Exhibit 10(aa)
UNITED STATES OF AMERICA
CONSUMER PRODUCT SAFETY COMMISSION
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In the Matter of
CENTRAL SPRINKLER CORP.,
and CPSC DOCKET NO. 98-2
CENTRAL SPRINKLER Co.,
Respondents
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CONSENT AGREEMENT
This Consent Agreement is made by and between the staff of the
Consumer Product Safety Commission and Respondents, Central Sprinkler Corp. and
Central Sprinkler Co., to settle the above-captioned administrative action. The
parties agree as follows:
Parties
1. The "staff" is the staff of the United States Consumer Product
Safety Commission ("CPSC" or "the Commission"), an independent regulatory agency
of the United States, established by Congress pursuant to Section 4 of the
Consumer Product Safety Act ("CPSA"), 15 U.S.C. Section 2053.
2. Respondents Central Sprinkler Corporation and Central Sprinkler
Company (hereinafter collectively "Central") are corporations organized and
existing under the laws of
Accepted and Approved: Accepted and Approved:
--------------------------------- --------------------------------
CPSC Office of Compliance Respondents Central Sprinkler Co.
and Central Sprinkler Corp.
the Commonwealth of Pennsylvania, with their principal place of business at 000
Xxxxx Xxxxxx Xxx., Xxxxxxxx, XX 00000.
Subject Matter
3. From 1982 to July, 1998, Central manufactured and sold and/or
distributed between 9 and 10 million "Omega" brand automatic fire sprinklers. On
March 3, 1998, the staff of the Consumer Product Safety Commission filed an
Administrative Complaint ("Complaint") against Central, seeking recall and
replacement of Central's Omega fire sprinklers pursuant to 15 U.S.C. Section
2064. The Complaint alleges that Central's Omega sprinklers are defective and
will not function in certain fire situations, creating a substantial risk of
bodily injury and/or death.
4. To date, the staff has received reports that from 1990 to the
present, Omega sprinklers did not function in 20 fires.
5. Central his filed an answer to the Complaint in which it avers, inter
alia, that its Omega sprinklers are not defective within the meaning of 15
U.S.C. Section 2064.
6. The staff also contends that Central obtained information which
reasonably supported the conclusion that Omega sprinklers contained a defect or
defects that could create a substantial risk of injury to the public but failed
to report such information in a timely manner pursuant to 15 U.S.C. 2064(b).
Central denies any wrongdoing under 15 U.S.C. Section 2064(b).
Agreement of the Parties
Accepted and Approved: Accepted and Approved:
--------------------------------- --------------------------------
CPSC Office of Compliance Respondents Central Sprinkler Co.
and Central Sprinkler Corp.
2
7. It is the express purpose of the parties in entering into this
Agreement to protect the public safety by carrying out the recall and
replacement of Omega sprinklers.
8. The parties intend for this Consent Agreement and the attached Order
(hereinafter "Order" or "the Order"), which is hereby incorporated by reference.
to resolve all allegations and requests for relief set forth in the
Administrative Complaint in this proceeding and to bar the initiation or
referral by the CPSC of any administrative, civil, or criminal claims within the
CPSC's jurisdiction arising from the conduct of Central, its officers, directors
and/or employees regarding Omega sprinklers. This resolution shall not apply to
any actions arising from non-compliance with or disputes pertaining to this
Agreement or the Order.
9. For purposes of this settlement only, Central admits that "Omega"
fire sprinklers are "consumer products" under Section 3 of the CPSA, 15 U.S.C.
Section 2052, subject to the jurisdiction of the Consumer Product Safety
Commission.
10. For purposes of this settlement only, Central agrees not to contest
the allegations in the Complaint that "Omega" fire sprinklers contain a "defect
which creates a substantial product hazard," as those terms are defined in
Section 15(a) of the CPSA, 15 U.S.C. Section 2064(a). Central has agreed not to
contest these allegations in order to avoid the expense, inconvenience and risks
associated with further litigation, and the parties recognize that this
resolution and this Consent Agreement may not be used or introduced as evidence
of defect or hazard against Central in other litigation not involving the
Commission or its staff. Entry of the Order will neither impair nor assist the
bringing of any other action.
Accepted and Approved: Accepted and Approved:
--------------------------------- --------------------------------
CPSC Office of Compliance Respondents Central Sprinkler Co.
and Central Sprinkler Corp.
3
11. As part of the amounts referenced in 1.a and 1.b of Appendix C of
the Order, Central shall deposit, without any adjudication or admission of fact
or law, $1.3 million into the Trust established in Appendix C of the Order, in
settlement of the staff's contention that Central failed to report to the
Commission problems with the Omega pursuant to 15 U.S.C. Section 2064(b).
Central has agreed to do so solely to avoid the inconvenience and burden of
litigation of this issue.
