-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I1PIigU1Y+55c8ucmJKVS2BpICYREVAJ5UrgYtbOhpJbEv7tXsaoIlGJaC4OkHCW GMBJtAz6cuzwJpaLT7uvTA== 0000950124-03-000079.txt : 20030114 0000950124-03-000079.hdr.sgml : 20030114 20030114155646 ACCESSION NUMBER: 0000950124-03-000079 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20021230 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TECUMSEH PRODUCTS CO CENTRAL INDEX KEY: 0000096831 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 381093240 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-00452 FILM NUMBER: 03513619 BUSINESS ADDRESS: STREET 1: 100 E PATTERSON ST CITY: TECUMSEH STATE: MI ZIP: 49286 BUSINESS PHONE: 5174238411 MAIL ADDRESS: STREET 1: 100 EAST PATTERSON STREET CITY: TECUMSEH STATE: MI ZIP: 49286 8-K 1 k73591e8vk.txt CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 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 reported): December 30, 2002 TECUMSEH PRODUCTS COMPANY (Exact name of registrant as specified in its charter) Michigan 0-452 38-1093240 (State or other jurisdiction of (Commission File No.) (IRS Employer incorporation) Identification No.) 100 East Patterson Street, Tecumseh, Michigan 49286 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (517) 423-8411 (Former name or former address, if changed since last report) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On December 30, 2002, Tecumseh Products Company ("Tecumseh") acquired the stock of the companies comprising the FASCO Motors business from Invensys plc ("Invensys") pursuant to a Stock Purchase Agreement dated as of November 27, 2002, as amended, by and among Tecumseh, Invensys and certain Invensys subsidiaries: BTR Industries Limited, BTR (European Holdings) BV, CPN Holdings Pty Limited, Invensys Controls Mexican Holding, L.L.C., and BTR (USA) Finance Company (collectively, the "Sellers"). FASCO is a leading manufacturer in the U.S. of fractional horsepower motors. FASCO manufactures AC motors, DC motors, blowers, gear motors and linear actuators. Its products are used in a wide variety of applications within the HVAC, automotive, healthcare and appliance industries among others. FASCO has 13 manufacturing facilities worldwide, including eight in the United States, two in Mexico and one each in Canada, Thailand and Australia, employing approximately 5,200 people. FASCO, along with certain existing Tecumseh operations, will form a new Electrical Components business segment of Tecumseh Products Company. The FASCO business will continue to operate as a single business unit and no manpower reductions are contemplated as a result of the combination, other than those at two locations currently in the process of being shutdown. The purchase price was $415 million. Of this amount, $397 million was paid at closing, and reflects $18.3 million in estimates of net debt assumed by Tecumseh and working capital and other adjustments. The preliminary estimates of net debt and working capital are subject to post-closing review and further adjustment. The purchase price for the FASCO business was determined through arm's length negotiations between Tecumseh and Invensys. The $397 million paid by Tecumseh at closing was funded from Tecumseh's cash reserves and borrowings totaling $325 million under two new credit facilities with a group of lenders led by Bank One, NA. Tecumseh borrowed $250 million under the Bridge Credit Agreement and $75 million under the Three-Year Credit Agreement. The Company presently intends to refinance both of the short-term borrowings with long-term financing of between $250 million and $300 million. Except for transactions contemplated in the Stock Purchase Agreement, there are no material relationships between Tecumseh or any of its affiliates, officers, or directors, or any of their respective associates and the Sellers or Invensys. The foregoing is a summary of the transactions provided for the Stock Purchase Agreement. It is not intended to be complete and is qualified by reference to the Stock Purchase Agreement that is filed as an Exhibit hereto. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial statements of business acquired. Unaudited condensed combined financial statements of FASCO Motors as of September 30, 2002, and for each of the six month periods ended September 30, 2002 and 2001, and the audited combined financial statements of FASCO Motors as of March 31, 2002 and 2001, and for each of the three fiscal years in the period ended March 31, 2002. ### (b) Pro forma financial information. Pro forma financial information of Tecumseh Products Company and FASCO Motors as follows: (i) unaudited pro forma combined balance sheet for Tecumseh Products Company and FASCO Motors at September 30, 2002; (ii) unaudited pro forma combined statements of operations of Tecumseh Products Company and FASCO Motors for the nine months ended as of September 30, 2002 and for the year ended December 31, 2001; and (iii) notes to such unaudited pro forma combined financial information. (c) Exhibits: Exhibit No. Description ----------- ----------- 2.1* Stock Purchase Agreement dated November 27, 2002, by and among Tecumseh Products Company, Invensys plc, BTR Industries Limited, BTR (European Holdings) BV, CPN Holdings Pty Limited, Invensys Controls Mexican Holding, L.L.C., and BTR (USA) Finance Company 2.2* Amendment No. 1 dated December 3, 2002, by and among Tecumseh Products Company, Invensys plc, BTR Industries Limited, BTR (European Holdings) BV, CPN Holdings Pty Limited, Invensys Controls Mexican Holding, L.L.C., and BTR (USA) Finance Company 2.3* Amendment No. 2 dated December 30, 2002, by and among Tecumseh Products Company, Invensys plc, BTR Industries Limited, BTR (European Holdings) BV, CPN Holdings Pty Limited, Invensys Controls Mexican Holding, L.L.C., and BTR (USA) Finance Company 4.1 Three-Year Credit Agreement, dated December 30, 2002, by and among Tecumseh Products Company, the Lenders and Bank One, NA 4.2 Bridge Credit Agreement, dated December 30, 2002, by and among Tecumseh Products Company, the Lenders and Bank One, NA 99.1 Unaudited condensed combined financial statements of FASCO Motors as of September 30, 2002, and for each of the six month periods ended September 30, 2002 and 2001, and the audited combined financial statements of FASCO Motors as of March 31, 2002 and 2001, and for each of the three fiscal years in the period ended March 31, 2002 -ii- 99.2 Pro forma financial information of Tecumseh Products Company and FASCO Motors as follows: (i) unaudited pro forma combined balance sheet for Tecumseh Products Company and FASCO Motors at September 30, 2002; (ii) unaudited pro forma combined statements of operations of Tecumseh Products Company and FASCO Motors for the nine months ended September 30, 2002 and for the year ended December 31, 2001; and (iii) notes to such unaudited pro forma combined financial statements * The schedules and annexes to such agreements are omitted pursuant to Item 601(b)(2) of Regulation S-K. Tecumseh agrees to furnish supplementally a copy of any omitted schedule and annex to the Commission upon request. -iii- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TECUMSEH PRODUCTS COMPANY Date: January 14, 2003 By /s/ David W. Kay --------------------- David W. Kay Vice President, Treasurer and Chief Financial Officer -iv- EXHIBIT INDEX Exhibit No. Description ----------- ----------- 2.1 Stock Purchase Agreement dated November 27, 2002, by and among Tecumseh Products Company, Invensys plc, BTR Industries Limited, BTR (European Holdings) BV, CPN Holdings Pty Limited, Invensys Controls Mexican Holding, L.L.C., and BTR (USA) Finance Company 2.2 Amendment No. 1 dated December 3, 2002, by and among Tecumseh Products Company, Invensys plc, BTR Industries Limited, BTR (European Holdings) BV, CPN Holdings Pty Limited, Invensys Controls Mexican Holding, L.L.C., and BTR (USA) Finance Company 2.3 Amendment No. 2 dated December 30, 2002, by and among Tecumseh Products Company, Invensys plc, BTR Industries Limited, BTR (European Holdings) BV, CPN Holdings Pty Limited, Invensys Controls Mexican Holding, L.L.C., and BTR (USA) Finance Company 4.1 Three-Year Credit Agreement, dated December 30, 2002, by and among Tecumseh Products Company, the Lenders and Bank One, NA 4.2 Bridge Credit Agreement, dated December 30, 2002, by and among Tecumseh Products Company, the Lenders and Bank One, NA 99.1 Unaudited condensed combined financial statements of FASCO Motors as of September 30, 2002, and for each of the six month periods ended September 30, 2002 and 2001, and the audited combined financial statements of FASCO Motors as of March 31, 2002 and 2001, and for each of the three fiscal years in the period ended March 31, 2002 -v- 99.2 Pro forma financial information of Tecumseh Products Company and FASCO Motors as follows: (i) unaudited pro forma combined balance sheet for Tecumseh Products Company and FASCO Motors at September 30, 2002; (ii) unaudited pro forma combined statements of operations of Tecumseh Products Company and FASCO Motors for the nine months ended September 30, 2002 and for the year ended December 31, 2001; and (iii) notes to such unaudited pro forma combined financial statements -vi- EX-2.1 3 k73591exv2w1.txt STOCK PURCHASE AGREEMENT EXHIBIT 2.1 - -------------------------------------------------------------------------------- STOCK PURCHASE AGREEMENT BETWEEN THE SELLERS IDENTIFIED HEREIN AND TECUMSEH PRODUCTS COMPANY -------------------------------------- Dated as of November 27, 2002 - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- ARTICLE 1 SALE AND PURCHASE OF SHARES.......................................................1 1.1 Sale and Purchase of Shares...........................................................1 ARTICLE 2 PURCHASE PRICE AND PAYMENT........................................................2 2.1 Purchase Price........................................................................2 2.2 Adjustment of Initial Purchase Price..................................................2 2.3 Payment of Initial and Final Purchase Price...........................................6 2.4 Allocation of Final Purchase Price....................................................6 2.5 Elkhorn and Ozark Adjustment..........................................................6 2.6 Pension Plan Escrow...................................................................7 ARTICLE 3 CLOSING AND TERMINATION...........................................................7 3.1 Closing Date..........................................................................7 3.2 Termination of Agreement..............................................................7 3.3 Procedure Upon Termination............................................................8 3.4 Effect of Termination.................................................................8 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF INVENSYS AND THE SELLERS........................8 4.1 Organization and Good Standing........................................................8 4.2 Authorization of Agreement............................................................9 4.3 Capitalization........................................................................9 4.4 Subsidiaries..........................................................................9 4.5 Corporate Records....................................................................10 4.6 Conflicts; Consents of Third Parties.................................................10 4.7 Ownership and Transfer of Shares.....................................................11 4.8 Financial Statements.................................................................11 4.9 No Undisclosed Liabilities...........................................................12 4.10 Absence of Certain Developments......................................................12 4.11 Certain Tax Matters..................................................................13 4.12 Real Property........................................................................16 4.13 Tangible Personal Property...........................................................16 4.14 Technology and Intellectual Property.................................................17 4.15 Material Contracts...................................................................18
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PAGE ---- 4.16 Employee Benefits....................................................................19 4.17 Labor................................................................................22 4.18 Litigation...........................................................................22 4.19 Compliance with Laws; Governmental Authorizations....................................23 4.20 Environmental Matters................................................................24 4.21 Financial Advisors...................................................................24 4.22 Insurance............................................................................25 4.23 Certain Payments.....................................................................25 4.24 Relationships with Related Persons...................................................25 4.25 No Other Representations or Warranties...............................................25 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................26 5.1 Organization and Good Standing.......................................................26 5.2 Authorization of Agreement...........................................................26 5.3 Conflicts; Consents of Third Parties.................................................26 5.4 Litigation...........................................................................27 5.5 Investment Intention.................................................................27 5.6 Financial Advisors...................................................................27 5.7 Sufficiency of Funds.................................................................27 ARTICLE 6 COVENANTS........................................................................27 6.1 Access to Management.................................................................27 6.2 Conduct of Business Pending the Closing..............................................28 6.3 Employee Matters.....................................................................29 6.4 Preservation of Records..............................................................32 6.5 Publicity............................................................................33 6.6 Schedule of Retiree Benefit Plan Participants........................................33 6.7 Use of Name..........................................................................33 6.8 Insurance............................................................................34 6.9 Reasonable Commercial Efforts........................................................34 6.10 HSR Act Compliance; Foreign Governmental Approvals...................................35 6.11 Contacts with Suppliers, Employees and Customers.....................................35
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PAGE ---- 6.12 Invensys Commitments.................................................................35 6.13 Intellectual Property................................................................36 6.14 Notification.........................................................................36 6.15 Estoppel Certificates and Title Commitments..........................................36 6.16 Financial Statements.................................................................36 6.17 Transition Services Agreement........................................................37 ARTICLE 7 CONDITIONS TO CLOSING............................................................38 7.1 Condition Precedent to Obligations of Purchaser......................................38 7.2 Condition Precedent to Obligations of Sellers........................................38 7.3 Conditions to Each Party's Obligations...............................................39 ARTICLE 8 DOCUMENTS TO BE DELIVERED........................................................39 8.1 Documents to be Delivered by the Sellers.............................................39 8.2 Documents to be Delivered by the Purchaser...........................................40 ARTICLE 9 INDEMNIFICATION..................................................................41 9.1 General Indemnification..............................................................41 9.2 Limitations on Indemnification.......................................................42 9.3 Limitations on Indemnification for Environmental Losses..............................43 9.4 Survival of Representations and Warranties and Covenants.............................43 9.5 General Indemnification Procedures...................................................44 9.6 Tax Matters..........................................................................47 9.7 Indemnification for Products Liability and Product Recall............................53 9.8 Employee Liabilities.................................................................53 9.9 Exclusive Remedies...................................................................54 9.10 Adjustments for Insurance and Tax Benefits...........................................55 9.11 Treatment of Indemnity Payments......................................................55 ARTICLE 10 MISCELLANEOUS....................................................................55 10.1 Certain Definitions..................................................................55 10.2 Payment of Transfer Taxes............................................................65 10.3 Expenses.............................................................................65 10.4 Further Assurances...................................................................65
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PAGE ---- 10.5 Governing Law........................................................................66 10.6 Submission to Jurisdiction; Consent to Service of Process............................66 10.7 Entire Agreement; Amendments and Waivers.............................................66 10.8 Table of Contents and Headings.......................................................66 10.9 Notices..............................................................................66 10.10 Severability.........................................................................67 10.11 Binding Effect; No Third Party Beneficiaries; Assignment.............................67 10.12 Counterparts.........................................................................68
iv TABLE OF ANNEXES AND SCHEDULES Schedules Schedule 2.2 - Accounting Principles Schedule 2.2.2.4 - ABO Calculation Assumptions Schedule 2.5 - Scheduled Cash Shut-down Costs Budgeted For Elkhorn and Ozark Schedule 4.4 - Subsidiaries Schedule 4.6.1 - Conflicts - Sellers Schedule 4.6.2 - Required Consents and Approvals - Sellers Schedule 4.8 - Recent Management Accounts Schedule 4.9.1 - Undisclosed Liabilities Schedule 4.9.2 - Liabilities Incurred Since the Most Recent Management Accounts Schedule 4.10 - Certain Developments Schedule 4.10.8 - Capital Expenditure Budget Schedule 4.11 - Tax Matters Schedule 4.11.5 - Tax Returns List Schedule 4.11.6 - Taxable Years/Contested Deficiencies Schedule 4.12 - Company Properties Schedule 4.13 - Tangible Personal Property Schedule 4.14.1 - Registered Patents, Trademarks and Copyrights (and Applications therefor) Included in Fasco Business Intellectual Property Schedule 4.14.2 - Third Party Owners of Fasco Business Intellectual Property Schedule 4.14.3 - Assignments, Transfers, Conveyances or Encumbrances of Fasco Business Intellectual Property Schedule 4.14.4 - Challenges to Validity and Enforceability of Fasco Business Intellectual Property Schedule 4.14.5 - Third Party Infringement on or Violation of Fasco Business Intellectual Property Schedule 4.14.6.1 - Intellectual Property/Technology Used and Not Owned by the Fasco Business Schedule 4.14.6.2 - Intellectual Property/Technology Used and Not Owned by the Fasco Business Subject to Third-Party Licenses Schedule 4.14.7 - Fasco Business Royalty and Similar Payment Obligations Schedule 4.14.8 - Alleged Infringements of Third Party Trademark, Copyright or Trade Secret Rights Schedule 4.15 - Material Contracts Schedule 4.16.1 - Employee Benefit Plans Schedule 4.16.6 - Reportable Events to which Notice Must Be Given to the PBGC Schedule 4.17.1 - Labor Schedule 4.18.1 - Litigation - Legal Proceedings Schedule 4.18.2 - Litigation - Orders Schedule 4.19.1 - Compliance with Laws v Schedule 4.19.2 - Governmental Authorizations Schedule 4.20 - Environmental Matters Schedule 4.21 - Sellers' Financial Advisors Schedule 4.24 - Relationships with Related Persons Schedule 5.3.2 - Required Consents and Approvals - Purchaser Schedule 5.6 - Purchaser's Financial Advisors Schedule 5.7.2 - Sources of Purchaser's Financing Schedule 6.2 - Conduct of the Business Pending the Closing Schedule 6.12 - Invensys Commitments Schedule 9.7 - Product Liability Claims vi Annexes Annex A - Companies and Ownership of Shares Annex B - Form of Non-Competition Agreement Annex C - Form of Estoppel Certificate Annex D - Procedures Used to Determine Knowledge of Sellers Annex E - Form of Escrow Agreement Annex F - Transition Services Agreement vii EXECUTION COPY PROJECT POLE STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT, dated as of November 27, 2002 (this "Agreement"), by and among Tecumseh Products Company, a corporation organized and existing under the laws of the State of Michigan (the "Purchaser"), BTR Industries Limited, a corporation organized and existing under the laws of England and Wales ("BTRI"), BTR (European Holdings) BV, a corporation organized and existing under the laws of the Netherlands ("BTR Holdings"), CPN Holdings Pty Limited, a corporation organized and existing under the laws of Australia ("CPN"), Invensys Controls Mexican Holding, L.L.C., a limited liability company organized and existing under the laws of Mexico ("ICMH") and BTR (USA) Finance Company, a Massachusetts business trust ("BTR Finance" and each of BTRI, BTR Holdings, CPN and ICMH, a "Seller" and, collectively, the "Sellers"), and Invensys plc, a corporation organized and existing under the laws of England and Wales ("Invensys"). W I T N E S S E T H: WHEREAS, the Sellers own all of the issued and outstanding shares (collectively, the "Shares") of capital stock of the companies set forth on Annex A (each a "Company" and, collectively, the "Companies"), except as otherwise indicated thereon; and WHEREAS, Invensys is the indirect owner of all of the issued and outstanding capital stock of, or ownership interests in, each of the Sellers; and WHEREAS, the Sellers desire to sell to Purchaser, and Purchaser desires to purchase from the Sellers, the Shares for the purchase price and upon the terms and conditions hereinafter set forth; and WHEREAS, certain terms used in this Agreement are defined in Section 10.1; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter contained, the parties hereby agree as follows: ARTICLE 1 SALE AND PURCHASE OF SHARES 1.1 Sale and Purchase of Shares. Upon the terms and subject to the conditions contained herein, on the Closing Date each Seller shall sell, assign, transfer, convey and deliver to the Purchaser, and the Purchaser shall purchase from each Seller, the Shares held by such Seller set forth next to such Seller's name on Annex A hereto. The purchase and sale of the Shares pursuant to this Agreement shall be effective as of the close of the business on the Closing Date (the "Effective Time"). ARTICLE 2 PURCHASE PRICE AND PAYMENT 2.1 Purchase Price. 2.1.1 The unadjusted purchase price for the Shares (the "Initial Purchase Price") shall be an amount equal to Four Hundred Fifteen Million Dollars ($415,000,000) adjusted for the Estimated External Cash/Debt Balance, the Elkhorn and Ozark Adjustment and the Estimated Trade Working Capital Adjustment. The Initial Purchase Price is subject to adjustment pursuant to Section 2.2 (as adjusted, the "Final Purchase Price"). The Initial Purchase Price and the Final Purchase Price shall be payable as provided in Section 2.3. All amounts set forth in this Agreement shall be in United States Dollars, unless otherwise stated. 2.1.2 The Sellers shall provide written notice of the Estimated External Cash/Debt Balance, the Elkhorn and Ozark Adjustment, and the Estimated Trade Working Capital Adjustment to the Purchaser at least five (5) days prior to the Closing Date. 2.2 Adjustment of Initial Purchase Price. 2.2.1 Final Trade Working Capital, Final External Cash/Debt Balance, Final Intercompany Payables, and Final Intercompany Receivables shall be determined as set forth in this Section 2.2.1. 2.2.1.1 The Purchaser shall prepare and deliver to the Sellers, within forty-five (45) days after the Closing, the Closing Management Accounts, which shall be prepared in accordance with the Accounting Principles. 2.2.1.2 The Purchaser also shall prepare and deliver to the Sellers, within forty-five (45) days after the Closing, a post-Closing purchase price adjustment statement (the "Adjustment Statement") detailing Purchaser's determination of: (i) the Final Trade Working Capital, (ii) the Final External Cash/Debt Balance, (iii) the Final Intercompany Payables, and (iv) Final Intercompany Receivables. The Adjustment Statement shall be prepared based upon the Closing Management Accounts, adjusted as necessary in accordance with the Accounting Principles, and including, but not limited to, the following adjustments: 2.2.1.2.1 the Final External Cash/Debt Balance shall be calculated converting the cash/debt balances of each Company or Subsidiary, in respect of which the management accounts are not expressed in US dollars, into US 2 dollars at the closing mid-point US dollar spot rate shown in the Financial Times published on the first Business Day following Closing; and 2.2.1.2.2 the Final Intercompany Payables and Final Intercompany Receivables in respect of each Company or Subsidiary, the management accounts of which are not expressed in US dollars, shall be converted into US dollars at the closing mid-point US dollar spot rate shown in the Financial Times published on the first Business Day following Closing. Any adjustments to the Closing Management Accounts balance sheet other than those described above shall, for the avoidance of doubt, be applied in a mutually consistent manner to the calculation of: (i) the Final External Cash/Debt Balance, (ii) the Final Trade Working Capital, (iii) Final Intercompany Payables, (iv) Final Intercompany Receivables, and (v) the Pension Plan Assets Adjustment. The Sellers shall give the Purchaser and its accountants and other appropriate personnel such assistance, as the Purchaser or such accountants or other personnel may reasonably request during normal business hours in order to enable them to prepare the Adjustment Statement. The Purchaser shall promptly deliver to the Sellers all such workpapers and other data used in the preparation of the Closing Management Accounts as may reasonably be requested by the Sellers. 2.2.1.3 The Adjustment Statement shall be final and binding on the parties unless the Sellers shall, within thirty (30) days following the delivery of the Adjustment Statement, deliver to the Purchaser written notice of objection (the "Objection Notice") with respect to the Adjustment Statement. The Objection Notice shall specify in reasonable detail the disputed items on the Adjustment Statement and describe in reasonable detail the basis for the disputed items, including the data that forms the basis thereof, as well as the amount in dispute. 2.2.1.4 If the Objection Notice is delivered, the parties shall consult with each other with respect to the disputed items and attempt in good faith to resolve the dispute. If the parties are unable to reach agreement within thirty (30) days after delivery of the Objection Notice, either the Purchaser or the Sellers may refer any unresolved disputed items to an accounting firm of national reputation selected by mutual agreement of the Purchaser and the Sellers, or if the Purchaser and the Sellers are unable to so agree, Deloitte & Touche LLP (the "Unrelated Accounting Firm"). The Unrelated Accounting Firm shall be directed to render a written report as promptly as practicable and, in any event, within thirty (30) days on the unresolved disputed items and to resolve only those issues of dispute set forth in the Objection Notice. The Unrelated Accounting Firm shall resolve such issues of dispute in accordance with the Accounting Principles. The resolution of the dispute by the Unrelated Accounting Firm shall be final and binding on the parties. The fees and expenses of the Unrelated Accounting Firm shall be borne equally by the Sellers and the Purchaser. 3 2.2.2 In order to determine the Final Purchase Price, the Initial Purchase Price shall be adjusted in respect of (i) the Final Trade Working Capital, (ii) the Final External Cash/Debt Balance, (iii) the Final Net Intercompany Amount, and (iv) the Pension Plan Assets Adjustment as set forth in this Section 2.2.2: 2.2.2.1 Final Trade Working Capital Adjustment. 2.2.2.1.1 If the amount of Final Trade Working Capital determined in accordance with Section 2.2.1 is less than the Baseline Trade Working Capital and that difference is greater than One Hundred Fifty Thousand Dollars ($150,000), the Initial Purchase Price shall be decreased by an amount equal to the excess of the difference over One Hundred Fifty Thousand Dollars ($150,000). For the avoidance of doubt, if the difference is less than One Hundred Fifty Thousand Dollars ($150,000), no adjustment shall be made. 2.2.2.1.2 If the amount of the Final Trade Working Capital is greater than the Baseline Trade Working Capital and that difference is greater than One Hundred Fifty Thousand Dollars ($150,000), the Initial Purchase Price shall be increased by an amount equal to excess of the difference over One Hundred Fifty Thousand Dollars ($150,000). For the avoidance of doubt, if the difference is less than One Hundred Fifty Thousand Dollars ($150,000), no adjustment shall be made. 2.2.2.1.3 The Initial Purchase Price shall be further adjusted to the extent the adjustment to the Initial Purchase Price to be made pursuant to this Section 2.2.2.1 is more or less than the adjustment made in Section 2.1.1 by virtue of application of the Estimated Trade Working Capital Adjustment. The amount of such further adjustment to the Initial Purchase Price is the "Final Trade Working Capital Adjustment." 2.2.2.2 Final External Cash/Debt Balance Adjustment. 2.2.2.2.1 If the amount of the Final External Cash/Debt Balance determined in accordance with Section 2.2.1 is less than the Estimated External Cash/Debt Balance, the Initial Purchase Price shall be decreased by an amount equal to the difference. 2.2.2.2.2 If the amount of the Final External Cash/Debt Balance determined in accordance with Section 2.2.1 is greater than the Estimated External Cash/Debt Balance, the Initial Purchase Price shall be increased by an amount equal to the difference. 2.2.2.3 Final Intercompany Amount Adjustment. Final Intercompany Receivables and Final Intercompany Payables shall be netted as of the Closing, and the resulting amount shall be referred to herein as the "Final Net Intercompany Amount." If the Final Net Intercompany Amount is a payable owing by the Company and the Subsidiaries to Invensys and its Affiliates (other 4 than the Company and the Subsidiaries), it shall be deducted from the Initial Purchase Price and such amount shall be paid at Closing by Purchaser in satisfaction of such payable. If the Final Net Intercompany Amount results in a payable owing by Invensys or its Affiliates (other than the Company and its Subsidiaries) to the Company and Subsidiaries, it shall be added to the Initial Purchase Price and such amount shall be paid at Closing by Sellers in satisfaction of such receivable. The parties acknowledge that the netting of Final Intercompany Receivables and Final Intercompany Payables, the payment of the Final Net Intercompany Amount (whether a payable or a receivable), and the resulting adjustment to the Initial Purchase Price, will always be non-cash adjustments, and, by means of the process referred to in this Section 2.2.2.3, as of the Closing, the Final Intercompany Payables and Final Intercompany Receivables shall be extinguished and released. All intercompany arrangements, except those provided for in the Transition Services Agreement, shall be cancelled as of the Closing. 2.2.2.4 Pension Plan Assets Adjustment. 2.2.2.4.1 In the event the fair market value of the assets of Sellers' Salaried Trust transferred to Purchaser's Salaried Trust (as finally determined pursuant to Section 6.3.7) equals or exceeds 85% of the ABO (calculated according to the assumptions set forth on Schedule 2.2.2.4) attributable to the Salaried Pension Transferees as of the Closing Date, the Escrow Funds shall be released from the Pension Plan Escrow and the full amount of such Escrow Funds shall be paid to Invensys (as agent for Sellers) together with any interest accrued and allocated to Sellers in accordance with Section 2.6. If the value so determined equals 85% of the ABO, there shall be no adjustment to the Initial Purchase Price. If the value so determined exceeds 85% of the ABO, the Initial Purchase Price shall be increased by an amount equal to such excess and such amount shall be paid to Invensys, as agent for Sellers, by Purchaser in accordance with Section 2.3.4. 2.2.2.4.2 In the event that 85% of the ABO attributable to the Salaried Pension Transferees as of the Closing Date exceeds the fair market value of the assets of Sellers' Salaried Trust transferred to Purchaser's Salaried Trust (as finally determined pursuant to Section 6.3.7), the Initial Purchase Price shall be reduced by the amount of such excess and an amount equal to such excess amount shall be released from the Pension Plan Escrow (or the full amount of such Escrow Funds if such excess is equal to or greater than such amount) and paid to Purchaser, together with any interest accrued and allocated to Purchaser in accordance with Section 2.6. If the amount of such excess equals the amount of the Escrow Funds, no further payments shall be made. If the amount of such excess is greater than the amount of the Escrow Funds, Invensys (as agent for the Sellers) shall pay any such difference to Purchaser in accordance with Section 2.3.4. If the amount of such excess is less than the amount of the Escrow Funds, an amount equal to such difference shall be released from the Pension Plan Escrow and paid to Invensys (as agent for Sellers) together with any interest accrued and allocated to Sellers in accordance with Section 2.6. The amount of any adjustment to 5 the Initial Purchase Price determined pursuant to either Section 2.2.2.4.1 or this Section 2.2.2.4.2 shall be known as the "Pension Plan Assets Adjustment." 2.3 Payment of Initial and Final Purchase Price. 2.3.1 At the Closing, the Purchaser shall pay to Invensys (as agent for the Sellers) an amount equal to the Initial Purchase Price, minus the Escrow Funds, by wire transfer of immediately available funds to an account or accounts designated by the Sellers in writing at least three (3) Business Days prior to the Closing Date. 2.3.2 Within five (5) Business Days after the determination of the Final Trade Working Capital and Final External Cash/Debt Balance in accordance with Section 2.2, Invensys (as agent for the Sellers) shall pay to the Purchaser, or the Purchaser shall pay to Invensys (as agents for the Sellers), as the case may be, the net amount of any adjustment to the Initial Purchase Price required pursuant to Sections 2.2.2.1 and 2.2.2.2 (the "Adjustment Amount"). 2.3.3 Payment of the Adjustment Amount shall be made by wire transfer of immediately available funds to a single account designated in writing at least five (5) Business Days prior to such payment by Invensys or the Purchaser, as the case may be, and shall be accompanied by a payment of interest determined by computing simple interest on the Adjustment Amount from the Closing Date to the date of payment(s) at the rate of interest announced publicly by JPMorgan Chase Bank from time to time as its "reference rate" (on the basis of a 365-day year). 2.3.4 Any amounts payable to Purchaser or to Invensys (as agent for Sellers) as the case may be, pursuant to Section 2.2.2.4 shall be made by wire transfer on the date of the final determination of the fair market value of the assets of Seller's Salaried Trust transferred to Purchaser's Salaried Trust pursuant to Section 6.3.7. 2.4 Allocation of Final Purchase Price. 2.4.1 Sellers and Purchaser agree to allocate the Initial Purchase Price among the Companies at or prior to the Closing. Within thirty (30) days following the later of the determination of the Adjustment Amount or the Pension Plan Assets Adjustment, Sellers and Purchaser shall agree upon a revised purchase price allocation to reflect such adjustments in accordance with the character of each such adjustment and in a manner that is consistent with the allocation of the Initial Purchase Price. 2.4.2 Neither Sellers, Purchaser nor any of their respective Affiliates shall file any Tax Return or other document or otherwise take, or agree to take, any position on any Tax Return which is inconsistent with the allocation determined pursuant to this Section 2.4, unless otherwise required by Law. 2.5 Elkhorn and Ozark Adjustment. Schedule 2.5 lists the scheduled cash shut-down costs expected to be incurred in connection with the closure of the 6 Elkhorn and Ozark facilities. The Initial Purchase Price payable at Closing shall include a reduction equal to the sum of the amounts scheduled on Schedule 2.5 which have not been expended as of the Closing. 2.6 Pension Plan Escrow. At the Closing, the Sellers, Invensys, and the Purchaser shall enter into an agreement substantially in the form of the Escrow Agreement, with Wachovia Bank (or such other institution as the parties otherwise agree) as escrow agent (the "Escrow Agent" ), pursuant to which the Escrow Funds shall be deposited into an interest bearing account with the Escrow Agent (the "Pension Plan Escrow") . Until the pension plan assets are transferred to Purchaser's Salaried Trust as described in Section 6.3.7, and the Pension Plan Assets Adjustment has been determined, the Escrow Funds will remain on deposit with the Escrow Agent. Interest accruing on the Escrow Funds shall belong to Sellers from the Closing Date until the earlier of (i) the date on which the pension assets are transferred, or (ii) the date which is one hundred twenty (120) days from the Closing Date. In the event that the pension plan assets have not been transferred to Purchaser's Salaried Trust on or before one hundred twenty (120) days from the Closing Date, interest on the Escrow Funds accruing thereafter shall be payable upon distribution of the Escrow Funds to Sellers and Purchaser in proportion to the allocation of the Escrow Funds between the parties in accordance with Section 2.2.2.4. All fees and costs of the Escrow Agent shall be borne equally by the Purchaser and the Sellers. ARTICLE 3 CLOSING AND TERMINATION 3.1 Closing Date. The closing of the sale and purchase of the Shares (the "Closing") shall take place at the offices of Weil, Gotshal & Manges LLP, located at 767 Fifth Avenue, New York, New York 10153 at 10:00 a.m., New York City time, on the third Business Day after the conditions to closing set forth in Section 7.1, Section 7.2 and Section 7.3 (other than those to be satisfied at the Closing, which shall be satisfied or waived at the Closing) have been satisfied or waived by the party entitled to waive such condition, or on such other date after such satisfaction or waiver and at such other time and place upon which the Sellers and the Purchaser shall agree (which time and place are designated as the "Closing Date"). 3.2 Termination of Agreement. This Agreement may be terminated prior to the Closing as follows: 3.2.1 At the election of either the Sellers or the Purchaser on or after March 31, 2003, if the Closing shall not have occurred by the close of business on such date, provided that the terminating party is not in default of any of its obligations hereunder; 3.2.2 by mutual written consent of the Sellers and the Purchaser; 7 3.2.3 at the election of either the Sellers or the Purchaser if there shall be in effect a final nonappealable Order of a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby; it being agreed that the parties hereto shall promptly appeal any appealable adverse determination (and pursue such appeal with reasonable diligence); or 3.2.4 by the Purchaser or the Sellers, as the case may be, if any condition in Article 7 to its or their obligations becomes impossible to satisfy (other than through the failure of the party seeking termination to comply with its obligations under this Agreement), and such condition has not been waived by the party entitled to the benefit thereof. 3.3 Procedure Upon Termination. In the event the Purchaser or the Sellers, or both, elect to terminate this Agreement pursuant to Section 3.2, written notice thereof shall forthwith be given to the other party or parties, and this Agreement shall terminate, and the purchase and sale of the Shares hereunder shall be abandoned, without further action by the Purchaser or the Sellers. If this Agreement is terminated as provided herein each party shall redeliver all documents, work papers and other material of any other party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the party furnishing the same. 3.4 Effect of Termination. In the event this Agreement is validly terminated as provided herein, then each of the parties shall be relieved of their duties and obligations arising under this Agreement after the date of such termination and such termination shall be without liability to the Purchaser, the Companies or any Seller; provided, however, that the obligations of the parties set forth in Section 6.5 and Section 10.3 shall survive any such termination and shall be enforceable hereunder; provided, further, that nothing in this Section 3.4 shall relieve the Purchaser, any Seller or Invensys of any liability for a breach of this Agreement. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF INVENSYS AND THE SELLERS The Sellers and Invensys hereby jointly and severally represent and warrant to the Purchaser that: 4.1 Organization and Good Standing. Each Company and each Seller is a corporation or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization as set forth above or on Annex A and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now conducted. Each Company is duly qualified to do business as a foreign corporation under the laws of each jurisdiction in which it owns or leases real property and each other jurisdiction in which the conduct of its business or the ownership of its assets requires such qualification and where the failure to be so qualified would have a material adverse effect on such Company. 8 4.2 Authorization of Agreement. Each Seller and Invensys has all requisite power, authority and legal capacity to execute and deliver this Agreement and each other agreement, document, instrument or certificate contemplated by this Agreement or to be executed by such Seller or Invensys in connection with the consummation of the transactions contemplated by this Agreement (together with this Agreement, the "Seller Documents"), and to consummate the transactions contemplated hereby and thereby. This Agreement has been, and each of the other Seller Documents will be at or prior to the Closing, duly and validly executed and delivered by Invensys and each Seller party thereto and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and each of the other Seller Documents when so executed and delivered will constitute, legal, valid and binding obligations of Invensys and each Seller, enforceable against Invensys and each Seller in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity. 4.3 Capitalization. 4.3.1 The (i) authorized capital stock, (ii) par value per share, and (iii) number of issued and outstanding shares of capital stock of each of the Companies and the owners of such shares are as set forth on Annex A. No shares of capital stock of any Company are held by such Company as treasury stock. 4.3.2 All of the Shares were duly authorized for issuance and are validly issued, fully paid and non-assessable. 4.3.3 There is no existing option, warrant, call, right, commitment or other agreement of any character to which Invensys or any Seller or Company is a party requiring, and there are no securities of any Company outstanding which upon conversion or exchange would require, the issuance, sale or transfer of any additional shares of capital stock or other equity securities of the respective Company or other securities convertible into, exchangeable for or evidencing the right to subscribe for or purchase shares of capital stock or other equity securities of such Company. None of Invensys, the Sellers or any Company is a party to any voting trust or other voting agreement with respect to any of the Shares or to any agreement relating to the issuance, sale, redemption, transfer or other disposition of the capital stock of any Company. 4.4 Subsidiaries. Schedule 4.4 hereto sets forth the name of each Subsidiary and, with respect to each Subsidiary, the jurisdiction in which it is incorporated or organized, the number of shares of its authorized capital stock, the number and class of shares thereof duly issued and outstanding, the names of all stockholders or other equity owners and the number of shares of stock owned by each stockholder or the amount of equity owned by each equity owner. All of the outstanding shares of capital stock or equity interests of each Subsidiary are validly issued, fully paid and non-assessable, and the shares or other equity interests shown on Schedule 4.4 as being owned by any Company are owned by such Company free and clear of any and all 9 Liens of any kind whatsoever. No shares of capital stock are held by any Subsidiary as treasury stock. There is no existing option, warrant, call, commitment or agreement to which any Subsidiary is a party requiring, and there are no convertible securities of any Subsidiary outstanding which upon conversion would require, the issuance of any additional shares of capital stock or other equity interests of any Subsidiary or other securities convertible into shares of capital stock or other equity interests of any Subsidiary or other equity security of any Subsidiary. With respect to any Subsidiary which is shown on Schedule 4.4 as having shares or other equity interests owned by a Person other than a Company, each such Person has no rights as a shareholder or holder of other equity interests in any Subsidiary, whether by contract, Subsidiary charter document or otherwise, other than rights which are available to a shareholder or holder of other equity interests existing by operation of applicable Law. Each Subsidiary is a duly organized and validly existing corporation or other entity in good standing under the laws of the jurisdiction of its organization and is duly qualified to do business under the laws of (i) each jurisdiction in which it owns or leases real property and (ii) each other jurisdiction in the United States in which the conduct of its business or the ownership of its assets requires such qualification and where the failure to be so qualified would have a material adverse effect on the Subsidiary and each such jurisdiction described in (i) and (ii) above is set forth on Schedule 4.4. Each Subsidiary has all requisite corporate power and authority to own its properties and carry on its business as presently conducted. 4.5 Corporate Records. The Sellers have made available to the Purchaser true, correct and complete copies of the certificates of incorporation and by-laws or comparable organizational documents of each Company and each Subsidiary. 4.6 Conflicts; Consents of Third Parties. 4.6.1 Except as set forth on Schedule 4.6.1, none of the execution and delivery by any Seller of this Agreement and the other Seller Documents, the consummation of the transactions contemplated hereby, or compliance by Invensys or any Seller with any of the provisions hereof or thereof will (i) conflict with, or result in the breach of, any provision of the certificate of incorporation or by-laws or comparable organizational documents of Invensys or any Company, any Seller or any Subsidiary; (ii) conflict with, violate, result in the breach or termination of, or constitute a default under any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which Invensys or any Seller, any Company or Subsidiary is a party or by which any of them or any of their respective properties or assets is bound; (iii) violate any statute, rule, regulation, or Material Order of any Governmental Body by which Invensys or any Seller, Company or Subsidiary is bound or give any Governmental Body the right to revoke, withdraw, suspend or modify any material Government Authorization held by any Company or Subsidiary; (iv) result in the creation of any Lien upon the properties or assets of any Company or any Subsidiary; or (v) conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or cancel, terminate or modify any Material Contract, except in the case of (ii) above, for such violations, conflicts, breaches or defaults as would not have a material adverse effect on any Company or Subsidiary. 10 4.6.2 Except as set forth on Schedule 4.6.2, no consent, waiver, approval, Order, permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of any Company or Subsidiary in connection with the execution and delivery of this Agreement or the other Seller Documents, or the compliance by each Seller or Company as the case may be, with any of the provisions hereof or thereof, except such consents, waivers, approvals, Orders, permits and authorizations which, if not obtained or made, would not have a material adverse effect on any Company or Subsidiary. 4.7 Ownership and Transfer of Shares. Each Seller is the record and beneficial owner of the Shares indicated as being owned by such Seller on Annex A, free and clear of any and all Liens. Each Seller has the corporate power and authority to sell, transfer, assign and deliver such Shares as provided in this Agreement, and such delivery will convey to the Purchaser title to such Shares, free and clear of any and all Liens. 4.8 Financial Statements. Sellers have delivered to Purchaser (a) the audited combined balance sheets of the Fasco Business at March 31, 2001 and 2002 (the "Audited Balance Sheet") and the related combined statements of operations, invested capital and cash flows for each of the fiscal years then ended, including the notes thereto, together with the report thereon of Ernst & Young LLP (collectively, the "Audited Financial Statements") and (b) the unaudited combined balance sheet of the Fasco Business at September 30, 2002 (the "Interim Balance Sheet") and the related combined statements of operations for the six (6) months then ended (collectively, the "Interim Financial Statements"). The Audited Financial Statements and the Interim Financial Statements are collectively referred to herein as the "Financial Statements". The Audited Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"). The Audited Financial Statements fairly present, in all material respects, the financial condition and results of operations of the Fasco Business, as of and for the periods to which they relate. The Interim Financial Statements have been prepared in accordance with U.S. GAAP and reasonably reflect in all material respects the combined financial condition and results of operations of the Fasco Business, except for the absence of notes. For the purposes hereof, March 31, 2002 is referred to as the "Audited Balance Sheet Date" and September 30, 2002 is referred to as the "Interim Balance Sheet Date". Schedule 4.8 presents certain monthly financial reports and schedules generated from the books and records of the Companies in relation to periods subsequent to the Interim Balance Sheet Date (the "Recent Management Accounts") . The Recent Management Accounts have been consistently prepared with past practice and with due care in accordance with the Standard Accounting Principles. All transactions undertaken by the Companies and Subsidiaries which relate to the period of the Recent Management Accounts and which would be required by the Standard Accounting Principles to be reflected and recorded in the Recent Management Accounts are reflected and recorded in the Recent Management Accounts. 11 4.9 No Undisclosed Liabilities. 4.9.1 Except as set forth on Schedule 4.9.1, as of the Audited Balance Sheet Date, no Company and no Subsidiary had any indebtedness, obligations or liabilities of any kind required by U.S. GAAP to be reflected in the Audited Balance Sheet that were not fully reflected in the Audited Balance Sheet and the notes thereto, and since the Audited Balance Sheet Date, no Company and no Subsidiary has incurred any indebtedness, obligation or liability other than in the ordinary course of business consistent with past practice. 4.9.2 To the Knowledge of Sellers, except as set forth on Schedule 4.9.2, the Companies and the Subsidiaries have incurred no liabilities of any kind (whether absolute, accrued, or contingent) since the most Recent Management Accounts except for liabilities (i) to be adjusted, paid, settled or cancelled pursuant to Sections 2.2 and 2.3 hereof, (ii) that are current liabilities (other than those adjusted, paid, settled or cancelled pursuant to Sections 2.2 and 2.3) incurred in the ordinary course of business, (iii) set forth on any Schedule to this Agreement, (iv) reflected or reserved against in the Recent Management Accounts as of a date subsequent to the Interim Balance Sheet Date and provided to Purchaser by Sellers, (v) which would be subject to the provisions of Sections 9.1.1.3, 9.1.1.4, 9.6.1.1 or 9.7 and (vi) incurred in the ordinary course of business which are not material to the Fasco Business. 4.10 Absence of Certain Developments. Except as contemplated by this Agreement or as permitted by Section 6.2 or set forth on Schedule 4.10, since the Audited Balance Sheet Date: 4.10.1 there has not been any damage, destruction or loss, whether or not covered by insurance, with respect to the property and assets of the Companies or the Subsidiaries having a replacement cost of more than Four Hundred Thousand Dollars ($400,000) in the aggregate; 4.10.2 there has not been any declaration, setting aside or payment of any dividend or other distribution in respect of any shares of capital stock of any Company or any repurchase, redemption or other acquisition by any Seller or any Company or any Subsidiary of any outstanding shares of capital stock or other securities of, or other ownership interest in, any Company or any Subsidiary; 4.10.3 there has not been any material change by any Company or any Subsidiary in accounting or Tax reporting principles, methods or policies; 4.10.4 no Company and no Subsidiary has entered into any transaction or Contract involving the expenditure of more than Two Hundred Fifty Thousand Dollars ($250,000) or conducted its business other than in the ordinary course of business consistent with past practice; 12 4.10.5 no Company and no Subsidiary has made any material loans, advances or capital contributions to, or investments in, or incurred any liabilities or obligations on behalf of, any Person or paid any fees or expenses to any Seller or any Affiliate of any Seller other than in the ordinary course of business consistent with past practice; 4.10.6 no Company and no Subsidiary has mortgaged, pledged or subjected to any Lien any material asset, or acquired any assets or sold, assigned, transferred, conveyed, leased or otherwise disposed of any of its assets for which the aggregate consideration paid or payable in any individual transaction was in excess of Two Hundred Fifty Thousand Dollars ($250,000), except for assets mortgaged, pledged, subjected to any Lien, acquired or sold, assigned, transferred, conveyed, leased or otherwise disposed of in the ordinary course of business consistent with past practice; 4.10.7 no Company and no Subsidiary has canceled or compromised any debt or claim with a value, individually or in the aggregate, exceeding Two Hundred Fifty Thousand Dollars ($250,000) or amended, canceled, terminated, relinquished, waived or released any Contract or right involving the expenditure of more than Two Hundred Fifty Thousand Dollars ($250,000); 4.10.8 no Company and no Subsidiary has made or committed to make any capital expenditures or capital additions or betterments in excess of Two Hundred Fifty Thousand Dollars ($250,000), other than in the ordinary course of business or except as is consistent with the capital expenditure budget attached hereto as Schedule 4.10.8 (the "Capital Expenditure Budget"); and 4.10.9 no Company and no Subsidiary has instituted or settled any Legal Proceeding in which equitable relief was sought or in which claimed damages exceeded Five Hundred Thousand Dollars ($500,000). 4.11 Certain Tax Matters. Except as set forth on Schedule 4.11: 4.11.1 (i) all Tax Returns required to be filed by or on behalf of any Company or any Subsidiary have been filed in a timely manner (within any applicable extension periods), (ii) all such Tax Returns are correct and complete in all material respects and all Taxes shown to be due on such Tax Returns have been timely paid in full or will be timely paid in full by the due date thereof, (iii) all Taxes have been timely paid in full or will be timely paid in full by the due date thereof, except to the extent that failure to pay such Taxes does not result in a material Loss, (iv) the Tax accounts reflected in the Audited Financial Statements are adequate (as determined in accordance with U.S. GAAP) to cover any Tax liability of the Companies and Subsidiaries as of the Audited Balance Sheet Date, (v) no claim has been made (A) by any authority in writing within the six (6) year period ending on the date of this Agreement or (B) to the Knowledge of Sellers, in a jurisdiction where any of the Companies or Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction, (vi) there are no Liens on any of the assets of the Companies or Subsidiaries that arose in 13 connection with any failure (or alleged failure) to pay Taxes, (vii) there is no dispute or claim concerning any tax liability of any of the Companies or Subsidiaries either (A) raised by any authority in writing or (B) to the Knowledge of Sellers, and (viii) none of the Companies or Subsidiaries is currently the beneficiary of any extension of time within which to file any Tax Return; 4.11.2 (i) none of the Companies or Subsidiaries has filed a consent under Section 341(f) of the Code concerning collapsible corporations (or any corresponding or similar provision of state, local or foreign Law), (ii) no property of the Companies or Subsidiaries is "tax exempt use property" within the meaning of Section 168(h) of the Code or "tax exempt bond financed property" within the meaning of Section 168(g) of the Code (or any corresponding or similar provisions of state, local or foreign Law) and (iii) no Company or Subsidiary is a party to any lease made pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954 (or any corresponding or similar provision of state, local or foreign Law); 4.11.3 BTR Finance is not a foreign person for purposes of Section 1445 of the Code. None of the Companies organized in a jurisdiction outside the United States currently has in effect an election described in Section 897(i) of the Code (or any corresponding or similar provision under state, local or foreign Law). No Company, Subsidiary or Seller is subject to withholding under Code Section 1445 in connection with the transactions undertaken in pursuance of this Agreement; 4.11.4 each of the Companies and Subsidiaries has complied in all material respects with all applicable Laws relating to the payment and withholding of Taxes and has duly and timely withheld from amounts paid to any employee, independent contractor, creditor, stockholder or other third party (including without limitation salaries, wages and other compensation, whether monetary or non-monetary) and has paid over to the appropriate taxing authorities all amounts required to be so withheld and paid over for all periods under all applicable Laws; 4.11.5 Schedule 4.11 contains a complete and accurate list of, and Sellers have made available to Purchaser complete copies of (i) all income or franchise Tax Returns of the Companies or the Subsidiaries (or, in the case of Tax Returns filed for an Affiliated Group, the portion of such consolidated Tax Returns relating to the Companies or the Subsidiaries) relating to the taxable periods ending after January 1, 1997 and (ii) the portions of any audit report issued within the last five years relating to any Company or any Subsidiary; 4.11.6 Schedule 4.11 lists the taxable years through which (i) the relevant taxing authorities have examined the United States federal and state income or franchise (or in the case of Michigan, single business) Tax Returns of the Companies and Subsidiaries or (ii) the applicable statute of limitations for such Tax Returns has expired. All deficiencies assessed in writing against the Companies or Subsidiaries have been paid, reserved against in the Audited Balance Sheet or, as described in Schedule 4.11, are being contested in good faith in appropriate proceedings. No Seller, Company or 14 Subsidiary has given waivers or extensions (or is or could reasonably be expected to be subject to a waiver or extension given by any other Person) of any statute of limitations relating to the payment of Taxes of any Company or Subsidiary or for which any Company or Subsidiary may be liable; 4.11.7 no Company or Subsidiary is a party to any tax sharing or similar agreement or arrangement (whether or not written) pursuant to which it will have any obligation to make any payments after the Closing; 4.11.8 none of the Companies or Subsidiaries will be required to include any item of income or gain in, or exclude any item of deduction or loss from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date under Section 481(c) of the Code (or any corresponding or similar provision of state, local or foreign income tax Law); (ii) "closing agreement" as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income tax Law) executed on or prior to the Closing Date; or (iii) installment sale made on or prior to the Closing Date; 4.11.9 there are no tax rulings, requests for rulings, or closing agreements relating to any Company or any Subsidiary that could affect the liability for Taxes of such entities for any period (or portion of a period) after the Closing Date; 4.11.10 no power of attorney (that is currently in force) has been granted by any Company or any Subsidiary with respect to any matter relating to Taxes of any Company or any Subsidiary; 4.11.11 any adjustment of Taxes of any Company or any Subsidiary made by the IRS in any examination which is required to be reported to the appropriate state, local or foreign taxing authorities has been reported, and any additional Taxes due with respect thereto have been paid; 4.11.12 no Company or Subsidiary has made, or is obligated to make, any payment or is a party to any agreement that could obligate it to make any payments that under Section 280G or Section 162(m) of the Code were or will not be deductible for tax purposes; 4.11.13 each Company and each Subsidiary has, in accordance with Treas. Reg. Section 1.6662-3(c), "adequately disclosed" on its Tax Returns all positions taken therein that could give rise to a "substantial understatement" of federal income Tax within the meaning of Section 6662 of the Code, or as applicable, such disclosure would meet the conditions of any provision analogous or similar to Treas. Reg. Section 1.6662-3(c) contained in state, local or foreign Law in any taxing jurisdiction to which it is asserted that such Company or Subsidiary is or could be subject; 15 4.11.14 neither the Companies nor the Subsidiaries has a subsidiary investment that could reasonably be expected to be subject to the loss disallowance rules of Temporary Treas. Reg. Section 1.337(d)-2T if such entity's stock were sold separately as of the Closing Date; and 4.11.15 (i) none of the Companies or Subsidiaries has, within the last six (6) years, been a member of an Affiliated Group filing a consolidated United States federal income Tax Return (or similar return under the provisions of state, local or foreign Law) other than a group the common parent of which was Invensys, Inc. and (ii) within the Knowledge of Sellers, no claim has been asserted against any Company or Subsidiary based upon liability for the Taxes of another Person (other than any of the Companies or Subsidiaries) (A) under Treas. Reg. Section 1.1502-6 (or corresponding or similar provisions of state, local or foreign Law), (B) as a transferee or successor or (C) by contract or otherwise. 4.12 Real Property. Schedule 4.12 sets forth a complete list of (i) all real property and interests in real property owned by the Company or any Subsidiary (individually, an "Owned Property" and collectively, the "Owned Properties"), and (ii) all real property and interests in real property leased by the Company or any Subsidiary as lessee or lessor (individually, a "Real Property Lease" and the real properties specified in such leases, together with the Owned Properties, being referred to herein individually as a "Company Property" and collectively as the "Company Properties"). A Company or a Subsidiary has good and marketable fee title to all Owned Property, free and clear of all Liens of any nature whatsoever except Permitted Exceptions. A Company or a Subsidiary has a valid and enforceable leasehold interest under each of the Real Property Leases, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity) and, no Company or Subsidiary has received any written notice of any default. Sellers have delivered to Purchaser (i) true, correct and complete copies of the deeds, leases or other instruments (including all amendments, modifications and extensions) by which the Companies or Subsidiaries acquired the Real Property Leases and the non-North American Owned Properties, and (ii) title commitments and ALTA surveys for each of the North American Owned Properties, none of which are more than two hundred seventy (270) days old, as of the date hereof. All of the Owned Properties are reflected on the Interim Balance Sheet, and no Company Property is subject to any right-of-way, building and use restriction, exception, variance, reservation or limitation of any nature except Permitted Exceptions. All of the buildings, plants and structures located on the Company Properties lie within the boundaries thereof and do not encroach upon the property of, or otherwise conflict with the property rights of, any other Person, except as shown on the plats of survey provided to Purchaser. 4.13 Tangible Personal Property. Except as set forth on Schedule 4.13, a Company or a Subsidiary: (i) owns or leases all tangible personal property that is currently employed by it in, and material to, the conduct of its business as presently conducted, free and clear of all Liens, (ii) owns or leases all of the tangible personal 16 property reflected in the Interim Balance Sheet (except for tangible personal property acquired or disposed of since the Interim Balance Sheet Date in the ordinary course of business), and (iii) upon consummation of the transactions contemplated by this Agreement, will be entitled to continue to use all such tangible personal property. 4.14 Technology and Intellectual Property. 4.14.1 Schedule 4.14.1 lists all U.S. patents, registered copyrights, registered trademarks and pending applications therefor included in the Fasco Business Intellectual Property. 4.14.2 Except as shown in Schedule 4.14.2, the Companies and the Subsidiaries are the sole and exclusive owners of the Fasco Business Intellectual Property, and no other person or entity has any claim of ownership with respect to the Fasco Business Intellectual Property. 4.14.3 Except as shown in Schedule 4.14.3, the Companies and the Subsidiaries have not previously assigned, transferred, conveyed or otherwise encumbered their right, title and interest in the Fasco Business Intellectual Property. 4.14.4 Except as shown in Schedule 4.14.4 or as noted in Schedule 4.14.1, the Fasco Business Intellectual Property is valid, subsisting, and enforceable, and is not the subject of any challenge. 4.14.5 Except as shown in Schedule 4.14.5, to the Knowledge of Sellers, no third party is currently violating or infringing upon any of the Companies' or the Subsidiaries' rights in the Fasco Business Intellectual Property. 4.14.6 The Companies or the Subsidiaries own or otherwise possess (or at the time of Closing will possess) valid and enforceable rights to use all Intellectual Property and Technology currently used in the businesses of the Fasco Business as conducted up to and through the Closing Date. With respect to Intellectual Property and Technology set forth in Schedule 4.14.6.1, each relevant Company and Subsidiary has been granted, or prior to the Closing will be granted, to the extent permissible, licenses or sublicenses sufficient for the conduct of its business as conducted up to and through the Closing Date. Schedule 4.14.6.2 lists all other license agreements granting to the relevant Companies and Subsidiaries the right to use any Intellectual Property or Technology other than software that is available through "shrink wrap" or similar widely available commercial end user licenses. 4.14.7 Except as shown in Schedule 4.14.7, no Company and no Subsidiary is under any obligation to pay any royalties or similar payments in connection with any license to any Company or any Subsidiary. 17 4.14.8 Except as shown in Schedule 4.14.8, to the Knowledge of Sellers, the businesses of the Fasco Business as they are currently conducted do not violate or infringe the Intellectual Property rights of any third party. 4.15 Material Contracts. Schedule 4.15 sets forth all of the following Contracts to which any Company or any Subsidiary is a party or by which it is bound (collectively, the "Material Contracts"): 4.15.1 Contracts with any Seller or any Affiliate of any Seller, which involve payments, in the aggregate, in excess of One Hundred Thousand Dollars ($100,000); 4.15.2 Contracts entered into other than in the ordinary course of business or for the grant to any Person of any preferential rights to purchase any of its assets in each case for consideration in excess of Five Hundred Thousand Dollars ($500,000); 4.15.3 joint venture or written partnership agreements with any Person; 4.15.4 Contracts containing covenants that in any way restrict the business activity of any Company or Subsidiary in any respect that would be material to that Company or Subsidiary, or which limit the freedom of any Company or Subsidiary to engage in any line of business or to compete with any Person; 4.15.5 Contracts relating to the acquisition by any Company or any Subsidiary of any operating business or the capital stock of any other Person, in each case, for consideration in excess of Five Hundred Thousand Dollars ($500,000); 4.15.6 Contracts relating to the borrowing of money involving amounts in excess of Five Hundred Thousand Dollars ($500,000); 4.15.7 to the Knowledge of Sellers, all confidentiality agreements which restrict the ability of a Company or a Subsidiary to disclose any information to a third party; 4.15.8 each written warranty, guaranty or other similar undertaking with respect to contractual performance extended by any Company or Subsidiary other than in the ordinary course of business; 4.15.9 written contractual obligations by which any Company or Subsidiary has agreed to pay or be responsible for the debts or obligations of any other Person, except where any such payment would be Fifty Thousand Dollars ($50,000) or less or where the other party is a Company or a Subsidiary; 4.15.10 any other Contracts, other than Real Property Leases, which involve the expenditure of more than Five Hundred Thousand Dollars ($500,000) in the aggregate that are not terminable by a Company or Subsidiary without penalty on less than thirty (30) days' notice; and 18 4.15.11 each written amendment, supplement or modification to any of the foregoing. Except as set forth in Part One of Schedule 4.15: (i) to the Knowledge of Sellers, no officer, director or employee of any Company or Subsidiary is bound by any Contract that limits the ability of such officer, director or employee to (A) engage in or continue any conduct, activity, or practice relating to the business of any Company or Subsidiary, or (B) assign to any Company or Subsidiary any rights to any invention, improvement or discovery; and (ii) no Company or Subsidiary owns, or has any Contract to acquire, any equity securities or other securities of any Person (other than the Companies or the Subsidiaries) or any direct or indirect equity or ownership interest in any other business. Except as set forth in Part Two of Schedule 4.15, all of the Material Contracts are in full force and effect and are the legal, valid and binding obligation of a Company and/or a Subsidiary, enforceable against it/them in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). Except as set forth in Part Three of Schedule 4.15: (i) to the Knowledge of Sellers each Company or Subsidiary is in compliance with all applicable terms and requirements of each Material Contract; (ii) to the Knowledge of Sellers, each other Person that has any obligation or liability under any Material Contract under which any Company or Subsidiary has any rights is in compliance with all applicable terms and requirements of such Material Contract; (iii) no Company or Subsidiary has given to or received from any other Person any written notice regarding any actual or alleged violation or breach of, or default under, any Material Contract; and (iv) there are no renegotiations of, or outstanding rights to renegotiate, any material amounts paid or payable to any Company or Subsidiary under current or completed Material Contracts with any Person and, to the Knowledge of Sellers, no such Person has made written demand for such renegotiation. 4.16 Employee Benefits. 4.16.1 Schedule 4.16.1.I sets forth a current, accurate and complete list of all written and material unwritten pension, retirement, cash balance, money purchase, savings, profit sharing, annuity, deferred compensation, bonus, incentive (including, 19 without limitation, cash, stock option, stock bonus, stock appreciation, phantom stock, restricted stock and stock purchase), medical, dental, vision, hospitalization, long-term care, prescription drug and other health, employee assistance, cafeteria, flexible benefits, life insurance, short and long term disability, vacation pay, severance pay, other welfare and fringe benefit and similar plans, programs, understandings, arrangements or agreements, including, without limitation, all employee benefit plans as defined in Section 3(3) of ERISA (the "Plans"), sponsored or maintained for current or former employees, officers, directors or consultants of any Company or any Subsidiary or to which any Company or any Subsidiary is a party or required to contribute or has any liability, whether direct or indirect, or actual or contingent (the "Invensys Plans"). Schedule 4.16.1.II separately identifies each Plan sponsored by a Company or a Subsidiary for current or former employees, officers, directors or consultants of any Company or Subsidiary (the "Company Plans") and Schedule 4.16.1.III identifies each Company Plan that is maintained outside of the United States primarily for the benefit of persons substantially all of whom are non-resident aliens ("Non-U.S. Plans"). 