-----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, J6qTOo7X+SSpcS2uyCv+qkkPPweTOS1NMvuhREPSW0J3T08n5XDwwOkCyYjQWxOi Ci5hFou5DzRt94/koh2O+w== 0000012355-98-000025.txt : 19980813 0000012355-98-000025.hdr.sgml : 19980813 ACCESSION NUMBER: 0000012355-98-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19980628 FILED AS OF DATE: 19980812 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLACK & DECKER CORP CENTRAL INDEX KEY: 0000012355 STANDARD INDUSTRIAL CLASSIFICATION: METALWORKING MACHINERY & EQUIPMENT [3540] IRS NUMBER: 520248090 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-03593 FILM NUMBER: 98683851 BUSINESS ADDRESS: STREET 1: 701 E JOPPA RD CITY: TOWSON STATE: MD ZIP: 21286 BUSINESS PHONE: 4107163900 MAIL ADDRESS: STREET 1: 701 EAST JOPPA ROAD STREET 2: MAIL STOP TW 290 CITY: TOWSON STATE: MD ZIP: 21286 FORMER COMPANY: FORMER CONFORMED NAME: BLACK & DECKER MANUFACTURING CO DATE OF NAME CHANGE: 19850206 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 28, 1998 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-1553 THE BLACK & DECKER CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 52-0248090 - -------------------------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 701 East Joppa Road Towson, Maryland 21286 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (410) 716-3900 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable - -------------------------------------------------------------------------------- (Former name, former address, and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X YES NO The number of shares of Common Stock outstanding as of June 28, 1998: 92,956,594 The exhibit index as required by item 601(a) of Regulation S-K is included in this report. -2- THE BLACK & DECKER CORPORATION AND SUBSIDIARIES INDEX - FORM 10-Q June 28, 1998 Page PART I - FINANCIAL INFORMATION Consolidated Statement of Earnings (Unaudited) For the Three Months and Six Months Ended June 28, 1998 and June 29, 1997 3 ----------------- Consolidated Balance Sheet June 28, 1998 (Unaudited) and December 31, 1997 4 ---------------------------- Consolidated Statement of Changes in Stockholders' Equity (Unaudited) For the Six Months Ended June 28, 1998 and June 29, 1997 5 -------------------- Consolidated Statement of Cash Flows (Unaudited) For the Six Months Ended June 28, 1998 and June 29, 1997 6 -------------------- Notes to Consolidated Financial Statements (Unaudited) 7 ------------------------- Management's Discussion and Analysis of Financial Condition and Results of Operations 14 ------------------------------------------------------ Quantitative and Qualitative Disclosures About Market Risk 26 -------------------- PART II - OTHER INFORMATION 27 --------------------------------------------------- SIGNATURES 31 -------------------------------------------------------------------- -3- PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF EARNINGS (Unaudited) The Black & Decker Corporation and Subsidiaries (Dollars in Millions Except Per Share Amounts) - -------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended June 28, 1998 June 29, 1997 June 28, 1998 June 29, 1997 - ------------------------------------------------------------------------------------------------------------------- Sales $ 1,169.7 $ 1,182.2 $ 2,178.0 $ 2,197.2 Cost of goods sold 771.9 761.8 1,430.2 1,412.3 Selling, general, and administrative expenses 285.5 316.1 565.4 607.3 Write-off of goodwill - - 900.0 - Restructuring and exit costs - - 140.0 - Gain on sale of businesses 36.5 - 36.5 - - ------------------------------------------------------------------------------------------------------------------- Operating Income (Loss) 148.8 104.3 (821.1) 177.6 Interest expense (net of interest income) 29.8 30.6 58.2 61.2 Other expense 2.7 3.6 2.4 5.9 - ------------------------------------------------------------------------------------------------------------------- Earnings (Loss) Before Income Taxes 116.3 70.1 (881.7) 110.5 Income taxes 57.9 24.6 31.3 38.7 - ------------------------------------------------------------------------------------------------------------------- Net Earnings (Loss) $ 58.4 $ 45.5 $ (913.0) $ 71.8 =================================================================================================================== Net Earnings (Loss) Per Common Share-- Basic $ .62 $ .48 $ (9.65) $ .76 =================================================================================================================== Shares Used in Computing Basic Earnings Per Share (in Millions) 94.1 94.5 94.6 94.4 =================================================================================================================== Net Earnings (Loss) Per Common Share-- Assuming Dilution $ .61 $ .47 $ (9.65) $ .75 =================================================================================================================== Shares Used in Computing Diluted Earnings Per Share (in Millions) 95.8 96.1 94.6 96.1 =================================================================================================================== Dividends Per Common Share $ .12 $ .12 $ .24 $ .24 =================================================================================================================== See Notes to Consolidated Financial Statements (Unaudited)
-4- CONSOLIDATED BALANCE SHEET The Black & Decker Corporation and Subsidiaries (Dollars in Millions Except Per Share Amount) - -------------------------------------------------------------------------------------------------------------------
(Unaudited) June 28, 1998 December 31, 1997 - ------------------------------------------------------------------------------------------------------------------- Assets Cash and cash equivalents $ 204.1 $ 246.8 Trade receivables 815.7 931.4 Inventories 765.0 774.7 Other current assets 205.1 125.9 - ------------------------------------------------------------------------------------------------------------------- Total Current Assets 1,989.9 2,078.8 - ------------------------------------------------------------------------------------------------------------------- Property, Plant, and Equipment 781.3 915.1 Goodwill 935.7 1,877.3 Other Assets 510.7 489.5 - ------------------------------------------------------------------------------------------------------------------- $ 4,217.6 $ 5,360.7 =================================================================================================================== Liabilities and Stockholders' Equity Short-term borrowings $ 89.1 $ 178.3 Current maturities of long-term debt 60.6 60.5 Trade accounts payable 355.3 372.0 Other accrued liabilities 822.3 761.8 - ------------------------------------------------------------------------------------------------------------------- Total Current Liabilities 1,327.3 1,372.6 - ------------------------------------------------------------------------------------------------------------------- Long-Term Debt 1,658.1 1,623.7 Deferred Income Taxes 55.6 57.7 Postretirement Benefits 283.0 304.2 Other Long-Term Liabilities 192.3 211.1 Stockholders' Equity Common stock, par value $.50 per share (outstanding: June 28, 1998--92,956,594 shares; December 31, 1997--94,842,544 shares) 46.5 47.4 Capital in excess of par value 1,145.3 1,278.2 Retained earnings (deficit) (373.7) 562.0 Accumulated other comprehensive income (116.8) (96.2) - ------------------------------------------------------------------------------------------------------------------- Total Stockholders' Equity 701.3 1,791.4 - ------------------------------------------------------------------------------------------------------------------- $ 4,217.6 $ 5,360.7 =================================================================================================================== See Notes to Consolidated Financial Statements (Unaudited)
-5- CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) The Black & Decker Corporation and Subsidiaries (Dollars in Millions Except Per Share Amounts) - -------------------------------------------------------------------------------------------------------------------
Accumulated Outstanding Capital in Retained Other Com- Total Common Par Excess of Earnings prehensive Stockholders' Shares Value Par Value (Deficit) Income Equity - ------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1996 94,248,807 $ 47.1 $ 1,261.7 $ 380.2 $ (56.6) $ 1,632.4 Comprehensive income: Net earnings -- -- -- 71.8 -- 71.8 Foreign currency translation adjustments, less effect of hedging activities (net of tax) -- -- -- -- (34.2) (34.2) - ------------------------------------------------------------------------------------------------------------------- Comprehensive income (loss) -- -- -- 71.8 (34.2) 37.6 - ------------------------------------------------------------------------------------------------------------------- Cash dividends ($.24 per share) -- -- -- (22.7) -- (22.7) Common stock issued under employee benefit plans 253,935 .2 6.6 -- -- 6.8 - ------------------------------------------------------------------------------------------------------------------- Balance at June 29, 1997 94,502,742 $ 47.3 $ 1,268.3 $ 429.3 $ (90.8) $ 1,654.1 =================================================================================================================== Balance at December 31, 1997 94,842,544 $ 47.4 $ 1,278.2 $ 562.0 $ (96.2) $ 1,791.4 Comprehensive income: Net loss -- -- -- (913.0) -- (913.0) Foreign currency translation adjustments, less effect of hedging activities (net of tax) -- -- -- -- (20.6) (20.6) - ------------------------------------------------------------------------------------------------------------------- Comprehensive income (loss) -- -- -- (913.0) (20.6) (933.6) - ------------------------------------------------------------------------------------------------------------------- Cash dividends ($.24 per share) -- -- -- (22.7) -- (22.7) Purchase and retirement of common stock (2,876,000) (1.4) (153.3) -- -- (154.7) Common stock issued under employee benefit plans 990,050 .5 20.4 -- -- 20.9 - ------------------------------------------------------------------------------------------------------------------- Balance at June 28, 1998 92,956,594 $ 46.5 $ 1,145.3 $ (373.7) $ (116.8) $ 701.3 =================================================================================================================== See Notes to Consolidated Financial Statements (Unaudited)
-6- CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) The Black & Decker Corporation and Subsidiaries (Dollars in Millions) - -------------------------------------------------------------------------------------------------------------------
Six Months Ended June 28, 1998 June 29, 1997 - ------------------------------------------------------------------------------------------------------------------- Operating Activities Net earnings (loss) $ (913.0) $ 71.8 Adjustments to reconcile net earnings (loss) to cash flow from operating activities: Gain on sale of businesses (36.5) - Non-cash charges and credits: Goodwill write-off 900.0 - Restructuring charges and exit costs 140.0 - Depreciation and amortization 81.6 110.5 Other 5.6 (2.6) Changes in selected working capital items (excluding, for 1998, effects of household products business sold): Trade receivables (3.3) 2.1 Inventories (53.5) (177.1) Trade accounts payable 2.8 29.9 Restructuring spending (13.0) - Other assets and liabilities (104.6) (136.5) Net decrease in receivables sold - (76.0) - ------------------------------------------------------------------------------------------------------------------- Cash Flow From Operating Activities 6.1 (177.9) - ------------------------------------------------------------------------------------------------------------------- Investing Activities Proceeds from sale of business 288.0 - Proceeds from disposal of assets 3.9 4.2 Capital expenditures (59.8) (85.0) Cash inflow from hedging activities 168.7 219.4 Cash outflow from hedging activities (166.0) (208.6) - ------------------------------------------------------------------------------------------------------------------- Cash Flow From Investing Activities 234.8 (70.0) - ------------------------------------------------------------------------------------------------------------------- Cash Flow Before Financing Activities 240.9 (247.9) Financing Activities Net decrease in short-term borrowings (84.6) (101.6) Proceeds from long-term debt (including revolving credit facility) 576.4 544.0 Payments on long-term debt (including revolving credit facility) (569.7) (186.1) Redemption of preferred stock of subsidiary (41.7) - Purchase of common stock (154.7) - Issuance of common stock 15.3 2.9 Cash dividends (22.7) (22.7) - ------------------------------------------------------------------------------------------------------------------- Cash Flow From Financing Activities (281.7) 236.5 Effect of exchange rate changes on cash (1.9) (4.1) - ------------------------------------------------------------------------------------------------------------------- Decrease In Cash And Cash Equivalents (42.7) (15.5) Cash and cash equivalents at beginning of period 246.8 141.8 - ------------------------------------------------------------------------------------------------------------------- Cash And Cash Equivalents At End Of Period $ 204.1 $ 126.3 =================================================================================================================== See Notes to Consolidated Financial Statements (Unaudited)
-7- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The Black & Decker Corporation and Subsidiaries NOTE 1: BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited consolidated financial statements include all adjustments consisting only of normal recurring accruals considered necessary for a fair presentation of the financial position and the results of operations. Operating results for the three- and six-month periods ended June 28, 1998, are not necessarily indicative of the results that may be expected for a full fiscal year. For further information, refer to the consolidated financial statements and notes included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1997. Effective January 1, 1998, the Corporation adopted Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income. SFAS No. 130 requires that, as part of a full set of financial statements, entities must present comprehensive income, which is the sum of net income and other comprehensive income. Other comprehensive income represents total non-stockholder changes in equity. The Corporation has included its presentation of comprehensive income in the accompanying Consolidated Statement of Changes in Stockholders' Equity for the six months ended June 28, 1998 and June 29, 1997. Comprehensive income for the three months ended June 28, 1998 and June 29, 1997, was $57.6 million and $55.2 million, respectively. In connection with the adoption of SFAS No. 130, the Corporation has changed the designation of its "Equity adjustment from translation" component of stockholders' equity in the accompanying Consolidated Balance Sheet to "Accumulated other comprehensive income." In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which is required to be adopted for years beginning after June 15, 1999. Early adoption of SFAS No. 133 is permitted as of the beginning of any fiscal quarter after its issuance. SFAS No. 133 will require the Corporation to recognize all derivatives on the balance sheet at fair value. Derivatives that do not qualify as hedges under the new standard must be adjusted to fair value through income. If a derivative qualifies as a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in 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 value will be immediately recognized in earnings. The Corporation has not yet determined when it will adopt SFAS No. 133, although early adoption is considered likely due to the new standard's more favorable treatment of certain foreign currency hedges than that afforded under prior accounting standards. Further, the Corporation has not yet determined what effect SFAS No.133 will have on its earnings and financial position. -8- NOTE 2: STRATEGIC REPOSITIONING Overview: A comprehensive strategic repositioning plan, designed to intensify focus on core operations and improve operating performance, was approved by the Corporation's Board of Directors on January 26, 1998. As announced, the program includes the following components: (i) divestiture of the household products business in North America, Latin America, and Australia, the recreational products business, and the glass container-forming and inspection equipment business; (ii) the repurchase of up to 10% of the Corporation's outstanding common stock over a two-year period; and (iii) a restructuring of the Corporation's remaining businesses. Also on January 26, 1998, the Board of Directors elected to authorize a change in the basis upon which the Corporation evaluates goodwill for impairment. Divestitures: The Corporation has taken actions to divest its household products business in North America, Latin America, and Australia, recreational products business, and glass container-forming and inspection equipment business. The Corporation has elected to retain the cleaning and lighting products component of the household products business. The recreational products and household products businesses are components of the Consumer and Home Improvement Products (Consumer) segment; the glass container-forming and inspection equipment business is a component of the Commercial and Industrial Products (Commercial) segment. In May 1998, the Corporation announced that it had entered into a definitive agreement with Windmere-Durable Holdings, Inc. for the sale of the Corporation's household products business (other than certain assets associated with the Corporation's cleaning and lighting products, such as the Dustbuster, SnakeLight, ScumBuster, and FloorBuster products) in North America, Central America, the Caribbean, and South America (excluding Brazil) for a purchase price of $315.0 million. The Corporation closed the sale to Windmere, with the exception of the sale of the household products business in Mexico, on June 26, 1998, and received gross proceeds of $288.0 million. Gross proceeds of $27.0 million from the sale of the household products business in Mexico, which were held in escrow at June 28, 1998 pending regulatory approval, were reflected in the accompanying Consolidated Balance Sheet as "Other current assets" at June 28, 1998, and were received in July 1998. As part of the transaction, the Corporation retained certain liabilities and agreed to license the Black & Decker name to Windmere in existing household product categories for a period of six and one-half years on a royalty-free basis, with extension options upon request of Windmere and at the discretion of the Corporation on a royalty-bearing basis. At the request of Windmere, additional product categories may be licensed at the Corporation's option on a royalty-bearing basis. During the six months ended June 28, 1998, the Corporation also completed the sale of its household products business in Australia, the proceeds from which were immaterial. The Corporation continues in its efforts to divest its household products business in Brazil. As more fully described in Note 8 of Notes to Consolidated Financial Statements, subsequent to June 28, 1998, the Corporation announced that it had signed a definitive agreement to recapitalize its recreational products business and had entered into a contract to sell its glass container-forming and inspection equipment business. These transactions are expected to close in 1998. -9- The aforementioned sales of the household products business and glass container-forming and inspection equipment business and recapitalization of the recreational products business are expected to yield gross cash proceeds of over $700 million and net cash proceeds of approximately $550 million. Net proceeds from the sales or recapitalization of these businesses, augmented by cash generated by remaining operations, have been and are expected to be utilized in the repurchase of up to 10% of the Corporation's outstanding common stock and to fund the restructuring program described below. Sales of the businesses divested and to be divested, in aggregate, were $146.9 million and $174.8 million for the three months ended June 28, 1998, and June 29, 1997, and $287.8 million and $327.6 million for the six months ended June 28, 1998, and June 29, 1997, respectively. Repurchase of Common Stock: On January 26, 1998, the Board of Directors authorized the repurchase of up to 10%, or 9,484,254 shares, of the Corporation's outstanding common stock over a two-year period. A combination of net proceeds from the sale of divested businesses and cash flow from remaining operations have been and will be used to fund the stock repurchase program. Prior to the receipt of proceeds from the sale of divested businesses, the Corporation also may utilize its existing borrowing facilities to fund a portion of the stock repurchase program. During the six months ended June 28, 1998, the Corporation repurchased 2,876,000 shares of common stock at an aggregate cost of $154.7 million. The aggregate cost of $154.7 million is net of $.7 million in premiums received in connection with the Corporation's sale of put options on 400,000 shares of its common stock. Restructuring Charge: The restructuring program, announced in January 1998, which will be completed over a period of two years, is being undertaken to reduce fixed costs and simplify the supply chain and new product introduction processes. During the first quarter of 1998, the Corporation commenced this program and recognized a restructuring charge in the amount of $140.0 million. The Corporation anticipates that additional restructuring charges will be recognized over the course of the two-year program. The major component of the restructuring charge relates to the elimination of approximately 3,700 positions. As a result, an accrual of $102.7 million, principally associated with European businesses in the Consumer segment, was included in the restructuring charge. Included in that severance accrual was $8.1 million related to severance actions taken in the businesses to be divested and with respect to the closure of a facility in Kuantan, Malaysia, that manufactures household products predominantly for sale in the United States and was not included in the assets sold with the household products business. To reduce fixed costs and simplify the supply chain and new product introduction processes, the Corporation is taking actions to rationalize certain manufacturing, sales, and administrative operations resulting in the closure of a number of facilities. As a result, the restructuring charge also included a $27.5 million write-down to fair value--less, if applicable, costs to sell--of certain land, buildings, and equipment. Included in that $27.5 million write-down was $9.0 million related to the closure of the Malaysian facility described above. The remainder of the write-down to fair value primarily relates to long-lived assets of European businesses in the Consumer segment. -10- The remaining restructuring charge of $9.8 million, principally associated with European businesses in the Consumer segment, relates to the accrual of future expenditures, principally consisting of lease and other contractual obligations, for which no future benefit will be realized. Change in Accounting for Goodwill: On a periodic basis through December 31, 1997, the Corporation estimated the future undiscounted cash flows of the businesses to which goodwill related in order to determine that the carrying value of the goodwill had not been impaired. As a consequence of the strategic repositioning plan, the Corporation elected to change its method of measuring goodwill impairment from an undiscounted cash flow approach to a discounted cash flow approach effective January 1, 1998. On a periodic basis, the Corporation estimates the future discounted cash flows of the businesses to which goodwill relates. When such estimate of the future discounted cash flows, net of the carrying amount of tangible net assets, is less than the carrying amount of goodwill, the difference will be charged to operations. For purposes of determining the future discounted cash flows of the businesses to which goodwill relates, the Corporation, based upon historical results, current projections, and internal earnings targets, determines the projected future operating cash flows, net of income tax payments, of the individual businesses. These projected future cash flows are then discounted at a rate corresponding to the Corporation's estimated cost of capital, which also is the hurdle rate used by the Corporation in making investment decisions. Future discounted cash flows for the recreational products business, the glass container-forming and inspection equipment business, and the household products business in North America, Latin America, and Australia include an estimate of the proceeds from the eventual sale of such businesses, net of associated selling expenses and taxes. The Corporation believes that measurement of the value of goodwill through a discounted cash flow approach is preferable in that such a measurement facilitates the timely identification of impairment of the carrying value of investments in businesses and provides a more current and, with respect to the businesses to be sold, more realistic valuation than the undiscounted approach. In connection with the Corporation's change in accounting policy with respect to measurement of goodwill impairment, $900.0 million of goodwill was written off through a charge to operations during the first quarter of 1998. That goodwill write-off represented a per-share net loss of $9.51 both on a basic and diluted basis for the six-month period ended June 28, 1998. That write-down, which relates to goodwill associated with the security hardware, plumbing products, and fastening and assembly systems businesses and includes a $40.0 million write-down of goodwill associated with a business to be sold, represents the amount necessary to write-down the carrying values of goodwill for those businesses to the Corporation's best estimate, as of January 1, 1998, of those businesses' future discounted cash flows using the methodology described in the preceding paragraph. This change represents a change in accounting principle which is indistinguishable from a change in estimate. -11- NOTE 3: INVENTORIES The components of inventory at the end of each period, in millions of dollars, consisted of the following:
June 28, 1998 December 31, 1997 - ------------------------------------------------------------------------------------------------------------------- FIFO cost Raw materials and work-in-process $ 205.1 $ 199.4 Finished products 584.7 599.4 - ------------------------------------------------------------------------------------------------------------------- 789.8 798.8 Excess of FIFO cost over LIFO inventory value (24.8) (24.1) - ------------------------------------------------------------------------------------------------------------------- $ 765.0 $ 774.7 ===================================================================================================================
Inventories are stated at the lower of cost or market. The cost of United States inventories is based primarily on the last-in, first-out (LIFO) method; all other inventories are based on the first-in, first-out (FIFO) method. NOTE 4: GOODWILL In connection with the Corporation's change in accounting policy with respect to measurement of goodwill impairment as discussed in Note 2, goodwill in the amount of $900.0 million was written off through a charge to operations during the first quarter of 1998, and has been reflected in the Consolidated Statement of Earnings as "Write-off of goodwill" for the six months ended June 28, 1998. That write-down, which relates to goodwill associated with the security hardware, plumbing products, and fastening and assembly systems businesses and includes a $40.0 million write-down of goodwill associated with a business to be sold, represents the amount necessary to write-down the carrying values of goodwill for those businesses to the Corporation's best estimate, as of January 1, 1998, of those businesses' future discounted cash flows using the methodology described in Note 2. In addition, goodwill related to the Corporation's household products business was written off in connection with the sale of that business during the quarter ended June 28, 1998. Goodwill at the end of each period, in millions of dollars, was as follows:
June 28, 1998 December 31, 1997 - ------------------------------------------------------------------------------------------------------------------- Goodwill $1,513.3 $2,499.9 Less accumulated amortization 577.6 622.6 - ------------------------------------------------------------------------------------------------------------------- $ 935.7 $1,877.3 ===================================================================================================================
-12- NOTE 5: LONG-TERM DEBT In June 1998, a wholly owned subsidiary of the Corporation issued senior unsecured notes that were guaranteed by the Corporation in the amount of $300.0 million. Of that amount, $150.0 million bear interest at a fixed rate of 6.55% and are due in 2007, and $150.0 million bear interest at a fixed rate of 7.05% and are due in 2028. Proceeds from the issuance of the senior unsecured notes were used to repay indebtedness outstanding under the Corporation's unsecured revolving credit facility. Indebtedness of subsidiaries of the Corporation in the aggregate principal amounts of $903.4 million and $776.0 million were included in the Consolidated Balance Sheet at June 28, 1998 and December 31, 1997, respectively, under the captions short-term borrowings, current maturities of long-term debt, and long-term debt. NOTE 6: SALE OF RECEIVABLES As more fully described in Note 2 of Notes to Consolidated Financial Statements included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1997, the Corporation voluntarily terminated its sale of receivables program in December 1997 as the program was no longer deemed necessary to support its liquidity requirements. As of June 29, 1997, the Corporation had sold $136.0 million of receivables under this program. The discount on sale of receivables is included in "Other expense." NOTE 7: INTEREST EXPENSE (NET OF INTEREST INCOME) Interest expense (net of interest income) for each period, in millions of dollars, consisted of the following: - -------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended June 28, 1998 June 29, 1997 June 28, 1998 June 29, 1997 - ------------------------------------------------------------------------------------------------------------------- Interest expense $35.7 $32.1 $72.3 $65.4 Interest (income) (5.9) (1.5) (14.1) (4.2) - ------------------------------------------------------------------------------------------------------------------- $29.8 $30.6 $58.2 $61.2 ===================================================================================================================
NOTE 8: SUBSEQUENT EVENTS On June 29, 1998, the Corporation announced that it had signed a definitive agreement with an affiliate of Cornerstone Equity Investors, LLC to recapitalize its recreational products business, True Temper Sports. In connection with the transaction, the Corporation will receive $202.7 million in cash and retain approximately 6% of preferred and common stock valued at approximately $4 million. The transaction is expected to close during the third quarter of 1998, subject to satisfaction of customary closing conditions. -13- On July 14, 1998, the Corporation announced that it had entered into a definitive agreement with Bucher Holding A.G., of Switzerland, to sell its glass container-forming and inspection equipment business, Emhart Glass, for $194.0 million. Net proceeds, after costs and taxes, are expected to approximate $150 million. The transaction is expected to close by mid-October 1998, subject to receipt of regulatory approvals and satisfaction of customary closing conditions. -14- ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Corporation reported net earnings of $58.4 million or $.61 per share on a diluted basis for the three-month period ended June 28, 1998. Included in net earnings for the quarter ended June 28, 1998, was an after-tax gain on sale of businesses of $4.2 million ($36.5 million before tax) or $.04 per share on a diluted basis. Excluding the gain on sale of businesses, net earnings were $54.2 million or $.57 per diluted share for the quarter ended June 28, 1998, compared to net earnings of $45.5 million or $.47 per share on a diluted basis for the comparable period in 1997. During the quarter ended June 28, 1998, the Corporation closed the sale of its household products business (excluding certain assets associated with the Corporation's cleaning and lighting products) in North America, Central America, the Caribbean, and South America (excluding Mexico and Brazil). Proceeds from the sale of the household products business in Mexico (excluding certain assets related to the cleaning and lighting business in that country), held in escrow at June 28, 1998 pending regulatory approval, were received in July 1998. Subsequent to June 28, 1998, the Corporation entered into definitive agreements to recapitalize its recreational products business, True Temper Sports, and to sell its glass container-forming and inspection equipment business, Emhart Glass. The sales or recapitalization of these three businesses, which will complete part of the Corporation's strategic repositioning plan, are expected to yield gross cash proceeds of over $700 million and net cash proceeds of approximately $550 million. The Corporation reported a net loss of $913.0 million or $9.65 per share on a diluted basis for the six-month period ended June 28, 1998, compared to net earnings of $71.8 million or $.75 per share on a diluted basis for the six-month period ended June 29, 1997. Excluding the effects of the restructuring charge of $140.0 million ($100.0 million after tax) and the goodwill write-off of $900.0 million, both recognized in the first quarter of 1998, and the after-tax gain on sale of businesses recognized in the second quarter of 1998, net earnings for the six months ended June 28, 1998, would have been $82.8 million or $.86 per share on a diluted basis. STRATEGIC REPOSITIONING As more fully described in Note 2 of Notes to Consolidated Financial Statements, on January 26, 1998, the Board of Directors approved a comprehensive strategic repositioning of the Corporation, consisting of three separate elements. The first element of the strategic repositioning plan is to focus the Corporation on its core operations-that is, those strategic businesses that the Corporation believes are capable of delivering superior operating and financial performance. As a result, the Corporation has taken actions to divest or recapitalize its non-strategic businesses, which consist of True Temper Sports, Emhart Glass, and the household products business in North America, Latin America, and Australia. During the quarter ended June 28, 1998, the Corporation closed the sale of its household products business in North America, Central America, the Caribbean, and South America (excluding Mexico and Brazil) and received gross proceeds of $288.0 million. Gross proceeds of -15- $27.0 million from the sale of the household products business in Mexico, held in escrow at June 28, 1998 pending regulatory approval, were received by the Corporation in July 1998. During 1998, the Corporation also completed the sale of its household products business in Australia. The Corporation continues to pursue the sale of its household products business in Brazil. In connection with the sale of the household products businesses, the Corporation will retain its cleaning and lighting product lines, which include the Dustbuster(R) cordless vacuum. Subsequent to June 28, 1998, the Corporation entered into definitive agreements to recapitalize True Temper Sports and to sell Emhart Glass. The sales or recapitalization of these businesses are expected to yield gross cash proceeds of over $700 million and net cash proceeds of approximately $550 million. The pre-tax gain on sale of businesses of $36.5 million ($4.2 million after tax) recognized by the Corporation during the quarter ended June 28, 1998, represents the gain on the sale of the household products business (excluding certain assets associated with the cleaning and lighting product lines) in North America, Central America, the Caribbean, and South America (excluding Brazil), and is net of losses recognized in connection with the agreement to sell Emhart Glass and the anticipated sale of the household products business in Brazil. Because True Temper Sports, Emhart Glass, and the household products business in North America, Latin America, and Australia are not treated as discontinued operations under generally accepted accounting principles, they remain a part of the Corporation's reported results from continuing operations until their sale. Under the accounting prescribed by Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, the Corporation is required to reflect the long-lived assets of these businesses at the lower of their carrying amounts or their expected fair value less costs to sell and has ceased depreciation of the businesses' fixed assets and amortization of goodwill related to these businesses during the period held for sale. The net proceeds from the sales of these businesses, augmented by free cash flow generated by the remaining businesses, have been and will be used to fund the second element of the strategic repositioning plan-the repurchase of up to 10% of the Corporation's outstanding common shares over a two-year period. During the six months ended June 28, 1998, the Corporation repurchased 2,876,000 common shares at an aggregate cost of $154.7 million, which is net of $.7 million in premiums received in connection with the Corporation's sale of put options on 400,000 shares of its common stock. During the period from June 29, 1998, through August 11, 1998, the Corporation purchased an additional 1,408,500 common shares at an aggregate cost of $81.0 million, which is net of $.7 million in premiums received in connection with the Corporation's further sale of put options on 400,000 shares of its common stock. The third element of the strategic repositioning plan involves a major restructuring program. That restructuring program is being undertaken to reduce fixed costs and to simplify the supply chain and new product introduction processes. As part of the restructuring program, the Corporation expects to make significant changes to its European power tools and accessories business by consolidating distribution and transportation and centralizing finance, marketing, and support services. These changes in Europe will be accompanied by investment in state-of-the-art information systems similar to the investments being made in the North American business. In addition, the worldwide power tools and accessories business will rationalize its manufacturing plant and design center network, resulting in the closure of a number of manufacturing plants and -16- design centers. The restructuring program also will include actions to improve the cost position of other businesses. This restructuring program is estimated to result in a pre-tax charge of up to $225 million, of which $140.0 million was recognized in the first quarter of 1998, with the balance to be recognized as the program progresses over a two-year period. The Corporation expects to recognize an additional portion of the total anticipated restructuring charge in the third quarter of 1998 in connection with a voluntary retirement program offered to employees in the United States. In addition to the restructuring charge, related expenses of approximately $60 million will be charged to operations over a two-year period as the restructuring program progresses. These related expenses, which are incremental to the plans being implemented, do not qualify as restructuring or exit costs under generally accepted accounting principles. The major component of the $140.0 million restructuring charge ($100.0 million net of tax) recognized in the first quarter of 1998 related to the accrual of severance benefits in the amount of $102.7 million, principally associated with European businesses in the Consumer segment. During the three and six months ended June 28, 1998, the Corporation recognized $22.8 million and $28.4 million of expenses, respectively, related to the restructuring program and divestitures in operating income. Included in those restructuring-related expenses were inventory write-downs associated with products in the retained cleaning and lighting business that will be discontinued. Cash spending on the restructuring program during 1998 is expected to range between $80 million to $100 million. Benefits from the restructuring charge taken in the first quarter of 1998, estimated at more than $60 million on an annual, pre-tax basis once fully implemented, are not expected to become evident until some time in 1999, as the 1998 benefits are likely to be offset by related expenses associated with the program. As indicated in Note 2 of Notes to Consolidated Financial Statements, the severance accrual included in the $140.0 million restructuring charge taken in the first quarter of 1998 related to the elimination of approximately 3,700 positions. As the Corporation shifts certain production and other activities, it is anticipated that an additional 1,300 positions will be created. As a result, the Corporation's estimate of annual, pre-tax savings in excess of $60 million, expected once the restructuring actions taken in the first quarter of 1998 are fully implemented, reflects the savings from a net reduction of approximately 2,400 positions. As a consequence of the strategic repositioning plan, the Corporation elected to change its method of measuring goodwill impairment from an undiscounted cash flow approach to a discounted cash flow approach, effective January 1, 1998. The Corporation believes that measurement of the value of goodwill through the discounted cash flow approach, as more fully described in Note 2 of Notes to Consolidated Financial Statements, is preferable in that the discounted cash flow measurement facilitates the timely identification of impairment of the carrying value of investments in businesses and provides a more current and, with respect to the businesses to be sold, realistic valuation than the undiscounted approach. The adoption of this discounted cash flow approach, however, may result in greater earnings volatility since decreases in projected discounted cash flows of certain businesses will, as discussed above, result in timely recognition of future impairment. -17- In connection with this change in accounting with respect to the measurement of goodwill impairment, a non-cash charge of $900.0 million was recognized during the first quarter of 1998 ($9.51 per share both on a basic and diluted basis for the six months ended June 28, 1998). The $900.0 million write-down, which relates to goodwill associated with the Corporation's security hardware, plumbing products, and fastening and assembly systems business and includes a $40.0 million write-down of goodwill associated with a business to be sold, represents the amount necessary to reduce the carrying values of goodwill for those businesses to the Corporation's best estimate, as of January 1, 1998, of those businesses' future discounted cash flows using the methodology described in Note 2 of Notes to Consolidated Financial Statements. As a result of the goodwill write-off and the cessation of goodwill amortization related to the businesses to be sold, goodwill amortization declined from $15.9 million for the three months ended June 29, 1997 ($31.9 million for the first half of 1997) to $5.9 million for the three months ended June 28, 1998 ($12.4 million for the first half of 1998). SALES The following chart sets forth an analysis of the consolidated changes in sales for the three- and six-month periods ended June 28, 1998 and June 29, 1997. ANALYSIS OF CHANGES IN SALES - -------------------------------------------------------------------------------------------------------------------
For the Three Months Ended For the Six Months Ended (Dollars in Millions) June 28, 1998 June 29, 1997 June 28, 1998 June 29, 1997 - ------------------------------------------------------------------------------------------------------------------- Total sales $1,169.7 $1,182.2 $2,178.0 $2,197.2 Unit volume 2% 1% 3% -% Price (1)% (1)% (1)% (1)% Currency (2)% (2)% (3)% (2)% - ------------------------------------------------------------------------------------------------------------------- Change in total sales (1)% (2)% (1)% (3)% ===================================================================================================================
The Corporation operates in two business segments: Consumer, including consumer and professional power tools and accessories, household products, security hardware, outdoor products (composed of electric lawn and garden tools and recreational products), plumbing products, and product service; and Commercial, including fastening and assembly systems and glass container-forming and inspection equipment. As discussed above and in Note 2 of Notes to Consolidated Financial Statements, the Corporation has sold the household products business (excluding assets associated with the cleaning and lighting product lines retained by the Corporation) in North America, Australia, Central America, the Caribbean, and South America (excluding Brazil), has entered into agreements to recapitalize True Temper Sports and sell Emhart Glass, and is pursuing the sale of the household products business in Brazil. The results of operations and financial positions of these businesses will be included in the consolidated financial statements through the dates of consummation of the respective transactions. -18- The following chart sets forth an analysis of the change in sales for the three and six months ended June 28, 1998, compared to the three and six months ended June 29, 1997, by geographic area for each business segment. ANALYSIS OF CHANGES IN SALES FOR THE THREE AND SIX MONTHS ENDED JUNE 28, 1998 - ----------------------------------------------------------------------------------------------------------------------
United States Europe Other Total (Dollars in Millions) 3 Months 6 Months 3 Months 6 Months 3 Months 6 Months 3 Months 6 Months - ---------------------------------------------------------------------------------------------------------------------- Consumer Total sales $610.7 $1,094.1 $279.0 $544.6 $123.3 $221.7 $1,013.0 $1,860.4 Unit volume 6% 6% 6% 6% (12)% (8)% 3% 4% Price (1)% (1)% -% -% (1)% (2)% (1)% (1)% Currency -% -% (4)% (6)% (5)% (5)% (2)% (2)% - ---------------------------------------------------------------------------------------------------------------------- 5% 5% 2% -% (18)% (15)% -% 1% - ---------------------------------------------------------------------------------------------------------------------- Commercial Total sales $ 71.6 $ 142.6 $ 63.1 $130.3 $ 22.0 $ 44.7 $ 156.7 $ 317.6 Unit volume (5)% (9)% (1)% 6% (27)% (21)% (8)% (5)% Price (1)% -% 1% -% (1)% (1)% -% -% Currency -% -% (3)% (5)% (5)% (4)% (2)% (3)% - ---------------------------------------------------------------------------------------------------------------------- (6)% (9)% (3)% 1% (33)% (26)% (10)% (8)% - ---------------------------------------------------------------------------------------------------------------------- Consolidated Total sales $682.3 $1,236.7 $342.1 $674.9 $145.3 $266.4 $1,169.7 $2,178.0 Unit volume 4% 4% 5% 6% (15)% (11)% 2% 3% Price (1)% (1)% -% -% (1)% (1)% (1)% (1)% Currency -% -% (4)% (6)% (5)% (5)% (2)% (3)% - ---------------------------------------------------------------------------------------------------------------------- Change in total sales 3% 3% 1% -% (21)% (17)% (1)% (1)% ======================================================================================================================
The negative effects of a stronger United States dollar compared to most major foreign currencies caused a decrease in the Corporation's consolidated sales from the prior year's level of 2% and 3% for the three and six months ended June 28, 1998, respectively. Pricing actions had a 1% negative effect on sales for both the three-and six-month periods ended June 28, 1998, compared to the corresponding periods in 1997. Unit volume increased by 2% for the three-month period ended June 28, 1998, compared to the prior year's level. For the six-month period ended June 28, 1998, unit volume rose 3% over the 1997 level. Unit volume in the Consumer segment for the three months ended June 28, 1998, increased by 3% compared to the corresponding quarter in 1997 while, for the six months ended June 28, 1998, unit volume exceeded the 1997 level by 4%. -19- Sales in the Corporation's Consumer businesses in the United States increased by 5% for both the three- and six-month periods ended June 28, 1998, over the 1997 levels. Excluding the sales declines experienced by the Corporation's accessories business and, most significantly, household products business in the three and six months ended June 28, 1998, sales in the Corporation's other domestic Consumer businesses for those periods exceeded the prior year's levels. Sales increased at double-digit rates during the three- and six-month periods ended June 28, 1998, over the corresponding periods in 1997 in the domestic plumbing products and recreational products businesses. Sales in the domestic power tools business increased at a high single-digit rate and at a double-digit rate during the three- and six-month periods ended June 28, 1998, respectively, compared to the corresponding periods in 1997. Sales in the security hardware business increased at a double-digit rate for the three-month period ended June 28, 1998, and at a mid-single digit rate for the six-month period ended June 28, 1998, both compared to the corresponding periods in 1997. Sales in the domestic accessories business decreased by mid-single digit rates for the three- and six-month periods ended June 28, 1998, compared to the corresponding 1997 periods principally due to SKU reduction efforts in that business. The domestic power tools business benefited from the strength of the DEWALT(R) professional power tools line, due largely to products introduced over the past year, and of outdoor products during the three- and six-month periods ended June 28, 1998, but those benefits were partially offset by weakness during the same periods in sales of consumer power tools. Sales gains in the domestic security hardware business during 1998 were driven by the introduction of the AccessOneTM Remote Keyless Entry lock and The Society Brass CollectionTM, principally in the second quarter of 1998. The sales increases in these businesses were partially offset by sharply lower sales in the domestic household products business in the three and six months ended June 28, 1998, compared to the corresponding periods in 1997. The most significant declines in the household products business were in the cleaning products category, specifically with respect to the ScumBusterTM cordless submersible scrubber. While the Corporation sold the domestic household products business on June 26, 1998, it has retained the cleaning and lighting product lines. The Corporation anticipates that negative comparisons to the prior year with respect to the retained cleaning and lighting business as well as negative sales comparisons for the businesses sold or to be sold will continue to affect the Corporation's 1998 results. Excluding the significant negative effect of changes in foreign exchange rates, sales in the Corporation's Consumer businesses in Europe improved by 6% for both the three and six months ended June 28, 1998, from the corresponding periods in 1997. Increased sales in Europe of consumer and professional power tools and accessories, outdoor lawn and garden tools, security hardware, and product service during the three and six months ended June 28, 1998, as compared to the prior year's levels more than offset declines during those periods in sales of household products. Sales of the Corporation's Consumer businesses in Other geographic areas for the three and six months ended June 28, 1998, decreased by 13% and 10%, respectively, from the same periods in 1997, excluding the negative effect of changes in foreign exchange rates during 1998. The continuing effect of the Asian economic crisis as well as sales weakness in Latin America, excluding Mexico, were the principal reasons for the decline. -20- Excluding the negative effect of changes in foreign exchange rates, sales in the Corporation's Commercial businesses decreased by 8% and 5% during the three and six months ended June 28, 1998, respectively, from the prior year's levels. Despite lower automotive sales during 1998 due to softness in Asia and the effects of the General Motors strike in the United States during the second quarter of 1998, sales in the Corporation's fastening and assembly systems business increased at a low single-digit rate for the three and six months ended June 28, 1998, compared to the corresponding periods in 1997, exclusive of negative currency effects. This sales growth was more than offset by sharply lower sales, exclusive of negative currency effects, in the Emhart Glass business during the three and six months ended June 28, 1998, compared to the comparable periods in 1997. EARNINGS Operating income for the three-month period ended June 28, 1998, excluding the gain on sale of businesses of $36.5 million, was $112.3 million, or 9.6% of sales, compared to $104.3 million, or 8.8% of sales, for the corresponding period in 1997. An operating loss of $821.1 million was recognized for the six months ended June 28, 1998, compared to operating income of $177.6 million for the corresponding period in 1997. Excluding the effects of the $140.0 million restructuring charge and the $900.0 million write-off of goodwill, both recognized in the first quarter of 1998, and of the $36.5 million gain on sale of businesses recognized in the second quarter of 1998, operating income for the first half of 1998 was $182.4 million, or 8.4% of sales, compared to $177.6 million, or 8.1% of sales, for the first half of 1997. Operating results for the three and six months ended June 28, 1998, included $22.8 million and $28.4 million, respectively, of expenses directly related to the strategic repositioning plan that do not qualify as restructuring or exit costs under generally accepted accounting principles ("restructuring-related expenses"). Included in these amounts is the write-down to net realizable value of cleaning and lighting inventories that will be discontinued in connection with the assumption of those product lines in North America by the Corporation's power tool business. Excluding the effects of both these restructuring-related expenses and the gain on sale of businesses, operating income would have increased by 30% from $104.3 million, or 8.8% of sales, for the quarter ended June 29, 1997, to $135.1 million, or 11.5% of sales, for the quarter ended June 28, 1998. Excluding the effects of these restructuring-related expenses, the restructuring charge, the goodwill write-off, and the gain on sale of businesses, all recognized in the first half of 1998, operating income would have increased by 19% from $177.6 million, or 8.1% of sales, for the six months ended June 29, 1997, to $210.8 million, or 9.7% of sales, for the six months ended June 28, 1998. In addition to the realization of benefits from restructuring actions taken in 1998, a major contributor to these improvements was the $10.0 million and $19.5 million reduction in the level of goodwill amortization experienced in the three and six months ended June 28, 1998, respectively, as compared to the corresponding periods in 1997, as a result of the goodwill write-off and cessation of amortization of goodwill associated with the businesses to be sold. The lower level of goodwill amortization experienced in the first half of 1998 will continue in future periods. -21- Improvements in operating income as a percentage of sales, exclusive of, for the six months ended June 28, 1998, the restructuring charge and goodwill write-off and, for the three and six months ended June 28, 1998, the gain on sale of businesses and restructuring-related expenses, were experienced in the Corporation's domestic power tools and accessories business, European security hardware business, plumbing products business, recreational products business, and fastening and assembly systems business, offset by decreased profitability in the household products and Emhart Glass businesses, in the domestic security hardware business, and in the power tools and accessories businesses outside the United States. Gross margin as a percentage of sales was 34.0% and 35.6% for the three-month periods ended June 28, 1998, and June 29, 1997, respectively. Gross margin as a percentage of sales was 34.3% for the first half of 1998, compared to 35.7% for the first half of 1997. The decline in gross margin during the three and six months ended June 28, 1998, compared to the corresponding periods in 1997 primarily resulted from adverse foreign exchange effects on product costs, principally in the European operations, competitive pressures that continued to constrain pricing, and restructuring-related expenses, partially offset by increased productivity net of inflation. Selling, general, and administrative expenses as a percentage of sales for the three-month period ended June 28, 1998, were 24.4% compared to 26.7% for the comparable period in 1997. Selling, general, and administrative expenses as a percentage of sales for the six-month period ended June 28, 1998, were 26.0%, compared to 27.6% for the comparable period in 1997. These improvements were the result of lower goodwill amortization in the three and six months ended June 28, 1998, compared to the corresponding periods in 1997, as a result of the goodwill write-off and cessation of amortization of goodwill related to the businesses to be sold, as well as benefits realized from restructuring actions taken in 1998. Net interest expense (interest expense less interest income) was $29.8 million and $58.2 million for the three and six months ended June 28, 1998, respectively, compared to $30.6 million and $61.2 million for the three and six months ended June 29, 1997, respectively. The lower level of net interest expense in the three and six months ended June 28, 1998, as compared to the corresponding periods in 1997 was primarily the result of more favorable debt mix in 1998 coupled with a lower level of net debt (total debt less cash and cash equivalents) due to improved cash flows from operating activities in 1998. The Corporation maintains a portfolio of interest rate hedge instruments for the purpose of managing interest rate exposure. During the six months ended June 28, 1998, the Corporation's portfolio was reduced as a result of the following scheduled maturities: (i) variable to fixed rate interest rate swaps with an aggregate notional principal amount of $50.0 million; (ii) fixed to variable rate interest rate swaps with an aggregate notional principal amount of $100.0 million; (iii) rate basis swaps with an aggregate notional principal amount of $50.0 million; and (iv) interest rate swaps that swapped from fixed rate United States dollars into fixed rate Japanese yen with an aggregate notional principal amount of $15.0 million. The Corporation also reduced its portfolio as a result of its termination of fixed to variable interest rate swaps with an aggregate notional principal amount of $250.0 million and of termination by the counterparties of fixed to variable rate interest rate swaps with an aggregate notional principal amount of $300.0 million. Deferred gains -22- and losses on the early termination of interest rate swaps as of June 28, 1998, were not significant. Partially offsetting these decreases in the interest rate hedge portfolio, the Corporation entered into new fixed to variable rate interest rate swaps with an aggregate notional principal amount of $250.0 million during the six months ended June 28, 1998. Other expense for the three- and six-month periods ended June 28, 1998, principally consisted of currency losses. Other expense for the three- and six-month periods ended June 29, 1997, primarily included the discount on the sale of receivables. Income tax expense of $57.9 million for the quarter ended June 28, 1998, included income tax expense of $32.3 million related to the gain on sale of businesses recognized during that quarter. Excluding the taxes associated with the gain on sale of businesses, the Corporation's reported tax rate would have been 32% in the second quarter of 1998, compared to a tax rate of 35% in the second quarter of 1997. Income tax expense of $31.3 million was recognized on the Corporation's pre-tax loss of $881.7 million for the six months ended June 28, 1998. Excluding the income tax benefit of $40.0 million related to the pre-tax restructuring charge of $140.0 million and the non-deductible write-off of goodwill in the amount of $900.0 million, both recognized in the first quarter of 1998, and the $32.3 million of tax expense recognized on the gain on sale of businesses in the second quarter of 1998, the Corporation's reported tax rate would have been 32% in the first six months of 1998, compared to a tax rate of 35% in the first half of 1997. This decrease in the effective tax rate in 1998 resulted from the lower amount of goodwill amortization, which is not tax deductible, in 1998 as compared to 1997 due to the $900.0 million write-off of goodwill that occurred in the first quarter of 1998 as a result of the Corporation's change in method of measuring goodwill impairment. The Corporation reported net earnings of $58.4 million, or $.62 per basic share and $.61 per diluted share, for the three months ended June 28, 1998. Excluding the after-tax gain on sale of businesses of $4.2 million recognized in the second quarter of 1998, net earnings were $54.2 million, or $.58 per basic share and $.57 per diluted share, for the three-month period ended June 28, 1998, compared to $45.5 million, or $.48 per basic share and $.47 per diluted share, for the three-month period ended June 29, 1997. The Corporation reported a net loss of $913.0 million, or $9.65 per share both on a basic and diluted basis, for the six-month period ended June 28, 1998, principally as a result of the restructuring charge and goodwill write-off during that period. Because the Corporation reported a net loss for the six months ended June 28, 1998, the calculation of reported earnings per share on a diluted basis excludes the impact of stock options since their inclusion would be anti-dilutive--that is, decrease the per-share loss. For comparative purposes, however, the Corporation believes that the dilutive effect of stock options should be considered when evaluating the Corporation's performance excluding the restructuring charge and goodwill write-off. If the dilutive effect of stock options were considered, net earnings, excluding the goodwill write-off and the after-tax restructuring charge and gain on sale of businesses, would have been $82.8 million or $.86 per share on this diluted basis for the six-month period ended June 28, 1998, compared to net earnings of $71.8 million or $.75 per share on a diluted basis for the six-month period ended June 29, 1997. -23- Interest Rate Sensitivity As a result of the significant changes during the six months ended June 28, 1998, described above, in the Corporation's interest rate hedge portfolio, the following table provides information as of June 28, 1998, about that portfolio. This table should be read in conjunction with the information contained in Management's Discussion and Analysis of Financial Condition and Results of Operations under the heading "Interest Rate Sensitivity" included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1997. Notional Principal Amounts and Interest Rate Detail by Contractual Maturity Dates
Year Ending Dec. 31, Fair Value 6 Mos. Ending ------------------------------------------- (Assets)/ (U.S. Dollars in Millions) Dec. 31, 1998 1999 2000 2001 2002 Thereafter Total Liabilities - ------------------------------------------------------------------------------------------------------------------------------ Interest Rate Derivatives Interest Rate Swaps (all U.S. dollar denomi- nated except for U.S. rates to foreign rates) Fixed to variable rates $ -- $ -- $ 50.0 $ -- $ -- $ 250.0 $ 300.0 $ .7 Average pay rate (a) Average receive rate 5.54% 6.02% 5.94% Variable to fixed rates $200.0 $ -- $ -- $ -- $ -- $ -- $ 200.0 $ (.6) Average pay rate 7.17% 7.17% Average receive rate (b) Fixed U.S. rates to fixed foreign rates (c) To Japanese yen $ -- $100.0 $ -- $ -- $ -- $ -- $ 100.0 $ (23.3) Average pay rate (in Japanese yen) (d) 1.99% 1.99% Average receive rate 6.66% 6.66% To deutsche marks $ -- $100.0 $ -- $ -- $ -- $ -- $ 100.0 $ (15.3) Average pay rate (in deutsche marks) (e) 4.73% 4.73% Average receive rate 6.64% 6.64% To Dutch guilders $ -- $ 50.0 $ -- $ -- $ -- $ -- $ 50.0 $ (8.1) Average pay rate (in Dutch guilders) (f) 4.58% 4.58% Average receive rate 6.77% 6.77% - ------------------------------------------------------------------------------------------------------------------------------ (a) The average pay rate is based upon 6-month forward LIBOR. (b) The average receive rate is based upon 3-month forward LIBOR. (c) The indicated fair values of interest rate swaps that swap from fixed U.S. rates to fixed foreign rates include the fair values of the exchange of the notional principal amounts at the end of the swap terms as well as the exchange of interest streams over the life of the swaps. The fair values of the currency exchange are also included in the disclosures of foreign currency exchange rate sensitivity included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1997. (d) The average pay rate (in Japanese yen) is based upon a notional principal amount of 10.9 billion Japanese yen. (e) The average pay rate (in deutsche marks) is based upon a notional principal amount of 153.3 million deutsche marks. (f) The average pay rate (in Dutch guilders) is based upon a notional principal amount of 85.9 million Dutch guilders.
-24- FINANCIAL CONDITION Operating activities provided cash of $6.1 million for the six months ended June 28, 1998, compared to $101.9 million of cash used before the sale of receivables for the corresponding period in 1997. This increased cash generation was principally the result of improved working capital management in the six months ended June 28, 1998, as compared to the corresponding period in 1997. Investing activities for the six months ended June 28, 1998, provided cash of $234.8 million due principally to the receipt of $288.0 million of proceeds from the sale of the household products business in North America and Latin America, excluding Mexico and Brazil. Excluding the $288.0 million of sales proceeds, investing activities for the six months ended June 28, 1998, used cash of $53.2 million compared to $70.0 million in cash used in the corresponding period in 1997. This lower cash usage in 1998 primarily resulted from a reduced level of capital expenditures in the first half of 1998 compared to the corresponding period in 1997. Financing activities used cash of $281.7 million for the six months ended June 28, 1998, compared to cash generated of $236.5 million in the first six months of 1997. The increase in cash used in financing activities during the first half of 1998 over the corresponding period in 1997 was principally the result of cash expended for the stock repurchase program and for the redemption of preferred stock of a subsidiary, coupled with lower borrowing levels in 1998 due, in part, to increased cash from operating activities and the receipt of proceeds from the sale of a portion of the household products business. During the six months ended June 28, 1998, a wholly owned subsidiary of the Corporation issued $300.0 million of fixed rate, senior unsecured notes that were guaranteed by the Corporation, of which $150.0 million is due in 2007 and the balance is due in 2028. Proceeds of that debt issuance were used to repay borrowings outstanding under the Corporation's revolving credit facility. In addition, during that period, the Corporation retired $182.2 million of long-term indebtedness in advance of their scheduled maturities. As a result of changes in the Corporation's debt portfolio, average debt maturity was 6.1 years at June 28, 1998, compared to 3.9 years at December 31, 1997. These changes in the Corporation's debt portfolio, coupled with changes in the Corporation's interest rate hedge portfolio described above, had the effect of decreasing the Corporation's variable rate debt to total debt ratio from 63% at December 31, 1997, to 39% at June 28, 1998. -25- In addition to measuring its cash flow generation and usage based upon the operating, investing, and financing classifications included in the Consolidated Statement of Cash Flows, the Corporation also measures its free cash flow. Free cash flow, a measure commonly employed by bond rating agencies and banks, is defined by the Corporation as cash available for debt reduction (including short-term borrowings), prior to the effects of cash received from divested businesses, issuances of equity, and sales of receivables and to the effects of cash paid for stock repurchases and for the redemption of stock of subsidiaries. Free cash flow, a more inclusive measure of the Corporation's cash flow generation than cash flow from operating activities included in the Consolidated Statement of Cash Flows, considers items such as cash used for capital expenditures and dividends, as well as net cash inflows or outflows from hedging activities. During the six months ended June 28, 1998, the Corporation experienced negative free cash flow of $98.0 million compared to negative free cash flow of $183.3 million for the corresponding period in 1997. This $85.3 million improvement in free cash flow during the first half of 1998 over the 1997 level was primarily the result of improved working capital management. FORWARD LOOKING STATEMENTS This Quarterly Report on Form 10-Q includes statements that constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and that are intended to come within the safe harbor protection provided by those sections. By their nature, all forward looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated by the forward looking statements for a number of reasons, including but not limited to: market acceptance of the new products introduced in 1997 and 1998 and scheduled for introduction in 1998; the level of sales generated from these new products relative to expectations, based on the existing investments in productive capacity and commitments of the Corporation to fund advertising and product promotions in connection with the introduction of these new products; the ability of the Corporation and its suppliers to meet scheduled timetables of new product introductions; unforeseen competitive pressure or other difficulty in maintaining mutually beneficial relationships with key distributors or penetrating new channels of distribution; adverse changes in currency exchange rates or raw material commodity prices, both in absolute terms and relative to competitors' risk profiles; delays in or unanticipated inefficiencies resulting from manufacturing and administrative reorganization actions in progress or contemplated by the strategic repositioning described in the Corporation's Annual Report on Form 10-K for the year ended December 31, 1997, and updated herein; and the continuation of modest economic growth in the United States and Europe and gradual improvement in the economic environment in Asia. In addition to the foregoing, the Corporation's ability to realize the anticipated benefits during 1998 and in the future of the restructuring actions undertaken in 1998 is dependent upon current market conditions, as well as the timing and effectiveness of the relocation or consolidation of production and administrative processes. The ability to realize the benefits inherent in the balance of the restructuring actions is dependent on the selection and implementation of economically viable projects in addition to the restructuring actions taken to date. The ability to achieve certain -26- sales and profitability targets and cash flow projections also is dependent upon the Corporation's ability to identify appropriate selected acquisitions that are complementary to the repositioned business units at acquisition prices that are consistent with these objectives. There can be no assurance that the Corporation will consummate the sales of the household products business in Brazil and the glass container-forming and inspection equipment business and complete the recapitalization of the recreational products business. Further, the Corporation's ability to realize aggregate proceeds from the sales of the household products business (excluding certain assets associated with the Corporation's cleaning and lighting products) in North America and Latin America, excluding Brazil, and the glass container-forming and inspection business and from the recapitalization of the recreational products business of over $700 million on a gross basis or approximately $550 million on a net basis, is dependent upon, with respect to the sale of the glass container-forming and inspection equipment business, the Corporation's receipt of regulatory and other necessary approvals and the satisfaction of customary closing conditions, and with respect to the recapitalization of the recreational products business, the satisfaction of customary closing conditions. ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information required under this Item is included in Item 2 of Part I of this report under the caption "Interest Rate Sensitivity" and in the seventh paragraph under the caption "Earnings" and is incorporated by reference herein. In addition, reference is made to Item 7A of the Corporation's Annual Report on Form 10-K for the year ended December 31, 1997. -27- THE BLACK & DECKER CORPORATION PART II - OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS The Corporation is involved in various lawsuits in the ordinary course of business. These lawsuits primarily involve claims for damages arising out of the use of the Corporation's products and allegations of patent and trademark infringement. The Corporation is also involved in litigation and administrative proceedings involving employment matters and commercial disputes. Some of these lawsuits include claims for punitive as well as compensatory damages. The Corporation, using current product sales data and historical trends, actuarially calculates the estimate of its current exposure for product liability claims for amounts in excess of established deductibles and accrues for the estimated liability as described above up to the limits of the deductibles. All other claims and lawsuits are handled on a case-by-case basis. The Corporation also is involved in lawsuits and administrative proceedings with respect to claims involving the discharge of hazardous substances into the environment. Certain of these claims assert damages and liability for remedial investigations and cleanup costs with respect to sites at which the Corporation has been identified as a potentially responsible party under federal and state environmental laws and regulations (off-site). Other matters involve sites that the Corporation currently owns and operates or has previously sold (on-site). For off-site claims, the Corporation makes an assessment of the cost involved based on environmental studies, prior experience at similar sites, and the experience of other named parties. The Corporation also considers the ability of other parties to share costs, the percentage of the Corporation's exposure relative to all other parties, and the effects of inflation on these estimated costs. For on-site matters associated with properties currently owned, an assessment is made as to whether an investigation and remediation would be required under applicable federal and state law. For on-site matters associated with properties previously sold, the Corporation considers the terms of sale as well as applicable federal and state laws to determine if the Corporation has any remaining liability. If the Corporation is determined to have potential liability for properties currently owned or previously sold, an estimate is made of the total cost of investigation and remediation and other potential costs associated with the site. The Corporation's estimate of the costs associated with legal, product liability, and environmental exposures is accrued if, in management's judgment, the likelihood of a loss is probable. These accrued liabilities are not discounted. Insurance recoveries for environmental and certain general liability claims are not recognized until realized. As of June 28, 1998, the Corporation had no known probable but inestimable exposures for awards and assessments in connection with environmental matters and other litigation and administrative proceedings that could have a material effect on the Corporation. -28- Management is of the opinion that the amounts accrued for awards or assessments in connection with the environmental matters and other litigation and administrative proceedings to which the Corporation is a party are adequate and, accordingly, ultimate resolution of these matters will not have a material adverse effect on the Corporation. ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS As indicated in Note 5 of Notes to Consolidated Financial Statements, in June 1998, a wholly owned subsidiary of the Corporation issued senior unsecured notes (the "Debt Securities") that were guaranteed by the Corporation. Closing on the sale of the Debt Securities occurred on June 26, 1998, and the title and amount of the Debt Securities were as follows: $150,000,000 of 6.55% Senior Notes due 2007 and $150,000,000 of 7.05% Senior Notes due 2028. The Debt Securities were unconditionally and irrevocably guaranteed by the Corporation. The initial purchasers of the Debt Securities were Lehman Brothers Inc., Citicorp Securities, Inc., NationsBanc Montgomery Securities LLC, and Chase Securities Inc. The Debt Securities were issued pursuant to the exemption from registration in Section 4(2) of the Securities Act of 1933 and may be resold in reliance upon the exemption to the registration requirements provided by Rule 144A. All of the Debt Securities were sold for cash and the Price to Investors, Discounts and Commissions, and Proceeds to Issuers were are follows: ===================================================================================================================
Price to Discounts and Proceeds to Investors(1) Commissions Issuer(2) - ------------------------------------------------------------------------------------------------------------------- Per 2007 Note.......................... 99.703% .65% 99.053% Total ................................. $149,554,500 $975,000 $148,579,500 - ------------------------------------------------------------------------------------------------------------------- Per 2028 Note......................... 99.837% .875% 98.962% Total................................. $149,755,500 $1,312,500 $148,443,000 =================================================================================================================== (1) Plus accrued interest, if any, from June 26, 1998. (2) Before deducting expenses payable by the Issuer estimated at $550,000.
As indicated in Note 2 of Notes to Consolidated Financial Statements under the heading "Repurchase of Common Stock," in connection with the Corporation's stock repurchase program the Corporation sold put options on 400,000 shares of its Common Stock during the first six months of 1998. The put options were sold in a series of transactions with an investment banking firm subject to customary transfer restrictions in reliance upon the exemption from registration in Section 4(2) of the Securities Act of 1933. The Corporation received aggregate premiums of $.7 million in connection with these transactions. Each of the put options is exercisable on a single fixed date specified in the option contract. The average strike price of the put options sold during the first six months of 1998 was $53.11 per share. -29- ITEM 5 OTHER INFORMATION As indicated in the Proxy Statement distributed to the Corporation's stockholders in connection with the 1998 Annual Meeting of Stockholders, it is expected that the Corporation's 1999 Annual Meeting of Stockholders (the "1999 Meeting") will be held on April 27, 1999. Stockholders wishing to submit a proposal to be considered for inclusion in the Corporation's proxy statement for the 1999 Meeting in accordance with the provisions of Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), must submit the proposal in writing and the proposal must be received by the Corporation on or before November 3, 1998. The advance notice provisions included in the Corporation's Bylaws provide that stockholders wishing to bring business before a stockholders' meeting, among other things, must give written notice to the Corporation of the business to be introduced at the meeting and the notice must be received by the Corporation's Corporate Secretary not less than 90 nor more than 110 days prior to the meeting. As a result, with the exception of stockholder proposals submitted in accordance with the provisions of Rule 14a-8 under the Exchange Act, to be properly brought before the 1999 Meeting, business introduced by a stockholder of the Corporation must be received by the Corporation's Corporate Secretary on or before January 27, 1999, but not before January 7, 1999. -30- ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K Exhibit No. Description 2(a)(i) Transaction Agreement dated as of May 10, 1998, by and between The Black & Decker Corporation and Windmere-Durable Holdings, Inc.* 2(a)(ii) Amendment No. 1 to Transaction Agreement dated as of June 26, 1998, by and between The Black & Decker Corporation and Windmere-Durable Holdings, Inc.* 2(b)(i) Reorganization, Recapitalization and Stock Purchase Agreement dated as of June 29, 1998, by and between The Black & Decker Corporation, True Temper Sports, Inc. and TTSI LLC.* 2(b)(ii) Amendment No. 1 to Reorganization, Recapitalization and Stock Purchase Agreement dated as of August 1, 1998, by and between The Black & Decker Corporation, True Temper Sports, Inc. and TTSI LLC.* 2(c) Transaction Agreement dated as of July 12, 1998, by and between The Black & Decker Corporation and Bucher Holding AG.* 3 Bylaws of the Corporation, as amended. 4 Indenture dated as of June 26, 1998, by and between Black & Decker Holdings Inc., as Issuer, the Corporation, as Guarantor, and The First National Bank of Chicago, as Trustee. 11 Computation of Earnings Per Share. 12 Computation of Ratios. 27 Financial Data Schedule. - --------------------- * Certain schedules and attachments have been omitted. The Corporation agrees to provide a copy of these schedules and attachments to the Securities and Exchange Commission upon request. On April 15, 1998, the Corporation filed a Current Report on Form 8-K with the Securities and Exchange Commission. This Current Report on Form 8-K, filed pursuant to Item 5 of that Form, stated that the Corporation had reported its earnings for the quarter ended March 29, 1998. The Corporation did not file any other reports on Form 8-K during the three-month period ended June 28, 1998. All other items were not applicable. -31- THE BLACK & DECKER CORPORATION S I G N A T U R E S 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. THE BLACK & DECKER CORPORATION By /s/ THOMAS M. SCHOEWE Thomas M. Schoewe Senior Vice President and Chief Financial Officer Principal Accounting Officer By /s/ STEPHEN F. REEVES Stephen F. Reeves Vice President and Controller Date: August 12, 1998 EX-2 2 EXHIBIT 2(A)(I) EXHIBIT 2(a)(i) TRANSACTION AGREEMENT Dated as of May 10, 1998 By and Between THE BLACK & DECKER CORPORATION and WINDMERE-DURABLE HOLDINGS, INC. TABLE OF CONTENTS Page ARTICLE I DEFINITIONS Section 1.01 Definitions....................................... 1 ARTICLE II TRANSACTIONS AND CLOSING Section 2.01 Closing Transactions.............................. 1 Section 2.02 Exchange Consideration............................ 3 Section 2.03 Closing........................................... 4 Section 2.04 Adjustment of Exchange Consideration.............. 4 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER Section 3.01 Representations and Warranties of Seller.......... 6 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Section 4.01 Representations and Warranties of Buyer........... 6 ARTICLE V COVENANTS AND AGREEMENTS OF SELLER Section 5.01 Conduct of Business............................... 7 Section 5.02 Access to Information; Confidentiality............ 8 Section 5.03 Change of Lockbox Accounts........................ 9 Section 5.04 Access to Information; Cooperation After Closing.. 9 Section 5.05 Maintenance of Insurance Policies................. 9 Section 5.06 Noncompetition; Nonsolicitation; etc.............. 10 ARTICLE VI COVENANTS AND AGREEMENTS OF BUYER Section 6.01 Confidentiality................................... 12 Section 6.02 Provision and Preservation of and Access to Certain Information; Cooperation.................. 12 Section 6.03 Insurance; Financial Support Arrangements......... 13 Section 6.04 Use of Intellectual Property...................... 14 Section 6.05 Certain Environmental Investigations.............. 14 Section 6.06 Nonsolicitation of Employees, etc................. 15 ARTICLE VII COVENANTS AND AGREEMENTS OF THE PARTIES Section 7.01 Further Assurances................................ 16 Section 7.02 Certain Filings; Consents......................... 16 Section 7.03 Public Announcements.............................. 16 Section 7.04 Intellectual Property............................. 16 Section 7.05 HSR Act........................................... 17 Section 7.06 Certain Environmental Insurance Matters........... 17 Section 7.07 Legal Privileges.................................. 18 ARTICLE VIII EMPLOYEES AND EMPLOYEE BENEFIT MATTERS Section 8.01 Employees and Employee Benefit Matters............ 18 ARTICLE IX CONDITIONS TO CLOSING Section 9.01 Conditions to the Obligations of Each Party....... 18 Section 9.02 Conditions to Obligation of Buyer................. 19 Section 9.03 Conditions to Obligation of Seller................ 20 Section 9.04 Effect of Waiver.................................. 20 ARTICLE X SURVIVAL; INDEMNIFICATION Section 10.01 Survival.......................................... 20 Section 10.02 Indemnification................................... 22 Section 10.03 Procedures........................................ 23 Section 10.04 Limitations....................................... 25 ARTICLE XI TERMINATION Section 11.01 Termination....................................... 26 Section 11.02 Effect of Termination............................. 27 ARTICLE XII MISCELLANEOUS Section 12.01 Notices........................................... 27 Section 12.02 Amendments; Waivers............................... 28 Section 12.03 Expenses; Taxes................................... 29 Section 12.04 Successors and Assigns............................ 29 Section 12.05 Disclosure........................................ 29 Section 12.06 Construction...................................... 29 Section 12.07 Entire Agreement.................................. 30 Section 12.08 Governing Law..................................... 30 Section 12.09 Counterparts; Effectiveness....................... 30 Section 12.10 Jurisdiction...................................... 31 Section 12.11 Severability...................................... 31 Section 12.12 Captions.......................................... 31 Section 12.13 Bulk Sales........................................ 31 EXHIBITS EXHIBIT A Definitions EXHIBIT B Representations and Warranties of Seller EXHIBIT C Representations and Warranties of Buyer EXHIBIT D Employees and Employee Benefit Matters EXHIBIT E Additional Matters Relating to Product Liability Issues ATTACHMENTS Attachment I Opening Statement Attachment II Form of Bill of Sale, Assignment and Assumption Agreement Attachment III Form of Assignment of United States Trademarks, Trademark Registrations and Applications for Registration Attachment IV Form of Assignment of Foreign Trademarks, Trademark Registrations and Applications for Registration Attachment V Form of Assignment of United States Patents and Patent Applications Attachment VI Form of Assignment of Foreign Patents and Applications for Patents Attachment VII Form of Trademark License Agreement Attachment VIII Form of Assignment of U.S. Copyrights Attachment IX Form of Assignment of Mexican Trademarks, Trademark Registrations and Applications for Registration Attachment X Form of Cross License Agreement Attachment XI Exchange Consideration Allocation Schedule Attachment XII Certain Intellectual Property Assets Attachment XIII Consents and Approvals Required Prior to Closing Attachment XIV HPG Financial Statements Attachment XV Certain Active Employees Attachment XVI Form of Distribution Services Agreement (United States) Attachment XVII Form of Distribution Services Agreement (Latin America) Attachment XVIII Form of Services Agreement (United States and Canada) Attachment XIX Form of Services Agreement (GPA) Attachment XX Form of Services Agreement (Mexico) Attachment XXI Form of Services Agreement (Latin American Group and CCA) Attachment XXII Form of Services Agreement (Colombia) Attachment XXIII Form of Services Agreement (Chile) Attachment XXIV Form of Services Agreement (Peru) Attachment XXV Form of Services Agreement (Argentina) Attachment XXVI Form of Services Agreement (Puerto Rico) Attachment XXVII Form of Services Agreement (Venezuela) Attachment XXVIII Asheboro Facility Attachment XXIX Opinion of Seller's Counsel -1- TRANSACTION AGREEMENT This Transaction Agreement (together with the Exhibits, Schedules and Attachments hereto, this "Agreement") is made as of the 10th day of May 1998, by and among The Black & Decker Corporation, a Maryland corporation ("Seller"), and Windmere-Durable Holdings, Inc., a Florida corporation ("Buyer"), on behalf of itself and its wholly owned Subsidiaries ("Buyer Companies"). W I T N E S S E T H: WHEREAS, Seller, through certain of its direct and indirect Subsidiaries, is engaged in the HPG Business; WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, Seller desires to transfer or to cause the Affiliated Transferors to transfer substantially all of the assets held, owned by or used to conduct the HPG Business, and to assign certain liabilities associated with the HPG Business, to Buyer or Buyer Companies designated by Buyer, and Buyer desires to receive or to cause such designated Buyer Companies to receive such assets and assume such liabilities; and WHEREAS, in connection with the sale of the HPG Business to Buyer, Seller and Buyer desire to enter into certain agreements and arrangements ancillary to such sale; NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties contained herein, the parties agree as follows: ARTICLE I DEFINITIONS Section 1.01 Definitions. Capitalized terms used in this Agreement shall have the meanings specified in this Agreement or in Exhibit A. ARTICLE II TRANSACTIONS AND CLOSING Section 2.01 Closing Transactions. Upon the terms and subject to the conditions set forth in this Agreement, the parties agree that at the Closing, among other things: (i) Seller and the Affiliated Transferors will transfer or cause to be transferred to Buyer or Buyer Companies designated by Buyer all Transferred Assets and Buyer or Buyer Companies designated by Buyer will assume all Assumed Liabilities in accordance with this Agreement; -2- (ii) to effect the transfer of certain assets and the assumption of liabilities contemplated by the foregoing clause (i), Seller or the Affiliated Transferors, as the case may be, and Buyer or Buyer Companies shall execute and deliver the Assignment and Assumption Agreements; (iii) to effect the transfer by Seller or the Affiliated Transferors of certain rights in respect of Intellectual Property used or held for use exclusively in connection with the HPG Business, Seller or the Affiliated Transferors, as the case may be, shall execute and deliver the Intellectual Property Assignment Agreements; (iv) to effect the license of certain rights in respect of Intellectual Property, Seller or the Affiliated Transferors, as the case may be, and Buyer or Buyer Companies shall execute (a) the Trademark License Agreement in the form contemplated by Attachment VII to this Agreement, and (b) the Cross License Agreement; (v) Seller or the Affiliated Transferors, as the case may be, and Buyer or Buyer Companies, as the case may be, shall execute and deliver the Services Agreements; provided, however that Buyer shall have the right to decline to enter into any or all of such Services Agreements by notice given to Seller at any time prior to Closing; (vi) Seller or the Affiliated Transferors, as the case may be, and Buyer or Buyer Companies, as the case may be, shall execute and deliver the Distribution Services Agreement (United States) and the Distribution Services Agreement (Latin America) in the forms contemplated by Attachment XVI and Attachment XVII to this Agreement; (vii) Seller or the Affiliated Transferors, as the case may be, and Buyer or Buyer Companies, as the case may be, to the extent requested by Buyer, shall execute and deliver sublease agreements for the sublease by Buyer or Buyer Companies, as the case may be, relating to the facilities located in Richmond Hill, Ontario, Canada, Miami, Florida, and Bosques de Las Lomas, Mexico and shared by the HPG Business and Seller's power tools business, on terms and conditions to be negotiated in good faith prior to the Closing consistent with the terms and conditions of the applicable lease for such shared facilities (including rent and expense reimbursement on a pro rata basis taking into account the space used by the HPG Business and the space used by Seller's power tools business) and on such other terms and conditions as may be agreed to by Seller and Buyer. Such subleases shall be on a month-to-month basis with 30 days advance written notice being required to terminate the subleases, but in no event shall expire later than the close of business on February 28, 1999; (viii) Seller or the Affiliated Transferors, as the case may be, and Buyer or Buyer Companies shall execute and deliver a supply agreement relating to the continued supply, at Seller's option, for a period commencing on the Closing Date and ending on the date on which the Trademark License Agreement terminates in respect of the Black & Decker trademark, of products and related parts, accessories or attachments manufactured or sold by the HPG Business following the Closing for sale by Seller Companies at the service centers and outlet stores of Seller Companies, on terms and conditions to be negotiated -3- in good faith prior to the Closing, it being understood and agreed that the price of such products to Seller Companies shall be equal to Buyer's standard cost of production calculated on a basis consistent with current practices plus 15%; (ix) Seller or the Affiliated Transferors, as the case may be, and Buyer or Buyer Companies, as the case may be, shall execute and deliver a lease agreement for the lease of the Kuantan Facility and any related fixtures and equipment at the Kuantan Facility for a period of up to six months following the Closing Date at a rental rate equal to the reasonable out-of-pocket costs to Seller Companies of the continued operation of the Kuantan Facility during the lease term plus $1.00, and an agreement providing Buyer with a right of first refusal on the sale by Seller Companies of any excess manufacturing equipment at the Kuantan Facility that Seller Companies decide not to use in their businesses; (x) Seller or the Affiliated Transferors, as the case may be, and Buyer or Buyer Companies, as the case may be, shall execute and deliver a lease agreement for the lease of the Asheboro Property for a period expiring on September 30, 1999, on terms and conditions consistent with Attachment XXVIII to this Agreement; (xi) Buyer Companies shall pay and deliver to Seller, for its own account and as agent for the Affiliated Transferors, $315,000,000 in immediately available funds by wire transfer to an account or accounts designated by Seller (which account shall be designated by Seller by written notice to Buyer at least two Business Days prior to the Closing Date, or such shorter notice as Buyer shall agree to accept); and (xii) At Closing, Seller shall deliver to Buyer: (A) in a form agreed to by both Buyer and Seller, the instruments of conveyance in form sufficient under Applicable Law to convey fee simple title to the Queretaro Property, and (B) a No Lien Certificate issued by the Public Registry of Property and Commerce in Queretaro, which confirms that fee simple title to the Queretaro Property is vested in Seller, and that the Queretaro Property is free and clear of all Liens, other than Permitted Liens; provided, however, that if it is impractical because of the legal formalities in Mexico to complete and record the instruments of conveyance on the Closing Date, the parties hereto agree that the Closing shall be consummated and such legal formalities will be completed as soon as practicable after the Closing Date. Section 2.02 Exchange Consideration. (a) The consideration to be paid to Seller and the Affiliated Transferors for the Transferred Assets (the "Exchange Consideration") shall consist of the following: (i) subject to adjustment in accordance with Section 2.04, $315,000,000 in cash (as so adjusted, the "Adjusted Purchase Price"); and (ii) the assumption by Buyer Companies of the Assumed Liabilities in accordance with the Transaction Documents. -4- (b) The Exchange Consideration shall be allocated to and among the respective Transferred Assets in the manner contemplated by Attachment XI to this Agreement. Seller and Buyer agree that the allocation of the Exchange Consideration contemplated by Attachment XI to this Agreement is consistent with the value of the Transferred Assets and the principles of Section 1060 of the Code and the regulations thereunder. Seller and Buyer agree that they shall use the allocation of the Exchange Consideration determined in accordance with Attachment XI to this Agreement in any Tax Returns or other reports that deal with the Contemplated Transactions and are filed with any Tax Authority. Section 2.03 Closing. The closing (the "Closing") of the Contemplated Transactions shall take place at the offices of Miles & Stockbridge P.C., 10 Light Street, Baltimore, Maryland 21202, on the 15th day following the delivery by Seller to Buyer of the audited financial statements contemplated by Section 9.02(g) (or the next Business Day if the 15th day is not a Business Day), provided, however, that unless the Buyer agrees otherwise, the Closing shall not occur prior to June 9, 1998, and, provided further, that if all of the conditions to Closing set forth in Article IX have not been satisfied (or waived) as of that date and if closing on that date therefore would be impractical, the Closing shall take place on the fifth Business Day following the satisfaction or waiver (by the party entitled to waive the condition) of all conditions to the Closing set forth in Article IX, or at such other time and place as the parties to this Agreement may agree. The Closing will occur at 9:00 a.m. on the Closing Date. Section 2.04 Adjustment of Exchange Consideration. (a) Promptly following the Closing Date, but in no event later than 60 days after the Closing Date, Seller shall, at its expense, with the assistance of Buyer, prepare and submit to Buyer a statement of net tangible assets (and, if applicable, net working capital) setting forth, in reasonable detail, Seller's calculation of the Net Tangible Assets as of the close of business on the day prior to the Closing Date (the "Proposed Final Net Tangible Asset Amount") and in addition, if the Closing Date is any day after June 28, 1998, Seller's calculation of the amount of the difference (the "Proposed Net Working Capital Change Amount") between the Net Working Capital as of the close of business on the day prior to the Closing Date (the "Closing Net Working Capital Amount") and the Net Working Capital as of the close of business on June 28, 1998 (the "June 28 Net Working Capital Amount"). In the event Buyer disputes the correctness of the Proposed Final Net Tangible Asset Amount or the Proposed Net Working Capital Change Amount, Buyer shall notify Seller of its objections within 45 days after receipt of Seller's calculation of the Proposed Final Net Tangible Asset Amount and the Proposed Net Working Capital Change Amount and shall set forth, in writing and reasonable detail, the reasons for Buyer's objections. If Buyer fails to deliver such notice of objections within such time, Buyer shall be deemed, for purposes of this Section 2.04, to have accepted Seller's calculation. To the extent Buyer does not object, in writing and in reasonable detail as required and within the time period contemplated by this Section 2.04(a) to a matter in the statement of net tangible assets (including, but not limited to, matters impacting Net Working Capital) prepared and submitted by Seller, Buyer shall be deemed to have accepted Seller's calculation and presentation in respect of the matter and the matter shall not be considered to be in dispute. Seller and Buyer shall endeavor in good faith to resolve any matters disputed under this Section 2.04 within 20 days after Seller's receipt of Buyer's notice of objections. If they are unable to do so, Seller and -5- Buyer shall select a nationally known independent accounting firm (other than Ernst & Young LLP or Grant Thornton LLP) to resolve the matters in dispute and only those matters (in a manner consistent with Section 2.04(b) and with any matters not in dispute), and the determination of such firm in respect of the correctness of each matter remaining in dispute shall be conclusive and binding on Seller and Buyer. With respect to each disputed matter, the determination of such firm as to the appropriate amount shall not exceed the higher amount or be less than the lower amount asserted by Buyer or Seller for such disputed matter on or before the date of Seller's receipt of Buyer's notice of objections. The Net Tangible Assets as of the close of business on the day prior to the Closing Date, and, if applicable, the amount of the difference between the Closing Net Working Capital Amount and the June 28 Net Working Capital Amount, as finally determined pursuant to this Section 2.04(a) (whether by failure of Buyer to deliver notice of objection, by agreement of Seller and Buyer or by determination of the independent accountants selected as set forth above), are referred to herein respectively as the "Final Net Tangible Asset Amount" and the "Final Net Working Capital Change Amount." (b) The Proposed Final Net Tangible Asset Amount, the Proposed Net Working Capital Change Amount, the Final Net Tangible Asset Amount and the Final Net Working Capital Change Amount shall be determined in accordance with the accounting principles, policies, practices and methods utilized in the preparation of the Opening Statement, as disclosed in the notes to the Opening Statement and, to the extent applicable, the notes to the special-purpose statement of net assets as of March 29, 1998, which is included in the HPG Financial Statements, except as otherwise set forth in Note E to the Opening Statement. Seller shall provide Buyer with notice of the time and location at which all procedures relating to the determination of inventory will be undertaken with respect to determination of the Proposed Final Net Tangible Asset Amount and the Proposed Net Working Capital Change Amount and shall permit Buyer and its representatives to be present to coordinate and observe the counting procedure performed and to take such test counts as such representatives of Buyer consider appropriate in the circumstances. (c) If the Final Net Tangible Asset Amount is equal to or greater than $107,500,000, there shall be no adjustment of the Exchange Consideration on account of the Final Net Tangible Asset Amount. If the Final Net Tangible Asset Amount is less than $107,500,000, the difference shall be paid to Buyer by Seller with simple interest thereon from the Closing Date to the date of payment at a floating rate per annum equal to the per annum interest rate announced from time to time by Citibank, N.A. as its prime rate in effect. Such payment shall be made in immediately available funds not later than five Business Days after the determination of the Final Net Tangible Asset Amount by wire transfer to a bank account designated in writing by Buyer. (d) If the Closing Date is any day after June 28, 1998, the Exchange Consideration shall be subject to adjustment on account of the Final Net Working Capital Change Amount as provided in this Section 2.04(d). If the Final Net Working Capital Change Amount is zero or constitutes a decrease of the Closing Net Working Capital Amount from the June 28 Net Working Capital Amount, there shall be no adjustment of the Exchange Consideration on account of the Final Net Working Capital Change Amount. If the Final Net Working Capital Change Amount constitutes an increase of the Closing Net Working Capital Amount over the June 28 Net Working Capital Amount, Buyer shall pay to Seller an amount equal to the Net Working Capital -6- Adjustment Amount (as hereinafter defined), together with interest thereon as provided below in this Section 2.04(d). The "Net Working Capital Adjustment Amount" shall equal the lesser of (i) the Final Net Working Capital Change Amount or (ii) the amount of the excess of the Final Net Tangible Asset Amount over $107,500,000. Interest shall accrue on the Net Working Capital Adjustment Amount from the Closing Date to the date of payment at a floating rate per annum equal to the per annum interest rate announced from time to time by Citibank, N.A. as its prime rate in effect. Payment of the Net Working Capital Adjustment Amount and accrued interest thereon shall be made in immediately available funds not later than five Business Days after the determination of the Final Net Working Capital Change Amount by wire transfer to a bank account designated in writing by Seller. (e) Seller shall make available and shall cause Ernst & Young LLP to make available, in accordance with reasonable and customary practices and professional standards and subject to such reasonable conditions as Ernst & Young LLP shall impose, the books, records, documents and work papers underlying the preparation and review of the Opening Statement and the calculation of the Proposed Final Net Tangible Asset Amount and the Proposed Net Working Capital Change Amount. Buyer shall make available and shall cause Grant Thornton LLP to make available, in accordance with reasonable and customary practices and professional standards and subject to such reasonable conditions as Grant Thornton LLP shall impose, the books, records, documents and work papers created or prepared by or for Buyer in connection with the review of the Proposed Final Net Tangible Asset Amount, the Proposed Net Working Capital Change Amount and the other matters contemplated by Section 2.04(a). (f) The fees and expenses, if any, of the accounting firm selected to resolve any disputes between Seller and Buyer in accordance with Section 2.04(a) shall be paid one-half by Seller and one-half by Buyer. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER Section 3.01 Representations and Warranties of Seller. Seller represents and warrants to Buyer as set forth in Exhibit B. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Section 4.01 Representations and Warranties of Buyer. Buyer represents and warrants to Seller as set forth in Exhibit C. -7- ARTICLE V COVENANTS AND AGREEMENTS OF SELLER Section 5.01 Conduct of Business. Except with the written consent of Buyer (which consent shall not be unreasonably withheld or delayed), as set forth in Schedule 5.01, as permitted below or required by Applicable Law, or in accordance with the terms and conditions of Contracts entered into in the ordinary course of business and consistent with past practices and in existence on the date of this Agreement, from the date of this Agreement until the Closing Date, Seller Companies shall conduct the HPG Business in all material respects in accordance with the historical and customary operating practices relating to the conduct of the HPG Business and shall use reasonable commercial efforts to preserve intact the HPG Business and the relationships of Seller Companies with third parties in connection with the HPG Business, and Seller Companies shall not: (i) except for expenditures contemplated by the 1998 capital expenditure plan for the HPG Business, make any capital expenditure, or group of related capital expenditures, relating to the HPG Business in excess of $500,000 in the aggregate; (ii) sell or dispose of more than an aggregate of $500,000 of assets that would constitute Transferred Assets if owned, held or used by any Seller Companies on the Closing Date (other than the sale of Inventory in the ordinary course of business consistent with past practices or obsolete Inventory whether or not in the ordinary course of business, and the sale of surplus equipment and materials arising out of or relating to the closing of the Kuantan Facility); (iii) sell, transfer, license or otherwise dispose of (other than in the ordinary course of business consistent with past practices to suppliers, vendors, or other Persons doing work for the HPG Business as part of such work for the HPG Business) any Intellectual Property used exclusively in the HPG Business; (iv) terminate the coverage of any policies of title, liability, fire, workers' compensation, property and any other form of insurance covering the operations of the HPG Business, except where such policies are replaced by policies that are substantially similar in all material respects to the terminated policies; (v) settle any lawsuit or claim if such settlement imposes a material continuing non-monetary obligation on the HPG Business or any of the Transferred Assets; (vi) grant any new or modified severance or termination arrangement or increase or accelerate in any material respect any amount payable under the severance or termination pay policies in effect on the date of this Agreement with respect to any Transferred Employee; or (vii) except as otherwise may be permitted or required by this Agreement or Applicable Law, adopt or amend in any material respect any Employee Plan or Benefit -8- Arrangement in respect of any Transferred Employee or, other than compensation increases in the ordinary course of business, with respect to any Transferred Employee at a level of Vice President or above, increase the compensation or fringe benefits of such Transferred Employee or pay any benefit not required by any Employee Plan or Benefit Arrangement with respect to such Transferred Employee. Section 5.02 Access to Information; Confidentiality. (a) Except as may be necessary to comply with any Applicable Laws, from the date of this Agreement until the Closing Date, Seller Companies shall (i) give Buyer and its Representatives reasonable access to the records of Seller Companies relating to the HPG Business during normal business hours and upon reasonable prior notice, (ii) give Buyer and its Representatives reasonable access to any facilities the possession of which will be transferred to Buyer at Closing during normal business hours and upon reasonable prior notice, (iii) furnish to Buyer and its Representatives such financial and operating data and other information relating to the HPG Business as Buyer may reasonably request and (iv) instruct the employees and Representatives of Seller Companies to provide reasonable cooperation to Buyer in its investigation of the HPG Business. Without limiting the generality of the foregoing, subject to the limitations set forth in the first sentence of this Section 5.02(a), from the date of this Agreement to the Closing Date Seller shall (i) use reasonable commercial efforts to enable Buyer and its Representatives to conduct, at Buyer's expense, business and financial reviews, investigations and studies as to the operation of the HPG Business, including any tax, operating or other efficiencies that may be achieved and (ii) give Buyer and its Representatives access upon reasonable request to information relating to the HPG Business. (b) For a period commencing on the Closing Date and ending on the date on which the Trademark License Agreement terminates in respect of the Black & Decker trademark, Seller Companies will treat and hold as confidential, any confidential information relating primarily to the operations or affairs of the HPG Business. In the event any Seller Companies are requested or required (by written request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand or similar process or by Applicable Law) to disclose any such confidential information, then Seller shall notify Buyer promptly of the request or requirement so that Buyer, at its expense, may seek an appropriate protective order or waive compliance with this Section 5.02(b). If, in the absence of a protective order or receipt of a waiver hereunder, any Seller Companies are, on the advice of counsel, compelled to disclose such confidential information, Seller Companies may so disclose the confidential information, provided that Seller Companies shall use their reasonable efforts to obtain reliable assurance that confidential treatment will be accorded to such confidential information. The provisions of this Section 5.02(b) shall not be deemed to prohibit the disclosure of confidential information relating to the operations or affairs of the HPG Business by any Seller Companies to the extent reasonably required (i) to prepare or complete any required Tax Returns or financial statements, (ii) in connection with audits or other proceedings by or on behalf of a Governmental Authority, (iii) in connection with any insurance claims, (iv) to the extent necessary to comply with any Applicable Laws or (v) to provide services to any Buyer Companies in accordance with the terms and conditions of any of the Transaction Documents. Notwithstanding the foregoing, the provisions of this Section 5.02(b) shall not apply to information that (i) is or becomes publicly available -9- other than as a result of a disclosure by any Seller Company, (ii) is or becomes available to a Seller Company on a non-confidential basis from a source that, to Seller's knowledge, is not prohibited from disclosing such information by a legal, contractual or fiduciary obligation or (iii) is or has been independently developed by a Seller Company (other than solely for the HPG Business). This Section 5.02(b) shall not apply to the disclosure of confidential information concerning the household products businesses of Seller Companies headquartered in countries other than the Designated Countries or to the use, license or sale of Intellectual Property not constituting Transferred Assets. Section 5.03 Change of Lockbox Accounts. Immediately after the Closing, Seller shall take such steps as Buyer may reasonably request to cause Buyer to be substituted as the sole party having control over any lockbox or similar bank account maintained exclusively by the HPG Business to which customers of the HPG Business directly make payments in respect of the HPG Business or to direct the bank at which any such lockbox or similar account is maintained to transfer any payments made thereto to an account established by Buyer. Section 5.04 Access to Information; Cooperation After Closing. (a) On and after the Closing Date, Seller shall, and shall cause each of the other Seller Companies to, at their expense (i) afford Buyer and its Representatives reasonable access upon reasonable prior notice during normal business hours, to all employees, offices, properties, agreements, records, books and affairs of Seller Companies to the extent relating to the conduct of the HPG Business prior to the Closing and (ii) cooperate fully with Buyer with respect to matters relating to the conduct of the HPG Business prior to the Closing, including, without limitation, in the defense or pursuit of any Transferred Asset or Assumed Liability or any claim or action that relates to occurrences involving the HPG Business prior to the Closing Date. In addition, Seller shall cause its independent accountants to make available their work papers in respect of the HPG Financial Statements and the financial statements contemplated by Section 9.02(g). (b) Subject to and consistent with the obligations of senior management to continue to manage and operate the HPG Business, Seller shall cause the members of the senior management team of the HPG Business to make themselves available to assist Buyer and their representatives in the review and preparation of offering memoranda and related documents to be used by Buyer in the financing of the Contemplated Transactions, and shall cause its independent accountants to provide comfort letters in customary form at Buyer's expense in connection with such financing and in connection therewith shall provide such representation letters to its independent accountants as are reasonably required. Section 5.05 Maintenance of Insurance Policies. Except as otherwise provided in Exhibit D, on and after the date of this Agreement and until the Closing Date, Seller shall not take or fail to take any action if such action or inaction, as the case may be, would adversely affect the applicability of any insurance (including reinsurance) in effect on the date of this Agreement that covers all or any part of the assets that would constitute Transferred Assets if owned, held or used by any Seller Companies on the Closing Date, the HPG Business or the Transferred Employees. Except as otherwise provided in Exhibit D or as may otherwise be -10- agreed in writing by the parties, Seller shall not have any obligation to maintain the effectiveness of any such insurance policy after the Closing Date or to make any monetary payment in connection with any such policy, unless such monetary payment relates to a period prior to Closing under a policy in effect prior to Closing. Section 5.06 Noncompetition; Nonsolicitation; etc. (a) Seller covenants and agrees, as an inducement to Buyer to enter into this Agreement and to consummate the Contemplated Transactions, that: (i) with respect to Additional Products (as defined in the Trademark License Agreement), for a period commencing on the Closing Date and ending on the date on which the Trademark License Agreement terminates in respect of the Black & Decker trademark ("Period One"), and (ii) with respect to products that are Designated Products as of the date of this Agreement, for a period commencing on the Closing Date and ending on the date that is the fifth anniversary of the date on which the Trademark License Agreement terminates in respect of the Black & Decker trademark (the "Fifth Anniversary Date"), no Seller Company (for so long but only for so long as it remains a Seller Company) will, directly or indirectly, carry on or participate in the ownership, management or control of any Competing Business (as hereinafter defined). "Competing Business" shall mean (i) during Period One, any business enterprise that sells in any Designated Countries any of the Additional Products or products that are Designated Products as of the date of this Agreement, and (ii) during the period commencing on the day after the date of termination of Period One and ending on the Fifth Anniversary Date, any business enterprise that sells in any Designated Countries any products that are Designated Products as of the date of this Agreement. (b) Nothing contained in this Section 5.06 shall limit or restrict the right of any Seller Company to hold and make investments in securities of any Person that has securities listed on a national securities exchange or admitted to trading privileges thereon or actively traded in a generally recognized over-the-counter market, provided that the aggregate equity interest therein of Seller Companies does not exceed five percent of the outstanding shares or interests in such Person at the time of Seller Companies' investment therein provided that such Seller Company does not take any active management role. Notwithstanding any provisions of this Section 5.06 to the contrary, if Seller or any other Seller Company acquires securities of any Person that is engaged in a Competing Business, Seller Companies shall not be deemed to be in violation of this Section 5.06, provided that (A) (i) at the time of acquisition the Competing Business represents less than 10% of the gross revenues of the acquired Person for the acquired Person's most recently completed fiscal year and (ii) Seller Companies use reasonable commercial efforts to divest the operations of such Competing Business subsequent to such acquisition, or (B) at the time of acquisition the Competing Business represents less than five percent of the gross revenues of the acquired Person for the acquired Person's most recently completed fiscal year. (c) Nothing contained in this Section 5.06 shall limit or restrict the right of any Seller Company to engage in any business outside of the Designated Countries or to sell any Designated Products to Persons outside of the Designated Countries so long as the Seller Company in connection with the sale of any such Designated Products to Persons outside of the Designated Countries takes commercially reasonable steps to ensure that the Designated Products will not be sold in the Designated Countries by such Persons. Nothing contained in this Section 5.06 shall -11- limit or restrict the right of any Seller Company to sell new products purchased from Buyer or Buyer Companies on or after the Closing Date, new products in inventory at or for the Seller Companies' service centers, company stores and outlet stores or reconditioned products (or any related parts, accessories or attachments) of the HPG Business through Seller Companies' service center network (consisting of both owned and authorized service centers) in a manner consistent with past practices or in accordance with any agreements or arrangements between a Seller Company and the HPG Business. (d) Notwithstanding any provisions of this Section 5.06 to the contrary, Seller Companies shall not be deemed to be in violation of this Section 5.06 to the extent that, following the Closing, Seller Companies sell Designated Products (i) that are in the Inventory of Seller Companies at or for the Seller Companies' service centers, company stores and outlet stores as of the Closing Date (or result from raw materials or work in process in the Inventory of Seller Companies at or for the Seller Companies' service centers, company stores and outlet stores as of the Closing Date) or (ii) to fulfill contracts, agreements, commitments, sales or purchase orders or other similar instruments of any kind, whether oral or written, at or for the Seller Companies' service centers, company stores and outlet stores as in effect on the Closing Date. Notwithstanding any provisions of this Section 5.06 to the contrary, Seller Companies shall not be deemed to be in violation of this Section 5.06 to the extent that, following the Closing, Seller Companies sell Cleaning and Lighting Products. (e) From and after the date of this Agreement until the first anniversary of the Closing Date, Seller Companies shall not, without prior written approval of Buyer employ any non-exempt (within the meaning of the Fair Labor Standards Act) Transferred Employee. In addition, from and after the date of this Agreement until the fifth anniversary of the Closing Date, no Seller Company shall, without the prior written approval of Buyer, directly or indirectly solicit any individual who was a non-exempt (within the meaning of the Fair Labor Standards Act) Transferred Employee to terminate his or her employment relationship with Buyer or Buyer Companies; provided, however, that the foregoing shall not apply to individuals hired as a result of the use of an independent employment agency (so long as the agency was not directed to solicit a particular individual or a class of individuals that could only be satisfied by employees of Buyer Companies) or as a result of the use of a general solicitation (such as an advertisement) not specifically directed to employees of Buyer Companies. From and after the date of this Agreement until the fifth anniversary of the Closing Date, no Seller Company will induce or seek to induce any contractor, supplier, client or customer of Buyer or Buyer Companies to terminate their relationship with Buyer or Buyer Companies in respect of the HPG Business. (f) Seller recognizes and agrees that a breach by Seller Companies of any of the covenants and agreements in this Section 5.06 could cause irreparable harm to Buyer, that Buyer's remedies at law in the event of such breach would be inadequate, and that, accordingly, in the event of such breach a restraining order or injunction or both may be issued against Seller Companies, in addition to any other rights and remedies that may be available to Buyer under Applicable Law. If this Section 5.06 is more restrictive than permitted by the Applicable Laws of the jurisdiction in which Buyer seeks enforcement hereof, this Section 5.06 shall be limited to the extent required to permit enforcement under such Applicable Laws. -12- ARTICLE VI COVENANTS AND AGREEMENTS OF BUYER Section 6.01 Confidentiality. Buyer agrees that all information provided or otherwise made available in connection with the Contemplated Transactions, to Buyer or any of its Representatives shall be treated as if provided under the Confidentiality Agreement (whether or not the Confidentiality Agreement is in effect or has been terminated). With the exception of the sixth paragraph of the Confidentiality Agreement, which shall continue to apply in accordance with the terms of the Confidentiality Agreement following the Closing, the other terms of the Confidentiality Agreement shall no longer apply following the Closing. Nothing in this Section 6.01, however, shall limit or otherwise restrict the applicability of any other confidentiality or similar provisions included in the Transaction Documents. Section 6.02 Provision and Preservation of and Access to Certain Information; Cooperation. (a) Prior to the Closing Date, Buyer shall provide to Seller promptly upon its receipt thereof copies of all environmental audit and similar reports with respect to facilities the possession of which will be transferred to Buyer at the Closing. Buyer shall provide to Seller a copy of all sampling results, boring logs, analyses and other data and reports regarding any environmental review conducted by Buyer immediately upon obtaining them. (b) On and after the Closing Date, Buyer shall preserve all books and records of the HPG Business for a period of six years commencing on the Closing Date (or in the case of books and records relating to Tax, employment and employee matters, until such time as Seller notifies Buyer in writing that all statutes of limitations to which such records relate have expired), and thereafter, not to destroy or dispose of such records without giving notice to Seller of such pending disposal and offering Seller such records. In the event Seller has not requested such materials within 90 days following the receipt of notice from Buyer, Buyer may proceed to destroy or dispose of such materials without any liability. Notwithstanding the foregoing, Buyer shall be entitled to destroy or dispose of any books and records of the HPG Business on or after the tenth anniversary of the Closing Date. (c) From and after the Closing Date, Buyer shall at its expense (i) afford Seller and its Representatives reasonable access upon reasonable prior notice during normal business hours, to all employees, offices, properties, agreements, records, books and affairs of Buyer relating to the HPG Business and provide