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EXHIBIT 2.2
EQUITY PURCHASE AGREEMENT
THIS EQUITY PURCHASE AGREEMENT (this "AGREEMENT"), is dated as of
January 9, 1998, by and among each of the Persons (as hereinafter defined) set
forth in the Schedule of Sellers attached hereto (each a "SELLER" and
collectively the "SELLERS") and Federal-Mogul Corporation, a Michigan
corporation ("F-M" or the "BUYER"). Capitalized terms used herein without
definition have the meanings accorded such terms in EXHIBIT A hereto.
R E C I T A L S
A. The Sellers collectively own (i) all of the partnership interests of
Fel-Pro Master General Partnership, an Illinois general partnership ("MGP"), and
(ii) all of the issued and outstanding capital stock of Felt Products Mfg. Co.,
a Delaware corporation, Fel-Pro Management Co., a Delaware corporation, Meridian
Parts Corporation, a California corporation, and Fel-Pro Mexico S. de R.L. de
C.V., a Mexican limited liability partnership (collectively, the "CORPORATIONS"
and together with MGP, the "COMPANIES").
B. Buyer desires to purchase all of the partnership interests of MGP
and all of the issued and outstanding capital stock of the Corporations.
C. Buyer desires to purchase certain real property owned by Fel-Pro
Realty Corporation ("REALTY").
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE OF EQUITY INTERESTS
SECTION 1.1 PURCHASE AND SALE
(a) Upon the terms and subject to the conditions set forth in
this Agreement, Sellers shall sell to the Buyer, without recourse,
representation or warranty except as otherwise expressly provided herein, and
Buyer shall purchase from Sellers, (i) all of the outstanding shares of capital
stock of the Corporations (the "SHARES") and all of the partnership interests of
MGP (the "PARTNERSHIP INTERESTS" and, together with the Shares, the "EQUITY
INTERESTS"), and (ii) the real property listed on SECTION 1.1(C) OF THE
DISCLOSURE SCHEDULE owned by Realty (the "INCLUDED REAL PROPERTY"), free and
clear of all liens, mortgages, charges, security interests, defects in title, or
other encumbrances of any nature whatsoever (a "LIEN"), other than, in the case
of clause (ii) above, Permitted Liens, and together with all rights now and
hereafter attaching thereto, for an aggregate purchase price equal to
$716,750,000 minus the Debt Amount (the "PURCHASE PRICE"), which shall consist
of (i) cash in an amount equal to $491,750,000 minus the Debt Amount (the "CASH
PORTION"), and (ii) that number of shares of F-M Exchangeable Preferred Stock
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equal to (x) $225,000,000 divided by (y) the product of the Effective Time Share
Value multiplied by five (5) (the "STOCK PORTION"). Notwithstanding the
foregoing, if F-M makes the F-M Cash Election, the Purchase Price shall be
reduced to $706,750,000, no shares of the F-M Exchangeable Preferred Stock will
be included as part of the Purchase Price and, in lieu thereof, the Cash Portion
will be increased by $215,000,000.
(b) The Purchase Price shall be allocated among the Equity
Interests and the Included Real Property as is mutually agreed to by the Buyer
and the Sellers' Representatives prior to the Closing. In the event the Buyer
and the Sellers' Representatives are unable to agree on such an allocation, the
Buyer and the Sellers shall retain a nationally recognized valuation or
accounting firm, the fees and expenses of which shall be borne 50% by the Buyer
and 50% by the Sellers, to perform such allocation based on its determination of
the appropriate valuation of the Companies, the Included Entities and the
Included Real Estate and the allocation of such firm shall be binding on the
Sellers and the Buyer.
(c) The Cash Portion and the Stock Portion shall be allocated
among the holders of the Equity Interests and the owners of the Included Real
Property in such amounts as is mutually agreed to prior to the Closing by the
holders of the Equity Interests and the owners of the Included Real Property.
(d) In addition to the Purchase Price, at the Closing, Buyer
shall pay to the Sellers, by wire transfer to one or more accounts designated by
the Sellers' Representatives, cash in the amount of $3,735,000 to compensate the
Sellers for income taxes resulting from the 338 Election.
(e) In the event the Closing does not occur prior to March 15,
1998 and Felt pays the approximately $1,900,000 installment of Taxes payable
under Code Section 1363 (relating to LIFO recapture upon an S Election) due on
March 15, 1998, each of the Purchase Price and the Cash Portion will be
increased by the amount of such payment.
SECTION 1.2. CLOSING. Unless the parties hereto shall agree in writing
upon a different location, time or date, the closing of the sale and
purchase of the Equity Interests and the Included Real Property (the "CLOSING")
shall take place at the offices of Katten Muchin & Zavis, 525 West Monroe
Street, Suite 1600, Chicago, Illinois 60661 at 10:00 A.M., Chicago time, on (i)
February 24, 1998, (ii) if the conditions required to be satisfied or
waived pursuant to ARTICLES 5 and 6 hereof (other than those requiring the
delivery of a certificate or other document, or the taking of other action, at
the Closing) have been satisfied or waived prior to February 24, 1998, then on
such earlier date which is designated by the Sellers' Representatives and
reasonably satisfactory to Buyer, or (iii) if the conditions required to be
satisfied or waived pursuant to ARTICLES 5 and 6 hereof (other than those
requiring the delivery of a certificate or other document, or the taking of
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other action, at the Closing) have not been satisfied or waived on
February 24, 1998, then on such later date which is designated by the Sellers'
Representatives and reasonably satisfactory to Buyer and is not less than three
nor more than ten business days after the satisfaction or waiver of the last of
the conditions required to be satisfied or waived pursuant to ARTICLES 5 and 6
hereof (other than those requiring the delivery of a certificate or other
document, or the taking of other action, at the Closing), or (iv) at such other
time and date as the parties hereto may designate by mutual written consent of
the Buyer and the Sellers' Representatives. The term "CLOSING DATE" means the
date and time at which the Closing occurs.
SECTION 1.3 DELIVERIES AT THE CLOSING. Subject to the conditions set forth
in this Agreement, at the Closing:
(a) Sellers shall deliver to Buyer (i) newly-issued
certificate(s) representing all of the Shares in the name of the Buyer, (ii)
written assignments of all of the Partnership Interests sufficient to convey to
Buyer good title to the Partnership Interests, (iii) instruments of conveyance
with respect to the Included Real Property reasonably acceptable to Buyer and
the Sellers, (iv) with respect to each Corporation and Included Entity (as set
forth on Exhibit B hereto) which is a corporation, instruments evidencing the
resignation of each director of such Corporation and Included Entity and each
officer of such Corporation and Included Entity, as designated by Buyer at least
five business days prior to the Closing, (v) all certificates and other
instruments and documents which are expressly required pursuant to this
Agreement to be delivered by Sellers to Buyer at the Closing and (vi) other
certificates, instruments and documents reasonably requested by the Buyer which
are necessary to consummate the transactions contemplated by this Agreement; and
(b) Buyer shall (i) accept and purchase the Equity Interests
and the Included Real Property from Sellers and pay and deliver to Sellers the
Cash Portion by wire transfer of immediately available funds to a bank account
or accounts, which account or accounts are to be specified in writing by the
Sellers' Representatives at least two business days prior to the Closing Date,
(ii) unless F-M has made the F-M Cash Election, deliver to the Sellers the
certificates representing the shares of F-M Exchangeable Preferred Stock
representing the Stock Portion, issued in the names of the Sellers as specified
to F-M by the Sellers' Representatives at least three (3) business days prior to
Closing, (iii) deliver to Sellers all certificates and other instruments and
documents which are expressly required pursuant to this Agreement to be
delivered by Buyer to Sellers at the Closing and (iv) deliver to Sellers other
certificates, instruments and documents reasonably requested by the Sellers
which are necessary to consummate the transactions contemplated by this
Agreement.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLERS
Subject to SECTION 10.1, Sellers represent and warrant to Buyer as of the
date hereof as follows:
SECTION 2.1 SELLERS.
(a) Organization; Authority; Good Standing. Each Seller which is a
trust is validly existing under its Charter Documents and has the power and
authority to execute, deliver and perform its obligations under this Agreement.
Each Seller who is an individual has the legal capacity to execute, deliver and
perform his or her obligations under this Agreement. Realty is a corporation
validly existing and in good standing under the laws of its state of
incorporation and has the corporate power and authority to execute, deliver and
perform its obligations under this Agreement. McCormick Investments, L.P. is a
limited partnership validly existing and in good standing under the laws of its
state of organization and has the partnership power and authority to execute,
deliver and perform its obligations under this Agreement.
(b) Enforceability. The execution and delivery of this Agreement
and the consummation of the transactions provided for hereby have been duly
authorized by the trustees and other trust fiduciaries, board of directors or
partners, as the case may be, of each of the Sellers, and no other trust,
corporate or partnership proceeding or action, as the case may be, on the part
of any Seller is necessary to authorize the execution or delivery of this
Agreement or the consummation of any of the transactions contemplated hereby.
This Agreement has been duly executed by each Seller and constitutes the legal
valid and binding obligations of each Seller, enforceable against such Seller in
accordance with its terms, except that such enforcement may be limited by any
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other
laws (whether statutory, regulatory or decisional), now or hereafter in effect,
relating to or affecting the rights of creditors generally or by equitable
principles (regardless of whether considered in a proceeding at law or in
equity).
(c) Ownership of Shares and Partnership Interests; Title. Each
Seller is the record and beneficial owner of the Shares and/or the Partnership
Interests set forth opposite its or their respective names in SECTION 2.1(C) OF
THE DISCLOSURE SCHEDULE. Each Seller has, and shall transfer to Buyer at the
Closing, good title to such Shares and/or Partnership Interests, free and clear
of any and all Liens, except (i) as created by this Agreement, (ii) for
restrictions imposed by federal and state securities laws and (iii) Liens
described on SECTION 2.1(C) of the DISCLOSURE SCHEDULE, which Liens will not
exist as of
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the Closing. The Equity Interests set forth on SECTION 2.1(C) OF THE
DISCLOSURE SCHEDULE constitute all of the Equity Interests.
(d) Representation Letter. Each Seller who is to receive shares of
F-M Exchangeable Preferred Stock has, or prior to the Closing will have,
delivered to F-M a duly executed Representation Letter, dated as of the date
hereof, substantially in the form attached hereto as EXHIBIT D, and each such
Representation Letter is, or at the time of delivery will be, complete and
accurate in all material respects.
SECTION 2.2 COMPANIES AND INCLUDED ENTITIES.
(a) Ownership of Equity Interests. Except as set forth on
SECTION 2.2(A) of THE DISCLOSURE SCHEDULE, the Companies and the Included
Entities, as the case may be, are the record and beneficial owners of all of the
shares of capital stock, partnership interests, membership interests or other
equity interests, as applicable, issued with respect to the Included Entities,
free and clear of any Liens, except (i) as created by this Agreement, (ii) for
restrictions imposed by federal and state securities laws and (iii) with respect
to Included Entities that are partnerships or limited liability companies,
restrictions pursuant to the partnership agreements or operating agreements,
respectively.
(b) Corporate Organization; Good Standing. Each Company and
Included Entity which is a corporation is validly existing and in good standing
under the laws of its jurisdiction of incorporation and has the corporate power
and authority to own, lease and operate the assets held or used by it and to
conduct its business as currently conducted. Each such Company and Included
Entity is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where qualification as a foreign corporation is
required, except where the failure to be so qualified and in good standing would
not have a Material Adverse Effect. Sellers have previously made available to
Buyer complete and correct copies of each such Company's and Included Entity's
Charter Documents as presently in effect. The minute books of each such
corporation have been made available to Buyer.
(c) Limited Partnerships, Limited Liability Company
Organization; Good Standing. Each Company and Included Entity which is either a
limited partnership or a limited liability company is validly existing and in
good standing under the laws of its jurisdiction of organization and has the
partnership or limited liability company power and authority to own, lease and
operate the assets held or used by it and to conduct its business as currently
conducted. Each such Company and Included Entity is duly qualified to do
business as a foreign limited partnership or limited liability company, as
applicable, in each jurisdiction where qualification as a foreign limited
partnership or limited liability company, as applicable, is required, except
where the failure to be so
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qualified would not have a Material Adverse Effect. Sellers have previously made
available to Buyer complete and correct copies of each such Company's and
Included Entity's Charter Documents as presently in effect.
(d) MGP Organization. MGP is an Illinois general partnership
validly existing and in good standing under the laws of the State of Illinois
and has the power and authority to own, lease and operate the assets held or
used by it and to conduct its business as currently conducted. MGP is duly
qualified to do business in each jurisdiction where such qualification is
required, except where the failure to be so qualified would not have a Material
Adverse Effect. Sellers have previously made available to Buyer a complete and
correct copy of the Charter Documents of MGP as presently in effect.
(e) Trusts. Each trust (each, a "TRUST") which holds legal
title to any of the Equity Interests as of the date hereof, has the requisite
authority and power to enter into this Agreement and to consummate the
transactions contemplated hereby. Each trust agreement creating a Trust is a
legal, valid and binding trust agreement and each Trust is a valid trust under
the laws of the jurisdiction in which it was created.
SECTION 2.3 SUBSIDIARIES. As of the Closing, except for Included
Entities, none of the Companies nor Included Entities will have any
Subsidiaries. As of the Closing, except for interests in Included Entities and
except as set forth in SECTION 2.3 OF THE DISCLOSURE SCHEDULE, none of the
Companies nor Included Entities will own, directly or indirectly, any equity,
profits or voting interest in any Person or have any agreement or commitment to
purchase any such interest.
SECTION 2.4 CAPITALIZATION.
(a) The authorized capital stock of the Companies and Included Entities
which are corporations is as set forth in SECTION 2.4 OF THE DISCLOSURE
SCHEDULE. All of the outstanding shares of such capital stock have been duly
authorized and validly issued, are fully paid and nonassessable and have not
been issued in violation of any preemptive rights. As of the Closing, other than
as set forth herein or in SECTION 2.4 OF THE DISCLOSURE SCHEDULE, there will be
no security, option, warrant, right, call, subscription, agreement, commitment
or understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly (i) calls for the issuance, sale, pledge or other disposition of any
shares of capital stock or other equity interest of any such Company or Included
Entity or any securities convertible into, or other rights to acquire, any
shares of any capital stock or other equity interest of any such Company or
Included Entity, (ii) relates to the voting or control of such capital stock,
equity interest, securities or rights of any such Company or Included Entity or
(iii) obligates any such Company or Included Entity to grant, offer or enter
into any of the foregoing.
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(b) With respect to each Company and Included Entity that is a
partnership or limited liability company, all the partnership interests or
membership interests of such entity are as described in its Charter Documents.
As of the Closing, other than as set forth herein or as described in the
applicable Charter Documents, there will be no security, option, warrant, right,
call, subscription, agreement, commitment or understanding of any nature
whatsoever, fixed or contingent, that directly or indirectly (i) calls for the
issuance, sale, pledge or other disposition of any partnership interests,
membership interests or other equity interest of any such Company or Included
Entity or any securities convertible into, or other rights to acquire, any
partnership interests, membership interests, or other equity interest of any
such Company or Included Entity, (ii) relates to the voting or control of any
partnership interests, membership interests, equity interest, securities or
rights of any such Company or Included Entity or (iii) obligates any such
Company or Included Entity to grant, offer or enter into any of the foregoing.
(c) The Shares and Partnership Interests set forth on SECTION 2.1(C) OF
THE DISCLOSURE SCHEDULE constitute all of the shares of capital stock,
partnership interests, membership interests and other equity interests issued
by, or with respect to, the Companies.
SECTION 2.5 NO CONFLICTS. The execution, delivery and performance by the
Sellers of this Agreement do not and will not (i)(A) contravene, conflict with
or violate any provisions of the Charter Documents of any Seller, Company or
Included Entity, (B) except as set forth in SECTION 2.5 OF THE DISCLOSURE
SCHEDULE, contravene, violate, conflict with or result in the breach or
termination of, or otherwise give any other person the right to accelerate,
renegotiate or terminate or receive any payment, or constitute a default, event
of default (or an event which with notice, lapse of time, or both, would
constitute a default or event of default), under the terms of any contracts,
agreements, leases, licenses, mortgages, indentures, bonds, notes or other
instruments to which any of the Sellers, Companies or Included Entities is a
party or by which any of them or their respective securities, properties or
businesses are bound, or result in the creation of any Liens upon any of their
respective securities, properties or businesses or (C) assuming that the
Governmental Actions/Filings referred to in this SECTION 2.5 below or in SECTION
2.5 OF THE DISCLOSURE SCHEDULE are obtained or made, result in any violation by
any Seller, Company or Included Entity of any law, rule or regulation applicable
to it, or any license or authorization, approval, registration permit issued by
any governmental, administrative or regulatory authority to any Seller, Company
or Included Entity (each, a "PERMIT"), except, with respect to sub-clauses (B)
and (C), for such contraventions, conflicts, terminations, violations, breaches,
accelerations, renegotiations, payments, defaults or events of default as would
not have a Material Adverse Effect, (ii) result in any violation by any Seller,
Company or Included Entity of any judgment, injunction or
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decree of any court or governmental, administrative or regulatory authority
applicable to it or (iii) assuming that the notices referred to in SECTION 2.5
OF THE DISCLOSURE SCHEDULE are made, require any consent or approval of, notice
to or filing, registration or qualification with, any governmental,
administrative or regulatory authority (a "GOVERNMENTAL ACTION/FILING") to be
made or obtained by any Seller, Company or Included Entity except (A) in
connection or compliance with the United States Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR ACT"), (B) any federal, state or local Tax filings, (C) any
Governmental Actions/Filings that may be required to be made as a result of (x)
the specific regulatory status of Buyer or any of its Affiliates, (y) any other
facts that relate to the business or activities in which Buyer or any of its
Affiliates is engaged or (z) without limitation of sub-clause (x) or (y), any
other facts that relate to the business or activities in which Buyer or any of
its Affiliates proposes to be engaged (other than, insofar as Governmental
Actions/Filings are concerned, by acquiring ownership of the Companies and
Included Entities, by reference to the Companies' and Included Entities'
activities as presently conducted), (D) any Pension Benefit Guaranty Corporation
("PBGC") "Notice of Reportable Event" required under Section 4043(c) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and (E)
any other Governmental Actions/Filings the failures of which to make or obtain
would not have a Material Adverse Effect.