4.16.2 True, correct and complete copies of the following documents, with respect to each of the Company Plans, if applicable, have been made available or delivered to the Purchaser: (i) any plans and related trust documents, and amendments thereto; (ii) the two most recent Forms 5500; (iii) the last IRS determination letter, if applicable; (iv) the most recent actuarial report; (v) summary plan descriptions; (vi) the two most recent Forms PBGC-1 and, (vii) with respect to any Company Plan that is maintained pursuant to a collective bargaining agreement, all collective bargaining agreements pursuant to which contributions are being made or obligations are owed to such plan and all contracts with third-party administrators, actuaries, investment managers, consultants and other independent contractors that relate to any such plan. 4.16.3 The Invensys Pension Plan and the Invensys 401(k) Plan are qualified under Section 401 of the Code and the trusts maintained pursuant thereto are exempt from federal income taxation under Section 501 of the Code, and nothing has occurred with respect to the operation of either plan which is reasonably likely to cause the loss of such qualification or exemption or the imposition on any Company or any Subsidiary of any liability, penalty or tax under ERISA or the Code. 4.16.4 Each Company Plan is in material compliance as to form and operation, and in accordance with all applicable provisions of the Code and ERISA and any other applicable federal and state laws, (including rules and regulations thereunder) and such plans have been operated in compliance with such laws and written plan documents. 4.16.5 No Company Plan is a "multiemployer pension plan" as defined in Section 3(37) of ERISA. No Company Plan utilizes a funding vehicle described in Section 501(c)(9) of the Code or is subject to the provisions of Section 505 of the Code. 4.16.6 The Pension Benefit Guaranty Corporation ("PBGC") has not instituted or threatened a proceeding to terminate or to appoint a trustee to administer any Invensys Plan pursuant to Subtitle 1 of Title IV of ERISA, and no condition or set of circumstances exists that presents a material risk of termination of any 20 Invensys Plan by the PBGC. Except as disclosed on Schedule 4.16.6, none of the Invensys Plans have been the subject of, and no event has occurred or condition exists that could be deemed, a reportable event (as defined in Section 4043 of ERISA) as to which a notice would be required (without regard to regulatory thresholds) to be filed with the PBGC. Each Seller, the Company and each Subsidiary has paid in full all insurance premiums due to the PBGC with regard to Invensys Plans for all applicable periods ending on or before the Closing Date. 4.16.7 No Company or Subsidiary has incurred or will incur with respect to any "employee benefit plan" as defined in Section (3)(3) of ERISA any actual or contingent liability, including, but not limited to, liability under Section 601 through 608 of ERISA and Section 4980B of the Code, any withdrawal liability from any multiemployer pension plan, any termination or withdrawal liability under Sections 4062, 4063 or 4064 of ERISA, any "accumulated funding deficiency" as such term is defined in Section 302 of ERISA and Section 412 of the Code (whether or not waived), any requirement to make any contributions to any multiemployer plan, solely as a result of any Company or Subsidiary being members of a "controlled group" of corporations, or treated as a single employer with, Seller or Invensys within the meaning of Section 414(b), 414(c), 414(m) or 414(n) of the Code arising from or incurred with respect to any period prior to the Closing Date. 4.16.8 Each Company Plan which is a group health plan within the meaning of Section 5000 of the Code complies and in each case has complied with the applicable requirements of Section 601 through 608 of ERISA and Section 4980B of the Code. Sellers will provide any COBRA notices or coverage required as a result of the transaction contemplated by this Agreement. 4.16.9 There are no actions or claims pending (other than routine claims for benefits) or, to the Knowledge of Sellers, threatened against any Company Plan or against the assets of any Company Plan. Neither Sellers, the Company nor any Subsidiary nor, to the Knowledge of Sellers, any other "disqualified person" or "party in interest," within the meanings of Section 4975 of the Code or Section 3(14) of ERISA, respectively has engaged in any "prohibited transaction," as such term is defined in Section 4975 of the Code or Section 406 of ERISA, which could, following the Closing Date, subject any Company Plan (or its related trust), Purchaser, Seller, the Company, any Subsidiary, or any officer or employee of either, to any material tax or penalty imposed under the Code or ERISA. 4.16.10 Except as required by Law or as disclosed on Schedule 4.16.10, the consummation of the transactions contemplated herein will not accelerate the time of vesting, or the time of payment or increase the amount, of compensation due any director, employee, officer, former employee or former officer of a Company or a Subsidiary. There are no contracts or arrangements providing for payments that could subject any Person to liability for tax under Section 4999 of the Code. 21 4.16.11 With respect to each Company Plan that is a Non-U.S. Plan, all employer and employee contributions required by Law or by the terms of such Non-U.S. Plan have been made, or, if applicable, accrued in accordance with the Company's normal accounting practices and each Non-U.S. Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities. 4.17 Labor. 4.17.1 Except as set forth on Schedule 4.17.1, no Company or Subsidiary is party to any labor or collective bargaining agreement and there are no labor or collective bargaining agreements which pertain to employees of the Company or any of its Subsidiaries. The Sellers have delivered or otherwise made available to the Purchaser true, correct and complete copies of the labor or collective bargaining agreements listed on Schedule 4.17.1, together with all amendments, modifications or supplements thereto. 4.17.2 No labor organization or group of employees of any Company or any Subsidiary has made in writing a pending demand for recognition, and there are no representation proceedings or petitions seeking a representation proceeding presently pending or, to the Knowledge of Sellers, threatened to be brought or filed with the National Labor Relations Board or other labor relations tribunal. 4.17.3 Except as set forth on Schedule 4.17.3, there are no strikes, work stoppages, unfair labor practice charges, slowdowns or lockouts or, to the Knowledge of Sellers, grievances or other labor disputes pending or overtly threatened against or involving any Company or any Subsidiary except individual grievances being processed and resolved in accordance with established grievance procedures utilized by such Company or Subsidiary. 4.18 Litigation. 4.18.1 Except as set forth in Schedule 4.18.1, there is no pending Legal Proceeding: (i) where an express written claim for damages against a Company or a Subsidiary exceeds One Million Dollars ($1,000,000) or there is an express written claim against a Company or a Subsidiary for injunctive relief; (ii) commenced against Invensys, a Seller, a Company or a Subsidiary that challenges or seeks to prevent, delay or otherwise interfere with any of the transactions contemplated hereby; or (iii) that has been commenced by any Company or Subsidiary which seeks Fifty Thousand Dollars ($50,000) or more in damages. 22 To the Knowledge of Sellers, no such Legal Proceeding has been threatened in writing by a Company or a Subsidiary or against a Company or a Subsidiary. Sellers have made available to Purchaser copies of all pleadings relating to each Legal Proceeding listed in Schedule 4.18.1. 4.18.2 Except as set forth in Schedule 4.18.2: (i) there is no Order to which any of the Companies or Subsidiaries, or any of the assets owned or used by any of them, is subject which (i) would require the payment of Fifty Thousand Dollars ($50,000) or more, or (ii) would restrict the operation of the business of any Company or Subsidiary as currently conducted (a "Material Order"); (ii) neither Invensys nor any Seller is subject to any Order that relates to the Shares; (iii) to the Knowledge of Sellers, no officer, director or employee of any Company or Subsidiary is subject to any Order that prohibits such officer, director, or employee from engaging in or continuing any conduct, activity, or practice relating to the business of any Company or Subsidiary; (iv) each Company and Subsidiary is in compliance with all of the terms and requirements of each Material Order; (v) to the Knowledge of Sellers, no event has occurred that would constitute or result in (with or without notice or lapse of time) a violation of or failure to comply with any term or requirement of any Material Order; and (vi) no Company or Subsidiary has received, at any time since January 1, 2001, any written notice from any Governmental Body or any other Person regarding any actual, alleged, possible, or potential violation of, or failure to comply with, any term or requirement of any Material Order. 4.19 Compliance with Laws; Governmental Authorizations. 4.19.1 Except as shown on Schedule 4.19.1, each Company and each Subsidiary is in compliance with all Laws applicable to the Company and the Subsidiaries or to the conduct of the business or operations of the Companies and the Subsidiaries or the use of their respective properties (including any leased property) and assets, except for such non-compliances as would not, individually or in the aggregate, have a material adverse effect on a Company or Subsidiary, and all Governmental Authorizations which are required for each of the Companies and the Subsidiaries to operate its business have been issued, except for those the absence of which will not cause any Company or Subsidiary to cease or materially alter any operations presently conducted by such Company or Subsidiary. 23 4.19.2 Schedule 14.9.2 contains a complete and accurate list of each Governmental Authorization that is held by any Company or Subsidiary which is material to the conduct of the business of any Company or Subsidiary. Each Governmental Authorization listed in Schedule 4.19.2 is valid and in full force and effect. Except as set forth in Schedule 4.19.2: (i) to the Knowledge of Sellers, each Company or Subsidiary is in compliance with all of the terms and requirements of each Governmental Authorization identified in Schedule 4.19.2; (ii) to the Knowledge of Sellers, no event has occurred that will (with or without notice or lapse of time) (A) constitute or result directly or indirectly in a violation of or failure to comply with any term or requirement of any Governmental Authorization listed in Schedule 4.19.2, or (B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation, or termination of, or any modification to, any Governmental Authorization listed in Schedule 4.19.2; and (iii) all applications required to have been filed for the renewal of the Governmental Authorizations listed in Schedule 4.19.2 have been duly filed with the appropriate Governmental Bodies, and all other filings required to have been made with respect to such Governmental Authorizations have been duly filed with the appropriate Governmental Bodies. 4.20 Environmental Matters. Except as disclosed on Schedule 4.20, (i) each Company and Subsidiary is in material compliance with all Environmental Laws, which compliance includes obtaining, maintaining and complying in all material respects with any and all permits required by Environmental Laws; (ii) there are no claims or proceedings pending or, to the Knowledge of Sellers, threatened against any Company or Subsidiary alleging the violation of or non-compliance with Environmental Laws; and (iii) to the Knowledge of Sellers, no facts, circumstances or conditions currently exist at any Company Property that would reasonably be expected to result in a Company or Subsidiary incurring liabilities under Environmental Laws or prevent continued material compliance with applicable Environmental Laws. Schedule 4.20 lists and identifies by site each Environmental Due Diligence Assessment prepared by URS Corporation in connection with the transactions contemplated by this Agreement. 4.21 Financial Advisors. Except as set forth on Schedule 4.21, no Person has acted, directly or indirectly, as a broker, finder or financial advisor for the Sellers in connection with the transactions contemplated by this Agreement and no Person is entitled to any fee or commission or like payment in respect thereof. The Sellers shall be responsible for the fees or commissions of any Person listed on Schedule 4.21. 24 4.22 Insurance. Sellers have delivered to Purchaser: (i) true and complete lists of all globally placed policies of insurance to which any Company or Subsidiary is a party or under which any Company or Subsidiary, or any director of any Company or Subsidiary, is covered; (ii) true and complete descriptions of all pending applications for global policies of insurance; and (iii) any statement by the auditor of any Company's financial statements with regard to the adequacy of such entity's coverage or of the reserves for claims. 4.23 Certain Payments. Since January 1, 2000, no Company or Subsidiary or director, officer, agent, or employee of any Company or Subsidiary has directly or indirectly made any contribution, gift, bribe, rebate, payoff, influence, payment, kickback, or other payment to any Person, private or public, regardless of form whether in money, property, or services (i) to obtain favorable treatment in securing business, (ii) to pay for favorable treatment for business secured, or (iii) to obtain special concessions or for special concessions already obtained, for or in respect of any Company or Subsidiary, in each case, with respect to clauses (i), (ii) and (iii), which was in violation of any Law in effect as of the date of such event. 4.24 Relationships with Related Persons. Except as listed and described on Schedule 4.24, none of the Sellers or Invensys, or any Affiliate of any of them (other than a Company or Subsidiary) (i) has any interest in any property (whether real, personal, or mixed and whether tangible or intangible) used in the Fasco Business, or (ii) is a party to any Contract with, has any claim or right against, or is a creditor of, any Company or Subsidiary. 4.25 No Other Representations or Warranties. Except for the representations and warranties contained in this Article 4, no Seller, Company, Subsidiary, Affiliate of a Seller, or Invensys or any other Person makes any representations or warranties, and the Sellers, the Companies and the Subsidiaries hereby disclaim any other representations or warranties, whether made by a Seller or any Affiliate of a Seller, or any of their respective officers, directors, employees, agents or representatives, with respect to the execution and delivery of this Agreement or any Seller Document, or the transactions contemplated hereby, notwithstanding the delivery or disclosure to Purchaser or its representatives of any documentation or other information with respect to any one or more of the foregoing. 25 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER The Purchaser hereby represents and warrants to the Sellers that: 5.1 Organization and Good Standing. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Michigan. 5.2 Authorization of Agreement. The Purchaser has full corporate power and authority to execute and deliver this Agreement and each other agreement, document, instrument or certificate contemplated by this Agreement or to be executed by the Purchaser in connection with the consummation of the transactions contemplated hereby and thereby (together with this Agreement, the "Purchaser Documents"), and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by the Purchaser of this Agreement and each Purchaser Document has been duly authorized by all necessary corporate action on behalf of the Purchaser. This Agreement has been, and each Purchaser Document will be at or prior to the Closing, duly executed and delivered by the Purchaser and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and each Purchaser Document when so executed and delivered will constitute, legal, valid and binding obligations of the Purchaser, enforceable against the Purchaser in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity. 5.3 Conflicts; Consents of Third Parties. 5.3.1 None of the execution and delivery by the Purchaser of this Agreement and the other Purchaser Documents, the consummation of the transactions contemplated hereby, or the compliance by the Purchaser with any of the provisions hereof or thereof will (i) conflict with, or result in the breach of, any provision of the certificate of incorporation or by-laws of the Purchaser, (ii) conflict with, violate, result in the breach of, or constitute a default under any note, bond, mortgage, indenture, license, agreement or other obligation to which the Purchaser is a party or by which the Purchaser or its properties or assets are bound or (iii) violate any statute, rule, regulation, or Order of any Governmental Body by which the Purchaser is bound, except, in the case of clause (ii), for such violations, breaches or defaults as would not, individually or in the aggregate, have a material adverse effect on the ability of the Purchaser to consummate the transactions contemplated by this Agreement. 5.3.2 Except as set forth on Schedule 5.3.2, no consent, waiver, approval, Order, permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of the Purchaser in 26 connection with the execution and delivery of this Agreement or the Purchaser Documents or the compliance by Purchaser with any of the provisions hereof or thereof. 5.4 Litigation. There are no Legal Proceedings pending or, to the Knowledge of Purchaser, threatened, that are reasonably likely to prohibit or adversely affect the ability of the Purchaser to enter into this Agreement or consummate the transactions contemplated hereby. 5.5 Investment Intention. The Purchaser is acquiring the Shares for its own account, for investment purposes only and not with a view to the distribution (as such term is used in Section 2(11) of the Securities Act of 1933, as amended (the "Securities Act") thereof. Purchaser understands that the Shares have not been registered under the Securities Act and cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available. 5.6 Financial Advisors. Except as set forth in Schedule 5.6, no Person has acted, directly or indirectly, as a broker, finder or financial advisor for the Purchaser in connection with the transactions contemplated by this Agreement and no Person is entitled to any fee or commission or like payment in respect thereof. The Purchaser shall be responsible for the fees or commissions of any Person listed on Schedule 5.6. 5.7 Sufficiency of Funds. 5.7.1 Purchaser (i) has, and at the Closing will have, sufficient internal funds (giving effect to any unfunded committed financing) available to pay the purchase price and any expenses incurred by Purchaser in connection with the transactions contemplated by this Agreement and (ii) has, and at the Closing will have, the resources and capabilities (financial or otherwise) to perform its obligations hereunder and under the other Purchaser Documents. 5.7.2 Schedule 5.7.2 sets forth each of the sources and amounts of Purchaser's financing, and Purchaser has delivered or shall deliver to Sellers, promptly upon its becoming available, any and all commitment letters and all other letters and agreements in connection with such financing. ARTICLE 6 COVENANTS 6.1 Access to Management. Sellers agree that, prior to the Closing Date, Purchaser shall be permitted access, during normal business hours, to such of the properties, books, Contracts, commitments, Tax Returns and other records relating to the Tax attributes of the Companies and Subsidiaries, and access to such officers, employees, consultants, agents, accountants, attorneys and other representatives of the Companies and the Subsidiaries, as Purchaser may reasonably request; provided, however, that Purchaser's access shall not materially disrupt or interfere with the 27 operation of the business. Sellers shall furnish Purchaser with all financial and operating data and other information concerning the affairs of the Companies and Subsidiaries as Purchaser may reasonably request. 6.2 Conduct of Business Pending the Closing. 6.2.1 Prior to the Closing, except: (i) as set forth on Schedule 6.2 hereto, (ii) as contemplated by this Agreement, (iii) as required by applicable Law or (iv) with the prior written consent of the Purchaser, the Sellers shall, and shall cause the Companies and the Subsidiaries to: 6.2.1.1 conduct the respective businesses of the Companies and the Subsidiaries only in the ordinary course consistent with past practice; 6.2.1.2 use reasonable commercial efforts to (i) preserve the present business operations, organization (including, without limitation, management, employees, agents and the sales force) and goodwill of the Companies and the Subsidiaries and (ii) preserve the present relationship with Persons having business dealings with the Companies and the Subsidiaries, including, without limitation, suppliers, customers, landlords and creditors; 6.2.2 Prior to the Closing, except as (i) set forth on Schedule 6.2 hereto, (ii) contemplated by this Agreement, (iii) required by applicable Law or (iv) with the prior written consent of the Purchaser, the Sellers shall not, and shall cause the Companies and the Subsidiaries not to: 6.2.2.1 declare, set aside, make or pay any dividend or other distribution in respect of the capital stock of the Companies or the Subsidiaries or repurchase, redeem or otherwise acquire any outstanding shares of the capital stock or other securities, or other ownership interests in, the Companies or any Subsidiaries; 6.2.2.2 transfer, issue, sell or dispose of any shares of capital stock or other securities of any Company or any Subsidiary or grant options, warrants, calls or other rights to purchase or otherwise acquire shares of the capital stock or other securities of any Company or any Subsidiary; 6.2.2.3 effect any recapitalization, reclassification, stock split or like change in the capitalization of any Company or any Subsidiary; 6.2.2.4 amend the certificate of incorporation or by-laws (or comparable instruments) of any Company or any Subsidiary; 6.2.2.5 except for trade payables and for indebtedness for borrowed money incurred in the ordinary course of business and consistent with past practice, borrow monies for any reason or draw down on any line of credit or debt 28 obligation, or become the guarantor, surety, endorser or otherwise liable for any debt, obligation or liability (contingent or otherwise) of any other Person; 6.2.2.6 subject to any Lien (except for Liens that do not materially impair the use of the property subject thereto in their respective businesses as presently conducted and Permitted Exceptions) any of the properties or assets (whether tangible or intangible) of any Company or Subsidiary; 6.2.2.7 acquire any properties or assets or sell, assign, transfer, convey, lease or otherwise dispose of any of the properties or assets (except for fair consideration in the ordinary course of business consistent with past practice) of any Company or Subsidiary for which the aggregate consideration paid or payable in any individual transaction is in excess of Five Hundred Thousand Dollars ($500,000); 6.2.2.8 permit any Company or any Subsidiary to enter into or agree to enter into any merger or consolidation with any corporation or other entity; or 6.2.2.9 agree to take any action prohibited by this Section 6.2. 6.3 Employee Matters. 6.3.1 Sellers shall or shall cause an Affiliate (other than the Companies and the Subsidiaries) to employ prior to the Closing Date each employee of any Company or any Subsidiary employed in the United States who was absent from active employment on the Closing Date due to long term disability or who is a former employee receiving severance benefits (an "Inactive Employee"). Such Inactive Employees shall be deemed to have transferred their employment from the Companies and the Subsidiaries to the Sellers or any such Affiliate prior to the close of business on the Closing Date. Sellers shall provide a schedule listing such Inactive Employees as of the Closing Date on or prior to the Closing Date. All Employees of the Companies and the Subsidiaries (other than Inactive Employees) ("Employees") who are actively at work (including Employees on vacation and on any Approved Absence, as defined below) as of the Closing Date shall continue to be employed as of the Closing Date at their base salary or wage rate in effect immediately prior to the Closing Date (or, as applicable, immediately prior to his or her Approved Absence). All other Employees of the Companies and the Subsidiaries employed in the United States who are not actively at work on the Closing Date due to an approved leave of absence (including active military service), short term disability (including employees on workers' compensation) or a layoff with active recall rights in place pursuant to the terms of applicable Company policy or labor agreement ("Approved Absence"), shall continue to be employed by the Companies and the Subsidiaries as of the Closing Date. All Employees of the Companies and the Subsidiaries employed outside the United States ("Non-U.S. Employees") shall continue to be employed on and after the Closing Date on terms and conditions required by and in accordance with the provisions of applicable foreign, federal or state Law. 29 6.3.2 Purchaser agrees to provide, and shall cause the Companies and the Subsidiaries to provide, each Employee with employee benefits (including, without limitation, medical and dental benefits) that in the aggregate are substantially similar to those benefits provided by Purchaser or its Affiliates to its similarly situated employees and such other terms and conditions of employment as may be required by applicable Law. 6.3.3 The Purchaser acknowledges that the Companies and the Subsidiaries will have in effect on the Closing Date, the collective bargaining agreements (including any benefit plans maintained pursuant to such collective bargaining agreements) and the Company Plans listed in Schedule 4.16.1 and Schedule 4.17.1 and statutory and social laws of foreign countries. 6.3.4 Purchaser agrees that, with respect to all of its employee benefit plans, programs and arrangements covering or otherwise benefiting any of the Employees on or after the Closing Date, service with the Companies and the Subsidiaries shall be, to the extent permitted under applicable Law, counted for purposes of eligibility to participate, vesting, level of benefits with respect to vacation , and benefit accruals in any defined benefit pension plan, to the same extent such service was counted under the corresponding employee benefit plans, programs, or arrangements of the Companies and the Subsidiaries prior to the Closing Date and, in the case of Non-U.S. Employees, further to the extent and in the manner provided for under applicable Law, except to the extent that such credit would result in duplication of benefits for such period of service. With regard to severance arrangements, Employees will be treated the same as similarly situated employees of the Purchaser. 6.3.5 Purchaser shall provide welfare benefits of the type described in Section 3(1) of ERISA and in accordance with this Section 6.3, as of the Closing Date so as to ensure uninterrupted coverage of all Employees employed in the United States ("U.S. Employees"). Such plans shall grant credit for amounts paid by the U.S. Employees on or before the Closing Date by an Employee or an Employee's covered dependent for purposes of satisfying applicable deductible, coinsurance, and maximum out-of-pocket provisions if such amounts are applicable to the same calendar year in which the Closing Date occurs, in each case, under any applicable welfare plan of Purchaser or its Affiliates, provided that such information is provided to Purchaser within thirty (30) days following the Closing Date, and Purchaser shall waive any pre-existing condition exclusions evidence of insurability provisions, waiting period requirements or any similar provision. 6.3.6 Effective as of the Closing Date, the Purchaser shall cover, or cause the Companies and the Subsidiaries to cover, the U.S. Employees under one or more defined contribution plans and trusts intended to qualify under Section 401(a) and Section 501(a) of the Code (the "Purchaser DC Plan"). Invensys shall transfer the account balances (including loans to U.S. Employees) of U.S. Employees under the Invensys 401(k) plan which is a defined contribution plan ("Seller DC Plan") to the Purchaser DC Plan. In connection with any transfer, the Purchaser will allow each U.S. 30 Employee's outstanding loan and related promissory note, if any, under the Seller DC Plan to be transferred to the Purchaser DC Plan. Sellers and Purchaser shall reasonably cooperate in good faith to effect such transfers as soon as practicable after the Closing Date. 6.3.7 6.3.7.1 Effective as of the Closing Date, the Purchaser shall establish one (1) or more qualified defined benefit plans or shall designate one (1) or more established defined benefit plans ("Purchaser's Salaried Plans") and a trust(s) to fund Purchaser's Salaried Plans ("Purchaser's Salaried Trust") to assume the liabilities attributable to the non-union, current U.S. Employees (and excluding former and Inactive Employees) of the Fasco Business (collectively, the "Salaried Pension Transferees") as of the Closing Date entitled to a benefit under the Invensys Pension Plan applicable to such Salaried Pension Transferees ("Assumed Salaried Pension Plan Liabilities"). 6.3.7.2 As soon as possible, but no later than sixty (60) days post-Closing, Purchaser shall provide Sellers with a current determination letter(s) on the qualification under Sections 401(a) and 501(a) of the Code of all Purchaser's Salaried Plans. 6.3.7.3 Within one hundred twenty (120) days after the Closing Date, but in no event prior to the confirmation that Purchaser's Salaried Plans and the Invensys Pension Plan comply with Sections 401(a) and 501(a) of the Code, Invensys shall cause the transfer of assets from the Sellers' qualified pension trust for the Invensys Pension Plan (the "Sellers' Salaried Trust") to Purchaser's Salaried Trust which shall comply with Section 414(l) of the Code and applicable PBGC regulations and assumptions, as described in PBGC regulation appendix B to Part 4044, Table I, as of the Closing Date. 6.3.7.4 The transfer, when made from the Sellers' Salaried Trust to the Purchaser's Salaried Trust, shall be in cash and shall be adjusted based on the actual rate of return of the Sellers' Salaried Trust on the amount calculated under Section 6.3.7.2 or Section 6.3.7.3 above from the Closing Date to the actual date of transfer to the Purchaser's Salaried Trust. 6.3.7.5 Upon the receipt of the assets by Purchaser's Salaried Trust in accordance with this Section 6.3.7 and upon receipt by Purchaser of all participant data reasonably necessary for Purchaser to calculate benefits and administer the Purchaser's Salaried Plan (with regard to such participants), the Purchaser and Purchaser's Salaried Plans shall be solely responsible for the Assumed Salaried Pension Plan Liabilities. 6.3.7.6 The Purchaser and the Sellers shall take such other actions necessary or appropriate to accomplish the assumption of the Assumed Salaried 31 Pension Plan Liabilities including, without limitation, the timely filing of IRS Forms 5310-A and the timely filing of any necessary PBGC filings. 6.3.7.7 Any calculations of the amount to be transferred under this Agreement by Sellers' actuary shall be subject to review by Purchaser's actuary. If Purchaser's and Sellers' actuaries cannot agree on the amount to be transferred, Purchaser and Sellers shall appoint a third mutually acceptable actuary whose decision on the amount to be transferred shall be binding on the parties. The Sellers and the Purchaser shall furnish, or cause to be furnished, to such actuary all information the actuary shall reasonably request for purposes of making this determination. The Sellers and the Purchaser shall cause the actuary to act promptly to resolve the issues in dispute. The fees and expenses of such actuary shall be borne equally (i.e., on a 50/50 basis) by the Sellers and the Purchaser. Following determination of the amount to be transferred under this Agreement, Purchaser and Invensys, as agent for the Sellers, shall send to the Escrow Agent a certificate, signed by each of Purchaser and Invensys, directing the Escrow Agent to disburse the Escrow Funds to Purchaser and/or Invensys in amounts determined in accordance with Section 2.2.2.4. 6.3.7.8 Effective on the Closing Date, the Purchaser shall assume all liability for providing retiree health and life insurance benefits to all Employees and all former employees of the Fasco Business entitled to such benefits under any plan, program or arrangement provided by the Sellers, the Companies or the Subsidiaries as of the Closing Date. 6.3.7.9 Effective as of the Closing Date, Fasco Australia Pty Limited and Fasco Motors Limited shall cease participating in any pension plan or fund which is not sponsored by the Companies or Subsidiaries and shall cease contributing on behalf of their respective current and former employees to such plans. With respect to such plans, Purchaser and Sellers agree to take all actions necessary or as required by Law to effectuate the foregoing. 6.4 Preservation of Records. Subject to Section 9.6.4.2 (relating to the preservation of Tax records), the Sellers and the Purchaser agree that each of them shall preserve and keep the records held by it relating to the business of the Companies and the Subsidiaries for a period of five (5) years from the Closing Date and shall make such records and personnel available to the other as may be reasonably required by such party in connection with, among other things, any insurance claims by, Legal Proceedings against or governmental investigations of the Sellers or the Purchaser or any of their Affiliates or in order to enable the Sellers or the Purchaser to comply with their respective obligations under this Agreement and each other agreement, document or instrument contemplated hereby or thereby. In the event the Sellers or the Purchaser wishes to destroy such records within five (5) years of the Closing Date, such party shall first give ninety (90) days prior written notice to the other and such other party shall have the right at its option and expense, upon prior written notice given to such party within that ninety (90) day period, to take possession of the records. 32 6.5 Publicity. Neither the Sellers nor the Purchaser shall issue any press release or public announcement concerning this Agreement or the transactions contemplated hereby without obtaining the prior written approval of the other party hereto, which approval will not be unreasonably withheld or delayed, unless, based upon advice of their respective legal counsel, disclosure is otherwise required by applicable Law or by the applicable rules of any stock exchange or NASDAQ or other national market on which the Purchaser or the parent company of the Sellers list securities, provided that, to the extent required by applicable Law, the party intending to make such release shall use its reasonable commercial efforts consistent with such applicable Law to consult with the other party with respect to the text thereof. Sellers and Purchaser will consult with each other concerning the means by which the Companies' and Subsidiaries' employees, customers and suppliers, and others having dealings with the Companies or the Subsidiaries, will be informed of the transactions contemplated by this Agreement. 6.6 Schedule of Retiree Benefit Plan Participants. Prior to the Closing Date, Sellers shall provide to Purchaser a schedule of all former employees of the Fasco Business participating, as of a date no more than fifteen (15) days prior to the Closing Date, in any retiree health or life insurance plan, program or arrangement the liability for which is assumed by Purchaser pursuant to Section 6.3.7.8. Within fifteen (15) days after the Closing Date, Sellers shall provide to Purchaser a similar schedule indicating, as of the Closing Date, any individuals added to the schedule due to their retirement since the date of the schedule provided pursuant to the preceding sentence or deleted from such preceding schedule. 6.7 Use of Name. Purchaser agrees that it shall cause the Companies and the Subsidiaries to (i) as soon as practicable after the Closing Date and in any event within thirty (30) Business Days following the Closing Date, cease to make any use of the name "Invensys", "Siebe" or "BTR", or any service marks, trademarks, trade names, identifying symbols, logos, emblems, signs or insignia related thereto or containing or comprising the foregoing, including any name or mark confusingly similar thereto (collectively, the "Seller Marks"), (ii) immediately after the Closing, cease to hold itself out as having any affiliation with any Seller or any of their Affiliates and (iii) effective as of the Closing, in the case of any Company or any Subsidiary whose name includes the name "Invensys", "Siebe" or "BTR", change its corporate name to a name that does not include the name "Invensys", "Siebe" or "BTR" and make any necessary legal filings with the appropriate Governmental Body to effect such change. In furtherance thereof, as promptly as practicable but in no event later than thirty (30) Business Days following the Closing Date, Purchaser shall cause the Companies and their Affiliates to remove, strike over or otherwise obliterate all Seller Marks from all materials owned by any Company or Subsidiary, including, without limitation, any vehicles, business cards, schedules, stationery, packaging materials, displays, signs, promotional materials, manuals, forms, computer software and other materials; provided, however, that the Company or the Subsidiary may during such thirty (30) day period continue to use any such material containing a Seller Mark to the extent that it is not practicable to remove or obliterate such Seller Mark. Notwithstanding anything herein to the contrary, Purchaser shall retain 33 any and all service marks, trademarks, identifying symbols, logos, emblems, signs or insignia of each Company and Subsidiary to the extent that they do not incorporate any of the Seller Marks. 6.8 Insurance. 6.8.1 Purchaser acknowledges and agrees that, upon Closing, all insurance coverage provided in relation to the Fasco Business pursuant to policies maintained by any Seller or its Affiliates (other than any Company or Subsidiary) (whether such policies are maintained with third party insurers or with Seller or its Affiliates (other than any Company or Subsidiary) shall cease and no further coverage shall be available to any Company or Subsidiary as an Affiliate under any such policies that are "claims made" basis policies but (subject to the terms of any relevant policy) without prejudice to any accrued claims which a Company or a Subsidiary or any Seller or Affiliate (in the latter case in relation to the Fasco Business) may have at Closing, provided that the Fasco Business shall retain the benefit of "occurrence" based policies of insurance in relation to events occurring prior to Closing but in respect of which no claim has yet arisen at the time of Closing. 6.8.2 Purchaser and Sellers agree that any claims made under the insurance policies referred to in Section 6.8.1 in respect of the Fasco Business shall be administered and collected by Sellers (or by a claims handler appointed by Sellers) on behalf of Purchaser. Purchaser shall cooperate fully with Sellers to enable Sellers to comply with the requirements of the relevant insurer, and Purchaser shall provide such information and assistance as Sellers may reasonably request in connection with any such claim. Any monies received by Sellers as a result of such claims shall be paid over to Purchaser, net of all reasonable costs and expenses of recovery (including, without limitation, all reasonable handling and collection charges by any claims handler appointed by Purchaser) and net of any deductible or self-insured retention amount. 6.8.3 In respect of all claims under the insurance policies referred to in Section 6.8.1 notified to insurers at the date of this Agreement and all claims subsequently brought under such insurance policies and relating to the Fasco Business, Purchaser acknowledges that the coverage available under such policies may be subject to a deductible or a self-insured retention amount and that Purchaser will not be entitled to seek reimbursement of such deductible or self-insured retention amount from Sellers. In no event will Purchaser have any monetary obligation to Sellers with respect to such deductible or self-insured retention amount. 6.9 Reasonable Commercial Efforts. Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use its reasonable commercial efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement, including the following: (i) the taking of all acts necessary to cause the conditions to Closing to be satisfied as 34 promptly as practicable, (ii) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from Governmental Bodies and the making of all necessary registrations and filings (if any, including filings with Governmental Bodies) and the taking of all steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by any Governmental Body, (iii) the obtaining of all necessary consents, approvals or waivers from third parties, (iv) the defending of any lawsuits or other Legal Proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Body vacated or reversed, and (v) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. 6.10 HSR Act Compliance; Foreign Governmental Approvals. Each of Purchaser and Sellers will promptly, and in any event within five (5) Business Days after execution of this Agreement, make all filings or submissions as are required under the HSR Act and as soon thereafter as reasonably practicable make all filings and submissions as are required to obtain all Foreign Governmental Approvals. For the purposes of this Agreement, the term "Foreign Governmental Approval" shall mean any consent or order of, with or to any foreign Governmental Body set forth on Schedule 4.6.2 or Schedule 5.3.2. Each of Purchaser and Sellers will promptly furnish to the other such necessary information and reasonable assistance as the other may request in connection with its preparation of any filing or submission which is necessary under the HSR Act or to obtain any Foreign Governmental Approval. Each of Purchaser and Sellers will promptly provide the other with copies of all written communications (and memoranda setting forth the substance of all oral communications) between each of them or their representatives, on the one hand, and any Governmental Body, on the other hand, with respect to this Agreement or the transactions contemplated hereby. Without limiting the generality of the foregoing, each of Purchaser and Sellers will promptly notify the other of the receipt and content of any inquiries or requests for additional information made by any Governmental Body in connection therewith and shall promptly (i) comply with any such inquiry or request and (ii) provide the other with a description of the information provided to any Governmental Body with respect to any such inquiry or request. In addition, each of Purchaser and Sellers will keep the other apprised of the status of any such inquiry or request. Sellers and Purchaser shall cooperate in seeking early termination of any applicable waiting period under the HSR Act. 6.11 Contacts with Suppliers, Employees and Customers. Without the consent of Sellers, which consent will not be unreasonably withheld, Purchaser shall not contact any suppliers to, employees of, or customers of, any Company or Subsidiary in connection with or pertaining to any subject matter of this Agreement. 6.12 Invensys Commitments. Purchaser acknowledges and agrees that, on or before the date that is ninety (90) days following the Closing Date, it shall cause any Commitment made by Invensys and its Affiliates (other than a Company or a Subsidiary) with respect to the activities (financial or otherwise) of a Company or a 35 Subsidiary to be terminated or settled or replaced by an alternate Commitment from a party other than Invensys or its Affiliates (excluding a Company or a Subsidiary). For purposes of the foregoing, "Commitment" shall mean the financial commitments or support, letters of credit, performance bonds, parent company guarantees, bid bonds, bank guarantees or similar instruments set forth on Schedule 6.12. 6.13 Intellectual Property. To the extent that Sellers transfer any Intellectual Property or Technology that does not relate to the Fasco Business or is necessary to the conduct of the business of Sellers or their Affiliates (other than the Companies and the Subsidiaries) as conducted up to and through the Closing Date, after written notice by a Seller to Purchaser within six months following the Closing Date, Purchaser agrees to transfer that Intellectual Property or Technology back to Sellers and/or their Affiliates or, if that Intellectual Property or Technology is used in the Fasco Business, to grant Sellers and/or their Affiliates a perpetual, nonexclusive, non-sublicensable, fully paid-up license to use that Intellectual Property or Technology to the extent that Purchaser has the right to make such grant. 6.14 Notification. Between the date of this Agreement and the Closing Date, each of the Sellers on the one hand and the Purchaser on the other hand will use its best efforts to promptly notify the other party in writing if a Seller or Purchaser becomes aware of any fact or condition that causes or constitutes a breach of any of such party's representations and warranties under this Agreement. Should any such fact or condition require any change in any Schedule previously delivered by a party under this Agreement, such party will promptly deliver to the other party a supplement to the subject Schedule(s) specifying such change. During the same period, each of the Sellers on the one hand and the Purchaser on the other hand will use its best efforts to promptly notify the other party of the occurrence of any breach of any of its covenants in this Section 6 or of the occurrence of any event that may make the satisfaction of the conditions in Section 7 impossible or unlikely. 6.15 Estoppel Certificates and Title Commitments. Sellers acknowledge and agree that from the date hereof through the Closing Date they shall use their commercially reasonable efforts to obtain estoppel certificates (a form of which is attached hereto as Annex C) from the landlords of each of the Real Property Leases and updated title commitments with respect to each of the North American Owned Properties. 6.16 Financial Statements. 6.16.1 Invensys acknowledges that it is Purchaser's requirement to have available to Purchaser, on or before January 31, 2003, the following financial statements: 6.16.1.1 audited combined balance sheets of the Fasco Business at March 31, 2002 and 2001, and the related combined statements of operations, invested capital and cash flows for each of the years ended March 31, 2002, 2001 and 2000, together with an audit report of Ernst and Young LLP thereon, in each 36 case prepared in accordance with U.S. GAAP, and with the accounting requirements and the published rules and regulations of the SEC; and 6.16.1.2 an unaudited condensed combined balance sheet of the Fasco Business at September 30, 2002, and the related combined statements of operations, invested capital and cash flows for the six month periods ended September 30, 2002 and 2001, together with a SAS 71 review report of Ernst and Young LLP ("E&Y") thereon, in each case prepared in accordance with U.S. GAAP, and with the accounting requirements and the published rules and regulations of the SEC, provided, however, that if the Closing occurs on or after February 1, 2003, it is Purchaser's requirement to have available to Purchaser, not later than February 28, 2003, an unaudited condensed combined balance sheet of the Fasco Business at December 31, 2002, and the related combined statements of operations, invested capital and cash flows for the nine month periods ended December 31, 2002 and 2001, together with a SAS 71 review report of E&Y thereon, in each case prepared in accordance with U.S. GAAP, and with the accounting requirements and the published rules and regulations of the SEC. 6.16.2 Prior to Closing, in order to assist Purchaser in achieving its requirements described in Section 6.16.1 above, Invensys and Sellers shall use their commercially reasonable best efforts to: 6.16.2.1 cause the management of the Companies and the Subsidiaries to prepare the financial statements described in Section 6.16.1 above, reflecting required E&Y adjustments; and 6.16.2.2 provide E&Y with such access to (i) management of the Companies and the Subsidiaries, (ii) other employees of Invensys and its Affiliates and (iii) the books and records of the Companies and the Subsidiaries as is necessary to permit E&Y to prepare the audit and review reports described in Section 6.16.1 above. 6.16.3 In order to assist Purchaser in achieving its requirements described in Section 6.16.1 above, Invensys and Sellers shall provide to E&Y any management representation letters signed or to be signed by: (i) the management of the Companies and the Subsidiaries (prior to Closing), and (ii) the management of Invensys as requested by E&Y in connection with E&Y's preparation of the audit and review reports described in 6.16.1. 6.16.4 Fees charged by E&Y to complete the required reviews and prepare the reports described in Section 6.16.1.2 shall be borne by the Purchaser. 6.17 Transition Services Agreement. Between the date of this Agreement and the Closing Date, the parties hereto agree to prepare Schedule I to the Transition Services Agreement, pursuant to which Invensys will provide certain services to the Companies and Subsidiaries for a transitional period after the Closing Date. The 37 parties acknowledge that the pricing of services to be included in Schedule I shall be calculated on a marginal cost basis. ARTICLE 7 CONDITIONS TO CLOSING 7.1 Condition Precedent to Obligations of Purchaser. The obligation of the Purchaser to consummate the transactions contemplated by this Agreement is subject to the fulfillment, on or prior to the Closing Date, of the following conditions (which may be waived by the Purchaser in whole or in part to the extent permitted by applicable Law): 7.1.1 The representations and warranties of Sellers in this Agreement shall be true and correct at and as of the Closing Date with the same force and effect as though made at and as of the Closing Date (it being understood that, for purposes of determining the accuracy of such representations and warranties: (i) to the extent that any representation or warranty is made as of a specific date, such representation or warranty shall be true and correct as of such date; (ii) any update to or modification to the Seller's Schedules made after the date of this Agreement shall be disregarded; and (iii) all materiality qualifications contained in such representations and warranties shall be disregarded), provided, however, that in the event of a breach of representation and warranty (except Sections 4.2 and 4.7), the condition set forth in this Section 7.1 shall be deemed satisfied unless the effect of all such breaches of representations and warranties (except a breach of Section 4.2 or 4.7) taken together, results in a Company Material Adverse Effect. 7.1.2 Each of the covenants and obligations that Sellers are required to perform or comply with pursuant to this Agreement at or prior to the Closing shall have been duly performed or complied with in all material respects, except that the covenants and agreements contained in Section 6.2 shall be duly performed or complied with in all respects. 7.1.3 There shall not have occurred any Company Material Adverse Effect or any event or circumstances that would result in a Company Material Adverse Effect. 7.1.4 Sellers and Invensys shall be able to deliver to the Purchaser all outstanding shares of stock in each of the Companies and the Subsidiaries held in the name of Invensys or any Affiliate of Invensys, free and clear of any and all Liens of any kind whatsoever. 7.2 Condition Precedent to Obligations of Sellers. The obligation of the Sellers to consummate the transactions contemplated by this Agreement is subject to the fulfillment, on or prior to the Closing Date, of the following conditions (which may be waived by the Sellers in whole or in part to the extent permitted by applicable Law): 38 7.2.1 The representations and warranties of Purchaser in this Agreement (i) that are qualified as to materiality shall be true and correct in all respects and (ii) that are not so qualified shall be true and correct in all material respects, at and as of the Closing Date with the same force and effect as though made at and as of the Closing Date (except to the extent that any representation or warranty is made as of a specific date, in which case such representation or warranty shall be true and correct as of such date). 7.2.2 Each of the covenants and obligations that Purchaser is required to perform or comply with pursuant to this Agreement at or prior to the Closing shall have been duly performed or complied with in all material respects. 7.3 Conditions to Each Party's Obligations. The respective obligations of each party to effect the transactions contemplated by this Agreement are subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by a party in whole or in part to the extent permitted by applicable Law): 7.3.1 The consents, waivers, approvals or other authorizations listed on Schedule 4.6.2 and Schedule 5.3.2 shall have been obtained or otherwise satisfied and any other approvals of Governmental Bodies required to consummate the transactions contemplated hereby shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired; 7.3.2 No Order issued by any court of competent jurisdiction or other Governmental Body restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement shall be in effect. ARTICLE 8 DOCUMENTS TO BE DELIVERED 8.1 Documents to be Delivered by the Sellers. At the Closing, the Sellers shall deliver, or cause to be delivered, to the Purchaser the following: 8.1.1 stock certificates representing all of the Shares and the shares described in Section 7.1.4, duly endorsed in blank or accompanied by stock transfer powers and with all requisite stock transfer tax stamps attached; 8.1.2 (a) written resignations of each of the directors of each Company and Subsidiary; and (b) written resignations of those Company and Subsidiary officers identified by Purchaser; 8.1.3 the Certificate of Non-Foreign Status; 39 8.1.4 a Non-Competition Agreement, duly executed by each Seller and Invensys, in the form set forth in Annex B; 8.1.5 such other documents as Purchaser may reasonably request for the purpose of (i) evidencing the accuracy of any of Sellers' representations and warranties, (ii) evidencing the performance by each Seller of, or the compliance by each Seller with, any covenant or obligations required to be performed or complied with by such Seller, (iii) evidencing the satisfaction of any condition referred to in Section 7, or (iv) otherwise facilitating the consummation or performance of any of the transactions contemplated by this Agreement; 8.1.6 documents, agreements or instruments, in form and substance satisfactory to Purchaser and its counsel, certifying to Purchaser that all receivables factoring arrangements to which any Company or Subsidiary is a party have been terminated, settled, or cancelled effective prior to or as of the Closing Date; 8.1.7 a certificate from the applicable Sellers certifying to Purchaser the dollar amounts that, as of the Closing Date, have not been expended in connection with shut-down costs for the Ozark and Elkhorn facilities and initially described on Schedule 2.5; and 8.1.8 the Escrow Agreement duly executed by each Seller and Invensys, in the form set forth in Annex E; and 8.1.9 the Transition Services Agreement duly executed by each Seller and Invensys, in the form set forth in Annex F. 8.2 Documents to be Delivered by the Purchaser. At the Closing, the Purchaser shall deliver to the Sellers the following: 8.2.1 evidence of the wire transfers referred to in Section 2.3.1; 8.2.2 such other documents as Sellers may reasonably request for the purpose of (i) evidencing the accuracy of any of Purchaser's representations and warranties, (ii) evidencing the performance by Purchaser of, or the compliance by Purchaser with, any covenant or obligation required to be performed or complied with by Purchaser, (iii) evidencing the satisfaction of any condition referred to in Section 7, or (iv) otherwise facilitating the consummation or performance of any of the transactions contemplated by this Agreement; 8.2.3 the Escrow Agreement duly executed by Purchaser, in the form set forth in Annex E; and 8.2.4 the Transition Services Agreement duly executed by Purchaser, in the form set forth in Annex F. 40 ARTICLE 9 INDEMNIFICATION 9.1 General Indemnification. 9.1.1 Subject to Sections 9.2, 9.3 and 9.4, Invensys and each Seller hereby agree to jointly and severally indemnify and hold the Purchaser, the Companies, and their respective directors, officers, employees, Affiliates, agents, successors and assigns (collectively, the "Purchaser Indemnified Parties") harmless from and against: 9.1.1.1 any and all Losses based upon, attributable to or resulting from the breach of any representation or warranty of any of the Sellers or Invensys set forth in Article 4, other than those set forth in Section 4.11, or the failure of any representation or warranty contained in any certificate delivered by or on behalf of the Sellers pursuant to this Agreement (without giving effect to any supplement to the Schedules) to be true and correct; 9.1.1.2 any and all Losses based upon, attributable to or resulting from the breach of any covenant or other agreement on the part of the Sellers under this Agreement; 9.1.1.3 any Pre-Closing Environmental Liability; 9.1.1.4 any Predecessor Environmental Liability; 9.1.1.5 any matter disclosed in Schedule 4.17.3; 9.1.1.6 Losses based upon, attributable to or resulting from matters related to motors manufactured by Von Weise Gear Company for use in medical lift chairs manufactured or assembled by Invacare Corporation; 9.1.1.7 Losses based upon, attributable to or resulting from Fasco Motors Limited being an "additional debtor" under a lease between Invensys Canada Inc. and PHH Vehicle Management Services to the extent such losses relate to vehicles other than vehicles used by Fasco Motors Limited; and 9.1.1.8 any claim by any Person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by any such Person with any Seller, Invensys, or any Company or Subsidiary (or any Person acting on their behalf) in connection with any of the transactions contemplated by this Agreement. 9.1.2 Subject to Section 9.2 and Section 9.4, Purchaser hereby agrees to indemnify and hold the Sellers and Invensys, and their respective directors, officers, employees, Affiliates, agents, successors and assigns (collectively, the "Seller Indemnified Parties") harmless from and against: 41 9.1.2.1 any and all Losses based upon, attributable to or resulting from the breach of any representation or warranty of the Purchaser set forth in Article 5, or the failure of any representation or warranty contained in any certificate delivered by or on behalf of the Purchaser pursuant to this Agreement (without giving effect to any supplement to the Schedules), to be true and correct; 9.1.2.2 any and all Losses based upon, attributable to or resulting from the breach of any covenant or other agreement on the part of the Purchaser under this Agreement; and 9.1.2.3 any claim by any Person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by any such Person with Purchaser (or any Person acting on its behalf) in connection with any of the transactions contemplated by this Agreement. 9.1.3 The provisions of this Section 9.1 and Section 9.5 shall not apply to Taxes, which shall be governed by the provisions of Section 9.6. 9.2 Limitations on Indemnification. 9.2.1 Other than with respect to the representations and warranties set forth in Sections 4.1, 4.2, 4.3, 4.7, 4.11, 4.20, 4.21 and 5.1, 5.2, 5.4 and 5.6, an indemnifying party shall not have any liability under Section 9.1.1.1 or 9.1.2.1: (i) with respect to any individual claim for the breach of a representation and warranty, unless and until the Losses claimed exceed Fifteen Thousand Dollars ($15,000) (the "De Minimis Amount"); (ii) unless and until the total amount of Losses to the indemnified parties finally determined to arise thereunder based upon, attributable to or resulting from the breach of all representations and warranties, exceeds, in the aggregate Three Million Dollars ($3,000,000) (the "Deductible"), disregarding any individual claim that does not exceed the De Minimis Amount and then only to the extent that such Losses exceed the Deductible; and (iii) for any Losses in excess of Fifty Million Dollars ($50,000,000) (the "Cap") once the total amount of Losses to the indemnified parties finally determined to arise thereunder based upon, attributable to or resulting from the breach of all representations and warranties equals or exceeds the Cap. 9.2.2 With respect to any claim for indemnification under Section 9.1.1.3, or with respect to a breach of Section 4.20, an indemnifying party shall not have any liability for Losses attributable thereto until such Losses exceed Seven Hundred Fifty Thousand Dollars ("$750,000") (the "Environmental Deductible") (excluding any Losses attributable to the Eaton Rapids Environmental Condition, which shall not be subject to 42 the Environmental Deductible), provided, however, the indemnifying parties shall not have any liability for Losses attributable to Pre-Closing Environmental Liabilities or for breaches of Section 4.20 in excess of Fifty Million Dollars ($50,000,000) in the aggregate. For the avoidance of doubt, the Environmental Deductible is not subject to the De Minimis Amount. 9.2.3 Claims for indemnification under Section 9.1.1.4, are not subject to the Environmental Deductible or the De Minimis Amount; provided, however, an indemnifying party shall not have any liability for Losses attributable to Predecessor Environmental Liabilities in excess of Fifty Million Dollars ($50,000,000) in the aggregate. 9.3 Limitations on Indemnification for Environmental Losses. 9.3.1 Sellers and Invensys shall have no obligation to indemnify, defend and hold harmless the Purchaser Indemnified Parties from and against any Losses arising in connection with a breach of the representation and warranty set forth in Section 4.20 or under Section 9.1.1.3 for Pre-Closing Environmental Liabilities ("Environmental Losses") to the extent that such Environmental Losses: (a) result from: (i) any change in the use of real property to non-industrial purposes, or (ii) an investigation of environmental conditions at any Company Properties, involving physically invasive testing procedures such as soil and groundwater sampling, undertaken by or for the Purchaser Indemnified Parties, other than any such investigation (A) affirmatively required under applicable Law, (B) required by any Order directed to a Company or Subsidiary, (C) reasonably determined by Purchaser in good faith to be necessary in connection with any bona fide construction or material maintenance activity (including expansion of any facility) at any Company Property where such construction, maintenance or repair does or would reasonably be expected to require access to, or disturbance of, soil or groundwater or (D) approved by Sellers in writing, which approval shall not be unreasonably withheld, or (b) result from Remedial Actions that are inconsistent with the standard of care set forth in Section 9.3.2. 9.3.2 Remedial Actions shall be conducted in a reasonable and cost effective manner, to standards applicable for the site use of the subject properties, and, to the extent applicable to that particular site, shall include the use of risk-based cleanup standards, natural attenuation, and deed restrictions or other actions as required by the enforcing Governmental Body to obtain closure where appropriate and available; provided, that with respect to Remedial Action at any Company Property the standards shall be those applicable to industrial use. 9.4 Survival of Representations and Warranties and Covenants. 9.4.1 The representations and warranties of Purchaser and Sellers and Invensys contained in this Agreement shall survive the Closing solely for purposes of Article 9 and such representations and warranties shall terminate at the close of business on the date that is twenty-one (21) months after the Closing Date; provided, however, that 43 (i) the representations and warranties contained in Section 4.7 shall survive the Closing and remain in effect indefinitely, (ii) the representations and warranties contained in Section 4.11 shall survive the Closing until the expiration of six (6) months following the last day on which any Tax may be validly assessed with due regard to any extension of time for assessment by the IRS or any other Governmental Body against any Company, any Subsidiary, or any of their respective assets, (iii) the representations and warranties contained in Section 4.16 shall survive the Closing and any investigation by the parties with respect thereto until the expiration of the applicable statute of limitations (including extensions thereof) and (iv) the survival of the representations and warranties contained in Section 4.20 shall be governed by Section 9.4.3 below. Any claim for indemnification with respect to any of such matters which is not asserted by notice given as herein provided relating thereto within such specified period of survival may not be pursued and is hereby irrevocably waived after such time. Any claim for indemnification of a Loss asserted within such period of survival as herein provided will be timely made for purposes hereof. 9.4.2 Unless a specified period is set forth in this Agreement (in which event such specified period will control), the covenants in this Agreement will survive the Closing and remain in effect indefinitely. 9.4.3 Any claim for indemnification under Section 9.1.1.3 with respect to Losses attributable to Pre-Closing Environmental Liabilities or for a breach of Section 4.20 which is not asserted by notice given as herein provided within seven (7) years of the Closing Date may not be pursued and is hereby irrevocably waived after such time. Any claim for indemnification of a Loss asserted within such period of survival as herein provided will be timely made for purposes hereof. 9.4.4 Any claim for indemnification under Section 9.1.1.4 with respect to Losses attributable to Predecessor Environmental Liabilities which is not asserted by notice given as herein provided within eight (8) years of the Closing Date may not be pursued and is hereby irrevocably waived after such time. Any claim for indemnification of a Loss asserted within such period of survival as herein provided will be timely made for purposes hereof. 9.5 General Indemnification Procedures. 9.5.1 In the event that any Legal Proceedings shall be instituted or any claim or demand, including a third party claim or demand (including reasonable attorney fees) (collectively, with a Legal Proceeding, a "Claim") shall be asserted by any Person in respect of which payment may be sought under Section 9.1 (regardless of the De Minimis Amount or the Deductible referred to above), the indemnified party shall reasonably and promptly cause written notice of the assertion of any Claim of which it has knowledge which is covered by this Article 9 to be forwarded to the indemnifying party. Such notice shall identify specifically the basis under which indemnification is sought pursuant to Section 9.1 and enclose true and correct copies of any written document furnished to the indemnified party by the Person that instituted the Claim. The 44 indemnifying party shall have the right, at its sole option and expense, to be represented by counsel of its choice, which must be reasonably satisfactory to the indemnified party, and to defend against, negotiate, settle or otherwise deal with any Claim which relates to any Losses indemnified against hereunder. If the indemnifying party elects to defend against, negotiate, settle or otherwise deal with any Claim which relates to any Losses indemnified against hereunder, it shall within ten (10) days (or sooner, if the nature of the Claim so requires) notify the indemnified party of its intent to do so. If the indemnifying party elects not to defend against, negotiate, settle or otherwise deal with any Claim which relates to any Losses indemnified against hereunder, fails to notify the indemnified party of its election as herein provided or contests its obligation to indemnify the indemnified party for such Losses under this Agreement, the indemnified party may defend against, negotiate, settle or otherwise deal with such Claim. If the indemnified party defends any Claim, then the indemnifying party shall reimburse the indemnified party for the reasonable expenses of defending such Claim upon submission of periodic bills. If the indemnifying party shall assume the defense of any Claim, the indemnified party may participate, at his or its own expense, in the defense of such Claim; provided, however, that such indemnified party shall be entitled to participate in any such defense with separate counsel at the expense of the indemnifying party: (i) if so requested by the indemnifying party to participate; (ii) if, in the reasonable opinion of counsel to the indemnified party, a conflict or potential conflict exists between the indemnified party and the indemnifying party that would make such separate representation advisable; or (iii) if the indemnifying party does not, in the reasonable opinion of the indemnified party, based on the written advice of counsel, diligently conduct such defense; and provided, further, that the indemnifying party shall not be required to pay for more than one such counsel for all indemnified parties in connection with any Claim. The parties hereto agree to cooperate fully with each other in connection with the defense, negotiation or settlement of any such Claim. The indemnified party shall promptly supply to the indemnifying party copies of all correspondence and documents relating to or in connection with such Claim and keep the indemnifying party fully informed of all developments relating to or in connection with such Claim (including, without limitation, providing to the indemnifying party on request updates and summaries as to the status thereof). If the indemnifying party assumes the defense of a Claim, (i) no compromise or settlement of such Claim may be effected by the indemnifying party without the indemnified party's consent unless (A) there is no finding or admission of any violation of Law or any violation of the rights of any Person and no effect on any other Claims made against the indemnified party, and (B) the sole relief provided is monetary damages that are paid in full by the indemnifying party; and (ii) the indemnified party will have no liability with respect to any compromise or settlement of such claims effected without its consent, which shall not be unreasonably withheld. Notwithstanding the foregoing, if an indemnified party determines in good faith that there is a reasonable probability that a Claim may adversely affect it or its Affiliates other than as a result of monetary damages, the indemnified party may, by 45 notice to the indemnifying party, assume the exclusive right to defend, compromise, or settle such Claim, but the indemnifying party will not be bound by any determination of a Claim so defended or any compromise or settlement effected without its consent (which may not be unreasonably withheld). 9.5.2 After any final judgment or award shall have been rendered by a court, arbitration board or administrative agency of competent jurisdiction and the expiration of the time in which to appeal therefrom, or a settlement shall have been consummated, or the indemnified party and the indemnifying party shall have arrived at a mutually binding agreement with respect to a Claim hereunder, the indemnified party shall forward to the indemnifying party notice of any sums due and owing by the indemnifying party pursuant to this Agreement with respect to such matter and the indemnifying party shall be required to pay all of the sums so due and owing to the indemnified party by wire transfer of immediately available funds within 10 Business Days after the date of such notice. 9.5.3 The failure of the indemnified party to give reasonably prompt notice of any Claim shall not release, waive or otherwise affect the indemnifying party's obligations with respect thereto except to the extent that the indemnifying party can demonstrate actual loss and prejudice as a result of such failure. 9.5.4 Subject to the limitations set forth in Section 9.2 and consistent with Article 9 of this Agreement, with respect to any Claim for indemnification under Section 9.1.1.1 for breaches of the representations and warranties set forth in Section 4.20, Section 9.1.1.3 and Section 9.1.1.4, Sellers shall (a) manage and control the Remedial Action and resolution of any claim arising out of or relating to the Eaton Rapids Environmental Condition and (b) have the right, but not the obligation, to manage and control any claim arising out of or relating to any Predecessor Environmental Liabilities under Section 9.1.1.4 or any Remedial Action for which indemnification is provided under Section 9.1.1.1, 9.1.1.3, or 9.1.1.4 of this Agreement. To this end, Sellers shall have ten (10) days after receipt of notice of a claim for potential Remedial Action from Purchaser to accept responsibility for such Remedial Action. If a Seller has or takes responsibility for any Remedial Action, Seller shall directly pay (or otherwise cause another party to make such direct payment) any such environmental consultant, contractor or subcontractor hired by Seller, and Purchaser shall provide such Seller and its environmental consultants, contractors and subcontractors, after Seller has provided reasonable notice to Purchaser, with reasonable access to the affected properties for the purpose of implementing any such Remedial Action, and Purchaser shall cooperate with Seller's activities, including signing necessary documentation for the implementation, monitoring and completion of such Remedial Action, provided that Sellers indemnify, defend and hold harmless Purchaser from all Losses that result from such cooperation that are not attributable to the gross negligence or willful misconduct of the Purchaser or the Companies. Seller shall coordinate any Remedial Action at a Company Property with Purchaser and shall ensure that any such remedy or Remedial Action does not unreasonably interfere with Purchaser's use and operation of the property. The party implementing the Remedial Action shall retain an environmental consultant acceptable to 46 the other party which acceptance shall not be unreasonably withheld, denied or conditioned; provided however, that with respect to the required Remedial Action for the Eaton Rapids Environmental Condition, the parties agree that Secor is acceptable. Notwithstanding the foregoing, nothing herein shall prevent the party not implementing the Remedial Action to retain an environmental consultant, at its cost, to review any workplans or reports related thereto. The party implementing the Remedial Action shall control any and all communication with Governmental Bodies having jurisdiction over the Remedial Action; provided the party implementing the Remedial Action shall provide the other party, if applicable, its consultants, with the opportunity to review and comment on any proposed plans for the Remedial Actions and shall incorporate such reasonable comments to the extent consistent with Section 9.3.2 of this Agreement. Notwithstanding the foregoing, the party implementing the Remedial Action shall provide the other party with periodic reports, no less than quarterly, on the progress of the Remedial Action and, to the extent the other party is responsible for reimbursing the party implementing the Remedial Action, the party implementing the Remedial Action shall keep the other party apprised of the associated costs, provided, further that Seller shall maintain a record of costs incurred with the indemnification hereunder and shall provide Purchaser with notice, if and when the aggregate Losses covered hereunder exceed Forty Millions Dollars ($40,000,000). Purchaser shall cooperate with Seller in undertaking such Remedial Action and Purchaser shall use commercially reasonable efforts to assist Seller in obtaining no further action determination or similar determination from the applicable Governmental Body indicating that no additional Remedial Action is required; provided Seller will reimburse Purchaser for its reasonable out-of-pocket expenses in connection with providing such cooperation and assistance. 