liability under Section 3.4(b) as
determined by agreement between the Partners or in a judicial proceeding
culminating in a final, non-appealable order) acted in good faith and in
a manner such Person reasonably believed to be in or not opposed to the
best interests of the Partnership, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such Person's
conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption
that the Person did not act in good faith and in a manner which such
Person reasonably believed to be in or not opposed to the best interests
of the Partnership, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that such Person's conduct
was unlawful. Except as provided in Article VI of the Participation
Agreement, the foregoing indemnity shall include, but not be limited to,
any Losses for or on account of or arising from or in connection with or
otherwise with respect to (i) any Liability assumed by the Partnership
under any of the Operative Documents and (ii) the conduct of the
business of the Partnership after the Closing and any liability of the
Partnership incurred in connection therewith.
(b) The Partnership shall indemnify any Person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Partnership to procure a
judgment in its favor by reason of the fact that such Person is or was
the Managing General Partner or the Limited Partner of the Partnership,
is or was a director or officer of the Managing General Partner or the
Limited Partner or an officer of the Partnership or a member of the
Advisory Committee, or is or was serving at the request of the
Partnership as a director, officer or trustee of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such
Person in connection with the defense or settlement of such action or
suit if such Person (other than the Managing General Partner, whose
conduct shall be subject to indemnification hereunder only to the extent
that such conduct would not give rise to liability under Section 3.4(b)
as determined initially by the Managing General Partner on behalf of the
Partnership or thereafter in a judicial proceeding culminating in a
final, non-appealable order (unless otherwise resolved by the parties))
acted in good faith and in a manner such Person reasonably believed to
be in or not opposed to the best interests of the Partnership and except
that no indemnification shall be made in respect of any claim, issue or
matter as to which such Person shall have been adjudged to be liable to
the Partnership unless and only to the extent that the Court of Chancery
or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view
of all the circumstances of the case, such Person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) The Partnership shall pay the expenses (including attorneys' fees)
incurred by any Person described in Section 8.1(a) or 8.1(b) in advance
of the final disposition of the action, suit or proceeding to which such
Person is a party upon receipt of an undertaking by or on behalf of such
Person to repay such amount (plus interest equal to one year LIBOR plus
100 basis points) if it shall ultimately be determined that such Person
is not entitled to be indemnified by the Partnership.
8.2 Indemnification by Partners. Each Partner shall indemnify and hold
the other Partner, each officer of the Partnership and the Partnership
and each member of the Advisory Committee harmless, from and against any
loss, cost, liability and expense arising out of or in any way connected
with any action, commitment, contract, covenant or undertaking of such
Partner for and on behalf of the Partnership which was not within the
scope of its authority hereunder or which required the approval of the
Limited Partner but for which no such approval was obtained. Each
Partner further agrees that it will indemnify the Partnership and the
other Partner against any and all damages to which the Partnership or
the other Partner may be or become subject arising or resulting from the
breach by such Partner of Sections 3.1 or 3.3 herein. Any obligations
pursuant to this Section 8.2 shall survive (i) any termination,
dissolution, winding up or liquidation of the Partnership and (ii) any
direct or indirect transfer or disposition by a Partner (including such
indemnifying Partner) of its Partnership interest.
8.3 Insurance. The Partnership may, to the full extent permitted by
law, purchase and maintain insurance against any liability that may be
asserted against any Person entitled to indemnity hereunder.
8.4 Contract Right. The indemnification provisions set forth in this
Article VIII, including Section 8.1(c), shall be a contract right. The
rights set forth in this Article VIII and the indemnification provisions
of the Participation Agreement shall not be construed cumulatively.
ARTICLE IX
DISSOLUTION; WITHDRAWAL.
9.1 Causes of Dissolution. The Partnership shall be dissolved upon any
of the following conditions:
(a) Mutual Consent. The mutual agreement of the Partners that the
Partnership should be dissolved in accordance with Section 9.2 below; or
(b) Governmental Action. The issuance by any court of competent
jurisdiction or Governmental Authority of a final decree or order, which
cannot be appealed and which (i) directs the Partnership to dissolve;
(ii) requires any Partner or any Affiliate of a Partner to withdraw from
the Partnership or otherwise divest itself of its interest in the
Partnership; or (iii) declares that the Partnership has been dissolved.
9.2 Dissolution by Agreement. If the Partners decide to dissolve and
liquidate the Partnership, the Partners shall proceed as promptly as
practicable to wind up the affairs of the Partnership and distribute the
assets thereof in accordance with Section 9.4(b) and applicable law, but
the business and assets of the Partnership shall be liquidated in an
orderly and businesslike manner, and a final accounting shall be made by
the Partnership. The Accountants shall review the final accounting and
shall render their opinion with respect thereto.
9.3 Winding Up. Dissolution of the Partnership shall be effective on
the day on which the event giving rise to the dissolution occurs, but
the Partnership shall not terminate until the assets of the Partnership
shall have been distributed as provided herein. The business of the
Partnership and the affairs of the Partners, as such, shall continue to
be governed by this Agreement until the Partnership is terminated as
aforesaid. Upon dissolution, the Managing General Partner shall satisfy
the liabilities and liquidate the assets of the Partnership and apply
and distribute the net proceeds thereof as provided in Section 9.4
below.
9.4 Distribution Upon Liquidation.
(a) Procedure. The Partnership shall cause to be prepared a statement
setting forth the assets and liabilities of the Partnership as of the
date of dissolution and shall furnish a copy of such statement to each
Partner. The assets which the Managing General Partner determines
should be liquidated shall be divested in a commercially reasonable
manner to avoid undue loss. The affairs of the Partnership shall then
be wound up and the proceeds of the Partnership distributed as follows:
the Managing General Partner shall set up such reserves as it deems
reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Partnership. Such reserves may be held in escrow for
the purpose of paying any such contingent or unforeseen liabilities or
obligations and, at the expiration of such period as the Managing
General Partner may deem advisable, such reserves shall be distributed
to the Partners or their assigns in the manner set forth in subsection
(b) of this Section 9.4.
(b) Distributions. After providing for such liabilities and such
reserves, the Managing General Partner, subject to the applicable
provisions of Sections 3.1 and 4.3(c)(vi) hereof, shall cause the
remaining net assets of the Partnership to be distributed to the
Partners, pro rata in proportion to their respective positive Capital
Account balances as determined after giving effect to all allocations
under this Agreement. For purposes of effecting such distributions the
Partnership assets shall be valued at their then Fair Market Value as
determined by the Managing General Partner.
9.5 Withdrawal Prohibited. Except pursuant to a written agreement
between the Partners or pursuant to the other Operative Documents or
except as set forth in Article VII above, neither Partner may withdraw
from the Partnership without the consent of the other Partner or effect
or cause a termination or dissolution of the Partnership.
ARTICLE X
CERTAIN TAX MATTERS.
10.1 Taxation as a Partnership.
(a) The Partners intend that the Partnership be treated as a limited
partnership for Federal, state, local and foreign tax purposes and (i)
shall take all reasonable action, including the amendment of this
Agreement and the execution of other documents, as may be required to
qualify for and receive treatment as a partnership for Federal tax
purposes and (ii) shall take no position for any purpose that is
inconsistent with the position that the Partnership is taxed as a
Partnership for Federal income tax purposes.
(b) No election shall be made by the Partnership or any Partner for the
Partnership to be excluded from the application of Subchapter K, Chapter
1 of Subtitle A of the Code or any similar provisions of state tax laws.
(c) Each Partner shall either (i) report its taxable income, gain or
loss in a manner consistent with Schedule K-1 (or any successor schedule
or form) as issued by the Partnership or (ii) disclose such
inconsistency on its Federal income Tax returns and notify the other
Partner of the inconsistency.
10.2 Election to Adjust Tax Basis. The Managing General Partner may,
but shall not be required to, cause the Partnership to make an election
or to revoke any such election previously made under section 754 of the
Code to adjust the basis of Partnership property under sections 734 and
743 of the Code; provided that, if the Limited Partner, while its Share
Percentage is at least 20% (measured immediately prior to the transfer
described herein), transfers all or substantially all of its interest to
a Person admitted as a partner pursuant to Article VII, the Managing
General Partner shall make such election at the written request of the
Limited Partner.
10.3 Partners' Share of Excess Nonrecourse Liabilities. For purposes
of Section 752 of the Code, the Partners shall share excess nonrecourse
liabilities under Treasury Regulation Section 1.752-3(a)(3) in
proportion to their Share Percentages.
10.4 Organizational Expenses. The Partnership shall elect to amortize
any organizational expenses pursuant to Section 709(b) of the Code.
10.5 Withholding and Certain Other Taxes.
(a) Notwithstanding any other provision of this Agreement, if the
Partnership is or may be obligated to pay any amount to a governmental
taxing authority (or otherwise make a payment) because of the status of
a Partner or otherwise attributable to such Partner (including, without
limitation, Federal withholding taxes, state personal property or
personal property replacement taxes and state unincorporated business
taxes), the Managing General Partner is authorized to take any action
that it reasonably determines to be necessary or appropriate to cause
the Partnership to comply with any such requirements, including, in the
event that the Limited Partner fails to make any such payment
attributable to it, to cause the Partnership to make such payment and
treat such payment as a distribution to the Limited Partner in an amount
equal to such payment.
(b) Any obligations pursuant to this Section 10.5 shall survive (i) any
termination, dissolution, winding up or liquidation of the Partnership
and (ii) any transfer or disposition by a Partner of its Partnership
interest.
10.6 Books, Records and Cooperation. Each Partner shall preserve and
keep, free of charge, all books, papers, and records (including, but not
limited to, tax records) ("Records") which relate to the Assets and
Liabilities contributed by such Partner to the Partnership. Each
Partner shall provide access to the Partnership and the other Partner to
such Records as reasonably requested by the Partnership or the other
Partner and cooperate with and provide information to the Partnership
and the other Partner as reasonably requested by the Partnership or the
other Partner. If either Partner disposes of its interest in the
Partnership, such Partner shall retain and not destroy, and share with
the Partnership upon its request, all Records which relate (i) primarily
to the Assets and Liabilities previously contributed by such Partner to
the Partnership and (ii) to any fiscal years for which federal income
tax returns have not been closed. These obligations shall remain in
full force and effect irrespective of whether either Partner disposes of
its interest in the Partnership.
10.7 Tax Elections. Except as otherwise provided in this Agreement,
all other elections by the Partnership for federal, state and local
income and franchise tax purposes shall be determined by the Managing
General Partner except where law provides that the election shall be
made by the Partners. Unless the Managing General Partner shall
determine, in its best judgment, that another election shall be in the
best interest of the Partnership and the Partners, the Managing General
Partner shall make those elections which best defer recognition of
taxable income, accelerate claiming of deductions and maximize tax
credits. The federal and state income tax returns shall be filed only
after the Partners have had at least fifteen Business Days to review
such returns. The Partners will communicate their comments on such
returns directly to the Managing General Partner.
10.8 Tax Matters Partner. Each Partner does hereby appoint and
designate initially the Managing General Partner as "Tax Matters
Partner" of the Partnership as such term is defined under the Code but
shall otherwise be considered to have retained such rights (and
obligations, if any) as are provided for under the Code with respect to
any examination, proposed adjustment or proceeding relating to
Partnership items. The Tax Matters Partner shall notify the other
Partners, within ten Business Days after it receives notice from the
IRS, of all administrative proceedings with respect to an examination
of, or proposed adjustments to Partnership items. Any Partner (other
than the Tax Matters Partner) may notify the Tax Matters Partner of such
Partner's intention to represent itself, or to cause independent tax
counsel or accountants to represent it, in connection with any such
examination, proceeding or proposed adjustment. In the event that a
Partner (other than the Tax Matters Partner) notifies the Tax Matters
Partner of its intention to represent itself, or to cause independent
tax counsel or accountants to represent it, in connection with any such
examination, proceeding or proposed adjustment, the Tax Matters Partner
agrees, upon request, to supply such Partner and its tax counsel or
accountants, as the case may be, with copies of all written
communications received by the Tax Matters Partner with respect thereto,
together with such other information as may be reasonably requested in
connection herewith. The Tax Matters Partner further agrees, in the
event of such separate representation, to cooperate with the Partner and
its tax counsel or accountants, as the case may be, in connection with
such separate representation, to the extent reasonably practicable. In
addition to the foregoing, the Tax Matters Partner shall notify the
Limited Partner prior to submitting a request for administrative
adjustment on behalf of the Partnership.
10.9 Amendment to Code or Treasury Regulations. If any section of the
Code or Treasury Regulations referred to in this Agreement is amended
after December 31, 1993, the Managing General Partner and the Limited
Partner agree, at the request of either party, to discuss in good faith
whether any amendment to this Agreement is desirable.
ARTICLE XI
NOTICE.
11.1 Manner of Giving Notice. Whenever notice is required to be given
pursuant to this Agreement, it shall be by letter, or facsimile
electronic transmission receipt of which is confirmed by telephone by
the addressee, or by overnight air courier sent to the Partners or the
Partnership at the addresses set forth below and, except as otherwise
provided herein, shall be deemed to be given when sent or transmitted.
11.2 Addresses. The addresses of the Partners for purposes of notice
shall be as follows:
For the Managing General Partner:
FMC Corporation
200 East Randolph Drive
Chicago, IL 60601
Attn: Corporate Secretary
For the Limited Partner:
Harsco Defense Holding, Inc.
P.O. Box 8888
Camp Hill, PA 17011
Attn: President
The address of the Partnership for purposes of notice shall be as
follows:
United Defense, L.P.
1525 Wilson Boulevard, Suite 700
Arlington, VA 22209
Attn: Chief Executive Officer
Any Person whose address is listed in this Section 11.2 may change its
address at any time by giving written notice, as provided herein, to the
other Persons listed herein.
