Item 1.01 Entry into a Material Definitive Agreement.
On August 30, 2019, CIRCOR International, Inc. and its wholly-owned subsidiaries, Spence Engineering Company, Inc. (“Spence”) and Leslie Controls, Inc. (“Leslie” and, together with Spence, the “Sellers”), entered into an asset purchase agreement (the “Purchase Agreement”) with Emerson Process Management Regulator Technologies, Inc. (the “Purchaser”). The Purchase Agreement is more fully described in Item 2.01 below.
In connection with the Purchase Agreement, on August 30, 2019, CIRCOR entered into a guaranty agreement for the benefit of the Purchaser (the “Guaranty”), pursuant to which CIRCOR guaranteed satisfaction of all of the obligations, covenants and agreements of the Sellers under the Purchase Agreement.
The foregoing description of the Guaranty does not purport to be complete and is qualified in its entirety by reference to the full text of the Guaranty, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
Pursuant to the Purchase Agreement, on August 30, 2019, the Sellers completed the disposition of substantially all of the assets of their steam equipment regulation product lines (the “Business”), except for specified excluded assets (including Spence’s Walden, NY facility), to the Purchaser for $84.5 million, subject to adjustment for working capital and other specified items (the “Disposition”). The Purchaser also assumed specified liabilities at the closing of the Disposition, with the Sellers generally remaining obligated for pre-closing liabilities (including environmental matters), other than the assumed liabilities (the “Excluded Liabilities”).
The Purchase Agreement contains customary representations and warranties made by the Sellers and the Purchaser. The Purchase Agreement also contains certain post-closing covenants, including the covenants by CIRCOR and Sellers, along with their affiliates, to not engage in a business that is competitive with the Business for a period of five years after the closing of the Disposition, subject to certain exceptions, and to not solicit employees of the Business for a period of three years after the closing of the Disposition, subject to certain exceptions. The Purchase Agreement provides that Spence will indemnify the Purchaser, and the Purchaser will indemnify CIRCOR, for breaches of representations, warranties and covenants, and for certain other matters, including the indemnification by Spence for Excluded Liabilities and, under certain circumstances, a portion of withdrawal liability under any multiemployer plan of the Business.
The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, which is filed as Exhibit 2.1 to this Current Report on Form 8-K and is incorporated herein by reference. The Purchase Agreement has been attached as an exhibit to this report to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about CIRCOR, the Sellers or the Purchaser or any of their respective subsidiaries or affiliates. The representations, warranties and covenants contained in the Purchase Agreement were made only for the purposes of such agreement and as of specified dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties. The representations and warranties may have been made for the purposes of allocating contractual risk between the parties to the agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Purchase Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of CIRCOR, the Sellers or the Purchaser or any of their respective subsidiaries or affiliates. In addition, the assertions embodied in the representations and warranties contained in the Purchase Agreement are qualified by information in a confidential disclosure schedule that the parties have exchanged. Accordingly, investors should not rely on the representations and warranties as characterizations of the actual state of facts, since (i) they were made only as of the date of such agreement or a prior, specified date, (ii) in some cases they are subject to qualifications with respect to materiality, knowledge and/or other matters and (iii) they may be modified in important part by the underlying disclosure schedule.