9.5.5 Procedure for Indemnification -- Other Claims. A claim for indemnification for any matter not involving a third-party claim may be asserted by notice to the party from whom indemnification is sought. 9.6 Tax Matters. 9.6.1 Tax Indemnification. 9.6.1.1 Sellers and Invensys shall jointly and severally indemnify the Purchaser Indemnified Parties and hold them harmless from and against any Losses attributable to (i) Excluded Taxes, (ii) all liability for Taxes attributable to a Seller Tax Act, (iii) a breach by any Seller or Invensys of its obligations under this Agreement that relate to Taxes, or (iv) a breach of the representations and warranties set forth in Section 4.11. Invensys shall cause the Sellers to reimburse Purchaser for Taxes of the Companies or the Subsidiaries that are the responsibility of the Sellers and Invensys pursuant to this Section 9.6 within fifteen (15) days after payment of such Taxes by Purchaser, any Company or any Subsidiary and the receipt by Sellers of a written description in reasonable detail from Purchaser of the nature of such Taxes. Notwithstanding the foregoing, Sellers and Invensys shall not indemnify and hold harmless Purchaser Indemnified Parties from any liability for Taxes attributable to (a) any action taken after the Closing on the Closing Date or after the Closing Date by 47 Purchaser, or any of its Affiliates (including the Companies and Subsidiaries) or any transferee of Purchaser or any of its Affiliates (a "Purchaser Tax Act") or (b) a breach by Purchaser of its obligations under this Agreement. For the avoidance of doubt, any (x) action required by applicable Law or taken pursuant to this Agreement, or (y) action attributable to a breach by any Seller or Invensys of its obligations under this Agreement shall not constitute a Purchaser Tax Act. 9.6.1.2 Purchaser shall, and shall cause the Companies and Subsidiaries to, indemnify the Seller Indemnified Parties and hold them harmless from (i) all liability for Taxes of the Companies and the Subsidiaries for any taxable period ending after the Closing Date (except to the extent such taxable period began before the Closing Date, in which case Purchaser's indemnity will cover only that portion of any such Taxes that are not for a Pre-Closing Tax Period) and (ii) all liability for Taxes attributable to a Purchaser Tax Act or to a breach by Purchaser of its obligations under this Agreement. Notwithstanding the foregoing, Purchaser (and the Companies and Subsidiaries) shall not indemnify and hold harmless Seller Indemnified Parties from any liability for Taxes attributable to (a) any action taken before the Closing on the Closing Date or before the Closing Date by Sellers or any of their Affiliates (including the Companies and Subsidiaries) (a "Seller Tax Act") or (b) a breach by any Seller or Invensys of its obligations under this Agreement. 9.6.1.3 For purposes of this Section 9.6, in the case of any Taxes imposed on a periodic basis and payable for a taxable period that includes (but does not end on) the Closing Date (a "Straddle Period"), the portion of such Taxes that relate to a Pre-Closing Tax Period shall (x) in the case of any Taxes other than Taxes based upon or related to income or receipts, be deemed to be the amount of such Taxes for the entire taxable period multiplied by the fraction the numerator of which is the number of days in the Straddle Period ending on the Closing Date and the denominator of which is the number of days in the entire Straddle Period, and (y) in the case of any Taxes based upon or related to income or receipts, be deemed to be the amount which would be payable if the relevant taxable period ended on the Closing Date, provided that any credit, exemption, allowance or deduction that is calculated on an annual basis (including, but not limited to, depreciation and amortization deductions) shall be allocated between the period ending on the Closing Date and the period after the Closing Date in proportion to the number of days in each period. 9.6.2 Procedures Relating to Indemnification of Tax Claims. 9.6.2.1 If one party is responsible for the payment of Taxes pursuant to Section 9.6.1 (the "Tax Indemnifying Party"), and the other party (the "Tax Indemnified Party") receives written notice of any deficiency, proposed adjustment, assessment, audit, examination, suit, dispute or other claim (a "Tax Claim") with respect to such Taxes, the Tax Indemnified Party shall, as soon as commercially practicable, notify the Tax Indemnifying Party in writing of such Tax Claim. If notice of a Tax Claim is not given to the Tax Indemnifying Party as soon as commercially practicable, the Tax Indemnifying Party shall not be liable to the Tax Indemnified Party (or any of its 48 Affiliates or any of their respective officers, directors, employees, stockholders, agents or representatives) to the extent that the Tax Indemnifying Party's position is actually prejudiced as a result thereof. 9.6.2.2 The Tax Indemnifying Party shall compromise, defend or settle, at its own expense, any Tax Claim and shall have the right to make all judgments and decisions in respect of such compromise, defense or settlement of such Tax Claim. Without limiting the foregoing, the Tax Indemnifying Party may pursue or forego any and all administrative proceedings with any taxing authority with respect thereto, and may either pay the Taxes claimed and sue for a refund or contest the Tax Claim in any permissible manner at its own expense; provided, however, that (i) in the case of a Tax Claim relating solely to Taxes of a Company or Subsidiary for a Straddle Period, Sellers and Purchaser shall jointly control all proceedings taken in connection with any such Tax Claim, and (ii) if any Tax Claim could reasonably be expected to have an adverse effect on (A) Purchaser, any Company, any Subsidiary or any of their Affiliates in any taxable period beginning after the Closing Date, the Tax Claim shall not be settled or resolved without Purchaser's prior written consent, which consent shall not be unreasonably delayed or withheld or (B) Sellers or any of their Affiliates in any taxable period ending on or before the Closing Date, the Tax Claim shall not be settled or resolved without Sellers' prior written consent, which consent shall not be unreasonably delayed or withheld. The Tax Indemnifying Party shall, as soon as commercially practicable, provide in writing and in reasonable detail the nature of such Tax Claims that could reasonably be expected to have an adverse effect on the Tax Indemnified Party. 9.6.2.3 The Tax Indemnified Party and each of its respective Affiliates shall cooperate with the Tax Indemnifying Party in contesting any Tax Claim, which cooperation shall include the retention and (upon the Tax Indemnifying Party's request) the provision to the Tax Indemnifying Party of records and information which are reasonably relevant to such Tax Claim, and making employees available on a mutually convenient basis to provide additional information or explanation of any material provided hereunder or to testify at proceedings relating to such Tax Claim. 9.6.2.4 In no case shall the Tax Indemnified Party, any Company or Subsidiary or any of their respective officers, directors, employees, stockholders, agents or representatives settle or otherwise compromise any Tax Claim without the Tax Indemnifying Party's prior written consent. Neither party shall settle a Tax Claim relating solely to Taxes of a Company or Subsidiary for a Straddle Period without the other party's prior written consent, which consent shall not be unreasonably delayed or withheld. 9.6.3 Responsibility for Preparation and Filing of Tax Returns and Amendments. 9.6.3.1 Purchaser shall prepare or cause to be prepared and file or caused to be filed any Tax Return of the Companies or Subsidiaries for any Straddle Period and remit to the taxing authorities payment for Taxes shown due on such Tax 49 Returns. Sellers shall pay Purchaser (within fifteen (15) days after the date on which Purchaser remitted such payment) an amount equal to the Taxes that relate to the portion of such Straddle Period ending on the Closing Date, as determined under Section 9.6.1.3. All such Tax Returns shall be prepared on a basis consistent with past practice. Purchaser shall furnish such Tax Returns to Sellers for their approval (which approval shall not be unreasonably delayed or withheld) at least twenty (20) days prior to the due date for filing such Tax Returns. 9.6.3.2 With respect to the taxable periods beginning after March 31, 2002, Sellers shall not, without the Purchaser's prior written consent (which consent shall not be unreasonably delayed or withheld), (i) make any Tax election not previously made with respect to the Companies or Subsidiaries or adopt a new (or change a) method of accounting for Tax purposes or (ii) take a position on any Tax Return for any such period that addresses an issue (whether factual or legal) not previously addressed in prior Tax Returns of the relevant Company or Subsidiary, in each case that relates solely to the Companies or Subsidiaries. 9.6.3.3 Sellers shall prepare and Purchaser or Sellers, as appropriate, shall file any Tax Return required to be filed for any taxable period of the Companies or Subsidiaries that ends on or before the Closing Date and remit to the taxing authorities payment for Taxes shown due on such Tax Return. Sellers will include the income of the Companies and the Subsidiaries that are members of the Affiliated Group of which Invensys, Inc. is the common parent corporation (including any deferred income, as such term is used in Treas. Reg. Section 1.1502-13, and any excess loss accounts taken into income under Treas. Reg. Section 1.1502-19) on Invensys, Inc.'s consolidated federal income Tax Returns for all periods through the Closing Date and pay any income Taxes attributable to such income. All such Tax Returns shall be prepared on a basis consistent with Section 9.6.3.2, past practice, and in compliance with applicable Law. Sellers will not elect to retain any net operating loss carryovers or capital loss carryovers (or any similar or comparable tax items under state, local, or foreign Law) of the Companies or Subsidiaries. Purchaser shall timely furnish tax workpapers to Sellers upon request in accordance with the past custom and practice of the Companies and Subsidiaries. Where Purchaser files such Tax Returns and remits to the taxing authorities payment for Taxes shown due thereon, Sellers shall pay Purchaser (within fifteen (15) days after the date on which Purchaser remitted such payment) an amount equal to the Taxes shown due on such Tax Returns. Any Tax Return to be filed by Purchaser or a Company or Subsidiary shall be furnished by Sellers to the Purchaser or the appropriate Company or Subsidiary, as the case may be, for signature and filing at least thirty (30) days prior to the due date for filing such Tax Return. The Purchaser or applicable Company or Subsidiary, as the case may be, shall sign and timely file any such Tax Return on a timely basis, provided, there is a "reasonable basis" (within the meaning of Treas. Reg. Section 1.6662-3(b)(3), or any similar or comparable provision of state, local, or foreign Law) for all positions taken on such Tax Return. Purchaser and Sellers agree to cause the Companies and the Subsidiaries to file all Tax Returns for the period including the Closing Date on the basis that the relevant taxable period ended as of the 50 close of business on the Closing Date, unless the relevant taxing authority will not accept a Tax Return filed on that basis. 9.6.3.4 Sellers shall be responsible for preparing and filing any amended consolidated, combined or unitary Tax Returns for any taxable years ending on or prior to the Closing Date. Where Sellers seek to file an amended Tax Return with respect to a Company or Subsidiary in accordance with this Section 9.6.3.4 in a jurisdiction in which separate Tax Returns are filed by such Company or Subsidiary, Sellers shall furnish to the Purchaser, the Company or the Subsidiary, as the case may be, such amended Tax Return and Purchaser or such Company or Subsidiary shall, subject to the succeeding sentence, sign and timely file any such amended Tax Return. Notwithstanding the foregoing, if the outcome of filing any amended Tax Return could reasonably be expected to have an adverse effect on Purchaser, any Company, any Subsidiary or any of their Affiliates in any taxable period beginning after the Closing Date, such amended Tax Return shall not be filed, whether by Sellers or Purchaser, as the case may be, without Purchaser's prior written consent, which consent shall not be unreasonably delayed or withheld. Purchaser may prepare and file amended Tax Returns with respect to separate Tax Returns filed by the Companies or Subsidiaries during any Pre-Closing Tax Period that contain a position for which there was no "reasonable basis" (within the meaning of Treas. Reg. Section 1.6662-3(b)(3), or any similar or comparable provision of state, local or foreign Law); provided, that no later than 20 days prior to the filing of such amended Tax Returns, Purchaser shall furnish to Sellers a copy of such amended Tax Return. 9.6.4 Cooperation. 9.6.4.1 Each of the Sellers, the Companies, the Subsidiaries and the Purchaser shall reasonably cooperate, and shall cause their respective Affiliates, officers, employees, agents, auditors and representatives reasonably to cooperate, in preparing and filing all Tax Returns, including maintaining and making available to each other all records necessary in connection with Taxes and in resolving all disputes and audits with respect to all taxable periods. 9.6.4.2 Such cooperation shall include the retention and (upon the other party's request, at the other party's cost and expense, and at the time and place mutually agreed upon by the parties) the provision of records and information that are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder, to the extent such information and/or explanation is readily available and within the control of the party to which such request is made. The responsibility to retain records and information shall include the responsibility to (i) retain such records and information as are required to be retained by any applicable taxing authority and (ii) retain such records and information in machine-readable format where appropriate (to the extent such records and information are in such format as of the Closing Date) such that the requesting party shall be able to readily access such records and information. Purchaser and Sellers shall (i) retain all books and 51 records with respect to Tax matters pertinent to each of the Companies and Subsidiaries relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Purchaser or Sellers, any extensions thereof) of the respective taxable periods, and to abide by all record retention arrangements entered into with any taxing authority, and (ii) give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other party so requests, Purchaser, or Sellers, as the case may be, shall allow the other party to take possession of such books and records at such other party's sole cost and expense. Any information or explanation obtained pursuant to this Section 9.6.4.2 shall be maintained in confidence, except (i) as may be legally required in connection with claims for refund or in conducting or defending any Tax audit or other proceeding or (ii) to the extent the disclosing party provides written permission for such disclosure. 9.6.5 Refunds and Credits. 9.6.5.1 Any refunds or credits of Taxes or offsets of Taxes otherwise due and payable by the Companies or the Subsidiaries for any Pre-Closing Tax Period or that are Excluded Taxes shall be for the account of Sellers; provided, that, if as a result of such refund, credit or offset, Purchaser, any Company, any Subsidiary or any of their Affiliates suffer, in a Post-Closing Tax Period, a decrease in a deduction, loss or Tax credit or an increase in income, gains, or recapture of Tax credit which otherwise (but for such refund, credit or offset) would have been reported by Purchaser, any Company, any Subsidiary or any of their Affiliates, then Sellers shall pay Purchaser the present value of the amount equal to the Tax benefits (but in no case more than the amount of the refund, credit or offset) that Purchaser, any Company, any Subsidiary or any of their Affiliates lost as a result of the refund, credit or offset obtained for the account of Sellers. Any refunds, credits or offsets of the Companies or the Subsidiaries for any taxable period beginning after the Closing Date shall be for the account of the Purchaser. Any refund, credit or offset of Taxes of the Companies or the Subsidiaries for any Straddle Period shall be equitably apportioned between Sellers and Purchaser and consistent with the previous two sentences. For purposes of this Section 9.6.5.1, in determining the present value of an amount of Tax benefits lost as a result of a refund, credit or offset, a discount rate equal to the long-term applicable federal rate (as defined in Code Section 1274(d)) for the month in which such refund, credit or offset is realized shall be applied. 9.6.5.2 Purchaser shall cause each Company and Subsidiary to elect, where permitted by applicable Law, to carry forward any Tax Asset (as defined below) arising in a taxable period beginning after the Closing Date that would, absent such election, be carried back to a Pre-Closing Tax Period in which such Company or Subsidiary was included in a consolidated, combined or unitary return with the Sellers or their Affiliates. Where no such election is available, Purchaser shall be permitted to cause the Companies or Subsidiaries to carry back to a Pre-Closing Tax Period a Tax Asset that arose in a taxable period ending after the Closing Date and notwithstanding anything in Section 9.6.5.1 to the contrary, Purchaser shall be entitled to any refunds 52 attributable to the carry back of such Tax Asset. For purposes of this Section 9.6.5.2, "Tax Asset" means any item of loss, deduction or credit incurred in one taxable period that may be used to reduce Taxes in a previous or subsequent taxable period, including by way of example and without limitation net operating loss carryovers and carrybacks (as such terms are used in Code Section 172(b)), capital loss carryovers and carrybacks (as such terms are used in Code Section 1212), and any corresponding or similar tax items arising under state, local or foreign Law. 9.6.6 Certificate of Non-Foreign Status. BTR Finance shall deliver to Purchaser at the Closing a certificate of non-foreign status in accordance with Treas. Reg. Section 1.1445-2(b)(2) (the "Certificate of Non-Foreign Status"). 9.7 Indemnification for Products Liability and Product Recall. Each of the claims reflected on Schedule 9.7 represent product liability and product recall claims with respect to which notification has been sent to an insurance carrier (together with all claims made in writing by third parties to Sellers between the date hereof and Closing with respect to product liabilities or product recalls, the "Product Liability Claims"). Sellers and Invensys acknowledge and agree that they shall retain all liabilities associated with such Product Liability Claims and shall indemnify and hold the Purchaser Indemnified Parties harmless for such Product Liability Claims in accordance with Section 9.5 above. To the extent insurance coverage is available for any such Product Liability Claim, but such insurance coverage includes a deductible or self-insured retention amount, Purchaser and Sellers and Invensys acknowledge and agree that Sellers and Invensys shall be responsible for the first One Million Dollars ($1,000,000), in the aggregate, of such deductibles or self-insured retention amounts. After Sellers and Invensys have assumed responsibility for the first One Million Dollars ($1,000,000) in deductibles or self-insured retention amounts, Purchaser and Sellers agree that each party shall be responsible for fifty percent (50%) of any deductibles or self-insured retention amounts applicable to all of such Product Liability Claims and that Purchaser shall reimburse Seller for fifty percent (50%) of any such deductibles or self-insured retention amounts. Notwithstanding the foregoing, the parties acknowledge that Purchaser shall not be obligated to reimburse Sellers for any amount under this Section 9.7 in excess of Five Million Dollars ($5,000,000). 9.8 Employee Liabilities. 9.8.1 Except as explicitly set forth in or otherwise explicitly provided in this Agreement, Seller and its Affiliates (except the Companies and Subsidiaries) shall be solely responsible after the Closing for, and shall indemnify and hold Purchaser and its Affiliates (including the Companies and Subsidiaries) harmless against, any and all obligations and liabilities: (i) that have arisen or may arise in connection with or related to any current or former employee of Seller or its Affiliates who is not considered an Employee hereunder, (ii) related to the failure of Sellers or their Affiliates to comply with any employee notification or consultation requirements of applicable Law (unless such 53 failure is caused by the failure of the Purchaser or any of its Affiliates to (a) reasonably cooperate with, or provide requested information to, the Sellers in connection with its efforts to comply with such Law or (b) a failure by Purchaser to comply with any employee notification or consultation requirements of applicable Law), and (iii) in connection with claims with respect to an Employee or former employee of the Companies or Subsidiaries for acts or omissions occurring or arising during the period prior to the Closing during which such individual was employed wholly or predominately by the Seller or one of its Affiliates other than the Companies or Subsidiaries with respect to the Seller or one of its Affiliates other than the Companies or Subsidiaries. 9.8.2 Except as explicitly set forth in or otherwise explicitly provided in this Agreement, Purchaser and its Affiliates shall be solely responsible after the Closing for, and shall indemnify and hold Sellers and their Affiliates harmless against, any and all obligations and liabilities related to the failure of Purchaser or its Affiliates to comply with any employee notification or consultation requirements of applicable Law (unless such failure is caused by the failure of the Sellers or any of their Affiliates to (a) reasonably cooperate with, or provide requested information to, the Purchaser in connection with its efforts to comply with such Law or (b) a failure by Sellers to comply with any employee notification or consultation requirements of applicable Law). 9.9 Exclusive Remedies. 9.9.1 Except as provided below, the parties hereto agree that their respective remedies under Article 9 of this Agreement are their exclusive remedies under this Agreement, including without limitation, any matter based on the inaccuracy, untruth, incompleteness or breach of any representation or warranty of any party hereto contained herein or based on the failure of any covenant, agreement or undertaking herein, and the parties hereto hereby waive any claims with respect to any other right of contribution or indemnity available against any indemnifying party hereunder in such capacity on the basis of common law, statute or otherwise beyond the express terms of this Agreement; provided, however, that this exclusive remedy for damages does not preclude a party from bringing an action for specific performance or other equitable remedy to require a party to perform its obligations under this Agreement or any Seller Document or Purchaser Document; and provided, further, that nothing contained in this Agreement (including, without limitation, this Section 9.9.1) shall affect or impair Purchaser's or Sellers' right to pursue any remedy in respect of a breach of any covenant or agreement contained herein to be performed by Sellers or Invensys or Purchaser after the Closing Date, and for the avoidance of doubt no such remedy shall be subject to the limitations of Section 9.2.1; and 9.9.2 Notwithstanding any other provision of this Agreement, the liability for indemnification of any indemnifying party under this Agreement shall not exceed the actual damages of the party entitled to indemnification and shall not otherwise include incidental, consequential, indirect, special, punitive, exemplary or other similar damages, other than compensatory damages. 54 9.10 Adjustments for Insurance and Tax Benefits. Any indemnification payable in accordance with Article 9 shall be net of any (i) amounts actually recovered (after deducting related costs and expenses) or recoverable by the indemnified party for the Losses for which such indemnification payment is made under any insurance policy, warranty or indemnity from any Person other than a party hereto, except, that the foregoing shall not apply to any insurance proceeds recovered or recoverable under any insurance policy obtained by Purchaser which covers in whole or in part Losses arising under Environmental Laws, and (ii) Tax benefits realized by the indemnified party in respect of any Losses for which such indemnification payment is made. 9.11 Treatment of Indemnity Payments. Sellers and the Purchaser agree that all indemnification payments made in accordance with Article 9 will be treated by the parties as an adjustment to the Final Purchase Price. 9.12 Right To Indemnification Not Affected By Knowledge. The right to indemnification, payment of damages or other remedy based on or resulting from a breach of representations, warranties, covenants, and obligations contained in this Agreement will not be affected by any investigation conducted with respect to, or any Knowledge of Purchaser or Knowledge of Sellers acquired at any time by Purchaser with respect to Sellers and Invensys, and Sellers and Invensys with respect to Purchaser, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, or obligation. The waiver of any condition to Closing set forth in Article 7 based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not affect the right to indemnification, payment of damages, or other remedy based on such representations, warranties, covenants, and obligations. ARTICLE 10 MISCELLANEOUS 10.1 Certain Definitions. For purposes of this Agreement, the following terms shall have the meanings specified in this Section 10.1: "Accounting Principles" shall mean the financial accounting principles and practices ordinarily used in the preparation of the management accounts of the Fasco Business (the "Standard Accounting Principles") as modified and supplemented by the accounting principles set forth in Schedule 2.2 as specifically identified therein. "Adjustment Amount" shall have the meaning set forth in Section 2.3.2. "Adjustment Statement" shall have the meaning set forth in Section 2.2.1.2. 55 "Affiliate" means, with respect to any Person, any other Person controlling, controlled by or under common control with such Person. "Affiliated Group" has the same meaning as the term described in Code Section 1504(a). "Agreement" shall have the meaning set forth in the first paragraph hereof. "Approved Absence" shall have the meaning set forth in Section 6.3.1. "Assumed Salaried Pension Plan Liabilities" shall have the meaning set forth in Section 6.3.7.1. "Audited Balance Sheet" shall have the meaning set forth in Section 4.8. "Audited Balance Sheet Date" shall have the meaning set forth in Section 4.8. "Audited Financial Statements" shall have the meaning set forth in Section 4.8. "Baseline Trade Working Capital" shall mean Sixty Eight Million Dollars ($68,000,000). "BTR Finance" shall have the meaning set forth in the first paragraph hereof. "BTR Holdings" shall have the meaning set forth in the first paragraph hereof. "BTRI" shall have the meaning set forth in the first paragraph hereof. "Business Day" means any day of the year on which national banking institutions in New York are open to the public for conducting business and are not required or authorized to close. "Cap" shall have the meaning set forth in Section 9.2.1(iii). "Capital Expenditure Budget" shall have the meaning set forth in Section 4.10.8. "Certificate of Non-Foreign Status" shall have the meaning set forth in Section 9.6.6. "Claim" shall have the meaning set forth in Section 9.5.1. "Closing" shall have the meaning set forth in Section 3.1. 56 "Closing Date" shall have the meaning set forth in Section 3.1. "Closing Management Accounts" means the reports and schedules identified in Schedule 2.2, generated from the books and records of the Companies as at and for the period ending on the Effective Time, prepared in accordance with the Accounting Principles and on the basis that the Effective Time shall be treated as if it were a normal reporting period end. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Commitment" shall have the meaning set forth in Section 6.12. "Company" and "Companies" shall have the meanings set forth in the first recital hereof. "Company Material Adverse Effect" means a material adverse effect on the assets, liabilities, business, financial condition or results of operations of the Companies and the Subsidiaries (taken as a whole) other than an effect resulting from an Excluded Matter. "Excluded Matters" means any one or more of the following: (i) the effect of any change arising from or related to any market in general in which the Companies or the Subsidiaries operate (whether in the United States or internationally), the United States economy as a whole, or the international economy; or (ii) any effect of the public announcement of this Agreement, the transactions contemplated hereby or the consummation of such transactions. "Company Plans" shall have the meaning ascribed to such term in Section 4.16.1. "Company Property" and "Company Properties" shall have the meaning ascribed to such term in Section 4.12. "Contract" means any contract, agreement, indenture, note, bond, loan, instrument, lease, commitment or other arrangement or agreement. "CPN" shall have the meaning set forth in the first paragraph hereof. "De Minimis Amount" shall have the meaning set forth in Section 9.2.1. "Deductible" shall have the meaning set forth in Section 9.2.1(ii). "E&Y" shall have the meaning set forth in Section 6.16.1.2. "Eaton Rapids Environmental Condition" means any obligation or responsibility of Fasco D.C. Motors at Plant 1, located at 402 East Haven Street in Eaton Rapids, MI ("Fasco Plant 1"), arising out of or related to the presence or migration of chlorinated solvents in or to the groundwater to the extent such solvents were released at, on or from the Fasco Plant 1 on or prior to the Closing Date, and addressed in the 57 Remedial Action Plan, Version 2, dated June 15, 2001 and any supplemental information associated therewith. "Effective Time" shall have the meaning ascribed to such term in Section 1.1. "Employees" shall have the meaning set forth in Section 6.3.1. "Environmental Deductible" shall have the meaning set forth in Section 9.2.2. "Environmental Law" means any applicable foreign, federal, state, local, county, or municipal statute, rule, regulation, ordinance, rule of common law or other legal requirement relating to the protection of the environment and human health as it relates to protection of the environment, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.Css.9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. App.ss. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.ss.6901 et seq.), the Clean Water Act (33 U.S.C.ss.1251 et seq.), the Clean Air Act (42 U.S.C.ss.7401 et seq.), the Toxic Substance Control Act (15 U.S.Css.2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.Css.136 et seq.), and the Occupational Safety and Health Act (29 U.S.C.ss.651 et seq.) (but only to the extent it relates to occupational exposure to toxic or hazardous substances, materials, or wastes, pollutants or contaminants as defined in OSHA.) In connection with the presence of, or any Remedial Action taken in relation to, a Hazardous Material in the soil or any body of water, including, but not limited to, any ground water, surface water or aquifer, "Environmental Law" shall include all Environmental Laws, whether now or hereinafter in effect All other references to "Environmental Laws" shall refer to Environmental Laws in effect on or prior to the Closing Date, unless specifically defined otherwise. "Environmental Losses" shall have the meaning set forth in Section 9.3.1. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Escrow Agent" shall have the meaning set forth in Section 2.6. "Escrow Agreement" means the form of agreement attached hereto as Annex E. "Escrow Funds" shall mean Five Million Dollars ($5,000,000) exclusive of interest. "Estimated External Cash/Debt Balance" shall mean Sellers' estimate of Final External Cash/Debt Balance to be provided to Purchaser pursuant to Section 2.1.2 (which may be a positive or negative amount). 58 "Estimated Trade Working Capital Adjustment" shall mean Sellers' estimate of the amount to be determined pursuant to Section 2.2.2.1 (which may be a positive or a negative amount). "Excluded Taxes" means any liability, obligation or commitment, whether or not accrued, assessed or currently due and payable, for any Taxes of the Companies or the Subsidiaries for any Pre-Closing Tax Period including, but not limited to, Taxes that result (i) under Treasury Regulation Section 1.1502-6(a) (or any similar provision of state, local or foreign law) relating to Taxes of a Seller or any other corporation which has been affiliated with such Seller (other than the Companies or Subsidiaries), (ii) from a transferee or successor, or (iii) by contract or otherwise. "Fasco Business" shall mean, collectively, all of the Companies and all of the Subsidiaries on a consolidated basis, taken as a single entity. "Fasco Business Intellectual Property" shall mean all Intellectual Property owned by the Companies and the Subsidiaries. "Final External Cash/Debt Balance" means cash and cash equivalents of the Fasco Business less the aggregate of all borrowings, accounts receivable subject to factoring arrangements, finance leases, and indebtedness of the Fasco Business for borrowed money, excluding Final Intercompany Payables and Final Intercompany Receivables, expressed in United States Dollars as of the Effective Time (which may be a positive or a negative amount). "Final Intercompany Payables" means, in relation to each Company or Subsidiary, the aggregate of all outstanding amounts owed by such Company or Subsidiary to Invensys and its Affiliates (other than a Company or a Subsidiary) as of the Effective Time. "Final Intercompany Receivables" means, in respect of Invensys and its Affiliates, the aggregate of all outstanding amounts owed by Invensys and its Affiliates (other than a Company or a Subsidiary) to any Company or Subsidiary as of the Effective Time. "Final Net Intercompany Amount" shall have the meaning set forth in Section 2.2.2.3. "Final Purchase Price" shall have the meaning set forth in Section 2.1. "Final Trade Working Capital" shall have the meaning set forth in Schedule 2.2. "Final Trade Working Capital Adjustment" shall have the meaning set forth in Section 2.2.2.1.3. 59 "Financial Statements" shall have the meaning ascribed to such term in Section 4.8. "Foreign Governmental Approval" shall have the meaning set forth in Section 6.10. "Governmental Authorization" shall mean any approval, consent, permit, waiver or other authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Law. "Governmental Body" means any government or governmental or regulatory body thereof, or political subdivision thereof, whether federal, state, local or foreign, or any agency, instrumentality or authority thereof, or any court or arbitrator (public or private). "Hazardous Material" means any substance, material or waste that is characterized, classified, regulated, or designated under any Environmental Law as hazardous, toxic, pollutant, contaminant, explosive, radioactive or words of similar meaning or effect, including without limitation, petroleum and its by-products, nuclear fuel, asbestos, urea formaldehyde, and polychlorinated biphenyls. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976 as amended. "ICMH" shall have the meaning set forth in the first paragraph hereof. "Inactive Employee" shall have the meaning set forth in Section 6.3.1. "Initial Purchase Price" shall have the meaning set forth in Section 2.1. "Intellectual Property" means all rights under patent, copyright, trademark or trade secret law or any other statutory provision or common law doctrine. "Interim Balance Sheet" shall have the meaning set forth in Section 4.8. "Interim Balance Sheet Date" shall have the meaning set forth in Section 4.8. "Interim Financial Statements" shall have the meaning set forth in Section 4.8. "Invensys" shall have the meaning set forth in the first paragraph hereof. "Invensys Plans" shall have the meaning set forth in Section 4.16.1. "IRS" means the United States Internal Revenue Service. 60 "Knowledge of Purchaser" means the actual knowledge of the senior officers of the Purchaser or other employees of the Purchaser actively involved in the transactions contemplated hereby. "Knowledge of Sellers" means the actual knowledge of each of Jim Doyle, Dan Sampson, Mike Atwood, Rick Emerick, Paul Mracek, David Jakob, Ignacio Santa Cruz, Jeremy Morcom and Victoria Hull. Annex D summarizes the procedures followed by Sellers in ascertaining the knowledge of the individuals listed in the preceding sentence. "Law" means any federal, state, local or foreign law (including common law), statute, code, ordinance, rule, regulation or other requirement. "Legal Proceeding" means any judicial, administrative or arbitral actions, suits, proceedings (public or private), claims or governmental proceedings. "Lien" means any lien, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, servitude, transfer restriction under any shareholder or similar agreement, encumbrance or any other restriction or limitation whatsoever. "Losses" means any and all losses, claims (including third-party claims), expenses, damages, judgments, settlements, debts, liabilities, penalties, fines, obligations, interest (including prejudgment interest), costs and expenses (including court costs and reasonable attorneys' fees and expenses and costs of investigation and remediation). "Material Contracts" shall have the meaning set forth in Section 4.15. "Material Order" shall have the meaning set forth in Section 4.18.2(i). "Non-U.S. Employees" shall have the meaning set forth in Section 6.3.1. "Non-U.S. Plans" shall have the meaning set forth in Section 4.16.1. "Objection Notice" shall have the meaning set forth in Section 2.2.1.3. "Order" means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award. "Owned Property" and "Owned Properties" shall have the meaning set forth in Section 4.12. "PBGC" shall have the meaning set forth in Section 4.16.6. "Pension Plan Assets Adjustment" shall have the meaning set forth in Section 2.2.2.4. 61 "Pension Plan Escrow" shall have the meaning set forth in Section 2.6. "Permitted Exceptions" means (i) statutory liens for current taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings, provided an appropriate reserve is established therefor; (ii) mechanics', carriers', workers', repairers' and similar Liens arising or incurred in the ordinary course of business that are not, individually or in the aggregate, material to the business, operations and financial condition of the Company, its Subsidiaries or any property so encumbered; (iii) zoning, entitlement and other land use and environmental regulations by any Governmental Body that affect legal title to the Owned Property, provided that such regulations have not been violated; (iv) such other imperfections in title, charges, easements, restrictions, encumbrances and matters which do not, individually or in the aggregate, materially detract from the value of or materially interfere with the present use of any Company Property subject thereto or affected thereby; and (v) those matters shown on Schedule 4.12. "Person" means any individual, partnership, joint venture, trust, corporation, limited liability entity, unincorporated organization or other entity (including a Governmental Body). "Pre-Closing Environmental Liabilities" means any and all Losses imposed pursuant to Environmental Laws arising out of, relating to or attributable to the ownership, operation, leasing or occupancy of any Company Properties, and any activities conducted thereon by any Person, at anytime, including, without limitation, (i) the presence of Hazardous Materials at, on or under such Company Properties at concentrations exceeding those allowed by Environmental Laws (including the Eaton Rapids Environmental Condition) and (ii) the use, treatment, transport or disposal of Hazardous Materials by the Company or any Subsidiary or at or from any Company Property at anytime on or before the Closing Date; provided, however, that Pre-Closing Environmental Liabilities shall not include any Losses attributable to the presence of building materials that contain Hazardous Materials, including lead based paint or asbestos containing building materials, the presence of which complied with Environmental Laws on the Closing Date. "Pre-Closing Tax Period" means, with respect to the Companies and Subsidiaries any Tax period (or portion thereof) ending on or before the Closing Date. "Predecessor Environmental Liabilities" means any and all Losses imposed pursuant to Environmental Laws arising out of, relating to or attributable to (1) any condition at any real property formerly owned, operated or leased by the Companies or Subsidiaries or any predecessors thereof or (2) any third-party property or transporter to which the Companies or Subsidiaries or any predecessors thereof used for the transport, disposal or treatment of Hazardous Materials prior to the Closing, but excluding any matters within the definition of Pre-Closing Environmental Liabilities. 62 "Product Liability Claims" shall have the meaning set forth in Section 9.7. "Products" means all current commercial products of the Fasco Business. "Purchaser" shall have the meaning set forth in the first paragraph hereof. "Purchaser DC Plan" shall have the meaning set forth in Section 6.3.6. "Purchaser Documents" shall have the meaning set forth in Section 5.2. "Purchaser Indemnified Parties" shall have the meaning set forth in Section 9.1.1. "Purchaser Salaried Plans" shall have the meaning set forth in Section 6.3.7.1. "Purchaser's Salaried Trust" shall have the meaning set forth in Section 6.3.7.1. "Purchaser Tax Act" shall have the meaning set forth in Section 9.6.1.1. "Real Property Lease" shall have the meaning set forth in Section 4.12. "Recent Management Accounts" shall have the meaning set forth in Section 4.8. "Remedial Action" means all actions affirmatively required by an Order of a Governmental Body enforcing Environmental Laws to investigate, clean up, remove, treat or otherwise address any Hazardous Material located at, on or under real property, and shall be limited to the least stringent standards applicable to the subject real estate. "Salaried Pension Transferees" shall have the meaning set forth in Section 6.3.7.1. "Securities Act" shall have the meaning set forth in Section 5.5. "Securities and Exchange Commission" or "SEC" means the United States Securities and Exchange Commission. "Seller" and "Sellers" shall have the meaning set forth in the first paragraph hereof. "Seller DC Plan" shall have the meaning set forth in Section 6.3.6. "Seller Documents" shall have the meaning set forth in Section 4.2. "Seller Indemnified Parties" shall have the meaning set forth in Section 9.1.2. 63 "Seller Marks" shall have the meaning ascribed to such term in Section 6.7. "Sellers' Salaried Trust" shall have the meaning set forth in Section 6.3.7.3. "Seller Tax Act" shall have the meaning set forth in Section 9.6.1.2. "Shares" shall have the meaning set forth in the first recital hereof. "Software" means all computer programs embodied in Products or used in the manufacture or testing of Products. "Standard Accounting Principles" shall have the meaning set forth in the definition of Accounting Principles. "Straddle Period" shall have the meaning set forth in Section 9.6.1.3. "Subsidiary" means any Person of which a majority of the outstanding voting securities or other voting equity interests are owned, directly or indirectly, by one or more of the Companies. "Tax Asset" shall have the meaning set forth in Section 9.6.5.2. "Tax Claim" shall have the meaning set forth in Section 9.6.2.1. "Tax Indemnified Party" shall have the meaning set forth in Section 9.6.2.1. "Tax Indemnifying Party" shall have the meaning set forth in Section 9.6.2.1. "Tax Returns" means all returns, declarations, reports, estimates, information returns and statements required to be filed in respect of any Taxes. "Taxes" means (i) all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including, without limitation, all income, gross receipts, capital, sales, use, ad valorem, value added, environmental (including without limitation taxes under Code Section 59) transfer, franchise, profits, windfall profits, inventory, capital stock, alternative or add-on minimum, license, withholding, payroll, disability or workers' compensation, employment, social security, unemployment, excise, severance, stamp, registration, occupation, property (whether real, personal, intangible or mixed) and estimated taxes, customs duties, fees, assessments and charges of any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any taxing authority in connection with any item described in clause (i), and (iii) "Tax" shall have the correlative meaning any transferee liability in respect of any items described in clauses (i) and/or (ii). 64 "Technology" means, collectively, all designs, formulas, algorithms, procedures, techniques, ideas, know-how, Software, tools, inventions, creations, improvements, works of authorship other similar materials relating to the Products, and all recordings, graphs, drawings, reports, analyses, other writings, and any other embodiment of the above, in any form, whether or not specifically listed herein, and all related technology used in, incorporated in, embodied in or displayed by any of the foregoing, or used or useful in the design, development, reproduction, maintenance or modification of any of the foregoing. "Transfer Taxes" means all sales, use, transfer, intangible, recordation, documentary stamp or similar Taxes or charges, of any nature whatsoever. "Treasury Regulation" or "Treas. Reg." means the regulations promulgated by the IRS under the Code. "Unrelated Accounting Firm" shall have the meaning set forth in Section 2.2.1.4. "U.S. GAAP" shall have the meaning set forth in Section 4.8. "U.S. Employees" shall have the meaning set forth in Section 6.3.5. 10.2 Payment of Transfer Taxes. The Purchaser, on the one hand, and the Sellers and Invensys, on the other hand, shall pay or cause to be paid, and shall indemnify, defend and hold harmless the other party for, 50% of any and all Transfer Taxes attributable to the transactions contemplated by this Agreement. Purchaser and Sellers shall use commercially reasonable efforts to mitigate, reduce or eliminate Transfer Taxes that could arise from, or be due as a result of, the transactions contemplated in this Agreement. 10.3 Expenses. Except as otherwise provided in this Agreement, the Sellers and the Purchaser shall each bear their own expenses incurred in connection with the negotiation, preparation, execution and performance of this Agreement and each other agreement, document and instrument contemplated by this Agreement and the consummation of the transactions contemplated hereby and thereby, including all fees and expenses of representatives, agents and advisors, it being understood that in no event shall the Companies or the Subsidiaries bear any of such costs and expenses. 10.4 Further Assurances. Each Seller and the Purchaser agrees to furnish upon request to each other such further information, to execute and deliver such other documents or agreements, and to take such other action as may be reasonably necessary or desirable for the implementation of this Agreement and the documents referred to in this Agreement, and the consummation of the transactions contemplated hereby. 65 10.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware regardless of the laws that might otherwise govern under applicable principles of conflict of laws thereof. 10.6 Submission to Jurisdiction; Consent to Service of Process. 10.6.1 The parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of any federal or state court located within the State of Michigan over any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby and each party hereby irrevocably agrees that all claims in respect of such dispute or any suit, action, or proceeding related thereto may be heard and determined in such courts. The parties hereby irrevocably waive, to the fullest extent permitted by applicable Law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. 10.6.2 Each of the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action or proceeding by the mailing of a copy thereof in accordance with the provisions of Section 10.9. 10.7 Entire Agreement; Amendments and Waivers. This Agreement (including the schedules and annexes hereto) represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and can be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement signed by the party against whom enforcement of any such amendment, supplement, modification or waiver is sought. No action taken pursuant to this Agreement, including without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. 10.8 Table of Contents and Headings. The table of contents and section headings of this Agreement are for reference purposes only and are to be given no effect in the construction or interpretation of this Agreement. 10.9 Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed given when (i) delivered personally, (ii) mailed by certified or registered mail, return receipt requested, or (iii) sent by FedEx 66 or other nationally recognized express carrier, fee prepaid to the parties (and shall also be transmitted by facsimile to the Persons receiving copies thereof) at the following addresses (or to such other address as a party may have specified by notice given to the other party pursuant to this provision): If to any Seller, to: Invensys plc Carlisle Place London, SW1P 1BX United Kingdom Attn: Corporate Secretary Facsimile: (44) (207) 821-3806 With a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Attn: Paul R. Lovejoy, Esq. Facsimile: (212) 310-8007 If to Purchaser, to: Tecumseh Products Company 100 East Patterson Street Tecumseh, Michigan 49286 Attn: Todd W. Herrick Facsimile: (517) 423-8619 With a copy to: Miller, Canfield, Paddock and Stone, P.L.C. 840 West Long Lake Road, Suite 200 Troy, Michigan 48098-6358 Attn: David D. Joswick, Esq., Facsimile: (248) 879-2001 10.10 Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement shall remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 10.11 Binding Effect; No Third Party Beneficiaries; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties and their 67 respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any person or entity not a party to this Agreement. No assignment of this Agreement or of any rights or obligations hereunder may be made by either the Sellers or the Purchaser (by operation of law or otherwise) without the prior written consent of the other parties hereto and any attempted assignment without the required consents shall be void; provided, however, that the Purchaser may assign this Agreement and any or all rights or obligations hereunder (including, without limitation, the Purchaser's rights to purchase the Shares and the Purchaser's rights to seek indemnification hereunder) to any Affiliate of the Purchaser. Upon any such permitted assignment, the references in this Agreement to the Purchaser shall also apply to any such assignee unless the context otherwise requires. 10.12 Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. [The Remainder of this Page Is Intentionally Left Blank.] 68 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first written above. PURCHASER: TECUMSEH PRODUCTS COMPANY By: /s/ TODD W. HERRICK ---------------------------------------- Name: Todd W. Herrick Title: President and Chief Executive Officer SELLERS: BTR INDUSTRIES LIMITED By: /s/ KATHLEEN O'DONOVAN ------------------------------------------ Name: Kathleen O'Donovan ---------------------------------------- Title: Attorney-in-Fact --------------------------------------- BTR (EUROPEAN HOLDINGS) BV By: /s/ KATHLEEN O'DONOVAN ------------------------------------------ Name: Kathleen O'Donovan ---------------------------------------- Title: Attorney-in-Fact --------------------------------------- CPN HOLDINGS PTY LIMITED By: /s/ KATHLEEN O'DONOVAN ----------------------------------------- Name: Kathleen O'Donovan --------------------------------------- Title: Attorney-in-Fact -------------------------------------- INVENSYS CONTROLS MEXICAN HOLDING, L.L.C. By: /s/ KATHLEEN O'DONOVAN ------------------------------------------ Name: Kathleen O'Donovan ---------------------------------------- Title: Attorney-in-Fact --------------------------------------- BTR (USA) FINANCE COMPANY By: /s/ KATHLEEN O'DONOVAN ------------------------------------------ Name: Kathleen O'Donovan ---------------------------------------- Title: Attorney-in-Fact --------------------------------------- INVENSYS PLC By: /s/ KATHLEEN O'DONOVAN ------------------------------------------ Name: Kathleen O'Donovan ---------------------------------------- Title: Attorney-in-Fact --------------------------------------- EX-2.2 4 k73591exv2w2.txt AMENDMENT #1 DATED 12/3/02 EXHIBIT 2.2 AMENDMENT No. 1 TO STOCK PURCHASE AGREEMENT THIS AMENDMENT No.1 (this "Amendment") to that certain Stock Purchase Agreement entered into as of November 27, 2002, by and among Tecumseh Products Company, a corporation organized and existing under the laws of the State of Michigan (the "Purchaser"), BTR Industries Limited, a corporation organized and existing under the laws of England and Wales ("BTRI"), BTR (European Holdings) BV, a corporation organized and existing under the laws of the Netherlands ("BTR Holdings"), CPN Holdings Pty Limited, a corporation organized and existing under the laws of Australia ("CPN"), Invensys Controls Mexican Holding, L.L.C., a limited liability company organized and existing under the laws of Mexico ("ICMH") and BTR (USA) Finance Company, a Massachusetts business trust ("BTR Finance" and collectively with BTRI, BTR Holdings, CPN and ICMH, the "Sellers"), and Invensys plc, a corporation organized and existing under the laws of England and Wales ("Invensys") (together with the Annexes, Schedules and Exhibits thereto, the "Agreement") is entered into as of the 3rd day of December, 2002. WHEREAS, capitalized terms used and not defined herein shall have the meanings ascribed to such terms in the Agreement; and WHEREAS, the parties desire to amend Sections 2.3.1, 2.4.1 and 10.1 of the Agreement as described herein and to add a new Section 9.6.7 to the Agreement. NOW THEREFORE, in consideration of the mutual premises herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Purchaser, Sellers and Invensys agree to amend the Agreement as follows: 1. Section 2.3.1 is hereby amended by adding, immediately after the phrase "minus the Escrow Funds", the following: "and, if a certificate from the Canadian Minister of National Revenue under Section 116 of the Income Tax Act (Canada) with a limit at least equal to the allocation to Fasco Motors Limited (set forth in Section 2.4.1) is not received on or prior to the Closing Date, minus the Canadian Withholding Amount" 2. Section 2.4.1 is hereby replaced in its entirety with the following: Sellers and Purchaser agree to allocate (i) 39,250,000 Canadian dollars to Fasco Motors Limited (Canada) and (ii) the balance of the Initial Purchase Price (which shall be determined by subtracting the amount described in clause (i) as converted to US dollars at the closing mid-point US dollar spot rate shown in the Financial Times published on the second Business Day before the Closing) among the remaining Companies at or prior to Closing. Within thirty (30) days following the later of the determination of the Adjustment Amount or the Pension Plan Assets Adjustment, Sellers and Purchaser shall agree upon a revised purchase price allocation to reflect such adjustments in accordance with the character of each such adjustment and in a manner that is consistent with the allocation of the Initial Purchase Price; provided, that, for purposes of Section 2.4, no such adjustments shall be allocable to Fasco Motors Limited (Canada). 3. The following is added to the Agreement as a new Section 9.6.7: 9.6.7 Notwithstanding the issuance of a certificate from the Canadian Minister of National Revenue as described in Section 2.3.1, in the event that the Canadian authorities reject, challenge, or invalidate such certificate or seek an adjustment of any kind from Purchaser with regard to the Canadian Withholding Amount, such rejection, challenge, invalidation, or adjustment shall constitute a Seller Tax Act subject to the indemnification provisions of Section 9.6.1. 4. Section 10.1 of the Agreement is hereby amended by inserting the following defined term in alphabetical order: "Canadian Withholding Amount" shall mean the amount that is required to be withheld by the Purchaser (or any Affiliate of the Purchaser that purchases the shares of Fasco Motors Limited (Canada)) pursuant to Section 116 of the Income Tax Act (Canada) (based upon the allocation to Fasco Motors Limited (Canada) set forth in Section 2.4) converted to US dollars at the closing mid-point US dollar spot rate shown in the Financial Times published on the first Business Day before the Closing. 5. Notwithstanding any other provision of the Agreement, the failure to obtain a certificate under Section 116 of the Income Tax Act (Canada) shall not constitute a condition to Closing. 6. Except as set forth herein, the Agreement is not otherwise amended in any respect. 7. This Amendment shall be governed by and construed in accordance with the laws of the State of Delaware regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 8. This Amendment may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 2 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first written above. TECUMSEH PRODUCTS COMPANY By: /s/ TODD W. HERRICK ----------------------------------------- Name: Todd W. Herrick Title: President and Chief Executive Officer BTR INDUSTRIES LIMITED By: /s/ VICTORIA HULL ------------------------------------------ Name: Victoria Hull ---------------------------------------- Title: General Counsel --------------------------------------- BTR (EUROPEAN HOLDINGS) BV By: /s/ VICTORIA HULL ------------------------------------------ Name: Victoria Hull ---------------------------------------- Title: General Counsel --------------------------------------- CPN HOLDINGS PTY LIMITED By: /s/ VICTORIA HULL ------------------------------------------ Name: Victoria Hull ---------------------------------------- Title: General Counsel --------------------------------------- INVENSYS CONTROLS MEXICAN HOLDING, L.L.C. By: /s/ VICTORIA HULL ------------------------------------------ Name: Victoria Hull ---------------------------------------- Title: General Counsel --------------------------------------- BTR (USA) FINANCE COMPANY By: /s/ VICTORIA HULL ------------------------------------------ Name: Victoria Hull ---------------------------------------- Title: General Counsel --------------------------------------- 3 INVENSYS PLC By: /s/ VICTORIA HULL ------------------------------------------ Name: Victoria Hull ---------------------------------------- Title: General Counsel --------------------------------------- 4 EX-2.3 5 k73591exv2w3.txt AMENDMENT #2 DATED 12/30/02 EXHIBIT 2.3 AMENDMENT No. 2 TO STOCK PURCHASE AGREEMENT THIS AMENDMENT No. 2, (this "Amendment") to that certain Stock Purchase Agreement entered into as of November 27, 2002, as amended by Amendment No. 1 dated December 3, 2002, by and among Tecumseh Products Company, a corporation organized and existing under the laws of the State of Michigan (the "Purchaser"), BTR Industries Limited, a corporation organized and existing under the laws of England and Wales ("BTRI"), BTR (European Holdings) BV, a corporation organized and existing under the laws of the Netherlands ("BTR Holdings"), CPN Holdings Pty Limited, a corporation organized and existing under the laws of Australia ("CPN"), Invensys Controls Mexican Holding, L.L.C., a limited liability company organized and existing under the laws of Delaware ("ICMH") and BTR (USA) Finance Company, a Massachusetts business trust ("BTR Finance" and collectively with BTRI, BTR Holdings, CPN and ICMH, the "Sellers"), and Invensys plc, a corporation organized and existing under the laws of England and Wales ("Invensys") (together with the Annexes, Schedules and Exhibits thereto, the "Agreement") is entered into as of the 30th day of December, 2002. WHEREAS, capitalized terms used and not defined herein shall have the meanings ascribed to such terms in the Agreement; and WHEREAS, the parties desire to amend Sections 2.1.1, 2.2.2.4.1, 2.2.2.4.2, 2.5, 6.3.1 and 9.1.1.6 of the Agreement, and to amend the form of Non-Competition Agreement attached to the Agreement as Annex B. NOW THEREFORE, in consideration of the mutual premises herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Purchaser, Sellers and Invensys agree to amend the Agreement as follows: 1. Section 2.1.1 is amended by replacing "Four Hundred Fifteen Million Dollars ($415,000,000)" with "Four Hundred Million Dollars ($400,000,000)". 2. Sections 2.2.2.4.1 and 2.2.2.4.2 are amended by replacing all references to "the Closing Date" with "January 1, 2003 or the Closing Date, whichever is later." 3. Section 2.5 is amended by deleting the second sentence of such Section 2.5 and adding the following sentence in place thereof: "The Initial Purchase Price payable at Closing shall be reduced by Eight Hundred Thousand Dollars ($800,000) in recognition of certain of the amounts scheduled on Schedule 2.5 not having been expended as of the Closing." 4. Section 9.1.1.6 is deleted and is replaced in its entirety with the following: 9.1.1.6 Losses based upon, attributable to or resulting from matters related to motors manufactured by Von Weise Gear Company prior to Closing for use in medical lift chairs manufactured or assembled by Invacare Corporation; 5. The form of the Non-Competition Agreement attached to the Agreement as Annex B is replaced in its entirety with the form of the Non-Competition Agreement attached hereto as Annex B. 6. The Initial Purchase Price is agreed to be allocated pursuant to Section 2.4.1 of the Agreement as is set forth on the attached "Allocation of Initial Purchase Price." 7. Section 6.3.1 is hereby amended by adding the following sentence as the second complete sentence of the paragraph, to be included immediately after the definition of Inactive Employee and applicable to those individuals listed on Exhibit 1 hereto: "Notwithstanding the immediately preceding sentence, Inactive Employees whose employment was terminated in connection with the shutdown of the Ozark and Elkhorn facilities as contemplated under Section 2.5 of this Agreement shall not be deemed to have transferred to the Sellers or any such Affiliate solely for purposes of the payment of severance and any other benefits available to these employees for the period of such post-employment salary continuation benefits, and all other liabilities and obligations with respect to such employees shall remain with Invensys, other than Purchaser's (and its Affiliates') obligations with respect to these payments." 8. Except as set forth herein, the Agreement is not otherwise amended in any respect. 9. This Amendment shall be governed by and construed in accordance with the laws of the State of Delaware regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 10. This Amendment may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. [ The Remainder of this Page Is Intentionally Left Blank.] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first written above. TECUMSEH PRODUCTS COMPANY By: /s/ David W. Kay ----------------------------- Name: David W. Kay Title: Chief Financial Officer, Vice President and Treasurer BTR INDUSTRIES LIMITED By: /s/ Kevin M. Keegan ----------------------------- Name: Kevin M. Keegan Title: Attorney-in-Fact BTR (EUROPEAN HOLDINGS) BV By: /s/ Kevin M. Keegan ----------------------------- Name: Kevin M. Keegan Title: Attorney-in-Fact CPN HOLDINGS PTY LIMITED By: /s/ Kevin M. Keegan ----------------------------- Name: Kevin M. Keegan Title: Attorney-in-Fact INVENSYS CONTROLS MEXICAN HOLDING, L.L.C. By: /s/ Kevin M. Keegan ----------------------------- Name: Kevin M. Keegan Title: Attorney-in-Fact BTR (USA) FINANCE COMPANY By: /s/ Kevin M. Keegan ----------------------------- Name: Kevin M. Keegan Title: Attorney-in-Fact INVENSYS PLC By: /s/ Kevin M. Keegan ----------------------------- Name: Kevin M. Keegan Title: Attorney-in-Fact EX-4.1 6 k73591exv4w1.txt THREE-YEAR CREDIT AGREEMENT EXHIBIT 4.1 THREE-YEAR CREDIT AGREEMENT DATED AS OF DECEMBER 30, 2002 AMONG TECUMSEH PRODUCTS COMPANY, THE LENDERS AND LC ISSUER, BANK ONE, NA AS AGENT AND BANC ONE CAPITAL MARKETS, INC. AS LEAD ARRANGER AND SOLE BOOK RUNNER TABLE OF CONTENTS ARTICLE I. DEFINITIONS...........................................................................................1 ARTICLE II. THE CREDITS..........................................................................................15 2.1. Commitment.......................................................................................15 2.2. Required Payments; Termination...................................................................15 2.3. Ratable Loans....................................................................................15 2.4. Types of Advances................................................................................15 2.5 Swing Line Loans.................................................................................15 2.6 Facility Fee, Utilization Fee; Reductions in Aggregate Commitment................................17 2.7. Minimum Amount of Each Advance...................................................................17 2.8. Optional Principal Payments......................................................................17 2.9. Method of Selecting Types and Interest Periods for New Advances..................................17 2.10. Conversion and Continuation of Outstanding Advances..............................................18 2.11. Changes in Interest Rate, etc....................................................................18 2.12. Rates Applicable After Default...................................................................19 2.13. Method of Payment................................................................................19 2.14. Noteless Agreement; Evidence of Indebtedness.....................................................19 2.15. Telephonic Notices...............................................................................20 2.16. Interest Payment Dates; Interest and Fee Basis...................................................20 2.17. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions..................20 2.18. Lending Installations............................................................................21 2.19. Facility LCs.....................................................................................21 2.20. Non-Receipt of Funds by the Agent................................................................25 2.21. Replacement of Lender............................................................................25 ARTICLE III. YIELD PROTECTION; TAXES..............................................................................25 3.1. Yield Protection.................................................................................25 3.2. Changes in Capital Adequacy Regulations..........................................................26 3.3. Availability of Types of Advances................................................................27 3.4. Funding Indemnification..........................................................................27 3.5. Taxes............................................................................................27 3.6. Lender Statements; Survival of Indemnity.........................................................28 ARTICLE IV. CONDITIONS PRECEDENT.................................................................................29
4.1. Initial Credit Extension.........................................................................29 4.2 Each Credit Extension............................................................................31 ARTICLE V. REPRESENTATIONS AND WARRANTIES........................................................................32 5.1. Existence and Standing...........................................................................32 5.2. Authorization and Validity.......................................................................32 5.3. No Conflict; Government Consent..................................................................32 5.4. Financial Statements.............................................................................32 5.5. Material Adverse Change..........................................................................33 5.6. Taxes............................................................................................33 5.7. Litigation and Contingent Obligations............................................................33 5.8. Subsidiaries.....................................................................................33 5.9. ERISA............................................................................................33 5.10. Accuracy of Information..........................................................................34 5.11. Regulations T, U and X...........................................................................34 5.12. Material Agreements..............................................................................34 5.13. Compliance With Laws.............................................................................34 5.14. Ownership of Properties..........................................................................34 5.15. Plan Assets; Prohibited Transactions.............................................................34 5.16. Environmental Matters............................................................................34 5.17. Investment Company Act...........................................................................35 5.18. Public Utility Holding Company Act...............................................................35 5.19. Solvency.........................................................................................35 5.20. FASCO Acquisition................................................................................35 ARTICLE VI. COVENANTS............................................................................................36 6.1. Financial Reporting..............................................................................36 6.2. Use of Proceeds; FASCO Acquisition Documents.....................................................37 6.3. Notice of Default................................................................................38 6.4. Conduct of Business..............................................................................38 6.5. Taxes............................................................................................38 6.6. Insurance........................................................................................38 6.7. Compliance with Laws.............................................................................38 6.8. Maintenance of Properties........................................................................38 6.9. Inspection.......................................................................................38 6.10. Dividends........................................................................................38 6.11. Non-Guarantor Indebtedness.......................................................................39 6.12. Merger...........................................................................................39 6.13. Sale of Assets...................................................................................39 6.14. Investments and Acquisitions.....................................................................39 6.15. Liens............................................................................................40 6.16. Affiliates.......................................................................................41 6.17 Limitation on Restrictions on Subsidiary Distributions...........................................41