copies of such information concerning the HPG Business as Seller may reasonably request in connection with the matters contemplated by Section 2.04, the preparation of any Tax Returns, in connection with any judicial, quasi-judicial, administrative, Tax, audit or arbitration proceeding, in connection with the preparation of any financial statements or reports required in accordance with Applicable Laws and in connection with the defense of any third party claims or allegations that relate to or may relate to Excluded Liabilities and (ii) cooperate fully with Seller for any proper purpose, including, without limitation, the defense of or pursuit of any Excluded Liability, Excluded Asset or Indemnified Claim, or any -13- third party claim or action that relates to an Excluded Liability, Excluded Asset or Indemnified Claim. Section 6.03 Insurance; Financial Support Arrangements. (a) Buyer acknowledges and agrees that as of the Closing Date, neither Buyer, the HPG Business, any property owned or leased by any of the foregoing nor any of the directors, officers, employees (including, without limitation, the Transferred Employees) or agents of any of the foregoing will be insured under any insurance policies maintained by Seller or any of its Affiliates, except (i) in the case of certain claims made policies, to the extent that a claim has been reported as of the Closing Date, (ii) in the case of a policy that is an occurrence policy, to the extent the accident, event or occurrence that results in an insurable loss occurs prior to the Closing Date and has been, is or will be reported or noticed to the respective carrier by Buyer or any Seller Company in accordance with the requirements of such policies (which claims Seller shall, at Buyer's cost and expense, pursue diligently on Buyer's behalf and the net proceeds of which claims (except to the extent they relate to Excluded Liabilities) shall be remitted promptly to Buyer upon receipt thereof), and (iii) as otherwise provided in Exhibit D or agreed to in writing by the parties. Except as otherwise provided in Exhibit D or as otherwise may be agreed to in writing by the parties, from and after the Closing Date, Seller shall have no obligation of any kind to maintain any form of insurance covering all or any part of the Transferred Assets, the HPG Business or the Transferred Employees. (b) From and after the Closing Date, Buyer agrees to reimburse Seller within 30 days of receipt of an invoice for any self insurance, retention, deductible, retrospective premium, cash payment for reserves calculated or charged on an incurred loss basis and similar items, including but not limited to associated administrative expenses and allocated loss adjustment or similar expenses (collectively, "Insurance Liabilities") allocated to the HPG Business by Seller on a basis consistent with past practices resulting from or arising under any and all current or former insurance policies maintained by Seller or any of its Affiliates to the extent that such Insurance Liabilities relate to or arise out of Assumed Liabilities or any activities of Buyer. Buyer agrees that, to the extent any of the insurers under the insurance policies, in accordance with the terms of the insurance policies, requests or requires collateral, deposits or other security to be provided with respect to claims made against such insurance policies relating to or arising from Assumed Liabilities, Buyer shall provide the collateral, deposits or other security or, upon request of Seller, will replace any collateral, deposits or other security provided by Seller or any of its Affiliates. (c) Buyer agrees that, for a period of six years commencing on the Closing Date, to the extent it maintains product liability or similar insurance coverage, Buyer will use reasonable efforts (at Seller's cost to the extent of any additional cost therefor, provided that, in the event there will be such a cost, Buyer will give Seller a reasonable period of time to determine whether it desires to incur such cost before Buyer commits to such coverage with respect to Seller) to include Seller and its Affiliates as an additional insured/loss payee on any such policies in respect of which Seller or its Affiliates has or may have an insurable interest with respect to the HPG Business, the Transferred Assets, any of the Assumed Liabilities or any facilities the possession of which will be transferred to Buyer at the Closing. Seller agrees, for a period of six years commencing on the Closing Date, to include Buyer Companies as additional insured/loss payees -14- on any product liability policies or similar insurance coverage of Seller (at Buyer's cost to the extent of any additional cost therefor, provided that, in the event there will be such a cost, Seller will give Buyer a reasonable period of time to determine whether it desires to incur such cost before Seller commits to such coverage with respect to Buyer) as to all claims or occurrences that constitute Excluded Liabilities. (d) Buyer agrees that, not later than December 31, 1998, and in a manner reasonably satisfactory to Seller, Buyer shall in good faith seek to release Seller and its Affiliates from all obligations under all Financial Support Arrangements. (e) If, at any time after the Closing Date, (i) any amounts are drawn on or paid under any Financial Support Arrangement where Seller or any of its Affiliates is obligated to reimburse the Person making such payment or (ii) Seller or any of its Affiliates pays any amounts under, or any fees, costs or expenses relating to, such Financial Support Arrangement, Buyer shall pay Seller such amounts promptly after receipt from Seller of notice thereof accompanied by written evidence of the underlying payment obligation and payment thereof. (f) In the event that Buyer fails to ensure that Seller and its Affiliates are unconditionally released from all obligations under the Financial Support Arrangements not later than December 31, 1998, Buyer shall either (i) promptly deposit with Seller cash in an amount equal to the aggregate principal or stated amount, as may be applicable, of the Financial Support Arrangements not so released or (ii) provide back-up letters of credit issued by one or more commercial banks reasonably satisfactory to Seller, payable to Seller in such aggregate principal or stated amount and otherwise in form and substance reasonably satisfactory to Seller with respect to such Financial Support Arrangements. Any cash deposited with Seller in accordance with clause (i) shall be held by Seller in a segregated interest-bearing account and shall be used by Seller solely to satisfy its payment obligations in respect of such Financial Support Arrangements, and the unused portion of any cash (including interest) so deposited with Seller shall be returned to Buyer promptly following the release of Seller Companies with respect to, or any other termination of, the Financial Support Arrangement. Section 6.04 Use of Intellectual Property. Buyer acknowledges and agrees that except as otherwise specifically contemplated by the Transaction Documents, no Buyer Company is obtaining any rights in or to use any Intellectual Property. Buyer further acknowledges and agrees that notwithstanding any provision to the contrary in the Transaction Documents, except as permitted by the Trademark License Agreement or the Cross License Agreement, Buyer shall not use, and Buyer shall cause its Affiliates not to use, any trademark, logo or tradename of Seller or any Affiliate of Seller (other than those listed on Attachment XII as Transferred Assets and transferred to Buyer under the terms of this Agreement) or any trademarks, logos or trade names that are confusingly similar thereto or that are a translation or transliteration thereof into any language or alphabet. Section 6.05 Certain Environmental Investigations. (a) Buyer agrees that, if Buyer decides to conduct prior to Closing an environmental audit or similar review of the HPG Business that involves testing, drilling or sampling at any -15- facility, possession of which is contemplated to be transferred to a Buyer Company at Closing, Buyer will so advise Seller and will give Seller sufficient prior written notice to enable Seller's Representatives to be present during any such testing, drilling or sampling, and to review and comment on any work plans related to such audit or review. Buyer further agrees to arrange for split samples to be taken in connection with any such audit or review, with any additional costs therefor to be paid by Seller. Except with respect to split samples, Buyer agrees that it will conduct such testing, drilling, or sampling, including disposal of all materials associated with such activities, such as drill cuttings, wastewater, and sampling equipment, at Buyer's sole cost and expense and in accordance with all Applicable Laws, including Environmental Laws. If the Closing contemplated by the Transaction Documents is not consummated for any reason, Buyer agrees to restore each facility at which any such testing, drilling or sampling was conducted to reasonable working condition. (b) Except to the extent Buyer is otherwise required to take action itself in accordance with Applicable Law, all information obtained from Buyer's environmental review shall be kept confidential and Buyer shall not provide it to any Person other than its advisors and Seller, and in the event that Buyer's environmental review discloses conditions at any of Seller's facilities that may require notice to a Governmental Authority prior to Closing, Seller shall determine what reporting, if any, is necessary and shall conduct any such reporting. Section 6.06 Nonsolicitation of Employees, etc. From and after the date of this Agreement until the fifth anniversary of the Closing Date, neither Buyer nor any Buyer Companies shall, without the prior written approval of Seller, directly or indirectly solicit any individual who is a non-exempt (within the meaning of the Fair Labor Standards Act) employee of a Seller Company to terminate his or her employment relationship with Seller Companies; provided, however, that the foregoing shall not apply to individuals hired as a result of the use of an independent employment agency (so long as the agency was not directed to solicit a particular individual or a class of individuals that could only be satisfied by employees of Seller Companies) or as a result of the use of a general solicitation (such as an advertisement) not specifically directed to employees of Seller Companies. Buyer recognizes and agrees that a breach by Buyer or Buyer Companies of any of the covenants and agreements in this Section 6.06 could cause irreparable harm to Seller, that Seller's remedies at law in the event of such breach would be inadequate, and that, accordingly, in the event of such breach a restraining order or injunction or both may be issued against Buyer or Buyer Companies, in addition to any other rights and remedies that may be available to Seller under Applicable Law. If this Section 6.06 is more restrictive than permitted by Applicable Laws of the jurisdiction in which Seller seeks enforcement hereof, this Section 6.06 shall be limited to the extent required to permit enforcement under such Applicable Laws. -16- ARTICLE VII COVENANTS AND AGREEMENTS OF THE PARTIES Section 7.01 Further Assurances. Subject to the terms and conditions of this Agreement, each party shall use reasonable commercial efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under Applicable Laws to consummate the Contemplated Transactions. Seller and Buyer shall execute and deliver, and shall cause Seller Companies and Buyer Companies, as appropriate or required and as the case may be, to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable to consummate or implement the Contemplated Transactions, specifically including the reading and formalization of a public deed in Spanish, in front of a Notary Public in Queretaro, Mexico, and the recordation of said public deed in the applicable governmental office or registry. Except as otherwise expressly set forth in the Transaction Documents, nothing in this Section 7.01 shall require any Seller Companies or Buyer Companies to make any payments in order to obtain any consents or approvals necessary or desirable in connection with the consummation of the Contemplated Transactions. Section 7.02 Certain Filings; Consents. Seller and Buyer shall cooperate with one another (i) in determining whether any action by or in respect of, or filing with, any Governmental Authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material Contracts, in connection with the consummation of the Contemplated Transactions and (ii) subject to the terms and conditions of this Agreement, in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers. Section 7.03 Public Announcements. Prior to the Closing, Seller and Buyer shall consult with each other before issuing any press release or making any public statement with respect to this Agreement or the Contemplated Transactions and, except as may be required by Applicable Law or any listing agreement with any national or international securities exchange, shall not issue any such press release or make any such public statement prior to such consultation. Notwithstanding the foregoing, no provision of this Agreement shall relieve Buyer from any of its obligations under the Confidentiality Agreement, or terminate any of the restrictions imposed upon Buyer by Section 6.01. Section 7.04 Intellectual Property. (a) Buyer acknowledges and agrees that Buyer Companies shall hold all Intellectual Property constituting part of the Transferred Assets subject to any licenses thereof granted by Seller Companies prior to the Closing Date and, other than in the ordinary course of business consistent with past practices to suppliers, vendors, or other Persons doing work for the HPG Business as part of such work for the HPG Business, Seller will not take any action to impair, encumber, impede or invalidate such Intellectual Property prior to the Closing Date. -17- (b) Buyer further acknowledges and agrees that the transfer of Intellectual Property constituting Transferred Assets to Buyer Companies shall not affect the right of Seller Companies to use, disclose or otherwise freely deal with any know-how, trade secrets and other technical information not constituting Transferred Assets, except to the extent otherwise limited in the Cross License Agreement and subject to the provisions of Section 5.06. Section 7.05 HSR Act. Seller and Buyer shall take all actions necessary or appropriate to cause the prompt expiration or termination of any applicable waiting periods under the HSR Act and the Mexican Federal Law of Economic Competition in respect of the Contemplated Transactions, including, without limitation, complying as promptly as practicable with any requests for additional information. Section 7.06 Certain Environmental Insurance Matters. The provisions of this Section 7.06 shall not have any effect on any insurance policies of Buyer or Buyer Companies. Notwithstanding any provision to the contrary in this Agreement, this Section 7.06 shall constitute Seller's and Buyer's agreement regarding the allocation of insurance proceeds with respect to matters that arise under or relate to Environmental Laws that are comprised, in whole or in part, of Environmental Liabilities that constitute Assumed Liabilities (the "Environmental Insurance Claims"). Buyer acknowledges and agrees that, notwithstanding any other provisions of the Transaction Documents, Seller shall control the Environmental Insurance Claims and shall have the right to compromise or settle any Environmental Insurance Claims; provided, however, that without the prior written consent of Buyer, Seller shall not have the right to enter into any compromise or settlement of any Environmental Insurance Claim that (i) imposes any liability, obligation or responsibility on any Buyer Company or (ii) imposes any condition, restriction or limitation on the operation or conduct of the HPG Business. Seller agrees to act in good faith and with reasonable prudence to maximize recovery (after costs and Taxes) with respect to the Environmental Insurance Claims and shall allocate any recovery received with respect to such Environmental Insurance Claims, first, to the costs incurred to collect such recovery (whether incurred before or after Closing) and, second, to all net Tax costs related to such recovery. With respect to any recovery remaining (the "Remaining Recovery"): (i) if the recovery applies to liabilities that are Assumed Liabilities and to liabilities that are not Assumed Liabilities, and the recovery was not designated as arising from specific liabilities (e.g., a global settlement with an insurance carrier), Seller will pay Buyer an amount equal to the Remaining Recovery multiplied by X multiplied by (one minus Y); where X equals the total of the Environmental Insurance Claims (estimated by Seller as of the date of recovery) under said insurance policies divided by the total environmental and other claims by Seller under said insurance policies; and Y equals Seller's past expenditures on said liabilities divided by the sum of (A) Seller's past expenditures in respect of said liabilities and (B) the total estimated expenditures to be made by Seller or Buyer in respect of said liabilities (estimated by Seller as of the date of recovery), or (ii) if the recovery was designated as arising from a specific liability that is an Assumed Liability, Seller will pay Buyer the Remaining Recovery multiplied by (one minus Y). -18- Any obligations assumed in any such compromise or settlement of the Environmental Insurance Claims shall be apportioned between Seller and Buyer in the same proportion as a recovery would be allocated pursuant to this Section 7.06. Section 7.07 Legal Privileges. Except as to attorney-client work product and other legal privileges with respect to the negotiation of, and matters relating to, the Contemplated Transactions, Seller and Buyer acknowledge and agree that all attorney-client, work product and other legal privileges that may exist with respect to the Transferred Assets, Excluded Assets, Assumed Liabilities or Excluded Liabilities shall, from and after the Closing Date, be deemed common privileges of Seller and Buyer to the extent that Seller and Buyer have common interests in the matter. Both Seller and Buyer shall use all commercially reasonable efforts after the Closing Date to preserve all such privileges and neither Seller nor Buyer shall knowingly waive any such privilege without the prior written consent of the other party (which consent shall not be unreasonably withheld or delayed). ARTICLE VIII EMPLOYEES AND EMPLOYEE BENEFIT MATTERS Section 8.01 Employees and Employee Benefit Matters. The parties agree as to employee and employee benefit matters as set forth in Exhibit D. ARTICLE IX CONDITIONS TO CLOSING Section 9.01 Conditions to the Obligations of Each Party. The obligations of Seller and Buyer to consummate the Closing are subject to the satisfaction (or waiver) of the following conditions: (a) any applicable waiting period under the HSR Act relating to the Contemplated Transactions shall have expired or been terminated without any action being taken by a Governmental Authority that restrains, prevents or results in a Material Adverse Effect on the HPG Business; (b) no provision of any Applicable Law and no judgment, injunction, order or decree shall restrain or prohibit the transactions contemplated hereby or shall exist which would materially limit or adversely effect Buyer's ownership or control of the Transferred Assets, and there shall not have been threatened, nor shall there be pending, any action or proceeding by or before any court or Governmental Authority challenging any of the Contemplated Transactions or seeking monetary relief by reason of the consummation of the Contemplated Transactions that reasonably could be expected to have a Material Adverse Effect on the HPG Business; and -19- (c) all actions by or in respect of or filings with any Governmental Authority required to permit the Contemplated Transactions shall have been obtained. Section 9.02 Conditions to Obligation of Buyer. The obligations of Buyer to consummate the Closing are subject to the satisfaction (or waiver by Buyer) of the following further conditions: (a) (i) Seller shall have performed in all respects all of its obligations under the Transaction Documents required to be performed by it on or prior to the Closing Date, (ii) the representations and warranties of Seller contained in the Transaction Documents shall be true and correct at and as of the date of this Agreement and as of the Closing Date, as if made at and as of each such date, except that those representations and warranties which are by their express terms made as of a specific date shall be true and correct only as of such date, in each case except for inaccuracies that could not reasonably be expected to have a Material Adverse Effect on the HPG Business (except with respect to the representations and warranties contained in Sections B.01 and B.02, which shall be true and correct subject only to the exceptions set forth therein), and (iii) Buyer shall have received a certificate signed by an executive officer of Seller to the foregoing effect; (b) since March 29, 1998, no event has occurred that has had a Material Adverse Effect on the HPG Business; (c) Seller or the applicable Affiliated Transferor shall have executed and delivered, on or before the Closing Date, the Transaction Documents that are required to be signed by a Seller Company; (d) Seller or the applicable Affiliated Transferor, as the case may be, shall have obtained the consents, approvals or permits contemplated by Attachment XIII to this Agreement; (e) Seller or the applicable Affiliated Transferor shall have prepared and delivered on or before the Closing Date a patent docket and a trademark docket, each of which shall set forth with particularity and accuracy with respect to all Intellectual Property that constitute Transferred Assets all actions known as of the date of preparation that are required to be taken to maintain such Intellectual Property within the six months following the Closing Date; (f) Buyer shall have received an opinion of Miles & Stockbridge P.C. in the form attached hereto as Attachment XXIX to this Agreement; and (g) Buyer shall have received audited financial statements of the HPG Business consisting of the balance sheets as of December 31, 1997 and 1996 and the related statements of operations, owners' equity and cash flows for each of the three years in the period ended December 31, 1997, together with the opinion of Ernst & Young LLP thereon, which opinion shall state that such financial statements have been prepared in accordance with GAAP and shall be without qualification, and unaudited financial statements of the HPG Business consisting of the balance sheet as of March 28, 1998, and statements of operations and cash flows for the quarter then ended. -20- Section 9.03 Conditions to Obligation of Seller. The obligation of Seller to consummate the Closing is subject to the satisfaction (or waiver by Seller) of the following further conditions: (a) (i) Buyer shall have performed in all respects all of its obligations under the Transaction Documents required to be performed by Buyer at or prior to the Closing Date, (ii) the representations and warranties of Buyer contained in the Transaction Documents shall be true and correct at and as of the date of this Agreement and as of the Closing Date, as if made at and as of each such date, except that those representations and warranties which are by their express terms made as of a specific date shall be true and correct only as of such date, in each case except for inaccuracies that could not reasonably be expected to have a Material Adverse Effect on the HPG Business (except with respect to the representations and warranties contained in Sections C.01 and C.02, which shall be true and correct subject only to the exceptions set forth therein), and (iii) Seller shall have received a certificate signed by an executive officer of Buyer to the foregoing effect; and (b) Buyer or the applicable Buyer Company shall have executed and delivered, on or before the Closing Date, the Transaction Documents that are required to be signed by a Buyer Company. Section 9.04 Effect of Waiver. Any waiver by Buyer of the conditions specified in clause (ii) of Section 9.02(a), and any waiver by Seller of the conditions specified in clause (ii) of Section 9.03, if made knowingly, shall also be deemed a waiver of any claim for Damages as the result of the matters waived. ARTICLE X SURVIVAL; INDEMNIFICATION Section 10.01 Survival. (a) None of the representations, warranties, covenants or agreements of the parties contained in any Transaction Document or in any certificate or other writing delivered pursuant to any Transaction Document or in connection with any Transaction Document shall survive the Closing, except for: (i) the representations and warranties in Sections B.01 and B.02 shall survive indefinitely; (ii) the representations and warranties in Section B.13 shall not survive the Closing Date; (iii) the representations and warranties in Section B.15 relating to Intellectual Property (other than patents and copyrights) and the representations and warranties in Sections B.07 and B.15 to the extent but only to the extent they relate to title to -21- Transferred Assets shall survive for a period of six years and six months from the Closing Date; (iv) the representations and warranties in Sections B.16 and B.18 shall survive until 30 days after the expiration of the applicable statute of limitations (or extensions or waivers thereof); (v) the representations and warranties in Exhibit B (other than (A) those Sections of Exhibit B referenced in the preceding clauses (i), (ii) and (iv), (B) those representations and warranties in Section B.15 relating to Intellectual Property (other than patents and copyrights) and (C) those representations and warranties in Sections B.07 and B.15 to the extent but only to the extent they relate to title to Transferred Assets) shall survive for a period of one year from the Closing Date; (vi) the representations and warranties in Sections C.01 and C.02 shall survive indefinitely; (vii) the representations and warranties in Exhibit C (other than those Sections of Exhibit C referenced in the preceding clause (v)) shall survive for a period of one year from the Closing Date; and (viii) those covenants and agreements set forth in the Transaction Documents that, by their terms, are to have effect after the Closing Date shall survive for the period contemplated by the covenants and agreements, or if no period is expressly set forth, indefinitely. The representations, warranties, covenants and agreements referenced in the preceding clauses (i) and (iii) through (viii) are referred to herein as the "Surviving Representations or Covenants." It is understood and agreed that, (i) before the Closing the remedies expressly set forth in Article XI are the sole and exclusive remedies for any breach of any representation, warranty, covenant or agreement and (ii) following the Closing the sole and exclusive remedy with respect to any breach of any representation, warranty, covenant or agreement (other than (1) with respect to a breach of the terms of a covenant or agreement, as to which Buyer or Seller, as the case may be, shall be entitled to seek specific performance or other equitable relief and (2) with respect to claims for fraud) shall be a claim for Damages (whether by contract, in tort or otherwise, and whether in law, in equity or both) made pursuant to this Article X. (b) Except as otherwise provided in this Agreement, Buyer for itself, its Affiliates and their respective Representatives and successors, effective as of the Closing, releases and discharges Seller, its Affiliates and their respective Representatives from any and all Damages (whether by contract, in tort or both, and whether in law, in equity or both), rights of subrogation and contribution and remedies of any nature whatsoever, known or unknown, relating to or arising out of Environmental Liabilities or Environmental Laws, in either case, arising in connection with or in any way relating to the HPG Business and constituting an Assumed Liability. -22- Section 10.02 Indemnification. (a) Effective as of the Closing and subject to the limitations set forth in Section 10.04(a), Buyer hereby indemnifies Seller and its Affiliates and their respective directors, officers, employees and agents against, and agrees to hold them harmless from any and all Damages incurred or suffered by any of them arising out of (i) any misrepresentation, breach or nonfulfillment of any Surviving Representation or Covenant made or to be performed by Buyer Companies pursuant to any of the Transaction Documents, (ii) except as otherwise contemplated by Sections 10.02(b)(iv), 10.04(b)(ii) and D.18, any Assumed Liabilities (including, without limitation, Buyer's (or any other Buyer Company's) failure to perform or in due course pay or discharge any Assumed Liability), (iii) any Financial Support Arrangement, (iv) any matters for which indemnification is provided under Exhibit D (it being understood that the terms of such indemnification shall be governed by and subject to the terms of Exhibit D) or (v) any Environmental Laws to the extent such liabilities arise out of, relate to, are based on or result from any action taken (or a failure to take action) or any event occurring on or after the Closing Date. Other than costs associated with split samples, Buyer hereby indemnifies Seller and its Affiliates and their respective directors, officers, employees and agents against, and agrees to hold them harmless from any and all Damages incurred or suffered by any of them arising out of or related in any way to any actions taken by Buyer Companies or any of their Representatives in connection with any environmental audit or similar review of the HPG Business that involves testing, drilling or sampling at any facility possession of which is contemplated to be transferred to a Buyer Company at Closing, including, without limitation, (A) personal injury, wrongful death, economic loss or property damage claims, (B) claims for natural resource damages, (C) violations of Applicable Law or (D) any Damages with respect thereto. (b) Effective as of the Closing and subject to the limitations set forth in Section 10.04(b), Seller hereby indemnifies Buyer and its Affiliates and their respective directors, officers, employees and agents against, and agrees to hold them harmless from any and all Damages incurred or suffered by any of them arising out of or related in any way to (i) any misrepresentation, breach or nonfulfillment of any Surviving Representation or Covenant made or to be performed by the Seller Companies pursuant to any Transaction Document, (ii) any Excluded Liability or any other liability or obligation of the HPG Business, other than Assumed Liabilities (provided that nothing herein shall diminish Seller's obligations pursuant to Section 10.04(b)(ii)), to the extent arising out of, relating to, based on or resulting from actions taken (or failures to take action), events occurring or conditions existing prior to the Closing (including, without limitation, Seller's (or any other Seller Company's) failure to perform or in due course pay or discharge any Excluded Liability), (iii) any matters for which indemnification is provided under Exhibit D (it being understood that the terms of such indemnification shall be governed by and subject to the terms of Exhibit D) or (iv) Asheboro Closing Costs in an amount equal to 50% of the first $20,000,000 of Asheboro Closing Costs and 100% of all Asheboro Closing Costs in excess of $20,000,000. -23- Section 10.03 Procedures. (a) If Seller or any of its Affiliates or any of their directors, officers, employees and agents, shall seek indemnification pursuant to Section 10.02(a), or if Buyer or any of its Affiliates or any of their directors, officers, employees and agents, shall seek indemnification pursuant to Section 10.02(b), the Person seeking indemnification (the "Indemnified Party") shall give written notice to the party from whom such indemnification is sought (the "Indemnifying Party") promptly (and in any event within 30 days) after the Indemnified Party (or, if the Indemnified Party is a corporation, any officer or employee of the Indemnified Party) becomes aware of the facts giving rise to such claim for indemnification (an "Indemnified Claim") specifying in reasonable detail the factual basis of the Indemnified Claim, stating the amount of the Damages, if known, the method of computation thereof, containing a reference to the provision of the Transaction Documents in respect of which such Indemnified Claim arises and demanding indemnification therefor. The failure of an Indemnified Party to provide notice in accordance with this Section 10.03 shall not constitute a waiver of that party's claims to indemnification pursuant to Section 10.02, except to the extent that (i) any such failure or delay in giving notice causes the amounts paid by the Indemnifying Party to be greater than they otherwise would have been or otherwise results in prejudice to the Indemnifying Party or (ii) such notice is not delivered to the Indemnifying Party prior to the expiration of the applicable survival period set forth in Section 10.01. If the Indemnified Claim arises from the assertion of any claim, or the commencement of any suit, action, proceeding or Remedial Action brought by a Person that is not a party hereto (a "Third Party Claim"), any such notice to the Indemnifying Party shall be accompanied by a copy of any papers theretofore served on or delivered to the Indemnified Party in connection with such Third Party Claim. With respect to any Third Party Claim asserted or brought prior to the Closing Date, notice of such Third Party Claim shall be deemed to have been delivered on the Closing Date. (b) (i) Upon receipt of notice of a Third Party Claim from an Indemnified Party pursuant to Section 10.03(a), the Indemnifying Party will be entitled to assume the defense and control of such Third Party Claim subject to the provisions of this Section 10.03, provided that in the case of matters involving actions or claims that, if not first paid, discharged or otherwise complied with would result in a material interruption or cessation of the conduct of the HPG Business, the Indemnifying Party shall act promptly to avoid, to the extent practicable, any such effects on the HPG Business. After written notice by the Indemnifying Party to the Indemnified Party of its election to assume the defense and control of a Third Party Claim, the Indemnifying Party shall not be liable to such Indemnified Party for any legal fees or expenses subsequently incurred by such Indemnified Party in connection therewith. Notwithstanding anything in this Section 10.3 to the contrary, if the Indemnifying Party does not assume defense and control of a Third Party Claim as provided in this Section 10.3, the Indemnified Party shall have the right to defend such Third Party Claim, subject to the limitations set forth in this Section 10.03, in such manner as it may deem appropriate. Whether the Indemnifying Party or the Indemnified Party is defending and controlling any such Third Party Claim, it shall select counsel, contractors, experts and consultants of recognized standing and competence, shall take all steps necessary in the investigation, defense or settlement thereof, and shall at all times diligently and promptly pursue the resolution -24- thereof. The party conducting the defense thereof shall at all times act as if all Damages relating to the Third Party Claim were for its own account and shall act in good faith and with reasonable prudence to minimize Damages therefrom. The Indemnified Party shall, and shall cause each of its Affiliates, directors, officers, employees, and agents to, cooperate fully with the Indemnifying Party in connection with any Third Party Claim. (ii) Subject to the provisions of Section 10.03(b)(iii) and Section 10.03(b)(iv), the Indemnifying Party shall be authorized to consent to a settlement of, or the entry of any judgment arising from, any Third Party Claims, and the Indemnified Party shall consent to a settlement of, or the entry of any judgment arising from, such Third Party Claims; provided, that the Indemnifying Party shall (1) pay or cause to be paid all amounts arising out of such settlement or judgment concurrently with the effectiveness thereof; (2) shall not encumber any of the assets of any Indemnified Party or agree to any restriction or condition that would apply to such Indemnified Party or to the conduct of that party's business; and (3) shall obtain, as a condition of any settlement or other resolution, a complete release of each Indemnified Party against any and all damages resulting from, arising out of or incurred with respect to such settlement or other resolution. Except for the foregoing, no settlement or entry of judgment in respect of any Third Party Claim shall be consented to by any Indemnifying Party or Indemnified Party without the express written consent of the other party. (iii) Notwithstanding the provisions of Section 10.03(b)(i), Buyer shall manage all Remedial Actions conducted with respect to facilities which constitute Transferred Assets, provided that Seller and its Representatives shall have the right, consistent with Buyer's right to manage such Remedial Actions as aforesaid, to participate fully in all decisions regarding any Remedial Action, including reasonable access to sites where any Remedial Action is being conducted, reasonable access to all documents, correspondence, data, reports or information regarding the Remedial Action, reasonable access to employees and consultants of Buyer with knowledge of relevant facts about the Remedial Action and the right to attend all meetings and participate in any telephone or other conferences with any Government Authority or other third party regarding the Remedial Action. (iv) In the case of the indemnification contemplated by Section 10.02(b)(iii), in the event that the Indemnifying Party desires to settle the matters referenced therein or consent to the entry of any judgment arising thereunder and the Indemnified Party does not wish to consent to such settlement or entry of judgment, the Indemnified Party shall have no obligation to consent to the settlement or entry of judgment provided that it agrees in writing to pay and be responsible for 100% of any Damages; provided that the Indemnified Party shall not be required to consent to any settlement or agree to be responsible for the payment of Damages thereafter incurred with respect to any matter the settlement or entry of judgment of which would require the consent of such Indemnified Party pursuant to Section 10.03(b)(ii). The obligation of an Indemnified Party that rejects any proposed settlement offer or entry of any such judgment to pay and be responsible for 100% of any Damages in accordance with this Section 10.03(b)(iv) shall be conditioned upon and subject to the payment by the Indemnifying Party, within five -25- Business Days of the date such Indemnified Party provides the written agreement contemplated by the preceding sentence, of an amount, in immediately available funds, equal to the portion of the total settlement that would have been payable by the Indemnifying Party according to the percentage sharing arrangement contemplated by Section 10.04(b)(ii). Thereafter, the Indemnified Party shall be solely responsible for any Damages and for the defense of the matter that is the subject of the proposed settlement or entry of judgment. Notwithstanding the foregoing, an Indemnifying Party may, at its option and expense, participate in the defense of any Indemnified Claim. (v) In furtherance of and not in limitation of the provisions of this Section 10.03, with respect to product liability matters and other matters contemplated by Exhibit E, Seller and Buyer covenant and agree as set forth in Exhibit E. (c) If the Indemnifying Party and the Indemnified Party are unable to agree with respect to a procedural matter arising under Section 10.03(b)(iii), the Indemnifying Party and the Indemnified Party shall, within 10 days after notice of disagreement given by either party, agree upon a third-party referee ("Referee"), who shall be an attorney and who shall have the authority to review and resolve the disputed matter. The parties shall present their differences in writing (each party simultaneously providing to the other a copy of all documents submitted) to the Referee and shall cause the Referee promptly to review any facts, law or arguments either the Indemnifying Party or the Indemnified Party may present. The Referee shall be retained to resolve specific differences between the parties within the range of such differences. Either party may request that all discussions with the Referee by either party be in each other's presence. The decision of the Referee shall be final and binding unless both the Indemnifying Party and the Indemnified Party agree. The parties shall share equally all costs and fees of the Referee. (d) If an Indemnifying Party makes any payment on an Indemnified Claim, the Indemnifying Party shall be subrogated, to the extent of such payment, to all rights and remedies of the Indemnified Party to any insurance benefits or other claims of the Indemnified Party with respect to such claim. Section 10.04 Limitations. Notwithstanding anything to the contrary in this Agreement or in any of the Transaction Documents: (a) Buyer shall only have liability to Seller or any other Person hereunder with respect to the representations and warranties described in clause (i) of Section 10.02(a) if such matters were the subject of a written notice given by the Indemnified Party pursuant to Section 10.03(a) within the period following the Closing Date specified for each respective matter in Section 10.01. (b) Seller shall only have liability to Buyer or any other Person hereunder: (i) with respect to the representations and warranties described in clause (i) of Section 10.02(b), (y) to the extent that the aggregate Damages of all Indemnified Parties as the result thereof exceed $3,500,000 but are not greater than an amount equal to $3,500,000 plus 25% of the Adjusted Purchase Price (it being understood that Seller's -26- maximum liability under Section 10.02(b)(i) with respect to representations and warranties and this Section 10.04(b)(i) shall be an amount equal to 25% of the Adjusted Purchase Price), and (z) if such matters were the subject of a written notice given by the Indemnified Party pursuant to Section 10.03(a) within the period following the Closing Date specified for each respective matter in Section 10.01; provided, however, that such $3,500,000 threshold shall not apply to any such breach of representation or warranty in respect of the Black & Decker Trademarks (as defined in the Trademark License Agreement). (ii) with respect to Environmental Liabilities constituting Assumed Liabilities, to the extent of 75% of the first $5,000,000 in aggregate Damages, and 100% of the aggregate Damages in excess of $5,000,000, in each case only to the extent incurred and paid within five years following the Closing Date by all Indemnified Parties as the result thereof based on the use of the facilities constituting Transferred Assets as of the Closing Date; and (iii) with respect to the matters described in clause (ii) of Section 10.02(b), there shall be no limitation on Seller's liability. ARTICLE XI TERMINATION Section 11.01 Termination. The Transaction Documents may be terminated at any time prior to the Closing: (i) by mutual written agreement of Seller and Buyer; (ii) by Seller or Buyer if the Closing shall not have been consummated by July 31, 1998; provided, however, that neither Seller nor Buyer may terminate the Transaction Documents pursuant to this clause (ii) if the Closing shall not have been consummated by July 31, 1998, by reason of the failure of such party or any of its Affiliates to perform in all material respects any of its or their respective covenants or agreements contained in the Transaction Documents; (iii) by either Seller or Buyer if there shall be any Applicable Law or regulation that makes consummation of the Contemplated Transactions illegal or otherwise prohibited or if consummation of the Contemplated Transactions would violate any nonappealable final order, decree or judgment of any Governmental Authority having competent jurisdiction; (iv) by Buyer if the representations and warranties of Seller shall not be true and correct as at any date prior to Closing or if Seller shall have failed to perform all of the covenants and comply with all of the provisions required by any Transaction Document to be performed or complied with by it on or before the Closing, unless such -27- matters would not rise to the level of a failure of the Closing condition contemplated by Section 9.02(a) if Seller fails to so perform, comply or otherwise cure such matter within 15 days of receipt of notice from Buyer of such matter; and (v) by Seller if the representations and warranties of Buyer shall not be true and correct as at any date prior to Closing or if Buyer shall have failed to perform all of the covenants and comply with all of the provisions required by any Transaction Document to be performed or complied with by it on or before the Closing, but only unless such matters would not rise to the level of a failure of the Closing condition contemplated by Section 9.03(a) if Buyer fails to so perform, comply or otherwise cure such matter within 15 days of receipt of notice from Seller of such matter. Any party desiring to terminate this Agreement pursuant to this Section 11.01 shall give written notice of such termination to the other parties to this Agreement. Section 11.02 Effect of Termination. If this Agreement is terminated as permitted by Section 11.01, such termination shall be without liability of any party (or any Affiliate, stockholder, director, officer, employee, agent, consultant or Representative of such party) to any other party to this Agreement; provided, however, that if the Contemplated Transactions fail to close as a result of a breach of the provisions of any Transaction Document by Seller or Buyer, such party shall be fully liable for any and all Damages incurred or suffered by the other party as a result of all such breaches if the other party is ready, willing and able to otherwise satisfy its obligations under the Transaction Documents. Notwithstanding the foregoing, the provisions of Sections 6.01 and 12.03, the second sentence of Section 10.02(a), and this Section 11.02 shall survive any termination hereof pursuant to Section 11.01. ARTICLE XII MISCELLANEOUS Section 12.01 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given, if to Seller: The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21286 Attention: Senior Vice President and Chief Financial Officer Telecopy: (410) 716-3318 -28- with a copy to: The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21286 Attention: Senior Vice President and General Counsel Telecopy: (410) 716-2660 and Miles & Stockbridge P.C. 10 Light Street Baltimore, Maryland 21202 Attention: Glenn C. Campbell Telecopy: (410) 385-3700 if to Buyer: Windmere-Durable Holdings, Inc. 5980 Miami Lakes Drive Miami Lakes, Florida 33014-2467 Attention: Harry D. Schulman Telecopy: (305) 364-0635 with a copy to: Greenberg Traurig 1221 Brickell Avenue Miami, Florida 33131 Attention: Paul Berkowitz Telecopy: (305) 579-0717 or to such other address or telecopy number and with such other copies, as such party may hereafter specify for the purpose by notice to the other parties. Each such notice, request or other communication shall be effective (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section 12.01 and evidence of receipt is received or (ii) if given by any other means, upon delivery or refusal of delivery at the address specified in this Section 12.01. Section 12.02 Amendments; Waivers. (a) Any provision of the Transaction Documents may be amended or waived prior to the Closing Date if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by Seller and Buyer, or in the case of a waiver, by the party against whom the waiver is to be effective. -29- (b) No failure or delay by any party in exercising any right, power or privilege under any Transaction Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 12.03 Expenses; Taxes. Except as otherwise provided in the Transaction Documents, all costs and expenses incurred in connection with the Transaction Documents shall be paid by the party incurring such cost or expense. Notwithstanding the foregoing, (i) all real estate transfer and similar taxes or governmental charges resulting from or relating to the transfer of the Transferred Assets to Buyer Companies by Seller or any of the Affiliated Transferors, shall be borne one-half by Seller and one-half by Buyer, (ii) all sales, use and similar taxes or governmental charges (other than value added or similar taxes for which Buyer or Buyer Companies can obtain a credit or refund) resulting from or relating to the transfer of the Transferred Assets to Buyer Companies by Seller or any of the Affiliated Transferors, shall be borne one-half by Seller and one-half by Buyer, and (iii) all value added or similar taxes for which Buyer or Buyer Companies can obtain a credit or refund shall be borne solely by Buyer and Buyer Companies. Each of Buyer and Seller shall reimburse the other for one-half of such fees and taxes and charges paid by the other promptly upon presentation of a demand therefor consistent with this Section 12.03. Any property taxes that are assessed on an annual basis and have been paid by Seller Companies prior to Closing shall be prorated at Closing and Buyer shall reimburse Seller Companies for amounts attributable to any period or portion thereof on or after the Closing Date. Section 12.04 Successors and Assigns. The provisions of the Transaction Documents shall be binding upon and inure to the benefit of the parties and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other party, except that Buyer may assign its rights and delegate its obligations hereunder to any Buyer Company, provided that Buyer shall remain responsible for the fulfillment of all such obligations and shall remain fully liable hereunder for its own actions or omissions and the actions or omissions of any such assignee as if such rights and obligations had not been assigned or delegated, and the Buyer may assign its rights hereunder to NationsBank, N.A., as collateral agent for Buyer's lenders. Section 12.05 Disclosure. Certain information set forth in the Disclosure Schedules has been included and disclosed solely for informational purposes and may not be required to be disclosed pursuant to the terms and conditions of the Transaction Documents. The disclosure of any such information shall not be deemed to constitute an acknowledgement or agreement that the information is required to be disclosed in connection with the representations and warranties made in the Transaction Documents or that the information is material, nor shall any information so included and disclosed be deemed to establish a standard of materiality or otherwise used to determine whether any other information is material. Section 12.06 Construction. As used in the Transaction Documents, any reference to the masculine, feminine or neuter gender shall include all genders, the plural shall include the singular, and the singular shall include the plural. With regard to each and every term and -30- condition of the Transaction Documents, the parties understand and agree that the same have or has been mutually negotiated, prepared and drafted, and that if at any time the parties desire or are required to interpret or construe any such term or condition or any agreement or instrument subject hereto, no consideration shall be given to the issue of which party actually prepared, drafted or requested any term or condition of the Transaction Documents. Section 12.07 Entire Agreement. (a) The Transaction Documents and any other agreements contemplated thereby (including, to the extent contemplated herein, the Confidentiality Agreement) constitute the entire agreement among the parties with respect to the subject matter of such documents and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter thereof. (b) The parties hereto acknowledge and agree that no representation, warranty, promise, inducement, understanding, covenant or agreement has been made or relied upon by any party hereto other than those expressly set forth in the Transaction Documents. Without limiting the generality of the disclaimer set forth in the preceding sentence, (i) neither Seller nor any of its Affiliates has made or shall be deemed to have made any representations or warranties, in any presentation or written information relating to the HPG Business given or to be given in connection with the Contemplated Transactions, in any filing made or to be made by or on behalf of Seller or any of its Affiliates with any Governmental Authority, and no statement, made in any such presentation or written materials, made in any such filing or contained in any such other information shall be deemed a representation or warranty hereunder or otherwise, and (ii) Seller, on its own behalf and on behalf of the other Seller Companies, expressly disclaims any implied warranties, including but not limited to warranties of fitness for a particular purpose and warranties of merchantability. Buyer acknowledges that Seller has informed them that no Person has been authorized by Seller or any of its Affiliates to make any representation or warranty in respect of the HPG Business or in connection with the Contemplated Transactions, unless in writing and contained in this Agreement or in any of the Transaction Documents to which they are a party. (c) Except as expressly provided herein or in any other Transaction Document, no Transaction Document or any provision thereof is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. Section 12.08 Governing Law. Except as otherwise provided in any of the Transaction Documents, this Agreement and the other Transaction Documents shall be construed in accordance with and governed by the law of the State of New York (without regard to the choice of law provisions thereof). Section 12.09 Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. -31- Section 12.10 Jurisdiction. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, any of the Transaction Documents or the Contemplated Transactions shall be brought in the United States District Court for the Southern District of New York (or, if subject matter jurisdiction is unavailable, in the state courts of the State of New York), and each of the parties hereby consents to the exclusive jurisdiction of such court (and of the appropriate appellate court) in any such suit, action or proceeding and waives any objection to venue laid therein. Process in any such suit, action or proceeding may be served on any party anywhere in the world. Without limiting the foregoing, Seller and Buyer agree that service of process upon such party at the address referred to in Section 12.01, together with written notice of such service to such party, shall be deemed effective service of process upon such party. Section 12.11 Severability. Any provision of the Transaction Documents that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of the Transaction Documents or affecting the validity or enforceability of such provision in any other jurisdiction. To the extent any provision of the Transaction Documents is determined to be prohibited or unenforceable in any jurisdiction Seller and Buyer agree to use reasonable commercial efforts, and agree to cause the other Seller Companies or Buyer Companies, as the case may be, to use reasonable commercial efforts, to substitute one or more valid, legal and enforceable provisions that, insofar as practicable implement the purposes and intent of the prohibited or unenforceable provision. Section 12.12 Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. Section 12.13 Bulk Sales. Buyer hereby waives compliance by Seller and each Affiliated Transferor, in connection with the Contemplated Transactions, with the provisions of Article 6 of the Uniform Commercial Code as adopted in the States of Connecticut, Maryland and North Carolina, and as adopted in any other states or jurisdictions where any of the Transferred Assets are located, and any other applicable bulk sales laws with respect to or requiring notice to Seller's (or any Affiliated Transferor's) creditors, as the same may be in effect on the Closing Date. Seller shall indemnify and hold harmless Buyer against any and all liabilities (other than liabilities in respect of Assumed Liabilities) which may be asserted by third parties against Buyer as a result of noncompliance with any such bulk sales law. -32- IN WITNESS WHEREOF, the parties hereto caused this Agreement to be duly executed by their respective authorized officers on the day and year first above written. THE BLACK & DECKER CORPORATION By: /s/ CHARLES E. FENTON Charles E. Fenton Senior Vice President and General Counsel WINDMERE-DURABLE HOLDINGS, INC. By: /s/ DAVID M. FRIEDSON David M. Friedson Chairman, President and Chief Executive Officer EXHIBIT A DEFINITIONS (a) The following terms have the following meanings: "Affiliate" means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such other Person. For purposes of determining whether a Person is an Affiliate, the term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of securities, contract or otherwise. "Affiliated Transferors" means any Seller Company that owns any of the assets that would constitute Transferred Assets if owned, held or used by Seller or any of its Affiliates on the Closing Date or is liable for any of the Assumed Liabilities. "Applicable Law" means, with respect to any Person, any domestic or foreign, federal, state or local statute, law, ordinance, rule, administrative interpretation, regulation, order, writ, injunction, decree or other requirement of any Governmental Authority (including any Environmental Law) applicable to such Person or any of their respective properties, assets, officers, directors, employees, consultants or agents (in connection with such officer's, director's, employee's, consultant's or agent's activities on behalf of such Person). "Asheboro Closing Costs" means the following cash closing costs in respect of the Asheboro Property: (a) employee severance benefits in respect of employees working at the Asheboro property, (b) dismantle, freight and installation costs, (c) travel and living expenses in connection with relocation to the Queretaro Property, (d) contract engineering and recruitment expenses, (e) any special bonus arrangements for employees working at the Asheboro Property as of the Closing Date that are agreed to in writing by Seller and Buyer, and (f) cleanup and maintenance costs after relocation. "Asheboro Property" means the property located at 1758 South Fayetteville Street, Asheboro, North Carolina 27203. "Assignment and Assumption Agreements" means the Bill of Sale, Assignment and Assumption Agreements to be entered into by Seller and an Affiliated Transferor and Buyer and a Buyer Company in respect of each of the countries where Transferred Assets are located as of the Closing Date, in the form contemplated by Attachment II (with such changes as may be required to satisfy any requirements of Applicable Law in any country or jurisdiction where such Transferred Assets are located) and any other similar agreements or further assurances documents contemplated by this Agreement executed and delivered by Seller and an Affiliated Transferor and Buyer and a Buyer Company in connection with the sale, assignment and transfer by Seller or an Affiliated Transferor of Transferred Assets and the assumption by a Buyer Company of Assumed Liabilities, as the same may be amended from time to time. "Assumed Liabilities" means all liabilities and obligations of Seller Companies, to the extent relating to or arising out of the operation, affairs and conduct of the HPG Business, the Transferred Assets or the HPG Leases, of any kind, character or description, whether liquidated or unliquidated, known or unknown, fixed or contingent, accrued or unaccrued, absolute, determined, determinable or indeterminable or otherwise, whether or not reflected or reserved against in the Opening Statement or in the calculation of the Final Net Tangible Asset Amount and whether presently in existence or arising hereafter, except for Excluded Liabilities, including but not limited to the following: (i) all liabilities and obligations relating to the HPG Business or the Transferred Assets (and, to the extent provided in clauses (a) or (d) below, in connection with the Cleaning and Lighting Products), whether accrued, liquidated, contingent, matured or unmatured, at or prior to the Closing, that (a) are set forth on, reflected or referred to in the Opening Statement (including those liabilities relating to the Cleaning and Lighting Products), (b) are disclosed in any of the Disclosure Schedules delivered hereunder, (c) would be subject to disclosure in any of the Disclosure Schedules delivered in connection with any of Seller's representations and warranties but for the materiality standards contained in such representation and warranty (provided that any such liabilities or obligations covered by this clause (c) shall not, in the aggregate, exceed an amount that reasonably could be expected to have a Material Adverse Effect on the HPG Business), (d) are reflected in the Final Net Tangible Asset Amount as determined in accordance with Section 2.04 herein (including without limitation accounts payable and reserves reflected as contra-asset accounts) or (e) are otherwise a liability or obligation that Buyer is expressly assuming pursuant to this Agreement; (ii) all liabilities and obligations arising under Contracts entered into in the ordinary course of business consistent with past practices, whether or not the Contracts have been completed or terminated prior to the Closing Date, including, without limitation, any such liabilities and obligations arising from or relating to the performance or non-performance of such Contracts by the HPG Business, a Buyer Company or any other Person, whether arising prior to, on or after the Closing Date, except to the extent they constitute Excluded Liabilities; (iii) all liabilities and obligations in respect of Transferred Employees, and beneficiaries of employees and former employees of the HPG Business, including, without limitation, liabilities and obligations under or relating to WARN or any similar state or local law to the extent relating to or arising out of any actions taken by Buyer Companies on or after the Closing Date, except to the extent otherwise provided in Exhibit D to be retained by Seller; (iv) all liabilities and obligations in respect of Transferred Employees and dependents and beneficiaries of Transferred Employees under Employee Plans and Benefit Arrangements, except to the extent otherwise provided in Exhibit D to be retained by Seller; (v) all liabilities and obligations relating to claims of manufacturing or design defects with respect to any product manufactured or sold or service provided by the HPG Business on or after the Closing Date (other than any product in the finished goods inventory of Seller Companies as of the close of business on the day preceding the Closing Date), including liabilities and obligations in respect of investigations regarding product safety, product recall and related matters, except to the extent they constitute Excluded Liabilities; (vi) all liabilities and obligations relating to warranty obligations or services with respect to any product sold or service provided by the HPG Business prior to, on or after the Closing Date; (vii) all Environmental Liabilities, whether arising prior to, on or after the Closing Date, to the extent relating to or arising out of conditions at the Queretaro Property; (viii) all liabilities and obligations relating to the HPG Leases, whether arising prior to, on or after the Closing Date; (ix) all liabilities and obligations (except to the extent they constitute Environmental Liabilities, which shall be governed by the foregoing clause (vii)) relating to the Occupational Safety and Health Act of 1970, as amended, and any regulations, decisions or orders promulgated thereunder, together with any state or local law, regulation or ordinance pertaining to worker, employee or occupational safety or health in effect as the same may be amended, supplemented or superseded, whether arising prior to, on or after the Closing Date, as the same relates to the HPG Business; (x) all liabilities and obligations arising from or relating to governmental, judicial or adversarial proceedings (public or private), litigation, suits, arbitration, disputes, claims, causes of action or investigations (collectively, "Proceedings") to the extent arising from or relating to the HPG Business or any Transferred Assets, whether or not accrued, liquidated, contingent, matured, unmatured, or known or unknown to Seller or Buyer at or prior to the Closing, except for liabilities and obligations of a type contemplated by the foregoing clause (v), which shall be governed by such clause; (xi) all liabilities and obligations relating to the ownership by Buyer Companies or any of their successors of the Transferred Assets, directly or indirectly relating to or arising under the Employee Plans and Benefit Arrangements or relating to the Transferred Employees, the lease of properties under the HPG Leases or otherwise, or the conduct of the HPG Business or any other business, in each case, from and after the Closing Date, including, without limitation, any and all Proceedings in respect thereof; and (xii) a pro rata portion of all ad valorem real property taxes for the portion of the taxable year ending on the Closing Date. "Benefit Arrangements" means all life and health insurance, hospitalization, retirement, savings, bonus, deferred compensation, incentive compensation, severance pay, disability and fringe benefit plans, holiday or vacation pay, profit sharing, seniority, and other policies, practices, agreements or statements of terms and conditions providing employee or executive compensation or benefits to Transferred Employees or any of their dependents, maintained by Seller Companies, other than an Employee Plan. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close. "Cleaning and Lighting Products" means hand held vacuums, upright floor vacuums, battery powered bathroom and outdoor cleaners sold under the Scumbuster(R) name, flexible flashlights, flexible lanterns, leashlights and rechargeable lights, together in each case with any related accessories or attachments. "Closing Date" means the date of the Closing. "Code" means the Internal Revenue Code of 1986, as amended. "Confidentiality Agreement" means the letter agreement dated February 3, 1998, by and between Seller and Buyer, as the same has been or may be amended from time to time. "Contemplated Transactions" means the transactions contemplated by the Transaction Documents. "Contracts" means all contracts, agreements, leases (including leases of real property), licenses, commitments, sales and purchase orders, and other undertakings of any kind, whether written or oral, relating exclusively to the HPG Business, except to the extent that any of the foregoing constitute any of the Employee Plans, Benefit Arrangements or funding vehicles associated with any of the Employee Plans or Benefit Arrangements. "Cross License Agreement" means the Intellectual Property Cross License Agreement in the form contemplated by Attachment X. "Damages" means all demands, claims, actions or causes of action, assessments, losses, damages, costs, expenses, liabilities, judgments, awards, fines, sanctions, penalties, charges and amounts paid in settlement, including, without limitation, reasonable costs, fees and expenses of attorneys, experts, accountants, appraisers, consultants, witnesses, investigators and any other agents or representatives of such Person (with such amounts to be determined net of any resulting Tax benefit actually received or realized and net of any refund or reimbursement of any portion of such amounts actually received or realized, including, without limitation, reimbursement by way of insurance or third party indemnification), but specifically excluding (i) any costs incurred by or allocated to an Indemnified Party with respect to time spent by employees of the Indemnified Party or any of its Affiliates, (ii) any lost profits or opportunity costs (except to the extent assessed in connection with a third-party claim with respect to which the Person against which such damages are assessed is entitled to indemnification hereunder), and (iii) the decrease in the value of any Transferred Asset to the extent that such valuation is based on any use of the Transferred Asset other than its use as of the Closing Date. "Designated Countries" means the countries located in the Caribbean and North, Central and South America, but excluding Brazil, Paraguay and Uruguay. "Designated Products" means coffeemakers, espresso makers, cappuccino makers, toasters, toaster ovens, steamers, choppers, can openers, mixers, food processors, irons, breadmakers, skillets, electric knives, blenders, juicers, grills, kettles and wafflebakers, together in each case with any related accessories or attachments, and all products in the foregoing categories under development in the HPG Business as of the Closing Date or that have been under development in the HPG Business at any time during the year prior to the Closing Date, but excluding step stools, Cleaning and Lighting Products, shop, construction and similar vacuums, and VersaPak(R) rechargeable battery packs and chargers, together in each case with related accessories or attachments. "Disclosure Schedules" means the Disclosure Schedules dated the date of this Agreement relating to this Agreement. Matters disclosed in one Schedule of the Disclosure Schedules shall be applicable to such Schedule only. "Employee Plans" means each "employee benefit plan" as defined in Section 3(3) of ERISA, maintained or contributed to by Seller or any of its Affiliates which provides benefits to employees of the HPG Business or their dependents. "Environmental Claim" means any written or oral notice, claim, demand, action, suit, complaint, proceeding or other communication by any third Person alleging liability or potential liability (including without limitation liability or potential liability for investigatory costs, cleanup costs, governmental response costs, natural resource damages, property damage, personal injury, fines or penalties) arising out of, relating to, based on or resulting from (i) the presence, discharge, emission, release or threatened release of any Hazardous Substances at any location, (ii) circumstances forming the basis of any violation or alleged violation of any Environmental Laws, or (iii) otherwise relating to obligations or liabilities under any Environmental Laws. "Environmental Laws" means any and all past, present or future federal, state, local and foreign statutes, laws, regulations, ordinances, judgments, orders, permits, codes, or injunctions, which (i) imposes liability for or standards of conduct concerning the manufacture, processing, generation, distribution, use, treatment, storage, disposal, cleanup, transport or handling of Hazardous Substances including, The Resource Conservation and Recovery Act of 1976, as amended, The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, The Superfund Amendment and Reauthorization Act of 1984, as amended, The Toxic Substances Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, to the extent it relates to the handling of and exposure to hazardous or toxic materials or similar substances, and any other so-called "Superfund" or "Superlien" law or (ii) otherwise relates to the protection of human health or the environment. "Environmental Liabilities" means all liabilities to the extent arising in connection with or in any way relating to the HPG Business or Seller's or any of its Affiliates' use or ownership thereof, whether vested or unvested, contingent or fixed, actual or potential, which arise under or relate to Environmental Laws including, without limitation, (i) Remedial Actions, (ii) personal injury, wrongful death, economic loss or property damage claims, (iii) claims for natural resource damages, (iv) violations of Applicable Law or (v) any Damages with respect thereto. Notwithstanding the foregoing, Environmental Liabilities shall not include any increased liabilities resulting from or arising out of a use of a facility constituting a Transferred Asset after the Closing other than the use of the facility as of the Closing Date. "ERISA" means the Employee Retirement Income Security act of 1974, as amended. "Excluded Assets" means: (i) all cash and cash equivalents of Seller Companies, including, without limitation, cash and cash equivalents used as collateral for letters of credit, deposits with utilities, insurance companies and other Persons, except to the extent taken into account in the determination of the Final Net Tangible Asset Amount; (ii) all original books and records that Seller Companies shall be required to retain pursuant to any Applicable Law (in which case copies of such books and records to the extent relating to the HPG Business shall be provided to Buyer), or that portion of such records that contain information relating to any business or activity of Seller Companies not forming a part of the HPG Business, or any employee of a Seller Company that is not a Transferred Employee; (iii) all Tax assets of any Seller Companies, other than Tax assets relating to sales and use taxes, gross receipts taxes, property taxes, licenses, employee and employer withholding and unemployment taxes and other non-income related taxes; (iv) all assets of Seller Companies not held or owned by or used exclusively in connection with the HPG Business; (v) all rights and claims of Seller Companies under any of the Transaction Documents and the agreements and instruments delivered to Seller Companies by Buyer Companies pursuant to any of the Transaction Documents; (vi) all accounts receivable, notes receivable or similar claims or rights (whether or not billed or accrued) of the HPG Business from any Seller Companies; (vii) all trade accounts receivable, trade notes receivable or similar trade claims or rights (whether or not billed or accrued) of the HPG Business relating to the sale of products by an Affiliated Transferor to a Person other than a Seller Company for sale outside of the United States (excluding Puerto Rico) or Canada; (viii) all capital stock or any other securities of any Seller Companies or any other Person; (ix) all GE Intellectual Property and all Intellectual Property not used or held for use exclusively in the HPG Business, it being understood and agreed that the only Intellectual Property deemed used or held for use exclusively in the HPG Business that is registered or as to which an application for registration is pending is listed as "Transferred Assets" on Attachment XII; (x) all assets related to Excluded Liabilities; (xi) all rights and claims of Seller Companies against SAI/Earle Palmer Brown Promotions, or any of its predecessors, successors or affiliates, in connection with the design, manufacture, purchase or sale of "Sharpei puppets" sold and/or packaged with irons sold by the HPG Business prior to the Closing Date; (xii) all ownership and leasehold interests of Seller Companies in respect of the facility, real property, fixtures and equipment located at or constituting the Kuantan Facility, except to the extent specifically contemplated within the definition of Transferred Assets; (xiii) all accounts receivable, notes receivable or similar claims or rights of Seller Companies arising out of or relating to any judgments entered by a court or arbitrator prior to the Closing Date in favor of Seller Companies in respect of Designated Products; (xiv) all rights, claims, credits and assets of Seller Companies arising out of or relating to media barter contracts, agreements or arrangements of Seller Companies; (xv) all Inventory (and any related parts, accessories or attachments) that is owned by Seller Companies and held for sale, use or consumption by Seller's national disposition center (i.e., Nashville facility), service centers, outlet stores and company stores in the United States or Canada, and all returned goods that are being held for reconditioning or are being considered for reconditioning by Seller's national disposition center (i.e., Nashville facility), service centers, outlet stores and company stores in the United States or Canada; (xvi) all assets related to Cleaning and Lighting Products, except for accounts receivable and prepaid expenses; (xvii) the 28 mold presses identified as relating to the Cleaning and Lighting Products located at the Asheboro Property and listed on Schedule A; and (xviii) all assets (other than Inventory) relating to operations in the Designated Countries other than the United States (excluding Puerto Rico) and Canada, and other than the manufacturing operations located at the Queretaro Property. "Excluded Liabilities" means the following liabilities and obligations: (i) all liabilities and obligations of Seller Companies not arising out of the conduct of the HPG Business, except as otherwise specifically provided in the Transaction Documents; (ii) except as otherwise specifically provided in the Transaction Documents, all liabilities or obligations for any Tax arising from or with respect to the Transferred Assets or the operations of the HPG Business prior to the Closing, other than Tax liabilities or obligations relating to sales and use taxes, gross receipts taxes, property taxes, licenses, employee and employer withholding and unemployment taxes and other non-income related taxes; (iii) all liabilities or obligations, whether presently in existence or arising after the date of this Agreement, in respect of accounts payable, notes payable (including intercompany promissory notes and similar financing arrangements) or similar obligations (whether or not billed or accrued) to Seller Companies, except for amounts accrued by the HPG Business and not billed by Seller Companies to the HPG Business as of the Closing Date in respect of accounts payable, notes payable or similar obligations relating to specific services provided to and specific expenses paid on behalf of the HPG Business by Seller Companies; (iv) all liabilities or obligations, whether presently in existence or arising after the date of the Agreement, relating to fees, commissions or expenses owed to any broker, finder, investment banker, accountant, attorney or other intermediary or advisor employed by Seller Companies in connection with the Contemplated Transactions; (v) all liabilities or obligations retained by Seller pursuant to Exhibit D; (vi) all liabilities or obligations related to Excluded Assets and not otherwise included in the Assumed Liabilities by express provision of this Agreement; (vii) all liabilities or obligations related to claims of manufacturer or design defects with respect to any products sold or service provided by the HPG Business prior to, on or after the Closing Date, including liabilities and obligations in respect of investigations regarding product safety, product recall and related matters, to the extent but only to the extent relating to products manufactured or sold prior to the Closing Date or any product in the finished goods inventory of Seller Companies as of the close of business on the day preceding the Closing Date; (viii) all Environmental Liabilities, whether arising prior to, on or after the Closing Date, to the extent arising out of actions taken prior to the Closing Date, (1) relating to the disposal by Seller Companies or any of their predecessors or respective agents prior to Closing of Hazardous Substances at any location that at the time of such disposal were not owned or leased by a Seller Company or any of its predecessors, it being understood and agreed that the migration of Hazardous Substances in soil or groundwater from a facility included in the Transferred Assets to surrounding properties shall not be considered a disposal of Hazardous Substances, or (2) relating to or arising out of conditions at, or the current or former operations at, any facilities other than the Queretaro Property; (ix) all Environmental Liabilities, whether arising prior to, on or after the Closing Date, relating to the operations at the Asheboro Property or Kuantan Facility prior to the Closing Date; (x) all liabilities or obligations, whether presently existing or arising after the date of this Agreement, relating directly or indirectly to (i) the home security alarm systems and related products (including, but not limited to, digital dialers) business previously conducted by Seller Companies, and (ii) the Agreement of Sale dated August 1, 1991, by and between Black & Decker Monitoring Services, Inc., Black & Decker (U.S.) Inc. and Monital Signal Corporation; and (xi) all liabilities or obligations relating directly or indirectly to the litigation titled Emerson Electric Co. v. Black & Decker Inc. pending in the United States District Court for the Southern District of New York. "Financial Support Arrangements" means the agreements listed in Schedule B.10 as "Financial Support Arrangements." "GAAP" means Generally Accepted Accounting Principles as in effect on the date of the Agreement, consistently applied. "GE Intellectual Property" means the Intellectual Property identified as such on Table 2 in Attachment XII. "Governmental Authority" means any foreign, domestic, federal, territorial, state or local governmental authority, quasi-governmental authority, instrumentality, court, government or self-regulatory organization, commission, tribunal or organization or any regulatory, administrative or other agency, or any political or other subdivision, department or branch of any of the foregoing. "Hazardous Substances" means (i) substances defined as "hazardous substances," "hazardous materials" or "hazardous waste" pursuant to The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or The Resource Conservation and Recovery Act of 1976, as amended, (ii) substances defined as "hazardous wastes" in the regulations adopted and publications promulgated pursuant to any of said laws, (iii) substances defined as "toxic substances" in The Toxic Substances Control Act, as amended, and (iv) petroleum, its derivatives and petroleum products, and asbestos and asbestos containing materials. "HPG Business" means (i) the household products business as presently conducted by Seller Companies involving the manufacturing, marketing or sale in the Designated Countries of the Designated Products, (ii) the manufacturing or sale of Designated Products (or components thereof) at the Kuantan Facility and (iii) the purchase or sourcing of Designated Products (or components thereof) for import and sale by Seller Companies into the Designated Countries. "HPG Financial Statements" means the special-purpose financial statements attached in Attachment I and Attachment XIV to this Agreement. "HPG Leases" means the real property leases listed on Schedule B.07(d) relating to the facilities used exclusively by the HPG Business, and any other real property leases entered into after the date of this Agreement and on or prior to the Closing Date with the consent of Buyer, exclusively for the benefit of the HPG Business, as the same may be amended and supplemented from time to time, including the interests of Seller Companies in any related fixtures, improvements and personal property located therein. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Intellectual Property" means all patents, copyrights, technology, know-how, processes, trade secrets, inventions, proprietary data, formulae, research and development data and computer software programs; all trademarks, trade names, service marks and service names; all registrations, applications, recordings, licenses and common-law rights relating thereto, all rights to sue at law or in equity for any infringement or other impairment thereto, including the right to receive all proceeds and damages therefrom, and all rights to obtain renewals, continuations, divisions or other extensions of legal protections pertaining thereto; and all other United States, state and foreign intellectual property owned by Seller Companies on the Closing Date. "Intellectual Property Assignment Agreements" means the Assignment of United States Trademarks, Trademark Registrations and Applications for Registration, the Assignment of Foreign Trademarks, Trademark Registrations and Applications for Registration, the Assignment of United States Patents and Patent Applications, the Assignment of Foreign Patents and Application for Patents, the Assignment of U.S. Copyrights, and the Assignment of Mexican Trademarks, Trademark Registrations and Applications for Registration, in the forms contemplated by Attachments III, IV, V, VI, VIII and IX to this Agreement, and such other assignment agreements as Buyer may reasonably request in order to effect the change of title to the Intellectual Property contemplated by such Attachments. "Inventory" means all items of inventory notwithstanding how classified in the financial records of Seller Companies, including all raw materials, work-in-process, finished goods, reconditioned products and to be reconditioned products. "Kuantan Facility" means the manufacturing facility located at Lot 109A, KWS. Perinbustrain Gebeng, P.O. Box 6, Kuantan, Pahang 26080, Malaysia. "Licensed Software" shall mean any software used by and material to the operation of the HPG Business that constitutes Transferred Assets, which software constitutes "off-the-shelf" software or is licensed by Seller Companies pursuant to a Contract. "Lien" means, with respect to any asset, any mortgage, lien, claim, pledge, charge, security interest or other encumbrance of any kind in respect of such asset. "Material Adverse Effect" means (i) with respect to the HPG Business, a material adverse effect on the assets, properties, business, financial condition or results of operations of the HPG Business taken as a whole, or (ii) with respect to any other Person, a material adverse effect on the assets, properties, business, financial condition or results of operations of such Person and its Subsidiaries taken as a whole. "Net Tangible Assets" means (i) all Transferred Assets, minus (ii) all Assumed Liabilities, calculated in accordance with the practices and policies that were employed in the preparation of the Opening Statement, determined, in each case, consistent with the Opening Statement and the notes thereto, except as provided in Note E thereto. "Net Working Capital" means (i) Net Tangible Assets, minus (ii) real property, equipment and capitalized software, other fixed assets and all other non-current assets, plus (iii) all non-current liabilities of the HPG Business, calculated in accordance with the practices and policies that were employed in the preparation of the Opening Statement, determined, in each case, consistent with the Opening Statement and the notes thereto, except as provided in Note E thereto. "Non US Benefit Arrangements" means Benefit Arrangements in respect of Non US Transferred Employees. "Non US Transferred Employees" means Transferred Employees who are not US Transferred Employees. "Opening Statement" means the "Base Business" column of the special-purpose combining statement of net assets of the HPG Business at March 29, 1998, together with the notes thereto, as included in the Other Financial Information section of Attachment I to this Agreement. "Owned Software" shall mean software used by and material to the operation of the HPG Business that constitutes Transferred Assets that has been designed and developed by Seller Companies separate from any Licensed Software as set forth and described on Schedule B.19. "Permitted Liens" means any of the following: (i) Liens for Taxes that (x) are not yet due or delinquent or (y) are being contested in good faith by appropriate proceedings; (ii) statutory Liens or landlords', carriers', warehousemen's, mechanic's, suppliers', materialmen's or other like Liens arising in the ordinary course of business with respect to amounts not yet overdue for a period of 60 days or amounts being contested in good faith by appropriate proceedings; (iii) easements, rights of way, restrictions and other similar charges or encumbrances on real property interests, that, individually or in the aggregate, do not materially interfere with the ordinary course of operation of the HPG Business or the use of any such real property for its current uses; (iv) with respect to real property, title defects or irregularities that do not in the aggregate materially impair the value of or the use of such real property for its current use; (v) rights and licenses granted to others in Intellectual Property that have been disclosed to Buyer prior to Buyer's execution of this Agreement, that are not material to the HPG Business taken as a whole or that have no effect upon the Transferred Assets; (vi) with respect to any of the HPG Leases where any Seller Company is a lessee, any Lien affecting the interest of the landlord thereunder; (vii) with respect to the Queretaro Property, the encroachment of a structure from the neighboring facility across a shared property line, approximately eight meters into the Queretaro Property; (viii) a lease of approximately 750 square feet of space at the Queretaro Property to BanaMex, which operates an automated teller machine and office for the use of the employees at the Queretaro Property; and (ix) Encumbrances disclosed in the Disclosure Schedule or taken into account in the Opening Statement. "Person" means an individual, a corporation, a general partnership, a limited partnership, a limited liability company, limited liability partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Queretaro Property" means the property located at Accesco III SIN, Fracc., Industrial Benito Juarez, Queretaro, QRO. 76130, Mexico. "Remedial Action(s)" means the investigation, clean-up or remediation of environmental contamination or damage caused by, related to or arising from the generation, use, handling, treatment, storage, transportation, disposal, discharge, release, or emission of Hazardous Substances, including, without limitation, investigations, response, removal and remedial actions under The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, corrective action under The Resource Conservation and Recovery Act of 1976, as amended, and clean-up requirements under similar state Environmental Laws. "Representatives" means (i) with respect to Buyer, any of the "Representatives" as defined in the Confidentiality Agreement and (ii) with respect to Seller, each of its respective directors, officers, advisors, attorneys, accountants, employees or agents. "Seller Companies" means Seller and its Subsidiaries. "Services Agreements" means the Services Agreement (United States and Canada), Services Agreement (GPA), Services Agreement (Mexico), Services Agreement (Latin American Group and CCA), Services Agreement (Colombia), Services Agreement (Chile), Services Agreement (Peru), Services Agreement (Argentina), Services Agreement (Puerto Rico) and Services Agreement (Venezuela), in the forms contemplated by Attachments XVIII, XIX, XX, XXI, XXII, XXIII, XXIV, XXV, XXVI and XXVII to this Agreement, as the same may be amended from time to time. "Subsidiary" as it relates to any Person, shall mean with respect to any Person, any corporation, partnership, joint venture or other legal entity of which such Person, either directly or through or together with any other Subsidiary of such Person, owns more than 50% of the voting power in the election of directors or their equivalents, other than as affected by events of default. "Tax Authority" shall mean a foreign or United States federal, state or local Governmental Authority having jurisdiction over the assessment, determination, collection or imposition of any Tax, as the context requires. "Tax Returns" means all returns (including information returns), declarations, reports, estimates and statements regarding Taxes, required to be filed with any Tax Authority. "Taxes" means all taxes, charges, fees, levies or other assessments, including without limitation, all net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, estimated, severance, stamp, occupation, property or other taxes, customs, duties, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any Tax Authority. "Transaction Documents" means this Agreement, the Assignment and Assumption Agreements, the Services Agreements, the Intellectual Property Assignment Agreements, the Cross License Agreement, the Trademark License Agreement, the Distribution Services Agreement (United States), and the Distribution Services Agreement (Latin America), and any exhibits or attachments to any of the foregoing, as the same may be amended from time to time. "Transferred Assets" means, other than Excluded Assets, all of the assets, properties, rights, licenses, permits, Contracts, causes of action and business of every kind and description as the same now exist (except to the extent transferred in the ordinary course consistent with past practices prior to the Closing Date) or exists on the Closing Date, wherever located, real, personal or mixed, tangible or intangible, owned by, leased by or in the possession of Seller or any Affiliated Transferor, whether or not reflected in the books and records thereof, and held or used exclusively in the conduct of the HPG Business as the same now exist (except to the extent transferred in the ordinary course consistent with past practices prior to the Closing Date) or exists on the Closing Date, and all assets of the HPG Business acquired by any Seller Company, on or prior to the Closing Date and not disposed of prior to the Closing Date in accordance with this Agreement, and including, without limitation, except as otherwise specified herein, all direct or indirect right, title and interest of Seller or any Affiliated Transferor in, to and under: (i) the Queretaro Property, together with all buildings, fixtures, easements, rights of way, and improvements thereon and appurtenances thereto to the extent relating to the HPG Business; (ii) the rights and interests of Seller Companies under the HPG Leases; (iii) all personal property and interests therein (other than Intellectual Property and other than that located at the Kuantan Facility), including machinery, equipment, furniture, office equipment, communications equipment, vehicles, storage tanks, spare and replacement parts, fuel and other tangible property (and interests in any of the foregoing) owned by any Seller Company that are used exclusively in connection with the HPG Business; (iv) all Inventory that is owned by Seller Companies and held for sale, use or consumption exclusively in the HPG Business; (v) all Contracts; provided, however that the license of the Spacemaker(R) trademark shall be limited to the Designated Countries; (vi) all accounts, accounts receivable and notes receivable whether or not billed, accrued or otherwise recognized in the Opening Statement or taken into account in the determination of the Final Net Tangible Asset Amount, together with any unpaid interest or fees accrued thereon or other amounts due with respect thereto of Seller Companies that relate exclusively to the HPG Business, and any security or collateral for any of the foregoing; (vii) all expenses that have been prepaid by Seller Companies relating exclusively to the operation of the HPG Business, including but not limited to ad valorem Taxes, lease and rental payments; (viii) all of Seller's or any of Seller Companies' rights, claims, credits, causes of action or rights of set-off against Persons other than Seller Companies relating exclusively to the HPG Business or the Transferred Assets, including, without limitation, unliquidated rights under manufacturers' and vendors' warranties; (ix) all Intellectual Property (other than Intellectual Property constituting an Excluded Asset) used or held for use exclusively in the HPG Business, including the goodwill of the HPG Business symbolized thereby, it being understood and agreed that the only Intellectual Property deemed used or held for use exclusively in the HPG Business that is registered or as to which an application for registration is pending is listed as "Transferred Assets" on Attachment XII; (x) all transferable franchises, licenses, permits or other governmental authorizations owned by, or granted to, or held or used by, Seller Companies and exclusively related to the HPG Business; (xi) except to the extent a Seller Company is required to retain the originals pursuant to any Applicable Law (in which case copies will be provided to Buyer), all business books, records, files and papers, whether in hard copy or computer format, of a Seller Company used exclusively in the HPG Business, including, without limitation, books of account, invoices, engineering information, sales and promotional literature, trademark and service mark legal files, other legal files, archival materials comprising historical advertising and sales information relating to Transferred Assets and Designated Products, manuals and data, sales and purchase correspondence, lists of present and former suppliers, lists of present and former customers, personnel and employment records of present or former employees, documentation developed or used for accounting, marketing, engineering, manufacturing, or any other purpose relating to the conduct of the HPG Business at any time prior to the Closing, except to the extent relating to Excluded Liabilities; (xii) the right to represent to third parties that Buyer is the successor to the HPG Business; (xiii) all insurance proceeds (except to the extent relating to Excluded Assets or Excluded Liabilities or to the extent relating to or arising out of Environmental Insurance Claims), net of any retrospective premiums, deductibles, retention or similar amounts, arising out of or related to damage, destruction or loss of any property or asset of or used exclusively in connection with the HPG Business to the extent of any damage or destruction that remains unrepaired, or to the extent any property or asset remains unreplaced at the Closing Date; (xiv) the equipment in the Kuantan Facility listed on Schedule A, which assets shall be included in the calculation of the Final Net Tangible Asset Amount; and (xv) accounts receivable and prepaid expenses relating to Cleaning and Lighting Products in the United States (except for the operations located in Miami, Florida) and Canada. "US Benefit Arrangements" means Benefit Arrangements in respect of US Transferred Employees. "US Transferred Employees" means Transferred Employees employed by the HPG Business in the United States. "WARN" means the Worker Adjustment Retraining and Notification Act, as amended. (b) "To the knowledge," "known by" or "known" (and any similar phrase) means (i) with respect to Seller, to the knowledge of any of the Chief Financial Officer, the General Counsel, the Treasurer or the Controller of Seller, or the President of the HPG Business, and shall be deemed to include a representation that a reasonable investigation or inquiry of the subject matter thereof has been made of such individuals, (ii) with respect to Buyer, to the knowledge of the President, Chief Financial Officer, the General Counsel, the Treasurer or the Controller of Buyer, and shall be deemed to include a representation that a reasonable investigation or inquiry of the subject matter thereof has been made of such individuals. (c) Each of the following terms is defined in the Section set forth opposite such term: Term Section Active Employee....................................................D.01 Adjusted Purchase Price............................................2.02 Agreement......................................................Preamble Buyer..........................................................Preamble Buyer Companies................................................Preamble Buyer's Mexico Plan................................................D.13 Buyer's Pension Plan...............................................D.07 Closing............................................................2.03 Closing Net Working Capital Amount.................................2.04 Competing Business.................................................5.06 CSA................................................................E.05 Encumbrances....................................................... A Environmental Insurance Claims.....................................7.06 Exchange Consideration.............................................2.02 Fifth Anniversary Date.............................................5.06 Final Net Tangible Asset Amount....................................2.04 Final Net Working Capital Change Amount............................2.04 Indemnified Claim.................................................10.03 Indemnified Party.................................................10.03 Indemnifying Party................................................10.03 Insurance Liabilities..............................................6.03 June 28 Net Working Capital Amount.................................2.04 Leased Real Property...............................................B.07 Net Working Capital Adjustment Amount..............................2.04 Owned Real Property................................................B.07 PBGC...............................................................B.18 Period One.........................................................5.06 Proceedings....................................................... A Proposed Final Net Tangible Asset Amount...........................2.04 Proposed Net Working Capital Change Amount.........................2.04 Referee...........................................................10.03 Remaining Recovery.................................................7.06 Seller.........................................................Preamble Seller's Canada Plan...............................................D.15 Seller's Mexico Plan...............................................D.13 Seller's Pension Plan..............................................D.07 Seller's Puerto Rico Plan..........................................D.14 Seller's Savings Plan..............................................D.08 Successor Canada Plan..............................................D.15 Successor Puerto Rico Plan.........................................D.14 Successor Savings Plan.............................................D.08 Surviving Representations or Covenants............................10.01 Third Party Claim.................................................10.03 Transferred Employees..............................................D.01 UL.................................................................E.05 Year 2000 Compliant................................................B.19 EXHIBIT B REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants prior to Buyer, that: B.01 Corporate Existence and Power. Each of Seller and each Affiliated Transferor is a corporation duly incorporated, validly existing and in good standing under the laws of the state or jurisdiction of its incorporation and has all corporate powers, and has all governmental licenses, authorizations, consents and approvals required to carry on the HPG Business as now conducted, except where the failure to have such licenses, authorizations, consents and approvals has not had, and could not reasonably be expected to have, a Material Adverse Effect on the HPG Business. Each of Seller and each Affiliated Transferor, as the case may be, is duly qualified to do business as a foreign corporation in each jurisdiction where the character of the property owned or leased by it or the nature of its activities make such qualification necessary to carry on the HPG Business as now conducted, except where the failure to be so qualified has not had, and could not reasonably be expected to have, a Material Adverse Effect on the HPG Business. B.02 Corporate Authorization. The execution, delivery and performance by Seller of each of the Transaction Documents to which it is a party and the consummation by Seller of the Contemplated Transactions are within its corporate powers and have been duly authorized by all necessary corporate action on its part. The execution, delivery and performance by Seller Companies other than Seller of the Transaction Documents to which a Seller Company other than Seller is a party and the consummation by such Seller Company of the Contemplated Transactions are within such Seller Company's corporate powers and as of Closing will have been duly authorized by all necessary corporate action on its part. Each of the Transaction Documents to which it is a party constitutes or will constitute at Closing a legal, valid and binding agreement of the applicable Seller Company, enforceable against it in accordance with its terms (i) except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers and (ii) subject to the limitations imposed by general equitable principles (regardless of whether such enforceability is considered in a proceeding at law or in equity). B.03 Governmental Authorization. The execution, delivery and performance by each Seller Company of the Transaction Documents to which it is a party require no action by or in respect of, or consent or approval of, or filing with, any Governmental Authority other than: (i) compliance with any applicable requirements of the HSR Act; (ii) actions, consents, approvals or filings set forth in Schedule B.03 or otherwise expressly referred to in this Agreement; and (iii) such other consents, approvals, authorizations, permits and filings the failure to obtain or make would not have, in the aggregate, a Material Adverse Effect on the HPG Business. B.04 Non-Contravention. Except as set forth in Schedule B.04, the execution, delivery and performance by Seller or any Affiliated Transferor of the Transaction Documents do not and will not (i)(A) contravene or conflict with the charter or bylaws of Seller or any Affiliated Transferor, (B) assuming compliance with the matters referred to in Section B.03, contravene or conflict with or constitute a violation of any provisions of any Applicable Law binding upon Seller or any Affiliated Transferor that is applicable to the HPG Business; (C) assuming compliance with the matters referred to in Section B.03, constitute a default under or give rise to any right of termination, cancellation or acceleration of, or to a loss of any benefit relating exclusively to the HPG Business to which Seller or any Affiliated Transferor is entitled under, any Contract binding upon Seller or any Affiliated Transferor and relating exclusively to the HPG Business or by which any of the Transferred Assets is or may be bound or any license, franchise, permit or similar authorization held by Seller or any Affiliated Transferor relating exclusively to the HPG Business except, in the case of clauses (B) and (C), for any such contravention, conflict, violation, default, termination, cancellation, acceleration or loss that could not reasonably be expected to have a Material Adverse Effect on the HPG Business or (ii) result in the creation or imposition of any Lien on any transferred Asset, other than Permitted Liens. B.05 Financial Statements. (a) The Opening Statement is presented fairly, in all material respects, and in conformity with GAAP (except as set forth in the notes thereto) applied on a basis consistent in all material respects with the manner in which the HPG Business reported as of December 31, 1997 its financial position for inclusion in the audited consolidated financial statements of Seller. (b) The HPG Financial Statements present fairly, in all material respects, the financial position and results of operations at the dates and for the periods set forth therein, in conformity with GAAP (except as set forth in the notes thereto). B.06 Absence of Certain Changes. Except for matters that would be permitted in accordance with Section 5.01 if they occurred after the date of this Agreement or as set forth in Schedule B.06, from March 30, 1998 to the date of this Agreement, there has not been any material adverse change in the business, financial condition or results of operations of the HPG Business and there has not been: (a) any event or occurrence that has had a Material Adverse Effect on the HPG Business; (b) any damage, destruction or other casualty loss affecting the HPG Business or any assets that would constitute Transferred Assets if owned, held or used by Seller or any of the Affiliated Transferors on the Closing Date that has had a Material Adverse Effect on the HPG Business; (c) any transaction or commitment made, or any Contract entered into, by Seller or any Affiliated Transferor relating primarily to the HPG Business or any assets that would constitute Transferred Assets if owned, held or used by Seller or any of the Affiliated Transferors on the Closing Date (including the acquisition or disposition of any assets) or any termination or amendment by Seller or any Affiliated Transferor of any Contract or other right relating primarily to the HPG Business, in either case, material to the HPG Business taken as a whole, other than transactions and commitments in the ordinary course of business consistent with past practices and those contemplated by this Agreement; (d) any sale or other disposition of more than an aggregate of $500,000 of assets (other than the sale of Inventory in the ordinary course of business consistent with past practices, the sale of obsolete Inventory whether or not in the ordinary course of business, any sale made in the ordinary course of business and the sale of surplus equipment and materials arising out of or relating to the closing of the Kuantan Facility) that would constitute Transferred Assets if owned, held or used by any Seller Companies on the Closing Date; (e) any increase in the compensation of any current employee of the HPG Business at a level of vice president or above, other than nondiscretionary increases pursuant to Employee Plans or Benefit Arrangements disclosed in Schedule B.18 or referenced in Exhibit D; and (f) any cancellation, compromise, waiver or release by Seller or any Affiliated Transferor of any claim or right (or a series of related rights and claims) related to the HPG Business, other than cancellations, compromises, waivers or releases in the ordinary course of business consistent with past practices. B.07 Sufficiency of and Title to the Transferred Assets. (a) Except as set forth in Schedule B.07, the Transferred Assets, together with the services to be provided to Buyer Companies pursuant to the Services Agreements, the Distribution Services Agreement (United States) and the Distribution Services Agreement (Latin America), and the Intellectual Property to be licensed to Buyer pursuant to the Trademark License Agreement, and the Cross License Agreement, and the subleases contemplated by Section 2.01, constitute, and on the Closing Date will constitute, all of the assets and services that are necessary or appropriate to permit the operation of the HPG Business in substantially the same manner as such operations have heretofore been conducted. (b) Except as set forth in Schedule B.07, subject to the receipt of any consents or approvals of any other Person, upon consummation of the Contemplated Transactions, Buyer will have acquired good and marketable title in and to, or a valid leasehold interest in, each of the Transferred Assets (except for the Intellectual Property as to which no representation is made in this Section B.07), free and clear of all Liens, except for Permitted Liens. Except as set forth in Schedule B.07, subject to the receipt of any consents or approvals of any other Person set forth in Schedules B.03 and B.04 or referenced in Section B.03, upon consummation of the Contemplated Transactions, Buyer will be in a position to operate the HPG Business in substantially the same manner as operations have heretofore been conducted. (c) Schedule B.07 includes a true and complete list of all real property owned by Seller Companies (or real property which Seller Companies have a right to acquire in connection with the operation of the HPG Business) which is included in the Transferred Assets (collectively, the "Owned Real Property"). Schedule B.07 sets forth (i) the address of each parcel of Owned Real Property and (ii) the owner of such Owned Real Property. (d) Schedule B.07 includes a true and complete list of all agreements (together with any amendments thereof) pursuant to which Seller Companies lease, sublease or otherwise occupy (whether as landlord, tenant, subtenant or other occupancy arrangement) any real property used in the HPG Business (collectively, the "Leased Real Property"). Schedule B.07 sets forth (i) the address of each parcel of Leased Real Property and (ii) the owner of the leasehold, subleasehold or occupancy interest for each Leased Real Property. B.08 No Undisclosed Liabilities. There are no liabilities of Seller or any Affiliated Transferor relating to the HPG Business that constitute Assumed Liabilities of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, other than: (a) liabilities disclosed in or provided for in the Opening Statement and liabilities for matters taken into account in the determination of the Final Net Tangible Asset Amount; (b) liabilities (i) disclosed in Schedule B.08, (ii) related to any contract, agreement, lease, license, commitment, sales or purchase order or other undertaking or matter disclosed in the Disclosure Schedules or (iii) related to any Employee Plan or Benefit Arrangements identified in Exhibit D or disclosed in Schedule B.18; and (c) liabilities incurred in the ordinary course of business consistent with past practices since March 29, 1998. B.09 Litigation. Except as set forth in Schedule B.09, there is no action, suit, investigation or proceeding pending against, or to the knowledge of Seller, threatened against or affecting, the HPG Business or any Transferred Asset before any Governmental Authority that could reasonably be expected to have a Material Adverse Effect on the HPG Business. B.10 Material Contracts. (a) Except as set forth in Schedule B.10 and except for Contracts that do not constitute Assumed Liabilities, Seller Companies, with respect to the HPG Business, are not parties to or otherwise bound by or subject to: (i) any written employment, severance, consulting or sales representative Contract which contains an obligation (excluding commissions) to pay more than $100,000 per year and constitutes an Assumed Liability; (ii) any Contract containing any covenant limiting the freedom of Seller Companies, with respect of the HPG Business or the operations of the HPG Business, to engage in any line of business or compete with any Person in any geographic area in any material respect if such Contract will be binding on Buyer Companies after the Closing; (iii) any Contract in effect on the date of this Agreement relating to the disposition or acquisition of the assets of, or any interest in, any business enterprise which relates to the HPG Business other than in the ordinary course of business consistent with past practices; (iv) any Financial Support Arrangements; (v) any indebtedness for borrowed money of the HPG Business that would constitute an Assumed Liability if in existence on the Closing Date, with a principal amount in excess of $500,000; or (vi) any offset agreement entered into in connection with an international sales transaction and relating to any Contract that imposes on the HPG Business an obligation to perform that will continue in effect on or after the Closing Date. (b) Except as disclosed in Schedule B.10, each Contract disclosed in Schedule B.10 is a legal, valid and binding obligation of Seller (or the applicable Affiliated Transferor) enforceable against Seller (or the applicable Affiliated Transferor) in accordance with its terms (except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers, and subject to the limitations imposed by general equitable principles regardless of whether such enforceability is considered in a proceeding at law or in equity), and Seller (or the applicable Affiliated Transferor) is not in default and has not failed to perform any obligation thereunder, and, to the knowledge of Seller, there does not exist any event, condition or omission which would constitute a breach or default (whether by lapse of time or notice or both) by any other Person. As of the date of this Agreement, Seller has not received any notification from any other Person party to any of the Contracts disclosed in Schedule B.10 of a claim of default by Seller. B.11 Licenses and Permits. To the knowledge of Seller, except as set forth in Schedule B.11, Seller (or the appropriate Affiliated Transferor) has all licenses, franchises, permits and other similar authorizations affecting, or relating in any way to, the HPG Business required by law to be obtained by Seller (or the appropriate Affiliated Transferor) to permit Seller to conduct the HPG Business in substantially the same manner as the HPG Business has heretofore been conducted. B.12 Finders' Fees. Except for Goldman, Sachs & Co., whose fees will be paid by Seller, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Seller who might be entitled to any fee or commission from Seller or Buyer or any of their Affiliates upon consummation of the Contemplated Transactions. B.13 Environmental Compliance. Except as disclosed in Schedule B.13 and except as reserved against or referred to in the Opening Statement, to the knowledge of Seller the HPG Business is and has been in substantial compliance with all applicable Environmental Laws, and has obtained all permits, licenses and other authorizations that are required under applicable Environmental Laws, except where the failure to be in compliance or to have obtained all material permits, licenses and other authorizations has not had, and cannot reasonably be expected to have, a Material Adverse Effect on the HPG Business. Except as set forth in Schedule B.13 and except as reserved against or referred to in the Opening Statement, to the knowledge of Seller (i) the HPG Business is and has been in material compliance with the terms and conditions under which the permits, licenses and other authorizations referenced in the preceding sentence were issued or granted, (ii) Seller Companies hold all permits required by Environmental Laws that are necessary and appropriate to conduct the HPG Business as presently conducted in all material respects and to operate the Transferred Assets and the Asheboro Property in all material respects as they are presently operated; (iii) no suspension, cancellation or termination of any permit referred to in clause (ii) is pending or threatened; (iv) Seller has not received written notice of any material Environmental Claim relating to or affecting the HPG Business or the Transferred Assets, and there is no such threatened Environmental Claim; (v) Seller, in connection with the HPG Business or the Transferred Assets, has not entered into, agreed in writing to, or is subject to any judgment, decree, order or other similar requirement of any Governmental Authority under any Environmental Laws; and (vi) no event has occurred and no circumstance exists that is reasonably likely to give rise to or serve as a basis for any Environmental Liability; except in the case of clauses (i) through (vi) where such failure, event or other circumstance has not had, and cannot reasonably be expected to have, a Material Adverse Effect on the HPG Business. B.14 Compliance with Laws. Except as set forth in Schedule B.14, for violations or infringements of Environmental Laws, and for violations or infringements that have not had, and may not reasonably be expected to have, a Material Adverse Effect on the HPG Business, to the knowledge of Seller the operation of the HPG Business and condition of the Transferred Assets have not violated or infringed, and do not violate or infringe, in any respect any Applicable Law or any order, writ, injunction or decree of any Governmental Authority. B.15 Intellectual Property. With respect to Intellectual Property that constitute Transferred Assets, except as set forth in Schedule B.15: (a) Seller (or an Affiliated Transferor) owns, free and clear of all Liens other than Permitted Liens, and subject to any licenses disclosed in Schedule B.15 or that in the aggregate are not material to the HPG Business as a whole granted by Seller Companies prior to the Closing Date, all right, title and interest in such Intellectual Property; (b) the use of such Intellectual Property in connection with the operation of the HPG Business as conducted during the past three years does not conflict with, infringe upon or violate the intellectual property rights of any other Persons; (c) Seller (or an Affiliated Transferor) has the right to use all such Intellectual Property used by the HPG Business and necessary for the continued operation of the HPG Business in the same manner as its operations have been conducted during the past three years and the list of such Intellectual Property comprising patents, patent applications, trademark and/or service mark registrations and applications that is included in Table 1 of Attachment XII sets forth a complete and accurate list of all such Intellectual Property that constitutes Transferred Assets; (d) Seller (or an Affiliated Transferor) is the owner of record of the pending patent applications and issued patents and of the applications or issued registrations for trademarks and service marks comprising Intellectual Property included in Table 1 of Attachment XII in each country or state of application or registration, and each trademark or service mark and each issued patent constituting such Intellectual Property is subsisting and in full force and effect; (e) Upon the consummation of the Closing hereunder, (i) Buyer will be vested with all of Seller's (or the Affiliated Transferors') rights, title and interest in, and Seller's (or the Affiliated Transferors') rights and authority to use in connection with the HPG Business, all of the Intellectual Property that constitute Transferred Assets and (ii) such Intellectual Property, together with the Intellectual Property licensed to Buyer in accordance with the Cross License Agreement and Trademark License Agreement and any other interests in Intellectual Property transferred hereunder will collectively constitute such rights and interests in Intellectual Property which are necessary for the continued operation of the HPG Business as a whole in the same manner as its operations have heretofore been conducted during the past three years; and (f) Notwithstanding the provisions of this Section B.15, Seller makes no representation or warranty, and no such representation or warranty shall be implied, that any of such Intellectual Property included in Table 1 of Attachment XII not constituting a trademark or service mark is valid or enforceable. B.16 Taxes. (a) Except as set forth in Schedule B.16, Seller and each Affiliated Transferor has exercised reasonable care in the preparation of, and has duly and timely filed, all applicable Tax Returns with respect to all Taxes required to be filed to the date hereof and, as of the Closing Date will have exercised reasonable care in the preparation of, and will have timely filed, all applicable Tax Returns with respect to Taxes required to have been filed to the Closing Date, except for Taxes relating to periods that close on or before the Closing Date that under Applicable Law are not obligations of Buyer Companies. Except as set forth in Schedule B.16, all Taxes shown on the Tax Returns or pursuant to any declarations or assessments received by Seller and each Affiliated Transferor (including estimated Taxes) have been duly and timely paid, except for Taxes relating to periods that close on or before the Closing Date that under Applicable Law are not obligations of Buyer Companies, and no such Taxes have created a Lien (other than a Permitted Lien) against or impair the ability to transfer the Transferred Assets to Buyer Companies free and clear of any Lien (other than a Permitted Lien) in accordance with the terms of this Agreement. Except as set forth in Schedule B.16, all such Tax Returns are true, correct and complete, except for Taxes relating to periods that close on or before the Closing Date that under Applicable Law are not obligations of Buyer Companies. Except as set forth in Schedule B.16, there exists no Tax deficiency or unpaid Tax assessed or proposed by any Governmental Authority against Seller or any Affiliated Transferor, except for Taxes relating to periods that close on or before the Closing Date that under Applicable Law are not obligations of Buyer Companies. (b) As of the date of this Agreement, Schedule B.16 contains a list of all states and other jurisdictions where Seller Companies have filed Tax Returns during the past three years with respect to Transferred Assets. (c) None of the Assumed Liabilities is or may be an obligation to make (i) a payment that will not be deductible by Buyer Companies under Code section 280G; or (ii) a payment under any tax allocation or tax sharing agreement or in respect of any liability for the Taxes of any Person under Treasury regulation section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract, or otherwise. (d) None of the Transferred Assets consists of stock in any corporation (whether or not it currently holds any assets) that is or has been a member of any consolidated, combined, unitary or other similar group in respect of any Taxes. B.17 Insurance. Schedule B.17 contains a correct and complete list of all material policies of insurance held by any Seller Companies that are in effect on the date of this Agreement or in calendar years 1997 or 1996 and that insure the HPG Business. Schedule B.17 contains an accurate and complete description of any provision contained in said policies which provides for retrospective or retroactive premium adjustment. None of the insurance carriers listed in Schedule B.17 are related to or affiliated with Seller, other than Shenandoah Insurance, Inc. Seller has not received notice or any other indication from any insurer or agent (other than Shenandoah Insurance, Inc.) of any intent to cancel or not to renew any of the insurance policies listed in Schedule B.17, except for cancellations or failures to renew that will occur as a result of the Closing. No Seller Company has been refused any insurance, nor has any Seller Company's coverage been limited by any insurance carrier to which it has applied for insurance or with which it has carried insurance during the last five years, except as limited by insurance carrier's internal policy regarding maximum coverage and limits. B.18 Employee Benefit Matters. (a) Schedule B.18 lists each Employee Plan or material Benefit Arrangement (other than Benefit Arrangements as to which Buyer has no obligations hereunder) which covers Transferred Employees and each collective bargaining agreement covering Transferred Employees. (b) Except as set forth in Schedule B.18, with respect to the HPG Business: (i) neither Seller nor any member of its "Controlled Group" (defined as any organization which is a member of a controlled group of organizations within the meaning of Code Sections 414(b), (c), (m) or (o)) has ever contributed to or had any liability to a multi-employer plan, as defined in Section 3(37) of ERISA, which could reasonably be expected to have a Material Adverse Effect on the HPG Business; (ii) no fiduciary of any funded Employee Plan has engaged in a nonexempt "prohibited transaction" (as that term is defined in Section 4975 of the Code and Section 406 of ERISA) which could subject Buyer to a penalty tax imposed by Section 4975 of the Code or Section 502(i) of ERISA; (iii) no Employee Plan that is subject to Section 412 of the Code has incurred an "accumulated funding deficiency" within the meaning of Section 412 of the Code, whether or not waived; (iv) each Employee Plan and Benefit Arrangement has been established and administered in all material respects in accordance with its terms and in compliance with Applicable Law; (v) no Employee Plan subject to Title IV of ERISA has incurred any material liability under such title other than for the payment of premiums to the Pension Benefit Guaranty Corporation ("PBGC"), all of which to the knowledge of Seller have been paid when due; (vi) no defined benefit Employee Plan has been terminated; nor have there been any "reportable events" (as that term is defined in Section 4043 of ERISA and the regulations thereunder), other than reportable events arising directly from the Contemplated Transactions, which would present a risk that an Employee Plan would be terminated by the PBGC in a distress termination; (vii) each Employee Plan intended to qualify under Section 401 of the Code has received a determination letter that it is so qualified and no event has occurred with respect to any such Employee Plan which could cause the loss of such qualification or exemption; (viii) with respect to each Employee Plan listed in Schedule B.18, Seller has made available to Buyer the most recent copy (where applicable) of (1) the plan document; (2) the most recent determination letter; (3) any summary plan description; and (4) Form 5500; (ix) with respect to the Transferred Employees, there are no post-retirement medical or health plans, dental plans, hospitalizations, life insurance or other plans or arrangements in effect; (x) there are no actions, claims or investigations pending or, to the knowledge of Seller threatened, against any Employee Plan, Benefit Arrangement, or any administrator, fiduciary or sponsor thereof with respect to the HPG Business, other than benefit claims arising in the normal course of operation of such Employee Plan or Benefit Arrangement; and (xi) except as otherwise expressly provided in Exhibit D, the consummation of the Contemplated Transactions in and of themselves will not entitle any individual to severance pay that is payable by Buyer Companies, and will not accelerate the time of payment or vesting, or increase the amount of any compensation or benefits due any Transferred Employee to the extent such compensation or benefits are the responsibility of any Buyer Companies. B.19 Software Applications. (a) Software Applications: Year 2000. All of the Owned and Licensed Software has been considered in Year 2000 remediation plans developed by the HPG Business. Except as otherwise set forth on Schedule B.19, Seller represents that to its knowledge the Owned Software will operate without interruption and/or malfunction due to the recognition and processing of dates on and beyond January 1, 2000, except to the extent that a failure to do so could not reasonably be expected to have a Material Adverse Effect on the HPG Business ("Year 2000 Compliant"). (b) Licensed Software. Seller's interest in Licensed Software reflected by a Contract listed on Schedule B.19, subject to consents contemplated by Schedule B.04 or Schedule B.19, is transferrable to Buyer. (c) No Errors; Non-Conformity. The Owned Software is free from defects in workmanship and materials, except for defects that could not reasonably be expected to have a Material Adverse Effect on the HPG Business. (d) No Bugs or Viruses. Seller has not knowingly altered its data to create a bug or virus which would cause either the Owned or Licensed Software to be fully dysfunctional, and there are no such bugs or viruses, except in either case to the extent that such bugs or viruses could not reasonably be expected to have a Material Adverse Effect on the HPG Business. (e) Passthrough Warranties. Seller shall, to the extent permitted by Applicable Law and the applicable manufacturer and supplier and provided that it is at no cost to Seller, transfer to Buyer all manufacturers' and suppliers' warranties for the Licensed Software, and the Seller shall, upon the Buyer's reasonable request, execute such documentation reasonably acceptable to Seller that is necessary to effectuate the transfer. (f) Documentation. Seller has furnished Buyer, or will furnish upon Buyer's request, copies of all documentation (End-User or otherwise) in its possession relating to the use, maintenance and operation of the Owned Software. B.20 Real Property. Except as otherwise set forth in Schedule B.20: (a) Subject only to the permitted Liens, there are no leases, tenancies or other occupancy agreements, either oral or written, which affect the Queretaro Property, and Seller has exclusive possession of the Queretaro Property; (b) Seller has no notice or knowledge of: (i) any pending improvement liens to be made by any Governmental Authority with respect to the Queretaro Property; (ii) any violations of building codes and/or zoning ordinances or other governmental regulations with respect to the Queretaro Property; or (iii) any pending or threatened condemnation proceedings with respect to the Queretaro Property; (c) To Seller's knowledge, no fact or condition exists which would result in the termination or impairment of access to the Queretaro Property or the discontinuation of necessary sewer, water, electric, gas, telephone or other utilities or services to the Queretaro Property; (d) All of the structural elements, mechanical systems, utility systems and roofs of the Queretaro Property are in good working order, ordinary wear and tear and routine maintenance excepted; (e) To Seller's knowledge, without independent investigation, all improvements on the Queretaro Property were permitted, conforming structures under applicable zoning and building laws and ordinances in effect when the improvements were constructed and the present uses thereof are permitted, conforming uses under applicable zoning and building laws and ordinances; (f) All water, sewer, gas, electric, telephone, drainage and other utility equipment and facilities necessary for the operation of the Queretaro Property are installed and connected pursuant to valid permits, are adequate to service the Queretaro Property and are in good operating condition; (g) To Seller's knowledge, all requirements applicable to the Queretaro Property imposed under zoning and building laws and ordinances adopted subsequent to the construction of the improvements have been complied with to the extent required by Applicable Law; and (h) Seller is vested with good and marketable fee simple title to the Queretaro Property subject only to the Permitted Liens. Without limiting the generality of the foregoing, there are no so-called "ejido" rights encumbering or otherwise affecting the Queretaro Property. EXHIBIT C REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and warrants to Seller that: C.01 Organization and Existence. Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Florida and has all corporate powers, and has all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except where the failure to have such licenses, authorizations, consents and approvals has not had and may not reasonably be expected to have, a Material Adverse Effect on Buyer. As of the Closing Date, Buyer will be duly qualified to do business as a foreign corporation in each jurisdiction where the character of the property owned or leased by it or the nature of its activities (after giving effect to the Contemplated Transactions) make such qualification necessary to carry on its business as now conducted, except for those jurisdictions where failure to be so qualified has not had, and may not reasonably be expected to have, a Material Adverse Effect on Buyer. C.02 Corporate Authorization. The execution, delivery and performance by Buyer of the Transaction Documents and the consummation by Buyer of the Contemplated Transactions are within the corporate powers of Buyer and have been (or, prior to the Closing, will have been) duly authorized by all necessary corporate action on the part of Buyer. Each of the Transaction Documents constitutes a legal, valid and binding agreement of Buyer, enforceable against Buyer in accordance with its terms (i) except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers and (ii) subject to the limitations imposed by general equitable principles (regardless of whether such enforceability is considered in a proceeding at law or in equity). C.03 Governmental Authorization. Except as set forth on Schedule C.03, the execution, delivery and performance by Buyer of the Transaction Documents require no action by or in respect of, consents or approvals of, or filing with, any governmental body, agency, official or authority other than compliance with any applicable requirements of the HSR Act. C.04 Non-Contravention. The execution, delivery and performance by Buyer of the Transaction Documents do not and will not (i) contravene or conflict with the charter or bylaws of Buyer, (ii) assuming compliance with the matters referred to in Section C.03, contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to Buyer, or (iii) constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation of Buyer or to a loss of any benefit to which Buyer is entitled under any provision of any agreement, contract or other instrument binding upon Buyer or any license, franchise, permit or other similar authorization held by Buyer, except, in the case of clauses (ii) and (iii), for any such contravention, conflict, violation, default, termination, cancellation, acceleration or loss that could not reasonably be expected to have a Material Adverse Effect on Buyer Companies taken as a whole. C.05 Finders' Fees. Except for NationsBanc Montgomery Securities LLC, whose fees will be paid by Buyer, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Buyer who might be entitled to any fee or commission from Seller or Buyer (or any of their Affiliates) upon consummation of the Contemplated Transactions. C.06 Litigation. There is no action, suit, investigation or proceeding pending against, or to the knowledge of Buyer, threatened against or affecting, Buyer before any court or arbitrator or any Governmental Authority that in any manner challenges or seeks to prevent, enjoin, alter or materially delay the Contemplated Transactions. C.07 Inspections. Buyer acknowledges that Seller has made no representation or warranty as to the prospects, financial or otherwise, of the HPG Business except as expressly set forth in the Transaction Documents. Buyer agrees that it shall accept the Transferred Assets and the Assumed Liabilities as they exist on the Closing Date based on Buyer's inspection, examination, determination with respect thereto as to all matters, and without reliance upon any express or implied representations or warranties of any nature, whether in writing, orally or otherwise, made by or on behalf of or imputed to Seller, except as expressly set forth in the Transaction Documents. C.08 Financing. Buyer has available to it cash, marketable securities or other investments, or presently available sources of credit, to enable it to consummate the Contemplated Transactions. EXHIBIT D EMPLOYEES AND EMPLOYEE BENEFIT MATTERS I. Employees and Employment. D.01 General. On the Closing Date, the employment of all Active Employees of the HPG Business including employees based in the HPG Business' headquarters in Shelton, Connecticut, employees based in the Asheboro Property, the Queretaro Property and the Kuantan Facility, and the employees listed on Attachment XV, shall be transferred to the Buyer Companies such that the employment of such persons shall be considered continuous employment under Applicable Law. "Active Employee" shall mean any individual who is actively employed by any Seller Company in connection with the HPG Business or is on authorized leave of absence, military service (without restriction) or lay-off with recall rights (without restriction) with respect to the HPG Business and where applicable shall include independent contractors. The Active Employees of the HPG Business who are employed at any time on or after the Closing Date with any of the Buyer Companies are herein collectively referred to as "Transferred Employees." Subject to the terms and conditions of this Exhibit D, such employment shall be at the same workplace and on substantially the same terms and conditions as those under which such employees are currently employed by Seller Companies and the employment of each Transferred Employee shall be continued by the Buyer Companies for the maximum applicable termination notice period to which the Seller Companies may be subject under Applicable Law as a result of the Contemplated Transactions. From and after the Closing Date, except as otherwise provided herein or in the Agreement, each Buyer Company employing a Transferred Employee shall assume all obligations under any agreements, contracts or Applicable Law relating to the terms and conditions of employment of such Transferred Employees, and such Buyer Company shall be responsible for any liability or obligations arising out of or pertaining to the termination of employment of, hiring of or failure or refusal to hire any Transferred Employee. D.02 Labor Agreements. The Buyer Companies agree to recognize the applicable labor unions, collective bargaining representative, trade unions or work councils representing any employees of the HPG Business as the exclusive collective bargaining representatives of such employees with respect to wages, hours, fringe and other terms and conditions of employment to the extent so recognized by Seller Companies for all such employees who are within the appropriate bargaining unit as determined by Applicable Law. The Buyer Companies shall become successor employers under any labor or collective bargaining agreements and agree to honor the terms of and to assume all obligations of the Seller Companies under applicable existing collective bargaining agreements in respect of such unionized Transferred Employees from and after the Closing Date and all legal obligations arising from such recognition or assumption. D.03 Recalled or Rehired Employees. Buyer Companies confirm that any employees of the HPG Business that are laid off or on leave as of the Closing Date and who are recalled or rehired by a Buyer Company or return from leave on or after the Closing Date will be recalled or rehired or returned to employment in compliance with any applicable agreements, contracts or Applicable Law and will be accorded the benefits otherwise provided to Transferred Employees by the Buyer Companies. D.04 Negotiations with Employees or Employee Representatives. If and to the extent that any provisions of this Agreement are or may be subject to negotiation with employees (including Transferred Employees), or applicable labor unions, trade unions or work councils, by policy, contract, collective agreement or Applicable Law, the Seller Companies and Buyer Companies shall cooperate fully in such negotiations. D.05 Termination and Plant Closing Notices; WARN. Seller shall provide any notices to the Transferred Employees that may be required under any Applicable Law, including but not limited to WARN or any similar state or local law, with respect to events that occur prior to the Closing Date. Buyer shall provide any such notices to Active Employees of the HPG Business with respect to events that occur as a result of the Closing, and to Transferred Employees with respect to events that occur on and after the Closing Date. Buyer shall not take any action after the Closing that would cause any termination of employees by the Seller Companies that occur on or before the Closing Date to constitute a "plant closing" or "mass layoff" under WARN or any similar state or local law, or create any liability to the Seller Companies for employment termination under Applicable Law. D.06 Immigration Matters. The Buyer Companies acknowledge that the Contemplated Transactions may trigger certain obligations under the immigration laws of the countries where the HPG Business operates. Buyer shall use reasonable efforts to comply with all requirements of such immigration laws and agrees to make any reasonable and necessary filings with the appropriate Governmental Authority to attempt to ensure the continued employment eligibility of the Transferred Employees, including Bruce Duncan, Rafael Diaz, David O'Connor, Kaj Koft and Larry Baab. II. United States Employee Benefit Matters. D.07 Pension Plans. (a) Seller and its Affiliates shall retain all liabilities and obligations in respect of benefits accrued by employees of the HPG Business (including Transferred Employees) as of the Closing Date under The Black & Decker Pension Plan ("Seller's Pension Plan"). Accrued benefits of US Transferred Employees under Seller's Pension Plan shall be fully vested as of the Closing Date. Benefit accruals in respect of US Transferred Employees under Seller's Pension Plan shall cease as of the Closing Date. US Transferred Employees participating in Seller's Pension Plan shall not be entitled to receive any such vested accrued benefits under Seller's Pension Plan unless and until their employment with Buyer Companies terminates. No assets of Seller's Pension Plan shall be transferred to Buyer Companies or to any employee benefit plan of Buyer or any of its Affiliates. (b) Except as otherwise provided in Section D.07(c), prior to or as soon as practicable after the Closing Date, Buyer shall designate or establish a defined benefit pension plan for the benefit of US Transferred Employees who were participants in Seller's Pension Plan ("Buyer's Pension Plan"). Buyer's Pension Plan shall cover all US Transferred Employees, each of whom shall be eligible to participate therein for a period of at least one year following the Closing Date on substantially the same terms and conditions as provided to the US Transferred Employees under Seller's Pension Plan immediately prior to the Closing Date; provided, however, that with respect to benefit accrual, Buyer may offset the benefit under the Buyer's Pension Plan for the benefit accrual of US Transferred Employees under the Seller's Pension Plan as of the Closing Date. (c) Buyer covenants and agrees that service with Seller or any of its Affiliates (and, to the extent applicable, with General Electric Company or any of its Affiliates) prior to the Closing Date that is recognized for any purpose by Seller's Pension Plan will be recognized by Buyer's Pension Plan for such purpose. (d) In lieu of adopting Buyer's Pension Plan, Buyer may make a contribution to an individual account plan maintained by the Buyer, and/or make a cash payment, to or for the benefit of each US Transferred Employee in an amount not less than the value of the benefit that the US Transferred Employee would have accrued under the Buyer's Pension Plan, after the offset for benefits under Seller's Pension Plan, for the one-year period beginning on the Closing Date. The Buyer shall make any such contribution, or cash payment net of any withholding taxes, within 120 days after the first anniversary of the Closing Date. (e) Seller shall provide Buyer with any information relating to the accrued benefits of the US Transferred Employees under Seller's Pension Plan as shall be reasonably requested by Buyer to enable it to calculate the benefits to be provided under the Buyer's Pension Plan pursuant to paragraph (b) of this Section D.07 or the contributions or payments otherwise required to be made by the Buyer pursuant to this paragraph (d) of this Section D.07. D.08 Savings Plans. (a) Seller shall cause the trustee of The Black & Decker Retirement Savings Plan ("Seller's Savings Plan") to transfer as of the transfer date specified below, the full account balances of the US Transferred Employees under Seller's Savings Plan, to the Successor Savings Plan (as hereinafter defined). Such assets shall be transferred to the Successor Savings Plan in cash, provided that assets consisting of notes or other instruments evidencing loans made to participating US Transferred Employees shall be transferred in such form to the Successor Savings Plan. Seller and Buyer shall make any and all filings and submissions to the appropriate Governmental Authorities, and shall make any necessary plan amendments arising in connection with the transfer of assets from Seller's Savings Plan to the Successor Savings Plan. (b) As soon as practicable after the Closing Date, Buyer shall establish or designate an individual account plan for the benefit of US Transferred Employees (the "Successor Savings Plan"), shall take all necessary action, if any, to qualify the Successor Savings Plan under the applicable provisions of the Code and shall make any and all filings and submissions to the appropriate Governmental Authorities required to be made by it in connection with the transfer of assets contemplated hereby. The Successor Savings Plan shall provide that those US Transferred Employees and their beneficiaries covered by Seller's Savings Plan shall receive credit for all service and compensation with Seller or any of its Affiliates (and, to the extent applicable, with General Electric Company or any of its Affiliates) prior to the Closing Date for all purposes, to the same extent such service and compensation are recognized under Seller's Savings Plan immediately prior to the Closing Date. Buyer shall take all action required or appropriate to vest fully all such US Transferred Employees in their entire account balances transferred to the Successor Savings Plan and, to the extent required under Section 411(d)(6) of the Code, to protect and preserve all benefits, rights and features relating to those account balances transferred from Seller's Savings Plan. As soon as practicable following the earlier of the delivery to Seller of a favorable determination letter from the Internal Revenue Service regarding the qualified status of the Successor Savings Plan or the issuance of indemnities satisfactory to Seller in its sole discretion, Seller shall cause the trustee of Seller's Savings Plan, subject to any election by a US Transferred Employee to withdraw his or her account balance prior to the transfer date in respect of Seller's Savings Plan, to transfer the full account balances of US Transferred Employees under Seller's Savings Plan as of the transfer date to the appropriate trustee designated by the Buyer under the trust agreement forming a part of the Successor Savings Plan; provided, that assets consisting of notes or other instruments evidencing loans made to participating US Transferred Employees shall be transferred in such form to the Successor Savings Plan. (c) Buyer, effective as of the date of the transfer of assets contemplated by this Section D.08, assumes all of the liabilities and obligations of Seller or any of its Affiliates in respect of the account balances accumulated by US Transferred Employees under Seller's Savings Plan, and the Successor Savings Plan assumes all liabilities and obligations of Seller's Savings Plan with respect to all account balances under Seller's Savings Plan of such US Transferred Employees. Neither Buyer nor any of its Affiliates shall assume any other obligations or liabilities arising under or attributable to Seller's Savings Plan and neither Seller nor any of its Affiliates shall assume any liabilities or obligations under or attributable to the Successor Savings Plan. Prior to the transfer of assets contemplated by this Section D.08, Buyer Companies, if consented to by the applicable US Transferred Employee, shall withhold from such US Transferred Employee's pay, loan repayments relating to any outstanding loan to such US Transferred Employee under Seller's Savings Plan and shall promptly forward those withholdings to Seller's Savings Plan. D.09 Health and Welfare Plans; Benefit Arrangements. (a) For a period of one year following the Closing Date, Buyer Companies shall ensure that the US Transferred Employees are provided benefits that are comparable in the aggregate to the health, medical, dental, life, disability and severance benefits in effect for the US Transferred Employees immediately prior to the Closing Date. (b) In furtherance and not in limitation of the provisions of this Section D.09, as of the Closing Date, Buyer (i) shall, subject to the provisions of Section 10.02(b)(iv), establish severance plans, agreements and arrangements with substantially the same terms and conditions as those provided under the applicable severance agreements, plans or arrangements listed on Schedule B.18, (ii) agrees to maintain such severance agreements, plans and arrangements for a period of at least one year following the Closing Date, and (iii) agrees to pay any benefits to any US Transferred Employees that they may be entitled to receive under such severance agreements, plans or arrangements. In furtherance and not in limitation of the provisions of this Section D.09, as of the Closing Date, Buyer or the applicable Buyer Company shall assume the obligations of Seller Companies under the individual employee severance agreements listed on Schedule B.18. (c) With respect to any US Transferred Employee (including any beneficiary or dependent thereof), except as expressly set forth herein, Seller Companies shall retain (i) all liabilities and obligations arising under any group life, accident, medical, dental or disability plan or similar arrangement (whether or not insured) to the extent that such liability or obligation relates to claims incurred (whether or not reported) on or prior to the Closing Date, and (ii) all liabilities and obligations arising under any worker's compensation laws to the extent such liability or obligation relates to the period prior to the Closing Date. (d) Any group health plan, disability plan or other plans established or designated by the Buyer Companies for the benefit of US Transferred Employees shall not contain any exclusion or limitation with respect to any preexisting condition. (e) Except as otherwise expressly provided in this Exhibit D, effective as of the Closing, Buyer shall assume the liabilities and obligations of Seller Companies in respect of all US Transferred Employees (and their beneficiaries and dependents) under the Benefit Arrangements sponsored or maintained by Seller Companies at any time prior to the Closing Date, if and only to the extent that such liabilities and obligations are reflected on the Opening Statement. D.10 Post-Retirement Medical and Life Insurance. (a) Seller Companies shall retain responsibility for providing health, medical, dental, hospitalization, life insurance or similar benefits (including, without limitation, reimbursement for Medicare premiums) to any employee or former employee of the HPG Business (other than US Transferred Employees) who retires or has retired on or before the Closing Date. Buyer Companies shall be responsible for providing any post-retirement medical, life or similar benefits to US Transferred Employees if and only to the extent that Buyer, in its sole discretion, agrees to provide such post-retirement benefits. (b) Notwithstanding the provisions of this Exhibit D, including but not limited to the provisions of this Section D.10, Seller Companies may amend, modify or terminate any plans or arrangements providing post-retirement health, medical, dental, hospitalization, life insurance or similar benefits (including, without limitation, reimbursement for Medicare premiums) to any employee or former employee of the HPG Business, subject in each case to the provisions of Applicable Law. (c) Buyer shall not be obligated by this Agreement to provide post-retirement, health, medical, dental, hospitalization, life insurance or similar benefits (including, without limitation, reimbursement for Medicare premiums), or any particular level of such benefits, to US Transferred Employees. III. Other Country Employee Benefit Matters. D.11 General. For a period of one year following the Closing Date, Buyer shall ensure that the Non-US Transferred Employees are provided benefits that are comparable in the aggregate to those provided under the Non-U.S. Benefit Arrangements as in effect for those Non-US Transferred Employees immediately prior to the Closing Date, it being understood that each Non-US Transferred Employee shall receive credit for all service and compensation with Seller Companies and any of their predecessors or Affiliates prior to the Closing Date for all purposes to the same extent that service and compensation are recognized immediately prior to the Closing. D.12 Severance/Termination Indemnities. In furtherance and not in limitation of the provisions of Section D.11, for a period of at least one year, Buyer shall provide severance programs and termination indemnities with substantially the same terms and conditions as those provided by the Seller Companies to the Non-US Transferred Employees immediately prior to the Closing and agrees to pay any benefit to Non-US Transferred Employees to which they may be entitled under such severance programs and/or termination indemnities with respect to events that occur as a result of the Closing and on or after the Closing Date. D.13 Mexico Plan. In furtherance and not in limitation of the provisions of Section D.11: (a) Except as otherwise provided in paragraph (d) of this Section D.13, prior to or as soon as practicable after the Closing Date, Buyer shall designate or establish a defined benefit pension plan ("Buyer's Mexico Plan") for the benefit of Non-US Transferred Employees who were participants in the Black & Decker, S.A. de C.V. Pension and Seniority Premium Plans ("Seller's Mexico Plan"). Buyer's Mexico Plan shall cover all Non-US Transferred Employees who were participants in the Seller's Mexico Plan, each of whom shall be eligible to participate therein for a period of at least one year following the Closing Date on the same terms and conditions as provided to participants under the Seller's Mexico Plan immediately prior to the Closing Date. (b) Buyer covenants and agrees that service with the Seller or any of its predecessors or Affiliates prior to the Closing Date that is recognized for any purpose under the Seller's Mexico Plan will be recognized by Buyer's Mexico Plan for such purpose. (c) As of the Closing Date, Seller shall cause the Seller's Mexico Plan to be amended to fully vest all Non-US Transferred Employees participating in that plan in their entire accrued benefit determined as of the Closing Date. The Seller shall cause assets of the Seller's Mexico Plan to be transferred to the Buyer's Mexico Plan in an amount equal to the accrued benefit of the Non-US Transferred Employees participating in the Seller's Mexico Plan, calculated on a discontinuance basis as of the Closing Date (increased or decreased by the rate of actual investment return realized with respect to such assets under the Seller's Mexico Plan for the period between the Closing Date and the date those assets are transferred to the Buyer's Mexico Plan). The amount of the transferred assets shall be calculated in accordance with the actuarial assumptions, used by the Seller's Mexico Plan actuary. (d) In lieu of adopting Buyer's Mexico Plan, subject to the provisions of Applicable Law, Buyer may make a contribution to an individual account plan maintained by Buyer, and/or make a cash payment, to or for the benefit of each Non-US Transferred Employee who was a participant in the Seller's Mexico Plan in an amount not less than the value of the benefit that the Non-US Transferred Employee would have accrued under the Buyer's Mexico Plan, after the offset for benefits under the Buyer's Mexico Plan, for the one-year period beginning on the Closing Date. The Buyer shall make any such contribution, or cash payment net of any withholding taxes, within 120 days after the first anniversary of the Closing Date. (e) Seller shall provide Buyer with any information relating to the accrued benefits of the Non-US Transferred Employees under the Buyer's Mexico Plan as shall be reasonably requested by Buyer to enable it to calculate the benefits to be provided under the Buyer's Mexico Plan pursuant to paragraph (a) of this Section D.13. D.14 Puerto Rico Plan. In furtherance and not in limitation of the provisions of Section D.11: (a) Seller shall cause the trustee of the Black & Decker (Puerto Rico) Inc. 401(k)/165(e) Benefit Pension Plan ("Seller's Puerto Rico Plan") to transfer, in cash, as of the transfer date specified below, the full account balances of the Non-US Transferred Employees under the Seller's Puerto Rico Plan to the Successor Puerto Rico Plan (as hereinafter defined). Seller and Buyer shall make any and all filings and submissions to the appropriate Governmental Authorities, and shall make any necessary plan amendments arising in connection with the transfer of assets from Seller's Puerto Rico Plan to the Successor Puerto Rico Plan. (b) As soon as practicable after the Closing Date, Buyer shall establish or designate an individual account plan for the benefit of Non-US Transferred Employees who were participants in the Seller's Puerto Rico Plan (the "Successor Puerto Plan"), shall take all necessary action, if any, to qualify the Successor Puerto Rico Plan under Applicable Law and shall make any and all filings and submissions to the appropriate Governmental Authorities required to be made by it in connection with the transfer of assets contemplated hereby. The Successor Puerto Rico Plan shall provide that those Non-US Transferred Employees and their beneficiaries covered by Seller's Puerto Rico Plan shall receive credit for all service and compensation with Seller or any of its predecessors and Affiliates prior to the Closing Date for all purposes, to the same extent such service and compensation is recognized under Seller's Puerto Rico Plan immediately prior to the Closing Date. Buyer shall take all action required or appropriate to vest fully all such Non-US Transferred Employees in their entire account balances transferred to the Successor Puerto Rico Plan and shall protect and preserve all benefits, rights and features relating to those account balances transferred from Seller's Puerto Rico Plan. As soon as practicable following the earlier of the delivery to Seller of appropriate notification of the qualified status of the Successor Puerto Rico Plan or the issuance of indemnities satisfactory to the Seller in its sole discretion, Seller shall cause the trustee of Seller's Puerto Rico Plan, subject to any election by a Non-US Transferred Employee to withdraw his or her account balance prior to the transfer date in respect of Seller's Puerto Rico Plan, to transfer the full account balances of Non-US Transferred Employees under Seller's Puerto Rico Plan as of the transfer date to the appropriate trustee designated by the Buyer under the trust deed forming part of the Successor Puerto Rico Plan. (c) Buyer, effective as of the date of the transfer of assets contemplated by this Section D.14, assumes all of the liabilities and obligations of Seller or any of its predecessors or Affiliates in respect of the account balances accumulated by Non-US Transferred Employees under Seller's Puerto Rico Plan and the Successor Puerto Rico Plan assumes all liabilities and obligations of Seller's Puerto Rico Plan with respect to all account balances under Seller's Puerto Rico Plan of such Non-US Transferred Employees. Neither Buyer nor any of its Affiliates shall assume any other obligations or liabilities arising under or attributable to Seller's Puerto Rico Plan and neither Seller nor any of its predecessors or Affiliates shall assume any liabilities or obligations under or attributable to the Successor Puerto Rico Plan. D.15 Canada Plan. In furtherance and not in limitation of the provisions in Section D.11: (a) Seller shall cause the trustee of the Black & Decker Retirement Plan ("Seller's Canada Plan") to transfer, in cash, as of the transfer date specified below, the full account balances of the Non-US Transferred Employees under the Seller's Canada Plan to the Successor Canada Plan (as hereinafter defined). Seller and Buyer shall make any and all filings and submissions to appropriate Governmental Authorities, and shall make any necessary plan amendments arising in connection with the transfer of assets from Seller's Canada Plan to the Successor Canada Plan. (b) As soon as practicable after the Closing Date, Buyer shall establish or designate an individual account plan for the benefit of Non-US Transferred Employees who were participants in the Seller's Canada Plan (the "Successor Canada Plan"), shall take all necessary action, if any, to qualify the Successor Canada Plan under Applicable Law and shall make any and all filings and submissions to the appropriate Governmental Authorities required to be made by it in connection with the transfer of assets contemplated hereby. The Successor Canada Plan shall provide that those Non-US Transferred Employees and their beneficiaries covered by Seller's Canada Plan shall receive credit for all service and compensation with Seller or any of its predecessors and Affiliates prior to the Closing Date for all purposes to the same extent such service and compensation is recognized under Seller's Canada Plan immediately prior to the Closing Date. Buyer shall take all action required or appropriate to vest fully all such Non-US Transferred Employees in their entire account balances transferred to the Successor Canada Plan and shall, to the extent required by Applicable Law, protect and preserve all benefits, rights and features relating to those account balances transferred from Seller's Canada Plan. As soon as practicable following delivery to Seller of appropriate notification of the qualified status of the Successor Canada Plan under Applicable Law or the issuance of indemnities satisfactory to the Seller in its sole discretion, Seller shall cause the trustee of Seller's Canada Plan to transfer the full account balances of Non-US Transferred Employees under Seller's Canada Plan as of the transfer date to the appropriate trustee designated by the Buyer under the trust deed or other funding vehicle forming part of the Successor Canada Plan. (c) Buyer, effective as of the date of the transfer of assets contemplated by this Section D.15, assumes all of the liabilities and obligations of Seller or any of its predecessors or Affiliates in respect of the account balances accumulated by Non-US Transferred Employees under Seller's Canada Plan and the Successor Canada Plan assumes all liabilities and obligations of Seller's Canada Plan with respect to all account balances under Seller's Canada Plan of such Non-US Transferred Employees. Neither Buyer nor any of its Affiliates shall assume any other obligations or liabilities arising under or attributable to Seller's Canada Plan and neither Seller nor any of its predecessors or Affiliates shall assume any liabilities or obligations under or attributable to the Successor Canada Plan. VII. General. D.16 No Third Party Beneficiaries. No provision of this Exhibit D or any other provision in the Transaction Documents shall create any third party beneficiary or other rights in any employee or former employee (including any beneficiary or dependent thereof) of Seller or of any of its Affiliates in respect of continued employment (or resumption of employment) with Seller or Buyer, or any of their Affiliates, and no provision of this Exhibit D shall create any such rights in any such individuals in respect of any benefits that may be provided, directly or indirectly, under any Employee Plan or Benefit Arrangement, or any plan or arrangement which may be established by Buyer or any of its Affiliates. Subject to Applicable Law, unless otherwise provided herein, no provision of this Agreement shall constitute a limitation on rights to amend, modify or terminate, either before or after Closing, any such Employee Plan or Benefit Arrangement of the Seller or any of its Affiliates. D.17 Indemnification by Buyer. Effective as of the Closing, except as otherwise provided in Section D.18, Buyer hereby indemnifies Seller and its Affiliates and their respective directors, officers, employees and agents against, and agrees to hold them harmless from, any and all Damages arising out of or pertaining to (i) the termination of employment of, hiring of or failure or refusal to hire, any Transferred Employee on or after the Closing; (ii) in relation to any Transferred Employee any modification of the pay, benefits or other terms and conditions of employment of any Transferred Employee on or after the Closing; and (iii) any breach of any covenants or agreements of the Buyer contained in this Exhibit D. D.18 Indemnification by Seller. Effective as of the Closing, Seller hereby indemnifies Buyer and its Affiliates and their respective directors, officers, employees and agents against, and agrees to hold them harmless from, any liability for retrenchment benefits, notice pay, termination indemnities, severance and other similar arrangements, as such arrangements exist on the Closing Date, in respect of Non-US Transferred Employees who work in the HPG Business at the Kuantan Facility notwithstanding that any termination of such employees may occur after the Closing Date; provided, however, that Seller shall have no liability under this Section D.18 for any increase in retrenchment benefits, notice pay, termination indemnities, severance or other similar benefits to the extent relating to actions taken by Buyer Companies following Closing (other than the termination of such employees). D.19 Miscellaneous. Except for the obligation to employ certain Active Employees set forth in Section D.01 on the Closing Date, nothing in this Exhibit D shall obligate Buyer or any Buyer Company to employ any Transferred Employee for any specified period. EXHIBIT E ADDITIONAL MATTERS RELATING TO PRODUCT LIABILITY ISSUES Seller and Buyer acknowledge and agree that each has a continuing interest in ensuring that claims involving alleged product defects and product safety are handled by Seller Companies and Buyer Companies after the Closing in a manner that minimizes liability of the parties and otherwise protects the parties' interests. This Exhibit E sets forth certain additional procedures, covenants and agreements relating to product liability and related matters in respect of products sold and services provided by the HPG Business that, among other things, are intended to enhance the parties' ability to achieve these objectives. E.01 With respect to liabilities and obligations relating to claims of manufacturing or design defects, the parties have agreed that certain of these liabilities and obligations will constitute Assumed Liabilities for which Buyer Companies will be responsible and certain of these liabilities and obligations will constitute Excluded Liabilities for which Seller Companies will be responsible. Because (i) it is likely that Buyer Companies may receive the initial notice or claim with respect to liabilities and obligations that ultimately prove to be Seller Companies' responsibility and vice versa and (ii) in many cases, particularly in the case of claims involving fire damage, it is critical to the defense of such claims that products and the location in which the alleged incident occurs be inspected as soon as practicable, each of Seller and Buyer agree to give immediate notice to the other party in the event that they receive notice of a claim involving or potentially involving claims of manufacturing or design defects where the party first receiving such notice reasonably believes that the responsibility for the liability or obligation, if any, will be that of the other party or if there is any doubt as to which party ultimately will be responsible for any related liabilities or obligations. Each of Seller and Buyer also agree with respect to each claim of manufacturing or design defect that they will perform a prompt, diligent and continuing investigation to determine whether the claim is an Assumed Liability or an Excluded Liability, and agree to give immediate notice to the other party at any time the investigation reveals that the responsibility for the liability or obligation, if any, will be that of the other party if there is any doubt as to which party ultimately will be responsible for any related liabilities or obligations. Each of Seller and Buyer agree that the party providing such notice will thereafter cooperate with the other party to permit the other party to conduct its own investigation, and the party providing such notice will provide to the other party reports on the status of the claim and subject to the provisions of Article X an opportunity to participate in the defense of the claim, at its own cost and expense. To expedite the review of these issues and ensure that both parties' rights and defenses are preserved, Seller and Buyer shall provide such notice by telecopy as follows: if to Seller: The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21286 Attention: Product Liability Counsel Telecopy No.: (410) 716-2379 if to Buyer: Windmere-Durable Holdings, Inc. 5980 Miami Lakes Drive Miami Lakes, Florida 33014-2467 Attention: Harry D. Schulman Telecopy: (305) 364-0635 E.02 To the extent that either Seller or Buyer (or any of their directors, officers, advisors, attorneys, accountants, employees, insurers or agents) conducts an investigation or other inquiry into any events or circumstances that lead to a claim of manufacturing or design defects in respect of a product or product line generally or a specific claim or allegation and the results of such investigation or inquiry relate to or otherwise affect the liabilities or obligations of the other party hereunder, Seller or Buyer, as the case may be, agree to share any information obtained as a result of the investigation or inquiry, in each case subject to the express provisions of Section 7.07 of this Agreement. E.03 To assist each of the parties to this Agreement with the defense of claims involving allegations of manufacturing or design defects and with compliance with each parties' respective legal obligations under this Agreement and otherwise, Seller and Buyer each agree from time to time to designate individuals within their respective organizations as an "Engineering/Safety Assurance Liaison" and a "Claims Liaison" for the purpose of coordinating the defense of claims involving products sold and services provided by the HPG Business. The initial individuals serving in these capacities shall be designated in writing by Seller and Buyer at Closing and, thereafter, may be changed from time to time by notice to the other party. E.04 To assist each of the parties to this Agreement with the defense of claims involving allegations of manufacturing or design defects and with compliance with each parties' respective legal obligations under this Agreement and otherwise, Seller and Buyer each agree from time to time to provide the other party access to all information as provided in Section 5.04 and Section 6.02. Without limiting the generality of those provisions, Seller and Buyer acknowledge and agree that the aforementioned information and access includes the existing databases relating to consumer complaints, claims and litigation, whether maintained at the headquarters of the HPG Business or otherwise, access to personnel and engineering and design drawings or documents and any other relevant information. E.05 Seller and Buyer acknowledge that in the course of the investigation or defense of claims involving allegations of manufacturing or design product defects, or investigations regarding product safety, product corrective action plans, product recalls and related matters, Seller Companies and Buyer Companies may require documents from Underwriters Laboratories Inc. ("UL") or the Canadian Standards Association ("CSA") relating to UL or CSA testing, listing, analysis or otherwise referring to products manufactured by Seller Companies or Buyer Companies. Buyer, on behalf of itself and the other Buyer Companies, hereby consents, and grants to Seller Companies the right and permission to request and obtain from UL or CSA, and consents and grants permission to UL and CSA the right to provide to Seller Companies, any and all documents relating to products or product lines designed or manufactured by Seller Companies, whether or not Buyer Companies continue to manufacture said products or product lines. Buyer agrees to provide to Seller Companies at Seller's request such other documents as Seller reasonably requires to evidence and confirm Buyer's consent herein. E.06 With respect to claims involving liabilities and obligations in respect of investigations regarding product safety, product corrective action plans, product recall and related matters, Seller and Buyer acknowledge that companies frequently are asked to satisfy, or prefer to satisfy, their corrective action plan obligations with the exchange of products or the sale of substitute or replacement products at a specified price, which may include a discount from normal retail prices. Seller and Buyer agree that it is in the best interests of each of them and the HPG Business that product be available to satisfy such obligations whether the ultimate responsibility for the liabilities and obligations are those of Seller, Buyer or Seller and Buyer. Because following Closing Seller no longer will have an ability to provide products to satisfy such obligations, Buyer agrees to consult with Seller in any circumstances in which Seller desires to satisfy corrective action plan or similar obligations with products of the HPG Business and to the extent practicable from time to time to make available to Seller quantities of such products reasonable under the circumstances at a price equal to the HPG Business' standard costs of production plus specifically allocable manufacturing variances. With respect to claims involving liabilities and obligations in respect of investigations regarding product safety, product corrective action plans and product recall and related matters which include both Assumed Liabilities and Excluded Liabilities, Seller and Buyer agree to cooperate in the defense of such claims. EX-2 3 EXHIBIT 2(A)(II) EXHIBIT 2(a)(ii) AMENDMENT NO. 1 Dated as of June 26, 1998 to TRANSACTION AGREEMENT Dated as of May 10, 1998 By and Between THE BLACK & DECKER CORPORATION and WINDMERE-DURABLE HOLDINGS, INC. AMENDMENT NO. 1 TO TRANSACTION AGREEMENT This Amendment No. 1 to Transaction Agreement (this "Amendment") is made as of the 26th day of June 1998, by and between The Black & Decker Corporation, a Maryland corporation ("Seller"), and Windmere-Durable Holdings, Inc., a Florida corporation ("Buyer"). W I T N E S S E T H: WHEREAS, Seller through certain of its direct and indirect Subsidiaries is engaged in the HPG Business; WHEREAS, Seller and Buyer have entered into a Transaction Agreement dated as of May 10, 1998 (the "Agreement"), pursuant to which Seller has agreed to transfer or to cause the Affiliated Transferors to transfer substantially all of the assets held, owned by or used to conduct the HPG Business, and to assign certain liabilities associated with the HPG Business, to Buyer or Buyer Companies designated by Buyer, and Buyer has agreed to receive or to cause such designated Buyer Companies to receive such assets and assume such liabilities upon the terms and subject to the conditions set forth in the Agreement; and WHEREAS, Seller and Buyer desire to amend the Agreement in accordance with the terms of this Amendment; NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties contained herein, the parties agree as follows: Section 1. Capitalized terms used but not defined herein have the meanings given to them in the Agreement. Section 2. The list of Attachments included on pages v and vi of the Agreement is amended by deleting "Attachment IX Form of Assignment of Mexican Trademarks, Trademark Registrations and Applications for Registration" and inserting in its place and stead "Attachment IX [Intentionally Omitted]", and by adding the following: "Attachment XXX Form of Kuantan Transition Agreement Attachment XXXI Form of Escrow Agreement Attachment XXXII Form of Manufacturing Agreement" Section 3. Section 2.01(ix) of the Agreement is deleted in its entirety and the following is inserted in its place and stead: "(ix) Seller and Buyer shall execute and deliver a transition agreement for the Kuantan Facility in the form contemplated by Attachment XXX to this Agreement, and an agreement providing Buyer with a right of first refusal in the sale by Seller Companies of any excess manufacturing equipment at the Kuantan Facility that Seller Companies decide not to use in their businesses;" Section 4. Section 2.01(xi) of the Agreement is deleted in its entirety and the following is inserted in its place and stead: "(xi) Buyer Companies shall (A) pay and deliver to Seller, for its own account and as agent for the Affiliated Transferors, $288,000,000 in immediately available funds by wire transfer to an account or accounts designated by Seller (which account or accounts shall be designated by Seller by written notice to Buyer at least two Business Days prior to the Closing Date, or such shorter notice as Buyer shall agree to accept) and (B) pay and deliver to the Escrow Agent under the Escrow Agreement $27,000,000 in immediately available funds by wire transfer to the account contemplated by the Escrow Agreement; and" Section 5. Section 2.01(xii) of the Agreement is deleted in its entirety and the following is inserted in its place and stead: "(xii) At Closing, Seller shall cause its wholly owned subsidiary, Black & Decker S.A. de C.V., and Buyer shall cause its wholly owned subsidiary, Household Products Limited de Mexico, S. de R.L. de C.V., to execute and deliver a manufacturing agreement for the Queretaro Property in the form contemplated by Attachment XXXII." Section 6. The following provision is added as Section 2.04(g) of the Agreement: "(g) Notwithstanding any other provisions of this Agreement and notwithstanding the fact that title to assets used at the Kuantan Facility and the Queretaro Property and Inventory located in Colombia, Argentina, Chile or Peru will not be transferred to Buyer or Buyer Companies on the Closing Date, in calculating the Proposed Final Net Tangible Asset Amount, the Proposed Net Working Capital Change Amount, the Final Net Tangible Asset Amount and the Final Net Working Capital Change Amount, Seller and Buyer agree to take into account those assets located at the Kuantan Facility and the Queretaro Property and the Inventory located in Colombia, Argentina, Chile or Peru that otherwise would have been Transferred Assets as of the Closing Date had title transferred at the Closing." Section 7. The second sentence of Section 5.06(d) of the Agreement is deleted in its entirety and the following sentence is inserted in its place and stead: "Notwithstanding any provisions of this Section 5.06 to the contrary, Seller Companies shall not be deemed to be in violation of this Section 5.06 to the extent that, following the Closing, Seller Companies sell (i) Cleaning and Lighting Products in any of the Designated Countries, (ii) corded or cordless vacuums (and any related accessories or attachments) in any of the Designated Countries (other than Chile), (iii) corded Dustbuster and Floorbuster vacuums in Chile, or (iv) any Excess Products that Buyer Companies do not purchase pursuant to the right of first refusal contemplated by the Manufacturing Agreement." Section 8. Section 10.02(a)(ii) is amended by deleting the phrase "Sections 10.02(b)(iv), 10.04(b)(ii) and D.18" and inserting in its place and stead "Sections 10.02(b)(iv) and 10.04(b)(ii)". Section 9. The definition of "Asheboro Closing Costs" set forth in Exhibit A of the Agreement is amended by inserting the phrase "Property (other than employees dedicated to the manufacturing of Cleaning and Lighting Products)" in lieu of the word "property" in clause (a), and by inserting the phrase "(other than costs associated with Cleaning and Lighting Products)" after the word "costs" in clause (b). Section 10. The definition of "Cleaning and Lighting Products" set forth in Exhibit A of the Agreement is deleted in its entirety and the following is inserted in its place and stead: ""Cleaning and Lighting Products" means hand held vacuums, upright floor vacuums, battery powered bathroom and outdoor cleaners sold under the Scumbuster(R) name, flexible flashlights, flexible lanterns, leashlights and rechargeable lights, together in each case with any related accessories or attachments, but excluding corded canister and corded upright floor vacuums sold in Chile and any related accessories or attachments." Section 11. The definition of "Designated Countries" set forth in Exhibit A of the Agreement is revised by deleting the phrase ", Paraguay and Uruguay" following the word "Brazil". Section 12. The definition of "Designated Products" set forth in Exhibit A of the Agreement is deleted in its entirety and the following is inserted in its place and stead: ""Designated Products" means coffeemakers, espresso makers, cappuccino makers, coffee mills, toasters, toaster ovens (including those with convection features), steamers, rice cookers, choppers, can openers, mixers, food processors, irons, breadmakers, skillets, electric WOKs, electric griddles, slow cookers, electric knives, blenders, juicers, grills, kettles, wafflebakers and corded canister and corded upright floor vacuums sold in Mexico, Central America, South America (other than Brazil) and the Caribbean together in each case with any related accessories or attachments, and all products in the foregoing categories under development in the HPG Business as of the Closing Date or that have been under development in the HPG Business at any time during the year prior to the Closing Date, but excluding step stools, Cleaning and Lighting Products, shop, construction and similar vacuums, and VersaPak(R) rechargeable battery packs and chargers, together in each case with related accessories or attachments. It is expressly understood and agreed that corded canister and corded upright floor vacuums (and any related accessories or attachments) shall only be "Designated Products" to the extent and only to the extent sold in Mexico, Central America, South America (other than Brazil) and the Caribbean." Section 13. The definition of "Excluded Assets" set forth in Exhibit A of the Agreement is amended by inserting the phrase "(other than Inventory representing administrative returns located at the national disposition center (i.e., Nashville facility))" after the first reference to "Canada". Section 14. The definition of "Intellectual Property Assignment Agreements" set forth in Exhibit A of the Agreement is amended by inserting the word "and" before the phrase "the Assignment of US Copyrights," and by deleting the phrase "and the Assignment of Mexican Trademarks, Trademark Registrations and Applications for Registration," and by deleting the roman numeral "IX". Section 15. Exhibit A of the Agreement is amended by adding the following definitions: "Escrow Agent" means the escrow agent acting as such from time to time pursuant to the terms of the Escrow Agreement. "Escrow Agreement" means the Escrow Agreement in the form contemplated by Attachment XXXI. "Escrow Funds" means any funds held from time to time by the Escrow Agent under the Escrow Agreement. "Manufacturing Agreement" means the Manufacturing Agreement in the form contemplated by Attachment XXXII. "Mexico Closing Date" means the Mexico Closing Date as defined in the Manufacturing Agreement. Section 16. The definition of "Transaction Documents" set forth in Exhibit A of the Agreement is deleted in its entirety and the following is inserted in its place and stead: ""Transaction Documents" means this Agreement, the Assignment and Assumption Agreements, the Services Agreements, the Intellectual Property Assignment Agreements, the Cross License Agreement, the Trademark License Agreement, the Kuantan Transition Agreement, the Manufacturing Agreement, the Escrow Agreement, the Supply Agreement contemplated by Section 2.01(viii), the Distribution Services Agreement (United States), and the Distribution Services Agreement (Latin America), and any exhibits or attachments to any of the foregoing, as the same may be amended from time to time." Section 17. The definition of "Transferred Assets" set forth in Exhibit A of the Agreement is amended by inserting "or the Mexico Closing Date, as the case may be," following the phrase "Closing Date" throughout the lead-in language in such definition, by deleting the word "and" following the semi-colon in clause (xiv), by deleting the "." at the end of clause (xv) and inserting in its place and stead ";" and by adding the following proviso at the end of the definition of "Transferred Assets": "provided, however, that assets, properties, rights, licenses, permits, Contracts, or causes of actions located at or relating to the Queretaro Property shall only be "Transferred Assets" on and as of the Mexico Closing Date." Section 18. The first sentence of Section D.01 of Exhibit D of the Agreement is deleted in its entirety and the following is inserted in its place and stead: "On the Closing Date, the employment of all Active Employees of the HPG Business, including employees based in the HPG Business' headquarters in Shelton, Connecticut, employees based in the Asheboro Property, and the employees listed on Attachment XV, but excluding the employees based at the Kuantan Facility and the Queretaro Property, shall be transferred to Buyer Companies. On the Mexico Closing Date, the employment of all Active Employees of the HPG Business based in the Queretaro Property shall be transferred to Buyer Companies. Buyer and Buyer Companies shall ensure that the transfer of employment of all such persons shall be considered continuous employment under Applicable Law." Section 19. The third sentence of the original draft of Section D.01 of Exhibit D of the Agreement is amended by inserting "(or with regard to Active Employees of the HPG Business at the Queretaro Property, on or after the Mexico Closing Date)" after the phrase "Closing Date". Section 20. The last sentence of Section D.02 of Exhibit D of the Agreement is amended by inserting "(or with regard to Active Employees of the HPG Business at the Queretaro Property, on or after the Mexico Closing Date)" after the phrase "Closing Date". Section 21. The first sentence of Section D.03 of Exhibit D of the Agreement is amended by inserting the word "applicable" before each of the references to "Closing Date". Section 22. The first sentence of Section D.05 of Exhibit D of the Agreement is amended by inserting "(or with regard to Active Employees of the HPG Business at the Queretaro Property, on or after the Mexico Closing Date)" after the phrase "Closing Date". Section 23. The second sentence of Section D.05 of Exhibit D of the Agreement is amended by inserting "or the closing of the transactions contemplated by Section 7 of the Manufacturing Agreement" after the word "Closing" and before the "," and by inserting "(or with regard to Active Employees of the HPG Business at the Queretaro Property, on or after the Mexico Closing Date)" after the phrase "Closing Date". Section 24. The third sentence of Section D.05 of Exhibit D of the Agreement is amended by inserting "(or with regard to Active Employees of the HPG Business at the Queretaro Property, on or after the Mexico Closing Date)" after the phrase "Closing Date". Section 25. The second sentence of Section D.06 of Exhibit D of the Agreement is revised by deleting the phrase ", David O'Connor, Kaj Koft" following the name Rafael Diaz. Section 26. Section D.11 of Exhibit D of the Agreement is deleted in its entirety and the following is inserted in its place and stead: "D.11 General. For a period of one year following the Closing Date (or with regard to Active Employees of the HPG Business at the Queretaro Property, the Mexico Closing Date), Buyer shall ensure that the Non-US Transferred Employees are provided benefits that are comparable in the aggregate to those provided under the Non-US Benefit Arrangements as in effect for those Non-US Transferred Employees immediately prior to the Closing Date (or the Mexico Closing Date, as the case may be), it being understood that each Non-US Transferred Employee shall receive credit for all service and compensation with Seller Companies and any of their predecessors or Affiliates prior to the Closing Date (or the Mexico Closing Date, as the case may be) for all purposes to the same extent that service and compensation are recognized immediately prior to such date." Section 27. Section D.12 of Exhibit D of the Agreement is deleted in its entirety and the following is inserted in its place and stead: "D.12 Severance/Termination Indemnities. In furtherance and not in limitation of the provisions of Section D.11, for a period of at least one year from the Closing Date (or with regard to Active Employees of the HPG Business at the Queretaro Property, the Mexico Closing Date), Buyer shall provide severance programs and termination indemnities with substantially the same terms and conditions as those provided by Seller Companies to the Non-US Transferred Employees immediately prior to the Closing Date (or with regard to Active Employees of the HPG Business at the Queretaro Property, the Mexico Closing Date) and agrees to pay any benefit to Non-US Transferred Employees to which they may be entitled under such severance programs and/or termination indemnities with respect to events that occur as a result of the Closing or the closing of the transactions contemplated by Section 7 of the Manufacturing Agreement, and on or after such date." Section 28. Section D.13 of Exhibit D of the Agreement is deleted in its entirety and the following is inserted in its place and stead: "D.13 Mexico Plan. In furtherance and not in limitation of the provisions of Section D.11: (a) Prior to or as soon as practicable after the Mexico Closing Date, Buyer shall designate or establish a plan ("Buyer's Mexico Plan"), providing pension and seniority premiums to Non-US Transferred Employees who were participants in the Black & Decker S.A. de C.V. Pension and Seniority Premium Plan ("Seller's Mexico Plan"). Buyer's Mexico Plan shall cover all Non-US Transferred Employees who were participants in the Seller's Mexico Plan, each of whom shall be eligible to participate therein on substantially the same terms and conditions as provided to the Non-US Transferred Employees under Seller's Mexico Plan immediately prior to the Mexico Closing Date. Buyer covenants and agrees that service with the Seller or any of its predecessors or Affiliates prior to the Mexico Closing Date that is recognized for any purpose under the Seller's Mexico Plan will be recognized by Buyer's Mexico Plan for such purpose. (b) As soon as practicable after the Mexico Closing Date, the Seller shall cause assets of the Seller's Mexico Plan to be transferred to the Buyer's Mexico Plan in an amount that is equal to the sum of (i) the accrued current liability ("ABO") as reported on the funding valuation report of Watson Wyatt Worldwide for Seller's Mexico Plan as of January 1, 1998 plus (ii) 50% of the difference between the actuarial accrued liability ("PBO") as reported on such funding valuation report under Seller's Mexico Plan and ABO as reported on such funding valuation report. For purposes of making this determination, the assets and liabilities of each component of Seller's Mexico Plan shall be aggregated and the calculations of ABO and PBO shall relate solely to the Non-US Transferred Employees and will be updated through the Mexico Closing Date. (c) Upon the transfer of assets from Seller's Mexico Plan to Buyer's Mexico Plan as contemplated herein, Buyer and its Affiliates shall assume all of the liabilities and obligations of Black & Decker or any of its Affiliates in respect of the benefit obligations of all Non-US Transferred Employees and their beneficiaries under Seller's Mexico Plan. Section 29. Section D.17 of Exhibit D of the Agreement is amended by inserting "(or in the case of Active Employees of the HPG Business in Mexico, on or after the Mexico Closing Date)" after the word "Closing" in clauses (i) and (ii). Section 30. Section D.18 of Exhibit D of the Agreement is deleted in its entirety. Section 31. Section D.19 of Exhibit D of the Agreement is renumbered Section D.18. Section 32. Section D.19 of Exhibit D of the Agreement (which is being renumbered pursuant to Section 30 above as Section D.18) is amended by inserting "(or in the case of Active Employees of the HPG Business in Mexico, on or after the Mexico Closing Date)" after the phrase "Closing Date". Section 33. Attachment IV is deleted in its entirety and the Assignment of Foreign Trademarks, Trademark Registrations and Applications for Registration attached to this Amendment as Exhibit A is inserted in its place and stead. Section 34. Attachment VII is deleted in its entirety and the Trademark License Agreement attached to this Amendment as Exhibit B is inserted in its place and stead. Section 35. Attachment X is deleted in its entirety and the Cross License Agreement attached to this Amendment as Exhibit C is inserted in its place and stead. Section 36. Table 1 and Table 2 of Attachment XII are deleted in their entirety and Table 1 and Table 2 attached to this Amendment as Exhibit D are inserted in their place and stead. Section 37. Item I.D. of Schedule B.18 to the Agreement titled "United States Severance Programs" is amended by inserting "(covers all salaried exempt employees)" following the reference in number 2 to "The Black & Decker Exempt Employees Severance Pay Plan," inserting "(covers all salaried and hourly nonexempt employees)" following the reference in number 3 to "The Black & Decker Nonexempt Employees Severance Pay Plan," and adding a new number 5 in Item I.D. as follows: "For all employees at the Asheboro Property employed prior to April 27, 1984, severance benefits consisting of two weeks pay for each of the employee's full years of continuous service, plus one-half week's pay for each additional three months of continuous service at the time of termination, and related Education & Retraining Assistance of up to $1,800 in accordance with the Asheboro Property Employee Handbook." Section 38. The list of Licensed Software in Schedule B.19 to the Agreement is amended by adding the following: Licensor Description Intemec Bar coding for plant and D.C. operations Section 39. For purposes of the Agreement, Seller and Buyer agree that sales by the HPG Business to agencies of the United States Armed Forces for sale in Armed Forces owned outlets and stores on Armed Forces bases, whether or not such outlets or stores are located in Designated Countries, shall be considered sales in the United States. Section 40. Attachment A-2 to Schedule A to the Agreement is deleted in its entirety and Attachment A-2 attached to this Amendment as Exhibit E is inserted in its place and stead. IN WITNESS WHEREOF, the parties hereto caused this Amendment to be duly executed by their respective authorized officers on the day and year first above written. THE BLACK & DECKER CORPORATION By: /s/ MARK M. ROTHLEITNER Vice President and Treasurer WINDMERE-DURABLE HOLDINGS, INC. By: /s/ DAVID M. FRIEDSON Chairman, President and Chief Executive Officer EX-2 4 EXHIBIT 2(B)(I) EXHIBIT 2(b)(i) REORGANIZATION, RECAPITALIZATION AND STOCK PURCHASE AGREEMENT Dated as of June 29, 1998 By and Between THE BLACK & DECKER CORPORATION, TRUE TEMPER SPORTS, INC. AND TTSI LLC TABLE OF CONTENTS Page ARTICLE I DEFINITIONS Section 1.01 Definitions....................................... 2 ARTICLE II TRANSACTIONS AND CLOSING Section 2.01 Reorganization of TTS Business.................... 2 Section 2.02 Recapitalization of TTSI.......................... 3 Section 2.03 Closing Transactions.............................. 3 Section 2.04 Section 338(h)(10) Election; Exchange Consideration..................................... 5 Section 2.05 Closing........................................... 5 Section 2.06 Estimation and Adjustment of Exchange Consideration..................................... 6 Section 2.07 Contingent Purchase Price......................... 7 ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT Section 3.01 Representations and Warranties of Parent.......... 8 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Section 4.01 Representations and Warranties of Buyer........... 9 ARTICLE V COVENANTS AND AGREEMENTS OF PARENT Section 5.01 Conduct of Business............................... 9 Section 5.02 Access to Information; Confidentiality............ 12 Section 5.03 Change of Lockbox Accounts........................ 13 Section 5.04 Access to Information; Cooperation After Closing.. 13 Section 5.05 Maintenance of Insurance Policies................. 14 Section 5.06 Noncompetition.................................... 14 Section 5.07 Debt Financing.................................... 15 Section 5.08 Advice of Changes................................. 15 Section 5.09 No Hire........................................... 15 ARTICLE VI COVENANTS AND AGREEMENTS OF BUYER Section 6.01 Confidentiality................................... 15 Section 6.02 Provision and Preservation of and Access to Certain Information; Cooperation...................16 Section 6.03 Insurance; Financial Support Arrangements......... 17 Section 6.04 Use of Intellectual Property...................... 18 Section 6.05 Conduct of TTS Business After Closing............. 19 Section 6.06 Debt Financing.................................... 19 Section 6.07 Certain Environmental Investigations.............. 19 ARTICLE VII COVENANTS AND AGREEMENTS OF THE PARTIES Section 7.01 Further Assurances................................ 20 Section 7.02 Certain Filings; Consents......................... 20 Section 7.03 Public Announcements.............................. 20 Section 7.04 Intellectual Property............................. 20 Section 7.05 HSR Act........................................... 21 Section 7.06 Certain Environmental Insurance Matters........... 21 Section 7.07 Legal Privileges.................................. 21 Section 7.08 Tax Matters....................................... 21 Section 7.09 Limitations on Confidentiality Restrictions....... 24 ARTICLE VIII EMPLOYEES AND EMPLOYEE BENEFIT MATTERS Section 8.01 Employees and Employee Benefit Matters............ 24 ARTICLE IX CONDITIONS TO CLOSING Section 9.01 Conditions to the Obligations of Each Party....... 24 Section 9.02 Conditions to Obligations of Buyer................ 25 Section 9.03 Conditions to Obligation of Parent and TTSI....... 26 Section 9.04 Updated Disclosure Schedules...................... 26 Section 9.05 Effect of Waiver.................................. 26 ARTICLE X SURVIVAL; INDEMNIFICATION Section 10.01 Survival.......................................... 26 Section 10.02 Indemnification................................... 28 Section 10.03 Procedures........................................ 29 Section 10.04 Limitations....................................... 32 ARTICLE XI TERMINATION Section 11.01 Termination....................................... 32 Section 11.02 Effect of Termination............................. 33 ARTICLE XII MISCELLANEOUS Section 12.01 Notices........................................... 33 Section 12.02 Amendments; Waivers............................... 35 Section 12.03 Expenses.......................................... 35 Section 12.04 Successors and Assigns............................ 35 Section 12.05 Disclosure........................................ 35 Section 12.06 Construction...................................... 36 Section 12.07 Entire Agreement.................................. 36 Section 12.08 Governing Law..................................... 37 Section 12.09 Counterparts; Effectiveness....................... 37 Section 12.10 Jurisdiction...................................... 37 Section 12.11 Severability...................................... 37 Section 12.12 Captions.......................................... 37 Section 12.13 Bulk Sales........................................ 37 EXHIBITS EXHIBIT A Definitions EXHIBIT B Representations and Warranties of Parent EXHIBIT C Representations and Warranties of Buyer EXHIBIT D Employees and Employee Benefit Matters EXHIBIT E Additional Matters Relating to Product Liability Issues ATTACHMENTS Attachment I Opening Statement Attachment II Assignment and Assumption Agreement Attachment III Assignment of United States Trademarks, Trademark Registrations and Applications for Registration Attachment IV Assignment of Foreign Trademarks, Trademark Registrations and Applications for Registration Attachment V Assignment of United States Patents and Patent Applications Attachment VI Assignment of Foreign Patents and Applications for Patents Attachment VII Services Agreement Attachment VIII Reserved Attachment IX Exchange Consideration Allocation Schedule Attachment X Intellectual Property (Registrations and Applications Therefor) Attachment XI Consents and Approvals Required Prior to Closing Attachment XII TTSI Financial Statements Attachment XIII Certain Active Employees Attachment XIV Terms of Stockholders' and Registration Rights Agreements Attachment XV Assignment of U.S. Copyright Registration -1- REORGANIZATION, RECAPITALIZATION AND STOCK PURCHASE AGREEMENT This Reorganization, Recapitalization and Stock Purchase Agreement (together with the Exhibits, Schedules and Attachments hereto, this "Agreement") is made as of the 29th day of June 1998, by and among The Black & Decker Corporation, a Maryland corporation ("Parent"), True Temper Sports, Inc., a Delaware corporation ("TTSI"), and TTSI LLC, a Delaware limited liability company ("Buyer"). W I T N E S E T H: WHEREAS, Parent, through certain of its direct and indirect Subsidiaries, is engaged in the TTS Business and indirectly beneficially owns all of the issued and outstanding capital stock of TTSI; WHEREAS, subsequent to the execution and delivery of this Agreement but prior to the Closing, Parent desires to cause Emhart Industries, Inc., a Connecticut corporation and an indirect, wholly-owned subsidiary of Parent ("EII"), to make a capital contribution of all of the assets and liabilities of EII which are used exclusively in or relate exclusively to the TTS Business to TTSI in exchange for newly issued shares of TTSI Common Stock and TTSI Preferred Stock and TTSI desires to accept such capital contribution, to issue such shares of TTSI Common Stock and TTSI Preferred Stock and to assume and agree to pay, satisfy and discharge such liabilities, all as more fully set forth herein; WHEREAS, subsequent to the execution and delivery of this Agreement but prior to the Closing, TTSI desires to acquire from Emhart Inc., a Delaware corporation and an indirect, wholly-owned subsidiary of Parent ("Emhart"), and Parent desires to cause Emhart to sell and transfer to TTSI, certain Intellectual Property used in connection with the TTS Business in exchange for newly issued shares of TTSI Common Stock and TTSI Preferred Stock, all as more fully set forth herein; WHEREAS, subsequent to the execution and delivery of this Agreement but prior to the Closing, Parent desires to cause certain of its other Subsidiaries to contribute certain assets used exclusively in the TTS Business to TTSI in exchange for promissory notes from TTSI payable at Closing and TTSI's assumption of related liabilities; WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, following the reorganization of the TTS Business contemplated by the preceding recitals, Parent desires to cause TTSI to incur indebtedness to facilitate the recapitalization of TTSI, and Buyer desires to assist TTSI to incur such indebtedness, all as more fully set forth herein; WHEREAS, Parent desires to cause TTSI, and Buyer desires to assist TTSI, to use the proceeds of such borrowings to redeem 100% of the TTSI Common Stock and 100% of the TTSI Preferred Stock then owned by Emhart for an aggregate consideration of $161,484,126 and 50% -2- of the TTSI Common Stock and 50% of the TTSI Preferred Stock then owned by EII for an aggregate consideration of $26,914,021; WHEREAS, following such redemption, Buyer desires to purchase, buy and acquire from EII and Parent desires to cause EII to sell, transfer and convey to Buyer the Acquired Shares, and Parent and Buyer desire to enter into certain agreements and arrangements ancillary to such transactions; and WHEREAS, upon consummation of the transactions contemplated by this Agreement, (i) Buyer and Buyer's Permitted Assigns will own TTSI Common Stock representing, in the aggregate, not less than 94.18% of all of the issued and outstanding shares of TTSI Common Stock and TTSI Preferred Stock representing, in the aggregate, 94.0% of all of the issued and outstanding shares of TTSI Preferred Stock, (ii) EII will own 5.82% of all of the issued and outstanding shares of TTSI Common Stock and 6.0% of all of the issued and outstanding shares of TTSI Preferred Stock, and (iii) management of the TTSI Business designated by Buyer will own any remaining shares of TTSI Common Stock. NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties contained herein, the parties agree as follows: ARTICLE I DEFINITIONS Section 1.01 Definitions. Capitalized terms used in this Agreement shall have the meanings specified in this Agreement or in Exhibit A. ARTICLE II TRANSACTIONS AND CLOSING Section 2.01 Reorganization of TTS Business. Upon the terms and subject to the conditions set forth in this Agreement, the parties agree that following the execution of this Agreement and prior to consummation of the transactions contemplated by Sections 2.02 and 2.03, among other things: (a) TTSI will file an Amended and Restated Certificate of Incorporation consistent with the terms of this Agreement as agreed to by Buyer and Parent; (b) Parent will cause EII to contribute the Contributed Assets to TTSI, free and clear of all Liens (other than Permitted Liens), and TTSI will assume and agree to pay, satisfy and discharge all of the Assumed Liabilities, all as contemplated by the Assignment and Assumption Agreement; -3- (c) In exchange for the capital contribution contemplated by Section 2.01(b), TTSI will issue 1,000 shares of TTSI Common Stock and 250 shares of TTSI Preferred Stock to EII, which upon such issuance shall be duly authorized, fully paid and non-assessable shares of capital stock of TTSI; (d) Parent shall and will cause Emhart and, to the extent applicable, EII to sell, transfer and convey to TTSI the Transferred Intellectual Property, all as contemplated by the Intellectual Property Assignment Agreements; (e) In exchange for the transfer of the Transferred Intellectual Property contemplated by Section 2.01(d), TTSI will issue 6,000 shares of TTSI Common Stock and 750 shares of TTSI Preferred Stock to Emhart, which upon such issuance shall be duly authorized, fully paid and non-assessable shares of capital stock of TTSI; (f) Parent (i) will cause TTSI to establish a branch in each of the United Kingdom, Australia and Japan and (ii) will cause each of Tucker Fasteners Limited ("Tucker"), Black & Decker (Australasia) Pty. Limited ("B&D Australasia") and Nippon Pop Rivets & Fasteners, Ltd. ("Nippon") to contribute the assets and liabilities relating exclusively to the TTS Business operations in the United Kingdom, Australia and Japan, respectively, to TTSI; and (g) In exchange for the contributions contemplated by Section 2.01(f), TTSI will issue and deliver to each of Tucker, B&D Australasia and Nippon a promissory note payable in full at Closing with an initial principal amount equal to the net book value of the respective contributed assets with a fixed interest rate equal to 7.5% per annum. Section 2.02 Recapitalization of TTSI. (a) Upon the terms and subject to the conditions set forth in this Agreement, the parties agree that following the execution of this Agreement and immediately prior to Closing, among other things, Buyer will use commercially reasonable best efforts to assist TTSI in obtaining debt financing in an aggregate amount of not less than $155,000,000, together with a revolving credit facility in the amount of $20,000,000, in the manner contemplated by the Commitment Letters or on other terms reasonably acceptable to Buyer, the proceeds of which will be used to consummate the Redemptions and to pay off the promissory notes contemplated by Section 2.01(g). (b) Buyer may elect at its option to pursue an alternative financing structure, provided that such structure does not result in any incremental increase in costs to TTSI. Section 2.03 Closing Transactions. (a) Redemption of TTSI Shares. On and subject to the terms and conditions set forth in this Agreement, at the Closing, TTSI shall: (i) Redeem all of the issued and outstanding TTSI Common Stock and TTSI Preferred Stock owned by Emhart by making a cash payment equal to $161,484,126 by wire transfer of immediately available funds to an account or -4- accounts of Emhart designated by Parent at least two Business Days prior to Closing; and (ii) Redeem 1,000 shares of the issued and outstanding TTSI Common Stock and 125 shares of the issued and outstanding TTSI Preferred Stock owned by EII by making a cash payment equal to $26,914,021 by wire transfer of immediately available funds to such account or accounts of EII designated by Parent at least two Business Days prior to Closing; such that, immediately following the consummation of the transactions contemplated by this Section 2.03(a), EII will own 1,000 shares of TTSI Common Stock and 125 shares of TTSI Preferred Stock which shares, in the aggregate, will constitute 100% of the issued and outstanding capital stock of TTSI. (b) Acquisition of Acquired Shares. On and subject to the terms and conditions set forth in this Agreement, at the Closing: (i) Parent shall cause EII to sell, transfer and convey to Buyer and Buyer's Permitted Assignees, free and clear of all Liens (other than Permitted Liens) an aggregate of 941.8 shares of TTSI Common Stock and an aggregate of 117.5 shares of TTSI Preferred Stock; and (ii) In consideration for the transfer of the Acquired Shares, Buyer shall make cash payments equalling, in the aggregate, $14,301,853 by wire transfer of immediately available funds to an account or accounts of EII designated by Parent at least two Business Days prior to Closing; such that, immediately following consummation of the transactions contemplated by this Section 2.03(b), EII will own 58.2 shares of TTSI Common Stock representing 5.82% of all the issued and outstanding shares of TTSI Common Stock and 7.5 shares of TTSI Preferred Stock representing 6.0% of all the issued and outstanding shares of TTSI Preferred Stock and Buyer and Buyer's Permitted Assignees will own, in the aggregate, 941.8 shares of TTSI Common Stock representing 94.18% of all the issued and outstanding shares of TTSI Common Stock and 117.5 shares of TTSI Preferred Stock representing 94.0% of all the issued and outstanding shares of TTSI Preferred Stock. (c) Consent and Waiver by Buyer. By execution and delivery of this Agreement, Buyer hereby consents to and waives any rights in respect of the redemption of TTSI Common Stock owned by EII or Emhart contemplated by Section 2.03(a). (d) Additional Closing Transactions. Upon the terms and subject to the conditions set forth in this Agreement, the parties agree that at the Closing, among other things: -5- (i) Parent or its Affiliates, as the case may be, and TTSI shall execute and deliver the Services Agreement with such additions, deletions and changes as may be agreed to by Buyer and Parent; and (ii) TTSI, Buyer, Buyer's Permitted Assigns and EII shall execute and deliver a Stockholders' and a Registration Rights Agreements containing the provisions contemplated by Attachment XIV. Section 2.04 Section 338(h)(10) Election; Exchange Consideration. (a) The parties agree to make an election under Section 338(h)(10) of the Code (and any corresponding elections under any applicable state, local, or foreign tax law) with respect to the sale of the Acquired Shares by EII to Buyer. (b) The consideration to be paid to Parent and its Affiliates in connection with the Contemplated Transaction (the "Exchange Consideration") shall consist of the following: (i) the aggregate amounts paid by TTSI to redeem shares of TTSI Common Stock and TTSI Preferred Stock pursuant to Section 2.03(a); and (ii) the aggregate amount paid by Buyer to EII in exchange for the Acquired Shares pursuant to Section 2.03(b); and (iii) the aggregate amounts payable to Tucker, B&D Australasia and Nippon pursuant to the promissory notes to be delivered in accordance with Section 2.01(g) (as so adjusted and together with the amount contemplated by Section 2.04(b)(i) and 2.04(b)(ii) above, the "Adjusted Purchase Price"); and (iv) the assumption by TTSI of the Assumed Liabilities in accordance with the Transaction Documents. (c) The Exchange Consideration and each Annual Thiokol Payment shall be allocated to and among the respective Contributed Assets and Transferred Intellectual Property as set forth in Attachment IX to this Agreement. Parent, TTSI and Buyer agree that the allocation of the Exchange Consideration has been negotiated by them and is consistent with the value of the Contributed Assets and the principles of Section 1060 of the Code and the regulations promulgated by the Internal Revenue Service thereunder. Parent, TTSI and Buyer agree that they shall use the allocation of the Exchange Consideration reflected in Attachment IX to this Agreement in any Tax Returns or other reports that deal with the Contemplated Transactions and are filed with any Tax Authority and shall promptly prepare and timely file such reports and information as may be required to report the allocation contemplated by this Section 2.04(c). Section 2.05 Closing. The closing (the "Closing") of the Contemplated Transactions (other than the transactions contemplated by Section 2.01, which may occur on an earlier date) shall take place at the offices of Kirkland & Ellis, 153 East 53rd Street, New York, New York -6- 10022, on September 24, 1998; provided, however, that if all of the conditions to Closing set forth in Article IX have not been satisfied (or waived) as of that date and if closing on that date therefore would be impractical, the Closing shall take place on the fifth Business Day following the satisfaction or waiver (by the party entitled to waive the condition) of all conditions to the Closing set forth in Article IX, or at such other time and place as the parties to this Agreement may agree. The Closing will occur at 10:00 a.m. on the Closing Date. Section 2.06 Estimation and Adjustment of Exchange Consideration. (a) Not later than two Business Days and not more than five Business Days prior to the Closing Date, Parent shall deliver to Buyer a statement of net working capital setting forth, in reasonable detail, Parent's reasonable good faith calculation of the estimated Net Working Capital of TTSI as of the close of business on the day prior to the scheduled Closing Date (the "Estimated Net Working Capital"). To the extent that the Estimated Net Working Capital is less than $11,600,000, Parent shall contribute, or cause to be contributed, to TTSI an amount, in cash, equal to such deficiency. To the extent that the Estimated Net Working Capital exceeds $11,600,000, Parent shall have the right to cause TTSI to distribute to its shareholders at or immediately prior to the Closing an amount, in cash, equal to such excess. (b) Promptly following the Closing Date, but in no event later than 60 days after the Closing Date, Parent shall, at its expense, with the assistance of Buyer and TTSI prepare and submit to Buyer a statement of net working capital setting forth, in reasonable detail, Parent's calculation of the actual Net Working Capital of TTSI as of the close of business on the day prior to the Closing Date after giving effect to any distribution or contribution made pursuant to Section 2.06(a) above (the "Proposed Final Net Working Capital Amount"). In the event Buyer disputes the correctness of the Proposed Final Net Working Capital Amount, Buyer shall notify Parent of its objections within 45 days after receipt of Parent's calculation of the Proposed Final Net Working Capital Amount and shall set forth, in writing and reasonable detail, the reasons for Buyer's objections. If Buyer fails to deliver such notice of objections within such time, Buyer shall be deemed to have accepted Parent's calculation. To the extent Buyer does not object, in writing and in reasonable detail, as required and within the time period contemplated by this Section 2.06(a) to a matter in the statement of net working capital prepared and submitted by Parent, Buyer shall be deemed to have accepted Parent's calculation and presentation in respect of the matter and the matter shall not be considered to be in dispute. Parent and Buyer shall endeavor in good faith to resolve any disputed matters within 20 days after Parent's receipt of Buyer's notice of objections. If they are unable to do so, Parent and Buyer shall select a nationally known independent accounting firm (other than Ernst & Young LLP or KPMG Peat Marwick LLP to resolve the matters in dispute (in a manner consistent with Section 2.06(b) and with any matters not in dispute), and the determination of such firm in respect of the correctness of each matter remaining in dispute shall be conclusive and binding on Parent and Buyer. The independent accountant's determination of Net Working Capital of TTSI as of the close of business on the day prior to the Closing Date shall be within the range established by Parent and Buyer. The Net Working Capital of TTSI as of the close of business on the day prior to the Closing Date, as finally determined pursuant to this Section 2.06(a) (whether by failure of Buyer to deliver notice of objection, by agreement of Parent and Buyer or by determination of the -7- independent accountants selected as set forth above), is referred to herein as the "Final Net Working Capital Amount." (c) The Proposed Final Net Working Capital Amount and the Final Net Working Capital Amount shall be determined in accordance with the accounting principles, policies, practices and methods utilized in the preparation of the Opening Statement, as disclosed in the notes to the Opening Statement, except as otherwise set forth in Note 8 to the Opening Statement. (d) If the Final Net Working Capital Amount is greater than $11,600,000, the difference shall be paid to Parent by TTSI with simple interest thereon from the Closing Date to the date of payment at a floating rate per annum equal to the per annum interest rate announced from time to time by Citibank, N.A. as its prime rate in effect. If the Final Net Working Capital Amount is less than $11,600,000, the difference shall be paid to TTSI by Parent with simple interest thereon from the Closing Date to the date of payment at a floating rate per annum equal to the per annum interest rate announced from time to time by Citibank, N.A. as its prime rate in effect. Such payment shall be made in immediately available funds not later than five Business Days after the determination of the Final Net Working Capital Amount by wire transfer to a bank account designated in writing by the party entitled to receive the payment. Any payment contemplated by this Section 2.06(d) shall be treated as an increase or decrease, as the case may be, in the amount paid pursuant to Section 2.03(a) on a pro rata basis between Emhart and EII. (e) Parent shall make available and shall cause Ernst & Young LLP to make available, in accordance with reasonable and customary practices and professional standards and subject to such reasonable conditions as Ernst & Young LLP shall impose, the books, records, documents and work papers underlying the preparation and review of the Opening Statement and the calculation of the Proposed Final Net Working Capital Amount. TTSI shall make available and shall cause KPMG Peat Marwick LLP to make available, in accordance with reasonable and customary practices and professional standards and subject to such reasonable conditions as KPMG Peat Marwick LLP shall impose, the books, records, documents and work papers created or prepared by or for TTSI in connection with the review of the Proposed Final Net Working Capital Amount and the other matters contemplated by Section 2.06(a). (f) The fees and expenses, if any, of the accounting firm selected to resolve any disputes between Parent and TTSI in accordance with Section 2.06(b) shall be paid one-half by Parent and one-half by TTSI. Section 2.07 Contingent Purchase Price. (a) Promptly following the last day of each fiscal year of TTSI after the Closing Date, but in no event later than 90 days thereafter, TTSI shall prepare and submit to Parent a statement of TTSI's estimate of the Thiokol Payment for the preceding fiscal year, setting forth, in reasonable detail, TTSI's calculation of the Thiokol Payment for that year together with detailed support for such calculation (the "Proposed Annual Thiokol Payment") and a certificate of the president of TTSI to the effect that the Proposed Annual Thiokol Payment was determined in accordance with the provisions of this Section 2.07. In the event that Parent disputes the correctness of the -8- Proposed Annual Thiokol Payment, Parent shall notify TTSI of its objections within 45 days of receipt of TTSI's calculation of the Proposed Annual Thiokol Payment and shall set forth, in reasonable detail, the reasons for Parent's objections. If Parent fails to deliver such notice of objections within such time, Parent shall be deemed to have accepted TTSI's calculation. Parent and TTSI shall, and Buyer shall cooperate with Parent and TTSI to, endeavor in good faith to resolve any disputed matters within 20 days after TTSI's receipt of a notice of objections. If they are unable to do so, Parent and TTSI shall select a nationally known independent accounting firm (other than Ernst & Young LLP, KPMG Peat Marwick LLP or TTSI's independent accountants) to resolve the matters in dispute (in a manner consistent with Section 2.07(b) and with any matters not in dispute), and the determination of such firm in respect of the correctness of each matter remaining in dispute shall be conclusive and binding on the parties. The independent accountants determination of the Thiokol Payment for that year shall be within the range established by TTSI and Parent. The Thiokol Payment for that year, as finally determined pursuant to this Section 2.07(a) (whether by failure of Parent to deliver notice of objections, by agreement of Parent and TTSI or by determination of the independent accountants selected as set forth above), is referred to herein as the "Annual Thiokol Payment." (b) The Annual Thiokol Payment for each fiscal year of TTSI shall be paid by TTSI to Parent with simple interest thereon from the last date of the applicable fiscal year to the date of payment at a floating rate per annum equal to the per annum interest rate announced from time to time by Citibank, N.A. (or its successors) as its prime rate. Such payment shall be made within 5 Business Days after the determination of the Annual Thiokol Payment for the respective fiscal year of TTSI by wire transfer to a bank account designated by Parent. (c) TTSI shall make available and shall cause TTSI's independent accountants to make available, in accordance with reasonable and customary practices and professional standards and subject to such reasonable conditions as TTSI's independent accountants shall impose, the books, records, documents and work papers underlying the preparation and review of the Proposed Annual Thiokol Payment. (d) The fees and expenses, if any, of the accounting firm selected to resolve any dispute between Parent and TTSI in accordance with Section 2.07(a) shall be borne by Parent if the Annual Thiokol Payment determined by the accounting firm selected is closer to the end of the range established by TTSI or by TTSI if the Annual Thiokol Payment is closer to the end of the range established by Parent. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT Section 3.01 Representations and Warranties of Parent. Parent represents and warrants to Buyer as set forth in Exhibit B. -9- ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Section 4.01 Representations and Warranties of Buyer. Buyer represents and warrants to Parent as set forth in Exhibit C. ARTICLE V COVENANTS AND AGREEMENTS OF PARENT Section 5.01 Conduct of Business. Except with the written consent of Buyer, as otherwise provided in this Agreement, as set forth in Schedule 5.01 or required by Applicable Law, or as required by the terms and conditions of Contracts either disclosed on or not required to be disclosed on Schedule B.12 ("Existing Contracts"), from the date of this Agreement until the Closing Date, Parent shall cause Seller Companies and TTSI to conduct the TTS Business in all material respects in accordance with the historical and customary operating practices relating to the conduct of the TTS Business and shall use commercially reasonable best efforts to preserve intact the TTS Business and the relationships of Seller Companies and TTSI with third parties in connection with the TTS Business, and Seller Companies and TTSI shall not: (i) make any capital expenditure, or group of related capital expenditures relating to the TTS Business in excess of $100,000 (other than capital expenditures contemplated by the 1998 capital plan previously provided to Buyer); (ii) sell or dispose of more than an aggregate of $250,000 of assets that would constitute Contributed Assets or Transferred Intellectual Property if owned, held or used by TTSI on the Closing Date (other than the sale of Inventory (including obsolete Inventory whether or not in the ordinary course of business), and any sale made in the ordinary course of business); (iii) notwithstanding Section 5.01(ii), sell, transfer, license or otherwise dispose of, any Transferred Intellectual Property (except for certain Intellectual Property with registrations that will expire in the normal course that will not constitute Transferred Intellectual Property, the license or sale of Intellectual Property in connection with the Shaft Lab product line or other licenses of Intellectual Property granted in the ordinary course of business which do not materially deplete the value of such Intellectual Property prior to Closing); (iv) except as contemplated by this Agreement, amend, modify or supplement TTSI's Certificate of Incorporation or bylaws; (v) issue any shares of capital stock of TTSI or any options, warrants or other rights to acquire any shares of capital stock of TTSI or securities convertible into or exchangeable for shares of TTSI capital stock, except as contemplated by Section 2.01; -10- (vi) incur any indebtedness for money borrowed, other than the debt financing contemplated by Section 2.02 or intercompany indebtedness with another Seller Company cancelled at or prior to Closing; (vii) terminate or materially reduce the coverage of any policies of title, liability, fire, workers' compensation, property and any other form of insurance covering the operations of TTSI or the TTS Business other than any termination or reduction of any insurance covering Parent's businesses generally or where such policies are replaced by policies that are substantially similar in all material respects to the terminated policies; (viii) settle any material lawsuit, claim or other material dispute nor settle any other lawsuit, claim or other dispute if such settlement imposes a material continuing non-monetary obligation on TTSI or the TTS Business or any of the Contributed Assets or Transferred Intellectual Property or any material monetary obligation that will not be satisfied prior to the Closing or due and payable on or before the one year anniversary of the Closing Date; (ix) except as would not otherwise be prohibited by Section 5.01(x) below and except as would not constitute an Assumed Liability, grant or implement any new or modified severance, termination or other employee benefit or compensation arrangement or increase or accelerate any benefits payable under the severance or termination pay policies or other employee benefit or compensation arrangement with respect to any Transferred Employee; or (x) except as otherwise may be permitted or required by this Agreement or Applicable Law and except as would not constitute an Assumed Liability, adopt or amend in any material respect any Employee Plan or Benefit Arrangement in respect of any Transferred Employee or, other than compensation increases in the ordinary course of business, with respect to any Transferred Employee whose base compensation is $75,000 or above of TTSI or the TTS Business, as the case may be, increase the compensation or fringe benefits of any such Transferred Employee or pay any benefit not required by any Employee Plan or Benefit Arrangement with respect to such Transferred Employee as in effect on the date hereof. (xi) fail to keep the equipment, machinery and systems used in the TTS Business in compliance, in all material respects, with all Applicable Laws and with all licenses and permits, and reasonably maintain all such assets and replace any thereof which shall be worn out, lost, stolen, or destroyed, in accordance with past practices (other than assets that are no longer necessary for the operation of the TTS Business); (xii) fail to maintain the files and records of the TTS Business in the usual, regular and ordinary manner, consistent with past practices; (xiii) fail to manage or cause to be managed the collection and payment of the accounts receivable and accounts payable of the TTS Business and otherwise maintain and -11- manage their respective inventories and other current assets and current liabilities in the ordinary course of business and consistent with past practice, including making payment with respect to all of their respective accounts payable, current maturities of long term debt and other current payables in a timely manner and in accordance with the terms of such payable or such indebtedness, as the case may be, provided that no such indebtedness (other than intercompany indebtedness) shall be prepaid or otherwise retired in whole or in part prior to the date on which such indebtedness or portion thereof is due to be repaid, it being understood that the covenant set forth in this Section 5.01(xiii) shall not prohibit Parent or the Seller Companies from disputing any accounts payable in good faith, in the ordinary course of business and consistent with past practice or require Parent or the Seller Companies to generally change its practices with respect to the collection and payment of accounts receivable and accounts payable; (xiv) fail to take commercially reasonable steps consistent with current practices, and to cause any relevant Seller Company to take commercially reasonable steps consistent with current practices, to protect all Transferred Intellectual Property and take commercially reasonable best efforts to prevent any of it from falling into the public domain; (xv) enter into any agreement, contract, lease, license, commitment or instrument (or series of related agreements, contracts, leases, licenses, commitments or instruments) that would be required to be listed on Schedule B.12 or accelerate, terminate, modify or cancel in a manner materially adverse to the TTS Business any agreement, contract, lease, license, commitment or instrument (or series of related agreements, contracts, leases, licenses, commitments or instruments) that is required to be listed on Schedule B.12; (xvi) impose any material Lien (other than any Lien of the type that would constitute a Permitted Lien if in existence on the date hereof) upon any of the Contributed Assets or Transferred Intellectual Property; (xvii) make any investment in, any loan to, or any acquisition of the securities of, other than in the ordinary course of business, assets of, any other Person (or series of related investments, loans, and acquisitions) either involving more than $100,000 or outside the ordinary course of business; (xviii) make any loan to, or enter into any other transaction with, any of its directors, officers, or employees, other than in their capacity as such in connection with employee benefits or compensation arrangements and in the ordinary course of business consistent with past practices; (xix) implement any layoffs of any employee who would otherwise be a Transferred Employee other than the termination of any employee in the ordinary course of business; -12- (xx) make or pledge to make any charitable or other capital contribution that would be payable following the closing and not reflected in the Final Net Working Capital Amount or otherwise exceeding $50,000; and (xxi) commit to any of the foregoing. Section 5.02 Access to Information; Confidentiality. (a) Except as may be necessary to comply with any Applicable Laws and subject to any applicable privileges (including, without limitation, the attorney-client and work-product privileges; provided that Parent and the Seller Companies shall use commercially reasonable efforts to provide access to Buyer in a manner that does not violate any applicable privileges), from the date of this Agreement until the Closing Date, Parent, TTSI and Seller Companies shall (i) give Buyer and its Representatives reasonable access to the records of TTSI and Seller Companies relating to the TTS Business during normal business hours and upon reasonable prior notice, (ii) give Buyer and its Representatives reasonable access to any facilities the possession of which will be transferred to Buyer at Closing during normal business hours and upon reasonable prior notice for the purpose of Buyer's conduct of an environmental audit of such facilities or documentary diligence, (iii) furnish to Buyer and its Representatives such financial and operating data and other information relating to TTSI and the TTS Business as Buyer may reasonably request and (iv) instruct the employees and Representatives of TTSI and Seller Companies to provide reasonable cooperation to Buyer in its investigation of the TTS Business. Without limiting the generality of the foregoing, subject to the limitations set forth in the first sentence of this Section 5.02(a), from the date of this Agreement to the Closing Date Parent shall (i) use reasonable commercial efforts to enable Buyer and its Representatives to conduct, at Buyer's expense, business and financial reviews, investigations and studies as to the operation of TTSI and the TTS Business, including any tax, operating or other efficiencies that may be achieved and (ii) give Buyer and its Representatives access upon reasonable request to information relating to TTSI and the TTS Business of the type and with the same level of detail as in the ordinary course of business currently is being made available to the president or chief financial officer, or other senior management of the TTS Business. Notwithstanding the foregoing, neither Buyer nor its Representatives shall have access to personnel records of any Seller Companies or TTSI relating to individual performance or evaluation records, medical histories or other information that in Parent's good faith opinion is sensitive or the disclosure of which could subject TTSI or any Seller Companies to risk of liability. (b) For a period of two years after the Closing Date and, with respect to any confidential information provided to Parent or any Seller Companies pursuant to Section 2.07, for a period of two years thereafter, Parent and the Seller Companies will treat and hold as confidential, any confidential information relating primarily to the operations or affairs of TTSI or the TTS Business. In the event Parent or any Seller Companies are requested or required (by oral or written request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand or similar process or by Applicable Law) to disclose any such confidential information, then Parent shall notify Buyer promptly of the request or requirement so that Buyer, at its expense, may seek an appropriate protective order or waive -13- compliance with this Section 5.02(b). If, in the absence of a protective order or receipt of a waiver hereunder, any Seller Companies are, on the advice of counsel, compelled to disclose such confidential information Parent or Seller Companies may so disclose the confidential information, provided that Parent or Seller Companies, as the case may be, shall use reasonable efforts to obtain reliable assurance that confidential treatment will be accorded to such confidential information. The provisions of this Section 5.02(b) shall not be deemed to prohibit the disclosure of confidential information relating to the operations or affairs of TTSI or the TTS Business by Parent or any Seller Companies to the extent reasonably required (i) to prepare or complete any required Tax Returns or financial statements, (ii) in connection with audits or other proceedings by or on behalf of a Governmental Authority, (iii) in connection with any insurance or benefits claims, (iv) to the extent necessary to comply with any Applicable Laws, (v) to provide services to TTSI in accordance with the terms and conditions of any of the Transaction Documents or (vi) as Parent reasonably determines to be necessary and not materially inconsistent with the intentions of this Section 5.02(b) in connection with any other similar administrative functions in the ordinary course of business. In addition, the provisions of this Section 5.02(b) shall not apply to information that (i) is or becomes publicly available other than as a result of a disclosure by any Seller Company, (ii) is or becomes available to a Seller Company on a non-confidential basis from a source that, to Parent's knowledge, is not prohibited from disclosing such information by a legal, contractual or fiduciary obligation or (iii) is or has been independently developed by a Seller Company (other than primarily for the TTS Business). This Section 5.02(b) shall not apply to the use, license or sale of Intellectual Property not constituting Transferred Intellectual Property. Section 5.03 Change of Lockbox Accounts. Prior to or immediately after the Closing, Parent shall take such steps as Buyer may reasonably request to cause TTSI to be substituted as the sole party having control over any lockbox or similar bank account maintained exclusively by the TTS Business to which customers of the TTS Business directly make payments in respect of the TTS Business or to direct the bank at which any such lockbox or similar account is maintained to transfer any payments made thereto to an account established by TTSI. To the extent that TTSI is not substituted as the sole party having control over any such lockbox account prior to Closing, Parent or the applicable Seller Company shall pay to TTSI any amount paid to such account following the Closing with respect to any account receivable constituting part of the Contributed Assets. Section 5.04 Access to Information; Cooperation After Closing. On and after the Closing Date and subject to any applicable privileges (including, without limitation, the attorney-client and work-product privileges; provided that Parent and the Seller Companies shall use commercially reasonable efforts to provide access to Buyer in a manner that does not violate any applicable privileges), Parent shall, and shall cause each of the other Seller Companies to, at their expense (i) afford Buyer and its Representatives reasonable access upon reasonable prior notice during normal business hours, to all employees, offices, properties, agreements, records, books and affairs of Seller Companies to the extent relating to the conduct of the TTS Business prior to the Closing and (ii) cooperate fully with Buyer with respect to matters relating to the conduct of the TTS Business prior to the Closing, including, without limitation, in the defense or pursuit -14- of any Contributed Asset, Transferred Intellectual Property or Assumed Liability or any claim or action that relates to occurrences involving the TTS Business prior to the Closing Date. Section 5.05 Maintenance of Insurance Policies. Except as otherwise provided in Exhibit D, on and after the date of this Agreement and until the Closing Date, Parent shall not take or fail to take any action if such action or inaction, as the case may be, would adversely affect the applicability of any insurance (including reinsurance) in effect on the date of this Agreement that covers all or any part of the assets that would constitute Contributed Assets, or Transferred Intellectual Property if owned, held or used by any Seller Companies on the Closing Date, TTSI, the TTS Business or the Transferred Employees. Except as otherwise provided in Exhibit D or as may otherwise be agreed in writing by the parties, Parent and its Affiliates shall not have any obligation to maintain the effectiveness of any such insurance policy after the Closing Date or to make any monetary payment in connection with any such policy. Section 5.06 Noncompetition. (a) Parent covenants and agrees, as an inducement to Buyer to enter into this Agreement and to consummate the Contemplated Transactions, that for a period of five years following the Closing Date no Seller Company (for so long but only for so long as it remains a Seller Company) will, directly or indirectly, carry on or participate in the ownership, management or control of, or license Intellectual Property to be used in a manner competitive with the TTS Business by, any business enterprise (other than the Seller Companies' ownership interest in TTSI following Closing) that competes anywhere in the world with the TTS Business as it is being conducted on the Closing Date (a "Competing Business"). (b) Nothing contained in this Section 5.06 shall limit or restrict the right of any Seller Company to hold and make investments in securities of any Person that has securities listed on a national securities exchange or admitted to trading privileges thereon or actively traded in a generally recognized over-the-counter market, provided that the aggregate equity interest therein of Seller Companies does not exceed five percent of the outstanding shares or interests in such Person at the time of Seller Companies' investment therein. Notwithstanding any provisions of this Section 5.06 to the contrary, if Parent or any other Seller Company acquires securities of any Person that is engaged in a Competing Business, Seller Companies shall not be deemed to be in violation of this Section 5.06, provided that (A) (i) at the time of acquisition the Competing Business represents less than one-third of the gross revenues of the acquired Person for the acquired Person's most recently completed fiscal year and (ii) Seller Companies use reasonable commercial efforts to divest the operations of such Competing Business subsequent to such acquisition, or (B) at the time of acquisition the Competing Business represents less than five percent of the gross revenues of the acquired Person for the acquired Person's most recently completed fiscal year. (c) Parent recognizes and agrees that a breach by Seller Companies of any of the covenants and agreements in this Section 5.06 could cause irreparable harm to Buyer, that Buyer's remedies at law in the event of such breach would be inadequate, and that, accordingly, in the event of such breach a restraining order or injunction or both may be issued against Seller -15- Companies, in addition to any other rights and remedies that may be available to Buyer under Applicable Law. If this Section 5.06 is more restrictive than permitted by the Applicable Laws of the jurisdiction in which Buyer seeks enforcement hereof, this Section 5.06 shall be limited to the extent required to permit enforcement under such Applicable Laws. Section 5.07 Debt Financing. Parent shall, and shall cause the Seller Companies and TTSI to, cooperate in a commercially reasonable manner with Buyer to assist Buyer to assist TTSI in obtaining the debt financing for TTSI contemplated by Section 2.02. In no event, however, shall Parent or any Seller Companies be required to guaranty or otherwise provide any Financial Support Arrangement in connection with TTSI obtaining the debt financing contemplated by Section 2.02. Notwithstanding the foregoing sentence, in the event that Parent elects to cause TTSI to obtain the bridge financing contemplated by the Commitment Letters in order to satisfy the financing conditions contained in Article IX, Parent agrees to reimburse TTSI for additional fees payable to the bridge lenders for the take down of such financing in the amount of up to $1,875,000 at Closing. Section 5.08 Advice of Changes. Parent shall advise Buyer promptly in writing after Parent obtains knowledge of any fact that, if known as of the date of this Agreement, would have been required to be set forth or disclosed in or pursuant to this Agreement or the Schedules hereto, or which would result in the breach by the Parent or any Seller Company of any of its representations, warranties, covenants or agreements hereunder or which could reasonably be expected to result in or cause a Material Adverse Effect. Section 5.09 No Hire. For a period of 12 months following the Closing Date, no Seller Company shall hire for employment or offer employment to Scott C. Hennessy. ARTICLE VI COVENANTS AND AGREEMENTS OF BUYER Section 6.01 Confidentiality. Buyer agrees that all non-public information provided or otherwise made available in connection with the Contemplated Transactions to Buyer or any of its Representatives shall be treated as if provided under the Confidentiality Agreement (whether or not the Confidentiality Agreement is in effect or has been terminated). The Confidentiality Agreement shall continue to apply in accordance with its terms following the Closing to any confidential information of Parent or any Seller Company that does not relate to the TTS Business or TTSI. In the event that Buyer or TTSI is requested or required (by oral or written request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process or by Applicable Law) to disclose any such confidential information, then Buyer and TTSI shall notify Parent promptly of their request or requirement so that Parent, at its expense, may seek an appropriate protective order or waive compliance with this Section 6.01. If, in the absence of a protective order or receipt of a waiver hereunder, Buyer or TTSI is, on the advice of counsel, compelled to disclose such confidential information, Buyer or TTSI may so disclose the confidential information, provided that Buyer or TTSI, as the case -16- may be, shall use reasonable commercial efforts to obtain reliable assurance that confidential treatment shall be accorded to such confidential information. The provisions of this Section 6.01 shall not be deemed to prohibit the disclosure of confidential information relating to the operations or affairs of TTSI or the TTS Business by Buyer to the extent reasonably required (i) to prepare or complete any required Tax Returns or financial statements, (ii) in connection with audits or other proceedings by or on behalf of a Governmental Authority, (iii) in connection with any insurance or benefits claims, or (iv) to the extent necessary to comply with any Applicable Laws. In addition, the provisions of this Section 6.01 shall not apply to information that (i) is or becomes publicly available other than as a result of a disclosure by TTSI or Buyer, (ii) is or becomes available to TTSI or Buyer on a non-confidential basis from a source that, to TTSI's and Buyer's knowledge, is not prohibited from disclosing such information by legal, contractual or fiduciary obligation, or (iii) is or has been independently developed by TTSI. Nothing in this Section 6.01, however, shall limit or otherwise restrict the applicability of any other confidentiality or similar provisions included in the Transaction Documents. Section 6.02 Provision and Preservation of and Access to Certain Information; Cooperation. (a) Prior to the Closing Date, Buyer shall provide to Parent promptly upon its receipt thereof copies of all environmental audit and similar reports with respect to facilities the possession of which will be transferred to TTSI in accordance with this Agreement. Buyer shall provide to Parent a copy of all sampling results, boring logs, analysis and other data and reports regarding any environmental review conducted by Buyer immediately upon obtaining them. (b) On and after the Closing Date, TTSI or any successor to the TTS Business shall preserve all books and records of the TTS Business for a period of six years commencing on the Closing Date (or in the case of books and records relating to Tax, employment and employee benefits matters, until such time as Parent notifies TTSI in writing that all statutes of limitations to which such records relate have expired), and thereafter, not to destroy or dispose of such records without giving notice to Parent of such pending disposal and offering Parent such records. In the event Parent has not requested such materials within 90 days following the receipt of notice from TTSI, TTSI may proceed to destroy or dispose of such materials without any liability. (c) From and after the Closing Date and subject to any applicable privileges (including, without limitation, the attorney-client and work-product privileges; provided that Buyer and TTSI shall use commercially reasonable efforts to provide access to Parent in a manner that does not violate any applicable privileges), Buyer shall at its expense (i) afford Parent and its Representatives reasonable access upon reasonable prior notice during normal business hours, to all employees, offices, properties, agreements, records, books and affairs of Buyer, and provide copies of such information, including, without limitation, manifests regarding pre-closing disposal of Hazardous Materials, concerning TTSI and the TTS Business as Parent may reasonably request for any proper purpose, including, without limitation, in connection with the matters contemplated by Section 2.06, the preparation of any Tax Returns, in connection with any judicial, quasi-judicial, administrative, Tax, audit or arbitration proceeding, in connection -17- with the preparation of any financial statements or reports and in connection with the defense or prosecution of any claims or allegations that relate to or may relate to Excluded Assets or Excluded Liabilities and (ii) cooperate fully with Parent as reasonably requested for any proper purpose, including, without limitation, the defense of or pursuit of any Excluded Liability, Excluded Asset or Indemnified Claim, or any claim or action that relates to an Excluded Liability, Excluded Asset or Indemnified Claim. Section 6.03 Insurance; Financial Support Arrangements. (a) Buyer acknowledges and agrees that as of the Closing Date, neither TTSI, the TTS Business, any property owned or leased by any of the foregoing nor any of the directors, officers, employees (including, without limitation, the Transferred Employees) or agents of any of the foregoing will be insured under any insurance policies maintained by Parent or any of its Affiliates, except (i) in the case of certain claims made policies, to the extent that a claim has been reported as of the Closing Date, (ii) in the case of a policy that is an occurrence policy, to the extent the accident, event or occurrence that results in an insurable loss occurs prior to the Closing Date and has been, is or will be reported or noticed to the respective carrier by Buyer, TTSI or any Seller Company in accordance with the requirements of such policies (which claims Parent shall, at TTSI's cost and expense, pursue diligently on TTSI's behalf and the net proceeds of which claims (except to the extent they relate to Excluded Liabilities) shall be remitted promptly to TTSI upon receipt thereof), and (iii) as otherwise provided in Exhibit D or agreed to in writing by the parties. Except as otherwise provided in Exhibit D or as otherwise may be agreed to in writing by the parties, from and after the Closing Date, Parent and its Affiliates shall have no obligation of any kind to maintain any form of insurance covering TTSI or all or any part of the Contributed Assets, the Transferred Intellectual Property, the TTS Business or the Transferred Employees. (b) From and after the Closing Date, TTSI agrees to reimburse Parent within 30 days of receipt of an invoice for any self insurance, retention, deductible, retrospective premium, cash payment for reserves calculated or charged on an incurred loss basis and similar items, including but not limited to associated administrative expenses and allocated loss adjustment or similar expenses (collectively, "Insurance Liabilities") allocated to TTSI or the TTS Business by Parent on a basis consistent with past practices resulting from or arising under any and all current or former insurance policies maintained by Parent or any of its Affiliates to the extent that such Insurance Liabilities