SECTION 2.6 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES; BANK DEBT.
(a) Sellers have delivered to Buyer the following financial
statements (collectively, the "FINANCIAL STATEMENTS"): the combined balance
sheets, statements of income and cash flow of the Fel-Pro Group for the year
ended December 31, 1996 and for the nine-month period ended September 30, 1997.
(i) The Fel-Pro Group December 31, 1996 financial
statements and accompanying notes to the financial statements
have been compiled from the financial statements of the
Companies, the Included Entities and the Excluded Entities.
SECTION 2.6(A) OF THE DISCLOSURE SCHEDULE sets forth which of
such financial statements are audited and which of such
financial statements are unaudited. The Fel-Pro Group December
31, 1996 financial statements present fairly, in all material
respects, the combined financial position of the Companies,
Included Entities, and Excluded Entities as of and for the
fiscal year ended December 31, 1996 in accordance with
generally accepted accounting principles applied on a
consistent basis ("GAAP").
(ii) The Fel-Pro Group September 30, 1997 financial
statements are the unaudited internal monthly statements of
the Companies, the
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Included Entities and the Excluded Entities. The Fel-Pro Group
September 30, 1997 financial statements present fairly, in all
material respects, the combined financial position of the
Companies, Included Entities and Excluded Entities as of and
for the nine-month period ended September 30, 1997 in
accordance with GAAP, except for the absence of required
footnote disclosure and customary year-end adjustments and
expense reclassifications.
(b) Except as set forth on SECTION 2.6(B) OF THE DISCLOSURE
SCHEDULE, as of September 30, 1997, none of the Companies or Included Entities
had any material liabilities or obligations of any nature, whether known or
unknown, accrued, absolute, contingent or otherwise, and whether due or to
become due (collectively, "LIABILITIES" and individually, a "LIABILITY") which
were required by GAAP to be reflected in financial statements and that were not
reflected or reserved against in the balance sheet of the Fel-Pro Group as of
September 30, 1997. Since September 30, 1997, none of the Companies or Included
Entities has incurred any material Liability that would be required by GAAP to
be reflected in the financial statements of the Fel-Pro Group except Liabilities
that were incurred in the usual and ordinary course of business consistent with
past practice.
(c) Either (x) the Bank Debt and all other indebtedness for
borrowed money of any of the Companies or Included Entities shall be satisfied
in full (i) by the Sellers or (ii) by the Companies or Included Entities, but
only out of cash held by any such Company or Included Entity on or prior to the
Closing, or (y) the principal amount of the Bank Debt and such other
indebtedness outstanding as of the Closing shall have been included in the Debt
Amount, but only if the prepayment thereof is permitted without premium or
penalty.
SECTION 2.7 BUSINESS SINCE SEPTEMBER 30, 1997. Except as disclosed in
SECTION 2.7 OF THE DISCLOSURE SCHEDULE and except as specifically
contemplated by this Agreement, since September 30, 1997 each of the Companies
and the Included Entities has conducted its businesses and operations only in
the ordinary and usual course in substantially the same manner as theretofore
conducted and has not undergone or suffered any change in its condition
(financial or otherwise), properties, liabilities or operations which has been,
in any case or in the aggregate, materially adverse to the Companies and
Included Entities, taken as a whole. For purposes of this Agreement, no change
shall be considered to be "materially adverse" if such change is primarily the
result of this Agreement or the transactions contemplated hereby or the
announcement thereof, the filing of additional lawsuits or actions relating to
asbestos fibers in products manufactured or sold by any Company or Included
Entity or any action permitted by the last sentence of SECTION 4.6(A) hereof.
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SECTION 2.8 COMPLIANCE WITH LAW; LITIGATION; INJUNCTIONS. (i) None
of the Companies nor any Included Entity is in violation of any law, rule,
regulation, order, judgment or decree applicable to it, except (A) as set forth
in SECTION 2.8 OF THE DISCLOSURE SCHEDULE and (B) for violations the existence
of which and cost of remedying would not have a Material Adverse Effect. Except
for the matters set forth in SECTION 2.8 OF THE DISCLOSURE SCHEDULE (as to which
no representation or warranty is made), (ii) there is no action, suit, claim or
other proceeding or investigation (each, a "PROCEEDING") pending or, to Sellers'
knowledge, threatened against any of the Companies or Included Entities, at law
or in equity, before any federal, state or municipal court, governmental
administrative or regulatory agency or arbitrator which, if, adversely
determined, would result in a Liability for any Company or Included Entity in
excess of $250,000, and (ii) none of the Companies nor any Included Entity, or
any of their respective assets, properties or businesses, is a party to, or
subject to or bound by, any order, injunction or decree of any court or
governmental authority which has a Material Adverse Effect.
(a) Except as set forth on SECTION 2.8 OF THE DISCLOSURE SCHEDULE,
since January 1, 1997, none of the Companies or Included Entities has received
any written notice in any form from a governmental, administrative or regulatory
authority (including any citations, notices of violations, complaints, consent
orders or inspection reports) alleging that any of the Companies or Included
Entities was not at the time of such notice or is not currently in compliance,
in all material respects, with all applicable Permits, laws, rules, regulations,
judgments or decrees.
SECTION 2.9 CONTRACTS AND AGREEMENTS; DEFAULTS. Set forth in Part A of
SECTION 2.9 OF THE DISCLOSURE SCHEDULE is a list, as of the date of this
Agreement, of (i) all outstanding mortgages, indentures, notes, installment
obligations or other contracts or instruments to which any of the Companies or
Included Entities is a party evidencing or providing for any borrowing of money
by any of the Companies or Included Entities (except as such borrowings relate
to intercompany payables or intercompany receivables), (ii) all outstanding
guaranties by any of the Companies or Included Entities of any obligation of
another Person for borrowings, excluding endorsements made for collection in the
ordinary course of business, (iii) all outstanding contracts containing
non-competition covenants of any of the Companies or Included Entities, (iv) all
outstanding leases to which any of the Companies or Included Entities is a party
involving obligations of more than $100,000 per annum and (v) each other
outstanding contract to which any of the Companies or Included Entities is a
party which was not entered into in the ordinary course of business or which
requires or is likely to require the payment by any of the Companies or Included
Entities in any future 12-month period of an amount, or requires any of the
Companies or Included Entities to provide in any future 12-month period goods or
services having a fair market value or aggregate sales price, of more than
$250,000. Except as set forth in Part B of SECTION 2.9 OF THE DISCLOSURE
SCHEDULE or for such breaches, defaults or events as have not had and are not
reasonably likely to have a
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Material Adverse Effect, (x) none of the Companies, Included Entities nor, to
the knowledge of Sellers, any other party to any contract to which any of the
Companies or Included Entities is a party is in breach of or default under any
such contract, (y) no event has occurred which would (or which would after
notice or lapse of time or both) become a breach or default by any of the
Companies or Included Entities under any such contract, and (z) no event has
occurred which would (or which would after notice or lapse of time or both)
entitle any other party thereto to cancel or terminate any such contract.
SECTION 2.10 AFFILIATED TRANSACTIONS. SECTION 2.10 OF THE DISCLOSURE
SCHEDULE sets forth a complete and accurate list of all agreements, commitments,
undertakings, leases, mortgages, notes or other contract or instruments, to
which any of the Sellers or any Affiliate of any Seller (including, without
limitation, the Excluded Entities, but excluding any of the Companies or
Included Entities), on the one hand, and any of the Companies or Included
Entities, on the other hand, is a party.
SECTION 2.11 EMPLOYEE BENEFITS.
(a) Except as set forth in SECTION 2.11(A) OF THE DISCLOSURE
SCHEDULE, the Companies and Included Entities do not maintain or
contribute to, or have any obligation to contribute to, or have any liability
with respect to, any plan, program, arrangement, agreement or commitment that
is an employment, consulting, severance or deferred compensation or change in
control agreement, or an executive compensation, incentive bonus, pension,
stock purchase, profit sharing, severance pay, life, health, disability,
accident, medical insurance, vacation, or other material employee benefit plan,
program, arrangement, agreement or commitment, including any "employee benefit
plan" as defined in section 3(3) of ERISA (collectively, the "BENEFIT PLANS").
(b) The Companies and Included Entities have made available to the
Buyer true and complete copies of each of the Benefit Plans and related trust
agreements and/or insurance contracts, if any, and all summary plan descriptions
related thereto, as they have been amended as of the date hereof, and the two
most recent Forms 5500, including financial statements and actuarial valuations,
filed with the IRS with respect to each of the Benefit Plans.
(c) For purposes of this SECTION 2.11, "SELLER GROUP PLAN" means each
"employee pension benefit plan" (within the meaning of section 3(2) of ERISA)
subject to Title IV of ERISA (i) that is maintained, sponsored or contributed to
by the Companies or Included Entities or by any other person or entity that is
considered a single employer with the Companies or Included Entities for
purposes of Title IV of ERISA or section 414 of the Internal Revenue Code of
1986, as amended (the "CODE") (the "SELLER GROUP"), (ii) or with respect to
which any member of the Seller Group may incur liability under Title
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IV of ERISA. No Seller Group Plan is a Multiemployer Plan (within the meaning of
Section 3(37)(A) of ERISA) subject to ERISA.
(d) With respect to each Seller Group Plan:
(i) no such plan has been terminated so as to result,
directly or indirectly, in any liability, contingent or
otherwise, of any member of the Seller Group under Title IV of
ERISA;
(ii) no complete or partial withdrawal from such plan
has been made by a member of the Seller Group, or by any other
person, so as to result in a liability to a member of the
Seller Group, whether such liability is contingent or
otherwise;
(iii) no proceeding has been initiated by any person
(including the PBGC) to terminate any such plan or to appoint
a trustee for any such plan;
(iv) no condition or event currently exists or
currently is expected to occur that could result, directly or
indirectly, in any liability of any member of the Seller Group
under Title IV of ERISA, whether to the PBGC or otherwise, on
account of the termination of any such plan;
(v) if any such plan were to be terminated as of the
Closing Date, no member of the Seller Group would incur,
directly or indirectly, any liability under Title IV of ERISA;
(vi) no "reportable event" (as defined in section
4043 of ERISA) has occurred with respect to any such plan;
(vii) no such plan which is subject to section 302 of
ERISA or section 412 of the Code has incurred any "accumulated
funding deficiency" (as defined in section 302 of ERISA and
section 412 of the Code, respectively), whether or not waived;
and
(viii) the transactions contemplated hereby will not
result in any event described in section 4062(e) of ERISA.
(e) Except as described in SECTION 2.11(E) OF THE DISCLOSURE
SCHEDULE, no event has occurred in connection with which the Companies or
Included Entities could be subject to any material liability under ERISA, the
Code or any other law, regulation or governmental order applicable to any
Benefit Plan, including, without limitation, sections 406, 409, 502(i) or 4069
of ERISA, or sections 4971, 4975 or 4976 of the Code. Each Benefit
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Plan is in compliance, in all material respects, with its terms, including, but
not limited to, the payment provisions thereof, except as otherwise required by
law, and is in compliance, in all material respects, with all applicable laws,
rules and regulations, including, without limitation, ERISA and the Code.
(f) Except as set forth in SECTION 2.11(F) OF THE DISCLOSURE
SCHEDULE, each Benefit Plan which is an "employee pension benefit plan" (as
defined in section 3(2) of ERISA) and intended to qualify under section 401 of
the Code has received a favorable determination letter from the IRS with respect
to such qualification, its related trust has been determined to be exempt from
taxation under section 501(a) of the Code and, to the knowledge of the Sellers,
nothing has occurred since the date of such letter that has or is likely to
adversely affect such qualification or exemption.
(g) With respect to each Benefit Plan, there are no actions,
suits or claims pending (other than routine claims for benefits) or, to the
knowledge of the Sellers, threatened, with respect to such Benefit Plan or
against the assets of such Benefit Plan which, if adversely determined, would
result in a Liability for any Company, Included Entity or Benefit Plan in excess
of $250,000.
(h) Except as disclosed in SECTION 2.11(H) OF THE DISCLOSURE
SCHEDULE, the consummation of the transactions contemplated hereby, either alone
or in combination with another event, will not (i) entitle any employee or
former employee of any of the Companies or Included Entities to severance pay or
unemployment compensation, (ii) increase the amount of compensation due to any
such employee, (iii) accelerate the time of vesting of any compensation, stock
incentive or other benefit or (iv) reasonably be expected to result in any
"excess parachute payment" under section 280G of the Code.
(i) Except as disclosed in SECTION 2.11(I) OF THE DISCLOSURE
SCHEDULE, there is no announced plan or commitment (whether or not legally
binding) to create any additional Benefit Plans or to amend or modify any
existing Benefit Plan. Except as disclosed in Section 2.11(i) of the Disclosure
Schedule, neither any Seller, nor any member of the Seller Group, has any
liability with respect to or in connection with providing post-employment health
and welfare benefits to any current or former employees, except as required
under section 4980B of the Code or state continuation of coverage laws.
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SECTION 2.12 LABOR MATTERS.
(a) Except as set forth in SECTION 2.12(A) OF THE DISCLOSURE SCHEDULE,
there are no collective bargaining agreements or other contracts between any of
the Companies or Included Entities and any union or other employee
organizations. Except as set forth in SECTION 2.12(A) OF THE DISCLOSURE
SCHEDULE, there is no organizing activity involving any Company or any Included
Entity pending or, to the knowledge of the Sellers, threatened by any labor
organization or group or employees of the Company.
(b) Except as set forth in SECTION 2.12(B) OF THE DISCLOSURE SCHEDULE,
none of the Companies or Included Entities has any written or unwritten
employment agreements or contracts, between such Company or Included Entity on
the one hand and any executives, managers, employees, or consultants on the
other hand.
(c) Except as set forth in SECTION 2.12(C) OF THE DISCLOSURE SCHEDULE,
there are no complaints, charges or claims against any of the Companies or
Included Entities pending or, to the knowledge of the Sellers, threatened to be
brought by or filed with any governmental, administrative or regulatory
authority based on, arising out of, in connection with or otherwise relating to
the employment by any of the Companies or Included Entities of any individual,
including individuals classified by the Companies or Included Entities as
independent contractors or "leased employees" (within the meaning of section
414(n) of the Code), or the failure to employ any individual, including any
claim relating to employment discrimination, equal pay, employee safety and
health, immigration, wages and hours or workers' compensation, which, if
adversely determined, would result in a Liability for any Company or Included
Entity in excess of $250,000.
(d) Except as set forth in SECTION 2.12(D) OF THE DISCLOSURE SCHEDULE,
each of the Companies and Included Entities is in compliance, in all material
respects, with all laws, rules and regulations, (including any legal obligation
to engage in affirmative action) relating to the employment of former, current,
and prospective employees, independent contractors and "leased employees"
(within the meaning of section 414(n) of the Code) including all such laws,
rules and regulations relating to wages, hours, collective bargaining,
employment discrimination, immigration, disability, civil rights, safety and
health, workers' compensation and pay equity.
(e) Except as set forth in SECTION 2.12(E) OF THE DISCLOSURE SCHEDULE,
no representation, election, arbitration proceeding, grievance, labor strike,
dispute, slowdown, stoppage or other labor trouble is pending or, to the
knowledge of the Sellers, threatened against, involving or affecting any of the
Companies or Included Entities.
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(f) Except as set forth in SECTION 2.12(F) OF THE DISCLOSURE SCHEDULE,
no individual has been treated by any of the Companies or Included Entities as a
"leased employee" (within the meaning of section 414(n) of the Code).
SECTION 2.13 TAXES. Except as set forth on SECTION 2.13 OF THE
DISCLOSURE SCHEDULE:
(A) GENERAL REPRESENTATIONS.
(i) FILING OF RETURNS. Each of the Companies have
duly and timely filed each material Tax Return required to be
filed with any Tax Authority (or has timely and properly filed
valid extensions of time with respect to the filing thereof)
and Sellers or Sellers' Affiliates have duly and timely filed
each material Tax Return required to be filed with any Tax
Authority by Sellers or Sellers' Affiliates which include or
are based upon the assets, operations, ownership or activities
of any of the Companies or Included Entities, including any
consolidated, combined, unitary, fiscal unity or similar Tax
Return which includes or is based upon the assets, operations,
ownership or activities of any of the Companies or Included
Entities (or Sellers or Sellers' Affiliates have timely and
properly filed valid extensions of time with respect to the
filing thereof). Such Tax Returns were correct and complete in
all material respects. Except as disclosed on SECTION 2.13
(A)(I) OF THE DISCLOSURE SCHEDULE, to the knowledge of
Sellers, there is no investigation or other proceeding pending
or threatened by any Tax Authority for any jurisdiction where
any of the Companies or Included Entities do not file Tax
Returns with respect to a given Tax that may lead to an
assertion by such Tax Authority that any of the Companies or
Included Entities is or may be subject in a given Tax in such
jurisdiction.
(ii) PAYMENT OF TAXES. The Companies and the Included
Entities (or Sellers or Sellers' Affiliates on behalf of the
Companies or Included Entities) have paid all Taxes shown to
be due on all Tax Returns filed prior to the date hereof with
respect to the assets, ownership, operations and activities of
the Companies and the Included Entities.