ii 6.18 Financial Contracts..............................................................................41 6.19. Financial Covenants..............................................................................41 6.20. Additional Covenants.............................................................................42 ARTICLE VII. DEFAULTS............................................................................................42 ARTICLE VIII. ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES.....................................................44 8.1. Acceleration; Facility LC Collateral Account.....................................................44 8.2. Amendments.......................................................................................45 8.3. Preservation of Rights...........................................................................46 ARTICLE IX. GENERAL PROVISIONS....................................................................................46 9.1. Survival of Representations......................................................................46 9.2. Governmental Regulation..........................................................................46 9.3. Headings.........................................................................................46 9.4. Entire Agreement.................................................................................47 9.5. Several Obligations; Benefits of this Agreement..................................................47 9.6. Expenses; Indemnification........................................................................47 9.7. Numbers of Documents.............................................................................47 9.8. Accounting.......................................................................................47 9.9. Severability of Provisions.......................................................................48 9.10. Nonliability of Lenders..........................................................................48 9.11. Confidentiality..................................................................................48 9.12. Nonreliance......................................................................................49 9.13. Disclosure.......................................................................................49 ARTICLE X. THE AGENT..............................................................................................49 10.1. Appointment; Nature of Relationship..............................................................49 10.2. Powers...........................................................................................49 10.3. General Immunity.................................................................................49 10.4. No Responsibility for Loans, Recitals, etc.......................................................49 10.5. Action on Instructions of Lenders................................................................50 10.6. Employment of Agents and Counsel.................................................................50 10.7. Reliance on Documents; Counsel...................................................................50 10.8. Agent's Reimbursement and Indemnification........................................................50 10.9. Notice of Default................................................................................51 10.10. Rights as a Lender...............................................................................51 10.11. Lender Credit Decision...........................................................................51 10.12. Successor Agent..................................................................................51 10.13. Agent and Arranger Fees..........................................................................52 10.14. Delegation to Affiliates.........................................................................52
iii 10.17. Co-Agents, Documentation Agent, Syndication Agent, etc...........................................52 ARTICLE XI. SETOFF; RATABLE PAYMENTS..............................................................................52 11.1. Setoff...........................................................................................52 11.2. Ratable Payments.................................................................................52 ARTICLE XII. BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS...................................................53 12.1. Successors and Assigns...........................................................................53 12.2. Participations...................................................................................53 12.3. Assignments......................................................................................54 12.4. Dissemination of Information.....................................................................56 12.5. Tax Treatment....................................................................................56 ARTICLE XIII. NOTICES............................................................................................57 13.1. Notices..........................................................................................57 13.2. Change of Address................................................................................57 ARTICLE XIV. COUNTERPARTS.........................................................................................57 ARTICLE XV. CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.........................................57 15.1. CHOICE OF LAW....................................................................................57 15.2. CONSENT TO JURISDICTION..........................................................................57 15.3. WAIVER OF JURY TRIAL.............................................................................58 EXHIBIT A. FORM OF OPINION.......................................................................................61 EXHIBIT B. COMPLIANCE CERTIFICATE................................................................................63 EXHIBIT D. LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION........................................................71 EXHIBIT E. NOTE..................................................................................................72 SCHEDULE 1. SUBSIDIARIES AND OTHER INVESTMENTS...................................................................74 SCHEDULE 2. INDEBTEDNESS AND LIENS...............................................................................75
iv SCHEDULE 3. FASCO ENTITIES.......................................................................................76 SCHEDULE 5.7. LITIGATION.........................................................................................76
v THREE-YEAR CREDIT AGREEMENT This Agreement, dated as of December 30, 2002, is among Tecumseh Products Company, a Michigan corporation, the Lenders and Bank One, NA, a national banking association having its principal office in Chicago, Illinois, as Agent. The parties hereto agree as follows: ARTICLE I DEFINITIONS As used in this Agreement: "Accumulated Funding Deficiency" means any accumulated funding deficiency within the meaning of Section 412 of the Code or Section 302 of ERISA. "Acquisition" means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or limited liability company, or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities Voting Stock of any Person. "Advance" means a borrowing hereunder, (i) made by some or all of the Lenders on the same Borrowing Date, or (ii) converted or continued by the Lenders on the same date of conversion or continuation, consisting, in either case, of the aggregate amount of the several Loans of the same Type and, in the case of Eurodollar Loans, for the same Interest Period. The term "Advance" shall include Swing Line Loans unless otherwise expressly provided. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 5% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. "Agent" means Bank One in its capacity as contractual representative of the Lenders pursuant to Article X, and not in its individual capacity as a Lender, and any successor Agent appointed pursuant to Article X. "Aggregate Commitment" means the aggregate of the Commitments of all the Lenders, as reduced from time to time pursuant to the terms hereof. As of the date hereof, the Aggregate Commitment equals $125,000,000. "Aggregate Outstanding Credit Exposure" means, at any time, the aggregate of the Outstanding Credit Exposure of all the Lenders. 1 "Agreement" means this credit agreement, as it may be amended or modified and in effect from time to time. "Agreement Accounting Principles" means generally accepted accounting principles as in effect from time to time, applied in a manner consistent with that used in preparing the financial statements referred to in Section 5.4. "Applicable Facility Fee Rate" means, at any time, the percentage rate per annum at which facility fees under Section 2.6(i) are accruing at such time as set forth in the Pricing Schedule. "Applicable Margin" means, with respect to Advances of any Type at any time, the percentage rate per annum which is applicable at such time with respect to Advances of such Type as set forth in the Pricing Schedule. "Approved Fund" means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. "Arranger" means Banc One Capital Markets, Inc., a Delaware corporation, and its successors, in its capacity as Lead Arranger and Sole Book Runner. "Article" means an article of this Agreement unless another document is specifically referenced. "Authorized Officer" means any of the president, chief executive officer or chief financial officer of the Borrower or any other employee of the Borrower designated in writing as an Authorized Officer by any of the foregoing, in each case acting singly. "Available Aggregate Commitment" means, at any time, the Aggregate Commitment then in effect minus the Aggregate Outstanding Credit Exposure at such time. "Bank One" means Bank One, NA, a national banking association having its principal office in Chicago, Illinois, in its individual capacity, and its successors. "Board of Directors" means: (i) with respect to a corporation, the board of directors of the corporation; (ii) with respect to a partnership, the Board of Directors of the general partner of the partnership; and (iii) with respect to any other Person, the board or committee of such Person serving a similar function. "Borrower" means Tecumseh Products Company, a Michigan corporation, and its successors and assigns. "Borrowing Date" means a date on which an Advance is made hereunder. "Borrowing Notice" is defined in Section 2.9. "Bridge Credit Agreement" means the Bridge Credit Agreement dated as of the date hereof among the Borrower, the lenders party thereto and Bank One, NA, as agent, as amended, modified, replaced or refinanced from time to time. 2 "Business Day" means (i) with respect to any borrowing, payment or rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Detroit and New York City for the conduct of substantially all of their commercial lending activities, interbank wire transfers can be made on the Fedwire system and dealings in United States dollars are carried on in the London interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Detroit for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system. "Capital Stock" means (i) in the case of any corporation, all capital stock and any securities exchangeable for or convertible into capital stock and any warrants, rights or other options to purchase or otherwise acquire capital stock or such securities or any other form of equity securities, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Capitalized Lease" of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Capitalized Lease Obligations" of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Cash Equivalent Investments" means (i) short-term obligations of, or fully guaranteed by, the United States of America, (ii) commercial paper rated A-1 or better by S&P or P-1 or better by Moody's, (iii) demand deposit accounts maintained in the ordinary course of business, and (iv) certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $100,000,000; provided in each case that the same provides for payment of both principal and interest (and not principal alone or interest alone) and is not subject to any contingency regarding the payment of principal or interest. "Change in Control" means (i) the acquisition by any Person (other than Permitted Holders), or two or more Persons (other than Permitted Holders) acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock of the Borrower; or (ii) a majority of the members of the Board of Directors of the Borrower shall not be Continuing Directors. "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "Collateral Shortfall Amount" is defined in Section 8.1. "Commitment" means, for each Lender, the obligation of such Lender to make Revolving Loans to, and participate in Swing Line Loans and Facility LCs issued upon the application of, the Borrower in an aggregate amount not exceeding the amount set forth opposite its signature below or as set forth in any Notice of Assignment relating to any assignment that has become effective pursuant to Section 12.3.3, as such amount may be modified from time to time pursuant to the terms hereof. 3 "Consolidated EBIT" means Consolidated Net Income plus, to the extent deducted from revenues in determining Consolidated Net Income, (i) Consolidated Interest Expense, (ii) expense for taxes paid or accrued, (iii) restructuring charges for plant closings (including charges for impairment of value of equipment and severance costs) taken after September 30, 2002 but on or before December 31, 2003 to the extent such restructuring charges do not exceed $40,000,000 in aggregate amount, and (iv) extraordinary losses incurred other than in the ordinary course of business, minus, to the extent included in Consolidated Net Income, extraordinary gains realized other than in the ordinary course of business, all calculated for the Borrower and its Subsidiaries on a consolidated basis. "Consolidated EBITDA" means Consolidated EBIT plus, to the extent deducted from revenues in determining Consolidated EBIT and without duplication, (i) depreciation, (ii) amortization and (iii) non-cash charges related specifically to any goodwill impairment charge required under FASB 142 not to exceed $25,000,000 in the aggregate for any four consecutive fiscal quarters or $50,000,000 in the aggregate for any twelve consecutive fiscal quarters, all calculated for the Borrower and its Subsidiaries on a consolidated basis. "Consolidated Indebtedness" means at any time the Indebtedness of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time. "Consolidated Interest Expense" means, with reference to any period, the interest expense of the Borrower and its Subsidiaries calculated on a consolidated basis for such period, including without limitation all financing costs in connection with a Qualified Receivables Transaction. "Consolidated Net Income" means, with reference to any period, the net income (or loss) of the Borrower and its Subsidiaries calculated on a consolidated basis for such period. "Consolidated Net Worth" means at any time the consolidated stockholders' equity of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time; provided that all accumulated other comprehensive income (as determined in accordance with Agreement Accounting Principles, which includes such non-cash adjustments for foreign currency translation and transaction adjustments, net unrealized gains/losses on all investments, minimum pension liability and other FASB 87 adjustments, and all FASB 133 related adjustments) shall be excluded in determining Consolidated Net Worth. "Contingent Obligation" of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or the obligations of any such Person as general partner of a partnership with respect to the liabilities of the partnership. "Continuing Directors" means, as of any date, individuals who at the beginning of any period of two consecutive calendar years ended before such date constituted the Board of Directors of the Borrower, together with any new directors whose election by such Board of Directors or whose nomination for election was approved by a vote of at least two-thirds of the members of such Board of Directors then still in office who either were members of such Board of Directors at the beginning of such period or whose election or nomination for election was previously so approved. 4 "Conversion/Continuation Notice" is defined in Section 2.10. "Controlled Group" means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Credit Extension" means the making of an Advance or the issuance of a Facility LC hereunder. "Credit Extension Date" means the Borrowing Date for an Advance or the issuance date for a Facility LC. "Default" means an event described in Article VII. "Defaulting Lender" means any Lender that on any Borrowing Date fails to make available to the Agent such Lender's Loans required to be made to the Borrower on such Borrowing Date or fails to make any payment due to the Agent as and when due hereunder. Once a Lender becomes a Defaulting Lender, such Lender shall continue as a Defaulting Lender until such time as such Defaulting Lender makes available to the Agent the amount of such Defaulting Lender's Loans together with all other amounts required to be paid to the Agent and/or the Lenders pursuant to this Agreement. "Domestic Subsidiary" means each present and future Subsidiary of the Borrower which is not a Foreign Subsidiary. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on human health, (iii) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water or land, or (iv) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder. "Eurodollar Advance" means an Advance which, except as otherwise provided in Section 2.12, bears interest at the applicable Eurodollar Rate. "Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the applicable British Bankers' Association LIBOR rate for deposits in U.S. dollars as reported by any generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, provided that, if no such British Bankers' Association LIBOR rate is available to the Agent, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the rate determined by the Agent to be the rate at which Bank One or one of its Affiliate banks offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, in the approximate amount of Bank One's relevant Eurodollar Loan and having a maturity equal to such Interest Period. 5 "Eurodollar Loan" means a Loan which, except as otherwise provided in Section 2.12, bears interest at the applicable Eurodollar Rate. "Eurodollar Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base Rate applicable to such Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period, plus (ii) the Applicable Margin. "Excluded Taxes" means, in the case of each Lender or applicable Lending Installation and the Agent, taxes imposed on its overall net income (including the Michigan single business tax), and franchise taxes imposed on it, by (i) the jurisdiction under the laws of which such Lender or the Agent is incorporated or organized or (ii) the jurisdiction in which the Agent's or such Lender's principal executive office or such Lender's applicable Lending Installation is located. "Exhibit" refers to an exhibit to this Agreement, unless another document is specifically referenced. "Facility LC" is defined in Section 2.19.1. "Facility LC Application" is defined in Section 2.19.3. "Facility LC Collateral Account" is defined in Section 2.19.11. "Facility Termination Date" means the earlier of (i) the date three years after the date of this Agreement or (ii) the date on which the Aggregate Commitment is reduced to zero or otherwise terminated pursuant to the terms hereof "FASCO" shall mean the entities comprising the FASCO Motors Group to be acquired by the Borrower as further described in the FASCO Acquisition Documents and set forth on attached Schedule 3. "FASCO Acquisition" means the Acquisition by the Borrower and/or a Guarantor of FASCO pursuant to the FASCO Acquisition Documents, which is currently scheduled to be completed on or before February 28, 2003. "FASCO Acquisition Documents" means the FASCO Purchase Agreement and all other material agreements, documents and instruments executed in connection therewith, in each case as amended or modified from time to time to the extent permitted by Section 6.2 hereof. "FASCO Stock Purchase Agreement" means the stock purchase agreement dated November 27, 2002 among the Borrower and the Sellers for the Acquisition by the Borrower and/or a Guarantor of FASCO, as amended or modified from time to time to the extent permitted by Section 6.2 hereof. "Federal Funds Effective Rate" means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Detroit time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion. 6 "Financial Contract" of a Person means (i) any exchange-traded or over-the-counter futures, forward, swap or option contract or other financial instrument with similar characteristics, or (ii) any Rate Management Transaction. "Floating Rate" means, for any day, a rate of interest per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds Effective Rate for such day plus 1/2% per annum. "Floating Rate Advance" means an Advance which, except as otherwise provided in Section 2.12, bears interest at the Floating Rate. "Floating Rate Loan" means a Loan which, except as otherwise provided in Section 2.12, bears interest at the Floating Rate. "Foreign Subsidiary" means each Subsidiary organized under the laws of a jurisdiction outside of the United States. "Fund" means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. "Governmental Authorization" means any permit, license, authorization, plan, directive, consent order or consent decree of or from any federal, state or local governmental authority, agency or court or any foreign governmental authority, agency or court. "Guarantor" means all present and future Domestic Subsidiaries of the Borrower and their successors and assigns, and any other Person executing a Guaranty at any time. "Guaranty" means all guaranties of the Obligations executed by the Guarantors in favor of the Agent, for the ratable benefit of the Lenders, as it may be amended or modified and in effect from time to time, and each such guaranty shall be in form and substance acceptable to the Agent. "Indebtedness" of a Person means such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) obligations of such Person to purchase securities or other Property arising out of or in connection with the sale of the same or substantially similar securities or Property, (vi) obligations of such Person with respect to Letters of Credit, whether drawn or undrawn, contingent or otherwise, (vii) Net Mark-to-Market Exposure, (viii) Off-Balance Sheet Liabilities, (ix) Capitalized Lease Obligations, (x) Receivables Transaction Attributed Indebtedness, (xi) any other obligation for borrowed money or other financial accommodation which in accordance with Agreement Accounting Principles would be shown as a liability on the consolidated balance sheet of such Person, and (xii) all Contingent Obligations of such Person with respect to any of the foregoing. 7 "Interest Period" means, with respect to a Eurodollar Advance, a period of one, two, three or six months commencing on a Business Day selected by the Borrower pursuant to this Agreement. Such Interest Period shall end on the day which corresponds numerically to such date one, two, three or six months thereafter, provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day. "Investment" of a Person means any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade) or contribution of capital by such Person; stocks, bonds, mutual funds, partnership interests, notes, debentures or other securities owned by such Person; any deposit accounts and certificate of deposit owned by such Person; and structured notes, derivative financial instruments and other similar instruments or contracts owned by such Person. "LC Fee" is defined in Section 2.19.4. "LC Issuer" means Bank One (or any subsidiary or affiliate of Bank One designated by Bank One) in its capacity as issuer of Facility LCs hereunder. "LC Obligations" means, at any time, the sum, without duplication, of (i) the aggregate undrawn stated amount under all Facility LCs outstanding at such time plus (ii) the aggregate unpaid amount at such time of all Reimbursement Obligations. "LC Payment Date" is defined in Section 2.19.5. "Lenders" means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns. Unless otherwise specified, the term "Lenders" includes Bank One in its capacity as Swing Line Lender. "Lending Installation" means, with respect to a Lender, the Agent or LC Issuer, the office, branch, subsidiary or affiliate of such Lender, the Agent or LC Issuer listed on the signature pages hereof or on a Schedule or otherwise selected by such Lender, the Agent or LC Issuer pursuant to Section 2.18 "Letter of Credit" of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable. "Leverage Ratio" means, as of any date of calculation, the ratio of (i) Consolidated Indebtedness outstanding on such date to (ii) Consolidated EBITDA for the Borrower's then most-recently ended four fiscal quarters. 8 "Lien" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement). "Loan Documents" means this Agreement, the Guaranties, the Facility LC Applications, any Notes issued pursuant to Section 2.14 and any other agreements or instruments executed in connection herewith at any time. "Loan" means a Revolving Loan or a Swing Line Loan. "Margin Stock" means "margin stock" as defined in Regulations U or X or "marginable OTC stock" or "foreign margin stock" within the meaning of Regulation T. "Material Adverse Effect" means a material adverse effect on (i) the business, Property, condition (financial or otherwise), results of operations, or prospects of the Borrower and its Subsidiaries taken as a whole, or of FASCO taken as a whole, (ii) the ability of the Borrower and the Guarantors taken as a whole to perform their respective obligations under the Loan Documents, or (iii) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agent, the LC Issuer or the Lenders thereunder. "Material Indebtedness" means Indebtedness in an outstanding principal amount of $25,000,000 or more in the aggregate (or the equivalent thereof in any currency other than U.S. dollars). "Material Indebtedness Agreement" means any agreement under which any Material Indebtedness was created or is governed or which provides for the incurrence of Indebtedness in an amount which would constitute Material Indebtedness (whether or not an amount of Indebtedness constituting Material Indebtedness is outstanding thereunder). "Modify" and "Modification" are defined in Section 2.19.1. "Moody's" means Moody's Investors Service, Inc. "Multiemployer Plan" means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which the Borrower or any member of the Controlled Group is a party to which more than one employer is obligated to make contributions. "Net Cash Proceeds" means, in connection with any issuance or sale of any equity securities or debt securities or instruments or the incurrence of loans, the cash proceeds received from such issuance or incurrence, net of investment banking fees, reasonable and documented attorneys' fees, accountants' fees, underwriting discounts and commissions and other reasonable and customary fees and expenses actually incurred in connection therewith. "Net Mark-to-Market Exposure" of a Person means, as of any date of determination, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from Rate Management Transactions. "Unrealized losses" means the fair market value of the cost to such Person of replacing such Rate Management Transaction as of the date of determination (assuming the Rate Management Transaction were to be terminated as of that date), and "unrealized profits" means the fair market value of the gain to such Person of replacing such Rate Management Transaction as of the date of determination (assuming such Rate Management Transaction were to be terminated as of that date). 9 "Non-U.S. Lender" is defined in Section 3.5(iv). "Note" is defined in Section 2.14. "Obligations" means all unpaid principal of and accrued and unpaid interest on the Loans, all Reimbursement Obligations, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower to the Lenders or to any Lender, the Agent, the LC Issuer or any indemnified party arising under the Loan Documents. "Off-Balance Sheet Liability" of a Person means (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability under any Sale and Leaseback Transaction which is not a Capitalized Lease, (iii) any liability under any so-called "synthetic lease" or "tax ownership operating lease" transaction entered into by such Person, or (iv) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheets of such Person, but excluding from this clause (iv) Operating Leases. "Opening Pro Forma Statements" is defined in Section 4.1(xii). "Opening Projections" is defined in Section 4.1(xii). "Operating Lease" of a Person means any lease of Property (other than a Capitalized Lease) by such Person as lessee which has an original term (including any required renewals and any renewals effective at the option of the lessor) of one year or more. "Other Taxes" is defined in Section 3.5(ii). "Outstanding Credit Exposure" means, as to any Lender at any time, the sum of (i) the aggregate principal amount of its Revolving Loans outstanding at such time, plus (ii) an amount equal to its Pro Rata Share of the LC Obligations and the aggregate principal amount of Swing Line Loans outstanding at such time. "Participants" is defined in Section 12.2.1. "Payment Date" means the date three months after the date hereof and each date occurring each three months thereafter. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "Permitted Holders" means and includes (A) any Person who is a lineal descendant of Raymond Herrick, (B) the spouse, children, or grandchildren of any such Person, (C) any trust of which any of such Persons is a trustee or a beneficiary, (D) the estate, executor, administrator, or any legal guardian of any such Person, (E) any partnership, corporation or limited liability company owned and controlled solely by such Persons and (F) the Herrick Foundation. 10 "Person" means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Borrower or any member of the Controlled Group may have any liability. "Pricing Schedule" means the Schedule attached hereto identified as such. "Prime Rate" means a rate per annum equal to the prime rate of interest announced from time to time by Bank One or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes. "Pro Rata Share" means, with respect to a Lender, a portion equal to a fraction the numerator of which is such Lender's Commitment and the denominator of which is the Aggregate Commitment. "Property" of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person. "Purchasers" is defined in Section 12.3.1. "Qualified Receivables Transaction" means any transaction or series of transactions that may be entered into by the Borrower or any Subsidiary pursuant to which the Borrower or any Subsidiary may sell, convey or otherwise transfer to a newly-formed Subsidiary or other special-purpose entity, or any other Person, any accounts or notes receivable and rights related thereto, provided that (i) all of the terms and conditions of such transaction or series of transactions, including without limitation the amount and type of any recourse to the Borrower or any Subsidiary with respect to the assets transferred, are acceptable to the Agent and the Required Lenders and (ii) the Receivables Transaction Attributed Indebtedness incurred in such transaction or series of transactions does not exceed $100,000,000. "Rate Management Transaction" means any transaction (including an agreement with respect thereto) now existing or hereafter entered by the Borrower which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures. "Rate Management Obligations" of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Rate Management Transactions, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Rate Management Transactions. "Receivables Transaction Attributed Indebtedness" means the amount of obligations outstanding under the legal documents entered into as part of any Qualified Receivables Transaction on any date of determination that would be characterized as principal if such Qualified Receivables Transaction were structured as a secured lending transaction rather than as a purchase. 11 "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "Regulation T" means Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System. "Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors. "Reimbursement Obligations" means, at any time, the aggregate of all obligations of the Borrower then outstanding under Section 2.19 to reimburse the LC Issuer for amounts paid by the LC Issuer in respect of any one or more drawings under Facility LCs. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code. "Reports" is defined in Section 9.6. "Required Lenders" means Lenders in the aggregate having more than 50% of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders in the aggregate holding more than 50% of the Aggregate Outstanding Credit Exposure. "Requirement of Law" means as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other governmental authority (foreign or domestic), in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject. "Reserve Requirement" means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities. "Revolving Loan" means, with respect to a Lender, such Lender's loan made pursuant to its commitment to lend set forth in Section 2.1 (or any conversion or continuation thereof). 12 "S&P" means Standard and Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. "Sale and Leaseback Transaction" means any sale or other transfer of Property by any Person with the intent to lease such Property as lessee. "Schedule" refers to a specific schedule to this Agreement, unless another document is specifically referenced. "SEC Reports" means the following reports and financial statements of the Borrower: (i) the Borrower's annual report on Form 10-K for the year ended December 31, 2001, as filed with or sent to the Securities and Exchange Commission as of the date hereof; and (ii) the Borrower's quarterly reports on Form 10-Q for the quarters ended March 31, 2002, June 30, 2002 and September 30, 2002, the definitive proxy statement for the 2002 annual shareholders meeting of the Borrower and all Form 8-K's filed after December 31, 2001, in each case as filed with the Securities and Exchange Commission as of the date hereof. "Section" means a numbered section of this Agreement, unless another document is specifically referenced. "Sellers" means BTR Industries Limited, a corporation organized and existing under the laws of England and Wales, BTR (European Holdings) BV, a corporation organized and existing under the laws of the Netherlands, CPN Holdings Pty Limited, a corporation organized and existing under the laws of Australia, Invensys Controls Mexican Holding, L.L.C., a limited liability company organized and existing under the laws of Mexico and BTR (USA) Finance Company, a Massachusetts business trust, and Invensys plc, a corporation organized and existing under the laws of England and Wales. "Significant Subsidiary" means any one or more Subsidiaries which, if considered in the aggregate as a single Subsidiary, would be a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X under the Securities Exchange Act of 1934. "Single Employer Plan" means a Plan maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group. "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Borrower. For purposes of the representations and warranties made herein, each reference to a "Subsidiary" of the Borrower shall include the Target and its Subsidiaries. 13 "Substantial Portion" means, with respect to the Property of the Borrower and its Subsidiaries, Property which represents more than 10% (or, for purposes of Section 6.13, 15%) of the consolidated assets of the Borrower and its Subsidiaries or property which is responsible for more than 10% (or, for purposes of Section 6.13, 15%) of the consolidated net sales or of the consolidated net income of the Borrower and its Subsidiaries, in each case, as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries as at the beginning of the twelve-month period ending with the month in which such determination is made (or if financial statements have not been delivered hereunder for that month which begins the twelve-month period, then the financial statements delivered hereunder for the quarter ending immediately prior to that month). "Swing Line Borrowing Notice" is defined in Section 2.5.2. "Swing Line Commitment" means the obligation of the Swing Line Lender to make Swing Line Loans up to a maximum principal amount of $15,000,000 at any one time outstanding. "Swing Line Lender" means Bank One or such other Lender which may succeed to its rights and obligations as Swing Line Lender pursuant to the terms of this Agreement. "Swing Line Loan" means a Loan made available to the Borrower by the Swing Line Lender pursuant to Section 2.5. "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes and Other Taxes. "Transferee" is defined in Section 12.4. "Type" means, with respect to any Advance, its nature as a Floating Rate Advance or a Eurodollar Advance and with respect to any Loan, its nature as a Floating Rate Loan or a Eurodollar Loan. "Unfunded Liabilities" means the amount (if any) by which the present value of all vested and unvested accrued benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans using PBGC actuarial assumptions for single employer plan terminations. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. "Voting Stock" of a Person means all classes of Capital Stock of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, trustees or similar persons thereof. "Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited liability company, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. 14 The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. ARTICLE II THE CREDITS 2.1. Commitment. From and including the date of this Agreement and prior to the Facility Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to (i) make Revolving Loans to the Borrower and (ii) participate in Swing Line Loans and Facility LCs issued upon the request of the Borrower, provided that, after giving effect to the making of each such Loan and the issuance of each such Facility LC, such Lender's Outstanding Credit Exposure shall not exceed its Commitment, provided, further, that at no time shall the aggregate principal amount of the Loans and Facility LC's outstanding hereunder exceed the Aggregate Commitment.. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow at any time prior to the Facility Termination Date. The Commitments to extend credit hereunder shall expire on the Facility Termination Date. The LC Issuer will issue Facility LCs hereunder on the terms and conditions set forth in Section 2.19. 2.2. Required Payments; Termination. Unless earlier payment is required hereunder, the Loans and all other unpaid Obligations shall be paid in full by the Borrower on the Facility Termination Date. 2.3. Ratable Loans. Each Advance hereunder (other than any Swing Line Loan) shall consist of Revolving Loans made from the several Lenders ratably in proportion to the ratio that their respective Commitments bear to the Aggregate Commitment. 2.4. Types of Advances. The Advances may be Floating Rate Advances or Eurodollar Advances, or a combination thereof, selected by the Borrower in accordance with Sections 2.9 and 2.10, or Swing Line Loans selected by the Borrower in accordance with Section 2.5. 2.5. Swing Line Loans. 2.5.1. Amount of Swing Line Loans. Upon the satisfaction of the conditions precedent set forth in Section 4.2 and, if such Swing Line Loan is to be made on the date of the initial Advance hereunder, the satisfaction of the conditions precedent set forth in Section 4.1 as well, from and including the date of this Agreement and prior to the Facility Termination Date, the Swing Line Lender agrees, on the terms and conditions set forth in this Agreement, to make Swing Line Loans to the Borrower from time to time in an aggregate principal amount not to exceed the Swing Line Commitment, provided that the Aggregate Outstanding Credit Exposure shall not at any time exceed the Aggregate Commitment, and provided further that at no time shall the sum of (i) the Swing Line Lender's Pro Rata Share of the Swing Line Loans, plus (ii) the outstanding Revolving Loans made by the Swing Line Lender pursuant to Section 2.1, exceed the Swing Line Lender's Commitment at such time. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow Swing Line Loans at any time prior to the Facility Termination Date. 15 2.5.2. Borrowing Notice. The Borrower shall deliver to the Agent and the Swing Line Lender irrevocable notice (a "Swing Line Borrowing Notice") not later than noon (Detroit time) on the Borrowing Date of each Swing Line Loan, specifying (i) the applicable Borrowing Date (which date shall be a Business Day), and (ii) the aggregate amount of the requested Swing Line Loan which shall be an amount not less than $100,000. The Swing Line Loans shall bear interest at the Floating Rate. 2.5.3. Making of Swing Line Loans. Promptly after receipt of a Swing Line Borrowing Notice, the Agent shall notify each Lender by fax, or other similar form of transmission, of the requested Swing Line Loan. Not later than 2:00 p.m. (Detroit time) on the applicable Borrowing Date, the Swing Line Lender shall make available the Swing Line Loan, in funds immediately available in Detroit, to the Agent at its address specified pursuant to Article XIII. The Agent will promptly make the funds so received from the Swing Line Lender available to the Borrower on the Borrowing Date at the Agent's aforesaid address. 2.5.4. Repayment of Swing Line Loans. Each Swing Line Loan shall be paid in full by the Borrower on or before the seventh (7th) Business Day after the Borrowing Date for such Swing Line Loan. In addition, the Swing Line Lender (i) may at any time in its sole discretion with respect to any outstanding Swing Line Loan, or (ii) shall on the seventh (7th) Business Day after the Borrowing Date of any Swing Line Loan, require each Lender (including the Swing Line Lender) to make a Revolving Loan in the amount of such Lender's Pro Rata Share of such Swing Line Loan (including, without limitation, any interest accrued and unpaid thereon), for the purpose of repaying such Swing Line Loan. Not later than noon (Detroit time) on the date of any notice received pursuant to this Section 2.5.4, each Lender shall make available its required Revolving Loan, in funds immediately available in Detroit to the Agent at its address specified pursuant to Article XIII. Revolving Loans made pursuant to this Section 2.5.4 shall initially be Floating Rate Loans and thereafter may be continued as Floating Rate Loans or converted into Eurodollar Loans in the manner provided in Section 2.10 and subject to the other conditions and limitations set forth in this Article II. Unless a Lender shall have notified the Swing Line Lender, prior to its making any Swing Line Loan, that any applicable condition precedent set forth in Sections 4.1 or 4.2 had not then been satisfied, such Lender's obligation to make Revolving Loans pursuant to this Section 2.5.4 to repay Swing Line Loans shall be unconditional, continuing, irrevocable and absolute and shall not be affected by any circumstances, including, without limitation, (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Agent, the Swing Line Lender or any other Person, (b) the occurrence or continuance of a Default or Unmatured Default, (c) any adverse change in the condition (financial or otherwise) of the Borrower, or (d) any other circumstances, happening or event whatsoever. In the event that any Lender fails to make payment to the Agent of any amount due under this Section 2.5.4, the Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Lender hereunder until the Agent receives such payment from such Lender or such obligation is otherwise fully satisfied. In addition to the foregoing, if for any reason any Lender fails to make payment to the Agent of any amount due under this Section 2.5.4, such Lender shall be deemed, at the option of the Agent, to have unconditionally and irrevocably purchased from the Swing Line Lender, without recourse or warranty, an undivided interest and participation in the applicable Swing Line Loan in the amount of such Revolving Loan, and such interest and participation may be recovered from such Lender together with interest thereon at the Federal Funds Effective Rate for each day during the period commencing on the date of demand and ending on the date such amount is received. On the Facility Termination Date, the Borrower shall repay in full the outstanding principal balance of the Swing Line Loans. 16 2.6. Facility Fee; Utilization Fee; Reductions in Aggregate Commitment. The Borrower agrees to pay to the Agent for the account of each Lender a (i) facility fee at a per annum rate equal to the Applicable Facility Fee Rate on such Lender's Commitment (whether used or unused) from the date hereof to and including the Facility Termination Date, payable on each Payment Date hereafter and on the Facility Termination Date, provided that, if any Lender continues to have Loans outstanding hereunder after the termination of its Commitment (including, without limitation, during any period when Loans may be outstanding but new Loans may not be borrowed hereunder), then such facility fee shall continue to accrue on the aggregate principal amount of the Loans owed to such Lender until such Loans are repaid in full, and (ii) utilization fee on all outstanding Loans of each Lenders at a per annum rate equal to 0.125% for each day when the aggregate principal amount of the Loans exceeds 33% of the Aggregate Commitment, payable on each Payment Date hereafter, on the Facility Termination Date and on demand thereafter. The Borrower may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders in integral multiples of $10,000,000, upon at least five Business Days' written notice to the Agent, which notice shall specify the amount of any such reduction, provided, however, that the amount of the Aggregate Commitment may not be reduced below the aggregate principal amount of the outstanding Advances. All accrued facility fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Loans hereunder and on the final date upon which all Loans are repaid hereunder. 2.7. Minimum Amount of Each Advance. Each Eurodollar Advance shall be in the minimum amount of $1,000,000 (and in multiples of $100,000 if in excess thereof), and each Floating Rate Advance (other than an Advance to repay Swing Line Loans) shall be in the minimum amount of $10,000, provided, however, that any Floating Rate Advance may be in the amount of the unused Aggregate Commitment. 2.8. Optional Principal Payments. The Borrower may from time to time pay, without penalty or premium, all outstanding Floating Rate Advances (other than Swing Line Loans), or, in a minimum aggregate amount of $10,000, any portion of the outstanding Floating Rate Advances (other than Swing Line Loans) upon two Business Days' prior notice to the Agent. The Borrower may at any time pay, without penalty or premium, all outstanding Swing Line Loans, or, in a minimum amount of $100,000 and increments of $50,000 in excess thereof, any portion of the outstanding Swing Line Loans, with notice to the Agent and the Swing Line Lender by 11:00 a.m. (Detroit time) on the date of repayment. The Borrower may from time to time pay, subject to the payment of any funding indemnification amounts required by Section 3.4 but without penalty or premium, all outstanding Eurodollar Advances, or, in a minimum aggregate amount of $5,000,000 or any integral multiple of $100,000 in excess thereof, any portion of the outstanding Eurodollar Advances upon three Business Days' prior notice to the Agent. 2.9. Method of Selecting Types and Interest Periods for New Advances. The Borrower shall select the Type of Advance and, in the case of each Eurodollar Advance, the Interest Period applicable thereto from time to time. The Borrower shall give the Agent irrevocable notice (a "Borrowing Notice") not later than 10:00 a.m. (Detroit time) at least one Business Day before the Borrowing Date of each Floating Rate Advance (other than a Swing Line Loan) and three Business Days before the Borrowing Date for each Eurodollar Advance, specifying: 17 (i) the Borrowing Date, which shall be a Business Day, of such Advance, (ii) the aggregate amount of such Advance, (iii) the Type of Advance selected, and (iv) in the case of each Eurodollar Advance, the Interest Period applicable thereto. Not later than noon (Detroit time) on each Borrowing Date, each Lender shall make available its Revolving Loan or Revolving Loans in funds immediately available in Detroit to the Agent at its address specified pursuant to Article XIII. The Agent will make the funds so received from the Lenders available to the Borrower at the Agent's aforesaid address. 2.10. Conversion and Continuation of Outstanding Advances. Floating Rate Advances shall continue as Floating Rate Advances (other than Swing Line Loans) unless and until such Floating Rate Advances are converted into Eurodollar Advances pursuant to this Section 2.10 or are repaid in accordance with Section 2.8. Each Eurodollar Advance shall continue as a Eurodollar Advance until the end of the then applicable Interest Period therefor, at which time such Eurodollar Advance shall be automatically converted into a Floating Rate Advance unless (x) such Eurodollar Advance is or was repaid in accordance with Section 2.8 or (y) the Borrower shall have given the Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurodollar Advance continue as a Eurodollar Advance for the same or another Interest Period. Subject to the terms of Section 2.7, the Borrower may elect from time to time to convert all or any part of a Floating Rate Advance into a Eurodollar Advance. The Borrower shall give the Agent irrevocable notice (a "Conversion/Continuation Notice") of each conversion of a Floating Rate Advance(other than Swing Line Loans) into a Eurodollar Advance or continuation of a Eurodollar Advance not later than 10:00 a.m. (Detroit time) at least three Business Days prior to the date of the requested conversion or continuation, specifying: (i) the requested date, which shall be a Business Day, of such conversion or continuation, (ii) the aggregate amount and Type of the Advance which is to be converted or continued, and (iii) the amount of such Advance which is to be converted into or continued as a Eurodollar Advance and the duration of the Interest Period applicable thereto. 2.11. Changes in Interest Rate, etc. Each Floating Rate Advance (other than a Swing Line Loan) shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is automatically converted from a Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.10, to but excluding the date it is paid or is converted into a Eurodollar Advance pursuant to Section 2.10 hereof, at a rate per annum equal to the Floating Rate for such day. Each Swing Line Loan shall bear interest on the outstanding principal amount thereof, for each day from and including the day such Swing Line Loan is made to but excluding the date it is paid, at a rate per annum equal to the Floating Rate for such day. Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Advance will take effect simultaneously with each change in the Floating Rate. Each Eurodollar Advance shall bear interest on the outstanding principal amount thereof from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined by the Agent as applicable to such Eurodollar Advance based upon the Borrower's selections under Sections 2.9 and 2.10 and otherwise in accordance with the terms hereof. No Interest Period may end after the Facility Termination Date. 18 2.12. Rates Applicable After Default. Notwithstanding anything to the contrary contained in Section 2.9, 2.10 or 2.11, during the continuance of a Default or Unmatured Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that no Advance may be made as, converted into or continued as a Eurodollar Advance. During the continuance of a Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that (i) each Eurodollar Advance shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable to such Interest Period plus 2% per annum, (ii) each Floating Rate Advance shall bear interest at a rate per annum equal to the Floating Rate in effect from time to time plus 2% per annum, and (iii) the LC Fee shall be increased by 2% per annum, provided that, during the continuance of a Default under Section 7.6 or 7.7, the interest rates set forth in clauses (i) and (ii) above and the increase in the LC Fee set forth in clause (iii) above shall be applicable to all Credit Extensions without any election or action on the part of the Agent or any Lender. 2.13. Method of Payment. All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Agent at the Agent's address specified pursuant to Article XIII, or at any other Lending Installation of the Agent specified in writing by the Agent to the Borrower, by noon (local time) on the date when due and shall (except in the case of Reimbursement Obligations for which the LC Issuer has not been fully indemnified by the Lenders, or as otherwise specifically required hereunder and except with respect to repayments of Swing Line Loans) be applied ratably by the Agent among the Lenders. Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Agent from such Lender. The Agent is hereby authorized to charge the account of the Borrower maintained with Bank One for each payment of principal, interest, Reimbursement Obligations and fees as it becomes due hereunder. Each reference to the Agent in this Section 2.13 shall also be deemed to refer, and shall apply equally, to the LC Issuer, in the case of payments required to be made by the Borrower to the LC Issuer pursuant to Section 2.19.6. 2.14. Noteless Agreement; Evidence of Indebtedness. (i) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (ii) The Agent shall also maintain accounts in which it will record (a) the amount of each Loan made hereunder, the Type thereof and the Interest Period with respect thereto, (b) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder, (c) the original stated amount of each Facility LC and the amount of LC Obligations outstanding at any time, and (d) the amount of any sum received by the Agent hereunder from the Borrower and each Lender's share thereof. 19 (iii) The entries maintained in the accounts maintained pursuant to paragraphs (i) and (ii) above shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; provided, however, that the failure of the Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Obligations in accordance with their terms. (iv) Any Lender may request that its Loans be evidenced by a promissory note or, in the case of the Swing Line Lender, promissory notes representing its Revolving Loans and Swing Line Loans, respectively, substantially in the form of Exhibit E, with appropriate changes for notes evidencing Swing Line Loans (each a "Note"). In such event, the Borrower shall prepare, execute and deliver to such Lender such Note or Notes payable to the order of such Lender. Thereafter, the Loans evidenced by each such Note and interest thereon shall at all times (prior to any assignment pursuant to Section 12.3) be represented by one or more Notes payable to the order of the payee named therein, except to the extent that any such Lender subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in paragraphs (i) and (ii) above. 2.15. Telephonic Notices. The Borrower hereby authorizes the Lenders and the Agent to extend, convert or continue Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons the Agent or any Lender in good faith believes to be acting on behalf of the Borrower, it being understood that the foregoing authorization is specifically intended to allow Borrowing Notices and Conversion/Continuation Notices to be given telephonically. The Borrower agrees to deliver promptly to the Agent a written confirmation, if such confirmation is requested by the Agent or any Lender, of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent manifest error. 2.16. Interest Payment Dates; Interest and Fee Basis. Interest accrued on each Floating Rate Advance shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof and at maturity. Interest accrued on each Eurodollar Advance shall be payable on the last day of its applicable Interest Period, on any date on which the Eurodollar Advance is prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued on each Eurodollar Advance having an Interest Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period. Interest, facility fees and LC Fees shall be calculated for actual days elapsed on the basis of a 360-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (local time) at the place of payment. If any payment of principal of or interest on an Advance shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment. 2.17. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions. Promptly after receipt thereof, the Agent will notify each Lender of the contents of each Aggregate Commitment reduction notice, Borrowing Notice, Swing Line Borrowing Notice, Conversion/Continuation Notice, and repayment notice received by it hereunder. The Agent will notify each Lender of the interest rate applicable to each Eurodollar Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Floating Rate. 20 2.18. Lending Installations. Each Lender may book its Loans and its participation in any LC Obligations and the LC Issuer may book the Facility LCs at any Lending Installation selected by such Lender or the LC Issuer, as the case may be, and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Loans, Facility LCs, participations in LC Obligations and any Notes issued hereunder shall be deemed held by each Lender or the LC Issuer, as the case may be, for the benefit of any such Lending Installation. Each Lender and the LC Issuer may, by written notice to the Agent and the Borrower in accordance with Article XIII, designate replacement or additional Lending Installations through which Loans will be made by it or Facility LCs will be issued by it and for whose account Loan payments or payments with respect to Facility LCs are to be made. 2.19. Facility LCs. 2.19.1. Issuance. The LC Issuer hereby agrees, on the terms and conditions set forth in this Agreement, to issue standby and commercial letters of credit (each, a "Facility LC") and to renew, extend, increase, decrease or otherwise modify each Facility LC ("Modify," and each such action a "Modification"), from time to time from and including the date of this Agreement and prior to the Facility Termination Date upon the request of the Borrower; provided that immediately after each such Facility LC is issued or Modified, (i) the aggregate amount of the outstanding LC Obligations shall not exceed $25,000,000 and (ii) the Aggregate Outstanding Credit Exposure shall not exceed the Aggregate Commitment. No Facility LC shall have an expiry date later than the earlier of (x) the fifth Business Day prior to the Facility Termination Date and (y) one year after its issuance. 2.19.2. Participations. Upon the issuance or Modification by the LC Issuer of a Facility LC in accordance with this Section 2.19, the LC Issuer shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably sold to each Lender, and each Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from the LC Issuer, a participation in such Facility LC (and each Modification thereof) and the related LC Obligations in proportion to its Pro Rata Share. 2.19.3. Notice. Subject to Section 2.19.1, the Borrower shall give the LC Issuer notice prior to 10:00 a.m. (Detroit time) at least five Business Days prior to the proposed date of issuance or Modification of each Facility LC, specifying the beneficiary, the proposed date of issuance (or Modification) and the expiry date of such Facility LC, and describing the proposed terms of such Facility LC and the nature of the transactions proposed to be supported thereby. Upon receipt of such notice, the LC Issuer shall promptly notify the Agent, and the Agent shall promptly notify each Lender, of the contents thereof and of the amount of such Lender's participation in such proposed Facility LC. The issuance or Modification by the LC Issuer of any Facility LC shall, in addition to the conditions precedent set forth in Article IV (the satisfaction of which the LC Issuer shall have no duty to ascertain), be subject to the conditions precedent that such Facility LC shall be satisfactory to the LC Issuer and that the Borrower shall have executed and delivered such application agreement and/or such other instruments and agreements relating to such Facility LC as the LC Issuer shall have reasonably requested (each, a "Facility LC Application"). In the event of any conflict between the terms of this Agreement and the terms of any Facility LC Application, the terms of this Agreement shall control. 2.19.4. LC Fees. The Borrower shall pay to the Agent, for the account of the Lenders ratably in accordance with their respective Pro Rata Shares, (i) with respect to each standby Facility LC, a letter of credit fee at a per annum rate equal to the Applicable Margin for Eurodollar Loans in effect from time to time on the average daily undrawn stated amount under such standby Facility LC, such fee to be payable in arrears on each Payment Date, and (ii) with respect to each commercial Facility LC, a one-time letter of credit fee in an amount equal to a percentage agreed upon between the Borrower and the LC Issuer of the initial stated amount (or, with respect to a Modification of any such commercial Facility LC which increases the stated amount thereof, such increase in the stated amount) thereof, such fee to be payable on the date of such issuance or increase (each such fee described in this sentence an "LC Fee"). The Borrower shall also pay to the LC Issuer for its own account (x) at the time of issuance of each Facility LC, a fronting fee in an amount equal to 0.125% per annum and (y) documentary and processing charges in connection with the issuance or Modification of and draws under Facility LCs in accordance with the LC Issuer's standard schedule for such charges as in effect from time to time. 21 2.19.5. Administration; Reimbursement by Lenders. Upon receipt from the beneficiary of any Facility LC of any demand for payment under such Facility LC, the LC Issuer shall notify the Agent and the Agent shall promptly notify the Borrower and each other Lender as to the amount to be paid by the LC Issuer as a result of such demand and the proposed payment date (the "LC Payment Date"). The responsibility of the LC Issuer to the Borrower and each Lender shall be only to determine that the documents (including each demand for payment) delivered under each Facility LC in connection with such presentment shall be in conformity in all material respects with such Facility LC. The LC Issuer shall endeavor to exercise the same care in the issuance and administration of the Facility LCs as it does with respect to letters of credit in which no participations are granted, it being understood that in the absence of any gross negligence or willful misconduct by the LC Issuer, each Lender shall be unconditionally and irrevocably liable without regard to the occurrence of any Default or any condition precedent whatsoever, to reimburse the LC Issuer on demand for (i) such Lender's Pro Rata Share of the amount of each payment made by the LC Issuer under each Facility LC to the extent such amount is not reimbursed by the Borrower pursuant to Section 2.19.6 below, plus (ii) interest on the foregoing amount to be reimbursed by such Lender, for each day from the date of the LC Issuer's demand for such reimbursement (or, if such demand is made after 11:00 a.m. (Detroit time) on such date, from the next succeeding Business Day) to the date on which such Lender pays the amount to be reimbursed by it, at a rate of interest per annum equal to the Federal Funds Effective Rate for the first three days and, thereafter, at a rate of interest equal to the rate applicable to Floating Rate Advances. 2.19.6. Reimbursement by Borrower. The Borrower shall be irrevocably and unconditionally obligated to reimburse the LC Issuer on or before the applicable LC Payment Date for any amounts to be paid by the LC Issuer upon any drawing under any Facility LC, without presentment, demand, protest or other formalities of any kind; provided that neither the Borrower nor any Lender shall hereby be precluded from asserting any claim for direct (but not consequential) damages suffered by the Borrower or such Lender to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence of the LC Issuer in determining whether a request presented under any Facility LC issued by it complied with the terms of such Facility LC or (ii) the LC Issuer's failure to pay under any Facility LC issued by it after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. All such amounts paid by the LC Issuer and remaining unpaid by the Borrower shall bear interest, payable on demand, for each day until paid at a rate per annum equal to (x) the rate applicable to Floating Rate Advances for such day if such day falls on or before the applicable LC Payment Date and (y) the sum of 2% plus the rate applicable to Floating Rate Advances for such day if such day falls after such LC Payment Date. The LC Issuer will pay to each Lender ratably in accordance with its Pro Rata Share all amounts received by it from the Borrower for application in payment, in whole or in part, of the Reimbursement Obligation in respect of any Facility LC issued by the LC Issuer, but only to the extent such Lender has made payment to the LC Issuer in respect of such Facility LC pursuant to Section 2.19.5. Subject to the terms and conditions of this Agreement (including without limitation the submission of a Borrowing Notice in compliance with Section 2.8 or a Swing Line Borrowing Notice in compliance with Section 2.5.2 and the satisfaction of the applicable conditions precedent set forth in Article IV), the Borrower may request an Advance hereunder for the purpose of satisfying any Reimbursement Obligation. 22 2.19.7. Obligations Absolute. The Borrower's obligations under this Section 2.19 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against the LC Issuer, any Lender or any beneficiary of a Facility LC. The Borrower further agrees with the LC Issuer and the Lenders that the LC Issuer and the Lenders shall not be responsible for, and the Borrower's Reimbursement Obligation in respect of any Facility LC shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrower, any of its Affiliates, the beneficiary of any Facility LC or any financing institution or other party to whom any Facility LC may be transferred or any claims or defenses whatsoever of the Borrower or of any of its Affiliates against the beneficiary of any Facility LC or any such transferee. The LC Issuer shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Facility LC. The Borrower agrees that any action taken or omitted by the LC Issuer or any Lender under or in connection with each Facility LC and the related drafts and documents, if done without gross negligence or willful misconduct, shall be binding upon the Borrower and shall not put the LC Issuer or any Lender under any liability to the Borrower. Nothing in this Section 2.19.7 is intended to limit the right of the Borrower to make a claim against the LC Issuer for damages as contemplated by the proviso to the first sentence of Section 2.19.6. 2.19.8. Actions of LC Issuer. The LC Issuer shall be entitled to rely, and shall be fully protected in relying, upon any Facility LC, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the LC Issuer. The LC Issuer shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Required Lenders as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Notwithstanding any other provision of this Section 2.19, the LC Issuer shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Lenders and any future holders of a participation in any Facility LC. 2.19.9. Indemnification. The Borrower hereby agrees to indemnify and hold harmless each Lender, the LC Issuer and the Agent, and their respective directors, officers, agents and employees from and against any and all claims and damages, losses, liabilities, costs or expenses which such Lender, the LC Issuer or the Agent may incur (or which may be claimed against such Lender, the LC Issuer or the Agent by any Person whatsoever) by reason of or in connection with the issuance, execution and delivery or transfer of or payment or failure to pay under any Facility LC or any actual or proposed use of any Facility LC, including, without limitation, any claims, damages, losses, liabilities, costs or expenses which the LC Issuer may incur by reason of or in connection with (i) the failure of any other Lender to fulfill or comply with its obligations to the LC Issuer hereunder (but nothing herein contained shall affect any rights the Borrower may have against any defaulting Lender) or (ii) by reason of or on account of the LC Issuer issuing any Facility LC which specifies that the term "Beneficiary" included therein includes any successor by operation of law of the named Beneficiary, but which Facility LC does not require that any drawing by any such successor Beneficiary be accompanied by a copy of a legal document, satisfactory to the LC Issuer, evidencing the appointment of such successor Beneficiary; provided that the Borrower shall not be required to indemnify any Lender, the LC Issuer or the Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the willful misconduct or gross negligence of the LC Issuer in determining whether a request presented under any Facility LC complied with the terms of such Facility LC or (y) the LC Issuer's failure to pay under any Facility LC after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. Nothing in this Section 2.19.9 is intended to limit the obligations of the Borrower under any other provision of this Agreement. 23 2.19.10. Lenders' Indemnification. Each Lender shall, ratably in accordance with its Pro Rata Share, indemnify the LC Issuer, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct or the LC Issuer's failure to pay under any Facility LC after the presentation to it of a request strictly complying with the terms and conditions of the Facility LC) that such indemnitees may suffer or incur in connection with this Section 2.19 or any action taken or omitted by such indemnitees hereunder. 2.19.11. Facility LC Collateral Account. The Borrower agrees that it will, upon the request of the Agent or the Required Lenders and until the final expiration date of any Facility LC and thereafter as long as any amount is payable to the LC Issuer or the Lenders in respect of any Facility LC, maintain a special collateral account pursuant to arrangements satisfactory to the Agent (the "Facility LC Collateral Account") at the Agent's office at the address specified pursuant to Article XIII, in the name of such Borrower but under the sole dominion and control of the Agent, for the benefit of the Lenders and in which such Borrower shall have no interest other than as set forth in Section 8.1. The Borrower hereby pledges, assigns and grants to the Agent, on behalf of and for the ratable benefit of the Lenders and the LC Issuer, a security interest in all of the Borrower's right, title and interest in and to all funds which may from time to time be on deposit in the Facility LC Collateral Account to secure the prompt and complete payment and performance of the Obligations. The Agent will invest any funds on deposit from time to time in the Facility LC Collateral Account in certificates of deposit of Bank One having a maturity not exceeding 30 days. Nothing in this Section 2.19.11 shall either require the Borrower, or obligate the Agent to require the Borrower, to deposit any funds in the Facility LC Collateral Account or limit the right of the Agent to release any funds held in the Facility LC Collateral Account in each case other than as required by Section 8.1. 24 2.19.12. Rights as a Lender. In its capacity as a Lender, the LC Issuer shall have the same rights and obligations as any other Lender. 2.20. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender, as the case may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal, interest or fees to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made. The Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Agent, the recipient of such payment shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (x) in the case of payment by a Lender, the Federal Funds Effective Rate for such day for the first three days and, thereafter, the interest rate applicable to the relevant Loan or (y) in the case of payment by the Borrower, the interest rate applicable to the relevant Loan. 2.21. Replacement of Lender. If the Borrower is required pursuant to Section 3.1, 3.2 or 3.5 to make any additional payment to any Lender or if any Lender's obligation to make or continue, or to convert Floating Rate Advances into, Eurodollar Advances shall be suspended pursuant to Section 3.3 or any Lender is a Defaulting Lender (any Lender so affected an "Affected Lender"), the Borrower may elect, if such amounts continue to be charged or such suspension is still effective, to replace such Affected Lender as a Lender party to this Agreement, provided that no Default or Unmatured Default shall have occurred and be continuing at the time of such replacement, and provided further that, concurrently with such replacement, (i) another bank or other entity which is reasonably satisfactory to the Borrower and the Agent shall agree, as of such date, to purchase for cash the Advances and other Obligations due to the Affected Lender pursuant to an assignment substantially in the form of Exhibit C and to become a Lender for all purposes under this Agreement and to assume all obligations of the Affected Lender to be terminated as of such date and to comply with the requirements of Section 12.3 applicable to assignments, and (ii) the Borrower shall pay to such Affected Lender in same day funds on the day of such replacement (A) all interest, fees and other amounts then accrued but unpaid to such Affected Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such Affected Lender under Sections 3.1, 3.2 and 3.5, and (B) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 3.4 had the Loans of such Affected Lender been prepaid on such date rather than sold to the replacement Lender. ARTICLE III YIELD PROTECTION; TAXES 3.1. Yield Protection. If, on or after the date of this Agreement, the adoption of any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any change in the interpretation or administration thereof by any governmental or quasi-governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or applicable Lending Installation 25 or the LC Issuer with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) subjects any Lender or any applicable Lending Installation or the LC Issuer to any Taxes, or changes the basis of taxation of payments (other than with respect to Excluded Taxes) to any Lender or the LC Issuer in respect of its Eurodollar Loans, Facility LCs or participations therein, or (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation or the LC Issuer (other than reserves and assessments taken into account in determining the interest rate applicable to Eurodollar Advances), or (iii) imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation or the LC Issuer of making, funding or maintaining its Eurodollar Loans, or of issuing or participating in Facility LCs, or reduces any amount receivable by any Lender or any applicable Lending Installation or the LC Issuer in connection with its Eurodollar Loans, Facility LCs_or participations therein, or requires any Lender or any applicable Lending Installation or the LC Issuer to make any payment calculated by reference to the amount of Eurodollar Loans, Facility LCs or participations therein held or interest or LC Fees received by it, by an amount deemed material by such Lender or the LC Issuer as the case may be, and the result of any of the foregoing is to increase the cost to such Lender or applicable Lending Installation or the LC Issuer, as the case may be, of making or maintaining its Eurodollar Loans or Commitment or of issuing or participating in Facility LCs or to reduce the return received by such Lender or applicable Lending Installation or the LC Issuer, as the case may be, in connection with such Eurodollar Loans, Commitment, Facility LCs or participations therein, then, within 15 days of demand by such Lender or the LC Issuer, as the case may be, the Borrower shall pay such Lender or the LC Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the LC Issuer, as the case may be, for such increased cost or reduction in amount received. 