ARTICLE XII
MISCELLANEOUS.
12.1 Amendment. This Agreement may be amended or modified by the
Partners only by a written instrument executed by both Partners. The
Limited Partner hereby agrees that it will not unreasonably withhold or
delay its consent to any amendment proposed by the Managing General
Partner to permit the entry of (i) one or more new limited partners,
each with an initial investment of at least $10,000,000, upon the
Limited Partner's or Managing General Partner's election not to exercise
preemptive rights under Section 3.1(g) and (ii) any new limited partner
that is acquiring its interest in the Partnership for consideration
other than cash. For purposes of the foregoing, it is understood that
the Limited Partner may withhold its consent based on the value of the
consideration to be received only in the event that (x) the new limited
partner is acquiring its interest in the Partnership for consideration
other than cash and (y) the Fair Market Value of such consideration is
less than the Fair Market Value of the interest in the Partnership being
acquired in exchange therefor, in each case as determined under Section
12.16 below.
12.2 Applicable Law. This Agreement will be governed by and construed
in accordance with the domestic laws of the State of Delaware, without
giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the
State of Delaware. In furtherance of the foregoing, the internal law of
the State of Delaware shall control the interpretation and construction
of this Agreement, even though under that jurisdiction's choice of law
or conflict of law analysis, the substantive law of some other
jurisdiction would ordinarily apply.
12.3 Further Assurances. Each of the Partners agrees to execute and
deliver all such other and additional instruments and documents and to
do such other acts and things as may be necessary more fully to
effectuate this Agreement and the Partnership created hereby and to
carry on the business of the Partnership in accordance with this
Agreement.
12.4 Headings. The headings used in this Agreement are for reference
purposes only and do not constitute substantive matter to be considered
in construing the terms of this Agreement.
12.5 Section Numbers. Unless otherwise indicated, reference to Section
numbers are to Sections of this Agreement.
12.6 Parties Bound. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective legal
representatives, successors, and permitted assigns where permitted by
law.
12.7 Severability. In case any one or more of the provisions contained
in this Agreement shall, for any reason, be held to be invalid, illegal,
or unenforceable in any respect, all other provisions of the Agreement
shall nevertheless remain in full force and effect, but if the economic
or legal substance of the transactions contemplated hereby is affected
in a manner materially adverse to either party as a result of the
determination that a provision is invalid, illegal or unenforceable, the
parties hereto agree to negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the fullest extent possible.
12.8 Waiver. No waiver by any Partner of the performance of any
provision, condition or requirement herein shall be deemed to be a
waiver of, or in any manner release the other Partner from, performance
of any other provision, condition or requirement herein; nor deemed to
be a waiver of, or in any manner release the other Partner from, future
performance of the same provision, condition or requirement; nor shall
any delay or omission by any Partner to exercise any right hereunder in
any manner impair the exercise of any such right accruing to it
thereafter.
12.9 Entire Agreement. This Agreement, the Participation Agreement and
the other Operative Documents constitute the entire agreement between
the Partners concerning the subject matter hereof or thereof and
supersede any prior understanding or written or oral agreements
respecting the subject matter of this Agreement or such documents.
12.10 Advice of Legal Counsel. Each Partner acknowledges and
represents that, in executing this Agreement, it has had the opportunity
to seek advice as to its legal rights from legal counsel and that the
person signing on its behalf has read and understood all of the terms
and provisions of this Agreement. This Agreement shall not be construed
against either Partner or any of its Affiliates or Subsidiaries by
reason of the drafting or preparation thereof.
12.11 Dispute Resolution. Subject to Sections 3.5(h) and 3.12, either
Parent shall have the right, at any time after good faith efforts have
failed to resolve a dispute as to any matter governed by this Agreement
or the Participation Agreement, to request a review of such matter by
the chief executive officers of each Parent ("CEO Review"). Either
Parent shall exercise its right to request a CEO Review by furnishing
written notice to the Partnership and the other Parent identifying the
matter in dispute and setting forth the positions of the parties with
respect thereto. The chief executive officers of the two Parents shall
meet within 30 days of the date on which such notice is received and
shall engage in good faith efforts to resolve the dispute. Within 15
days of such meeting, the chief executive officers shall provide notice
to the Partnership stating whether they have been able to resolve the
dispute and, if so, full details with respect to such resolution. Any
such resolution shall be binding on the Partnership, the Partners and
the Parents. If the chief executive officers are unable to resolve the
dispute within the time limit set forth above, either party shall be
free to seek judicial relief by appropriate proceedings.
12.12 Parties in Interest; Limitation on Rights of Others. Subject to
the other provisions of this Section, the terms of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
successors and permitted assigns. Nothing in this Agreement, whether
express or implied, shall be construed to give any Person (other than
the parties hereto and their successors and permitted assigns and as
expressly provided herein) any legal or equitable right, remedy or claim
under or in respect of this Agreement or any covenants, conditions or
provisions contained herein. This Agreement is not assignable in whole
or in part by the Limited Partner or the Managing General Partner unless
assigned in connection with the assignment of a Share Percentage in
excess of 20% (in the case of the Limited Partner) or 30% (in the case
of the Managing General Partner) of the aggregate Share Percentages in
the Partnership and, if applicable, in accordance with the Managing
General Partner's right of first refusal set forth in Section 7.1(b)
above or pursuant to the terms of Section 7.2(e) above. Any such
assignment by the Managing General Partner shall not include an
assignment of the Annual Fee payable under the Management Services
Agreement unless the assignee becomes the Managing General Partner. No
assignee of any portion of the Managing General Partner's interest shall
be entitled to become the Managing General Partner unless such assignee
acquires a greater ownership interest in the Partnership than is then
held by Harsco L.P. Notwithstanding the foregoing, in the event that
the Limited Partner assigns to a third party, in accordance with the
terms of this Agreement, any portion of its ownership interest in the
Partnership, such assignment shall be subject to, and entitled to the
benefits of, the continued application of the terms of Sections
7.1(a)(i), 7.1(c) and 7.2, and such third party shall be entitled to all
of the rights and subject to all of the obligations of the Limited
Partner therein set forth; provided, however, that (i) such third party
shall only be entitled to be assigned the consent rights set forth in
Section 3.1(a) in the event that it holds a Share Percentage in excess
of 20% of the aggregate Share Percentages (in which event the assignor
shall not have and may not, directly or indirectly, exercise any such
consent rights) and (ii) such third party shall only be entitled to
exercise the right set forth in Annex A to agree to the amount of the
Limited Partner Allocation (without the consent or approval of any other
partner or holder of a Partnership interest) in the event that it holds
a Share Percentage in excess of 20% of the aggregate Share Percentages
(in which event the assignor shall not have and may not, directly or
indirectly, exercise any such right). No assignment or transfer of this
Agreement or a party's interest in the Partnership or its Partner shall
relieve such party from its obligations hereunder or under any other
Operative Document.
12.13 Counterparts. This Agreement and any written consents required
to be executed by both Partners hereunder may be executed by the
Partners in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same document.
12.14 Jurisdiction, Court Proceedings. Any suit, action or proceeding
against any party hereto arising out of or relating to this Agreement or
any other Operative Document, any transaction contemplated hereby or any
judgment entered by any court in respect of any such suit, action or
proceeding may be brought in any Federal or State court located in the
Northern District of Virginia or such other district as may contain the
Partnership's principal place of business, and each party hereto hereby
submits to the jurisdiction of such courts for the purpose of any such
suit, action or proceeding. To the extent that service of process by
mail is permitted by applicable law, each such party irrevocably
consents to the service of process in any such suit, action or
proceeding in such courts by the delivery of such process by mail, at
its address set forth in Article XI, and no such service shall be
effective until such delivery is made. Each such party irrevocably
agrees not to assert any objection which it may ever have to the laying
of venue of any such suit, action or proceeding in any Federal or State
court in the Northern District of Virginia (or such other district which
contains the Partnership's principal place of business), and any claim
that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
12.15 Waiver of Rights of Partition and Dissolution. Each Partner
waives all rights it may have at any time to maintain any action for
partition or sale of any Partnership assets as now or hereafter
permitted under applicable law. Each Partner waives its rights to seek a
court decree of dissolution or to seek the appointment of a court
receiver for the Partnership as now or hereafter permitted under
applicable law.
12.16 Determination of Fair Market Value. Except as provided in
Section 4.1, the Managing General Partner shall determine the Fair
Market Value of any property or liability where such Fair Market Value
is relevant for purposes of this Agreement (including, without
limitation, any determination of the Fair Market Value of property
acquired by the Partnership in exchange for the issuance of a
partnership interest). If the Limited Partner objects in writing to the
Managing General Partner's determination of Fair Market Value within 15
Business Days of receiving notice from the Managing General Partner of
such valuation and the Limited Partner and the Managing General Partner
are unable to agree on the Fair Market Value of the property or
liability within 30 days of the date of the Limited Partner's objection,
the Fair Market Value of the property or liability shall be determined
by an independent appraiser mutually acceptable to the Partners (with
the costs of such determination to be borne by the Partnership).
Notwithstanding the foregoing sentence, in the event that Fair Market
Value is determined pursuant to Section 12.1 and the Limited Partner
objects in writing to such determination within 15 Business Days of
receiving notice of such valuation, such Fair Market Value shall be
redetermined by either Ernst & Young or Price Waterhouse, whichever is
not the Accountants, which shall be required to make a valuation within
30 days of its retention.
IN WITNESS WHEREOF, this Agreement has been duly executed on behalf of
the Partners by their respective authorized representatives all as of
the day and year first above written.
FMC CORPORATION
By: /S/ Robert N. Burt
Its: Chairman & CEO
HARSCO DEFENSE HOLDING, INC.
By: /S/ Barrett W. Taussig
Its: President
UNITED DEFENSE, L.P.
By: FMC Corporation
Its General Partner
By: /S/ Robert N. Burt
Its: Chairman & CEO
List of Omitted Exhibits and Schedules
to Partnership Agreement
Schedule 3.2 Reports to the Limited Partner
Schedule 4.1 Determination of Initial Capital Accounts
Schedule 5.9 Accounting Methods, Tax Elections and Tax Depreciation
Methods
Exhibit A Insurance Coverages
Exhibit B Form of Confidentiality Agreement for Officers and
Advisory
Committee Members
Exhibit C Form of Confidentiality Agreement for Prospective
Employees
Exhibit D Form of Senior Promissory Note
Harsco Corporation will furnish supplementally a copy of any omitted
exhibit or schedule to the Commission upon request.
DEFINITIONS RELATING TO THE PARTNERSHIP AGREEMENT
among
FMC CORPORATION,
HARSCO DEFENSE HOLDING, INC.
and
UNITED DEFENSE, L.P.
Dated as of January 1, 1994
AND
THE PARTICIPATION AGREEMENT
among
FMC CORPORATION,
HARSCO CORPORATION,
HARSCO DEFENSE HOLDING, INC.
and
UNITED DEFENSE, L.P.
Dated as of January 1, 1994
"$" denominates U.S. Dollars.
"401(k) Plan" means a defined contribution plan as defined in Section
3(34) of ERISA that is qualified under Section 401(a) of the Code and
that meets the requirements of Section 401(k) of the Code.
"Accountants" means a nationally-recognized independent certified public
accounting firm mutually agreed to by the Partners for the Partnership.
Unless otherwise agreed by the Partners, the Accountants for the
Partnership shall be either Ernst & Young or Price Waterhouse, as
determined by the Partnership on or before February 28, 1994. With
respect to FNSS, the term "Accountants" shall refer to Arthur Andersen &
Co. In any other foreign jurisdiction, the term "Accountants" for
purposes of Section 5.12 of the Partnership Agreement shall refer to the
nationally recognized independent certified public accounting firm
selected by the Partnership to represent it in such foreign
jurisdiction.
"Active Contract" means those Contracts which provide for the delivery
of products or the rendering of services by a Parent and with respect to
which the final product has not yet been delivered or the final service
has not yet been rendered.
"Adjusted Capital Account Deficit" has the meaning set forth in Section
4.6(a) of the Partnership Agreement.
"Adjusted Profits" has the meaning set forth in Section 4.6(b) of the
Partnership Agreement.
"Advance Agreement" means a written agreement entered into between UD
and a contracting officer or administrative contracting officer of the
U.S. Federal government that specifies the allowability, reasonableness
and allocability of certain special or unusual contract costs incurred
by UD after the date of the Agreement.
"Advisory Committee" has the meaning set forth in Section 3.5(a) of the
Partnership Agreement.
"Affiliate" of any Person means any other Person directly or indirectly
controlling (within the meaning of Rule 12b-2 under the Securities
Exchange Act of 1934, as amended, as in effect on the Closing Date),
directly or indirectly controlled by or under direct or indirect common
control with such Person, but such term does not, as to FMC or Harsco,
include the Partnership or any Affiliate of the Partnership which is
directly or indirectly controlled by the Partnership.
"Appraised Value" has the meaning set forth in Section 7.2(c) of the
Partnership Agreement.
"Arbitrator" has the meaning set forth in Section 3.12 of the
Partnership Agreement.
"Assets" means the FMC Assets, and the Harsco Assets, or any of them,
depending on the context.
"Assignment" means an assignment of a Contract to the Partnership which
assignment is reasonably acceptable to the Parents and, in the case of
Contracts with a Governmental Authority, acceptable to the Governmental
Authority.
"Assumption Agreement" means an assumption agreement, substantially in
the form of Exhibit B to the Participation Agreement.
"Authorization Date" has the meaning set forth in Section 7.1(b) of the
Partnership Agreement.