(iii) TAX OWNERSHIP. Except as disclosed in SECTION
2.13(A)(III) OF THE DISCLOSURE SCHEDULE, each asset with
respect to which any of the Companies or Included Entities
claim depreciation, amortization or similar expense for Tax
purposes is owned for Tax purposes by such Company or Included
Entity under Applicable Tax Law.
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(iv) RULINGS. Except as disclosed in SECTION
2.13(A)(IV) OF THE DISCLOSURE Schedule, there are no
outstanding rulings of or requests for rulings with any Tax
Authority expressly addressed to any of the Companies or
Included Entities (or to an Affiliate of any Company or
Included Entity) that are, or if issued would be, binding upon
the Companies for any Post-Closing Period.
(v) CLOSING AGREEMENTS. Except as disclosed in
SECTION 2.13(A)(V) OF THE DISCLOSURE SCHEDULE, none of the
Companies or Included Entities (or Sellers or Sellers'
Affiliates with respect to any of the Companies or Included
Entities) has, in a manner that would be binding on any of the
Companies or for any Post-Closing Period, (A) executed, become
subject to or entered into any closing agreement pursuant to
section 7121 of the Code or any similar or predecessor
provision thereof under the Code or other Applicable Tax Law,
(B) agreed to any extension of time with respect to the filing
of any Tax Return of any of the Companies or Included Entities
(including any Tax Return which includes or is based upon
their respective assets, ownership, operations or activities),
the payment of any Taxes of any of the Companies or Included
Entities, or any limitation period regarding the assessment of
any such Taxes or (C) received approval to make or agreed to a
change in accounting method or has any application pending
with any Tax Authority requesting permission for any such
change.
(vi) GAIN RECOGNITION. Except as disclosed in SECTION
2.13(A)(VI) OF THE DISCLOSURE SCHEDULE, no item of income or
gain reported for financial purposes in any Pre-Closing Period
is required to be included in taxable income for a
Post-Closing Period.
(vii) TAX EXEMPT FINANCING, ETC. None of the assets
of the Companies or the Included Entities is (A) required to
be or are being depreciated under the alternative depreciation
system under section 168(g)(2) of the Code, or (B) is subject
to section 168(f) of the Code. None of the assets of the
Companies or the Included Entities are property which the
Purchaser or the companies will be required to treat as "tax
exempt use property" within the meaning of section 168(h)(1)
of the Code. Except as disclosed on SECTION 2.13(A)(VII) OF
THE DISCLOSURE SCHEDULE, no "industrial development bonds"
within the meaning of section 103 of the United States
Internal Revenue Code of 1954, as amended and in effect prior
to the enactment of the United States Tax Reform Act of 1986,
"private activity bonds" within the meaning of section 141 of
the Code or other tax exempt financing which have been used to
finance assets of the Companies whether leased or owned.
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(viii) INTANGIBLE ELECTIONS. Except as set forth in
SECTION 2.13(A)(VIII) OF THE DISCLOSURE SCHEDULE, no Company
has made or is bound by any election under section 197 of the
Code.
(ix) ELIGIBILITY OF MERIDIAN PARTS CORPORATION UNDER
SECTION 338(H)(10). The Sellers are eligible to make the 338
Election.
(b) Definitions. For purposes of this Section 2.13, the
following capitalized terms shall be given the meanings set forth below.
(i) "APPLICABLE TAX LAW" shall mean any law of any
nation, state, region, province, locality, municipality or
other jurisdiction relating to Taxes, including regulations
and other official pronouncements of any governmental entity
or political subdivision of such jurisdiction charged with
interpreting such laws.
(ii) "POST-CLOSING PERIOD" shall mean, (A) with
respect to any of the Companies or any of the Included
Entities which are classified as partnerships under the Code,
any Tax Period commencing after the Closing Date and the
portion of any Straddle Period commencing after the Closing
Date; and (B) with respect to any of the Companies or any of
the Included Entities which are classified as S Corporations
under the Code, any Tax Period commencing on the Closing Date
and the portion of any Straddle Period commencing on the
Closing Date.
(iii) "PRE-CLOSING PERIOD" shall mean, (A) with
respect to any of the Companies or any of the Included
Entities which are classified as partnerships under the Code,
any Tax Period ending on the Closing Date and the portion of
any Straddle Period ending on the Closing Date; and (B) with
respect to any of the Companies or any of the Included
Entities which are classified as S Corporations under the
Code, any Tax Period ending before the Closing Date and any
portion of any Straddle Period ending before the Closing Date.
(iv) "STRADDLE PERIOD" shall mean, with respect to
any Company, any Tax Period that begins before and ends on or
after the Closing Date.
(v) "TAX" or "TAXES" shall mean any income,
corporation, gross receipts, profits, gains, capital stock,
capital duty, franchise, withholding, social security
(including any social security charge or premium),
unemployment, disability, property, wealth, welfare, stamp,
excise,
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occupation, sales, use, transfer, value added, alternative
minimum, estimated or other similar tax (including any fee,
assessment or other charge in the nature of or in lieu of any
tax) imposed by any governmental entity (whether national,
local, municipal or otherwise) or political subdivision
thereof, and any interest, penalties, additions to tax or
additional amounts in respect of the foregoing, and including
any transferee or secondary liability in respect of any tax
(whether by Applicable Tax Law, contractual agreement or
otherwise) and any liability in respect of any tax as a result
of being a member of any affiliated, consolidated, combined,
unitary or similar group.
(vi) "TAX AUTHORITY" shall mean, with respect to any
Tax, the governmental entity or political subdivision thereof
that imposes such Tax, and the agency (if any) charged with
the collection of such Taxes for such entity or subdivision,
including any governmental or quasi-governmental entity or
agency that imposes, or is charged with collecting, social
security or similar charges or premiums.
(vii) "TAX BENEFIT" shall mean the present value of
any refund, credit or reduction in otherwise required Tax
payments including any interest payable thereon, which present
value shall be computed as of the Closing Date or the first
date on which the right to the refund, credit or other Tax
reduction arises or otherwise becomes available to be
utilized, whichever is later, (A) using the Tax rate
applicable to the highest level of income with respect to such
Tax under the Applicable Tax Law on such date, and (B) using
the interest rate on such date imposed on corporate
deficiencies paid within 30 days of a notice of proposed
deficiency under the U.S. Code or other Applicable Tax Law.
Any Tax Benefit shall be computed net of any related Tax cost
(which shall be computed in the same manner in which Tax
Benefits are otherwise computed pursuant to this definition).
(viii) "TAX PERIOD" shall mean, with respect to any
Tax, the period for which the tax is reported as provided
under Applicable Tax Laws.
(ix) "TAX RETURN" shall mean, with respect to any
Tax, any information return with respect to such Tax, any
report, statement, declaration or document required to be
filed under the Applicable Tax Law in respect of such Tax, any
claims for refund or Taxes paid, and any amendment or
supplements to any of the foregoing.
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SECTION 2.14 PERMITS. Except as set forth in SECTION 2.14 OF THE DISCLOSURE
SCHEDULE or as would not have a Material Adverse Effect, (i) all Permits that
are presently required for the operation of the businesses conducted by each of
the Companies and the Included Entities as presently conducted, have been duly
obtained by the relevant Company or Included Entity and are in full force and
effect and will remain in full force and effect following consummation of the
transactions contemplated hereby and (ii) the Companies and Included Entities
are in compliance with all such Permits. No Proceeding to modify, suspend,
terminate or otherwise limit any such Permit that is material to the businesses
of the Companies and the Included Entities is pending or, to the knowledge of
Sellers, threatened.
SECTION 2.15 TITLE. Each of the Companies and Included Entities, has good
title to each item of tangible personal property owned by such Company
or Included Entity, free and clear of all Liens except Permitted Liens and
Liens described in SECTION 2.15 OF THE DISCLOSURE SCHEDULE. The real property
and tangible personal property owned or leased by the Companies and the
Included Entities includes all real property and tangible personal property
necessary for the conduct of the businesses and operations as currently
conducted by the Companies and the Included Entities.
SECTION 2.16 CONDITION OF ASSETS. Except as set forth in SECTION 2.16 OF
THE DISCLOSURE SCHEDULE, all material items of tangible personal property of the
Companies and Included Entities currently used in their businesses or operations
is in all material respects in working condition, reasonable wear and tear and
loss due to normal operations, excepted.
SECTION 2.17 ENVIRONMENTAL.
(a) Compliance with Environmental Requirements. To the
knowledge of the Sellers, except as set forth in SECTION 2.17(A) OF
THE DISCLOSURE SCHEDULE, the Companies and Included Entities are in compliance
with all applicable federal, state and local laws, rules, regulations,
ordinances and requirements relating to pollution or protection of the
environment or human health ("ENVIRONMENTAL REQUIREMENTS"), with respect to
which the failure to comply would have a Material Adverse Effect.
(b) No Hazardous Wastes. To the knowledge of Sellers, except
as set forth in SECTION 2.17(B) OF THE DISCLOSURE SCHEDULE, the Companies and
the Included Entities have never generated, transported, treated, stored, or
disposed of any Hazardous Materials at any site, location or facility in
material violation of any Environmental Requirements, except where such a
violation would not have a Material Adverse Effect, and no such Hazardous
Materials are present on, in or under any real property owned or used by the
Companies and the Included Entities in violation of any Environmental
Requirement, except where the presence of such Hazardous Materials would not
have a
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Material Adverse Effect. For purposes of this Agreement, "HAZARDOUS
MATERIALS" shall mean any pollutants or contaminants or hazardous or toxic
substances, wastes or materials including petroleum products, PCBs and asbestos
defined as such or governed by any applicable Environmental Requirement.
(c) No Actions or Proceedings. The Companies and the Included
Entities have not been subject to, or received any notice (written or oral) of
any private, administrative or judicial action, or any notice (written or oral)
of any intended private, administrative, or judicial action or material
liability relating to the presence or alleged presence of Hazardous Materials
in, under or upon any real property owned or used by the Companies or the
Included Entities or any Hazardous Materials released or sent to off-site
locations, which would have a Material Adverse Effect and, other than as set
forth in SECTION 2.17(C) OF THE DISCLOSURE SCHEDULE, to the knowledge of the
Sellers, (i) there is no reasonable basis for any such notice or action; and
(ii) there are no pending or threatened actions or proceedings (or notices of
potential actions or proceedings) from any governmental agency or any other
entity regarding any matter relating to protection of the environment which
would have a Material Adverse Effect.
SECTION 2.18 REAL PROPERTY. Each Company or Included Entity has good and
marketable fee simple title to all of the real property listed in SECTION 2.18
OF THE DISCLOSURE SCHEDULE under its name (collectively, the "OWNED REAL
PROPERTY"), and has valid leasehold interests in all of the real property which
it holds under the leases described in SECTION 2.18 OF THE DISCLOSURE SCHEDULE
under its name (collectively, the "LEASED REAL PROPERTY"; and together with the
Owned Real Property, the "REAL PROPERTY"), in each case free and clear of all
Liens, except for Liens listed in SECTION 2.18 OF THE DISCLOSURE SCHEDULE and
Permitted Liens. The Owned Real Property and the Leased Real Property, together,
constitute all real properties used or occupied by the Companies or Included
Entities in connection with their businesses and operations. SECTION 2.18 OF THE
DISCLOSURE SCHEDULE includes a correct and complete list, and a brief
description of all real estate in which the Companies or Included Entities have
an ownership interest and accurately reflects the status of title to the subject
real estate as of the date hereof. SECTION 2.18 OF THE DISCLOSURE SCHEDULE
includes a correct and complete list, and a brief description of all real estate
leased to the Companies or Included Entities and leased by the Companies or
Included Entities, and all improvements thereon. With respect to the Real
Property:
(a) Easements. The applicable Company or Included Entity has
all material easements and rights necessary to conduct its businesses
and operations;
(b) Condemnation. No material portion of any parcel thereof is
subject to any pending or, to the knowledge of the Sellers, threatened
condemnation proceeding or proceeding by any public authority;
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(c) Subleases. Except for the leases described in SECTION
2.18(C) OF THE DISCLOSURE SCHEDULE, there are no leases, subleases,
licenses, concessions or other agreements, written or oral, granting to any
Person or Persons (other than the Companies or Included Entities) the right
of use or occupancy of any portion of any parcel of the Real Property;
(d) Options. There are no outstanding options or rights of
first refusal to purchase any parcel of the Owned Real Property or any
parcel of the Leased Real Property leased from an Affiliate of any Company,
or any portion thereof or interest therein;
(e) Possession. There are no parties (other than the Companies
or Included Entities) in possession of any parcel of Real Property, other
than tenants under any leases of the Real Property who are in possession of
space to which they are entitled, and the applicable Company or Included
Entity enjoys peaceful and undisturbed possession under all leases for
Leased Real Property;
(f) Utilities. All facilities located on each parcel of Real
Property are supplied with utilities and other services necessary for the
operation of such facilities, including gas, electricity, water and
telephone, all of which services are adequate for the operation of such
facilities as presently conducted by the applicable Company or Included
Entity and are provided via public roads or via permanent, irrevocable,
appurtenant easements benefiting the parcel of the Real Property; and
(g) Access. Each parcel of Real Property abuts on and has
direct vehicular access to a public road or access to a public road via a
permanent, irrevocable, appurtenant easement benefiting the parcel of Real
Property.
SECTION 2.19 INTELLECTUAL PROPERTY. SECTION 2.19 OF THE DISCLOSURE SCHEDULE
contains a complete and correct list of all registered trademarks and
servicemarks owned by any Company or Included Entity and all patents, pending
patent applications and applications for the registration of other trademarks or
servicemarks owned or filed by any Company or Included Entity. SECTION 2.19 OF
THE DISCLOSURE SCHEDULE also contains (a) a complete and correct list of all
material trade or corporate names used by any Company or Included Entity, (b) a
complete and correct list of all material licenses and other rights granted by
any Company or Included Entity to any third party with respect to Proprietary
Rights and (c) a complete and correct list of all material licenses and other
rights granted by any third party with respect to Proprietary Rights to any
Company or Included Entity, excluding commercially available software. Except as
set forth in SECTION 2.19 OF THE DISCLOSURE SCHEDULE, the applicable Company or
Included Entity has a valid
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right to use all of its registered and unregistered trademarks and servicemarks
and other Proprietary Rights material to the operation of its business as
presently conducted. Except as set forth in SECTION 2.19 OF THE DISCLOSURE
SCHEDULE, (A) none of the Companies, Included Entities nor any agent of the
Companies or Included Entities has received any written notice of an allegation
or claim of any infringement or misappropriation by, or conflict with, any third
party with respect to the Proprietary Rights or products processes and services,
which are material to the operation of the business as presently conducted, and
(B) no Company or Included Entity has infringed, misappropriated or otherwise
violated any Proprietary Rights of any third party, which would have a Material
Adverse Effect.
SECTION 2.20 INSURANCE POLICIES. Set forth on SECTION 2.20 OF THE
DISCLOSURE SCHEDULE is a correct and complete list (specifying the insurer, the
policy number or covering note number with respect to binders) of insurance
policies, binders, contracts or instruments (collectively, the "POLICIES") to
which any of the Companies or Included Entities is a party or by which any of
their assets are covered by property, fire, liability, product liability,
workmen's compensation, vehicular, crime, fiduciary, builders' risk, title and
other insurance. True and complete copies all of such Policies have been or, at
Closing, will be provided to Buyer. Except as set forth in SECTION 2.20 OF THE
DISCLOSURE SCHEDULE, all such Policies are in full force and effect in
accordance with their respective terms and will remain in full force and effect
after the Closing. Except as set forth on SECTION 2.20 OF THE DISCLOSURE
SCHEDULE, none of Sellers, the Companies or the Included Entities has received
any notice that any of the Companies or Included Entities is in default with
respect to any provision of any such policies, binders, contracts or
instruments. Except as set forth on SECTION 2.20 OF THE DISCLOSURE SCHEDULE,
none of the Companies or Included Entities has failed to give any notice or
present any claim thereunder in due and timely fashion or as required by any
such Policies so as to jeopardize full recovery under such Policies.
SECTION 2.21 BROKERS. Except for Donaldson, Lufkin & Jenrette Securities
Corporation and The Beacon Group, the fees of whom will be the sole
responsibility of Sellers, none of the Sellers, the Companies, the Included
Entities nor any of their respective directors, officers, employees or
Affiliates has employed any broker or finder or has incurred or will incur any
broker's, finder's or similar fees, commissions or expenses, in each case in
connection with the transactions contemplated by this Agreement.
SECTION 2.22 ACCOUNTS RECEIVABLE AND INVENTORY. The accounts receivable
shown on the balance sheet at September 30, 1997 contained in the Financial
Statements, or recorded by any of the Companies or Included Entities subsequent
to the date of such balance sheet, except to the extent thereafter collected or
written-off in the ordinary course of business and consistent with past
practices, are bona fide accounts receivable
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created in the ordinary course of business, and each of such accounts
receivable exists without setoff, is not the subject of a pledge or assignment
to secure debt and is free of any and all Liens. The Company and included
Entities have good and sufficient title to the inventory owned by them, free and
clear of Liens, other than Permitted Liens.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Subject to SECTION 10.1, Buyer hereby represents and warrants to each
Seller as of the date hereof as follows:
SECTION 3.1 INCORPORAION OF BUYER. F-M is a Michigan corporation validly
existing as a corporation in good standing under the laws of the State of
Michigan.
