1
SUPPLEMENTAL AGREEMENT NO.1 TO PURCHASE AGREEMENT
THIS SUPPLEMENTAL AGREEMENT NO. 1 TO PURCHASE AGREEMENT (this
"Agreement"), dated as of August 25, 1997, is entered into by and among FMC
Corporation, a Delaware corporation, Harsco Corporation, a Delaware corporation,
Harsco UDLP Corporation, a Pennsylvania business corporation (together with FMC
Corporation and Harsco Corporation, "Sellers"), and Iron Horse Acquisition
Corp., a Delaware corporation ("Buyer"). Capitalized terms used and not
otherwise defined in Section 6 below or otherwise herein have the meaning
ascribed to such terms in the Purchase Agreement (as defined below).
WHEREAS, Sellers and Buyer are parties to a Purchase Agreement
(the "Purchase Agreement"), dated as of the date hereof;
WHEREAS, this Agreement contemplates the issuance of a
Special Note under certain specified circumstances, which Special Note is
intended to provide Buyer security against any Loss resulting from a Call
Election, a Liquidation Election, a Purported Turkish Termination, a Joint
Venture Termination, a License Agreement Termination or other Adverse Legal
Consequences (collectively, "Loss Events" and each, a "Loss Event") as
applicable, but which is not intended to provide any compensation or security
with respect to any Losses resulting from any other factors, including the
performance of UDLP or FNSS, changes within SSM and/or the government of Turkey
and the scheduled expiration of the Turkish Procurement Contract; and
WHEREAS, Sellers and Buyer intend this Agreement to supplement
and modify the terms of the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. Modification of the Initial Purchase Price. Pursuant to
Section 1(b) of the Purchase Agreement, the Initial Purchase Price is
$850,000,000 payable in immediately available funds at the Closing.
Notwithstanding the terms of Section 1(b) of the Purchase Agreement, and any
other provision of the Purchase Agreement to the contrary, Sellers and Buyer
hereby agree that unless Sellers have obtained a Nurol Waiver and a Turkish
Acknowledgement prior to the Closing the Initial Purchase Price shall be
modified to consist of (i) $800,000,000 payable in immediately available funds
at the Closing and (ii) a note in the aggregate principal amount of $50,000,000,
in form and substance reasonably satisfactory to Sellers and Buyer, containing
the terms and conditions specified on Exhibit A hereto (the "Special Note")
deliverable to Sellers at the Closing.
2. Mandatory Prepayment of Special Note. Upon the first to
occur of any of the following events, the aggregate principal amount outstanding
under the Special Note and all accrued and unpaid interest thereon will become
immediately due and payable, subject to the rights of set-off in Section 3:
2
(a) the occurrence of both (i) a Nurol Waiver or a Nurol
Revocation and (ii) a Turkish Acknowledgment;
(b) the consummation of an initial public offering of shares
of common equity interests or other securities equivalent thereto of
UDLP;
(c) the consummation of (i) the sale of UDLP to one or more
parties pursuant to which such party or parties acquire greater than
50% of the equity interests, capital stock or other securities of UDLP
(whether by merger, consolidation, sale or transfer of equity
interests, capital stock or other securities or otherwise) or (ii) the
sale of all or substantially all of UDLP's assets, in either case
whether in one transaction or a series of related transactions;
(d) the consummation of a sale of all or substantially all of
UDLP's Turkish business or UDLP's interests in FNSS not pursuant to a
Call or a Liquidation;
(e) the consummation of the Call pursuant to the terms of
Section 11.4 of the Joint Venture Agreement; and
(f) the substantial completion of the Liquidation pursuant to
the terms of Section 11.4 of the Joint Venture Agreement.
3. Right of Set-Off. Upon the maturity of the Special Note,
whether at scheduled maturity or pursuant to the mandatory prepayment provisions
of Section 2 or pursuant to acceleration (the "Set-Off Date"), Buyer shall have
the right to assert a set-off against any and all amounts due under the Special
Note the amount of any Loss that Buyer shall have incurred as a result of a Loss
Event. If Buyer desires to assert such a Loss, Buyer shall provide to Sellers
(as soon as possible, and in any event within 30 days after the Set-Off Date in
the case of a mandatory prepayment of the Special Note or acceleration and on or
before the Set-Off Date in the case of scheduled maturity) a written statement
(a "Set-Off Statement") setting forth in reasonable detail the amount of any
asserted Loss, the basis of Buyer's asserted right to set-off of any such Loss
and a detailed statement of how any such Loss is a result of a Loss Event.