"Average Limited Partner Allocation" means an amount equal to the
arithmetic average of the Limited Partner Allocation, without regard to
whether there has been any allocation or payment of such Limited Partner
Allocation under the terms of the Partnership Agreement, for the three
Fiscal Years immediately preceding the calculation of the Capitalized
Limited Partner Allocation.
"Book Value" of an Asset or Liability means, as of any particular date,
the value at which the Asset or Liability is reflected on the books and
records of the appropriate entity, computed under the accrual method of
accounting in accordance with GAAP and the Principal Accounting
Procedures and, except to the extent otherwise required by the reserve
policies reflected in the Principal Accounting Procedures or as set
forth on Schedule 2.3.1, on an accounting basis consistent with the
principles used in the preparation of the appropriate Pro Forma Balance
Sheet.
"Burdensome Governmental Condition" to a transaction shall be deemed to
exist when a court of competent jurisdiction or any Governmental
Authority acting within its regulatory authority has issued an order,
injunction or preliminary injunction against the Partnership, any
Partner, any party or any Affiliate of any party which would prohibit
the transaction or which would compel the applicable Person to dispose
of or hold separate a material portion of its business or assets as a
result of such transaction.
"Business Day" means a day other than a Saturday, Sunday or other day on
which banks are required or authorized to be closed in Arlington,
Virginia.
"Capital Account" has the meaning set forth in Section 4.1(a) of the
Partnership Agreement.
"Capital Contribution" means a contribution to the capital of the
Partnership in cash or property as required or permitted by the
Partnership Agreement.
"Capitalized Limited Partner Allocation" means the product of (x) the
Earnings Multiple, (y) the Average Limited Partner Allocation and (z)
one (1) minus the then current Tax Rate. In the event that any put or
call by a Partner is exercised before three years of data are available,
then the data for all Fiscal Quarters completed since the inception of
the Partnership shall be used to determine the Earnings Multiple and
Average Limited Partner Allocation. Notwithstanding the foregoing or
any other provision of the Operative Documents, the Capitalized Limited
Partner Allocation shall be equal to zero in the event that, immediately
after giving effect to the transaction in connection with which the
Capitalized Limited Partner Allocation is being determined, the Managing
General Partner or its permitted successor in interest will not be
entitled, whether due to termination, resignation or replacement as
Managing General Partner, breach or any other cause, to receive its
Annual Fee under Section 4(b) of the Management Services Agreement.
"Carrying Value" means (a) with respect to property contributed to the
Partnership by or for the account of a Partner, the Fair Market Value of
such property at contribution, reduced (but not below zero) by all
depreciation, amortization and cost recovery deductions charged to the
Partners' Capital Accounts pursuant to Article IV of the Partnership
Agreement with respect to such property and increased by all
post-contribution improvements to such property, (b) if Capital Accounts
are restated pursuant to Section 4.1(d) of the Partnership Agreement,
with respect to property owned by the Partnership at the time of the
restatement, the Fair Market Value of such property at the time of the
restatement, reduced (but not below zero) by all subsequent
depreciation, amortization and cost recovery deductions charged to the
Partners' Capital Accounts pursuant to Article IV of the Partnership
Agreement with respect to such property and increased by all
post-restatement improvements to such property and (c) with respect to
any other property, the adjusted basis of such property for Federal
income tax purposes, as of the time of determination.
"Carryover Amount" has the meaning set forth in Section 4.3(a)(i) of the
Partnership Agreement.
"CAS" means Cost Accounting Standards as promulgated by the Cost
Accounting Standards Board.
"CEO" has the meaning set forth in Section 3.6(a) of the Partnership
Agreement.
"CEO Review" has the meaning set forth in Section 12.11 of the
Partnership Agreement.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Section 9601, et seq.
"Change in Control" shall be deemed to have occurred with respect to a
Person at such time as (1) a "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")), becomes the "beneficial owner" (as defined in
Rule 13d-3 under the 1934 Act) of shares representing more than fifty
percent (50%) of the then outstanding common stock of the Parent; or (2)
the Person consolidates into or merges with any other Person pursuant to
a transaction that results in the stockholders of the Person immediately
preceding the effectiveness of such transaction owning, directly or
indirectly, immediately after the effectiveness of the transaction, less
than fifty percent (50%) of the outstanding voting stock of such new or
surviving corporation.
"Close" has the meaning set forth in Section 3.0 of the Participation
Agreement.
"Closing" means the closing of the transactions described in Section 2
of the Participation Agreement.
"Closing Date" means January 1, 1994, subject to Section 2.2 of the
Participation Agreement.
"Closing Party" has the meaning set forth in Section 3.0 of the
Participation Agreement.
"Code" means the Internal Revenue Code of 1986, as amended and effective
as of December 31, 1993.
"Common Excluded Assets" means those assets set forth as common excluded
assets on Schedule A annexed hereto.
"Competitive Contract" means, in the case of a contract with the U.S.
government (including any FMS contract), any contract which does not
require the submission of certified cost or pricing data.
"Condition Party" has the meaning set forth in Section 3.1 of the
Participation Agreement.
"Confidentiality Agreement" means the confidentiality agreement dated
January 16, 1992 and amended July 27, 1992 between FMC and Harsco which
is attached as Exhibit C to the Participation Agreement.
"Consent" means a consent, reasonably acceptable to the Parents, from a
counterparty (other than the Parents) to a Contract transferred by a
Parent to a Partner or the Partnership.
"Consolidation Costs" means out-of-pocket costs that would not have been
incurred after the Closing Date but for the combination of the FMC
Defense Business and the Harsco Defense Business, including, without
limitation, costs incurred in connection with (i) severance payments;
(ii) land preparation; (iii) relocation of equipment and tooling; (iv)
re-layout of facilities; (v) standardization of computer-aided-design
and computer-aided-manufacturing techniques and processes; (vi)
construction of an oval test track; (vii) work transfer; (viii)
retraining of employees; (ix) relocation of employees; (x) purchasing
and systems conversions; and (xi) sale or other disposal of redundant
plant, equipment, tooling and other property (including any losses
thereby incurred); but excluding transfer taxes and other transaction
costs incident to the combination.
"Contract Price" has the meaning set forth in Section 5.22.4.4 of the
Participation Agreement.
"Contracts" means FMC Contracts or Harsco Contracts.
"Controlled Group" has the meaning set forth in Section 4.21.7 of the
Participation Agreement.
"CPR" has the meaning set forth in Section 3.12 of the Partnership
Agreement.
"CRB Carrying Costs" of a Partner or its Parent for any Fiscal Quarter
means the product of (i) 2.5% and (ii) the average of the relevant
Partner's Cumulative Remedial Balances as of the beginning and as of the
end of such Fiscal Quarter. In the case of a Fiscal Quarter consisting
of less than 3 calendar months, the "CRB Carrying Costs" of a Partner or
its Parent for such short Fiscal Quarter means (a) the product of (i)
2.5%, (ii) the average of the relevant Partner's Cumulative Remedial
Balances as of the beginning and as of the end of such Fiscal Quarter
and (iii) a fraction the numerator of which is the number of days in
such short Fiscal Quarter and the denominator of which is the number of
days in the calendar quarter of which the short Fiscal Quarter is a
part.
"CRBCC Carryover Amount" has the meaning set forth in Section 4.3(a) of
the Partnership Agreement.
"Cumulative Remedial Balance" of a Partner or its Parent means the
cumulative amount since formation of the Partnership of all charges (net
of all credits) to the relevant Partner's Remedial Cost Account in
excess of the amount of the environmental reserves for Remedial
Expenditures reflected on such Partner's Final Closing Balance Sheet;
provided that charges and credits to such Remedial Cost Account under
clauses (i), (vi) and (vii) of Section 5.22.4.2 of the Participation
Agreement shall be ignored for this purpose.
"Data Rights" means unregistered copyrights and trade secrets and
confidential information and knowledge possessed by each Parent as of
the Closing Date, including, but not limited to, ideas, inventions,
blueprints, know-how, formulae, manufacturing and production processes
and techniques, research and development information, software,
drawings, specifications, designs, plans, proposals, technical data,
financial and accounting data, business and marketing plans and customer
and supplier lists.
"Debt" of any Person as used in Sections 4.2 and 4.5 of the
Participation Agreement means (a) obligations of such Person for
borrowed money, (b) obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) obligations of such
Person to pay the deferred purchase price of property or services (other
than trade payables), (d) obligations of such Person as lessee under
capital leases, (e) Debt of another secured by a Lien on any asset of
such Person, whether or not such Debt is assumed by such Person, and (f)
Debt of others guaranteed directly or indirectly by such Person or as to
which such Person has an obligation which is the economic equivalent of
a guarantee.
"Defense Affiliate" means, as to FMC, any Affiliate operating in the FMC
Defense Business and, as to Harsco, any Affiliate operating in the
Harsco Defense Business, which Affiliates are listed on Schedule B
annexed hereto.
"Defense Business" means the FMC Defense Business or the Harsco Defense
Business.
"Defense Subsidiary" means, as to FMC, any Subsidiary operating in the
FMC Defense Business and, as to Harsco, any Subsidiary operating in the
Harsco Defense Business, which Subsidiaries are listed on Schedule B
annexed hereto. Such term shall not include, as to FMC or Harsco, the
Partnership.
"Defense Systems Group" means the Ground Systems, Armament Systems,
Steel Products and Defense Systems International Divisions of FMC's
Defense Systems Group, including FMC's investment in and contractual
relations with FNSS, but specifically excluding the properties set forth
as FMC Excluded Assets or Common Excluded Assets on Schedule A annexed
hereto.
"Demolition Costs" has the meaning set forth in Section 6.4 of the
Participation Agreement.
"Designated Representative" means Barrett W. Taussig, or any successor
designated by Harsco L.P.
"Designee" means any of a Partner's designated representatives to the
Advisory Committee, as provided in Section 3.5(b) of the Partnership
Agreement.
"DOD" means the U.S. Department of Defense.
"DOJ" means the U.S. Department of Justice.
"Earnings Multiple" means the quotient obtained by dividing the
Appraised Value of the Partnership by the arithmetic average of the
annual after-tax income of the Partnership determined in accordance with
GAAP (as reduced by the Limited Partner Allocation) for the three Fiscal
Years immediately preceding the calculation of the Capitalized Limited
Partner Allocation (as determined from the Partnership's regularly
prepared financial statements, but assuming that the Partnership paid
corporate tax on such income at a rate equal to the Tax Rate for each
such Fiscal Year), provided that the Earnings Multiple shall never be
less than 5 nor more than 15.
"Environmental Requirements" means all civil and criminal federal,
state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all common law, and any
currently effective judicial and administrative orders, permits and
licenses (and conditions of the same) and determinations binding on the
FMC Defense Business, the Harsco Defense Business, the FMC Assets, or
the Harsco Assets, which provisions, common law, permits, licenses and
orders and determinations concern public health and safety, worker
health and pollution or protection of the environment, including without
limitation all those relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any Hazardous Substances but
excluding any of the foregoing to the extent relating to worker safety,
all as may be amended or superseded from time to time.
"Environmental Liability Event" means any of the following: (a) the
Release (as hereinafter defined) of any Hazardous Substance at, from or
onto any property or facility at any time owned, operated or used by
either Defense Business or the Partnership, (b) the offsite treatment,
storage, disposal, handling, disposition or Release of any Hazardous
Substance generated, handled or in any fashion originating from or at
any property or facility at any time owned, operated or used by, or
otherwise in connection with, either Defense Business or the business of
the Partnership or (c) any failure by either Parent, with respect to its
Defense Business, or by the Partnership to comply with applicable
Environmental Requirements (as such Environmental Requirements are
constituted prior to the Closing Date).
"Environmental Realization Status Report" has the meaning set forth in
Section 5.22.3.1 of the Participation Agreement.
"Environmental Special Allocation" has the meaning set forth in Section
5.22.1 of the Participation Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means the FMC Excluded Assets and the Harsco Excluded
Assets.
"Excluded Liabilities" means, in connection with each Defense Business:
(i) all liabilities relating to Income Taxes of either Parent or any of
its Affiliates;
(ii) all liabilities relating to Taxes, other than Income Taxes, to the
extent not accrued on the Final Closing Balance Sheet;
(iii) all liabilities for borrowed money as of the Closing Date other
than FMC Liabilities relating to FNSS;
(iv) all liabilities relating to claims with respect to government
contracts, whether asserted or unasserted by the government, arising
prior to the Closing Date to the extent not accrued on the Final Closing
Balance Sheet;
(v) all liabilities relating to "holdback reserves," "management
contingency reserves" and "sales reserves" for all Inactive Contracts,
and all "holdback reserves" (except for those relating to fixed-price
incentive fee Contracts), on Active Contracts;
(vi) all liabilities relating to any claims for pre-Closing breaches of
contract or violations of Governmental Rules, to the extent not accrued
on the Final Closing Balance Sheet; provided, however, that liabilities
that are Remedial Expenditures shall be assumed to the extent provided
in the Operative Documents;
(vii) all liabilities not set forth on or identified on an exhibit to
the Final Closing Balance Sheet or on any Schedule to the Participation
Agreement, in each case listing liabilities to be assumed by the
Partnership, other than the liabilities set forth in clause (viii)(B),
(xi) and (xii) of the definition of FMC Liabilities and the liabilities
set forth in clauses (viii), (x) and (xi) of the definition of Harsco
Liabilities;
(viii) all liabilities for pre-Closing workers' compensation (subject
to Section 5.15 of the Participation Agreement) and, to the extent not
accrued on the Final Closing Balance Sheet, pre-Closing general and
product liability occurrences; and
(ix) all liabilities resulting from an Excluded Asset or any other
Asset not acquired by the Partnership.
"Existing Contract" means any contract entered into by either Parent
prior to the Closing.