SECTION 3.2 AUTHORITY, BINDING EFFECT. Buyer has the corporate power and
corporate authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions provided for hereby,
and all corporate action of Buyer necessary for the making and performance of
this Agreement by Buyer has been duly taken. The execution, delivery and
performance by Buyer of this Agreement do not and will not (i)(A) contravene any
provisions of the Charter Documents of Buyer, (B) with or without the giving of
notice or the passage of time or both, result in any breach by Buyer of, or
default or permitted or required acceleration of performance by Buyer under, or
the creation of any Lien upon any of Buyer's assets, or the creation in favor of
any third party of any right of termination of, any mortgage, indenture,
contract, agreement or other instrument to which Buyer is a party or (C)
assuming that the Governmental Actions/Filings referred to in this SECTION 3.2
below are obtained or made, result in any violation by Buyer of any law, rule or
regulation applicable to Buyer, or any Permit except, with respect to
sub-clauses (B) and (C), for such violations, breaches or defaults as would not
in the aggregate (x) result in the imposition of any liability on Seller, or (y)
prevent Buyer from consummating its purchase of the Equity Interests as
contemplated by this Agreement (clause (x) or (y), a "BUYER ADVERSE EFFECT"),
(ii) result in any violation by Buyer of any judgment, injunction or decree of
any court or governmental authority applicable to Buyer or (iii) require any
Governmental Action/Filing to be made or obtained by Buyer except (A) in
connection or in compliance with the HSR Act, (B) any federal, state or local
Tax filings and (C) any other Governmental Actions/Filings the failure to make
or obtain would not in the aggregate have a Buyer Adverse Effect. Buyer is not a
party to, nor subject to or bound by, any Judgment injunction or decree of any
court or governmental authority which may prevent Buyer from consummating its
purchase of the Equity Interests as contemplated by this Agreement. This
Agreement has been duly executed and delivered by Buyer.
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This Agreement constitutes the valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms except that such
enforcement may be limited by any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws (whether statutory, regulatory or
decisional), now or hereafter in effect, relating to or affecting the rights of
creditors generally or by equitable principles (regardless of whether considered
in a proceeding at law or in equity).
SECTION 3.3 ACQUISTITION OF EQUITY INTERESTS FOR INVESTMENT. Buyer is
acquiring the Equity Interests for investment and not with a view toward, or for
sale in connection with, any distribution thereof in violation of any applicable
securities laws, nor with any present intention of publicly distributing or
selling the Equity Interests in violation of any applicable securities laws.
Buyer agrees that the Equity Interests may not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of (i) without registration
under the United States Securities Act of 1933, as amended, except pursuant to
an exemption from such registration available under such Act and (ii) except in
accordance with any applicable provisions of state securities laws.
SECTION 3.4 BROKERS. Except for Morgan Stanley & Co. Incorporated, the fees
of which will be the sole responsibility of Buyer, neither Buyer, nor any
director, officer, employee or Affiliate thereof, has employed any broker or
finder or has incurred or will incur any broker's, finder's or similar fees,
commissions or expenses, in each case in connection with the transactions
contemplated by this Agreement.
SECTION 3.5 BUYER FINANCING. Buyer will have at the Closing sufficient
funds to enable it to pay the Purchase Price and to perform its obligations
hereunder.
SECTION 3.6 CAPITALIZATION.
(a) The authorized capital stock of F-M consists of 60,000,000 shares of
F-M Common Stock and 5,000,000 shares of preferred stock ("F-M PREFERRED
STOCK"). As of January 5, 1998, 40,202,603 shares of F-M Common Stock and
773,351 shares of F-M Preferred Stock were issued and outstanding. As of January
5, 1998, F-M was obligated to issue 14,929,200 shares of F-M Common Stock upon
exercise or conversion of outstanding options, warrants and other convertible
securities. F-M has no other obligations to issue shares of F-M Common Stock or
F-M Preferred Stock. The Buyer has previously made available to the Sellers'
Representatives correct and complete copies of the Charter Documents of F-M.
(b) The F-M Exchangeable Preferred Stock has been duly authorized by all
necessary actions of F-M (other than the filing of the Certificate of
Designations with the Secretary of State of the State of Michigan), and, upon
issuance, will be validly issued, fully paid and nonassessable, free and clear
of all Liens, except (i) as created by this
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Agreement and (ii) for restrictions on transfer pursuant to the Securities Act
and applicable state securities laws.
SECTION 3.7 SEC FILINGS. Since December 31, 1996, F-M has filed all forms,
reports and documents required to be filed with the SEC pursuant to the federal
securities laws and the SEC rules and regulations thereunder (the "BUYER SEC
REPORTS"). As of their respective dates, the Buyer SEC Reports (i) were prepared
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Buyer SEC Reports and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 3.8 SEC PROCEEDINGS. There are no Proceedings pending, or to F-M's
knowledge threatened, against F-M before the SEC. No stop order suspending the
effectiveness of any registration statement filed with the SEC with respect to
the F-M Common Stock is in effect and no Proceedings for such purpose are
pending or, to F-M's knowledge, threatened by the SEC.
SECTION 3.9 FINANCIAL STATEMENTS. Each of the audited financial statements
and each of the unaudited financial statements (including, in each case, any
related notes thereto), contained in the Buyer SEC Reports fairly presents in
all material respects the financial condition and results of operations of F-M
and its Subsidiaries as at the respective dates thereof and for the periods
referred to therein, all in accordance with GAAP, except as may be indicated in
the notes thereto and except that the unaudited interim financial statements
were or are subject to normal year-end adjustments in accordance with GAAP.
SECTION 3.10 NO MATERIAL ADVERSE CHANGE. Since September 30, 1997, there
has not been any material adverse change in the condition (financial or
otherwise), properties, liabilities or operations of F-M and its Subsidiaries,
taken as a whole.
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ARTICLE 4
COVENANTS
SECTION 4.1 ACCESS; CONFIDENTIALITY
(a) At the reasonable request of Buyer, and upon reasonable advance
notice, Sellers shall from time to time prior to the Closing give or cause to be
given to the officers, employees, accountants, counsel and other authorized
representatives of Buyer (collectively, "BUYER'S REPRESENTATIVES") access during
normal business hours to any and all premises, properties, files, books,
records, documents and other information of the Companies and Included Entities.
(b) The provisions of the confidentiality agreement, dated October 1,
1997 between Fel-Pro Incorporated and F-M (the "CONFIDENTIALITY AGREEMENT"),
shall survive the execution of this Agreement and shall apply with respect to
all information made available to Buyer's Representatives pursuant to this
SECTION 4.1.
SECTION 4.2 NOTICE OF PROCEEDINGS; AGREEMENT TO DEFEND
(a) Each party to this Agreement will notify the other promptly in
writing upon (i) such party's becoming aware of any order, judgment or decree
restraining or enjoining the consummation of this Agreement or the transactions
contemplated hereby or any complaint or threatened complaint seeking such an
order, judgment or decree or (ii) such party's receiving any notice from any
governmental authority of its intention (A) to institute a Proceeding to
restrain or enjoin, the consummation of this Agreement or the transactions
contemplated hereby or (B) to nullify or render ineffective this Agreement or
such transactions if consummated.
(b) In the event any Person brings a Proceeding, which challenges the
validity or legality of this Agreement or the transactions contemplated by this
Agreement or any instrument or document contemplated hereby, the parties hereto
agree to consult and to cooperate with each other and use all reasonable efforts
to defend against such Proceeding and, in the event an injunction or other order
is issued in connection with any of the foregoing, to use all reasonable efforts
to have such injunction lifted or such order set aside so that the transactions
contemplated by this Agreement and the instruments and documents contemplated
hereby may proceed.
SECTION 4.3 CONSUMMATION OF AGREEMENT. Subject to the provisions of
SECTION 8.1 of this Agreement, each party hereto shall use all reasonable
efforts to fulfill and perform all conditions and obligations on its part to be
fulfilled and performed under this Agreement, and to cause the transactions
contemplated by this Agreement to be fully
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carried out. Notwithstanding anything herein to the contrary, nothing contained
in this Agreement shall obligate Buyer to consent or agree to take any action
(or to permit Sellers or any of the Companies or Included Entities to take any
action), requested or required by any Person, involving the making of
arrangements for or effecting any sale or disposition of, or holding separate,
any assets or any properties of Buyer or any of its Affiliates or any of the
Companies or Included Entities or the imposition of any limitation on the
conduct by Buyer or the Companies or Included Entities of any of their
respective businesses or operations.
SECTION 4.4 CONSENTS AND FILINGS; HSR ACT. Each of the parties hereto
shall (and shall cause its Affiliates to) use all reasonable efforts to obtain
or make, as the case may be, as soon as possible, all Governmental
Actions/Filings as may be required to be obtained or made, as the case may be,
by it (and/or any of its Affiliates) in order to enable such party (and/or any
of its Affiliates) to perform its obligations under this Agreement. Within 10
business days after the date of this Agreement, Buyer and Seller shall each file
or cause to be filed with the United States Federal Trade Commission (the "FTC")
and the United States Department of Justice (the "DOJ") their respective filings
and any other required submissions under the HSR Act. Without limiting the
generality of the preceding sentence, Buyer and Seller shall promptly file or
cause to be filed any additional documents with the FTC and the DOJ that are
required to be filed by such parties and their Affiliates under the HSR Act in
connection with this Agreement and the transactions contemplated hereby and
shall comply in a timely manner with all requests for further information by the
FTC or DOJ.
SECTION 4.5 ANNOUNCEMENTS. Neither party hereto will (and each such
party will cause its Affiliates not to) issue any press release or otherwise
make any public statement with respect to the transactions contemplated hereby
without the prior written consent of the other party which shall not be
unreasonably withheld, except as and to the extent that such party or any of its
Affiliates determines in good faith that it is so obligated by applicable law,
regulation or stock exchange rules, in which case such party shall give notice
to the other party in advance of such party's or its Affiliate's intent to make
such announcement or issue such press release and the parties hereto shall use
all reasonable efforts to cause a mutually agreeable release or announcement to
be issued.
SECTION 4.6 CONDUCT OF BUSINESS OF THE COMPANY PRIOR TO THE CLOSING
(a) Except as specifically contemplated by this Agreement and
except as set forth in SECTION 4.6(A) OF THE DISCLOSURE SCHEDULE, during the
period from the date of this Agreement to the Closing, Sellers shall cause each
of the Companies and Included Entities to:
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(1) carry on its business in, and only in, the ordinary
course in substantially the same manner as heretofore conducted and, to
the extent consistent with such business, use all reasonable efforts to
preserve intact its present business organization, keep available the
services of its present officers and employees and preserve its
relationships with clients, suppliers, customers, distributors and
others having business dealings with it, pay its obligations in
accordance with its normal payment practices unless such obligations
are being contested in good faith, maintain all assets other than those
disposed of in the ordinary course of business in satisfactory repair
and condition, maintain its books of account and records in the usual
regular and ordinary manner, and preserve its good will; and
(2) promptly advise Buyer in writing of any change in its
condition (financial or otherwise), properties, Liabilities, operations
or prospects which is or may reasonably be expected to be materially
adverse to it.
Nothing contained in this Agreement shall be deemed to limit in any way Sellers'
ability to cause the Companies and Included Entities to make distributions of
Excluded Assets to Sellers or any Affiliates of any Seller or incur indebtedness
for borrowed money so long as the principal amount of such indebtedness
outstanding as of the Closing has been included in the Debt Amount and
prepayment thereof is permitted without premium or penalty.
(b) Sellers shall ensure that Companies and the Included Entities
will not, during the period from the date of this Agreement to the Closing,
except as set forth in SECTION 4.6(A) OR (B) OF THE DISCLOSURE SCHEDULE or as
specifically contemplated by this Agreement, without the prior written consent
of Buyer:
(1) purchase, acquire, sell or lease any substantial
properties or assets except in the ordinary course of business
consistent with past practices;
(2) enter into any contract of employment with any
employee (other than contracts terminable at will by the applicable
Company or Included Entity without penalty) or make any loan to any
employee, except travel advances to employees in the ordinary course of
business;
(3) except in the ordinary course of business, as may
be required by, or as a result of, applicable law, in order to replace
or repair similar assets, or pursuant to contracts or commitments
existing as of the date hereof, make (except pursuant to contracts or
agreements existing on the date of this Agreement), or enter into any
contract directly committing the Companies or Included Entities to
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make, any single capital expenditure in excess of $250,000 provided
further that the aggregate of all capital expenditures shall not exceed
$750,000;
(4) except as may be required by, or as a result of,
applicable law or grant (except pursuant to contracts, agreements or
benefit plans existing on the date of this Agreement) or agree to grant
to any existing employee any material increase in the rates of
salaries, compensation or other employment benefits of any class of
employees of the Companies or Included Entities aggregating more than
ten percent (10%) of the aggregate compensation of such employee as of
the date hereof;
(5) except for borrowings under any credit facility
or loan agreement existing on the date of this Agreement, which
borrowings shall be satisfied in full by Sellers or by the Companies or
Included Entities, but only out of cash held by any Company or Included
Entity, on or prior to the Closing and the incurrence of indebtedness
for borrowed money by any Company or Included Entity, which is repaid
out of Excluded Assets or which remains outstanding as of the Closing
so long as the principal amount of such indebtedness outstanding as of
the Closing is included in the Debt Amount and prepayment thereof is
permitted without premium or penalty, incur or guarantee any
indebtedness for borrowed money (other than endorsements made for
collection in the ordinary course of business).
(6) amend any of its Charter Documents;
(7) acquire, by merger, consolidation, purchase of
stock or assets or otherwise, any corporation, partnership, association
or other business organization or division thereof;
(8) alter its outstanding capital stock, other equity
interests or partnership structure, as the case may be, or declare, set
aside, make or pay any dividend or other distribution (other than
dividends or distributions of Excluded Assets) in respect of its
capital stock, partnership interests or other equity interests, as the
case may be, or purchase or redeem any shares of its capital stock,
partnership interests or other equity interests, as the case may be;
(9) issue or sell any of its capital stock,
partnership interests or other equity interests, as the case may be, or
any options, warrants or other rights to purchase any such shares or
interests or any securities convertible into or exchangeable for any
such shares or interests;
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(10) mortgage, pledge or subject to any Lien (other
than Permitted Liens), any of its properties, other than in the
ordinary course of business consistent with past practice;
(11) compromise, settle or otherwise adjust any material
claim or litigation;
(12) make any change in its accounting procedures or
practices unless mandated by generally accepted accounting principles;
(13) except as provided for in Section 9.1(g), adopt,
enter into, amend in any material respect, announce any intention to
adopt or terminate, any Benefit Plan or other employee benefit plan,
program or arrangement of general applicability; or
(14) agree to do any of the foregoing.
SECTION 4.7 TAX COVENANTS.
(a) Preparation and Filing of Tax Returns; Payment of Taxes.
Between the date hereof and the Closing, Sellers shall cause the Companies and
the Included Entities to prepare and file on or before the due date therefor all
Tax Returns required to be filed by the Companies and the Included Entities
(except for any Tax Return for which an extension has been granted as permitted
hereunder) on or before the Closing, and shall pay, or cause the Companies and
the Included Entities to pay, all Taxes (including estimated Taxes) due on such
Tax Return (or due with respect to Tax Returns for which an extension has been
granted as permitted hereunder) or which are otherwise required to be paid at
any time prior to or during such period. Such Tax Returns shall be prepared in
accordance with the most recent Tax practices as to elections and accounting
methods except for new elections that may be made therein that were not
previously available.
(b) Notification of Tax Proceedings. Between the date hereof
and the Closing, to the extent any Seller has knowledge of the commencement or
scheduling of any Tax audit, the assessment of any Tax, the issuance of any
notice of Tax due or any bill for collection of any Tax due for Taxes, or the
commencement or scheduling of any other administrative or judicial proceeding
with respect to the determination, assessment or collection of any Tax of any
Company or Included Entity, Sellers shall provide prompt notice to Purchaser of
such matter, setting forth information (to the extent known) describing any
asserted Tax liability in reasonable detail and including copies of any notice
or other documentation received from the applicable Tax authority with respect
to such matter.
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(c) Tax Elections, Waivers and Settlements. Sellers shall not,
and shall cause each Company or Included Entity not to, take any of the
following actions: (i) make, revoke or amend any Tax election; (ii) execute any
waiver of restrictions on assessment or collection of any Tax; or (iii) except
as set forth on SECTION 4.7(C) OF THE DISCLOSURE SCHEDULE, enter into or amend
any agreement or settlement with any Tax authority.
SECTION 4.8 INTERCOMPANY ACCOUNTS. Sellers shall take all steps
necessary such that (a) all indebtedness for borrowed money of any of the
Companies or Included Entities are paid out of Excluded Assets or with the
proceeds of indebtedness for borrowed money, the outstanding principal amount of
which is included in the Debt Amount so long as prepayment thereof is permitted
without premium or penalty and (b) all contracts between any Company or Included
Entity and any Seller or any Affiliate of the Sellers (including, without
limitation, the Excluded Entities but excluding the Companies and Included
Entities) existing as of the Closing (other than the Chemical Lease) are
canceled at or prior to the Closing without any consideration being paid in
respect therefor.
ARTICLE 5
CONDITIONS TO THE OBLIGATIONS OF SELLERS
SECTION 5.1 SELLERS' CLOSING CONDITIONS. The obligations of Sellers
under this Agreement to effect the Closing are, subject to the fulfillment of
the following conditions prior to or at the Closing, each of which may be waived
(as conditions to Sellers' obligations) by the Sellers' Representatives in their
absolute discretion:
(a) Representations, Warranties, Covenants
(1) The representations and warranties of Buyer contained in
ARTICLE 3 of this Agreement shall be true and correct in all material respects
as of the date hereof and as of the Closing Date as though restated on and as of
such date (except in the case of any representation or warranty that by its
terms is made as of a date specified therein which shall be accurate in all
material respects as of such date):
(2) Buyer shall have performed and complied in all material
respects with each and every covenant and agreement required by this Agreement
to be performed or complied with by it at or prior to the Closing; and
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(3) Buyer shall have furnished Seller with a certificate,
dated the Closing Date and duly executed on behalf of Buyer to the effect that
the conditions set forth in clauses (1) and (2) of this SECTION 5.1(A) have been
satisfied.