3.2. Changes in Capital Adequacy Regulations. If a Lender or the LC Issuer determines the amount of capital required or expected to be maintained by such Lender or the LC Issuer, any Lending Installation of such Lender or the LC Issuer, or any corporation controlling such Lender or the LC Issuer is increased as a result of a Change, then, within 15 days of demand by such Lender or the LC Issuer, the Borrower shall pay such Lender or the LC Issuer the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender or the LC Issuer determines is attributable to this Agreement, its Outstanding Credit Exposure or its Commitment to make Loans and issue or participate in Facility LCs, as the case may be, hereunder (after taking into account such Lender's or the LC Issuer's policies as to capital adequacy). "Change" means (i) any change after the date of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any Lender or the LC Issuer or any Lending Installation or any corporation controlling any Lender or the LC Issuer. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities 26 outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement. 3.3. Availability of Types of Advances. If any Lender determines that maintenance of its Eurodollar Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or if the Required Lenders determine that (i) deposits of a type and maturity appropriate to match fund Eurodollar Advances are not available or (ii) the interest rate applicable to Eurodollar Advances does not accurately reflect the cost of making or maintaining Eurodollar Advances, then the Agent shall suspend the availability of Eurodollar Advances and require any affected Eurodollar Advances to be repaid or converted to Floating Rate Advances, subject to the payment of any funding indemnification amounts required by Section 3.4. 3.4. Funding Indemnification. If any payment of a Eurodollar Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Eurodollar Advance is not made on the date specified by the Borrower for any reason other than default by the Lenders, the Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain such Eurodollar Advance. 3.5. Taxes. (i) All payments by the Borrower to or for the account of any Lender, the LC Issuer or the Agent hereunder or under any Note or Facility LC Application shall be made free and clear of and without deduction for any and all Taxes. If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender, the LC Issuer or the Agent, (a) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.5) such Lender, the LC Issuer or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (b) the Borrower shall make such deductions, (c) the Borrower shall pay the full amount deducted to the relevant authority in accordance with applicable law and (d) the Borrower shall furnish to the Agent the original copy of a receipt evidencing payment thereof within 30 days after such payment is made. (ii) In addition, the Borrower hereby agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or Facility LC Application or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note or Facility LC Application ("Other Taxes"). (iii) The Borrower hereby agrees to indemnify the Agent, the LC Issuer and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by the Agent, the LC Issuer or such Lender and any liability (including interest and expenses, unless resulting solely from such Lender's failure to timely pay such Taxes or Other Taxes) arising therefrom or with respect thereto. Payments due under this indemnification shall be made within 30 days of the date the Agent, the LC Issuer or such Lender makes demand therefor pursuant to Section 3.6. (iv) Each Lender that is not incorporated under the laws of the United States of America or a state thereof (each a "Non-U.S. Lender") agrees that it will, not more than ten Business Days after the date of this Agreement, (i) deliver to the Agent two duly completed copies of United States Internal 27 Revenue Service Form W-8BEN or W-8ECI, certifying in either case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, and (ii) deliver to the Agent a United States Internal Revenue Form W-8 or W-9, as the case may be, and certify that it is entitled to an exemption from United States backup withholding tax. Each Non-U.S. Lender further undertakes to deliver to each of the Borrower and the Agent (x) renewals or additional copies of such form (or any successor form) on or before the date that such form expires or becomes obsolete, and (y) after the occurrence of any event requiring a change in the most recent forms so delivered by it, such additional forms or amendments thereto as may be reasonably requested by the Borrower or the Agent. All forms or amendments described in the preceding sentence shall certify that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form or amendment with respect to it and such Lender advises the Borrower and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. (v) For any period during which a Non-U.S. Lender has failed to provide the Borrower with an appropriate form pursuant to clause (iv), above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5 with respect to Taxes imposed by the United States; provided that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required under clause (iv), above, the Borrower shall take such steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to recover such Taxes. (vi) Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or any Note pursuant to the law of any relevant jurisdiction or any treaty shall deliver to the Borrower (with a copy to the Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. (vii) If the U.S. Internal Revenue Service or any other governmental authority of the United States or any other country or any political subdivision thereof asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered or properly completed, because such Lender failed to notify the Agent of a change in circumstances which rendered its exemption from withholding ineffective, or for any other reason), such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax, withholding therefor, or otherwise, including penalties and interest, and including taxes imposed by any jurisdiction on amounts payable to the Agent under this subsection, together with all costs and expenses related thereto (including attorneys fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent). The obligations of the Lenders under this Section 3.5(vii) shall survive the payment of the Obligations and termination of this Agreement. 3.6. Lender Statements; Survival of Indemnity. To the extent reasonably possible, each Lender and the LC Issuer shall designate an alternate Lending Installation with respect to its Eurodollar Loans or the Facility LCs to reduce any liability of the Borrower to such Lender or the LC Issuer under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of Eurodollar Advances under Section 3.3, so long 28 as such designation is not, in the judgment of such Lender, disadvantageous to such Lender. Each Lender or the LC Issuer shall deliver a written statement of such Lender or the LC Issuer to the Borrower (with a copy to the Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Eurodollar Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the Borrower of such written statement. The obligations of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the Obligations and termination of this Agreement. ARTICLE IV CONDITIONS PRECEDENT 4.1. Initial Credit Extension. The Lenders shall not be required to make the initial Credit Extension hereunder unless the Borrower has furnished to the Agent: (i) Copies of the articles or certificate of incorporation of the Borrower and each Guarantor, together with all amendments, and a certificate of good standing, each certified by the appropriate governmental officer in its jurisdiction of incorporation. (ii) Copies, certified by the Secretary or Assistant Secretary of the Borrower and each Guarantor, of its by-laws and of its Board of Directors' resolutions and of resolutions or actions of any other body authorizing the execution of the Loan Documents to which the Borrower is a party. (iii) An incumbency certificate, executed by the Secretary or Assistant Secretary of the Borrower and each Guarantor, which shall identify by name and title and bear the signatures of the Authorized Officers and any other officers of the Borrower and each Guarantor authorized to sign the Loan Documents to which it is a party, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Borrower or such Guarantor. (iv) A certificate, signed by the chief financial officer of the Borrower, stating that on the initial Credit Extension Date no Default or Unmatured Default has occurred and is continuing. (v) A written opinion of the Borrower's and each Guarantor's counsel, addressed to the Lenders in substantially the form of Exhibit A. (vi) Any Notes requested by a Lender pursuant to Section 2.14 payable to the order of each such requesting Lender. 29 (vii) Written money transfer instructions, in substantially the form of Exhibit D, addressed to the Agent and signed by an Authorized Officer, together with such other related money transfer authorizations as the Agent may have reasonably requested and the payment of all fees required in connection herewith. (viii) All Guaranties signed by the Guarantors. (ix) Copies of such financial statements of the Borrower and its Subsidiaries required by the Agent, together with prospective financial information for the Borrower and its Subsidiaries, in each case in form and substance satisfactory to the Agent. (x) The Borrower and its Subsidiaries shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary in connection with the FASCO Acquisition and the other transactions contemplated by the Loan Documents and the FASCO Acquisition Documents, and each of the foregoing shall be in full force and effect. All applicable waiting periods shall have expired without any action being taken by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the completion of the FASCO Acquisition or the financing thereof. No action, request for stay, petition for review or rehearing, reconsideration, or appeal with respect to any of the foregoing shall be pending, and the time for any applicable agency to take action to set aside its consent on its own motion shall have expired. (xi) (a) All conditions precedent to the FASCO Acquisition shall have been satisfied pursuant to the FASCO Acquisition Documents or waived by the party entitled to do so to the extent permitted by Section 6.2 hereof; (b) The aggregate consideration paid or payable, including without limitation all direct payments, all deferred payments, all Indebtedness assumed and all other consideration, for the FASCO Acquisition shall not exceed $450,000,000; and (c) the Agent shall have received a certificate of the Borrower to the effect set forth in clauses (a) and (b) above and stating that the Borrower and/or another Guarantor will proceed to consummate the FASCO Acquisition substantially in accordance with the FASCO Acquisition Documents on or within one Business Day of the initial Advance hereunder and containing such other certifications as may be reasonably required by the Agent. (xii) The Agent shall have received pro forma balance sheet and income statement as of September 30, 2002 (the "Opening Pro Forma Statements") giving effect to the FASCO Acquisition and consolidated and consolidating (breaking out the Borrower and its Subsidiaries and FASCO) projections (the "Opening Projections") covering a period of not less than three years and updating the summary projections previously provided to the Agent on or about August 14, 2002, all in form and substance reasonably acceptable to the Agent, together with a compliance certificate, signed by the chief financial officer of the Borrower, dated the date hereof and giving effect to the FASCO Acquisition, and such other information as the Agent may request indicating compliance with all financial and other covenants and showing no material change from the existing summary projections delivered on or about August 14, 2002. (xiii) Satisfactory results of all due diligence required by the Agent, including without limitation a review of all contingent liabilities, a review of contracts and insurance, a review of all litigation, environmental matters, all retiree medical benefits, ERISA 30 matters and other due diligence with respect to FASCO and the FASCO Acquisition required by the Agent. (xiv) The Agent shall have received all FASCO Acquisition Documents and shall be satisfied with the form, structure and terms of the FASCO Acquisition and all related transactions, the legal and the regulatory aspects of the FASCO Acquisition and all related transactions and all other legal (including tax implications), financial and regulatory matters relating to the FASCO Acquisition and related transactions. (xv) The Bridge Credit Agreement shall close simultaneously herewith and all conditions precedent thereto shall be satisfied. (xvi) All liabilities and obligations under the existing $100,000,000 credit agreement of the Borrower dated July 15, 1994, as amended, shall be paid in full and the credit facility thereunder shall be terminated (and the Borrower hereby agrees that any commitment to lend or other credit facility under such credit agreement is terminated). (xvii) The Agent shall have received a certificate from the chief financial officer of the Borrower concerning the solvency and other appropriate factual information in form and substance satisfactory to the Agent with respect to solvency. (xviii) Since March 31, 2002 there shall have been no change in the business, Property, prospects, condition (financial or otherwise) or results of operations of FASCO which could reasonably be expected to have a Material Adverse Effect. (xix) The Agent shall have received such other documents as the Agent or its counsel may have reasonably requested. 4.2. Each Credit Extension. The Lenders shall not (except as otherwise set forth in Section 2.5.4 with respect to Revolving Loans for the purpose of repaying Swing Line Loans) be required to make any Credit Extension unless on the applicable Credit Extension Date: (i) There exists no Default or Unmatured Default. (ii) The representations and warranties contained in Article V are true and correct as of such Credit Extension Date except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct on and as of such earlier date. (iii) All legal matters incident to the making of such Credit Extension shall be satisfactory to the Lenders and their counsel. Each Borrowing Notice, Swing Line Borrowing Notice or request for issuance of a Facility LC with respect to each such Credit Extension shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 4.2(i) and (ii) have been satisfied. Any Lender may require a duly completed compliance certificate in substantially the form of Exhibit B as a condition to making a Credit Extension. 31 ARTICLE V REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lenders that: 5.1. Existence and Standing. Each of the Borrower and its Subsidiaries is a corporation, partnership (in the case of Subsidiaries only) or limited liability company duly and properly incorporated or organized, as the case may be, validly existing and (to the extent such concept applies to such entity) in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted. 5.2. Authorization and Validity. The Borrower and each Guarantor has the power and authority and legal right to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder. The execution and delivery by the Borrower and each Guarantor of the Loan Documents to which it is a party and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and the Loan Documents to which the Borrower is a party constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally. 5.3. No Conflict; Government Consent. Neither the execution and delivery by the Borrower or any Guarantor of the Loan Documents to which it is a party, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower or any of its Subsidiaries or (ii) the Borrower's or any Subsidiary's articles or certificate of incorporation, partnership agreement, certificate of partnership, articles or certificate of organization, by-laws, or operating or other management agreement, as the case may be, or (iii) the provisions of any indenture, instrument or agreement to which the Borrower or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on the Property of the Borrower or a Subsidiary pursuant to the terms of any such indenture, instrument or agreement. No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority, or any subdivision thereof, which has not been obtained by the Borrower or any of its Subsidiaries, is required to be obtained by the Borrower or any of its Subsidiaries in connection with the execution and delivery of the Loan Documents, the borrowings under this Agreement, the payment and performance by the Borrower of the Obligations or the legality, validity, binding effect or enforceability of any of the Loan Documents. 5.4. Financial Statements. The December 31, 2001 and the September 30, 2002 consolidated financial statements of the Borrower and its Subsidiaries heretofore delivered to the Lenders were prepared in accordance with Agreement Accounting Principles in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of the Borrower and its Subsidiaries at such date and the consolidated results of their operations for the period then ended. The March 31, 2002 consolidated pro forma financial statements of FASCO heretofore delivered to the Lenders were prepared as special purpose audits in accordance with generally accepted accounting principles in effect on the date such statements were prepared and, subject to the assumptions stated therein, fairly present the consolidated financial condition and operations of FASCO at such date and the 32 consolidated results of their operations for the period then ended. The Opening Pro Forma Statements are complete and accurate in all material respects and fairly represent pro forma financial condition and operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with generally accepted accounting principles in effect on the date such statements were prepared and after giving effect on a pro forma basis to (i) the consummation of the FASCO Acquisition, (ii) the Advances to be made hereunder and the use of proceeds thereof, (iii) the payment of fees and expenses in connection with the foregoing and (iv) the other transactions contemplated by the FASCO Acquisition and the FASCO Acquisition Documents. The Opening Projections are based on good faith estimates and assumptions made by the management of the Borrower, and there are no statements or conclusions in the Opening Projections which are based upon or include information known to the Borrower to be misleading or which fail to take into account material information regarding the matters reported therein. On the date of the initial Advance hereunder and on the date of the consummation of the FASCO Acquisition, the Borrower believes that the Opening Projections are reasonable and attainable, it being understood that uncertainty is inherent in any forecasts or projections. 5.5. Material Adverse Change. Since December 31, 2001 there has been no change in the business, Property, prospects, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries which could reasonably be expected to have a Material Adverse Effect, except as disclosed in the SEC Reports. To the Borrower's knowledge, since March 31, 2002 there has been no change in the business, Property, prospects, condition (financial or otherwise) or results of operations of the FASCO which could reasonably be expected to have a Material Adverse Effect 5.6. Taxes. The Borrower and its Subsidiaries have filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided in accordance with Agreement Accounting Principles and as to which no Lien exists. No tax liens have been filed and no claims are being asserted with respect to any such taxes. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of any taxes or other governmental charges are adequate. 5.7. Litigation and Contingent Obligations. Except as set forth on Schedule 5.7, there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which seeks to prevent, enjoin or delay the making of any Credit Extensions. Other than any liability incident to any litigation, arbitration or proceeding which could not reasonably be expected to have a Material Adverse Effect, the Borrower has no material contingent obligations not provided for or disclosed in the financial statements referred to in Section 5.4. 5.8. Subsidiaries. Schedule 1 contains an accurate list of all Subsidiaries of the Borrower as of the date of this Agreement, setting forth their respective jurisdictions of organization and the percentage of their respective Capital Stock or other ownership interests owned by the Borrower or other Subsidiaries. All of the issued and outstanding shares of Capital Stock or other ownership interests of such Subsidiaries have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and non-assessable. 5.9. ERISA. No Accumulated Funding Deficiency exists with respect to any Single Employer Plan. Neither the Borrower nor any other member of the Controlled Group has incurred, or is 33 reasonably expected to incur, any withdrawal liability to Multiemployer Plans in excess of $15,000,000 in the aggregate. Each Plan complies in all material respects with all applicable requirements of law and regulations, no Reportable Event has occurred with respect to any Plan, neither the Borrower nor any other member of the Controlled Group has withdrawn from any Plan or initiated steps to do so, and no steps have been taken to reorganize or terminate any Plan. 5.10. Accuracy of Information. No information, exhibit or report furnished by the Borrower or any of its Subsidiaries to the Agent or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents, taken in the light of all other information supplied to the Agent and the Lenders, contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading. 5.11 Regulations T, U and X. Neither the Borrower nor any of its Subsidiaries extends or maintains, in the ordinary course of business, credit for the purpose, whether immediate, incidental, or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of any Advance will be used for the purpose, whether immediate, incidental, or ultimate, of buying or carrying any such Margin Stock or maintaining or extending credit to others for such purpose in any way that would violate Regulation T, U or X. After applying the proceeds of each Advance, Margin Stock will not constitute more than 25% of the value of the assets (either of the Borrower alone or of the Borrower and its Subsidiaries on a consolidated basis) that are subject to any provisions of any Loan Document that may cause the Advances to be deemed secured, directly or indirectly, by Margin Stock. The Borrower and its Subsidiaries are in compliance with Section 6.2. 5.12. Material Agreements. Neither the Borrower nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (i) any agreement to which it is a party, which default could reasonably be expected to have a Material Adverse Effect or (ii) any agreement or instrument evidencing or governing Indebtedness. 5.13. Compliance With Laws. The Borrower and its Subsidiaries have complied with all applicable Requirements of Law except for any failure to comply with any of the foregoing which could not reasonably be expected to have a Material Adverse Effect. 5.14. Ownership of Properties. Except as set forth on Schedule 2, on the date of this Agreement, the Borrower and its Subsidiaries will have good title, free of all Liens other than those permitted by Section 6.15, to all of the Property and assets reflected in the Borrower's most recent consolidated financial statements provided to the Agent as owned by the Borrower and its Subsidiaries. 5.15. Plan Assets; Prohibited Transactions. The Borrower is not an entity deemed to hold "plan assets" within the meaning of 29 C.F.R. ss. 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan (within the meaning of Section 4975 of the Code), and neither the execution of this Agreement nor the making of Credit Extensions hereunder gives rise to a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. 5.16. Environmental Matters. In the ordinary course of its business, the officers of the Borrower consider the effect of Environmental Laws on the business of the Borrower and its Subsidiaries, in the course of which they identify and evaluate potential risks and liabilities accruing to 34 the Borrower due to Environmental Laws. Except as disclosed in the SEC Reports, on the basis of this consideration, the Borrower has concluded that Environmental Laws cannot reasonably be expected to have a Material Adverse Effect. Except as disclosed in the SEC Reports, neither the Borrower nor any Subsidiary has received any notice to the effect that its operations are not in material compliance with any of the requirements of applicable Environmental Laws or are the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action could reasonably be expected to have a Material Adverse Effect. 5.17. Investment Company Act. Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 5.18. Public Utility Holding Company Act. Neither the Borrower nor any Subsidiary is a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 5.19. Solvency. (i) Immediately after the consummation of the transactions to occur on the date hereof and immediately following the making of each Credit Extension, if any, made on the date hereof and after giving effect to the application of the proceeds of such Credit Extensions, (a) the fair value of the assets of the Borrower and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, subordinated, contingent or otherwise, of the Borrower and its Subsidiaries on a consolidated basis; (b) the present fair saleable value of the Property of the Borrower and its Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability of the Borrower and its Subsidiaries on a consolidated basis on their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Borrower and its Subsidiaries on a consolidated basis will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Borrower and its Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted after the date hereof. (ii) The Borrower does not intend to, or to permit any of its Subsidiaries to, and does not believe that it or any of its Subsidiaries will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing of and amounts of cash to be received by it or any such Subsidiary and the timing of the amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary. 5.20 FASCO Acquisition. (i) The Borrower has heretofore furnished to the Agent true and complete copies of the FASCO Stock Purchase Agreement and all other FASCO Acquisition Documents, in each case together with all schedules and exhibits referred to therein or delivered pursuant thereto and all amendments, modifications and waivers relating thereto. On the date hereof and immediately prior to giving effect to the consummation of the FASCO Acquisition, (a) other than amendments delivered to the Agent prior to the date hereof, none of the FASCO Acquisition Documents shall have been amended, modified or supplemented, nor any condition or provision thereof waived, in any manner which would breach Section 6.2 hereof, and each of the FASCO Acquisition Documents is in full force and effect and neither the Borrower, any Guarantor any other party thereto is in default thereunder or in breach thereof, (b) all conditions to the obligations of the Borrower and the Guarantors under each of such FASCO 35 Acquisition Documents to consummate the transactions contemplated thereby on the date hereof shall have been satisfied or shall be satisfied with the consummation of the transactions contemplated hereunder to occur on the date hereof or shall be waived by the party entitled to waive such condition to the extent permitted by Section 6.2 hereof, and (c) the FASCO Acquisition will be consummated substantially in accordance with the terms of the FASCO Acquisition Documents, this Agreement and the certificate delivered pursuant to Section 4.1(xi)(c) hereof and in compliance with all applicable Requirements of Law. (ii) Each of the representations and warranties given by the Sellers to the Borrower and/or any Guarantor and by the Borrower and/or any Guarantor to the Sellers in the FASCO Acquisition Documents is true and correct as of the date hereof (or as of any earlier date to which such representation and warranty specifically relates). ARTICLE VI COVENANTS During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing: 6.1. Financial Reporting. The Borrower will maintain, for itself and each Subsidiary, a system of accounting established and administered in accordance with generally accepted accounting principles, and furnish to the Lenders: (i) Within 90 days after the close of each of its fiscal years, an unqualified (except for qualifications relating to changes in accounting principles or practices reflecting changes in generally accepted accounting principles and required or approved by the Borrower's independent certified public accountants) audit report certified by independent certified public accountants acceptable to the Lenders, prepared in accordance with Agreement Accounting Principles on a consolidated basis for itself and its Subsidiaries, including balance sheets as of the end of such period, related profit and loss and reconciliation of surplus statements, and a statement of cash flows, accompanied by (a) any management letter prepared by said accountants, and (b) a certificate of said accountants that, in the course of their examination necessary for their certification of the foregoing, they have obtained no knowledge of any Default or Unmatured Default, or if, in the opinion of such accountants, any Default or Unmatured Default shall exist, stating the nature and status thereof. (ii) Within 45 days after the close of the first three quarterly periods of each of its fiscal years, for itself and its Subsidiaries, consolidated unaudited balance sheets as at the close of each such period and consolidated profit and loss and reconciliation of surplus statements and a statement of cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified by its chief financial officer. (iii) As soon as available, but in any event within 30 days after the beginning of each fiscal year of the Borrower, a copy of the plan and forecast (including a projected consolidated 36 and consolidating balance sheet, income statement and funds flow statement) of the Borrower for such fiscal year. (iv) Together with the financial statements required under Sections 6.1(i) and (ii), a compliance certificate in substantially the form of Exhibit B signed by its chief financial officer showing the calculations necessary to determine compliance with this Agreement and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof. (v) Within 365 days after the close of each fiscal year, a statement of the Unfunded Liabilities of each Single Employer Plan, certified as correct by an actuary enrolled under ERISA. (vi) As soon as possible and in any event within 10 days after the Borrower knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by the chief financial officer of the Borrower, describing said Reportable Event and the action which the Borrower proposes to take with respect thereto. (vii) As soon as possible and in any event within 10 days after receipt by the Borrower, a copy of (a) any notice or claim to the effect that the Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the release by the Borrower, any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, and (b) any notice alleging any violation of any federal, state or local environmental, health or safety law or regulation by the Borrower or any of its Subsidiaries, which, in either case, could reasonably be expected to have a Material Adverse Effect. (viii) Promptly upon the furnishing thereof to the shareholders of the Borrower, copies of all financial statements, reports and proxy statements so furnished. (ix) Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission. (x) Such other information (including non-financial information) as the Agent or any Lender may from time to time reasonably request. 6.2. Use of Proceeds; FASCO Acquisition Documents. The Borrower will use the proceeds of the Credit Extensions for working capital and other general corporate purposes, including in part to consummate the FASCO Acquisition. The Borrower will not, nor will it permit the Borrower or any Subsidiary to, use any of the proceeds of the Advances to purchase or carry any Margin Stock. The Borrower will not permit the FASCO Acquisition Documents to be amended or modified, or waive any condition or right thereunder, which in any of the foregoing cases would individually or in the aggregate (i) cause the consideration paid or payable (including without limitation all direct payments, all deferred payments, all Indebtedness assumed and all other consideration) for the FASCO Acquisition to increase, (ii) decrease the percentage of the issued and outstanding Capital Stock of FASCO being acquired pursuant to the FASCO Acquisition Documents below 100% or otherwise decrease the Property being acquired in the FASCO Acquisition or (iii) otherwise reasonably be expected to be materially adverse to the Lenders, without in each case obtaining the prior written consent of the Agent. 37 6.3. Notice of Default. The Borrower will, and will cause each Subsidiary to, give prompt notice in writing to the Lenders of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise, which could reasonably be expected to have a Material Adverse Effect. 6.4. Conduct of Business. The Borrower will, and will cause each Subsidiary to, carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted and do all things necessary to remain duly incorporated or organized, validly existing and (to the extent such concept applies to such entity) in good standing as a domestic corporation, partnership or limited liability company in its jurisdiction of incorporation or organization, as the case may be, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted. 6.5. Taxes. The Borrower will, and will cause each Subsidiary to, timely file complete and correct United States federal and applicable foreign, state and local tax returns required by law and pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with Agreement Accounting Principles. 6.6. Insurance. The Borrower will, and will cause each Subsidiary to, maintain with financially sound and reputable insurance companies insurance on all their Property in such amounts and covering such risks as is consistent with sound business practice, and the Borrower will furnish to any Lender upon request full information as to the insurance carried. 6.7. Compliance with Laws. The Borrower will, and will cause each Subsidiary to, comply with all Requirements of Law, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. 6.8. Maintenance of Properties. The Borrower will, and will cause each Subsidiary to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times. 6.9. Inspection. The Borrower will, and will cause each Subsidiary to, permit the Agent and the Lenders, by their respective representatives and agents, to inspect any of the Property, books and financial records of the Borrower and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Borrower and each Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and each Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Agent or any Lender may designate. 6.10. Dividends. The Borrower will not, nor will it permit any Subsidiary to, declare or pay any dividends or make any distributions on its Capital Stock (other than dividends payable in its own Capital Stock) or redeem, repurchase or otherwise acquire or retire any of its Capital Stock at any time outstanding, except that (i) any Subsidiary may declare and pay dividends or make distributions to the Borrower or to a Wholly-Owned Subsidiary, and (ii) the Borrower may declare and pay dividends on its Capital Stock and make redemptions, repurchases or other acquisitions or retirements of any of its 38 Capital Stock provided that in each case no Default or Unmatured Default shall exist before or after giving effect thereto or be caused as a result thereof. 6.11. Non-Guarantor Indebtedness. The Borrower will not permit any Subsidiary which is not a Guarantor to, create, incur or suffer to exist any Indebtedness, except: (i) Indebtedness existing on the date hereof and described in Schedule 2, but no increase in the amount thereof as reduced from time to time. (ii) Other Indebtedness in an aggregate outstanding amount for all such Subsidiaries not to exceed $25,000,000. 6.12. Merger. The Borrower will not, nor will it permit any Subsidiary to, merge or consolidate with or into any other Person, except that, (i) a Subsidiary of the Borrower may merge with the Borrower, provided that the Borrower shall be the surviving corporation, (ii) a Subsidiary of the Borrower may merge or consolidate with a Guarantor, provided that the Guarantor shall be the surviving corporation, (iii) a Subsidiary of the Borrower that is not a Guarantor may merge, consolidate or amalgamate with any other Subsidiary of the Borrower that is not a Guarantor, and (iv) the Borrower or any Subsidiary may merge, consolidate or amalgamate with any other Person in connection with an Acquisition, provided that, if any such merger involves the Borrower or a Guarantor, the Borrower or such Guarantor shall be the surviving corporation and such Acquisition is permitted pursuant to the terms of Section 6.14. 6.13. Sale of Assets. The Borrower will not, nor will it permit any Subsidiary to, lease, sell or otherwise dispose of its Property to any other Person, except: (i) Sales of inventory in the ordinary course of business. (ii) Leases, sales or other dispositions of its Property that, together with all other Property of the Borrower and its Subsidiaries previously leased, sold or disposed of (other than inventory in the ordinary course of business) as permitted by this Section during the twelve-month period ending with the month in which any such lease, sale or other disposition occurs, do not constitute a Substantial Portion of the Property of the Borrower and its Subsidiaries. (iii) Any transfer of an interest in accounts or notes receivable and related assets as part of a Qualified Receivables Transaction. (iv) Transfers of assets between Guarantors or between the Borrower and Guarantors. (v) Transfers of assets between the Borrower's Subsidiaries that are not Guarantors. 6.14. Investments and Acquisitions. The Borrower will not, nor will it permit any Subsidiary to, make or suffer to exist any Investments (including without limitation, loans and advances to, and other Investments in, Subsidiaries), or commitments therefore, or to create any Subsidiary or to become or remain a partner in any partnership or joint venture, or to make any Acquisition of any Person, except: (i) Cash Equivalent Investments. 39 (ii) Existing Investments in Subsidiaries and other Investments in existence on the date hereof and described in Schedule 1. (iii) Investments comprised of capital contributions (whether in the form of cash, a note, or other assets) to a Subsidiary or other special-purpose entity created solely to engage in a Qualified Receivables Transaction or otherwise resulting from transfers of assets permitted by Section 6.13(iii) to such a special-purpose entity. (iv) Investments in Guarantors. (v) Other Investments (other than Acquisitions) provided that the aggregate amount of such Investments made in any fiscal year does not exceed 10% of Consolidated Net Worth as of the beginning of such fiscal year. (vi) The FASCO Acquisition, subject to the terms of this Agreement. (vii) Any other Acquisition, provided that (a) immediately before and after giving effect to such Acquisition, on a pro forma basis acceptable to the Agent, no Default or Unmatured Default shall exist or shall have occurred and be continuing and the representations and warranties contained in Article V and in the other Loan Documents shall be true and correct on and as of the date thereof (both before and after such Acquisition is consummated) as if made on the date such Acquisition is consummated, (b) the target of such Acquisition is in substantially the same line of business as the Borrower, (c) such Acquisition is non-hostile and the Board of Directors of the target of such Acquisition has approved such Acquisition, and (d) the aggregate consideration paid or payable in connection with all Acquisitions permitted by this Section 6.14(vii) in any consecutive twelve month period, including without limitation all direct payments, all deferred payments, all Indebtedness assumed and all other consideration, shall not exceed $150,000,000. 6.15. Liens. The Borrower will not, nor will it permit any Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the Property of the Borrower or any of its Subsidiaries, except: (i) Liens for taxes, assessments or governmental charges or levies on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with Agreement Accounting Principles shall have been set aside on its books. (ii) Liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on its books. (iii) Liens arising out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation. 40 (iv) Utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Borrower or its Subsidiaries. (v) Liens existing on the date hereof and described in Schedule 2. (vii) Liens incurred in connection with any transfer of an interest in accounts or notes receivable or related assets as part of a Qualified Receivables Transaction. (viii) Liens securing Indebtedness and not otherwise permitted by the foregoing provisions of this Section 6.15, provided that the aggregate outstanding principal amount of the Indebtedness secured by all such Liens shall not at any time exceed 10% of Consolidated Net Worth. 6.16. Affiliates. The Borrower will not, and will not permit any Subsidiary to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate except (i) in the ordinary course of business and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain in a comparable arms-length transaction and (ii) transactions between the Borrower or any Subsidiary, on the one hand, and any Subsidiary or other special-purpose entity created to engage solely in a Qualified Receivables Transaction. 6.17 Limitation on Restrictions on Subsidiary Distributions. The Borrower will not, and will not permit any Subsidiary to, enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary of the Borrower to (i) pay dividends or make any other distributions in respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any other Subsidiary of the Borrower, (ii) make loans or advances to the Borrower or any other Subsidiary of the Borrower or (iii) transfer any of its assets to the Borrower or any other Subsidiary of the Borrower, except for such encumbrances or restrictions existing under or by reason of (a) any restrictions existing under the Loan Documents, (b) any restrictions with respect to a Subsidiary imposed pursuant to an agreement which has been entered into in connection with the disposition of all or substantially all of the Capital Stock or assets of such Subsidiary, or (c) any restrictions with respect to assets encumbered by a Lien permitted by Section 6.15 so long as such restriction applies only to the assets encumbered by such permitted Lien. 6.18 Financial Contracts. The Borrower will not, and will not permit any Subsidiary to, enter into or remain a party to any Financial Contract for purposes of financial speculation, provided that hedging by the Borrower or any of its Subsidiaries of their own interest rate or foreign currency exposure shall not be deemed financial speculation. 6.19. Financial Covenants. 6.19.1. Interest Coverage Ratio. The Borrower will not permit the ratio, determined as of the end of each of its fiscal quarters for the then most-recently ended four fiscal quarters, of (i) Consolidated EBIT to (ii) Consolidated Interest Expense to be less than (a) 2.75 to 1.0 as of the end of any fiscal quarter ending after the date hereof and prior to December 31, 2003 or (b) 3.00 to 1.0 as of the end of any fiscal quarter thereafter. 41 6.19.2. Leverage Ratio. The Borrower will not permit the ratio, determined as of the end of each of its fiscal quarters, of (i) Consolidated Indebtedness to (ii) Consolidated EBITDA for the then most-recently ended four fiscal quarters to be greater than 2.50 to 1.0. 6.19.3. Minimum Net Worth. The Borrower will at all times maintain Consolidated Net Worth of not less than the sum of (i) $900,000,000 plus (ii) 50% of Consolidated Net Income earned in the fiscal quarter ending December 31, 2002 (without deduction for losses) plus (iii) 50% of Consolidated Net Income earned in each fiscal year beginning with the fiscal year ending December 31, 2003 (without deduction for losses). 6.20 Additional Covenants. This covenant governs any instrument or agreement, or any group of related instruments or agreements, relating to or amending any terms or conditions applicable to any Indebtedness equal to or greater than $100,000,000 of the Borrower or a Subsidiary (each a "Debt Instrument"), whether such Debt Instrument is now existing or subsequently entered into by the Borrower or a Subsidiary. The Borrower shall promptly deliver to the Agent a copy of each Debt Instrument. If any Debt Instrument contains any covenant, term or condition or default not substantially provided for in this Agreement or that is more favorable to the lender or lenders thereunder than those provided for in this Agreement (each a "More Favorable Provision"), such More Favorable Provision shall be incorporated by reference in this Agreement as if set forth fully herein (a) as of the date of this Agreement if such Debt Instrument is now existing, or (b) as of the effective date of the Debt Instrument if the Borrower or a Subsidiary subsequently enters into such Debt Instrument. No amendment, other modification, termination or expiration of any More Favorable Provision shall alter or otherwise affect such provision as incorporated herein, except that any modification which makes such provision become more favorable to the applicable lender shall be incorporated herein in addition to (and not in lieu of) the provisions which it replaces. Notwithstanding the foregoing, More Favorable Provisions shall not include any term of a Debt Instrument relating to amount, rate of interest, fees, amortization, or maturity of the Indebtedness or the conditions to be satisfied for consummation of the related borrowing. ARTICLE VII DEFAULTS The occurrence of any one or more of the following events shall constitute a Default: 7.1. Any representation or warranty made or deemed made by or on behalf of the Borrower or any of its Subsidiaries to the Lenders or the Agent under or in connection with this Agreement, any Credit Extension, or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be materially false on the date as of which made. 7.2. Nonpayment of principal of any Loan when due, nonpayment of any Reimbursement Obligation within one Business Day after the same becomes due, or nonpayment of interest upon any Loan or of any facility fee, LC Fee or other obligations under any of the Loan Documents within five days after the same becomes due. 42 7.3. The breach by the Borrower of any of the terms or provisions of Section 6.1, 6.2, 6.3, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15 or 6.19. 7.4. The breach by the Borrower (other than a breach which constitutes a Default under another Section of this Article VII) of any of the terms or provisions of this Agreement which is not remedied within thirty days after written notice from the Agent or any Lender. 7.5. Failure of the Borrower or any of its Subsidiaries to pay when due any Material Indebtedness; or the default by the Borrower or any of its Subsidiaries in the performance (beyond the applicable grace period with respect thereto, if any) of any term, provision or condition contained in any Material Indebtedness Agreement, or any other event shall occur or condition exist, the effect of which default, event or condition is to cause, or to permit the holder(s) of such Material Indebtedness or the lender(s) under any Material Indebtedness Agreement to cause, such Material Indebtedness to become due prior to its stated maturity or any commitment to lend under any Material Indebtedness Agreement to be terminated prior to its stated expiration date; or any Material Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be due and payable or required to be prepaid or repurchased (other than by a regularly scheduled payment) prior to the stated maturity thereof; or the Borrower or any of its Subsidiaries shall not pay, or admit in writing its inability to pay, its debts generally as they become due. 7.6. The Borrower or any of its Subsidiaries shall (i) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (iv) institute any proceeding seeking an order for relief under the Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (v) take any corporate or partnership action to authorize or effect any of the foregoing actions set forth in this Section 7.6 or (vi) fail to contest in good faith any appointment or proceeding described in Section 7.7. 7.7. Without the application, approval or consent of the Borrower or any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any of its Subsidiaries or any Substantial Portion of its Property, or a proceeding described in Section 7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 30 consecutive days. 7.8. Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of, all or any portion of the Property of the Borrower and its Subsidiaries which, when taken together with all other Property of the Borrower and its Subsidiaries so condemned, seized, appropriated, or taken custody or control of, during the twelve-month period ending with the month in which any such action occurs, constitutes a Substantial Portion. 7.9. The Borrower or any of its Subsidiaries shall fail within 30 days to pay, bond or otherwise discharge one or more (i) judgments or orders for the payment of money in excess of $15,000,000 (or the equivalent thereof in currencies other than U.S. Dollars) in the aggregate, or (ii) nonmonetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, which judgment(s), in any such case, is/are not stayed on appeal or otherwise being appropriately contested in good faith. 43 7.10. Any Change in Control shall occur. 7.11. The occurrence of any "default", as defined in any Loan Document (other than this Agreement) or the breach of any of the terms or provisions of any Loan Document (other than this Agreement), which default or breach continues beyond any period of grace therein provided. 7.12. Any Guaranty shall fail to remain in full force or effect or any action shall be taken to discontinue or to assert the invalidity or unenforceability of any Guaranty, or any Guarantor shall fail to comply with any of the terms or provisions of any Guaranty to which it is a party, or any Guarantor shall deny that it has any further liability under any Guaranty to which it is a party, or shall give notice to such effect. 7.13. Any member of the Controlled Group shall fail to pay when due an amount or amounts aggregating in excess of $15,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Single Employer Plan with Unfunded Liabilities in excess of $15,000,000 (a "Material Plan") shall be filed under Section 4041(c) of ERISA by any member of the Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist that could reasonably be expected to result in PBGC obtaining a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which causes one or more members of the Controlled Group to incur a current payment obligation for withdrawal liability in excess of $15,000,000 in aggregate amount for the Controlled Group. 7.14. (i) The FASCO Acquisition shall be unwound, reversed or otherwise rescinded in whole or in any material part for any reason, or (ii) the FASCO Acquisition shall not be consummated on or before February 28, 2003 in accordance with the terms of the Loan Documents and the FASCO Acquisition Documents. ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 8.1. Acceleration; Facility LC Collateral Account. (i) If any Default described in Section 7.6 or 7.7 occurs with respect to the Borrower, the obligations of the Lenders to make Loans hereunder and the obligation and power of the LC Issuer to issue Facility LCs shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Agent, the LC Issuer or any Lender and the Borrower will be and become thereby unconditionally obligated, without any further notice, act or demand, to pay to the Agent an amount in immediately available funds, which funds shall be held in the Facility LC Collateral Account, equal to the difference of (x) the amount of LC Obligations at such time, less (y) the amount on deposit in the Facility LC Collateral Account at such time which is free and clear of all rights and claims of third parties and has not been applied against the Obligations (such difference, the "Collateral Shortfall Amount"). If any other Default occurs, the Required Lenders (or the Agent with the consent of the Required Lenders) may (a) terminate or suspend the obligations of the Lenders to make Loans hereunder and the obligation and 44 power of the LC Issuer to issue Facility LCs, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrower hereby expressly waives, and (b) upon notice to the Borrower and in addition to the continuing right to demand payment of all amounts payable under this Agreement, make demand on the Borrower to pay, and the Borrower will, forthwith upon such demand and without any further notice or act, pay to the Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account. (ii) If at any time while any Default is continuing, the Agent determines that the Collateral Shortfall Amount at such time is greater than zero, the Agent may make demand on the Borrower to pay, and the Borrower will, forthwith upon such demand and without any further notice or act, pay to the Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account. (iii) The Agent may at any time or from time to time after funds are deposited in the Facility LC Collateral Account if a Default has occurred and is continuing, apply such funds to the payment of the Obligations and any other amounts as shall from time to time have become due and payable by the Borrower to the Lenders or the LC Issuer under the Loan Documents. (iv) At any time while any Default is continuing, neither the Borrower nor any Person claiming on behalf of or through the Borrower shall have any right to withdraw any of the funds held in the Facility LC Collateral Account. After all of the Obligations have been indefeasibly paid in full and the Aggregate Commitment has been terminated, any funds remaining in the Facility LC Collateral Account shall be returned by the Agent to the Borrower or paid to whomever may be legally entitled thereto at such time. (v) If, within 30 days after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Loans and the obligation and power of the LC Issuer to issue Facility LCs hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in their sole discretion) shall so direct, the Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination. 8.2. Amendments. Subject to the provisions of this Section 8.2, the Required Lenders (or the Agent with the consent in writing of the Required Lenders) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of all of the Lenders: (i) Extend the final maturity of any Loan, or extend the expiry date of any Facility LC to a date after the Facility Termination Date, or forgive all or any portion of the principal amount thereof or any Reimbursement Obligation related thereto, or reduce the rate or extend the time of payment of interest or fees thereon or Reimbursement Obligations related thereto. (ii) Reduce the percentage specified in the definition of Required Lenders. 45 (iii) Extend the Facility Termination Date, or reduce the amount or extend the payment date for, the mandatory payment required under Section 2.2, or increase the amount of the Aggregate Commitment or of the Commitment of any Lender hereunder or permit the Borrower to assign its rights under this Agreement. (iv) Amend this Section 8.2. (v) Release any Guarantor or Guarantors that would constitute a Significant Subsidiary. No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent. No amendment of any provision of this Agreement relating to the Swing Line Lender or any Swing Line Loans shall be effective without the written consent of the Swing Line Lender. No amendment of any provision relating to the LC Issuer or any Facility LCs shall be effective without the written consent of the LC Issuer. The Agent may waive payment of the fee required under Section 12.3.2 without obtaining the consent of any other party to this Agreement. Notwithstanding anything herein to the contrary, no Defaulting Lender shall be entitled to vote (whether to consent or to withhold its consent) with respect to any amendment, modification, termination or waiver requiring the consent of the Required Lenders and, for purposes of determining the Required Lenders, the Commitments and Loans of each Defaulting Lender shall be disregarded. 8.3. Preservation of Rights. No delay or omission of the Lenders, the LC Issuer or the Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Credit Extension notwithstanding the existence of a Default or the inability of the Borrower to satisfy the conditions precedent to such Credit Extension shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Agent, the LC Issuer and the Lenders until the Obligations have been paid in full. ARTICLE IX GENERAL PROVISIONS 9.1. Survival of Representations. All representations and warranties of the Borrower contained in this Agreement shall survive the making of the Credit Extensions herein contemplated. 9.2. Governmental Regulation. Anything contained in this Agreement to the contrary notwithstanding, neither the LC Issuer nor any Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation. 9.3. Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. 46 9.4. Entire Agreement. The Loan Documents embody the entire agreement and understanding among the Borrower, the Agent, the LC Issuer and the Lenders and supersede all prior agreements and understandings among the Borrower, the Agent, the LC Issuer and the Lenders relating to the subject matter thereof other than those contained in the fee letter described in Section 10.13 which shall survive and remain in full force and effect during the term of this Agreement. 9.5. Several Obligations; Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns, provided, however, that the parties hereto expressly agree that the Arranger shall enjoy the benefits of the provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name to the same extent as if it were a party to this Agreement. 9.6. Expenses; Indemnification. (i) The Borrower shall reimburse the Agent and the Arranger for any reasonable costs and out-of-pocket expenses (including attorneys' fees of attorneys for the Agent) paid or incurred by the Agent or the Arranger in connection with the preparation, negotiation, execution, delivery, syndication, distribution (including, without limitation, via the internet), review, amendment, modification, and administration of the Loan Documents. The Borrower also agrees to reimburse the Agent, the Arranger, the LC Issuer and the Lenders for any reasonable costs and out-of-pocket expenses (including attorneys' fees of attorneys for the Agent, the Arranger, the LC Issuer and the Lenders) paid or incurred by the Agent, the Arranger, the LC Issuer or any Lender in connection with the collection and enforcement of the Loan Documents. (ii) The Borrower hereby further agrees to indemnify the Agent, the Arranger, the LC Issuer, each Lender, their respective affiliates, and each of their directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent, the Arranger, the LC Issuer, any Lender or any affiliate is a party thereto) which any of them may pay or incur arising out of or relating to this Agreement, the other Loan Documents, any Acquisition, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Credit Extension hereunder except to the extent that they are determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the party seeking indemnification. The obligations of the Borrower under this Section 9.6 shall survive the termination of this Agreement. 9.7. Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may furnish one to each of the Lenders. 9.8. Accounting. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles; provided that, if the Borrower notifies the Agent that the Borrower wishes to amend any covenant contained in Article VI to eliminate the effect of any change in generally accepted accounting principles on the calculation of such covenant (or if the Agent notifies the Borrower 47 that the Required Lenders wish to amend Article VI for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders. Notwithstanding anything herein, in any financial statements of the Borrower or in Agreement Accounting Principles to the contrary, for purposes of calculating and determining compliance with the financial covenants in Article VI and determining the Applicable Margin and the Applicable Facility Fee Rate, including defined terms used therein, any Acquisition (including without limitation the FASCO Acquisition) made by the Borrower or any of its Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the period for which such financial covenants or the Applicable Margin and the Applicable Facility Fee Rate were calculated shall be deemed to have occurred on the first day of the relevant period for which such financial covenants or the Applicable Margin and the Applicable Facility Fee Rate were calculated on a pro forma basis acceptable to the Agent. 9.9. Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 9.10. Nonliability of Lenders. The relationship between the Borrower on the one hand and the Lenders, the LC Issuer and the Agent on the other hand shall be solely that of borrower and lender. Neither the Agent, the Arranger, the LC Issuer nor any Lender shall have any fiduciary responsibilities to the Borrower. Neither the Agent, the Arranger, the LC Issuer nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower's business or operations. The Borrower agrees that neither the Agent, the Arranger, the LC Issuer nor any Lender shall have liability to the Borrower (whether sounding in tort, contract or otherwise) for losses suffered by the Borrower in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought. Neither the Agent, the Arranger, the LC Issuer nor any Lender shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue for, any special, indirect, consequential or punitive damages suffered by the Borrower in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby. 9.11. Confidentiality. The Agent, the LC Issuer and each Lender agree to hold any confidential information which it may receive from the Borrower pursuant to this Agreement in confidence, except for disclosure (i) to its Affiliates and to other Lenders, the Agent and the LC Issuer and their respective Affiliates, (ii) to legal counsel, accountants, and other professional advisors to such Lender or to a Transferee, (iii) to regulatory officials, (iv) to any Person as required by law, regulation, or legal process, (v) to any Person in connection with any legal proceeding to which such Lender is a party, (vi) to such Lender's direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties, and (vii) permitted by Section 12.4. The Agent, the LC Issuer and Lenders agree to give reasonable prior notice to the Borrower of any disclosure pursuant to the foregoing clauses (iv) and (v) to the extent feasible and so long as giving such notice is not otherwise prohibited by applicable law. 48 9.12. Nonreliance. Each Lender hereby represents that it is not relying on or looking to any Margin Stock for the repayment of the Credit Extensions provided for herein. 9.13. Disclosure. The Borrower and each Lender hereby acknowledge and agree that Bank One and/or its Affiliates from time to time may hold investments in, make other loans to or have other relationships with the Borrower and its Affiliates. ARTICLE X THE AGENT 10.1. Appointment; Nature of Relationship. Bank One, NA is hereby appointed by each of the Lenders as its contractual representative (herein referred to as the "Agent") hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. The Agent agrees to act as such contractual representative upon the express conditions contained in this Article X. Notwithstanding the use of the defined term "Agent," it is expressly understood and agreed that the Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement or any other Loan Document and that the Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders' contractual representative, the Agent (i) does not hereby assume any fiduciary duties to any of the Lenders, (ii) is a "representative" of the Lenders within the meaning of the term "secured party" as defined in the Michigan Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders hereby agrees to assert no claim against the Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives. 10.2. Powers. The Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Agent. 10.3. General Immunity. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to the Borrower, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is determined in a final non-appealable judgment by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of such Person. 10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of any 49 obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered solely to the Agent; (d) the existence or possible existence of any Default or Unmatured Default; (e) the validity, enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any collateral security; or (g) the financial condition of the Borrower or any guarantor of any of the Obligations or of any of the Borrower's or any such guarantor's respective Subsidiaries. The Agent shall have no duty to disclose to the Lenders information that is not required to be furnished by the Borrower to the Agent at such time, but is voluntarily furnished by the Borrower to the Agent (either in its capacity as Agent or in its individual capacity). 10.5. Action on Instructions of Lenders. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. The Lenders hereby acknowledge that the Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders. The Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action. 10.6. Employment of Agents and Counsel. The Agent may execute any of its duties as Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Agent shall be entitled to advice of counsel concerning the contractual arrangement between the Agent and the Lenders and all matters pertaining to the Agent's duties hereunder and under any other Loan Document. 10.7. Reliance on Documents; Counsel. The Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Agent, which counsel may be employees of the Agent. 10.8. Agent's Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify the Agent ratably in proportion to their respective Commitments (or, if the Commitments have been terminated, in proportion to their Commitments immediately prior to such termination) (i) for any amounts not reimbursed by the Borrower for which the Agent is entitled to reimbursement by the Borrower under the Loan Documents, (ii) for any other expenses incurred by the Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents (including, without limitation, for any expenses incurred by the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including, without limitation, 50 for any such amounts incurred by or asserted against the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms of the Loan Documents or of any such other documents, provided that (i) no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Agent and (ii) any indemnification required pursuant to Section 3.5(vii) shall, notwithstanding the provisions of this Section 10.8, be paid by the relevant Lender in accordance with the provisions thereof. The obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement. 10.9. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Unmatured Default hereunder unless the Agent has received written notice from a Lender or the Borrower referring to this Agreement describing such Default or Unmatured Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders. 10.10. Rights as a Lender. In the event the Agent is a Lender, the Agent shall have the same rights and powers hereunder and under any other Loan Document with respect to its Commitment and its Credit Extensions as any Lender and may exercise the same as though it were not the Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a Lender, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby from engaging with any other Person. 10.11. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent, the Arranger, the LC Issuer or any other Lender and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Agent, the Arranger, the LC Issuer or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents. 10.12. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five days after the retiring Agent gives notice of its intention to resign. The Agent may be removed at any time with or without cause by written notice received by the Agent from the Required Lenders, such removal to be effective on the date specified by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint one of the Lenders, on behalf of the Borrower and the Lenders, a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders within thirty days after the resigning Agent's giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of the Borrower and the Lenders, one of the Lenders as a successor Agent. Notwithstanding the previous sentence, the Agent may at any time without the consent of the Borrower or any Lender, appoint any of its Affiliates which is a commercial bank as a successor Agent hereunder. If the Agent has resigned or been removed and no successor Agent has been appointed, the Lenders may perform all the duties of the Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable 51 Lender and for all other purposes shall deal directly with the Lenders. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning or removed Agent. Upon the effectiveness of the resignation or removal of the Agent, the resigning or removed Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation or removal of an Agent, the provisions of this Article X shall continue in effect for the benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder and under the other Loan Documents. In the event that there is a successor to the Agent by merger, or the Agent assigns its duties and obligations to an Affiliate pursuant to this Section 10.12, then the term "Prime Rate" as used in this Agreement shall mean the prime rate, base rate or other analogous rate of the new Agent. 10.13. Agent and Arranger Fees. The Borrower agrees to pay to the Agent and the Arranger, for their respective accounts, the fees agreed to by the Borrower, the Agent and the Arranger from time to time. 10.14. Delegation to Affiliates. The Borrower and the Lenders agree that the Agent may delegate any of its duties under this Agreement to any of its Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents and employees) which performs duties in connection with this Agreement shall be entitled to the same benefits of the indemnification, waiver and other protective provisions to which the Agent is entitled under Articles IX and X. 10.15. Co-Agents, Documentation Agent, Syndication Agent, etc. Neither any of the Lenders identified in this Agreement or elsewhere as a "co-agent", a "documentation agent" or a "syndication agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of such Lenders shall have or be deemed to have a fiduciary relationship with any Lender. Each Lender hereby makes the same acknowledgments with respect to such Lenders as it makes with respect to the Agent in Section 10.11. ARTICLE XI SETOFF; RATABLE PAYMENTS 11.1. Setoff. In addition to, and without limitation of, any rights of the Lenders under applicable law, if the Borrower becomes insolvent, however evidenced, or any Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender or any Affiliate of any Lender to or for the credit or account of the Borrower may be offset and applied toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part hereof, shall then be due. 11.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it upon its Outstanding Credit Exposure (other than payments received pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Aggregate Outstanding Credit Exposure held by the other Lenders 52 so that after such purchase each Lender will hold its Pro Rata Share of the Aggregate Outstanding Credit Exposure. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their respective Pro Rata Shares of the Aggregate Outstanding Credit Exposure. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 12.1. Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lenders and their respective successors and assigns permitted hereby, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents without the prior written consent of each Lender, (ii) any assignment by any Lender must be made in compliance with Section 12.3, and (iii) any transfer by Participation must be made in compliance with Section 12.2. Any attempted assignment or transfer by any party not made in compliance with this Section 12.1 shall be null and void, unless such attempted assignment or transfer is treated as a participation in accordance with Section 12.3.2. The parties to this Agreement acknowledge that clause (ii) of this Section 12.1 relates only to absolute assignments and this Section 12.1 does not prohibit assignments creating security interests, including, without limitation, (x) any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and any Note to a Federal Reserve Bank or (y) in the case of a Lender which is a Fund, any pledge or assignment of all or any portion of its rights under this Agreement and any Note to its trustee in support of its obligations to its trustee; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 12.3. The Agent may treat the Person which made any Credit Extension or which holds any Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 12.3; provided, however, that the Agent may in its discretion (but shall not be required to) follow instructions from the Person which made any Credit Extension or which holds any Note to direct payments relating to such Credit Extension or Note to another Person. Any assignee of the rights to any Credit Extension or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Credit Extension (whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Credit Extension. 12.2. Participations. 12.2.1. Permitted Participants; Effect. Any Lender may at any time sell to one or more banks or other entities ("Participants") participating interests in any Credit Extension owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Credit Extensions 53 and the holder of any Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. 12.2.2. Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Credit Extension or Commitment in which such Participant has an interest which would require consent of all of the Lenders pursuant to the terms of Section 8.2 or of any other Loan Document. 12.2.3. Benefit of Certain Provisions. The Borrower agrees that each Participant shall be deemed to have the right of setoff provided in Section 11.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 11.1 with respect to the amount of participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender. The Borrower further agrees that each Participant shall be entitled to the benefits of Sections 3.1, 3.2, 3.4 and 3.5 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 12.3, provided that (i) a Participant shall not be entitled to receive any greater payment under Section 3.1, 3.2 or 3.5 than the Lender who sold the participating interest to such Participant would have received had it retained such interest for its own account, unless the sale of such interest to such Participant is made with the prior written consent of the Borrower, and (ii) any Participant not incorporated under the laws of the United States of America or any State thereof agrees to comply with the provisions of Section 3.5 to the same extent as if it were a Lender. 12.3. Assignments. 12.3.1. Permitted Assignments. Any Lender may at any time assign to one or more banks or other entities ("Purchasers") all or any part of its rights and obligations under the Loan Documents. Such assignment shall be substantially in the form of Exhibit C or in such other form as may be agreed to by the parties thereto. Each such assignment with respect to a Purchaser which is not a Lender or an Affiliate of a Lender or an Approved Fund shall either be in an amount equal to the entire applicable Commitment and Credit Extensions of the assigning Lender or (unless each of the Borrower and the Agent otherwise consents) be in an aggregate amount not less than $10,000,000 or such lesser amount agreed to by the Agent. The amount of the assignment shall be based on the Commitment or outstanding Credit Extensions (if the Commitment has been terminated) subject to the assignment, determined as of the date of such assignment or as of the "Trade Date," if the "Trade Date" is specified in the assignment. 12.3.2. Consents. The consent of the Borrower shall be required prior to an assignment becoming effective unless the Purchaser is a Lender, an Affiliate of a Lender or an Approved Fund, provided that the consent of the Borrower shall not be required if a Default has occurred and is continuing. The consent of the Agent and the LC Issuer shall be required prior to an 54 assignment becoming effective unless the Purchaser is a Lender, an Affiliate of a Lender or an Approved Fund. Any consent required under this Section 12.3.2 shall not be unreasonably withheld or delayed. 12.3.3. Effect; Effective Date. Upon (i) delivery to the Agent of an assignment, together with any consents required by Sections 12.3.1 and 12.3.2, and (ii) payment of a $3,500 fee to the Agent for processing such assignment (unless such fee is waived by the Agent), such assignment shall become effective on the effective date specified in such assignment. The assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Credit Extensions under the applicable assignment agreement constitutes "plan assets" as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be "plan assets" under ERISA. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by or on behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party thereto, and the transferor Lender shall be released with respect to the Commitment and Credit Extensions assigned to such Purchaser without any further consent or action by the Borrower, the Lenders or the Agent. In the case of an assignment covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a Lender hereunder but shall continue to be entitled to the benefits of, and subject to, those provisions of this Agreement and the other Loan Documents which survive payment of the Obligations and termination of the applicable agreement. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.3 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 12.2. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.3, the transferor Lender, the Agent and the Borrower shall, if the transferor Lender or the Purchaser desires that its Loans be evidenced by Notes, make appropriate arrangements so that new Notes or, as appropriate, replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their respective Commitments, as adjusted pursuant to such assignment. 12.3.4. Register. The Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. 12.3.5 Special Purpose Funding Vehicles. (i) Notwithstanding anything to the contrary contained herein, any Lender (a "Designating Lender") may grant to one or more special purpose funding vehicles (each, an "SPV"), identified as such in writing from time to time by the Designating Lender to the Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Designating Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement, provided that (A) nothing herein shall constitute a 55 commitment by any SPV to make any Loan, (B) if any SPV elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Designating Lender shall be obligated to make such Loan pursuant to the terms hereof, (C) the Designating Lender shall remain liable for any indemnity or other payment obligation with respect to its Commitments hereunder and (D) the Borrower shall not incur any additional costs or expenses as a result of any such grant by a Designated Lender to an SPV. The making of a Loan by an SPV hereunder shall utilize the relevant Commitment of the Designating Lender to the same extent, and as if, such Loan were made by such Designating Lender. (ii) As to any Loans or portion thereof made by it, each SPV shall have all the rights that a Lender making such Loans or portion thereof would have had under this Agreement; provided, however, that each SPV shall have granted to its Designating Lender an irrevocable power of attorney, to deliver and receive all communications and notices under this Agreement (and any related documents) and to exercise on such SPV's behalf, all of such SPV's voting rights under this Agreement. No additional Note shall be required to evidence the Loans or portion thereof made by an SPV; and the related Designating Lender shall be deemed to hold its Note, if any, as agent for such SPV to the extent of the Loans or portion thereof funded by such SPV. In addition, any payments for the account of any SPV shall be paid to its Designating Lender as agent for such SPV. (iii) Each party hereto hereby agrees that no SPV shall be liable for any indemnity or payment under this Agreement for which a Lender would otherwise be liable. In furtherance of the foregoing, each party hereto hereby agrees (which agreements shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPV, it will not institute against, or join any other person in instituting against, such SPV any bankruptcy, reorganization, arrangement insolvency or liquidation proceedings under the laws of the United States or any State thereof. (iv) In addition, subject to Section 12.4, any SPV may (A) at any time and without paying any processing fee therefor, assign or participate all or a portion of its interest in any Loans to the Designating Lender or to any financial institutions providing liquidity and/or credit support to or for the account of such SPV to support the funding or maintenance of Loans and (B) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancements to such SPV. This Section 12.3.3 may not be amended without the written consent of any Designating Lender affected thereby. 12.4. Dissemination of Information. The Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "Transferee") and any prospective Transferee any and all information in such Lender's possession concerning the creditworthiness of the Borrower and its Subsidiaries, including without limitation any information contained in any Reports; provided that each Transferee and prospective Transferee agrees to be bound by Section 9.11 of this Agreement. 12.6. Tax Treatment. If any interest in any Loan Document is transferred to any Transferee which is not incorporated under the laws of the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 3.5(iv). 56 ARTICLE XIII NOTICES 13.1. Notices. Except as otherwise permitted by Section 2.15 with respect to borrowing notices, all notices, requests and other communications to any party hereunder shall be in writing (including electronic transmission, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Agent, at its address or facsimile number set forth on the signature pages hereof, (y) in the case of any Lender, at its address or facsimile number set forth in its administrative questionnaire or (z) in the case of any party, at such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower in accordance with the provisions of this Section 13.1. Each such notice, request or other communication shall be effective (i) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, or (ii) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified in this Section; provided that notices to the Agent under Article II shall not be effective until received. 13.2. Change of Address. The Borrower, the Agent and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto. ARTICLE XIV COUNTERPARTS This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the Borrower, the Agent, the LC Issuer and the Lenders and each party has notified the Agent by facsimile transmission or telephone that it has taken such action. ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL 15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF MICHIGAN, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 15.2. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR MICHIGAN STATE COURT SITTING IN DETROIT, MICHIGAN IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE 57 BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT, THE LC ISSUER OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN DETROIT, MICHIGAN. 15.3. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT, THE LC ISSUER AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. 58 IN WITNESS WHEREOF, the Borrower, the Lenders, the LC Issuer and the Agent have executed this Agreement as of the date first above written. TECUMSEH PRODUCTS COMPANY By: /s/ David W. Kay ----------------------------------------- Title: Vice President, Treasurer & CFO 100 East Patterson Tecumseh, Michigan 49286 Attention: David W. Kay Telephone: (517) 423-8542 FAX: (517) 423-0200 Commitments $125,000,000 BANK ONE, NA, Individually and as Agent and LC Issuer By: /s/ Thomas A. Gamm ----------------------------------------- Title: First Vice President 611 Woodward Avenue Detroit, Michigan 48226 Attention: Corporate Banking - Michigan Group Telephone: (313) 225-2531 FAX: (313) 226-0855 59 PRICING SCHEDULE