"Fair Market Value" means the price a willing buyer would pay a willing
seller in an arm's-length transaction, neither being under any
compulsion to buy or sell and both having reasonable knowledge of
relevant facts. As applied to a liability, Fair Market Value means the
price a buyer would demand in exchange for assuming the liability from
the seller.
"FAR" means the Federal Acquisition Regulation, 48 C.F.R. Chapter 1, as
promulgated by the U.S. government.
"Final Closing Balance Sheet" has the meaning set forth in Section 2.3.2
of the Participation Agreement.
"Fiscal Quarter" has the meaning set forth in Section 5.1 of the
Partnership Agreement.
"Fiscal Year" means a calendar year for the Partnership (as set forth in
Section 5.1 of the Partnership Agreement).
"FMC" means FMC Corporation, a Delaware corporation.
"FMC Assets" means (a) $14,800,000 in cash and (b) all of the right,
title and interest that FMC possesses in and to the following assets
exclusively used or intended for exclusive use in the business of its
Defense Systems Group:
(i) all inventories of raw materials, packaging materials, work in
process, consigned goods and finished goods (including warehoused
inventories and inventories covered by purchase orders), including any
such inventories acquired after the date hereof but excluding any such
inventories sold or otherwise disposed of after the date hereof in the
ordinary course of business consistent with past practices;
(ii) all supplies, furniture, fixtures, machinery, equipment, vehicles
and other fixed assets;
(iii) all FMC Contracts;
(iv) all Transferred Intellectual Property Rights;
(v) the Real Property listed or described on Schedule 4.8.2A to the
Participation Agreement;
(vi) all accounts, notes and other receivables;
(vii) any permits or licenses issued by any Governmental Authority;
(viii) all stock or other debt or equity interests (including
partnership interests) in the FMC Defense Affiliates set forth on
Schedule B annexed hereto; and
(ix) all other tangible or intangible assets.
The FMC Assets shall not include the FMC Excluded Assets or the Common
Excluded Assets.
"FMC Capital Account Value" has the meaning set forth in Schedule 4.1 to
the Partnership Agreement.
"FMC Contracts" means all contracts (other than Restricted Contracts),
indentures, agreements, commitments, purchase orders, letters of credit,
guarantees, foreign exchange contracts, commodity hedges, leases and
other legally binding arrangements, whether oral or written, entered
into in connection with the FMC Defense Business.
"FMC Defense Business" means the entire business and operations of the
Defense Systems Group, as conducted on the date hereof.
"FMC Environmental Liability Event" means any Environmental Liability
Event relating to or arising out of the conduct by FMC prior to the
Closing Date of its Defense Business or the ownership, operation or use
by FMC or any of its Affiliates prior to the Closing Date of any
facility or property now or previously owned, operated or used in its
Defense Business.
"FMC Excluded Assets" means those assets of FMC set forth on Schedule A
annexed hereto.
"FMC Liabilities" means the following liabilities and obligations of FMC
arising out of the operations of the FMC Defense Business or the
ownership, operation or use of the FMC Assets (whether asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, or due or arising before the Closing Date):
(i) all liabilities to vendors and other creditors for goods purchased
or services received on open account;
(ii) amounts received from customers as advance payments to be applied
to the related receivable when a sale is recorded at time of shipment or
completion of service;
(iii) amounts withheld from employees' compensation for Federal, state
or local taxes and for other payroll deductions;
(iv) sundry accounts payable;
(v) amounts accrued for salaries, wages, commission and other
remuneration earned by employees;
(vi) commissions earned by salesmen, dealers or other agents who are
not employees;
(vii) all liabilities relating to accrued Taxes, other than Income
Taxes, including but not limited to Taxes assessed against real and
personal property based on the valuation of such property as determined
by the laws of the state or local taxing authority;
(viii) (A) accruals for FMC's cost of Federal, state or local taxes on
payroll that are not an Excluded Liability and (B) all liabilities for
other employee benefits to the extent provided in Section 5.9 of the
Participation Agreement, but excluding workers compensation liabilities
to the extent provided in Section 5.15 of the Participation Agreement;
(ix) accruals for royalties payable in accordance with terms of royalty
agreements; legal and professional fees for services rendered; insurance
premiums (excluding workers' compensation and general and product
liability coverages); policy and warranty claims and product and service
liabilities, but excluding pre-Closing products liability or general
liability occurrences (except to the extent, but not in excess of, any
amount reserved for and reflected on FMC's Final Closing Balance Sheet);
and miscellaneous expenses;
(x) all liabilities associated with FMC's ownership of or interest in
the Defense Affiliates of FMC set forth on Schedule B annexed hereto;
(xi) all liabilities and obligations associated with any FMC
Environmental Liability Event; and
(xii) obligations under FMC Contracts remaining unperformed on the
Closing Date.
The FMC Liabilities shall not include any Excluded Liability.
"FMC Master Trust" means the Master Trust established by the Master
Trust Agreement between FMC Corporation and Bankers Trust Company dated
January 1, 1976 implementing the pension benefit plans of FMC and its
Subsidiaries and Affiliates.
"FMC Qualifying Remedial Expenditure" means any Remedial Expenditure to
the extent arising out of any FMC Environmental Liability Event.
"FMS" means Foreign Military Sales.
"FNSS" means FMC-Nurol Savunma Sanayii A.S., a Turkish corporation.
"FRA" means the final remedial adjustment as described in Section
5.22.4.4 of the Participation Agreement.
"FTC" means the U.S. Federal Trade Commission.
"GAAP" means generally accepted accounting principles in the United
States of America.
"Goodyear" has the meaning set forth in Section 5.23 of the
Participation Agreement.
"Goodyear Litigation" means the litigation styled as FMC Corporation v.
The Goodyear Tire & Rubber Company (N.D. Ala., Eastern Div., Civil
Action No. CV-90-H-01018E), including all appeals therefrom and all
settlements thereof.
"Governmental Actions" means all authorizations, orders, consents,
approvals, waivers, exceptions, variances, franchises, permissions,
permits and licenses of, and filings and declarations with, by or in
respect of, any Governmental Authorities.
"Governmental Authority" means any national, federal, state, local or
foreign governmental Person, authority or agency, court, regulatory
commission, stock exchange or other body and any arbitrator having
jurisdiction over the matter; provided, that any arbitrators within this
definition shall include only arbitrators having the right to issue a
binding order or decision in such matter.
"Governmental Rule" means any statute, law, treaty, rule, code,
ordinance, regulation, permit, certificate or order of any Governmental
Authority or any judgment, decree, injunction, writ, order or like
action of any court, arbitrator or other judicial or quasi-judicial
tribunal, other than an ex-parte or temporary order if either party
takes prompt action to set aside such action and such temporary order
does not become final.
"Harsco" means Harsco Corporation, a Delaware corporation.
"Harsco Assets" means (a) $5,200,000 in cash and (b) all of the right,
title and interest that Harsco possesses in and to the following assets
exclusively used or intended for exclusive use in the business of its
BMY-Combat Systems Division:
(i) all inventories (net of progress payments) of raw materials,
packaging materials, work in process, consigned goods and finished goods
(including warehoused inventories and inventories covered by purchase
orders), including any such inventories acquired after the date hereof
but excluding any such inventories sold or otherwise disposed of after
the date hereof in the ordinary course of business consistent with past
practices;
(ii) all supplies, furniture, fixtures, machinery, equipment, vehicles
and other fixed assets;
(iii) all Harsco Contracts;
(iv) all Transferred Intellectual Property Rights;
(v) the Real Property listed or described on Schedule 4.8.2B to the
Participation Agreement;
(vi) all accounts, notes and other receivables;
(vii) any permits or licenses issued by any Governmental Authority; and
(viii) all other tangible and intangible assets.
The Harsco Assets shall not include the Harsco Excluded Assets or the
Common Excluded Assets.
"Harsco Capital Account Value" has the meaning set forth in Schedule 4.1
to the Partnership Agreement.
"Harsco Contracts" means all contracts (other than Restricted
Contracts), indentures, agreements, commitments, purchase orders,
letters of credit, guarantees, foreign exchange contracts, commodity
hedges, leases and other legally binding arrangements, whether oral or
written, entered into in connection with the Harsco Defense Business.
"Harsco Defense Business" means the entire business and operations of
Harsco's BMY-Combat Systems Division, whose principal address is Wolf
Church Road, York, Pennsylvania 17404, as conducted on the date hereof.
"Harsco Environmental Liability Event" means any Environmental Liability
Event relating to or arising out of the conduct by Harsco prior to the
Closing Date of its Defense Business or the ownership, operation or use
by Harsco or any of its Affiliates prior to the Closing Date of any
facility or property now or previously owned, operated or used in its
Defense Business.
"Harsco Excluded Assets" means those assets of Harsco set forth on
Schedule A annexed hereto.
"Harsco L.P." means Harsco Defense Holding, Inc., a Delaware corporation
which is to be the Harsco limited partner of the Partnership and which
is directly and wholly-owned by Harsco.
"Harsco Liabilities" means the following liabilities and obligations of
Harsco arising out of the operations of the Harsco Defense Business or
the ownership, operation or use of the Harsco Assets (whether asserted
or unasserted, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated, or due or arising before the Closing Date):
(i) all liabilities to vendors and other creditors for goods purchased
or services received on open account;
(ii) amounts received from customers as advance payments to be applied
to the related receivable when a sale is recorded at time of shipment or
completion of service;
(iii) amounts withheld from employees' compensation for Federal, state
or local taxes and for other payroll deductions;
(iv) sundry accounts payable;
(v) amounts accrued for salaries, wages, commission and other
remuneration earned by employees;
(vi) commissions earned by salesmen, dealers, or other agents who are
not employees;
(vii) all liabilities relating to accrued Taxes, other than Income
Taxes, including but not limited to Taxes assessed against real and
personal property based on the valuation of such property as determined
by the laws of the state or local taxing authority;
(viii) (A) accruals for Harsco's cost of Federal, state or local taxes
on payroll that are not an Excluded Liability and (B) all liabilities
for other employee benefits to the extent provided in Section 5.9 of the
Participation Agreement, but excluding workers compensation liabilities
to the extent provided in Section 5.15 of the Participation Agreement;
(ix) accruals for royalties payable in accordance with terms of royalty
agreements; legal and professional fees for services rendered; insurance
premiums (excluding workers' compensation and general and products
liability coverages); policy and warranty claims and product and service
liabilities, but excluding pre-Closing products liability or general
liability occurrences (except to the extent, but not in excess of, any
amount reserved for and reflected on Harsco's Final Closing Balance
Sheet); and miscellaneous expenses;
(x) all liabilities and obligations associated with any Harsco
Environmental Liability Event; and
(xi) obligations under Harsco Contracts remaining unperformed on the
Closing Date.
The Harsco Liabilities shall not include any Excluded Liability.
"Harsco Qualifying Remedial Expenditure" means any Remedial Expenditure
to the extent arising out of any Harsco Environmental Liability Event.
"Hazardous Substance" means any material, substance or waste that poses
or causes, or is alleged to pose or cause, any damage to property or
personal injury, including death, or any threat to the environment,
including without limitation those substances defined, listed,
designated, or classified as hazardous, toxic, radioactive, or dangerous
or otherwise regulated or governed under any Environmental Requirements,
including without limitation any hazardous substance for purposes of
CERCLA, any hazardous waste for purposes of RCRA, any petroleum product
or by-product, crude oil or any fraction thereof, natural gas, natural
gas liquids, liquefied natural gas, synthetic gas usable as fuel,
polychlorinated biphenyls, asbestos, heat, noise, microwave, odor,
radioactive material or any substance that has been identified as a
carcinogen or reproductive toxin under the Safe Drinking Water and Toxic
Enforcement Act of 1986 of the State of California.
"Inactive Contract" means those Contracts which provide for the delivery
of products or the rendering of contract-defined deliverable services,
excluding warranties, by a Parent and with respect to which the final
product has been delivered and the final service has been rendered prior
to the Closing Date.
"Income Taxes" means Taxes measured by or based on income, and
franchise, capital stock or net worth Taxes.
"Indemnified Parties" has the meaning set forth in Section 6.1 of the
Participation Agreement.
"Initial Capital Contribution" of each of FMC and Harsco L.P. means the
aggregate transfers by or on behalf of FMC or Harsco L.P., as
applicable, pursuant to Sections 2.1.3, 2.1.4 and 2.1.5 of the
Participation Agreement, as adjusted pursuant to Section 2.3.3 thereof.
"Intellectual Property Agreements" means the agreements to be entered
into between FMC and the Partnership and between Harsco and the
Partnership on or prior to the Closing Date, substantially in the forms
of Exhibits F-1 and F-2 to the Participation Agreement.
"IRS" means the U.S. Internal Revenue Service.
"Knowledge" means the actual knowledge of the individuals listed on
Schedule C.1 hereto in the case of FMC and the individuals listed on
Schedule C.2 hereto in the case of Harsco, in each case after reasonable
investigation unless otherwise expressly specified.
"Lease Agreement" means the agreement to be entered into between FMC and
the Partnership on or prior to the Closing Date, substantially in the
form of Exhibit G to the Participation Agreement.
"Leased Property" has the meaning set forth in Section 4.8.2 of the
Participation Agreement.
"Liabilities" means FMC Liabilities or Harsco Liabilities.
"LIBOR" means the applicable London Interbank Offered Rate as set forth
in The Wall Street Journal.
"Licensed Intellectual Property" means, with respect to each Parent,
Data Rights, Statutory Rights and Marks used or intended for use, but
not exclusively, in its Defense Business that will be licensed to the
Partnership under the Intellectual Property Agreements.
"Licensed Third Party Rights" means, as to each Parent, copyrights and
trade secrets and confidential information and knowledge and letters
patent, utility models, inventor's certificates, registered copyrights,
registered mask works and applications therefor under which such Parent
has been granted license or other rights by a third party.