(b) Proceedings. No party to this Agreement shall be subject to any
order, stay, injunction or decree of any court of competent jurisdiction or
governmental, administrative or regulatory authority restraining or prohibiting
the consummation of the transactions contemplated hereby.
(c) Real Estate. At or prior to the Closing, Fel-Pro Chemical Products,
L.P. ("CHEMICAL") shall have executed a real estate lease with Realty to lease
the portion of the building currently leased by Chemical from Realty for a term
of three years on market terms (the "CHEMICAL LEASE"), which lease shall be in a
form reasonably acceptable to the Sellers.
(d) HSR Act. The waiting period (and any extension thereof) under the
HSR Act applicable to the transactions contemplated hereby shall have expired or
been terminated.
(e) Certificate of Designations. The Certificate of Designations in
substantially the form attached hereto as EXHIBIT E (the "CERTIFICATE OF
DESIGNATIONS") shall have been duly filed with the Secretary of State of the
State of Michigan.
(f) Registration Agreement. F-M shall have executed and delivered to
the Sellers' Representatives the Registration Agreement in the form attached
hereto as EXHIBIT F (the "REGISTRATION AGREEMENT").
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF BUYER
SECTION 6.1 BUYER'S CLOSING CONDITIONS. The obligations of Buyer under
this Agreement to effect the Closing are, at its option, subject to the
fulfillment of the following conditions prior to or at the Closing, each of
which may be waived (as conditions to its obligations) by Buyer in its absolute
discretion:
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(a) Representations, Warranties, Covenants.
(1) The representations and warranties of Sellers
contained in ARTICLE 2 of this Agreement shall have been true and
correct in all material respects as of the date hereof and, after
taking into account all amendments and/or supplements to the
Disclosure Schedule pursuant to SECTION 10.12(B) hereof, shall be true
and correct in all material respects as of the Closing Date as though
restated on and as of such date (except in the case of any
representation or warranty that by its terms is made as of a date
specified therein, which shall be accurate in all material respects as
of such date);
(2) Sellers shall have performed and complied in all
material respects with each and every covenant and agreement required
by this Agreement to be performed or complied with by them at or prior
to the Closing; and
(3) Sellers shall have furnished Buyer with a
certificate, dated the Closing Date and duly executed on behalf of
Sellers by the Sellers' Representatives, to the effect that the
conditions set forth in clauses (1) and (2) of this SECTION 6.1(A)
have been satisfied.
(b) Proceedings. No party to this Agreement shall be
subject to any law, rule or regulation or any order, stay, injunction or decree
of any court of competent jurisdiction or governmental, administrative or
regulatory authority, restraining or prohibiting the consummation of the
transactions contemplated hereby.
(c) Real Estate. At or prior to the Closing, Chemical shall have
executed the Chemical Lease, which lease shall be in a form reasonably
acceptable to the Buyer.
(d) Consents. All consents of any governmental, administrative or
regulatory authority required for the Sellers' consummation of the transactions
contemplated by this Agreement shall have been made or obtained and all waiting
periods specified under applicable laws, rules and regulations and all
extensions thereof, the passing of which is necessary for such consummation,
shall have passed.
(e) Absence of Withholding Tax Liability. The Sellers agree to
provide to the Buyer a certificate executed by each Seller that, as of the
Closing Date, such Seller is not a foreign person within the meaning of Section
1445 of the Code and the Treasury Regulations thereunder. If such certificate is
not delivered to Buyer, Buyer shall be entitled to withhold 10% of the Purchase
Price as required by Section 1445 of the Code.
(f) Debt-Free. As of the Closing, none of the Companies or
Included Entities shall have any outstanding indebtedness for borrowed money
except for such
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indebtedness for borrowed money, the outstanding principal amount of which has
been included in the Debt Amount and is prepayable without premium or penalty.
(g) Registration Agreement. The Sellers that are to receive
shares of Exchangeable Preferred Stock shall have executed and delivered to F-M
the Registration Agreement.
ARTICLE 7
TAX AND OTHER MATTERS
SECTION 7.1 TAXES RELATED TO TRANSACTIONS. Notwithstanding anything to the
contrary in this ARTICLE 7, Sellers shall be liable for and shall pay (i) any
and all Taxes imposed on the Sellers arising in any way in connection with the
transfer of the Equity Interests contemplated by SECTION 1.1; (ii) any taxes
payable by the Sellers as partners or shareholders of the Companies or any of
the Included Entities (including, without limitation, any shareholder level tax
imposed upon the deemed asset sale and deemed liquidation of Meridian under
Treasury Regulation ss.1.338(h)(10)-1); (iii) except for Taxes payable by Felt
under Code Section 1363 (relating to LIFO recapture upon an S Election), any
corporate level Taxes imposed upon any of the Companies or any of the Included
Entities resulting from the transfer of the Equity Interests contemplated by
SECTION 1.1 (including, without limitation, (A) any corporate level Taxes
imposed upon any of the Companies under Code Section 1374 resulting from the
transfer of the Equity Interests contemplated by SECTION 1.1, and (B) any Taxes
incurred under Treasury Regulation ss.1.338(h)(10)-1(e)(1) and 1.338(h)(10)-1(f)
upon the deemed asset sale by Meridian); and (iv) any other transfer Taxes
incurred in connection with the transactions contemplated hereby and Sellers
shall indemnify, defend and hold Buyer harmless against any and all such Taxes.
SECTION 7.2 ALLOCATION OF LIABILITY FOR TAXES.
(a) Sellers Liable For Shareholder And Partner Level Taxes. Except as
set forth in SECTION 7.2(C), Sellers shall be liable for, and shall
indemnify, defend and hold Buyer harmless from and against, any and all
Taxes imposed on items of income, loss, deduction or credit which are
passed through to the Sellers, as shareholders or partners of any of the
Companies or any of the Included Entities, for any time periods during
which (i) any of the Companies or any of the Included Entities are
classified as S Corporations or Partnerships for purposes of the Code and
(ii) the Sellers are such shareholders or partners; including, without
limitation, any and all Taxes imposed on items of income, loss, deduction
or credit which are passed through to the Sellers, as shareholders or
partners, under the provisions of
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Code Section 1366 (in the case of any "S corporation" (as such term is
defined in Code Section 1361) hereinafter an "S Corporation")), or Code
Section 702 (in the case of any partnership).
(b) Sellers Liable For Installment Sale Obligation. Sellers shall be
liable for, and shall indemnify, defend and hold Buyer harmless from and
against, any income Taxes imposed on Felt (including, without limitation,
any Taxes imposed under Code Sections 1374 and 453), relating to the
installment sale of certain assets from Felt (or its affiliates or
predecessors) to Fel-Pro Chemical Products L.P., Fel-Pro Specialty Sealing
Products, L.P. and FP Diesel L.P. under the terms and conditions of the
following promissory notes: (i) Amended and Restated Secured Promissory
Note dated December 28, 1992 payable by Fel-Pro Chemical Products, L.P. to
Fel-Pro Incorporated, (ii) Amended and Restated Secured Promissory Note
dated December 28, 1992 payable by Fel-Pro Specialty Sealing Products LP to
Fel-Pro Incorporated, and (iii) Amended and Restated Secured Promissory
Note dated January 31, 1994 payable by FP Diesel LP (formerly Phillips) to
Fel-Pro Incorporated.
(c) Buyer Liable For Certain Corporate Level Taxes. Except for those
corporate level Taxes expressly treated under SECTION 7.1 above and those
corporate level Taxes allocated to Sellers under SECTIONS 7.2(B) or 7.7(D),
Buyer shall be liable for, and shall indemnify, defend and hold Sellers
harmless from and against, any Taxes imposed on any of the Companies or any
of the Included Entities which are classified as corporations for U.S.
Federal income tax proposes (including, without limitation, any Taxes
payable by Felt under Code Section 1363 (relating to LIFO recapture upon an
S Election)).
SECTION 7.3 PRORATION OF TAXES
(a) Method of Proration for Income Tax. Income Tax items shall be
apportioned between the Pre-Closing Period and the Post-Closing Period based on
a closing of the books and records of the relevant entity or entities as of the
Closing Date (provided that depreciation, amortization and depletion for any
Straddle Period shall be apportioned on a daily pro rata basis). Notwithstanding
anything to the contrary in the preceding sentence, the parties agree that for
U.S. federal income Tax purposes, Tax Items for any Straddle Period shall be
apportioned between Pre-Closings Periods and Post-Closing Periods in accordance
with U.S. Treasury Regulations Section 1.1362-3(b), which regulations shall be
reasonably interpreted by the parties in a manner intended to achieve the method
of apportionment described in the preceding sentence.
(b) No Contrary Elections. Seller and Buyer will not exercise any
option or election (including any election to ratably allocate a Tax year's
items under Treasury
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Regulation Section 1.1362-3(b)) to allocate Tax items in a manner inconsistent
with SECTION 7.2(A) hereof.
SECTION 7.4 PREPARATION AND FILING OF TAX RETURNS AND PAYMENT OF TAX.
(a) Seller's Rights and Responsibilities. Sellers shall have the right
and obligation to timely prepare and file, and cause to be timely prepared and
filed, when due: (i) any Income Tax Return that is required to include the
operations, ownership, assets or activities of any Company or Included Entity
for any period ending on or prior to the Closing Date, including, without
limitation, (x) all final returns of any of the Companies or Included Entities
which are S Corporations or partnerships for the periods beginning on the first
day of the 1998 fiscal year through and including the Closing Date, and (y) all
returns related to the deemed asset sale and deemed liquidation of Meridian
under Treasury Regulation ss.1.338(h)(10)-1(e)(1), (2); and (ii) all Tax Returns
for transfer taxes to be paid by Sellers pursuant to the terms hereof.
(b) Buyer's Rights and Responsibilities. Buyer shall have the right and
obligation to timely prepare and file, or cause to be timely prepared and filed,
when due, all other Tax Returns that are required to include the operations,
ownership, assets or activities of any Company or Included Entity.
SECTION 7.5 PARTNERSHIP ELECTIONS UNDER SECTION 754
Sellers shall cause such Included Entities as are identified by the
Buyer in writing prior to the Closing Date and which are classified as
partnerships for federal income tax purposes to make elections under Section 754
of the Code.
SECTION 7.6 TAX CONTROVERSIES; ASSISTANCE AND COOPERATION.
(a) Notice. In the event any Income Tax Authority informs a Seller, on
the one hand, or Buyer, on the other, of any notice of proposed audit, claim,
assessment or other dispute concerning an amount of Income Taxes with respect to
which the other party may be liable, the party so informed shall promptly notify
the other party of such matter. Such notice shall contain factual information
(to the extent known) describing any asserted Income Tax liability in reasonable
detail and shall be accompanied by copies of any notice or other documents
received from any Tax authority with respect to such matter.
(b) Consent to Settlement. Buyer and Sellers shall not agree to settle
or permit the settlement of any Tax liability or compromise any claims with
respect to Taxes, which settlement or compromise may affect the liability for
Taxes (or right to tax benefit) of the other party, without such other party's
consent. Neither Buyer nor the Sellers shall
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make, revoke or amend any Tax election or amend any Tax return of the other
party, without such other party's consent which may affect the other party's
liability for Taxes or right to tax benefit.
(c) Assistance and Cooperation. Sellers, on the one hand, and Buyer and
Company, on the other, shall cooperate (and cause their affiliates to cooperate)
with each other and with each other's agents, including accounting firms and
legal counsel, in connection with Tax matters relating to the Companies or any
Included Entity, including (i) preparation and filing of Tax Returns, (ii)
determining the liability and amount of any Taxes due or the right to and amount
of any refund of Taxes, (iii) examinations of Tax Returns, and (iv) any
administrative or judicial proceeding in respect of Taxes assessed or proposed
to be assessed. Such cooperation shall include each party making all information
and documents in its possession relating to the Company and available to the
other party. The parties shall retain all Tax Returns, schedules and work
papers, and all material records and other documents relating thereto, until the
expiration of the applicable statute of limitations (including, to the extent
notified by any party, any extension thereof), of the Tax Period to which such
Tax Returns and other documents and information relate. Each of the parties
shall also make available to the other party, as reasonably requested and
available, personnel (including officers, directors, employees and agents)
responsible for preparing, maintaining, and interpreting information and
documents relevant to Taxes, and personnel reasonably required as witnesses or
for purposes of providing information or documents in connection with any
administrative or judicial proceedings relating to Taxes.
SECTION 7.7 MERIDIAN SECTION 338 ELECTION.
(a) With respect to the purchase and sale (the "MERIDIAN TRANSACTION")
pursuant hereto of the capital stock of Meridian Parts Corporation ("MERIDIAN"),
the Buyer and the Sellers shall make a timely election (i) under Section
338(h)(10) of the Code and Section 1.338(h)(10)-1 of the Treasury Regulations
promulgated pursuant to the Code (the "338 ELECTION"), but pursuant to Section
230515(e)(3) of the California General Taxation Code will elect to not make a
similar Section 338(h)(10) election for purposes of tax in the State of
California. The Sellers shall take all actions reasonably requested by the Buyer
(including, but not limited to, the preparation, completion and timely joint
filing by the Buyer and the Sellers of Form 8023-A, and the preparation,
completion and timely filing of such other forms, returns, elections, schedules
and other documents and instruments reasonably requested by the Buyer) to effect
a timely Section 338(h)((10) election in accordance with Section 338(h)(10) of
the Code and Section 1.338(h)(10)-1 of the Treasury Regulations promulgated
pursuant to the Code, and the Buyer shall take all actions reasonably requested
by the Sellers' Representatives to file any forms required by the California
Franchise Tax Board to elect not to have Section 338(h)(10) applicable for
California purposes, with respect to the Meridian Transaction. The Buyer and the
Sellers
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shall report the Meridian Transaction consistent with the 338 Election and with
the California election described above and shall take no position contrary
thereto or inconsistent therewith in any tax return, or in any discussion with
or any proceeding before any taxing authority or other governmental body or
otherwise.
(b) The portion of the Purchase Price allocated to the Meridian
Transaction pursuant to the allocation of the Purchase Price pursuant to SECTION
1.2 that comprises the "modified aggregate deemed sale price" (as defined in,
and required to be allocated pursuant to, Section 338(h)(10) of the Code) shall
be allocated with respect to the Meridian Transaction in accordance with a
schedule prepared by the Sellers' Representatives and the Buyer consistent with
the methodology utilized to calculate the amount identified in Section 1.1(d)
and otherwise in accordance with the requirements of the Code and the
regulations thereunder. Such allocation shall, for federal tax purposes, be
binding on Meridian, the Sellers and the Buyer. Meridian, the Sellers and the
Buyer shall file their respective federal tax returns in accordance with such
allocation and shall not take any position inconsistent with such allocation.
Meridian, the Sellers and the Buyer shall file their respective California tax
returns consistent with the election not to have Section 338(h)(10) apply. In
the event that any such allocation is disputed by any taxing authority, the
party receiving notice of such dispute shall promptly notify and consult with
the other parties hereto concerning resolution of such dispute and such dispute
shall be settled or compromised by the Buyer, with the consent of the Sellers'
Representative which consent shall not be unreasonably withheld. The Buyer shall
cause Meridian to comply with this SECTION 7.7.
(c) The Sellers shall, on a timely basis, prepare (in a manner
consistent with prior practice and this Agreement), execute, and file on behalf
of Meridian (A) the federal income tax returns to be filed on behalf of Meridian
for the period ending as of the close of business on the Closing Date that will
include the gain or loss resulting from the "deemed sale" and "deemed
liquidation" that will occur (pursuant to Treasury Regulation Section
1.338(h)(10)-1(e)(1) and (2) promulgated under the Code) by reason of the
Buyer's and the Sellers' election pursuant to Section 338(h)(10) of the Code and
(B) any corresponding state and local income tax returns required to be filed on
behalf of Company for the period ending as of the close of business on the
Closing Date. The Buyer shall cooperate with the Sellers in connection with the
preparation and filing of such returns by making the books, records and
personnel of the appropriate companies and Included Entities available to the
Sellers and taking such other actions as the Sellers may reasonably request. The
Buyer shall have the right to review and comment upon such returns prior to
filing. The Sellers shall bear the costs and expenses of preparing and filing
such return.
(d) ALLOCATION OF MERIDIAN INCOME TAXES. Sellers shall be
responsible for all federal income Taxes attributable to Meridian for periods
ending on or before the
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Closing Date resulting from the 338 Election (including, without limitation, any
built-in gain tax imposed upon Meridian under Code Section 1374). Buyer shall be
responsible for all federal income Taxes of Meridian for periods ending after
the Closing Date. Sellers will be liable for California income taxes of Meridian
resulting from the refusal of the California Tax authorities to respect the
election not to make a 338 Election for California tax purposes, and Buyer and
Meridian will be liable for non-federal income Taxes of Meridian for periods
ending after the Closing Date.
SECTION 7.8 NO COMPETITION. Sellers' Representatives agree that during the
two-year period commencing on the Closing Date, none of the Sellers'
Representatives will, directly or indirectly, (i) participate or engage in any
of the businesses currently engaged in by the Companies and Included Entities
anywhere in the United States; or (ii) induce or attempt to influence any
employee of any of the Companies or Included Entities as of the Closing Date to
terminate such employee's employment or become an employee of any entity
established by or associated with any of Seller or any Affiliate of the Sellers'
Representatives.
SECTION 7.9 CONFIDENTIALITY. If the transactions contemplated by this
Agreement are consummated, the Sellers agree to maintain the confidentiality of
all proprietary and other non-public information regarding the Companies and the
Included Entities, except as necessary to file tax returns and other reports to
governmental agencies and except as set forth below. In the event that any
Seller reasonably believes that it is required by law to disclose any
confidential information described in this SECTION 7.7, such Seller will (i)
provide the Buyer with prompt notice before such disclosure in order that the
Buyer may attempt to obtain a protective order or other assurance that
confidential treatment will be accorded such confidential information and (ii)
cooperate with the Buyer in attempting to obtain such order or other assurance.