LEVEL I STATUS LEVEL II STATUS LEVEL III STATUS LEVEL IV STATUS -------------- --------------- ---------------- --------------- Applicable Facility Fee Rate 12.5 bps 15.0 bps 17.5 bps 22.5 bps Applicable Margin - Eurodollar Rate Loans 37.5 bps 47.5 bps 70.0 bps 100.0 bps
For the purposes of this Schedule, the following terms have the following meanings, subject to the final paragraph of this Schedule: "Financials" means the annual or quarterly financial statements of the Company delivered pursuant to the Credit Agreement. "Level I Status" exists at any date if, on such date, the Leverage Ratio is less than or equal to 1.00:1. "Level II Status" exists at any date if, on such date, (i) the Company has not qualified for Level I Status and (ii) the Leverage Ratio is greater than 1.00:1. "Level III Status" exists at any date if, on such date, (i) the Company has not qualified for Level I Status or Level II Status and (ii) the Leverage Ratio is greater than 1.50:1. "Level IV Status" exists at any date if, on such date, (i) the Company has not qualified for Level I Status, Level II Status or Level III Status and (ii) the Leverage Ratio is greater than 2.00:1 "Status" means Level I Status, Level II Status, Level III Status, or Level IV Status. The Applicable Margin and Applicable Facility Fee Rate shall be determined in accordance with the foregoing table based on the Company's Status as determined in the then most recent Financials. Adjustments, if any, to the Applicable Margin and Applicable Facility Fee Rate shall be effective five Business Days after the date the Company is required to deliver the applicable Financials. If the Borrower fails to deliver the Financials to the Agent at the time required pursuant to the Credit Agreement, then the Applicable Margin and the Applicable Facility Fee Rate shall be the highest Applicable Margin and Applicable Facility Fee Rate set forth in the foregoing table until five days after such Financials are so delivered. Notwithstanding anything herein to the contrary, the Applicable Margin and Applicable Facility Fee Rate shall be set at Level III as of the date hereof and shall be adjusted for the first time based on the Financials for the fiscal quarter ending March 31, 2003. 60 EX-4.2 7 k73591exv4w2.txt BRIDGE CREDIT AGREEMENT EXHIBIT 4.2 BRIDGE CREDIT AGREEMENT DATED AS OF DECEMBER 30, 2002 AMONG TECUMSEH PRODUCTS COMPANY, THE LENDERS, BANK ONE, NA AS AGENT AND BANC ONE CAPITAL MARKETS, INC. AS LEAD ARRANGER AND SOLE BOOK RUNNER TABLE OF CONTENTS ARTICLE I. DEFINITIONS..........................................................................................1 ARTICLE II. THE CREDITS........................................................................................13 2.1. Commitment.......................................................................................13 2.2. Required Payments; Termination...................................................................14 2.3. Ratable Loans....................................................................................14 2.4. Types of Advances................................................................................14 2.5. Facility Fee; Reductions in Aggregate Commitment.................................................14 2.6. Minimum Amount of Each Advance...................................................................14 2.7. Optional Principal Payments......................................................................14 2.8. Method of Selecting Types and Interest Periods for New Advances..................................15 2.9. Conversion and Continuation of Outstanding Advances..............................................15 2.10. Changes in Interest Rate, etc....................................................................15 2.11. Rates Applicable After Default...................................................................16 2.12. Method of Payment................................................................................16 2.13. Noteless Agreement; Evidence of Indebtedness.....................................................16 2.14. Telephonic Notices...............................................................................17 2.15. Interest Payment Dates; Interest and Fee Basis...................................................17 2.16. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions..................17 2.17. Lending Installations............................................................................17 2.18. Non-Receipt of Funds by the Agent................................................................17 2.19. Replacement of Lender............................................................................18 ARTICLE III. YIELD PROTECTION; TAXES...........................................................................18 3.1. Yield Protection.................................................................................18 3.2. Changes in Capital Adequacy Regulations..........................................................19 3.3. Availability of Types of Advances................................................................19 3.4. Funding Indemnification..........................................................................20 3.5. Taxes............................................................................................20 3.6. Lender Statements; Survival of Indemnity.........................................................21 ARTICLE IV. CONDITIONS PRECEDENT...............................................................................22 4.1. Initial Advance..................................................................................22 4.2. Each Advance.....................................................................................24
ARTICLE V. REPRESENTATIONS AND WARRANTIES......................................................................24 5.1. Existence and Standing...........................................................................24 5.2. Authorization and Validity.......................................................................24 5.3. No Conflict; Government Consent..................................................................25 5.4. Financial Statements.............................................................................25 5.5. Material Adverse Change..........................................................................25 5.6. Taxes............................................................................................26 5.7. Litigation and Contingent Obligations............................................................26 5.8. Subsidiaries.....................................................................................26 5.9. ERISA............................................................................................26 5.10. Accuracy of Information..........................................................................26 5.11. Regulations T, U and X...........................................................................26 5.12. Material Agreements..............................................................................27 5.13. Compliance With Laws.............................................................................27 5.14. Ownership of Properties..........................................................................27 5.15. Plan Assets; Prohibited Transactions.............................................................27 5.16. Environmental Matters............................................................................27 5.17. Investment Company Act...........................................................................27 5.18. Public Utility Holding Company Act...............................................................27 5.19. Solvency.........................................................................................27 5.20. FASCO Acquisition................................................................................28 ARTICLE VI. COVENANTS..........................................................................................29 6.1. Financial Reporting..............................................................................29 6.2. Use of Proceeds; FASCO Acquisition Documents.....................................................30 6.3. Notice of Default................................................................................30 6.4. Conduct of Business..............................................................................30 6.5. Taxes............................................................................................31 6.6. Insurance........................................................................................31 6.7. Compliance with Laws.............................................................................31 6.8. Maintenance of Properties........................................................................31 6.9. Inspection.......................................................................................31 6.10. Dividends........................................................................................31 6.11. Indebtedness.....................................................................................31 6.12. Merger...........................................................................................31 6.13. Sale of Assets...................................................................................32 6.14. Investments and Acquisitions.....................................................................32 6.15. Liens............................................................................................33 6.16. Affiliates.......................................................................................34 6.17 Limitation on Restrictions on Subsidiary Distributions...........................................34 6.18 Financial Contracts..............................................................................34 6.19. Financial Covenants..............................................................................34 6.20. Additional Covenants.............................................................................34
ii ARTICLE VII. DEFAULTS..........................................................................................35 ARTICLE VIII. ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES...................................................37 8.1. Acceleration.....................................................................................37 8.2. Amendments.......................................................................................37 8.3. Preservation of Rights...........................................................................38 ARTICLE IX. GENERAL PROVISIONS..................................................................................38 9.1. Survival of Representations......................................................................38 9.2. Governmental Regulation..........................................................................38 9.3. Headings.........................................................................................38 9.4. Entire Agreement.................................................................................38 9.5. Several Obligations; Benefits of this Agreement..................................................39 9.6. Expenses; Indemnification........................................................................39 9.7. Numbers of Documents.............................................................................39 9.8. Accounting.......................................................................................39 9.9. Severability of Provisions.......................................................................40 9.10. Nonliability of Lenders..........................................................................40 9.11. Confidentiality..................................................................................40 9.12. Nonreliance......................................................................................40 9.13. Disclosure.......................................................................................40 ARTICLE X. THE AGENT............................................................................................41 10.1. Appointment; Nature of Relationship..............................................................41 10.2. Powers...........................................................................................41 10.3. General Immunity.................................................................................41 10.4. No Responsibility for Loans, Recitals, etc.......................................................41 10.5. Action on Instructions of Lenders................................................................42 10.6. Employment of Agents and Counsel.................................................................42 10.7. Reliance on Documents; Counsel...................................................................42 10.8. Agent's Reimbursement and Indemnification........................................................42 10.9. Notice of Default................................................................................43 10.10. Rights as a Lender...............................................................................43 10.11. Lender Credit Decision...........................................................................43 10.12. Successor Agent..................................................................................43 10.13. Agent and Arranger Fees..........................................................................44 10.14. Delegation to Affiliates.........................................................................44 10.15. Co-Agents, Documentation Agent, Syndication Agent, etc...........................................44 ARTICLE XI. SETOFF; RATABLE PAYMENTS............................................................................44 11.1. Setoff...........................................................................................44
iii 11.2. Ratable Payments.................................................................................44 ARTICLE XII. BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS.................................................45 12.1. Successors and Assigns...........................................................................45 12.2. Participations...................................................................................45 12.3. Assignments......................................................................................46 12.4. Dissemination of Information.....................................................................48 12.5. Tax Treatment....................................................................................48 ARTICLE XIII. NOTICES..........................................................................................48 13.1. Notices..........................................................................................48 13.2. Change of Address................................................................................49 ARTICLE XIV. COUNTERPARTS.......................................................................................49 ARTICLE XV. CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.......................................49 15.1. CHOICE OF LAW....................................................................................49 15.2. CONSENT TO JURISDICTION..........................................................................49 15.3. WAIVER OF JURY TRIAL.............................................................................50 PRICING SCHEDULE.................................................................................................52 EXHIBIT A. FORM OF OPINION.....................................................................................53 EXHIBIT B. COMPLIANCE CERTIFICATE..............................................................................54 EXHIBIT D. LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION......................................................62 EXHIBIT E. NOTE................................................................................................63 SCHEDULE 1. SUBSIDIARIES AND OTHER INVESTMENTS.................................................................65 SCHEDULE 2. INDEBTEDNESS AND LIENS.............................................................................66
iv SCHEDULE 3. FASCO ENTITIES.....................................................................................67 SCHEDULE 5.7. LITIGATION.......................................................................................67
v BRIDGE CREDIT AGREEMENT This Agreement, dated as of December 30, 2002, is among Tecumseh Products Company, a Michigan corporation, the Lenders and Bank One, NA, a national banking association having its principal office in Chicago, Illinois, as Agent. The parties hereto agree as follows: ARTICLE I DEFINITIONS As used in this Agreement: "Accumulated Funding Deficiency" means any accumulated funding deficiency within the meaning of Section 412 of the Code or Section 302 of ERISA. "Acquisition" means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or limited liability company, or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities Voting Stock of any Person. "Advance" means a borrowing hereunder, (i) made by the Lenders on the same Borrowing Date, or (ii) converted or continued by the Lenders on the same date of conversion or continuation, consisting, in either case, of the aggregate amount of the several Loans of the same Type and, in the case of Eurodollar Loans, for the same Interest Period. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 5% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. "Agent" means Bank One in its capacity as contractual representative of the Lenders pursuant to Article X, and not in its individual capacity as a Lender, and any successor Agent appointed pursuant to Article X. "Aggregate Commitment" means the aggregate of the Commitments of all the Lenders, as reduced from time to time pursuant to the terms hereof. As of the date hereof, the Aggregate Commitment equals $250,000,000. "Agreement" means this credit agreement, as it may be amended or modified and in effect from time to time. 1 "Agreement Accounting Principles" means generally accepted accounting principles as in effect from time to time, applied in a manner consistent with that used in preparing the financial statements referred to in Section 5.4. "Applicable Margin" means, with respect to Advances of any Type at any time, the percentage rate per annum which is applicable at such time with respect to Advances of such Type as set forth in the Pricing Schedule. "Approved Fund" means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. "Arranger" means Banc One Capital Markets, Inc., a Delaware corporation, and its successors, in its capacity as Lead Arranger and Sole Book Runner. "Article" means an article of this Agreement unless another document is specifically referenced. "Authorized Officer" means any of the president, chief executive officer or chief financial officer of the Borrower or any other employee of the Borrower designated in writing as an Authorized Officer by any of the foregoing, in each case acting singly. "Bank One" means Bank One, NA, a national banking association having its principal office in Chicago, Illinois, in its individual capacity, and its successors. "Board of Directors" means: (i) with respect to a corporation, the board of directors of the corporation; (ii) with respect to a partnership, the Board of Directors of the general partner of the partnership; and (iii) with respect to any other Person, the board or committee of such Person serving a similar function. "Borrower" means Tecumseh Products Company, a Michigan corporation, and its successors and assigns. "Borrowing Date" means a date on which an Advance is made hereunder. "Borrowing Notice" is defined in Section 2.8. "Business Day" means (i) with respect to any borrowing, payment or rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Detroit and New York City for the conduct of substantially all of their commercial lending activities, interbank wire transfers can be made on the Fedwire system and dealings in United States dollars are carried on in the London interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Detroit for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system. "Capital Stock" means (i) in the case of any corporation, all capital stock and any securities exchangeable for or convertible into capital stock and any warrants, rights or other options to purchase or otherwise acquire capital stock or such securities or any other form of equity securities, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation 2 that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Capitalized Lease" of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Capitalized Lease Obligations" of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Cash Equivalent Investments" means (i) short-term obligations of, or fully guaranteed by, the United States of America, (ii) commercial paper rated A-1 or better by S&P or P-1 or better by Moody's, (iii) demand deposit accounts maintained in the ordinary course of business, and (iv) certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $100,000,000; provided in each case that the same provides for payment of both principal and interest (and not principal alone or interest alone) and is not subject to any contingency regarding the payment of principal or interest. "Change in Control" means (i) the acquisition by any Person (other than Permitted Holders), or two or more Persons (other than Permitted Holders) acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock of the Borrower; or (ii) a majority of the members of the Board of Directors of the Borrower shall not be Continuing Directors. "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "Commitment" means, for each Lender, the obligation of such Lender to make Loans not exceeding the amount set forth opposite its signature below, as it may be modified as a result of any assignment that has become effective pursuant to Section 12.3.3 or as otherwise modified from time to time pursuant to the terms hereof. "Consolidated EBIT" means Consolidated Net Income plus, to the extent deducted from revenues in determining Consolidated Net Income, (i) Consolidated Interest Expense, (ii) expense for taxes paid or accrued, (iii) restructuring charges for plant closings (including charges for impairment of value of equipment and severance costs) taken after September 30, 2002 but on or before December 31, 2003 to the extent such restructuring charges do not exceed $40,000,000 in aggregate amount, and (iv) extraordinary losses incurred other than in the ordinary course of business, minus, to the extent included in Consolidated Net Income, extraordinary gains realized other than in the ordinary course of business, all calculated for the Borrower and its Subsidiaries on a consolidated basis. "Consolidated EBITDA" means Consolidated EBIT plus, to the extent deducted from revenues in determining Consolidated EBIT and without duplication, (i) depreciation, (ii) amortization and (iii) non-cash charges related specifically to any goodwill impairment charge required under FASB 142 not to exceed $25,000,000 in the aggregate for any four consecutive fiscal quarters or $50,000,000 in the aggregate for any twelve consecutive fiscal quarters, all calculated for the Borrower and its Subsidiaries on a consolidated basis. 3 "Consolidated Indebtedness" means at any time the Indebtedness of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time. "Consolidated Interest Expense" means, with reference to any period, the interest expense of the Borrower and its Subsidiaries calculated on a consolidated basis for such period, including without limitation all financing costs in connection with a Qualified Receivables Transaction. "Consolidated Net Income" means, with reference to any period, the net income (or loss) of the Borrower and its Subsidiaries calculated on a consolidated basis for such period. "Consolidated Net Worth" means at any time the consolidated stockholders' equity of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time; provided that all accumulated other comprehensive income (as determined in accordance with Agreement Accounting Principles, which includes such non-cash adjustments for foreign currency translation and transaction adjustments, net unrealized gains/losses on all investments, minimum pension liability and other FASB 87 adjustments, and all FASB 133 related adjustments) shall be excluded in determining Consolidated Net Worth. "Contingent Obligation" of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or the obligations of any such Person as general partner of a partnership with respect to the liabilities of the partnership. "Continuing Directors" means, as of any date, individuals who at the beginning of any period of two consecutive calendar years ended before such date constituted the Board of Directors of the Borrower, together with any new directors whose election by such Board of Directors or whose nomination for election was approved by a vote of at least two-thirds of the members of such Board of Directors then still in office who either were members of such Board of Directors at the beginning of such period or whose election or nomination for election was previously so approved. "Conversion/Continuation Notice" is defined in Section 2.9. "Controlled Group" means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Default" means an event described in Article VII. "Defaulting Lender" means any Lender that on any Borrowing Date fails to make available to the Agent such Lender's Loans required to be made to the Borrower on such Borrowing Date or fails to make any payment due to the Agent as and when due hereunder. Once a Lender becomes a Defaulting Lender, such Lender shall continue as a Defaulting Lender until such time as such Defaulting Lender makes available to the Agent the amount of such Defaulting Lender's Loans together with all other amounts required to be paid to the Agent and/or the Lenders pursuant to this Agreement. 4 "Domestic Subsidiary" means each present and future Subsidiary of the Borrower which is not a Foreign Subsidiary. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on human health, (iii) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water or land, or (iv) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder. "Eurodollar Advance" means an Advance which, except as otherwise provided in Section 2.11, bears interest at the applicable Eurodollar Rate. "Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the applicable British Bankers' Association LIBOR rate for deposits in U.S. dollars as reported by any generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, provided that, if no such British Bankers' Association LIBOR rate is available to the Agent, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the rate determined by the Agent to be the rate at which Bank One or one of its Affiliate banks offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, in the approximate amount of Bank One's relevant Eurodollar Loan and having a maturity equal to such Interest Period. "Eurodollar Loan" means a Loan which, except as otherwise provided in Section 2.11, bears interest at the applicable Eurodollar Rate. "Eurodollar Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base Rate applicable to such Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period, plus (ii) the Applicable Margin. "Excluded Taxes" means, in the case of each Lender or applicable Lending Installation and the Agent, taxes imposed on its overall net income (including the Michigan single business tax), and franchise taxes imposed on it, by (i) the jurisdiction under the laws of which such Lender or the Agent is incorporated or organized or (ii) the jurisdiction in which the Agent's or such Lender's principal executive office or such Lender's applicable Lending Installation is located. "Exhibit" refers to an exhibit to this Agreement, unless another document is specifically referenced. "Facility Termination Date" means the earliest to occur of (i) the date six months after the date of this Agreement, (ii) the date the obligations are due (whether at stated maturity, by acceleration or otherwise) or the commitments are terminated under the Three-Year Credit Agreement (other than as a 5 result of a voluntary reduction of the commitments thereunder by the Borrower), or (iii) the date on which the Aggregate Commitment is reduced to zero or otherwise terminated pursuant to the terms hereof "FASCO" shall mean the entities comprising the FASCO Motors Group to be acquired by the Borrower as further described in the FASCO Acquisition Documents and set forth on attached Schedule 3. "FASCO Acquisition" means the Acquisition by the Borrower and/or a Guarantor of FASCO pursuant to the FASCO Acquisition Documents, which is currently scheduled to be completed on or before January 15, 2003. "FASCO Acquisition Documents" means the FASCO Purchase Agreement and all other material agreements, documents and instruments executed in connection therewith, in each case as amended or modified from time to time to the extent permitted by Section 6.2 hereof. "FASCO Stock Purchase Agreement" means the stock purchase agreement dated November 27, 2002 among the Borrower and the Sellers for the Acquisition by the Borrower and/or a Guarantor of FASCO, as amended or modified from time to time to the extent permitted by Section 6.2 hereof. "Federal Funds Effective Rate" means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Detroit time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion. "Financial Contract" of a Person means (i) any exchange-traded or over-the-counter futures, forward, swap or option contract or other financial instrument with similar characteristics, or (ii) any Rate Management Transaction. "Floating Rate" means, for any day, a rate of interest per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds Effective Rate for such day plus 1/2% per annum. "Floating Rate Advance" means an Advance which, except as otherwise provided in Section 2.11, bears interest at the Floating Rate. "Floating Rate Loan" means a Loan which, except as otherwise provided in Section 2.11, bears interest at the Floating Rate. "Foreign Subsidiary" means each Subsidiary organized under the laws of a jurisdiction outside of the United States. "Fund" means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. 6 "Governmental Authorization" means any permit, license, authorization, plan, directive, consent order or consent decree of or from any federal, state or local governmental authority, agency or court or any foreign governmental authority, agency or court. "Guarantor" means all present and future Domestic Subsidiaries of the Borrower and their successors and assigns, and any other Person executing a Guaranty at any time. "Guaranty" means all guaranties of the Obligations executed by the Guarantors in favor of the Agent, for the ratable benefit of the Lenders, as it may be amended or modified and in effect from time to time, and each such guaranty shall be in form and substance acceptable to the Agent. "Indebtedness" of a Person means such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) obligations of such Person to purchase securities or other Property arising out of or in connection with the sale of the same or substantially similar securities or Property, (vi) obligations of such Person with respect to Letters of Credit, whether drawn or undrawn, contingent or otherwise, (vii) Net Mark-to-Market Exposure, (viii) Off-Balance Sheet Liabilities, (ix) Capitalized Lease Obligations, (x) Receivables Transaction Attributed Indebtedness, (xi) any other obligation for borrowed money or other financial accommodation which in accordance with Agreement Accounting Principles would be shown as a liability on the consolidated balance sheet of such Person, and (xii) all Contingent Obligations of such Person with respect to any of the foregoing. "Interest Period" means, with respect to a Eurodollar Advance, a period of one, two, three or six months commencing on a Business Day selected by the Borrower pursuant to this Agreement. Such Interest Period shall end on the day which corresponds numerically to such date one, two, three or six months thereafter, provided, however, that if there is no such numerically corresponding day in such next, second, third or sixth succeeding month, such Interest Period shall end on the last Business Day of such next, second, third or sixth succeeding month. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day. "Investment" of a Person means any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade) or contribution of capital by such Person; stocks, bonds, mutual funds, partnership interests, notes, debentures or other securities owned by such Person; any deposit accounts and certificate of deposit owned by such Person; and structured notes, derivative financial instruments and other similar instruments or contracts owned by such Person. "Lenders" means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns. 7 "Lending Installation" means, with respect to a Lender or the Agent, the office, branch, subsidiary or affiliate of such Lender or the Agent listed on the signature pages hereof or on a Schedule or otherwise selected by such Lender or the Agent pursuant to Section 2.17 "Letter of Credit" of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable. "Leverage Ratio" means, as of any date of calculation, the ratio of (i) Consolidated Indebtedness outstanding on such date to (ii) Consolidated EBITDA for the Borrower's then most-recently ended four fiscal quarters. "Lien" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement). "Loan" means, with respect to a Lender, such Lender's loan made pursuant to Article II (or any conversion or continuation thereof). "Loan Documents" means this Agreement, the Guaranties, any Notes issued pursuant to Section 2.13 and any other agreements or instruments executed in connection herewith at any time. "Margin Stock" means "margin stock" as defined in Regulations U or X or "marginable OTC stock" or "foreign margin stock" within the meaning of Regulation T. "Material Adverse Effect" means a material adverse effect on (i) the business, Property, condition (financial or otherwise), results of operations, or prospects of the Borrower and its Subsidiaries taken as a whole, or of FASCO taken as a whole, (ii) the ability of the Borrower and the Guarantors taken as a whole to perform their respective obligations under the Loan Documents, or (iii) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agent or the Lenders thereunder. "Material Indebtedness" means Indebtedness in an outstanding principal amount of $25,000,000 or more in the aggregate (or the equivalent thereof in any currency other than U.S. dollars). "Material Indebtedness Agreement" means any agreement under which any Material Indebtedness was created or is governed or which provides for the incurrence of Indebtedness in an amount which would constitute Material Indebtedness (whether or not an amount of Indebtedness constituting Material Indebtedness is outstanding thereunder). "Moody's" means Moody's Investors Service, Inc. "Multiemployer Plan" means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which the Borrower or any member of the Controlled Group is a party to which more than one employer is obligated to make contributions. "Net Cash Proceeds" means, in connection with any issuance or sale of any equity securities or debt securities or instruments or the incurrence of loans, the cash proceeds received from such issuance or 8 incurrence, net of investment banking fees, reasonable and documented attorneys' fees, accountants' fees, underwriting discounts and commissions and other reasonable and customary fees and expenses actually incurred in connection therewith. "Net Mark-to-Market Exposure" of a Person means, as of any date of determination, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from Rate Management Transactions. "Unrealized losses" means the fair market value of the cost to such Person of replacing such Rate Management Transaction as of the date of determination (assuming the Rate Management Transaction were to be terminated as of that date), and "unrealized profits" means the fair market value of the gain to such Person of replacing such Rate Management Transaction as of the date of determination (assuming such Rate Management Transaction were to be terminated as of that date). "Non-U.S. Lender" is defined in Section 3.5(iv). "Note" is defined in Section 2.13. "Obligations" means all unpaid principal of and accrued and unpaid interest on the Loans, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower to the Lenders or to any Lender, the Agent or any indemnified party arising under the Loan Documents. "Off-Balance Sheet Liability" of a Person means (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability under any Sale and Leaseback Transaction which is not a Capitalized Lease, (iii) any liability under any so-called "synthetic lease" or "tax ownership operating lease" transaction entered into by such Person, or (iv) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheets of such Person, but excluding from this clause (iv) Operating Leases. "Opening Pro Forma Statements" is defined in Section 4.1(xii). "Opening Projections" is defined in Section 4.1(xii). "Operating Lease" of a Person means any lease of Property (other than a Capitalized Lease) by such Person as lessee which has an original term (including any required renewals and any renewals effective at the option of the lessor) of one year or more. "Other Taxes" is defined in Section 3.5(ii). "Participants" is defined in Section 12.2.1. "Payment Date" means the date three months after the date hereof and each date occurring each three months thereafter. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "Permitted Holders" means and includes (A) any Person who is a lineal descendant of Raymond Herrick, (B) the spouse, children, or grandchildren of any such Person, (C) any trust of which any of such Persons is a trustee or a beneficiary, (D) the estate, executor, administrator, or any legal guardian of any 9 such Person, (E) any partnership, corporation or limited liability company owned and controlled solely by such Persons and (F) the Herrick Foundation. "Person" means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Borrower or any member of the Controlled Group may have any liability. "Pricing Schedule" means the Schedule attached hereto identified as such. "Prime Rate" means a rate per annum equal to the prime rate of interest announced from time to time by Bank One or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes. "Property" of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person. "Purchasers" is defined in Section 12.3.1. "Qualified Receivables Transaction" means any transaction or series of transactions that may be entered into by the Borrower or any Subsidiary pursuant to which the Borrower or any Subsidiary may sell, convey or otherwise transfer to a newly-formed Subsidiary or other special-purpose entity, or any other Person, any accounts or notes receivable and rights related thereto, provided that (i) all of the terms and conditions of such transaction or series of transactions, including without limitation the amount and type of any recourse to the Borrower or any Subsidiary with respect to the assets transferred, are acceptable to the Agent and the Required Lenders and (ii) the Receivables Transaction Attributed Indebtedness incurred in such transaction or series of transactions does not exceed $100,000,000. "Rate Management Transaction" means any transaction (including an agreement with respect thereto) now existing or hereafter entered by the Borrower which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures. "Rate Management Obligations" of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Rate Management Transactions, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Rate Management Transactions. "Receivables Transaction Attributed Indebtedness" means the amount of obligations outstanding under the legal documents entered into as part of any Qualified Receivables Transaction on any date of determination that would be characterized as principal if such Qualified Receivables Transaction were 10 structured as a secured lending transaction rather than as a purchase. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "Regulation T" means Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System. "Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code. "Reports" is defined in Section 9.6. "Required Lenders" means Lenders in the aggregate having more than 50% of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders in the aggregate holding more than 50% of the aggregate outstanding Loans. "Requirement of Law" means as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other governmental authority (foreign or domestic), in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject. "Reserve Requirement" means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities. "S&P" means Standard and Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. "Sale and Leaseback Transaction" means any sale or other transfer of Property by any Person with the intent to lease such Property as lessee. 11 "Schedule" refers to a specific schedule to this Agreement, unless another document is specifically referenced. "SEC Reports" means the following reports and financial statements of the Borrower: (i) the Borrower's annual report on Form 10-K for the year ended December 31, 2001, as filed with or sent to the Securities and Exchange Commission as of the date hereof; and (ii) the Borrower's quarterly reports on Form 10-Q for the quarters ended March 31, 2002, June 30, 2002 and September 30, 2002, the definitive proxy statement for the 2002 annual shareholders meeting of the Borrower and all Form 8-K's filed after December 31, 2001, in each case as filed with the Securities and Exchange Commission as of the date hereof. "Section" means a numbered section of this Agreement, unless another document is specifically referenced. "Sellers" means BTR Industries Limited, a corporation organized and existing under the laws of England and Wales, BTR (European Holdings) BV, a corporation organized and existing under the laws of the Netherlands, CPN Holdings Pty Limited, a corporation organized and existing under the laws of Australia, Invensys Controls Mexican Holding, L.L.C., a limited liability company organized and existing under the laws of Mexico and BTR (USA) Finance Company, a Massachusetts business trust, and Invensys plc, a corporation organized and existing under the laws of England and Wales. "Significant Subsidiary" means any one or more Subsidiaries which, if considered in the aggregate as a single Subsidiary, would be a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X under the Securities Exchange Act of 1934. "Single Employer Plan" means a Plan maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group. "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Borrower. For purposes of the representations and warranties made herein, each reference to a "Subsidiary" of the Borrower shall include the Target and its Subsidiaries. "Substantial Portion" means, with respect to the Property of the Borrower and its Subsidiaries, Property which represents more than 10% (or, for purposes of Section 6.13, 15%) of the consolidated assets of the Borrower and its Subsidiaries or property which is responsible for more than 10% (or, for purposes of Section 6.13, 15%) of the consolidated net sales or of the consolidated net income of the Borrower and its Subsidiaries, in each case, as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries as at the beginning of the twelve-month period ending with the month in which such determination is made (or if financial statements have not been delivered hereunder for that month which begins the twelve-month period, then the financial statements delivered hereunder for the quarter ending immediately prior to that month). 12 "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes and Other Taxes. "Three-Year Credit Agreement" means the Three-Year Credit Agreement dated as of the date hereof among the Borrower, the lenders party thereto and Bank One, NA, as agent, as amended, modified, replaced or refinanced from time to time. "Transferee" is defined in Section 12.4. "Type" means, with respect to any Advance, its nature as a Floating Rate Advance or a Eurodollar Advance and with respect to any Loan, its nature as a Floating Rate Loan or a Eurodollar Loan. "Unfunded Liabilities" means the amount (if any) by which the present value of all vested and unvested accrued benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans using PBGC actuarial assumptions for single employer plan terminations. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. "Voting Stock" of a Person means all classes of Capital Stock of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, trustees or similar persons thereof. "Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited liability company, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. ARTICLE II THE CREDITS 2.1. Commitment. From and including the date of this Agreement and prior to the Facility Termination Date, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Loans to the Borrower from time to time in amounts not to exceed in the aggregate at any one time outstanding the amount of its Commitment. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow at any time prior to the Facility Termination Date. The Commitments to lend hereunder shall expire on the Facility Termination Date. 13 2.2. Required Payments; Termination. Unless earlier payment is required hereunder, the Loans and all other unpaid Obligations shall be paid in full by the Borrower on the Facility Termination Date. In addition to any other required payment, the Borrower shall cause the Loans and all other unpaid Obligations to be paid with 100% of the Net Cash Proceeds from (i) the issuance of any senior unsecured notes, public bonds or notes or similar debt securities after the date hereof, or the incurrence of any indebtedness for borrowed money (other than loans under the Three-Year Credit Agreement) by the Borrower or any of its Subsidiaries in excess of $75,000,000 in aggregate amount after the date hereof (provided that it is acknowledged that 100% of the Net Cash Proceeds of such issuance or incurrence shall be used as a prepayment and not only the amount in excess of $75,000,0000), and (ii) the issuance or other sale or transfer of any Capital Stock of the Borrower or any of its Subsidiaries after the date hereof. Such mandatory payments shall also permanently decrease the Aggregate Commitment, on a pro rata basis among the Lenders, by the amount of such payments. 2.3. Ratable Loans. Each Advance hereunder shall consist of Loans made from the several Lenders ratably in proportion to the ratio that their respective Commitments bear to the Aggregate Commitment. 2.4. Types of Advances. The Advances may be Floating Rate Advances or Eurodollar Advances, or a combination thereof, selected by the Borrower in accordance with Sections 2.8 and 2.9. 2.5. Facility Fee; Reductions in Aggregate Commitment. The Borrower agrees to pay to the Agent for the account of each Lender a facility fee at a per annum rate equal to 0.15% on such Lender's Commitment (whether used or unused) from the date hereof to and including the Facility Termination Date, payable on each Payment Date hereafter and on the Facility Termination Date, provided that, if any Lender continues to have Loans outstanding hereunder after the termination of its Commitment (including, without limitation, during any period when Loans may be outstanding but new Loans may not be borrowed hereunder), then such facility fee shall continue to accrue on the aggregate principal amount of the Loans owed to such Lender until such Loans are repaid in full. The Borrower may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders in integral multiples of $10,000,000, upon at least five Business Days' written notice to the Agent, which notice shall specify the amount of any such reduction, provided, however, that the amount of the Aggregate Commitment may not be reduced below the aggregate principal amount of the outstanding Advances. All accrued facility fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Loans hereunder and on the final date upon which all Loans are repaid hereunder. 2.6. Minimum Amount of Each Advance. Each Eurodollar Advance shall be in the minimum amount of $1,000,000 (and in multiples of $100,000 if in excess thereof), and each Floating Rate Advance shall be in the minimum amount of $10,000, provided, however, that any Floating Rate Advance may be in the amount of the unused Aggregate Commitment. 2.7. Optional Principal Payments. The Borrower may from time to time pay, without penalty or premium, all outstanding Floating Rate Advances, or, in a minimum aggregate amount of $10,000, any portion of the outstanding Floating Rate Advances upon two Business Days' prior notice to the Agent. The Borrower may from time to time pay, subject to the payment of any funding indemnification amounts required by Section 3.4 but without penalty or premium, all outstanding Eurodollar Advances, or, in a minimum aggregate amount of $5,000,000 or any integral multiple of $100,000 in excess thereof, any portion of the outstanding Eurodollar Advances upon three Business Days' prior notice to the Agent. 14 2.8. Method of Selecting Types and Interest Periods for New Advances. The Borrower shall select the Type of Advance and, in the case of each Eurodollar Advance, the Interest Period applicable thereto from time to time. The Borrower shall give the Agent irrevocable notice (a "Borrowing Notice") not later than 10:00 a.m. (Detroit time) at least one Business Day before the Borrowing Date of each Floating Rate Advance and three Business Days before the Borrowing Date for each Eurodollar Advance, specifying: (i) the Borrowing Date, which shall be a Business Day, of such Advance, (ii) the aggregate amount of such Advance, (iii) the Type of Advance selected, and (iv) in the case of each Eurodollar Advance, the Interest Period applicable thereto. Not later than noon (Detroit time) on each Borrowing Date, each Lender shall make available its Loan or Loans in funds immediately available in Detroit to the Agent at its address specified pursuant to Article XIII. The Agent will make the funds so received from the Lenders available to the Borrower at the Agent's aforesaid address. 2.9. Conversion and Continuation of Outstanding Advances. Floating Rate Advances shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurodollar Advances pursuant to this Section 2.9 or are repaid in accordance with Section 2.7. Each Eurodollar Advance shall continue as a Eurodollar Advance until the end of the then applicable Interest Period therefor, at which time such Eurodollar Advance shall be automatically converted into a Floating Rate Advance unless (x) such Eurodollar Advance is or was repaid in accordance with Section 2.7 or (y) the Borrower shall have given the Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurodollar Advance continue as a Eurodollar Advance for the same or another Interest Period. Subject to the terms of Section 2.6, the Borrower may elect from time to time to convert all or any part of a Floating Rate Advance into a Eurodollar Advance. The Borrower shall give the Agent irrevocable notice (a "Conversion/Continuation Notice") of each conversion of a Floating Rate Advance into a Eurodollar Advance or continuation of a Eurodollar Advance not later than 10:00 a.m. (Detroit time) at least three Business Days prior to the date of the requested conversion or continuation, specifying: (i) the requested date, which shall be a Business Day, of such conversion or continuation, (ii) the aggregate amount and Type of the Advance which is to be converted or continued, and (iii) the amount of such Advance which is to be converted into or continued as a Eurodollar Advance and the duration of the Interest Period applicable thereto. 2.10. Changes in Interest Rate, etc. Each Floating Rate Advance shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is automatically converted from a Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.9, to but excluding the date it is paid or is converted into a Eurodollar Advance pursuant to Section 2.9 hereof, at a rate per annum equal to the Floating Rate for such day. Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Advance will take effect simultaneously with each 15 change in the Floating Rate. Each Eurodollar Advance shall bear interest on the outstanding principal amount thereof from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined by the Agent as applicable to such Eurodollar Advance based upon the Borrower's selections under Sections 2.8 and 2.9 and otherwise in accordance with the terms hereof. No Interest Period may end after the Facility Termination Date. 2.11. Rates Applicable After Default. Notwithstanding anything to the contrary contained in Section 2.8, 2.9 or 2.10, during the continuance of a Default or Unmatured Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that no Advance may be made as, converted into or continued as a Eurodollar Advance. During the continuance of a Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that (i) each Eurodollar Advance shall bear interest for the remainder of the applicable Interest Period at the rate otherwise applicable to such Interest Period plus 2% per annum and (ii) each Floating Rate Advance shall bear interest at a rate per annum equal to the Floating Rate in effect from time to time plus 2% per annum, provided that, during the continuance of a Default under Section 7.6 or 7.7, the interest rates set forth in clauses (i) and (ii) above shall be applicable to all Advances without any election or action on the part of the Agent or any Lender. 2.12. Method of Payment. All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Agent at the Agent's address specified pursuant to Article XIII, or at any other Lending Installation of the Agent specified in writing by the Agent to the Borrower, by noon (local time) on the date when due and shall be applied ratably by the Agent among the Lenders. Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Agent from such Lender. The Agent is hereby authorized to charge the account of the Borrower maintained with Bank One for each payment of principal, interest and fees as it becomes due hereunder. 2.13. Noteless Agreement; Evidence of Indebtedness. (i) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (ii) The Agent shall also maintain accounts in which it will record (a) the amount of each Loan made hereunder, the Type thereof and the Interest Period with respect thereto, (b) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (c) the amount of any sum received by the Agent hereunder from the Borrower and each Lender's share thereof. (iii) The entries maintained in the accounts maintained pursuant to paragraphs (i) and (ii) above shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; provided, however, that the failure of the Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Obligations in accordance with their terms. 16 (iv) Any Lender may request that its Loans be evidenced by a promissory note in substantially the form of Exhibit E (a "Note"). In such event, the Borrower shall prepare, execute and deliver to such Lender such Note payable to the order of such Lender. Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (prior to any assignment pursuant to Section 12.3) be represented by one or more Notes payable to the order of the payee named therein, except to the extent that any such Lender subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in paragraphs (i) and (ii) above. 2.14. Telephonic Notices. The Borrower hereby authorizes the Lenders and the Agent to extend, convert or continue Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons the Agent or any Lender in good faith believes to be acting on behalf of the Borrower, it being understood that the foregoing authorization is specifically intended to allow Borrowing Notices and Conversion/Continuation Notices to be given telephonically. The Borrower agrees to deliver promptly to the Agent a written confirmation, if such confirmation is requested by the Agent or any Lender, of each telephonic notice signed by an Authorized Officer. If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent manifest error. 2.15. Interest Payment Dates; Interest and Fee Basis. Interest accrued on each Floating Rate Advance shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof and at maturity. Interest accrued on each Eurodollar Advance shall be payable on the last day of its applicable Interest Period, on any date on which the Eurodollar Advance is prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued on each Eurodollar Advance having an Interest Period longer than three months shall also be payable on the last day of each three-month interval during such Interest Period. Interest and facility fees shall be calculated for actual days elapsed on the basis of a 360-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (local time) at the place of payment. If any payment of principal of or interest on an Advance shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment. 2.16. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions. Promptly after receipt thereof, the Agent will notify each Lender of the contents of each Aggregate Commitment reduction notice, Borrowing Notice, Conversion/Continuation Notice, and repayment notice received by it hereunder. The Agent will notify each Lender of the interest rate applicable to each Eurodollar Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Floating Rate. 2.17. Lending Installations. Each Lender may book its Loans at any Lending Installation selected by such Lender and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Loans and any Notes issued hereunder shall be deemed held by each Lender for the benefit of any such Lending Installation. Each Lender may, by written notice to the Agent and the Borrower in accordance with Article XIII, designate replacement or additional Lending Installations through which Loans will be made by it and for whose account Loan payments are to be made. 2.18. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender, as the case may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent of (i) in the 17 case of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal, interest or fees to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made. The Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Agent, the recipient of such payment shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (x) in the case of payment by a Lender, the Federal Funds Effective Rate for such day for the first three days and, thereafter, the interest rate applicable to the relevant Loan or (y) in the case of payment by the Borrower, the interest rate applicable to the relevant Loan. 2.19. Replacement of Lender. If the Borrower is required pursuant to Section 3.1, 3.2 or 3.5 to make any additional payment to any Lender or if any Lender's obligation to make or continue, or to convert Floating Rate Advances into, Eurodollar Advances shall be suspended pursuant to Section 3.3 or any Lender is a Defaulting Lender (any Lender so affected an "Affected Lender"), the Borrower may elect, if such amounts continue to be charged or such suspension is still effective, to replace such Affected Lender as a Lender party to this Agreement, provided that no Default or Unmatured Default shall have occurred and be continuing at the time of such replacement, and provided further that, concurrently with such replacement, (i) another bank or other entity which is reasonably satisfactory to the Borrower and the Agent shall agree, as of such date, to purchase for cash the Advances and other Obligations due to the Affected Lender pursuant to an assignment substantially in the form of Exhibit C and to become a Lender for all purposes under this Agreement and to assume all obligations of the Affected Lender to be terminated as of such date and to comply with the requirements of Section 12.3 applicable to assignments, and (ii) the Borrower shall pay to such Affected Lender in same day funds on the day of such replacement (A) all interest, fees and other amounts then accrued but unpaid to such Affected Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such Affected Lender under Sections 3.1, 3.2 and 3.5, and (B) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 3.4 had the Loans of such Affected Lender been prepaid on such date rather than sold to the replacement Lender. ARTICLE III YIELD PROTECTION; TAXES 3.1. Yield Protection. If, on or after the date of this Agreement, the adoption of any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any change in the interpretation or administration thereof by any governmental or quasi-governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or applicable Lending Installation with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) subjects any Lender or any applicable Lending Installation to any Taxes, or changes the basis of taxation of payments (other than with respect to Excluded Taxes) to any Lender in respect of its Eurodollar Loans, or 18 (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation (other than reserves and assessments taken into account in determining the interest rate applicable to Eurodollar Advances), or (iii) imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation of making, funding or maintaining its Eurodollar Loans or reduces any amount receivable by any Lender or any applicable Lending Installation in connection with its Eurodollar Loans, or requires any Lender or any applicable Lending Installation to make any payment calculated by reference to the amount of Eurodollar Loans held or interest received by it, by an amount deemed material by such Lender, and the result of any of the foregoing is to increase the cost to such Lender or applicable Lending Installation of making or maintaining its Eurodollar Loans or Commitment or to reduce the return received by such Lender or applicable Lending Installation in connection with such Eurodollar Loans or Commitment, then, within 15 days of demand by such Lender, the Borrower shall pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction in amount received. 3.2. Changes in Capital Adequacy Regulations. If a Lender determines the amount of capital required or expected to be maintained by such Lender, any Lending Installation of such Lender or any corporation controlling such Lender is increased as a result of a Change, then, within 15 days of demand by such Lender, the Borrower shall pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender determines is attributable to this Agreement, its Loans or its Commitment to make Loans hereunder (after taking into account such Lender's policies as to capital adequacy). "Change" means (i) any change after the date of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any Lender or any Lending Installation or any corporation controlling any Lender. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement. 3.3. Availability of Types of Advances. If any Lender determines that maintenance of its Eurodollar Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or if the Required Lenders determine that (i) deposits of a type and maturity appropriate to match fund Eurodollar Advances are not available or (ii) the interest rate applicable to Eurodollar Advances does not accurately reflect the cost of making or maintaining Eurodollar Advances, then the Agent shall suspend the availability of Eurodollar Advances and require any affected Eurodollar Advances to be repaid or converted to Floating Rate Advances, subject to the payment of any funding indemnification amounts required by Section 3.4. 19 3.4. Funding Indemnification. If any payment of a Eurodollar Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Eurodollar Advance is not made on the date specified by the Borrower for any reason other than default by the Lenders, the Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain such Eurodollar Advance. 