"Lien" means any lien, mortgage, encumbrance, pledge, charge, lease
restriction, easement, servitude, right of others or security interest
of any kind, including any thereof arising under conditional sales or
other title retention agreements.
"Limited Non-Exclusive Licenses" means the licenses to be entered into
between FMC and the Partnership and between Harsco and the Partnership
on or prior to the Closing Date.
"Limited Partner" has the meaning set forth in the preface to the
Partnership Agreement.
"Limited Partner Allocation" shall be an amount equal to $13,300,000 in
the first Fiscal Year of the Partnership, and in each subsequent Fiscal
Year of the Partnership shall equal the amount agreed to by FMC and the
Limited Partner (so long as the Limited Partner's Share Percentage is at
least 20%) or any other third party assignee from the Limited Partner
who was assigned a Share Percentage in excess of 20% of the aggregate
Share Percentages (which agreement shall not require the consent or
approval of any other partner or holder of an interest of the
Partnership) prior to the beginning of such Fiscal Year. If no such
agreement is reached, then the Limited Partner Allocation shall equal
the prior year's Limited Partner Allocation (as the same may have
previously been adjusted by agreement and/or for inflation), as further
adjusted for inflation by the percentage increase (or decrease) in the
Producer Price Index for Finished Goods (unadjusted index) for such
prior Fiscal Year.
"Limited Partner Allocation Late Payment Interest" has the meaning set
forth in Section 6.1 of the Partnership Agreement.
"Loss" means any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses).
"Major ASD Contract" means any New Contract (excluding any engineering
contract) that provides for the production of products which are of the
type currently produced by FMC's Armament Systems Division and that has
a Contract Price, after giving effect to the exercise of any options
which are exercised under such New Contract, of at least $50,000,000.
"Major Contract" means any Major ASD Contract, Major GSD/CSD Contract or
Major SPD Contract.
"Major GSD/CSD Contract" means any New Contract (excluding any
engineering contract) that provides for the production of products which
are of the type currently produced by FMC's Ground Systems Division or
the Harsco Defense Business and that has a Contract Price, after giving
effect to the exercise of any options which are exercised under such New
Contract, of at least $50,000,000.
"Major SPD Contract" means any New Contract (excluding any engineering
contract) that provides for the production of products which are of the
type currently produced by FMC's Steel Products Division and that has a
Contract Price, after giving effect to the exercise of any options which
are exercised under such New Contract, of at least $50,000,000.
"Management Services Agreement" means the agreement to be entered into
between FMC and the Partnership on or prior to the Closing Date
substantially in the form of Exhibit H to the Participation Agreement.
"Managing General Partner" has the meaning set forth in the preface to
the Partnership Agreement.
"Marks" means, with respect to each Parent, registered and unregistered
trademarks, tradenames, service marks, trade dress, logos and
applications for registration thereof, all right, title and interest in
which is owned by such Parent as of the Closing Date.
"Material Adverse Effect" means: (a) with respect to either Parent's
Defense Business, a material adverse effect on (i) the financial
condition, results of operation, properties, business or prospects of
such Parent's Defense Business, (ii) the Partnership's ability to
conduct such Parent's Defense Business or (iii) the ability of such
Parent or any of its Affiliates to perform any of its material
obligations under any Operative Document; and (b) with respect to the
Partnership, a material adverse effect on (i) the financial condition,
results of operation, properties, business or prospects of the
Partnership, (ii) the Partnership's ability to conduct its business or
(iii) the ability of the Partnership to perform any of its material
obligations under any Operative Document.
"Modified Taxable Income" has the meaning set forth in Section 6.5(a) of
the Partnership Agreement.
"Net Book Value" means, with respect to each Parent, the Book Value of
its Assets which are of the types reflected on the Pro Forma Balance
Sheet minus the Book Value of its Liabilities which are of the types
reflected on the Pro Forma Balance Sheet.
"Net Working Capital" means the excess of current assets over current
liabilities.
"New Contract" means (i) any contract that was entered into by the
Partnership after the Closing Date and (ii) that portion of any Existing
Contract which relates to any increase in the quantity of deliverables
subsequent to the Closing beyond the quantity (including priced options
thereunder) formerly specified in such Existing Contract, which increase
involves an increase in the contract price of at least $50 million.
"Nonqualified Plan" means a plan described in Section 3(34) or 3(35) of
ERISA that is not qualified under Section 401(a) of the Code.
"Normative Fee" has the meaning specified in Section 5.22.4.4 of the
Participation Agreement.
"Notice of Arbitration" has the meaning set forth in Section 3.12 of the
Partnership Agreement.
"Novation Agreement" means the novation agreement, substantially
consistent with the standard form of novation agreement set forth in the
Federal Acquisition Regulation, 48 C.F.R. Subsection 42.12, among FMC,
Harsco, the Partnership and the U.S. Government.
"Operative Documents" means the Assignments, the Assumption Agreements,
the Consents, the Intellectual Property Agreements, the Lease Agreement,
the Sublease and Assignment of Option to Purchase Aiken, South Carolina
Facilities, the Limited Non-Exclusive Licenses, the Management Services
Agreement, the Novation Agreement, the Partnership Agreement, the
Registration Rights Agreement, the Participation Agreement and any other
agreements that the parties mutually agree in writing to treat as
Operative Documents.
"Owned Property" has the meaning set forth in Section 4.8.2 of the
Participation Agreement.
"Parent" means FMC or Harsco, as appropriate given the context of the
Participation Agreement. For purposes of the Operative Documents, FMC
shall be deemed to be the Parent of the FMC Partner.
"Participation Agreement" means the Participation Agreement dated as of
January 1, 1994 by and between FMC, Harsco, Harsco L.P. and the
Partnership as amended from time to time in accordance with its terms.
"Partner" means FMC (in the case of FMC) or Harsco L.P. (in the case of
Harsco). For purposes of the Operative Documents, FMC shall be deemed
to be the Partner of FMC.
"Partners" means FMC and Harsco L.P.
"Partnership" means United Defense, L.P., the Delaware limited
partnership formed in accordance with the Partnership Agreement.
"Partnership 401(k) Plan" has the meaning set forth in Section 5.9.6 of
the Participation Agreement.
"Partnership Agreement" means the Delaware limited partnership agreement
to be entered into by and among the Partners and the Partnership on or
before the Closing Date and substantially in the form of Exhibit I of
the Participation Agreement.
"Partnership Benefit Plans" has the meaning set forth in Section 5.9.3
of the Participation Agreement.
"Partnership Master Trust" means the Partnership Master Trust described
in Section 5.9.6 of the Participation Agreement.
"Partnership Nonunion Pension Plan" has the meaning set forth in Section
5.9.3 of the Participation Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Capital Investments" means capital investments for (i) new
equipment and equipment upgrades and replacements for existing lines of
business; (ii) plant and equipment for existing or new programs at or
adjoining existing Partnership facilities that are within the
Partnership's Scope of Activity or carried on by SPD not primarily for
commercial purposes; and (iii) research and development for programs
within the Partnership's Scope of Activity.
"Permitted Liens" means (a) the rights and interests of the Partnership,
any Parent or its Affiliates as provided in the Operative Documents, (b)
Liens for Taxes either not yet due or being contested in good faith and
by appropriate proceedings and (c) materialmen's, mechanics', workers',
repairmen's, employees' or other Liens arising in the ordinary course of
business for amounts either not yet due or being contested in good faith
and by appropriate proceedings, so long as such proceedings shall not
involve any substantial danger of the sale, forfeiture or loss of any
part of the relevant asset, title thereto or any interest therein and
shall not interfere with the use or disposition thereof.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
Governmental Authority.
"Plan Participant" means, as the context requires, (a) a Transferred
Employee who, on the Closing Date, participated under the terms of on
the applicable plan, (b) a former employee who terminated employment
before the Closing Date but as of the Closing Date had not incurred a
break in service sufficient under the terms of the applicable plan to
eliminate such former employee's right to prior service credit with
respect to such plan or (c) a former employee (including the spouse or
other dependent of a former employee) who terminated employment before
the Closing Date but as of the Closing Date had rights to a benefit
under the terms of the applicable plan; provided, however, that, in the
case of (b) or (c), in order to be a Plan Participant such former
employee, when terminating employment with FMC or Harsco, must have been
employed in the Defense Business of FMC or Harsco.
"Postretirement Benefit Plan" means an employee welfare benefit plan as
defined in Section 3(1) of ERISA that provides benefits to retired
employees and their dependents.
"Preliminary Closing Balance Sheet" has the meaning set forth in Section
2.3.1 of the Participation Agreement.
"Principal Accounting Procedures" means those accounting procedures
described in Section 5.9 of the Partnership Agreement.
"Principal Office" of the Partnership has the meaning set forth in
Section 2.1(c) of the Partnership Agreement.
"Private Actions" means all authorizations, consents, approvals,
waivers, exceptions, variances, franchises, permissions, permits and
licenses of (a) Persons other than Governmental Authorities and (b)
Governmental Authorities acting in private capacities.
"Profits" or "Losses" has the meaning set forth in Section 4.2(a) of the
Partnership Agreement.
"Pro Forma Balance Sheet" has the meaning set forth in Section 4.14 of
the Participation Agreement.
"Qualified Pension Plan" means a defined benefit plan as described in
Section 3(35) of ERISA that is qualified under Section 401(a) of the
Code.
"Qualifying Remedial Expenditure" means any Remedial Expenditure to the
extent arising out of any FMC Environmental Liability Event or Harsco
Environmental Liability Event, as the case may be.
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
Subsection 6901 et seq.
"Real Property" means the Owned Property and the Leased Property.
"Realization" includes, with respect to each Major Contract, the
Remedial Expenditures amount included in the forward pricing rate used
by the Partnership to establish the contract price as adjusted as
provided in Section 5.22.4.4 of the Participation Agreement and, with
respect to each production contract other than a Major Contract and each
other contract, regardless of amount, the Remedial Expenditures amount
included in the forward pricing rate used by the Partnership to
establish the contract price. In addition, any amount reflected as a
credit to FMC or Harsco in accordance with Section 5.22.4.2 of the
Participation Agreement (including under clause (i) therein, but
excluding clauses (vii) and (viii) therein) shall be deemed to be a
Realization.
"Realize" means to obtain a Realization.
"Realized Remedial Expenditure" means any Remedial Expenditure (i) which
has been (or is deemed to have been under Section 5.22.4 of the
Participation Agreement) Realized pursuant to customer contracts or any
other source (it being understood that Remedial Expenditures may be
offset by such Realizations for purposes of the Operative Documents,
irrespective of whether or not such Remedial Expenditures relate to the
circumstances giving rise to such Realizations), (ii) as to which any
related rebuttable presumption under Section 5.22.2.2 or 5.22.2.3 has
been rebutted or (iii) which has been charged against the environmental
reserves referred to in clause (i) of Section 5.22.4.2 (it being
understood that Remedial Expenditures may be offset by such reserves for
purposes of the Operative Documents, irrespective of whether or not such
Remedial Expenditures relate to the historical basis for the creation of
such reserves). The Parents acknowledge that the Partnership may have
Realizations prior to such time as the Partnership incurs the related
Remedial Expenditures. FMC Realized Remedial Expenditure and Harsco
Realized Remedial Expenditure have corollary meanings.
"Reallocated Loss Account" means the account into which Losses, which,
but for the application of Section 4.6(a) of the Partnership Agreement,
would have been allocated to the Limited Partner.
"Reallocated Loss Amount" means the quotient of (i) the amount of Losses
allocated to the Managing General Partner's Reallocated Loss Account
pursuant to Section 4.6(a) of the Partnership Agreement divided by (ii)
1 minus the Managing General Partner's Share Percentage. The
Reallocated Loss Amount shall be as adjusted from time to time as
provided in Section 4.6(b) of the Partnership Agreement.
"Records" has the meaning set forth in Section 10.6 of the Partnership
Agreement.
"Recovery Items" has the meaning set forth in Section 6.7(d) of the
Participation Agreement.
"Registration Rights Agreement" means the agreement between FMC and
Harsco L.P. to be entered into on or before the Closing Date
substantially in the form of Exhibit J of the Participation Agreement.
"Related Party Transaction" means any transaction between the
Partnership and any Partner or any Affiliate of any Partner.
"Release" means "release" as such term is defined for purposes of
CERCLA.
"Remedial Costs Account" has the meaning set forth in Section 5.22.4.2
of the Participation Agreement.
"Remedial Expenditure" means any expenditure by the Partnership with
respect to any Environmental Liability Event either for (i) the
treatment, containment or removal of contaminated soil or groundwater or
the disposal of removed material (including such activity as conducted
in connection with a corrective action pursuant to RCRA or a removal or
remedial action pursuant to CERCLA), (ii) corrective or remedial action
to cure a failure by either Parent or the Partnership, with respect to
its Defense Business, prior to the Closing Date, to comply with
applicable Environmental Requirements (as such Environmental
Requirements are constituted prior to the Closing Date) and any
governmental fines, penalties or other sanctions, whether civil or
criminal, to the extent arising from such failure or (iii) legal and
administrative proceedings against Persons other than either Parent
regarding the nature and extent of the Partnership's or such other
Persons' legal and financial responsibility for matters described in (i)
and (ii) herein.
"Restricted Contracts" has the meaning set forth in Section 5.11 of the
Participation Agreement.
"Rules" has the meaning set forth in Section 3.12 of the Partnership
Agreement.
"Sale Notice" has the meaning set forth in Section 7.1(b) of the
Partnership Agreement.