The provisions of this SECTION 7.7 shall not apply to any information, documents
or materials which are in the public domain or shall come into the public
domain, other than by reason of default by a Seller.
SECTION 7.10 NAMES. Sellers agree to take such steps as are necessary as
soon as practicable to change the name of any Excluded Entity to delete the
names "Fel-Pro" or "FP" therefrom and agree not to employ, trade upon or utilize
such names in any business of any kind or character.
SECTION 7.11 AUTHORIZED SHARES. F-M shall use its best efforts to cause the
number of authorized shares of F-M Common Stock to be increased, as soon as
practicable, to an aggregate number of authorized shares of F-M Common Stock
sufficient to effect the issuance of all of the shares of F-M Common Stock
issuable upon exchange of the F-M Exchangeable Preferred Stock issuable in
connection with the transactions contemplated hereby. F-M shall provide the
Sellers' Representatives with copies of any solicitations of its stockholders in
connection with such matter. Promptly following any
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such increase, F-M shall reserve and keep available out of its authorized but
unissued shares of F-M Common Stock a sufficient number of its shares of F-M
Common Stock to effect the exchange of all shares of the F-M Exchangeable
Preferred Stock issuable in connection with the transactions contemplated
hereby.
SECTION 7.12 STOCK LISTING. F-M shall take all action necessary, including,
but not limited to filing an additional listing application, to list the shares
of F-M Common Stock issuable upon conversion of the F-M Exchangeable Preferred
Stock on the stock exchange or market on which the F-M Common Stock is then
listed provided that all applicable listing requirements are satisfied.
ARTICLE 8
TERMINATION
SECTION 8.1 TERMINATION OF AGREEMENT. This Agreement may be terminated at
any time on or prior to the Closing:
(a) by the mutual written consent of the Sellers' Representatives
and Buyer;
(b) by either the Sellers' Representatives or Buyer, if the
Closing has not taken place by April 20, 1998, and the terminating party is
not in material breach of its obligations hereunder;
(c) by Buyer or the Sellers' Representatives, if any court or
governmental, administrative or regulatory body of competent jurisdiction
in the United States shall have issued an order, stay, judgment or decree,
or taken any other action, permanently prohibiting the transactions
contemplated by this Agreement, or mandating that Buyer sell, dispose of or
hold separate any assets or properties of Buyer or any of its Affiliates or
any assets or properties of the Companies or Included Entities and such
order, stay, judgment, decree or other action, shall have become final and
non-appealable; or
(d) by Buyer if the amendments and supplements to the Disclosure
Schedule pursuant to SECTION 10.12(B) have, in the aggregate, a Material
Adverse Effect.
If Buyer or the Sellers' Representatives terminate this Agreement pursuant to
the foregoing provisions of this SECTION 8.1, such termination shall be effected
by written
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notice to the other party specifying the provision pursuant to which
such termination is made.
SECTION 8.2 LIABILITIES UPON TERMINATION. Except for SECTION 4.5 hereof
(and, to the extent relevant thereto, the terms of SECTIONS 10.4, 10.5, 10.6,
10.7, 10.13, 10.14, 10.17 and 10.18 hereof), which shall survive any termination
of this Agreement, upon the termination of this Agreement pursuant to SECTION
8.1 hereof, this Agreement shall forthwith become null and void, and no party
hereto or any of its officers, directors, partners, employees, agents,
consultants, stockholders or principals shall have any rights, liabilities or
obligations hereunder or with respect hereto; provided, however, that nothing
contained in SECTION 8.1 or this SECTION 8.2 shall (i) relieve any party from
liability for any willful failure to comply with any covenant or agreement
contained herein (and the terms of SECTIONS 10.4, 10.5, 10.6, 10.7, 10.13,
10.14, 10.17 and 10.18 hereof shall apply to any such failure) or (ii) affect
the Confidentiality Agreement, which shall survive any termination of this
Agreement.
ARTICLE 9
EMPLOYEE MATTERS
SECTION 9.1 EMPLOYEE BENEFIT PLAN MATTERS.
(a) Effective as of the Closing, Buyer shall cause the applicable
Company or Included Entity to offer to employ or continue the employment of all
persons who are designated on the records of such Company, Included Entity or
Realty as of the Closing as employees, whether or not then actively at work,
including, without limitation, any employees who are on vacation leave, leave of
absence, sick leave or disability leave ("COMPANY EMPLOYEES"). Buyer shall also
cause the applicable Company or Included Entity to honor any re-employment
rights of any current or former employees of such Company or Included Entity,
including, but not limited to, any such persons who are receiving long-term
disability benefits as of the Closing. Nothing contained herein shall be deemed
to require the Buyer to employ or cause any Company or Included Entity to employ
any individual for any period of time following the Closing.
(b) Each employee benefit plan, fund, policy or arrangement
established or maintained by Buyer or its Affiliates for Company Employees
("BUYER PLAN") shall grant vesting and eligibility credit (for initial
participation purposes), to the extent such credit was given under the Benefit
Plans, to each Company Employee for all service on or prior to the Closing Date
with any Company or Included Entity or any predecessor or Affiliate of any of
the foregoing, for all purposes other than benefit accrual under a "defined
benefit plan," within the meaning of Section 3(35) of ERISA; provided, that any
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Buyer Plan may be designed to offset, or otherwise avoid duplication of, any
benefits to which a Company Employee is entitled under any comparable Benefit
Plan or any amount payable under a Benefit Plan may be reduced to the extent
paid under a Buyer Plan.
(c) Effective as of the Closing, Buyer shall establish, or shall
cause the appropriate Companies and/or Included Entities, to continue, or be
included in, a group health plan which shall cover all Company Employees and
their family members who immediately prior to the Closing were covered under any
group health plan maintained by any Company or Included Entity. Any such group
health plan established or maintained by Buyer shall (i) waive any waiting
period, (ii) waive any exclusion or limitation for preexisting conditions which
were covered (generally and/or specifically as to any individual) under any
group health plan maintained by the Companies and Included Entities prior to the
Closing and (iii) grant credit (for purposes of annual deductibles, copayments
and out-of-pocket limits) for any covered claims incurred or payments made prior
to the Closing Date during the plan year in which the Closing Date occurs.
(d) Buyer shall, or shall cause the applicable Company or
Included Entity to, recognize and honor the terms of (including, but not by way
of limitation, making contributions or benefit payments as may be required by)
the ERP Bonus Program, the Fel-Pro Incorporated Management Deferred Compensation
Plan and the Fel-Pro Incorporated Voluntary Deferral Plan, and shall not allow
such plans to be amended or terminated in any way that adversely affects any
participant's benefits thereunder; provided, that such deferred compensation
plans may be amended so that no further accruals or additions to participant's
benefits thereunder shall be required from the date of the adoption of such
amendment (other than earnings or similar credits pursuant to the terms of such
plans as currently in effect). In addition, Buyer shall cause the Companies and
Included Entities to maintain in effect the benefit programs set forth on
SECTION 9.1(D) OF THE DISCLOSURE SCHEDULE as currently in effect for the periods
set forth on SECTION 9.1(D) OF THE DISCLOSURE SCHEDULE. Except as set forth in
this SECTION 9.1(D) or the terms of any such Benefit Plan, Seller recognizes
Buyer's right to amend or terminate any Benefit Plan or substitute any Buyer
Plan at any time after the Closing.
(e) Buyer shall, or shall cause the applicable Company or
Included Entity to, make the severance payments listed on Part A of SECTION
9.1(E) OF THE DISCLOSURE SCHEDULE to any Company Employee (except for those
Company Employees set forth on Part B of SECTION 9.1(E) OF THE DISCLOSURE
SCHEDULE), who are terminated by the applicable Company or Included Entity other
than for "cause" (as hereafter defined) on or prior to the date that is one year
after the Closing Date. For purposes of this paragraph (e) "CAUSE" shall mean
such Company Employee's theft, fraud, willful and
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repeated neglect of duties or conviction of a felony. Notwithstanding anything
contained herein to the contrary, Sellers shall be responsible for making all
payments to Company Employees pursuant to (i) the Long-Term Incentive Plan
resulting from a "CHANGE IN CONTROL", (ii) any and all retention bonus
agreements executed in contemplation of or as a consequence of the Companies
being sold (excluding the employment agreements listed on Part C of SECTION
9.1(E) OF THE DISCLOSURE SCHEDULE) (the "Retention Bonus Agreements")and (iii)
the Special Bonus. The Sellers may, at their option, fulfill such responsibility
by (i) causing the Companies and Included Entities to incur indebtedness for
borrowed money, the proceeds of which are used to pay or fund such obligations,
so long as the principal amount of such indebtedness has been included in the
determination of the Debt Amount and prepayment thereof is permitted without
premium or penalty, (ii) causing the Companies and Included Entities to pay or
fund such obligations with Excluded Assets, (iii) paying or funding such
obligations, or (iv) any combination of the foregoing. The bonuses payable
pursuant to the Retention Bonus Agreements shall be accrued by the Companies and
the Included Entities prior to the Closing and paid within seventy-five (75)
days of the Closing Date. If requested by the Sellers' Representatives, the
Buyer shall use its best efforts to cause the Companies and the Included
Entities to amend the Retention Bonus Agreements to provide for the payment of
such bonuses within seventy-five (75) days of the Closing Date.
(f) Buyer shall be liable for and shall indemnify and hold the Sellers
and their Affiliates harmless from and against any and all liability arising
under the Workers Adjustment and Retraining Notification Act and any similar
state laws as a result of actions by the Buyer or by any Company or Included
Entity after the Closing.
(g) Buyer acknowledges that the Companies and the Included Entities
shall pay a bonus to the Eligible Employees in the aggregate gross pretax amount
of $10,000,000 (the "SPECIAL BONUS") in consideration for the Eligible
Employees' services to the Companies, the Included Entities and Realty prior to
the Closing Date and agrees to cause the Companies and the Included Entities to
comply with the terms of this SECTION 9.1(G). The Special Bonus shall be in
addition to all other amounts owed to the Eligible Employees by the Companies,
the Included Entities and Realty and shall not reduce any amounts that may be
payable to any Eligible Employee at any time in the future (including, but not
limited to, amounts payable under the bonus and other arrangements listed on
SECTION 4.6 OF THE DISCLOSURE SCHEDULE). The Special Bonus to be paid to, or on
account of, each Eligible Employee shall be determined and paid in accordance
with, the following provisions:
(1) Determination. The amount of the Special Bonus to be paid to
or on account of each Eligible Employee shall be determined by first allocating
the gross pretax amount of the Special Bonus among each Company, Included Entity
and Realty based on the percentage that the wages of the Eligible Employees of
such entity for 1997
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and the first payroll of 1998 bears to the total wages of the Eligible Employees
of the Companies, the Included Entities and Realty for 1997 and the first
payroll of 1998. With respect to the Participating Eligible Employees, the
amount of the Special Bonus allocated to each Company, Included Entity or Realty
shall be allocated to the Participating Eligible Employees of such entity
through the application of the formulas set forth in Section 17 of the
Retirement Plan that are effective upon a Change of Control (the "CHANGE OF
CONTROL FORMULAS"), disregarding for this purpose any applicable
non-discrimination, allocation limitation or other testing rules contained in
the Code that limit the amount that may be allocated to any Eligible Employee.
With respect to the Non-Participating Eligible Employees, the amount of the
Special Bonus allocated to each Company, Included Entity or Fel-Pro Realty
Corporation shall be allocated to Non-Participating Eligible Employees based on
the percentage that each Non-Participating Eligible Employee's wages for 1997
and the first payroll of 1998 bears to the total wages of all of the
Non-Participating Eligible Employees for 1997 and the first payroll of 1998
employed by such entity.
(2) Contribution and Payments.
(A) With respect to Participating Eligible Employees, the
amount of the Special Bonus allocated to each Participating Eligible Employee
that the Company or Included Entity that employs or employed such Participating
Eligible Employee is permitted to contribute to the Retirement Plan to satisfy
the required allocation, taking into account all applicable non-discrimination,
allocation limitations and other testing rules contained in the Code that limit
the amount that may be allocated to such Participating Eligible Employee, shall
be contributed to the Retirement Plan and allocated to such Participating
Eligible Employee in accordance with the Change in Control Formulas. To the
extent the amount of the Special Bonus allocated to a Participating Eligible
Employee exceeds the amount that the Company or Included Entity that employs or
employed such Participating Eligible Employee is permitted to contribute to the
Retirement Plan, the excess shall be paid, in cash, directly to such
Participating Eligible Employee.
(B) With respect to Non-Participating Eligible Employees, the
amount of the Special Bonus allocated to each such employee shall be paid, in
cash, directly to such employee.
(3) Timing. All contributions required to be made to the Retirement
Plan pursuant to this SECTION 9.1(G) shall be made prior to the Closing Date.
All payments required to be made directly to Eligible Employees pursuant to this
SECTION 9.1(G) shall be accrued prior to the Closing Date and paid to such
Eligible Employees within 75 days of the Closing Date. In the event that any
Eligible Employee becomes ineligible to receive the Special Bonus allocated to
such Eligible Employee that was to be
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paid directly to such Eligible Employee in accordance with paragraph (2) above,
the Buyer shall cause the amount allocated to such Eligible Employee to be paid
to the Sellers.
(4) Taxes. Any payments to be made directly to Eligible
Employees hereunder shall be subject to customary withholding taxes
and such other employment taxes as are required under applicable law to be
collected from an employee with respect to compensation paid by an employer to
an employee.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 EXCLUSIVITY OF REPRESENTATIONS; RELIANCE ON
REPRESENTATIONS; TERMINATION OF EPRESENTATIONS.
(a) THE REPRESENTATIONS AND WARRANTIES MADE BY SELLERS AND BUYER,
RESPECTIVELY, IN THIS AGREEMENT ARE IN LIEU OF AND ARE EXCLUSIVE OF ALL OTHER
REPRESENTATIONS AND WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE AND ANY OTHER
IMPLIED WARRANTIES, OF SELLERS AND BUYER, RESPECTIVELY. SELLERS AND BUYER EACH
HEREBY DISCLAIMS ANY SUCH OTHER OR IMPLIED REPRESENTATIONS OR WARRANTIES,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE BY SELLERS OR ANY OTHER PERSON TO
BUYER OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES,
OR BY BUYER OR ANY OTHER PERSON TO SELLERS OR ANY OF ITS DIRECTORS, OFFICERS
EMPLOYEES, AGENTS OR REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION
IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(b) Except for the representations and warranties of Sellers set
forth in SECTIONS 2.1(C), 2.1(D), 2.2(A), 2.4 and 2.21 and of Buyer
set forth IN SECTIONS 3.4 AND 3.6 (such representations and warranties of
Sellers and Buyer, the "SURVIVING REPRESENTATIONS AND WARRANTIES"), the
representations and warranties of the Sellers set forth in ARTICLE 2 and of
Buyer set forth in ARTICLE 3 shall terminate and merge at, and not survive, the
closing and thereafter shall be void and no longer enforceable. The parties
hereto agree and acknowledge that, except for claims of actual fraud or a
breach of any Surviving Representations and Warranties, no party hereto will
have any right to indemnification or the right to bring any claim or action for
damages relating to the breach of any representation or warranty set forth
herein or in any other agreement
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contemplated hereby, whether such claim or action arises under
contract or tort, as a result of a violation of law or otherwise.
(c) ARTICLES 7, 10, and SECTION 9.1 hereof shall survive the
Closing.
SECTION 10.2 EXPENSES. The Sellers, on the one hand, and the Buyer, on the
other hand, shall bear all of its respective expenses incurred in connection
with the transactions contemplated by this Agreement, including, without
limitation, accounting and legal fees incurred in connection herewith. The
Sellers shall bear all of the expenses incurred by the Companies prior to the
Closing in connection with the sale of the Equity Interests and the Included
Real Property contemplated hereby.
SECTION 10.3 FURTHER ASSURANCES. From time to time after the Closing
Date, without the payment of any additional consideration except as
otherwise set forth in this Agreement, each party hereto will execute all such
instruments and take all such actions as the other party, being advised by
counsel, shall reasonably request in connection with carrying out and
effectuating the intent and purpose hereof and all transactions and things
contemplated by this Agreement.
SECTION 10.4 NOTICES. Notices and other communications provided for herein
shall be in writing (which shall include notice by facsimile transmission) and
shall be delivered or mailed (or if by graphic scanning or other facsimile
communications equipment of the sending party hereto, delivered by such
equipment), addressed as follows:
If to Sellers to:
Kenneth A. Lehman
2715 Sheridan Road
Evanston, Illinois 60201
Telecopier No. (847) 475-2234
and
Richard A. Morris
2323 Marcy
Evanston, Illinois 60201
Telecopier No. (847) 328-3035
and
David A. Weinberg
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2135 North Cleveland
Chicago, Illinois 60614
Telecopier No. (773) 929-2288
With a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661
Telecopier No. (312) 902-1061
Attention: Allan B. Muchin, Esq.
David R. Shevitz, Esq.
If to Buyer:
Federal Mogul Corporation
26555 Northwestern Highway
Southfield, Michigan 48034
Attention: Charles B. Grant
Vice President-Corporate Development
Diane L. Kaye, Esq.
Vice President, General Counsel
and Secretary
or to such other address as a party may from time to time designate in writing
in accordance with this section. All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt.