3.5. Taxes. (i) All payments by the Borrower to or for the account of any Lender or the Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all Taxes. If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or the Agent, (a) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.5) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (b) the Borrower shall make such deductions, (c) the Borrower shall pay the full amount deducted to the relevant authority in accordance with applicable law and (d) the Borrower shall furnish to the Agent the original copy of a receipt evidencing payment thereof within 30 days after such payment is made. (ii) In addition, the Borrower hereby agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note ("Other Taxes"). (iii) The Borrower hereby agrees to indemnify the Agent and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by the Agent or such Lender as a result of its Commitment, any Loans made by it hereunder, or otherwise in connection with its participation in this Agreement and any liability (including interest and expenses, unless resulting solely from such Lender's failure to timely pay such Taxes or Other Taxes) arising therefrom or with respect thereto. Payments due under this indemnification shall be made within 30 days of the date the Agent or such Lender makes demand therefor pursuant to Section 3.6. (iv) Each Lender that is not incorporated under the laws of the United States of America or a state thereof (each a "Non-U.S. Lender") agrees that it will, not more than ten Business Days after the date of this Agreement, (i) deliver to the Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, certifying in either case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, and (ii) deliver to the Agent a United States Internal Revenue Form W-8 or W-9, as the case may be, and certify that it is entitled to an exemption from United States backup withholding tax. Each Non-U.S. Lender further undertakes to deliver to each of the Borrower and the Agent (x) renewals or additional copies of such form (or any successor form) on or before the date that such form expires or becomes obsolete, and (y) after the occurrence of any event requiring a change in the most recent forms so delivered by it, such additional forms or amendments thereto as may be reasonably requested by the Borrower or the Agent. All forms or amendments described in the preceding sentence shall certify that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly 20 completing and delivering any such form or amendment with respect to it and such Lender advises the Borrower and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. (v) For any period during which a Non-U.S. Lender has failed to provide the Borrower with an appropriate form pursuant to clause (iv), above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5 with respect to Taxes imposed by the United States; provided that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required under clause (iv), above, the Borrower shall take such steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to recover such Taxes. (vi) Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or any Note pursuant to the law of any relevant jurisdiction or any treaty shall deliver to the Borrower (with a copy to the Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. (vii) If the U.S. Internal Revenue Service or any other governmental authority of the United States or any other country or any political subdivision thereof asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered or properly completed, because such Lender failed to notify the Agent of a change in circumstances which rendered its exemption from withholding ineffective, or for any other reason), such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax, withholding therefor, or otherwise, including penalties and interest, and including taxes imposed by any jurisdiction on amounts payable to the Agent under this subsection, together with all costs and expenses related thereto (including attorneys fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent). The obligations of the Lenders under this Section 3.5(vii) shall survive the payment of the Obligations and termination of this Agreement. 3.6. Lender Statements; Survival of Indemnity. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurodollar Loans to reduce any liability of the Borrower to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of Eurodollar Advances under Section 3.3, so long as such designation is not, in the judgment of such Lender, disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender to the Borrower (with a copy to the Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Eurodollar Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the Borrower of such written statement. The obligations of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the Obligations and termination of this Agreement. 21 ARTICLE IV CONDITIONS PRECEDENT 4.1. Initial Advance. The Lenders shall not be required to make the initial Advance hereunder unless the Borrower has furnished to the Agent with sufficient copies for the Lenders: (i) Copies of the articles or certificate of incorporation of the Borrower and each Guarantor, together with all amendments, and a certificate of good standing, each certified by the appropriate governmental officer in its jurisdiction of incorporation. (ii) Copies, certified by the Secretary or Assistant Secretary of the Borrower and each Guarantor, of its by-laws and of its Board of Directors' resolutions and of resolutions or actions of any other body authorizing the execution of the Loan Documents to which the Borrower is a party. (iii) An incumbency certificate, executed by the Secretary or Assistant Secretary of the Borrower and each Guarantor, which shall identify by name and title and bear the signatures of the Authorized Officers and any other officers of the Borrower and each Guarantor authorized to sign the Loan Documents to which it is a party, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Borrower or such Guarantor. (iv) A certificate, signed by the chief financial officer of the Borrower, stating that on the initial Borrowing Date no Default or Unmatured Default has occurred and is continuing. (v) A written opinion of the Borrower's and each Guarantor's counsel, addressed to the Lenders in substantially the form of Exhibit A. (vi) Any Notes requested by a Lender pursuant to Section 2.13 payable to the order of each such requesting Lender. (vii) Written money transfer instructions, in substantially the form of Exhibit D, addressed to the Agent and signed by an Authorized Officer, together with such other related money transfer authorizations as the Agent may have reasonably requested and the payment of all fees required in connection herewith. (viii) All Guaranties signed by the Guarantors. (ix) Copies of such financial statements of the Borrower and its Subsidiaries required by the Agent, together with prospective financial information for the Borrower and its Subsidiaries, in each case in form and substance satisfactory to the Agent. (x) The Borrower and its Subsidiaries shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary in connection with the FASCO Acquisition and the other transactions contemplated by the Loan Documents and the FASCO Acquisition Documents, and each of the foregoing shall be in full force and effect. All applicable waiting periods shall have expired without any action being taken 22 by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the completion of the FASCO Acquisition or the financing thereof. No action, request for stay, petition for review or rehearing, reconsideration, or appeal with respect to any of the foregoing shall be pending, and the time for any applicable agency to take action to set aside its consent on its own motion shall have expired. (xi) (a) All conditions precedent to the FASCO Acquisition shall have been satisfied pursuant to the FASCO Acquisition Documents or waived by the party entitled to do so to the extent permitted by Section 6.2 hereof; (b) The aggregate consideration paid or payable, including without limitation all direct payments, all deferred payments, all Indebtedness assumed and all other consideration, for the FASCO Acquisition shall not exceed $450,000,000; and (c) the Agent shall have received a certificate of the Borrower to the effect set forth in clauses (a) and (b) above and stating that the Borrower and/or another Guarantor will proceed to consummate the FASCO Acquisition substantially in accordance with the FASCO Acquisition Documents on or within one Business Day of the initial Advance hereunder and containing such other certifications as may be reasonably required by the Agent. (xii) The Agent shall have received pro forma balance sheet and income statement as of September 30, 2002 (the "Opening Pro Forma Statements") giving effect to the FASCO Acquisition and consolidated and consolidating (breaking out the Borrower and its Subsidiaries and FASCO) projections (the "Opening Projections") covering a period of not less than three years and updating the summary projections previously provided to the Agent on or about August 14, 2002, all in form and substance reasonably acceptable to the Agent, together with a compliance certificate, signed by the chief financial officer of the Borrower, dated the date hereof and giving effect to the FASCO Acquisition, and such other information as the Agent may request indicating compliance with all financial and other covenants and showing no material change from the existing summary projections delivered on or about August 14, 2002. (xiii) The initial Loan hereunder shall be made on or before January 15, 2003. (xiv) Satisfactory results of all due diligence required by the Agent, including without limitation a review of all contingent liabilities, a review of contracts and insurance, a review of all litigation, environmental matters, all retiree medical benefits, ERISA matters and other due diligence with respect to FASCO and the FASCO Acquisition required by the Agent. (xv) The Agent shall have received all FASCO Acquisition Documents and shall be satisfied with the form, structure and terms of the FASCO Acquisition and all related transactions, the legal and the regulatory aspects of the FASCO Acquisition and all related transactions and all other legal (including tax implications), financial and regulatory matters relating to the FASCO Acquisition and related transactions. (xvi) The Three-Year Credit Agreement shall close simultaneously herewith and all conditions precedent thereto shall be satisfied, including without limitation termination of the existing $100,000,000 Credit Agreement of the Borrower dated July 15, 1994, as amended. 23 (xvii) The Agent shall have received a certificate from the chief financial officer of the Borrower concerning the solvency and other appropriate factual information in form and substance satisfactory to the Agent with respect to solvency. (xviii) Since March 31, 2002 there shall have been no change in the business, Property, prospects, condition (financial or otherwise) or results of operations of FASCO which could reasonably be expected to have a Material Adverse Effect. (xix) The Agent shall have received such other documents as the Agent or its counsel may have reasonably requested. 4.2. Each Advance. The Lenders shall not be required to make any Advance unless on the applicable Borrowing Date: (i) There exists no Default or Unmatured Default. (ii) The representations and warranties contained in Article V are true and correct as of such Borrowing Date except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct on and as of such earlier date. (iii) All legal matters incident to the making of such Advance shall be satisfactory to the Lenders and their counsel. Each Borrowing Notice with respect to each such Advance shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 4.2(i) and (ii) have been satisfied. Any Lender may require a duly completed compliance certificate in substantially the form of Exhibit B as a condition to making an Advance. ARTICLE V REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lenders that: 5.1. Existence and Standing. Each of the Borrower and its Subsidiaries is a corporation, partnership (in the case of Subsidiaries only) or limited liability company duly and properly incorporated or organized, as the case may be, validly existing and (to the extent such concept applies to such entity) in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted. 5.2. Authorization and Validity. The Borrower and each Guarantor has the power and authority and legal right to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder. The execution and delivery by the Borrower and each Guarantor of the Loan Documents to which it is a party and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and the Loan Documents to which the Borrower is a party 24 constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally. 5.3. No Conflict; Government Consent. Neither the execution and delivery by the Borrower or any Guarantor of the Loan Documents to which it is a party, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower or any of its Subsidiaries or (ii) the Borrower's or any Subsidiary's articles or certificate of incorporation, partnership agreement, certificate of partnership, articles or certificate of organization, by-laws, or operating or other management agreement, as the case may be, or (iii) the provisions of any indenture, instrument or agreement to which the Borrower or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on the Property of the Borrower or a Subsidiary pursuant to the terms of any such indenture, instrument or agreement. No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority, or any subdivision thereof, which has not been obtained by the Borrower or any of its Subsidiaries, is required to be obtained by the Borrower or any of its Subsidiaries in connection with the execution and delivery of the Loan Documents, the borrowings under this Agreement, the payment and performance by the Borrower of the Obligations or the legality, validity, binding effect or enforceability of any of the Loan Documents. 5.4. Financial Statements. The December 31, 2001 and the September 30, 2002 consolidated financial statements of the Borrower and its Subsidiaries heretofore delivered to the Lenders were prepared in accordance with Agreement Accounting Principles in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of the Borrower and its Subsidiaries at such date and the consolidated results of their operations for the period then ended. The March 31, 2002 consolidated pro forma financial statements of FASCO heretofore delivered to the Lenders were prepared as special purpose audits in accordance with generally accepted accounting principles in effect on the date such statements were prepared and, subject to the assumptions stated therein, fairly present the consolidated financial condition and operations of FASCO at such date and the consolidated results of their operations for the period then ended. The Opening Pro Forma Statements are complete and accurate in all material respects and fairly represent pro forma financial condition and operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with generally accepted accounting principles in effect on the date such statements were prepared and after giving effect on a pro forma basis to (i) the consummation of the FASCO Acquisition, (ii) the Advances to be made hereunder and the use of proceeds thereof, (iii) the payment of fees and expenses in connection with the foregoing and (iv) the other transactions contemplated by the FASCO Acquisition and the FASCO Acquisition Documents. The Opening Projections are based on good faith estimates and assumptions made by the management of the Borrower, and there are no statements or conclusions in the Opening Projections which are based upon or include information known to the Borrower to be misleading or which fail to take into account material information regarding the matters reported therein. On the date of the initial Advance hereunder and on the date of the consummation of the FASCO Acquisition, the Borrower believes that the Opening Projections are reasonable and attainable, it being understood that uncertainty is inherent in any forecasts or projections. 5.5. Material Adverse Change. Since December 31, 2001 there has been no change in the business, Property, prospects, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries which could reasonably be expected to have a Material Adverse Effect, except as 25 disclosed in the SEC Reports. To the Borrower's knowledge, since March 31, 2002 there has been no change in the business, Property, prospects, condition (financial or otherwise) or results of operations of the FASCO which could reasonably be expected to have a Material Adverse Effect 5.6. Taxes. The Borrower and its Subsidiaries have filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided in accordance with Agreement Accounting Principles and as to which no Lien exists. No tax liens have been filed and no claims are being asserted with respect to any such taxes. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of any taxes or other governmental charges are adequate. 5.7. Litigation and Contingent Obligations. Except as set forth on Schedule 5.7, there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which seeks to prevent, enjoin or delay the making of any Loans. Other than any liability incident to any litigation, arbitration or proceeding which could not reasonably be expected to have a Material Adverse Effect, the Borrower has no material contingent obligations not provided for or disclosed in the financial statements referred to in Section 5.4. 5.8. Subsidiaries. Schedule 1 contains an accurate list of all Subsidiaries of the Borrower as of the date of this Agreement, setting forth their respective jurisdictions of organization and the percentage of their respective Capital Stock or other ownership interests owned by the Borrower or other Subsidiaries. All of the issued and outstanding shares of Capital Stock or other ownership interests of such Subsidiaries have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and non-assessable. 5.9. ERISA. No Accumulated Funding Deficiency exists with respect to any Single Employer Plan. Neither the Borrower nor any other member of the Controlled Group has incurred, or is reasonably expected to incur, any withdrawal liability to Multiemployer Plans in excess of $15,000,000 in the aggregate. Each Plan complies in all material respects with all applicable requirements of law and regulations, no Reportable Event has occurred with respect to any Plan, neither the Borrower nor any other member of the Controlled Group has withdrawn from any Plan or initiated steps to do so, and no steps have been taken to reorganize or terminate any Plan. 5.10. Accuracy of Information. No information, exhibit or report furnished by the Borrower or any of its Subsidiaries to the Agent or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents, taken in the light of all other information supplied to the Agent and the Lenders, contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading. 5.11 Regulations T, U and X Neither the Borrower nor any of its Subsidiaries extends or maintains, in the ordinary course of business, credit for the purpose, whether immediate, incidental, or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of any Advance will be used for the purpose, whether immediate, incidental, or ultimate, of buying or carrying any such Margin Stock or maintaining or extending credit to others for such purpose in any way that would violate Regulation T, U or X. After applying the proceeds of each Advance, Margin Stock will not constitute more than 25% of the value of the assets (either of the Borrower alone or of the Borrower and its Subsidiaries on a 26 consolidated basis) that are subject to any provisions of any Loan Document that may cause the Advances to be deemed secured, directly or indirectly, by Margin Stock. The Borrower and its Subsidiaries are in compliance with Section 6.2. 5.12. Material Agreements. Neither the Borrower nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (i) any agreement to which it is a party, which default could reasonably be expected to have a Material Adverse Effect or (ii) any agreement or instrument evidencing or governing Indebtedness. 5.13. Compliance With Laws. The Borrower and its Subsidiaries have complied with all applicable Requirements of Law except for any failure to comply with any of the foregoing which could not reasonably be expected to have a Material Adverse Effect. 5.14. Ownership of Properties. Except as set forth on Schedule 2, on the date of this Agreement, the Borrower and its Subsidiaries will have good title, free of all Liens other than those permitted by Section 6.15, to all of the Property and assets reflected in the Borrower's most recent consolidated financial statements provided to the Agent as owned by the Borrower and its Subsidiaries. 5.15. Plan Assets; Prohibited Transactions. The Borrower is not an entity deemed to hold "plan assets" within the meaning of 29 C.F.R. ss. 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan (within the meaning of Section 4975 of the Code), and neither the execution of this Agreement nor the making of Loans hereunder gives rise to a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. 5.16. Environmental Matters. In the ordinary course of its business, the officers of the Borrower consider the effect of Environmental Laws on the business of the Borrower and its Subsidiaries, in the course of which they identify and evaluate potential risks and liabilities accruing to the Borrower due to Environmental Laws. Except as disclosed in the SEC Reports, on the basis of this consideration, the Borrower has concluded that Environmental Laws cannot reasonably be expected to have a Material Adverse Effect. Except as disclosed in the SEC Reports, neither the Borrower nor any Subsidiary has received any notice to the effect that its operations are not in material compliance with any of the requirements of applicable Environmental Laws or are the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action could reasonably be expected to have a Material Adverse Effect. 5.17. Investment Company Act. Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 5.18. Public Utility Holding Company Act. Neither the Borrower nor any Subsidiary is a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 5.19. Solvency. (i) Immediately after the consummation of the transactions to occur on the date hereof and immediately following the making of each Loan, if any, made on the date hereof and 27 after giving effect to the application of the proceeds of such Loans, (a) the fair value of the assets of the Borrower and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, subordinated, contingent or otherwise, of the Borrower and its Subsidiaries on a consolidated basis; (b) the present fair saleable value of the Property of the Borrower and its Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability of the Borrower and its Subsidiaries on a consolidated basis on their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Borrower and its Subsidiaries on a consolidated basis will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Borrower and its Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted after the date hereof. (ii) The Borrower does not intend to, or to permit any of its Subsidiaries to, and does not believe that it or any of its Subsidiaries will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing of and amounts of cash to be received by it or any such Subsidiary and the timing of the amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary. 5.20 FASCO Acquisition. (i) The Borrower has heretofore furnished to the Agent true and complete copies of the FASCO Stock Purchase Agreement and all other FASCO Acquisition Documents, in each case together with all schedules and exhibits referred to therein or delivered pursuant thereto and all amendments, modifications and waivers relating thereto. On the date hereof and immediately prior to giving effect to the consummation of the FASCO Acquisition, (a) other than amendments delivered to the Agent prior to the date hereof, none of the FASCO Acquisition Documents shall have been amended, modified or supplemented, nor any condition or provision thereof waived, in any manner which would breach Section 6.2 hereof, and each of the FASCO Acquisition Documents is in full force and effect and neither the Borrower, any Guarantor any other party thereto is in default thereunder or in breach thereof, (b) all conditions to the obligations of the Borrower and the Guarantors under each of such FASCO Acquisition Documents to consummate the transactions contemplated thereby on the date hereof shall have been satisfied or shall be satisfied with the consummation of the transactions contemplated hereunder to occur on the date hereof or shall be waived by the party entitled to waive such condition to the extent permitted by Section 6.2 hereof, and (c) the FASCO Acquisition will be consummated substantially in accordance with the terms of the FASCO Acquisition Documents, this Agreement and the certificate delivered pursuant to Section 4.1(xi)(c) hereof and in compliance with all applicable Requirements of Law. (ii) Each of the representations and warranties given by the Sellers to the Borrower and/or any Guarantor and by the Borrower and/or any Guarantor to the Sellers in the FASCO Acquisition Documents is true and correct as of the date hereof (or as of any earlier date to which such representation and warranty specifically relates). 28 ARTICLE VI COVENANTS During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing: 6.1. Financial Reporting. The Borrower will maintain, for itself and each Subsidiary, a system of accounting established and administered in accordance with generally accepted accounting principles, and furnish to the Lenders: (i) Within 90 days after the close of each of its fiscal years, an unqualified (except for qualifications relating to changes in accounting principles or practices reflecting changes in generally accepted accounting principles and required or approved by the Borrower's independent certified public accountants) audit report certified by independent certified public accountants acceptable to the Lenders, prepared in accordance with Agreement Accounting Principles on a consolidated basis for itself and its Subsidiaries, including balance sheets as of the end of such period, related profit and loss and reconciliation of surplus statements, and a statement of cash flows, accompanied by (a) any management letter prepared by said accountants, and (b) a certificate of said accountants that, in the course of their examination necessary for their certification of the foregoing, they have obtained no knowledge of any Default or Unmatured Default, or if, in the opinion of such accountants, any Default or Unmatured Default shall exist, stating the nature and status thereof. (ii) Within 45 days after the close of the first three quarterly periods of each of its fiscal years, for itself and its Subsidiaries, consolidated unaudited balance sheets as at the close of each such period and consolidated profit and loss and reconciliation of surplus statements and a statement of cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified by its chief financial officer. (iii) As soon as available, but in any event within 30 days after the beginning of each fiscal year of the Borrower, a copy of the plan and forecast (including a projected consolidated and consolidating balance sheet, income statement and funds flow statement) of the Borrower for such fiscal year. (iv) Together with the financial statements required under Sections 6.1(i) and (ii), a compliance certificate in substantially the form of Exhibit B signed by its chief financial officer showing the calculations necessary to determine compliance with this Agreement and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof. (v) Within 365 days after the close of each fiscal year, a statement of the Unfunded Liabilities of each Single Employer Plan, certified as correct by an actuary enrolled under ERISA. (vi) As soon as possible and in any event within 10 days after the Borrower knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by the chief 29 financial officer of the Borrower, describing said Reportable Event and the action which the Borrower proposes to take with respect thereto. (vii) As soon as possible and in any event within 10 days after receipt by the Borrower, a copy of (a) any notice or claim to the effect that the Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the release by the Borrower, any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, and (b) any notice alleging any violation of any federal, state or local environmental, health or safety law or regulation by the Borrower or any of its Subsidiaries, which, in either case, could reasonably be expected to have a Material Adverse Effect. (viii) Promptly upon the furnishing thereof to the shareholders of the Borrower, copies of all financial statements, reports and proxy statements so furnished. (ix) Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission. (x) Such other information (including non-financial information) as the Agent or any Lender may from time to time reasonably request. 6.2. Use of Proceeds; FASCO Acquisition Documents. The Borrower will use the proceeds of the Advances solely to consummate the FASCO Acquisition. The Borrower will not, nor will it permit the Borrower or any Subsidiary to, use any of the proceeds of the Advances to purchase or carry any Margin Stock. The Borrower will not permit the FASCO Acquisition Documents to be amended or modified, or waive any condition or right thereunder, which in any of the foregoing cases would individually or in the aggregate (i) cause the consideration paid or payable (including without limitation all direct payments, all deferred payments, all Indebtedness assumed and all other consideration) for the FASCO Acquisition to increase, (ii) decrease the percentage of the issued and outstanding Capital Stock of FASCO being acquired pursuant to the FASCO Acquisition Documents below 100% or otherwise decrease the Property being acquired in the FASCO Acquisition or (iii) otherwise reasonably be expected to be materially adverse to the Lenders, without in each case obtaining the prior written consent of the Agent. 6.3. Notice of Default. The Borrower will, and will cause each Subsidiary to, give prompt notice in writing to the Lenders of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise, which could reasonably be expected to have a Material Adverse Effect. 6.4. Conduct of Business. The Borrower will, and will cause each Subsidiary to, carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted and do all things necessary to remain duly incorporated or organized, validly existing and (to the extent such concept applies to such entity) in good standing as a domestic corporation, partnership or limited liability company in its jurisdiction of incorporation or organization, as the case may be, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted. 30 6.5. Taxes. The Borrower will, and will cause each Subsidiary to, timely file complete and correct United States federal and applicable foreign, state and local tax returns required by law and pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with Agreement Accounting Principles. 6.6. Insurance. The Borrower will, and will cause each Subsidiary to, maintain with financially sound and reputable insurance companies insurance on all their Property in such amounts and covering such risks as is consistent with sound business practice, and the Borrower will furnish to any Lender upon request full information as to the insurance carried. 6.7. Compliance with Laws. The Borrower will, and will cause each Subsidiary to, comply with all Requirements of Law, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. 6.8. Maintenance of Properties. The Borrower will, and will cause each Subsidiary to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times. 6.9. Inspection. The Borrower will, and will cause each Subsidiary to, permit the Agent and the Lenders, by their respective representatives and agents, to inspect any of the Property, books and financial records of the Borrower and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Borrower and each Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and each Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Agent or any Lender may designate. 6.10. Dividends. The Borrower will not, nor will it permit any Subsidiary to, declare or pay any dividends or make any distributions on its Capital Stock (other than dividends payable in its own Capital Stock) or redeem, repurchase or otherwise acquire or retire any of its Capital Stock at any time outstanding, except that (i) any Subsidiary may declare and pay dividends or make distributions to the Borrower or to a Wholly-Owned Subsidiary, and (ii) the Borrower may declare and pay dividends on its Capital Stock and make redemptions, repurchases or other acquisitions or retirements of any of its Capital Stock provided that in each case no Default or Unmatured Default shall exist before or after giving effect thereto or be caused as a result thereof. 6.11. Non-Guarantor Indebtedness. The Borrower will not permit any Subsidiary which is not a Guarantor to, create, incur or suffer to exist any Indebtedness, except: (i) Indebtedness existing on the date hereof and described in Schedule 2, but no increase in the amount thereof as reduced from time to time. (ii) Other Indebtedness in an aggregate outstanding amount for all such Subsidiaries not to exceed $25,000,000. 6.12. Merger. The Borrower will not, nor will it permit any Subsidiary to, merge or consolidate with or into any other Person, except that, (i) a Subsidiary of the Borrower may merge with the Borrower, provided that the Borrower shall be the surviving corporation, (ii) a Subsidiary of the 31 Borrower may merge or consolidate with a Guarantor, provided that the Guarantor shall be the surviving corporation, (iii) a Subsidiary of the Borrower that is not a Guarantor may merge, consolidate or amalgamate with any other Subsidiary of the Borrower that is not a Guarantor, and (iv) the Borrower or any Subsidiary may merge, consolidate or amalgamate with any other Person in connection with an Acquisition, provided that, if any such merger involves the Borrower or a Guarantor, the Borrower or such Guarantor shall be the surviving corporation and such Acquisition is permitted pursuant to the terms of Section 6.14. 6.13. Sale of Assets. The Borrower will not, nor will it permit any Subsidiary to, lease, sell or otherwise dispose of its Property to any other Person, except: (i) Sales of inventory in the ordinary course of business. (ii) Leases, sales or other dispositions of its Property that, together with all other Property of the Borrower and its Subsidiaries previously leased, sold or disposed of (other than inventory in the ordinary course of business) as permitted by this Section during the twelve-month period ending with the month in which any such lease, sale or other disposition occurs, do not constitute a Substantial Portion of the Property of the Borrower and its Subsidiaries. (iii) Any transfer of an interest in accounts or notes receivable and related assets as part of a Qualified Receivables Transaction. (iv) Transfer of assets between Guarantors or between the Borrower and Guarantors. (v) Transfer of assets between the Borrower's Subsidiaries that are not Guarantors. 6.14. Investments and Acquisitions. The Borrower will not, nor will it permit any Subsidiary to, make or suffer to exist any Investments (including without limitation, loans and advances to, and other Investments in, Subsidiaries), or commitments therefor, or to create any Subsidiary or to become or remain a partner in any partnership or joint venture, or to make any Acquisition of any Person, except: (i) Cash Equivalent Investments. (ii) Existing Investments in Subsidiaries and other Investments in existence on the date hereof and described in Schedule 1. (iii) Investments comprised of capital contributions (whether in the form of cash, a note, or other assets) to a Subsidiary or other special-purpose entity created solely to engage in a Qualified Receivables Transaction or otherwise resulting from transfers of assets permitted by Section 6.13(iii) to such a special-purpose entity. (iv) Investments in Guarantors. (v) Other Investments (other than Acquisitions) provided that the aggregate amount of such Investments made in any fiscal year does not exceed 10% of Consolidated Net Worth as of the beginning of such fiscal year. (vi) The FASCO Acquisition, subject to the terms of this Agreement. 32 (vii) Any other Acquisition, provided that (a) immediately before and after giving effect to such Acquisition, on a pro forma basis acceptable to the Agent, no Default or Unmatured Default shall exist or shall have occurred and be continuing and the representations and warranties contained in Article V and in the other Loan Documents shall be true and correct on and as of the date thereof (both before and after such Acquisition is consummated) as if made on the date such Acquisition is consummated, (b) the target of such Acquisition is in substantially the same line of business as the Borrower, (c) such Acquisition is non-hostile and the Board of Directors of the target of such Acquisition has approved such Acquisition, and (d) the aggregate consideration paid or payable in connection with all Acquisitions permitted by this Section 6.14(vii) in any consecutive twelve month period, including without limitation all direct payments, all deferred payments, all Indebtedness assumed and all other consideration, shall not exceed $150,000,000. 6.15. Liens. The Borrower will not, nor will it permit any Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the Property of the Borrower or any of its Subsidiaries, except: (i) Liens for taxes, assessments or governmental charges or levies on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with Agreement Accounting Principles shall have been set aside on its books. (ii) Liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on its books. (iii) Liens arising out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation. (iv) Utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Borrower or its Subsidiaries. (v) Liens existing on the date hereof and described in Schedule 2. (vii) Liens incurred in connection with any transfer of an interest in accounts or notes receivable or related assets as part of a Qualified Receivables Transaction. (viii) Liens securing Indebtedness and not otherwise permitted by the foregoing provisions of this Section 6.15, provided that the aggregate outstanding principal amount of the Indebtedness secured by all such Liens shall not at any time exceed 10% of Consolidated Net Worth. 33 6.16. Affiliates. The Borrower will not, and will not permit any Subsidiary to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate except (i) in the ordinary course of business and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain in a comparable arms-length transaction and (ii) transactions between the Borrower or any Subsidiary, on the one hand, and any Subsidiary or other special-purpose entity created to engage solely in a Qualified Receivables Transaction. 6.17 Limitation on Restrictions on Subsidiary Distributions. The Borrower will not, and will not permit any Subsidiary to, enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary of the Borrower to (i) pay dividends or make any other distributions in respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any other Subsidiary of the Borrower, (ii) make loans or advances to the Borrower or any other Subsidiary of the Borrower or (iii) transfer any of its assets to the Borrower or any other Subsidiary of the Borrower, except for such encumbrances or restrictions existing under or by reason of (a) any restrictions existing under the Loan Documents, (b) any restrictions with respect to a Subsidiary imposed pursuant to an agreement which has been entered into in connection with the disposition of all or substantially all of the Capital Stock or assets of such Subsidiary, or (c) any restrictions with respect to assets encumbered by a Lien permitted by Section 6.15 so long as such restriction applies only to the assets encumbered by such permitted Lien. 6.18 Financial Contracts. The Borrower will not, and will not permit any Subsidiary to, enter into or remain a party to any Financial Contract for purposes of financial speculation, provided that hedging by the Borrower or any of its Subsidiaries of their own interest rate or foreign currency exposure shall not be deemed financial speculation. 6.19. Financial Covenants. 6.19.1. Interest Coverage Ratio. The Borrower will not permit the ratio, determined as of the end of each of its fiscal quarters for the then most-recently ended four fiscal quarters, of (i) Consolidated EBIT to (ii) Consolidated Interest Expense to be less than (a) 2.75 to 1.0 as of the end of any fiscal quarter ending after the date hereof and prior to December 31, 2003 or (b) 3.00 to 1.0 as of the end of any fiscal quarter thereafter. 6.19.2. Leverage Ratio. The Borrower will not permit the ratio, determined as of the end of each of its fiscal quarters, of (i) Consolidated Indebtedness to (ii) Consolidated EBITDA for the then most-recently ended four fiscal quarters to be greater than 2.50 to 1.0. 6.19.3. Minimum Net Worth. The Borrower will at all times maintain Consolidated Net Worth of not less than the sum of (i) $900,000,000 plus (ii) 50% of Consolidated Net Income earned in the fiscal quarter ending December 31, 2002 (without deduction for losses) plus (iii) 50% of Consolidated Net Income earned in each fiscal year beginning with the fiscal year ending December 31, 2003 (without deduction for losses). 6.20 Additional Covenants. This covenant governs any instrument or agreement, or any group of related instruments or agreements, relating to or amending any terms or conditions applicable to any Indebtedness equal to or greater than $100,000,000 of the Borrower or a Subsidiary (each a "Debt Instrument"), whether such Debt Instrument is now existing or subsequently entered into by the Borrower 34 or a Subsidiary. The Borrower shall promptly deliver to the Agent a copy of each Debt Instrument. If any Debt Instrument contains any covenant, term or condition or default not substantially provided for in this Agreement or that is more favorable to the lender or lenders thereunder than those provided for in this Agreement (each a "More Favorable Provision"), such More Favorable Provision shall be incorporated by reference in this Agreement as if set forth fully herein (a) as of the date of this Agreement if such Debt Instrument is now existing, or (b) as of the effective date of the Debt Instrument if the Borrower or a Subsidiary subsequently enters into such Debt Instrument. No amendment, other modification, termination or expiration of any More Favorable Provision shall alter or otherwise affect such provision as incorporated herein, except that any modification which makes such provision become more favorable to the applicable lender shall be incorporated herein in addition to (and not in lieu of) the provisions which it replaces. Notwithstanding the foregoing, More Favorable Provisions shall not include any term of a Debt Instrument relating to amount, rate of interest, fees, amortization, or maturity of the Indebtedness or the conditions to be satisfied for consummation of the related borrowing. ARTICLE VII DEFAULTS The occurrence of any one or more of the following events shall constitute a Default: 7.1. Any representation or warranty made or deemed made by or on behalf of the Borrower or any of its Subsidiaries to the Lenders or the Agent under or in connection with this Agreement, any Loan, or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be materially false on the date as of which made. 7.2. Nonpayment of principal of any Loan when due, or nonpayment of interest upon any Loan or of any facility fee or other obligations under any of the Loan Documents within five days after the same becomes due. 7.3. The breach by the Borrower of any of the terms or provisions of Section 6.1, 6.2, 6.3, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15 or 6.19. 7.4. The breach by the Borrower (other than a breach which constitutes a Default under another Section of this Article VII) of any of the terms or provisions of this Agreement which is not remedied within thirty days after written notice from the Agent or any Lender. 7.5. Failure of the Borrower or any of its Subsidiaries to pay when due any Material Indebtedness; or the default by the Borrower or any of its Subsidiaries in the performance (beyond the applicable grace period with respect thereto, if any) of any term, provision or condition contained in any Material Indebtedness Agreement, or any other event shall occur or condition exist, the effect of which default, event or condition is to cause, or to permit the holder(s) of such Material Indebtedness or the lender(s) under any Material Indebtedness Agreement to cause, such Material Indebtedness to become due prior to its stated maturity or any commitment to lend under any Material Indebtedness Agreement to be terminated prior to its stated expiration date; or any Material Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be due and payable or required to be prepaid or repurchased (other than by a regularly scheduled payment) prior to the stated maturity thereof; or the Borrower or any of its Subsidiaries shall not pay, or admit in writing its inability to pay, its debts generally as they become due. 35 7.6. The Borrower or any of its Subsidiaries shall (i) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (iv) institute any proceeding seeking an order for relief under the Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (v) take any corporate or partnership action to authorize or effect any of the foregoing actions set forth in this Section 7.6 or (vi) fail to contest in good faith any appointment or proceeding described in Section 7.7. 7.7. Without the application, approval or consent of the Borrower or any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any of its Subsidiaries or any Substantial Portion of its Property, or a proceeding described in Section 7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 30 consecutive days. 7.8. Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of, all or any portion of the Property of the Borrower and its Subsidiaries which, when taken together with all other Property of the Borrower and its Subsidiaries so condemned, seized, appropriated, or taken custody or control of, during the twelve-month period ending with the month in which any such action occurs, constitutes a Substantial Portion. 7.9. The Borrower or any of its Subsidiaries shall fail within 30 days to pay, bond or otherwise discharge one or more (i) judgments or orders for the payment of money in excess of $15,000,000 (or the equivalent thereof in currencies other than U.S. Dollars) in the aggregate, or (ii) nonmonetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, which judgment(s), in any such case, is/are not stayed on appeal or otherwise being appropriately contested in good faith. 7.10. Any Change in Control shall occur. 7.11. The occurrence of any "default", as defined in any Loan Document (other than this Agreement) or the breach of any of the terms or provisions of any Loan Document (other than this Agreement), which default or breach continues beyond any period of grace therein provided. 7.12. Any Guaranty shall fail to remain in full force or effect or any action shall be taken to discontinue or to assert the invalidity or unenforceability of any Guaranty, or any Guarantor shall fail to comply with any of the terms or provisions of any Guaranty to which it is a party, or any Guarantor shall deny that it has any further liability under any Guaranty to which it is a party, or shall give notice to such effect. 7.13 Any member of the Controlled Group shall fail to pay when due an amount or amounts aggregating in excess of $15,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Single Employer Plan with Unfunded Liabilities in excess of $15,000,000 (a "Material Plan") shall be filed under Section 4041(c) of ERISA by any member of the Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall 36 institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist that could reasonably be expected to result in PBGC obtaining a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which causes one or more members of the Controlled Group to incur a current payment obligation for withdrawal liability in excess of $15,000,000 in aggregate amount for the Controlled Group. 7.14 (i) The FASCO Acquisition shall be unwound, reversed or otherwise rescinded in whole or in any material part for any reason, or (ii) the FASCO Acquisition shall not be consummated on or before January 15, 2003 in accordance with the terms of the Loan Documents and the FASCO Acquisition Documents. ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 8.1. Acceleration. If any Default described in Section 7.6 or 7.7 occurs with respect to the Borrower, the obligations of the Lenders to make Loans hereunder shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Agent or any Lender. If any other Default occurs, the Required Lenders (or the Agent with the consent of the Required Lenders) may terminate or suspend the obligations of the Lenders to make Loans hereunder, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrower hereby expressly waives. If, within 30 days after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Loans hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in their sole discretion) shall so direct, the Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination. 8.2. Amendments. Subject to the provisions of this Section 8.2, the Required Lenders (or the Agent with the consent in writing of the Required Lenders) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of all of the Lenders: (i) Extend the final maturity of any Loan or forgive all or any portion of the principal amount thereof, or reduce the rate or extend the time of payment of interest or fees thereon. (ii) Reduce the percentage specified in the definition of Required Lenders. 37 (iii) Extend the Facility Termination Date, or reduce the amount or extend the payment date for, the mandatory payments required under Section 2.2, or increase the amount of the Aggregate Commitment or of the Commitment of any Lender hereunder, or permit the Borrower to assign its rights under this Agreement. (iv) Amend this Section 8.2. (v) Release any Guarantor or Guarantors that would constitute a Significant Subsidiary. No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent. The Agent may waive payment of the fee required under Section 12.3.2 without obtaining the consent of any other party to this Agreement. Notwithstanding anything herein to the contrary, no Defaulting Lender shall be entitled to vote (whether to consent or to withhold its consent) with respect to any amendment, modification, termination or waiver requiring the consent of the Required Lenders and, for purposes of determining the Required Lenders, the Commitments and Loans of each Defaulting Lender shall be disregarded. 8.3. Preservation of Rights. No delay or omission of the Lenders or the Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Loan notwithstanding the existence of a Default or the inability of the Borrower to satisfy the conditions precedent to such Loan shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Agent and the Lenders until the Obligations have been paid in full. ARTICLE IX GENERAL PROVISIONS 9.1. Survival of Representations. All representations and warranties of the Borrower contained in this Agreement shall survive the making of the Loans herein contemplated. 9.2. Governmental Regulation. Anything contained in this Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation. 9.3. Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. 9.4. Entire Agreement. The Loan Documents embody the entire agreement and understanding among the Borrower, the Agent and the Lenders and supersede all prior agreements and understandings among the Borrower, the Agent and the Lenders relating to the subject matter thereof 38 other than those contained in the fee letter described in Section 10.13 which shall survive and remain in full force and effect during the term of this Agreement. 9.5. Several Obligations; Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns, provided, however, that the parties hereto expressly agree that the Arranger shall enjoy the benefits of the provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name to the same extent as if it were a party to this Agreement. 9.6. Expenses; Indemnification. (i) The Borrower shall reimburse the Agent and the Arranger for any reasonable costs and out-of-pocket expenses (including attorneys' fees of attorneys for the Agent) paid or incurred by the Agent or the Arranger in connection with the preparation, negotiation, execution, delivery, syndication, distribution (including, without limitation, via the internet), review, amendment, modification, and administration of the Loan Documents. The Borrower also agrees to reimburse the Agent, the Arranger and the Lenders for any reasonable costs and out-of-pocket expenses (including attorneys' fees of attorneys for the Agent, the Arranger and the Lenders) paid or incurred by the Agent, the Arranger or any Lender in connection with the collection and enforcement of the Loan Documents. (ii) The Borrower hereby further agrees to indemnify the Agent, the Arranger, each Lender, their respective affiliates, and each of their directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent, the Arranger, any Lender or any affiliate is a party thereto) which any of them may pay or incur arising out of or relating to this Agreement, the other Loan Documents, any Acquisition, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Loan hereunder except to the extent that they are determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the party seeking indemnification. The obligations of the Borrower under this Section 9.6 shall survive the termination of this Agreement. 9.7. Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may furnish one to each of the Lenders. 9.8. Accounting. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles; provided that, if the Borrower notifies the Agent that the Borrower wishes to amend any covenant contained in Article VI to eliminate the effect of any change in generally accepted accounting principles on the calculation of such covenant (or if the Agent notifies the Borrower that the Required Lenders wish to amend Article VI for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders. Notwithstanding anything herein, in any financial statements of the 39 Borrower or in Agreement Accounting Principles to the contrary, for purposes of calculating and determining compliance with the financial covenants in Article VI and determining the Applicable Margin, including defined terms used therein, any Acquisition (including without limitation the FASCO Acquisition) made by the Borrower or any of its Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the period for which such financial covenants or the Applicable Margin were calculated shall be deemed to have occurred on the first day of the relevant period for which such financial covenants or the Applicable Margin were calculated on a pro forma basis acceptable to the Agent. 9.9. Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 9.10. Nonliability of Lenders. The relationship between the Borrower on the one hand and the Lenders and the Agent on the other hand shall be solely that of borrower and lender. Neither the Agent, the Arranger nor any Lender shall have any fiduciary responsibilities to the Borrower. Neither the Agent, the Arranger nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower's business or operations. The Borrower agrees that neither the Agent, the Arranger nor any Lender shall have liability to the Borrower (whether sounding in tort, contract or otherwise) for losses suffered by the Borrower in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought. Neither the Agent, the Arranger nor any Lender shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue for, any special, indirect, consequential or punitive damages suffered by the Borrower in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby. 9.11. Confidentiality. The Agent and each Lender agree to hold any confidential information which it may receive from the Borrower pursuant to this Agreement in confidence, except for disclosure (i) to its Affiliates and to the Agent and other Lenders and their respective Affiliates, (ii) to legal counsel, accountants, and other professional advisors to such Lender or to a Transferee, (iii) to regulatory officials, (iv) to any Person as required by law, regulation, or legal process, (v) to any Person in connection with any legal proceeding to which such Lender is a party, (vi) to such Lender's direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties, and (vii) permitted by Section 12.4. The Agent and Lenders agree to give reasonable prior notice to the Borrower of any disclosure pursuant to the foregoing clauses (iv) and (v) to the extent feasible and so long as giving such notice is not otherwise prohibited by applicable law. 9.12. Nonreliance. Each Lender hereby represents that it is not relying on or looking to any Margin Stock for the repayment of the Loans provided for herein. 9.13. Disclosure. The Borrower and each Lender hereby acknowledge and agree that Bank One and/or its Affiliates from time to time may hold investments in, make other loans to or have other relationships with the Borrower and its Affiliates. 40 ARTICLE X THE AGENT 10.1. Appointment; Nature of Relationship. Bank One, NA is hereby appointed by each of the Lenders as its contractual representative (herein referred to as the "Agent") hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. The Agent agrees to act as such contractual representative upon the express conditions contained in this Article X. Notwithstanding the use of the defined term "Agent," it is expressly understood and agreed that the Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement or any other Loan Document and that the Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders' contractual representative, the Agent (i) does not hereby assume any fiduciary duties to any of the Lenders, (ii) is a "representative" of the Lenders within the meaning of the term "secured party" as defined in the Michigan Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders hereby agrees to assert no claim against the Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives. 10.2. Powers. The Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Agent. 10.3. General Immunity. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to the Borrower, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is determined in a final non-appealable judgment by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of such Person. 10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered solely to the Agent; (d) the existence or possible existence of any Default or Unmatured Default; (e) the validity, enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any collateral security; or (g) the financial condition of the Borrower or any guarantor of any of the Obligations or of any of the Borrower's or any such guarantor's respective Subsidiaries. The Agent shall have no duty to disclose to 41 the Lenders information that is not required to be furnished by the Borrower to the Agent at such time, but is voluntarily furnished by the Borrower to the Agent (either in its capacity as Agent or in its individual capacity). 10.5. Action on Instructions of Lenders. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. The Lenders hereby acknowledge that the Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders. The Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action. 10.6. Employment of Agents and Counsel. The Agent may execute any of its duties as Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Agent shall be entitled to advice of counsel concerning the contractual arrangement between the Agent and the Lenders and all matters pertaining to the Agent's duties hereunder and under any other Loan Document. 10.7. Reliance on Documents; Counsel. The Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Agent, which counsel may be employees of the Agent. 10.8. Agent's Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify the Agent ratably in proportion to their respective Commitments (or, if the Commitments have been terminated, in proportion to their Commitments immediately prior to such termination) (i) for any amounts not reimbursed by the Borrower for which the Agent is entitled to reimbursement by the Borrower under the Loan Documents, (ii) for any other expenses incurred by the Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents (including, without limitation, for any expenses incurred by the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including, without limitation, for any such amounts incurred by or asserted against the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms of the Loan Documents or of any such other documents, provided that (i) no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Agent and (ii) any indemnification required pursuant to Section 3.5(vii) shall, notwithstanding the provisions of this Section 10.8, be paid by the relevant Lender in accordance with the provisions thereof. 42 The obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement. 10.9. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Unmatured Default hereunder unless the Agent has received written notice from a Lender or the Borrower referring to this Agreement describing such Default or Unmatured Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders. 10.10. Rights as a Lender. In the event the Agent is a Lender, the Agent shall have the same rights and powers hereunder and under any other Loan Document with respect to its Commitment and its Loans as any Lender and may exercise the same as though it were not the Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a Lender, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby from engaging with any other Person. 10.11. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent, the Arranger or any other Lender and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Agent, the Arranger or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents. 10.12. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five days after the retiring Agent gives notice of its intention to resign. The Agent may be removed at any time with or without cause by written notice received by the Agent from the Required Lenders, such removal to be effective on the date specified by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint one of the Lenders, on behalf of the Borrower and the Lenders, a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders within thirty days after the resigning Agent's giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of the Borrower and the Lenders, one of the Lenders as a successor Agent. Notwithstanding the previous sentence, the Agent may at any time without the consent of the Borrower or any Lender, appoint any of its Affiliates which is a commercial bank as a successor Agent hereunder. If the Agent has resigned or been removed and no successor Agent has been appointed, the Lenders may perform all the duties of the Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning or removed Agent. Upon the effectiveness of the resignation or removal of the Agent, the resigning or removed Agent shall be discharged from its duties and obligations hereunder and 43 under the Loan Documents. After the effectiveness of the resignation or removal of an Agent, the provisions of this Article X shall continue in effect for the benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder and under the other Loan Documents. In the event that there is a successor to the Agent by merger, or the Agent assigns its duties and obligations to an Affiliate pursuant to this Section 10.12, then the term "Prime Rate" as used in this Agreement shall mean the prime rate, base rate or other analogous rate of the new Agent. 10.13. Agent and Arranger Fees. The Borrower agrees to pay to the Agent and the Arranger, for their respective accounts, the fees agreed to by the Borrower, the Agent and the Arranger from time to time. 10.14. Delegation to Affiliates. The Borrower and the Lenders agree that the Agent may delegate any of its duties under this Agreement to any of its Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents and employees) which performs duties in connection with this Agreement shall be entitled to the same benefits of the indemnification, waiver and other protective provisions to which the Agent is entitled under Articles IX and X. 10.15. Co-Agents, Documentation Agent, Syndication Agent, etc. Neither any of the Lenders identified in this Agreement or elsewhere as a "co-agent", a "documentation agent" or a "syndication agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of such Lenders shall have or be deemed to have a fiduciary relationship with any Lender. Each Lender hereby makes the same acknowledgments with respect to such Lenders as it makes with respect to the Agent in Section 10.11. ARTICLE XI SETOFF; RATABLE PAYMENTS 11.1. Setoff. In addition to, and without limitation of, any rights of the Lenders under applicable law, if the Borrower becomes insolvent, however evidenced, or any Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender or any Affiliate of any Lender to or for the credit or account of the Borrower may be offset and applied toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part thereof, shall then be due. 11.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it upon its Loans (other than payments received pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Loans held by the other Lenders so that after such purchase each Lender will hold its ratable proportion of Loans. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their Loans. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. 44 ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 12.1. Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lenders and their respective successors and assigns permitted hereby, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents without the prior written consent of each Lender, (ii) any assignment by any Lender must be made in compliance with Section 12.3, and (iii) any transfer by Participation must be made in compliance with Section 12.2. Any attempted assignment or transfer by any party not made in compliance with this Section 12.1 shall be null and void, unless such attempted assignment or transfer is treated as a participation in accordance with Section 12.3.2. The parties to this Agreement acknowledge that clause (ii) of this Section 12.1 relates only to absolute assignments and this Section 12.1 does not prohibit assignments creating security interests, including, without limitation, (x) any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and any Note to a Federal Reserve Bank or (y) in the case of a Lender which is a Fund, any pledge or assignment of all or any portion of its rights under this Agreement and any Note to its trustee in support of its obligations to its trustee; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 12.3. The Agent may treat the Person which made any Loan or which holds any Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 12.3; provided, however, that the Agent may in its discretion (but shall not be required to) follow instructions from the Person which made any Loan or which holds any Note to direct payments relating to such Loan or Note to another Person. Any assignee of the rights to any Loan or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Loan (whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Loan. 12.2. Participations. 12.2.1. Permitted Participants; Effect. Any Lender may at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Loans and the holder of any Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. 45 12.2.2. Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Loan or Commitment in which such Participant has an interest which would require consent of all of the Lenders pursuant to the terms of Section 8.2 or of any other Loan Document. 12.2.3. Benefit of Certain Provisions. The Borrower agrees that each Participant shall be deemed to have the right of setoff provided in Section 11.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 11.1 with respect to the amount of participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender. The Borrower further agrees that each Participant shall be entitled to the benefits of Sections 3.1, 3.2, 3.4 and 3.5 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 12.3, provided that (i) a Participant shall not be entitled to receive any greater payment under Section 3.1, 3.2 or 3.5 than the Lender who sold the participating interest to such Participant would have received had it retained such interest for its own account, unless the sale of such interest to such Participant is made with the prior written consent of the Borrower, and (ii) any Participant not incorporated under the laws of the United States of America or any State thereof agrees to comply with the provisions of Section 3.5 to the same extent as if it were a Lender. 12.3. Assignments. 12.3.1. Permitted Assignments. Any Lender may at any time assign to one or more banks or other entities ("Purchasers") all or any part of its rights and obligations under the Loan Documents. Such assignment shall be substantially in the form of Exhibit C or in such other form as may be agreed to by the parties thereto. Each such assignment with respect to a Purchaser which is not a Lender or an Affiliate of a Lender or an Approved Fund shall either be in an amount equal to the entire applicable Commitment and Loans of the assigning Lender or (unless each of the Borrower and the Agent otherwise consents) be in an aggregate amount not less than $10,000,000 or such lesser amount agreed to by the Agent. The amount of the assignment shall be based on the Commitment or outstanding Loans (if the Commitment has been terminated) subject to the assignment, determined as of the date of such assignment or as of the "Trade Date," if the "Trade Date" is specified in the assignment. 12.3.2. Consents. The consent of the Borrower shall be required prior to an assignment becoming effective unless the Purchaser is a Lender, an Affiliate of a Lender or an Approved Fund, provided that the consent of the Borrower shall not be required if a Default has occurred and is continuing. The consent of the Agent shall be required prior to an assignment becoming effective unless the Purchaser is a Lender, an Affiliate of a Lender or an Approved Fund. Any consent required under this Section 12.3.2 shall not be unreasonably withheld or delayed. 12.3.3. Effect; Effective Date. Upon (i) delivery to the Agent of an assignment, together with any consents required by Sections 12.3.1 and 12.3.2, and (ii) payment of a $3,500 fee to the Agent for processing such assignment (unless such fee is waived by the Agent), such assignment 46 shall become effective on the effective date specified in such assignment. The assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Loans under the applicable assignment agreement constitutes "plan assets" as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be "plan assets" under ERISA. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by or on behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party thereto, and the transferor Lender shall be released with respect to the Commitment and Loans assigned to such Purchaser without any further consent or action by the Borrower, the Lenders or the Agent. In the case of an assignment covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a Lender hereunder but shall continue to be entitled to the benefits of, and subject to, those provisions of this Agreement and the other Loan Documents which survive payment of the Obligations and termination of the applicable agreement. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.3 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 12.2. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.3, the transferor Lender, the Agent and the Borrower shall, if the transferor Lender or the Purchaser desires that its Loans be evidenced by Notes, make appropriate arrangements so that new Notes or, as appropriate, replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their respective Commitments, as adjusted pursuant to such assignment. 12.3.4. Register. The Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. 12.3.5 Special Purpose Funding Vehicles. (i) Notwithstanding anything to the contrary contained herein, any Lender (a "Designating Lender") may grant to one or more special purpose funding vehicles (each, an "SPV"), identified as such in writing from time to time by the Designating Lender to the Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Designating Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement, provided that (A) nothing herein shall constitute a commitment by any SPV to make any Loan, (B) if any SPV elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Designating Lender shall be obligated to make such Loan pursuant to the terms hereof, (C) the Designating Lender shall remain liable for any indemnity or other payment obligation with respect to its Commitments hereunder and (D) the Borrower shall not incur any additional costs or expenses as a result of any such grant by a Designated Lender to an SPV. The making of a Loan by an SPV hereunder shall utilize the relevant Commitment of the Designating Lender to the same extent, and as if, such Loan were 47 made by such Designating Lender. (ii) As to any Loans or portion thereof made by it, each SPV shall have all the rights that a Lender making such Loans or portion thereof would have had under this Agreement; provided, however, that each SPV shall have granted to its Designating Lender an irrevocable power of attorney, to deliver and receive all communications and notices under this Agreement (and any related documents) and to exercise on such SPV's behalf, all of such SPV's voting rights under this Agreement. No additional Note shall be required to evidence the Loans or portion thereof made by an SPV; and the related Designating Lender shall be deemed to hold its Note, if any, as agent for such SPV to the extent of the Loans or portion thereof funded by such SPV. In addition, any payments for the account of any SPV shall be paid to its Designating Lender as agent for such SPV. (iii) Each party hereto hereby agrees that no SPV shall be liable for any indemnity or payment under this Agreement for which a Lender would otherwise be liable. In furtherance of the foregoing, each party hereto hereby agrees (which agreements shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPV, it will not institute against, or join any other person in instituting against, such SPV any bankruptcy, reorganization, arrangement insolvency or liquidation proceedings under the laws of the United States or any State thereof. (iv) In addition, subject to Section 12.4, any SPV may (A) at any time and without paying any processing fee therefor, assign or participate all or a portion of its interest in any Loans to the Designating Lender or to any financial institutions providing liquidity and/or credit support to or for the account of such SPV to support the funding or maintenance of Loans and (B) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancements to such SPV. This Section 12.3.3 may not be amended without the written consent of any Designating Lender affected thereby. 12.4. Dissemination of Information. The Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "Transferee") and any prospective Transferee any and all information in such Lender's possession concerning the creditworthiness of the Borrower and its Subsidiaries, including without limitation any information contained in any Reports; provided that each Transferee and prospective Transferee agrees to be bound by Section 9.11 of this Agreement. 12.5. Tax Treatment. If any interest in any Loan Document is transferred to any Transferee which is not incorporated under the laws of the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 3.5(iv). ARTICLE XIII NOTICES 13.1. Notices. Except as otherwise permitted by Section 2.14 with respect to borrowing notices, all notices, requests and other communications to any party hereunder shall be in writing 48 (including electronic transmission, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Agent, at its address or facsimile number set forth on the signature pages hereof, (y) in the case of any Lender, at its address or facsimile number set forth in its administrative questionnaire or (z) in the case of any party, at such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower in accordance with the provisions of this Section 13.1. Each such notice, request or other communication shall be effective (i) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, or (ii) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified in this Section; provided that notices to the Agent under Article II shall not be effective until received. 13.2. Change of Address. The Borrower, the Agent and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto. ARTICLE XIV COUNTERPARTS This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the Borrower, the Agent and the Lenders and each party has notified the Agent by facsimile transmission or telephone that it has taken such action. ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL 15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF MICHIGAN, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 15.2. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR MICHIGAN STATE COURT SITTING IN DETROIT, MICHIGAN IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER 49 JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN DETROIT, MICHIGAN. 15.3. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. 50 IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed this Agreement as of the date first above written. TECUMSEH PRODUCTS COMPANY By: /s/ David W. Kay ----------------------------------------- Title: Vice President, Treasurer & CFO 100 East Patterson Tecumseh, Michigan 49286 Attention: David W. Kay Telephone: (517) 423-8542 FAX: (517) 423-0200 Commitments $250,000,000 BANK ONE, NA, Individually and as Agent By: /s/ Thomas A. Gamm ----------------------------------------- Title: First Vice President 611 Woodward Avenue Detroit, Michigan 48226 Attention: Corporate Banking - Michigan Group Telephone: (313) 225-2531 FAX: (313) 226-0855 51 PRICING SCHEDULE