12. Upon acceptance by the Consumer Product Safety Commission of this
Consent Agreement, and entry of the Order, Central knowingly, voluntarily and
completely waives and relinquishes any past, present and/or future right or
rights in this matter: (1) to an administrative or judicial hearing and to all
further procedural steps, including findings of fact, conclusions of law and/or
further determination of whether Omega sprinklers contain a defect which creates
a substantial product hazard within the meaning of Section 15 of the CPSA; (2)
to seek judicial review or otherwise contest the validity of this Consent
Agreement and/or Order as issued and entered, and (3) to seek judicial review of
this or any past orders, findings and/or determinations of the Commission or the
Presiding Officer in this matter, except as set forth in the provisions
regarding review in Paragraph 28 of this Agreement.
13. Central agrees to fulfill all requirements of the Order.
14. Central agrees to immediately cease and desist manufacturing,
selling, distributing, marketing, exporting, importing, and/or attempting to
distribute or sell any
Accepted and Approved: Accepted and Approved:
--------------------------------- --------------------------------
CPSC Office of Compliance Respondents Central Sprinkler Co.
and Central Sprinkler Corp.
4
Omega sprinkler, whether by itself or through its subsidiaries, affiliates,
Central-owned distribution centers, or any other persons or entities over whom
Central has control, whether in the United States or any other foreign state,
country, or territory.
15. Central shall request that Underwriters Laboratories, Inc. withdraw
its listing of approval for all Omega sprinklers.
16. Central shall provide the staff with thirty days written notice of
any transfer of property rights it holds in the following U.S. Patents:
4,465,141; 4,491,182; 4,508,175; 4,553,602; 5,094,298; 4,619,327; 3,734,191;
3,902,510; 3,877,527, 3,911,940; 3,991,829, and 4,359,098.
17. A violation of this Consent Agreement or the Order is a prohibited
act within the meaning of Section 19 of the CPSA, 15 U.S.C. Section 2068.
18. The Commission or Central may disclose terms of this Consent
Agreement and Order to the public.
19. This Consent Agreement shall take effect upon its final acceptance
by the Consumer Product Safety Commission.
20. This Consent Agreement and Order shall be binding upon the parties
hereto and their successors, assigns, and receivers. If, prior to the
termination of this Consent Agreement and Order, Central merges with any other
corporation or sells, assigns, or otherwise transfers substantially all of its
assets, Central shall provide reasonable prior notice to the surviving
corporation or, in the case of an asset sale, assignment, or transfer, the
Accepted and Approved: Accepted and Approved:
--------------------------------- --------------------------------
CPSC Office of Compliance Respondents Central Sprinkler Co.
and Central Sprinkler Corp.
5
purchaser, transferee, or assignee of substantially all of Central's assets, of
this Consent Agreement and Order, and of its binding effect upon said surviving
corporation, purchaser, assignee, or transferee. The existence of this Consent
Agreement and Order and their binding effect shall be noted in any agreement
between Central and such surviving corporation, purchaser, transferee, or
assignee. It shall be a condition of any such merger, sale, assignment, or
transfer that the surviving corporation or, in the case of an asset sale, the
purchaser, assignee, or transferee, execute a document agreeing to be bound by
the provisions of this Consent Agreement and Order, and to submit to the
jurisdiction of the Commission for purposes of enforcement of this Consent
Agreement and Order. In the event of any merger or sale, transfer, or assignment
of substantially all of Central's assets, notice shall be provided to the staff
no later than 15 days prior to any such merger or asset sale, transfer, or
assignment.
21. This Consent Agreement and Order have been negotiated by the
parties. Central is not relying on the advice of the staff, nor anyone
associated with the staff, as to legal, tax, or other consequences of any kind
arising out of this Consent Agreement and Order, and Central specifically
assumes the risk of all such legal, tax and other consequences.
22. For all purposes, this Consent Agreement and Order shall constitute
an enforceable judgment obtained in an action or proceeding by a governmental
unit to enforce its police or regulatory power. Central acknowledges and agrees
that this Agreement and Order are pursuant to the Commission's police or
regulatory power to remedy the risk
Accepted and Approved: Accepted and Approved:
--------------------------------- --------------------------------
CPSC Office of Compliance Respondents Central Sprinkler Co.
and Central Sprinkler Corp.
6
created by and protect the public from a substantial product hazard which the
Commission believes is presented by Omega sprinklers, and that the Agreement and
Order are not subject to an automatic stay if Central becomes the subject of a
bankruptcy proceeding.
23. If all of the Replacement Sprinklers are not listed or approved by
Underwriters' Laboratories Inc. "UL") and all of the exclusively non-residential
Replacement Sprinklers are not listed or approved by Factory Mutual Research
Corporation ("FMRC") by November 1, 1998, or if the listing or approval of any
of the Replacement Sprinklers by UL or FMRC is withdrawn, discontinued or
modified at any time, for any reason whatsoever, the Commission, at its sole
discretion and upon reasonable notice to Central, may void, suspend, or rescind
all or any part of this Consent Agreement and Order.
24. The Commission, at its sole discretion and upon reasonable notice to
Central, may void, suspend, or rescind all or any part of this Consent Agreement
and Order if Central has made material misrepresentations regarding its current
financial condition, manufacturing and shipping costs for Replacement Sprinklers
and Replacement Parts, the number of Omega sprinklers remaining to be remediated
(approximately 8.4 million), and/or the projected costs of administering the
recall and replacement program in this Agreement and Order, and the staff has
relied on those misrepresentations in entering into this Agreement. Appendix D
of the Order lists those documents containing representations deemed material by
the parties.