Sellers may contest the amount or validity and propriety of any item of Loss set
forth on the Set-Off Statement by giving written notice thereof to Buyer within
60 days after receipt of the Set-Off Statement. No amount of Loss specified on
any Set-Off Statement shall be valid or proper unless it is set forth in
reasonable detail on such Set-Off Statement, and the amount of any Loss on any
such Set-Off Statement not contested by Sellers in such a written notice of
Sellers shall be conclusively deemed to be valid and proper. The amount of any
Loss specified in a Set-Off Statement which is so contested shall be resolved
pursuant to the arbitration provisions set forth on Schedule 29(b) of the
Purchase Agreement. In determining the existence or amount of a Loss, the
arbitrators will be entitled to take into account any substituted business of
UDLP or its Affiliates in Turkey which in reality offsets or compensates UDLP
for any Loss resulting from a Loss Event. Interest shall continue to accrue on
the principal amount of the Special Note which was not paid based on any Loss
specified in a Set-Off Statement which is subject to arbitration as provided
above and shall be payable to Sellers if and when such amount is determined to
have not been properly set-off but shall not be payable with respect to any such
amount which is determined to have been properly set-off.
- 2 -
3
4. Limitations on Right of Set-Off. Notwithstanding anything
to the contrary in Section 3 above, the right of Buyer to a set-off as specified
in Section 3 above is subject to the following limitations. If there has
occurred a Purported Turkish Termination and subsequently, in any final and
non-appealable adjudication, it is determined by a court, agency or other
tribunal of competent jurisdiction that such Purported Turkish Termination was
impermissible, wrongful, unlawful or otherwise improper, then the amount of Loss
set-off in connection with the applicable Set-Off Statement shall be
redetermined by the arbitrators pursuant to the arbitration provisions set forth
on Schedule 29(b) of the Purchase Agreement and any reduction shall be paid
(with accrued interest thereon) to Sellers.
5. Covenants.
(a) In anticipation of or in the event of a Loss Event,
Sellers shall have the right to participate in any and all
negotiations, discussions, meetings and other communications relating
to the Loss Event or potential Loss Event, as applicable, and shall
have the right to approve of any and all settlements, agreements or
other arrangements made in connection therewith (such approval not to
be unreasonably withheld or delayed).
(b) In anticipation of or in the event of a Loss Event,
subject to Seller's rights pursuant to clause (a) above, Buyer shall
and shall cause its Affiliates to use all commercially reasonable
efforts to (a) obtain a Nurol Revocation in the most cost-effective and
expeditious manner practicable (provided that the costs thereof to UDLP
or Buyer shall constitute a loss subject to rights of set-off) and (b)
otherwise act in good faith to minimize any Loss in respect of any such
Loss Event.
(c) Buyer and UDLP will use all commercially reasonable
efforts to maximize the value (exclusive of any rights of set-off under
this Agreement) of UDLP's Turkish business and FNSS, whether or not in
connection with either a Call or a Liquidation, as applicable,
including (if required under appropriate circumstances) permitting the
assignment of FNSS's rights under the Manufacturing License Agreement
(other than to a competitor of UDLP) and/or extending the term of the
Manufacturing License Agreement on commercially reasonable terms.
(d) Buyer shall deliver to Sellers at Buyer's sole cost and
expense (so long as Sellers hold any portion of the outstanding
principal amount of the Special Note or so long as any arbitration
proceeding contemplated by Section 3 above is not finally resolved,
whichever is later, and in the form regularly prepared in the ordinary
course):
(i) as soon as available after the end of each
monthly accounting period in each fiscal year, unaudited
statements of income and cash flows of FNSS for such monthly
period and for the period from the beginning of the fiscal
year to the end of such month, and unaudited balance sheets of
FNSS as of the end of such monthly period;
(ii) within 90 days after the end of each fiscal
year, statements of income and cash flows of FNSS for such
fiscal year, and balance sheets of UDLP's Turkish business
and/or FNSS as of the end of such fiscal year;
- 3 -
4
(iii) promptly upon receipt thereof, any additional
reports, management letters or other detailed information
concerning significant aspects of FNSS' operations or
financial affairs given to Buyer or UDLP by their independent
accountants (and not otherwise contained in other materials
provided hereunder);
(iv) an annual budget with respect to FNSS for each
fiscal year as and when prepared in the ordinary course, and
promptly upon preparation thereof any other significant
budgets prepared by UDLP with respect thereto;
(v) with reasonable promptness, such other
information and financial data concerning FNSS as Sellers may
reasonably request.
(e) So long as Sellers hold any portion of the outstanding
principal amount of the Special Note or so long as any arbitration
proceeding contemplated by Section 3 above is not finally resolved,
whichever is later, Sellers shall be entitled at their election to
designate one person to serve as an observer at meetings of the board
of directors of FNSS and Buyer shall use its reasonable best efforts to
permit such person to attend all meetings of the board of directors of
FNSS.