"Santa Clara Properties" means the following properties owned by FMC in
Santa Clara County, California, used by and recorded on the financial
statements of the FMC Defense Business, and leased by FMC to the
Partnership pursuant to the terms of the Lease Agreement:
(i) 333 W. Brokaw Road, Santa Clara, California;
(ii) 328 W. Brokaw Road, Santa Clara, California;
(iii) 333 W. Julian Street, San Jose, California (except for that
certain parcel thereof that is leased from Southern Pacific Railway and
not owned by FMC); and
(iv) 1107, 1115 and 1125 Coleman Avenue, San Jose, California.
"Scope of Activity" has the meaning set forth in Section 2.2 of the
Partnership Agreement.
"SEC" means the U.S. Securities and Exchange Commission.
"Settle" has the meaning set forth in Section 6.6 of the Participation
Agreement.
"Share Percentage" means 60% as to FMC and 40% as to Harsco L.P., as
adjusted from time to time pursuant to Section 4.5 of the Partnership
Agreement.
"Significant Event" has the meaning set forth in Section 4.1(d) of the
Partnership Agreement.
"Signing Date" means the date on which the Participation Agreement is
executed.
"Slow-Moving Inventory" means the inventory set forth on Schedule 5.16
to the Participation Agreement. This definition excludes inventory
charged or allocated to cost-type contracts. Inventory charged or
allocated to cost-type contracts is owned by the Government and
therefore outside the scope of Slow-Moving Inventory. The gross level
of Slow-Moving Inventory will be reduced but not completely offset by
reserves on the Preliminary Closing Balance Sheet.
"SPD" means the Steel Products Division of FMC.
"Statutory Rights" means, with respect to each Parent, (i) letters
patent, utility models, inventor's certificates, registered copyrights,
registered mask works, (ii) applications for any of the foregoing and
rights which may issue on such applications and (iii) any reissues,
continuations, continuations-in-part, extensions, divisions,
reexaminations or renewals of the foregoing, in which such Parent owns
all or a part of the right, title and interest as of the Closing Date.
"Subsidiary" of any Person means a corporation, partnership, company or
other entity (a) more than 50% of whose outstanding shares or securities
(representing the right to vote for the election of directors or other
managing authority) are or (b) which does not have outstanding shares or
securities (as may be the case in a partnership, joint venture or
unincorporated association), but more than 50% of whose ownership
interest representing the right to make decisions for such other entity
is, now or hereafter owned or controlled, directly or indirectly, by
such Person; provided that such corporation, partnership, company or
other entity shall be deemed to be a Subsidiary only so long as such
ownership exists.
"Target Net Asset Value" means (i) in the case of FMC, $138,600,000,
including $14,800,000 of cash and (ii) in the case of Harsco L.P.,
$29,600,000, including $5,200,000 of cash.
"Tax Benefits" has the meaning set forth in Section 6.7(a) of the
Participation Agreement.
"Taxes" means any and all governmental or quasi-governmental fees
(including license, filing and registration fees), taxes (including
income, gross receipts, franchise, sales, use and property (real or
personal, tangible or intangible), interest equalization and stamp
taxes, assessments, levies, imposts, duties, charges, withholdings or
other taxes of any kind or nature whatsoever, together with any and all
penalties, fines or interest thereon.
"Tax Matters Partner" has the meaning set forth in Section 10.8 of the
Partnership Agreement.
"Tax Rate" means an amount equal to the maximum Federal marginal income
tax rate applicable to a corporation under Section 11 of the Code in
effect for the relevant Fiscal Year plus five percentage points.
"Tentative Remedial Expenditure Realization" or "TRER" means the
Remedial Expenditure amount determined in accordance with clause (ii) of
Section 5.22.4.4 of the Participation Agreement.
"Third Party Claim" has the meaning set forth in Section 6.5 of the
Participation Agreement.
"Transfer Taxes" means any sales, use, recording, deed, value added,
stamp, documentary or other transfer Taxes.
"Transferred Contract" means a contract entered into by a Parent or an
Affiliate thereof transferred to the Partnership in accordance with the
Participation Agreement.
"Transferred Employee" has the meaning set forth in Section 5.9.1 of the
Participation Agreement.
"Transferred Intellectual Property Rights" means, with respect to each
Parent, Data Rights, Statutory Rights and Marks (together with goodwill
associated therewith) exclusively used or intended for exclusive use in
its Defense Business, along with all income, royalties, damages and
payments due or payable at the Closing or thereafter (including, without
limitation, damages and payments for past and future infringements or
misappropriations thereof), and the right to sue for damages and
injunctive relief.
"Transferring Partner" has the meaning set forth in Section 5.11 of the
Participation Agreement.
"Transition Benefit Plans" has the meaning set forth in Section 5.9.2 of
the Participation Agreement.
"Treasury Regulations" means the income tax regulations promulgated
under the Code and effective as of December 31, 1993.
"UD" means United Defense, L.P., the Delaware limited partnership formed
in accordance with the Partnership Agreement.
"Unrealized Remedial Expenditure" means any Qualifying Remedial
Expenditure which is not a Realized Remedial Expenditure. FMC
Unrealized Remedial Expenditure and Harsco Unrealized Remedial
Expenditure have corollary meanings.
"VLS Receivables" means any unbilled account receivable relating to
FMC's VLS contract included in the FMC Assets which will not become due
until after the Closing.
Schedule A
Excluded Assets.
FMC Excluded Assets:
Rights to damages or other recoveries arising from the following
litigation: FMC Corporation v. The Goodyear Tire & Rubber Company (N.D.
Ala., Eastern Div., Civil Action No. CV-90-H-01018E), subject to Section
5.23 of the Participation Agreement; ASBCA Case No. 39546; and FMC
Corporation v. Liberty Mutual Insurance Co. et al., subject to Section
6.2 of the Participation Agreement.
Cash and cash equivalents in excess of $14,800,000
The Minneapolis Tech Center
Any rights in the trade name or trademark "FMC," subject to the Limited
License Agreement, dated the date hereof, between FMC and the
Partnership
The Santa Clara Properties (except as the Lease Agreement provides for
their lease to the Partnership)
Harsco Excluded Assets:
Cash and cash equivalents in excess of $5,200,000
Any rights in the trade name or trademark "Harsco" or, subject to the
Limited License Agreement, dated the date hereof, between Harsco and the
Partnership, "BMY"
The contracts set forth in Article I of the Non-Transfer and
Indemnification Agreement
Common Excluded Assets:
Intellectual property rights (including patents, marks, know-how and
rights and licenses thereto and interests therein), other than
Transferred Intellectual Property Rights, to the extent, if any,
applicable to The Field (as defined in the Intellectual Property
Agreements).
Credits and claims for refunds with respect to Taxes related to periods
prior to the Closing
Policies, manuals, financial statements and other material not relating
exclusively to the contributed Assets or Business
Items prepaid or for which charges were deferred, to the extent the
benefit of such items will not accrue to the Partnership
Insurance policies and contracts and claims thereunder relating to
periods prior to Closing (subject to Article VI of the Participation
Agreement)
Licenses, permits and other assets not transferable by law
Intra-company accounts receivable and payable
Claims against and recoveries from third parties arising out of acts or
omissions (in the case of Active Contracts, only if a claim has been
asserted in writing) prior to the Closing except to the extent included
in the Final Closing Balance Sheets or as may be provided otherwise in
any of the Operative Documents
Any receivable referred to in Section 5.14 of the Participation
Agreement
Schedule B
Defense Affiliates and Defense Subsidiaries; Defense Affiliate Stock and
Equity Interests Transferred by FMC.
FMC
1. FMC-Nurol Savunma Sanayii A.S., a Turkish corporation
Armored Vehicle Technologies Associated, a partnership of FMC and
General
Dynamics Land Systems, Inc.
G&F, a partnership of FMC and General Motors Corporation
FMC Arabia Ltd., a Saudi Arabian limited liability company
Harsco
1. Harsco Defense Holding, Inc.
Schedule C.1
FMC
Robert N. Burt
Larry D. Brady
Arthur D. Lyons
William H. Schumann, III
Randy S. Ellis
Thomas W. Rabaut
David I. Kolovat
Eugene M. McCluskey
Robert L. Day
Francis A. Riddick, III
Robert N. Sankovich
Francis Raborn
Schedule C.2
Harsco
Malcolm W. Gambill
Derek C. Hathaway
Barrett W. Taussig
Paul C. Coppock
Leonard A. Campanaro
Warren A. Weisel
Salvatore D. Fazzolari
Richard C. Hawkins
Daniel J. Sharp
Richard E. Clemens
Stuart J. Levey
REGISTRATION RIGHTS AGREEMENT
among
FMC CORPORATION,
HARSCO DEFENSE HOLDING, INC.
and
UNITED DEFENSE, L.P.
Dated as of January 1, 1994
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made as of January 1, 1994, by and among FMC
Corporation, a Delaware corporation ("FMC"), Harsco Defense Holding,
Inc., a Delaware corporation ("Harsco L.P.") and United Defense, L.P., a
Delaware limited partnership ("UD").
FMC and Harsco L.P. desire to form UD pursuant to the terms of a
Partnership Agreement, dated as of the date hereof, by and among FMC,
Harsco L.P. and UD (the "Partnership Agreement"). The execution and
delivery of this Agreement is a condition to the obligations of FMC,
Harsco Corporation, a Delaware corporation ("Harsco") and Harsco L.P.
under the Participation Agreement dated as of the date hereof (the
"Participation Agreement"), to which this Agreement is attached as
Exhibit J.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this
Agreement hereby agree as follows:
1. Certain Definitions.
Unless otherwise defined below, capitalized terms used herein will have
the meanings set forth in Annex A to the Participation Agreement.
"Demand Registration" has the meaning set forth in Section 3(a).
"Included Securities" has the meaning set forth in Section 3(a).
"IPO" has the meaning set forth in Section 4(e).
"Net Public Price" has the meaning set forth in Section 3(c).
"Piggyback Registration" has the meaning set forth in Section 4(a).
"Public Price" has the meaning set forth in Section 3(c).
"Registrable Securities" means all shares of UD's common stock, issued
to FMC or Harsco L.P. (i) upon the incorporation of UD pursuant to
Section 2 hereof and (ii) as a dividend or other distribution with
respect to or in exchange for or in replacement of the shares referenced
in (i) above. As to any particular Registrable Securities, such
securities will cease to be Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act or sold to the public through a broker, dealer or market
maker in compliance with Rule 144 or Rule 144A under the Securities Act
(or any similar rule then in force). For purposes of this Agreement, a
Person will be deemed to be a holder of Registrable Securities on any
given date whenever such Person has the right to acquire directly or
indirectly such Registrable Securities (upon conversion or exercise in
connection with a transfer of securities or otherwise within six months
of such date, but disregarding any restrictions or limitations upon the
exercise of such right), whether or not such acquisition has actually
been effected.
"Registration Expenses" has the meaning set forth in Section 7(a).
"Requesting Party" has the meaning set forth in Section 2(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Total Common Equity Value" has the meaning set forth in Section 2(b).
2.Incorporation of UD.
(a) At any time after the eighteen-month anniversary of the Closing
Date, either FMC or Harsco L.P. (the "Requesting Partner") may request
in a written notice to the non-requesting Partner and UD that UD be
incorporated or organized as a corporation in the State of Delaware. UD
will thereafter make all filings required and take all other reasonable
steps to effect such incorporation under the Delaware General
Corporation Law; provided that (i) such incorporation is subject to UD's
receipt of all required government approvals (including any approval
required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, but excluding any novation agreement that is required between
UD and the U.S. Government) and any third-party consent which if not
received would have a Material Adverse Effect on UD, which the parties
hereto agree to use their reasonable best efforts to obtain and (ii) the
effectiveness of such incorporation need not take place until
immediately prior to the effectiveness of a registration statement (or,
if required by the SEC as a condition to such effectiveness, the day
prior to the anticipated effectiveness of such registration statement)
pursuant to a request for registration under Section 3(a) below by a
Requesting Partner. Effective as of the date of such incorporation,
shares of common stock in the new corporation will be issued to each of
FMC and Harsco L.P. in proportion to their respective Share Percentages
immediately prior to incorporation.
(b) Upon the effectiveness of the incorporation of UD, the parties will
continue to be governed, to the fullest extent possible (but subject to
the stockholders' agreement referred to below), by the terms of the
Participation Agreement and all rights and obligations thereunder
(including those relating to indemnification) will remain in full force
and effect. Effective as of the date of such incorporation, (i) the
Limited Partner Allocation to be distributed by UD in accordance with
Section 6.1 of the Partnership Agreement shall be terminated and (ii)
the incorporated UD shall authorize and issue to Harsco L.P. all of the
shares of a series of preferred stock having the terms outlined on Annex
A hereto and having an aggregate par value determined by calculating the
Capitalized Limited Partner Allocation as of the date of issuance of the
preferred stock; provided that, for purposes of determining the Earnings
Multiple in connection therewith, the "Total Common Equity Value" shall
be used in lieu of the Appraised Value, where Total Common Equity Value
equals the product of (i) the gross public offering price per share of
the UD common stock being sold in the offering and (ii) the number of
shares of UD common stock issued to the partners of UD upon its
incorporation pursuant to this Agreement. In connection with the
incorporation of UD, the parties hereto will, pursuant to Section 3.1(a)
of the Partnership Agreement, negotiate in good faith to adopt an
appropriate certificate of incorporation and by-laws and to enter into
(i) all amendments to the Operative Documents necessary to effect the
conversion of UD from a partnership to a corporation and otherwise to
give effect to the provisions contemplated by the Operative Documents
after such incorporation and (ii) a stockholders' agreement having the
terms outlined on Annex B hereto. In addition, the actions contemplated
by Section 7.3 of the Partnership Agreement will be taken upon
incorporation of UD.