relate to or arise out of Assumed Liabilities, but only to the extent that the underlying claim was that of a third party and not a Seller Company. TTSI agrees that, to the extent any of the insurers under the insurance policies, in accordance with the terms of the insurance policies, requests or requires collateral, deposits or other security to be provided with respect to claims made against such insurance policies relating to or arising from TTSI or the TTS Business, TTSI shall provide the collateral, deposits or other security or, upon request of Parent, will replace any collateral, deposits or other security provided by Parent or any of its Affiliates. (c) TTSI agrees that, for a period of six years commencing on the Closing Date, to the extent TTSI maintains product liability or similar insurance coverage, TTSI will (at Parent's -18- cost to the extent of any additional cost therefor, provided that, in the event there will be such a cost, TTSI will give Parent a reasonable period of time to determine whether it desires to incur such cost before TTSI commits to such coverage with respect to Parent) include Parent and its Affiliates as an additional insured/loss payee on any such policies in respect of which Parent or its Affiliates has or may have an insurable interest with respect to TTSI or the TTS Business, the Contributed Assets, Transferred Intellectual Property, any of the Assumed Liabilities or any facilities the possession of which will be transferred to TTSI in accordance with this Agreement prior to Closing. (d) Parent, TTSI and, prior to Closing, Buyer agree that they shall in good faith seek to obtain the release of Parent and its Affiliates from all obligations under all Financial Support Arrangements maintained by Parent or any of its Affiliates in connection with TTSI or the TTS Business. (e) If, at any time after the Closing Date, (i) any amounts are drawn on or paid under any Financial Support Arrangement where Parent or any of its Affiliates is obligated to reimburse the Person making such payment or (ii) Parent or any of its Affiliates pays any amounts under, or any fees, costs or expenses relating to, any Financial Support Arrangement, TTSI shall indemnify and hold Parent and its Affiliates harmless and pay Parent such amounts promptly after receipt from Parent of notice thereof accompanied by written evidence of the underlying payment obligation. Section 6.04 Use of Intellectual Property. Each of Buyer and TTSI acknowledge and agrees that except as otherwise specifically contemplated by the Transaction Documents neither TTSI nor Buyer is obtaining any rights in or to use any Intellectual Property. Buyer and TTSI further acknowledge and agree that notwithstanding any provision to the contrary in the Transaction Documents, Buyer and TTSI shall not use, and each shall cause their respective Affiliates not to use, any trademark, logo or tradename of Parent or any Affiliate of Parent (other than those listed on Attachment X as Transferred Intellectual Property and transferred to Buyer under the terms of this Agreement) or any trademarks, logos or trade names that are confusingly similar thereto or that are a translation or transliteration thereof into any language or alphabet. Without limiting the generality of the foregoing, Buyer and TTSI shall not use, and shall cause their respective Affiliates not to use (i) the words "The Black & Decker Corporation," "Emhart Inc.," "Emhart Industries, Inc.," "Black & Decker," "Emhart" or any derivatives, translations or transliterations of any of the foregoing or (ii) the words "True Temper" or any derivative, translation or transliteration thereof in violation of the Huffy Trademark Agreement; provided, however, that with respect to any work-in-progress, preprinted stationery, invoices, receipts, forms, advertising and promotional materials, training and source literature, packaging material or other supplies that TTSI has in inventory after the Closing which bears the name "The Black & Decker Corporation," "Black & Decker," "Emhart Inc.," "Emhart Industries, Inc." or "Emhart," Parent hereby grants to TTSI a paid-up license to use such names on such inventory; provided, further, that TTSI agrees to use its reasonable best efforts to exhaust such inventory in the ordinary course of business as soon as is reasonably practicable after the Closing. The provisions of this Section 6.04 shall survive the Closing indefinitely. -19- Section 6.05 Conduct of TTS Business After Closing. From and after the Closing, TTSI shall, and Buyer shall cause TTSI (and any successor or assign in respect of the TTS Business) to, conduct the TTS Business in all respects in accordance with each of the 1959 TTSI Consent Decree and the 1961 TTSI Consent Decree for so long as either such decree is in force and binding upon the TTS Business. The provisions of this Section 6.05 shall survive the Closing indefinitely. Section 6.06 Debt Financing. Buyer shall use its commercially reasonable best efforts to assist TTSI to obtain the debt financing contemplated by Section 2.02. In this regard, and without limiting the generality of the foregoing, Buyer shall take all action within its control which is necessary or appropriate and consistent with commercially reasonable best efforts to secure the debt financing contemplated by the Commitment Letters or other financing satisfactory to Buyer. Buyer shall not amend or otherwise modify the Commitment Letters (or any term or condition thereof) in any respect that would materially and adversely affect the ability of TTSI to obtain such financing without the prior written consent of Parent. Section 6.07 Certain Environmental Investigations. (a) Buyer agrees that, if Buyer decides to conduct prior to Closing an environmental audit or similar review of the TTS Business that involves testing, drilling or sampling at any facility, possession of which is contemplated to be transferred to TTSI, Buyer shall be permitted to do so, provided Buyer will so advise Parent and will give Parent sufficient prior written notice to enable Parent's Representatives to be present during any such testing, drilling or sampling and to review and comment on any work plans related to such audit or review. Buyer further agrees to arrange for split samples to be taken in connection with any such auditor review. Buyer agrees that it will conduct such testing, drilling, or sampling, including disposal of all materials associated with such activities, such as drill cuttings, waste water, and sampling equipment, at Buyer's sole cost and expenses and in accordance with all Applicable Laws, including Environmental Laws. If the Closing contemplated by the Transaction Documents is not consummated for any reason, Buyer agrees to restore each facility at which any such testing, drilling or sampling was conducted to its condition prior to the commencement of Buyer's environmental audit or similar review. (b) All information obtained from Buyer's environmental review shall be kept confidential and Buyer shall not provide it to any Person other than Parent. In the event that Buyer's environmental review discloses conditions at any of Seller Companies' facilities that may require notice to a Governmental Authority prior to Closing, Parent shall determine what reporting, if any, is necessary and shall conduct such reporting. -20- ARTICLE VII COVENANTS AND AGREEMENTS OF THE PARTIES Section 7.01 Further Assurances. Subject to the terms and conditions of this Agreement, each party shall use commercially reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under Applicable Laws to consummate the Contemplated Transactions. Parent and Buyer shall execute and deliver, and shall cause Seller Companies and TTSI, as appropriate or required and as the case may be, to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable to consummate or implement the Contemplated Transactions. Except as otherwise expressly set forth in the Transaction Documents, nothing in this Section 7.01 shall require any Seller Companies, TTSI or Buyer to make any payments in order to obtain any consents or approvals necessary or desirable in connection with the consummation of the Contemplated Transactions (other than any payments specifically required by the term of any Contract). Section 7.02 Certain Filings; Consents. Parent and Buyer shall cooperate with one another and use their respective commercially reasonable best efforts (i) in determining whether any action by or in respect of, or filing with, any Governmental Authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material Contracts, in connection with the consummation of the Contemplated Transactions and (ii) subject to the terms and conditions of this Agreement, in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers. Section 7.03 Public Announcements. Prior to the Closing, Parent and Buyer shall consult with each other before issuing any press release or making any public statement with respect to this Agreement or the Contemplated Transactions and, except as may be required by Applicable Law or any listing agreement with any national or international securities exchange, shall not issue any such press release or make any such public statement prior to such consultation. Notwithstanding the foregoing, no provision of this Agreement shall relieve Buyer from any of its obligations under the Confidentiality Agreement, or terminate any of the restrictions imposed upon Buyer under Section 6.01. Section 7.04 Intellectual Property. (a) Buyer and TTSI acknowledge and agree that TTSI shall hold all Transferred Intellectual Property constituting part of the Contributed Assets subject to any licenses thereof granted by Seller Companies prior to the Closing Date that have been disclosed to Buyer in writing or that are immaterial in the aggregate, are granted in connection with the license or sale of Intellectual Property in connection with the Shaft Lab product line or are incurred in the ordinary course of business after the date of this Agreement and prior to Closing and do not materially deplete the value of such Intellectual Property. -21- (b) Buyer and TTSI further acknowledge and agree that the transfer of Transferred Intellectual Property to TTSI shall not affect the right of Seller Companies to use, disclose or otherwise freely deal with any know-how, trade secrets and other technical information not constituting Transferred Intellectual Property or Contributed Assets; provided, however, that the foregoing shall not constitute a license to the Seller Companies under any patents included among the Transferred Intellectual Property. Section 7.05 HSR Act. Parent and Buyer shall use their respective commercially reasonable best efforts to cause the prompt expiration or termination of any applicable waiting period under the HSR Act in respect of the Contemplated Transactions, including, without limitation, complying as promptly as practicable with any requests for additional information. Section 7.06 Certain Environmental Insurance Matters. Notwithstanding any provision to the contrary in this Agreement, this Section 7.06 shall constitute Parent's and Buyer's agreement regarding the allocation of insurance proceeds with respect to matters that arise under or relate to Environmental Laws that are comprised, in whole or in part, of Environmental Liabilities that constitute Assumed Liabilities (the "Environmental Insurance Claims"). Each of Buyer and TTSI acknowledges and agrees that, notwithstanding any other provisions of the Transaction Documents, Parent shall control the Environmental Insurance Claims and shall have the right to compromise or settle any Environmental Insurance Claims; provided, however, that without the prior written consent of Buyer, Parent shall not have the right to enter into any compromise or settlement of any Environmental Insurance Claim that (i) imposes any liability, obligation or responsibility on TTSI or (ii) imposes any condition, restriction or limitation on the operation or conduct of the TTS Business. Parent agrees to act in good faith and with reasonable prudence to maximize recovery (after costs and Taxes) with respect to the Environmental Insurance Claims and shall allocate any recovery received with respect to such Environmental Insurance Claims, first, to the costs incurred to collect such recovery (whether incurred before or after Closing) and, second, to all net Tax costs related to such recovery. Any recovery remaining shall be apportioned equitably between Parent and TTSI. Any obligations assumed in any such compromise or settlement of the Environmental Insurance Claims shall be apportioned between Parent or the applicable Seller Company and TTSI in the same proportion as a recovery would be allocated pursuant to this Section 7.06. Section 7.07 Legal Privileges. Parent, Buyer and TTSI acknowledge and agree that all attorney-client, work product and other legal privileges that may exist with respect to TTSI and the TTS Business (including, without limitation, with respect to the Contributed Assets, Transferred Intellectual Property, Excluded Assets, Assumed Liabilities and Excluded Liabilities) shall, from and after the Closing Date, be deemed joint privileges of Seller Companies, Buyer and TTSI. Each of Seller Companies, TTSI and Buyer shall use all commercially reasonable efforts after the Closing Date to preserve all such privileges and none of Seller Companies, TTSI nor Buyer shall knowingly waive any such privilege without the prior written consent of the other party (which consent shall not be unreasonably withheld or delayed). -22- Section 7.08 Tax Matters. (a) The parties hereto recognize that the transactions that are contemplated by this Agreement constitute a fully taxable sale for all Tax purposes of all of the assets of the TTS Business to TTSI. Except as provided below, it is the intention of the parties that Seller Companies will accept liability for and pay any and all Taxes based on the income of TTSI due for or attributable to Tax periods ending on or before the Closing Date and that portion related to the operation of the Business on or prior to the Closing Date for any Tax period ending after the Closing Date. Seller Companies will accept liability for and pay any and all Taxes attributable to the transfer of assets to TTSI. Seller Companies will accept liability for and pay all Taxes attributable to the deemed sale of assets pursuant to the Section 338(h)(10) election; provided, however, for those state jurisdictions which do not respect or allow the Section 338(h)(10) election contemplated by Section 2.05, Seller Companies will pay Taxes on the sale of stock of TTSI, but their respective obligations to pay Taxes on the deemed asset sale under the Section 338(h)(10) election will be reduced correspondingly, thereby causing the Contemplated Transactions to be subject to Tax only once for any state or local purposes. Accordingly, the Buyer will indemnify Seller Companies to the extent of any double Tax imposed by such states. (b) (i) Parent will file with the appropriate Tax Authorities all Tax Returns required to be filed on its behalf and on behalf of TTSI for any taxable period ending on or before the Closing Date, and Parent will include the taxable income of TTSI (to the extent permitted by Applicable Law) for each such period in its consolidated federal income Tax Return and in any consolidated, combined or unitary Tax Return (including Tax Returns based on or measured by net income) filed by Parent or any Affiliate thereof in which such income can be included under Applicable Law. TTSI will furnish Tax information to Parent for inclusion in such consolidated, combined or unitary Tax Returns filed by Parent or an Affiliate thereof for the period which includes the Closing Date. Parent and its Affiliates agree that they will take commercially reasonable efforts to treat the transactions contemplated by this Agreement as being a fully taxable sale of all of the assets of the TTS Business pursuant to a taxable transfer under the Code and the Section 338(h)(10) election of the Code at the time of the transfer of Contributed Assets and Transferred Intellectual Property to TTSI. As a result, all Contributed Assets and Transferred Intellectual Property will have a basis equal to their fair market value for purposes of determining any gain under the deemed sale resulting from the 338(h)(10) election. (ii) TTSI will, and Buyer will cause TTSI to, file with the appropriate Tax Authorities all Tax Returns required to be filed by TTSI or any of its Affiliates for any taxable period ending after the Closing Date and will remit any Taxes due in respect of such Tax Returns. Parent will pay to TTSI the Taxes for which Parent or any Seller Company is liable pursuant to Section 7.08(b)(i) and 7.08(c) hereof, but which are payable in respect of Tax Returns to be filed by TTSI pursuant to this Section 7.08(b)(ii) within 10 Business Days prior to the due date (taking account of any extensions of time for filing) for the filing of such Tax Returns but no earlier than 20 Business Days after such Tax Returns and the tax allocation calculations have been submitted to Parent for review and approval. -23- (c) Parent will be liable for and will pay, and hereby indemnifies, TTSI for all Taxes, resulting from TTSI ceasing to be a member of any affiliated group (as defined in Section 1504(a) of the Code without regard to the limitations contained in Section 1504(d) of the Code) that includes Parent or any of its predecessors; Taxes imposed on any member of Parent's affiliated group for any taxable year (i) under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or foreign law), (ii) as a transferee or successor of a member of Parent's affiliated group, or (iii) by contract or otherwise; amounts pursuant to any guaranty, indemnification, tax sharing, or similar agreement made on or before the Closing Date relating to the sharing of liability for payment of Taxes; and any real estate transfer Taxes or charges resulting from transactions described in Section 2.01 hereof, for any taxable year ending on or prior to the Closing Date and for the portions of such taxable year or period ending on or prior to the Closing Date (or, in the case of consolidated, combined or unitary Tax Returns, including Parent, any period including the Closing Date) and any costs and expenses (including, without limitation, costs of collection and attorneys' fees) arising out of or resulting from Parent's liability and indemnity for Taxes hereunder. Parent will be entitled to retain any refund of Taxes with respect to TTSI or the TTS Business relating to any such periods. To apportion appropriately any income Taxes relating to any taxable year or period that begins before and ends after the Closing Date, the parties hereto will, to the extent permitted by Applicable Law, elect with the relevant Tax Authority to terminate the taxable year as of the Closing Date (provided, however, that any Taxes related to the transfer of assets or the Section 338(h)(10) election will be determined as provided in Section 7.08(a) hereof). In any case where Applicable Law does not permit any company to treat the Closing Date as the end of a taxable year of such corporation, then whenever it is necessary to calculate the liability for income or franchise Taxes of such company for a portion of a taxable year, such determination will (unless otherwise agreed to in writing by Buyer and Parent) be determined by a closing of such corporation's books at the close of business on the Closing Date, except that exemptions, allowances or deductions that are calculated on an annual basis, such as the deduction for depreciation, will be apportioned on a daily basis. To apportion appropriately any Taxes, other than income or franchise Taxes, relating to any taxable year or period that begins before and ends after the Closing Date, (i) ad valorem Taxes (including, without limitation, real and personal property Taxes) will be accrued on a daily basis over the period for which the Taxes are levied, or if it cannot be determined over what period the Taxes are being levied, over the fiscal period of the relevant Tax Authority, in each case irrespective of the lien or assessment date of such Taxes, and (ii) franchise and other privilege Taxes not measured by income will be accrued on a daily basis over the period to which the privilege relates. (d) (i) Parent will be entitled to control the defense of any audits of or administrative or court proceedings relating to Parent's or any of its Affiliate's consolidated, combined or unitary Tax Returns which relate to the operations of the TTS Business for periods ending prior to the Closing Date. (ii) Buyer and TTSI will give notice to Parent of any Tax claim relating to any taxable year or period that includes the Closing Date, and will keep Parent and its counsel informed of the progress of, and the issues involved in, the same, in each case which may be the subject of indemnification by Parent pursuant to this Agreement. Buyer and TTSI will be entitled -24- to control the defense and resolution of any such audits or proceedings, provided, however, that if Buyer, TTSI or any of their Affiliates settles any Tax claim for the portion of a taxable year or period ending on or prior to or after the Closing Date or including the Closing Date which may be the subject of indemnification by Parent pursuant to this Agreement without the prior written consent of Parent, which consent will not be unreasonably withheld, Parent will be released from any indemnification or other obligations hereunder in respect of such matter. (e) The parties hereto will provide such necessary information as any other party hereto may reasonably request in connection with the preparation of such party's Tax Returns, or to respond to or contest any audit, prosecute any claim for refund or credit or otherwise satisfy the provisions of Applicable Law relating to Taxes of each party hereto or their respective Affiliates. (f) The obligations of the parties set forth in this Section 7.08 relating to Taxes will, except as otherwise agreed in writing, be unconditional and absolute and will remain in effect without limitation as to time or amount of recovery by any party hereto until thirty (30) days after the expiration of the applicable statute of limitations governing the Tax to which such obligations relate (after giving effect to any agreement extending or tolling such statute of limitations). Section 7.09 Limitations on Confidentiality Restrictions. The parties hereby agree that the provisions relating to confidentiality contained in Sections 5.02 and 6.01 and the provisions of the Confidentiality Agreement shall not apply to the disclosure of any information relating primarily to TTSI or the TTS Business in a registration statement, offering memorandum, offering circular or similar or related document, which is created and used in connection with the placement of any debt or equity financing by TTSI. ARTICLE VIII EMPLOYEES AND EMPLOYEE BENEFIT MATTERS Section 8.01 Employees and Employee Benefit Matters. The parties agree as to employee and employee benefit matters as set forth in Exhibit D. ARTICLE IX CONDITIONS TO CLOSING Section 9.01 Conditions to the Obligations of Each Party. The obligations of Parent and Buyer to consummate the Closing are subject to the satisfaction (or waiver) of the following conditions: -25- (a) any applicable waiting period under the HSR Act relating to the Contemplated Transactions shall have expired or been terminated; (b) no provision of any Applicable Law and no judgment, injunction, order or decree shall prohibit the Closing, and no action or proceeding shall be pending before any court, arbitrator or Governmental Authority with respect to which counsel reasonably satisfactory to Parent and Buyer shall have rendered a written opinion that there is a substantial likelihood of a determination that would materially restrain or prohibit the Closing or otherwise have a material adverse effect on the transactions contemplated hereby or Buyer's right to own or exercise rights with respect to any capital stock of TTSI; (c) all actions by or in respect of or filings with any Governmental Authority required to permit the consummation of the Closing shall have been obtained; and (d) Parent or TTSI, as the case may be, shall have obtained the consents, approvals or permits contemplated by Attachment XI. Section 9.02 Conditions to Obligations of Buyer. The obligations of Buyer to consummate the Closing are subject to the satisfaction (or waiver by Buyer) of the following further conditions: (a) (i) Each of Parent and TTSI shall have performed in all material respects all of its obligations under the Transaction Documents required to be performed by it on or prior to the Closing Date, (ii) the representations and warranties of Parent contained in the Transaction Documents shall be true and correct at and as of the date of this Agreement and as of the Closing Date, as if made at and as of each such date, except that those representations and warranties which are by their express terms made as of a specific date shall be true and correct only as of such date, in each case except for inaccuracies that could not reasonably be expected to have a Material Adverse Effect on the TTS Business, and (iii) Buyer shall have received a certificate signed by an executive officer of Parent to the foregoing effect; (b) the transactions contemplated by Section 2.01 shall have occurred in accordance with the terms of this Agreement; (c) Parent or the applicable Seller Company shall have executed and delivered, on or before the Closing Date, the Transaction Documents that are required to be signed by a Seller Company; (d) there shall not have occurred from March 29, 1998 to the Closing a material adverse effect on the assets, properties, business, financial condition, results of operations or prospects of the TTS Business taken as a whole; (e) TTSI shall have obtained the financing contemplated by the Commitment Letters or on other terms satisfactory to Buyer; and -26- (f) TTSI shall not be obligated for any indebtedness for borrowed money other than as contemplated by Section 2.02. Section 9.03 Conditions to Obligation of Parent and TTSI. The obligation of Parent and TTSI to consummate the Closing is subject to the satisfaction (or waiver by Parent) of the following further conditions: (a) (i) Buyer shall have performed in all material respects all of its obligations under the Transaction Documents required to be performed by it at or prior to the Closing Date, (ii) the representations and warranties of Buyer contained in the Transaction Documents shall be true and correct at and as of the date of this Agreement and as of the Closing Date, as if made at and as of each such date, except that those representations and warranties which are by their express terms made as of a specific date shall be true and correct only as of such date, in each case except for inaccuracies that could not reasonably be expected to have a Material Adverse Effect on Buyer, and (iii) Parent shall have received a certificate signed by an executive officer of Buyer to the foregoing effect; (b) The transactions contemplated by Section 2.02 and Section 2.03(a) shall have been consummated in accordance with the terms of this Agreement; and (c) Buyer shall have executed and delivered, on or before the Closing Date, the Transaction Documents that are required to be signed by Buyer. Section 9.04 Updated Disclosure Schedules. At any time prior to the Closing, Parent shall be entitled to deliver to Buyer updates to or substitutions of the Disclosure Schedules provided that such updates or substitutions are clearly marked as such and are addressed to Buyer at the address listed in Section 12.01. In the event that Parent delivers updated or substitute Disclosure Schedules on or after the third day before any scheduled closing date, Buyer shall be entitled to extend the scheduled closing date to the third day after it receives the updated or substitute Disclosure Schedules, or if such day is not a Business Day, to the next Business Day. The delivery by Parent of updated or substitute Disclosure Schedules shall not prejudice any rights of Buyer under this Agreement, including but not limited to the right to claim that the representations and warranties of Parent, when made on the date of this Agreement, were untrue. Section 9.05 Effect of Waiver. Any waiver by Buyer of the conditions specified in clause (ii) of Section 9.02(a), and any waiver by Parent of the conditions specified in clause (ii) of Section 9.03(a), if made knowingly and in writing, shall also be deemed a waiver of any claim for Damages as the result of the matters waived. -27- ARTICLE X SURVIVAL; INDEMNIFICATION Section 10.01 Survival. (a) None of the representations, warranties, covenants or agreements of the parties contained in any Transaction Document or in any certificate or other writing delivered pursuant to any Transaction Document or in connection with any Transaction Document shall survive the Closing, except for: (i) the representations and warranties in Sections B.01, B.02 B.05, B.09(b) and B.14 shall survive indefinitely; (ii) the representations and warranties in Section B.15 shall not survive the Closing Date; (iii) the representations and warranties in Sections B.18 and B.20 shall survive until 30 days after the expiration of the applicable statute of limitations (or extensions or waivers thereof); (iv) the representations and warranties in Exhibit B (other than those Sections of Exhibit B referenced in the preceding clauses (i), (ii) and (iii)), shall survive for a period that is the earlier to occur of the date on which audited financial statements for TTSI are delivered to the Company by its independent auditors for TTSI's year ended December 31, 1999 or 18 months following the Closing Date; (v) the representations and warranties in Sections C.01, C.02, C.09 and C.10 shall survive indefinitely; (vi) the representations and warranties in Exhibit C (other than those Sections of Exhibit C referenced in the preceding clause (v)) shall survive for a period of one year from the Closing Date; (vii) the covenants and agreements set forth in Section 2.07 shall survive until payment of the final Annual Thiokol Payment contemplated thereby; and (viii) those covenants and agreements set forth in the Transaction Documents that, by their terms, are to have effect after the Closing Date shall survive for the period contemplated by the covenants and agreements, or if no period is expressly set forth, indefinitely. The representations, warranties, covenants and agreements referenced in the preceding clauses (i) and (iii) through (vii) are referred to herein as the "Surviving Representations or Covenants." It is understood and agreed that, (i) before the Closing the remedies expressly set -28- forth in Article XI are the sole and exclusive remedies for any breach of any representation, warranty, covenant or agreement and (ii) following the Closing the sole and exclusive remedy with respect to any breach of any representation, warranty, covenant or agreement (other than (1) with respect to a breach of the terms of a covenant or agreement, as to which Buyer or Parent, as the case may be, shall be entitled to seek specific performance or other equitable relief and (2) with respect to claims for fraud) shall be a claim for Damages (whether by contract, in tort or otherwise, and whether in law, in equity or both) made pursuant to this Article X. (b) Except as otherwise provided in this Agreement, Parent, its Affiliates and their respective Representatives and successors on the one hand, and TTSI and Buyer for itself, its Affiliates, TTSI and their respective Representatives and successors, on the other hand, effective as of the Closing, release and discharge one another from any and all Damages (whether by contract, in tort or both, and whether in law, in equity or both), rights of subrogation and contribution and remedies of any nature whatsoever, known or unknown, relating to or arising out of Environmental Liabilities or Environmental Laws, in either case, arising in connection with or in any way relating to TTSI or the TTS Business. Section 10.02 Indemnification. (a) Effective as of the Closing and subject to the limitations set forth in Section 10.04(a), Buyer hereby indemnifies Parent and its Affiliates and their respective directors, officers, employees and agents against, and agrees to hold them harmless from any and all Damages incurred or suffered by any of them, arising out of or related in any way to any misrepresentation or breach of any Surviving Representation or Covenant made or to be performed by Buyer pursuant to any of the Transaction Documents. Effective as of the Closing and subject to the limitations set forth in Section 10.04(a), TTSI hereby indemnifies Parent and its Affiliates and their respective directors, officers, employees and agents against, and agrees to hold them harmless from any and all Damages incurred or suffered by any of them arising out of or related in any way to (i) any misrepresentation or breach of any Surviving Representation or Covenant made or to be performed by Buyer or TTSI pursuant to any of the Transaction Documents, (ii) except as otherwise contemplated by Sections 10.02(b)(iii), 10.04(b)(ii) and Exhibit D, any Assumed Liabilities (including, without limitation, TTSI's failure to perform or in due course pay or discharge any Assumed Liability), (iii) any Financial Support Arrangement, (iv) any matters for which indemnification is provided under Exhibit D (it being understood that the terms of such indemnification shall be governed by and subject to the terms of Exhibit D) or (v) any liabilities or obligations arising in connection with or in any way relating to TTSI or the TTS Business (but only where and to the extent conducted on or after the Closing Date), or a facility the possession of which is transferred to TTSI after the date of this Agreement and at or prior to the Closing (but only during a period in which TTSI or any of its Affiliates or successors owns or leases such facility), or the use, ownership or operation of such facilities by TTSI or an Affiliate of TTSI, or a successor of TTSI or such Affiliate, whether vested or unvested, contingent or fixed, actual or potential, which arise under or relate to Environmental Laws to the extent conditions underlying such liabilities arise out of, relate to, are based on or result from any action taken by any Person other than a Seller Company or a willful or intentional failure by any such person to take action on or after the Closing Date, including, -29- without limitation, (A) Remedial Actions, (B) personal injury, wrongful death, economic loss or property damage claims, (C) claims for natural resource damages, (D) violations of Applicable Law or (E) any other Damages with respect to such Environmental Laws. Buyer hereby indemnifies Parent and its Affiliates and their respective directors, officers, employees and agents against, and agrees to hold them harmless from any and all Damages incurred or suffered by any of them and caused by any actions taken or failure to act by Buyer or any of its Representatives in connection with any environmental audit or similar review of the TTS Business that involves testing, drilling or sampling at any facility possession of which is contemplated to be transferred to TTSI, including, without limitation, (A) Remedial Actions, (B) personal injury, wrongful death, economic loss or property damage claims, (C) claims for natural resource damages, (D) violations of Applicable Law, or (E) any other Damages with respect to such Environmental Laws excluding any such Damages arising from pre-existing conditions of contamination which are identified but are not exacerbated by such audit or review. (b) Effective as of the Closing and subject to the limitations set forth in Section 10.04(b), Parent hereby indemnifies Buyer, TTSI and their Affiliates and their respective directors, officers, employees and agents against, and agrees to hold them harmless from any and all Damages incurred or suffered by any of them arising out of or related in any way to (i) any misrepresentation or breach of any Surviving Representation or Covenant made or to be performed by the Seller Companies pursuant to any Transaction Document, (ii) any Excluded Liabilities (including, without limitation, Parent's (or any other Seller Company's) failure to perform or in due course pay or discharge any Excluded Liability), (iii) any Environmental Liabilities to the extent the conditions underlying arise out of, relate to, are based on or result from actions taken (or failures to take action), conditions existing or events occurring prior to the Closing, (iv) any matters for which indemnification is provided under Exhibit D (it being understood that the terms of such indemnification shall be governed by and subject to the terms of Exhibit D) or (v) any indemnification paid by TTSI to any of its directors as a result of a claim by any Person (other than Buyer, TTSI or any of their respective Affiliates, any Permitted Assigns or any other Person (other than a Seller Company) who purchases shares of capital stock of TTSI) against such directors that is a result of any action taken by such directors on or prior to Closing. Section 10.03 Procedures. (a) If Parent or any of its Affiliates or any of their directors, officers, employees and agents, shall seek indemnification pursuant to Section 10.02(a), or if Buyer or any of its Affiliates or any of their directors, officers, employees and agents, shall seek indemnification pursuant to Section 10.02(b), the Person seeking indemnification (the "Indemnified Party") shall give written notice to the party from whom such indemnification is sought (the "Indemnifying Party") promptly (and in any event within 30 days) after the Indemnified Party (or, if the Indemnified Party is a corporation, any officer or employee of the Indemnified Party) becomes aware of the facts giving rise to such claim for indemnification (an "Indemnified Claim") specifying in reasonable detail the factual basis of the Indemnified Claim, stating the amount of the Damages, if known, the method of computation thereof, containing a reference to the provision of the Transaction Documents in respect of which such Indemnified Claim arises and demanding -30- indemnification therefor. The failure of an Indemnified Party to provide notice in accordance with this Section 10.03 shall not constitute a waiver of that party's claims to indemnification pursuant to Section 10.02, except to the extent that (i) any such failure or delay in giving notice causes the amounts paid by the Indemnifying Party to be greater than they otherwise would have been or otherwise results in prejudice to the Indemnifying Party or (ii) such notice is not delivered to the Indemnifying Party prior to the expiration of the applicable survival period set forth in Section 10.01. If the Indemnified Claim arises from the assertion of any claim, or the commencement of any suit, action, proceeding or Remedial Action brought by a Person that is not a party hereto (a "Third Party Claim"), any such notice to the Indemnifying Party shall be accompanied by a copy of any papers theretofore served on or delivered to the Indemnified Party in connection with such Third Party Claim. (b) (i) Upon receipt of notice of a Third Party Claim from an Indemnified Party pursuant to Section 10.03(a), the Indemnifying Party will be entitled to assume the defense and control of such Third Party Claim subject to the provisions of this Section 10.03. After written notice by the Indemnifying Party to the Indemnified Party of its election to assume the defense and control of a Third Party Claim, the Indemnifying Party shall not be liable to such Indemnified Party for any legal fees or expenses subsequently incurred by such Indemnified Party in connection therewith. Notwithstanding anything in this Section 10.3 to the contrary, if the Indemnifying Party does not assume defense and control of a Third Party Claim as provided in this Section 10.3, the Indemnified Party shall have the right to defend such Third Party Claim, subject to the limitations set forth in this Section 10.03, in such manner as it may deem appropriate. Whether the Indemnifying Party or the Indemnified Party is defending and controlling any such Third Party Claim, they shall select counsel, contractors, experts and consultants of recognized standing and competence, shall take all steps necessary in the investigation, defense or settlement thereof, and shall at all times diligently and promptly pursue the resolution thereof. The party conducting the defense thereof shall at all times act as if all Damages relating to the Third Party Claim were for its own account and shall act in good faith and with reasonable prudence to minimize Damages therefrom. The Indemnified Party shall, and shall cause each of its Affiliates, directors, officers, employees, and agents to, cooperate fully with the Indemnifying Party in connection with any Third Party Claim. (ii) Subject to the provisions of Section 10.03(b)(iii) and Section 10.03(b)(iv), the Indemnifying Party shall be authorized to consent to a settlement of, or the entry of any judgment arising from, any Third Party Claims, and the Indemnified Party shall consent to a settlement of, or the entry of any judgment arising from, such Third Party Claims; provided, that the Indemnifying Party shall (1) pay or cause to be paid all amounts arising out of such settlement or judgment concurrently with the effectiveness thereof; (2) shall not encumber any of the assets of any Indemnified Party or agree to any restriction or condition that would apply to such Indemnified Party or to the conduct of that party's business; and (3) shall obtain, as a condition of any settlement or other resolution, a complete release of each Indemnified Party. Except to the extent of the foregoing, no settlement or entry of judgment in respect of any Third Party Claim shall be consented to by any Indemnifying Party or Indemnified Party without the express written consent of the other party. -31- (iii) Notwithstanding the provisions of Section 10.03(b)(i), Buyer shall manage all Remedial Actions conducted with respect to facilities which constitute Contributed Assets, provided that Parent and its Representatives shall have the right, consistent with Buyer's right to manage such Remedial Actions as aforesaid, to participate fully in all decisions regarding any Remedial Action, including reasonable access to sites where any Remedial Action is being conducted, reasonable access to all documents, correspondence, data, reports or information regarding the Remedial Action, reasonable access to employees and consultants of Buyer with knowledge of relevant facts about the Remedial Action and the right to attend all meetings and participate in any telephone or other conferences with any Government Authority or other third party regarding the Remedial Action. (iv) In the case of the indemnification contemplated by Section 10.02(b)(iii), in the event that the Indemnifying Party desires to settle the matters referenced therein or consent to the entry of any judgment arising thereunder and the Indemnified Party does not wish to consent to such settlement or entry of judgment, the Indemnified Party shall have no obligation to consent to the settlement or entry of judgment provided that it agrees in writing to pay and be responsible for 100% of any Damages; provided that the Indemnified Party shall not be required to consent to any settlement or agree to be responsible for the payment of Damages thereafter incurred with respect to any matter the settlement or entry of judgment of which would require the consent of such Indemnified Party pursuant to Section 10.03(b)(ii). The obligation of an Indemnified Party that rejects any proposed settlement offer or entry of any such judgment to pay and be responsible for 100% of any Damages in accordance with this Section 10.03(b)(iv) shall be conditioned upon and subject to the payment by the Indemnifying Party, within five Business Days of the date such Indemnified Party provides the written agreement contemplated by the preceding sentence, of an amount, in immediately available funds, equal to the portion of the total settlement that would have been payable by the Indemnifying Party according to the percentage sharing arrangement contemplated by Section 10.04(b)(ii). Thereafter, the Indemnified Party shall be solely responsible for any Damages and for the defense of the matter that is the subject of the proposed settlement or entry of judgment. Notwithstanding the foregoing, an Indemnifying Party may, at its option and expense, participate in the defense of any Indemnified Claim. (v) In furtherance of and not in limitation of the provisions of this Section 10.03, with respect to product liability matters and other matters contemplated by Exhibit E, Parent and Buyer covenant and agree as set forth in Exhibit E. (c) If the Indemnifying Party and the Indemnified Party are unable to agree with respect to a procedural matter arising under Section 10.03(b)(iii), the Indemnifying Party and the Indemnified Party shall, within 10 days after notice of disagreement given by either party, agree upon a third-party referee ("Referee"), who shall be an environmental attorney or environmental consultant as appropriate under the circumstances and who shall have the authority to review and resolve the disputed matter. The parties shall present their differences in writing (each party simultaneously providing to the other a copy of all documents submitted) to the Referee and shall cause the Referee promptly to review any facts, law or arguments either the Indemnifying Party or the Indemnified Party may present. The Referee shall be retained to resolve specific differences between the parties within the range of such differences. Either party may request -32- that all discussions with the Referee by either party be in each other's presence. The decision of the Referee shall be final and binding unless both the Indemnifying Party and the Indemnified Party agree. The parties shall share equally all costs and fees of the Referee. (d) If an Indemnifying Party makes any payment on an Indemnified Claim, the Indemnifying Party shall be subrogated, to the extent of such payment, to all rights and remedies of the Indemnified Party to any insurance benefits or other claims or benefits of the Indemnified Party with respect to such claim. Section 10.04 Limitations. Notwithstanding anything to the contrary in this Agreement or in any of the Transaction Documents (other than in Section 7.08, but, except to the extent of Assumed Liabilities): (a) Buyer and TTSI shall only have liability to Parent or any other Person hereunder with respect to the representations and warranties described in clause (i) of Section 10.02(a) if such matters were the subject of a written notice given by the Indemnified Party pursuant to Section 10.03(a) within the period following the Closing Date specified for each respective matter in Section 10.01. Effective as of the Closing, and subject to the limitations set forth in Section 10.04(a), Buyer hereby indemnifies Parent and its Affiliates and their respective directors, officers, employees and agents against, and agrees to hold them harmless from any and all Damages incurred or suffered by any of them, arising out of or related in any way to any misrepresentation or breach of any Surviving Representation or Covenant made or to be performed by Buyer pursuant to any of the Transaction Documents. (b) Parent shall only have liability to Buyer, TTSI or any other Person hereunder: (i) with respect to the representations and warranties described in clause (i) of Section 10.02(b), (y) to the extent that the aggregate Damages of all Indemnified Parties as the result thereof exceed $5,000,000 but are not greater than an amount equal to $5,000,000 plus 25% of the Adjusted Purchase Price (it being understood that Parent's maximum liability under Section 10.02(b)(i) with respect to representations and warranties and this Section 10.04(b)(i) shall be an amount equal to 25% of the Adjusted Purchase Price), and (z) if such matters were the subject of a written notice given by the Indemnified Party pursuant to Section 10.03(a) within the period following the Closing Date specified for each respective matter in Section 10.01; and (ii) with respect to the matters described in clause (iii) of Section 10.02(b), to the extent of (x) 50% of the first $10,000,000 and (y) 80% of all amounts over $10,000,000 of the aggregate Damages incurred and paid within five years following the Closing Date by all Indemnified Parties as the result thereof based on the use of the facilities constituting Contributed Assets. -33- ARTICLE XI TERMINATION Section 11.01 Termination. The Transaction Documents may be terminated at any time prior to the Closing: (i) by mutual written agreement of Parent and Buyer; (ii) by Parent or Buyer if the Closing shall not have been consummated on or before September 30, 1998; provided, however, that neither Parent nor Buyer may terminate the Transaction Documents pursuant to this clause (ii) if the Closing shall not have been consummated on or before September 30, 1998, by reason of the failure of such party or any of its Affiliates to perform in all material respects any of its or their respective covenants or agreements contained in the Transaction Documents; (iii) by either Parent or Buyer if there shall be any Applicable Law that makes consummation of the Contemplated Transactions illegal or otherwise prohibited or if consummation of the Contemplated Transactions would violate any order, decree or judgment of any Governmental Authority having competent jurisdiction; (iv) by Buyer if there shall have occurred following March 29, 1998 a material adverse effect on the assets, properties, business, financial condition, results of operations or prospects of the TTS Business taken as a whole; and (v) by Buyer or Parent if the other party shall have materially breached any representation or warranty or any covenant hereunder and such breach prevents or renders impossible the satisfaction of any of the conditions to Closing set forth herein; provided, that as a condition to the right of a party to elect to terminate this Agreement pursuant to the immediately preceding proviso, the parties shall first provide 10 Business Days prior written notice to the other party specifying in reasonable detail the nature of the condition that such party has concluded will not be satisfied, and the other party shall be entitled during such 10 Business Day period to take any actions it may elect consistent with the terms of this Agreement such that the condition reasonably could be expected to be satisfied prior to the expiration of such time period. Any party desiring to terminate this Agreement pursuant to this Section 11.01 shall give written notice of such termination to the other parties to this Agreement. Section 11.02 Effect of Termination. If this Agreement is terminated as permitted by Section 11.01, such termination shall be without liability of any party (or any Affiliate, stockholder, director, officer, employee, agent, consultant or Representative of such party) to any other party to this Agreement; provided, however, that if the Contemplated Transactions fail to close as a result of a breach of the provisions of any Transaction Document by Parent or Buyer, such party shall be fully liable for any and all losses and other damages incurred or suffered by -34- the other party as a result of all such breaches if the other party is ready, willing and able to otherwise satisfy in all material respects its obligations under the Transaction Documents. Notwithstanding the foregoing, the provisions of Sections 6.01 and 12.03 and this Section 11.02 shall survive any termination hereof pursuant to Section 11.01. ARTICLE XII MISCELLANEOUS Section 12.01 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given, if to Parent (or TTSI prior to Closing): c/o The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21286 Attention: Senior Vice President and Chief Financial Officer Telecopy: (410) 716-3318 with a copy to: The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21286 Attention: Senior Vice President and General Counsel Telecopy: (410) 716-2660 and Miles & Stockbridge P.C. 10 Light Street Baltimore, Maryland 21202 Attention: Glenn C. Campbell David A. Gibbons Telecopy: (410) 385-3700 -35- if to Buyer (or TTSI after Closing): TTSI LLC c/o Cornerstone Equity Investors, LLC 717 5th Avenue Suite 1100 New York, New York 10022 Attention: Mr. Mark Rossi Telecopy: (212) 826-6798 with a copy to: Kirkland & Ellis 153 East 53rd Street New York, New York 10022 Attention: Frederick Tanne, Esquire Telecopy: (212) 446-4900 or to such other address or telecopy number and with such other copies, as such party may hereafter specify by notice to the other parties. Each such notice, request or other communication shall be effective (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section 12.01 and evidence of receipt is received or (ii) if given by any other means, upon delivery or refusal of delivery at the address specified in this Section 12.01. Section 12.02 Amendments; Waivers. (a) Subject to the provisions of Section 9.04, any provision of the Transaction Documents may be amended or waived prior to the Closing Date if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by Parent and Buyer, or in the case of a waiver, by the party against whom the waiver is to be effective. (b) No failure or delay by any party in exercising any right, power or privilege under any Transaction Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 12.03 Expenses. Except as otherwise provided in the Transaction Documents, all costs and expenses incurred in connection with the Transaction Documents shall be paid by the party incurring such cost or expense; provided that TTSI shall not incur any material costs or expenses on behalf of Parent or any Seller Company in connection with the transactions contemplated hereby (except for any costs, expenses or fees associated with the transfer of the Japanese country club membership to TTSI under the terms of that membership). Notwithstanding the foregoing, after Closing, TTSI may pay reasonable costs, expenses and fees incurred by Buyer, Cornerstone Equity Investors IV, LP, or Cornerstone Equity Investors, LLC -36- in connection with the Contemplated Transactions, including a closing fee to Cornerstone Equity Investors LLC or one of its Affiliates. Section 12.04 Successors and Assigns. The provisions of the Transaction Documents shall be binding upon and inure to the benefit of the parties and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other party, provided the Buyer may assign its or TTSI's rights hereunder to an agent for the financing sources in connection with the Contemplated Transactions, as collateral security for TTSI's obligations, and Buyer may assign its rights to purchase Acquired Shares to Permitted Assignees. Section 12.05 Disclosure. Certain information set forth in the Disclosure Schedules has been included and disclosed solely for informational purposes and may not be required to be disclosed pursuant to the terms and conditions of the Transaction Documents. The disclosure of any such information shall not be deemed to constitute an acknowledgement or agreement that the information is required to be disclosed in connection with the representations and warranties made in the Transaction Documents or that the information is material, nor shall any information so included and disclosed be deemed to establish a standard of materiality or otherwise used to determine whether any other information is material. Section 12.06 Construction. As used in the Transaction Documents, any reference to the masculine, feminine or neuter gender shall include all genders, the plural shall include the singular, and the singular shall include the plural. With regard to each and every term and condition of the Transaction Documents, the parties understand and agree that the same have or has been mutually negotiated, prepared and drafted, and that if at any time the parties desire or are required to interpret or construe any such term or condition or any agreement or instrument subject hereto, no consideration shall be given to the issue of which party actually prepared, drafted or requested any term or condition of the Transaction Documents. Section 12.07 Entire Agreement. (a) The Transaction Documents and any other agreements contemplated thereby (including, to the extent contemplated herein, the Confidentiality Agreement) constitute the entire agreement among the parties with respect to the subject matter of such documents and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter thereof. (b) The parties hereto acknowledge and agree that no representation, warranty, promise, inducement, understanding, covenant or agreement has been made or relied upon by any party hereto other than those expressly set forth in the Transaction Documents. Without limiting the generality of the disclaimer set forth in the preceding sentence, (i) neither Parent nor any of its Affiliates has made or shall be deemed to have made any representations or warranties, in any presentation or written information relating to TTSI or the TTS Business given or to be given in connection with the Contemplated Transactions, in any filing made or to be made by or on behalf of Parent or any of its Affiliates with any Governmental Authority, and no statement, -37- made in any such presentation or written materials, made in any such filing or contained in any such other information shall be deemed a representation or warranty hereunder or otherwise, (ii) neither Parent nor any of its Affiliates has made or shall be deemed to have made any representations or warranties in respect of the accounting or tax treatment to be afforded Buyer, TTSI or the TTS Business in respect of the Contemplated Transactions, and (iii) Parent, on its own behalf and on behalf of the other Seller Companies, expressly disclaims any implied warranties, including but not limited to warranties of fitness for a particular purpose and warranties of merchantability. Buyer acknowledges that Parent has informed it that no Person has been authorized by Parent or any of its Affiliates to make any representation or warranty in respect of TTSI or the TTS Business or in connection with the Contemplated Transactions, unless in writing and contained in this Agreement or in any of the Transaction Documents to which they are a party. (c) Except as expressly provided herein or in any other Transaction Document, no Transaction Document or any provision thereof is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. Section 12.08 Governing Law. Except as otherwise provided in any of the Transaction Documents, this Agreement and the other Transaction Documents shall be construed in accordance with and governed by the law of the State of Delaware (without regard to the choice of law provisions thereof). Section 12.09 Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. Section 12.10 Jurisdiction. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, any of the Transaction Documents or the Contemplated Transactions shall be brought in the United States District Court for the District of Delaware (or, if subject matter jurisdiction is unavailable, any of the state courts of the State of Delaware), and each of the parties hereby consents to the exclusive jurisdiction of such court (and of the appropriate appellate court) in any such suit, action or proceeding and waives any objection to venue laid therein. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the State of Delaware. Without limiting the foregoing, Parent, TTSI and Buyer agree that service of process upon such party at the address referred to in Section 12.01, together with written notice of such service to such party, shall be deemed effective service of process upon such party. Section 12.11 Severability. Any provision of the Transaction Documents that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of the Transaction Documents or affecting the validity or enforceability of such provision in any other jurisdiction. To the extent any provision of the Transaction Documents is determined to be prohibited or unenforceable in any jurisdiction Parent and Buyer agree to use reasonable -38- commercial efforts, and agree to cause the other Seller Companies and TTSI, as the case may be, to use reasonable commercial efforts, to substitute one or more valid, legal and enforceable provisions that, insofar as practicable implement the purposes and intent of the prohibited or unenforceable provision. Section 12.12 Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. Section 12.13 Bulk Sales. Buyer and TTSI hereby waive compliance by Parent and each Seller Company, in connection with the Contemplated Transactions, with the provisions of Article 6 of the Uniform Commercial Code as adopted in the States of Tennessee, California, Maryland and Mississippi, and as adopted in any other states or jurisdictions where any of the Contributed Assets or Transferred Intellectual Property are located, and any other applicable bulk sales or similar laws with respect to or requiring notice to Parent's (or any Seller Company) creditors, as the same may be in effect on the date of such contribution or transfer, as the case may be. Parent shall indemnify and hold harmless TTSI against any and all liabilities (other than liabilities in respect of Assumed Liabilities) which may be asserted by third parties against TTSI as a result of noncompliance with any such bulk sales or similar law. IN WITNESS WHEREOF, the parties hereto caused this Agreement to be duly executed by their respective authorized officers on the day and year first above written. THE BLACK & DECKER CORPORATION By: /s/ STEPHEN F. REEVES Stephen F. Reeves Vice President and Controller TRUE TEMPER SPORTS, INC. By: /s/ STEPHEN F. REEVES Stephen F. Reeves Vice President TTSI LLC By: /s/ TYLER J. WOLFRAM Tyler J. Wolfram EXHIBIT A DEFINITIONS (a) The following terms have the following meanings: "Acquired Shares" means the shares of capital stock of TTSI to be acquired by Buyer from EII, all as contemplated by Section 2.03(b). "Affiliate" means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such other Person. For purposes of determining whether a Person is an Affiliate, the term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of securities, contract or otherwise. For purposes of this Agreement, TTSI shall not be deemed to be an Affiliate of Parent or any other Seller Companies after Closing. "Amory Facility" means the TTS Business' steel shaft manufacturing facility located in Amory, Mississippi. "Applicable Law" means, with respect to any Person, any domestic or foreign, federal, state or local statute, law, ordinance, rule, administrative interpretation, regulation, order, writ, injunction, decree or other requirement of any Governmental Authority (including any Environmental Law) applicable to such Person or any of their respective properties, assets, officers, directors, employees, consultants or agents (in connection with such officer's, director's, employee's, consultant's or agent's activities on behalf of such Person). "Assignment and Assumption Agreement" means the Assignment and Assumption Agreement to be entered into by EII and TTSI, in the form contemplated by Attachment II (with such changes as may be required to satisfy any requirements of Applicable Law in any country or jurisdiction where Contributed Assets are located) and any other similar agreements contemplated by this Agreement executed and delivered by EII and TTSI in connection with the sale, assignment and transfer by EII or a Seller Company of Contributed Assets and the assumption by EII And TTSI of Assumed Liabilities, as the same may be amended from time to time. "Assumed Liabilities" means all debts, liabilities and obligations of Seller Companies, to the extent relating to or arising out of the operation, affairs and conduct of the TTS Business, the Contributed Assets or the TTSI Leases, of any kind, character or description, whether liquidated or unliquidated, known or unknown, fixed or contingent, accrued or unaccrued, absolute, determined, determinable or indeterminable or otherwise, whether or not reflected or reserved against in the Opening Statement or in the calculation of the Final Net Working Capital Amount and whether presently in existence or arising hereafter, except for Excluded Liabilities, including but not limited to the following: (i) all debts, liabilities and obligations relating to the TTS Business, the Contributed Assets or the Transferred Intellectual Property, whether accrued, liquidated, contingent, matured or unmatured, at or prior to the date the transactions contemplated by Section 2.01 are consummated, that (a) are set forth on, reflected or referred to in the Opening Statement, (b) are disclosed in any of the Disclosure Schedules delivered hereunder, (c) would be subject to disclosure in any of the Disclosure Schedules delivered in connection with any of Parent's representations and warranties but for the materiality standards contained in such representation and warranty, (d) are reflected in the Final Net Working Capital Amount as determined in accordance with Section 2.06 herein (including without limitation accounts payable and reserves reflected as contra-asset accounts) or (e) are otherwise a liability or obligation that TTSI is expressly assuming in accordance with this Agreement; (ii) all liabilities and obligations arising under Contracts, whether or not the Contracts have been completed or terminated prior to the Closing Date, including, without limitation, any such liabilities and obligations arising from or relating to the performance or non-performance of the Contracts by TTSI, Buyer or any other Person, whether arising prior to, on or after the Closing Date, except to the extent they constitute Excluded Liabilities and except to the extent that a claim of non-performance, breach or other violation has been asserted prior to Closing and is not otherwise included within clause (xi); (iii) all liabilities and obligations in respect of employees and former employees of TTSI or the TTS Business, and beneficiaries of employees and former employees of TTSI or the TTS Business, including, without limitation, liabilities and obligations under or relating to WARN or any similar state or local law to the extent relating to or arising out of any actions taken by TTSI or Buyer or any Affiliate of either of the foregoing on or after the Closing Date, except to the extent otherwise required by Exhibit D to be retained by Parent or Seller Companies; (iv) all liabilities and obligations in respect of Transferred Employees and dependents and beneficiaries of Transferred Employees under (A) Employee Plans to the extent listed or referred to in Schedule B.20, (B) post employment medical, dental, or life insurance benefits, and (C) Benefit Arrangements to the extent such Benefit Arrangements are listed on or referred to in Schedule B.20, but in the case of the foregoing clause (C) limited to an amount equal to the extent that such liabilities or obligations are reflected in the Final Net Working Capital Amount or cash equal to such liabilities or obligations is transferred to TTSI on the Closing Date, plus $100,000, except to the extent otherwise required by Exhibit D to be retained by Parent or Seller Companies; (v) all liabilities and obligations relating to claims of manufacturing or design defects with respect to any product sold or service provided by TTSI prior to, on or after the Closing Date, including liabilities and obligations in respect of investigations regarding product safety, product recall and related matters, except to the extent they constitute Excluded Liabilities; (vi) all liabilities and obligations relating to warranty obligations or services with respect to any product manufactured or sold or service provided by TTSI or the TTS Business prior to, on or after the Closing Date; (vii) all Environmental Liabilities, whether arising prior to, on or after the Closing Date, to the extent relating to or arising out of conditions at, or the current or former operations of TTSI or the TTS Business at, the facilities owned or leased by TTSI or the TTS Business as of the date the transactions contemplated by Section 2.01(ii) of this Agreement are consummated and included in the Contributed Assets (whether by fee ownership or leasehold interest), except to the extent they constitute Excluded Liabilities; (viii) all liabilities and obligations relating to the TTSI Leases, whether arising prior to, on or after the Closing Date; (ix) all Tax liabilities and obligations relating to sales and use taxes, gross receipts taxes, property taxes, licenses, employee and employer withholding and unemployment taxes and other non-income Taxes relating exclusively to TTSI or the TTS Business; (x) all liabilities and obligations arising from or relating to governmental, judicial or adversarial proceedings (public or private), litigation, suits, arbitration, disputes, claims, causes of action or investigations (collectively, "Proceedings") arising from or directly or indirectly relating to the TTS Business, any Contributed Assets or any Transferred Intellectual Property, whether or not accrued, liquidated, contingent, matured, unmatured, or known or unknown to Parent or Buyer at or prior to the Closing, except for liabilities and obligations of a type contemplated by the foregoing clause (v), which shall be governed by such clause; and (xi) all liabilities and obligations relating to the ownership by TTSI or any of its successors of the Contributed Assets, directly or indirectly relating to the Transferred Employees, the lease of properties under the TTSI Leases or otherwise, or the conduct of the TTS Business or any other business, in each case, arising from actions occurring after the Closing Date, including, without limitation, any and all Proceedings in respect thereof. "Benefit Arrangements" means all life and health insurance, hospitalization, retirement, savings, bonus, deferred compensation, incentive compensation, severance pay, disability and fringe benefit plans, holiday or vacation pay, profit sharing, seniority, and other policies, practices, agreements or statements of terms and conditions providing employee or executive compensation or benefits to employees of the TTS Business or any of their dependents, which are maintained by Seller Companies and constitute Assumed Liabilities, other than an Employee Plan. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close. "Closing Date" means the date of the Closing. "Code" means the Internal Revenue Code of 1986, as amended. "Commitment Letters" means the following letters expressing the commitment of reputable third parties relating to the debt financing contemplated by Section 2.02: (i) that certain letter, dated June 28, 1998 (including the Annexes attached thereto) from DLJ Capital Funding, Inc. and Donaldson, Lufkin & Jenrette Securities Corporation to Cornerstone Equity Investors IV, L.P. regarding the commitment to provide certain senior secured financing and (ii) that certain letter dated June 28, 1998 (including the Annexes attached thereto) from DLJ Bridge Financing, Inc. to Cornerstone Equity Investors IV, L.P. regarding the commitment to provide certain bridge financing. "Confidentiality Agreement" means the letter agreement dated March 13, 1998, by and between Parent and Buyer, as the same has been or may be amended from time to time. "Contemplated Transactions" means the transactions contemplated by the Transaction Documents. "Contracts" means all contracts, agreements, leases (including leases of real property), licenses, commitments, sales and purchase orders, and other undertakings of any kind, whether written or oral, relating exclusively to the TTS Business other than Employee Plans and Benefit Arrangements. "Contributed Assets" means, other than Excluded Assets and Transferred Intellectual Property, all of the assets, properties, rights, licenses, permits, Contracts, causes of action and business of every kind and description as the same shall exist on the date of the contributions contemplated by Section 2.01(ii) of this Agreement, wherever located, real, personal or mixed, tangible or intangible, owned by, leased by or in the possession of Parent or any Seller Company, whether or not reflected in the books and records thereof, and held or used exclusively in the conduct of the TTS Business as the same shall exist on the date of the capital contribution of EII contemplated by Section 2.01 of this Agreement, and including, without limitation, except as otherwise specified herein, all direct or indirect right, title and interest of Parent or any Seller Company in, to and under: (i) the Olive Branch Property, together with all buildings, fixtures, easements, rights of way, and improvements thereon and appurtenances thereto to the extent relating to the TTS Business; (ii) the rights and interests of Seller Companies under the TTSI Leases; (iii) all personal property and interests therein (other than Intellectual Property), including machinery, equipment, furniture, office equipment, communications equipment, vehicles, storage tanks, spare and replacement parts, fuel and other tangible property (and interests in any of the foregoing) owned by any Seller Company that are used exclusively in connection with the TTS Business; (iv) all Inventory that is owned by Seller Companies and held for sale, use or consumption exclusively in the TTS Business; (v) all Contracts; (vi) all accounts, accounts receivable and notes receivable whether or not billed, accrued or otherwise recognized in the Opening Statement or taken into account in the determination of the Final Net Working Capital Amount, together with any unpaid interest or fees accrued thereon or other amounts due with respect thereto of Seller Companies that relate exclusively to the TTS Business, and any security or collateral for any of the foregoing; (vii) all expenses that have been prepaid by Seller Companies relating exclusively to the operation of the TTS Business, including but not limited to ad valorem Taxes, lease and rental payments; (viii) all of Parent's or any of Seller Companies' rights, claims, credits, causes of action or rights of set-off against Persons other than Seller Companies relating exclusively to the TTS Business or the Contributed Assets, including, without limitation, unliquidated rights under manufacturers' and vendors' warranties; (ix) all transferable franchises, licenses, permits or other governmental authorizations owned by, or granted to, or held or used by, Seller Companies and exclusively related to the TTS Business; (x) except to the extent a Seller Company is required to retain the originals pursuant to any Applicable Law (in which case copies will be provided to TTSI upon request), all business books, records, files and papers, whether in hard copy or computer format, of a Seller Company used exclusively in the TTS Business, including, without limitation, books of account, invoices, engineering information, sales and promotional literature, manuals and data, sales and purchase correspondence, lists of present and former suppliers, lists of present and former distributors, lists of present and former customers, personnel and employment records of present or former employees, documentation developed or used for accounting, marketing, engineering, manufacturing, or any other purpose relating to the conduct of the TTS Business at any time prior to the Closing; (xi) the right to represent to third parties that TTSI is the successor to the TTS Business; and (xii) all insurance proceeds (except to the extent relating to Excluded Assets or Excluded Liabilities or to the extent relating to or arising out of Environmental Insurance Claims), net of any retrospective premiums, deductibles, retention or similar amounts, arising out of or related to damage, destruction or loss of any property or asset of or used exclusively in connection with the TTS Business to the extent of any damage or destruction that remains unrepaired, or to the extent any property or asset remains unreplaced at the Closing Date. "Damages" means all demands, claims, actions or causes of action, assessments, losses, damages, costs, expenses, liabilities, judgments, awards, fines, sanctions, penalties, charges and amounts paid in settlement, including, without limitation, reasonable costs, fees and expenses of attorneys, experts, accountants, appraisers, consultants, witnesses, investigators and any other agents or representatives of such Person (with such amounts to be determined net of any resulting Tax benefit actually received or realized and net of any refund or reimbursement of any portion of such amounts actually received or realized, including, without limitation, reimbursement by way of insurance or third party indemnification), but specifically excluding (i) any costs incurred by or allocated to an Indemnified Party with respect to time spent by employees of the Indemnified Party or any of its Affiliates, (ii) any lost profits or opportunity costs or exemplary or punitive damages (except to the extent assessed in connection with a third-party claim with respect to which the Person against which such damages are assessed is entitled to indemnification hereunder) and (iii) the decrease in the value of any Contributed Asset to the extent that such valuation is based on any use of the Contributed Asset other than its use as of the Closing Date. "Disclosure Schedules" means the Disclosure Schedules dated the date of this Agreement relating to this Agreement, as amended from time to time in accordance with this Agreement. "EBIT Contribution" means revenues derived from the Thiokol Contract, less (i) cost of sales of the Thiokol Contract, (ii) direct selling, general and administrative costs of the Thiokol Contract, and (iii) an amount equal to indirect non-promotional selling, general and administrative costs of TTSI times the ratio of revenues derived from the Thiokol Contract to total revenues of TTSI. "EII" means Emhart Industries, Inc., a Delaware corporation. "Emhart" means Emhart Inc., a Delaware corporation. "Employee Plans" means each "employee benefit plan" as defined in Section 3(3) of ERISA, maintained or contributed to by Parent or any of its Affiliates which provides benefits to employees of TTSI or the TTS Business or their dependents. "Encumbrances" means Liens, title defects, encumbrances, easements and restrictions, invalidities of leasehold interests. "Environmental Claim" means any written or oral notice, claim, demand, action, suit, complaint, proceeding or other communication by any third Person alleging liability or potential liability (including without limitation liability or potential liability for investigatory costs, cleanup costs, governmental response costs, natural resource damages, property damage, personal injury, fines or penalties) arising out of, relating to, based on or resulting from (i) the presence, discharge, emission, release or threatened release of any Hazardous Substances at any location, (ii) circumstances forming the basis of any violation or alleged violation of any Environmental Laws, or (iii) otherwise relating to obligations or liabilities under any Environmental Laws. "Environmental Laws" means any and all past, present or future federal, state, local and foreign statutes, laws, regulations, ordinances, judgments, orders, permits, codes, or injunctions, and all common law, which (i) impose liability for or standards of conduct concerning the manufacture, processing, generation, distribution, use, treatment, storage, disposal, cleanup, transport or handling of Hazardous Substances including, The Resource Conservation and Recovery Act of 1976, as amended, The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, The Superfund Amendment and Reauthorization Act of 1984, as amended, The Toxic Substances Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, to the extent it relates to the handling of and exposure to hazardous or toxic materials or similar substances, and any other so-called "Superfund" or "Superlien" law or (ii) otherwise relate to the protection of human health or the environment. "Environmental Liabilities" means all liabilities to the extent arising in connection with or in any way relating to the TTS Business or Parent's or any of its Affiliates' use or ownership thereof, whether vested or unvested, contingent or fixed, actual or potential, which arise under or relate to Environmental Laws including, without limitation, (i) Remedial Actions, (ii) personal injury, wrongful death, economic loss or property damage claims, (iii) claims for natural resource damages, (iv) violations of law or (v) any Damages with respect thereto. Notwithstanding the foregoing, Environmental Liabilities shall not include any increased liabilities resulting from or arising out of a use of a facility constituting a Contributed Asset other than an industrial use. "ERISA" means the Employee Retirement Income Security act of 1974, as amended. "Excluded Assets" means: (i) all cash and cash equivalents of Seller Companies, including, without limitation, cash and cash equivalents used as collateral for letters of credit, advance payments, deposits with utilities, insurance companies and other Persons, except to the extent taken into account in the determination of the Final Net Working Capital Amount; (ii) all original books and records that Seller Companies shall be required to retain pursuant to any Applicable Law (in which case copies of such books and records to the extent relating to the TTS Business shall be provided to TTSI upon request), or that contain information relating to any business or activity of Seller Companies not forming a part of the TTS Business, or any employee of a Seller Company that is not a Transferred Employee; (iii) all Tax assets of any Seller Companies, other than Tax assets relating to sales and use taxes, gross receipts taxes, property taxes, licenses, employee and employer withholding and unemployment taxes and other non-income related taxes relating exclusively to the TTS Business; (iv) all assets of Seller Companies not held or owned by or used exclusively in connection with the TTS Business; (v) all rights and claims of Seller Companies under any of the Transaction Documents and the agreements and instruments delivered to Seller Companies by Buyer pursuant to any of the Transaction Documents; (vi) all accounts receivable, notes receivable or similar claims or rights (whether or not billed or accrued) of the TTS Business from any Seller Companies; (vii) all capital stock or any other securities of any Seller Companies or any other Person; (viii) all Intellectual Property not used or held for use exclusively in the TTS Business; (ix) all assets related to Excluded Liabilities, including, without limitation, any reserve on the books of Parent or TTSI relating to any labor grievances filed by employees prior to Closing; (x) all ownership and leasehold interests of Seller Companies in respect of the facility, real property, fixtures and equipment located at or constituting the Seneca and Wheatley Facilities; and (xi) all accounts receivable, notes receivable or similar claims or rights of Seller Companies arising out of or relating to any judgments entered by a court or arbitrator prior to the Closing Date in favor of Seller Companies, except to the extent taken into account in the determination of the Final Net Working Capital Amount. "Excluded Liabilities" means the following liabilities and obligations: (i) all liabilities and obligations of Seller Companies not arising out of the conduct of the TTS Business, except as otherwise specifically provided in the Transaction Documents; (ii) except as otherwise specifically provided in the Transaction Documents, all liabilities or obligations for any Tax arising from or with respect to the Contributed Assets or the operations of the TTS Business prior to the date on which the transactions contemplated by Section 2.01 of this Agreement are consummated, other than Tax liabilities or obligations relating to sales and use taxes, gross receipts taxes, property taxes, licenses, employee and employer withholding and unemployment taxes and other non-income related taxes; (iii) all liabilities or obligations, whether presently in existence or arising after the date of this Agreement, in respect of accounts payable, notes payable (including intercompany promissory notes and similar financing arrangements) or similar obligations (whether or not billed or accrued) to Seller Companies, except for amounts accrued by the TTS Business and not billed by Seller Companies to the TTS Business as of the date on which the transaction contemplated by Section 2.01 of this Agreement are consummated in respect of accounts payable, notes payable or similar obligations relating to specific services provided to and specific expenses paid on behalf of the TTS Business by Seller Companies; (iv) all liabilities or obligations, whether presently in existence or arising after the date of the Agreement, relating to fees, commissions or expenses owed to any broker, finder, investment banker, accountant, attorney or other intermediary or advisor employed by Seller Companies in connection with the Contemplated Transactions; (v) all liabilities or obligations retained by Parent pursuant to Exhibit D; (vi) except to the extent otherwise covered by Exhibit D, all liabilities or obligations related to Excluded Assets; (vii) all liabilities or obligations related to claims of manufacturer or design defects with respect to any products sold or services provided by the TTS Business prior to, on or after the Closing Date, including liabilities and obligations in respect of investigations regarding product safety, product recall and related matters, to the extent but only to the extent relating to products manufactured or sold prior to the Closing Date; (viii) all Environmental Liabilities, whether arising prior to, on or after the date on which the transactions contemplated by Section 2.01 are consummated, (1) relating to the disposal prior to the date on which the transactions contemplated by Section 2.01(ii) are consummated of Hazardous Substances at locations that at the time of such disposal were not owned or leased by a Seller Company or any of its predecessors, it being understood and agreed that the migration of Hazardous Substances in soil or groundwater from a facility included in the Contributed Assets to surrounding properties shall not be considered a disposal of Hazardous Substances, or (2) relating to or arising out of conditions at, or the current or former operations at, any facilities not included in the Contributed Assets (whether by fee ownership or leasehold interest) (including any predecessors to such facilities); (ix) all Environmental Liabilities, whether arising prior to, on or after the Closing Date, relating to the operations at the Seneca and Wheatley Facilities; and (x) all liabilities or obligations of Seller Companies relating to worker's compensation and labor grievances filed against Seller Companies on or prior to Closing. "Financial Support Arrangements" means any obligations, contingent or otherwise, of a Person in respect of any indebtedness, obligation or liability (including assumed indebtedness, obligations or liabilities) of another Person, including but not limited to remaining obligations or liabilities associated with indebtedness, obligations or liabilities that are assigned, transferred or otherwise delegated to another Person, if any, letters of credit and standby letters of credit (including any related reimbursement or indemnity agreements), direct or indirect guarantees, endorsements (except for collection or deposit in the ordinary course of business), notes co-made or discounted, recourse agreements, take-or-pay agreements, keep-well agreements, agreements to purchase or repurchase such indebtedness, obligation or liability or any security therefor or to provide funds for the payment or discharge thereof, agreements to maintain solvency, assets, level of income or other financial condition, agreements to make payment other than for value received and any other financial accommodations. "GAAP" means Generally Accepted Accounting Principles in the United States as in effect on the date of the Agreement consistently applied. "Governmental Authority" means any foreign, domestic, federal, territorial, state or local governmental authority, quasi-governmental authority, instrumentality, court, government or self-regulatory organization, commission, tribunal or organization or any regulatory, administrative or other agency, or any political or other subdivision, department or branch of any of the foregoing. "Hazardous Substances" means (i) substances defined as "hazardous substances," "hazardous materials" or "hazardous waste" pursuant to The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or The Resource Conservation and Recovery Act of 1976, as amended, (ii) substances defined as "hazardous wastes" in the regulations adopted and publications promulgated pursuant to any of said laws, (iii) substances defined as "toxic substances" in The Toxic Substances Control Act, as amended, and (iv) petroleum, its derivatives and petroleum products, and asbestos and asbestos containing materials. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Huffy Trademark Agreement" means the Trademark Agreement dated as of November 7, 1990, by and between Emhart Industries, Inc. and H.C.A., Inc. regarding the assignment of rights with respect to the True Temper trademarks. "Intellectual Property" means all patents, copyrights, technology, know-how, processes, trade secrets, inventions, proprietary data, formulae, specifications, research and development data and computer software programs; all trademarks, trade names, trade dress, service marks and service names; all registrations, applications, recordings, licenses whether as licensee or licensor and common-law rights relating thereto, all rights to sue at law or in equity for any infringement or other impairment thereto, including the right to receive all proceeds and damages therefrom, and all rights to obtain renewals, continuations, continuations in a part, reissues, reexaminations, divisions or other extensions of legal protections pertaining thereto; and all other United States, state and foreign intellectual property. "Intellectual Property Assignment Agreements" means the Assignment of United States Trademarks, Trademark Registrations and Applications for Registration, the Assignment of Foreign Trademarks, Trademark Registrations and Applications for Registration, the Assignment of United States Patents and Patent Applications, the Assignment of Foreign Patents and Application for Patents and the Assignment of U.S. Copyright Registrations, in the forms contemplated by Attachments III, IV, V, VI and XV to this Agreement. "Inventory" means all items of inventory notwithstanding how classified in the financial records of Seller Companies, including all raw materials, work-in-process and finished goods. "Lien" means, with respect to any asset, any mortgage, lien, claim, pledge, charge, security interest or other encumbrance of any kind in respect of such asset. "Material Adverse Effect" means (i) with respect to TTSI or the TTS Business, a material adverse effect on the assets, properties, business, financial condition or results of operations of the TTS Business taken as a whole, or (ii) with respect to any other Person, a material adverse effect on the assets, properties, business, financial condition or results of operations of such Person and its Subsidiaries taken as a whole. "Net Working Capital" means (i) all Contributed Assets that are current assets of the TTS Business, minus (ii) all Assumed Liabilities that are current liabilities of the TTS Business, in each case calculated in accordance with the practices and policies that were employed in the preparation of the Opening Statement, determined consistent with the Opening Statement and the notes thereto. "1959 TTSI Consent Decree" means the Final Judgment dated August 20, 1959 in connection with Civil Action No. 58 C 1158 in the United States District Court for the Northern District of Illinois, Eastern Division. "1961 TTSI Consent Decree" means the Final Judgment dated August 1, 1961, in connection with Civil Action No. 58 C 1159 in the United States District Court for the Northern District of Illinois, Eastern Division. "Non US Benefit Arrangements" means Benefit Arrangements in respect of Non US Transferred Employees. "Non US Transferred Employees" means Transferred Employees who are not US Transferred Employees. "Olive Branch Property" means the real property owned by Seller Companies located at 8706 Deerfield Drive, Olive Branch, Mississippi 38654. "Opening Statement" means the special purpose statement of net assets of the TTS Business at March 29, 1998, together with the notes thereto, as attached in Attachment I to this Agreement. "Permitted Assigns" means any Person to which Buyer assigns its right to purchase Acquired Shares hereunder, provided that (i) such assignment will not jeopardize the exemption or exemptions from registration under applicable securities and blue sky laws pursuant to which the Acquired Shares are being transferred, and (ii) such Person delivers to Parent evidence satisfactory to Parent that such Person has agreed to be bound by the provisions of Section 2.03(b) and such Person makes the representations and warranties contained in Sections C.8 and C.9 of Exhibit C for the benefit of the Seller Companies and agrees to indemnify, defend and hold harmless Parent and its Affiliates and their respective directors, officers, employees and agents for any breach of such representations and warranties. "Permitted Liens" means any of the following: (i) Liens for Taxes that (x) are not yet due or delinquent or (y) are being contested in good faith by appropriate proceedings and for which appropriate reserves have been made or are not required under GAAP; (ii) statutory Liens or landlords', carriers', warehousemen's, mechanic's, suppliers', materialmen's or other like Liens arising in the ordinary course of business with respect to amounts not yet overdue or amounts being contested in good faith by appropriate proceedings and for which appropriate reserves have been made or are not required under GAAP; (iii) easements, rights of way, restrictions and other similar charges or encumbrances on real property interests, that, individually or in the aggregate, do not materially interfere with the ordinary course of operation of the TTS Business or the use of any such real property for its current uses; (iv) with respect to real property, title defects or irregularities that do not in the aggregate materially impair the use of such real property for its current use; (v) rights and licenses granted to others in Intellectual Property prior to the date of this Agreement or, prior to Closing, the license or sale of Intellectual Property in connection with the Shaft Lab product line or other licenses of Intellectual Property granted in the ordinary course of business which do not materially deplete the value of such Intellectual Property prior to Closing; (vi) with respect to any of the TTSI Leases where any Seller Company is a lessee, any Lien affecting the interest of the landlord thereunder; and (vii) Encumbrances disclosed in the Disclosure Schedules or taken into account in the Opening Statement. "Person" means an individual, a corporation, a general partnership, a limited partnership, a limited liability company, limited liability partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Redemptions" shall mean the purchase by TTSI of shares of TTSI Common Stock from EII and Emhart as contemplated by Section 2.03(a). "Remedial Action(s)" means the investigation, clean-up or remediation of contamination or environmental or damage caused by, related to or arising from the generation, use, handling, treatment, storage, transportation, disposal, discharge, release, or emission of Hazardous Substances, including, without limitation, investigations, response, removal and remedial actions under The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, corrective action under The Resource Conservation and Recovery Act of 1976, as amended, and clean-up requirements under similar state Environmental Laws. "Representatives" means (i) with respect to Buyer, any of the "Representatives" as defined in the Confidentiality Agreement and (ii) with respect to Parent, each of its respective directors, officers, advisors, attorneys, accountants, employees or agents. "Securities Act" means the Securities Act of 1933, as amended. "Seller Companies" means Parent and its Subsidiaries, other than TTSI. "Seneca and Wheatley Facilities" means those former manufacturing facilities of the TTS Business located in Seneca, South Carolina and Wheatley, Arkansas. "Services Agreement" means the Services Agreement in the form contemplated by Attachment VII to this Agreement, as amended from time to time. "Stockholders' and Registration Rights Agreements" means the Stockholders' Agreement and Registration Rights Agreement in the forms to be entered into in accordance with Section 2.03(d)(ii), as amended from time to time. "Subsidiary" as it relates to any Person, shall mean with respect to any Person, any corporation, partnership, joint venture or other legal entity of which such Person, either directly or through or together with any other Subsidiary of such Person, owns more than 50% of the voting power in the election of directors or their equivalents, other than as affected by events of default. "Tax Authority" shall mean a foreign or United States federal, state or local Governmental Authority having jurisdiction over the assessment, determination, collection or imposition of any Tax, as the context requires. "Tax Returns" means all returns (including information returns), declarations, reports, estimates and statements regarding Taxes, required to be filed with any Tax Authority, including any claims for refund and any amendments to any of the foregoing. "Taxes" means all taxes, charges, fees, levies or other assessments, including without limitation, all net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, estimated, severance, stamp, occupation, property or other taxes, customs, duties, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any Tax Authority. "Thiokol Contract" means the Teaming Agreement between Thiokol Corporation and True Temper Sports dated January 13, 1997-March 9, 1997, Purchase Order No. 41125 dated March 9, 1997, Purchase Order No. 36986, dated March 14, 1997, renewed December 2, 1997, together with the initial production contract relating thereto. "Thiokol Payment" means 25% of EBIT Contribution derived from TTSI's sales to Thiokol pursuant to the Thiokol Contract. "Transaction Documents" means this Agreement, the Assignment and Assumption Agreement, the Services Agreement, the Stockholders' and Registration Rights Agreements, the Intellectual Property Assignment Agreements and any exhibits or attachments to any of the foregoing, as the same may be amended from time to time. "Transferred Intellectual Property" shall mean all Intellectual Property owned by or licensed to any of the Seller Companies and used or held for use exclusively in the TTS Business, including the goodwill of the TTS Business symbolized thereby, it being understood and agreed that the Intellectual Property used or held for use exclusively in the TTS Business that is patented, registered or as to which an application for patent or registration is pending, along with all material unregistered trademarks, servicemarks, trade names and copyrights used or held for use exclusively in the TTS Business, is listed as "Transferred Intellectual Property" on Attachment X. "TTS Business" means the True Temper Sports business as presently conducted by Seller Companies involving the development, manufacturing, marketing or sale of steel and composite golf club shafts, tubular steel and composite components for the bicycle, automotive and recreational sports industries and high performance, lightweight, low-cost composite cylinders for rocket motor cases, ordnance, and space structure applications. "TTSI Common Stock" means the shares of common stock, $1.00 par value per share, of TTSI. "TTSI Financial Statements" means the (i) Unaudited Balance Sheet of TTSI as of March 29, 1998, (ii) Unaudited Statements of Earnings for each of the three month periods ended March 29, 1998 and March 30, 1997, (iii) the Balance Sheets of TTSI at December 31, 1997 and 1996, and (iv) the Statements of Earnings of TTSI for each of the three years ended December 31, 1997, 1996 and 1995, including in each case all notes thereto, all as set forth in Attachment XII to this Agreement. "TTSI Leases" means the real property leases relating to the facilities used exclusively by the TTS Business, as the same may be amended and supplemented from time to time, including the interests of Seller Companies in any related fixtures, improvements and personal property located therein. "TTSI Preferred Stock" means shares of preferred stock of TTSI with such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rates, and qualifications, limitations or restrictions thereof, as shall be agreed to by Buyer and Parent and expressed in the Amended and Restated Certificate of Incorporation. "US Benefit Arrangements" means Benefit Arrangements in respect of US Transferred Employees. "US Transferred Employees" means Transferred Employees employed by the TTS Business in the United States. "WARN" means the Worker Adjustment Retraining and Notification Act, as amended. "West Coast Technical Center" means the TTS Business facility located in Carlsbad, California. (b) "To the knowledge," "known by" or "known" (and any similar phrase) means (i) with respect to Parent, to the actual knowledge of any of the Senior Vice President and Chief Financial Officer, the Senior Vice President and General Counsel, the Treasurer or the Controller of Parent, and shall be deemed to include a representation that a reasonable investigation or inquiry of the subject matter thereof has been made by such individuals, (ii) with respect to Buyer, to the actual knowledge of the Chief Financial Officer, the General Counsel, the Treasurer or the Controller of Buyer, and shall be deemed to include a representation that a reasonable investigation or inquiry of the subject matter thereof has been made by such individuals or (iii) with respect to TTSI, Scott C. Hennessy and Fred H. Geyer. (c) Each of the following terms is defined in the Section set forth opposite such term: Term Section Active Employee....................................................D.01 Adjusted Purchase Price............................................2.04 Agreement......................................................Preamble Annual Thiokol Payment.............................................2.07 B&D Australasia....................................................2.01 Buyer..........................................................Preamble Closing............................................................2.05 Competing Business.................................................5.06 Controlled Group...................................................B.20 EII............................................................Recitals Emhart.........................................................Recitals Encumbrances....................................................... A Environmental Insurance Claims.....................................7.06 Estimated Net Working Capital......................................2.06 Exchange Consideration.............................................2.04 Existing Contracts.................................................5.01 Final Net Working Capital Amount...................................2.06 Indemnified Claim.................................................10.03 Indemnified Party.................................................10.03 Indemnifying Party................................................10.03 Insurance Liabilities..............................................6.03 Leased Real Property...............................................B.07 Nippon.............................................................2.01 Owned Real Property................................................B.07 PBGC...............................................................B.20 Proceedings....................................................... A Prohibited Transaction............................................ B.20 Proposed Final Net Working Capital Amount..........................2.06 Referee...........................................................10.03 Remaining Recovery.................................................7.06 Reportable Events..................................................B.20 Parent.........................................................Preamble Parent's Hourly Pension Plan.......................................D.08 Parent's Salaried Pension Plan.....................................D.07 Parent's Savings Plan..............................................D.09 Proposed Annual Thiokol Payment....................................2.07 Successor Hourly Pension Plan......................................D.08 Successor Salaried Pension Plan....................................D.07 Successor Savings Plan.............................................D.09 Surviving Representations or Covenants............................10.01 Third Party Claim.................................................10.03 Transferred Employees..............................................D.01 TTSI...........................................................Preamble Tucker.............................................................2.01 EXHIBIT B REPRESENTATIONS AND WARRANTIES OF PARENT Parent hereby represents and warrants to Buyer, that: B.01 Corporate Existence and Power. Each of Parent, Emhart, EII and TTSI is a corporation duly incorporated, validly existing and in good standing under the laws of the state or jurisdiction of its incorporation and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on the TTS Business as now conducted and as contemplated to be conducted upon consummation of the transactions contemplated by Section 2.01, except where the failure to have such licenses, authorizations, consents and approvals does not have a Material Adverse Effect on the TTS Business. Each of Parent, Emhart, EII and TTSI, as the case may be, is duly qualified to do business as a foreign corporation in each jurisdiction where the character of the property owned or leased by it or the nature of its activities make such qualification necessary to carry on the TTS Business as now conducted and as contemplated to be conducted upon consummation of the transactions contemplated by Section 2.01, except where the failure to be so qualified does not have a Material Adverse Effect on the TTS Business. B.02 Corporate Authorization. The execution, delivery and performance by Parent and TTSI of each of the Transaction Documents to which it is a party and the consummation by Parent and TTSI of the Contemplated Transactions are within their respective corporate powers and have been duly authorized by all necessary corporate action on their respective parts. The execution, delivery and performance by Seller Companies other than Parent and TTSI of the Transaction Documents to which a Seller Company other than Parent is a party and the consummation by such Seller Company of the Contemplated Transactions are within such Seller Company's corporate powers and, as of the respective date of execution thereof, will have been duly authorized by all necessary corporate action on its part. Each of the Transaction Documents to which it is a party constitutes or will constitute as of the respective date of execution thereof a legal, valid and binding agreement of the applicable Seller Company, enforceable against it in accordance with its terms (i) except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers and (ii) subject to the limitations imposed by general equitable principles (regardless of whether such enforceability is considered in a proceeding at law or in equity). B.03 Governmental Authorization. The execution, delivery and performance by each Seller Company of the Transaction Documents to which it is a party require no action by or in respect of, or consent or approval of, or filing with, any Governmental Authority other than: (i) compliance with any applicable requirements of the HSR Act; (ii) filing of an amendment to the Certificate of Incorporation of TTSI to increase authorized capital; (iii) compliance with the terms and conditions under which any industrial revenue or other bonds were issued (or leases related thereto) in connection with financing the acquisition, lease, development or improvement of any Owned Real Property, Leased Real Property or any machinery or equipment used in connection with the TTS Business; (iv) compliance with the terms and conditions of the 1959 TTSI Consent Decree and the 1961 TTSI Consent Decree; (v) the filing of applicable documentation with Governmental Authorities in each of the United Kingdom, Japan and Australia for the establishment of branches in those countries as contemplated by Section 2.01(f); (vi) actions, consents, approvals or filings set forth in Schedule B.03 or otherwise expressly referred to in this Agreement; and (vii) such other consents, approvals, authorizations, permits and filings the failure to obtain or make would not have, in the aggregate, a Material Adverse Effect on TTSI or the TTS Business after giving effect to or as the result of the transactions contemplated by Section 2.01. B.04 Non-Contravention. Except as set forth in Schedule B.04, assuming compliance with the matters referred to in Section B.03, the execution, delivery and performance by Parent or any Seller Company of the Transaction Documents do not and will not (i)(A) contravene or conflict with the charter or bylaws of Parent or any Seller Company, (B) contravene or conflict with or constitute a violation of any provisions of any Applicable Law binding upon Parent or any Seller Company that is applicable to the TTS Business; (C) constitute a default under or give rise to any right of termination, cancellation or acceleration of, or to a loss of any benefit relating exclusively to the TTS Business to which Parent or any Seller Company is entitled under, any Contract binding upon Parent or any Seller Company and relating exclusively to the TTS Business or by which any of the Contributed Assets is or may be bound or any license, franchise, permit or similar authorization held by Parent or any Seller Company relating exclusively to the TTS Business except, in the case of clauses (B) and (C), for any such contravention, conflict, violation, default, termination, cancellation, acceleration or loss that could not reasonably be expected to have a Material Adverse Effect on the TTS Business or (ii) result in the creation or imposition of any Lien on any Contributed Asset, other than Permitted Liens. B.05 Capitalization of TTSI. As of the date hereof, the authorized capital stock of TTSI consists of 1,000 shares, all of one class called Common Stock, par value $1.00 per share. As of the date hereof, EII owns 1,000 shares of TTSI Common Stock representing 100% of all of the issued and outstanding shares of TTSI Common Stock. Following the consummation of the transactions contemplated by Section 2.01 and prior to the Closing, (i) the authorized capital stock of TTSI will consist of 8,000 shares of TTSI Common Stock and 1,000 shares of TTSI Preferred Stock, (ii) EII will own 2,000 shares of TTSI Common Stock and 250 shares of TTSI Preferred Stock, (iii) Emhart will own 6,000 shares of TTSI Common Stock and 750 shares of TTSI Preferred Stock, and (iv) the shares of TTSI Common Stock and TTSI Preferred Stock owned by EII and Emhart, in the aggregate, will constitute 100% of the issued and outstanding capital stock of TTSI. Other than as contemplated by this Agreement, there are not now, and as of Closing there will not be, any options, warrants or other rights to acquire or securities convertible into or exchangeable for shares of capital stock or any stock appreciation, phantom stock or similar rights of TTSI outstanding. Each outstanding share of capital stock of TTSI has been duly authorized and is validly issued, fully paid and nonassessable. In addition, (i) there are no rights of first refusal, rights of first offer, or other similar rights affecting TTSI's outstanding or unissued capital stock, and (ii) there are no Liens affecting any of the outstanding shares of TTSI capital stock. B.06 Organizational Instruments; Subsidiaries. Parent has made available to Buyer complete and accurate copies of the Certificate of Incorporation and Bylaws of TTSI, in each case as amended to date. TTSI is not in violation of any provision of its Certificate of Incorporation or Bylaws. TTSI does not have any Subsidiaries nor does TTSI directly or indirectly own or have the power to vote shares of capital stock or other ownership interests of any Person. B.07 Financial Statements. (a) Except as set forth in the notes to the Opening Statement, the Opening Statement has been prepared in conformity with GAAP applied on a consistent basis and presents fairly, in all material respects, the net assets of the TTS Business as of March 29, 1998. (b) Subject to the provisions of B.07(c) below, the TTSI Financial Statements present fairly in all material respects the financial position and results of operations of TTSI at the dates and for the periods set forth therein, in conformity with (i) GAAP applied on a consistent basis other than as described therein or in the notes thereto and (ii) the principles and procedures set forth in the notes thereto. (c) Notwithstanding anything contained herein or in the TTSI Financial Statements to the contrary, neither Seller Companies nor TTSI make any representation or warranty as to (i) goodwill reflected in the TTSI Financial Statements or (ii) any accounting treatment which may or may not be available to TTSI or Buyer upon consummation of the Contemplated Transactions or in connection with the debt financing contemplated by Section 2.02, including, without limitation, the availability of leveraged recapitalization accounting treatment and the existence of goodwill (or the amount thereof) that is or may be required to be reflected in the TTSI Financial Statements or any financial statements of TTSI covering periods after the TTSI Financial Statements. B.08 Absence of Certain Changes. Except for matters that would be permitted in accordance with Section 5.01 if they occurred after the date of this Agreement or as set forth in Schedule B.08, from March 29, 1998 to the date of this Agreement, there has not been any material adverse change in the business, financial condition or results of operations of the TTS Business taken as a whole and there has not been: (a) any event or occurrence that has had a Material Adverse Effect on the TTS Business, other than those resulting from changes, whether actual or prospective, in general conditions applicable to the industries in which the TTS Business is involved or general economic conditions; (b) any damage, destruction or other casualty loss affecting the TTS Business or any assets that would constitute Contributed Assets or Transferred Intellectual Property if owned, held or used by Parent or any of the Seller Companies on the date on which the transactions contemplated by Section 2.01 are consummated that has a value in excess of $250,000; (c) other than this Agreement, any transaction or commitment made, or any Contract entered into, by Parent or any Seller Company relating primarily to the TTS Business or any assets that would constitute Contributed Assets or Transferred Intellectual Property if owned, held or used by Parent or any of the Seller Companies on the date on which the transactions contemplated by Section 2.01 are consummated (including the acquisition or disposition of any assets) or any termination or amendment by Parent or any Seller Company of any Contract or other right relating primarily to the TTS Business, in either case, which would be prohibited by the provisions of Section 5.01 of the Agreement if it were so made, entered, amended or modified; (d) any sale or other disposition, other than as contemplated by this Agreement, of more than $50,000 individually or $250,000 in the aggregate of assets (other than the sale of Inventory (including obsolete Inventory whether or not made in the ordinary course of business) in the ordinary course of business) that would constitute Contributed Assets or Transferred Intellectual Property if owned, held or used by any Seller Companies on the date on which the transactions contemplated by Section 2.01 are consummated; (e) any increase in the compensation of any current employee of the TTS Business other than as would be permitted under Section 5.01 and other than nondiscretionary increases pursuant to Employee Plans or Benefit Arrangements disclosed in Schedule B.20 or referenced in Exhibit D; and (f) any cancellation, compromise, waiver or release by Parent or any Seller Company of any claim or right (or a series of related rights and claims) related to the TTS Business, other than cancellations, compromises, waivers or releases in the ordinary course of business. B.09 Sufficiency of and Title to the Contributed Assets. (a) Except as set forth in Schedule B.09, the Contributed Assets and the Transferred Intellectual Property, together with the services to be provided to TTSI after Closing pursuant to the Services Agreement, constitute, and on the Closing Date will constitute, all of the tangible and intangible assets and services that are necessary for TTSI to operate the TTS Business in the same manner in all material respects as such operations have heretofore been conducted. (b) Except as set forth in Schedule B.09, subject to the receipt of any consents or approvals of any other Person, upon consummation of the Contemplated Transactions, TTSI will have acquired good and marketable title in and to, or a valid leasehold interest in, each of the Contributed Assets and Transferred Intellectual Property that were used in the TTS Business to generate the financial and operating results that are reflected in the Opening Statement and the TTSI Financial Statements (other than any such Contributed Assets that are consumed in the ordinary conduct of the TTS Business prior to Closing and in a manner consistent with Section 5.01), free and clear of all Liens, except for Permitted Liens. (c) Schedule B.09 includes a true and complete list of all real property owned by Seller Companies (or real property which Seller Companies have a right to acquire in connection with the operation of the TTS Business) which is included in the Contributed Assets (collectively, the "Owned Real Property"). Schedule B.09 sets forth (i) the address of each parcel of Owned Real Property and (ii) the owner of such Owned Real Property. (d) Schedule B.09 includes a true and complete list of all agreements (together with any amendments thereof) pursuant to which Seller Companies lease, sublease or otherwise occupy (whether as landlord, tenant, subtenant or other occupancy arrangement) any real property used in, or relating to, the TTS Business (collectively, the "Leased Real Property"). Schedule B.09 sets forth (i) the address or location of each parcel of Leased Real Property and (ii) the owner of the leasehold, subleasehold or occupancy interest for each Leased Real Property. B.10 No Undisclosed Liabilities. There are no liabilities (including indebtedness for borrowed money) of Parent or any Seller Company relating to the TTS Business that will constitute Assumed Liabilities of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, other than: (a) liabilities disclosed in or provided for in the Opening Statement or the TTSI Financial Statements and liabilities for matters reflected in the determination of the Final Net Working Capital Amount; (b) liabilities (i) disclosed in Schedule B.10, (ii) related to any contract, agreement, lease, license, commitment, sales or purchase order or other undertaking disclosed in the Disclosure Schedules or (iii) related to any Employee Plan or Benefit Arrangements identified in Exhibit D or disclosed in Schedule B.20, other than, with respect to clause (iii) those arising from any breach, non-performance or other violation of any of the foregoing or any fiduciary duty relating thereto; (c) liabilities incurred in the ordinary course of business consistent with past practice since March 29, 1998; (d) liabilities which in the aggregate are not in excess of $100,000 not required to be accrued for or reserved against in accordance with GAAP as of March 29, 1998; and (e) with respect to the bring down of this representation and warranty as of the Closing Date, liabilities which in the aggregate are not in excess of $100,000 not required to be accrued for or reserved against in accordance with GAAP (or the other policies and procedures set forth in the notes to the Opening Statement) as of the Closing Date. B.11 Litigation. Except as set forth in Schedule B.11 or reserved against or described in the Opening Statement, there is no action, suit, investigation or proceeding pending against, or to the knowledge of Parent, threatened against or affecting, the TTS Business or any Contributed Asset or Transferred Intellectual Property before any Governmental Authority that could reasonably be expected to result in damages, in the aggregate, in excess of $100,000. B.12 Material Contracts. (a) Except as set forth in Schedule B.12 and except for Contracts that do not constitute Assumed Liabilities, no Seller Company, with respect to the TTS Business, is, and as of Closing TTSI will not be, party to or otherwise bound by or subject to: (i) any written employment, severance, consulting or sales representative Contract which contains an obligation (excluding commissions) to pay more than $100,000 per year and constitutes an Assumed Liability; (ii) any Contract containing any covenant limiting the freedom of Seller Companies, with respect of the TTS Business or the operations of the TTS Business, to engage in any line of business or compete with any Person in any geographic area if such Contract will be binding on TTSI after the Closing; (iii) any Contract in effect on the date of this Agreement relating to the disposition or acquisition of the assets of, or any interest in, any business enterprise which relates to the TTS Business other than the purchase and sale of inventory or the license or sale of Intellectual Property in connection with the Shaft Lab product line or other licenses of Intellectual Property granted in the ordinary course of business which do not materially deplete the value of such Intellectual Property prior to Closing; (iv) any Financial Support Arrangements; (v) any indebtedness for borrowed money of the TTS Business (other than intercompany indebtedness that will be paid or otherwise cancelled at or prior to Closing) that will constitute an Assumed Liability if in existence on the date on which the transactions contemplated by Section 2.01 are consummated; (vi) any offset agreement entered into in connection with an international sales transaction and relating to any Contract that imposes on the TTS Business an obligation to perform that will continue in effect on or after the Closing Date; (vii) any agreement that places any Lien (other than a Permitted Lien) on the Contributed Asset or any of the Transferred Intellectual Property; (viii) any agreements regarding leasing of any material property (real or personal) as lessor or lessee; (ix) any license or other grant of any rights or interest in any Transferred Intellectual Property (other than any such license or grant that would not be prohibited under Section 5.01); (x) any warranty or indemnification agreement with respect to the sale or distribution of its products; (xi) any material agreement or contract with a distributor, broker, sales agent or the like; and (xii) any other agreement of any type involving payments of more than $250,000 annually. (b) Except as disclosed in Schedule B.12, each Contract disclosed in Schedule B.12 is a legal, valid and binding obligation of Parent (or the applicable Seller Company) enforceable against Parent (or the applicable Seller Company) in accordance with its terms (except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers, and subject to the limitations imposed by general equitable principles regardless of whether such enforceability is considered in a proceeding at law or in equity), and Parent (or the applicable Seller Company) is not in material default and has not failed to perform any material obligation thereunder, and, to the knowledge of Parent, there does not exist any event, condition or omission which would constitute a material breach or default (whether by lapse of time or notice or both) by any other Person. B.13 Licenses and Permits. To the knowledge of Parent, except as set forth in Schedule B.13, Parent (or the appropriate Seller Company) has and immediately following the Closing TTSI will have all licenses, franchises, permits and other similar authorizations affecting, or relating in any way to, the TTS Business required by law to be obtained by Parent (or the appropriate Seller Company) or, following the Closing, TTSI to permit Parent or TTSI to conduct the TTS Business in substantially the same manner as the TTS Business has heretofore been conducted. As of Closing, except as set forth in Schedule B.13, TTSI will have all licenses, franchises, permits and other similar authorizations necessary for the conduct of the TTS Business, except where the failure to have any such license, franchise, permit or other similar authorization could not reasonably be expected to have a Material Adverse Effect on the TTS Business. B.14 Finders' Fees. Except for Donaldson, Lufkin & Jenrette Securities Corporation, whose fees and expenses relating exclusively to the sale of the TTS Business by Parent will be paid by Parent, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Parent or any Seller Company or TTSI who might be entitled to any fee or commission from Parent or Buyer or any of their Affiliates upon consummation of the Contemplated Transactions. B.15 Environmental Compliance. Except as disclosed in Schedule B.15 and except as reserved against or specifically identified in the Opening Statement, Parent the TTS Business is and has been in material compliance with all applicable Environmental Laws, and has obtained all material permits, licenses and other authorizations that are required under applicable Environmental Laws. Except as set forth in Schedule B.15 and except as reserved against or specifically identified in the Opening Statement, (i) the TTS Business is and has been in material compliance with the terms and conditions under which the permits, licenses and other authorizations referenced in the preceding sentence were issued or granted, (ii) Seller Companies hold all permits required by Environmental Laws that are appropriate to conduct the TTS Business as presently conducted in all material respects and to operate the Contributed Assets in all material respects as they are presently operated; (iii) no suspension, cancellation or termination of any permit referred to in clause (ii) is pending or threatened; (iv) Parent has not received written notice of any material Environmental Claim relating to or affecting the TTS Business or the Contributed Assets, and there is no such threatened Environmental Claim; (v) no Hazardous Substance is present at the facilities constituting Contributed Assets in a manner to give rise to a material Environmental Liability; and (vi) Parent, in connection with the TTS Business or the Contributed Assets, has not entered into, agreed in writing to, or is subject to any judgment, decree, order or other similar requirement of any Governmental Authority under any Environmental Laws. B.16 Compliance with Laws. Except as set forth in Schedule B.16, for violations or infringements of Environmental Laws, the operation of the TTS Business and condition of the Contributed Assets and the Transferred Intellectual Property have not violated or infringed, and do not violate or infringe, in any material respect any material Applicable Law or any material order, writ, injunction or decree of any Governmental Authority. B.17 Intellectual Property. Except as set forth in Schedule