6. Definitions. As used in this Agreement (including the
Exhibits hereto), the following definitions shall apply:
"Adverse Legal Consequences" shall mean Losses to Buyer or
UDLP, under Turkish law or the Turkish Contracts, resulting from or
caused by the change of control and ownership at Closing without the
prior consent of SSM or Nurol.
"Call" means the sale by UDLP of all of the shares of FNSS
owned by it to Nurol pursuant to the provisions of Section 11.4(iii)
and 11.4(A) of the Joint Venture Agreement.
"Call Election" means the delivery of written notice within
the time periods permitted by the Joint Venture Agreement by Nurol to
UDLP indicating that Nurol has exercised its rights under Section
11.4(iii) and Section 11.4(A) of the Joint Venture Agreement with
respect to the Call.
"FNSS" means FMC-Nurol Savunma Sansyii A.S. and its
successors.
"Joint Venture Agreement" means the Restated Joint Venture
Agreement of FMC-Nurol Savunma Sansyii A.S., as amended by Amendment 1
to the Restated Joint Venture Agreement dated July 1, 1997.
"License Agreement Termination" shall mean the termination of
the Manufacturing License Agreement pursuant to Article IX.A thereof as
a result of the change of control and ownership effected by Closing (it
being understood that UDLP will not permit FNSS to terminate the
Manufacturing License Agreement so long as UDLP remains in control of
FNSS).
"Liquidation" means the liquidation and dissolution of FNSS
pursuant to the provisions of Section 11.4(iii) and 11.4(B) of the
Joint Venture Agreement.
-4-
5
"Liquidation Election" means the delivery of written notice
within the time periods permitted by the Joint Venture Agreement by
Nurol to UDLP indicating that Nurol has exercised its rights under
Section 11.4(iii) and Section 11.4(B) of the Joint Venture Agreement
with respect to the Liquidation.
"Loss" means a diminution in value, if any, of UDLP's equity
interest in FNSS or other Turkish business interests, taking into
account any related royalties, management fees or other payments or
distributions received or to be received, including as a result of a
Call or a Liquidation, taken as a whole and on a going-concern basis,
from the date hereof to the applicable measurement date, as a result of
a Loss Event, and any diminution in value of UDLP's Turkish business
interests due to a License Agreement Termination, and any costs or
expenses incurred by UDLP or Buyer to obtain a Nurol Waiver, Nurol
Revocation or Turkish Acknowledgment or to avoid or mitigate Loss from
a Loss Event, but shall not include any Losses as a result of any other
unrelated factors, including the performance of UDLP or FNSS, changes
within SSM and/or the government of Turkey and the scheduled expiration
of the Turkish Procurement Contract.
"Manufacturing License Agreement" means the Manufacturing
License Agreement, dated August 3, 1989, by and between UDLP and FNSS,
as amended.
"Nurol" means Nurol Inasaat ve Ticaret A.S. and its
successors.
"Nurol Revocation" means, after delivery by Nurol to UDLP of a
Call Election or a Liquidation Election, (i) a written agreement of
Nurol that it will not pursue the Call or the Liquidation, as
applicable, and (ii) the earlier of the expiration or waiver of any
rights to make a Termination Election or the passage of 365 days after
Closing where Nurol has not made a Termination Election.
"Nurol Waiver" means either (i) a written agreement of Nurol
that it will make neither a Call Election nor a Liquidation Election
nor a Termination Election or (ii) (x) the passage of one hundred
twenty days after Closing without Nurol having made a Call Election or
a Liquidation Election and (y) the earlier of the expiration or waiver
of any rights to make a Termination Election or the passage of 365 days
after Closing where Nurol has not made a Termination Election.
"Purported Turkish Termination" means a written notice
delivered to UDLP by SSM or its agent stating that SSM has canceled the
Turkish Procurement Contract pursuant to Section 19.1.3 of the Turkish
Procurement Contract as a result of the change of control and ownership
effected at Closing.
"SSM" means the Under Secretariat for Defense Industries of
Turkey.
"Termination Election" shall mean an election by Nurol to
terminate the Joint Venture Agreement pursuant to Article 18 thereof as
a result of the change of control and ownership effected by the
Closing.
"Turkish Acknowledgment" means either (i) a letter or other
writing from SSM acknowledging the transaction between Sellers and
Buyer that evidences the intention of SSM to continue the Turkish
Production Contract despite the change of ownership and control
effected by
-5-
6
the Closing or (ii) the passage of 365 days after Closing
where SSM has not made a Purported Turkish Termination.