SECTION 10.5 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that neither
this Agreement nor any of the rights, interests, or obligations hereunder may be
assigned by any of the parties hereto without the prior written consent of the
other parties, except that (i) Buyer may assign any or all of its rights and
obligations hereunder (other than F-M'S obligation to issue its stock
consideration and its obligations under SECTIONS 7.11 AND 7.12) to one of its
wholly-owned subsidiaries without the consent of the Sellers; provided, that any
such assignment shall not relieve Buyer from any liability hereunder, and (ii)
any Seller may assign any or all of its right and obligations hereunder to any
Permitted Transferee to whom such Seller sells, assigns or transfers any or all
of such Seller's Equity Interests prior to the Closing; provided, that such
Permitted Transferee expressly agrees in writing to be bound by the terms of
this Agreement. In the event of any transfer of Equity Interests
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made pursuant to clause (ii) of the preceding sentence, the Schedule of Sellers
and SECTION 2.1(C) OF THE DISCLOSURE SCHEDULE shall be amended to reflect such
sale, assignment or transfer. Any assignment in violation of this Agreement
shall be null and void ab initio.
SECTION 10.6 CONSTRUCTION.
(a) Unless otherwise expressly specified herein, (i) defined terms in
the singular shall also include the plural and vice versa, (ii) the words
"hereof," "herein," "hereunder" and other similar words refer to this Agreement
as a whole, (iii) Article, Section, Schedule and Exhibit references in this
Agreement are to Articles of, Sections of Schedules to and Exhibits to this
Agreement and (iv) words of any gender (masculine, feminine, neuter) mean and
include correlative words of the other genders.
(b) The captions in this Agreement are for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
(c) All references to "days" shall be to calendar days unless business
days are specified.
(d) Unless the context otherwise requires, (i) "or" is not exclusive
and (ii) "including" means "including but not limited to" and "including without
limitation".
(e) As used herein, the phrases "date of this Agreement" and "date
hereof" and any other phrases of similar import shall mean January 9, 1998
(regardless, with respect to representations and warranties, of the date or time
as of which such representations and warranties are made or deemed to have been
made or as of which the accuracy or inaccuracy thereof is measured or
determined).
SECTION 10.7 LAW GOVERNING. THIS AGREEMENT IS INTENDED AS A CONTRACT
UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF
THE STATE OF ILLINOIS, INCLUDING WITHOUT LIMITATION AS TO ALL MATTERS OF
CONSTRUCTION, VALIDITY, ENFORCEABILITY AND PERFORMANCE.
SECTION 10.8 WAIVER OF PROVISIONS. The provisions, terms, covenants,
representations, warranties and conditions of this Agreement may be waived only
by a written instrument executed by the party hereto waiving compliance. The
failure of any party hereto at any time or times to require performance of any
provision of this Agreement shall in no manner affect the right of such party at
a later date to enforce the same. No waiver by any party hereto of any condition
or the breach of any provision, term, covenant, representation or warranty
contained in this Agreement, whether by
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conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or of the
breach of any other provision, term, covenant, representation or warranty of
this Agreement.
SECTION 10.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one agreement,
binding on the parties hereto, notwithstanding that such parties are not
signatory to the same counterpart.
SECTION 10.10 ENTIRE AGREEMENT. This Agreement and the Schedules and
Exhibits hereto constitute the entire agreement between the parties and
supersedes and cancels any and all prior agreements between them relating to the
subject matter hereof, excluding the Confidentiality Agreement (which shall
remain in full force and effect). This Agreement may not be amended or modified
except by a written agreement signed by Buyer and Seller.
SECTION 10.11 ACCESS TO BOOKS AND RECORDS.
(a) After the Closing, Buyer shall, upon the Sellers'
Representatives' request from time to time, and upon reasonable notice, in
connection with the preparation by Sellers or their Affiliates of Tax returns
and for such other purposes as the Sellers' Representatives shall reasonably
request, (i) (A) provide to the authorized representatives of Sellers and its
Affiliates full access, during normal business hours, to any and all premises,
properties, files, books, records, documents and other information of the
Companies and Included Entities, (B) cause its officers and the officers of the
Companies and Included Entities to furnish to Sellers and their authorized
representatives any and all financial, technical and operating data and other
information pertaining to the Companies and Included Entities and (C) make
available to Sellers and their authorized representatives personnel of Buyer and
the Companies and Included Entities to consult with such personnel and (ii) make
available for inspection and copying by Sellers at Sellers' expense true and
complete copies of any documents relating to the foregoing. In exercising their
rights under the foregoing provisions of this SECTION 10.11, Sellers and their
representatives shall not interfere with Buyer's, the Companies' or the Included
Entities' normal operations. Buyer shall cause the Companies and Included
Entities to retain the files, books, records and documents of the Companies and
the Included Entities for at least six years after the Closing Date. Thereafter,
Buyer shall give the Sellers' Representatives at least 60 business days prior
written notice of the proposed destruction of any such files, books, records or
documents and, at the request and expense of Sellers, shall deliver to Sellers
any of such files, books, records or documents that Sellers may request.
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(b) After the Closing, Buyer, the Companies and the Included
Entities, on the one hand, and the Sellers, on the other hand, will
make available to the other, as reasonably requested, and to any taxing
authority, all information, records or documents relating to the liability for
Taxes or potential liability of the Companies or any of the Included Entities
for Taxes for all periods prior to or including the Closing Date and will
preserve such information, records or documents until the expiration of any
applicable statute or limitations or extensions thereof.
SECTION 10.12 DISCLOSURE SCHEDULE.
(a) Any information disclosed in any section of the Disclosure
Schedule, if reasonably related to any other sections of the Disclosure Schedule
and described in reasonable detail to allow a reasonable person to make the
applicable connection, shall be deemed fully disclosed for the purposes of all
applicable sections of the Disclosure Schedule. Neither the specification
(directly or indirectly by reference to a defined term hereof) of any dollar
amount in the representations and warranties set forth in ARTICLE 2 nor the
inclusion of any items in the Disclosure Schedule shall be deemed to constitute
an admission by Sellers or Buyer, or otherwise imply, that any such amount or
such items so included are material for the purposes of this Agreement. The
inclusion of, or reference to, any item within any particular section of the
Disclosure Schedule does not constitute an admission by either Sellers or Buyer
that such item meets any or all of the criteria set forth in this Agreement for
inclusion in such section of the Disclosure Schedule. The inclusion of, or
reference to, any item within any particular section of the Disclosure Schedule
does not constitute an admission by either Sellers or Buyer that the item
constitutes a violation of any federal, state or local law, rule, statute,
regulation, ordinance, permit, judgment, decree or other equivalent.
(b) From the date hereof until the Closing Date, the Sellers may
amend and/or supplement the Disclosure Schedule to reflect events or changes
occurring after the execution of this Agreement. Such amendments and/or
supplements shall not effect Buyer's right to terminate this Agreement under
SECTION 8.1(D).
SECTION 10.13 ARBITRATION. Any dispute arising out of or relating in any
manner to this Agreement or the underlying transaction, or to the breach,
termination or validity of this Agreement, shall be resolved in accordance with
the procedures specified in this SECTION 10.13, which shall be the sole and
exclusive procedures for resolution of any such disputes.
Any such dispute shall be submitted to arbitration in accordance with the
rules and procedures of the American Arbitration Association, before three
independent and impartial arbitrators, none of whom shall be appointed by either
party, provided, however, that if either party will not participate in
non-binding mediation, the other may
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initiate arbitration before the expiration of the above period. The place of
arbitration shall be Chicago, Illinois. Substantive legal issues in the
arbitration shall be determined in accordance with the laws of the State of
Illinois in accordance with SECTION 10.7. The arbitrators are empowered to grant
and issue mandatory directives, prohibitions, orders or restraints to enforce
this Agreement as they may deem necessary or advisable, directed to or against
any of the parties, including a directive or order requiring specific
performance of any covenant, agreement or provision of this Agreement. The
arbitrators are not empowered to award damages in excess of compensatory
damages, and each party irrevocably waives any right to recover such damages
with respect to any dispute resolved by arbitration. Judgment upon the award
rendered by the arbitrators may be entered by any court having jurisdiction
thereof. Each party shall bear its own costs, except that the costs of the
mediator and the arbitrators shall be borne equally by the parties.
SECTION 10.14 NO THIRD PARTY BENEFICIARY. This Agreement is for the sole
benefit of the parties hereto and their respective successors and permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
SECTION 10.15 SELLERS' REPRESENTATIVES.
(a) Each of the Sellers agrees that actions (including, but not
limited to, waivers and consents to amendments) or omissions to act hereunder by
Sellers' Representatives, whether before or after the Closing, shall be binding
upon and enforceable against each Seller.
(b) In furtherance of SECTION 10.15(A) hereof, Buyer shall be
entitled to rely exclusively upon any communications or writings given or
executed by the Sellers' Representatives and shall not be liable in any manner
whatsoever for any action taken or not taken in reliance upon the actions taken
or not taken or communications or writings given or executed by the Sellers'
Representatives and Buyer shall be entitled to disregard any notices or
communications given or made by Sellers unless given or made through the
Sellers' Representatives.
SECTION 10.16 NO PRESUMPTION. With regard to each and every term and
condition of this Agreement and any and all agreements and instruments subject
to the terms hereof or referred to herein, the parties hereto understand and
agree that the same have or has been mutually negotiated, prepared and drafted,
and if at any time the parties hereto 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
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which party hereto actually prepared, drafted or requested any term or condition
of this Agreement or any agreement or instrument subject hereto.
SECTION 10.17 SEVERABILITY. To the fullest extent that they may
effectively do so under applicable law, the parties hereto hereby waive any
provision of law which renders any provision of this Agreement invalid, illegal
or unenforceable in any respect. Such parties further agree that any provision
of this Agreement which, notwithstanding the preceding sentence, is rendered or
held invalid, illegal or unenforceable in any respect in any jurisdiction shall
be ineffective, but such ineffectiveness shall be limited as follows: (i) if
such provision is rendered or held invalid, illegal or unenforceable in such
jurisdiction only as to a particular Person or Persons or under any particular
circumstance or circumstances, such provision shall be ineffective, but only in
such jurisdiction and only with respect to such particular Person or Persons or
under such particular circumstance or circumstances, as the case may be; (ii)
without limitation of clause (i), such provision shall in any event be
ineffective only as to such jurisdiction and only to the extent of such
invalidity, illegality or unenforceability, and such invalidity, illegality or
unenforceability in such jurisdiction shall not render invalid, illegal or
unenforceable such provision in any other jurisdiction, and (iii) without
limitation of clause (i) or (ii), such ineffectiveness shall not render invalid,
illegal or unenforceable this Agreement or any of the remaining provisions
hereof. Without limitation of the preceding sentence, (A) it is the intent of
the parties hereto that, in the event that in any court proceeding, such court
determines that any provision of this Agreement is illegal, invalid or
unenforceable in any jurisdiction to any extent, such court shall have the power
to, and shall, (1) modify such provision (including by limiting the Persons
against whom, or the circumstances under which, such provision shall be
effective in such jurisdiction) for purposes of such proceeding to the minimum
extent necessary so that such provision, as so modified, may then be enforced in
such proceeding and (2) enforce such provision, as so modified pursuant to
clause (1), in such proceeding and (B) upon any determination that any provision
of this Agreement is invalid, illegal or unenforceable, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of such parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible. Nothing in this SECTION 10.17 is
intended to, or shall, (x) limit the ability of any party hereto to appeal any
court ruling or the effect of any favorable ruling on appeal or (y) limit the
intended effect of SECTION 10.7 or 10.13.
SECTION 10.18 AFFILIATES; SUBSIDIARIES. References in this Agreement to
"Affiliates" or "Subsidiaries" of a specified Person refer to, and include, only
other Persons which from time to time constitute "Affiliates" or "Subsidiaries,"
as the case may be, of such specified Person, and do not include, at any
particular time, other Persons that may have been, but at such time have ceased
to be, "Affiliates" or "Subsidiaries," as the case may be, of such specified
Person.
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[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
SELLERS:
FEL-PRO REALTY CORPORATION
By:
--------------------------------
Title:
-------------------------
MCCORMICK INVESTMENTS L.P.
By:
--------------------------------
Title:
-------------------------
THE OTHER SELLERS LISTED ON THE
ATTACHED SCHEDULE OF SELLERS
By:
---------------------------------------
Richard A. Morris, under power-of-
attorney
By:
---------------------------------------
Kenneth A. Lehman, under power-of-
attorney
By:
---------------------------------------
David A. Weinberg, under power-of-
attorney
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BUYER:
FEDERAL-MOGUL CORPORATION
By:
-------------------------------
Title:
-----------------------
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SCHEDULE OF SELLERS
Fel-Pro Realty Corporation
McCormick Investments L.P.
MORRIS FAMILY
A. FEL-PRO MANAGEMENT CO.
Robert J. Morris Revocable Trust U/A/D 2/16/83
Ellen J. Morris
Bruce E. Morris
Richard A. Morris
B. FEL-PRO MASTER GENERAL PARTNERSHIP
Morris MGP Trust for Ellen U/A/D 3/1/96
Morris MGP Trust for Bruce U/A/D 6/23/96
Morris MGP Trust for Richard U/A/D 3/1/96
C. MERIDIAN PARTS CORPORATION
Morris 1992 Gift Trust for Ellen U/A/D 12/10/92
Morris Meridian Trust for Ellen U/A/D 3/1/96
Morris 1992 Gift Trust for Bruce U/A/D 12/10/92
Morris Meridian Trust for Bruce U/A/D 6/23/96
Morris 1992 Gift Trust for Richard U/A/D 12/10/92
Morris Meridian Trust for Richard U/A/D 3/1/96
D. FELT PRODUCTS MFG. CO.
Robert J. Morris Revocable Trust U/A/D 2/16/83
Robert J. Morris Trust U/A/D 7/26/65
Clara Morris Trust U/A/D 12/20/55
Ellen J. Morris
Ellen J. Morris 1997 Children's Trust U/A/D 11/3/97
Bruce E. Morris
Bruce Morris 1997 Children's Trust U/A/D 11/3/97
Richard A. Morris
Richard A. Morris 1997 Children's Trust U/A/D 10/31/97
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Ellen J. Morris Family Gift Trust U/A/D 9/27/85
Bruce E. Morris Family Gift Trust U/A/D 9/27/85
Richard A. Morris Family Gift Trust U/A/D 9/27/85
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LEHMAN FAMILY
A. FEL-PRO MANAGEMENT CO.
Elliot Lehman Trust dated 5/20/87
Frances M. Lehman Trust dated 5/20/87
Kenneth A. Lehman
Lucy G. Lehman
Kay L. Schlozman
Stanley F. Schlozman
Paul A. Lehman
B. FEL-PRO MASTER GENERAL PARTNERSHIP
Kenneth A. Lehman 1992E Family Trust
Paul A. Lehman 1992E Family Trust
Kay Lehman Schlozman 1992E Family Trust
Paul A. Lehman 1992F Family Trust
Kay Lehman Schlozman 1992F Family Trust
Kenneth A. Lehman 1992F Family Trust
C. MERIDIAN PARTS CORPORATION
Kenneth A. Lehman 1992E Family Trust dated 12/11/92
Paul A. Lehman 1992E Family Trust dated 12/11/92
Kay Lehman Schlozman 1992E Family Trust dated 12/11/92
Kenneth A. Lehman 1992F Family Trust dated 12/11/92
Paul A. Lehman 1992F Family Trust dated 12/11/92
Kay Lehman Schlozman 1992F Family Trust dated 12/11/92
D. FELT PRODUCTS MFG. CO.
Elliot Lehman Trust dated 5/20/87
Frances M. Lehman Trust dated 5/20/87
E. Lehman Fifteen Year Income Trust
F. Lehman Fifteen Year Income Trust
Kenneth A. Lehman 1996 E Family Trust U/A/D 6/11/96
Kenneth A. Lehman 1996 F Family Trust U/A/D 6/11/96
Paul Lehman 1996 E Family Trust U/A/D 6/11/96
Paul Lehman 1996 E Family Trust U/A/D
Kay Lehman Schlozman 1996 E Family Trust U/A/D 6/11/96
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Kay Lehman Schlozman 1996 F Family Trust U/A/D 6/11/96
Kenneth A. Lehman
Lucy G. Lehman
Kay L. Schlozman
Stanley F. Schlozman
Paul A. Lehman
Ronna Stamm
Kay Schlozman Children's Trust U/A/D 12/20/82
Schlozman Family Trust U/A/D 9/30/85
Schlozman Family Gift Trust U/A/D 9/30/85
Kay Lehman Schlozman 1997 Children's Trust U/A/D 11/3/97
Paul Lehman Children's Trust U/A/D 12/20/82
Paul Lehman Irrevocable Children's Trust U/A/D 9/30/85
Paul Lehman Children's Trust U/A/D 9/30/85
Betsy Ganford Lehman Irrevocable Trust No. 1 dated 12/22/83
Betsy Ganford Lehman Irrevocable Trust No. 2 U/A/D 9/30/85
Kenneth Lehman Children's Trust U/A/D 12/20/82 F/B/O Betsy Ganford
Lehman
Kenneth Lehman Children's Trust U/A/D 9/30/85 F/B/O Betsy Ganford
Lehman
Amy Ganford Lehman Irrevocable Trust No. 1 dated 12/22/83
Amy Ganford Lehman Irrevocable Trust No. 2 U/A/D 9/30/85
Kenneth Lehman Children's Trust U/A/D 12/20/82 F/B/O Amy Ganford
Lehman
Kenneth Lehman Children's Trust U/A/D 9/30/85 F/B/O Amy Ganford Lehman
Peter Ganford Lehman Irrevocable Trust No. 1 dated 12/22/83
Peter Ganford Lehman Irrevocable Trust No. 2 U/A/D 9/30/85
Kenneth Lehman Children's Trust U/A/D 12/20/82 F/B/O Peter Ganford
Lehman
Kenneth Lehman Children's Trust U/A/D 9/30/85 F/B/O Peter Ganford
Lehman
Daniel Aaron Schlozman Trust No. 1 U/A/D 12/30/81
Daniel Aaron Schlozman Trust No. 2 U/A/D 12/30/81
Schlozman 1994 Gift Trust for Julia U/A/D 1/3/94
Paul A. Lehman Irrevocable Family Trust A U/A/D 11/3/97
Jonathan Lehman Irrevocable Trust No. 1 dated 12/22/83
Michael Lehman Irrevocable Trust No. 1 dated 12/22/83
Elizabeth Lehman Irrevocable Trust No. 2 dated 5/12/97
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WEINBERG/RADOV/KESSLER FAMILY