============================== ====================================== ==================================== APPLICABLE MARGIN ANY TIME DURING THE FIRST THREE ANY TIME THEREAFTER MONTHS AFTER CLOSING - ------------------------------ -------------------------------------- ------------------------------------ Eurodollar Rate 0.60% 0.85% ============================== ====================================== ====================================
Notwithstanding the foregoing, the Applicable Margin shall automatically be increased in excess of the percentages described above as may be necessary such that the Applicable Margin hereunder is at all times at least 0.125% higher than the Applicable Margin as defined in the Three-Year Credit Agreement. 52 EX-99.1 8 k73591exv99w1.txt UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS EXHIBIT 99.1 Condensed Combined Financial Statements FASCO Motors Group Six months ended September 30, 2002 and 2001 FASCO Motors Group Condensed Combined Financial Statements Six months ended September 30, 2002 and 2001 CONTENTS Condensed Combined Financial Statements (Unaudited) Independent Accountants' Review Report ..................................... 1 Condensed Combined Balance Sheets at September 30, 2002 and March 31, 2002 .......................................................... 2 Condensed Combined Statements of Operations for the six months ended September 30, 2002 and 2001 ....................................... 3 Condensed Combined Statement of Invested Capital for the six months ended September 30, 2002 ......................................... 4 Condensed Combined Statements of Cash Flows for the six months ended September 30, 2002 and 2001 ................................ 5 Notes to Condensed Combined Financial Statements - September 30, 2002 ...................................................... 6 Independent Accountants' Review Report The Board of Directors Invensys plc We have reviewed the accompanying condensed combined balance sheet of FASCO Motors Group as of September 30, 2002, and the related condensed combined statements of operations and cash flows for the six month periods ended September 30, 2002 and 2001 and the related statement of invested capital for the six months ended September 30, 2002. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed combined financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States. We have previously audited, in accordance with auditing standards generally accepted in the United States, the combined balance sheet of FASCO Motors Group as of March 31, 2002, and the related combined statements of operations, invested capital, and cash flows for the year then ended (not presented herein) and in our report dated July 11, 2002, we expressed an unqualified opinion on those combined financial statements. In our opinion, the information set forth in the accompanying condensed combined balance sheet as of March 31, 2002, is fairly stated, in all material respects, in relation to the combined balance sheet from which it has been derived. December 20, 2002 Ernst & Young LLP 1 FASCO Motors Group Condensed Combined Balance Sheets (In Millions of Dollars)
SEPTEMBER 30 MARCH 31 2002 2002 ------------------------- (Unaudited) (Audited) ASSETS Current assets: Cash and cash equivalents $ 8.9 $ 31.7 Accounts receivable: Trade, net of allowances for doubtful accounts of $0.7 at September 30, 2002 and $0.5 at March 31, 2002 29.5 35.7 From affiliates 7.8 7.7 Other 5.6 4.9 Inventories, net 37.6 40.9 Prepayments and other current assets 6.0 5.6 Deferred income taxes 13.6 13.6 ---------------------- Total current assets 109.0 140.1 Property, plant, and equipment, net 132.4 138.0 Intangible assets, net 409.3 409.9 Long-term receivables from affiliates 227.3 74.9 ---------------------- Total assets $ 878.0 $ 762.9 ====================== LIABILITIES AND INVESTED CAPITAL Current liabilities: Accounts payable: Trade $ 46.8 $ 49.7 To affiliates 35.9 6.9 Other 1.1 0.9 Short-term portion of debt 13.8 15.3 Income taxes payable 10.2 17.8 Accruals and other current liabilities 16.2 14.4 ---------------------- Total current liabilities 124.0 105.0 Long-term payables to affiliates 316.2 231.1 Long-term portion of debt 1.6 1.4 Pensions and other postretirement benefits 19.0 17.8 Deferred income taxes 24.3 25.3 Other long-term liabilities 0.5 0.6 ---------------------- Total liabilities 485.6 381.2 Total invested capital 392.4 381.7 ---------------------- Total liabilities and invested capital $ 878.0 $ 762.9 ======================
See notes to condensed combined financial statements. 2 FASCO Motors Group Condensed Combined Statements of Operations (Unaudited, in Millions of Dollars)
SIX MONTHS ENDED SEPTEMBER 30 2002 2001 ------------------------ Net sales: To third parties $ 234.5 $ 246.0 To affiliates -- 0.2 ------------------------ 234.5 246.2 Cost of sales 185.4 192.4 ------------------------ Gross profit 49.1 53.8 Selling, general, and administrative expenses 23.1 19.3 Restructuring and other similar costs 4.0 5.4 Amortization of intangible assets 0.6 6.2 Other operating expenses, net 0.3 1.1 ------------------------ Operating income 21.1 21.8 Nonoperating income (expense): Interest expense (4.6) (8.6) ------------------------ Income before income taxes 16.5 13.2 Provision for income taxes (5.5) (8.0) ------------------------ Net income $ 11.0 $ 5.2 ========================
See notes to condensed combined financial statements. 3 FASCO Motors Group Condensed Combined Statement of Invested Capital (Unaudited, in Millions of Dollars)
OTHER INVESTED COMPREHENSIVE TOTAL CAPITAL INCOME EQUITY ---------------------------------------- Balance at March 31, 2002 $ 386.9 $ (5.2) $ 381.7 Other comprehensive income: Net income 11.0 -- 11.0 Foreign currency translation adjustments -- (0.3) (0.3) ---------------------------------------- Total comprehensive income 11.0 (0.3) 10.7 ---------------------------------------- Balance at September 30, 2002 $ 397.9 $ (5.5) $ 392.4 ========================================
See notes to condensed combined financial statements. 4 FASCO Motors Group Condensed Combined Statements of Cash Flows (Unaudited, in Millions of Dollars)
SIX MONTHS ENDED SEPTEMBER 30 2002 2001 ---------------------------- OPERATING ACTIVITIES Net income $ 11.0 $ 5.2 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 7.4 7.4 Amortization 0.6 6.2 Impairment provisions 1.0 0.4 Deferred income taxes (1.0) (2.6) Net loss on dispositions of property, plant, and equipment -- 0.7 Noncash restructuring charges 1.5 -- Changes in operating assets and liabilities: Receivables 4.1 1.7 Inventories 3.3 3.3 Payables (2.6) (10.5) Trade to/from affiliates 29.0 (10.0) Income taxes (7.6) 9.2 Pensions and other postretirement benefits 1.2 1.1 ---------------------------- Cash provided by operating activities 47.9 12.1 INVESTING ACTIVITIES Expenditures for property, plant, and equipment (2.7) (3.3) Proceeds from the dispositions of property, plant, and equipment 0.3 0.5 ---------------------------- Cash used for investing activities (2.4) (2.8) FINANCING ACTIVITIES Increase (decrease) in debt (1.3) 1.5 Net change in amounts due to affiliates (67.3) (8.9) ---------------------------- Net cash used in financing activities (68.6) (7.4) Effect of exchange rate changes on cash 0.3 -- ---------------------------- Increase (decrease) in cash and cash equivalents (22.8) 1.9 Cash and cash equivalents at beginning of year 31.7 23.2 ---------------------------- Cash and cash equivalents at end of year $ 8.9 $ 25.1 ============================
See notes to condensed combined financial statements. 5 FASCO Motors Group Notes to Condensed Combined Financial Statements September 30, 2002 1. BASIS OF PRESENTATION The unaudited condensed combined financial statements of FASCO Motors Group (the Company) included herein have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed combined financial statements be read in conjunction with the audited combined financial statements of the Company including the notes thereto. In the opinion of management, the aforementioned combined financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods. Results for the six months ended September 30, 2002 are not necessarily indicative of results that may be expected for the year ending March 31, 2003. 2. GOODWILL In June 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations" (SFAS 141), and SFAS No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS 141 addresses financial accounting and reporting for business combinations and requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Under SFAS 142, goodwill and certain other intangible assets will no longer be systematically amortized but instead will be reviewed for impairment and written down and charged to results of operations when their carrying amount exceeds their estimated fair value. SFAS 142 is effective for fiscal years beginning after December 15, 2001, with early adoption permitted for entities with fiscal years beginning after March 15, 2001. The Company adopted SFAS 142 effective April 1, 2002. The effect of ceasing amortization of goodwill increased net income approximately $5.5 million in the six months to September 30, 2002 and is expected to increase net income by approximately $11.1 million in the year ending March 31, 2003. 6 FASCO Motors Group Notes to Condensed Combined Financial Statements (continued) 2. GOODWILL (CONTINUED) In connection with the adoption of SFAS 142, the Company completed the first step of the transitional impairment test, which required the Company to compare the fair value of its reporting units to the carrying value of the net assets of the respective reporting units, as of April 1, 2002. Based on this analysis, the Company has concluded that there will be an impairment to the carrying value of goodwill existing at the time of the adoption of SFAS 142. Although this has not been fully quantified, management believes that the impairment is likely to exceed $120 million. The Company expects to complete the analysis during the second half of fiscal 2003, and, therefore no impairment charge has been recorded in the six months ended September 30, 2002. 3. INVENTORIES Inventories are summarized as follows (in millions):
SEPTEMBER 30 MARCH 31 2002 2002 --------------------------- Finished goods $ 12.5 $ 16.5 Work-in-process 11.5 10.2 Raw materials, parts, and supplies 13.6 14.2 --------------------------- Total $ 37.6 $ 40.9 ===========================
4. PROVISION FOR INCOME TAXES In each of the six months ended September 30, 2002 and 2001, there are provisions for income taxes of $5.5 million and $7.9 million, respectively. In the six months ended September 30, 2001 the provision reflects the add back of $6.2 million of goodwill amortization which is not reflected in six months ended September 30, 2002 (following the adoption of SFAS 142 as explained in Note 2). In addition, in the six months ended September 30, 2002 the provision reflects permanent adjustments of $2.3 million from March 31, 2002 provision to return differences. 7 FASCO Motors Group Notes to Condensed Combined Financial Statements (continued) 5. SUBSEQUENT EVENT FASCO Motors is part of, and wholly-owned by, Invensys plc. On November 27, 2002 Invensys plc entered into a Stock Purchase Agreement with Tecumseh Products Company pursuant to which the Company will be acquired by Tecumseh Products Company for cash of $415.0 million. The consideration for the acquisition is subject to certain closing date adjustments. 8 Combined Financial Statements FASCO Motors Group Years ended March 31, 2002, 2001, and 2000 with Report of Independent Auditors FASCO Motors Group Combined Financial Statements Years ended March 31, 2002, 2001, and 2000 CONTENTS Report of Independent Auditors........................................... 1 Combined Financial Statements Combined Balance Sheets.................................................. 2 Combined Statements of Operations........................................ 3 Combined Statement of Invested Capital................................... 4 Combined Statements of Cash Flows........................................ 5 Notes to Combined Financial Statements................................... 6 Report of Independent Auditors The Board of Directors Invensys plc We have audited the accompanying combined balance sheets of FASCO Motors Group including the entities listed in Note 2 (collectively, referred to as the Company) as of March 31, 2002 and 2001, and the related combined statements of operations, invested capital and cash flows for each of the three years in the period ended March 31, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of the Company at March 31, 2002 and 2001, and the combined results of their operations and their cash flows for each of the years in the period ended March 31, 2002, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP July 11, 2002, (except for Note 18), and November 27, 2002 (Note 18) 1 FASCO Motors Group Combined Balance Sheets (In Millions of Dollars)
MARCH 31 2002 2001 -------------------- ASSETS Current assets: Cash and cash equivalents $ 31.7 $ 23.2 Accounts receivable: Trade, net of allowances for doubtful accounts of $0.5 in 2002 and $1.3 in 2001 35.7 34.4 From affiliates 7.7 -- Other 4.9 4.5 Inventories, net 40.9 54.1 Prepayments and other current assets 5.6 5.3 Deferred income taxes 13.6 13.2 -------------------- Total current assets 140.1 134.7 Property, plant, and equipment, net 138.0 148.9 Intangible assets, net 409.9 421.1 Long-term receivables from affiliates 74.9 61.4 -------------------- Total assets $ 762.9 $ 766.1 ==================== LIABILITIES AND INVESTED CAPITAL Current liabilities: Accounts payable: Trade $ 49.7 $ 68.5 To affiliates 6.9 19.5 Other 0.9 1.2 Short-term portion of debt 15.3 9.0 Income taxes payable 17.8 18.8 Accruals and other current liabilities 14.4 15.6 -------------------- Total current liabilities 105.0 132.6 Long-term payables to affiliates 231.1 235.1 Long-term portion of debt 1.4 2.3 Pensions and other postretirement benefits 17.8 16.1 Deferred income taxes 25.3 22.4 Other long-term liabilities 0.6 0.3 -------------------- Total liabilities 381.2 408.8 Total invested capital 381.7 357.3 -------------------- Total liabilities and invested capital $ 762.9 $ 766.1 ====================
See notes to combined financial statements. 2 FASCO Motors Group Combined Statements of Operations (In Millions of Dollars)
YEARS ENDED MARCH 31 2002 2001 2000 ----------------------------------- Net sales: To third parties $ 478.6 $ 535.6 $ 573.9 To affiliates 0.3 0.5 0.5 ----------------------------------- 478.9 536.1 574.4 Cost of sales 372.0 406.9 431.4 ----------------------------------- Gross profit 106.9 129.2 143.0 Selling, general, and administrative expenses 38.8 43.0 45.2 Restructuring and other similar costs 9.2 17.6 17.3 Amortization of intangible assets 12.3 12.3 12.3 Other operating expenses, net 2.6 1.3 2.1 ----------------------------------- Operating income 44.0 55.0 66.1 Nonoperating income (expense): Interest expense: To third parties (2.1) (1.5) (1.O) To affiliates (12.2) (20.5) (18.3) Other, net 0.9 -- (0.2) ----------------------------------- Income before income taxes 30.6 33.0 46.6 Provision for income taxes (16.5) (18.5) (24.1) ----------------------------------- Net income $ 14.1 $ 14.5 $ 22.5 ===================================
See notes to combined financial statements. 3 FASCO Motors Group Combined Statement of Invested Capital (In Millions of Dollars)
OTHER INVESTED COMPREHENSIVE TOTAL CAPITAL INCOME EQUITY -------------------------------- Balance at March 31, 1999 $428.4 $ -- $428.4 Other comprehensive income: Net income 22.5 -- 22.5 Foreign currency translation adjustments (0.5) (0.3) (0.8) Other activity with affiliates (0.5) -- (0.5) -------------------------------- Total comprehensive income 21.5 (0.3) 21.2 Cash dividends (71.8) -- (71.8) Capital contributions 1.9 -- 1.9 -------------------------------- Balance at March 31, 2000 380.0 (0.3) 379.7 Other comprehensive income: Net income 14.5 -- 14.5 Foreign currency translation adjustments (3.5) (5.5) (9.0) -------------------------------- Total comprehensive income 11.0 (5.5) 5.5 Cash dividends (28.4) -- (28.4) Capital contributions 0.5 -- 0.5 -------------------------------- Balance at March 31, 2001 363.1 (5.8) 357.3 Other comprehensive income: Net income 14.1 -- 14.1 Foreign currency translation adjustments 1.1 0.6 1.7 Other activity with affiliates 0.9 -- 0.9 -------------------------------- Total comprehensive income 16.1 0.6 16.7 Capital contributions 7.7 -- 7.7 -------------------------------- Balance at March 31, 2002 $386.9 $ (5.2) $381.7 ================================
See notes to combined financial statements. 4 FASCO Motors Group Combined Statements of Cash Flows (In Millions of Dollars)
YEARS ENDED MARCH 31 2002 2001 2000 ----------------------------------- OPERATING ACTIVITIES Net income $ 14.1 $ 14.5 $ 22.5 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 15.4 15.4 13.2 Amortization 12.3 12.3 12.3 Impairment provisions 0.8 0.4 1.9 Deferred income taxes 2.5 3.9 (8.5) Net loss (gain) on dispositions of property, plant, and equipment 1.7 0.7 (0.1) Noncash restructuring charges -- -- 0.6 Changes in operating assets and liabilities: Receivables (1.8) 21.2 22.8 Inventories 13.4 1.4 5.9 Payables (20.4) 1.3 -- Trade to/from affiliates (20.3) 13.4 2.4 Income taxes (1.0) (13.4) 21.5 Pensions and other postretirement benefits 1.6 2.5 5.3 ----------------------------------- Cash provided by operating activities 18.3 73.6 99.8 INVESTING ACTIVITIES Expenditures for property, plant, and equipment (7.1) (21.2) (17.7) Proceeds from the dispositions of property, plant, and equipment 1.1 0.9 0.2 ----------------------------------- Cash used for investing activities (6.0) (20.3) (17.5) FINANCING ACTIVITIES Cash dividends -- (28.4) (71.8) Capital contributions from Parent 7.7 0.5 1.9 Increase (decrease) in debt 5.4 (2.6) 13.9 Net change in amounts due to affiliates (16.7) (27.9) (13.1) ----------------------------------- Net cash used in financing activities (3.6) (58.4) (69.1) Effect of exchange rate changes on cash (0.2) (1.1) (0.1) ----------------------------------- Increase (decrease) in cash and cash equivalents 8.5 (6.2) 13.1 Cash and cash equivalents at beginning of year 23.2 29.4 16.3 ----------------------------------- Cash and cash equivalents at end of year $ 31.7 $ 23.2 $ 29.4 =================================== SUPPLEMENTAL INFORMATION Income taxes paid $ 0.8 $ 2.4 $ 2.9 Interest paid $ 9.4 $ 14.8 $ 12.0
See notes to combined financial statements. 5 FASCO Motors Group Notes to Combined Financial Statements March 31, 2002, 2001, and 2000 1. ACCOUNTING POLICIES BASIS OF PREPARATION AND DESCRIPTION OF BUSINESS FASCO Motors Group (the Company), which includes the entities listed in Note 2 to combined financial statements, is part of and wholly owned by Invensys plc (the Parent), a publicly held corporation based in the United Kingdom. The Company is headquartered in Eaton Rapids, Michigan, and is a custom designer and manufacturer of AC motors, DC motors, blowers, gearmotors, and linear actuators, with design and manufacturing facilities in the United States, Mexico, Canada, Australia, and Thailand. The Company's products are used in a wide variety of applications within the HVAC, automotive, healthcare, and appliance industries among others and are typically sold to OEM manufacturers and aftermarket channels within North America and the Asia Pacific regions. All inter-company accounts and transactions, including profits as a result of those transactions, within the FASCO Motors Group are eliminated on combination. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the financial statements. Actual results could differ from those estimates. THIRD-PARTY RECEIVABLES The Company regularly factors certain third-party trade receivables to unrelated financial institutions on a nonrecourse basis pursuant to two separate agreements. The Company accounts for the transfer of receivables pursuant to these agreements as a sale of financial assets. The agreements, which are negotiated and administered by the Parent or its affiliates, require the Company to collect funds with respect to the factored receivables and remit the funds to the financial institutions. At March 31, 2002 and 2001, the amount of outstanding receivables transferred under the factoring agreement totaled $28.2 million and $39.8 million, respectively. 6 FASCO Motors Group Notes to Combined Financial Statements (continued) 1. ACCOUNTING POLICIES (CONTINUED) For the years ended March 31, 2002, 2001, and 2000, costs incurred relating to these agreements amounted to $1.5 million, $0.7 million, and $0.4 million, respectively. INVENTORIES Inventories are stated at the lower of cost or market, using the first in, first out (FIFO) method. Cost is determined based on standard cost with appropriate adjustments to approximate FIFO cost. Market is determined on the basis of estimated realizable values. PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment are stated at cost. Depreciation of property, plant, and equipment is provided using the straight-line method over the estimated useful life of the asset, as follows: Land None Buildings and improvements 40 to 50 years Plant and machinery 3 to 15 years Furniture and fixtures 5 to 14 years Computer equipment 4 to 10 years Improvements and replacements are capitalized to the extent that they increase the useful economic life or increase the expected economic benefit of the underlying asset. Repairs and maintenance expenditures are charged to expense as incurred. INTANGIBLE ASSETS Intangible assets consist of goodwill and patents. Goodwill represents the excess of the purchase price paid by the Parent for the Company over the fair value of the net assets acquired. Patents are stated at fair value on the date of acquisition of the Company by the Parent as determined by an independent valuation firm. Goodwill and patents are amortized using the straight-line method over 40 years and 8 years, respectively. 7 FASCO Motors Group Notes to Combined Financial Statements (continued) 1. ACCOUNTING POLICIES (CONTINUED) IMPAIRMENT OF LONG-LIVED ASSETS Long-lived assets, including goodwill and other intangible assets such as patents, are reviewed for impairment when events or circumstances indicate that the carrying amount of a long-lived asset may not be recoverable and for all assets to be disposed of. Long-lived assets held for use are reviewed for impairment by comparing the carrying amount of an asset to the undiscounted future cash flows expected to be generated by the asset over its remaining useful life. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. Management determines fair value using discounted future cash flow analysis or other accepted valuation techniques. In each of the three years ended March 31, 2002, 2001, and 2000, the Company identified certain assets that were considered impaired following changes in business activity. Impairment charges for the three years ended March 31, 2002, 2001, and 2000, were $0.8 million, $0.4 million, and $1.9 million, respectively. INCOME TAXES The Company, along with certain affiliates and its Parent, are included in a consolidated federal income tax return in the United States. The Company's tax provisions and related liabilities are reflected in the combined financial statements as if they were on a separate-return basis. DEFERRED TAXES The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement basis and the tax basis of the Company's assets and liabilities using enacted statutory tax rates applicable to future years. FOREIGN CURRENCY TRANSLATION Assets and liabilities of subsidiaries operating outside of the United States with a functional currency other than the U.S. dollar are translated into U.S. dollars using exchange rates at the end of the respective period. Sales, costs, and expenses are translated at average exchange rates effective during the respective period. 8 FASCO Motors Group Notes to Combined Financial Statements (continued) 1. ACCOUNTING POLICIES (CONTINUED) Foreign currency translation adjustments are included in accumulated other comprehensive loss as a separate component of invested capital. Currency transaction gains (losses) are included in the results of operations in the period incurred and were $0.9 million, $nil, and $(0.2) million in the years ended March 31, 2002, 2001, and 2000, respectively. REVENUE RECOGNITION Sales and related cost of sales are generally recorded upon shipment of products to the customer, which is generally when title passes. ADVERTISING COSTS Advertising costs are charged to selling, general, and administrative expenses as incurred and amounted to $1.1 million, $1.5 million, and $1.3 million in the years ended March 31, 2002, 2001, and 2000, respectively. RESEARCH AND DEVELOPMENT COSTS Research and development costs are charged to selling, general, and administrative expenses as incurred and amounted to $4.7 million, $5.9 million, and $4.8 million in the years ended March 31, 2002, 2001, and 2000, respectively. SIGNIFICANT CUSTOMER The Company has one customer, which accounted for 10.1%, 7.4%, and 7.4% of sales for the years ended March 31, 2002, 2001, and 2000, respectively. Trade receivables related to this customer at March 31, 2002 and 2001, were $6.3 million and $7.0 million, respectively. CONCENTRATION OF CREDIT RISK Credit is extended by the Company based upon an evaluation of the customer's financial position, and generally advance payment is not required. Credit losses are provided for in the combined financial statements and consistently have been within management's expectations. 9 FASCO Motors Group Notes to Combined Financial Statements (continued) 1. ACCOUNTING POLICIES (CONTINUED) SHIPPING AND HANDLING COSTS The Company classifies costs associated with shipping and handling activities within cost of sales in the combined statements of operations. Shipping and handling costs were $6.3 million, $7.7 million, and $5.6 million in the years ended March 31, 2002, 2001, and 2000, respectively. LEASES Assets held under capital leases are included in fixed assets. Each asset is depreciated over the shorter of the lease term or its useful life. Obligations related to finance leases, net of finance charges in respect of future periods, are included as appropriate within accounts payable. The interest element of the rental obligation is allocated to accounting periods during the lease term to reflect a constant rate of interest on the remaining balance of the obligation for each accounting period. Rentals under operating leases are charged to income on a straight-line basis over the lease term. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of cash, trade receivables, and trade payables approximated fair values as of March 31, 2002 and 2001. DERIVATIVE FINANCIAL INSTRUMENTS Effective April 1, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133 requires the Company to record all derivatives on the balance sheet at fair value regardless of the purpose or intent for holding them. Derivatives that are not hedges are adjusted to fair value through earnings. For derivatives that are hedges, depending on the nature of the hedge, changes in fair value are either offset by changes in the fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is immediately recognized in earnings. The effect of adopting SFAS 133 was not material. 10 FASCO Motors Group Notes to Combined Financial Statements (continued) 1. ACCOUNTING POLICIES (CONTINUED) NEW ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations" (SFAS 141), and SFAS No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS 141 addresses financial accounting and reporting for business combinations and requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Under SFAS 142, goodwill and certain other intangible assets will no longer be systematically amortized but instead will be reviewed for impairment and written down and charged to results of operations when their carrying amount exceeds their estimated fair value. SFAS 142 is effective for fiscal years beginning after December 15, 2001, with early adoption permitted for entities with fiscal years beginning after March 15, 2001. The Company expects to adopt SFAS 142 effective April 1, 2002. Management expects that the effect of ceasing amortization of goodwill will increase net income by approximately $11.1 million in the year ending March 31, 2003. The Company has not completed its assessment of the additional effects of adopting SFAS 142; however, a preliminary review indicates that may be an impairment of goodwill upon adopting SFAS 142. In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS 144), which addresses financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of. SFAS 144 is effective for fiscal years beginning after December 15, 2001, with early adoption permitted. Management is currently evaluating the provisions of SFAS 144 but believes there will be no significant effect on the Company's financial position, results of operations, or invested capital resulting from the adoption. 11 FASCO Motors Group Notes to Combined Financial Statements (continued) 2. ENTITIES INCLUDED WITHIN COMBINED FINANCIAL STATEMENTS Amounts reflected in the combined financial statements or the notes thereto relate to the continuing operations of the Company: FASCO Industries Inc (USA) ECM Motor Company (USA) Brinkley Motor Products Company (USA) Von Weise Gear Company (USA) Motores FASCO de Mexico de RL de CV (Mexico) Eaton Technologies Inc (USA) FASCO Motors Ltd (Canada) FASCO Australia Pty Ltd FASCO Australia Services Pty Ltd Invensys (Thailand) Ltd FASCO Motors (Thailand) Ltd FASCO Yamabishi Co. Ltd (Thailand) 3. RESTRUCTURING AND OTHER SIMILAR COSTS Restructuring and other similar costs are summarized as follows (in millions):
YEARS ENDED MARCH 31 2002 2001 2000 -------------------------- Plant closure, relocation, and related costs $3.5 $ 4.5 $11.1 Severance and other termination related costs 1.4 7.5 1.6 Other restructuring and similar costs 4.3 5.6 4.6 ------------------------ 9.2 17.6 17.3 ======================== Cash payments 9.8 17.3 22.2 Noncash restructuring charges - - 0.6 ------------------------ $9.8 $17.3 $22.8 ========================
12 FASCO Motors Group Notes to Combined Financial Statements (continued) 3. RESTRUCTURING AND OTHER SIMILAR COSTS (CONTINUED) PLANT CLOSURE, RELOCATION, AND RELATED COSTS In the year ended March 31, 1999, management decided to close its Russellville, Parsons, and LaGrange facilities and move production into other existing plants in order to streamline manufacturing operations. The total costs of exiting these facilities were $11.1 million, of which $3.2 million was incurred in the year ended March 31, 1999. An additional $0.6 million and $7.3 million was incurred for the costs of exiting these facilities in the years ended March 31, 2001 and 2000, respectively. Management also consolidated its Australian operations and relocated production into the Company's Thailand facility, incurring $0.3 million, $0.2 million, and $3.3 million during the years ended March 31, 2002, 2001, and 2000, respectively. In the years ended March 31, 2002 and 2001, management further relocated several production lines from U.S. operations to its Mexico facilities at a cost of $1.1 million and $3.0 million, respectively. In the year ended March 31, 2002, management commenced the consolidation of its ECM facility, the incremental cost, of which was $1.7 million. Other costs incurred during the years ended March 31, 2002, 2001, and 2000, in respect of plant closures, relocation, and other related costs amounted to $0.4 million, $0.7 million, and $0.5 million, respectively. SEVERANCE AND OTHER TERMINATION RELATED COSTS In addition to plant closures and relocations, management reduced headcount to streamline manufacturing operations to eliminate duplicate administrative, selling, and marketing operations and to respond to declining demand and increasing costs. The number of employees terminated was 203 in the year ended March 31, 2002, 412 in the year ended March 31, 2001, and 440 in the year ended March 31, 2000. OTHER RESTRUCTURING AND SIMILAR COSTS Management also responded to the changing economic environment of declining demand and increasing costs by implementing other restructuring projects throughout the three-year period. These included reorganizing factory layouts and implementing lean manufacturing and six sigma principles in order to reduce costs and maximize production efficiency. The costs include fees paid to external advisors, as well as incremental costs incurred by the operations. There were no individually significant projects. 13 FASCO Motors Group Notes to Combined Financial Statements (continued) 3. RESTRUCTURING AND OTHER SIMILAR COSTS (CONTINUED) Restructuring accruals are summarized as follows (in millions):
YEARS ENDED MARCH 31 2002 2001 2000 --------------------------- Restructuring accrual at beginning of year $0.7 $0.4 $ 5.9 Provisions charged to income 0.1 0.3 - Utilized (0.7) - (5.5) --------------------------- Restructuring accrual at end of year $0.1 $0.7 $ 0.4 ===========================
In addition to the provisions charged to income, the Company has expensed other costs arising from the restructuring projects as they are incurred. These amount to $9.1 million, $17.4 million, and $17.3 million in the years ended March 31, 2002, 2001, and 2000, respectively. 4. INVENTORIES Inventories are summarized as follows (in millions):
MARCH 31 2002 2001 -------------- Finished goods $16.5 $18.7 Work-in-process 10.2 14.3 Raw materials, parts, and supplies 14.2 21.1 -------------- Total $40.9 $54.1 ==============
14 FASCO Motors Group Notes to Combined Financial Statements (continued) 5. PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment is summarized as follows (in millions):
MARCH 31 2002 2001 -------------------- Land $ 1.9 $ 1.9 Buildings and improvements 49.5 45.6 Machinery and equipment 234.3 227.0 Construction in progress 5.0 14.7 -------------------- Total property, plant, and equipment 290.7 289.2 Less: Accumulated depreciation 152.7 140.3 -------------------- Property, plant, and equipment, net $138.0 $148.9 ====================
6. INTANGIBLE ASSETS Intangible assets are summarized as follows (in millions):
MARCH 31 2002 2001 --------------------- Goodwill $439.5 $438.4 Trademarks, patents, and other intangibles 9.1 9.1 --------------------- Total intangibles 448.6 447.5 Less: Accumulated amortization 38.7 26.4 --------------------- Intangible assets, net $409.9 $421.1 =====================
15 FASCO Motors Group Notes to Combined Financial Statements (continued) 7. ACCRUALS AND OTHER CURRENT LIABILITIES Accruals and other current liabilities are summarized as follows (in millions):
MARCH 31 2002 2001 ------------------- Accrued vacation $ 4.4 $ 4.9 Accrued healthcare claims 2.1 2.1 Payroll costs 1.4 1.4 Workers compensation claims 1.2 0.8 Other 5.3 6.4 ------------------- Accruals and other current liabilities $14.4 $15.6 ===================
8. LONG-TERM PAYABLES TO AFFILIATES The Company's Parent and its affiliates maintain various banking and credit facilities, which provide the Company's principal source of financing. The Company's borrowing rates have been adjusted to reflect the U.S. "Prime" lending rate, and the interest expense thereon is recorded as interest expense to affiliates. Excess balances in the Company's cash accounts are generally transferred to the Parent company and its affiliates on a daily basis as a repayment of financing. Although there is no formal credit agreement between the Company and its Parent, it has been the practice of the Parent to make such funds available as are necessary for the continued operation of the Company. The debt owed to the Parent and its affiliates is therefore classified as "Long-term payables to affiliates." Management believes that cash flow provided by the Company's operations together with financing provided by the Parent and its affiliates will continue to be adequate to fund the Company's future operating requirements. 16 FASCO Motors Group Notes to Combined Financial Statements (continued) 9. OPERATING LEASES Rent expense for operating leases was $2.2 million, $2.2 million, and $1.4 million in 2002, 2001, and 2000, respectively. Future minimum rental payments for operating leases consist of the following as of March 31, 2002 (in millions):
MINIMUM PAYMENTS ------------ YEAR ENDING MARCH 31 2003 $2.0 2004 1.5 2005 2.0 2006 1.2 2007 0.5 Thereafter 0.2 ------------ Total $7.4 ============
10. STOCK OPTIONS The Parent operates two stock option plans in which certain of the Company's senior management participate. EXECUTIVE STOCK OPTION SCHEME (THE 1998 SCHEME) The Parent maintains a discretionary stock option scheme under which options to purchase the Parent's stock may be granted each year to senior management at multiples of salary, which reflect the prevailing market practice in the relevant country. When options were granted during 2002, 2001, and 2000, the Parent concluded that the salary multiple, which is appropriate for the Company's senior management, is between 0.5 and 2.1 times annual salary. No options are granted at a discount, and all options are subject to stretching performance conditions on exercise as determined at the time of grant. The performance condition for the year under review was for the Parent's earnings per share to out-perform the Retail Price Index by at least 12% in the three years after the grant of the option, or by 16% in the four years after the grant of the option, or by 20% in the five years after the grant of the option, failing which the option will lapse. The Remuneration Committee will continue to set appropriate and stretching performance targets depending on the specific demands of the business and the operating environment. It is the Parent's policy to extend participation in the 1998 Scheme to overseas executives on terms as close as practicable to those applicable in the United Kingdom. 17 FASCO Motors Group Notes to Combined Financial Statements (continued) 10. STOCK OPTIONS (CONTINUED) The Company accounts for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Stock compensation expense recognized in 2002, 2001, and 2000 was not significant. Information relative to stock options granted to Company senior management pursuant to the aforementioned plan for each of the three years ended March 31 is as follows (weighted average exercise prices are in pounds sterling since all stock options are issued and exercisable in such currency):
YEARS ENDED MARCH 31 2002 2001 2000 ------------------------------------------------------------------------------------ WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE ------------------------------------------------------------------------------------ Number of shares under option: Outstanding at beginning of year 1,469,770 (pound) 2.52 961,326 (pound) 2.89 397,883 (pound) 2.95 Granted: Time-vesting 839,828 (pound) 1.41 603,044 (pound) l.96 563,443 (pound) 2.85 Adjustments: Canceled or expired (24,400) (pound) 2.79 (94,600) (pound) 2.82 -- -- ----------- ---------- --------- Outstanding at end of year 2,285,198 (pound) 2.11 1,469,770 (pound) 2.52 961,326 (pound) 2.89 =========== ========== ========= Exercisable at end of year 352,883 (pound) 2.98 64,578 (pound) 5.19 42,640 (pound) 6.06 =========== ========== =========
The range of exercise prices for options outstanding at March 31, 2002, is (pound)0.90 to (pound)6.26. The range of exercise prices for options exercisable at March 31, 2002, is (pound)1.80 to (pound)6.26. The range of remaining contractual life for options outstanding at March 31, 2002, is one to nine years. 18 FASCO Motors Group Notes to Combined Financial Statements (continued) 10. STOCK OPTIONS (CONTINUED) The Company's net income would not have been significantly different had the Company accounted for stock-based compensation using the fair value method provided by SFAS No. 123, "Accounting for Stock-Based Compensation". The Company determines the fair value of options granted using the Black-Scholes option pricing model. Fair value was determined using the following weighted-average assumptions:
YEARS ENDED MARCH 31 2002 2001 2000 -------------------------------------------------- Average risk-free interest rate 4.3% 5.2% 5.0% Expected dividend yield 2.2% 5.6% 2.7% Expected volatility 62.3% 48.9% 35.8% Expected life 3-7 YEARS 3-7 years 3-7 years
11. RETIREMENT BENEFITS The Company and its Parent sponsor defined-benefit pension plans and other postretirement benefit plans for their employees. The pension plans cover most of the Company's employees in the United States and Canada and provide for monthly pension payments to eligible employees upon retirement. The Company's eligible employees are covered by the Parent's various pension plans, which are different for the United States and Canadian employees. Pension benefits for salaried employees generally are based on years of credited service and average earnings. Pension benefits for hourly employees generally are based on specified benefit amounts and years of service. The Company's policy is to fund its pension obligations in conformity with the funding requirements of laws and governmental regulations applicable in the respective country. Other postretirement benefits are in the form of retirement medical plans and cover most of the Company's United States employees and provide for the payment of certain medical costs of eligible employees and dependents upon retirement. The Company's eligible United States employees and dependents are covered by the Parent's retiree medical and life insurance plans. 19 FASCO Motors Group Notes to Combined Financial Statements (continued) 11. RETIREMENT BENEFITS (CONTINUED) The components of net periodic benefit cost for active participants are as follows (in millions):
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS YEARS ENDED MARCH 31 2002 2001 2000 2002 2001 2000 -------------------------------------------------------------------------------- Service cost 3.1 3.2 3.0 0.1 0.1 0.1 Interest cost 2.3 2.0 1.8 0.6 0.6 0.6 Expected return on plan assets (3.2) (3.0) (2.7) -- -- -- Amortization: Prior service cost -- -- -- (0.4) -- -- Net actuarial loss (0.3) (0.1) -- (0.1) (0.1) (0.1) -------------------------------------------------------------------------------- Net periodic benefit cost 1.9 2.1 2.1 0.2 0.6 0.6 ================================================================================
Benefit obligation, plan asset, funded status, and net liability information for active participants is summarized as follows (in millions):
PENSION OTHER POSTRETIREMENT BENEFITS BENEFITS YEARS ENDED MARCH 31 2002 2001 2002 2001 ------------------------------------------------- Benefit obligation at beginning of year 30.4 30.0 11.9 11.5 Service cost 3.1 3.2 0.1 0.1 Interest cost 2.3 2.0 0.6 0.6 Actuarial (gains) losses (0.9) (4.5) (0.1) (0.1) Plan amendments 1.6 -- -- -- Benefits paid (0.2) (0.2) (0.4) (0.2) Other (including currency translation) (0.1) (0.1) (0.4) -- ------------------------------------------------- Benefit obligation at end of year 36.2 30.4 11.7 11.9 Fair value of plan assets at beginning of year 32.9 30.0 -- -- Actual return on plan assets 3.0 3.0 -- -- Company contributions 0.3 0.3 0.4 0.2 Benefits paid (0.2) (0.2) (0.4) (0.2) Other (including currency translation) (0.1) (0.2) -- -- ------------------------------------------------- Fair value of plan assets at end of year 35.9 32.9 -- -- Funded status of plans (0.3) 2.5 (11.7) (11.9) Unrecognized prior service cost 1 7 0.1 0.3 -- Deferred net actuarial gains (7.5) (6.8) (0.3) -- ------------------------------------------------- Net amount recognized at year end (6.1) (4.2) (11.7) (11.9) Net liability on balance sheet consists of: Prepaid benefit cost 0.3 0.2 -- -- Accrued benefit liability (6.4) (4.4) (11.7) (11.9) Deferred tax asset -- -- -- -- Intangible asset -- -- -- -- Accumulated other comprehensive loss -- -- -- -- ------------------------------------------------- Net liability on balance sheet (6.1) (4.2) (11.7) (11.9) =================================================
20 FASCO Motors Group Notes to Combined Financial Statements (continued) 11. RETIREMENT BENEFITS (CONTINUED) The Company uses an actuarial measurement date of December 31 to measure its benefit obligations. Significant assumptions used in determining these benefit obligations and net periodic benefit cost for active participants are summarized as follows (in weighted averages):
PENSION OTHER POSTRETIREMENT BENEFITS BENEFITS YEARS ENDED MARCH 31 2002 2001 2002 2001 ----------------------------------------------------- Discount rate 7.5% 7.7% 7.5% 7.7% Compensation increase rate 4.0% 4.0% N/A N/A Expected return on plan assets 10.0% 10.0% N/A N/A Heath care cost trend rate N/A N/A 9.0% 6.58%
The other postretirement benefit obligation was determined using an assumed healthcare cost trend rate of 10.0% in 2002, grading down to 5.0% in 2006 and thereafter. The discount rate, compensation increase rate, and health care cost trend rate assumptions are determined as of the measurement date. The expected return on plan assets assumption is determined as of the previous measurement date. OTHER POSTRETIREMENT BENEFITS Assumed health care cost trend rates have a significant effect on amounts reported for the retiree medical plans. A one-percentage point change in assumed health care cost trend rates would have the following effect (in millions):
ONE PERCENTAGE POINT ONE PERCENTAGE POINT INCREASE DECREASE YEARS ENDED MARCH 31 2002 2001 2002 2001 -------------------------------------------------- Increase (decrease) to total of service and interest cost components $0.1 $0.1 $(0.1) $(0.1) ================================================== Increase (decrease) to postretirement benefit obligation $1.0 $1.1 $(0.9) $(1.0) ==================================================
21 FASCO Motors Group Notes to Combined Financial Statements (continued) 11. RETIREMENT BENEFITS (CONTINUED) DEFINED-CONTRIBUTION SAVINGS PLANS The Company sponsors certain defined-contribution savings plans for eligible employees. Expense related to these plans was $1.4 million in each of the three years ended March 31, 2002, 2001, and 2000. 12. OTHER OPERATING EXPENSES, NET The components of other operating expenses, net are as follows (in millions):
MARCH 31 2002 2001 2000 ------------------------------------------------ Net gain (loss) on dispositions of property, plant, and equipment $(1.7) $(0.7) $ 0.1 Impairment write-offs (0.8) (0.4) (1.9) Other (0.1) (0.2) (0.3) ------------------------------------------------ Other operating expenses, net $(2.6) $(1.3) $(2.1) ================================================
13. INCOME TAXES The components of the income tax provision are as follows (in millions):
MARCH 31 2002 2001 2000 ------------------------------------------------ Current: United States $12.7 $11.1 $28.5 Non-United States -- 2.3 3.5 State and local 1.3 0.2 0.2 ------------------------------------------------ Total current 14.0 13.6 32.2 Deferred: United States 1.2 3.2 (6.7) Non-United States 1.1 1.2 (0.3) State and local 0.2 0.5 (1.1) ------------------------------------------------ Total deferred 2.5 4.9 (8.1) ------------------------------------------------ Income tax provision $16.5 $18.5 $24.1 ================================================
22 FASCO Motors Group Notes to Combined Financial Statements (continued) 13. INCOME TAXES (CONTINUED) The provision for income taxes was calculated based upon the following components of income (loss) before income taxes (in millions):
YEARS ENDED MARCH 31 2002 2001 2000 ------------------------------------------------ United States $27.4 $33.7 $41.4 Non-United States 3.2 (0.7) 5.2 ------------------------------------------------ Income before income taxes $30.6 $33.0 $46.6 ================================================
Net current deferred income tax assets (liabilities) are as follows (in millions):
MARCH 31 2002 2001 ------------------------------------- Compensation and benefits $(0.6) $(0.7) Inventory 3.4 3.8 Interest 6.6 5.3 Other 4.2 4.8 ------------------------------------- Total current deferred income tax assets $13.6 $13.2 =====================================
Net long-term deferred income taxation assets (liabilities) are as follows (in millions):
MARCH 31 2002 2001 ------------------------------- Retirement benefits $ 7.5 $ 7.3 Property (20.6) (20.0) Intangible assets (8.6) (6.2) Start-up costs/reorganization costs (2.3) (2.1) Non-United States net operating loss carryforwards 1.2 2.6 Other (1.3) (1.4) ------------------------------- Total long-term deferred income taxes (24.1) (19.8) Total current deferred income taxes 13.6 13.2 ------------------------------- Subtotal (10.5) (6.6) Valuation allowance (1.2) (2.6) ------------------------------- Net deferred income tax liabilities $(11.7) $ (9.2) ===============================
23 FASCO Motors Group Notes to Combined Financial Statements (continued) 13. INCOME TAXES (CONTINUED) These deferred tax assets and liabilities are classified in the combined balance sheet based on the balance sheet classification of the related assets and liabilities. Management believes it is more likely than not that current and long-term deferred tax assets will be realized through the reduction of future taxable income. Significant factors considered by management in this determination include the historical operating results of the Company and the expectation of future earnings, including anticipated reversals of future taxable temporary differences. A valuation allowance was established at March 31, 2002 and 2001, for deferred tax assets related to non-United States net operating loss carryforwards for which utilization is uncertain. The provision for income taxes differs from the United States statutory tax rate due to the following items:
YEARS ENDED MARCH 31 2002 2001 2000 ---------------------------------------------- United States statutory tax rate 35.0% 35.0% 35.0% State income taxes, net of federal benefit 3.2 1.5 (1.4) Non-United States taxes (0.3) 2.5 4.5 Non-United States net operating losses for which tax benefit was not provided 4.0 7 9 2.3 Nondeductible goodwill 14.2 13.0 9.3 Other (2.2) (3.8) 2.0 ---------------------------------------------- Effective income tax rate 53.9% 56.1% 51.7% ==============================================
No provision has been made for United States or foreign income taxes related to approximately $10.1 million of undistributed earnings of foreign subsidiaries, which are considered to be permanently reinvested. It is not practical to determine the income tax liability, if any, which would be payable if such earnings were not permanently reinvested. Various United States and foreign subsidiaries of the Company are included in consolidated tax filings with other affiliated companies of the Parent. The methodology applied for allocating taxes between affiliates that participate in consolidated tax filings is as follows: to the extent that a company generates taxable income, the company remits taxes to its affiliated parent company based upon the applicable statutory effective tax rate. If a taxable loss is generated by a company, the affiliated parent company does not provide any current or future cash benefit. 24 FASCO Motors Group Notes to Combined Financial Statements (continued) 13. INCOME TAXES (CONTINUED) The income tax provision for the Company has been calculated as if the entities included in the combined financial statements file separately from their non-FASCO Motors Group affiliates. 14. RELATED PARTY TRANSACTIONS MANAGEMENT CHARGES Included within selling, general, and administrative expenses are charges for administrative expenses incurred by the Parent and its affiliates that are directly attributed to, or reasonably allocated to, the stand-alone operations of the Company. These charges are primarily for insurance coverage, accounting, legal, and data transmission services. These charges totaled $2.8 million, $2.8 million, and $2.8 million for the years ended March 31, 2002, 2001, and 2000, respectively. The expenses allocated have been determined on a basis that the Company, the Parent, and its affiliates considered to be reasonable estimates of the utilization of services provided or the benefit received by the Company. The financial information included herein may not reflect the combined financial position, operating results, and cash flows of the Company in the future or what they would have been had the Company been a separate, independent entity during the periods presented. TRADING ACTIVITY The Company sells to and purchases from affiliates various products in the normal course of business. Pricing is generally negotiated on an arm's-length basis based on standard pricing schedules. Purchases from affiliates were $0.9 million, $0.6 million, and $0.6 million in 2002, 2001, and 2000, respectively. FUNDING ACTIVITY The Company participates in the Parent's treasury function whereby funds are loaned to and borrowed from affiliates in the normal course of business. At March 31, 2002 and 2001, the long-term payables to affiliates and all long-term receivables from affiliates are not evidenced by underlying Notes. These are classified as long-term in the combined balance sheets as current, as past funding practice has been that repayments are made on a long-term basis. Management does not believe the amounts outstanding at March 31, 2002 and 2001, are indicative of the Company's financing needs on a stand-alone basis. 25 FASCO Motors Group Notes to Combined Financial Statements (continued) 15. COMMITMENTS AND CONTINGENT LIABILITIES The Company is also involved in various unresolved legal actions, administrative proceedings, and claims in the ordinary course of its business involving product liability, product warranty, property damage, insurance coverage, patents, and environmental matters. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss or recovery, based upon current information, management believes these unresolved legal actions will not have a material effect on the financial position or results of operations of the Company. 16. BUSINESS SEGMENT INFORMATION The Company operates in a single business segment. Net sales to third parties and property, plant, and equipment by geographic region are as follows (in millions):
NET SALES PROPERTY, PLANT, TO THIRD PARTIES AND EQUIPMENT --------------------------------------- ---------------------- YEARS ENDED MARCH 31 MARCH 31 2002 2001 2000 2002 2001 --------------------------------------- ---------------------- North America $431.4 $482.2 $513.8 $106.3 $116.0 Rest of World 47.2 53.4 60.1 31.7 32.9 --------------------------------------- ---------------------- $478.6 $535.6 $573.9 $138.0 $148.9 ======================================= ======================
Net sales to third parties are attributed to the geographic regions based on the country in which the shipment originates. Amounts attributed to the geographic regions for property, plant, and equipment are based on the location of the entity, which holds such assets. 17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED, IN MILLIONS OF DOLLARS)
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter ----------------------------------------------------------------------------------- 2002 2001 2002 2001 2002 2001 2002 2001 ----------------------------------------------------------------------------------- Net sales $122.4 $136.1 $123.8 $139.3 $115.2 $132.1 $117.5 $128.6 Gross profit 24.7 31.7 29.1 36.0 26.8 31.8 26.3 29.7 Net income 2.7 3.5 2.5 3.9 4.0 4.6 4.9 2.4
26 FASCO Motors Group Notes to Combined Financial Statements (continued) 18. SUBSEQUENT EVENTS Subsequent to March 31, 2002, management has approved plans to restructure certain operations by transferring production to Mexico. In particular, the closure of the Ozark, Missouri, site was announced on June 18, 2002. Management estimates the total cost of these restructuring projects will amount to approximately $7.3 million. On November 27, 2002, the Parent entered into a Stock Purchase Agreement with Tecumseh Products Company pursuant to which the Company will be acquired by Tecumseh Products Company for cash of $415.0 million. The consideration for the acquisition is subject to certain closing date adjustments. 27 EX-99.2 9 k73591exv99w2.txt PRO FORMA FINANCIAL STATEMENTS EXHIBIT 99.2 PRO FORMA COMBINED FINANCIAL INFORMATION (UNAUDITED) (DOLLARS IN MILLIONS) The unaudited pro forma combined balance sheet as of September 30, 2002 (the "Unaudited Pro Forma Combined Balance Sheet") gives pro forma effect to the acquisition of FASCO Motors as if it had occurred on September 30, 2002. The acquisition of FASCO Motors will be accounted for by the purchase method of accounting pursuant to which the purchase price is allocated among the acquired tangible and intangible assets and assumed liabilities in accordance with estimates of their fair values on the date of acquisition. The pro forma adjustments represent the Company's preliminary determination of purchase accounting adjustments and are based upon available information and certain assumptions that the Company believes to be reasonable under the circumstances. Consequently, the amounts reflected in the Unaudited Pro Forma Balance Sheet are subject to change and the final values may differ substantially from these amounts. The Company does not expect that differences between the preliminary and final purchase price allocation will have a material impact on the Company's financial position. The Unaudited Pro Forma Balance Sheet does not purport to be indicative of the financial position of the Company had such transactions actually been completed as of the assumed dates and for the periods presented, or which may be obtained in the future. The unaudited pro forma combined statement of operations for the nine months ended September 30, 2002 and for the year ended December 31, 2001 (the "Unaudited Pro Forma Combined Statements of Operations") gives pro forma effect of the acquisition of FASCO Motors as if it had occurred on January 1, 2001. The Unaudited Pro Forma Statements of Operations do not purport to be indicative of the results of operations of the Company had such transactions actually been completed as of the assumed dates and for the periods presented, or which may be obtained in the future. The pro forma adjustments are based upon available information and various assumptions that the Company believes are reasonable. The pro forma adjustments and certain assumptions are described in the accompanying notes. Pro forma adjustments have been used to eliminate historical goodwill amortization over the periods presented. The allocation of the purchase price is preliminary and will be revised upon the completion of the fixed asset and intangible asset appraisals, which are in progress. The final allocations and the amounts included in these pro forma financial statements could differ significantly. UNAUDITED PRO FORMA COMBINED BALANCE SHEET As of September 30, 2002 (in millions)
Tecumseh FASCO Adjustments Notes Pro Forma ----------------------------------------------------------------- ASSETS Cash and cash equivalents $ 369.2 $ 8.9 $ (105.9) (a) 272.2 Accounts receivable, less allowance 203.0 35.1 30.8 (b) (1.8) (h) 267.1 Accounts receivable - affiliates - 7.8 (7.8) (c) - ---------------------------------------- --------- Total receivables 203.0 42.9 21.2 267.1 Inventories 262.4 37.6 5.1 (f) 305.1 Deferred income taxes 44.8 13.6 (1.8) (k) 56.6 Prepayments and other Current assets 17.6 6.0 1.0 (a) 24.6 ---------------------------------------- --------- TOTAL CURRENT ASSETS 897.0 109.0 (80.4) 925.6 Net property 389.2 132.4 (7.9) (d) 40.0 (g) 553.7 Goodwill and intangibles, less amortization 43.7 409.3 20.0 (j) 15.0 (j) (409.3 (l) (226.2) (l) 304.9 Long-term receivables - affiliates - 227.3 (227.3) (c) - Deferred income taxes 52.6 - 2.1 (k) 54.7 Prepaid pension expense 158.9 - - 158.9 Other assets 16.1 - - 16.1 ---------------------------------------- --------- TOTAL ASSETS $ 1,557.5 $ 878.0 $ (421.6) $ 2,013.9 ======================================== ========= LIABILITIES AND EQUITY Trade payables $ 121.3 $ 47.9 $ (1.8) (h) $ 167.4 Trade payables - affiliates - 35.9 (35.9) (c) - ---------------------------------------- --------- Total payables 121.3 83.8 (37.7) 167.4 Income taxes payable 7.4 10.2 - 17.6 Short-term borrowings 10.0 13.8 - 23.8 Accrued liabilities 138.1 16.2 - 154.3 ---------------------------------------- --------- TOTAL CURRENT LIABILITIES 276.8 124.0 (37.7) 363.1 Long-term debt 44.0 1.6 300.0 (a) 345.6 Long-term payable to affiliates - 316.2 (316.2) (c) - Deferred income taxes 3.0 24.3 18.9 (k) 46.2 Pension & other postretirement benefit liabilities 223.7 19.0 5.8 (e) 248.5 Product warranty and self-insured risks 21.0 0.5 - 21.5 Accrual for environmental matters 28.4 - - 28.4 ---------------------------------------- --------- TOTAL LIABILITIES 596.9 485.6 (29.2) 1,053.3 EQUITY Class A common stock 13.4 - - 13.4 Class B common stock 5.1 - - 5.1 Retained earnings 1,075.5 392.4 (392.4) (i) 1,075.5 Accumulated other comprehensive income (133.4) - - (133.4) ---------------------------------------- --------- TOTAL EQUITY 960.6 392.4 (392.4) 960.6 ---------------------------------------- --------- TOTAL LIABILITIES AND EQUITY $ 1,557.5 $ 878.0 $ (421.6) $ 2,013.9 ======================================== =========
See accompanying Notes to Unaudited Proforma Combined Balance Sheet. NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET (DOLLARS IN MILLIONS) The Unaudited Pro Forma Combined Balance Sheet as of September 30, 2002 gives pro forma effect to the acquisition of FASCO Motors as if it had occurred on September 30, 2002. (a) Reflects the estimated sources and uses of funds for the sole purpose of acquiring FASCO Motors presented as if the acquisition had occurred on September 30, 2002. The purchase price of $415 million has been adjusted to reflect the impact of adjustments for estimated trade working capital, estimated net debt as well as other purchase price adjustments as if the acquisition had occurred on September 30, 2002. At closing, the Company borrowed (i) $250 million under the Bridge Credit Agreement, which requires refinancing within ninety days, and (ii) $75 million under the Three-Year Credit Agreement. The Company intends to refinance both of these short-term borrowings with long-term financing of between $250 million and $300 million. The Unaudited Combined Pro Forma Balance Sheet reflects the high end of the Company's estimated range of the long-term debt balance that will replace the $325 million of short term financing used to fund this transaction. The Company estimates (i) $1 million in loan origination fees related to the Bridge Credit Agreement, Three-Year Credit Agreement and subsequent refinancing into long-term debt and (ii) $5.5 million in acquisition related fees.
Initial Impact Final Acquisition of Acquisition Financing Refinancing Financing ----------- ----------- ----------- (in millions) Source of funds: Borrowings under the Bridge Credit Agreement $ 250.0 $ (250.0) $ - Borrowings under the Three-Year Credit Agreement 75.0 (75.0) - Long term financing - 300.0 300.0 Cash 80.9 25.0 105.9 ---------- ----------- --------- Total sources $ 405.9 $ - $ 405.9 ========== =========== =========
September 30, 2002 ------------- (in millions) Use of funds: Acquisition of FASCO Motors $ 400.0 Estimated reduction for trade working capital (8.3) Estimated reduction for net debt (6.5) Other estimated purchase price reductions (0.8) Estimated acquisition related fees 5.5 Estimated loan origination fees 1.0 ------------ Sub-total 390.9 Consideration for non-compete agreement 15.0 ------------ Total uses $ 405.9 ============
(b) Reflects the termination of a receivables factoring arrangement as if it had occurred as of September 30, 2002. The adjustment represents the value of receivables that had been sold as of September 30, 2002. The receivables factoring arrangement was terminated prior to closing. (c) Reflects the adjustment to eliminate receivables and payables balances with affiliates, which were settled at closing. (d) Reflects the net book value of assets that will not be acquired by the Company. Assets consist of $4.8 million and $3.1 million for the Ozark, Missouri and Elkhorn, Wisconsin facilities, respectively. (e) Reflects the net impact of transferring FASCO's pension and OPEB liabilities and associated assets as of September 30, 2002 in accordance with the agreement. These amounts also reflect the impact of purchase accounting.
September 30, 2002 ------------------ (in millions) Increase pension obligations $ 7.2 Decrease OPEB obligations (1.4) ---------------- NET ADJUSTMENT $ 5.8 ================
(f) Reflects an increase in inventory to its estimated fair market value less an amount equal to the profit associated with selling and distribution efforts. (g) Reflects an increase in property, plant and equipment to its estimated fair market value. (h) Reflects the adjustment to eliminate receivable and payable balances between Tecumseh and FASCO, which as a result of the acquisition constitute intercompany balances that would eliminate in consolidation. (i) Reflects the elimination of FASCO's retained earnings. (j) Reflects the recognition of the estimated fair value of (1) $20 million for intangible assets subject to amortization resulting from this transaction and (ii) $15 million for a non-compete agreement. (k) Reflects the estimated impact on deferred taxes resulting from the purchase accounting adjustments related to the acquisition of FASCO Motors. (l) Reflects the net adjustment to recognize the estimated fair value of goodwill and other intangible assets with indefinite useful lives resulting from the acquisition.
September 30, 2002 ------------- (in millions) Historical net book value of FASCO Motors $ 392.4 Adjustments: Eliminate historical book value of FASCO Motors' intangible assets (409.3) Capitalization of estimated loan origination fees (note a) 1.0 Impact of the termination of the receivables factoring arrangement (note b) 30.8 Elimination of receivables from affiliates (note c) (235.1) Elimination of payables to affiliates (note c) 352.1 Elimination of assets not acquired (note d) (7.9) Estimated increase in pension and post retirement reserve (note e) (5.8) Estimated increase in inventory to estimate fair market value (note f) 5.1 Estimated increase in property plant and equipment to estimated fair value (note g) 40.0 Capitalization of estimated fair value of the non-compete agreement (note j) 15.0 Recognition of the estimated fair value of intangibles assets subject to amortization (note j) 20.0 Estimated increase in deferred tax assets (note k) 0.3 Estimated increase in deferred tax liability (note k) (18.9) ------- Total adjustments (212.7) ------- Estimated fair value of acquired net tangible and intangible assets subject to amortization $ 179.7 Purchase price (note a) $ 405.9 Less estimated fair value of acquired net tangible and intangibles assets subject to amortization 179.7 ------- Estimated goodwill and intangibles assets with indefinite useful lives resulting from the acquisition $ 226.2 =======
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS For the Nine Months Ended September, 30, 2002 (in millions, except per share amounts)
(a) Tecumseh FASCO Adjustments Notes Pro Forma --------------------------------------------------------------- SALES $ 1,039.6 $ 352.0 (8.1) (e) 1,383.5 COSTS AND EXPENSES Costs of sales & Operating Expenses 882.1 281.8 1.7 (c) (8.1) (e) 1.8 (f) (2.8) (g) 7.2 (h) 1,163.7 Selling, administrative, and other expenses 88.9 32.4 - 121.3 Nonrecurring charges 4.5 5.5 - 10.0 ------------------------------------- --------- Total costs and expenses 975.5 319.7 (0.2) 1,295.0 OPERATING INCOME 64.1 32.3 (7.9) 88.5 Interest expense (3.5) (7.3) (4.2) (d) (15.0) Interest income and other, net 8.8 - (0.3) (d) 8.5 ------------------------------------- --------- INCOME BEFORE TAXES 69.4 25.0 (12.4) 82.0 Provision for income taxes 24.6 10.5 (3.8) (i) 31.3 Effect of accounting change for goodwill, net of tax (3.1) - - (3.1) ------------------------------------- --------- NET INCOME $ 41.7 $ 14.5 $ (8.6) $ 47.6 ===================================== ========= Basic and diluted earnings per share $ 2.26 $ 2.58 ========= ========= based on 18,479,684 shares outstanding
For the Year Ended December 31, 2001 (in millions, except per share amounts)
(b) Tecumseh FASCO Adjustments Notes Pro Forma --------------------------------------------------------------- SALES $ 1,398.9 $ 478.9 $ (12.3) (e) $ 1,865.5 COSTS AND EXPENSES Costs of sales & Operating Expenses 1,207.2 386.9 2.3 (c) (12.3) (e) 2.4 (f) (11.0) (g) 9.5 (h) 1,585.0 Selling, administrative, and other expenses 112.1 38.8 - 150.9 Nonrecurring charges 35.4 9.2 - 44.6 ------------------------------------- --------- Total costs and expenses 1,354.7 434.9 (9.1) 1,780.5 OPERATING INCOME 44.2 44.0 (3.2) 85.0 Interest expense (4.1) (14.3) (1.3) (d) (19.7) Interest income and other, net 20.3 0.9 (0.3) (d) 20.9 ------------------------------------- --------- INCOME BEFORE TAXES 60.4 30.6 (4.8) 86.2 Provision for income taxes 17.6 16.5 (0.9) (i) 33.2 ------------------------------------- --------- NET INCOME $ 42.8 $ 14.1 $ (3.9) $ 53.0 ===================================== ========= Basic and diluted earnings per share $ 2.32 $ 2.87 ========= ========= based on 18,479,684 shares outstanding
See accompanying Notes to Unaudited Pro Forma Combined Statements of Operations. NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS (DOLLARS IN MILLIONS) The Unaudited Pro Forma Combined Statements of Operations for the nine months ended September 30, 2002 and for the year ended December 31, 2001 give pro forma effect to the acquisition of FASCO Motors as if it had occurred on January 1, 2001. (a) FASCO Motors historical fiscal year end was March 31. For purposes of the Unaudited Pro Forma Combined Statements of Operations, the results for the nine months ended September 30, 2002 for FASCO Motors were obtained by combining the results for the six months ended September 30, 2002 and the fiscal quarter ended March 31, 2002. The result of combining these periods is reflected as the historical FASCO results for the nine months ended September 30, 2002. (b) For purposes of the Unaudited Pro Forma Combined Statements of Operations, the twelve months ended March 31, 2002 for FASCO Motors have been combined with the twelve months ended December 31, 2001 for Tecumseh Products Company to represent the Unaudited Pro Forma Combined Statements of Operations for the year ended December 31, 2001. (c) Reflects the net impact of transferring FASCO's pension and OPEB liabilities and associated assets as of September 30, 2002 in accordance with the agreement. These amounts also reflect the impact of purchase accounting.
Nine months ended Year ended September 30, December 31, 2002 2001 ------------- ------------ (in millions) Pension $ 1.3 $ 1.7 OPEB 0.4 0.6 ----- ----- NET ADJUSTMENT $ 1.7 $ 2.3 ===== =====
(d) Reflects the net effect on interest income and expense resulting from (i) the elimination of historical interest expense due to affiliates; (ii) the elimination of historical fees attributable to factored receivables; (iii) borrowings to initially fund the acquisition of FASCO Motors; (iv) long-term debt to replace the initial acquisition financing; (v) amortization of $1 million in debt origination fees over an average life of five years; and (vi) a decrease in interest income resulting from the reduction in cash after the refinancing into long-term debt. For purposes of the Unaudited Pro Forma Combined Statements of Operations (i) the refinancing of $300 million of the initial $325 million of short-term acquisition financing into long-term debt is reflected as if it occurred on January 1, 2001; and (ii) the remaining balance of the initial short term acquisition financing, or $25 million, is reflected as being paid down on March 31, 2001. Interest expense on long-term debt has been calculated assuming $300 million in borrowings. If the Company borrows at the bottom of its estimated range, $250 million, after-tax earnings would improve by $0.8 million ($0.04 per share) and $1 million ($0.06 per share) for the nine months ended September 30, 2002 and year ended December 31, 2001, respectively.
Nine months ended Year ended September 30, December 31, 2002 2001 ------------- ------------ (in millions) Historical FASCO Motors interest expense $ (5.3) $ (12.2) Historical FASCO Motors fees on factored receivables (1.5) (1.4) Interest on initial acquisition financing (See 1 below) - 0.1 Interest on long-term debt (See 2 below) 10.8 14.6 Amortization of loan origination fee 0.2 0.2 ------ ------- NET INCREASE TO INTEREST EXPENSE $ 4.2 $ 1.3 ====== ======= ------ ------- REDUCTION TO INTEREST INCOME (See 3 below) $ (0.3) $ (0.3) ====== ======= Impact of 1/8% variance on initial acquisition financing $ - $ 0.01 Impact of 1/8% variance on long-term debt 0.28 0.38 Impact of 1/8% variance on interest income 0.02 0.02
________ (1) Reflects interest expense on $25 million of initial acquisition financing at 2.02% for three months. (2) Reflects interest expense on $300 million of long-term debt at 4.85%. (3) Reflects the reduction in interest income on $25 million at 1.5% for nine months. (e) Reflects the elimination of sales between Tecumseh and FASCO Motors, which as a result of the acquisition constitute intercompany sales. (f) Reflects increased depreciation expense as a result of the estimated write up of property, plant and equipment to fair market value. (g) Tecumseh adopted the provisions SFAS 142 effective January 1, 2002. For purposes of the Unaudited Pro Forma Combined Statements of Operations the provisions of SFAS 142 have been applied to the FASCO Motors acquisition effective January 1, 2001. The resulting adjustment reflects the elimination of FASCO Motors historical goodwill amortization. (h) Reflects estimated amortization expense for (i) a non-compete agreement of $15 million with a two year useful life; and (ii) $20 million in other intangibles over an estimated ten year useful life. (i) Reflects the estimated income tax effect of the Company's pro forma adjustments using an effective tax rate of 36%. -----END PRIVACY-ENHANCED MESSAGE-----