"Turkish Contracts" shall mean the Turkish Procurement
Contract, the Manufacturing License Agreement and the Joint Venture
Agreement, collectively.
"Turkish Procurement Contract" means the Contract between the
Under Secretariat for Defense Industries and FNSS.
"UDLP" means United Defense, L.P. and its successors.
7. Amendment and Waiver. No modification, amendment or waiver
of any provision of this Agreement shall be effective against any party hereto
unless such modification, amendment or waiver is approved in writing by such
party. The failure of any party hereto to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such provisions and shall
not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
8. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of
this Agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect the validity, legality or
enforceability of any other provision of this Agreement in such jurisdiction or
affect the validity, legality or enforceability of any provision in any other
jurisdiction, but this Agreement shall be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
9. Entire Agreement. Except as otherwise expressly set forth
herein, this Agreement embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
10. Successors and Assigns. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
the respective successors and assigns of each of the parties hereto.
11. Counterparts. This Agreement may be executed in multiple
counterparts (including by means of telecopied signature pages), each of which
shall be an original and all of which taken together shall constitute one and
the same agreement.
12. Notices. Any notice provided for in this Agreement shall
be in writing and shall be either personally delivered, or mailed first class
mail (postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to any party hereto at the address indicated in the Purchase Agreement,
or at such address or to the attention of such other person as the recipient
party has specified by prior written notice to the sending party. Notices shall
be deemed to have been
-6-
7
given hereunder when delivered personally, three days after deposit in the U.S.
mail and one day after deposit with a reputable overnight courier service.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Illinois, without
giving effect to any choice of law or conflict of law rules or provisions
(whether of the State of Illinois or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Illinois.
14. Descriptive Headings; Interpretation. The descriptive
headings and captions of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement. The use of the word "including" herein
shall mean "including without limitation."
15. Sole Remedy. The rights of set-off as provided in this
Agreement shall be the exclusive right and remedy of Buyer for any alleged Loss
resulting from any Loss Event (it being understood, however, that Buyer shall
only be entitled to a set-off under the circumstances, in the events
contemplated by and pursuant to the provisions of Sections 3 and 4 above). Other
than as set forth in this Agreement, Sellers shall have no liability whatsoever
for any amount claimed to be set-off pursuant to the terms of this Agreement or
in excess of the amount, if any, available to be set-off hereunder from time to
time.
* * * * *
- 7 -
8
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the date first written above.
FMC CORPORATION
By: /s/ J. Paul McGrath
---------------------------------
Its: Senior Vice President
HARSCO CORPORATION
By: /s/ Leonard A. Campanaro
---------------------------------
Its: Senior Vice President and C.F.O.
HARSCO UDLP CORPORATION
By: /s/ Leonard A. Campanaro
---------------------------------
Its: Treasurer
IRON HORSE ACQUISITION CORP.
By: /s/ Allan M. Holt
---------------------------------
Its: President
- 8 -
9
EXHIBIT A -- TERMS OF THE SPECIAL NOTE
Borrower: The entity that issues the Senior Debt and Senior
Notes.
Principal Amount: $50,000,000
Maturity: The final maturity of the Special Note shall be 3
years from the Closing Date.
Ranking: The payment of principal of, premium, if any, and
interest on the Special Note will be subordinate
and subject in right of payment to all existing
and future Senior Indebtedness (to be defined) and
pari passu in right of payment with all other
senior subordinated or subordinated indebtedness
of Borrower. Initially Senior Indebtedness will
consist principally of Borrower's bank facility
and subordinated indebtedness will consist
principally of $225 million of senior subordinated
notes (the "Senior Notes"), and the parties will
agree to appropriate protections to preserve
equivalent type of ranking in connection with
future debt incurrences.
Guaranties: Each person who guarantees Borrower's Senior Notes
(each a "Guarantor" and, collectively, the
"Guarantors") shall be required to provide a
guaranty of all amounts owing under the Special
Note (the "Guaranties"), equivalent in ranking and
terms to the Guarantees of the Sub Debt.
Interest Rates: Outstanding principal on the Special Note shall
bear interest at the same rate per annum as the
Senior Notes, and shall be payable quarterly in
arrears on the last business day of each calendar
quarter. Interest will also be payable at the time
of repayment of the Special Note and at maturity.
Covenants: The Special Note will have substantially the same
covenants and default provisions as the Senior
Notes; provided, however, that the maturity of the
Special Note may be accelerated only in the event
of acceleration of the Senior Debt and the Senior
Notes.
Subordination: As required by senior lenders (equivalent to the
Senior Notes).
- 9 -