3. Demand Registrations.
(a) Requests for Registration. Each Partner may request a total of two
registrations under the Securities Act, in which UD will pay all
Registration Expenses, of all or a part of its Registrable Securities on
Form S-1 or other form permitted by the rules of the SEC, to be
effective at any time after the twenty-five month anniversary of the
Closing Date, upon at least 90 days' (180 days' in the case of an
initial public offering) prior notice; provided, that any such request
must be in writing and delivered to UD and must specify such number of
Registrable Securities as is reasonably anticipated by the Requesting
Partner to yield a minimum aggregate price to public of $50,000,000,
unless such request relates to all of the Registrable Securities then
held by the Requesting Partner. Within five (5) Business Days after
receipt of such request, UD will give written notice of such requested
registration to all other holders of Registrable Securities. UD will
include in such registration (i) the number of Registrable Securities
requested to be included by the Requesting Partner (the "Included
Securities") and (ii) that number of Registrable Securities, held by
other holders who have delivered to UD (within ten (10) Business Days
after receipt of UD's notice) a written request for inclusion, which the
lead managing underwriter advises UD in writing does not exceed the
number that can be sold in an orderly manner in such offering within a
price range acceptable to the Requesting Partner. A registration
requested pursuant to this Section 3(a) is referred to herein as a
"Demand Registration," and the Registrable Securities registered thereby
will be offered and sold to the public in an underwritten offering.
(b) Selection of Underwriters. At the time of requesting a Demand
Registration, the Requesting Partner will select the lead managing
underwriter of such Demand Registration from among the following three
investment banking firms: (1) Morgan Stanley & Co. Incorporated, (2)
Salomon Brothers Inc and (3) Goldman, Sachs & Co. UD may then select
one or two nationally recognized investment banking firms to act as
co-manager of such Demand Registration.
(c) Determination of Public Price. In connection with any Demand
Registration by Harsco L.P., and prior to the filing of any registration
statement, UD will select a nationally recognized investment banking
firm from among the co-managers selected by UD which, together with the
lead managing underwriter, will promptly select a third nationally
recognized investment banking firm. Each of the three firms will
provide to UD, within thirty (30) days of its engagement, a good faith
estimate of the initial public market voting listed common equity
offering value of the Included Securities (or, if applicable, the
partnership interests that are intended to be Included Securities). The
three estimates will be averaged, and the estimate that deviates from
the average by the greatest amount will be ignored, and the average of
the two remaining values will be the "Public Price." The Public Price
less the actual proposed underwriting discount (which shall be
comparable to that charged by the proposed managing underwriter in
similar offerings) will be the "Net Public Price."
(d) Right of First Refusal. Notwithstanding the foregoing, FMC (or any
of its Affiliates) may, in its discretion at any time after Harsco L.P.
has given notice of any of its Demand Registrations but before the
filing of the registration statement relating to such Demand
Registration with the SEC, purchase all of the Included Securities (or,
in the event that UD is not yet a corporation, then all of the
partnership interests to be included in the public offering to which
such Demand Registration applies) pursuant to such Demand Registration
at a purchase price in cash equal to the Net Public Price; provided,
however, that FMC (or any of its Affiliates) shall not be entitled to
purchase any such Included Securities (or corresponding partnership
interests) if, within three (3) Business Days after receipt of notice
from FMC (or one of its Affiliates) of its intent to exercise its right
of first refusal pursuant to this sentence, Harsco L.P. withdraws its
request for Demand Registration. In addition, if a registration
statement is filed pursuant to a Demand Registration initiated by Harsco
L.P. and Harsco L.P. intends to sell the Included Securities for an
aggregate price (net of underwriting commissions) equal to less than 90%
of the Net Public Price, Harsco L.P. will so promptly notify FMC and FMC
will have the right to purchase, within two (2) Business Days after
receiving such notice, all of the Included Securities for an aggregate
price in cash equal to that set forth in such notice. In the event that
FMC (or any of its Affiliates) exercises its right of first refusal to
purchase, and does so purchase, Included Securities of Harsco L.P.
pursuant to this Section 3(d), UD will pay all Registration Expenses
applicable to the Included Securities, all reasonable expenses
customarily paid out of the underwriter's discount, with such reasonable
expenses not to exceed $100,000 and any fees of underwriters which
Harsco L.P. is obligated to pay, not to exceed $250,000.
(e) Restrictions on Demand Registrations. UD may postpone for up to
three months the filing or the effectiveness of a registration statement
for the Demand Registration if UD determines in good faith that such
filing or effectiveness of a registration statement (i) would have a
material adverse effect on any current proposal or plan by UD or any of
its Subsidiaries to engage in any acquisition of assets (other than in
the ordinary course of business), any merger, consolidation, tender
offer or similar material transaction, any financing or any other
material transaction or (ii) would require public disclosure of
information, the public disclosure of which would materially and
adversely affect UD's business or financial position; provided that in
such event, the Requesting Partner will be entitled to withdraw its
request for such Demand Registration and, if such request is withdrawn,
such Demand Registration will not count as a permitted Demand
Registration hereunder and UD will pay all Registration Expenses in
connection with such withdrawn registration. In the event that the
Requesting Partner withdraws its request for a Demand Registration other
than as provided in the foregoing sentence, such Requesting Partner may
elect either to treat such withdrawn registration as a permitted Demand
Registration or to pay all Registration Expenses and other expenses
(including any fees and expenses of underwriters) in connection with
such withdrawn registration.
(f) Other Registration Rights. Except as provided in this Agreement,
UD will not grant to any Person the right to request UD to register any
equity securities of UD, or any securities convertible or exchangeable
into or exercisable for such securities, without the prior written
consent of the holders of at least eighty percent (80%) of the
Registrable Securities; provided that UD may grant rights to other
Persons to request UD to register any equity securities of UD, or any
securities convertible or exchangeable into or exercisable for such
securities, on a basis which is pari passu with (or less favorable than)
rights given to holders of Registrable Securities hereunder, including
with respect to priorities under Sections 3(a), 4(c) and 4(d), so long
as it complies with the provisions of the Shareholder Agreement
described in Section 4 of Annex A to this Agreement and Section 3.1(g)
of the Partnership Agreement, whichever is applicable, or in the event
that UD issues such securities in a transaction that does not require
compliance with any of such Sections.
4. Piggyback Registrations.
(a) Right to Piggyback. Whenever UD proposes to register any of its
equity securities under the Securities Act (otherwise than on Form S-4,
Form S-8 or any successor form), including pursuant to a Demand
Registration by FMC or Harsco L.P., UD will give prompt written notice
(in any event within three (3) Business Days after its receipt of notice
of any exercise of demand registration rights other than under this
Agreement) to all holders of Registrable Securities of its intention to
effect such a registration (a "Piggyback Registration") and, subject to
the provisions of Sections 4(c), 4(d) and 4(e) below, will include in
such registration all Registrable Securities with respect to which UD
has received written requests for inclusion therein within ten (10)
Business Days after the receipt of UD's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities will be paid by UD in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of UD, and the lead
managing underwriter advises UD in writing that the number of securities
requested to be included in such registration exceeds the number which
can be sold in an orderly manner in such offering within a price range
acceptable to UD, then UD will include in such registration (i) first,
the securities UD proposes to sell, (ii) second (but subject to Section
3(f)), the Registrable Securities requested to be included in such
registration by FMC and Harsco L.P., pro rata on the basis of the number
of shares owned by each and (iii) third, other securities requested to
be included in such registration, pro rata on the basis of the number of
shares owned by the holders thereof.
(d) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of UD's
securities (including a holder of Registrable Securities), and the
managing underwriter advises UD in writing that the number of securities
requested to be included in such registration exceeds the number which
can be sold in an orderly manner in such offering within a price range
acceptable to the holders initially requesting such registration, then
UD will include in such registration (i) first (but subject to Section
3(f)), the Registrable Securities requested to be included in such
registration by FMC and Harsco L.P., pro rata on the basis of the number
of shares owned by each and (ii) second, other securities requested to
be included in such registration, pro rata on the basis of the number of
shares owned by the holders thereof.
(e) Other Registrations. If UD has previously received a request for a
Demand Registration pursuant to Section 3 to file a registration
statement or has filed a registration statement with respect to
Registrable Securities pursuant to Section 3, and if such request for
Demand Registration or previous registration has not been withdrawn or
abandoned, UD will not file or cause to be effected any other
registration of any of its equity securities or securities convertible
or exchangeable into or exercisable for its equity securities under the
Securities Act (except on Form S-4, Form S-8 or any successor form),
whether on its own behalf or at the request of any holder or holders of
such securities, until a period of at least ninety (90) days (or, in the
case of the initial public offering by UD (the "IPO"), one hundred
eighty (180) days) has elapsed from the effective date of such previous
registration unless the managing underwriters of the previous registered
public offering otherwise agree in writing.
5. Holdback Agreements.
(a) Each holder of Registrable Securities agrees not to effect any
public sale or distribution (including sales pursuant to Rule 144 or
Rule 144A under the Securities Act) of equity securities of UD, or any
securities convertible into or exchangeable or exercisable for such
securities, during the thirty (30) days prior to and the 90-day period
(or, in the case of the IPO, 180-day period) beginning on the effective
date of any underwritten Demand Registration or any underwritten
Piggyback Registration in which Registrable Securities are (or could
have been) included (except as part of such underwritten registration),
unless the underwriters managing the registered public offering
otherwise agree.
(b) UD agrees not to effect any public sale or distribution of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the thirty (30) days prior to
and during the 90-day period (or, in the case of the IPO, 180-day
period) beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part
of such underwritten registration or pursuant to registrations on Form
S-4, Form S-8 or any successor form), unless the underwriters managing
the registered public offering otherwise agree.
6. Registration Procedures. Whenever any Requesting Partner has
requested that any Registrable Securities be registered pursuant to this
Agreement, UD will, subject to the provisions of this Agreement, use its
reasonable best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of
disposition thereof, and pursuant thereto UD will as expeditiously as
reasonably possible:
(a) prepare and file with the SEC a registration statement with respect
to such Registrable Securities and use its reasonable best efforts to
cause such registration statement to become effective (provided that
before filing a registration statement or prospectus or any amendments
or supplements thereto, UD will furnish to the counsel selected by the
Requesting Partner and the counsel selected by the lead managing
underwriter copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel);
(b) (1) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for a period of not more than nine months and (2) comply with
the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement during such period
in accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as such
seller may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such seller;
(d) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of
such jurisdictions as any seller reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to
enable such seller to consummate the disposition in such jurisdictions
of the Registrable Securities owned by such seller (provided that UD
will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this Section, (ii) subject itself to taxation in any such jurisdiction
or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any material fact necessary to
make the statements therein not misleading in light of the circumstances
then existing, and, at the request of any such seller, UD will prepare
and furnish to such seller a reasonable number of copies of a supplement
or amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading in
light of the circumstances then existing;
(f) use its reasonable best efforts to cause all such Registrable
Securities to be listed on each securities exchange on which similar
securities issued by UD are then listed and, if not so listed, to become
listed on either (as UD determines) a national securities exchange or
the NASD automated quotation system and, if listed on the NASD automated
quotation system, use its reasonable best efforts to secure designation
of all such Registrable Securities covered by such registration
statement as a NASDAQ "national market system security" or, failing
that, to secure NASDAQ authorization for such Registrable Securities
and, without limiting the generality of the foregoing, to arrange for at
least two market makers to register as such with respect to such
Registrable Securities with the NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form consistent with this Agreement) and take
all such other actions customary for such offerings as the Requesting
Partner or the underwriters reasonably request in order to expedite or
facilitate the disposition of the UD securities being sold (including,
without limitation, effecting a stock split or a combination of shares);
(i) use its reasonable best efforts to make available for inspection by
any seller of Registrable Securities, any underwriter participating in
any disposition pursuant to such registration statement and any attorney
retained by any such seller or underwriter, an executed copy of (i) an
opinion of counsel for UD addressed to such seller and such underwriter
and (ii) a "comfort" letter from the independent public accountants who
have reported on UD's financial statements included or incorporated by
reference in such registration statement addressed to such seller and
such underwriter, covering substantially the same matters with respect
to such registration statement, and the prospectus included therein
(including, in the case of the accountants' comfort letter, with respect
to events subsequent to the date of such financial statements), as are
customarily covered in opinions of issuer's counsel and in accountants'
comfort letters delivered to the underwriters in underwritten public
offerings of securities (and dated the dates such opinions and comfort
letters are customarily dated) and, in the case of the accountants'
comfort letter, such other financial matters, and in the case of the
legal opinion, such other legal matters, as such seller or such
underwriter may reasonably request;
(j) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months beginning with
the first day of UD's first full calendar quarter after the effective
date of the registration statement, which earnings statement will
satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder;
(k) permit any holder of Registrable Securities which holder is or
might be deemed to be an underwriter or a controlling person of UD, to
participate in the preparation of such registration or comparable
statement;
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the
qualification of any common stock included in such registration
statement for sale in any jurisdiction, use its reasonable best efforts
promptly to obtain the withdrawal of such order; and
(m) use its reasonable best efforts to cause such Registrable
Securities covered by such registration statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary to enable the sellers thereof to consummate the disposition
of such Registrable Securities.
If any such registration or comparable statement refers to any holder by
name or otherwise as the holder of any securities of UD and if such
holder is or might be deemed to be a controlling person of UD, such
holder will have the right to require (i) the insertion therein of
language, in form and substance satisfactory to such holder and
presented to UD in writing, to the effect that the holding by such
holder of such securities is not to be construed as a recommendation by
such holder of the investment quality of UD's securities covered thereby
and that such holding does not imply that such holder will assist in
meeting any future financial requirements of UD, or (ii) in the event
that such reference to such holder by name or otherwise is not required
by the Securities Act or any similar Federal statute then in force, the
deletion of the reference to such holder; provided that with respect to
this clause (ii) such holder will furnish to UD an opinion of counsel to
such effect, which opinion of counsel will be reasonably satisfactory to
UD. In the event of a Demand Registration under this Agreement, the
Requesting Party will furnish any information, execute any customary
agreements (including a customary underwriting agreement) and take any
other action in connection with such Demand Registration that is
reasonably requested by UD or the managing underwriter of such Demand
Registration.