Accepted and Approved: Accepted and Approved:
--------------------------------- --------------------------------
CPSC Office of Compliance Respondents Central Sprinkler Co.
and Central Sprinkler Corp.
7
25. Beginning 3 months after the effective date of the Commission's
Order, and for every 3 months thereafter until the expiration or final
determination of the Claims as defined in Paragraph 1.c of Appendix C of the
Order, Central shall provide to the staff a full report on the progress and
status of the Claims as defined in Paragraph 1.c of Appendix C of the Order, and
the progress and status of the remediation program set forth in this Agreement
and Order, including but not limited to the payments made to the Trust as
defined in Appendix C of the Order, and the expenses paid and/or incurred for
notice and administration of the remediation program set forth in this Agreement
and Order. Central shall provide, with these reports, the daily timesheets, with
descriptions of all work performed, of each Central employee involved in
administration of the remediation program, for the time period since the last
report date. At any time, upon reasonable written notice, the Commission may
require Central to submit to an independent or Commission review and/or audit of
the remediation program set forth in this Consent Agreement and Order, and/or
any Claims as defined in Paragraph 1.c of Appendix C. Central shall provide the
staff with a copy of every audit report of its financial condition within 5
business days of the date the report is prepared.
26. If, after the effective date hereof, any provision of this Consent
Agreement and Order is held to be illegal, invalid, or unenforceable under
present or future laws effective during the terms of this Consent Agreement and
Order, such provision shall be fully severable. The rest of the Agreement and
Order shall remain in full effect, unless the
Accepted and Approved: Accepted and Approved:
--------------------------------- --------------------------------
CPSC Office of Compliance Respondents Central Sprinkler Co.
and Central Sprinkler Corp.
8
Commission determines that severing the provision materially impacts the
rernediation program set forth in this Agreement and Order.
27. Central acknowledges that this Consent Agreement and Order have been
negotiated between unrelated, sophisticated and knowledgeable parties acting in
their own self-interest and represented by counsel, and the provisions of this
Consent Agreement and Order shall not be interpreted or construed against any
person or entity because that person or entity or any of its attorneys or
representatives drafted or participated in drafting this Consent Agreement.
28. The provisions of this Consent Agreement and Order shall be
interpreted in a reasonable manner to effect its purpose to remedy the alleged
hazard that Omegas pose. In the event of a dispute between the parties arising
under this Consent Agreement and Order, the parties agree to submit the issue
for determination by the Commission. Except as stated to the contrary in
Paragraphs 7 through 10 of Appendix C of the Order, Central shall have the right
to seek judicial review of the Commission decision, such review to be based upon
the record of any such Commission proceeding and according to law.
29. The existence of a dispute shall not excuse, toll, or suspend any
obligation or deadline imposed upon Central under this Consent Agreement and
Order.
30. This Consent Agreement and Order shall not be waived, changed,
amended, modified, or otherwise altered, except in writing executed by the party
or parties against
Accepted and Approved: Accepted and Approved:
--------------------------------- --------------------------------
CPSC Office of Compliance Respondents Central Sprinkler Co.
and Central Sprinkler Corp.
9
whom such amendment, modification, alteration, or waiver is sought to be
enforced, and approved by the Commission.
Dated: October 1, 1998
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/s/ Xxxx X. Xxxxxx, Esq. /s/ J. Xxxxxx Xxxxxx, Xx., Esq.
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Xxxxxxx X. Xxxxxx, Esq. J. Xxxxxx Xxxxxx, Xx., Esq.
Xxxx X. Xxxxxx, Esq. Xxxxx X. Xxxxxxxx, Esq.
Xxxxxx X. Xxxxxxx, Esq. XXXXXX, XXXXX & BOCKIUS LLP
Complaint Counsel 0000 Xxx Xxxxx Xxxxxx
X.X. Consumer Product Safety Commission Xxxxxxxxxxxxx, XX 00000
Office of Compliance (000) 000-0000
0000 Xxxx Xxxx Xxxxxxx
Xxxxxxxx, XX 00000
(000) 000-0000
Of Counsel Xxxxxxx X. Xxxxx. Esq.
Xxxx X. Xxxxx XXXXXX, XXXXX & BOCKIUS LLP
Director, Legal Division 0000 X Xxxxxx, XX
Xxxx X. Xxxxxx Xxxxxxxxxx, XX 00000-0000
Assistant Executive Director (000) 000-0000
Office of Compliance
Xxxx X. Xxxxxxxxxx, Esq.
Complaint Counsel CORR, XXXXXXX & XXXXXXXXXX
Five Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
(000) 000-0000
Counsel for Respondents
/s/ X. Xxxxxx Xxxxxxxx
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X. Xxxxxx Xxxxxxxx
CEO, Central Sprinkler Corp. and
Central Sprinkler Co.
Accepted and Approved: Accepted and Approved:
--------------------------------- --------------------------------
CPSC Office of Compliance Respondents Central Sprinkler Co.
and Central Sprinkler Corp.
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