A. FEL-PRO MANAGEMENT CO.
Sylvia Radov Revocable Trust U/A/D 10/23/85
Lewis C. Weinberg Irrevocable Trust dated 8/12/76
Barbara W. Kessler Revocable Trust U/A/D 7/26/82
Dennis L. Kessler Revocable Trust U/A/D 7/26/82
David A. Weinberg Estate Trust U/A/D 6/5/84
Kessler 1996 Gift Trust for Daniel U/A/D 12/16/96
Daniel C. Weinberg Revocable Trust U/A/D 7/29/97
Carol Jung
Ronna Stamm
B. FEL-PRO MASTER GENERAL PARTNERSHIP
Weinberg 1992 Gift Trust for Barbara U/A/D 12/10/92
Weinberg 1992 Gift Trust for David U/A/D 12/10/92
Weinberg 1992 Gift Trust for Daniel U/A/D 12/10/92
Sylvia MGP Trust for Barbara U/A/D 6/1/96
Sylvia MGP Trust for David U/A/D 6/1/96
Sylvia MGP Trust for Daniel U/A/D 6/1/96
C. MERIDIAN PARTS CORPORATION
Sylvia 1992 Gift Trust for Barbara U/A/D 12/10/92
Sylvia 1992 Gift Trust for David U/A/D 12/10/92
Sylvia 1992 Gift Trust for Daniel U/A/D 12/10/92
D. FELT PRODUCTS MFG. CO.
Sylvia M. Radov
Lewis C. Weinberg Irrevocable Trust dated 8/12/76
Sylvia 1996 Gift Trust for Barbara U/A/D 4/4/96
Sylvia 1996 Gift Trust for David U/A/D 4/4/96
Sylvia 1996 Gift Trust for Daniel U/A/D 4/4/96
Barbara W. Kessler Revocable Trust U/A/D 7/26/82
Dennis L. Kessler Revocable Trust U/A/D 7/26/82
Dennis L. Kessler 1997 Children's Trust U/A/D 11/3/97
Kessler Family Trust U/A/D 9/30/85
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David A. Weinberg Estate Trust U/A/D 6/5/84
DAW Family Trust U/A/D 9/30/85
Daniel C. Weinberg Revocable Trust U/A/D 7/29/97
Carol Jung
Kessler 1996 Gift Trust for David U/A/D 12/16/96
Kessler 1996 Gift Trust for Daniel U/A/D 12/16/96
LCW-DCW Family Gift Trust U/A/D 9/30/85
SMR-DCW Family Gift Trust U/A/D 9/30/85
DCW Family Trust U/A/D 9/30/85
Lewis C. Weinberg Grandchildren's Gift Trust for Keith Albert U/A/D
12/1/82
Keith A. Kessler
Keith A. Kessler 1997 Children's Trust U/A/D 11/3/97
Lewis C. Weinberg Grandchildren's Gift Trust for Arthur Jay U/A/D
12/1/82
Arthur J. Kessler
Lewis C. Weinberg Grandchildren's Gift Trust for Eric Joseph U/A/D
12/1/82
Eric Joseph Kessler Irrevocable Trust U/A/D 12/27/77
Lewis C. Weinberg Grandchildren's Gift Trust for Mindy Joy U/A/D
12/1/82
Mindy Joy Weinberg Irrevocable Trust U/A/D 12/27/77
SMR-DAW Children's Gift Trust for Mindy Joy U/A/D 12/13/82
Lewis C. Weinberg Grandchildren's Gift Trust for Brian Lee U/A/D
12/1/82
Brian L. Weinberg SMR-DAW Children's Gift Trust for Brian
U/A/D 12/13/82
Lewis C. Weinberg Grandchildren's Gift Trust for Zachary Daniel U/A/D
12/1/82
Zachary Daniel Weinberg Irrevocable Trust U/A/D 12/31/81
Abigail Weinberg Trust U/A/D 2/20/90
Abigail Weinberg Annual Gift Trust U/A/D 12/3/91
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EXHIBIT A
1. For purposes of the Agreement to which this EXHIBIT A is attached
(the "AGREEMENT"), the following terms shall have the following meanings:
"AFFILIATE" means, as to any specified Person, any other Person which,
directly or indirectly, controls, is controlled by or is under common control
with, such specified Person. For the purposes of this definition, "control"
means the possession of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"AVERAGE PRICE" means the average of the daily closing prices per share
for the F-M Common Stock on the New York Stock Exchange (as reported in the NYSE
Composite Transactions listing) for the twenty (20) trading days commencing with
the first trading day after the announcement by the parties hereto of the
execution of this Agreement.
"BANK DEBT" means all borrowings under that certain line of credit
by and between Fel-Pro Incorporated, Felt Products Mfg. Co. and The First
National Bank of Chicago, dated April 22, 1997.
"CHANGE OF CONTROL" has the meaning ascribed to it in the Retirement
Plan.
"CHARTER DOCUMENTS" means (i) with respect to a corporation, the
articles or certificate of incorporation and bylaws of such corporation, (ii)
with respect to a general partnership, the partnership or other similar
agreement of such general partnership, (iii) with respect to a limited
partnership, the certificate of limited partnership or similar state filing and
partnership or other similar agreement of such limited partnership, (iv) with
respect to a trust, the trust or similar agreement of such trust, (v) with
respect to a limited liability company, the certificate of organization or other
similar state filing and operating or other similar agreement of such limited
liability company and (vi) with respect to any Person, including the foregoing,
the charter or constantive documents and filings of such Person.
"DEBT AMOUNT" means the aggregate principal amount of all indebtedness
for borrowed money of the Companies and the Included Entities outstanding as of
the Closing.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule, dated the date of
the Agreement, delivered to Buyer, as from time to time amended and/or
supplemented in accordance with SECTION 10.12(B) of the Agreement.
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"EFFECTIVE TIME SHARE VALUE" means (i) if the Average Price is greater
than or equal to $40.00 and less than or equal to $42.00, the Average Price;
(ii) if the Average Price is greater than $42.00, $42.00 plus fifty percent of
the amount by which the Average Price exceeds $42.00; and (iii) if the Average
Price is less than $40.00, $40.00 minus fifty percent of the amount by which
$40.00 exceeds the Average Price.
"ELIGIBLE EMPLOYEES" means the Participating Eligible Employees
and the Non-Participating Eligible Employees.
"EXCHANGE ACT" means the Securities Act of 1934, as amended, or any
successor law including the rules and regulations promulgated thereunder.
"EXCLUDED ASSETS" means the assets described on EXHIBIT C to the
Agreement.
"EXCLUDED ENTITIES" means those entities listed as Excluded Entities on
EXHIBIT B to the Agreement.
"FEL-PRO GROUP" means the Companies, the Included Entities and the
Excluded Entities.
"FELT" means Felt Products Mfg. Co., a Delaware corporation.
"F-M CASH ELECTION" means the election, exercisable by F-M, in F-M's
sole discretion, by written notice delivered to the Sellers' Representatives at
least five (5) business days prior to the Closing Date, if the Average Price is
below $40.00, to deliver cash in the amount of $215,000,000 to the Sellers at
the Closing in lieu of shares of F-M Exchangeable Preferred Stock as part of the
Purchase Price.
"F-M COMMON STOCK" means the Common Stock of F-M.
"F-M EXCHANGEABLE PREFERRED STOCK" means the Series E Mandatory
Exchangeable Preferred Stock of F-M.
"INCLUDED ENTITIES" means those entities listed as Included Entities on
EXHIBIT B to the Agreement.
"IRS" means the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"KNOWLEDGE OF SELLER" or "SELLERS' KNOWLEDGE" (or words of similar
import) means the actual knowledge of any member of the Operating Committee of
Fel-Pro Incorporated, the general managers of FP Diesel LP, FP Performance
Products LP and FP
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Chemical Products LP, respectively, the President of the Ventures Group of
Fel-Pro Incorporated or the Vice President International.
"LIEN" has the meaning set forth in SECTION 1.1.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect on the
assets, condition (financial or otherwise), operations or business of the
Companies and the Included Entities, on a combined basis, or (ii) an effect that
will prevent Sellers from consummating the sale of the Equity Interests to Buyer
as contemplated by the Agreement. For purposes hereof, the filing of additional
lawsuits or actions relating to asbestos fibers in products manufactured or sold
by any Company or Included Entity shall be deemed not to have a "Material
Adverse Effect."
"NON-PARTICIPATING ELIGIBLE EMPLOYEES" means those Company Employees,
as of the Closing Date, who could satisfy the criteria set forth in Section 17
of the Retirement Plan to receive an allocation of a contribution upon a Change
of Control if they were employed by a Company or Included Entity that
participates in the Retirement Plan.
"PARTICIPATING ELIGIBLE EMPLOYEES" means those Company Employees, as of
the Closing Date, who could satisfy the criteria set forth in Section 17 of the
Retirement Plan to receive an allocation of a contribution upon a Change of
Control.
"PERMITTED LIENS" means (i) Liens for Taxes not yet due and payable or
that are being contested in good faith, (ii) Liens arising or resulting from any
action taken by Buyer or any of its Affiliates, (iii) Liens created by, arising
out of or specifically contemplated or permitted by the Agreement, and (iv)
Liens identified as Permitted Liens in any Section of the Disclosure Schedule,
(v) materialmen's, mechanics', workmen's, repairmen's, employees or other like
Liens arising in the course of construction or in the ordinary course of
operations or maintenance, in each such case securing obligations which are not
delinquent or are being contested in good faith, (vi) zoning restrictions,
easements, licenses or other restrictions on the use of real property or other
immaterial irregularities in title thereto or encumbrances thereon, so long as
the same do not materially interfere with or impair the use of such real
property in the manner normally used, (vii) Liens arising out of judgments or
awards with respect to which at the time an appeal or proceeding for review is
being prosecuted in good faith if adequate reserves with respect thereto have
been established and are being maintained and with respect to which there shall
have been secured a stay of execution pending such appeal or proceeding for
review and (viii) that are immaterial, individually and in the aggregate, with
respect to the assets of the Companies and the Included Entities, taken as a
whole.
"PERMITTED TRANSFEREE" means, with respect to a Seller, (i) the spouse
or lineal descendants (or their spouses) of such Seller, (ii) any trust for the
benefit of such Seller or
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the benefit of the spouse or lineal descendants (or their spouses) of such
Seller, (iii) any Person in which such Seller, the spouse and the lineal
descendants (or their spouses) of such Seller are the direct and/or beneficial
owners of all of the equity interests, (iv) the personal representative of such
Seller upon such Seller's death for purposes of administration of such Seller's
estate or upon such Seller's incompetency for purposes of the protection and
management of the assets of such Seller, (v) if such Seller is a trust, the
beneficiary or beneficiaries of such trust and (vi) another Seller.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
"PROPRIETARY RIGHTS" means all patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or not reduced
to practice); all trademarks, service marks, trade dress, trade names and
corporate names; all registered and unregistered statutory and common law
copyrights; all registrations, applications and renewals for any of the
foregoing; all trade secrets, confidential information, ideas, formulae,
compositions, know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
improvements, proposals, technical and computer data, documentation and
software, financial, business and marketing plans, and franchisee, customer and
supplier lists and related information and all other proprietary rights.
"RETIREMENT PLAN" means the Fel-Pro Incorporated Employees' Profit
Sharing and Retirement Plan (also incorporating the provisions of the Fel-Pro
Incorporated Employees' Money Purchase Plan), including any amendments made
prior to Closing.
"SEC" means the Securities and Exchange Commission of the United
States.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor law including the rules and regulations promulgated thereunder.
"SELLERS' REPRESENTATIVES" means, collectively, Richard A. Morris,
David A. Weinberg and Kenneth A. Lehman, and any one of them, acting pursuant to
the power-of-attorney granted to the foregoing pursuant to Section 4 of that
certain Equityholders Agreement dated September 26, 1997.
"SUBSIDIARY" means each corporation or other Person in which a Person
owns or controls, directly or indirectly, capital stock or other equity
interests representing more than 50% of the outstanding voting stock or other
equity interests of such corporation or other Person.
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2. The following terms are defined in the sections of the Agreement
indicated:
DEFINED TERM SECTION
"338 Election".............................................................................7.7(a)
"Agreement"..........................................................................Introduction
"Benefit Plans"...........................................................................2.11(a)
"Buyer"..............................................................................Introduction
"Buyer Adverse Effect"........................................................................3.2
"Buyer Plan"...............................................................................9.1(b)
"Buyer SEC Reports"...........................................................................3.7
"Buyer's Representatives"..................................................................4.1(a)
"Cash Portion".............................................................................1.1(a)
"cause"....................................................................................9.1(e)
"Certificate of Designations...............................................................5.1(f)
"change in control"........................................................................9.1(e)
"Change of Control Formulas"............................................................9.1(g)(i)
"Chemical".................................................................................5.1(c)
"Chemical Lease"...........................................................................5.1(c)
"Closing".....................................................................................1.2
"Closing Date"................................................................................1.2
"Code"....................................................................................2.11(c)
"Companies".............................................................................Recital A
"Company Employees"........................................................................9.1(a)
"Confidentiality Agreement"................................................................4.1(b)
"Corporations"..........................................................................Recital A
"DOJ".........................................................................................4.4
"Environmental Requirements"..............................................................2.17(a)
"ERISA".......................................................................................2.5
"Equity Interests"............................................................................1.1
"Financial Statements".....................................................................2.6(a)
"F-M"................................................................................Introduction
"F-M Preferred Stock".........................................................................3.6
"FTC".........................................................................................4.4
"GAAP"..................................................................................2.6(a)(i)
"Governmental Action/Filing"..................................................................2.5
"Hazardous Materials".....................................................................2.17(b)
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67
"HSR Act".....................................................................................2.5
"Included Real Property"......................................................................1.1
"Leased Real Property".......................................................................2.18
"Liabilities/Liability"....................................................................2.6(b)
"Lien"........................................................................................1.1
"Meridian".................................................................................7.5(a)
"Meridian Transaction".....................................................................7.5(a)
"MGP"...................................................................................Recital A
"Owned Real Property"........................................................................2.18
"Partnership Interests".......................................................................1.1
"PBGC"........................................................................................2.5
"Permit"......................................................................................2.5
"Policies"...................................................................................2.20
"Proceeding"..................................................................................2.8
"Purchase Price"..............................................................................1.1
"Real Property"..............................................................................2.18
"Realty"................................................................................Recital C
"Registration Agreement"...................................................................5.1(g)
"Seller(s)"..........................................................................Introduction
"Seller Group"............................................................................2.11(c)
"Seller Group Plan".......................................................................2.11(c)
"Shares"......................................................................................1.1
"Special Bonus"............................................................................9.1(g)
"Stock Portion"............................................................................1.1(a)
"Surviving Representations and Warranties"................................................10.1(c)
"Taxes"................................................................................2.13(b)(v)
"Trust"....................................................................................2.2(e)
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EXHIBIT B
INCLUDED ENTITIES
Fel-Pro Incorporated, an Illinois corporation
Fel-Pro Canada, a Canadian corporation
Fel-Pro Mercosur L.P., a Delaware limited partnership [INACTIVE]
FP Performance Products LP, a Delaware limited partnership
Fel-Pro Specialty Sealing Products L.P., a Delaware limited
partnership
Fel-Pro Chemical Products L.P., a Delaware limited partnership
Fel-Pro Chemical Products Latin America L.P., a Delaware limited
partnership
Fel-Pro S.A., a Colombian corporation
Fel-Pro Limited, a UK private limited corporation Polymer Scotland,
Ltd., a UK private limited corporation
FP Diesel L.P., a Delaware limited partnership
FP Diesel, Limited, a UK private limited corporation MPC Export, Inc.
a California corporation
Fel-Pro Chemical Products Chile, S.A., a Chilean corporation Demech
Fel-Pro Private Limited, an Indian limited partnership
EXCLUDED ENTITIES
Fel-Pro Investments, L.L.C., a Delaware limited liability company
Fel-Pro Realty Corporation, an Illinois corporation
McCormick Investments, Inc., a Delaware corporation
McCormick Investments L.P., a Delaware limited partnership
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EXHIBIT C
EXCLUDED ASSETS
12-28-97
Estimated(1)
(000's)
$ 9,096 a. All cash of the Companies and Included Entities, including, but
(15,500) Line of Credit not limited to, the proceeds received in the repayment of any indebtedness
( 6,404) of borrowed money from another Company or Included Entity.
6,035 b. All marketable securities owned by any Company or Included Entity (except for
marketable securities included in the Fel-Pro Incorporated Employee Benefits
Trust).
9,860 c. All life insurance policies owned by any Company or Included
Entity.
25,453 d. All receivables owing by all insurance trusts and split dollar insurance
receivables owing to any Company or Included Entity.
8,558 e. All notes receivable due from the shareholders and partners.
0 f. All membership interests of three limited liability companies or
partnerships created to hold only Excluded Assets.
156 g. All trade and accounts receivable that exist between any Company
or Included Entity, on the one hand, and any Excluded Entity, on the other
hand.
(18,261) h. All notes receivable (notes payable) that exist between any of
the Companies, the Included Entities or the Excluded Entities.
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(1) These amounts are expected to change prior to the Closing.
C-2