7. Registration Expenses.
(a) All expenses incident to UD's performance of or compliance with
this Agreement, including without limitation all registration,
qualification and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery
expenses, fees and disbursements of counsel for UD and of all
independent certified public accountants and of other Persons retained
by UD (all such expenses being herein called "Registration Expenses"),
will be borne by UD, except as provided in this Agreement. In addition,
UD will pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review
and the expenses and fees for listing the securities to be registered on
each securities exchange on which similar securities issued by UD are
then listed or on the NASD automated quotation system. Holders of
Registrable Securities included in any proposed public offering will in
any event pay all fees and expenses of counsel and underwriters retained
by them, except as otherwise provided in Section 3(d) above.
(b) Except as provided in Sections 3(a), 3(d), 3(e), 4(b) or 7(a)
above, each holder of securities included in any registration hereunder
will pay those Registration Expenses allocable to the registration of
such holder's securities so included, and any Registration Expenses not
so allocable will be borne by all sellers of securities included in such
registration in proportion to the aggregate selling price of the
securities to be so registered.
8. Indemnification.
(a) UD agrees to indemnify, to the extent permitted by law, each holder
of Registrable Securities included in a registration under the terms of
this Agreement, its officers and directors and each Person who controls
such holder (within the meaning of Section 15 of the Securities Act) and
its officers and directors against all losses, claims, damages,
liabilities and expenses arising out of or based on any untrue or
alleged untrue statement of a material fact contained in any
registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged
omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the
circumstances then existing, and will reimburse each such holder, its
officers and directors and each Person who controls such holder (within
the meaning of Section 15 of the Securities Act) and its officers and
directors for any legal and other expenses reasonably incurred by them
in connection with investigating, defending or settling any such losses,
claims, damages, liabilities and expenses, except insofar as the same
arise out of or are based on any untrue statement or omission contained
in any information furnished in writing to UD by such holder expressly
for use therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements
thereto after UD has furnished such holder with a sufficient number of
copies of the same. In connection with an underwritten offering, UD
will indemnify such underwriters, their officers and directors and each
Person who controls such underwriters (within the meaning of Section 15
of the Securities Act) and its officers and directors to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder will furnish
to UD in writing such information and affidavits as UD reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, agrees to indemnify UD,
its directors and officers and each Person who controls UD (within the
meaning of Section 15 of the Securities Act) and its officers and
directors against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of a material fact
contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances then existing, but only to the extent that
such untrue or alleged untrue statement or omission or alleged omission
is contained in any information or affidavit so furnished in writing by
such holder expressly for use therein; provided that the obligation to
indemnify pursuant to this Section 8(b) will be individual to each
holder and will be limited to the net amount of proceeds received by
such holder from the sale of Registrable Securities pursuant to such
registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party unless in such
indemnified party's reasonable judgment representation of both parties
by the same counsel would be inappropriate due to actual or potential
differing interests between them. In any event, the indemnifying party
will not be subject to any liability for any settlement made by the
indemnified party without its consent (which consent will not be
unreasonably withheld). An indemnifying party who is not entitled to,
or elects not to, assume the defense of a claim will not be obligated to
pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and will survive the transfer of
securities. UD also agrees to make such provisions, as are reasonably
requested by any indemnified party, for contribution to such party in
the event UD's indemnification is unavailable for any reason.
9. Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless
such Person (a) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Person or
Persons initiating such registration and (b) completes and executes all
questionnaires, powers of attorney, indemnities, customary underwriting
agreements and other documents required under the terms of such
underwriting arrangements for persons in comparable positions.
10. Rule 144. For so long as either Partner holds any Registrable
Securities, UD will use its reasonable best efforts to (i) make and keep
adequate current public information (within the meaning of Rule 144(c)
under the Securities Act) with respect to UD available at all times from
and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by UD for an offering of
securities to the general public; (ii) file with the SEC in a timely
manner all reports and other documents required of UD under the
Securities Act and the Securities Exchange Act of 1934 at any time after
it has become subject to such reporting requirements; and (iii) upon
request by either Partner, deliver to such Partner a written statement
as to whether it has complied with the requirements referred to in (i)
and (ii) above.
11. Miscellaneous.
(a) No Inconsistent Agreements. UD will not hereafter enter into any
agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in
this Agreement.
(b) Remedies. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically to
recover damages caused by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. The parties
hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that any
party may apply to any court of law or equity of competent jurisdiction
for specific performance and for other injunctive relief in order to
enforce or prevent violation of the provisions of this Agreement.
(c) Amendments and Waivers. No term or provision of this Agreement may
be amended or waived unless in writing signed by the party against which
such amendment or waiver is sought to be enforced, provided that Harsco
L.P. will not unreasonably withhold or delay its consent to any such
amendment or waiver proposed by FMC in order to effect the granting of
registration rights to a third party in a transaction which complies
with Section 3(f) hereof.
(d) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and
inure to the benefit of the respective successors and permitted assigns
of the parties hereto whether so expressed or not. In addition, whether
or not any express assignment has been made, the provisions of this
Agreement which are for the benefit of purchasers or holders of
Registrable Securities are also for the benefit of, and enforceable by,
any permitted subsequent holder of Registrable Securities. No sale of
Registrable Securities hereunder will relieve the holder of its
obligations under this Agreement or under any other Operative Document.
The right of Harsco L.P. to request incorporation of UD pursuant to
Section 2(a) may not be assigned, directly or indirectly, unless in
connection with the assignment of a Share Percentage in excess of 20%.
(e) Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of this Agreement.
(f) Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, any one of which need not contain the signatures
of more than one party, but all such counterparts taken together will
constitute one and the same Agreement.
(g) Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(h) Governing Law. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of Delaware, without
giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the
State of Delaware. In furtherance of the foregoing, the internal law of
the State of Delaware will control the interpretation and construction
of this Agreement, even though under that jurisdiction's choice of law
or conflict of law analysis, the substantive law of some other
jurisdiction would ordinarily apply.
(i) Liability of UD. Any liability under this Agreement of UD to
Harsco L.P. or to any underwriter or other Person retained by Harsco
L.P. or to any Person who controls any of the foregoing (within the
meaning of Section 15 of the Securities Act) arising out of the
transactions contemplated hereby shall be the sole obligation of UD and
shall be explicitly nonrecourse to FMC, Harsco, Harsco L.P. and the
Affiliates (other than UD) of each of them.
(j) Notices. Any notice provided for in this Agreement will be in
writing and will be either personally delivered, or mailed first class
mail (postage prepaid) or sent by reputable overnight courier service
(charges prepaid) to UD, FMC and Harsco L.P. at the addresses set forth
below and to any subsequent holder of UD securities subject to this
Agreement at such address as indicated by UD's records, or at such
address or to the attention of such other person as the recipient party
has specified by prior written notice to the sending party. Notices
will be deemed to have been given hereunder when delivered personally,
three (3) days after deposit in the U.S. mail and one day after deposit
with a reputable overnight courier service.
To UD:
United Defense, L.P.
1525 Wilson Boulevard
Suite 700
Arlington, VA 22209
Attn: Chief Executive Officer
Telephone:(703) 312-6100
Telecopy:(703) 312-6111
To FMC:
FMC Corporation
200 East Randolph Drive
Chicago, IL 60601
Attn: Corporate Secretary
Telephone: (312) 861-5923
Telecopy: (312) 861-7127
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Michael G. Timmers
Telephone: (312) 861-2224
Telecopy: (312) 861-2200
To Harsco L.P.:
Harsco Defense Holding, Inc.
P.O. Box 8888
Camp Hill, PA 17011
Attn: President (with a copy to the General Counsel)
Telephone: (717) 763-6406
Telecopy: (717) 763-6402
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
UNITED DEFENSE, L.P.
By: FMC CORPORATION,
a Delaware corporation,
Its Managing General Partner
By /S/ Robert L. Day
Its Secretary
FMC CORPORATION
By /S/ Robert L. Day
Its Secretary
HARSCO DEFENSE HOLDING, INC.
By /S/ Paul C. Coppock
Its Secretary
ANNEX A
Terms of Senior Preferred Stock
Designation Senior Preferred Stock, par
value
$100 per share
Dividend Rights Equal to Limited Partner
Allocation,
subject to annual adjustment
Payable quarterly
Cumulative, whether or not
earned
Preferential: no dividends
may be paid
on any other capital stock and
no other
distribution may be made while
any
accumulated dividend is unpaid
No stock may be acquired for
value while
any accumulated dividend is
unpaid and
no capital stock pari passu
with or
junior to the Senior Preferred
may be
acquired for value while any
Senior
Preferred is outstanding
Redemption Redeemable at par plus
accumulated
dividends
Must be redeemed before any
other
capital stock is redeemed or
acquired
for value by issuer
At any time while shares of
Senior
Preferred are outstanding, UD
has the
right, at its option, to call
for
redemption any or all shares
of the
Senior Preferred for an amount
equal to
their par value plus accrued
but unpaid
dividends. Upon any sale of
shares of
UD common stock by Harsco L.P.
to an
unrelated third party
(including the
initial public offering), UD
shall be
required to call for
redemption (for the
amount set forth in the
preceding
sentence) that number of
shares of
Senior Preferred held by
Harsco L.P.
which bears the same
proportion to the
total number of shares of
Senior
Preferred issued to Harsco
L.P. upon
incorporation of UD pursuant
to the
Registration Rights Agreement
as the
number of shares of common
stock sold by
Harsco L.P. bears to the total
number of
shares of common stock issued
to Harsco
L.P. upon such incorporation
Voting Rights If UD defaults in the timely
and full
payment of any quarterly
dividend on the
Senior Preferred Stock, then
the amount
of each of the next three
monthly
payments of Annual Fees to be
paid to
FMC under the Management
Services
Agreement shall be reduced by
an amount
equal to one twelfth of the
difference
between the Annual Fee in
effect and
$5,000,000, multiplied by the
fraction,
the numerator of which is the
amount of
the quarterly dividend paid
and the
denominator of which is the
amount of
the dividend payable
If UD (i) defaults in the
timely and
full payment of a total of
four
quarterly dividends on the
Senior
Preferred Stock and (ii) has
failed to
reduce the monthly payments of
Annual
Fees to FMC (as provided for
above) for
each such default in the
timely and full
payment of quarterly
dividends, then
until all arrearages of all
accumulated
dividends have been paid, the
Senior
Preferred voting separately,
as a single
class, shall have the sole
right to
elect a majority of the full
board of
directors of UD
When all arrearages are paid,
the Senior
Preferred right to vote, if
any, shall
terminate and the terms of
directors
elected by the Senior
Preferred shall
expire
Any vacancy in the office of
any
director elected by the Senior
Preferred
shall be filled by the Senior
Preferred
Consents Required from Senior Preferred Creation of any class of
capital stock
ranking pari passu with or
senior to the
Senior Preferred with respect
to either
payment of dividends or
distributions or
in the event of voluntary or
involuntary
liquidation, dissolution or
winding up
Amendment or alteration of or
change in
the powers, preferences or
special
rights of the Senior Preferred
Merger into or consolidation
with any
other entity or disposition of
all or
substantially all of UD's
assets
Liquidation Senior Preferred entitled to
receive out
of assets of UD cash in an
amount equal
to par value plus all
accumulated
dividends before any payment
or
distribution shall be made on
any other
capital stock
ANNEX B
Terms of Stockholders' Agreement
1. Parties: UD, FMC and Harsco L.P.
2. Board representation: FMC agrees to vote for four Harsco
L.P.-nominated directors if Harsco L.P. has maintained a Share
Percentage of 40%. Upon any adjustment of the Share Percentages, FMC
agrees to vote for the number of Harsco L.P.-nominated directors closest
to one-tenth of Harsco L.P.'s Share Percentage, provided that if Harsco
L.P.'s Share Percentage is a whole number ending in five, then FMC
agrees to vote for the number of such directors closest to one-tenth of
such Share Percentage rounded down to the next lowest multiple of ten.
For purposes of this item 2, in the event that UD has been incorporated,
"Share Percentage" means Harsco's percentage ownership of UD's
outstanding common stock. The provisions of this item 2 shall be
proportionately adjusted in the event that the Board of UD has a number
of directors which is more or less than ten.
3. Corporate governance provisions substantially the same as in
Section 3.1 of the Partnership Agreement (other than Section 3.1(k))
4. Harsco L.P. to have preemptive right with respect to issuances
of common stock for cash (except employee stock options for up to 5% of
the total outstanding number of shares of common stock of UD)
5. Prohibition on transfer of Harsco L.P. stock except pursuant to
underwritten registered offering (subject to FMC right of first refusal)
as provided in Registration Rights Agreement or private sale (subject to
FMC right of first refusal) as provided in Partnership Agreement.
6. Put/call provisions in Harsco L.P. stock substantially the same as
in Section 7.2 of the Partnership Agreement.
7. UD assumes all of Partnership's rights and obligations under the
Partnership Agreement and Participation Agreement, including
indemnification provisions.
[FN]
These terminate at such time as Harsco L.P.'s ownership of UD
common stock is less than 20% of total UD outstanding common stock.
Stock issued or issuable pursuant to employee stock options is ignored
for purposes of determining Harsco L.P.'s percentage ownership of UD
stock.