B.17: (a) Parent (or a Seller Company) owns, free and clear of all Liens other than Permitted Liens, and subject to any licenses granted by Seller Companies prior to the date of this Agreement, or after the date of this Agreement and prior to Closing in accordance with Section 5.01, all right, title and interest in the Transferred Intellectual Property; (b) The operation of the TTS Business as heretofore conducted does not conflict with, infringe upon or violate the Intellectual Property rights of any other Persons and none of the Seller Companies have received any written notices or claims with respect to the TTS Business alleging infringement or misappropriation of any Intellectual Property of any third party or contesting the validity, enforceability, use or ownership of the Transferred Intellectual Property (including, without limitation, any demands or offers to license any Intellectual Property from any third party, except as previously disclosed to Buyer, except to the extent that such conflict, infringement or violation has not had, and cannot reasonably be expected to have, a Material Adverse Effect on the TTS Business; (c) Parent (or a Seller Company) has the right to use all Intellectual Property used by the TTS Business and necessary for the continued operation of the TTS Business in substantially the same manner as its operations have heretofore been conducted; (d) Upon the consummation of the Closing hereunder, (i) TTSI will be vested with all of Parent's (or the Seller Company's) rights, title and interest in, and Parent's (or the Seller Company's) rights and authority to use in connection with the TTS Business, all of the Transferred Intellectual Property and (ii) the Transferred Intellectual Property, and any other interests in Intellectual Property transferred hereunder collectively constitute all rights and interests in Intellectual Property which are necessary for the continued operation of the TTS Business as a whole in substantially the same manner as its operations have heretofore been conducted; (e) Neither Parent nor any of the Seller Companies has received any written notice of any infringement or misappropriation by any third party with respect to the Transferred Intellectual Property; (f) To the knowledge of Parent and each of the Seller Companies, all of the desktop software and all of the Oracle financial software necessary for the conduct of the TTS Business will operate without interruption and/or malfunction due to the recognition and processing of dates on and beyond January 1, 2000, except to the extent that a failure to do so could not reasonably be expected to have a Material Adverse Effect on the TTS Business. The TTS Business has commenced review of its CNC manufacturing computer software located at the Amory Facility and the Olive Branch Facility. This review is in its early stages and no year 2000 remediation plans have been finalized. To the knowledge of Parent and TTSI, there exists sufficient time to remediate any material non-compliance issues that may arise with respect to the CNC manufacturing computer software such that the CNC manufacturing computer software will operate without interruption and/or malfunction due to the recognition and processing of dates on and beyond January 1, 2000 except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect on the TTS Business. (g) Notwithstanding the provisions of this Section B.17, Parent makes no representation or warranty, and no such representation or warranty shall be implied, that any of such Intellectual Property is valid or enforceable. B.18 Taxes. (a) Except as set forth in Schedule B.18, Parent and each Seller Company has exercised reasonable care in the preparation of, and has duly and timely filed, all applicable material Tax Returns with respect to all Taxes required to be filed prior to the date hereof and, as of the Closing Date will have exercised reasonable care in the preparation of, and will have timely filed, all applicable Tax Returns with respect to Taxes required to have been filed prior to the Closing Date, except where the failure to exercise reasonable care or to file such Tax Returns could not reasonably be expected to have a Material Adverse Effect on the TTS Business. Except as set forth in Schedule B.18, all Taxes shown on the Tax Returns or pursuant to any declarations or assessments received by Parent and each Seller Company (including estimated Taxes), have been duly and timely paid, except when the failure to make payment could not reasonably be expected to have a Material Adverse Effect on the TTS Business, and no such Taxes have created a Lien (other than a Permitted Lien) against or impair the ability to transfer the Contributed Assets to TTSI free and clear of any Lien (other than a Permitted Lien) in accordance with the terms of this Agreement. Except as set forth in Schedule B.18, all such Tax Returns are true, correct and complete in all material respects, except where the failure to be true, correct and complete could not reasonably be expected to have a Material Adverse Effect on the TTS Business. Except as set forth in Schedule B.18, there exists no Tax deficiency or unpaid Tax assessed by any Governmental Authority against Parent or any Seller Company, except where such deficiency or assessment could not reasonably be expected to have a Material Adverse Effect on the TTS Business. (b) As of the date of this Agreement, Schedule B.18 contains a list of all states and other jurisdictions where Seller Companies have filed Tax Returns during the past three years with respect to Contributed Assets or Transferred Intellectual Property. (c) (i) TTSI has filed all material Tax Returns that it was required to file. All such Tax Returns were correct and complete in all material respects. All Taxes owed by TTSI (whether or not shown on any Tax Return) have been paid. TTSI is not currently the beneficiary of any extension of time within which to file any Tax Return, other than as disclosed on Schedule B.18 or as a result of being a member of a combined or a consolidated group for Tax purposes. There are no Liens on any of the assets of TTSI that arose in connection with any failure (or alleged failure) to pay any Tax. (ii) TTSI has withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholders, or other third party. (iii) Neither Parent nor any Seller Company expects any authority to assess any additional Taxes for any period for which Tax Returns have been filed for TTSI, other than as disclosed on Schedule B.18 or as a result of being a member of a combined or a consolidated group for Tax purposes. There is no dispute or claim concerning any Tax Liability of TTSI either (A) claimed or raised by any authority in writing or (B) as to which any of the Parent or any Seller Company has knowledge based upon personal contact with any agent of such authority, other than as disclosed on Schedule B.18 or as a result of being a member of a combined or a consolidated group for Tax purposes. Schedule B.18 lists all federal, state, local, and foreign income Tax Returns filed with respect to TTSI for taxable periods ended on or after December 31, 1993, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. (iv) TTSI has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency, other than as disclosed on Schedule B.18 or as a result of being a member of a combined or a consolidated group for Tax purposes. (v) TTSI has not filed a consent under Code Section 341(f) concerning collapsible corporations. TTSI has not made any payments, is not obligated to make any payments, and is not a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Code Section 280G. TTSI has not been a United States real property holding corporation within the meaning of Code Section 897(c)(2) during the applicable period specified in Code Section 897(c)(1)(A)(ii). B.19 Insurance. Schedule B.19 contains a correct and complete list of all material policies of insurance held by any Seller Companies that are in effect on the date of this Agreement and that are applicable to the TTS Business. None of the insurance carriers listed in Schedule B.19 are related to or affiliated with Parent, other than Shenandoah Insurance, Inc., and Parent has not received notice or any other indication from any insurer or agent (other than Shenandoah Insurance, Inc.) of any intent to cancel or not to renew any of the insurance policies listed in Schedule B.19, except for cancellations or failures to renew that will occur as a result of the Closing. B.20 Employee Benefit Matters. (a) Schedule B.20 lists each Employee Plan and material Benefit Arrangement which covers Transferred Employees and each collective bargaining agreement covering Transferred Employees. (b) Except as set forth in Schedule B.20, with respect to the TTS Business: (i) neither Parent nor any member of its "Controlled Group" (defined as any organization which is a member of a controlled group of organizations within the meaning of Code Sections 414(b), (c), (m) or (o)) has ever contributed to or had any liability to a multi-employer plan, as defined in Section 3(37) of ERISA; (ii) no fiduciary of any funded Employee Plan has engaged in a nonexempt "prohibited transaction" (as that term is defined in Section 4975 of the Code and Section 406 of ERISA) which could subject Buyer to a penalty tax imposed by Section 4975 of the Code; (iii) no Employee Plan that is subject to Section 412 of the Code has incurred an "accumulated funding deficiency" within the meaning of Section 412 of the Code, whether or not waived; (iv) each Employee Plan and Benefit Arrangement has been established and administered in all material respects in accordance with its terms, the terms of any applicable collective bargaining agreements and in compliance with Applicable Law; (v) TTSI has not incurred and Parent is not aware of any facts which would result in TTSI incurring any liability under Title IV of ERISA other than for the payment of premiums to the Pension Benefit Guaranty Corporation ("PBGC"), all of which, to the knowledge of Parent, have been paid when due with respect to any plan that TTSI or any member of its controlled group (within the meaning of Code Section 414) maintains or ever has maintained or to which any of them contributes or ever has been required to contribute; (vi) no defined benefit Employee Plan has been terminated; nor have there been any "reportable events" (as that term is defined in Section 4043 of ERISA and the regulations thereunder), other than reportable events arising directly from the Contemplated Transactions, which would present a risk that an Employee Plan would be terminated by the PBGC in a distress termination; (vii) each Employee Plan intended to qualify under Section 401 of the Code has received a determination letter that it is so qualified and to the knowledge of Parent, no event has occurred with respect to any such Employee Plan which could cause the loss of such qualification or exemption; (viii) with respect to each Employee Plan listed in Schedule B.20, Parent has made available to Buyer the most recent true and complete copy (where applicable) of (A) the plan document; (B) the most recent determination letter; (C) any summary plan description; (D) Form 5500; (E) the most recent actuarial report; and (6) a complete copy of any collective bargaining agreement pursuant to which any Employee Plan or Benefit Arrangement is maintained; (ix) with respect to the Transferred Employees, there are no post-retirement medical or health plans in effect (other than as required under Section 4980B of the Code); (x) there are no actions, claims or investigations pending or, to the knowledge of Parent threatened, against any Employee Plan, Benefit Arrangement, or any administrator, fiduciary or sponsor thereof with respect to the TTS Business, other than benefit claims arising in the normal course of operation of such Employee Plan or Benefit Arrangement; (xi) none of the Employee Plans or Benefit Arrangements obligates TTSI to pay any separation, severance, termination or similar benefit solely as a result of any transaction contemplated by this Agreement or solely as a result of a change in control or ownership; (xii) none of the Employee Plans or Benefit Arrangements has unfunded liabilities that are Assumed Liabilities (other than those relating to post employment medical, dental and life insurance benefits); (xiii) the post-retirement medical benefits liability set forth in the TTSI audited December 31, 1997 financial statements was calculated in accordance with Financial Accounting Statement 106 based on claim experience which is reasonably representative of that historically incurred by the Parent Company and its Affiliates in the aggregate and such claim experience is not materially different from that which was historically incurred by the TTS Business; (xiv) assets under the Parent's Hourly Pension Plan (as such term is defined in Section D.08) may be transferred to the Successor Hourly Pension Plan (as such term is defined in Section D.08) in accordance with Section D.08 of this Agreement without violating the collective bargaining agreement or other Applicable Law; (xv) all Employee Plans and material Benefit Arrangements required under any collective bargaining agreement or Applicable Law relating to the bargaining unit employees of the TTS Business are listed or referred to on Schedule B.20; and (xvi) to the knowledge of Parent no organizational effort is presently being made or threatened by or on behalf of any labor union with respect to employees of any of the nonunionized TTS Business locations. Except for the matters referenced in Items 1 and 19 of Schedule B.11 of the Disclosure Schedule, with respect to the TTS Business, no labor strike, work stoppage or slowdown, or other material labor dispute is underway or, to the knowledge of Parent, threatened. Section B.21. No Material Shared Assets/Liabilities. Except to the extent contemplated by the services to be provided under the Services Agreement, there is no material asset, tangible or intangible, necessary for the conduct of the TTS Business as it has historically been conducted the use of which is shared by the TTS Business and any business of Parent or any of the Seller Companies other than the TTS Business. There is no material Assumed Liability the obligation for which is shared by the TTS Business and any business of Parent or any of the Seller Companies other than the TTS Business. EXHIBIT C REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and warrants to Parent that: C.01 Organization and Existence. Buyer is a limited liability company duly formed, validly existing and in good standing under the laws of the state of its formation and has all powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and as contemplated to be conducted in connection with the transactions contemplated hereby, except where the failure to have such licenses, authorizations, consents and approvals has not had and may not reasonably be expected to have, a Material Adverse Effect on Buyer. As of the Closing Date, Buyer will be duly qualified to do business as a foreign corporation in each jurisdiction where the character of the property owned or leased by it or the nature of its activities (after giving effect to the Contemplated Transactions) make such qualification necessary to carry on its business as now conducted, except, in the case of Buyer, for those jurisdictions where failure to be so qualified has not had, and may not reasonably be expected to have, a Material Adverse Effect on Buyer. C.02 Corporate Authorization. The execution, delivery and performance by Buyer of the Transaction Documents and the consummation by each of Buyer of the Contemplated Transactions are within the powers of Buyer and have been (or, prior to the Closing, will have been) duly authorized by all necessary action on the part of Buyer. Each of the Transaction Documents to which Buyer is party constitutes a legal, valid and binding agreement of Buyer, enforceable against Buyer in accordance with its terms (i) except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers and (ii) subject to the limitations imposed by general equitable principles (regardless of whether such enforceability is considered in a proceeding at law or in equity). C.03 Governmental Authorization. Except as set forth on Schedule C.03, the execution, delivery and performance by Buyer of the Transaction Documents require no action by or in respect of, consents or approvals of, or filing with, any governmental body, agency, official or authority other than compliance with any applicable requirements of the HSR Act. C.04 Non-Contravention. The execution, delivery and performance by Buyer of the Transaction Documents do not and will not (i) contravene or conflict with the articles of organization or limited liability company agreement of Buyer, (ii) assuming compliance with the matters referred to in Section C.03, contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to Buyer, or (iii) constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation of Buyer or to a loss of any benefit to which Buyer is entitled under any provision of any agreement, contract or other instrument binding upon Buyer or any license, franchise, permit or other similar authorization held by Buyer, except, in the case of clauses (ii) and (iii), for any such contravention, conflict, violation, default, termination, cancellation, acceleration or loss that could not reasonably be expected to have a Material Adverse Effect on Buyer taken as a whole. C.05 Finders' Fees. There is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Buyer who might be entitled to any fee or commission from Parent or Buyer (or any of their Affiliates) upon consummation of the Contemplated Transactions. C.06 Litigation. There is no action, suit, investigation or proceeding pending against, or to the knowledge of Buyer, threatened against or affecting, Buyer before any court or arbitrator or any Governmental Authority that in any manner challenges or seeks to prevent, enjoin, alter or materially delay the Contemplated Transactions. C.07 Financing. Buyer has or will have prior to Closing available to it cash, marketable securities or other investments, or presently available sources of credit, to enable it to purchase the Acquired Shares as contemplated by Section 2.03(b) and Buyer will use its commercially reasonable best efforts to assist TTSI to have available to it prior to Closing borrowings sufficient to consummate the Redemptions and to pay off the promissory notes to be delivered to Tucker, B&D Australasia and Nippon pursuant to Section 2.01(g). As of the date hereof, Buyer has delivered true, correct and complete copies of the Commitment Letters to Parent. The copies of the Commitment Letters delivered to Parent include all of the terms and conditions of the financings contemplated therein, including but not limited to the conditions to any such financings, and there are no other terms or conditions applicable to such financings. C.8 Investment Representations. The Buyer is acquiring the Acquired Shares for its own account and not with a view to or for sale in connection with any distribution other than in accordance with federal and state securities laws. The Buyer has received from Parent all information that is requested and considers necessary or appropriate for deciding whether to purchase the Acquired Shares. The Buyer further represents that it has had an opportunity to ask questions and receive answers from Parent, the Seller Companies and TTSI regarding the terms and conditions of its acquisition of the Acquired Shares. The Buyer has experience as an investor in securities of companies and acknowledges that it can bear the economic risk of its investment in the Acquired Shares. The Buyer has (i) by reason of its business or financial experience or the business or financial experience of its professional advisers who are unaffiliated with, and who are not compensated by, Parent or the Seller Companies or any affiliate thereof, directly or indirectly, has the capacity to protect is own interest in connection with its purchase of the Acquired Shares. The Buyer has the financial capacity to bear the risk of this investment and has received from Parent, TTSI and the Seller Companies all information that it requested and considers necessary or appropriate for deciding whether to purchase the Acquired Shares. The Buyer is an "Accredited Investor" within the meaning of Rule 501(a) of Regulation D under the Securities Act. C.9 Restrictive Legends. The Buyer understands that the Acquired Shares will be "restricted securities" under the Securities Act, in as much as they are being acquired from an affiliate of TTSI in a transaction not involving a public offering, and that, under the Securities Act, and applicable regulations thereunder, such securities may be resold without registration under the Securities Act, only in certain limited circumstances. The Buyer understands that the certificates evidencing the Acquired Shares will bear the legend set forth below, together with any other legends required by the applicable state securities laws: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE RIGHTS OF HOLDERS THEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER RESTRICTIONS, AND THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE, INCLUDING ANY FUTURE HOLDERS IS BOUND BY THE TERMS OF THE STOCKHOLDERS' AND REGISTRATION RIGHTS AGREEMENTS BETWEEN THE ORIGINAL PURCHASER, THE COMPANY AND CERTAIN OTHER STOCKHOLDERS (COPIES OF WHICH MAY BE OBTAINED FROM THE COMPANY). EXHIBIT D EMPLOYEES AND EMPLOYEE BENEFIT MATTERS I. Employees and Employment. D.01 General. In connection with the Contemplated Transactions, and on or before the Closing Date, the employment of all Active Employees of the TTS Business including, without limitation, employees based in the TTS Business headquarters in Memphis, Tennessee, employees based in the Olive Branch Facility, the Amory Facility and the West Coast Technical Center and the employees listed on Attachment XIII, shall be transferred to TTSI such that the employment of such persons shall be considered continuous employment under Applicable Law. "Active Employee" shall mean any individual who is actively employed by TTSI or any Seller Company in connection with the TTS Business or is on authorized leave of absence, military service (without restriction) or lay-off with recall rights (without restriction) with respect to the TTS Business and where applicable shall include independent contractors. The Active Employees who are employed at any time on or after the Closing Date with Buyer or TTSI are herein collectively referred to as "Transferred Employees." Buyer shall ensure that such employment shall be at the same workplace and on the same terms and conditions as those under which such employees are currently employed by Seller Companies and the employment of each Transferred Employee shall be continued by Buyer or TTSI for the maximum applicable termination notice period to which the Seller Companies may be subject under Applicable Law as a result of the Contemplated Transactions. From and after the Closing Date, except as otherwise provided herein, Buyer and TTSI shall assume all obligations under any agreements, contracts or Applicable Law relating to the terms and conditions of employment of all Active Employees of the TTS Business, and Buyer and TTSI shall be responsible for any liability or obligations arising out of or pertaining to the termination of employment of, hiring of or failure or refusal to hire any Active Employee of the TTS Business on and after the Closing Date. No later than three days prior to Closing, Parent shall provide buyer with a listing of each Active Employee and the status of each such Active Employee, including whether such Active Employee is actively employed, on leave of absence (and the reason for such leave of absence) or on lay-off with recall rights. D.02 Labor Agreements. TTSI shall recognize the applicable labor unions, collective bargaining representative, trade unions or work councils representing any employees of the TTS Business as the exclusive collective bargaining representatives of such employees with respect to wages, hours, fringe benefits and other terms and conditions of employment to the extent so recognized by Seller Companies for all such employees who are within the appropriate bargaining unit as determined by Applicable Law. TTSI shall become a successor employer under any labor or collective bargaining agreements and Buyer and TTSI agree to honor the terms of and to assume all obligations of the Seller Companies under existing collective bargaining agreements in respect of such unionized employees from and after the Closing Date and all legal obligations arising from such recognition or assumption. D.03 Recalled or Rehired Employees. Buyer and TTSI confirm that any employees of the TTS Business that are laid off or on leave as of the Closing Date and who are recalled or rehired by Buyer or TTSI or return from leave on or after the Closing Date will be recalled or rehired by Buyer or TTSI or returned to employment in compliance with any applicable agreements, contracts or Applicable Law and will be accorded the benefits otherwise provided to Transferred Employees by Buyer or TTSI. Buyer further agrees that during the term of such leave or layoff, Buyer, in accordance with the terms of such plans and arrangements and Applicable Law, shall credit such employee with service and shall provide benefits under TTSI's plans. D.04 Negotiations with Employees or Employee Representatives. If and to the extent that any provisions of this Agreement are or may be subject to negotiation with employees, or applicable labor unions, trade unions or work councils, by policy, contract, collective agreement or Applicable Law, the Seller Companies, Buyer and TTSI shall cooperate fully in such negotiations. D.05 Termination and Plant Closing Notices; WARN. Parent shall provide or cause to be provided any notices to the employees of the TTS Business that may be required under any Applicable Law, including but not limited to WARN or any similar state or local law, with respect to events that occur prior to the reorganization of the TTS Business. Buyer shall provide any such notices to Active Employees with respect to events that occur as a result of the Contemplated Transactions, and to Transferred Employees with respect to events that occur on and after the Closing Date. Buyer shall not take, and shall cause TTSI not to take, any action after the Closing that would cause any termination of employees by Seller Companies that occur on or before the Closing Date to constitute a "plant closing" or "mass layoff" under WARN or any similar state or local law, or create any liability to the Seller Companies for employment termination under Applicable Law. Seller shall provide Buyer, upon request, with a list of employees terminated prior to Closing who may be affectd under WARN or similar state or local law. D.06 Immigration Matters. Buyer acknowledges that the Contemplated Transactions may trigger certain obligations under the immigration laws of the countries where the TTS Business operates. Buyer shall be solely responsible for compliance with all requirements of such immigration laws and agrees to make any necessary filings with the appropriate Governmental Authority to ensure the continued employment eligibility of the Transferred Employees. II. United States Employee Benefit Matters. D.07 Salaried Employee Pension Plans. (a) As soon as practicable after the Closing Date, with effect as of the Closing Date, TTSI shall establish a defined benefit plan ("Successor Salaried Pension Plan"). As soon as practicable following the earlier of delivery to Parent of a favorable determination letter from the Internal Revenue Service regarding the qualified status of the Successor Salaried Pension Plan or the issuance of indemnities satisfactory to the Parent in its sole discretion, Parent shall cause the transfer from The Black & Decker Pension Plan ("Parent's Salaried Pension Plan") to the Successor Salaried Pension Plan of assets (in accordance with paragraphs (c) and (d) below) and liabilities which are attributable to the Active Employees who are participants in the Parent's Salaried Pension Plan as of the Closing Date. (b) The Active Employees shall be eligible to participate under the Successor Salaried Pension Plan for a period of at least one year following the Closing Date on the same terms and conditions as provided to the Active Employees under Parent's Salaried Pension Plan immediately prior to the Closing Date. Service with Parent or any of its Affiliates prior to the Closing Date which was recognized under Parent's Salaried Pension Plan shall be recognized for the same purposes under the Successor Salaried Pension Plan. (c) The amount of assets to be transferred from the Parent's Salaried Pension Plan shall be equal to the Projected Benefit Obligation ("PBO") as determined in accordance with the Financial Accounting Standards Board Statement 87 ("FAS 87") and which is attributable to the Active Employees who are participants in Parent's Salaried Pension Plan as of the Closing Date (the "Transfer Amount"). Determination of the PBO shall be in accordance with the actuarial demographic assumptions used by the Seller's actuary in preparing the January 1, 1996 actuarial report for Parent's Salaried Pension Plan and the economic assumptions used by Parent for its December 31, 1997 FAS 87 year end disclosures. The above-described calculation of the amount to be transferred from the Parent's Salaried Pension Plan to the Successor Salaried Pension Plan shall be made by Seller's actuary and reviewed by Buyer's actuary. (d) All assets transferred under this Section D.07 shall be made in cash. The transfer contemplated herein shall comply with all requirements of Sections 414(l) and 401(a)(12) of the Code and in no event shall the Transfer Amount be less than the amount determined pursuant to Section 414(l) of the Code, using an interest rate of 5.75%. Pending completion of the transfers contemplated by this Section D.07, any benefits that are payable to Active Employees under the Parent's Salaried Pension Plan shall be paid or continue to be paid out of such plan. The Transfer Amount will be adjusted on a pro-rata basis (based on the ratio of the PBO calculated under this Section D.07 versus the total PBO for Parent's Salaried Pension Plan, calculated as of the Closing Date) to reflect the actual asset performance of the Parent's Salaried Pension Plan from the Closing Date to the first day of the month prior to the date of transfer and credited with interest from that date until the date of transfer at the rate of 7.5% per year, and adjusted to reflect benefit payments and expenses paid after the Closing Date by the Parent's Salaried Pension Plan which are related to the obligations being transferred to the Successor Salaried Pension Plan. Pending the completion of such transfers, Parent will cooperate with Buyer with respect to plan administration, disbursement of benefits and other pertinent information. (e) The Successor Salaried Pension Plan and TTSI shall be liable for benefits with respect to Active Employees accrued under the Parent's Salaried Pension Plan prior to the Closing Date to the extent of the assets transferred in accordance with this Section D.07. The Buyer agrees that neither Parent nor Parent's Salaried Pension Plan shall have any further responsibility with respect to the assets and liabilities so transferred. D.08 Hourly Paid Employee Pension Plans. (a) As soon as practicable after the Closing Date, with effect as of the Closing Date, TTSI shall establish a defined benefit plan ("Successor Hourly Pension Plan"). As soon as practicable following the earlier of delivery to Parent of a favorable determination letter from the Internal Revenue Service regarding the qualified status of the Successor Hourly Pension Plan, or the issuance of indemnities satisfactory to the Parent, in its sole discretion Parent shall cause the transfer from the Pension Plan for Hourly Employees of the True Temper Sports Division represented by the United Steelworkers of America ("Parent's Hourly Pension Plan") to the Successor Hourly Pension Plan of assets (in accordance with paragraph (c) and (d) below) and liabilities which are attributable to the Active Employees who are participants in the Parent's Hourly Pension Plan as of the Closing Date. (b) The Active Employees shall be eligible to participate under the Successor Hourly Pension Plan in accordance with any applicable collective bargaining agreement and Applicable Law. Service with Parent or any of its Affiliates prior to the Closing Date which was recognized under Parent's Hourly Pension Plan shall be recognized for the same purposes under the Successor Hourly Pension Plan. (c) The amount of assets to be transferred from the Parent's Hourly Pension Plan shall be equal to the Projected Benefit Obligation ("PBO") as determined in accordance with the Financial Accounting Standards Board Statement 87 ("FAS 87") and which is attributable to the Active Employees who are participants in Parent's Hourly Pension Plan as of the Closing Date (the "Transfer Amount"). Determination of the PBO shall be in accordance with the actuarial demographic assumptions used by Seller's actuary in preparing the January 1, 1996 actuarial report for Parent's Hourly Pension Plan and the economic assumptions used by Parent for its December 31, 1997 FAS 87 year end disclosures. The above-described calculation of the amount to be transferred from the Parent's Hourly Pension Plan to the Successor Hourly Pension Plan shall be made by Seller's actuary and reviewed by Buyer's actuary. (d) All assets transferred under this Section D.08 shall be made in cash. The transfer contemplated herein shall comply with all requirements of Sections 414(l) and 401(a)(12) of the Code and in no event shall the Transfer Amount be less than the amount determined pursuant to Section 414(l) of the Code, using an interest rate of 5.75%. Pending completion of the transfers contemplated by this Section D.08, any benefits that are payable to Active Employees under the Parent's Hourly Pension Plan shall be paid or continue to be paid out of such plan. The Transfer Amount will be adjusted on a pro-rata basis (based on the ratio of the PBO calculated under this Section D.08 versus the total PBO for Parent's Hourly Pension Plan, calculated as of the Closing Date) reflect the actual asset performance of the Parent's Hourly Pension Plan from the Closing Date to the first day of the month prior to the date of transfer and credited with interest from that date until the date of transfer at the rate of 7.5% per year, and adjusted to reflect benefit payments and expenses paid after the Closing Date by the Parent's Hourly Pension Plan which are related to the obligations being transferred to the Successor Hourly Pension Plan. Pending the completion of such transfers, Parent will cooperate with Buyer with respect to plan administration, disbursement of benefits and other pertinent information. (d) The Successor Hourly Pension Plan shall be liable for benefits with respect to Active Employees accrued under the Parent's Hourly Pension Plan prior to the Closing Date to the extent of the assets transferred in accordance with this Section D.08. The Buyer agrees that neither Parent nor Parent's Salaried Pension Plan shall have any further responsibility with respect to the assets and liabilities so transferred. D.09 Savings Plans. (a) Parent shall cause the trustee of The Black & Decker Retirement Savings Plan ("Parent's Savings Plan") to transfer, as of the transfer date specified below, the full account balances of the Active Employees under Parent's Savings Plan, to the Successor Savings Plan (as hereinafter defined). To the extent permissible under Parent's Savings Plan and to the extent participants' account balances are invested in Parent's stock, such assets shall be transferred to the Successor's Savings Plan in kind. Parent, Buyer and TTSI shall make any and all filings and submissions to the appropriate Governmental Authorities, and shall make any necessary plan amendments arising in connection with the transfer of assets from Parent's Savings Plan to the Successor Savings Plan. (b) As soon as practicable after the Closing Date, TTSI shall, and Buyer shall cause TTSI to, establish or designate an individual account plan for the benefit of Active Employees who were participants in Parent's Savings Plan (the "Successor Savings Plan"), shall take all necessary action, if any, to qualify the Successor Savings Plan under the applicable provisions of the Code and shall make any and all filings and submissions to the appropriate Governmental Authorities required to be made by it in connection with the transfer of assets contemplated hereby. The Successor Savings Plan shall provide that those Transferred Employees and their beneficiaries who were participants in Parent's Savings Plan shall receive credit for all service and compensation with Parent or any of its Affiliates prior to the Closing Date for all purposes, to the same extent as such service and compensation are recognized under Parent's Savings Plan immediately prior to the Closing Date. TTSI shall, and Buyer shall cause TTSI to, take all action required or appropriate to vest fully all such Transferred Employees in their entire account balances transferred to the Successor Savings Plan and, to the extent required under Section 411(d)(6) of the Code, to protect and preserve all benefits, rights and features relating to those account balances transferred from Parent's Savings Plan. As soon as practicable following the earlier of the delivery to Parent of a favorable determination letter from the Internal Revenue Service regarding the qualified status of the Successor Savings Plan or the issuance of indemnities satisfactory to Parent in its sole discretion, Parent shall cause the trustee of Parent's Savings Plan, to transfer the full account balances of Transferred Employees under Parent's Savings Plan as of the transfer date to the appropriate trustee designated by TTSI and Buyer under the trust agreement forming a part of the Successor Savings Plan; provided, that assets consisting of notes or other instruments evidencing loans made to participating Transferred Employees shall be transferred in such form to the Successor Savings Plan. (c) Effective as of the date of the transfer of assets contemplated by this Section D.09, TTSI shall assume all of the liabilities and obligations of Parent or any of its Affiliates in respect of the account balances accumulated by Transferred Employees under Parent's Savings Plan (to the extent that assets relating to such account balances have been transferred to the Successor Savings Plan), and the Successor Savings Plan assumes all liabilities and obligations of Parent's Savings Plan with respect to all account balances under Parent's Savings Plan of such US Transferred Employees (to the extent that assets relating to such account balances have been transferred to the Successor Savings Plan). Neither Buyer, TTSI nor any of their respective Affiliates shall assume any other obligations or liabilities arising under or attributable to Parent's Savings Plan and neither Parent nor any of its Affiliates shall assume any liabilities or obligations under or attributable to the Successor Savings Plan. Prior to the transfer of assets contemplated by this Section D.09, TTSI, if consented to by the applicable Transferred Employee, shall withhold from such Transferred Employee's pay, loan repayments relating to any outstanding loan to such Transferred Employee under Parent's Savings Plan and shall promptly forward those withholdings to Parent's Savings Plan. D.10 Health and Welfare Plans; Benefit Arrangements. (a) For a period of one year following the Closing Date, TTSI shall ensure, and Buyer shall cause TTSI to ensure, that the US Transferred Employees are provided benefits that are substantially equivalent on an aggregate basis (and "substantially identical" with respect to health benefit coverage for purposes of satisfying Section 4980B of the Code) to those provided under the Employee Plans and Benefit Arrangements as in effect for those US Transferred Employees immediately prior to the Closing Date, it being understood and agreed that such benefits provided by TTSI shall include health, medical, dental, life, disability and severance benefits. Notwithstanding anything to the contrary in the preceding sentence, Buyer shall take commercially reasonable steps for purposes of TTSI providing health benefit coverage to US Transferred Employees on the Closing Date through CIGNA and agrees that such health benefit coverage will be "substantially identical" to that provided under Parent's group health plan as in effect immediately prior to the Closing Date for purposes of satisfying Section 4980B of the Code; provided, however, that if such health benefit coverage is not in place as of the Closing Date, Parent agrees to provide continuation coverage to US Transferred Employees (and their covered dependents) to the extent required by Section 4980B of the Code. Parent, at its option, may provide and administer continuation coverage and benefit claims under its group health plan and in such event TTSI shall reimburse Parent for the reasonable and customary cost of the provision and administration of benefits thereunder for the TTSI employees and covered dependents. Parent agrees to cooperate and assist Buyer and TTSI as is reasonably necessary to put such TTSI's health benefit coverage in place. (b) In furtherance and not in limitation of the provisions of this Section D.10, as of the Closing Date, TTSI shall, and Buyer shall cause TTSI to, (i) establish severance plans, agreements and arrangements with the same terms and conditions as those provided under the applicable severance agreements, plans or arrangements listed on Schedule B.20, (ii) maintain such severance agreements, plans and arrangements for a period of at least one year following the Closing Date, and (iii) pay any benefits to any US Transferred Employees that they may be entitled to receive under such severance agreements, plans or arrangements. In furtherance and not in limitation of the provisions of this Section D.10, as of the Closing Date, TTSI shall assume the obligations of Seller Companies under the individual employee severance agreements listed on Schedule B.20. (c) With respect to any US Transferred Employee (including any beneficiary or dependent thereof), except as expressly set forth herein, Seller Companies shall retain (i) all liabilities and obligations arising under any group life, accident, medical, dental or disability plan or similar arrangement (whether or not insured) to the extent that such liability or obligation relates to claims incurred (whether or not reported) on or prior to the Closing Date, and (ii) all liabilities and obligations arising under any worker's compensation laws to the extent such liability or obligation relates to the period prior to the Closing Date. (d) Any group health plan, disability plan or other plans established or designated by TTSI after closing for the benefit of US Transferred Employees shall not contain any exclusion or limitation with respect to any preexisting condition. (e) In furtherance and not in limitation of the provisions of this Section D.10, TTSI covenants and agrees that in 1998 it shall continue the annual incentive plan arrangements in effect for the individuals listed in Attachment B.20-A to Schedule B.20 on the basis set forth in Attachment B.20-A and shall not amend or otherwise modify such arrangements. Buyer covenants and agrees to take all actions necessary or appropriate after the Closing to cause TTSI to satisfy its obligations under this Section D.10(e). D.11 Post-Retirement Medical and Life Insurance. (a) Seller Companies shall retain responsibility for providing health, medical, dental, hospitalization, life insurance or similar benefits (including, without limitation, reimbursement for Medicare premiums) to any employee or former employee of the TTS Business (other than US Transferred Employees) who retires or has retired on or before the Closing Date. TTSI and Buyer shall be responsible for providing any post-retirement medical, life or similar benefits to US Transferred Employees. (b) Notwithstanding the provisions of this Exhibit D, including but not limited to the provisions of this Section D.11, Seller Companies may amend, modify or terminate any plans or arrangements providing post-retirement health, medical, dental, hospitalization, life insurance or similar benefits (including, without limitation, reimbursement for Medicare premiums) to any employee or former employee of the TTS Business, subject in each case to the provisions of Applicable Law. (c) Except as may be required by Applicable Law, Buyer shall not be obligated by this Agreement to provide post-retirement, health, medical, dental, hospitalization, life insurance or similar benefits (including, without limitation, reimbursement for Medicare premiums), or any particular level of such benefits, to US Transferred Employees. D.12 Supplemental Plans. Parent shall retain all liability and obligation with respect to Active Employees under the Black & Decker Executive Deferred Compensation Plan, the Black & Decker Supplemental Executive Retirement Plan, the Black & Decker Supplemental Pension Plan and the Black & Decker Supplemental Retirement Savings Plan. III. Other Country Employee Benefit Matters. D.13 General. For a period of one year following the Closing Date, Buyer and TTSI shall ensure that the Non-US Transferred Employees are provided benefits that are substantially similar to those provided under the Non-U.S. Benefit Arrangements as in effect for those Non-US Transferred Employees immediately prior to the Closing Date, it being understood that each Non-US Transferred Employee shall receive credit for all service and compensation with Seller Companies and any of their predecessors or Affiliates prior to the Closing Date for all purposes other than Benefit Service to the same extent that service and compensation are recognized immediately prior to the Closing. D.14 Severance/Termination Indemnities. In furtherance and not in limitation of the provisions of Section D.12, for a period of at least one year, TTSI shall provide severance programs and termination indemnities with the same terms and conditions as those provided by the Seller Companies or TTSI to the Non-US Transferred Employees immediately prior to the Closing and agrees to pay any benefit to Non-US Transferred Employees to which they may be entitled under such severance programs and/or termination indemnities applicable to Buyer and its Affiliates with respect to events that occur on or after the Closing Date or as a result of the Contemplated Transactions, or applicable to Parent and its Affiliates as a result of the Contemplated Transactions. VII. General. D.15 No Third Party Beneficiaries. No provision of this Exhibit D or any other provision in the Transaction Documents shall create any third party beneficiary or other rights in any employee or former employee (including any beneficiary or dependent thereof) of Parent or of any of its Affiliates in respect of continued employment (or resumption of employment) with Parent, Buyer, TTSI or any of their Affiliates, and no provision of this Exhibit D shall create any such rights in any such individuals in respect of any benefits that may be provided, directly or indirectly, under any Employee Plan or Benefit Arrangement, or any plan or arrangement which may be established by Buyer, TTSI or any of their Affiliates. Subject to Applicable Law, unless otherwise provided herein, no provision of this Agreement shall constitute a limitation on rights to amend, modify or terminate, either before or after Closing, any such Employee Plan or Benefit Arrangement of the Parent or any of its Affiliates. D.16 Indemnification by Buyer. Effective as of the Closing, Buyer hereby indemnifies Parent and its Affiliates and their respective directors, officers, employees and agents against, and agrees to hold them harmless from, any and all Damages arising out of or pertaining to (i) the termination of employment of, hiring of or failure or refusal to hire, any Active Employee of the TTS Business on or after the Closing; (ii) in relation to any Active Employee any modification of the pay, benefits or other terms and conditions of employment of any Active Employee on or after the Closing; and (iii) any breach of any covenants of the Buyer contained in this Exhibit D. D.17 Indemnification by Parent. Effective as of the Closing, Parent hereby indemnifies Buyer and TTSI and agrees to hold each harmless from any and all Damages arising out of or pertaining to any breach of any covenants of the Parent or its Affiliates contained in this Exhibit D. EXHIBIT E ADDITIONAL MATTERS RELATING TO PRODUCT LIABILITY ISSUES Parent and Buyer acknowledge and agree that each has a continuing interest in ensuring that claims involving alleged product defects and product safety are handled by TTSI after the Closing in a manner that minimizes liability of the parties and otherwise protects the parties' interests. This Exhibit E sets forth certain additional procedures, covenants and agreements relating to product liability and related matters in respect of products sold and services provided by TTSI or the TTS Business that, among other things, are intended to enhance the parties' ability to achieve these objectives. E.01 With respect to liabilities and obligations relating to claims of manufacturing or design defects, the parties have agreed that certain of these liabilities and obligations will constitute Assumed Liabilities for which TTSI will be responsible and certain of these liabilities and obligations will constitute Excluded Liabilities for which Seller Companies will be responsible. Because (i) it is likely that TTSI may receive the initial notice or claim with respect to liabilities and obligations that ultimately prove to be Seller Companies' responsibility and vice versa and (ii) in many cases it is critical to the defense of such claims that products and the location in which the alleged incident occurs be inspected as soon as practicable, each of Parent, TTSI and Buyer agree to give immediate notice to the other party in the event that they receive notice of a claim involving or potentially involving claims of manufacturing or design defects where the party first receiving such notice reasonably believes that the responsibility for the liability or obligation, if any, will be that of the other party or if there is any doubt as to which party ultimately will be responsible for any related liabilities or obligations. Each of Parent, TTSI and Buyer also agree with respect to each claim of manufacturing or design defects that they will perform a prompt, diligent and continuing investigation to determine whether the claim is an Assumed Liability or an Excluded Liability, and agree to give immediate notice to the other parties at any time if the investigation reveals that the responsibility for the liability or obligation, if any, will be that of the other party if there is any doubt as to which party ultimately will be responsible for any related liabilities or obligations. Each of Parent, TTSI and Buyer agree that the party providing such notice will thereafter cooperate with the other party to permit the other party to conduct its own investigation, and the party providing such notice will provide to the other party reports on the status of the claim and subject to the provisions of Article X an opportunity to participate in the defense of the claim, at its own cost and expense. To expedite the review of these issues and ensure that both parties' rights and defenses are preserved, Parent, TTSI and Buyer shall provide such notice as follows: if to Parent, or TTSI prior to Closing: The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21286 Attention: Product Liability Counsel if to Buyer, or TTSI after Closing: True Temper Sports, Inc. 8275 Tournament Drive, Suite 200 Memphis, Tennessee 38125 Attention: President E.02 To the extent that either Parent, TTSI or Buyer (or any of their directors, officers, advisors, attorneys, accountants, employees, insurers or agents) conducts an investigation or other inquiry into any events or circumstances that lead to a claim of manufacturing or design defects in respect of a product or product line generally or a specific claim or allegation and the results of such investigation or inquiry relate to or otherwise affect the liabilities or obligations of the other party hereunder, Parent, TTSI or Buyer, as the case may be, agree to share any information obtained as a result of the investigation or inquiry, in each case subject to the express provisions of Section 7.07 of this Agreement. E.03 To assist each of the parties to this Agreement with the defense of claims involving allegations of manufacturing or design defects and with compliance with each parties' respective legal obligations under this Agreement and otherwise, Parent, TTSI and Buyer each agree from time to time to designate individuals within their respective organizations as an "Engineering/Safety Assurance Liaison" and a "Claims Liaison" for the purpose of coordinating the defense of claims involving products sold and services provided by TTSI or the TTS Business. The initial individuals serving in these capacities shall be designated in writing by Parent, TTSI and Buyer at Closing and, thereafter, may be changed from time to time by notice to the other party. E.04 To assist each of the parties to this Agreement with the defense of claims involving allegations of manufacturing or design defects and with compliance with each parties' respective legal obligations under this Agreement and otherwise, Parent, TTSI and Buyer each agree from time to time to provide the other party access to all information as provided in Section 5.04 and Section 6.02. Without limiting the generality of those provisions, Parent, TTSI and Buyer acknowledge and agree that the aforementioned information and access includes the existing databases relating to consumer complaints, claims and litigation, whether maintained at the headquarters of the TTS Business or otherwise, access to personnel and engineering and design drawings or documents and any other relevant information. EX-2 5 EXHIBIT 2(B)(II) EXHIBIT 2(b)(ii) AMENDMENT NO. 1 Dated August 1, 1998 to REORGANIZATION, RECAPITALIZATION AND STOCK PURCHASE AGREEMENT Dated as of June 29, 1998 By and Between THE BLACK & DECKER CORPORATION, TRUE TEMPER SPORTS, INC. AND TTSI LLC AMENDMENT NO. 1 to REORGANIZATION, RECAPITALIZATION AND STOCK PURCHASE AGREEMENT This Amendment No. 1 (this "Amendment") to Reorganization, Recapitalization and Stock Purchase Agreement (together with the Exhibits, Schedules and Attachments thereto, the "Agreement") is made as of the 1st day of August 1998, by and among The Black & Decker Corporation, a Maryland corporation ("Parent"), True Temper Sports, Inc., a Delaware corporation ("TTSI"), and TTSI LLC, a Delaware limited liability company ("Buyer"). W I T N E S E T H: WHEREAS, Parent, TTSI and Buyer entered into the Agreement as of June 29, 1998; and WHEREAS, Parent, TTSI and Buyer desire to amend and clarify certain terms contained in the Agreement, all as more fully set forth herein; NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties contained herein, the parties agree as follows: Section 1. Definitions. Capitalized terms used in but not defined in this Amendment shall have the meanings specified in the Agreement. Section 2. Amendment to Recitals. The sixth and seventh "WHEREAS" clauses contained in the Agreement are hereby amended by deleting those clauses in their entirety and replacing them with the following: "WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, Parent desires to cause TTSI, and Buyer desires to assist TTSI, to redeem a portion of the TTSI Common Stock then owned by Emhart and a portion of the TTSI Common Stock then owned by EII with promissory notes to be paid at Closing with the proceeds of such borrowings; WHEREAS, following such redemption, Buyer desires to purchase, buy and acquire from EII and Emhart and Parent desires to cause EII and Emhart to sell, transfer and convey to Buyer the Acquired Shares, and Parent and Buyer desire to enter into certain agreements and arrangements ancillary to such transactions; and" Section 3. Amendment to ARTICLE II. Sections 2.01 through 2.04 of ARTICLE II - TRANSACTIONS AND CLOSING of the Agreement are hereby amended by deleting Section 2.01 through and including Section 2.04 in their entirety and replacing them with the following: "Section 2.01 Reorganization of TTS Business. Upon the terms and subject to the conditions set forth in this Agreement, the parties agree that following the execution of this Agreement and prior to consummation of the transactions contemplated by Sections 2.02 and 2.03, among other things: (a) TTSI will file an Amended and Restated Certificate of Incorporation consistent with the terms of this Agreement as agreed to by Buyer and Parent; (b) Parent will cause EII to contribute the Contributed Assets to TTSI, free and clear of all Liens (other than Permitted Liens), and TTSI will assume and agree to pay, satisfy and discharge all of the Assumed Liabilities, all as contemplated by the Assignment and Assumption Agreement; (c) In exchange for the capital contribution contemplated by Section 2.01(b), TTSI will issue 1,011.21 shares of TTSI Common Stock and 368.75 shares of TTSI Preferred Stock to EII, which upon such issuance shall be duly authorized, fully paid and non-assessable shares of capital stock of TTSI; (d) Parent will cause Emhart to sell, transfer and convey to TTSI the Transferred Intellectual Property, all as contemplated by the Intellectual Property Assignment Agreements; (e) In exchange for the transfer of the Transferred Intellectual Property contemplated by Section 2.01(d), TTSI will issue 6,000 shares of TTSI Common Stock and 881.25 shares of TTSI Preferred Stock to Emhart, which upon such issuance shall be duly authorized, fully paid and non-assessable shares of capital stock of TTSI; (f) Parent (i) will cause TTSI to establish a branch or, at the expense of TTSI, a subsidiary in each of the United Kingdom, Australia and Japan and (ii) will cause each of Tucker Fasteners Limited ("Tucker"), Black & Decker (Australasia) Pty. Limited ("B&D Australasia") and Nippon Pop Rivets & Fasteners, Ltd. ("Nippon") to contribute the assets and liabilities relating exclusively to the TTS Business operations in the United Kingdom, Australia and Japan, respectively, to TTSI; and (g) In exchange for the contributions contemplated by Section 2.01(f), TTSI will issue and deliver to each of Tucker, B&D Australasia and Nippon a promissory note with a fixed interest rate equal to 7.5% per annum payable in full at Closing with principal amounts equal to (A) $3,860,000, (B) $1,936,024.05 and (C) $406,000, respectively, which the parties agree is the net book value of the respective Contributed Assets. Section 2.02 Recapitalization of TTSI. (a) Upon the terms and subject to the conditions set forth in this Agreement, the parties agree that following the execution of this Agreement and immediately prior to Closing, among other things, Buyer will use commercially reasonable best efforts to assist TTSI in obtaining debt financing in an aggregate amount of not less than $155,000,000, together with a revolving credit facility in the amount of $20,000,000, in the manner contemplated by the Commitment Letters or on other terms reasonably acceptable to Buyer, the proceeds of which will be used to consummate the Redemptions and to pay off the promissory notes contemplated by Section 2.01(g). (b) Buyer may elect at its option to pursue an alternative financing structure, provided that such structure does not result in any incremental increase in costs to TTSI. Section 2.03 Closing Transactions. (a) Redemption of TTSI Shares. On and subject to the terms and conditions set forth in this Agreement, immediately following the consummation of the transactions contemplated by Section 2.02 and prior to the Closing, TTSI shall: (i) Redeem 5,818.60 shares of the issued and outstanding TTSI Common Stock owned by Emhart by issuing a promissory note to Emhart, on terms reasonably satisfactory to Parent and Buyer, with a principal amount equal to $112,747,535.88 to be paid at Closing with the proceeds of the borrowings contemplated by Section 2.02; and (ii) Redeem 1,274 shares of the issued and outstanding TTSI Common Stock owned by EII by issuing a promissory note to EII, on terms reasonably satisfactory to Parent and Buyer, with a principal amount equal to $24,686,412.66 to be paid at Closing with the proceeds of the borrowings contemplated by Section 2.02. such that, immediately following the consummation of the transactions contemplated by this Section 2.03(a), EII will own 737.21 shares of TTSI Common Stock and 368.75 shares of TTSI Preferred Stock and Emhart will own 181.40 shares of TTSI Common Stock and 881.25 shares of TTSI Preferred Stock, which shares, in the aggregate, will constitute 100% of the issued and outstanding capital stock of TTSI. (b) Acquisition of Acquired Shares. On and subject to the terms and conditions set forth in this Agreement, at the Closing: (i) Parent shall cause (A) EII to sell, transfer and convey to Buyer and Buyer's Permitted Assignees, free and clear of all Liens (other than Permitted Liens) an aggregate of 683.7468 shares of TTSI Common Stock and an aggregate of 293.75 shares of TTSI Preferred Stock and (B) Emhart to sell, transfer and convey to Buyer and Buyer's Permitted Assignees, free and clear of all Liens (other than Permitted Liens) an aggregate of 181.40 shares of TTSI Common Stock and an aggregate of 881.25 shares of TTSI Preferred Stock; and (ii) In consideration for the transfer of the Acquired Shares, Buyer and Buyer's Permitted Assignees shall make cash payments (A) to EII equalling $23,824,023.29 in the aggregate, which constitutes $13,249,023.29 in respect of the TTSI Common Stock and $10,575,000 in respect of the TTSI Preferred Stock, by wire transfer of immediately available funds to an account or accounts of EII designated by Parent at least two Business Days prior to Closing and (B) to Emhart equalling $35,240,004.13 in the aggregate, which constitutes $3,515,004.13 in respect of the TTSI Common Stock and $31,725,000 in respect of the TTSI Preferred Stock, by wire transfer of immediately available funds to an account or accounts of Emhart designated by Parent at least two Business Days prior to Closing; such that, immediately following consummation of the transactions contemplated by this Section 2.03(b), EII will own 53.4632 shares of TTSI Common Stock representing 5.82% of all the issued and outstanding shares of TTSI Common Stock and 75 shares of TTSI Preferred Stock representing 6.0% of all the issued and outstanding shares of TTSI Preferred Stock and Buyer and Buyer's Permitted Assignees will own, in the aggregate, 865.1468 shares of TTSI Common Stock representing 94.18% of all the issued and outstanding shares of TTSI Common Stock and 1175 shares of TTSI Preferred Stock representing 94.0% of all the issued and outstanding shares of TTSI Preferred Stock. (c) Consent and Waiver by Buyer. By execution and delivery of this Agreement, Buyer hereby consents to and waives any rights in respect of the redemption of TTSI Common Stock owned by EII or Emhart contemplated by Section 2.03(a). (d) Additional Closing Transactions. Upon the terms and subject to the conditions set forth in this Agreement, the parties agree that at the Closing, among other things: (i) Parent or its Affiliates, as the case may be, and TTSI shall execute and deliver the Services Agreement with such additions, deletions and changes as may be agreed to by Buyer and Parent; (ii) TTSI, Buyer, Buyer's Permitted Assigns and EII shall execute and deliver a Stockholders' and a Registration Rights Agreements containing the provisions contemplated by Attachment XIV; (iii) TTSI shall pay off the promissory notes issued to Tucker, B&D Australasia and Nippon pursuant to Section 2.01(g); (iv) TTSI shall pay off the promissory notes issued to each of EII and Emhart pursuant to Section 2.03(a). Section 2.04 Section 338(h)(10) Election; Exchange Consideration. (a) The parties agree to make an election under Section 338(h)(10) of the Code (and any corresponding elections under any applicable state, local, or foreign tax law) with respect to the sale of the Acquired Shares by EII to Buyer. (b) The consideration to be paid to Parent and its Affiliates in connection with the Contemplated Transaction (the "Exchange Consideration") shall consist of the following: (i) the aggregate amounts paid by TTSI to pay off the promissory notes issued to redeem shares of TTSI Common Stock and TTSI Preferred Stock pursuant to Section 2.03(a); (ii) the aggregate amount paid by Buyer to EII and Emhart in exchange for the Acquired Shares pursuant to Section 2.03(b); (iii) the aggregate amounts payable to Tucker, B&D Australasia and Nippon pursuant to the promissory notes to be delivered in accordance with Section 2.01(g) (as so adjusted and together with the amount contemplated by Section 2.04(b)(i) and 2.04(b)(ii) above, the "Adjusted Purchase Price"); and (iv) the assumption by TTSI of the Assumed Liabilities in accordance with the Transaction Documents. (c) The Exchange Consideration and each Annual Thiokol Payment shall be allocated to and among the respective Contributed Assets and Transferred Intellectual Property as set forth in Attachment IX to this Agreement. Parent, TTSI and Buyer agree that the allocation of the Exchange Consideration has been negotiated by them and is consistent with the value of the Contributed Assets and the principles of Section 1060 of the Code and the regulations promulgated by the Internal Revenue Service thereunder. Parent, TTSI and Buyer agree that they shall use the allocation of the Exchange Consideration reflected in Attachment IX to this Agreement in any Tax Returns or other reports that deal with the Contemplated Transactions and are filed with any Tax Authority and shall promptly prepare and timely file such reports and information as may be required to report the allocation contemplated by this Section 2.04(c)." Section 4. Limited Amendment. Except as amended by this Amendment and as the context may otherwise require to give effect to the intent and purposes of this Amendment, the Agreement shall remain in full force and effect without any other amendments or modifications. Section 5. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given, if to Parent (or TTSI prior to Closing): c/o The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21286 Attention: Senior Vice President and Chief Financial Officer Telecopy: (410) 716-3318 with a copy to: The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21286 Attention: Senior Vice President and General Counsel Telecopy: (410) 716-2660 and Miles & Stockbridge P.C. 10 Light Street Baltimore, Maryland 21202 Attention: Glenn C. Campbell David A. Gibbons Telecopy: (410) 385-3700 if to Buyer (or TTSI after Closing): TTSI LLC c/o Cornerstone Equity Investors, LLC 717 5th Avenue Suite 1100 New York, New York 10022 Attention: Mr. Mark Rossi Telecopy: (212) 826-6798 with a copy to: Kirkland & Ellis 153 East 53rd Street New York, New York 10022 Attention: Frederick Tanne, Esquire Telecopy: (212) 446-4900 or to such other address or telecopy number and with such other copies, as such party may hereafter specify by notice to the other parties. Each such notice, request or other communication shall be effective (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section 5 and evidence of receipt is received or (ii) if given by any other means, upon delivery or refusal of delivery at the address specified in this Section 5. Section 6. Amendments; Waivers. Subject to the provisions of Section 9.04 of the Agreement, any provision of this Amendment may be amended or waived prior to the Closing Date if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by Parent and Buyer, or in the case of a waiver, by the party against whom the waiver is to be effective. Section 7. Successors and Assigns. The provisions of this Amendment shall be binding upon and inure to the benefit of the parties and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other party, provided the Buyer may assign its or TTSI's rights hereunder to an agent for the financing sources in connection with the Contemplated Transactions, as collateral security for TTSI's obligations, and Buyer may assign its rights to purchase Acquired Shares to Permitted Assignees. Section 8. Entire Agreement. The Transaction Documents and any other agreements contemplated thereby (including, to the extent contemplated herein, the Confidentiality Agreement) as amended by this Amendment constitute the entire agreement among the parties with respect to the subject matter of such documents and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter thereof. Section 9. Jurisdiction. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Amendment or the Contemplated Transactions shall be brought in the United States District Court for the District of Delaware (or, if subject matter jurisdiction is unavailable, any of the state courts of the State of Delaware), and each of the parties hereby consents to the exclusive jurisdiction of such court (and of the appropriate appellate court) in any such suit, action or proceeding and waives any objection to venue laid therein. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the State of Delaware. Without limiting the foregoing, Parent, TTSI and Buyer agree that service of process upon such party at the address referred to in Section 4 together with written notice of such service to such party, shall be deemed effective service of process upon such party. Section 10. Severability. Any provision of this Amendment that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of the this Amendment or affecting the validity or enforceability of such provision in any other jurisdiction. To the extent any provision of this Amendment is determined to be prohibited or unenforceable in any jurisdiction Parent and Buyer agree to use reasonable commercial efforts, and agree to cause the other Seller Companies and TTSI, as the case may be, to use reasonable commercial efforts, to substitute one or more valid, legal and enforceable provisions that, insofar as practicable implement the purposes and intent of the prohibited or unenforceable provision. Section 11. Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. IN WITNESS WHEREOF, the parties hereto caused this Amendment to be duly executed by their respective authorized officers on the day and year first above written. THE BLACK & DECKER CORPORATION By:/s/STEPHEN F. REEVES Name: Steven F. Reeves Title:Vice President and Controller TRUE TEMPER SPORTS, INC. By:/s/STEPHEN F. REEVES Name: Steven F. Reeves Title:Vice President TTSI LLC By:/s/TYLER J. WOLFRAM Name: Tyler J. Wolfram Title:Managing Director EX-2 6 EXHIBIT 2(C) EXHIBIT 2(c) TRANSACTION AGREEMENT Dated as of July 12, 1998 By and Between THE BLACK & DECKER CORPORATION and BUCHER HOLDING AG TABLE OF CONTENTS Page ARTICLE I DEFINITIONS Section 1.01 Definitions.........................................1 ARTICLE II TRANSACTIONS AND CLOSING Section 2.01 Closing Transactions................................1 Section 2.02 Exchange Consideration..............................3 Section 2.03 Closing.............................................3 Section 2.04 Adjustments of Exchange Consideration...............4 ARTICLE III REPRESENTATIONS AND WARRANTIES OF BLACK & DECKER Section 3.01 Representations and Warranties of Black & Decker....5 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Section 4.01 Representations and Warranties of Buyer.............5 ARTICLE V COVENANTS AND AGREEMENTS OF BLACK & DECKER Section 5.01 Conduct of Business.................................6 Section 5.02 Access to Information; Confidentiality..............7 Section 5.03 Change of Lockbox Accounts..........................8 Section 5.04 Access to Information; Cooperation After Closing....8 Section 5.05 Maintenance of Insurance Policies...................9 Section 5.06 Noncompetition......................................9 Section 5.07 Third Party's Consent and Notification to Third Parties............................................10 ARTICLE VI COVENANTS AND AGREEMENTS OF BUYER Section 6.01 Confidentiality....................................10 Section 6.02 Provision and Preservation of and Access to Certain Information; Cooperation...................10 Section 6.03 Insurance; Financial Support Arrangements..........11 Section 6.04 Use of Intellectual Property.......................13 Section 6.05 Certain Environmental Investigations...............13 ARTICLE VII COVENANTS AND AGREEMENTS OF THE PARTIES Section 7.01 Further Assurances.................................14 Section 7.02 Certain Filings; Consents..........................14 Section 7.03 Public Announcements...............................14 Section 7.04 Intellectual Property..............................14 Section 7.05 Filings............................................15 Section 7.06 Legal Privileges...................................15 Section 7.07 Taxes..............................................15 Section 7.08 Currency Hedge Contracts...........................18 Section 7.09 Restructuring Costs................................20 ARTICLE VIII EMPLOYEES AND EMPLOYEE BENEFIT MATTERS Section 8.01 Employees and Employee Benefit Matters.............20 ARTICLE IX CONDITIONS TO CLOSING Section 9.01 Conditions to the Obligations of Each Party........20 Section 9.02 Conditions to Obligation of Buyer..................21 Section 9.03 Conditions to Obligation of Black & Decker.........21 Section 9.04 Updated Disclosure Schedules.......................22 Section 9.05 Effect of Waiver...................................22 ARTICLE X SURVIVAL; INDEMNIFICATION Section 10.01 Survival...........................................22 Section 10.02 Indemnification....................................23 Section 10.03 Procedures.........................................25 Section 10.04 Limitations........................................27 ARTICLE XI TERMINATION Section 11.01 Termination........................................28 Section 11.02 Effect of Termination..............................29 ARTICLE XII MISCELLANEOUS Section 12.01 Notices............................................29 Section 12.02 Amendments; Waivers................................30 Section 12.03 Expenses; Taxes....................................31 Section 12.04 Successors and Assigns.............................31 Section 12.05 Disclosure.........................................31 Section 12.06 Construction.......................................32 Section 12.07 Entire Agreement...................................32 Section 12.08 Governing Law......................................32 Section 12.09 Counterparts; Effectiveness........................32 Section 12.10 Jurisdiction.......................................33 Section 12.11 Severability.......................................34 Section 12.12 Bulk Sales.........................................34 EXHIBITS EXHIBIT A Definitions EXHIBIT B Representations and Warranties of Black & Decker EXHIBIT C Representations and Warranties of Buyer EXHIBIT D Employees and Employee Benefit Matters ATTACHMENTS Attachment I Glass Machinery Units, Methods of Sale and Sellers Attachment II Form of Supplemental Agreements Attachment III Form of Trademark Agreement Attachment IV Exchange Consideration Allocation Schedule Attachment V Conduct of Business Pending Closing Attachment VI List of Hedge Contracts Attachment VII Consents and Approvals Required Prior to Closing Attachment VIII Form of Assignment of United States Trademarks, Trademark Registrations and Applications for Registration Attachment IX Glass Machinery Financial Statements Attachment X Form of Assignment of Foreign Trademarks, Trademark Registrations and Applications for Registration Attachment XI Form of Assignment of United States Patents and Patent Applications Attachment XII Form of Assignment of Foreign Patents and Applications for Patents Attachment XIII Special Purpose Financial Statements (3/22/98) Attachment XIV Form of Services Agreement Attachment XV List of Glass Machinery Business Intellectual Property that is Registered or Subject to an Application for Registration Attachment XVI List of Certain Active Employees Attachment XVII Opinion of Counsel Attachment XVIII Agreements Relating to the Determination of the Proposed Net Tangible Asset Amount and the Final Net Tangible Asset Amount -1- TRANSACTION AGREEMENT This Transaction Agreement (together with the Exhibits, Schedules and Attachments hereto, this "Agreement") is made as of the 12th day of July, 1998, by and among The Black & Decker Corporation, a Maryland corporation ("Black & Decker"), and Bucher Holding AG, a Swiss corporation ("Buyer"). W I T N E S S E T H: WHEREAS, Black & Decker, through certain of its direct and indirect Subsidiaries, is engaged in the Glass Machinery Business; WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, Black & Decker desires to cause each Seller of Transferred Assets to transfer substantially all of the assets held, owned or used by it to conduct the Glass Machinery Business and to assign certain liabilities associated with the Glass Machinery Business, to a Buyer Company, and to cause each Seller of Shares to transfer such Shares to a Buyer Company; WHEREAS, Buyer desires to receive or to cause a Buyer Company to receive such assets and shares and to assume such liabilities; and WHEREAS, in connection with the sale of the Glass Machinery Business by Black & Decker to Buyer, Black & Decker and Buyer desire to enter into certain agreements and arrangements ancillary to such sale; NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties contained herein, the parties agree as follows: ARTICLE I DEFINITIONS Section 1.01 Definitions. Capitalized terms used in this Agreement shall have the meanings specified in this Agreement or in Exhibit A. ARTICLE II TRANSACTIONS AND CLOSING Section 2.01 Closing Transactions. Upon the terms and subject to the conditions set forth in this Agreement, the parties agree that at the Closing, among other things: -2- (i) Black & Decker will cause each Seller of Transferred Assets as listed on Attachment I to transfer to a Buyer Company designated by Buyer all Transferred Assets of such Seller and such Buyer Company will assume all Assumed Liabilities of such Seller in accordance with this Agreement; (ii) to effect the transfer of the Transferred Assets and the assumption of the Assumed Liabilities contemplated by the foregoing clause (i), each Seller of Transferred Assets and a Buyer Company shall execute and deliver (a) a Supplemental Asset Sale Agreement and all exhibits, schedules and attachments thereto, substantially in the form attached hereto as Attachment II and modified to the extent necessary to comply with the laws of, and to ensure its enforceability in, the nation in which each Glass Machinery Unit to which such Supplemental Asset Sale Agreement relates is located, in a manner which as closely comports with the intent of the provisions of this Agreement, the Supplemental Asset Sale Agreement and all exhibits, schedules and attachments thereto as is permitted by such laws and (b) the Intellectual Property Assignment Agreements; (iii) Black & Decker will cause each Seller of Shares as listed on Attachment I to transfer to Buyer or a Buyer Company designated by Buyer all Shares of such Seller; (iv) to effect the transfer of the Shares contemplated by the foregoing clause (iii) and the transfer and assignment of Excluded Assets and Excluded Liabilities from a Glass Machinery Share Company to the Seller of the Shares thereof, each Seller of Shares and a Buyer Company shall execute and deliver a Supplemental Share Sale Agreement and all exhibits, schedules and attachments thereto, substantially in the form attached hereto as Attachment II and modified to the extent necessary to comply with the laws of, and to ensure its enforceability in, the nation in which each Glass Machinery Company to which such Supplemental Share Sale Agreement relates is organized, in a manner which as closely comports with the intent of the provisions of this Agreement, the Supplemental Share Sale Agreement and all exhibits, schedules and attachments thereto as is permitted by such laws; (v) to effect the license of certain rights in respect of certain Intellectual Property, Black & Decker and Buyer shall execute the Trademark Agreement substantially in the form contemplated by Attachment III to this Agreement; (vi) Black & Decker and Buyer shall execute and deliver the Services Agreement substantially in the form contemplated by Attachment XIV of this Agreement; (vii) Buyer shall pay and deliver to Black & Decker, for its own account and as agent for the Sellers on account of the Adjusted Purchase Price, the amount of $178,656,000 in immediately available funds by wire transfer to one single account designated by Black & Decker (which account shall be designated by Black & Decker by written notice to Buyer at least two Business Days prior to the Closing Date, or such shorter notice as Buyer shall agree to accept); -3- (viii) Black & Decker shall deliver resignation letters of the members of the boards of directors or the manager board (in case of the S.r.l.) of the Glass Machinery Share Companies in accordance with the instructions of Buyer provided that Black & Decker shall not be required to take such action with respect to any such individual who is an Active Employee of a Glass Machinery Unit; (ix) Black & Decker shall deliver to Buyer a legal opinion substantially in the form of Attachment XVII; and (x) Except as otherwise provided in the Transaction Documents, Black & Decker and its Affiliate and each of the Glass Machinery Units shall mutually terminate all agreements between Black & Decker or any of its Affiliates, on the one hand, and a Glass Machinery Unit, on the other hand, except that Black & Decker and its Affiliates shall assign to Buyer Companies designated by Buyer the following agreements: License Agreement For Patents and Technical Information dated September 30, 1991; Management Services and Technical Assistance Agreement dated January 1, 1993; General Agency Agreement dated November 1, 1964; and Technical Assistance and License Agreement dated August 31, 1968, in each case as amended through the Closing Date. Section 2.02 Exchange Consideration. (a) The consideration to be paid to Black & Decker and the Sellers for the Transferred Assets and the Shares (the "Exchange Consideration") shall consist of the following: (i) subject to adjustment in accordance with Section 2.04, $194,000,000 in cash (as so adjusted, the "Adjusted Purchase Price"); and (ii) the assumption by Buyer Companies of the Assumed Liabilities in accordance with the Transaction Documents. (b) The Exchange Consideration shall be allocated to and among the respective Transferred Assets and the Shares as set forth in Attachment IV to this Agreement. Black & Decker and Buyer agree that the allocation of the Exchange Consideration has been negotiated by them and is consistent with the value of the Transferred Assets and the Shares and in accordance with the principles of Section 1060 of the Code and the regulations thereunder. Black & Decker and Buyer agree that they shall use the allocation of the Exchange Consideration reflected in Attachment IV to this Agreement in any Tax Returns filed with any U.S. Tax Authority or other reports that deal with the Contemplated Transactions and are filed with any U.S. Tax Authority. Section 2.03 Closing. The closing (the "Closing") of the Contemplated Transactions shall take place at the offices of Homburger Rechtsanwaelte, Weinbergstrasse 56/58, 8006 Zurich, Switzerland, on the tenth Business Day following the satisfaction or waiver (by the party entitled -4- to waive the condition) of all conditions to the Closing set forth in Article IX, or at such other time and place as the parties to this Agreement may agree, but no later than December 31, 1998. The Closing will occur at 3:00 p.m. on the Closing Date. Section 2.04 Adjustments of Exchange Consideration. (a) Promptly following the Closing Date, but in no event later than 60 days after the Closing Date, Black & Decker shall, at its expense, with the assistance of Buyer prepare and submit to Buyer a combined statement of net tangible assets setting forth, in reasonable detail, Black & Decker's calculation of the Net Tangible Assets consistent with the Opening Statement and in accordance with Note 12 thereto of the Glass Machinery Business as of the close of business on the day prior to the Closing Date (the "Proposed Final Net Tangible Asset Amount"). In the event Buyer disputes the correctness of the Proposed Final Net Tangible Asset Amount, Buyer shall notify Black & Decker of its objections within 45 days after receipt of Black & Decker's calculation of the Proposed Final Net Tangible Asset Amount and shall set forth, in writing and reasonable detail, the reasons for Buyer's objections. If Buyer fails to deliver such notice of objections within such time, Buyer shall be deemed to have accepted Black & Decker's calculation. To the extent Buyer does not object, in writing and in reasonable detail as required and within the time period contemplated by this Section 2.04(a) to a matter in the combined statement of net tangible assets prepared and submitted by Black & Decker, Buyer shall be deemed to have accepted Black & Decker's calculation and presentation in respect of the matter and the matter shall not be considered to be in dispute. Black & Decker and Buyer shall endeavor in good faith to resolve any disputed matters within 20 days after Black & Decker's receipt of Buyer's notice of objections. If they are unable to do so, Black & Decker and Buyer shall select an independent "big five" accounting firm (other than Ernst & Young LLP or PricewaterhouseCoopers) to resolve the matters in dispute (in a manner consistent with Section 2.04(b) and with any matters not in dispute), and the determination of such firm in respect of the correctness of each matter remaining in dispute shall be conclusive and binding on Black & Decker and Buyer. The Net Tangible Assets of the Glass Machinery Business as of the close of business on the day prior to the Closing Date, as finally determined pursuant to this Section 2.04(a) (whether by failure of Buyer to deliver notice of objection, by agreement of Black & Decker and Buyer or by determination of the independent accountants selected as set forth above), is referred to herein as the "Final Net Tangible Asset Amount." (b) The Proposed Final Net Tangible Asset Amount and the Final Net Tangible Asset Amount shall be determined in accordance with the accounting principles, policies, practices and methods utilized in the preparation of the Opening Statement, as disclosed in the notes to the Opening Statement, except as otherwise set forth in Note 12 to the Opening Statement and in Attachment XVIII hereto. (c) If the Final Net Tangible Asset Amount is greater than $72,665,000], the difference shall be paid to Black & Decker by Buyer with simple interest thereon from the Closing Date to the date of payment at a floating rate per annum equal to the per annum interest rate announced from time to time by Citibank, N.A. as its prime rate in effect. If the Final Net Tangible Asset Amount is less than $72,665,000, the difference shall be paid to Buyer by Black & Decker with -5- simple interest thereon from the Closing Date to the date of payment at a floating rate per annum equal to the per annum interest rate announced from time to time by Citibank, N.A. as its prime rate in effect. Such payment shall be made in immediately available funds in U.S. dollars not later than five Business Days after the determination of the Final Net Tangible Asset Amount by wire transfer to a bank account designated in writing by the party entitled to receive the payment. (d) Black & Decker shall make available and shall cause Ernst & Young LLP to make available, in accordance with reasonable and customary practices and professional standards and subject to such reasonable conditions as Ernst & Young LLP shall impose, the books, records, documents and work papers underlying the preparation and review of the Opening Statement and the calculation of the Proposed Final Net Tangible Asset Amount. Buyer shall make available and shall cause PricewaterhouseCoopers to make available, in accordance with reasonable and customary practices and professional standards and subject to such reasonable conditions as PricewaterhouseCoopers shall impose, the books, records, documents and work papers created or prepared by or for Buyer in connection with the review of the Proposed Final Net Tangible Asset Amount and the other matters contemplated by Section 2.04(a). (e) The fees and expenses, if any, of the accounting firm selected to resolve any disputes between Black & Decker and Buyer in accordance with Section 2.04(a) shall be paid one-half by Black & Decker and one-half by Buyer. (f) On the date that the payment due under Section 2.04(c) is due, Buyer shall pay to Black & Decker the sum of $15,344,000 with simple interest thereon from the Closing Date to the date of payment at a floating rate per annum equal to the per annum interest rate announced from time to time by Citibank, N.A. as its prime rate in effect. Such payment shall be made in immediately available funds in U.S. dollars not later than five (5) Business Days after the determination of the Final Net Tangible Asset Amount by wire transfer to a bank account designated in writing by Black & Decker. ARTICLE III REPRESENTATIONS AND WARRANTIES OF BLACK & DECKER Section 3.01 Representations and Warranties of Black & Decker. Black & Decker represents and warrants to Buyer as set forth in Exhibit B. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Section 4.01 Representations and Warranties of Buyer. Buyer represents and warrants to Black & Decker as set forth in Exhibit C. -6- ARTICLE V COVENANTS AND AGREEMENTS OF BLACK & DECKER Section 5.01 Conduct of Business. Except (a) with the written consent of Buyer (which consent shall not be unreasonably withheld or delayed), (b) as set forth in Attachment V, (c) as permitted below or required by Applicable Law, (d) in accordance with the terms and conditions of Contracts in existence on the date of this Agreement, (e) in accordance with the terms of this Agreement, or (f) with respect to Excluded Assets and Excluded Liabilities, from the date of this Agreement until the Closing Date, the Glass Machinery Units shall conduct the Glass Machinery Business in all material respects in accordance with the historical and customary operating practices relating to the conduct of the Glass Machinery Business (to the extent such practices are reasonable commercial practices) and shall use reasonable efforts to preserve intact the Glass Machinery Business and the relationships of the Glass Machinery Units with third parties in connection with the Glass Machinery Business, and the Glass Machinery Units shall not: (i) make any capital expenditure, or group of related capital expenditures relating to the Glass Machinery Business in excess of $500,000; (ii) sell or dispose of more than an aggregate of $500,000 of assets that (1) would constitute Transferred Assets if owned, held or used by any Seller of Transferred Assets on the Closing Date or (2) are owned on the date of this Agreement by a Glass Machinery Share Company (in either case, other than the sale of Inventory (including obsolete Inventory whether or not in the ordinary course of business), and any sale made in the ordinary course of business); (iii) sell, transfer, license or otherwise dispose of, any Intellectual Property used exclusively in the Glass Machinery Business other than implied licenses of Intellectual Property in connection with the sale of products of the Glass Machinery Business; (iv) terminate the coverage of any policies of title, liability, fire, workers' compensation, property and any other form of insurance covering the operations of the Glass Machinery Business, except where the termination could not reasonably be expected to have a Material Adverse Effect on the Glass Machinery Business; (v) settle any lawsuit or claim if such settlement imposes a material continuing non-monetary obligation on the Glass Machinery Business, any of the Transferred Assets or any Glass Machinery Share Company; (vi) grant any new or modified severance or termination arrangement or increase or accelerate in any material respect any payable under the severance or termination pay policies in effect on the date of this Agreement with respect to any Transferred Employee; -7- (vii) except as otherwise may be permitted or required by this Agreement or Applicable Law, adopt or amend in any material respect any Employee Plan or Benefit Arrangement in respect of any Transferred Employee or, other than compensation increases in the ordinary course of business, with respect to any Transferred Employee at a level of Vice President or above increase the compensation or fringe of such Transferred Employee or pay any benefit not required by any Employee Plan or Benefit Arrangement with respect to such Transferred Employee; or (viii) enter into any new collective bargaining agreements or extend any existing collective bargaining agreement except that Emhart Glass Machinery (U.S.) Inc. may enter into a new collective bargaining agreement with the union that represents the unionized employees of the Hartford Division substantially on the terms set forth on Attachment V. Section 5.02 Access to Information; Confidentiality. (a) Except as may be necessary to comply with any Applicable Laws and subject to any reasonably applicable privileges (including, without limitation, the attorney-client privilege), from the date of this Agreement until the Closing Date, the Glass Machinery Units shall (i) give Buyer and its Representatives reasonable access to the records of the Glass Machinery Units relating to the Glass Machinery Business during normal business hours and upon reasonable prior notice, (ii) give Buyer and its Representatives reasonable access to any facilities the possession of which will be transferred, directly or indirectly, to Buyer at Closing during normal business hours and upon reasonable prior notice for the purpose of Buyer's conduct of an environmental audit of such facilities or documentary due diligence, (iii) furnish to Buyer and its Representatives such financial and operating data and other information relating to the Glass Machinery Business as Buyer may reasonably request and (iv) instruct the employees and Representatives of the Glass Machinery Units to provide reasonable cooperation to Buyer in its investigation of the Glass Machinery Business. Without limiting the generality of the foregoing, subject to the limitations set forth in the first sentence of this Section 5.02(a), from the date of this Agreement to the Closing Date Black & Decker shall (i) use reasonable commercial efforts to enable Buyer and its Representatives to conduct, at Buyer's expense, business and financial reviews, investigations and studies as to the operation of the Glass Machinery Business, including any tax, operating or other efficiencies that may be achieved and (ii) give Buyer and its Representatives access upon reasonable request to information relating to the Glass Machinery Business of the type and with the same level of detail as in the ordinary course of business currently is being made available to the president or chief financial officer of the Glass Machinery Business. Notwithstanding the foregoing, neither Buyer nor its Representatives shall have access to personnel records of any the Glass Machinery Units relating to individual performance or evaluation records, medical histories or other information that in Black & Decker's good faith opinion is sensitive or the disclosure of which could subject any the Glass Machinery Units to risk of liability. (b) For a period of two years after the Closing Date, Black & Decker and its Subsidiaries will treat and hold as confidential, any confidential information relating primarily to the operations or affairs of the Glass Machinery Business. For a period of five years after the Closing Date, Black & Decker and its Subsidiaries will not disclose any confidential information -8- that includes technical (including without limitation Intellectual Property) or marketing information to a Competing Business for a period of five (5) years after the Closing Date. In the event any such Person is requested or required (by oral or written request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand or similar process or by Applicable Law) to disclose any such confidential information, then Black & Decker shall notify Buyer promptly of the request or requirement so that Buyer, at its expense, may seek an appropriate protective order or waive compliance with this Section 5.02(b). If, in the absence of a protective order or receipt of a waiver hereunder, any such Person is, on the advice of counsel, compelled to disclose such confidential information such Person may so disclose the confidential information, provided that such Person shall use its reasonable efforts to obtain reliable assurance that confidential treatment will be accorded to such confidential information. The provisions of this Section 5.02(b) shall not be deemed to prohibit the disclosure of confidential information relating to the operations or affairs of the Glass Machinery Business by Black & Decker or any of its Subsidiaries to the extent reasonably required (i) to prepare or complete any required Tax Returns or financial statements, (ii) in connection with audits or other proceedings by or on behalf of a Governmental Authority, (iii) in connection with any insurance or claims, (iv) to the extent necessary to comply with any Applicable Laws, (v) to provide services to any Buyer Company in accordance with the terms and conditions of any of the Transaction Documents or (vi) in connection with any other similar administrative functions in the ordinary course of business. Notwithstanding the foregoing, the provisions of this Section 5.02(b) shall not apply to information that (i) is or becomes publicly available other than as a result of a disclosure by Black & Decker or any of its Subsidiaries, (ii) is or becomes available to Black & Decker or any of its Subsidiaries on a non-confidential basis from a source that, to Black & Decker's knowledge, is not prohibited from disclosing such information by a legal, contractual or fiduciary obligation or (iii) is or has been independently developed by a Black & Decker or any of its Subsidiaries (other than solely for the Glass Machinery Business) after the Closing Date. Section 5.03 Change of Lockbox Accounts. Immediately after the Closing, Black & Decker shall take such steps as Buyer may reasonably request to cause Buyer to be substituted as the sole party having control over any lockbox or similar bank account maintained exclusively by the Glass Machinery Business to which customers of the Glass Machinery Business directly make payments in respect of the Glass Machinery Business or to direct the bank at which any such lockbox or similar account is maintained to transfer any payments made thereto to an account established by Buyer. Section 5.04 Access to Information; Cooperation After Closing. On and after the Closing Date and subject to any applicable privileges (including, without limitation, the attorney-client privilege), Black & Decker shall, and shall cause each of its Subsidiaries to, at their expense (i) afford Buyer and its Representatives reasonable access upon reasonable prior notice during normal business hours, to all employees, offices, properties, agreements, records and books retained by Black & Decker and its Subsidiaries to the extent relating to the conduct of the Glass Machinery Business prior to the Closing and (ii) cooperate fully with Buyer with respect to matters relating to the conduct of the Glass Machinery Business prior to the Closing, including, without limitation, in the defense or pursuit of any Transferred Asset or Assumed Liability or any -9- claim or action that relates to occurrences involving the Glass Machinery Business prior to the Closing Date. Section 5.05 Maintenance of Insurance Policies. Except as otherwise provided in Exhibit D, on and after the date of this Agreement and until the Closing Date, Black & Decker shall not take or fail to take any action if such action or inaction, as the case may be, would adversely affect the applicability of any insurance (including reinsurance) in effect on the date of this Agreement that covers all or any part of (i) the assets that would constitute Transferred Assets if owned, held or used by any Seller of Transferred Assets on the Closing Date, (ii) the assets (other than Excluded Assets) of a Glass Machinery Share Company, (iii) the Glass Machinery Business or (iv) the Transferred Employees. Except as otherwise provided in Exhibit D or as may otherwise be agreed in writing by the parties, Black & Decker shall not have any obligation to maintain the effectiveness of any such insurance policy after the Closing Date or to make any monetary payment in connection with any such policy. Section 5.06 Noncompetition. (a) Black & Decker covenants and agrees, as an inducement to Buyer to enter into this Agreement and to consummate the Contemplated Transactions, that for a period of five years following the Closing Date neither Black & Decker nor any of its Subsidiaries (for so long but only for so long as it remains a Subsidiary of Black & Decker) will, directly or indirectly, carry on or participate in the ownership, management or control of any business enterprise that is engaged in the Glass Machinery Business (a "Competing Business"). (b) Nothing contained in this Section 5.06 shall limit or restrict the right of Black & Decker or any of its subsidiaries to hold and make investments in securities of any Person that has securities listed on a national securities exchange or admitted to trading privileges thereon or actively traded in a generally recognized over-the-counter market, provided that the aggregate equity interest therein of Black & Decker and any of its Subsidiaries does not exceed five percent of the outstanding shares or interests in such Person at the time of their investment therein. (c) Notwithstanding any provisions of this Section 5.06 to the contrary, if Black & Decker or any of its Subsidiaries acquires the assets or securities of any Person that is engaged in a Competing Business, such acquisition shall not be deemed to be in violation of this Section 5.06, provided that (A) (i) at the time of acquisition the Competing Business represents less than one-third of the gross revenues of the acquired Person for the acquired Person's most recently completed fiscal year and (ii) Black & Decker and its Subsidiaries use reasonable commercial efforts to divest the operations of such Competing Business subsequent to such acquisition, or (B) at the time of acquisition the Competing Business represents less than five percent of the gross revenues of the acquired Person for the acquired Person's most recently completed fiscal year. (d) Black & Decker recognizes and agrees that a breach by it or any of its Subsidiaries of any of the covenants and agreements in this Section 5.06 could cause irreparable harm to Buyer, that Buyer's remedies at law in the event of such breach would be inadequate, and that, accordingly, in the event of such breach a restraining order or injunction or both may be issued -10- against Black & Decker or any of its Subsidiaries in addition to any other rights and remedies that may be available to Buyer under Applicable Law. If this Section 5.06 is more restrictive than permitted by the Applicable Laws of the jurisdiction in which Buyer seeks enforcement hereof, this Section 5.06 shall be limited to the extent required to permit enforcement under such Applicable Laws. Section 5.07 Third Party's Consent and Notification to Third Parties. Black & Decker shall undertake all actions which are reasonably required to obtain the consents from, or to make the notifications to be made to, third parties which are listed in Schedule B.06. ARTICLE VI COVENANTS AND AGREEMENTS OF BUYER Section 6.01 Confidentiality. Buyer agrees that all information provided or otherwise made available in connection with the Contemplated Transactions, to Buyer or any of its Representatives shall be treated as if provided under the Confidentiality Agreement which shall continue in effect for such purpose following the signing of this Agreement. This confidentiality undertaking shall terminate (a) upon Closing with respect to all information regarding the Glass Machinery Business and (b) on the second anniversary of the Closing with respect to all other information provided or otherwise made available in connection with the Contemplated Transactions to Buyer or any of its Representatives. Nothing in this Section 6.01, however, shall limit or otherwise restrict the applicability of any other confidentiality or similar provisions included in the Transaction Documents. Section 6.02 Provision and Preservation of and Access to Certain Information; Cooperation. (a) Prior to the Closing Date, Buyer shall provide to Black & Decker promptly upon its receipt thereof copies of all environmental audit and similar reports with respect to facilities the possession of which will be transferred, directly or indirectly, to Buyer at the Closing. Buyer shall provide to Black & Decker a copy of all sampling results, boring logs, analyses and other data and reports regarding any environmental review conducted by Buyer immediately upon obtaining them. (b) On and after the Closing Date, Buyer shall preserve all books and records of the Glass Machinery Business for a period of six years commencing on the Closing Date (or in the case of books and records relating to Tax, employment and employee matters, for so long as required by Applicable Law), and thereafter for an additional four years, not destroy or dispose of such records without giving notice to Black & Decker of such pending disposal and offering Black & Decker such records. In the event Black & Decker has not requested such materials within 90 days following the receipt of notice from Buyer, Buyer may proceed to destroy or dispose of such materials without any liability. -11- (c) From and after the Closing Date and subject to any applicable privileges (including, without limitation, the attorney-client privilege), Buyer shall at its expense (i) afford Black & Decker and its Representatives reasonable access upon reasonable prior notice during normal business hours, to all employees, offices, properties, agreements, records, books and affairs of Buyer, and provide copies of such information concerning the Glass Machinery Business as Black & Decker may reasonably request for any proper purpose, including, without limitation, in connection with the matters contemplated by Section 2.04, pre-closing hazardous waste manifests, the preparation of any Tax Returns, in connection with any judicial, quasi-judicial, administrative, Tax, audit or arbitration proceeding, in connection with the preparation of any financial statements or reports and in connection with the defense of any claims or allegations that relate to or may relate to Excluded Liabilities and (ii) cooperate fully with Black & Decker for any proper purpose, including, without limitation, the defense of or pursuit of any Excluded Liability, Excluded Asset or Indemnified Claim, or any claim or action that relates to an Excluded Liability, Excluded Asset or Indemnified Claim. Section 6.03 Insurance; Financial Support Arrangements. (a) Buyer acknowledges and agrees that as of the Closing Date, neither the Buyer Companies, the Glass Machinery Share Companies, the Glass Machinery Business, any property owned or leased by any of the foregoing nor any of the directors, officers, employees (including, without limitation, the Transferred Employees) or agents of any of the foregoing will be insured under any insurance policies maintained by Black & Decker or any of its Affiliates, except (i) in the case of certain claims made policies, to the extent that a claim has been reported as of the Closing Date, (ii) in the case of a policy that is an occurrence policy, to the extent the accident, event or occurrence that results in an insurable loss occurs prior to the Closing Date and has been, is or will be reported or noticed to the respective carrier by a Glass Machinery Unit or Buyer in accordance with the requirements of such policies (which claims Black & Decker shall, at Buyer's cost and expense, pursue diligently on Buyer's behalf and the net proceeds of which claims (except to the extent they relate to Excluded Liabilities) shall be remitted promptly to Buyer upon receipt thereof), and (iii) as otherwise provided in Exhibit D or agreed to in writing by the parties. Except as otherwise provided in Exhibit D or as otherwise may be agreed to in writing by the parties, from and after the Closing Date, Black & Decker shall have no obligation of any kind to maintain any form of insurance covering any of the Glass Machinery Units or all or any part of the Transferred Assets, the Glass Machinery Business or the Transferred Employees, provided that Black & Decker shall reasonably cooperate with the Buyer to permit the Glass Machinery Business to have the benefit of reasonable uninterrupted insurance coverage. (b) From and after the Closing Date, Buyer agrees to reimburse Black & Decker within 30 days of receipt of an invoice for any self insurance, retention, deductible, retrospective premium, cash payment for reserves calculated or charged on an incurred loss basis and similar items, including but not limited to associated administrative expenses and allocated loss adjustment or similar expenses (collectively, "Insurance Liabilities") allocated to the Glass Machinery Business by Black & Decker and Black & Decker agrees to pay to Buyer any refunds or credits with respect to such items on a basis consistent with past practices resulting from or arising under any and all current or former insurance policies maintained by Black & Decker or -12- any of its Affiliates to the extent that (i) such Insurance Liabilities relate to or arise out of Assumed Liabilities, liabilities (other than Excluded Liabilities) of a Glass Machinery Share Company or any activities of Buyer, (ii) relate to a period prior to the Closing and (iii) the past practices reasonably conform with arms' length principles. Buyer agrees that, to the extent any of the insurers under the insurance policies, in accordance with the terms of the insurance policies, requests or requires collateral, deposits or other security to be provided with respect to claims made against such insurance policies relating to or arising from such Insurance Liabilities, Buyer shall provide the collateral, deposits or other security or, upon request of Black & Decker, will replace any collateral, deposits or other security provided by Black & Decker or any of its Affiliates. (c) Buyer agrees that, for a period of six years commencing on the Closing Date, to the extent it maintains product liability or similar insurance coverage, Buyer will (at Black & Decker's cost to the extent of any additional cost therefor, provided that, in the event there will be such a cost, Buyer will give Black & Decker a reasonable period of time to determine whether it desires to incur such cost before Buyer commits to such coverage with respect to Black & Decker) include Black & Decker and its Affiliates as additional insureds/loss payees on any such policies in respect of which Black & Decker or its Affiliates has or may have an insurable interest with respect to the Glass Machinery Business, the Transferred Assets, any of the Assumed Liabilities or any facilities the possession of which will be transferred, directly or indirectly, to Buyer at the Closing. (d) Buyer agrees that, not later than December 31, 1998, and in a manner reasonably satisfactory to Black & Decker, Buyer shall in good faith seek to release Black & Decker and its Affiliates from all obligations under all Financial Support Arrangements maintained by Black & Decker or any of its Affiliates in connection with the Glass Machinery Business; provided that this obligation to release shall extend only to Financial Support Arrangements which are listed in paragraph (a)(v) of Schedule B.12. (e) If, at any time after the Closing Date, (i) any amounts are drawn on or paid under any Financial Support Arrangement referred to in Section 6.03(d) where Black & Decker or any of its Affiliates is obligated to reimburse the Person making such payment or (ii) Black & Decker or any of its Affiliates pays any amounts under, or any fees, costs or expenses relating to, any such Financial Support Arrangement, Buyer shall pay Black & Decker such amounts promptly after receipt from Black & Decker of notice thereof accompanied by written evidence of the underlying payment obligation. (f) In the event that Buyer fails to ensure that Black & Decker and its Affiliates are unconditionally released from all obligations under the Financial Support Arrangements referred to in Section 6.03(d) not later than December 31, 1998, Buyer shall either (i) promptly deposit with Black & Decker cash in an amount equal to the aggregate principal or stated amount, as may be applicable, of such Financial Support Arrangements not so released or (ii) provide back-up letters of credit issued by one or more commercial banks reasonably satisfactory to Black & Decker, payable to Black & Decker in such aggregate principal or stated amount and otherwise in form and substance reasonably satisfactory to Black & Decker with respect to such Financial -13- Support Arrangements. Any cash deposited with Black & Decker in accordance with clause (i) shall be held by Black & Decker in a segregated interest-bearing account and shall be used by Black & Decker solely to satisfy its payment obligations in respect of such Financial Support Arrangements, and the unused portion of any cash (including interest) relating to a Financial Support Arrangement shall be returned to Buyer promptly following the release of Black & Decker and its Affiliates with respect to, or any other termination of, the Financial Support Arrangement. Section 6.04 Use of Intellectual Property. Buyer acknowledges and agrees that except as permitted by the Transaction Documents, Buyer shall not use, and Buyer shall cause its Affiliates not to use, any trademark, logo or tradename of Black & Decker or any Affiliate of Black & Decker (other than those (i) transferred to Buyer under the terms of the Intellectual Property Assignment Agreements or (ii) owned by a Glass Machinery Share Company that do not constitute an Excluded Asset) or any trademarks, logos or trade names that are confusingly similar thereto or that are a translation or transliteration thereof into any language or alphabet. Section 6.05 Certain Environmental Investigations. (a) Buyer agrees that, if Buyer decides to conduct prior to Closing an environmental audit or similar review of the Glass Machinery Business that involves testing, drilling or sampling at any facility the possession of which is contemplated to be transferred, directly or indirectly, to a Buyer Company at Closing, Buyer will so advise Black & Decker and will give Black & Decker sufficient prior written notice to enable Black & Decker's Representatives to be present during any such testing, drilling or sampling, and to review and comment on any work plans related to such audit or review. Except as specifically provided in this Section 6.05(a), the scope of such audit shall be at the sole discretion of Buyer. Buyer further agrees to arrange for split samples to be taken in connection with any such audit or review. Buyer agrees that it will conduct such testing, drilling, or sampling, including disposal of all materials associated with such activities, such as drill cuttings, wastewater, and sampling equipment, at Buyer's sole cost and expense and in accordance with all Applicable Laws, including Environmental Laws. If the Closing contemplated by the Transaction Documents is not consummated for any reason, Buyer agrees to restore each facility at which any such testing, drilling or sampling was conducted to its condition prior to the commencement of Buyer's environmental audit or similar review. (b) All information obtained from Buyer's environmental review (including, but not limited to, environmental Phase I, II or other reports, analytical/sampling data and reports) (i) shall be kept confidential pursuant to Section 6.01; (ii) shall not be provided to any Person other than Black & Decker; and (iii) shall be provided to Black & Decker prior to Closing. In the event that Buyer's environmental review discloses conditions at any of Black & Decker's facilities that may require notice to a Governmental Authority prior to Closing, Black & Decker shall determine what reporting, if any, is necessary and shall conduct any such reporting. -14- ARTICLE VII COVENANTS AND AGREEMENTS OF THE PARTIES Section 7.01 Further Assurances. Subject to the terms and conditions of this Agreement, each party shall use reasonable commercial efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under Applicable Laws to consummate the Contemplated Transactions. Black & Decker and Buyer shall execute and deliver, and shall cause the Sellers and Buyer Companies, as appropriate or required and as the case may be, to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable to consummate or implement the Contemplated Transactions. Except as otherwise expressly set forth in the Transaction Documents, nothing in this Agreement shall require Black & Decker, any of its Affiliates, any of the Buyer Companies to make any payments in order to (i) obtain any consents or approvals necessary or desirable in connection with the consummation of the Contemplated Transactions, or (ii) cure any breach of a representation or warranty by Black & Decker prior to the Closing. Section 7.02 Certain Filings; Consents. Black & Decker and Buyer shall cooperate with one another (i) in determining whether any action by or in respect of, or filing with, any Governmental Authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material Contracts, in connection with the consummation of the Contemplated Transactions and (ii) subject to the terms and conditions of this Agreement, in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers. Section 7.03 Public Announcements. Prior to the Closing, Black & Decker and Buyer shall consult with each other before issuing any press release or making any public statement with respect to this Agreement or the Contemplated Transactions and, except as may be required by Applicable Law or any listing agreement with, or any listing rules of, any national or international securities exchange, shall not issue any such press release or make any such public statement prior to such consultation. Section 7.04 Intellectual Property. (a) Buyer acknowledges and agrees that Buyer Companies and the Glass Machinery Share Companies shall hold all Intellectual Property constituting part of the Transferred Assets or assets (other than the Excluded Assets) of the Glass Machinery Companies, as the case may be, subject to any licenses thereof granted by the Glass Machinery Units prior to the date of this Agreement or other than implied licenses of Intellectual Property in connection with the sale of products of the Glass Machinery Business or with the written consent of Buyer prior to the Closing Date. (b) Buyer further acknowledges and agrees that the transfer of Intellectual Property constituting Transferred Assets to Buyer Companies shall not affect the right of the Sellers to use, -15- disclose or otherwise freely deal with any know-how, trade secrets and other technical information not constituting Transferred Assets. Section 7.05 Filings. Black & Decker and Buyer shall take all actions necessary (without payment of money, commencement of litigation, the assumption of any material obligation or the entering of any agreement to divest or hold separate any assets) or appropriate to cause the prompt expiration or termination of any applicable waiting period under the HSR Act or similar filing requirements in respect of the Contemplated Transactions, including, without limitation, complying as promptly as practicable with any requests for additional information. Section 7.06 Legal Privileges. Black & Decker and Buyer acknowledge and agree that all attorney-client, work product and other legal privileges that may exist with respect to the Glass Machinery Business, the Transferred Assets, Excluded Assets, Assumed Liabilities or Excluded Liabilities shall, from and after the Closing Date, be deemed joint privileges of Black & Decker and Buyer. Both Black & Decker and Buyer shall use all reasonable efforts after the Closing Date to preserve all such privileges and neither Black & Decker nor Buyer shall knowingly waive any such privilege without the prior written consent of the other party (which consent shall not be unreasonably withheld or delayed). Section 7.07 Taxes. (a) Except as provided in Section 7.07(d), Black & Decker and its Affiliates shall pay and be responsible for, and shall be entitled to all refunds and credits of, (i) Income Taxes with respect to the Glass Machinery Companies and Glass Machinery Business for any Pre-Closing Period, including any liability for Income Taxes arising out of the inclusion of any of the Glass Machinery Companies in any Consolidated Returns, (ii) all Taxes with respect to an Affiliated Group for all taxable periods whatsoever, and (iii) Taxes imposed on any Seller with respect to gain or other income from its sale of Transferred Assets or Shares hereunder. Black & Decker shall be responsible for the timely preparation and filing of all Tax Returns for the Taxes described in the immediately preceding sentence. In the event that a reserve with respect to any Taxes for which Black & Decker is responsible under this Section 7.07(a) is included in or taken into account in the calculation or determination of the Final Net Tangible Asset Amount, Buyer shall reimburse Black & Decker for the amount of such reserve promptly upon presentation of an invoice therefor. (b) Except as provided in Section 7.07(d), Buyer shall pay and be responsible for, and shall be entitled to all refunds and credits of, all Taxes with respect to the Glass Machinery Share Companies and the Glass Machinery Business for any Post-Closing Period. Buyer shall be responsible for the timely preparation and filing of all Tax Returns of the Glass Machinery Share Companies and the Glass Machinery Business (i) for any Post-Closing Period, and (ii) required to be filed by any of the Glass Machinery Share Companies (except as a member of an Affiliated Group) and the Glass Machinery Business after the Closing Date. (c) The parties hereto will, to the extent permitted by Applicable Law, elect or otherwise agree with the relevant Tax Authority to treat the portion of each Bridge Period before the Closing Date (a "Seller Period") for all purposes as a short taxable period ending as of the -16- close of business on the day before the Closing Date and such short taxable period shall be treated as a Pre-Closing Period for purposes of this Agreement and the portion of the Bridge Period on and after the Closing Date (the "Buyer Period") shall be treated as a Post-Closing Period for purposes of this Agreement. (d) In any case where Applicable Law does not permit the election or agreement described in Section 7.07(c) to be made, then, for purposes of this Agreement and subject to Section 7.07(f), Income Taxes for the Bridge Period shall be allocated between the Seller Period and the Buyer Period using an interim-closing-of-the-books method assuming that such taxable period ended at the close of business on the Closing Date, except that exemptions, allowances or deductions that are calculated on an annual basis (such as the deduction for depreciation) shall be apportioned on a per diem basis. Buyer shall be responsible for the timely preparation and filing of all Tax Returns and the payment of all Income Taxes due, if any, of the Glass Machinery Share Companies for any Bridge Period that does not terminate on the Closing Date, pursuant to Section 7.07(c). Within thirty (30) days of Buyer providing Black & Decker with a copy of any such Tax Return and a copy of Buyer's detailed calculation of the Income Taxes attributable to the Seller Period determined in accordance with the first sentence of this Section 7.07(d), Black & Decker shall pay to Buyer such Income Taxes attributable to the Seller Period by wire transfer of immediately available funds to the account designated by Buyer. (e) Other than as provided in Section 7.07(f), Black & Decker shall be entitled to the benefit of any refunds or credits of any Taxes for which Black & Decker is responsible under Section 7.07(a) or 7.07(d) and Buyer shall, promptly after the receipt thereof, remit to Black & Decker any such Tax refund received by any Buyer Company or any Glass Machinery Share Company after the Closing. If any adjustment shall be made to any Income Tax Return relating to a Glass Machinery Share Company for any Pre-Closing Period which results in any Tax benefit to Buyer or a Glass Machinery Share Company for any Post-Closing Period, Black & Decker shall be entitled to the benefit of such Income Tax benefit and Buyer shall pay to Black & Decker the amount of such Income Tax benefit at such time or times as and to the extent that Buyer or a Glass Machinery Shares Company realizes such benefit through a refund of Tax or reduction in the amount of Taxes which such Person would otherwise have had to pay if such adjustment had not been made. Buyer shall be entitled to the benefit of any refunds or credits of Taxes for which Buyer is responsible under Section 7.07(b) or 7.07(d) and Black & Decker shall, promptly after the receipt thereof, remit to Buyer any such Tax refund received by Black & Decker or any of its Affiliates after the Closing. If any adjustment shall be made to any Tax Return relating to a Glass Machinery Share Company for any Post-Closing Period which results in any Income Tax benefit to Black & Decker or any Affiliate of Black & Decker for any Pre-Closing Period, such Glass Machinery Share Company shall be entitled to the benefit of such Income Tax benefit, and Black & Decker shall pay to Buyer on behalf of such Glass Machinery Share Company the amount of such Income Tax benefit at such time or times as and to the extent that Black & Decker or any Affiliate of Black & Decker realizes such benefit through a refund of Income Tax or reduction in the amount of Income Taxes which Black & Decker or any such Affiliate would otherwise have had to pay if such adjustment had not been made. -17- (f) Any loss or credit of any Glass Machinery Share Company arising in any Post-Closing Period that is available as a carryback to a Pre-Closing Period ("Buyer's Carryback") shall be for the benefit of the appropriate Glass Machinery Share Company (provided, however, that any loss or credit of a Glass Machinery Share Company arising in any Post-Closing Period that may be either carried back or carried forward at the Glass Machinery Share Company's option, may, in Buyer's sole discretion and judgment, be carried back (and be subject to the provisions of this subsection) or be carried forward). Any loss or credit of any Glass Machinery Share Company arising in any Pre-Closing Period that is available as a carryforward to a Post-Closing Period ("Seller's Carryforward") shall be for the benefit of Black & Decker. Black & Decker shall pay to the appropriate Glass Machinery Share Company or to Buyer on behalf of such Glass Machinery Share Company the amount of any Income Tax benefit realized with respect to any Buyer's Carryback at such time or times and to the extent that Black & Decker or any Affiliate of Black & Decker realizes such benefit through a refund of Income Taxes or reduction in the amount of Income Taxes which Black & Decker or any such Affiliate would otherwise have had to pay but for such carryback. Buyer or the appropriate Glass Machinery Share Company shall pay to Black & Decker the amount of any Income Tax benefit realized with respect to any Seller's Carryforward at such time or times and to the extent of the amount of Income Taxes that the Glass Machinery Share Company, Buyer or any Affiliate thereof would otherwise have had to pay but for such carryforward. In the event that, pursuant to this Section 7.07(f), Black & Decker pays to Buyer, a Glass Machinery Share Company or an Affiliate thereof, the amount of any such Income Tax benefit, Buyer shall indemnify and hold Black & Decker harmless from any subsequent increase in Black & Decker's or any of Black & Decker's Affiliates' Income Tax liability arising out of a subsequent reduction of the amount of any Buyer's Carryback arising from audit, adjustment or otherwise. In the event that, pursuant to this Section 7.07(f), Buyer or a Glass Machinery Share Company pays to Black & Decker or an Affiliate of Black & Decker, the amount of any such Income Tax benefit, Black & Decker shall indemnify and hold Buyer harmless from any subsequent increase in Buyer's, any of a Glass Machinery Company's or any of their Affiliates' Income Tax liability arising out of a subsequent reduction in the amount of any Seller's Carryforward arising from audit, adjustment or otherwise. (g) Buyer shall have exclusive control over and responsibility to conduct any Contest for a Post-Closing Period and for a Bridge Period if the Contest for a Bridge Period relates solely to the Buyer; provided, however, that Buyer shall not enter into any agreement in compromise or settlement of such Contest which could affect a Pre-Closing Period or a Seller Period without the written consent of Seller. Black & Decker shall have exclusive control over and responsibility to conduct any Contest for a Pre-Closing Period and for a Bridge Period if the Contest for a Bridge Period relates solely to the Seller Period; provided, however, that Black & Decker shall not enter into any agreement in compromise or settlement of such Contest which could affect a Post-Closing Period or a Buyer Period without the written consent of Buyer. In any Contest controlled by Black & Decker, Buyer will take, and will cause its Affiliates to take, such action as Black & Decker may by written notice reasonably request in connection with such Contest (including the payment of a Tax preparatory to filing a claim for refund of such Tax; provided, that Black & Decker shall first pay the amount of such Tax to Buyer). Buyer and Seller agree to jointly control and conduct any Contest for a Bridge Period that relates to both the Seller Period and the Buyer Period. Seller, Seller's Parent and Buyer agree to cooperate fully -18- with each other with respect to defending or answering any such Contest and to provide each other with all materials, information and documents as reasonably requested by the other. Neither Buyer, Seller, nor Seller's Parent shall be liable for any portion of any settlement of any Contest for a Bridge Period that relates to both the Seller Period and the Buyer Period effected without its written consent, provided such consent was not unreasonably withheld. (h) Buyer shall notify Black & Decker in writing promptly upon receipt by any Glass Machinery Share Company of notice of any Contest or assessment relating thereto for a Pre-Closing Period or a Bridge Period. Failure of Buyer to so notify Black & Decker shall not relieve Black & Decker from any liability under this Section 7.07, except to the extent it is proven that Black & Decker suffered actual prejudice in connection with or in defending against a Contest. Black & Decker shall notify Buyer in writing promptly upon receipt by Black & Decker of notice of any Contest or assessment relating to a Post-Closing Period or a Bridge Period. Failure of Black & Decker to so notify Buyer shall not relieve Buyer from any liability under this Section 7.07, except to the extent it is proven that Buyer suffered actual prejudice in connection with or in defending against a Contest. Section 7.08 Currency Hedge Contracts. (a) In the ordinary course of their business certain of the Glass Machinery Units enter into forward currency exchange contracts ("Hedge Contracts") with Black & Decker to hedge the currency exchange risk of such Glass Machinery Unit transacting business in a currency other than the currency of its primary operations (i.e., its functional currency). As of June 26, 1998, the Glass Machinery Units have Hedge Contracts with Black & Decker as listed on Attachment VI. (b) From the date hereof to the Closing Date, Black & Decker, as agent for the Glass Machinery Units, will enter into Hedge Contracts on behalf of the Glass Machinery Units with a third party financial institution in the ordinary course of business and in accordance with past practice to cover trade exposures, provided that any roll forward of a closed Hedge Contract may occur only with the prior consent of the Buyer which consent, in the case of such a roll forward of a Hedge Contract that covers a bona fide trade, will not be withheld unreasonably. (c) All Hedge Contracts between Black & Decker and a Glass Machinery Unit, other than a Glass Machinery Share Company, will be assigned by the Glass Machinery Units to and assumed by a Buyer Company at the Closing. No gain or loss on Hedge Contracts of the Glass Machinery Units will be recognized in the determination of the Proposed Final Net Tangible Asset Amount or the Final Net Tangible Asset Amount other than those recognized in the books of account of the Glass Machinery Units in accordance with the current accounting policies followed by the Glass Machinery Units. (d) All Hedge Contracts between a Glass Machinery Unit and Black & Decker will be closed effective as of the Closing Date. Each such Hedge Contract shall be closed at the rates of exchange for the forward purchase of and with the relevant currencies for the period of time remaining on each such Hedge Contract as quoted by Bank of America as of 10:00 a.m. local -19- New York time on the Closing Date. The amount due each Buyer Company that assumed a Hedge Contract and each Glass Machinery Share Company that is a party to a Hedge Contract, or Black & Decker, as the case may be, under each such Hedge Contract that is not in U.S. dollars shall be converted to U.S. dollars at the rate of exchange for the spot purchase of U.S. dollars with the relevant foreign currency as quoted by the Bank of America as of 10:00 a.m. local New York time on the Closing Date. (e) Black & Decker shall prepare a schedule of the gain or loss on each of such Hedge Contracts and the aggregate gain or loss realized by each of (i) Black & Decker and (ii) all Buyer Companies that assumed a Hedge Contract and all Glass Machinery Share Companies that are parties to a Hedge Contract, expressed in U.S. dollars, calculated using the rates of exchange referred to in Section 7.08(d) and shall provide such schedule, together with the quotations from the Bank of America to Buyer by the close of business on the second Business Day following the Closing Date. Such schedule and the calculations thereon shall be conclusive absent manifest error. If such schedule reflects that there is aggregate gain realized by the Glass Machinery Units upon the closure of all such Hedge Contracts the amount of such aggregate gain shall be paid by Black & Decker to Buyer on the second Business Day following the delivery of such schedule. If such schedule reflects that there is aggregate loss realized by the Glass Machinery Units upon the closure of such Hedge Contracts the amount of such aggregate loss shall be paid by Buyer to Black & Decker on the second Business Day following the delivery of such schedule. Such payment shall be made in immediately available funds in U.S. dollars by wire transfer to a bank account designated in writing by the party entitled to receive such payment. The making or receipt of any such payment to or by Buyer shall be as agent for each Buyer Company that assumed a Hedge Contract and each Glass Machinery Share Company that is a party to a Hedge Contract. Within five (5) Business Days of the Closing Date, Black & Decker shall deliver to Buyer two (2) copies of a Foreign Exchange Compensating Contract Confirmation (each a "Hedge Closure Confirmation") signed by Black & Decker confirming the closure of each such Hedge Contract. Within five (5) Business Days of its receipt of such Hedge Closure Confirmations, Buyer shall cause each Buyer Company that assumed a Hedge Contract and each Glass Machinery Share Company that is a party to a Hedge Contract to sign such Hedge Closure Confirmations and return one fully signed copy of each such Hedge Closure Confirmation to Black & Decker. (f) In the event that any of the Hedge Contracts assumed by Buyer are with third party financial institutions and Black & Decker has provided a Financial Support Arrangement with respect to such Hedge Contracts, the provisions of Sections 6.03(d), 6.03(e) and 6.03(f) shall, subject to the proviso at the end of Section 6.03(d), apply to such Financial Support Arrangements. (g) All costs, taxes and fees associated with the transfer and closing of the Hedge Contracts (other than the gains and losses referred to in Sections 7.08(c) or 7.08(e) above and Income Taxes on any gain recognized by a Glass Machinery Share Company or a Buyer Company on the closing of such Hedge Contracts) shall be borne by Black & Decker. -20- Section 7.09 Restructuring Costs. Promptly upon receipt of one or more certifications from Buyer's chief financial officer that Buyer has made actual cash expenditures prior to December 31, 2000 in connection with the restructuring of the Glass Machinery Business and specifying the amount of such expenditures and the Glass Machinery Unit that made such expenditure, Black & Decker will cause each Seller of such Glass Machinery Unit to reimburse Buyer for an aggregate of up to $7,000,000 of such expenditures. ARTICLE VIII EMPLOYEES AND EMPLOYEE BENEFIT MATTERS Section 8.01 Employees and Employee Benefit Matters. The parties agree that (i) the allocation of obligations with respect to employees of the Glass Machinery Business accrued prior to the Closing shall be pursuant to Exhibit D and (ii) subject to mandatory Applicable Law and existing agreements that preclude implementation of the provisions of Exhibit D, the obligations of Buyer to offer terms and conditions of employment to Transferred Employees shall principally be as set forth in Exhibit D. ARTICLE IX CONDITIONS TO CLOSING Section 9.01 Conditions to the Obligations of Each Party. The obligations of Black & Decker and Buyer to consummate the Closing are subject to the satisfaction (or waiver) of the following conditions: (a) any applicable waiting period under the HSR Act relating to the Contemplated Transactions shall have expired or been terminated; (b) no provision of any Applicable Law and no judgment, injunction, order or decree shall prohibit the Closing, and no action or proceeding shall be pending before any court, arbitrator or Governmental Authority with respect to which counsel reasonably satisfactory to Black & Decker and Buyer shall have rendered a written opinion that there is a substantial likelihood of a determination that would prohibit the Closing; (c) the actions by or in respect of or filings with any Governmental Authority listed on Attachment VII shall have been obtained or made and any waiting period connected therewith shall have expired or been terminated; and (d) Black & Decker or the applicable Seller or Glass Machinery Unit, as the case may be, shall have obtained the consents, approvals or permits or taken the actions contemplated by Attachment VII. -21- Section 9.02 Conditions to Obligation of Buyer. The obligations of Buyer to consummate the Closing are subject to the satisfaction (or waiver by Buyer) of the following further conditions: (a) (i) Black & Decker shall have performed in all material respects all of its obligations under the Transaction Documents required to be performed by it on or prior to the Closing Date, (ii) the representations and warranties of Black & Decker contained in the Transaction Documents shall be true and correct at and as of the date of this Agreement and as of the Closing Date, as if made at and as of each such date, except that those representations and warranties which are by their express terms made as of a specific date shall be true and correct only as of such date, in each case except for inaccuracies that in the aggregate could not reasonably be expected to have a Material Adverse Effect on the Glass Machinery Business, and (iii) Buyer shall have received a certificate signed by an executive officer of Black & Decker to the foregoing effect; (b) since March 22, 1998, no event has occurred that has had a Material Adverse Effect on the Glass Machinery Business, other than those resulting from changes, whether actual or prospective, in general conditions applicable to the business in which the Glass Machinery Business is involved or general economic conditions; and (c) Black & Decker or the applicable Affiliated Transferor shall have executed and delivered, on or before the Closing Date, the Transaction Documents that are required to be signed by a Black & Decker Company. (d) The environmental conditions of the facilities included in the Transferred Assets or owned or leased by a Glass Machinery Share Company as ascertained through investigations conducted by Buyer pursuant to Section 6.02 do not in the aggregate constitute conditions that could reasonably be expected to have a Material Adverse Effect on the Glass Machinery Business. Section 9.03 Conditions to Obligation of Black & Decker. The obligation of Black & Decker to consummate the Closing is subject to the satisfaction (or waiver by Black & Decker) of the following further conditions: (a) (i) Buyer shall have performed in all material respects all of their respective obligations under the Transaction Documents required to be performed by them at or prior to the Closing Date, (ii) the representations and warranties of Buyer contained in the Transaction Documents shall be true and correct at and as of the date of this Agreement and as of the Closing Date, as if made at and as of each such date, except that those representations and warranties which are by their express terms made as of a specific date shall be true and correct only as of such date, in each case except for inaccuracies that could not reasonably be expected to have a Material Adverse Effect on the Glass Machinery Business, and (iii) Black & Decker shall have received a certificate signed by an executive officer of Buyer to the foregoing effect; and -22- (b) Buyer or the applicable Buyer Company shall have executed and delivered, on or before the Closing Date, the Transaction Documents that are required to be signed by a Buyer Company. Section 9.04 Updated Disclosure Schedules. At any time prior to the Closing Black & Decker shall be entitled to deliver to Buyer updates to or substitutions of the Disclosure Schedules provided that such updates or substitutions are clearly marked as such and are addressed to Buyer at the address listed in Section 12.01. In the event that Black & Decker delivers updated or substitute Disclosure Schedules on or after the third day before any scheduled closing date, Buyer shall be entitled to extend the scheduled closing date to the third day after it receives the updated or substitute Disclosure Schedules, or if such day is not a Business Day, to the next Business Day. The delivery by Black & Decker of updated or substitute Disclosure Schedules shall not prejudice any rights of Buyer under this Agreement, including but not limited to the right to claim that the representations and warranties of Black & Decker, when made on the date of this Agreement, were untrue or that a Material Adverse Effect on the Glass Machinery Business has occurred; provided, however, that if Buyer decides not to assert any such claim and consummates the Closing, the updated or substitute Disclosure Schedules shall replace, in whole or in part as the case may be, the Disclosure Schedules previously delivered hereunder for all purposes. Section 9.05 Effect of Waiver. Any waiver by Buyer of the conditions specified in clause (ii) of Section 9.02(a), and any waiver by Black & Decker of the conditions specified in clause (ii) of Section 9.03, if made knowingly, shall also be deemed a waiver of any claim for Damages as the result of the matters waived. ARTICLE X SURVIVAL; INDEMNIFICATION Section 10.01 Survival. None of the representations, warranties, covenants or agreements of the parties contained in any Transaction Document or in any certificate or other writing delivered pursuant to any Transaction Document or in connection with any Transaction Document shall survive the Closing, except for: (i) the representations and warranties in Sections B.01 through B.04 shall survive indefinitely; (ii) the representations and warranties in Section B.15 shall not survive the Closing Date; -23- (iii) the representations and warranties in Sections B.18 and B.20 shall survive until 30 days after the expiration of the applicable statute of limitations (or extensions or waivers thereof); (iv) the representations and warranties in Section B.21 shall survive for a period of two years from the Closing Date; (v) the representations and warranties in Exhibit B (other than those Sections of Exhibit B referenced in the preceding clauses (i), (ii) and (iii)), shall survive for a period of one year from the Closing Date; (vi) the representations and warranties in Sections C.01 and C.02 shall survive indefinitely; (vii) the representations and warranties in Exhibit C (other than those Sections of Exhibit C referenced in the preceding clause (v)) shall survive for a period of one year from the Closing Date; and (viii) those covenants and agreements set forth in the Transaction Documents that, by their terms, are to have effect after the Closing Date shall survive for the period contemplated by such covenants and agreements, or if no period is expressly set forth, indefinitely. The representations, warranties, covenants and agreements referenced in the preceding clauses (i) and (iii) through (vii) are referred to herein as the "Surviving Representations or Covenants." It is understood and agreed that, (i) before the Closing the remedies expressly set forth in Article XI are the sole and exclusive remedies for any breach of any representation, warranty, covenant or agreement and (ii) following the Closing the sole and exclusive remedy with respect to any breach of any representation, warranty, covenant or agreement (other than (1) with respect to a breach of the terms of a covenant or agreement, as to which Buyer or Black & Decker, as the case may be, shall be entitled to seek specific performance or other equitable relief and (2) with respect to claims for fraud) shall be a claim for Damages (whether by contract, in tort or otherwise, and whether in law, in equity or both) made pursuant to this Article X. Section 10.02 Indemnification. (a) Effective as of the Closing and subject to the limitations set forth in Section 10.04(a), Buyer hereby indemnifies Black & Decker and its Affiliates and their respective directors, officers, employees and agents against, and agrees to hold them harmless from any and all Damages incurred or suffered by any of them arising out of or related in any way to (i) any misrepresentation or breach of any Surviving Representation or Covenant made or to be performed by Buyer Companies pursuant to any of the Transaction Documents, (ii) except as otherwise contemplated by Sections 10.02(b)(iii) and 10.04(b)(ii), (A) any Assumed Liabilities (including, without limitation, any Buyer Company's failure to perform or in due course pay or discharge any Assumed Liability) and (B) any liability of a Glass Machinery Share Company -24- other than an Excluded Liability, (iii) subject to the proviso contained in the last sentence of Section 6.03(d) any Financial Support Arrangement described in Section 6.03(d), (iv) any matters for which indemnification is provided to Black & Decker or any of its Affiliates under Exhibit D (it being understood that the terms of such indemnification shall be governed by and subject to the terms of Exhibit D), (v) the first One Million Dollars ($1,000,000) in Damages (other than legal fees or similar costs) that arise following Closing in respect of the Arbitration Cases, or (vi) any liabilities or obligations arising in connection with or in any way relating to the Glass Machinery Business (but only to the extent conducted after the Closing Date), or a facility the possession of which is transferred, directly or indirectly, to a Buyer Company at Closing (but only during a period in which such Buyer Company or any of its Affiliates or any of their successors owns or leases such facility), to the extent such liabilities arise out of, relate to, are based on or result from any action taken (or a failure to take action) or any event occurring after the Closing Date. Buyer hereby indemnifies Black & Decker and its Affiliates and their respective directors, officers, employees and agents against, and agrees to hold them harmless from any and all Damages incurred or suffered by any of them directly arising out of actions taken by Buyer Companies or any of their Representatives in connection with any environmental audit or similar review of the Glass Machinery Business that involves testing, drilling or sampling at any facility possession of which is contemplated to be transferred to a Buyer Company at Closing. The indemnity contained in the immediately preceding sentence is explicitly limited to not include any costs related to any (A) Remedial Actions, (B) personal injury, wrongful death, economic loss or property damage claims, (C) claims for natural resource damages, (D) violations of Applicable Law, (E) reporting requirements, or (F) any other Damages with respect to Environmental Laws which, in each case, may be identified in said audit or similar review but are not directly caused by said audit or similar review. (b) Effective as of the Closing and subject to the limitations set forth in Section 10.04(b), Black & Decker hereby indemnifies Buyer and its Affiliates and their respective directors, officers, employees and agents against, and agrees to hold them harmless from any and all Damages incurred or suffered by any of them arising out of or related in any way to (i) any misrepresentation or breach of any Surviving Representation or Covenant made or to be performed by Black & Decker pursuant to any Transaction Document, (ii) any Excluded Liabilities (including, without limitation, Black & Decker's or any of its Affiliates' failure to perform or in due course pay or discharge any Excluded Liability), (iii) any Environmental Liabilities, whether or not the subject of a claim by any Governmental Authority or any other third party, incurred by reason of any violation of any Environmental Law or the presence of any Hazardous Substances to the extent that the event or condition causing any such Loss (a) exists as of or prior to the Closing Date, whether or not caused by Black & Decker or contributed to by Black & Decker, (b) arises out of, relates to, is based on or results from actions taken (or the failure to take action), or events occurring prior to the Closing Date, or (c) Environmental Liabilities that are Excluded Liabilities including, without limitation, those that relate to or stem from the actual or alleged shipment of, or arrangement for the shipment of, Hazardous Substances prior to the Closing Date, for offsite treatment, storage, processing, recycling, reuse or disposal at any facility or location not included in the Transferred Assets (whether by fee ownership or leasehold interest) or not owned or leased on the Closing Date by a Glass Machinery Share Company, or (iv) any matters for which indemnification is provided under Exhibit D (it being -25- understood that the terms of such indemnification shall be governed by and subject to the terms of Exhibit D). Section 10.03 Procedures. (a) If Black & Decker or any of its Affiliates or any of their directors, officers, employees and agents, shall seek indemnification pursuant to Section 10.02(a), or if Buyer or any of its Affiliates or any of their directors, officers, employees and agents, shall seek indemnification pursuant to Section 10.02(b), the Person seeking indemnification (the "Indemnified Party") shall give written notice to the party from whom such indemnification is sought (the "Indemnifying Party") promptly (and in any event within 30 days) after the Indemnified Party (or, if the Indemnified Party is a corporation, any officer or employee of the Indemnified Party) becomes aware of the facts giving rise to such claim for indemnification (an "Indemnified Claim") specifying in reasonable detail the factual basis of the Indemnified Claim, stating the amount of the Damages, if known, the method of computation thereof, containing a reference to the provision of the Transaction Documents in respect of which such Indemnified Claim arises and demanding indemnification therefor. The failure of an Indemnified Party to provide notice in accordance with this Section 10.03 shall not constitute a waiver of that party's claims to indemnification pursuant to Section 10.02, except to the extent that (i) any such failure or delay in giving notice causes the amounts paid by the Indemnifying Party to be greater than they otherwise would have been or otherwise results in prejudice to the Indemnifying Party or (ii) such notice is not delivered to the Indemnifying Party prior to the expiration of the applicable survival period set forth in Section 10.01. If the Indemnified Claim arises from the assertion of any claim, or the commencement of any suit, action, proceeding or Remedial Action brought by a Person that is not a party hereto (a "Third Party Claim"), any such notice to the Indemnifying Party shall be accompanied by a copy of any papers theretofore served on or delivered to the Indemnified Party in connection with such Third Party Claim. With respect to any Third Party Claim asserted or brought prior to the Closing Date, notice of such Third Party Claim shall be deemed to have been delivered on the Closing Date. (b) (i) Upon receipt of notice of a Third Party Claim from an Indemnified Party pursuant to Section 10.03(a), the Indemnifying Party will be entitled to assume the defense and control of such Third Party Claim subject to the provisions of this Section 10.03. After written notice by the Indemnifying Party to the Indemnified Party of its election to assume the defense and control of a Third Party Claim, the Indemnifying Party shall not be liable to such Indemnified Party for any legal fees or expenses subsequently incurred by such Indemnified Party in connection therewith, (except that the Indemnifying Party shall be responsible for fees and expenses of counsel to the Indemnified Party to the extent it is advised by counsel that either (x) the Indemnifying Party's counsel has a conflict of interest or (y) there are legal defenses available to the Indemnifying Party that are different from or in addition to those that are available to the Indemnifying Party and counsel provided by the Indemnifying Party is not in a position to assert such defenses). Notwithstanding anything in this Section 10.3 to the contrary, if the Indemnifying Party does not assume defense and control of a Third Party Claim as provided in this Section 10.3, the Indemnified Party shall have the right to defend such -26- Third Party Claim, subject to the limitations set forth in this Section 10.03, in such manner as it may deem appropriate. Whether the Indemnifying Party or the Indemnified Party is defending and controlling any such Third Party Claim, they shall select counsel, contractors, experts and consultants of recognized standing and competence, shall take all steps necessary in the investigation, defense or settlement thereof, and shall at all times diligently and promptly pursue the resolution thereof. The party conducting the defense thereof shall at all times act as if all Damages relating to the Third Party Claim were for its own account and shall act in good faith and with reasonable prudence to minimize Damages therefrom. The Indemnified Party shall, and shall cause each of its Affiliates, directors, officers, employees, and agents to, cooperate fully with the Indemnifying Party in connection with any Third Party Claim. (ii) Subject to the provisions of Section 10.03(b)(iii) and Section 10.03(b)(iv), the Indemnifying Party shall be authorized to consent to a settlement of, or the entry of any judgment arising from, any Third Party Claims, and the Indemnified Party shall consent to a settlement of, or the entry of any judgment arising from, such Third Party Claims; provided, that the Indemnifying Party shall (1) pay or cause to be paid all amounts arising out of such settlement or judgment concurrently with the effectiveness thereof; (2) shall not encumber any of the assets of any Indemnified Party or agree to any restriction or condition that would apply to such Indemnified Party or to the conduct of that party's business; and (3) shall obtain, as a condition of any settlement or other resolution, a complete release of each Indemnified Party. Except for the foregoing, no settlement or entry of judgment in respect of any Third Party Claim shall be consented to by any Indemnifying Party or Indemnified Party without the express written consent of the other party. (iii) Notwithstanding the provisions of Section 10.03(b)(i), Buyer shall manage all Remedial Actions conducted with respect to facilities which constitute Transferred Assets or assets (other than Excluded Assets) owned or leased by a Glass Machinery Share Company, provided that Black & Decker and its Representatives shall have the right, consistent with Buyer's right to manage such Remedial Actions as aforesaid, to participate fully in all decisions regarding any Remedial Action, including reasonable access to sites where any Remedial Action is being conducted, reasonable access to all documents, correspondence, data, reports or information regarding the Remedial Action, reasonable access to employees and consultants of Buyer with knowledge of relevant facts about the Remedial Action and the right to attend all meetings and participate in any telephone or other conferences with any Government Authority or other third party regarding the Remedial Action. (iv) In the case of the indemnification contemplated by Section 10.02(b)(iii), in the event that the Indemnifying Party desires to settle the matters referenced therein or consent to the entry of any judgment arising thereunder and the Indemnified Party does not wish to consent to such settlement or entry of judgment, the Indemnified Party shall have no obligation to consent to the settlement or entry of judgment provided that it agrees in writing to pay and be responsible for 100% of any Damages; provided that the -27- Indemnified Party shall not be required to consent to any settlement or agree to be responsible for the payment of Damages thereafter incurred with respect to any matter the settlement or entry of judgment of which would require the consent of such Indemnified Party pursuant to Section 10.03(b)(ii). The obligation of an Indemnified Party that rejects any proposed settlement offer or entry of any such judgment to pay and be responsible for 100% of any Damages in accordance with this Section 10.03(b)(iv) shall be conditioned upon and subject to the payment by Indemnifying Party, within five Business Days of the date such Indemnified Party provides the written agreement contemplated by the preceding sentence, of an amount, in immediately available funds, equal to the portion of the total settlement that would have been payable by the Indemnifying Party according to the percentage sharing arrangement contemplated by Section 10.04(b)(ii). Thereafter, the Indemnified Party shall be solely responsible for any Damages and for the defense of the matter that is the subject of the proposed settlement or entry of judgment. Notwithstanding the foregoing, an Indemnifying Party may, at its option and expense, participate in the defense of any Indemnified Claim. (c) If the Indemnifying Party and the Indemnified Party are unable to agree with respect to a procedural matter arising under Section 10.03(b)(iii), the Indemnifying Party and the Indemnified Party shall, within 10 days after notice of disagreement given by either party, agree upon a third-party referee ("Referee"), who shall be an attorney and who shall have the authority to review and resolve the disputed matter. The parties shall present their differences in writing (each party simultaneously providing to the other a copy of all documents submitted) to the Referee and shall cause the Referee promptly to review any facts, law or arguments either the Indemnifying Party or the Indemnified Party may present. The Referee shall be retained to resolve specific differences between the parties within the range of such differences. Either party may request that all discussions with the Referee by either party be in each other's presence. The decision of the Referee shall be final and binding unless both the Indemnifying Party and the Indemnified Party agree. The parties shall share equally all costs and fees of the Referee. (d) If an Indemnifying Party makes any payment on an Indemnified Claim, the Indemnifying Party shall be subrogated, to the extent of such payment, to all rights and remedies of the Indemnified Party to any insurance or other claims or of the Indemnified Party with respect to such claim. (e) Notwithstanding the provisions contained in this Section 10.03, Black & Decker and its Affiliates shall control the defense of the Arbitration Cases following Closing as if they were indemnifying parties defending a Third Party Claim in the manner contemplated by Section 10.03(b)(i). Section 10.04 Limitations. Notwithstanding anything to the contrary in this Agreement or in any of the Transaction Documents: (a) Buyer shall only have liability to Black & Decker or any other Person hereunder with respect to the representations and warranties described in clause (i) of Section 10.02(a) if such matters were the subject of a written notice given by the Indemnified Party pursuant to -28- Section 10.03(a) within the period following the Closing Date specified for each respective matter in Section 10.01. (b) Black & Decker shall only have liability to Buyer or any other Person hereunder: (i) with respect to the representations and warranties described in clause (i) of Section 10.02(b), (y) to the extent that the aggregate Damages of all Indemnified Parties as the result thereof exceed $1,000,000 but are not greater than an amount equal to $1,000,000 plus 33% of the Adjusted Purchase Price (it being understood that Black & Decker's maximum liability under Section 10.02(b)(i) with respect to representations and warranties and this Section 10.04(b)(i) shall be an amount equal to 33% of the Adjusted Purchase Price), provided that the limitations expressed in this subclause (b) shall not apply to any claim made under Section B.18; and (z) if such matters were the subject of a written notice given by the Indemnified Party pursuant to Section 10.03(a) within the period following the Closing Date specified for each respective matter in Section 10.01; and (ii) with respect to the matters described in clauses (iii)(a) and (iii)(b) of Section 10.02(b), to the extent of (x) 75% of the aggregate Damages incurred and paid within the first five years following the Closing Date by all Indemnified Parties as a result thereof based, to the extent relevant, on the use of the facilities constituting Transferred Assets or facilities owned or leased by a Glass Machinery Share Company as of the Closing Date, (y) 50% of the aggregate Damages incurred and paid within the second five years following the Closing Date by all Indemnified Parties as the result thereof based, to the extent relevant, on the use of the facilities constituting Transferred Assets or facilities owned or leased by a Glass Machinery Share Company as of the Closing Date, and (z) if the aggregate of such Damages incurred and paid within first ten years following the Closing Date by all Indemnified Parties (after giving effect to the payment of indemnified amounts by Black & Decker to the Indemnified Parties under this Section 10.04(a)(ii)) exceeds $5,000,000, all additional Damages incurred and paid by all Indemnified Parties in the first ten years following the Closing Date by all Indemnified Parties as a result thereof based, to the extent relevant, on the use of the facilities constituting Transferred Assets or facilities owned or leased by a Glass Machinery Share Company as of the Closing Date. ARTICLE XI TERMINATION Section 11.01 Termination. The Transaction Documents may be terminated at any time prior to the Closing: (i) by mutual written agreement of Black & Decker and Buyer; -29- (ii) by Black & Decker or Buyer if the Closing shall not have been consummated by December 31, 1998; provided, however, that neither Black & Decker nor Buyer may terminate the Transaction Documents pursuant to this clause (ii) if the Closing shall not have been consummated by December 31, 1998, by reason of the failure of such party or any of its Affiliates to perform in all material respects any of its or their respective covenants or agreements contained in the Transaction Documents; and (iii) by either Black & Decker or Buyer if there shall be any Applicable Law or regulation that makes consummation of the Contemplated Transactions illegal or otherwise prohibited or if consummation of the Contemplated Transactions would violate any nonappealable final order, decree or judgment of any Governmental Authority having competent jurisdiction. Any party desiring to terminate this Agreement pursuant to this Section 11.01 shall give written notice of such termination to the other parties to this Agreement. Section 11.02 Effect of Termination. If this Agreement is terminated as permitted by Section 11.01, such termination shall be without liability of any party (or any Affiliate, stockholder, director, officer, employee, agent, consultant or Representative of such party) to any other party to this Agreement; provided, however, that if the Contemplated Transactions fail to close as a result of a breach of the provisions of any Transaction Document by Black & Decker or Buyer, such party shall be fully liable for any and all losses and damages incurred or suffered by the other party as a result of all such breaches, and the other party shall be able to pursue any and all remedies which may be available to it, if the other party is ready, willing and able to otherwise satisfy its obligations under the Transaction Documents. Notwithstanding the foregoing, the provisions of Sections 6.01 and 12.03, the second sentence of Section 10.02(a), and this Section 11.02 shall survive any termination hereof pursuant to Section 11.01. ARTICLE XII MISCELLANEOUS Section 12.01 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given, if to Black & Decker: The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21286 Attention: Senior Vice President and Chief Financial Officer Telecopy: ++1(410) 716-3318 -30- with a copy to: The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21286 Attention: Senior Vice President and General Counsel Telecopy: ++1(410) 716-2660 and Miles & Stockbridge P.C. 10 Light Street Baltimore, Maryland 21202 Attention: Robert M. Cattaneo, Esquire Telecopy: ++1(410) 385-3700 if to Buyer: Bucher Holding AG 8166 Niederweningen Switzerland Attention: Chief Executive Officer Telecopy: ++411 857-2219 with a copy to: Homburger Rechtsanwaelte Weinbergstrasse 56/58 8006 Zurich, Switzerland Attention: Dr. Peter Kurer Telecopy: ++411 265-3511 or to such other address or telecopy number and with such other copies, as such party may hereafter specify for the purpose by notice to the other parties. Each such notice, request or other communication shall be effective (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section 12.01 and evidence of receipt is received or (ii) if given by any other means, upon delivery or refusal of delivery at the address specified in this Section 12.01. Section 12.02 Amendments; Waivers. (a) Subject to the provisions of Section 9.04, any provision of the Transaction Documents may be amended or waived prior to the Closing Date if, and only if, such amendment -31- or waiver is in writing and signed, in the case of an amendment, by Black & Decker and Buyer, or in the case of a waiver, by the party against whom the waiver is to be effective. (b) No failure or delay by any party in exercising any right, power or privilege under any Transaction Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 12.03 Expenses; Taxes. Except as otherwise provided in the Transaction Documents, all costs and expenses incurred in connection with the Transaction Documents shall be paid by the party incurring such cost or expense. Notwithstanding the foregoing, (i) all real estate transfer, stock transfer, registration and transfer taxes and fees (other than fees and charges associated with the registration and transfer of Intellectual Property), stamp duties, notarial charges, sales, use, value added and similar taxes (except to the extent they are recoverable by Buyer or the Buyer Companies) or governmental charges resulting from or relating to the transfer of the Transferred Assets or Shares to a Buyer Company by Black & Decker or any of the Sellers or the transfer of the Excluded Assets by a Glass Machinery Share Company to Black & Decker or any of its Affiliates, shall be borne by the party primarily obligated therefor under Applicable Law (or, absent Applicable Law, local custom) and (ii) all fees and charges, including notarial charges, associated with the registration and transfer of Intellectual Property shall be paid by Black & Decker. Each of Buyer and Black & Decker shall reimburse the other for 50% of any such fees and taxes and charges paid by the other promptly upon presentation of a demand therefor consistent with this Section 12.03, provided that Buyer's obligation to pay such fees and taxes or reimburse Black & Decker for 50% of such fees and taxes paid by Black & Decker shall be limited to a maximum amount of $500,000. Section 12.04 Successors and Assigns. The provisions of the Transaction Documents shall be binding upon and inure to the benefit of the parties and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other party. Section 12.05 Disclosure. Certain information set forth in the Disclosure Schedules has been included and disclosed solely for informational purposes and may not be required to be disclosed pursuant to the terms and conditions of the Transaction Documents. The disclosure of any such information shall not be deemed to constitute an acknowledgment or agreement that the information is required to be disclosed in connection with the representations and warranties made in the Transaction Documents or that the information is material, nor shall any information so included and disclosed be deemed to establish a standard of materiality or otherwise used to determine whether any other information is material. It is understood and agreed by the parties that in cases where a representation and warranty excepts from its scope matters that are "specifically disclosed" only those items marked with an asterisk on the referenced Disclosure Schedule shall be deemed to have been so specifically disclosed and that any other disclosures shall not be deemed to be sufficiently specific to operate as an exception to such representation and warranty whatsoever. -32- Section 12.06 Construction. As used in the Transaction Documents, any reference to the masculine, feminine or neuter gender shall include all genders, the plural shall include the singular, and the singular shall include the plural. Section 12.07 Entire Agreement. (a) The Transaction Documents and any other agreements contemplated thereby (including, to the extent contemplated herein, the Confidentiality Agreement) constitute the entire agreement among the parties with respect to the subject matter of such documents and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter thereof. (b) The parties hereto acknowledge and agree that no representation, warranty, promise, inducement, understanding, covenant or agreement has been made or relied upon by any party hereto other than those expressly set forth in the Transaction Documents. Without limiting the generality of the disclaimer set forth in the preceding sentence, (i) none of the parties to this Agreement has made or shall be deemed to have made any representations or warranties, in any presentation or written information relating to the Glass Machinery Business given or to be given in connection with the Contemplated Transactions, in any filing made or to be made by or on behalf of any such parties with any Governmental Authority, and no statement, made in any such presentation or written materials, made in any such filing or contained in any such other information shall be deemed a representation or warranty hereunder or otherwise, and (ii) Black & Decker, on its own behalf and on behalf of the other Sellers, expressly disclaims any implied warranties, including but not limited to warranties of fitness for a particular purpose and warranties of merchantability. Buyer acknowledges that Black & Decker has informed them that no Person has been authorized by Black & Decker or any of its Affiliates to make any representation or warranty in respect of the Glass Machinery Business or in connection with the Contemplated Transactions, unless in writing and contained in this Agreement or in any of the Transaction Documents to which they are a party. Black & Decker acknowledges that Buyer has informed them that no Person has been authorized by Black & Decker or any of its Affiliates to make any representation or warranty in respect of the Glass Machinery Business or in connection with the Contemplated Transactions, unless in writing and contained in this Agreement or in any of the Transaction Documents to which they are a party. (c) Except as expressly provided herein or in any other Transaction Document, no Transaction Document or any provision thereof is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder. Section 12.08 Governing Law. Except as otherwise provided in any of the Transaction Documents, this Agreement and the other Transaction Documents shall be construed in accordance with and governed by the law of the State of Maryland (without regard to the choice of law provisions thereof). Section 12.09 Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures -33- thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. Section 12.10 Jurisdiction. Any dispute, controversy or claim arising out of or relating to the Transaction Documents or the Contemplated Transactions or the breach, termination or invalidity thereof, shall exclusively be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force. In addition, or in exception as the case may be, to such rules, Black & Decker and Buyer agree on the following rules with respect to the arbitration: (a) The number of arbitrators shall be three and each party shall appoint one arbitrator and the two party-appointed arbitrators shall appoint the chairman. In case (i) the defendant party fails to appoint its arbitrator within thirty days of receipt of the claimant party's request for arbitration or (ii) if the two party-appointed arbitrators fail to nominate the chairman within forty days of the nomination of the defendant party-appointed arbitrator, the appointing authority shall appoint (x) the second party-appointed arbitrator (who then, together with the plaintiff party-appointed arbitrator, shall appoint the chairman in accordance with the above) or (y) the chairman, whatever the case is. In case the claimant party fails to appoint its arbitrator, the request for arbitration shall not be deemed to be valid. (b) The appointing authority shall be the International Chamber of Commerce (ICC) acting in accordance with the Rules adopted by the ICC for such purpose. (c) The chairman shall be of British nationality. All arbitrators shall be practicing lawyers, attorneys, professors of law or judges and shall have proven experience in arbitrating business and financial disputes; they shall not be older than the age of sixty-five at the time of their appointment. (d) The arbitrators shall have sole jurisdiction to decide on their own competence. (e) At the request of any of the parties the arbitrators may take any interim measures deemed necessary in respect of the subject matter of the dispute; such interim measures may be established in the form of an interim award; the parties undertake to abide voluntarily by such measures ordered by the arbitrators. (f) The language of the arbitration shall be the English language. (g) The arbitration shall have its seat in Brussels. The arbitrators shall be free to hold hearings and meetings elsewhere. (h) The arbitral award (including any interim award) shall be final and binding upon the parties. The parties undertake to carry out the award (including any interim or partial awards) without delay and they are waiving any rights of appeal insofar as such waiver can validly be made. -34- (i) The parties hereby expressly waive the right to avail themselves of any defense of non-arbitrability and of any privileges or immunities from jurisdiction, suit and/or execution/ enforcement with respect to any proceedings instituted in connection with these Transaction Documents or the Contemplated Transactions before any panel of arbitrators appointed in accordance with these provisions or any state courts (including the state court which could have jurisdiction to deal with interim measures of protection, attachments or recognition or enforcement proceedings). Section 12.11 Severability. Any provision of the Transaction Documents that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of the Transaction Documents or affecting the validity or enforceability of such provision in any other jurisdiction. To the extent any provision of the Transaction Documents is determined to be prohibited or unenforceable in any jurisdiction Black & Decker and Buyer agree to use reasonable efforts, and agree to cause their Affiliates, as the case may be, to use reasonable efforts, to substitute one or more valid, legal and enforceable provisions that, insofar as practicable implement the purposes and intent of the prohibited or unenforceable provision. Section 12.12 Bulk Sales. Buyer hereby waives compliance by Black & Decker and each Seller of Transferred Assets located in the United States of America, in connection with the Contemplated Transactions, with the provisions of Article 6 of the Uniform Commercial Code as adopted in any states or jurisdictions where any of the Transferred Assets are located, and any other applicable bulk sales laws with respect to or requiring notice to Black & Decker's (or any Seller's) creditors, as the same may be in effect on the Closing Date. Black & Decker shall indemnify and hold harmless Buyer against any and all Damages which may be incurred by Buyer as a result of noncompliance with any such bulk sales law. -35- IN WITNESS WHEREOF, the parties hereto caused this Agreement to be duly executed by their respective authorized officers on the day and year first above written. THE BLACK & DECKER CORPORATION By: /s/ CHARLES E. FENTON Charles E. Fenton Senior Vice President BUCHER HOLDING AG By: /s/ RUDOLF HAUSER Rudolf Hauser CEO EXHIBIT A DEFINITIONS (a) The following terms have the following meanings: "Affiliate" means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such other Person. For purposes of determining whether a Person is an Affiliate, the term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of securities, contract or otherwise. "Affiliated Group" means one or more corporations which (a) include any of the Glass Machinery Share Companies and (b) for purposes of the tax laws of any nation are required to or have elected to file Consolidated Returns with one or more Affiliates of Black & Decker other than a Glass Machinery Company. "Applicable Law" means, with respect to any Person, any domestic or foreign, federal, state or local statute, law, ordinance, rule, administrative interpretation, regulation, order, writ, injunction, decree or other requirement of any Governmental Authority (including any Environmental Law) applicable to such Person or any of their respective properties, assets, officers, directors, employees, consultants or agents (in connection with such officer's, director's, employee's, consultant's or agent's activities on behalf of such Person). "Arbitration Cases" means the two arbitration proceedings pending before the Court of Arbitration of the International Chamber of Commerce in London, England between Emhart Glass SA and a customer of Emhart Glass SA. "Arbitration Cases Customer Receivables" means the accounts receivable due to Emhart Glass SA by the customer of Emhart Glass SA that is the party that is adverse to Emhart Glass SA in the Arbitration Cases and relate to the work performed or products sold by Emhart Glass SA for and to such customer pursuant to the contracts that are the subject matter of the Arbitration Cases. "Asbestos Claims" means any claim made by a third party seeking Damages resulting from exposure to asbestos contained in any machine manufactured and sold by the Glass Machinery Business prior to Closing. "Assumed Liabilities" means all liabilities and obligations of each Seller of Transferred Assets to the extent relating to or arising out of the operation, affairs and conduct of the Glass Machinery Business or the Transferred Assets, of any kind, character or description, whether liquidated or unliquidated, known or unknown, fixed or contingent, accrued or unaccrued, absolute, determined, determinable or indeterminable or otherwise, whether or not reflected or reserved against in the Opening Statement or in the calculation of the Final Net Tangible Asset Amount and whether presently in existence or arising hereafter, except for Excluded Liabilities, including but not limited to the following: (i) all liabilities and obligations relating to the Glass Machinery Business or the Transferred Assets, whether accrued, liquidated, contingent, matured or unmatured, at or prior to the Closing, that (a) are set forth on, reflected or referred to in the Opening Statement, (b) are specifically disclosed in any of the Disclosure Schedules delivered hereunder, (c) would be subject to disclosure in any of the Disclosure Schedules delivered in connection with any of Black & Decker's representations and warranties but for the materiality standards contained in such representation and warranty, (d) are reflected in the Final Net Tangible Asset Amount as determined in accordance with Section 2.04 herein (including without limitation accounts payable and reserves reflected as contra-asset accounts) or (e) are otherwise a liability or obligation that a Buyer Company is expressly assuming pursuant to this Agreement; (ii) all liabilities and obligations arising under Contracts to the extent they relate exclusively to the Glass Machinery Business, whether or not the Contracts have been completed or terminated prior to the Closing Date, including, without limitation, any such liabilities and obligations arising from or relating to the performance or non-performance of the Contracts by the Glass Machinery Business, a Buyer Company or any other Person, whether arising prior to, on or after the Closing Date, except to the extent they constitute Excluded Liabilities; (iii) all liabilities and obligations in respect of employees and former employees of the Glass Machinery Business, and beneficiaries of employees and former employees of the Glass Machinery Business, including, without limitation, liabilities and obligations under or relating to WARN or any similar state or local law to the extent relating to or arising out of any actions taken by a Buyer Company on or after the Closing Date, except to the extent otherwise provided in Exhibit D to be retained by Black & Decker or any Seller; (iv) all liabilities and obligations in respect of Transferred Employees and dependents and beneficiaries of Transferred Employees under Employee Plans and Benefit Arrangements, except to the extent otherwise provided in Exhibit D to be retained by Black & Decker or any Seller; (v) all liabilities and obligations relating to warranty obligations or services with respect to any product sold or service provided by the Glass Machinery Business prior to, on or after the Closing Date; (vi) all Environmental Liabilities, except to the extent they (i) constitute Excluded Liabilities or (ii) are subject to indemnification pursuant to Section 10.02(b)(iii); (vii) all liabilities and obligations (except to the extent they constitute Environmental Liabilities, which shall be governed by the foregoing clause (vii)) relating to the Occupational Safety and Health Act of 1970, as amended, and any regulations, decisions or orders promulgated thereunder, together with any state or local law, regulation or ordinance pertaining to worker, employee or occupational safety or health in effect as the same may be amended, supplemented or superseded, whether arising prior to, on or after the Closing Date; (viii) all liabilities and obligations arising from or relating to governmental, judicial or adversarial proceedings (public or private), litigation, suits, arbitration, disputes, claims, causes of action or investigations (collectively, "Proceedings") arising from or directly or indirectly relating to the Glass Machinery Business or any Transferred Assets, whether or not accrued, liquidated, contingent, matured, unmatured, or known or unknown to Black & Decker or any Seller or Buyer at or prior to the Closing, except for liabilities and obligations of a type contemplated by the foregoing clause (v), which shall be governed by such clause; and (ix) all liabilities and obligations for sales, use and value added taxes, gross receipts taxes, property taxes, licenses, employee and employer withholding and unemployment taxes and other Taxes which are not Income Taxes. "Benefit Arrangements" means all life and health insurance, hospitalization, savings, bonus, deferred compensation, incentive compensation, bonus plans, stock option, stock purchase, severance pay, disability and fringe benefit plans, individual employment and severance and change of control contracts, and other policies and practices providing employee or executive compensation or benefits to employees or former employees of the Glass Machinery Business or any of their dependents, maintained or contributed to by the Glass Machinery Units, other than an Employee Plan. "Bridge Period" means a taxable year or taxable period which begins before the Closing Date and ends after the Closing Date. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York or Zurich, Switzerland are required by law to close. "Buyer Companies" means Buyer and each company designated by the Buyer to purchase Transferred Assets or Shares or to assume Assumed Liabilities. "Closing Date" means the date of the Closing. "Code" means the Internal Revenue Code of 1986, as amended. "Confidentiality Agreement" means the letter agreement dated March 27/30, 1998, by and between Black & Decker and Buyer, as the same has been or may be amended from time to time. "Consolidated Returns" means all tax returns with respect to Consolidated Taxes. "Consolidated Taxes" means all Taxes, penalties and interest due in respect of any transaction engaged in by any Affiliated Group for which Taxes are due. "Contemplated Transactions" means the transactions contemplated by the Transaction Documents. "Contest" means any audit, investigation, assessment, appeal, proceeding or litigation relating to Taxes. "Contracts" means all contracts, agreements, leases (including leases of real property), licenses, commitments, sales and purchase orders, and other instruments of any kind, whether written or oral. "Corporate Pass Through Charges" means amounts charged by Black & Decker and its Affiliates to a Glass Machinery Unit for the administration of payroll, payroll taxes, insurance and other employee benefit programs with respect to U.S. employees, certain insurance and risk management programs, certain out-of-pocket expenses associated with the filing, protection and maintenance of Intellectual Property, and the costs borne by Black & Decker and its Affiliates with respect to the employment by such Person of the Active Employees listed on Attachment XVI hereto, all as allocated and charged to the Glass Machinery Units in accordance with past practice. "Damages" means all demands, claims, actions or causes of action, assessments, losses, damages, costs, expenses, liabilities, judgments, awards, fines, sanctions, penalties, charges and amounts paid in settlement, including, without limitation, reasonable costs, fees and expenses of attorneys, experts, accountants, appraisers, consultants, witnesses, investigators and any other agents or representatives of such Person (with such amounts to be determined net of any resulting Tax benefit actually received or realized and net of any refund or reimbursement of any portion of such amounts actually received or realized, including, without limitation, reimbursement by way of insurance or third party indemnification), but specifically excluding (i) any costs incurred by or allocated to an Indemnified Party with respect to time spent by employees of the Indemnified Party or any of its Affiliates, (ii) any lost profits or opportunity costs or punitive damages (except to the extent assessed in connection with a third-party claim with respect to which the Person against which such damages are assessed is entitled to indemnification hereunder), and (iii) the decrease in the value of any Transferred Asset or any asset of a Glass Machinery Share Company to the extent that such valuation is based on any use of such asset other than its use as of the Closing Date. "Disclosure Schedules" means the Disclosure Schedules provided by Black & Decker to Buyer pursuant to Exhibit B dated the date of this Agreement relating to the Agreement, as it may be amended from time to time in accordance with this Agreement. "Employee Plans" means each "employee benefit plan" as defined in Section 3(3) of ERISA, maintained or contributed to by Black & Decker or an Affiliate of Black & Decker which provides benefits to employees of the Glass Machinery Business or their dependents. "Environmental Claim" means any written or oral notice, claim, demand, action, suit, complaint, proceeding or other communication by any third Person including, without limitation, any Governmental Authority alleging liability or potential liability (including without limitation liability or potential liability for investigatory costs, cleanup costs, governmental response costs, natural resource damages, property damage, personal injury, fines or penalties) arising out of, relating to, based on or resulting from (i) the presence, discharge, emission, release or threatened release of any Hazardous Substances at any location, (ii) circumstances forming the basis of any violation or alleged violation of any Environmental Laws, or (iii) otherwise relating to obligations or liabilities under any Environmental Laws. "Environmental Laws" means any and all past and present statutes, laws (including common law), regulations, ordinances, judgments, orders, permits, codes, decrees or injunctions of any foreign (including, without limitation, the European Community and the European Union), federal, state or local governmental authority which (i) impose liability for or standards of conduct concerning the manufacture, processing, generation, distribution, use, treatment, storage, disposal, cleanup, transport or handling of Hazardous Substances including, The Resource Conservation and Recovery Act of 1976, as amended, The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, The Superfund Amendment and Reauthorization Act of 1984, as amended, The Toxic Substances Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, to the extent it relates to the handling of and exposure to hazardous or toxic materials or similar substances, and any other so-called "Superfund" or "Superlien" law or (ii) otherwise relates to contamination, pollution or the protection of human health or the environment. "Environmental Liabilities" means all liabilities to the extent arising in connection with or in any way relating to the Glass Machinery Business or Black & Decker's or any of its Affiliates' use or ownership thereof, whether vested or unvested, contingent or fixed, actual or potential, which arise under or relate to Environmental Laws including, without limitation, (i) Remedial Actions, (ii) personal injury, wrongful death, economic loss or property damage claims, (iii) claims for natural resource damages, (iv) violations of law or (v) any Damages with respect thereto. Notwithstanding the foregoing, Environmental Liabilities shall not include any increased liabilities resulting from or arising out of a use of a facility constituting a Transferred Asset or owned or leased on the Closing Date by a Glass Machinery Share Company other than in the manner that such facility was used on the Closing Date. "ERISA" means the Employee Retirement Income Security act of 1974, as amended. "Excluded Assets" means with respect to each Seller of Transferred Assets and each Glass Machinery Share Company: (i) cash and cash equivalents of a Glass Machinery Unit, including, without limitation, cash and cash equivalents used as collateral for letters of credit, deposits with utilities, insurance companies and other Persons, except to the extent any Glass Machinery Share Company has cash or cash equivalents on the Closing Date; (ii) all original books and records that any Seller shall be required to retain pursuant to any Applicable Law (in which case copies of such books and records to the extent relating to the Glass Machinery Business shall be provided to Buyer upon request), or that contain information relating primarily to any business or activity of a Glass Machinery Unit not forming a part of the Glass Machinery Business, an Excluded Asset, and Excluded Liability or any employee of a Seller that is not a Transferred Employee; (iii) all Tax assets of any Glass Machinery Unit (other than a Glass Machinery Share Company that is not a member of an Affiliated Group), other than (A) Tax assets relating to sales, use, value added and similar taxes, gross receipts taxes, property taxes, licenses, employee and employer withholding and unemployment taxes and other non-income related taxes and (B) Income Tax assets of a Glass Machinery Share Company that is not a member of an Affiliated Group to the extent provided in Section 7.07; (iv) all assets of a Glass Machinery Unit not held or owned by or used primarily in connection with the Glass Machinery Business; (v) all rights and claims of Black & Decker or any Seller under any of the Transaction Documents and the agreements and instruments delivered to Black & Decker or any Seller by a Buyer Company pursuant to any of the Transaction Documents; (vi) all accounts receivable, notes receivable or similar claims or rights (whether or not billed or accrued) of the Glass Machinery Business from Black & Decker or any of its Affiliates, except for accounts receivable, notes receivable or similar claims or rights (whether billed or accrued) relating to materials sold or services rendered by a Glass Machinery Unit to any other Glass Machinery Unit; (vii) all capital stock or any other securities of any Person other than the Shares and the partnership interest in the IPGR Partnership held by Emhart Glass Research, Inc.; (viii) all Intellectual Property not used primarily in the Glass Machinery Business including, without limitation, the Emhart Trademarks (as defined in the Trademark Agreement) other than the rights granted pursuant to the Trademark Agreement; (ix) all rights of a Glass Machinery Unit under insurance policies that insure a Glass Machinery Unit to the extent that any Excluded Liability constitutes an insured occurrence or insured claim thereunder; (x) the Arbitration Cases Customer Receivables as reflected in Note 1 to the Opening Statement up to a total amount of USD$745,000; and (xi) except as otherwise expressly provided in Exhibit D, all assets related to Employee Plans and Benefit Arrangements. "Excluded Liabilities" means in respect of each Seller of Transferred Assets and each Glass Machinery Share Company the following liabilities and obligations: (i) all liabilities and obligations of a Seller of Transferred Assets not arising out of the conduct of the Glass Machinery Business, except as otherwise specifically provided in the Transaction Documents; (ii) all liabilities or obligations of any Glass Machinery Unit for any Tax arising from or with respect to the Transferred Assets or the operations of the Glass Machinery Business prior to the Closing, other than (A) Tax liabilities or obligations relating to sales, use, value added and similar taxes, gross receipts taxes, property taxes, licenses, employee and employer withholding and unemployment taxes and other Taxes that are not Income Taxes and (B) Income Tax liabilities or obligations of a Glass Machinery Share Company that is not a member of an Affiliated Group to the extent that Buyer is responsible for such Income Tax liabilities pursuant to Section 7.07; (iii) all liabilities or obligations, whether presently in existence or arising after the date of the Agreements, in respect of accounts payable, notes payable (including intercompany promissory notes and similar financing arrangements) or similar obligations (whether or not billed or accrued) to Black & Decker or any of its Affiliates, except for (A) the Insurance Liabilities, (B) liabilities and obligations for Corporate Pass Through Charges and (C) liabilities or obligations as of the Closing Date in respect of accounts payable, notes payable or similar obligations relating to specific services provided to and specific expenses payable by a Glass Machinery Unit to another Glass Machinery Unit; (iv) all liabilities or obligations, whether presently in existence or arising after the date of the Agreement, relating to fees, commissions or expenses owed to any broker, finder, investment banker, accountant, attorney or other intermediary or advisor employed by Black & Decker in connection with the Contemplated Transactions; (v) all liabilities or obligations retained by Black & Decker or any Seller pursuant to Exhibit D; (vi) all liabilities or obligations related to Excluded Assets and not otherwise included in the Assumed Liabilities by express provision of this Agreement; (vii) all liabilities or obligations related to claims of manufacturer or design defects (including Asbestos Claims) made prior to, on or after the Closing Date with respect to any products manufactured and sold or service provided by the Glass Machinery Business prior to the Closing Date (including liabilities and obligations in respect of investigations regarding product safety, product recalls and related matters), unless, except with respect to an Asbestos Claim, any such claim is based on an injury caused by the fact that the product to which such claim relates has been inspected, overhauled or upgraded after the Closing Date by any of the Buyer Companies or any of the Glass Machinery Share Companies; (viii) all Environmental Liabilities, whether arising prior to, on or after the Closing Date, (1) relating to the disposal prior to Closing of Hazardous Substances at locations other than facilities included in the Transferred Assets (whether by fee ownership or leasehold interest) or facilities owned or leased on the Closing Date by a Glass Machinery Share Company, it being understood and agreed that the migration of Hazardous Substances in soil or groundwater from a facility included in the Transferred Assets or owned or leased by a Glass Machinery Share Company on the Closing Date to surrounding properties shall not be considered such a disposal of Hazardous Substances, or (2) relating to or arising out of conditions at, or the current or former operations at, any facilities or locations not included in the Transferred Assets (whether by fee ownership or leasehold interest) (including any predecessors to such facilities or locations) or facilities or locations not owned or leased on the Closing Date by a Glass Machinery Share Company; (ix) except as provided in Section 10.02(a)(v), all liabilities or obligations related to the Arbitration Cases; and (x) all liabilities and obligations related to the litigation described in item 3 of Schedule B.11. "Financial Support Arrangements" means any obligations, contingent or otherwise, of a Person in respect of any indebtedness, obligation or liability (including assumed indebtedness, obligations or liabilities) of another Person, including but not limited to remaining obligations or liabilities associated with indebtedness, obligations or liabilities that are assigned, transferred or otherwise delegated to another Person, if any, letters of credit and standby letters of credit (including any related reimbursement or indemnity agreements), direct or indirect guarantees, endorsements (except for collection or deposit in the ordinary course of business), notes co-made or discounted, recourse agreements, take-or-pay agreements, keep-well agreements, agreements to purchase or repurchase such indebtedness, obligation or liability or any security therefor or to provide funds for the payment or discharge thereof, agreements to maintain solvency, assets, level of income or other financial condition, agreements to make payment other than for value received and any other financial accommodations. "GAAP" means U.S. Generally Accepted Accounting Principles as in effect on the date of the Agreement. "Glass Machinery Business" means the development, production, distribution and sale of glass and glass container making machines and systems (and spare parts therefor) and glass container inspection machinery and systems (and spare parts therefor) and the repair, refabrication and modification of glass and glass container making machines and systems and glass container inspection machines and systems, all as engaged in by the Glass Machinery Units on the date of this Agreement. "Glass Machinery Company" means each of the following corporations: Emhart Glass Machinery Investments, Inc., a Delaware corporation; Emhart Inc., a Delaware corporation; Emhart Sweden AB, a corporation formed under the laws of Sweden; Aktiebolaget Sundsvalls Verkstader, a corporation formed under the laws of Sweden; Emhart S.r.l., a corporation formed under the laws of Italy; Emhart Glass SA, a corporation formed under the laws of Switzerland; Emhart Glass Machinery (U.S.) Inc., a Delaware corporation; Emhart Glass Research, Inc., a Delaware corporation, Emhart Deutschland GmbH, a corporation formed under the laws of Germany; and Emhart (U.K.) Limited, a corporation formed under the laws of England. "Glass Machinery Division" means each of the unincorporated Glass Machinery Division of Black & Decker Asia Pacific Pte. Ltd. and the unincorporated Glass Machinery Division of Nippon POP Rivets & Fasteners LTD. "Glass Machinery Financial Statements" means the entirety of (a) the special-purpose financial combining statements of operating income and net assets of the Glass Machinery Business, as attached in Attachment IX to this Agreement, (b) the Special Purpose Financial Statements (3/22/98) attached as Attachment XIII and (c) the Statement of the Proposed Final Net Tangible Assets to be established in accordance with Section 2.04(a). "Glass Machinery Share Company" means each Glass Machinery Company the Shares of which are being sold, directly or indirectly, hereunder. "Glass Machinery Unit" means a Glass Machinery Company or a Glass Machinery Division. "Governmental Authority" means any foreign, domestic, federal, territorial, state or local governmental authority, quasi-governmental authority, instrumentality, court, government or self-regulatory organization, commission, tribunal or organization (including, without limitation, the European Community and the European Union) or any regulatory, administrative or other agency, or any political or other subdivision, department or branch of any of the foregoing. "Hazardous Substances" means all hazardous or toxic substances, wastes, materials or chemicals, petroleum (including crude oil or any fraction thereof) and petroleum products, asbestos and asbestos-containing materials, pollutants, contaminants and all other materials, substances and forces regulated pursuant to, or that could form the basis of liability under any Environmental Law. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Income Taxes" means any income, gains, net worth, surplus, franchise or with respect to any interest, dividends or royalties, withholding taxes (including interest, penalties or other additions to Tax) imposed by a Tax Authority. "Intellectual Property" means all patents, copyrights, technology, know-how, processes, trade secrets, inventions, proprietary data, formulae, research and development data and computer software programs; all trademarks, trade names, service marks and service names; all registrations, applications, recordings, licenses and common-law rights relating thereto, all rights to sue at law or in equity for any infringement or other impairment thereto, including the right to receive all proceeds and damages therefrom, and all rights to obtain renewals, continuations, divisions or other extensions of legal protections pertaining thereto; and all other United States, state and foreign intellectual property. "Intellectual Property Assignment Agreements" means Assignment of United States Trademarks, Trademark Registrations and Applications for Registration, Assignment of Foreign Trademarks, Trademark Registrations and Applications for Registration, Assignment of United States Patents and Patent Applications and Assignment of Foreign Patents and Application for Patents, in the forms contemplated by Attachments VIII, X, XI and XII to this Agreement. "Inventory" means all items of inventory notwithstanding how classified in the financial records of a Glass Machinery Unit, including all raw materials, work-in-process and finished goods, reconditioned products and products to be reconditioned products. "IRS" means the Internal Revenue Service. "Liens" means any pledge, security, interest, lien, charge, encumbrance, mortgage, trust deed, or other restriction having like or similar effect on sale, transfer or disposition, whether imposed by agreement, law or otherwise.. "Material Adverse Effect" means (i) with respect to the Glass Machinery Business, a material adverse effect on the assets, properties, business, financial condition (including the tax position) or results of operations of the Glass Machinery Business taken as a whole, or (ii) with respect to any other Person, a material adverse effect on the assets, properties, business, financial condition (including the tax position) or results of operations of such Person and its Subsidiaries taken as a whole. "Net Tangible Assets" means (i) all Transferred Assets of the Glass Machinery Business, plus (ii) all assets of a Glass Machinery Share Company, other than any Excluded Asset minus (iii) all (1) Assumed Liabilities of the Glass Machinery Business, (2) all liabilities of a Glass Machinery Share Company, other than any Excluded Liability and (3) goodwill, all expressed in U.S. dollars and as calculated in accordance with the practices and policies that were employed in the preparation of the Opening Statement, determined, in each case, consistent with the Opening Statement and in accordance with Note 12 thereto and, in the case of the Final Net Tangible Asset Amount, Attachment XVIII.. "Non US Benefit Arrangements" means Benefit Arrangements in respect of Non US Transferred Employees. "Non US Transferred Employees" means Transferred Employees who are not US Transferred Employees. "Opening Statement" means the Statement of Net Assets contained in the Special Purpose Financial Statements for the quarter ended March 22, 1998 together with the notes thereto, as attached in Attachment XIII to this Agreement. "Permitted Liens" means any of the following: (i) Liens for Taxes that (x) are not yet due or delinquent or (y) are being contested in good faith by appropriate proceedings; (ii) statutory Liens or landlords', carriers', warehousemen's, mechanic's, suppliers', materialmen's or other like Liens arising in the ordinary course of business with respect to amounts not yet overdue for a period of 60 days or amounts being contested in good faith by appropriate proceedings; (iii) easements, rights of way, restrictions and other similar charges or encumbrances on real property interests, that, individually or in the aggregate, do not materially interfere with the ordinary course of operation of the Glass Machinery Business or the use of any such real property for its current uses; (iv) leases or subleases granted to others that do not materially interfere with the ordinary conduct of the Glass Machinery Business; (v) with respect to real property, title defects or irregularities that do not in the aggregate materially impair the use of such real property for its current use; (vi) Liens in favor of a customer of the Glass Machinery Business arising in the ordinary course of business; (vii) Liens, title defects, encumbrances, easements and restrictions, invalidities of leasehold interests (collectively, "Encumbrances") that have not had, and could not reasonably be expected to have, a Material Adverse Effect on the Glass Machinery Business; and (viii) Encumbrances specifically disclosed in the Disclosure Schedule or taken into account in the Opening Statement. "Person" means an individual, a corporation, a general partnership, a limited partnership, a limited liability company, limited liability partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Post-Closing Period" means any taxable period ending on or after the Closing Date. "Pre-Closing Period" means any taxable period that ends before the Closing Date. "Remedial Action(s)" means the investigation, clean-up or remediation of contamination or environmental damage caused by, related to or arising from the generation, use, handling, treatment, storage, transportation, disposal, discharge, release, or emission of Hazardous Substances, including, without limitation, investigations, response, removal and remedial actions under The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, corrective action under The Resource Conservation and Recovery Act of 1976, as amended, and clean-up requirements under similar Environmental Laws. "Representatives" means (i) with respect to Buyer, any of the "Representatives" as defined in the Confidentiality Agreement and (ii) with respect to B&D or any Seller, each of its respective directors, officers, advisors, attorneys, accountants, employees or agents. "Seller" means, each Seller of Shares and Transferred Assets as set forth on Schedule 2.01. "Services Agreement" means the Services Agreement substantially in the form contemplated by Attachment XIV to this Agreement, as the same may be amended from time to time. "Shares" means all of the issued and outstanding shares of the following Glass Machinery Companies which are being sold, to a Buyer Company pursuant to this Agreement: Emhart (U.K.) Limited; Emhart Sweden AB; Aktiebolaget Sundsvalls Verkstader; Emhart S.r.l; Emhart Glass Machinery (U.S.) Inc. and Emhart Glass Research, Inc. "Subsidiary" as it relates to any Person, shall mean with respect to any Person, any corporation, partnership, joint venture or other legal entity of which such Person, either directly or through or together with any other Subsidiary of such Person, owns more than 50% of the voting power in the election of directors or their equivalents, other than as affected by events of default. "Supplemental Agreements" means, collectively, the Supplemental Asset Sale Agreements, and the Supplemental Share Sale Agreements. "Supplemental Asset Sale Agreement" means each agreement between each Seller of Transferred Assets and Assumed Liabilities and a Buyer Company, substantially in the form of Attachment II-1, pursuant to which such Seller is to transfer to a Buyer Company Transferred Assets and Assumed Liabilities. "Supplemental Share Sale Agreement" means each agreement between each Seller of Shares and a Buyer Company, substantially in the form of Attachment II-2, pursuant to which such Seller is to transfer to a Buyer Company Shares and a Glass Machinery Share Company is to convey and assign to such Seller the Excluded Assets and Excluded Liabilities of such Glass Machinery Share Company. "Tax Authority" means a foreign or United States federal, state or local Governmental Authority having jurisdiction over the assessment, determination, collection or imposition of any Tax or any private party having such authority under applicable tax law. "Tax Returns" means all returns (including information returns), declarations, reports, estimates and statements regarding Taxes, required to be filed with any Tax Authority. "Taxes" means all taxes, charges, fees, levies or other assessments, including without limitation, all net income, gross income, gross receipts, sales, use, ad valorem, transfer, value added, franchise, profits, license, withholding, payroll, employment, excise, estimated, severance, stamp, occupation, property, net worth, capital or other taxes, customs, duties, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any Tax Authority. "Trademark Agreement" means the Trademark Agreement to be executed by the parties substantially in the form of Attachment III. "Transaction Documents" means this Agreement, the Supplemental Agreements the Services Agreement, the Intellectual Property Assignment Agreements, the Trademark Agreement, and any exhibits or attachments to any of the foregoing, as the same may be amended from time to time. "Transferred Assets" means, other than Excluded Assets, all of the assets, properties, rights, licenses, permits, Contracts, causes of action and business of every kind and description as the same shall exist on the Closing Date, wherever located, real, personal or mixed, tangible or intangible, owned by, leased by or in the possession of the Glass Machinery Divisions and Emhart Glass Machinery Investments, Inc., Emhart Inc., Emhart Glass SA and Emhart Deutschland GmbH, whether or not reflected in the books and records thereof, and held or used primarily in the conduct of the Glass Machinery Business as the same shall exist on the Closing Date, and including, without limitation, except as otherwise specified herein, all direct or indirect right, title and interest of any Seller of Transferred Assets in, to and under: (i) all personal property and interests therein (other than Intellectual Property), including machinery, equipment, furniture, office equipment, communications equipment, vehicles, storage tanks, spare and replacement parts, fuel and other tangible property (and interests in any of the foregoing) owned by any such Seller that are used primarily in connection with the Glass Machinery Business; (ii) all Inventory that is owned by any such Seller and held for sale, use or consumption primarily in the Glass Machinery Business; (iii) all Contracts that relate primarily to the Glass Machinery Business to which any such Seller is a party or by which it is bound; (iv) all accounts, accounts receivable and notes receivable whether or not billed, accrued or otherwise recognized in the Opening Statement or taken into account in the determination of the Final Net Tangible Asset Amount, together with any unpaid interest or fees accrued thereon or other amounts due with respect thereto of any such Seller to the extent they relate to the Glass Machinery Business, and any security or collateral for any of the foregoing; (v) all expenses that have been prepaid by any such Seller to the extent relating to the operation of the Glass Machinery Business, including but not limited to ad valorem Taxes, lease and rental payments; (vi) all of any such Seller's rights, claims, credits, causes of action or rights of set-off against Persons, other than Black & Decker or any of its Affiliates, to the extent relating to the Glass Machinery Business or the Transferred Assets, including, without limitation, unliquidated rights under manufacturers' and vendors' warranties; (vii) all Intellectual Property of any such Seller (other than Intellectual Property constituting an Excluded Asset) used or held for use primarily in the Glass Machinery Business, including the goodwill of the Glass Machinery Business symbolized thereby, it being understood and agreed that the Intellectual Property used or held for use primarily in the Glass Machinery Business that is registered or as to which an application for registration is pending is listed on Attachment XV; (vii) all transferable franchises, licenses, permits or other governmental authorizations owned by, or granted to, or held or used by, any such Seller and primarily related to the Glass Machinery Business; (ix) except to the such Seller is required to retain the originals pursuant to any Applicable Law (in which case copies will be provided to Buyer upon request), all business books, records, files and papers, whether in hard copy or computer format, of any such Seller used primarily in the Glass Machinery Business, including, without limitation, books of account, invoices, engineering information, sales and promotional literature, manuals and data, sales and purchase correspondence, lists of present and former suppliers, lists of present and former customers, personnel and employment records of present or former employees, documentation developed or used for accounting, marketing, engineering, manufacturing, or any other purpose relating primarily to the conduct of the Glass Machinery Business at any time prior to the Closing; (x) all Tax assets that are not an Excluded Asset; (xi) the right to represent to third parties that Buyer is the successor to the Glass Machinery Business; and (xii) all insurance proceeds due or to become due to any such Seller (except to the extent relating to Excluded Assets or Excluded Liabilities, net of any retrospective premiums, deductibles, retention or similar amounts, arising out of or related to damage, destruction or loss of any property or asset of or used primarily in connection with the Glass Machinery Business to the extent of any damage or destruction that remains unrepaired, or to the extent any property or asset remains unreplaced at the Closing Date. "US Benefit Arrangements" means Benefit Arrangements in respect of US Transferred Employees. "US Transferred Employees" means Transferred Employees employed by the Glass Machinery Business in the United States. "WARN" means the Worker Adjustment Retraining and Notification Act, as amended. (b) "To the knowledge," "known by" or "known" (and any similar phrase) means (i) with respect to Black & Decker, to the actual knowledge of any of the General Counsel, Chief Financial Officer, Controller and Treasurer of Black & Decker, the President of the Glass Machinery Business and the controller of each Glass Machinery Unit, and shall be deemed to include a representation that a reasonable investigation or inquiry of the subject matter thereof has been made of such individuals, and (ii) with respect to Buyer, to the actual knowledge of Senior Vice Presidents or higher ranking officers of Buyer, and shall be deemed to include a representation that a reasonable investigation or inquiry of the subject matter thereof has been made of such individuals. (c) "Specifically disclosed" or "specific disclosures" shall only mean those disclosures made in the Disclosure Schedules which are indicated with an asterisk. (d) Each of the following terms is defined in the Section set forth opposite such term: Term Section Active Employee....................................................D.01 Adjusted Purchase Price............................................2.02 Agreement......................................................Preamble Black & Decker.................................................Preamble Buyer..........................................................Preamble Buyer's Carryback ................................................ 7.07 Seller's Carryforward .............................................7.07 Buyer's Swiss Pension Plan ....................................... D.18 Buyer's U.K. Pension Plan ........................................ D.15 Buyer's U.S. Pension Plan ....................................... D.08 Buyer Period .................................................... 7.08 Closing............................................................2.03 Competing Business.................................................5.06 Encumbrances..........................................................A Exchange Consideration.............................................2.02 Final Net Tangible Asset Amount....................................2.04 Hedge Closure Confirmation ....................................... 7.08 Hedge Contracts .................................................. 7.08 Indemnified Claim.................................................10.03 Indemnified Party.................................................10.03 Indemnifying Party................................................10.03 Insurance Liabilities..............................................6.03 Non-U.S. Transferred Employee......................................D.__ Leased Real Property...............................................B.07 Owned Real Property................................................B.07 PBGC...............................................................B.18 Proceedings....................................................... A Proposed Final Net Tangible Asset Amount...........................2.04 Referee...........................................................10.03 Seller Period .....................................................7.07 Seller's German Pension Plan ......................................D.16 Seller's Hourly Pension Plan ..................................... D.09 Seller's Japanese Plan ............................................D.17 Seller's Savings Bank .............................................D.10 Seller's Swiss Pension Plan .......................................D.18 Seller's U.K. Pension Plan ....................................... D.15 Seller's U.S. Pension Plan.........................................D.08 Successor Hourly Pension Plan .....................................D.09 Successor Savings Plan.............................................D.10 Surviving Representations or Covenants............................10.01 Systems...........................................................B.21 Third Party Claim.................................................10.03 Transferred Employees..............................................D.01 EXHIBIT B REPRESENTATIONS AND WARRANTIES OF BLACK & DECKER Black & Decker hereby represents and warrants to Buyer, that: B.01 Corporate Existence and Power. Black & Decker is a corporation duly incorporated, validly existing and in good standing under the laws of the state of Maryland. Each Seller of Transferred Assets and each Glass Machinery Share Company is a corporation duly incorporated, validly existing and in good standing under the laws of the state or jurisdiction of its incorporation and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on the Glass Machinery Business as now conducted. Each Seller of Transferred Assets and each Glass Machinery Share Company is duly qualified to do business as a foreign corporation in each jurisdiction where the character of the property owned or leased by it or the nature of its activities make such qualification necessary to carry on the Glass Machinery Business as now conducted, except where the failure to be so qualified has not been, and could not reasonably be expected to be material to the Glass Machinery Business. B.02 Corporate Authorization. The execution, delivery and performance by Black & Decker and each Seller of each of the Transaction Documents to which it is a party and the consummation by Black & Decker and each Seller of the Contemplated Transactions are within its corporate powers and have been duly authorized by all necessary corporate action on its part. Each of the Transaction Documents to which it is a party constitutes or will constitute at Closing a legal, valid and binding agreement of Black & Decker and each Seller, enforceable against it in accordance with its terms (i) except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers and (ii) subject to the limitations imposed by general equitable principles (regardless of whether such enforceability is considered in a proceeding at law or in equity). B.03 Capitalization. The designations of each class of the capital stock of each of the Glass Machinery Share Companies, and the number of authorized and issued shares thereof is as described on Schedule B.03. All of the Shares and all other capital stock or other securities of the Glass Machinery Share Companies have been validly issued and are fully paid and nonassessable. Except as described in Schedule B.03, no shares of capital stock or other securities of any of the Glass Machinery Share Companies are held in treasury, and there are no other issued or outstanding shares of capital stock or other securities of the Glass Machinery Share Companies and no other issued or outstanding securities of any of the Glass Machinery Share Companies that are at any time convertible into or exchangeable or exercisable for any capital stock or other securities of any of such Glass Machinery Companies. None of the Glass Machinery Share Companies are subject to any commitment or obligation that would require the issuance or sale of additional shares of capital stock or other securities of any of such Glass Machinery Companies at any time under options, subscriptions, warrants, rights or any other obligations. There are no agreements, commitments, restrictions or arrangements (whether or not legally enforceable) relating to ownership (including without limitation repurchase or redemption) or voting of any shares of capital stock or other securities of any Glass Machinery Share Companies. Except as set forth on Schedule B.03, no Glass Machinery Share Company has, nor any of the Transferred Assets includes, any Subsidiary or any equity interest or other investment in any corporation, partnership, joint venture or other entity of any kind other than another Glass Machinery Company. B.04 Ownership of Shares. The Persons listed in Schedule B.03 are the record and beneficial owners of the Shares, all of which are free of any lien, security interest, charge, encumbrance or claim. Such Persons have, or will have on the Closing Date, the right to, and will in fact, transfer to the Buyer or Buyer's Companies complete and unencumbered legal and equitable title to the Shares which are to be transferred to the Buyer or Buyer's Companies. B.05 Governmental Authorization. The execution, delivery and performance by Black & Decker and each Seller of the Transaction Documents to which it is a party require no action by or in respect of, or consent or approval of, or filing with, any Governmental Authority other than: (i) compliance with any applicable requirements of the HSR Act; (ii) actions, consents, approvals or filings set forth in Schedule B.05 or otherwise expressly referred to in this Agreement; and (iii) such other consents, approvals, authorizations, permits and filings the failure to obtain or make would not be, in the aggregate, material to the Glass Machinery Business. B.06 Non-Contravention. Except as set forth in Schedule B.06, the execution, delivery and performance by Black & Decker and each Seller of each of the Transaction Documents to which it is a party do not and will not (i)(A) contravene or conflict with the charter or bylaws of Black & Decker, a Seller or any Glass Machinery Share Company, (B) assuming compliance with the matters referred to in Section B.05, contravene or conflict with or constitute a violation of any provisions of any Applicable Law binding upon Black & Decker, a Seller or any Glass Machinery Share Company; (C) assuming compliance with the matters referred to in Section B.05, constitute a default under or give rise to any right of termination, cancellation or acceleration of, or to a loss of any benefit relating exclusively to the Glass Machinery Business to which a Seller of the Transferred Assets is entitled under, any Contract binding upon such a Seller relating exclusively to the Glass Machinery Business or by which any of the Transferred Assets is or may be bound or any license, franchise, permit or similar authorization held by such a Seller relating exclusively to the Glass Machinery Business; or (D) assuming compliance with the matters referred to in Section B.05, constitute a default under or give rise to any right of termination, cancellation or acceleration of, or to a loss of any benefit to which a Glass Machinery Share Company is entitled under any Contract (other than an Excluded Asset) to which such a Glass Machinery Share Company is a party or may be bound or any license, franchise, permit or similar authorization held by such a Glass Machinery Share Company; except, in the case of clauses (B), (C) and (D) for any such contravention, conflict, violation, default, termination, cancellation, acceleration or loss that could not reasonably be expected to be material to the Glass Machinery Business or (ii) result in the creation or imposition of any Lien on any Transferred Asset or asset (other than Excluded Assets) of a Glass Machinery Share Company, other than Permitted Liens. B.07 Financial Statements. The Glass Machinery Financial Statements present fairly the financial position and results of operations of the Glass Machinery Business at the dates and for the periods set forth therein, in conformity with the principles and procedures set forth in the notes thereto. B.08 Absence of Certain Changes. Except for matters that would be permitted in accordance with Section 5.01 if they occurred after the date of this Agreement or as specifically disclosed in Schedule B.08, from March 22, 1998 to the date of this Agreement, there has not been any material adverse change in the business, financial condition (including its tax position) or results of operations of the Glass Machinery Business and there has not been: (a) any event or occurrence that has been material to the Glass Machinery Business, other than those resulting from changes, whether actual or prospective, in general conditions applicable to the industries in which the Glass Machinery Business is involved or general economic conditions; (b) any material damage, destruction or other casualty loss affecting (i) the Glass Machinery Business or (ii) any material assets that would constitute Transferred Assets if owned, held or used by a Seller of Transferred Assets on the Closing Date or (iii) any material asset (other than an Excluded Asset) of a Glass Machinery Share Company; (c) any transaction or commitment made, or any Contract entered into (i) by a Glass Machinery Share Company, or (ii) by a Seller of Transferred Assets relating primarily to the Glass Machinery Business or any assets that would constitute Transferred Assets if owned, held or used by such a Seller on the Closing Date (including the acquisition or disposition of any assets), in either case, material to the Glass Machinery Business taken as a whole, other than transactions and commitments in the ordinary course of business and those contemplated by this Agreement; (d) any termination or amendment (i) by a Glass Machinery Share Company of any Contract (other than an Excluded Asset) or other right or (ii) by a Seller of Transferred Assets of any Contract or other right relating primarily to the Glass Machinery Business, in either case, material to the Glass Machinery Business taken as a whole, other than terminations or amendments made in the ordinary course of business and those contemplated by this Agreement; (e) any sale or other disposition by a Seller of Transferred Assets or a Glass Machinery Share Company, of more than an aggregate of $500,000 of assets (other than the sale of Inventory (including obsolete Inventory whether or not in the ordinary course of business) which would constitute Transferred Assets or assets (other than Excluded Assets) of a Glass Machinery Share Company on the Closing Date; (f) any increase in the compensation of any current employee of the Glass Machinery Business at a level of vice president or above, other than nondiscretionary increases pursuant to Employee Plans or Benefit Arrangements specifically disclosed in Schedule B.20; and (g) any cancellation, compromise, waiver or release by (i) a Seller of Transferred Assets of any claim or right (or a series of related rights and claims) related to the Glass Machinery Business, or (ii) a Glass Machinery Share Company of any claim or right (or a series of related rights and claims) other than, in either case, cancellations, compromises, waivers or releases in the ordinary course of business or relating to an Excluded Asset. B.09 Sufficiency of and Title to the Transferred Assets. (a) Except as specifically disclosed in Schedule B.09, the Transferred Assets, and the assets (other than Excluded Assets) of the Glass Machinery Share Companies, together with the services to be provided to Buyer Companies pursuant to the Services Agreement, and the Intellectual Property to be transferred to Buyer pursuant to the Trademark Agreement, constitute, and on the Closing Date will constitute, all of the assets and services that are necessary to permit the operation of the Glass Machinery Business in substantially the same manner as such operations have heretofore been conducted. (b) Except as specifically disclosed in Schedule B.09, subject to the receipt of any consents or approvals of any other Person, upon consummation of the Contemplated Transactions, Buyer will have acquired good and marketable title in and to, or a valid leasehold interest in, each of the Transferred Assets (other than any Intellectual Property), free and clear of all Liens, except for Permitted Liens. (c) Schedule B.09 includes a true and complete list of all real property (i) owned by a Glass Machinery Share Company (or real property which such a Glass Machinery Company has the right to acquire), and (ii) owned by a Seller of Transferred Assets (or real property which such a Seller has the right to acquire in connection with its operation of the Glass Machinery Business) which is included in the Transferred Assets, (collectively, the "Owned Real Property"). Schedule B.09 sets forth (i) the address of each parcel of Owned Real Property and (ii) the owner of such Owned Real Property. (d) Schedule B.09 includes a true and complete list of all agreements (together with any amendments thereof) pursuant to which (i) a Seller of Transferred Assets leases, subleases or otherwise occupies (whether as landlord, tenant, subtenant or other occupancy arrangement) any real property used in the Glass Machinery Business or (ii) a Glass Machinery Share Company, leases, subleases, or otherwise occupies (whether as landlord, tenant, subtenant or other occupancy arrangement) any real property in connection with the operation of the Glass Machinery Business (collectively, the "Leased Real Property"). Schedule B.09 sets forth (i) the address of each parcel of Leased Real Property and (ii) the owner of the leasehold, subleasehold or occupancy interest for each Leased Real Property. B.10 No Undisclosed Liabilities. There are (a) no liabilities (other than Excluded Liabilities) of a Glass Machinery Share Company, or (b) no liabilities of a Seller of Transferred Assets relating to the Glass Machinery Business that constitute Assumed Liabilities, in either case, of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, other than: (i) liabilities disclosed in or provided for in the Opening Statement and liabilities for matters taken into account in the determination of the Final Net Tangible Asset Amount; (ii) liabilities specifically (x) disclosed in Schedule B.10 and B.11, (y) related to any contract, agreement, lease, license, commitment, sales or purchase order or other undertaking disclosed in the Disclosure Schedules or (z) related to any Employee Plan or Benefit Arrangements identified in Exhibit D or disclosed in Schedule B.20; (iii) liabilities incurred in the ordinary course of business since March 31, 1998; (iv) liabilities not required to be accrued for or reserved against in accordance with GAAP; and (v) liabilities in addition to those referenced in the foregoing clauses (i) through (iv), that in the aggregate could not reasonably be expected to be material to the Glass Machinery Business. B.11 Litigation. Except for Excluded Liabilities, as specifically disclosed in Schedule B.11 or reserved against or referred to in the Opening Statement, there is no action, suit, investigation or proceeding pending against, or to the knowledge of Black & Decker, threatened against or affecting, a Glass Machinery Share Company, the Glass Machinery Business or any Transferred Asset before any Governmental Authority that could reasonably be material to the Glass Machinery Business. B.12 Material Contracts. (a) Except as set forth on Schedule B.12 and for Contracts that are Excluded Assets or Excluded Liabilities, as of the date hereof, the Sellers of Transferred Assets, with respect to the Glass Machinery Business, and the Glass Machinery Share Companies are not parties to or otherwise bound by or subject to: (i) any Contract that involves the receipt or payment by any Glass Machinery Unit of more than $500,000 in any twelve (12) month period other than Contracts relating to the sale of goods or the provision of services by a Glass Machinery Unit entered in the ordinary course of business by such Glass Machinery Unit; (ii) any written employment, severance, consulting or sales representative Contract (other than those that relate to Active Employees) which contains an obligation (excluding commissions) to pay more than $100,000 per year; (iii) any Contract containing any covenant limiting the freedom of a Seller of Transferred Assets, with respect of the Glass Machinery Business or the operations of the Glass Machinery Business, or a Glass Machinery Share Company to engage in any line of business or compete with any Person in any geographic area in any material respect if such Contract will be binding after the Closing other than sales agency agreements granting exclusive territories to sales agents and Intellectual Property licenses or sharing agreements limiting the use of Intellectual Property; (iv) any Contract in effect on the date of this Agreement relating to the disposition or acquisition of the assets of, or any interest in, any business enterprise other than in the ordinary course of business or, in the case of Sellers of Transferred Assets, Contracts which do not relate to the Glass Machinery Business; (v) any Financial Support Arrangements; (vi) any indebtedness for borrowed money that would constitute an Assumed Liability or a liability (other than an Excluded Liability) of a Glass Machinery Share Company, if in existence on the Closing Date, with a principal amount in excess of $500,000; (vii) any offset agreement entered into in connection with an international sales transaction and relating to any Contract that imposes an obligation to perform that will continue in effect on or after the Closing Date; or (viii) any other material Contract not otherwise disclosed in the Disclosure Schedules. (b) Except as specifically disclosed in Schedule B.12, each Contract disclosed in Schedule B.12 is a legal, valid and binding obligation of the respective Seller or Glass Machinery Share Company enforceable against such Person in accordance with its terms (except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers, and subject to the limitations imposed by general equitable principles regardless of whether such enforceability is considered in a proceeding at law or in equity), and the respective Seller or Glass Machinery Share Company is not in breach or default and has not failed to perform any obligation thereunder, and, to the knowledge of Black & Decker, there does not exist any event, condition or omission which would constitute a breach or default (whether by lapse of time or notice or both) by any other Person, except, in either case, for any such default, failure or breach as has not had, and could not reasonably be expected to be material to the Glass Machinery Business. B.13 Licenses and Permits. Except as specifically disclosed in Schedule B.13, each Seller of Transferred Assets and each Glass Machinery Share Company has all material licenses, franchises, permits and other similar authorizations affecting, or relating in any way to, the Glass Machinery Business required by law to be obtained by each Seller of Transferred Assets and each such Glass Machinery Share Company to permit such Person to conduct the Glass Machinery Business in substantially the same manner as the Glass Machinery Business has heretofore been conducted. B.14 Finders' Fees. Except for Lehman Brothers Inc., whose fees will be paid by Black & Decker, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Black & Decker and, except for the employees who are parties to the agreements described in Section B.20(b)(xi), there is no employee of the Glass Machinery Business who might be entitled to any fee or commission from Black & Decker or Buyer or any of their Affiliates upon consummation of the Contemplated Transactions. B.15 Environmental Compliance. Except as specifically disclosed in Schedule B.15, the Glass Machinery Business conducted by the Sellers of Transferred Assets and the business conducted by the Glass Machinery Share Companies, is and has been in substantial compliance with all applicable Environmental Laws, and each of the Sellers of the Transferred Assets and the Glass Machinery Share Companies has obtained all material permits, licenses and other authorizations that are required under applicable Environmental Laws. Except as specifically disclosed in Schedule B.15,(i) the Glass Machinery Business conducted by the Sellers of Transferred Assets and the business conducted by the Glass Machinery Share Companies is and has been in material compliance with the terms and conditions under which the permits, licenses and other authorizations referenced in the preceding sentence were issued or granted, (ii) the Sellers of Transferred Assets hold all material permits required by Environmental Laws that are appropriate and necessary to conduct the Glass Machinery Business as presently conducted in all material respects and to operate the Transferred Assets in all material respects as they are presently operated; (iii) the Glass Machinery Share Companies hold all material permits required by Environmental Laws that are appropriate and necessary to conduct their businesses as presently conducted in all material respects and to operate their assets (other than Excluded Assets) in all material respects as they are presently operated; (iv) no suspension, cancellation refusal to renew or termination of any permit referred to in clauses (ii) or (iii) is pending or threatened; (v) the Sellers of Transferred Assets have not received notice of any material Environmental Claim relating to or affecting the Glass Machinery Business or the Transferred Assets, and there is no such threatened Environmental Claim or any circumstances, conditions or events that could give rise to such a claim; (vi) the Sellers of Transferred Assets, in connection with the Glass Machinery Business or the Transferred Assets, have not entered into, agreed to, or are subject to any judgment, decree, order or other similar requirement of any Governmental Authority under any Environmental Laws; (vii) the Glass Machinery Share Companies have not received notice of any material Environmental Claim and there is no such threatened Environmental Claim; (viii) neither Black & Decker nor any of its Affiliates received written notice of any material Environmental Claim and there is no such threatened Environmental Claim or any circumstances, conditions or events that could give rise to such a claim; (ix) the Glass Machinery Share Companies have not entered into, agreed in writing to, or are subject to any judgment, decree, order or other similar requirement of any Governmental Authority under any Environmental Laws. B.16 Compliance with Laws. Except as specifically disclosed in Schedules B.15 and B.16, for violations or infringements of Environmental Laws, and for violations or infringements that have not had, and may not reasonably be expected to be material to the Glass Machinery Business, the operation by the Sellers of Transferred Assets of the Glass Machinery Business and the operation of the business conducted by the Glass Machinery Share Companies have not violated or infringed, and do not violate or infringe, in any material respect any Applicable Law or any order, writ, injunction or decree of any Governmental Authority. B.17 Intellectual Property. With respect to (a) Intellectual Property of each Seller of Transferred Assets that constitutes Transferred Assets and (b) Intellectual Property of a Glass Machinery Share Company (other than Intellectual Property constituting an Excluded Asset), except as specifically disclosed in Schedule B.17: (a) Each Seller of Transferred Assets and each Glass Machinery Share Company owns, free and clear of all Liens other than Permitted Liens, and subject to any licenses granted by the Seller or Glass Machinery Company prior to the Closing Date, each of which is listed in Schedule B.12(a)(i), all right, title and interest in such Intellectual Property and such Intellectual Property, to the extent registered, is unexpired and has not been abandoned; (b) The use of such Intellectual Property by a Seller of Transferred Assets in connection with the operation of the Glass Machinery Business as heretofore conducted or by a Glass Machinery Company in connection with the operation of the Glass Machinery Business or otherwise does not conflict with, infringe upon or violate the intellectual property rights of any other Persons, except to the extent that such conflict, infringement or violation has not been, and cannot reasonably be expected to be, material to the Glass Machinery Business; (c) The operations of the Glass Machinery Business, as presently conducted, do not infringe upon or violate the intellectual property rights of any other Persons, except to the extent that such conflict, infringement or violation has not been, and cannot reasonably be expected to be, material to the Glass Machinery Business; (d) The Sellers of Transferred Assets and the Glass Machinery Share Companies have the right to use all Intellectual Property used by the Glass Machinery Business and necessary for the continued operation of the Glass Machinery Business in substantially the same manner as its operations have heretofore been conducted, except where the failure to have any such Intellectual Property has not been, and could not reasonably be expected to be material to the Glass Machinery Business; and (e) Upon the consummation of the Closing hereunder, (i) Buyer Companies will be vested with all of the Sellers of Transferred Assets' rights, title and interest in, and rights and authority to use in connection with the Glass Machinery Business, all of the Intellectual Property that constitute Transferred Assets and (ii) such Intellectual Property, together with the Intellectual Property owned by the Glass Machinery Share Companies (other than Excluded Assets), and the Intellectual Property licensed to Buyer in accordance with the Trademark Agreement and any other interests in Intellectual Property transferred hereunder will collectively constitute such rights and interests in Intellectual Property which are necessary for the continued operation of the Glass Machinery Business as a whole in substantially the same manner as its operations have heretofore been conducted, except where any inaccuracy of clause (ii) has not been, and could not reasonably be expected to be, material to the Glass Machinery Business. (f) To the knowledge of Black & Decker (i) such Intellectual Property is valid or enforceable and (ii) except as specifically disclosed in Section (ii) of Schedule B.17, no Person is infringing or violating such Intellectual Property. . B.18 Taxes. (a) Each Seller of Transferred Assets, each Glass Machinery Share Company and each Affiliated Group, has exercised reasonable care in the preparation of, and has duly and timely filed, all applicable material Tax Returns with respect to all Taxes required to be filed to the date hereof and, as of the Closing Date will have exercised reasonable care in the preparation of, and will have timely filed, all applicable Tax Returns with respect to Taxes required to have been filed prior to the Closing Date. All Taxes shown on the Tax Returns or pursuant to any declarations or assessments received by a Seller of Transferred Assets or a Glass Machinery Share Company (including estimated Taxes), have been duly and timely paid, and no such Taxes have created a Lien (other than a Permitted Lien) against any of the Transferred Assets or the assets (other than Excluded Assets) of a Glass Machinery Share Company, or impair the ability of a Seller to transfer the Transferred Assets to Buyer Companies free and clear of any Lien (other than a Permitted Lien) in accordance with the terms of this Agreement. All such Tax Returns are true, correct and complete in all material respects. Except for Taxes that are Excluded Liabilities, there exists no Tax deficiency or unpaid Tax assessed by any Governmental Authority against a Seller of Transferred Assets or a Glass Machinery Share Company which is not fully provided for in the respective Financial Statements. The statement of the Final Net Tangible Asset Amount established in accordance with Section 2.04(a) will include sufficient provisions for all Taxes that are Assumed Liabilities. (b) As of the date of this Agreement, Schedule B.18 contains a list of all states and other jurisdictions where each Seller of Transferred Assets (with respect to Transferred Assets) and each Glass Machinery Share Company (with respect to its assets other than Excluded Assets), have filed Tax Returns during the past three years. B.19 Insurance. Schedule B.19 contains a correct and complete list of all material policies of insurance held by (a) any Seller of Transferred Assets that are in effect on the date of this Agreement and that insure the Glass Machinery Business or (b) any Glass Machinery Share Company. None of the insurance carriers listed in Schedule B.19 are related to or affiliated with Black & Decker, other than Shenandoah Insurance, Inc. Black & Decker has not received notice or any other indication from any insurer or agent (other than Shenandoah Insurance, Inc.) of any intent to cancel or not to renew any of the insurance policies listed in Schedule B.19, except for cancellations or failures to renew that will occur as a result of the Closing. B.20 Employee Benefit Matters. (a) Except as listed in Schedule B.20 there is no Employee Plan or material Benefit Arrangement which covers Transferred Employees and no collective bargaining agreement covering Transferred Employees. (b) Except as specifically disclosed in Schedule B.20, with respect to the Glass Machinery Business: (i) neither Black & Decker nor any member of its "Controlled Group" (defined as any organization which is a member of a controlled group of organizations within the meaning of Code Sections 414(b), (c), (m) or (o)) has ever contributed to or had any liability to a multi-employer plan, as defined in Section 3(37) of ERISA, which could reasonably be expected to be, material to the Glass Machinery Business; (ii) no fiduciary of any funded Employee Plan has engaged in a nonexempt "prohibited transaction" (as that term is defined in Section 4975 of the Code and Section 406 of ERISA) which could subject Buyer to a penalty tax imposed by Section 4975 of the Code; (iii) no Employee Plan has incurred an "accumulated funding deficiency" within the meaning of Section 412 of the Code or similar non-U.S. Applicable Law, whether or not waived; (iv) each Employee Plan and Benefit Arrangement has been established and administered in all material respects in accordance with its terms and in compliance with Applicable Law and all contributions to be made to such plans have been made in accordance with Applicable Law and the regulations of such plans; (v) no Employee Plan subject to Title IV of ERISA has incurred any material liability under such title other than for the payment of premiums to the Pension Benefit Guaranty Corporation ("PBGC"), all of which have been paid when due; (vi) no defined benefit Employee Plan has been terminated; nor have there been any "reportable events" (as that term is defined in Section 4043 of ERISA and the regulations thereunder) which would present a risk that an Employee Plan would be terminated by the PBGC in a distress termination; (vii) each Employee Plan intended to qualify under Section 401 of the Code has received a determination letter that it is so qualified and no event has occurred with respect to any such Employee Plan which could cause the loss of such qualification or exemption; (viii) with respect to each Employee Plan listed in Schedule B.20, Black & Decker has made available to Buyer the most recent copy (where applicable) of (1) the plan document; (2) the most recent determination letter; (3) any summary plan description; and (4) Form 5500; (ix) with respect to the Transferred Employees, there are no post-retirement medical or health plans in effect; (x) there are no actions, claims or investigations pending or threatened, against any Employee Plan, Benefit Arrangement, or any administrator, fiduciary or sponsor thereof with respect to the Glass Machinery Business, other than benefit claims arising in the normal course of operation of such Employee Plan or Benefit Arrangement; and (xi) except with respect to the Letter Agreements with Messrs. Siegenthaler and Blatt disclosed under Sections B(f)(9) and (10) of Schedule B.20 and the Severance Agreements disclosed under Sections E(2)(4), E(e)(1), E(f)(2) through (6) and E(h)(6) through (8) of Schedule B.20, no Benefit Arrangement or other agreement or arrangement exists that could result in the payment to any present or former employee of the Glass Machinery Business of any money or other property or accelerate or provide any other rights or benefits to any present or former employee of the Glass Machinery Business as a result of the transaction contemplated by this Agreement, whether or not such payment would constitute a parachute payment within the meaning of Code Section 280G. (c) Labor Controversies. The Glass Machinery Units (i) are in substantial compliance in all material respects with all Applicable Laws respecting employment and employment practices, terms and conditions of employment and wages and hours except for the matters described in schedule B.11, (ii) there is no labor strike, dispute, slowdown or stoppage actually pending or, to Black & Decker's knowledge, threatened against or affecting the Glass Machinery Units, (iii) except that the collective bargaining agreement with the union representing the unionized employees at the Hartford Division has expired and a new collective bargaining agreement has not yet been executed, since 1989 none of the Glass Machinery Units have experienced any material strike, work stoppage or other labor difficulty. B.21 Year 2000 Matters. The Glass Machinery Business has implemented Plans (the "Y2K Remediation Plans") to take the actions required to permit the proper functioning (but only to the extent that such proper functioning would otherwise be impaired by the occurrence of the year 2000) in and following the year 2000 of "Systems" (as herein defined) material to the Glass Machinery Business. The Y2K Remediation Plans (including the testing of all Systems of the Glass Machinery Business and other equipment after implementation of the Y2K Remediation Plans) are designed to and are being implemented in a manner that will prevent impairment in and following the year 2000 of (i) Systems owned, operated, manufactured or repaired by the Glass Machinery Business, and (ii) Systems supplied by others or with which the computer systems of the Glass Machinery Business interface including any System already installed and operating at a customer's site but only to the extent the Glass Machinery Business has an existing or contingent year 2000 liability with respect to such System. The costs that the Glass Machinery Business has not incurred as of the Closing Date for implementation of the Y2K Remediation Plans are either (i) covered by the amount of USD$1,500,000 referred to in paragraph 2 of Attachment V of this Agreement, or (ii) sufficiently provided for in the statement of the Final Net Tangible Asset Amount to be prepared in accordance with section 2.04(a) of the Transaction Agreement. Except for (i) implementation of the Y2K Remediation Plans and (ii) Systems required to provide the services provided to the Glass Machinery Business by Black & Decker and its Affiliates, the Systems of the Glass Machinery Business are and, with ordinary course upgrading and maintenance, will continue to be, sufficient for the conduct of the Glass Machinery Business as currently conducted. "Systems" means computer systems and other equipment containing embedded microchips. B.22 Facilities. The facilities and equipment of the Glass Machinery Business are in all material respects in a good state of repair and operating condition for use in the ordinary course of business, normal wear and tear excepted. B.23 Product Liability Claims. Except as specifically disclosed in Schedule B.23, since 1989 no law suits, claims, demands or notices of personal injuries have been asserted against any of the Glass Machinery Units Sellers relating to any of the products manufactured and sold by the Glass Machinery Business. B.24 Disclosure. The representations and warranties contained in this Exhibit B do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Exhibit B not misleading. EXHIBIT C REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby represents and warrants to Black & Decker that: C.01 Organization and Existence. Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of Switzerland and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. As of the Closing Date, each of the Buyer Companies shall be a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and shall have all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as then conducted. As of the Closing Date, each Buyer Company will be duly qualified to do business as a foreign corporation in each jurisdiction where the character of the property owned or leased by it or the nature of its activities (after giving effect to the Contemplated Transactions) make such qualification necessary to carry on its business as now conducted, except for those jurisdictions where failure to be so qualified has not been, and may not reasonably be expected to be material to the Buyer Companies taken as a whole. C.02 Corporate Authorization. The execution, delivery and performance by each Buyer Company of the Transaction Documents and the consummation by each Buyer Company of the Contemplated Transactions are within the corporate powers of each Buyer Company and have been (or, prior to the Closing, will have been) duly authorized by all necessary corporate action on the part of each Buyer Company. Each of the Transaction Documents constitutes a legal, valid and binding agreement of each Buyer Company, enforceable against each Buyer Company in accordance with its terms (i) except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers and (ii) subject to the limitations imposed by general equitable principles (regardless of whether such enforceability is considered in a proceeding at law or in equity). C.03 Governmental Authorization. Except as set forth on Schedule B.05, the execution, delivery and performance by each Buyer Company of the Transaction Documents requires no action by or in respect of, consents or approvals of, or filings with, any governmental body, agency, official or authority other than compliance with any applicable requirements of the HSR Act. C.04 Non-Contravention. The execution, delivery and performance by each Buyer Company of the Transaction Documents do not and will not (i) contravene or conflict with the charter or bylaws of the Buyer Company, (ii) assuming compliance with the matters referred to in Section C.03, contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to the Buyer Company, or (iii) constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation of the Buyer Company or to a loss of any benefit to which the Buyer Company is entitled under any provision of any agreement, contract or other instrument binding upon the Buyer Company or any license, franchise, permit or other similar authorization held by the Buyer Company, except, in the case of clauses (ii) and (iii), for any such contravention, conflict, violation, default, termination, cancellation, acceleration or loss that could not reasonably be expected to be material to the Buyer Companies taken as a whole. C.05 Finders' Fees. There is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Buyer who might be entitled to any fee or commission from Seller or Buyer (or any of their Affiliates) upon consummation of the Contemplated Transactions. C.06 Litigation. There is no action, suit, investigation or proceeding pending against, or to the knowledge of Buyer, threatened against or affecting, any Buyer Company before any court or arbitrator or any Governmental Authority that in any manner challenges or seeks to prevent, enjoin, alter or materially delay the Contemplated Transactions. C.07 Inspections/Investment Intent. (a) Buyer is an informed and sophisticated participant in the Contemplated Transactions, and has engaged expert advisors, experienced in evaluation and purchase of enterprises such as the Glass Machinery Business. Buyer has undertaken an investigation, has been provided with, has evaluated and has relied upon certain documents and information to assist Buyer in making an informed and intelligent decision with respect to the execution of the Transaction Documents. Buyer acknowledges that Seller has made no representation or warranty as to the prospects, financial or otherwise, of the Glass Machinery Business. Buyer agrees that it shall accept the Transferred Assets and the Assumed Liabilities conveyed by the Sellers of Transferred Assets and through its acquisition of the Shares the assets (other than Excluded Assets) and the liabilities (other than Excluded Liabilities) of the Glass Machinery Share Companies as they exist on the Closing Date (subject to the representations and warranties made by Black & Decker in the Transaction Documents) based on Buyer's inspection, examination, determination with respect thereto as to all matters, and without reliance upon any express or implied representations or warranties of any nature, whether in writing, orally or otherwise, made by or on behalf of or imputed to Seller, except as expressly set forth in the Transaction Documents. (b) Buyer is aware that none of the Shares have been registered under the Securities Act of 1933 or any other applicable securities laws. Buyer is an accredited investor within the meaning of Rule 501 of Securities and Exchange Commission Rule D. The Buyer Companies are acquiring the Shares for their own account, for investment purposes only and not with a view to the distribution thereof. Buyer agrees that the Shares will not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of without registration under the Securities Act of 1933 or the securities laws of other applicable jurisdictions, except pursuant to valid exemptions from registration under such laws. C.08 Financing. Buyer has available to it cash, marketable securities or other investments, or presently available sources of credit, to enable it to consummate the Contemplated Transactions. EXHIBIT D EMPLOYEES AND EMPLOYEE BENEFIT MATTERS I. Employees and Employment. D.01 General. On the Closing Date, the employment of all Active Employees of the Glass Machinery Business shall (a) be transferred to a Buyer Company in the case of Active Employees of a Seller of Transferred Assets, (b) remain employed by a Glass Machinery Share Company in the case of Active Employees employed by a Glass Machinery Share Company, or (c) be transferred to a Buyer Company in the case of employees listed on Attachment XVI. In any case, the employment of such persons shall be considered continuous employment under Applicable Law. "Active Employee" shall mean any individual who is actively employed by any Seller of Transferred Assets, who is actively employed by any Glass Machinery Share Company, who is listed on Attachment XVI, and any employee of the Glass Machinery Business who is on authorized leave of absence, military service (without restriction) or lay-off with recall rights (without restriction). Where applicable the term "Active Employee" shall include independent contractors. The Active Employees who are employed at any time on or after the Closing Date by a Glass Machinery Share Company, or by any of the Buyer Companies are herein collectively referred to as "Transferred Employees." Except as otherwise expressly contemplated in the Transaction Documents, such employment shall be at the same workplace and on the same terms and conditions as those under which such employees are currently employed (except to the extent that any change is necessary to any stock option plan or other equity-based Employee Plan or Benefit Arrangement to eliminate the use of any equity securities of the employer), and the employment of each Transferred Employee shall be continued by the Buyer Companies for at least the maximum applicable termination notice period to which a Seller of Transferred Assets, a Glass Machinery Share Company or such other employer of such Transferred Employee may be subject under Applicable Law as a result of the Contemplated Transactions. From and after the Closing Date, the Buyer Companies or the Glass Machinery Share Companies shall assume or continue to be bound by, as the case may be, all obligations under any agreements, contracts or Applicable Law relating to the terms and conditions of employment of all Active Employees, except for any severance obligations (other than those disclosed in Schedule B.20) that result solely from the transfer of a Transferred Employee's employment to the Buyer Companies and not from any other change in the terms and conditions of his or her employment. Nothing in this Agreement shall restrict the Buyer Companies from terminating the employment of any Transferred Employee at any time and for any reason, subject to all obligations under any agreements, contracts or Applicable Law relating to the terms and conditions of employment of Active Employees. D.02 Severance Plans and Agreements. As of the Closing Date, it is the Buyer's intention to (i) establish or cause to be established severance plans, agreements and arrangements with substantially similar terms and conditions as those provided under the applicable severance agreements, plans or arrangements listed on Schedule B.20, (ii) maintain or cause to be maintained such severance agreements, plans and arrangements for a period of at least one year following the Closing Date, and (iii) pay or cause to be paid any benefits to any Transferred Employees that they may be entitled to receive under such severance agreements, plans or arrangements. In furtherance and not in limitation of the provisions of this Section D.02, as of the Closing Date, Buyer shall assume and discharge the obligations under the individual employee severance agreements listed on Schedule B.20 provided that such employees are Active Employees. D.03 Labor Agreements. The Buyer Companies agree to recognize (and to cause the Glass Machinery Share Companies to continue to recognize) the applicable labor unions, collective bargaining representatives, trade unions or work councils representing any employees of the Glass Machinery Business as the exclusive collective bargaining representatives of the Active Employees with respect to wages, hours, fringe benefits and other terms and conditions of employment to the extent so recognized by the current employers of such Active Employees for all such Active Employees who are within the appropriate bargaining unit as determined by Applicable Law. The Buyer Companies shall become successor employers under the applicable labor or collective bargaining agreements and agree to honor the terms of and to assume all obligations under existing collective bargaining agreements in respect of such unionized Active Employees which arise after the Closing Date and all legal obligations arising from such recognition or assumption. D.04 Recalled or Rehired Employees. Buyer, for itself, each Buyer Company and each Glass Machinery Share Company, confirms that any employees of the Glass Machinery Business that are laid off or on leave with continuing recall or return rights under applicable agreements, contracts, policies or Applicable Law as of the Closing Date will be recalled or rehired or returned to employment in compliance with any applicable agreements, contracts or Applicable Law and will be accorded the benefits otherwise provided to Transferred Employees by the Buyer Companies and the Glass Machinery Share Companies. D.05 Negotiations with Employees or Employee Representatives. If and to the extent that any provisions of this Agreement are or may be subject to negotiation with employees, or applicable labor unions, trade unions or work councils, by policy, contract, collective bargaining agreement or Applicable Law, Black & Decker and its Affiliates and Buyer Companies shall cooperate in good faith in such negotiations. D.06 Termination and Plant Closing Notices; WARN. Black & Decker and its Affiliates shall provide any notices to the employees of the Glass Machinery Business that may be required under any Applicable Law, including but not limited to WARN or any similar state or local law, with respect to events that occur up to and including the day prior to the Closing Date. Buyer and its Affiliates shall provide any such notices to Active Employees with respect to events that occur as a result of the Closing, and to Transferred Employees with respect to events that occur on and after the Closing Date. Buyer shall not take any action on or after the Closing that would cause any termination of employees by Black & Decker and its Affiliates or by a Glass Machinery Share Company that occur prior to the Closing Date to constitute a "plant closing" or "mass layoff" under WARN or any similar state or local law, or create any liability to Black & Decker or its Affiliates for employment termination under Applicable Law. D.07 Immigration Matters. The Buyer Companies acknowledge that the Contemplated Transactions may trigger certain obligations under the immigration laws of the countries where the Glass Machinery Business operates. Buyer shall comply (and shall cause the Buyer Company and each Glass Machinery Share Company to comply) with all requirements of such immigration laws and agrees to make (or cause to be made) any necessary filings with the appropriate Governmental Authority with regard to the Transferred Employees. II. United States Employee Benefit Matters. D.08 Salaried Employee Pension Plans. (a) As soon as practicable after the Closing Date, with effect as of the Closing Date, Buyer shall establish a defined benefit plan ("Buyer's U.S. Salaried Pension Plan"). As soon as practicable following the earlier of delivery to Black & Decker by Buyer of a favorable determination letter from the Internal Revenue Service regarding the qualified status of the Buyer's U.S. Salaried Pension Plan, Black & Decker shall cause the transfer from The Black & Decker Pension Plan ("Seller's U.S. Salaried Pension Plan") to the Buyer's U.S. Salaried Pension Plan of assets (in accordance with paragraphs (c) and (d) below) and all liabilities which are attributable to the US Transferred Employees who are participants in the Seller's U.S. Salaried Pension Plan as of the Closing Date. Buyer shall take (or cause to be taken) all action required or appropriate to vest fully all such US Transferred Employees in their entire accrued benefits transferred to the Buyer's U.S. Salaried Pension Plan and, to the extent required under Section 411(d)(6) of the Code, to protect and preserve all benefits, rights and features relating to those accrued benefits transferred from Seller's U.S. Salaried Pension Plan. Benefit accruals in respect of US Transferred Employees under Seller's U.S. Salaried Pension Plan shall cease as of the Closing Date. Black & Decker and Buyer shall make or cause to be made any and all filings and submissions to the appropriate Governmental Authorities, and shall make any necessary plan amendments arising in connection with the transfer of assets and liabilities from Seller's U.S. Salaried Pension Plan to the Buyer's U.S. Salaried Pension Plan. Prior to such transfer of assets and liabilities, Black & Decker shall provide to Buyer a favorable determination letter from the Internal Revenue Service regarding the qualified status of the Seller's U.S. Salaried Plan, as then in effect. (b) It is the Buyer's intention that the Transferred Employees shall be eligible to participate under the Buyer's U.S. Salaried Pension Plan for a period of one year following the Closing Date on the same terms and conditions as provided to the US Transferred Employees under Seller's U.S. Salaried Pension Plan immediately prior to the Closing Date. Service and compensation with Black & Decker or any of its Affiliates prior to the Closing Date which was recognized under Seller's U.S. Salaried Pension Plan shall be recognized for the same purposes under the Buyer's U.S. Salaried Pension Plan. (c) The amount of assets to be transferred from the Seller's U.S. Salaried Pension Plan shall be equal to the Projected Benefit Obligation ("PBO") determined as of the Closing Date in accordance with the Financial Accounting Standards Board Statement 87 ("FAS 87") and which is attributable to the US Transferred Employees who are participants in Seller's U.S. Salaried Pension Plan as of the Closing Date or such larger amount determined under paragraph (d) below (the "Transfer Amount"). Determination of the PBO shall be in accordance with the actuarial assumptions used by the Seller's actuary in preparing the most recent actuarial report for Seller's U.S. Salaried Pension Plan. The above-described calculation of the amount to be transferred from the Seller's U.S. Salaried Pension Plan to the Buyer's U.S. Salaried Pension Plan shall be made by Seller's actuary and reviewed by Buyer's actuary. (d) All assets transferred under this Section D.08 shall be made in cash. The transfer contemplated herein shall comply with all requirements of Sections 414(l) and 401(a)(12) of the Code and in no event shall the Transfer Amount be less than the amount determined pursuant to Section 414(l) of the Code and Treasury Regulation 1.414(l)-1(n) (using assumptions that are reasonable, as determined by Seller's actuary in accordance with Treasury Regulation 1.414(l)-1(b)(5)(ii)) or required by Applicable Law or by any Governmental Authority. Pending completion of the transfers contemplated by this Section D.08, any benefits that are payable to US Transferred Employees under the Seller's U.S. Salaried Pension Plan shall be paid or continue to be paid out of such plan. The Transfer Amount will be adjusted on a pro-rata basis to reflect the actual asset performance of the Seller's U.S. Salaried Pension Plan from the Closing Date to the first day of the month prior to the date of transfer and credited with interest on a daily basis from that date until the date of transfer at an interest rate equivalent to the rate on the 90-day United States Treasury Bills announced for the auction immediately preceding the first day of the month in which the transfer occurs, and adjusted to reflect benefit payments and expenses paid after the Closing Date by the Seller's U.S. Salaried Pension Plan which are related to the obligations being transferred to the Buyer's U.S. Salaried Pension Plan. Pending the completion of such transfers, Black & Decker will cooperate with Buyer with respect to plan administration, disbursement of benefits and other pertinent information. (e) The Buyer's U.S. Salaried Pension Plan and Buyer shall be liable for all benefits with respect to US Transferred Employees accrued under the Seller's U.S. Salaried Pension Plan prior to the Closing Date upon such transfer of assets in accordance with this Section D.08. The Buyer agrees that neither Black & Decker, nor any of its Affiliates nor Seller's U.S. Salaried Pension Plan shall have any further responsibility with respect to the assets and liabilities so transferred. D.09 Hourly Paid Employee Pension Plans. (a) As soon as practicable after the Closing Date, with effect as of the Closing Date, Buyer shall establish a defined benefit plan ("Successor U.S. Hourly Pension Plan"). As soon as practicable following the earlier of delivery to Black & Decker by Buyer of a favorable determination letter from the Internal Revenue Service regarding the qualified status of the Successor U.S. Hourly Pension Plan, Black & Decker shall cause the transfer from the Hourly Employees Retirement Plan of Hartford Division, Emhart Industries, Inc. ("Seller's U.S. Hourly Pension Plan") to the Successor U.S. Hourly Pension Plan of assets (in accordance with paragraph (c) and (d) below) and all liabilities which are attributable to the US Transferred Employees who are participants in the Seller's U.S. Hourly Pension Plan as of the Closing Date. Buyer shall take (or cause to be taken) all action required or appropriate, to the extent required under Section 411(d)(6) of the Code, to protect and preserve under the Successor U.S. Hourly Pension Plan all benefits, rights and features relating to those accrued benefits transferred from Seller's U.S. Hourly Pension Plan. Benefit accruals in respect of US Transferred Employees under the Successor U.S. Hourly Pension Plan shall cease as of the Closing Date. Black & Decker and Buyer shall make or cause to be made any and all filings and submissions to the appropriate Governmental Authorities, and shall make any necessary plan amendments arising in connection with the transfer of assets and liabilities from Seller's U.S. Hourly Pension Plan to the Successor U.S. Hourly Pension Plan. Prior to such transfer of assets and liabilities, Black & Decker shall provide to Buyer a favorable determination letter from the Internal Revenue Service regarding the qualified status of the Seller's U.S. Hourly Plan, as then in effect. (b) The US Transferred Employees shall be eligible to participate under the Successor U.S. Hourly Pension Plan in accordance with any applicable collective bargaining agreement and Applicable Law. Service and compensation with Black & Decker or any of its Affiliates prior to the Closing Date which was recognized under Seller's U.S. Hourly Pension Plan shall be recognized for the same purposes under the Successor U.S. Hourly Pension Plan. (c) The amount of assets to be transferred from the Seller's U.S. Hourly Pension Plan shall be equal to the Projected Benefit Obligation ("PBO") determined as of the Closing Date in accordance with the Financial Accounting Standards Board Statement 87 ("FAS 87") but assuming that the unit benefit rate under the plan shall increase at the rate of 4% per year and which is attributable to the US Transferred Employees who are participants in Seller's U.S. Hourly Pension Plan as of the Closing Date or such larger amount determined under paragraph (d) below (the "Transfer Amount"). Determination of the PBO shall be in accordance with the actuarial assumptions used by Seller's actuary in preparing the most recent actuarial report for Seller's U.S. Hourly Pension. The above-described calculation of the amount to be transferred from the Seller's U.S. Hourly Pension Plan to the Successor U.S. Hourly Pension Plan shall be made by Seller's actuary and reviewed by Buyer's actuary. (d) All assets transferred under this Section D.09 shall be made in cash. The transfer contemplated herein shall comply with all requirements of Sections 414(l) and 401(a)(12) of the Code and in no event shall the Transfer Amount be less than the amount determined pursuant to Section 414(l) of the Code and Treasury Regulation 1.414(l)-1(n) (using assumptions that are reasonable, as determined by Seller's actuary in accordance with Treasury Regulation 1.414(l)-1(b)(5)(ii)) or required by Applicable Law or by any Governmental Authority. Pending completion of the transfers contemplated by this Section D.09, any benefits that are payable to US Transferred Employees under the Seller's U.S. Hourly Pension Plan shall be paid or continue to be paid out of such plan. The Transfer Amount will be adjusted on a pro-rata basis to reflect the actual asset performance of the Seller's U.S. Hourly Pension Plan from the Closing Date to the first day of the month prior to the date of transfer and credited with interest on a daily basis from that date until the date of transfer at an interest rate equivalent to the rate on the 90-day United States Treasury Bills announced for the auction immediately preceding the first day of the month in which the transfer occurs, and adjusted to reflect benefit payments and expenses paid after the Closing Date by the Seller's U.S. Hourly Pension Plan which are related to the obligations being transferred to the Successor U.S. Hourly Pension Plan. Pending the completion of such transfers, Black & Decker will cooperate with Buyer with respect to plan administration, disbursement of benefits and other pertinent information. (e) The Successor U.S. Hourly Pension Plan shall be liable for all benefits with respect to US Transferred Employees accrued under the Seller's U.S. Hourly Pension Plan prior to the Closing Date upon the transfer of assets in accordance with this Section D.09. The Buyer agrees that neither Black & Decker, any of its Affiliates nor Seller's U.S. Salaried Pension Plan shall have any further responsibility with respect to the assets and liabilities so transferred. D.10 Savings Plans. (a) Black & Decker shall cause the trustee of The Black & Decker Retirement Savings Plan ("Seller's Savings Plan") to transfer as of the transfer date specified below, the full account balances of the US Transferred Employees under Seller's Savings Plan, to the Successor Savings Plan (as hereinafter defined). To the extent permissible under Seller's Savings Plan, such assets shall be transferred to the Successor Savings Plan in cash, except that participant loans shall be transferred in kind. Black & Decker and Buyer shall make or cause to be made any and all filings and submissions to the appropriate Governmental Authorities, and shall make any necessary plan amendments arising in connection with the transfer of assets and liabilities from Seller's Savings Plan to the Successor Savings Plan. (b) As soon as practicable after the Closing Date, Buyer shall establish or designate (or cause to be established or designated) an individual account plan for the benefit of US Transferred Employees (the "Successor Savings Plan"), shall take (or cause to be taken) all necessary action, if any, to qualify the Successor Savings Plan under the applicable provisions of the Code and shall make any and all filings and submissions to the appropriate Governmental Authorities required to be made or its Affiliates in connection with the transfer of assets contemplated hereby. The Successor Savings Plan shall provide that those US Transferred Employees and their beneficiaries covered by Seller's Savings Plan shall receive credit for all service with Black & Decker or any of its Affiliates prior to the Closing Date for all purposes, to the same extent such service is recognized under Seller's Savings Plan immediately prior to the Closing Date and, to the extent of the assets transferred, benefit accruals. Buyer shall take (or cause to be taken) all action required or appropriate to vest fully all such US Transferred Employees in their entire account balances transferred to the Successor Savings Plan and, to the extent required under Section 411(d)(6) of the Code, to protect and preserve all benefits, rights and features relating to those account balances transferred from Seller's Savings Plan. As soon as practicable following the earlier of the delivery to Black & Decker of a favorable determination letter from the Internal Revenue Service regarding the qualified status of the Successor Savings Plan, subject to any withdrawals or distributions made by, to or on behalf of a US Transferred Employee under the terms of the Seller's Savings Plan prior to the transfer date, to transfer the full account balances of US Transferred Employees under Seller's Savings Plan as of the transfer date to the appropriate trustee designated by the Buyer under the trust agreement forming a part of the Successor Savings Plan; provided, that assets consisting of notes or other instruments evidencing loans made to participating US Transferred Employees shall be transferred in such form to the Successor Savings Plan. Prior to such transfer of assets and liabilities, Black & Decker shall provide to Buyer a favorable determination letter from the Internal Revenue Service regarding the qualified status of the Seller's Savings Plan, as then in effect. (c) Buyer, effective as of the date of the transfer of assets contemplated by this Section D.10, assumes all of the liabilities and obligations of Black & Decker or any of its Affiliates in respect of the account balances accumulated by US Transferred Employees under Seller's Savings Plan to the extent of the assets transferred, and the Successor Savings Plan assumes all liabilities and obligations of Seller's Savings Plan with respect to all account balances under Seller's Savings Plan of such US Transferred Employees to the extent of the assets transferred. Neither Buyer nor any of its Affiliates shall assume any other obligations or liabilities arising under or attributable to Seller's Savings Plan and neither Black & Decker nor any of its Affiliates shall assume any liabilities or obligations under or attributable to the Successor Savings Plan. Prior to the transfer of assets contemplated by this Section D.10, Buyer and its Affiliates, if consented to by the applicable US Transferred Employee, shall withhold from such US Transferred Employee's pay, loan repayments relating to any outstanding loan to such US Transferred Employee under Seller's Savings Plan and shall promptly forward those withholdings to Seller's Savings Plan. D.11 Health and Welfare Plans; Benefit Arrangements. (a) For a period of one year following the Closing Date, Buyer intends to ensure that the US Transferred Employees are provided benefits that are substantially equivalent on an aggregate basis (and "substantially identical" with respect to health benefit coverage for purposes of satisfying Section 4980B of the Code) to those provided under the Employee Plans and Benefit Arrangements as in effect for those US Transferred Employees immediately prior to the Closing Date (except to the extent that any change is necessary to any stock option plan or other equity-based Benefit Arrangement to eliminate the use of any equity securities of the employer), it being understood and agreed that such benefits provided by Buyer and its Affiliates shall include at a minimum health, medical, dental, life, disability and severance benefits. Each U.S. Transferred Employee shall receive credit for service and compensation with Black & Decker and its Affiliates prior to the Closing Date for all purposes to the same extent that service and compensation are recognized under Employee Plans and Benefit Arrangement immediately prior to the Closing. (b) With respect to any US Transferred Employee (including any beneficiary or dependent thereof), except as expressly set forth herein, Black & Decker and its Affiliates shall retain (i) all liabilities and obligations arising under any group life, accident, medical, dental or disability plan or similar arrangement (whether or not insured) to the extent that such liability or obligation relates to claims incurred (whether or not reported) on or prior to the Closing Date, and (ii) all liabilities and obligations arising under any worker's compensation laws to the extent such liability or obligation relates to the period prior to the Closing Date. (c) Any group health plan, disability plan or other plans established or designated by the Buyer and its Affiliates for the benefit of US Transferred Employees shall not contain any exclusion or limitation with respect to any preexisting condition; provided, however, that buyer need not waive any pre-existing condition which was excluded from coverage under the Seller's plans, to the extent the condition would have been excluded under the Seller's plans after the Closing Date. (d) Except as otherwise expressly provided in this Exhibit D, effective as of the Closing, Buyer shall assume (or cause one of its Affiliates to assume) the liabilities and obligations of Black & Decker and its Affiliates in respect of all US Transferred Employees (and their beneficiaries and dependents) under the Bonus, Stock and Incentive Plans disclosed in Section B(h) of Schedule B.20 and under the Other Employment Benefit Arrangements/ Fringe Benefits disclosed in Section H(h) of Schedule B.20 sponsored or maintained by Black & Decker and its Affiliates at any time prior to the Closing Date (except to the extent that any change is necessary to any stock option plan or other equity-based Benefit Arrangement to eliminate the use of any equity securities of the employer). D.12 Post-Retirement Medical and Life Insurance. (a) Black & Decker and its Affiliates shall retain responsibility for providing health, medical, dental, hospitalization, life insurance or similar benefits (including, without limitation, reimbursement for Medicare premiums) to any employee or former employee of the Glass Machinery Business and their dependents who retires or has retired before the Closing Date. Buyer and its Affiliates shall be responsible for providing any post-retirement medical, life or similar benefits to US Transferred Employees and their dependents. (b) Notwithstanding the provisions of this Exhibit D, including but not limited to the provisions of this Section D.12, Black & Decker and its Affiliates may amend, modify or terminate any plans or arrangements providing post-retirement health, medical, dental, hospitalization, life insurance or similar benefits (including, without limitation, reimbursement for Medicare premiums) to any employee or former employee of the Glass Machinery Business and their dependents, subject in each case to the provisions of Applicable Law. (c) Except as otherwise contemplated by the provisions of this Exhibit D, including but not limited to the provisions of Section D.11, Buyer shall not be obligated by this Agreement to provide post-retirement, health, medical, dental, hospitalization, life insurance or similar benefits (including, without limitation, reimbursement for Medicare premiums), or any particular level of such benefits, to US Transferred Employees. III. Other Country Employee Benefit Matters. D.13 General. For a period of one year following the Closing Date, Buyer intends to ensure that the Non-US Transferred Employees are provided benefits that are substantially equivalent on an aggregate basis to those provided under the Non-U.S. Benefit Arrangements as in effect for those Non-US Transferred Employees immediately prior to the Closing Date (except to the extent that any change is necessary to any stock option plan or other equity-based Employee Plan or Benefit Arrangement to eliminate the use of any equity securities of the employer), it being understood that each Non-US Transferred Employee shall receive credit for all service and compensation with Black & Decker and its Affiliates prior to the Closing Date for all purposes to the same extent that service and compensation are recognized under the Benefit Arrangements immediately prior to the Closing. D.14 Severance/Termination Indemnities. In furtherance and not in limitation of the provisions of Section D.13, for a period of at least one year, Buyer intends to provide (or cause to be provided) severance programs and termination indemnities with the same terms and conditions as those provided by Black & Decker and its Affiliates, or that are otherwise available, to the Non-US Transferred Employees immediately prior to the Closing, including credit for service and compensation with Black & Decker and its Affiliates, and agrees to pay or cause to be paid any benefit to Non-US Transferred Employees to which they may be entitled under any severance programs and/or termination indemnities applicable to either Buyer and its Affiliates or Black & Decker and its Affiliates with respect to events that occur on or after the Closing Date or as a result of the Contemplated Transactions. D.15 United Kingdom Pension Plan. In furtherance and not in limitation of the provisions of Section D.13, Black & Decker may elect, on or before the Closing Date, in its discretion, to have the provisions of either Section D.15(a) or D.15(b) be effective as of the Closing Date: (a) If so elected by Black & Decker, the following provisions shall be effective: (i) Black & Decker and its Affiliates shall retain all liabilities and obligations in respect of benefits accrued by employees of the Glass Machinery Business (including Transferred Employees) as of the Closing Date under the Black & Decker 1995 Pension Scheme ("Seller's U.K. Pension Plan"). Accrued benefits of Non-US Transferred Employees under Seller's U.K. Pension Plan shall be fully vested as of the Closing Date. Benefit accruals in respect of Non-US Transferred Employees under Seller's U.K. Pension Plan shall cease as of the Closing Date. No assets of Seller's U.K. Pension Plan shall be transferred to Buyer or any of its Affiliates or to any employee benefit plan of Buyer or any of its Affiliates and Buyer shall procure that no employee benefit or pension plan of Buyer or any of its Affiliates, whether designated in accordance with (ii) or otherwise, shall accept a transfer from the Seller's U.K. Pension Plan. (ii) Prior to or as soon as practicable after the Closing Date, Buyer shall designate or establish a pension plan for the benefit of Non-US Transferred Employees who were participants in Seller's U.K. Pension Plan ("Buyer's U.K. Pension Plan"). Buyer's U.K. Pension Plan shall cover all such Non-US Transferred Employees each of whom shall be eligible to participate therein for at least one year following the Closing Date. Buyer's U.K. Pension Plan shall be a retirement benefit scheme which is, or is capable of being, an exempt approved scheme (as defined under the Income and Corporation Taxes Act 1988). Buyer's U.K. Pension Plan shall provide benefits which are at least broadly comparable in value to those provided to such Non-US Transferred Employees under the Seller's U.K. Pension Plan immediately prior to the Closing Date, but, for the avoidance of doubt, such benefits may be provided on a defined benefit or defined contribution basis. (b) If so elected by Black & Decker, the following provisions shall be effective, in lieu of the provisions of Section D.15(a): (i) Accrued benefits of Non-US Transferred Employees under the Black & Decker 1995 Pension Scheme ("Seller's U.K. Pension Plan") shall be fully vested as of the Closing Date. Benefit accruals in respect of Non-US Transferred Employees under Seller's U.K. Pension Plan shall cease as of the Closing Date. Prior to or as soon as practicable after the Closing Date, with effect as of the Closing Date, Buyer shall establish a pension plan ("Buyer's U.K. Pension Plan") for the benefit of Non-US Transferred Employees who were participants in Seller's U.K. Pension Plan. Buyer's U.K. Pension Plan shall cover all such Non-US Transferred Employees each of whom shall be eligible to participate therein for at least one year following the Closing Date on the same terms and conditions as provided to such Non-US Transferred Employees under Seller's U.K. Pension Plan immediately prior to the Closing Date. Buyer's U.K. Pension Plan shall be a retirement benefit scheme which is, or is capable of being, an exempt approved scheme (as defined under the Income and Corporation Taxes Act 1988). Service and compensation with Black & Decker or any of its Affiliates prior to the Closing Date which was recognized under Seller's U.K. Pension Plan shall be recognized for the same purposes under the Buyer's U.K. Pension Plan. (ii) As soon as practicable following the Approval Date or the issuance of indemnities satisfactory to Black & Decker, Black & Decker in its sole discretion shall cause the transfer from Seller's U.K. Pension Plan to the Buyer's U.K. Pension Plan of assets (in accordance with paragraphs (iii) and (iv) below) and all liabilities which are attributable to the Non-US Transferred Employees (other than Non-Transfer Employees as described in Section D.15(b)(iii)) who are participants in the Seller's U.K. Pension Plan as of the Closing Date. For the purposes of this Section D.15(b), "Approval Date" shall mean the date on which the Buyer shall deliver to Black & Decker copies of the Buyer's U.K. Pension Plan, governmental approval or determination letter and other documents verifying that all of the following have occurred with respect to the Buyer's U.K. Pension Plan: (A) that the plan has been established; (B) that the plan has obtained the approvals by all Governmental Authorities which are necessary to obtain any regulatory or fiscal regime; (C) that the approval of the transfer by all Governmental Authorities, trustees or managers of the plan has been obtained to the extent the approval is required by law; and (D) that all notices relating to the transfer and required by law to be given by the plan, the employer sponsoring the plan or any trustee or other fiduciary of the plan to any Governmental Authority, employee or beneficiary or collective bargaining representative, have been given. (iii) The amount of assets to be transferred from the Seller's U.K. Pension Plan shall be equal to the Projected Benefit Obligation ("PBO") determined as of the Closing Date in accordance with the Financial Accounting Standards Board Statement 87 ("FAS 87") and which is attributable to the Non-US Transferred Employees (excluding Non-Transfer Employees) who are participants in Seller's U.K. Pension Plan as of the Closing Date or such larger amount as may be required to be transferred by the plan trustees or Applicable Law (the "Transfer Amount"). Determination of the PBO shall be in accordance with the actuarial assumptions used by the Seller's actuary for the determination of the 1998 FAS 87 expense for Seller's U.K. Pension Plan. The above-described calculation of the amount to be transferred from the Seller's U.K. Pension Plan to the Buyer's U.K. Pension Plan shall be made by Seller's actuary and reviewed by Buyer's actuary. For the purposes of this Section D.15(b), "Non-Transfer Employees" means those Transferred Employees (including the beneficiaries of a deceased employee) whose accrued benefits in the Seller's U.K. Pension Plan are not transferred pursuant to this Agreement to the Buyer's U.K. Pension Plan by reason of the election or determination by any such Transferred Employee, the requirements of any law, or the terms of the Seller's U.K. Pension Plan. (iv) All assets transferred under this Section D.15(b) shall be made in cash. The transfer contemplated herein shall comply with all requirements of Applicable Law. Pending completion of the transfers contemplated by this Section D.15(b), any benefits that are payable to Non-US Transferred Employees under the Seller's U.K. Pension Plan shall be paid or continue to be paid out of such plan. The Transfer Amount will be adjusted on a pro-rata basis to reflect the actual asset performance of the Seller's U.K. Pension Plan from the Closing Date to the first day of the month prior to the date of transfer and credited with interest from that date until the date of transfer at the rate of 5% per year, and adjusted to reflect benefit payments and expenses paid or incurred after the Closing Date by the Seller's U.K. Pension Plan which are related to the obligations being transferred to the Buyer's U.K. Pension Plan. Pending the completion of such transfers, Black & Decker will cooperate with Buyer with respect to plan administration, disbursement of benefits and other pertinent information. (v) The Buyer's U.K. Pension Plan and Buyer shall be liable for all benefits with respect to Non-US Transferred Employees (other than Non-Transfer Employees) accrued under the Seller's U.K. Pension Plan prior to the Closing Date upon the transfer of assets in accordance with this Section D.15(b). The Buyer agrees that neither Black & Decker, nor any of its Affiliates nor Seller's U.K. Pension Plan shall have any further responsibility with respect to the assets and liabilities so transferred. D.16 German Retirement Plans. In furtherance and not in limitation of the provisions of Section D.13: (a) As of the Closing Date, Black & Decker shall transfer or cause to be transferred and Buyer shall assume or cause to be assumed the benefit obligations of all participants, their beneficiaries and dependents (including, without limitation, terminated vested participants and retirees) under the Emhart Glass/Emhart Deutschland GmbH/Versorgungsordnung fur unsere Mitargeiter ("Seller's German Pension Plan"). As soon as administratively practicable after the Closing Date, Black & Decker and Buyer shall make or cause to be made any and all filings and submissions to the appropriate Governmental Authorities required to be made by it in connection with the transfer of benefit obligations contemplated hereby. The participants and their beneficiaries covered by Seller's German Pension Plan shall receive credit for all service and compensation with Black & Decker or any of its Affiliates prior to the Closing Date for all purposes, to the same extent such service and compensation are recognized under Seller's German Pension Plan. (b) Effective as of the Closing, Buyer and its Affiliates shall assume all of the liabilities and obligations of Black & Decker or any of its Affiliates in respect of the benefit obligations of all participants and their beneficiaries under Seller's German Pension Plan. Neither Black & Decker nor any of its Affiliates shall assume any liabilities or obligations under or attributable to the Seller's German Pension Plan on and after the Closing Date. D.17 Japanese Benefit Arrangements. In furtherance and not in limitation of the provisions of Section D.13: (a) As of the Closing Date, Black & Decker shall transfer (or cause to be transferred) and Buyer shall assume (or cause to be assumed) the benefit obligations of all participants, their beneficiaries and dependents (including, without limitation, terminated vested participants and retirees) under any Benefit Arrangements for employees of the Glass Machinery Business employed by Nippon POP Rivets, K.K. and its predecessors ("Seller's Japanese Plans"). Black & Decker and Buyer shall make (or cause to be made) any and all filings and submissions to the appropriate Governmental Authorities and obtain approvals for the transfer to and assumption by Buyer of any insurance contracts that may be required or appropriate to be made by it in connection with the transfer of benefit obligations and insurance contracts contemplated hereby. The participants and their beneficiaries covered by Seller's Japanese Plans shall receive credit for all service and compensation with Black & Decker or any of its Affiliates prior to the Closing Date for all purposes, to the same extent such service and compensation are recognized under Seller's Japanese Plans. (b) Effective as of the Closing Date, Buyer and its Affiliates shall assume all of the liabilities and obligations of Black & Decker or any of its Affiliates in respect of the benefit obligations of Non-US Transferred Employees and their beneficiaries under Seller's Japanese Plans and any insurance contract related thereto. Neither Black & Decker nor any of its Affiliates shall assume or retain any liabilities or obligations under or attributable to the Seller's Japanese Plan on and after the Closing Date. D.18 Swiss Pension Plan. In furtherance and not in limitation of the provisions of Section D.13: (a) As of the Closing Date, Black & Decker shall transfer (or cause to be transferred) and the Buyer shall assume (or cause to be assumed) the sponsorship of the Emhart Glass AG pension plan ("Seller's Swiss Pension Plan"). As soon as administratively practicable after the Closing Date, Black & Decker and Buyer shall make (or cause to be made) any and all filings and submissions to the appropriate Governmental Authorities and make any necessary plan or trust amendments arising in connection with the transfer of the Seller's Swiss Pension Plan from Black & Decker and its Affiliates to Buyer and its Affiliates. The participants and their beneficiaries covered by Seller's Swiss Pension Plan shall receive credit for all service and compensation with Black & Decker and its Affiliates prior to the Closing Date for all purposes, to the same extent such service and compensation are recognized under the Seller's Swiss Pension Plan. (b) Effective as of the Closing, Buyer and its Affiliates shall assume or cause to be assumed all of the liabilities and obligations of Black & Decker and any of its Affiliates in respect of the benefit obligations of all participants and their beneficiaries under Seller's Swiss Pension Plan and in respect of the assets thereof. Neither Black & Decker nor any of its Affiliates shall retain any liabilities or obligations under or attributable to the Seller's Swiss Pension Plan or the assets thereof regardless of whether such liabilities or obligations accrued before or after the Closing. D.19 Swedish Benefit Arrangements. In furtherance and not in limitation of the provisions of Section D.13: (a) As of the Closing Date, Black & Decker shall transfer (or cause to be transferred) and Buyer shall assume (or cause to be assumed) the benefit obligations of all participants (including without limitation, terminated vested employees and retirees), their beneficiaries and dependents under any Benefit Arrangement maintained for employees of Emhart Sweden AB or any of its Subsidiaries. Notwithstanding anything to the contrary in this Agreement, it is understood and agreed that, prior to the Closing Date, Black & Decker may insure part or all of the benefit liabilities attributable to the employees of Emhart Sweden AB or any of its Subsidiaries as Black & Decker shall determine in its discretion. Buyer shall make (or cause to be made) any and all filings and submissions to any appropriate organization, institution or Governmental Authority, including but not limited to Forsakringsbolaget Pensions Garanti, Omsesidigt (Pension Guaranty, Mutual Insurance Company). Buyer acknowledges that any surety bond issued by Black & Decker in connection with any Benefit Arrangements of Emhart Sweden AB or any of its Subsidiaries is a Financial Support Arrangement subject to the provisions of Section 6.03(d), 6.03(e) and 6.03(f) of the Transaction Agreement. (b) Effective as of the Closing, Buyer and its Affiliates shall assume all liabilities and obligations of Black & Decker or any of its Affiliates in respect of any Benefit Arrangements maintained by Emhart Sweden AB. Neither Black & Decker nor any of its Affiliates shall assume any liabilities or obligations under or attributable to any Benefit Arrangement maintained by Emhart Sweden AB on and after the Closing Date. D.20. Singapore Benefit Arrangements. In furtherance and not in limitation of the provisions of Section D.13: (a) As of the Closing Date, Black & Decker shall transfer (or cause to be transferred) and Buyer shall assume (or cause to be assumed) the benefit obligations of all participants, their beneficiaries and dependents (including without limitation, terminated vested employees and retirees) under all Benefit Arrangements by Black & Decker Asia Pacific that benefit employees of the Glass Machinery Business. Black & Decker and Buyer shall make (or cause to be made) any and all filings and submissions to the appropriate Governmental Authorities required to be made in connection with the transfer of benefit obligations contemplated hereby. The participants and their beneficiaries covered by Benefit Arrangements of Black & Decker Asia Pacific shall receive credit for all service and compensation with Black & Decker or any of its Affiliates prior to the Closing Date for all purposes to the same extent such service and compensation are recognized under any Benefit Arrangement maintained by Black & Decker Asia Pacific. (b) Effective as of the Closing Date, Buyer and its Affiliates shall assume all of the liabilities and obligations of Black & Decker or any of its Affiliates in respect of the benefit obligations under any Benefit Arrangement maintained by Black & Decker Asia Pacific. Neither Black & Decker nor any of its Affiliates shall assume any liabilities or obligations under or attributable to any Benefit Arrangement maintained by Black & Decker Asia Pacific on and after the Closing Date. D.21. Italian Benefit Arrangements In furtherance and not in limitation of the provisions of Section D.13: (a) As of the Closing Date, Black & Decker shall transfer (or cause to be transferred) and Buyer shall assume (or cause to be assumed) the benefit obligations of all participants, their beneficiaries and dependents (including terminated employees, retirees, their beneficiaries and dependents) under Benefit Arrangements maintained by Emhart S.r.l. Black & Decker and Buyer shall make (or cause to be made) any and all filings and submissions to the appropriate Governmental Authorities required to be made in connection with the transfer of benefit obligations contemplated hereby. The participants, their beneficiaries and dependents covered by any Benefit Arrangement maintained by Emhart S.r.l. shall receive credit for all service and compensation with Black & Decker or any of its Affiliates prior to the Closing Date for all purposes to the same extent such service and compensation are recognized under the Benefit Arrangements maintained by Emhart S.r.l. (b) Effective as of the Closing, Buyer and its Affiliates shall assume all of the liabilities and obligations of Black & Decker or any of its Affiliates in respect of the benefit obligations of any participants, their beneficiaries and dependents under the Benefit Arrangements maintained by Emhart S.r.l. Neither Black & Decker nor any of its Affiliates shall retain any liabilities or obligations under or attributable to the Benefit Arrangements maintained by Emhart S.r.l on and after the Closing Date. VII. General. D.22 No Third Party Beneficiaries. No provision of this Exhibit D or any other provision in the Transaction Documents shall create any third party beneficiary or other rights in any employee or former employee (including any beneficiary or dependent thereof) of Black & Decker or of any of its Affiliates in respect of continued employment (or resumption of employment) with Black & Decker or Buyer, or any of their Affiliates, and no provision of this Exhibit D shall create any such rights in any such individuals in respect of any benefits that may be provided, directly or indirectly, under any Employee Plan or Benefit Arrangement, or any plan or arrangement which may be established by Buyer or any of its Affiliates. Subject to Applicable Law, unless otherwise provided herein, no provision of this Agreement shall constitute a limitation on rights to amend, modify or terminate, either before or after Closing, any such Employee Plan or Benefit Arrangement of Black & Decker or any of its Affiliates. D.23 Indemnification by Buyer. Effective as of the Closing, Buyer hereby indemnifies Black & Decker and its Affiliates and their respective directors, officers, employees and agents against, and agrees to hold them harmless from, any and all Damages arising out of or pertaining to (i) the termination of employment of, hiring of or failure or refusal to hire, any Active Employee of the Glass Machinery Business on or after the Closing; (ii) any modification of the pay, benefits or any other terms and conditions of employment of any Transferred Employee on or after the Closing; and (iii) any breach of any covenants or agreements of the Buyer contained in this Exhibit D. D.24 Actuarial Calculations. Except as otherwise required by Applicable Law, the amount of the pension obligations to be determined under this Exhibit D shall be made using the same assumptions and procedures used in calculating the PBO liability in determining the Final Net Tangible Asset Amount in accordance with Attachment XVIII. EX-3.(II) 7 BYLAWS AS AMENDED JUNE 16, 1998 EXHIBIT 3 Adopted 10/17/96 As amended 07/16/98 BYLAWS OF THE BLACK & DECKER CORPORATION ARTICLE I Stockholders SECTION 1. Annual Meeting. The annual meeting of stockholders shall be held on the last Tuesday in April of each year or on such day within 15 days thereof and at such time and at such place as the Board of Directors may by resolution provide for the purpose of electing directors and for the transaction of only such other business as is properly brought before the meeting in accordance with these Bylaws. To be properly brought before the meeting, business must be either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board, (b) otherwise properly brought before the meeting by or at the direction of the Board, or (c) otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given written notice thereof that is received by the Secretary of the Corporation at the principal executive offices of the Corporation not less than 90 days nor more than 110 days prior to the meeting; provided, however, that in the event that less than 100 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder must be so received not later than the close of business on the 10th day following the day on which the notice of the date of the annual meeting was mailed or the public disclosure was made, whichever first occurred. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (iv) any material interest of the stockholder in such business. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this section, provided, however, that nothing in this section shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting. The Chairman of the annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Article, and if the Chairman should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. SECTION 2. Special Meetings. Special meetings of the stockholders may be called at any time for any purpose or purposes by the Chief Executive Officer, by a majority of the Board of Directors, or by a majority of the Executive Committee. Special meetings of the stockholders shall be called forthwith by the Chairman of the Board, by the President, or by the Secretary of the Corporation upon the written request of stockholders entitled to cast a majority of all votes entitled to be cast at the special meeting. A written request that a special meeting be called shall state the purpose or purposes of the meeting and the matters proposed to be acted on at the meeting. However called, notice of the meeting shall be given to each stockholder and shall state the purpose or purposes of the meeting. No business other than that stated in the notice shall be transacted at any special meeting. -2- SECTION 3. Place of Meetings. All meetings of stockholders shall be held at the principal offices of the Corporation at Towson, Baltimore County, Maryland, or at such other location in the United States of America as the Board of Directors may provide in the notice of the meeting. SECTION 4. Notice of Meetings. Written or printed notice of each meeting of the stockholders shall be delivered to each stockholder by leaving the notice with the stockholder at the stockholder's residence or usual place of business, or by mailing it, postage prepaid and addressed to the stockholder at the stockholder's address as it appears upon the records of the Corporation. The notice shall be delivered or mailed not more than 90 nor less than 20 days before the meeting, and shall state the place, day, and hour at which the meeting is to be held. No notice of any meeting of the stockholders need be given to any stockholder who attends the meeting in person or by proxy, or to any stockholder who, in writing executed and filed with the records of the meeting either before or after the holding thereof, waives notice. SECTION 5. Quorum. At any meeting of stockholders the presence in person or by proxy of the holders of record of a majority of the shares of stock entitled to vote at the meeting shall constitute a quorum. In the absence of a quorum, the stockholders entitled to vote who shall be present in person or by proxy at any meeting (or adjournment thereof) may, by a majority vote and without further notice, adjourn the meeting from time to time, but not for a period of over thirty days at any one time, until a quorum shall attend. At any adjourned meeting at which a quorum shall be present, any business may be transacted that could have been transacted if the meeting had been held as originally scheduled. SECTION 6. Conduct of Meetings. Meetings of stockholders shall be presided over by the Chairman of the Board of Directors of the Corporation or, in the Chairman's absence, by the Vice Chairman of the Board, or if both of such officers are absent, by the President of the Corporation. The Secretary of the Corporation shall act as secretary of meetings of the stockholders and in the Secretary's absence, the records of the proceedings shall be kept and authenticated by such other person as may be appointed for that purpose at the meeting by the presiding officer. To participate in a meeting, stockholders must be present in person or by proxy; stockholders may not participate by means of a conference telephone or other communications equipment. The rules contained in the current edition of Robert's Rules of Order Newly Revised shall govern in all cases to which they are applicable and in which they are not inconsistent with these Bylaws and any special rules of order that the meeting may adopt. SECTION 7. Approval of Minutes. The minutes of all meetings of stockholders shall be corrected and approved by a committee of directors designated by the Board and if none is designated, by the Organization Committee. At a subsequent meeting of stockholders, a synopsis of the minutes shall be read for information at the request of the presiding officer or any stockholder. SECTION 8. Proxies. Stockholders may vote either in person or by proxy, but no proxy that is dated more than 11 months before the meeting at which it is offered shall be accepted unless the proxy shall on its face name a longer period for which it is to remain in force. Each proxy shall be in writing and signed by the stockholder, or by the stockholder's duly authorized agent, and shall be dated. The proxy need not be sealed, witnessed or acknowledged. Proxies shall be filed with the Secretary of the Corporation at or before the meeting. -3- SECTION 9. Voting. Except as otherwise provided in the charter of the Corporation, at all meetings of stockholders, each holder of shares of Common Stock shall be entitled to one vote for each share of stock of the Corporation registered in the stockholder's name upon the books of the Corporation on the date fixed by the Board of Directors as the record date for the determination of stockholders entitled to vote at the meeting. Except as otherwise provided in the charter of the Corporation, all elections and matters submitted to a vote at meetings of stockholders shall be decided by a majority of all votes cast in person or by proxy, unless more than a majority of the votes cast is required by statute, by charter, or by these Bylaws. If the presiding officer shall so determine, a vote by ballot may be taken upon any election or matter, and the vote shall be so taken upon the request of the holders of ten percent of the stock present and entitled to vote on the election or matter. If the presiding officer shall so determine, the votes on all matters to be voted upon by ballot may be postponed to be voted on at the same time or on a single ballot. SECTION 10. Inspectors of Elections. One or more inspectors may be appointed by the presiding officer at any meeting. If so appointed, the inspector or inspectors shall open and close the polls, receive and take charge of the proxies and ballots, decide all questions as to the qualifications of voters and the validity of proxies, determine and report the results of elections and votes on matters before the meeting, and do such other acts as may be proper to conduct the election and the vote with fairness to all stockholders. SECTION 11. List of Stockholders. Prior to each meeting of the stockholders, the Secretary of the Corporation shall prepare, as of the record date fixed by the Board of Directors with respect to the meeting, a full and accurate list of all stockholders entitled to vote at the meeting, indicating the number of shares and class of stock held by each. The Secretary shall be responsible for the production of that list at the meeting. ARTICLE II Board of Directors SECTION 1. Powers. The property, business, and affairs of the Corporation shall be managed by the Board of Directors of the Corporation. The Board of Directors may exercise all the powers of the Corporation, except those conferred upon or reserved to the stockholders by statute, by charter or by these Bylaws. The Board of Directors shall keep minutes of each of its meetings and a full account of all of its transactions. SECTION 2. Number of Directors. The number of directors of the Corporation shall be 14 or such lesser number not less than eight as may from time to time be determined by the vote of three-fourths of the entire Board of Directors. However, the tenure of Office of a director shall not be affected by any change in number. -4- SECTION 3. Nomination of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors at a meeting of stockholders. Nominations of persons for election as Directors may be made at a meeting of stockholders by or at the direction of the Board of Directors by any nominating committee or person appointed by the Board or by any stockholder of the Corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this section. Nominations, other than those made by or at the direction of the Board, shall be made pursuant to written notice delivered to or mailed and received by the Secretary of the Corporation at the principal executive offices of the Corporation not less than 90 days nor more than 110 days prior to the meeting; provided, however, that in the event that less than 100 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder must be so received not later than the close of business on the 10th day following the day on which notice of the date of the meeting was mailed or public disclosure was made, whichever first occurred. The notice to the Secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a Director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of Directors pursuant to Rule 14a under the Securities Exchange Act of 1934; and (b) as to the stockholder giving the notice (i) the name and record address of stockholder and (ii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of the proposed nominee to serve as Director of the Corporation. The presiding officer of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if the presiding officer shall so determine and shall so declare to the meeting, the defective nomination shall be disregarded. SECTION 4. Election. Except as hereinafter provided, the members of the Board of Directors shall be elected each year at the annual meeting of stockholders by the vote of the holders of record of a majority of the shares of stock present in person or by proxy and entitled to vote at the meeting. Each director shall hold office until the next annual meeting of stockholders held after his or her election and until his or her successor shall have been duly elected and qualified, or until death, or until he or she shall have resigned, or shall have been removed as hereinafter provided. Each person elected as director of the Corporation shall qualify as such by written acceptance or by attendance at and participation as a director in a duly called meeting of the Board of Directors. SECTION 5. Removal. At a duly called meeting of the stockholders at which a quorum is present, the stockholders may, by vote of the holders of a majority of the votes entitled to be cast at the meeting, remove with or without cause any director or directors from office, and may elect a successor or successors to fill any resulting vacancy for the remainder of the term of the director so removed. SECTION 6. Vacancies. If any director shall die or resign, or if the stockholders shall remove any director without electing a successor to fill the remaining term, that vacancy may be filled by the vote of a majority of the remaining members of the Board of Directors, although a majority may be less than a quorum. Vacancies in the Board created by an increase in the number of directors may be filled by the vote of a majority of the entire Board as constituted prior to the increase. A director elected by the Board of Directors to fill any vacancy, however created, shall hold office until the next annual meeting of stockholders and until his or her successor shall have been duly elected and qualified. -5- SECTION 7. Meetings. Immediately after each annual meeting of stockholders at which a Board of Directors shall have been elected, the Board of Directors shall meet, without notice, for the election of an Executive Committee of the Board of Directors, for the election of officers of the Corporation, and for the transaction of other business. Other regular meetings of the Board of Directors shall be held in the months of February, July, October and December on the day and at the time designated by the Chief Executive Officer. Special meetings of the Board of Directors may be called at any time by the Chief Executive Officer or by any two directors. Regular and special meetings of the Board of Directors may be held at such place, in or out of the State of Maryland, as the Board may from time to time determine. SECTION 8. Notice of Meetings. Except for the meeting immediately following the annual meeting of stockholders, notice of the place, day and hour of a regular meeting of the Board of Directors shall be given in writing to each director not less than three days prior to the meeting and delivered to the director or to the director's residence or usual place of business, or by mailing it, postage prepaid and addressed to the director at his or her address as it appears upon the records of the Corporation. Notice of special meetings may be given in the same way, or may be given personally, by telephone, or by telegraph or facsimile message sent to the director's home or business address as it appears upon the records of the Corporation, not less than one day prior to the meeting. Unless required by these Bylaws or by resolution of the Board of Directors, no notice of any meeting of the Board of Directors need state the business to be transacted at the meeting. No notice of any meeting of the Board of Directors need be given to any director who attends, or to any director who, in writing executed and filed with the records of the meeting either before or after the holding thereof, waives notice. SECTION 9. Quorum. A majority of the Board of Directors shall constitute a quorum for the transaction of business at meetings of the Board of Directors. Except as otherwise provided by statute, by charter, or by these Bylaws, the vote of a majority of the directors present at a duly constituted meeting shall be sufficient to pass any measure, and such decision shall be the decision of the Board of Directors. In the absence of a quorum, the directors present, by majority vote and without further notice, may adjourn the meeting from time to time until a quorum shall be present. The Board of Directors may also take action or make decisions by any other method which may be permitted by statute, by charter, or by these Bylaws. SECTION 10. Presumption of Assent. A director of the Corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless the director announces his or her dissent at the meeting, and (a) the dissent is entered in the minutes of the meeting, (b) before the meeting adjourns the director files with the person acting as the secretary of the meeting a written dissent to the action, or (c) the director forwards a written dissent within 24 hours after the meeting is adjourned by registered or certified mail to the Secretary of the Corporation. The right to dissent does not apply to a director who voted in favor of the action or who failed to announce his or her dissent at the meeting. A director may abstain from voting on any matter before the meeting by so stating at the time the vote is taken and by causing the abstention to be recorded or stated in writing in the same manner as provided above for a dissent. SECTION 11. Compensation. Each director shall be entitled to receive such remuneration as may be fixed from time to time by the Board of Directors. However, no director who receives a salary as an officer or employee of the Corporation or of any subsidiary thereof shall receive any remuneration as a director or as a member of any committee of the Board of Directors. Each director may also receive reimbursement for the reasonable expenses incurred in attending the meetings of the Board of Directors, the meetings of any committee thereof, or otherwise in connection with attending to the affairs of the Corporation. -6- SECTION 12. Director Emeritus. Any retired member of the Board of Directors may be designated by the Board as a Director Emeritus for a period of one year for each of the three years next succeeding retirement as a Director. Each Director Emeritus shall receive notices of meetings, remuneration, and reimbursement for expenses in attending meetings as may be fixed by the Board of Directors from time to time. A Director Emeritus shall be entitled to attend all meetings of the Board of Directors and of any committee to which he or she may be appointed and may participate in the discussion of (but not in the voting on) any matter properly before the meeting. A Director Emeritus shall not be counted for the purpose of determining the number of appointments to be made to a committee or for determining a quorum of the committee. ARTICLE III Committees SECTION 1. Executive Committee. At its first meeting after the annual meeting of the stockholders, the Board of Directors shall elect an Executive Committee consisting of at least five members of the Board, of whom the Chairman of the Board, if any, shall be one. The Board shall designate a Chairman of the Committee who shall serve as Chairman of the Committee at the pleasure of the Board. During the intervals between the meetings of the Board of Directors, the Executive Committee shall possess and may exercise all powers in the management and direction of the business and affairs of the Corporation except as limited by the Maryland General Corporation Law or by resolution of the Board of Directors. All action taken by the Executive Committee shall be reported to the Board of Directors at its meeting next succeeding such action, and shall be subject to revision and alteration by the Board, provided that no rights of third parties may be adversely affected by any revision or alteration. Delegation of authority to the Executive Committee shall not relieve the Board of Directors or any director of any responsibility imposed by law or statute or by charter. SECTION 2. Other Committees. From time to time the Board of Directors by resolution adopted by the affirmative vote of a majority of the members of the entire Board may provide for and appoint other committees to have the powers and perform the duties assigned to them by the Board of Directors. These committees may include, but are not limited to, an Organization Committee, a Finance Committee, and an Audit Committee. SECTION 3. Meetings of Committees. Each Committee of the Board of Directors shall fix its own rules of procedure, and shall meet as provided by those rules or by resolution of the Board, or at the call of the chairman or any two members of the committee. A majority of each committee shall constitute a quorum thereof, and in every case the affirmative vote of a majority of the entire committee shall be necessary to take any action. Each committee may also take action by any other method that may be permitted by statute, by charter, or by these Bylaws. In the event a member of a committee fails to attend any meeting of the committee, the other members of the committee present at the meeting, whether or not they constitute a quorum, may appoint a member of the Board of Directors to act in the place of the absent member. Regular minutes of the proceedings of each committee and a full account of all its transactions shall be kept in a book provided for the purpose, except that the Organization Committee shall not be required to keep minutes. Vacancies in any committee of the Board of Directors shall be filled by the Board of Directors. -7- ARTICLE IV Officers SECTION 1. Election and Tenure. The Board of Directors may elect a Chairman and a Vice Chairman from among the directors. The Board of Directors shall elect a President, a Treasurer and a Secretary, and one or more Vice Presidents, one or more Assistant Treasurers, one or more Assistant Secretaries, and such other officers with such powers and duties as the Board may designate, none of whom need be a director. Each officer shall hold office until the first meeting of the Board of Directors after the annual meeting of stockholders next succeeding his or her election and until a successor shall have been duly chosen and qualified or until he or she shall have resigned or been removed. All elections to office shall be by a majority vote of the entire Board of Directors. SECTION 2. Chairman of the Board. The Chairman of the Board shall preside at all meetings of stockholders and of the Board of Directors at which he or she shall be present. The Chairman shall have such other powers and perform such other duties as from time to time may be assigned by the Board of Directors. SECTION 3. Vice Chairman of the Board. The Vice Chairman of the Board, in the absence of the Chairman of the Board, shall preside at all meetings of stockholders and the Board of Directors. (In the absence of the Chairman and the Vice Chairman, the Board of Directors shall elect a chairman of the meeting.) The Vice Chairman shall have such other powers and perform such other duties as from time to time may be assigned by the Board of Directors or by the Chairman of the Board. SECTION 4. President. The President shall be the Chief Executive Officer of the Corporation and, subject to the control of the Board of Directors and the Executive Committee, shall have general charge and supervision of the Corporation's business, affairs, and properties. The President shall have authority to sign and execute, in the name of the Corporation, all authorized deeds, mortgages, bonds, contracts or other instruments. The President may sign, with the Secretary or the Treasurer, stock certificates of the Corporation. In the absence of the Chairman and the Vice Chairman of the Board, the President shall preside at meetings of stockholders. In general, the President shall perform all the duties ordinarily incident to the office of a president of a corporation, and such other duties as, from time to time, may be assigned by the Board of Directors or by the Executive Committee. SECTION 5. Vice Presidents. Each Vice President, which term shall include any Executive Vice President or Group Vice President, shall have the power to sign and execute, unless otherwise provided by resolution of the Board of Directors, all contracts or other obligations in the name of the Corporation in the ordinary course of business, and with the Secretary, or with the Treasurer, or with an Assistant Secretary, or with an Assistant Treasurer, may sign stock certificates of the Corporation. At the request of the President or in the President's absence or during the President's inability to act, the Vice President or Vice Presidents shall perform the duties and exercise the functions of the President, and when so acting shall have the powers of the President. If there is more than one Vice President, the Board of Directors may determine which one or more of the Vice Presidents shall perform any of such duties or exercise any of such functions, or if the determination is not made by the Board, the President may make the determination. The Vice President or Vice Presidents shall have such other powers and perform such other duties as may be assigned by the Board of Directors or by the President. For purposes of this Article IV, Section 5, the term Vice President does not include a Vice President appointed pursuant to Article IV, Section 9. -8- SECTION 6. Secretary. The Secretary shall keep the minutes of the meetings of the stockholders, of the Board of Directors, and of the Executive Committee, including all the votes taken at the meetings, and record them in books provided for that purpose. The Secretary shall see that all notices are duly given in accordance with the provisions of these Bylaws or as required by statute. The Secretary shall be the custodian of the records and of the corporate seal of the Corporation. The Secretary may affix the corporate seal to any document executed on behalf of the Corporation, and may attest the same. The Secretary may sign, with the President or a Vice President, stock certificates of the Corporation. In general, the Secretary shall perform all duties ordinarily incident to the office of a secretary of a corporation, and such other duties as, from time to time, may be assigned by the Board of Directors or by the President. SECTION 7. Treasurer. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation, and shall deposit or cause to be deposited, in the name of the Corporation, all moneys or other valuable effects in such banks, trust companies, or depositories as may be designated by the Board of Directors. The Treasurer shall maintain full and accurate accounts of all assets, liabilities and transactions of the Corporation, and shall render to the President and the Board of Directors, whenever they may require it, an account of all transactions as Treasurer and of the financial condition of the Corporation. In general, the Treasurer shall perform all the duties ordinarily incident to the office of a treasurer of a corporation, and such other duties as, from time to time, may be assigned to him or her by the Board of Directors or by the President. The Treasurer shall give the Corporation a bond, if required by the Board of Directors, in a sum, and with one or more sureties, satisfactory to the Board of Directors, for the faithful performance of the duties of the office and for the restoration to the Corporation in case of death, resignation, retirement or removal from office of all corporate books, papers, vouchers, moneys, and other properties of whatever kind in his or her possession or under his or her control. SECTION 8. Subordinate Officers. The subordinate officers shall consist of such assistant officers and agents as may be deemed desirable and as may be elected by a majority of the members of the Board of Directors. Each such subordinate officer shall hold office for such period, have such authority and perform such duties as the Board of Directors may prescribe. SECTION 9. Appointed Vice Presidents. The Chief Executive Officer may from time to time appoint one or more Vice Presidents with such administrative powers and duties as may be designated or approved by the Chief Executive Officer. An appointed Vice President shall not be a corporate officer and may be removed by the Chief Executive Officer. SECTION 10. Officers Holding Two or More Offices. Any two or more of the above named offices, except those of Chairman and Vice Chairman of the Board and those of President and Vice President, may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity, if the instrument is required by statute, by charter, by these Bylaws, or by resolution of the Board of Directors to be executed, acknowledged, or verified by two or more officers. SECTION 11. Compensation. The Board of Directors shall have power to fix the compensation of all officers of the Corporation. It may authorize any officer upon whom the power of appointing subordinate officers may have been conferred to fix the compensation of the subordinate officers. -9- SECTION 12. Removal. Any officer of the Corporation may be removed, with or without cause, by a vote of a majority of the entire Board of Directors, and any officer of the Corporation appointed by another officer may also be removed, with or without cause, by the appointing officer, by the Executive Committee, or by the Board of Directors. SECTION 13. Vacancies. A vacancy in any office because of death, resignation, removal, or any other cause shall be filled for the unexpired portion of the term by election of the Board of Directors at any regular or special meeting. ARTICLE V Stock SECTION 1. Certificates. Each stockholder shall be entitled to a certificate or certificates which shall represent and certify the number and kind of shares of the Corporation's stock owned by the stockholder for which full payment has been made, or for which payment is being made by installments in conjunction with a stockholder-approved option plan. Each stock certificate shall be signed by the Chairman, the President or a Vice President and countersigned by the Secretary or Treasurer or Assistant Treasurer of the Corporation. A stock certificate shall be deemed to be so signed and sealed whether the required signatures are manual or facsimile signatures and whether the seal is a facsimile seal or any other form of seal. In case any officer of the Corporation who has signed a stock certificate ceases to be an officer of the Corporation, whether because of death, resignation or otherwise, before the stock certificate is issued, the certificate may nevertheless be issued and delivered by the Corporation as if the officer had not ceased to be such officer on the date of issue. SECTION 2. Transfer of Shares. Shares of stock shall be transferable only on the books of the Corporation by the holder thereof, in person or by duly authorized agent, upon the surrender of the stock certificate representing the shares to be transferred, properly endorsed. The Board of Directors shall have power and authority to make other rules and regulations concerning the issue, transfer and registration of stock certificates as it may deem expedient. SECTION 3. Transfer Agents and Registrars. The Corporation may have one or more transfer agents and one or more registrars of its stock, whose respective duties the Board of Directors may, from time to time, define. No stock certificate shall be valid until countersigned by a transfer agent, if the Corporation has a transfer agent in respect of that class or series of capital stock, or until registered by a registrar, if the Corporation has a registrar in respect of that class or series of capital stock. The duties of transfer agent and registrar may be combined. SECTION 4. New Certificates. In case any stock certificate is alleged to have been lost, stolen, mutilated, or destroyed, the Board of Directors may authorize the issue of a new certificate in place thereof upon such terms and conditions as it may deem advisable. The Board of Directors may, in its discretion, further require the owner of the stock certificate or the owner's duly authorized agent to give bond with sufficient surety to the Corporation to indemnify it against any loss or claim which may arise by reason of the issue of a stock certificate in the place of one reportedly lost, stolen, or destroyed. -10- SECTION 5. Record Dates. The Board of Directors may fix, in advance, a date as the record date for the purpose of determining those stockholders who shall be entitled to notice of, or to vote at, any meeting of stockholders, or for the purpose of determining those stockholders who shall be entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of making any other proper determination with respect to stockholders. The date shall be not more than 90 days, and in the case of a meeting of stockholders, not less than 10 days, prior to the date on which the particular action, requiring such determination of stockholders, is to be taken. In lieu of fixing a record date, the Board of Directors may provide that the stock transfer books shall be closed for a stated period, not to exceed in any case 20 days. When the stock transfer books are closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, the closing of the transfer books shall be at least 10 days before the date of the meeting. SECTION 6. Annual Report. The President of the Corporation shall annually prepare a full and correct statement of the affairs of the Corporation, including a balance sheet and a financial statement of operations for the preceding fiscal year. These statements shall be sent to the extent possible to each beneficial owner of the stock of the Corporation prior to or with the proxy statement and notice to stockholders of the annual meeting of stockholders. It will be submitted at the annual meeting, and within 20 days thereafter be placed on file at the Corporation's principal offices in Maryland. ARTICLE VI Dividends and Finance SECTION 1. Dividends. Subject to any statutory or charter conditions and limitations, the Board of Directors may in its discretion declare what, if any, dividends shall be paid from the surplus or from the net profits of the Corporation, the date when the dividends shall be payable, and the date for the determination of holders of record to whom the dividends shall be paid. SECTION 2. Depositories. The Board of Directors from time to time shall designate one or more banks or trust companies as depositories of the Corporation and shall designate those officers and agents who shall have authority to deposit corporate funds in such depositories. It shall also designate those officers and agents who shall have authority to withdraw from time to time any or all of the funds of the Corporation so deposited upon checks, drafts, or orders for the payment of money, notes and other evidences of indebtedness, drawn against the account and issued in the name of the Corporation. The signatures of the officers or agents may be made manually or by facsimile. No check or order for the payment of money shall be invalidated because a person whose signature appears thereon has ceased to be an officer or agent of the Corporation prior to the time of payment of the check or order by any depository. SECTION 3. Corporate Obligations. No loans shall be contracted on behalf of the Corporation and no evidences of indebtedness or guaranties of the obligations of others shall be issued in the name of the Corporation unless authorized by a resolution of the Board of Directors. Such authority may be either general or specific. When duly authorized, all loans, promissory notes, acceptances, other evidences of indebtedness and guaranties shall be signed by the President, a Vice President, the Treasurer, or an Assistant Treasurer. -11- SECTION 4. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January and end on the last day of December of each year. ARTICLE VII Books and Records SECTION 1. Books and Records. The Corporation shall maintain a stock ledger which shall contain the name and address of each stockholder and the number of shares of stock of the Corporation which the stockholder holds. The ledger shall be kept at the principal offices of the Corporation in Towson, Baltimore County, Maryland, or at the offices of the Corporation's stock transfer agent. All other books, accounts, and records of the Corporation, including the original or a certified copy of these Bylaws, the minutes of all stockholders meetings, a copy of the annual statement, and any voting trust agreements on file with the Corporation, shall be kept and maintained by the Secretary at the principal offices of the Corporation in Towson. SECTION 2. Inspection Rights. Except as otherwise provided by statute or by charter, the Board of Directors shall determine whether and to what extent the books, accounts, and records of the Corporation, or any of them, shall be open to the inspection of stockholders. No stockholder shall have any right to inspect any book, account, document or record of the Corporation except as conferred by statute, by charter, or by resolution of the stockholders or the Board of Directors. ARTICLE VIII Seal SECTION 1. Seal. The seal of the Corporation shall consist of a circular impression bearing the name of the Corporation and the word "Maryland" around the rim and in the center the word "Incorporated" and the year "1910." -12- ARTICLE IX Indemnification SECTION 1. Indemnification. The Corporation to the full extent permitted by, and in the manner permissible under, the laws of the State of Maryland and other applicable laws and regulations may indemnify any person who is or was an officer, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation or entity and shall indemnify any director of the Corporation or any director who is or was serving at the request of the Corporation as a director of another corporation or entity, who by reason of his or her position was, is, or is threatened to be made a party to an action or proceeding, whether civil, criminal, administrative, or investigative, against any and all expenses (including, but not limited to, attorneys' fees, judgments, fines, penalties, and amounts paid in settlement) actually and reasonably incurred by the director, officer, employee, or agent in connection with the proceeding. Repeal or modification of this Section or the relevant law shall not affect adversely any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts. ARTICLE X Amendments SECTION 1. Amendment of Bylaws. These Bylaws may be amended at any meeting of the stockholders by a majority of all the votes cast, provided the text of the amendment is submitted with the notice of the meeting. The Board of Directors may also amend these Bylaws by a vote of a majority of the directors present at a meeting, provided that the Board of Directors shall not consider or act on any amendment to these Bylaws that, directly or indirectly, modifies the meaning or effect of any amendment to these Bylaws adopted by the stockholders within the preceding 12-month period, or any amendment to these Bylaws that, directly or indirectly, contains substantially similar provisions to those of an amendment rejected by the stockholders within the preceding 12-month period. EX-4 8 INDENTURE DATED JUNE 26, 1998 EXHIBIT 4 BLACK & DECKER HOLDINGS INC., as Issuer, THE BLACK & DECKER CORPORATION, as Guarantor AND THE FIRST NATIONAL BANK OF CHICAGO, as Trustee INDENTURE Dated as of June 26, 1998 $150,000,000 6.55% Senior Notes due 2007 $150,000,000 7.05% Senior Notes due 2028 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE................ 1 SECTION 1.1 Definitions............................................ 1 SECTION 1.2 Incorporation by Reference of TIA...................... 9 SECTION 1.3 Rules of Construction.................................. 10 ARTICLE II THE TRANCHE A AND TRANCHE B NOTES.................... 10 SECTION 2.1 Form and Dating........................................ 10 SECTION 2.2 Execution and Authentication........................... 12 SECTION 2.3 Exchange Agent and Paying Agent........................ 13 SECTION 2.4 Paying Agent To Hold Assets in Trust................... 14 SECTION 2.5 List of Holders........................................ 14 SECTION 2.6 Transfer and Exchange.................................. 14 SECTION 2.7 Replacement Notes...................................... 19 SECTION 2.8 Outstanding Notes...................................... 19 SECTION 2.9 Treasury Notes......................................... 20 SECTION 2.10 Temporary Notes....................................... 20 SECTION 2.11 Cancellation.......................................... 21 SECTION 2.12 Defaulted Interest.................................... 21 SECTION 2.13 CUSIP and CINS Number................................. 22 SECTION 2.14 Deposit of Moneys..................................... 22 SECTION 2.15 Certain Matters Relating to Global Notes.............. 22 ARTICLE III REDEMPTION................................ 23 SECTION 3.1 Optional Redemption.................................... 23 SECTION 3.2 Election to Redeem; Notice to Trustee.................. 23 SECTION 3.3 Selection by Trustee of Notes to Be Redeemed........... 23 SECTION 3.4 Notice of Redemption................................... 24 SECTION 3.5 Effect of Notice of Redemption......................... 25 SECTION 3.6 Deposit of Redemption Price............................ 25 SECTION 3.7 Notes Redeemed in Part................................. 26 SECTION 3.8 Applicability of This Article.......................... 26 ARTICLE IV COVENANTS................................ 27 SECTION 4.1 Payment of Notes....................................... 27 SECTION 4.2 Maintenance of Office or Agency........................ 27 SECTION 4.3 Limitation on Liens.................................... 28 SECTION 4.4 Limitation on Sale-Leaseback Transactions.............. 29 SECTION 4.5 No Lien Created, etc................................... 29 SECTION 4.6 Compliance Certificate; Notice of Default.............. 30 SECTION 4.7 Reports................................................ 30 SECTION 4.8 Payment of Certain Non-Income Taxes and Similar Charges........................................ 30 Page ARTICLE V MERGER, CONSOLIDATION OR SALE BY THE COMPANY AND THE GUARANTOR..................... 31 SECTION 5.1 Merger, Consolidation or Sale of All or Substantially All Assets of the Company.............................. 31 SECTION 5.2 Merger, Consolidation or Sale of All or Substantially All Assets of the Guarantor............................ 31 ARTICLE VI DEFAULT AND REMEDIES........................... 31 SECTION 6.1 Events of Default...................................... 31 SECTION 6.2 Acceleration........................................... 34 SECTION 6.3 Other Remedies......................................... 34 SECTION 6.4 Waiver of Past Defaults................................ 34 SECTION 6.5 Control by Majority.................................... 34 SECTION 6.6 Limitation on Suits.................................... 35 SECTION 6.7 Rights of Holders to Receive Payment................... 35 SECTION 6.8 Collection Suit by Trustee............................. 35 SECTION 6.9 Trustee May File Proofs of Claim....................... 35 SECTION 6.10 Priorities............................................ 36 SECTION 6.11 Undertaking for Costs................................. 36 ARTICLE VII TRUSTEE................................. 36 SECTION 7.1 Duties of Trustee...................................... 36 SECTION 7.2 Rights of Trustee...................................... 38 SECTION 7.3 Individual Rights of Trustee........................... 39 SECTION 7.4 Trustee's Disclaimer................................... 40 SECTION 7.5 Notice of Default...................................... 40 SECTION 7.6 Report by Trustee to Holders........................... 40 SECTION 7.7 Compensation and Indemnity............................. 41 SECTION 7.8 Replacement of Trustee................................. 42 SECTION 7.9 Successor Trustee by Merger, Etc....................... 43 SECTION 7.10 Eligibility; Disqualification; Corporate Trust Required; Conflicting Interest........................ 44 SECTION 7.11 Preferential Collection of Claims Against Company..... 45 SECTION 7.12 Authenticating Agents................................. 45 ARTICLE VIII SATISFACTION AND DISCHARGE OF INDENTURE................. 46 SECTION 8.1 Option To Effect Legal Defeasance or Covenant Defeasance............................................. 46 SECTION 8.2 Legal Defeasance and Discharge......................... 46 SECTION 8.3 Covenant Defeasance.................................... 47 SECTION 8.4 Conditions to Legal or Covenant Defeasance............. 48 SECTION 8.5 Satisfaction and Discharge of Indenture................ 50 SECTION 8.6 Survival of Certain Obligations........................ 51 SECTION 8.7 Acknowledgment of Discharge by Trustee................. 51 SECTION 8.8 Application of Trust Moneys............................ 51 Page SECTION 8.9 Repayment to the Company; Unclaimed Money.............. 52 SECTION 8.10 Reinstatement.......................................... 52 ARTICLE IX AMENDMENTS, SUPPLEMENTS AND WAIVERS................... 53 SECTION 9.1 Without Consent of Holders of Notes.................... 53 SECTION 9.2 With Consent of Holders of Notes....................... 54 SECTION 9.3 Compliance with TIA.................................... 55 SECTION 9.4 Revocation and Effect of Consents...................... 55 SECTION 9.5 Notation on or Exchange of Notes....................... 56 SECTION 9.6 Trustee To Sign Amendments, Etc........................ 56 SECTION 9.7 Effect of Supplemental Indentures...................... 56 ARTICLE X GUARANTEES................................ 56 SECTION 10.1 Guarantees............................................ 56 SECTION 10.2 Successors and Assigns................................ 59 SECTION 10.3 No Waiver............................................. 59 SECTION 10.4 Modification.......................................... 59 ARTICLE XI MEETINGS OF HOLDERS OF THE NOTES..................... 59 SECTION 11.1 Purposes of Meetings.................................. 59 SECTION 11.2 Place of Meetings..................................... 60 SECTION 11.3 Call and Notice of Meetings........................... 60 SECTION 11.4 Voting at Meetings.................................... 60 SECTION 11.5 Voting Rights, Conduct and Adjournment................ 61 SECTION 11.6 Revocation of Consent by Holders...................... 62 SECTION 11.7 No Delay of Rights by Meeting......................... 62 ARTICLE XII MISCELLANEOUS.............................. 62 SECTION 12.1 TIA Controls.......................................... 62 SECTION 12.2 Notices............................................... 62 SECTION 12.3 Notice to Holders..................................... 64 SECTION 12.4 Compliance Certificates and Opinions.................. 64 SECTION 12.5 Form of Documents Delivered to Trustee................ 65 SECTION 12.6 Rules by Trustee, Paying Agent, Exchange Agent........ 65 SECTION 12.7 Non-Business Day...................................... 65 SECTION 12.8 Governing Law and Submission to Jurisdiction.......... 66 SECTION 12.9 No Adverse Interpretation of Other Agreements......... 66 SECTION 12.10 Immunity of Incorporators, Stockholders, Employees, Officers and Directors............................... 66 SECTION 12.11 Successors and Assigns............................... 66 SECTION 12.12 Counterpart Originals................................ 66 SECTION 12.13 Severability......................................... 66 SECTION 12.14 Table of Contents, Headings, etc..................... 66 SECTION 12.15 Benefits of Indenture................................ 66 Page SECTION 12.16 Language of Notices, etc............................. 67 SIGNATURES.......................................................... 67 EXHIBITS Exhibit A - Form of Tranche A Global Note Exhibit B - Form of Tranche A Definitive Note Exhibit C - Form of Tranche B Global Note Exhibit D - Form of Tranche B Definitive Note Exhibit E - Form of Transfer Certificate -- U.S. Global Note to Regulation S Global Note During the Restricted Period Exhibit F - Form of Transfer Certificate -- U.S. Global Note to Regulation S Global Note After the Restricted Period Exhibit G-1 - Form of Transfer Certificate -- Regulation S Global Note to U.S. Global Note During the Restricted Period Exhibit G-2 - Form of Transfer Certificate -- Regulation S Global Notes to U.S. Global Note After the Expiration of the Restricted Period Exhibit H - Form of Exchange Certificate -- Notes Acquired Pursuant to Rule 144A Exhibit I - Form of Exchange Certificate -- Notes Acquired Pursuant to Regulation S NOTE: This Table of Contents shall not, for any purpose, be deemed to be part of this Indenture. CROSS-REFERENCE TABLE TIA Indenture Section Section 310 (a)(1).......................................... 7.10 (a)(2).......................................... 7.10 (a)(3).......................................... NA (a)(4) ......................................... NA (a)(5) ......................................... 7.8; 7.10 (b)............................................. 7.3; 7.10 (c)............................................. NA 311 (a)............................................. 7.11 (b)............................................. 7.11 (c)............................................. NA 312 (a)............................................. 2.5 (b)............................................. 14.3 (c)............................................. 14.3 313 (a)............................................. 7.6 (b)(1) NA (b)(2) 7.6 (c) 7.6; (d) 7.6 314 (a)............................................. 4.8; 4.10; 14.2; 14.4 (b)............................................. NA (c)(1).......................................... 7.2; 14.4 (c)(2).......................................... 7.2; 14.4 (c)(3).......................................... NA (d)............................................. NA (e)............................................. 14.5 (f)............................................. NA 315 (a)............................................. 7.1(c) (b)............................................. 7.5; 14.2 (c)............................................. 7.1(a) (d)............................................. 6.5; ................................................ 7.1(c) (e)............................................. 6.11 316 (a)(last sentence).............................. 2.9 (a)(1)(A)....................................... 6.5 (a)(1)(B)....................................... 6.4 (a)(2).......................................... NA (b)............................................. 6.7 317 (a)(1).......................................... 6.8 (a)(2).......................................... 6.9 (b)............................................. 2.4 318 (a)............................................. 14.1 (c)............................................. 14.1 NA means Not Applicable. NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of this Indenture. -1- INDENTURE dated as of June 26, 1998, among BLACK & DECKER HOLDINGS INC., a corporation organized under the laws of Delaware (the "Company"), THE BLACK & DECKER CORPORATION, a corporation organized under the laws of Maryland (the "Guarantor"), and THE FIRST NATIONAL BANK OF CHICAGO, a national banking association, as Trustee (the "Trustee"). The Company has duly authorized the creation of an issue of $150,000,000 6.55% Senior Notes due 2007 (the "Tranche A Notes") and $150,000,000 7.05% Senior Notes due 2028 (the "Tranche B Notes" and together with the Tranche A Notes, the "Notes") and, to provide therefor, the Company has duly authorized the execution and delivery of this Indenture. The Guarantor has duly authorized the creation of the Guarantee of the Notes and, to provide therefor, the Guarantor has duly authorized the execution and delivery of this Indenture. The Company, the Guarantor and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Notes: ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1 Definitions. For purposes of this Indenture, unless otherwise specifically indicated herein, the term "consolidated" with respect to any Person refers to such Person consolidated with Subsidiaries. In addition, for purposes of the following definitions and this Indenture generally, all calculations and determinations shall be made in accordance with U.S. GAAP and shall be based upon the consolidated financial statements of the Guarantor and its subsidiaries prepared in accordance with U.S. GAAP. As used in this Indenture, the following terms shall have the following meanings: "Additional Amounts" shall have the meaning set forth in paragraph 2 of Exhibit A and Exhibit C hereto. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. "Agent" means any Exchange Agent, Paying Agent, Authenticating Agent or co-Exchange Agent. -2- "Agent Members" shall have the meaning set forth in Section 2.15. "Applicable Procedures" shall have the meaning set forth in Section 2.6(a)(i)(1). "Attributable Debt" for a lease means the carrying value of the capitalized rental obligation determined under generally accepted accounting principles whether or not such obligation is required to be shown on the balance sheet as a long-term liability. The carrying value may be reduced by the capitalized value of the rental obligations, calculated on the same basis, that any sublessee has for all or part of the sample property. "Authenticating Agent" shall have the meaning set forth in Section 2.2. "Authorized Newspaper" means a newspaper customarily published at least once a day for at least five days in each calendar week and of general circulation in New York City and in London and, if and so long as the Notes are listed on the Luxembourg Stock Exchange and such Stock Exchange shall so require, in Luxembourg or, if it shall be impracticable in the opinion of the Trustee to make such publication, in another capital city in Western Europe. Such publication (which may be in different newspapers) is expected to be made in the Eastern edition of The Wall Street Journal and in the London edition of the Financial Times, and, if and so long as the Notes are listed on the Luxembourg Stock Exchange and such Stock Exchange shall so require, in the Luxemburger Wort. "Bankruptcy Law" shall have the meaning set forth in Section 6.1. "Board of Directors" means, with respect to any Person, the board of directors of such Person or any duly authorized committee thereof. "Board Resolution" means, with respect to any Person, a resolution of the Board of Directors or of a committee or person to which or to whom the Board of Directors has properly delegated the appropriate authority, a copy of which has been certified by the Secretary or an Assistant Secretary of the Person to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee. "Business Day" when used with respect to any particular Place of Payment, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment are authorized or obligated by law to close, and shall otherwise mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking -3- institutions, at the place where any specified act pursuant to this Indenture is to occur, are authorized or obligated by law to close. "Cedel" means Cedel Bank, societe anonyme. "Certificate of a Firm of Independent Public Accountants" means a certificate signed by any firm of independent public accountants of recognized standing selected by the Company or the Guarantor. The term "Independent" when used with respect to any specified firm of public accountants means a firm that is or would be qualified to act as the Company's and the Guarantor's accountants within the meaning of Section 210.2-01 of Regulation S-X as promulgated by the SEC, and any successor thereto. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture and thereafter means such successor. "Company Order" means a written order or request signed in the name of the Company by (1) the Chairman of the Board, the Vice Chairman of the Board, the President or any Vice President of the Company and by a Director, the Treasurer, an Assistant Treasurer, the Controller, an Assistant Controller, the Secretary or an Assistant Secretary of the Company or (2) any two Persons designated in a Company Order previously delivered to the Trustee by any two of the foregoing officers and delivered to the Trustee. "Consolidated Net Tangible Assets" means total assets less (1) total current liabilities (excluding any Debt which, at the option of the borrower, is renewable or extendible to a term exceeding 12 months and which is included in current liabilities and further excluding any deferred income taxes which are included in current liabilities) and (2) goodwill, patents, trademarks and other like intangibles, all as stated on the Guarantor's most recent quarter-end consolidated balance sheet preceding the date of determination. "Corporate Trust Office" means the address of the Trustee specified in Section 12.2. "Covenant Defeasance" shall have the meaning set forth in Section 8.3. "Custodian" shall have the meaning set forth in Section 6.1. "Debt" means any debt for borrowed money (including the Notes), capitalized lease obligations and purchase money obligations, or any guarantee of such debt, in any such case which would appear on the consolidated balance sheet of the Guarantor as a liability. -4- "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Default Interest Payment Date" shall have the meaning set forth in Section 2.12. "Definitive Notes" means the Tranche A Notes and the Tranche B Notes in definitive form substantially in the form of Exhibit B and Exhibit D, respectively. "Depositary" means the book-entry depositary or its nominee or the custodian of either, designated by the Company in the Depositary Agreement until a successor depositary shall have become such pursuant to applicable provisions of the Depositary Agreement, and thereafter "Depositary" shall mean such successor book-entry depositary or its nominee or the custodian of either. "Depositary Agreement" means the Note Depositary Agreement dated as of the date of this Indenture between the Depositary, the Company and the Guarantor. "Distribution" shall mean, with respect to any Note, any principal, premium, if any, interest, Additional Amounts, if any, or any other payments or distributions in respect of such Note. "DTC" means The Depository Trust Company or its successors. "Euroclear Operator" means Morgan Guaranty Trust Company of New York (Brussels office), as operator of the Euroclear System. "Event of Default" shall have the meaning set forth in Section 6.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. "Exchange Agent" shall have the meaning set forth in Section 2.3. "Exempted Debt" means the sum, without duplication, of the following items outstanding as of the date Exempted Debt is being determined: (i) Debt incurred after the date of this Indenture and secured by liens created or assumed or permitted to exist pursuant to Section 4.3(b), and (ii) Attributable Debt of the Guarantor and its Subsidiaries in respect of all sale and lease-back transactions with regard to any Principal Property entered into pursuant to Section 4.4(b). -5- "First Chicago" means The First National Bank of Chicago. "Funded Debt" means all Debt having a maturity of more than one year from the date of its creation or having a maturity of less than one year but by its terms being renewable or extendible, at the option of the obligor in respect thereof, beyond one year from its creation. "Global Note" means a security evidencing all or a part of the Tranche A Notes or the Tranche B Notes deposited with the Depositary in accordance with Section 2.1 and substantially in the form of Exhibit A and Exhibit C, respectively. "Government Securities" means securities that are (i) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided, however, that such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal or interest on the Government Securities evidenced by such depository receipt. "guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Debt or other obligations. "Guarantees" shall have the meaning set forth in Section 10.1. "Guarantor" shall have the meaning set forth in the preamble of this Indenture until one or more successor corporations shall have become such pursuant to the applicable provisions of this Indenture, and thereafter means such successors. "Guarantor Order" means a written order signed in the name of the Guarantor by (1) the Chairman of the Board, the Vice Chairman of the Board, the President or any Vice President of the Guarantor and by the Treasurer, an Assistant Treasurer, the -6- Controller, an Assistant Controller, the Secretary or an Assistant Secretary of the Guarantor or (2) any two Persons designated in a Guarantor Order previously delivered to the Trustee by any two of the foregoing officers and delivered to the Trustee. "Holder" means, with respect to a particular tranche of Notes (i) for so long as the Notes of such tranche are represented by Global Notes, the bearer thereof which shall initially be the Depositary and (ii) in the event that Definitive Notes of such tranche are issued, the person in whose name a Definitive Note of such tranche is registered on the Exchange Agent's books. "Indenture" means this Indenture, as amended, modified or supplemented from time to time in accordance with the terms hereof, including the terms of the Notes. "Initial Purchasers" means Lehman Brothers Inc., Citicorp Securities, Inc., Nationsbanc Montgomery Securities LLC and Chase Securities Inc. "Interest Payment Date" means, with respect to a particular tranche of Notes the stated maturity of an installment of interest on the Notes of such tranche. "Issuance Date" means the closing date for the sale and issuance of the Notes under this Indenture, which is expected to be on or about June 26, 1998. "Legal Defeasance" shall have the meaning set forth in Section 8.2. "Maturity Date" means July 1, 2007 with respect to the Tranche A Notes and July 1, 2028 with respect to the Tranche B Notes. "Notes" shall have the meaning set forth in the preamble of this Indenture. "Notice of Default" shall have the meaning set forth in Section 6.1. "Offering" means the offering of the Notes described in the Offering Memorandum. "Offering Memorandum" means the final offering memorandum of the Company, dated June 23, 1998 pursuant to which the Notes were sold. "Officer" means, with respect to any Person (other than any Agent), the Chairman of the Board, the Vice Chairman of the Board, the President, any Vice President, the Treasurer or the -7- Secretary of such Person (and with respect to the Company, a director thereof). "Officers' Certificate" means a certificate signed (i) in the case of the Company, on behalf of the Company by two Officers of the Company or by an Officer and an Assistant Treasurer or an Assistant Secretary and (ii) in the case of the Guarantor, on behalf of the Guarantor by two Officers of the Guarantor or by an Officer and an Assistant Treasurer or Assistant Secretary, in each case that meets the requirements of Sections 12.4 and 12.5. "Opinion of Counsel" means a written opinion from legal counsel (including, if applicable, tax counsel) which and who are reasonably acceptable to, and addressed to, the Trustee complying with the requirements of Sections 12.4 and 12.5. Unless otherwise required by the TIA, the legal counsel may be an employee of or counsel to the Company, the Guarantor or the Trustee. "Paying Agent" shall have the meaning set forth in Section 2.3. "Paying Agent Agreement" shall have the meaning set forth in Section 2.3. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Place of Payment," when used with respect to the Notes means the place or places where the principal, premium, if any, interest and Additional Amounts, if any, on the Notes are payable, as contemplated by Section 2.3. "Principal Property" means land, land improvements, buildings and associated factory and laboratory equipment owned or leased pursuant to a capital lease and used by the Guarantor or any Subsidiary primarily for manufacturing, assembling, processing, producing, packaging or storing its products, raw materials, inventories or other materials and supplies located in the United States and having an acquisition cost plus capitalized improvements in excess of 2% of Consolidated Net Tangible Assets as of the date of determination, but shall not include any such property financed through the issuance of tax exempt governmental obligations, or any such property that has been determined by Board Resolution of the Guarantor not to be of material importance to the respective businesses conducted by the Guarantor and its Subsidiaries taken as a whole, effective as of the date such resolution is adopted. -8- "Private Placement Legend" means the legend initially set forth on the Notes in the form set forth on Exhibit A, B, C and D. "Record Date" means, with respect to Definitive Notes, a particular tranche of Notes, the Record Dates specified in the Notes of such tranche. "Redemption Date" when used with respect to any Note of a particular tranche to be redeemed, means the date fixed for such redemption pursuant to this Indenture and Paragraphs 7 and 8 of the Notes of such tranche. "Redemption Price" when used with respect to any Note of a particular tranche to be redeemed, means the price fixed for such redemption pursuant to this Indenture and Paragraphs 7 and 8 of the Notes of such tranche, which shall include accrued and unpaid interest thereon and Additional Amounts, if any, to the Redemption Date. "Regulation S" means Regulation S under the Securities Act. "Regulation S Certificate" shall have the meaning set forth in Section 2.6(a)(i)(3)(a). "Regulation S Global Notes" shall have the meaning set forth in Section 2.1. "Regulation S Notes" shall have the meaning set forth in Section 2.1. "Release Date" shall have the meaning set forth in Section 2.6(a)(i)(3)(a). "Restricted Period" means the period of 40 consecutive days beginning on and including the first day after the Issuance Date. "Rule 144A" means Rule 144A under the Securities Act. "SEC" means the United States Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. "Subsidiary" means a corporation a majority of the Voting Stock of which is owned by (i) the Guarantor, (ii) the Guarantor and one or more Subsidiaries, or (iii) one or more Subsidiaries. -9- "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb), as it may be amended from time to time. "Tranche A Notes" shall have the meaning set forth in the preamble to this Indenture. "Tranche B Notes" shall have the meaning set forth in the preamble to this Indenture. "Trust Officer" means any officer within the corporate trust department (or any successor group of the Trustee), including any vice president, assistant vice president, corporate trust officer, assistant corporate trust officer, assistant secretary or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at that time shall be such officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such trust matter is referred because of his or her knowledge of and familiarity with the particular subject. "Trustee" means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor. "U.S. GAAP" means generally accepted accounting principles in the United States as have been approved by a significant segment of the U.S. accounting profession, which are in effect at the time of each application for determining compliance with the covenants pursuant to Article IV. For the purposes of this Indenture, the term "consolidated" with respect to any Person shall mean such Person consolidated with its Subsidiaries. "United States" means the United States of America, but excluding the Commonwealth of Puerto Rico, the Virgin Islands and other territories and possessions thereof. "U.S. Global Notes" shall have the meaning set forth in Section 2.1. "U.S. Note" shall have the meaning set forth in Section 2.1. "U.S. Persons" has the meaning given in Regulation S under the Securities Act. "Voting Stock" means capital stock having voting power under ordinary circumstances to elect directors. SECTION 1.2 Incorporation by Reference of TIA. Except as set forth in 7.6, this Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in, and -10- made a part of, this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC; "indenture securities" means the Notes and the Guarantees; "indenture security holder" means a Holder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means the Company, the Guarantor or any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.3 Rules of Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with U.S. GAAP; (c) "or" is not exclusive; (d) words in the singular include the plural, and words in the plural include the singular; (e) provisions apply to successive events and transactions; and (f) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. ARTICLE II THE TRANCHE A AND TRANCHE B NOTES SECTION 2.1 Form and Dating. The Tranche A Notes and the notation relating to the Trustee's certificate of authentication shall be substantially in the form of Exhibits A or B, as applicable, and the Tranche B Notes and the notation relating to the Trustee's certificate of authentication shall be -11- substantially in the form of Exhibits C or D, as applicable. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. The Company and the Trustee shall approve the form of the Notes and any notation, legend or endorsement on them. Each Note shall be dated the date of its issuance and shall show the date of its authentication. The terms and provisions contained in the Notes, annexed hereto as Exhibits A, B, C and D shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company, the Guarantor and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. The Notes will initially be represented by the Global Notes. The Tranche A Notes and Tranche B Notes, if any, offered and sold in their initial distribution in reliance on Regulation S shall be initially issued as a single note, with respect to each tranche, in global bearer form without interest coupons, substantially in the form of Exhibit A (in respect of Tranche A Notes) or Exhibit C (in respect of Tranche B Notes) hereto, with such applicable legends as are provided in Exhibit A or Exhibit C hereto, as applicable, except as otherwise permitted herein. It is understood that such Global Notes, if any, shall be deposited initially with the Depositary pursuant to the terms of the Depositary Agreement, duly executed by the Company and authenticated by the Trustee as hereinafter provided. Such Global Notes shall be referred to herein as the "Regulation S Global Notes". The aggregate principal amount of each Regulation S Global Note may from time to time be increased or decreased by adjustments made by annotation or endorsement thereon by the Company or by the Trustee, the Depositary or a custodian of either on behalf of the Company (or by the issue of a further Regulation S Global Notes), in connection with a corresponding decrease or increase in the aggregate principal amount of the U.S. Global Note of the same tranche or in consequence of the issue of Definitive Notes or additional Regulation S Notes, as hereinafter provided. The Regulation S Global Notes and all other Notes that are not U.S. Global Notes shall collectively be referred to herein as the "Regulation S Notes". The Tranche A Notes and Tranche B Notes, if any, offered and sold in their initial distribution in reliance on Rule 144A shall be initially issued as a single note, with respect to each tranche, in global bearer form without interest coupons, substantially in the form of Exhibit A (in respect of Tranche A) or Exhibit C (in respect of Tranche B) hereto, with such applicable legends as are provided in Exhibit A and Exhibit C hereto, as applicable, except as otherwise permitted herein. It is understood that such Global Notes, if any, shall be deposited initially with the Depositary pursuant to the terms of the Depositary Agreement, duly executed by the Company and authenticated by the Trustee as hereinafter provided. Such Global Notes shall be referred to herein as the "U.S. Global -12- Notes". The aggregate principal amount of each U.S. Global Note may from time to time be increased or decreased by adjustments made by annotation or endorsement thereon by the Company or by the Trustee, the Depositary or a custodian of either on behalf of the Company (or by the issue of a further U.S. Global Notes), in connection with a corresponding decrease or increase in the aggregate principal amount the Regulation S Global Note of the same tranche or in consequence of the issue of Definitive Notes or additional U.S. Notes, as hereinafter provided. The U.S. Global Notes and all other Notes evidencing the debt, or any portion of the debt, initially evidenced by such U.S. Global Notes, other than Notes transferred or exchanged upon certification as provided in Section 2.6(a)(i)(1), (2) or (4), shall collectively be referred to herein as the "U.S. Notes." SECTION 2.2 Execution and Authentication. The Notes shall be executed on behalf of the Company by two Officers by manual or facsimile signature. The Notes shall be so executed under the corporate seal (which may be in facsimile form) of the Company reproduced thereon. If an Officer whose signature is on a Note was an Officer at the time of such execution but no longer holds that office or position at the time the Trustee authenticates the Note, the Note shall be valid nevertheless. A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall authenticate Tranche A Notes for original issue in the aggregate principal amount of $150,000,000 and Tranche B Notes for an original issue in the aggregate principal amount of $150,000,000, in each case upon receipt of a Company Order and Guarantor Order, each in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of Tranche A Notes and Tranche B Notes to be authenticated, the type of Notes and the date on which the Notes of each tranche are to be authenticated, whether the Notes of each tranche are to be Definitive Notes or Global Notes and whether or not the Notes of each tranche shall bear the Private Placement Legend, or such other information as the Trustee may reasonably request. The aggregate principal amount of Tranche A Notes outstanding at any time may not exceed $150,000,000 and the aggregate principal amount of Tranche B Notes outstanding at any one time may not exceed $150,000,000 except, in each case, as provided in Section 2.7. Upon receipt of a Company Order, the Trustee shall authenticate Notes in substitution of Notes originally issued to reflect any name change of the Company. The Trustee may appoint an authenticating agent ("Authenticating Agent") reasonably acceptable to the Company and the Guarantor to authenticate Notes. Unless otherwise provided -13- in the appointment, an Authenticating Agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such Authenticating Agent. An Authenticating Agent has the same rights as an Agent to deal with the Company, the Guarantor and Affiliates of the Company and the Guarantor. The Trustee hereby appoints The First National Bank of Chicago to be the Authenticating Agent on the Issuance Date. The Notes shall be issuable only in denominations of $1,000 and any multiple thereof. The Global Notes shall be in bearer form without coupons and the Definitive Notes shall be in registered form. SECTION 2.3 Exchange Agent and Paying Agent. The Company shall maintain (a) an office or agency in the United States, where (a) Global Notes may be presented or surrendered for transfer or for exchange pursuant to Section 2.6 (the "Exchange Agent"), (b) Global Notes may be presented or surrendered for payment ("Paying Agent") and (c) notices and demands in respect of such Global Notes and this Indenture may be served. In the event that Definitive Notes are issued, (x) Definitive Notes may be presented or surrendered for registration of transfer or for exchange, (y) Definitive Notes may be presented or surrendered for payment and (z) notices and demands in respect of the Definitive Notes and this Indenture may be served at an office of the Exchange Agent or the Paying Agent, as applicable, in the Borough of Manhattan, The City of New York. In the event that Definitive Notes are issued, the Exchange Agent shall keep a register of the Notes and of their transfer and exchange. The Company, upon notice to the Trustee, may have one or more co-Exchange Agents and one or more additional Paying Agents reasonably acceptable to the Trustee. The term "Exchange Agent" includes any co-Exchange Agent and the term "Paying Agent" includes any additional Paying Agent. The Company is initially appointing First Chicago Trust Company of New York as Exchange Agent and Paying Agent pursuant to the Paying Agent Agreement dated as of June 26, 1998, among the Company, the Guarantor and the Paying Agent (the "Paying Agent Agreement") until such time as First Chicago Trust Company of New York has resigned or a successor has been appointed. The Company may change any Exchange Agent or Paying Agent without notice to any Holder. The Company may appoint the Guarantor to act as Exchange Agent or Paying Agent, except that for purposes of a redemption pursuant to paragraph 7 and 8 of the Notes, none of the Company, the Guarantor and any Affiliate of the Company or Guarantor, may act as Paying Agent. If Definitive Notes are issued, the Company will appoint Kredietbank S.A. Luxembourgeoise, or such other Person located in Luxembourg and reasonably acceptable to the Trustee, as an additional paying and transfer agent. Upon the issuance of Definitive Notes, Holders will be able to receive principal, premium, if any, interest and Additional Amounts, if any, on the Notes and will be able to transfer Definitive Notes at the Luxembourg office of such paying and transfer agent, -14- subject to the right of the Company or the Guarantor to mail payments in accordance with the terms of this Indenture. In all circumstances, the Company shall ensure that the Paying Agent shall be located outside the United Kingdom. SECTION 2.4 Paying Agent To Hold Assets in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that each Paying Agent shall hold in trust for the benefit of Holders or the Trustee all assets held by the Paying Agent for the payment of principal, premium, if any, interest and Additional Amounts, if any, on the Notes, and shall notify the Trustee of any Default by the Company in making any such payment. The Company at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to distribute all assets held by it to the Trustee and to account for any assets distributed. Upon distribution to the Trustee of all assets that shall have been delivered by the Company to the Paying Agent, the Paying Agent shall have no further liability for such assets. SECTION 2.5 List of Holders. In the event Definitive Notes are issued, the Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Exchange Agent, the Company shall furnish to the Trustee before each Record Date and at such other times as the Trustee may request in writing a list as of such date and in such form as the Trustee may reasonably require of the names and addresses of Holders, which list may be conclusively relied upon by the Trustee. SECTION 2.6 Transfer and Exchange. (a) The following procedures and restrictions shall not apply with respect to Notes of a particular tranche transferred or exchanged for the account of a Person who is not an Affiliate of the Company at the time of the transfer or exchange and has not been an Affiliate during the preceding three months, provided a period of at least two years has elapsed since the later of the date the Notes of such tranche were acquired from the Company or from an Affiliate of the Company. (i) Notwithstanding any other provisions of this Indenture or the Notes, transfers and exchanges, of any whole or part of a Global Note of the kinds described in clauses (1), (2), (3), (4) and (5) below and exchanges of any whole or part of Global Notes or of other Notes as described in clause (6) below, shall be made only in accordance with this Section 2.6(a), and all transfers of any whole or part of Regulation S Global Notes, if any, shall comply with clause (7) below. (1) Transfers of U.S. Global Note to Regulation S Global Note During the Restricted Period. If the Holder of a -15- U.S. Global Note of a particular tranche wishes at any time during the Restricted Period to transfer, in whole or in part, a portion of such Note to the applicable Regulation S Global Note, such transfer may be effected, subject to the rules and procedures of DTC, the Euroclear Operator and Cedel, to the extent applicable (the "Applicable Procedures"), only in accordance with the provisions of this Section 2.6(a)(i)(1). Upon receipt by the Trustee of a certificate in substantially the form set forth in Exhibit E, the Trustee shall present the relevant Global Notes to the Company or its agent to reduce the principal amount of the applicable U.S. Global Note and to increase the principal amount of the applicable Regulation S Global Note, by the principal amount of the portion of the U.S. Global Note to be so transferred, by annotation thereon. (2) Transfers of U.S. Global Note to Regulation S Global Note After the Expiration of the Restricted Period. If the Holder of a U.S. Global Note of a particular tranche wishes at any time after the expiration of the Restricted Period to transfer, in whole or in part, a portion of such Note to the applicable Regulation S Global Note, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 2.6(a)(i)(2). Upon receipt by the Trustee of a certificate in substantially the form set forth in Exhibit F, the Trustee shall present the relevant Global Notes to the Company or its agent to reduce the principal amount of the applicable U.S. Global Note, and to increase the principal amount of the applicable Regulation S Global Note, by the principal amount of the portion of the U.S. Global Notes to be so transferred, by annotation thereon. (3) Transfers of Regulation S Global Note to U.S. Global Note During the Restricted Period; Transfers of Regulation S Global Note to U.S. Global Note After Restricted Period. (a) If the Holder of a Regulation S Global Note of a particular tranche wishes at any time during the Restricted Period to transfer, in whole or in part, a portion of such Note to the applicable U.S. Global Note, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 2.6(a)(i)(3)(a). Upon receipt by the Trustee with respect to a transfer of such Regulation S Global Note during the Restricted Period (but not after the expiration of the Restricted Period) of a certificate in substantially the form set forth in Exhibit G-1, the Trustee shall present the relevant Global Notes to the Company or its agent to reduce the principal amount of the applicable Regulation S Global Note, and to increase the principal amount of the applicable U.S. Global Notes, by the principal amount of the portion of the Regulation S Global Note to be so transferred, by annotation thereon. (b) If the Holder of a Regulation S Global Note of a particular tranche wishes at any time after the expiration of the Restricted Period to transfer, in whole or in part, a portion of such Note to the applicable U.S. Global Note, such transfer may -16- be effected, subject to the Applicable Procedures, only in accordance with this Section 2.6(a)(i)(3)(b). Upon receipt by the Trustee of a certificate in substantially the form set forth in Exhibit G-2, the Trustee shall present the relevant Global Notes to the Company or its agent to reduce the principal amount of the applicable Regulation S Global Note, and to increase the principal amount of the applicable U.S. Global Note, by the principal amount of the portion of the Regulation S Global Note to be so transferred, by annotation thereon. (4) Exchanges of U.S. Global Note for Regulation S Global Note. If the Holder of a U.S. Global Note of a particular tranche wishes at any time to exchange, in whole or in part, a portion of such Note to the applicable Regulation S Global Note, such exchange may be effected, subject to the Applicable Procedures, only in accordance with the provisions of this Section 2.6(a)(i)(4). Upon receipt by the Trustee of a certificate in substantially the form set forth in Exhibit H, the Trustee shall present the relevant Global Notes to the Company or its agent to reduce the principal amount of the applicable U.S. Global Note, and to increase the principal amount of the applicable Regulation S Global Note, by the principal amount of the portion of the U.S. Global Note to be so exchanged, by annotation thereon. (5) Exchanges of Regulation S Global Note for U.S Global Note. If the Holder of a Regulation S Global Note of a particular tranche wishes at any time to exchange, in whole or in part, a portion of such Note to the applicable U.S. Global Note, such exchange may be effected, subject to the Applicable Procedures, only in accordance with the provisions of this Section 2.6(a)(i)(5). Upon receipt by the Trustee of a certificate in substantially the form set forth in Exhibit I, the Trustee shall present the relevant Global Notes to the Company or its agent to reduce the principal amount of the applicable Regulation S Global Note, and to increase the principal amount of the applicable U.S. Global Note, by the principal amount of the portion of the Regulation S Global Note to be so exchanged, by annotation thereon. (6) Other Exchanges. In the event that any Global Note or any portion thereof is exchanged for Notes in definitive form pursuant to Section 2.6(c) hereof, such Definitive Notes may in turn be exchanged (on transfer or otherwise) for other Definitive Notes and only in accordance with such procedures, which shall be substantially consistent with the provisions of clauses (1) through (5) above and (7) below (including the certification requirements intended to ensure that transfers and exchanges of portions of a Note comply with Rule 144A or Regulation S, as the case may be) and any Applicable Procedures, as may from time to time be adopted by the Company and the Exchange Agent. -17- (7) Interests in Regulation S Global Note to be Held Through the Euroclear Operator or Cedel. Until the expiration of the Restricted Period, interests in a Regulation S Global Note may be held only through the Euroclear Operator and Cedel. (ii) Each U.S. Note issued hereunder shall, upon issuance, bear the legend set forth on the form of the Note attached hereto as Exhibit A, B, C and D and such legend shall not be removed from such Note except as provided in the next sentence. The legend required for a U.S. Note of a particular tranche may be removed from such U.S. Note if there is delivered to the Company such satisfactory evidence, which may include an opinion of independent U.S. counsel, as may be reasonably required by the Company, that neither such legend nor the restrictions on transfer set forth therein are required to ensure that transfers of such Note will not violate the registration requirements of the Securities Act. Upon provision of such satisfactory evidence, the Trustee, at the direction of the Company, shall authenticate and deliver in exchange for such Note another Note or Notes having an equal aggregate principal amount that does not bear such legend. If such a legend required for a U.S. Note has been removed from a U.S. Note as provided above, no other Note issued in exchange for all or any part of such Note shall bear such legend, unless the Company has reasonable cause to believe that such other Note is a "restricted security" within the meaning of Rule 144 and instructs the Trustee to cause a legend to appear thereon. (b) Transfer of any Global Note shall be by delivery. Each Global Note of a tranche authenticated under this Indenture shall be in bearer form and it is understood that such Global Note will initially be delivered to the Depositary or a nominee or custodian therefor, and each such Global Note of such tranche shall constitute a single Note for all purposes of this Indenture. (c) All Global Notes of a particular tranche shall be exchanged by the Company (with authentication by the Trustee) for one or more Definitive Notes of the same tranche free of charge, substantially in the form of Exhibit B (in respect of Tranche A Notes) or Exhibit D (in respect of Tranche B Notes), if, for such tranche of Notes, (a) DTC (i) has notified the Company that it is unwilling or unable to continue as, or ceases to be, a clearing agency registered under the Exchange Act and (ii) a successor to DTC registered as a clearing agency under the Exchange Act is not able to be appointed by the Company within 90 days of such notification, (b) for so long as the Depositary is the Holder, such circumstances as set out in Section 2.4 of the Depositary Agreement have occurred or (c) at any time at the option of the Company. If an Event of Default with respect to a particular tranche of Notes occurs and is continuing, the Company shall, at the request of the Holder thereof, exchange all or part of a Global Note of such tranche for one or more Definitive Notes of the same tranche (with authentication by the Trustee), -18- substantially in the form of Exhibit B (in respect of Tranche A Notes) or Exhibit D (in respect of Tranche B Notes); provided, however, that the principal amount at maturity of such Definitive Notes and such Global Note after such exchange shall be $1,000 or multiples thereof. Whenever all of a Global Note is exchanged for one or more Definitive Notes, it shall be surrendered by the Holder thereof to the Trustee for cancellation. Whenever a part of a Global Note is exchanged for one or more Definitive Notes the Global Note shall be surrendered by the Holder thereof to the Trustee who shall cause an adjustment to be made to Schedule A of such Global Note such that the principal amount of such Global Note will be equal to the portion of such Global Note not exchanged and shall thereafter return such Global Note to such Holder. All Definitive Notes issued in exchange for a Global Note or any portion thereof shall be registered in such names as the Depositary shall instruct the Trustee based on the instructions of DTC. Every Note authenticated and delivered in exchange for or in lieu of a Global Note, or any portion thereof, pursuant to Section 2.6(a), 2.7, 2.10 or 3.7 hereof or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for a Definitive Note other than as provided in this Section 2.6(c). (d) Definitive Notes of a particular tranche shall be transferable only upon the surrender of a Definitive Note of the same tranche for registration of transfer. When a Definitive Note is presented to the Exchange Agent or a co-Exchange Agent with a request to register a transfer, the Exchange Agent shall register the transfer as requested if its requirements for such transfers are met. When Definitive Notes are presented to the Exchange Agent or a co-Exchange Agent with a request to exchange them for an equal principal amount of Definitive Notes of other denominations, the Exchange Agent shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Company and the Guarantor shall execute and the Trustee shall authenticate Definitive Notes at the Exchange Agent's or co-Exchange Agent's request. (e) The Company shall not be required to make, and the Exchange Agent need not register transfers or exchanges of, Definitive Notes selected for redemption (except, in the case of Definitive Notes to be redeemed in part, the portion thereof not to be redeemed) for a period of 15 days before a selection of Definitive Notes to be redeemed. (f) Prior to the due presentation for registration of transfer of any Definitive Note, the Company, the Guarantor, the Trustee, the Paying Agent, the Exchange Agent or any co-Exchange Agent may deem and treat the Person in whose name a Definitive Note is registered as the absolute owner of such Definitive Note for the purpose of receiving payment of principal, premium, if any, interest and Additional Amounts, if any, on such Definitive Note and for all other purposes whatsoever, whether or not such -19- Definitive Note is overdue, and none of the Company, the Guarantor, the Trustee, the Paying Agent, the Exchange Agent or any co-Exchange Agent shall be affected by notice to the contrary. (g) The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section 2.6. (h) All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture will evidence the same debt (including the Guarantee of the Guarantor) and will be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange. (i) Holders of Notes (or holders of interests therein) and prospective purchasers designated by such Holders (or holders of interests therein) will have the right to obtain from the Company and the Guarantor upon request by such Holders (or holders of interests therein) or prospective purchasers, during any period in which the Guarantor is not subject to Section 13 or 15(d) of the Exchange Act, or is exempt from reporting pursuant to 12g3-2(b) under the Exchange Act, the information required by paragraph d(4)(i) of Rule 144A in connection with any transfer or proposed transfer of such Notes. SECTION 2.7 Replacement Notes. If a mutilated Definitive Note is surrendered to the Exchange Agent, if a mutilated Global Note is surrendered to the Company or if the Holder of a Note claims that such Note has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Note (including the Guarantor's Guarantee) in such form as the Note being replaced if the requirements of the Trustee, the Exchange Agent, the Company and the Guarantor are met. If required by the Trustee, the Exchange Agent, the Company or the Guarantor, such Holder must provide an indemnity bond or other indemnity, sufficient in the judgment of the Company, the Guarantor, the Exchange Agent and the Trustee, to protect the Company, the Guarantor, the Trustee and any Agent from any loss which any of them may suffer if a Note is replaced. The Company, the Guarantor and the Trustee may charge such Holder for its reasonable, out-of-pocket expenses in replacing a Note, including reasonable fees and expenses of counsel. Every replacement Note is an additional obligation of the Company guaranteed by the Guarantor. SECTION 2.8 Outstanding Notes. Notes outstanding at any time of a particular tranche are all the Notes of such tranche that have been authenticated by the Trustee except those cancelled by it, those delivered to it for cancellation, those reductions in the Global Note of such tranche effected in accordance with the provisions hereof and those described in this Section as not outstanding. Subject to Section 2.9, a Note does -20- not cease to be outstanding because the Company, the Guarantor or any of its Affiliates holds the Note. If a Note is replaced pursuant to Section 2.7 (other than a mutilated Note surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.7. If the principal amount of any Note is considered paid under Section 4.1 hereof, it ceases to be outstanding and interest and Additional Amounts, if any, on it cease to accrue. If on a Redemption Date or the Maturity Date of a particular tranche the Paying Agent holds cash in U.S. dollars or Government Securities sufficient to pay all of the principal, premium, if any, interest and Additional Amounts, if any, due on the Notes of such tranche payable on that date, then on and after that date such Notes cease to be outstanding and interest and Additional Amounts, if any, on such Notes cease to accrue. SECTION 2.9 Treasury Notes. In determining whether the Holders of the required principal amount of Notes of a particular tranche have concurred in any direction, waiver or consent, Notes of such tranche owned by the Company or its Affiliates shall be disregarded, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes of such tranche that the Trustee actually knows are so owned shall be disregarded. The Company shall notify the Trustee, in writing, when it or any of its Affiliates repurchases or otherwise acquires Notes, of the aggregate principal amount of such Notes so repurchased or otherwise acquired. The Trustee may require an Officers' Certificate listing Notes owned by the Company, a Subsidiary of the Company or an Affiliate of the Company. SECTION 2.10 Temporary Notes. Until permanent Definitive Notes of a particular tranche are ready for delivery, the Company and the Guarantor may prepare and the Trustee shall authenticate temporary Definitive Notes of such tranche upon receipt of a Company Order and Guarantor Order each in the form of an Officers' Certificate. Each Officers' Certificate shall specify the amount of temporary Definitive Notes of a particular tranche to be authenticated and the date on which the temporary Definitive Notes of such tranche are to be authenticated. Temporary Definitive Notes of a particular tranche shall be substantially in the form of permanent Definitive Notes of such tranche but may have variations that the Company or the Guarantor considers appropriate for temporary Definitive Notes of such tranche. Without unreasonable delay, the Company and the Guarantor shall prepare and the Trustee shall authenticate upon -21- receipt of a Company Order and Guarantor Order pursuant to Section 2.2 permanent Definitive Notes of a particular tranche in exchange for temporary Definitive Notes of such tranche. SECTION 2.11 Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Exchange Agent and the Paying Agent shall forward to the Trustee any Notes surrendered to them for transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Exchange Agent or the Paying Agent, and no one else, shall cancel and, at the written direction of the Company, shall dispose of (subject to the record retention requirements of the Exchange Act) all Notes surrendered for transfer, exchange, payment or cancellation; provided, however, that the Trustee may, but shall not be required to, destroy such cancelled Notes. Subject to Section 2.7, the Company may not issue new Notes to replace Notes that it has paid or delivered to the Trustee for cancellation. If the Company shall acquire any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the Debt represented by such Notes unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11. SECTION 2.12 Defaulted Interest. If the Company defaults in a payment of interest on the Tranche A Notes or the Tranche B Notes, it shall pay the defaulted interest of such Notes, plus (to the extent lawful) any interest payable on the defaulted interest to the Holder thereof. The Company shall notify the Trustee and Paying Agent in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment (a "Default Interest Payment Date"), and at the same time the Company shall deposit with the Trustee or Paying Agent an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee or Paying Agent for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such defaulted interest as in this Section 2.12; provided, however, that in no event shall the Company deposit monies proposed to be paid in respect of defaulted interest later than 11:00 a.m. New York City time on the proposed Default Interest Payment Date. At least 30 days before the Default Interest Payment Date, the Company shall mail to each Holder of Notes of the applicable tranche and publish in a leading newspaper having a general circulation in New York (which is expected to be the Wall Street Journal) (and so long as the Tranche A Notes or the Tranche B Notes, as applicable, are listed on the Luxembourg Stock Exchange and the rules of such Luxembourg Stock Exchange shall so require, a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort)) or, in the case of Definitive Notes of a particular tranche, mail by first-class mail to each Holder's registered address (and, so long as the Tranche A Notes or the Tranche B Notes are listed on the Luxembourg Stock Exchange and -22- the rules of such Stock Exchange shall so require, publish in a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort)), with a copy to the Trustee, a notice that states the Default Interest Payment Date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. SECTION 2.13 CUSIP and CINS Number. The Company in issuing the Tranche A and the Tranche B Notes may use a "CUSIP" or "CINS" number, and if so, the Trustee shall use the CUSIP and CINS number in notices of redemption or exchange as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP and CINS number printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. The Company shall promptly notify the Trustee of any change in the CUSIP or CINS number. SECTION 2.14 Deposit of Moneys. Prior to 11:00 a.m. New York City time on each Interest Payment Date and Maturity Date, the Company shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date or Maturity Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such Interest Payment Date or Maturity Date, as the case may be. SECTION 2.15 Certain Matters Relating to Global Notes. (a) For the avoidance of doubt, members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary, or the Trustee as its custodian, or under the Global Note, and the Depositary for so long as it is Holder may be treated by the Company, the Guarantor, the Trustee and any agent of the Company, the Guarantor or the Trustee as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Guarantor, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note. (b) The Holder of any Global Note of a particular tranche may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes of that tranche. -23- ARTICLE III REDEMPTION SECTION 3.1 Optional Redemption. The Company may redeem all or any portion of the Notes of a particular tranche, upon the terms and at the Redemption Prices set forth in each of the Notes of that tranche. The Guarantor may redeem all of the Notes of a particular tranche upon the terms and at the Redemption Prices set forth in the Notes of that tranche. Any redemption pursuant to this Section 3.1 shall be made pursuant to the provisions of this Article III. SECTION 3.2 Election to Redeem; Notice to Trustee. The election of the Company or the Guarantor to redeem any Notes of a particular tranche shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company of less than all of the Notes of a particular tranche, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee) notify the Trustee by Company Order of such Redemption Date, the Redemption Price (or if the Redemption Price is not calculable at such time, the formula for calculating such price) and of the principal amount of Notes of such tranche to be redeemed and shall deliver to the Trustee such documentation and records as shall enable such Trustee to select the Notes of such tranche to be redeemed pursuant to Section 3.3; provided, however, that if the Redemption Price is not calculable at the time such notice is sent, the Company shall notify the Trustee promptly at such time such Redemption Price is calculable. In any case of redemption of Notes of a particular tranche pursuant to Section 8 of the Notes of such tranche, prior to any Notice of redemption given pursuant to Section 3.4, the Company or the Guarantor, as the case may be, shall deliver to the Trustee an opinion of tax counsel reasonably satisfactory to the Trustee to the effect that the circumstances referred to in Section 8 in such Note exist. SECTION 3.3 Selection by Trustee of Notes to Be Redeemed. If less than all the Notes of a particular tranche are to be redeemed, the Trustee may select the particular Notes of such tranche to be redeemed not more than 60 days prior to the Redemption Date for such Notes, from the outstanding Notes of such tranche not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for such Notes, or any multiple thereof) of the principal amount of Notes of such tranche of a denomination larger than the minimum authorized denomination for such Notes. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of -24- any Notes selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Notes of a particular tranche shall relate, in the case of any Note of a particular tranche redeemed or to be redeemed only in part, to the portion of the principal amount of such Notes which has been or is to be redeemed. SECTION 3.4 Notice of Redemption. Notice of redemption of a particular tranche of Notes shall be mailed to the Holders by first-class mail and given in the manner provided in Section 12.3 not later than the thirtieth day and not earlier than the sixtieth day prior to the Redemption Date, to each Holder of Notes of the relevant tranche to be redeemed. All notices of redemption shall state: (a) the Redemption Date; (b) the Redemption Price if such price is calculable at the time such notice is sent or, if not, the formula for calculating such price; provided, however, that notice of the Redemption Price shall be mailed to the Holders by first-class mail and given in the manner provided in Section 12.3 promptly after such price is calculable; (c) if less than all outstanding Notes of a particular tranche are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the particular Notes such tranche to be redeemed; (d) the place or places where such Notes are to be surrendered for payment of the Redemption Price; (e) the name and address of the Paying Agent; (f) that Notes of a particular tranche called for redemption must be surrendered to the Paying Agent to collect the Redemption Price plus accrued and unpaid interest, if any, and Additional Amounts, if any; (g) that, unless the Company or the Guarantor defaults in making the redemption payment, interest and Additional Amounts, if any, on Notes of a particular tranche called for redemption ceases to accrue on and after the Redemption Date, and the only remaining right of the Holders of such Notes of such tranche is to receive payment of the Redemption Price upon surrender to the Paying Agent of the Notes of such tranche redeemed; -25- (h) (i) if any Global Note of a particular tranche is being redeemed in part, the portion of the principal amount of such Note of such tranche to be redeemed and that, after the Redemption Date, interest and Additional Amounts, if any, shall cease to accrue on the portion called for redemption, and upon surrender of such Global Note of such tranche, the Global Note of such tranche with a notation on Schedule A thereof adjusting the principal amount thereof to be equal to the unredeemed portion, will be returned and (ii) if any Definitive Note of a particular tranche is being redeemed in part, the portion of the principal amount of such Note of such tranche to be redeemed, and that, after the Redemption Date, upon surrender of such Definitive Note of such tranche, a new Definitive Note or Notes of such tranche in aggregate principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof, upon cancellation of the original Note of such tranche; (i) the paragraph of the Notes pursuant to which the Notes of a particular tranche are to be redeemed; and (j) the CUSIP or CINS number, and that no representation is made as to the correctness or accuracy of the CUSIP or CINS number, if any, listed in such notice or printed on the Notes of such tranche. If at the time a notice of redemption is being made to Holders of Notes of a particular tranche pursuant to this Section 3.4, Notes of such tranche are listed on the Luxembourg Stock Exchange, and so long as the rules of the Luxembourg Stock Exchange so require, the Company or the Guarantor, as the case may be, shall also cause a notice of redemption to be published in a leading daily newspaper of general circulation in Luxembourg (which is expected to be the Luxemburger Wort), at least 30 days but not more than 60 days before the Redemption Date. SECTION 3.5 Effect of Notice of Redemption. Once notice of redemption is given in accordance with Section 3.4, Notes of a particular tranche called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon surrender to the Trustee or Paying Agent, such Notes of such tranche called for redemption shall be paid at the Redemption Price, but installments of interest, the maturity of which is on or prior to the Redemption Date, shall be payable to Holders on the relevant Interest Payment Date, or, in the case of Definitive Notes, Holders of record at the close of business on the relevant Record Dates. SECTION 3.6 Deposit of Redemption Price. Prior to 11:00 a.m. New York City time on the Redemption Date, the Company or the Guarantor, as the case may be, shall deposit with the Paying Agent, in immediately available funds, U.S. dollars sufficient to pay the Redemption Price of all Notes of a -26- particular tranche to be redeemed on that date. The Paying Agent shall promptly return to the Company or the Guarantor, as the case may be, any cash in U.S. dollars so deposited which is not required for that purpose upon the written request of the Company or the Guarantor, as the case may be. If the Company or the Guarantor, as the case may be, complies with the preceding paragraph, then, unless the Company or the Guarantor defaults in the payment of such Redemption Price on the Notes of a particular tranche to be redeemed will cease to accrue on and after the applicable Redemption Date, whether or not such Notes of such tranche are presented for payment. With respect to Definitive Notes of a particular tranche, if a Definitive Note of such tranche is redeemed on or after an interest Record Date but on or prior to the related Interest Payment Date, then any accrued and unpaid interest and Additional Amounts, if any, shall be paid to the Person in whose name such Note of such tranche was registered at the close of business on such Record Date. If any Note of a particular tranche called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company or the Guarantor to comply with the preceding paragraph, interest and Additional Amounts, if any, shall be paid on the unpaid principal (or premium, if any), from the Redemption Date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.1. SECTION 3.7 Notes Redeemed in Part. Upon surrender and cancellation of a Definitive Note of a particular tranche that is redeemed in part, the Company and the Guarantor shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Definitive Note of such tranche equal in principal amount to the unredeemed portion of the Definitive Note surrendered and cancelled; provided, however, that each such Definitive Note shall be in a principal amount at maturity of $1,000 or a multiple thereof. Upon surrender of a Global Note of a particular tranche that is redeemed in part, the Paying Agent shall forward such Global Note to the Trustee who shall make a notation on Schedule A thereof to reduce the principal amount of such Global Note to an amount equal to the unredeemed portion of the Global Note surrendered; provided, however, that each such Global Note shall be in a principal amount at maturity of $1,000 or a multiple thereof. SECTION 3.8 Applicability of This Article. Redemption of Notes of a particular tranche as permitted or required by any form of Note of such tranche issued pursuant to this Indenture shall be made in accordance with such form of Note and this Article, provided, however, that if any provision of any such form of Note shall conflict with any provision of this Article, the provision of such form of Note shall govern. -27- ARTICLE IV COVENANTS SECTION 4.1 Payment of Notes. The Company shall promptly pay the principal, premium, if any, interest and Additional Amounts, if any, on the Tranche A Notes on the dates and in the manner provided in the Tranche A Notes. The Company shall promptly pay the principal, premium, if any, interest and Additional Amounts, if any, on the Tranche B Notes on the dates and in the manner provided in the Tranche B Notes. Except in the case that the Guarantor or any Affiliate of the Guarantor is the Paying Agent, the Company may satisfy its obligations under the preceding sentences by making payment to the Paying Agent. To the extent lawful, the Company or the Guarantor shall pay interest on overdue principal at the rate borne by the Tranche A Notes and shall pay interest on overdue installments of interest at the same rate. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months and, in the case of an incomplete month, the number of days elapsed, the amount of interest payable on the Tranche A Notes for any period to be equal to the product of (i) the principal amount of the Tranche A Notes outstanding during such period, (ii) the stated rate of interest per annum (expressed as a decimal fraction) payable on the Tranche A Notes and (iii) a fraction, the numerator of which is the total number of full months elapsed in such period multiplied by 30, plus the number of days in an incomplete month during which such Tranche A Notes were outstanding, and the denominator of which is 360. To the extent lawful, the Company or the Guarantor shall pay interest on overdue principal at the rate borne by the Tranche B Notes and shall pay interest on overdue installments of interest at the same rate. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months and, in the case of an incomplete month, the number of days elapsed, the amount of interest payable on the Tranche B Notes for any period to be equal to the product of (i) the principal amount of the Tranche B Notes outstanding during such period, (ii) the stated rate of interest per annum (expressed as a decimal fraction) payable on the Tranche B Notes and (iii) a fraction, the numerator of which is the total number of full months elapsed in such period multiplied by 30, plus the number of days in an incomplete month during which such Tranche B Notes were outstanding, and the denominator of which is 360. SECTION 4.2 Maintenance of Office or Agency. The Company shall maintain the office or agency (which office may be an office of the Trustee or an affiliate of the Trustee, Exchange Agent or co-Exchange Agent) required under Section 2.3 where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in -28- respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 12.2. SECTION 4.3 Limitation on Liens. (a) The Guarantor will not, and will not permit any Subsidiary to, directly or indirectly, as security for any Debt, mortgage, pledge or create or permit to exist any lien on any shares of stock, indebtedness or other obligations of a Subsidiary or any Principal Property, whether such shares of stock, indebtedness or other obligations of a Subsidiary or Principal Property are owned at the date of this Indenture or hereafter acquired, unless the Company or the Guarantor secures or causes to be secured any outstanding Notes equally and ratably with all Debt secured by such mortgage, pledge or lien, so long as that Debt shall be secured; provided, however, that this covenant shall not apply in the case of (i) the creation of any mortgage, pledge or other lien on any shares of stock, indebtedness or other obligations of a Subsidiary or a Principal Property hereafter acquired (including acquisitions by way of merger or consolidation) by the Guarantor or a Subsidiary contemporaneously with such acquisition, or within 120 days thereafter, to secure or provide for the payment or financing of any part of the purchase price thereof, or the assumption of any mortgage, pledge or other lien upon any shares of stock, indebtedness or other obligations of a Subsidiary or a Principal Property hereafter acquired existing at the time of such acquisition, or the acquisition of any shares of stock, indebtedness or other obligations of a Subsidiary or a Principal Property subject to any mortgage, pledge or other lien without the assumption thereof, provided that any mortgage, pledge or lien referred to in this clause (i) shall attach only to the shares of stock, indebtedness or other obligations of a Subsidiary or a Principal Property so acquired and fixed improvements thereon; (ii) any mortgage, pledge or other lien on any shares of stock, indebtedness or other obligations of a Subsidiary or a Principal Property existing on the date that the Notes are first issued; (iii) any mortgage, pledge or other lien on any shares of stock, indebtedness or other obligations of a Subsidiary or a Principal Property in favor of the Company, the Guarantor or any other Subsidiary; (iv) any mortgage, pledge or other lien on a Principal Property being constructed or improved securing Debt incurred to finance the construction or improvements; (v) any mortgage, pledge or other lien on shares of stock, indebtedness or other obligations of a Subsidiary or a Principal Property incurred in connection with the issuance by a state or political subdivision thereof of any securities the interest on which is exempt from Federal income taxes by virtue of Section 103 of the United States Internal Revenue Code of 1986, as amended, or any other laws and regulations in effect at -29- the time of such issuance; and (vi) any renewal of or substitution for any mortgage, pledge or other lien permitted by any of the preceding clauses (i) through (v), provided, in the case of a mortgage, pledge or other lien permitted under clause (i), (ii) or (iv), the Debt secured is not increased nor the line extended to any additional assets. (b) Notwithstanding the provisions of paragraph (a) of this Section 4.3, the Guarantor or any Subsidiary may create or assume liens in addition to those permitted by paragraph (a) of this Section 4.3, and renew, extend or replace such liens, provided, that at the time of such creation, assumption, renewal, extension or replacement, and after giving effect thereto, Exempted Debt does not exceed 10% of Consolidated Net Tangible Assets. SECTION 4.4 Limitation on Sale-Leaseback Transactions. (a) The Guarantor will not, and will not permit, any Subsidiary to, sell or transfer, directly or indirectly, except to the Guarantor or a Subsidiary, a Principal Property as an entirety, or any substantial portion thereof, with the intention of taking back a lease of all or part of such property except a lease for a period of three years or less at the end of which it is intended that the use of such property by the lessee will be discontinued; provided that, notwithstanding the foregoing, the Guarantor or any Subsidiary may sell a Principal Property and lease it back for a longer period (i) if the Guarantor or such Subsidiary would be entitled, pursuant to the provisions of Section 4.3(a), to create a mortgage on the property to be leased securing Debt in an amount equal to the Attributable Debt with respect to the sale and lease-back transaction without equally and ratably securing the outstanding Notes or (ii) if (A) the Guarantor promptly informs the Trustee of such transactions, (B) the net proceeds of such transactions are at least equal to the fair value (as determined by a Board Resolution) of such property and (C) the Guarantor causes an amount equal to the net proceeds of the sale to be applied to the retirement (whether by redemption, cancellation after open-market purchases, or otherwise), within 120 days after receipt of such proceeds, of Funded Debt and having an outstanding principal amount equal to the net proceeds. (b) Notwithstanding the provisions of paragraph (a) of this Section 4.4, the Guarantor or any Subsidiary may enter into sale and lease-back transactions in addition to those permitted by paragraph (a) of this Section 4.4 and without any obligation to retire any outstanding Funded Debt, provided that at the time of entering into such sale and lease-back transactions and after giving effect thereto, Exempted Debt does not exceed 10% of Consolidated Net Tangible Assets. SECTION 4.5 No Lien Created, etc. This Indenture and the Notes do not create a lien, charge or encumbrances on any property of the Company, the Guarantor or any Subsidiary. -30- SECTION 4.6 Compliance Certificate; Notice of Default. (a) The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate signed by the principal executive officer, principal financial officer or principal accounting officer of the Company stating whether or not the signers know of any Default or Event of Default. If they know of a Default or Event of Default, the certificate shall describe the Default or Event of Default. The certificate need not comply with Section 12.4 (b) The Guarantor shall deliver to the Trustee within 120 days after the end of each fiscal year of the Guarantor an Officers' Certificate signed by the principal executive officer, principal financial officer or principal accounting officer of the Guarantor stating whether or not the signers know of any Default or Event of Default. If they know of a Default or Event of Default, the certificate shall describe the Default or Event of Default. The certificate need not comply with Section 12.4. SECTION 4.7 Reports. (a) The Company shall comply with the provisions of Section 314(c) of the TIA. (b) The Guarantor shall file with the Trustee within 15 days after it files them with the Commission copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe) which the Guarantor is required to file with the Commission pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934. The Guarantor also shall comply with the other provisions of Section 314(a) of the Trust Indenture Act. (c) Such reports shall be delivered to the Exchange Agent and, after the issuance of Definitive Notes, the Exchange Agent will mail them at the Company's expense to the Holders at their addresses appearing in the register of Notes maintained by the Exchange Agent. SECTION 4.8 Payment of Certain Non-Income Taxes and Similar Charges. The Company will pay any present or future stamp, court or documentary taxes, or any other excise or property taxes, charges or similar levies which arise in any jurisdiction from the execution, delivery or registration of the Notes or any other document or instrument referred to therein, or the receipt of any payments with respect to the Notes, excluding any such taxes, charges or similar levies imposed by any jurisdiction outside the United Kingdom, the United States of America or any jurisdiction in which a Paying Agent is located, other than those resulting from, or required to be paid in connection with, the enforcement of the Notes of a particular tranche or any other such document or instrument following the occurrence of any Event of Default with respect to the Notes of such tranche. -31- ARTICLE V MERGER, CONSOLIDATION OR SALE BY THE COMPANY AND THE GUARANTOR SECTION 5.1 Merger, Consolidation or Sale of All or Substantially All Assets of the Company. The Company shall not consolidate with or merge into, or transfer, directly or indirectly, all or substantially all of its assets to another corporation or other Person unless (1) the resulting, surviving or transferee corporation or other Person assumes by supplemental indenture all the obligations of the Company under the Notes and this Indenture, (2) immediately after giving effect to such transaction, no Event of Default and no circumstances that, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing, and (3) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture comply with this Indenture, and thereafter all such obligations of the Company shall terminate. SECTION 5.2 Merger, Consolidation or Sale of All or Substantially All Assets of the Guarantor. The Guarantor shall not consolidate with or merge into, or transfer, directly or indirectly, all or substantially all of its assets to another corporation or other Person unless (1) the resulting, surviving or transferee corporation or other Person assumes by supplemental indenture all the obligations of the Guarantor under the Notes and this Indenture, (2) immediately after giving effect to such transaction, no Event of Default and no circumstances that, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing, and (3) the Guarantor shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture comply with this Indenture, and thereafter all such obligations of the Guarantor shall terminate. ARTICLE VI DEFAULT AND REMEDIES SECTION 6.1 Events of Default. An "Event of Default" occurs with respect to the Notes of a particular tranche if: (a) the Company or the Guarantor defaults in the payment of interest or Additional Amounts, if any, on any Note of such tranche, when the same becomes due and payable and the default continues for a period of 30 days; (b) the Company or the Guarantor defaults in the payment of the principal of (or premium on, if any) any Note -32- of such tranche when the same becomes due and payable at maturity, upon redemption or otherwise; (c) the Company or the Guarantor fails to comply with any of its other agreements in the Notes of such tranche or this Indenture for the benefit of such tranche and the default continues for the period and after the notice specified in this Section; (d) the Company, the Guarantor or any Subsidiary fails to pay, in accordance with its terms and when payable, any of the principal, premium, if any, interest or additional amounts, if any, on any Debt (including any tranche of Notes other than the tranche or tranches, if any, with respect to which the failure to pay principal, premium, if any, interest or Additional Amounts is also an "Event of Default" under Section 6.1(a) and/or 6.1(b) above) having, in the aggregate, a then outstanding principal amount in excess of $20,000,000 or the maturity of any Debt in such amount shall have been accelerated by any holder or holders thereof or any trustee or agent acting on behalf of such holder or holders, or any Debt in such amount shall have been required by such holder, holders, trustee or agent to be prepaid prior to the stated maturity thereof, in accordance with the provisions of any contract evidencing, providing for the creation of or concerning such Debt; (e) the Company or the Guarantor pursuant to or within the meaning of any Bankruptcy Law: (1) commences a voluntary case, (2) consents to the entry of an order for relief against it in an involuntary case, (3) consents to the appointment of a Custodian of it or for all or substantially all of its property, (4) makes a general assignment for the benefit of its creditors, or (5) ceases or suspends generally payments of its debts or announces an intention so to do or is (or is deemed for the purposes of any law applicable to it to be) unable to pay its debts as they fall due, or makes a general assignment for the benefit of or a composition with its creditors generally or a moratorium is declared in respect of any of its indebtedness; (f) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: -33- (1) is for relief against the Company or the Guarantor in an involuntary case, (2) appoints a Custodian of the Company or of the Guarantor or for all or substantially all of the Company's or Guarantor's property, as the case may be, (3) orders the winding up or liquidation of the Company or the Guarantor, or (4) orders any execution of distress in respect of any material liability to be levied against the Company or the Guarantor or an encumbrancer takes possession of the whole or any material part of, the property, undertaking, or assets of the Company or the Guarantor, and the order or decree remains unstayed and in effect for 60 days; or (g) the Guarantee with respect to such tranche of Notes ceases to be in full force and effect or the Guarantor denies or disaffirms its obligations under such Guarantee. The term "Bankruptcy Law" means Title 11, United States Code or any similar Federal or state law for the relief of debtors and the U.K. Insolvency Act 1986 as supplemented or amended together with all rules, regulations and instruments made thereunder and applicable United Kingdom law relating to bankruptcy, insolvency, winding up, administration, receivership and other similar matters. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A default under clause (c) is not an Event of Default with respect to the Notes of a particular tranche until the Trustee or the Holders of at least 25% in principal amount of all the Notes of such tranche notify the Company or the Guarantor (and the Trustee if such notice is given by Holders) of the default and the Company or the Guarantor, as the case may be, does not cure the default within 30 days after receipt of the notice. The notice must specify the default, demand that it be remedied and state that the notice is a "Notice of Default." Subject to the provisions of Article VII, the Trustee shall not be charged with knowledge of any default unless written notice thereof shall have been given to the Trustee by the Company, the Guarantor, the Paying Agent, the Holder of a Note of the applicable tranche or an agent of such Holder. -34- SECTION 6.2 Acceleration. If an Event of Default with respect to the Notes of a particular tranche occurs and is continuing, the Trustee by notice to the Company and the Guarantor or the Holders of at least 25% in principal amount of the Notes of such tranche, by notice to the Company, the Guarantor and the Trustee, may declare the principal, premium, if any, accrued interest and Additional Amounts, if any, on all the Notes of such tranche to be due and payable immediately. Upon a declaration such principal, premium, if any, interest and Additional Amounts, if any, shall be due and payable immediately. The Holders of a majority in principal amount of the Notes of a particular tranche by notice to the Trustee may rescind an acceleration (and upon such rescission any past Event of Default caused by such acceleration shall be deemed cured) with respect to the Notes of such tranche and its consequences if all existing Events of Default with respect to the Notes of such tranche have been cured or waived, if the rescission would not conflict with any judgment or decree, and if all payments due to the Trustee and any predecessor Trustee under Section 7.7 have been made. No such rescission shall affect any subsequent Default or impair any rights consequent thereto. SECTION 6.3 Other Remedies. If an Event of Default with respect to the Notes of a particular tranche occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal, premium, if any, interest and Additional Amounts, if any, on the Notes of such tranche or to enforce the performance of any provision of such Notes, the applicable Guarantees or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. SECTION 6.4 Waiver of Past Defaults. The Holders of a majority in principal amount of the Notes of a particular tranche by notice to the Trustee may waive an existing Default or Event of Default with respect to the Notes of such tranche and its consequences. When a Default or Event of Default is waived, it is cured and stops continuing, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. SECTION 6.5 Control by Majority. The Holders of a majority in principal amount of the Notes of a particular tranche may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on it with respect to the -35- Notes of such tranche. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, or, subject to Section 7.1, that the Trustee determines is unduly prejudicial to the rights of other Holders of the Notes of the same tranche or would involve the Trustee in personal liability. SECTION 6.6 Limitation on Suits. No Holder of a Note of a particular tranche may pursue any remedy with respect to this Indenture or the Notes of such tranche unless: (a) the Holder gives to the Trustee written notice stating that an Event of Default with respect to the Notes of such tranche is continuing; (b) the Holders of at least 25% in principal amount of the Notes of such tranche make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the Notes of such tranche do not give the Trustee a direction inconsistent with the request. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over the other Holder. SECTION 6.7 Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal, premium, if any, interest and Additional Amounts, if any, on the Notes, on or after the respective due dates expressed in the Notes, or to bring suit for the enforcement of any such payment on or after such respective date, shall not be impaired or affected without the consent of the Holder. SECTION 6.8 Collection Suit by Trustee. If an Event of Default in payment of principal, premium, if any, interest or Additional Amounts, if any, specified in Section 6.1(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or the Guarantor for the whole amount of principal, premium, if any, interest and Additional Amounts, if any, remaining unpaid. SECTION 6.9 Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or -36- documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders allowed in any judicial proceedings relative to the Company or the Guarantor, its creditors or its property, and unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions. SECTION 6.10 Priorities. If the Trustee collects any money pursuant to this Article with respect to the Notes of a particular tranche, it shall pay out the money in the following order: First: to the Trustee for amounts due under Section 7.7. Second: to the Holders of Notes of such tranche for amounts due and unpaid on such Notes for principal, premium, if any, interest and Additional Amounts, if any, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal, premium, if any, interest and Additional Amounts, if any, respectively; and Third: to the Company or the Guarantor, as applicable. The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section. SECTION 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit other than the Trustee of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit including the Trustee, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in principal amount of the Notes. ARTICLE VII TRUSTEE SECTION 7.1 Duties of Trustee. (a) If an Event of Default with respect to a particular tranche of Notes known to the Trustee has occurred and is continuing, the Trustee shall, on behalf of the Holders of the Notes of such tranche, exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the -37- conduct of his or her own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under this Indenture at the request of any of the Holders of Notes, unless they shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (b) Except during the continuance of an Event of Default with respect to a particular tranche of Notes known to the Trustee: (i) The Trustee and the Agents will perform only those duties as are specifically set forth herein and no others and no implied covenants or obligations shall be read into this Indenture against the Trustee or the Agents. (ii) In the absence of bad faith on their part, the Trustee and the Agents may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions and such other documents delivered to them pursuant to Section 12.4 hereof furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provision hereof are required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) This paragraph does not limit the effect of paragraph (b) of this Section 7.1. (ii) Neither the Trustee nor any Agent shall be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee or such Agent was negligent in ascertaining the pertinent facts. (iii) The Trustee shall not be liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in principal amount of the outstanding Notes of a particular tranche relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to such Notes; and (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or to take or omit to take any action under this Indenture or take any action at the request or direction of -38- Holders if it shall have reasonable grounds for believing that repayment of such funds is not assured to it or it does not receive an indemnity satisfactory to it in its sole discretion against such risk, liability, loss, fee or expense which might be incurred by it in compliance with such request or direction. (e) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company or the Guarantor. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) Any provision hereof relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.1 and, upon qualification of this Indenture under the TIA, the TIA. SECTION 7.2 Rights of Trustee. Subject to Section 7.1: (a) The Trustee and each Agent may rely conclusively on and shall be protected from acting or refraining from acting based upon any document believed by them to be genuine and to have been signed or presented by the proper person. Neither the Trustee nor any Agent shall be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent order, approval, appraisal, bond, debenture, note, coupon, security or other paper or document, but the Trustee or its Agent, as the case may be, in its discretion, may make reasonable further inquiry or investigation into such facts or matters stated in such document and if the Trustee or its Agent as the case may be, shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company and the Guarantor, at reasonable times during normal business hours, personally or by agent or attorney; (b) any request, direction, order or demand of the Company or Guarantor mentioned herein shall be sufficiently evidenced by (i) a Company Order or Guarantor Order, as the case may be, or an Officers' Certificate and (ii) any resolution of the Board of Directors of the Company or Guarantor may be sufficiently evidenced by a Board Resolution; (c) before the Trustee acts or refrains from acting, it may require, in the absence of bad faith, an Officers' Certificate or an Opinion of Counsel or both, which shall conform to the provisions of Sections 12.4 and 12.5. Neither the Trustee -39- nor any Agent shall be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion; (d) The Trustee and any Agent may act through their attorneys and agents and shall not be responsible for the misconduct or negligence of any agent (other than an agent who is an employee of the Trustee or such Agent) appointed with due care. (e) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers conferred upon it by this Indenture; provided, however, that the Trustee's conduct does not constitute willful misconduct, negligence or bad faith. (f) The Trustee or any Agent may consult with counsel of its selection and the advice or opinion of such counsel or any Opinion of Counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (g) Subject to Section 9.2 hereof, the Trustee may (but shall not be obligated to), without the consent of the Holders, give any consent, waiver or approval required by the terms hereof, but shall not without the consent of the Holders of not less than a majority in aggregate principal amount of the Notes of a particular tranche at the time outstanding (i) give any consent, waiver or approval or (ii) agree to any amendment or modification of this Indenture, in each case, that shall have a material adverse effect on the interests of any Holder of Notes of such tranche. The Trustee shall be entitled to request and conclusively rely on an Opinion of Counsel with respect to whether any consent, waiver, approval, amendment or modification shall have a material adverse effect on the interests of any Holder of Notes of a particular tranche. (h) The Trustee shall not be charged with knowledge of any Event of Default with respect to the Notes of a particular tranche unless either (1) a Trust Officer shall have actual knowledge of such Event of Default or (2) written notice of such Event of Default shall have been given to the Trustee by the Company, the Guarantor or any other obligor on the Notes of such tranche or by any Holder of the Notes of such tranche. (i) The Trustee shall have no duties or responsibilities with respect to and shall have no liability for the actions taken or the failures to act of any other Trustees appointed hereunder. SECTION 7.3 Individual Rights of Trustee. The Trustee in its individual or any other capacity may, subject to Sections 7.10 and 7.11, become the owner or pledgee of Notes and may -40- otherwise deal with the Company, the Guarantor, its Subsidiaries, or their respective Affiliates with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest, as defined by Section 310(b) of the TIA, it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights. SECTION 7.4 Trustee's Disclaimer. The Trustee and the Agents shall not be responsible for and make no representation as to the validity, effectiveness or adequacy of this Indenture or the Notes; it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision hereof, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee and it shall not be responsible for any statement or recital herein of the Company or the Guarantor, the Offering Memorandum or any other document issued in connection with the sale of Notes or any statement in the Notes other than the Trustee's certificate of authentication. SECTION 7.5 Notice of Default. (a) If a Default or an Event of Default with respect to a particular tranche of Notes occurs and is continuing and the Trustee receives actual notice of such event, the Trustee shall mail to each Holder of Notes of such tranche, as their names and addresses appear on the list of Holders described in Section 2.5, notice of the uncured Default or Event of Default within 90 days after the Trustee receives such notice. Except in the case of a Default or Event of Default in payment of principal, premium, if any, interest or Additional Amounts, if any, on any Note of a particular tranche, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interest of the Holders of Notes of such tranche, and provided, further, that in the case of any default of the character specified in Section 6.1(c) no such notice to Holders shall be given until at least 60 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to the Notes. SECTION 7.6 Report by Trustee to Holders. This Section 7.6 shall not be operative as a part of this Indenture until this Indenture is qualified under the TIA, and, until such qualification, this Indenture shall be construed as if this Section 7.6 were not contained herein. Within 60 days after each May 15 beginning with May 15, 1999, the Trustee shall, to the extent that any of the events described in TIA Section 313(a) occurred within the previous twelve months, but not otherwise, mail to each Holder a brief report dated as of such date that complies with TIA Section -41- 313(a). The Trustee also shall comply with TIA Sections 313(b), 313(c) and 313(d). A copy of each report at the time of its mailing to Holders shall be mailed to the Company and the Guarantor and filed with the SEC and each securities exchange, if any, on which the Notes of a particular tranche are listed. The Company shall promptly notify the Trustee if the Notes of a particular tranche become listed on any securities exchange or of any delisting thereof. SECTION 7.7 Compensation and Indemnity. The Company shall pay to the Trustee from time to time such compensation as the Company and the Trustee shall from time to time agree in writing for its acceptance of this Indenture and services hereunder. The Trustee's and the Agents' compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances (including reasonable fees and expenses of counsel) incurred or made by it in addition to the compensation for their services, except any such disbursements, expenses and advances as may be attributable to the Trustee's or any Agent's negligence or bad faith. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's and Agents' accountants, experts and counsel and any taxes or other expenses incurred by a trust created pursuant to Section 8.4 hereof. The Company shall indemnify each of the Trustees, any predecessor Trustee and the Agents for, and hold them harmless against, any and all loss, damage, claim, expense or liability including taxes (other than taxes based on the income of the Trustee) incurred by the Trustee or an Agent without negligence, willful misconduct or bad faith on its part in connection with acceptance of administration of this trust and its duties under this Indenture, including the reasonable expenses and attorneys' fees and expenses of defending itself against any claim of liability arising hereunder. The Trustee and the Agents shall notify the Company promptly of any claim asserted against the Trustee or such Agent for which it may seek indemnity. However, the failure by the Trustee or the Agent to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee or such Agent shall cooperate in the defense (and may employ its own counsel) at the Company's expense. The Trustee or such Agent may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its written consent, which consent shall not be unreasonably withheld. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee or such Agent as a result of the violation of this Indenture by the Trustee or such Agent if such violation arose from the Trustee's or such Agent's negligence or bad faith. -42- To secure the Company's payment obligations in this Section 7.7, the Trustee and the Agents shall have a senior lien prior to the Notes against all money or property held or collected by the Trustee and the Agents, in its capacitY as Trustee or Agent, except money or property held in trust to pay principal, premium, if any, interest or Additional Amounts, if any, on particular Notes. When the Trustee or an Agent incurs expenses or renders services after an Event of Default specified in Section 6.1(e) or (f) occurs, the expenses (including the reasonable fees and expenses of its agents and counsel) and the compensation for the services shall be preferred over the status of the Holders in a proceeding under any Bankruptcy Law and are intended to constitute expenses of administration under any Bankruptcy Law. The Company's obligations under this Section 7.7 and any claim or lien arising hereunder shall survive the resignation or removal of any Trustee or Agent, the discharge of the Company's obligations pursuant to Article VIII and any rejection or termination under any Bankruptcy Law. SECTION 7.8 Replacement of Trustee. The Trustee may resign as Trustee on behalf of the Holders of Notes of a particular tranche at any time by so notifying the Company and the Guarantor in writing. The Holders of a majority in principal amount of the outstanding Notes of a particular tranche may remove the Trustee as Trustee on behalf of Holders of Notes of such tranche by so notifying the Company, the Guarantor and the Trustee in writing and may appoint a successor trustee with the Company's and the Guarantor's consent. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this section. The Company or the Guarantor may remove the Trustee if: (i) the Trustee fails to comply with Section 7.10; (ii) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (iii) a receiver or other public officer takes charge of the Trustee or its property; or (iv) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall notify each Holder of such event and shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes of a particular tranche may, with the Company's consent, appoint a successor Trustee to replace the -43- successor Trustee appointed by the Company to serve as Trustee on behalf of Holders of Notes of such tranche. Every successor Trustee appointed hereunder with respect to the Notes of a particular tranche shall execute, acknowledge and deliver to the Company, the Guarantor and to the retiring Trustee an instrument accepting such appointment and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but on the request of the Company, the Guarantor or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in the immediately preceding paragraph of this Section, as the case may be. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, the Guarantor or the Holders of at least 10% in principal amount of the then outstanding Notes of a particular tranche may petition any court of competent jurisdiction for the appointment of a successor Trustee to serve as Trustee on behalf of Holders of Notes of such tranche. If the Trustee after written request by any Holder who has been a Holder for at least six months fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company's obligations under Section 7.7 shall continue for the benefit of the retiring Trustee. SECTION 7.9 Successor Trustee by Merger, Etc. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of such Trustee, shall be the successor of such Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Notes shall have been authenticated, but not -44- delivered, by the Trustee or the Authenticating Agent, any successor by merger, conversion or consolidation to such authenticating Trustee, or any successor Authenticating Agent, as the case may be, may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee or successor Authenticating Agent had itself authenticated such Notes. SECTION 7.10 Eligibility; Disqualification; Corporate Trust Required; Conflicting Interest. The Trustee for the Notes shall be subject to the provisions of Section 310(b) of the TIA (as if this Indenture were qualified thereunder) during the period of time required thereby. Nothing herein shall prevent the Trustee from filing with the SEC the application referred to in the penultimate paragraph of Section 310(b) of the TIA. In determining whether the Trustee has a conflicting interest as defined in Section 310(b) of the TIA with respect to a tranche of Notes, there shall be excluded Notes of the other tranche of Notes. The Trustee shall not be deemed to have a conflict of interest under Section 310(b) of the TIA with respect to any other indenture entered into with the Company or the Guarantor, provided that the Notes issued under this Indenture are wholly unsecured and any other indenture and the securities issued thereunder are wholly unsecured and rank equally with the Notes. There shall at all times be a Trustee hereunder which shall be (i) a corporation organized and doing business under the laws of the United States of America, any state thereof, or the District of Columbia, authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by Federal or State authority, or (ii) a corporation or other Person organized and doing business under the laws of a foreign government that is permitted to act as Trustee pursuant to a rule, regulation, or other order of the SEC, authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees, having, in either case, a combined capital and surplus of at least $10,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Company, the Guarantor or any Person directly or indirectly controlling, controlled by, or under common control with the Company or the Guarantor shall not serve as Trustee for the Notes. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereunder specified in this Article. -45- SECTION 7.11 Preferential Collection of Claims Against Company. The Trustee, in its capacity as Trustee hereunder, shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated. SECTION 7.12 Authenticating Agents. From time to time, the Trustee may, subject to its sole discretion, appoint one or more Authenticating Agents with respect to the Notes of a particular tranche, which may include any director or officer of the Company, the Guarantor or any Affiliate with power to act in the name of the Trustee and subject to its discretion in the authentication and delivery of the Notes of such tranche in connection with registrations of transfers and exchanges under Sections 2.6, 2.7, and 3.7 as fully to all intents and purposes as though such Authenticating Agent had been expressly authorized by those Sections of this Indenture to authenticate and deliver such Notes. For all purposes of this Indenture the authentication and delivery of such Notes by an Authentication Agent for such Notes pursuant to this Section shall be deemed to be authentication and delivery of such Notes "by the Trustee" for the Notes of such series. Any such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States or of any State thereof, or the District of Columbia, authorized under such laws to exercise corporate trust powers, and, if other than an Affiliate of the Trustee, having a combined capital and surplus of at least $10,000,000, and subject to supervision or examination by Federal, State, or District of Columbia authority. If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such supervising or examining authority, then for the purposes of this Section the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any Authenticating Agent may resign at any time by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the appointment of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company in the manner set forth in Section 12.2. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section, the Trustee may appoint a successor Authenticating Agent, shall give written notice of such appointment to the Company and shall give written notice of such appointment to all Holders of Notes of such tranche in the manner set forth in Section 12.3. Any successor Authenticating Agent -46- upon acceptance of his appointment hereunder, shall become vested with all the rights, powers and duties of his predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Company agrees to pay to any corporation that has been appointed as Authenticating Agent from time to time reasonable compensation for such services. If an appointment with respect to the Notes of a particular tranche is made pursuant to this Section, the Notes of such tranche may have endorsed thereon, in addition to the Trustee's certification of authentication, an alternate certificate of authentication in the following form: "This is one of the Notes designated therein described in the within-mentioned Indenture. [-----------------------], as Trustee By:_________________________________ As Authenticating Agent By:________________________________" ARTICLE VIII SATISFACTION AND DISCHARGE OF INDENTURE SECTION 8.1 Option To Effect Legal Defeasance or Covenant Defeasance. The Company or the Guarantor, as the case may be, may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, with respect to the Notes of a particular tranche, elect to have either Section 8.2 or 8.3 be applied to all outstanding Notes of such tranche upon compliance with the conditions set forth below in this Article VIII. SECTION 8.2 Legal Defeasance and Discharge. Upon the Company's or the Guarantor's exercise under Section 8.1 of the option applicable to this Section 8.2, the Company or the Guarantor, as the case may be, shall be deemed to have been discharged from its obligations with respect to all outstanding Notes of a particular tranche or Guarantees with respect to such tranche of Notes, as the case may be, on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means that the Company -47- shall be deemed to have paid and discharged all the obligations relating to the outstanding Notes of such tranche or the Guarantor shall be deemed to have discharged all the obligations relating to the Guarantees with respect to such tranche of Notes, and such Notes and Guarantees, as applicable, shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.6, Section 8.8 and the other Sections of this Indenture referred to in clauses (a) and (d) below, and to have satisfied all of their other respective obligations under such Notes or Guarantees and this Indenture and cured all then existing Events of Default with respect to such tranche of Notes (and the Trustee, on demand of and at the expense of the Company or the Guarantor, as the case may be, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (a) the rights of holders of outstanding Notes of such tranche and Guarantees with respect to such tranche of Notes to receive payments in respect of the principal, premium, if any and interest on such Notes when such payments are due or on the Redemption Date solely out of the trust created pursuant to this Indenture, (b) the right of holders of outstanding Notes of such tranche to receive payments in respect of Additional Amounts, if any, on such Notes when such payments are due or on the Redemption Date; (c) the rights, powers, trusts, duties and immunities of the Trustee, and the Company's and Guarantor's obligations in connection therewith; and (d) this Article VIII and the obligations set forth in Section 8.6 hereof. Subject to compliance with this Article VIII, the Company or the Guarantor may exercise its option under this Section 8.2 notwithstanding the prior exercise of its option under Section 8.3 with respect to the Notes of a particular tranche or the Guarantee with respect to such tranche of Notes, as applicable. SECTION 8.3 Covenant Defeasance. Upon the Company's or the Guarantor's exercise under Section 8.1 of the option applicable to this Section 8.3, the Company or the Guarantor, as the case may be, shall be released from any obligations under the covenants contained in Sections 4.3, 4.4 and 4.6 hereof with respect to the outstanding Notes of a particular tranche or Guarantees with respect to such tranche of Notes, as the case may be, on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes of such tranche and Guarantees with respect to such tranche of Notes, as applicable, shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes and Guarantees shall not be deemed outstanding for accounting purposes). For this purpose, such Covenant Defeasance means that, with respect to the outstanding Notes of a particular tranche and Guarantees with -48- respect to the Notes of such tranche, the Company and the Guarantor, respectively, may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or Event of Default with respect to the Notes of such tranche under Section 6.1(c), nor shall any event referred to in Sections 6.1(d) thereafter constitute a Default or Event of Default with respect to the Notes of such tranche, but, except as specified above, the remainder of this Indenture and such Notes and Guarantees shall be unaffected thereby. SECTION 8.4 Conditions to Legal or Covenant Defeasance. The following shall be the conditions to the application of either Section 8.2 or Section 8.3 to the outstanding Notes of a particular tranche and Guarantees with respect to the Notes of such tranche: (i) in the case of Legal Defeasance, either (A) all Notes of such tranche theretofore authenticated and delivered under the Indenture must have been delivered to the Trustee for cancellation or (B) the Company or the Guarantor, as the case may be, must irrevocably deposit, or cause to be irrevocably deposited, with the Trustee, in trust, for the benefit of the Holders of the Notes of such tranche, cash in U.S. dollars, non-callable Government Securities or a combination thereof in such amounts (and, in the case of Government Securities, together with the predetermined and certain income to accrue thereon, without consideration of any reinvestment thereof) as will be sufficient, as evidenced by a Certificate of a Firm of Independent Public Accountants delivered to the Trustee to pay the principal, premium, if any, interest and Additional Amounts, if any, due on the outstanding Notes of such tranche on the stated maturity date or on the applicable Redemption Date, as the case may be, of such principal, premium, if any, interest and Additional Amounts, if any, on the outstanding Notes of such tranche; (ii) in the case of Covenant Defeasance, the Company or the Guarantor, as the case may be, must irrevocably deposit, or cause to be irrevocably deposited, with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities or a combination thereof in such amounts (and, in the case of Government Securities, together with the predetermined and certain income to accrue thereon, without consideration of any reinvestment thereof) as will be sufficient, as evidenced by a Certificate of a Firm of Independent Public Accountants delivered to the Trustee to pay the principal, premium, if any, interest and Additional Amounts, if any, -49- due on the outstanding Notes of such tranche on the stated maturity date or on the applicable Redemption Date, as the case may be, of such principal, premium, if any, interest and Additional Amounts, if any, on the outstanding Notes of such tranche; (iii) in the case of Legal Defeasance, the Company or the Guarantor, as the case may be, shall have delivered to the Trustee (A) an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, (1) the Company has received from, or there has been published by, the U.S. Internal Revenue Service a ruling or (2) since the Issuance Date, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such opinion of counsel in the United States shall confirm that, subject to customary assumptions and exclusions, the Holders of the outstanding Notes of such tranche will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred and (B) an Opinion of Counsel in the United Kingdom reasonably acceptable to the Trustee to the effect that Holders of the outstanding Notes of such tranche will not recognize income, gain or loss for United Kingdom income tax purposes as a result of such Legal Defeasance and will be subject to United Kingdom income tax on the same amounts, in the same manner and at the same time as would have been the case if such Legal Defeasance had not occurred; (iv) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee (A) an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, the Holders of the outstanding Notes of such tranche will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to such tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred and (B) an Opinion of Counsel in the United Kingdom reasonably acceptable to the Trustee to the effect that Holders of the outstanding Notes of such tranche will not recognize income, gain or loss for United Kingdom income tax purposes as a result of such Covenant Defeasance and will be subject to United Kingdom income tax on the same amount in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (v) such Covenant Defeasance shall not result in a breach or violation of, or constitute a default under any -50- material agreement or instrument to which the Company or the Guarantor is a party or by which the Company or the Guarantor is bound; (vi) in the case of Legal Defeasance, 91 days shall have passed during which no Event of Default under Section 6.1(e) or 6.1(f) has occurred; (vii) the Company or the Guarantor, as the case may be, shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company or the Guarantor, as the case may be, with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or the Guarantor, as the case may be, or others; (viii) the Company or the Guarantor, as the case may be, shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel complying with Section 12.4; and (ix) if the Notes of such tranche are then listed on any securities exchange, the Company or the Guarantor, as the case may be, has delivered to the Trustee an Opinion of Counsel to the effect that such deposit and defeasance will not cause such Notes to be delisted. SECTION 8.5 Satisfaction and Discharge of Indenture. This Indenture will be discharged with respect of the Notes of a particular tranche and will cease to be of further effect as to all Notes of such tranche issued thereunder and all obligations of the Guarantor with respect to the Notes of such tranche, including the Guarantees with respect to the Notes of such tranche, when either (a) all such Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes of such tranche which have been replaced or paid and Notes of such tranche for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or (b)(i) all such Notes not theretofore delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Company or the Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust an amount of money in U.S. dollars or Government Securities or any combination thereof sufficient to pay and discharge the entire indebtedness on such Notes not theretofore delivered to the Trustee for cancellation for principal, premium, if any, accrued and unpaid interest and Additional Amounts, if any, to the date of maturity or redemption; (ii) no Default with respect to the Notes of such tranche shall have occurred within 91 days of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or the Guarantor is a party or by which it is bound; (iii) the Company or the Guarantor has paid or caused to be paid -51- all sums payable by it with respect to the Notes of such tranche under this Indenture; and (iv) the Company or the Guarantor has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of such Notes at maturity or the redemption date, as the case may be. In addition, with respect to clause (b) of the preceding sentence, the Company or the Guarantor shall have (i) delivered to the Trustee an Opinion of Counsel to the effect that the Holders of Notes will not recognize income, gain or loss for United States federal income tax purposes or United Kingdom income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred; (ii) if such Notes are then listed on any securities exchange, delivered to the Trustee an Opinion of Counsel to the effect that such deposit, defeasance and discharge will not cause such Notes to be delisted; and (iii) delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, complying with Section 12.4. SECTION 8.6 Survival of Certain Obligations. Notwithstanding the satisfaction and discharge of this Indenture with respect to a particular tranche of Notes and of the Notes of such tranche and Guarantees with respect to the Notes of such tranche referred to in Section 8.1, 8.2, 8.3, 8.4 or 8.5, the respective obligations of the Company, the Guarantor and the Trustee under Sections 2.6, 2.7, 4.2, 7.7, 7.8 and 7.10 shall survive until the Notes of such tranche and related Guarantees are no longer outstanding. Nothing contained in this Article VIII shall abrogate any of the obligations or duties of the Trustee under this Indenture. SECTION 8.7 Acknowledgment of Discharge by Trustee. Subject to Section 8.10, after (i) the conditions of Section 8.4 or 8.5 have been satisfied, (ii) the Company or the Guarantor has paid or caused to be paid all other sums payable hereunder by the Company or the Guarantor and (iii) the Company and the Guarantor have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent referred to in clause (i) above relating to the satisfaction and discharge of this Indenture with respect to a particular tranche of Notes have been complied with, the Trustee upon written request shall acknowledge in writing the discharge of all of the Guarantor's obligations under this Indenture with respect to the Notes of such tranche and all of the Company's obligations under this Indenture with respect to the Notes of such tranche except for those surviving obligations specified in this Article VIII. SECTION 8.8 Application of Trust Moneys. All cash in U.S. dollars and Government Securities deposited with the Trustee pursuant to Section 8.4 or 8.5 in respect of Notes of a particular tranche or Guarantees with respect to the Notes of such tranche shall be held in trust and applied by the Trustee, -52- in accordance with the provisions of such Notes, Guarantees and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Notes, of all sums due and to become due thereon for principal, premium, if any, interest and Additional Amounts, if any but such money need not be segregated from other funds except to the extent required by law. The Holder of any Note replaced pursuant to Section 2.7 shall not be entitled to any such payment and shall look only to the Company or the Guarantor for any payment which such Holder may be entitled to collect. In connection with the satisfaction and discharge of this Indenture or the defeasance of certain obligations under this Indenture, the Company may direct the Trustee to (i) invest any money received by the Trustee on the Government Securities deposited in trust in additional Government Securities, and (ii) deliver or pay to the Company from time to time upon the request of the Company any money or Government Securities held by it, which, as evidenced by a Certificate of a Firm of Independent Public Accountants, are in excess of the amount thereof which would then have been required to be deposited for the purpose for which such money or Government Securities were deposited or received. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Securities deposited pursuant to Section 8.4 or 8.5 or the principal, premium, if any, interest and Additional Amounts, if any, received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of outstanding Notes. SECTION 8.9 Repayment to the Company; Unclaimed Money. The Trustee and any Paying Agent shall promptly pay or return to the Company upon Company Order, as the case may be, any cash or Government Securities held by them at any time that are not required for the payment of the principal, premium, if any, interest and any Additional Amounts, if any, on the Notes for which cash or Government Securities have been deposited pursuant to Section 8.4 or 8.5. SECTION 8.10 Reinstatement. If the Trustee or Paying Agent is unable to apply any cash or Government Securities in accordance with Section 8.2, 8.3, 8.4 or 8.5 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Notes and the Guarantor's obligations under this Indenture shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.2, 8.3, 8.4 or 8.5 until such time as the Trustee or Paying Agent is permitted to apply all such cash or Government Securities in accordance with Section 8.2, 8.3, 8.4 or 8.5; provided, however, that if the Company or the Guarantor has made any payment of principal, premium, if any, interest or any Additional Amounts, -53- if any, on any Notes because of the reinstatement of its obligations, the Company and the Guarantor shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent. ARTICLE IX AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.1 Without Consent of Holders of Notes. Without notice to or the consent of any Holders, the Company and the Guarantor, when each is authorized by a Board Resolution,and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to such Trustee, for any of the following purposes: (i) to evidence the succession of another corporation or other Person to the Company or the Guarantor, and the assumption by any such successor of the covenants of the Company or the Guarantor, as the case may be, herein and in the Notes; (ii) to add to the covenants of the Company or the Guarantor, for the benefit of the Holders of Notes of a particular tranche, to convey, transfer, assign, mortgage or pledge any property to or with the Trustee or otherwise secure the Notes of a particular tranche or to surrender any right or power herein conferred upon the Company or the Guarantor; (iii) to add any additional Events of Default with respect to the Notes; (iv) to evidence and provide for the acceptance of appointment hereunder of a Trustee other than First Chicago, as Trustee and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder; (v) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Notes of a particular tranche and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trust hereunder; (vi) to add to the conditions, limitations and restrictions on the authorized amount, form, terms or purposes of issue, authentication and delivery of Notes, as herein set forth, other conditions, limitations and restrictions thereafter to be observed; -54- (vii) to add to or change or eliminate any provisions of this Indenture as shall be necessary or desirable in accordance with any amendments to the TIA; (viii) to cure any ambiguity, omission, defect or inconsistency; (ix) to make any other amendment, modification, change or supplement to this Indenture or the Notes of any tranche that does not materially adversely affect the rights of any Holder of any Notes of that tranche; (x) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under this Indenture of any such Holder; and (xi) to surrender any right or power conferred upon the Company or the Guarantor. The Trustee may waive compliance by the Company or the Guarantor with any provision of this Indenture or the Notes without notice to or consent of any Holder of any Notes if such waiver does not materially adversely affect the rights of any Holder of any Notes. SECTION 9.2 With Consent of Holders of Notes. The Company, the Guarantor and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of amending or supplementing any of the provisions of this Indenture, to the extent applicable to the Notes of a particular tranche, or the Notes of a particular tranche or Guarantees of a particular tranche of Notes, without notice to any Holder, but with the written consent of the Holders of a majority in aggregate principal amount of the Notes of such tranche then outstanding. The Holders of a majority in principal amount of the Notes of such tranche affected may waive compliance by the Company or the Guarantor with any provision of this Indenture or the Notes of such tranche or Guarantee of such tranche without notice to any Holder, in each case by act of said Holders delivered to the Company the Guarantor and the Trustee. No such supplemental indenture shall, without the consent of the Holder of each outstanding Note of such tranche affected thereby: (i) change the Maturity Date of the principal of, or any installment of principal of or interest on, any Note of such tranche, or reduce the principal amount thereof or the rate of interest thereon, if any, or any premium payable upon the redemption thereof, or change any obligation of the Company or the Guarantor to pay Additional Amounts, if any, (except as contemplated by Sections 5.1 and 5.2 and permitted by Section 9.1(i)) or change the Place of Payment or the currency in which any Note of such tranche or the interest thereon is payable; -55- (ii) reduce the percentage in principal amount of the Notes of such tranche, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; (iii) modify any of the provisions of this Section, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Note of such tranche affected thereby; provided, however, that this clause shall not be deemed to require the consent of any Holder of a Note of such tranche with respect to changes in the references to "the Trustee" and concomitant changes in this Section, or the deletion of this proviso, in accordance with the requirements of Sections 7.8, 7.10, 9.1(iv) and 9.1(v); and (iv) amend the terms of the Notes of such tranche (including the Guarantees) or this Indenture in a way that would result in the loss of an exemption from any taxes or an exemption from any obligation to withhold or deduct taxes unless the Company and the Guarantor agree to pay Additional Amounts, if any, in respect thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company or the Guarantor shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company or the Guarantor to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment or supplemental indenture or waiver. SECTION 9.3 Compliance with TIA. From the date on which this Indenture is qualified under the TIA, every amendment, waiver or supplement of this Indenture or the Notes shall comply with the TIA as then in effect. SECTION 9.4 Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder of a Note. -56- The Company may fix a record date for determining which Holders of the Notes must consent to such amendment, supplement or waiver. If the Company fixes a record date, the record date shall be fixed at (i) the later of 30 days prior to the first solicitation of such consent or the date of the most recent list of Holders of Notes furnished to the Trustee prior to such solicitation pursuant to Section 2.5 or (ii) such other date as the Company shall designate. SECTION 9.5 Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes of a particular tranche may issue and the Trustee shall authenticate new Notes of such tranche that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note of a particular tranche shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.6 Trustee To Sign Amendments, Etc. The Trustee shall execute any amendment, supplement or waiver authorized pursuant to this Article IX; provided, however, that the Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture. The Trustee shall be entitled to receive indemnity reasonably satisfactory to it, and shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate from each of the Company and the Guarantor each stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article IX is authorized or permitted by this Indenture and constitutes the legal, valid and binding obligations of the Company and the Guarantor enforceable in accordance with its terms. Such Opinion of Counsel shall not be an expense of the Trustee. SECTION 9.7 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. ARTICLE X GUARANTEES SECTION 10.1 Guarantees. The Guarantor hereby unconditionally and irrevocably guarantees to each Holder and to the Trustee and its successors and assigns (i)(a) the full and punctual payment of principal and interest on the Notes of such Holder when due, whether at maturity, by acceleration, by -57- redemption or otherwise, and all other monetary obligations of the Company under this Indenture and the Notes (including Additional Amounts, if any) and (b) the full and punctual performance within applicable grace periods of all other obligations of the Company under this Indenture and the Notes and (ii) in the case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal (all of the foregoing being hereinafter collectively called the "Guarantees"). The Guarantor waives presentation to, demand of, payment from and protest to the Company of any of the Guarantees and also waives notice of protest for nonpayment. The Guarantor waives notice of any default under the Notes or the Guarantees. The Guarantees hereunder shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Notes or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Notes or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Guarantees or any of them; (e) the failure of any Holder or Trustee to exercise any right or remedy against any other guarantor of the Guarantees or (f) any change in the ownership of the Guarantor. The Guarantor further agrees that its Guarantees hereunder constitute a guarantee of payment, performance and compliance when due (and not a guarantee of collection). The Guarantor hereby agrees that its obligations hereunder shall be as principal and not merely as surety, and shall be absolute and unconditional, irrespective of, and shall be unaffected by, any invalidity, irregularity or failure to enforce the provisions of any Note or this Indenture, or any waiver, modification, consent or indulgence granted to the Company with respect thereto (unless the same shall also be provided the Guarantor), by the Holder of any Note or the Trustee, the recovery of any judgment against the Company or any action to enforce the same, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or guarantor; provided that, notwithstanding the foregoing, no such waiver, modification, indulgence or circumstance shall, without the consent of the Guarantor, increase the principal amount of a Note or the interest rate thereon or increase any premium payable upon redemption thereof. The Guarantees shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guarantees or otherwise. Without -58- limiting the generality of the foregoing, the Guarantor covenants that the Guarantees shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Notes or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of the Guarantor or would otherwise operate as a discharge of the Guarantor as a matter of law or equity. The Guarantor further agrees that the Guarantees shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal, premium, if any, interest or Additional Amounts, if any, on the Tranche A Notes or the Tranche B Notes is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against the Guarantor by virtue hereof, upon the failure of the Company to pay the principal of, premium on, if any, interest on, or Additional Amounts, if any, on the Tranche A Notes or the Tranche B Notes when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other obligation under the Notes, the Guarantor hereby promises to and will, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid amount of such obligations under such Notes, (ii) accrued and unpaid interest on such obligations under such Notes (but only to the extent not prohibited by law) and (iii) all other monetary obligations with respect to such Notes (including Additional Amounts, if any) of the Company to the Holders and the Trustee. The Guarantor will be subrogated to all rights of the Holder against the Company in respect of any amount paid by the Guarantor pursuant to the provisions of the Guarantee; provided, however, that the Guarantor shall not be entitled to enforce, or to receive any payments arising out of or based upon, such right of subrogation until the principal of, premium on, if any, interest and Additional Amounts, if any, on such Note shall have been paid in full. The Guarantor further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations with respect to the Tranche A Notes or Tranche B Notes hereby may be accelerated as provided in Article VI for the purposes of the Guarantees, herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations with respect to such Notes, and (y) in the event of any declaration of acceleration of such obligations as provided in Article VI, the -59- Guarantees (whether or not due and payable) shall forthwith become due and payable by the Guarantor for the purposes of this Section. The Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees and expenses) incurred by the Trustee or any Holder in enforcing any rights under this Section. SECTION 10.2 Successors and Assigns. This Article X shall be binding upon the Guarantor and its successors and assigns and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Notes shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture. SECTION 10.3 No Waiver. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article X shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article X at law, in equity, by statute or otherwise. SECTION 10.4 Modification. No modification, amendment or waiver of any provision of this Article X, nor the consent to any departure by the Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on the Guarantor in any case shall entitle the Guarantor to any other or further notice or demand in the same, similar or other circumstances. ARTICLE XI MEETINGS OF HOLDERS OF THE NOTES SECTION 11.1 Purposes of Meetings. A meeting of the Holders of a particular tranche of Notes may be called at any time from time to time pursuant to this Article XI for any of the following purposes: (1) to give any notice to the Company, the Guarantor or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any Default hereunder and -60- its consequences, or to take any other action authorized to be taken by Holders pursuant to Article VI hereof; (2) to remove the Trustee and appoint a successor trustee pursuant to Article VII hereof; (3) to consent to the execution of an indenture supplemental hereto pursuant to Article IX hereof; or (4) to take any other action authorized to be taken by or on behalf of the Holders of any specified aggregate principal amount of the outstanding Notes of a particular tranche under any other provision of this Indenture or under applicable law. SECTION 11.2 Place of Meetings. Meetings of Holders may be held at such place or places as the Trustee or, in case of its failure to act, the Company, the Guarantor or the Holders calling the meeting, shall from time to time determine. SECTION 11.3 Call and Notice of Meetings. (a) The Trustee may at any time call a meeting of Holders of a particular tranche of Notes to be held at such time and at such place in the location determined by the Trustee pursuant to Section 11.2 hereof. Notice of every meeting of Holders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to each Holder and published in the manner contemplated by Section 12.3 hereof. Such notice shall be given not less than 20 days nor more than 90 days prior to the date fixed for the meeting. (b) In case at any time the Company or the Guarantor, as the case may be, pursuant to a Board Resolution, or the Holders of at least a majority in aggregate principal amount of the Notes of a particular tranche then outstanding, shall have requested the Trustee to call a meeting of the Holders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have made the first giving of the notice of such meeting within 20 days after receipt of such request, then the Company, the Guarantor or the Holders in the amount above specified may determine the time (not less than 21 days after notice is given) and the place in the location determined by the Company, the Guarantor or the Holders pursuant to Section 11.2 hereof for such meeting and may call such meeting to take any action authorized in Section 11.1 hereof by giving notice thereof as provided in Section 11.3(a) hereof. SECTION 11.4 Voting at Meetings. To be entitled to vote at any meeting of Holders, a Person shall be (i) a Holder or (ii) a Person appointed in writing as proxy for a Holder or Holders by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders shall be the Persons so entitled to vote at such meeting and -61- their counsel, any representatives of the Trustee and its counsel, any representatives of the Company and its counsel and any representatives of the Guarantor and its counsel. SECTION 11.5 Voting Rights, Conduct and Adjournment. (a) Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders in regard to proof of the holding of Notes of a particular tranche and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Notes of a particular tranche shall be proved in the manner specified in Article II hereof and the appointment of any proxy shall be proved in such manner as is deemed appropriate by the Trustee or by having the signature of the person executing the proxy witnessed or guaranteed by any bank, banker or trust company customarily authorized to certify to the holding of a security such as a Global Note. (b) No action at a meeting of Holders shall be effective unless approved by Persons holding or representing Notes of a particular tranche in the aggregate principal amount required by the provision of this Indenture pursuant to which such action is being taken. (c) At any meeting of Holders, each Holder or proxy shall be entitled to one vote for each $1,000 principal amount of outstanding Notes of a particular tranche held or represented; provided, however, that no vote shall be cast or counted at any meeting in respect of any Note of such tranche challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of outstanding Note of such tranche held by him or instruments in writing duly designating him as the person to vote on behalf of Holders. Any meeting of Holders with respect to which a meeting was duly called pursuant to the provisions of Section 11.3 may be adjourned from time to time by a majority of such Holders present and the meeting may be held as so adjourned without further notice. (d) The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company, the Guarantor or by Holders as provided in Section 11.3, in which case the Company, the Guarantor or the Holders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by a majority vote of the meeting. -62- SECTION 11.6 Revocation of Consent by Holders. At any time prior to (but not after) the evidencing to the Trustee of the taking of any action at a meeting of Holders by the Holders of the percentage in aggregate principal amount of the Notes of a particular tranche specified in this Indenture in connection with such action, any Holder of a Note of such tranche the serial number of which is included in the Notes of such tranche the Holders of which have consented to such action may, by filing written notice with the Trustee at its principal corporate trust office and upon proof of holding as provided herein, revoke such consent so far as concerns such Notes. Except as aforesaid any such consent given by the Holder of any Notes shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Notes and of any Notes issued in exchange therefore, in lieu thereof or upon transfer thereof, irrespective of whether or not any notation in regard thereto is made upon such Notes. Any action taken by the Holders of the percentage in aggregate principal amount of the Holders specified in this Indenture in connection with such action shall be conclusively binding upon the Company, the Guarantor, the Trustee and the Holders of all the Notes of such tranche. SECTION 11.7 No Delay of Rights by Meeting. Nothing contained in this Article XI shall be deemed or construed to authorize or permit, by reason of any call of a meeting of Holders or any rights expressly or impliedly conferred hereunder to make such call, any hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to any Holder under any of the provisions of this Indenture or of the Notes of any tranche. ARTICLE XII MISCELLANEOUS SECTION 12.1 TIA Controls. Except as otherwise provided herein, if any provision hereof limits, qualifies or conflicts with the duties imposed by any of Sections 310 through 317, inclusive, of the TIA through the operation of Section 318(c) thereof, such imposed duties shall control. SECTION 12.2 Notices. Any notice or communication shall be sufficiently given if in writing and delivered in person or mailed by first-class mail addressed as follows: if to the Company: Black & Decker Holdings Inc. 210 Bath Road Slough, Berkshire SL1 3YD England Attention: Secretary -63- with a copy to the Guarantor; if to the Guarantor: The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21286 Attention: Treasurer with a copy to: Miles & Stockbridge P.C. 10 Light Street Baltimore, Maryland 21202 Attention: Glenn Campbell and The Black & Decker Corporation 701 East Joppa Road Towson, Maryland 21228 Attention: General Counsel if to the Trustee: The First National Bank of Chicago One First National Plaza, Suite 0126 Chicago, Illinois 60670-0126 Attention: Corporate Trust Services Division Facsimile: 312-407-1708 with a copy to: The First National Bank of Chicago 153 West 51st Street, 6th Floor New York, New York 10019 Attention: Michael Pinzon For purposes of Section 4.2: The First Chicago Trust Company of New York 14 Wall Street, 8th Floor New York, New York 10005 Attention: Michael Pinzon Facsimile: 212-240-8938 if to the Exchange Agent or Paying Agent: The First Chicago Trust Company of New York 14 Wall Street, 8th Floor New York, New York 10005 Attention: Michael Pinzon Facsimile: 212-240-8938 -64- The Company, the Guarantor or the Trustee by notice to the others may designate additional or different addresses for subsequent notices or communications. If the Trustee of any Notes is other than the Trustee initially named in this Indenture or any successor thereto, any notice or communication shall be sufficiently given if in writing and delivered in person or mailed by first class mail addressed to that Trustee at the address provided for in the supplemental indenture executed in connection with the appointment of that Trustee in respect of the Notes. SECTION 12.3 Notice to Holders. Any notice or communication mailed to a Holder shall be mailed by first-class mail or other equivalent means at that Holder's address as it appears on the registration books of the Exchange Agent and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. Notices regarding the Notes of a particular tranche will be (i) published in a leading newspaper having a general circulation in New York (which is expected to be the Wall Street Journal) (and so long as such Notes are listed on the Luxembourg Stock Exchange and the rules of such Luxembourg Stock Exchange shall so require, a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort)) or (ii) in the case of Definitive Notes of a particular tranche, mailed to Holders by first-class mail at their respective addresses as they appear on the registration books of the Exchange Agent (and, so long as such Notes are listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange shall so require, published in a newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort)). Notices given by publication will be deemed given on the first date on which publication is made and notices given by first-class mail, postage prepaid, will be deemed given five calendar days after mailing. SECTION 12.4 Compliance Certificates and Opinions. Upon any request or application by the Company or the Guarantor to the Trustee to take any action under this Indenture, the Company or the Guarantor shall furnish to the Trustee (i) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and (ii) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. -65- Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include (i) a statement that the person making such certificate or opinion has read such certificate or condition, (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based, (iii) a statement that, in the opinion of such person, the person has made such examination or investigation as is necessary to enable the person to express an informed opinion as to whether such covenant or condition has been complied with, and (iv) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. SECTION 12.5 Form of Documents Delivered to Trustee. Any certificate or opinion of an officer of the Company or the Guarantor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company or Guarantor stating that the information with respect to such factual matters is in the possession of the Company or Guarantor, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 12.6 Rules by Trustee, Paying Agent, Exchange Agent. The Trustee, Paying Agent or Exchange Agent may make reasonable rules for its functions. SECTION 12.7 Non-Business Day. In any case where any payment date of a Note of any particular tranche shall not be a Business Day at any Place of Payment with respect to Notes of that tranche, then (notwithstanding any other provision of this Indenture or of the Notes) payment of principal, premium, if any, interest or Additional Amounts, if any, with respect to such Note need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the payment date, provided that no interest shall accrue for the period from and after such payment date. -66- SECTION 12.8 Governing Law and Submission to Jurisdiction. THIS INDENTURE, THE GUARANTEE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH OF THE COMPANY AND THE GUARANTOR AGREES TO SUBMIT TO THE JURISDICTION OF THE U.S. FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE BOROUGH OF MANHATTAN, CITY AND STATE OF NEW YORK FOR PURPOSES OF ANY LEGAL ACTIONS AND PROCEEDINGS ARISING OUT OF OR BASED UPON THE NOTES AND THE INDENTURE, IN THE CASE OF THE COMPANY, AND THE GUARANTEES AND THE INDENTURE IN THE CASE OF THE GUARANTOR. SECTION 12.9 No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of any of the Company, the Guarantor or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.10 Immunity of Incorporators, Stockholders, Employees, Officers and Directors. A director, officer, employee, stockholder or incorporator, as such, of the Company or the Guarantor shall not have any liability for any obligation of the Company or the Guarantor under the Notes or the Indenture or for any claim based on, with respect to or by reason of such obligations or their creation. All such liability is waived and released as a condition of, and as partial consideration for, the execution of this Indenture and the issue of the Notes. SECTION 12.11 Successors and Assigns. Except as otherwise provided herein, all covenants and agreements in this Indenture by the Company and the Guarantor shall bind their successors and assigns, whether so expressed or not. SECTION 12.12 Counterpart Originals. All parties hereto may sign any number of copies of this Indenture. Each signed copy or counterpart shall be an original, but all of them together shall represent one and the same agreement. SECTION 12.13 Severability. In any case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 12.14 Table of Contents, Headings, etc. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 12.15 Benefits of Indenture. Nothing in this Indenture or in the Notes, expressed or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any Exchange Agent or co-Exchange Agent and their successors hereunder and the Holders of Notes, any benefit or any legal or equitable right, remedy or claim under this Indenture. -67- SECTION 12.16 Language of Notices, etc. Any request, demand, authorization, direction, notice, consent or waiver required or permitted under this Indenture shall be in the English language, and any published notice may also be in an official language of the country or province of publication. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested as of the date first written above. [SEAL] BLACK & DECKER HOLDINGS INC., as Issuer Attest: /s/Norman R. Judd By /s/Mark M. Rothleitner Director Name: Mark M. Rothleitner Title: Director [SEAL] THE BLACK & DECKER CORPORATION, as Guarantor Attest: /s/Lucy A. Bosley By /s/Thomas M. Schoewe Asst. Secretary Name: Thomas M. Schoewe Title: Senior Vice President and Chief Financial Officer THE FIRST NATIONAL BANK OF CHICAGO, as Trustee By /s/Michael Pinzon Name: Michael Pinzon Title: Trust Officer EX-11 9 EXHIBIT 11 EXHIBIT 11(a) THE BLACK & DECKER CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (Amounts in Millions Except Per Share Data)
For The Three Months Ended June 28, 1998 June 29, 1997 Amount Per Share Amount Per Share Basic: Average shares outstanding 94.1 94.5 ==== ==== Net earnings $58.4 $.62 $45.5 $.48 ===== ==== ===== ==== Diluted: Average shares outstanding 94.1 94.5 Dilutive stock options and stock issuable under employee benefit plans--based on the Treasury stock method using the average market price 1.7 1.6 ---- ---- Adjusted average shares outstanding for diluted calculation 95.8 96.1 ==== ==== Net earnings $58.4 $.61 $45.5 $.47 ===== ==== ===== ====
EXHIBIT 11(b) THE BLACK & DECKER CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (Amounts in Millions Except Per Share Data)
For The Six Months Ended June 28, 1998 June 29, 1997 Amount Per Share Amount Per Share Basic: Average shares outstanding 94.6 94.4 ==== ==== Net earnings (loss) $(913.0) $(9.65) $71.8 $.76 ======== ======= ===== ==== Diluted: Average shares outstanding 94.6 94.4 Dilutive stock options and stock issuable under employee benefit plans--based on the Treasury stock method using the average market price 1.8 (Note 1) 1.7 ---- ----- Adjusted average shares outstanding for diluted calculation 96.4 96.1 ==== ==== Net earnings (loss) $(913.0) $(9.48) $71.8 $.75 ======== ======= ===== ==== Notes: 1. Due to the net loss incurred by the Corporation for the six-month period ended June 28, 1998, the assumed exercise of stock options and stock issuable under employee benefit plans is anti-dilutive and, therefore, is not used in the calculation of diluted earnings per share included in the financial statements. As a result, the financial statements reflect diluted earnings per share equal to basic earnings per share for the six-months ended June 28, 1998--both a loss of $9.65 per share.
EX-12 10 EXHIBIT 12 EXHIBIT 12 THE BLACK & DECKER CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Millions of Dollars Except Ratios)
Three Months Ended Six Months Ended June 28, 1998 June 28, 1998 -------------- -------------- EARNINGS: Earnings (loss) before income taxes (Note 1) $ 116.3 $(881.7) Interest expense 35.7 72.3 Portion of rent expense representative of an interest factor 6.3 12.6 ------- ------- Adjusted earnings (loss) before income taxes and fixed charges $ 158.3 $(796.8) ======= ======= FIXED CHARGES: Interest expense $ 35.7 $ 72.3 Portion of rent expense representative of an interest factor 6.3 12.6 ------- ------- Total fixed charges $ 42.0 $ 84.9 ======= ======= RATIO OF EARNINGS TO FIXED CHARGES (DEFICIENCY) (Notes 1 and 2) 3.77 -- ======= ======= Note: 1. Included in earnings (loss) before income taxes for the six months ended June 28, 1998, are restructuring charges in the amount of $140.0 and a write-off of goodwill in the amount of $900.0, both of which were recognized in the first quarter of 1998. 2. Earnings (loss) before income taxes for the six months ended June 28, 1998, were insufficient to cover fixed charges by the amount of $881.7.
EX-27 11 EXHIBIT 27
5 This schedule contains financial information extracted from the Corporation's unaudited interim financial statements as of and for the six months ended June 28, 1998, and the accompanying footnotes and is qualified in its entirety by the reference to such financial statements. 0000012355 THE BLACK & DECKER CORPORATION 1,000 6-MOS DEC-31-1998 JUN-28-1998 204,100 0 815,700 0 765,000 1,989,900 781,300 0 4,217,600 1,327,300 1,658,100 0 0 46,500 654,800 4,217,600 2,178,000 2,178,000 1,430,200 2,999,100 0 0 72,300 (881,700) 31,300 (913,000) 0 0 0 (913,000) (9.65) (9.65) Represents net trade receivables. Represents net property, plant, and equipment. Includes a pre-tax restructuring charge in the amount of $140,000, a write-off of goodwill in the amount of $900,000 and a pre-tax gain on the sale of businesses of $36,500. Includes a $40,000 tax benefit associated with the restructuring charge and $32,300 of tax expense resulting from the gain on the sale of businesses, both items were recognized during the six months ended June 28,1998. Includes a restructuring charge and a gain on the sale of businesses, net of tax effects, in the amounts of $100,000 and $4,200, respectively, and a write-off of goodwill in the amount of $900,000. Represents basic earnings per share.
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