EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
BETWEEN
COOPER INDUSTRIES, INC.
AND
FEDERAL-MOGUL CORPORATION
DATED
August 17, 1998
TABLE OF CONTENTS
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1. CERTAIN DEFINITIONS............................................................. __
2. PURCHASE AND SALE............................................................... __
2.1. Purchase and Sale................................................... __
2.2. Purchase Price...................................................... __
2.3. Closing Statement of Net Assets..................................... __
2.4. Seller's Review of Preliminary Closing Statement of Net Assets...... __
2.5. Buyer's Response to Seller's Letter................................. __
2.6. Meeting to Resolve Proposed Adjustments............................. __
2.7. Resolution by Accounting Arbitrator................................. __
2.8. Notices Relating to the Closing Statement of Net Assets............. __
2.9. Closing............................................................. __
2.10. Allocation of Purchase Price........................................ __
3. REPRESENTATIONS AND WARRANTIES OF SELLER........................................ __
3.1. Organization of Seller and the Champion Companies................... __
3.2. Capitalization...................................................... __
3.3. Authorization of Transaction and Validity of Agreement.............. __
3.4. Consents, Approvals and Filings..................................... __
3.5. Non-Contravention................................................... __
3.6. Financial Statements................................................ __
3.7. Absence of Certain Changes.......................................... __
3.8. Undisclosed Liabilities............................................. __
3.9. Litigation.......................................................... __
3.10. Compliance with Applicable Law...................................... __
3.11. Environmental Matters............................................... __
3.12. Material Contracts; No Defaults..................................... __
3.13. Assets.............................................................. __
3.14. Real Property....................................................... __
3.15. Intellectual Property............................................... __
3.16. Labor Matters....................................................... __
3.17. Insurance........................................................... __
3.18. Sufficiency of Assets............................................... __
3.19. Brokers, Finders, etc .............................................. __
3.20 Product Liability .................................................. --
3.21 Product Warranty.................................................... --
3.22 Disclosure Schedules................................................ --
4. REPRESENTATIONS AND WARRANTIES OF BUYER......................................... __
4.1. Organization of Buyer............................................... __
4.2. Authorization of Transaction and Validity of Agreement.............. __
4.3. Consents, Approvals and Filings..................................... __
4.4. Non-Contravention................................................... __
4.5. Brokers, Finders, etc............................................... __
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4.6. Availability of Funds.................................................. --
4.7. Investment............................................................. __
5. COVENANTS OF SELLER AND BUYER...................................................... __
5.1. Business Covenants of Seller........................................... __
5.2. Access to Information.................................................. __
5.3. Consents; Filings; Fulfill Conditions.................................. __
5.4. Fees and Expenses...................................................... __
5.5. Public Announcements................................................... __
5.6. Use of the Cooper Name................................................. __
5.7. Company Books and Records.............................................. __
5.8. Insurance Coverage..................................................... __
5.9. Transfer Costs......................................................... __
5.10. Disclosure Supplements................................................. __
5.11. WARN Act............................................................... __
5.12. Assumption of Certain Seller Obligations............................... __
5.13. Inter- and Intra-Company Accounts...................................... __
5.14. Patent and Trademark Matters........................................... __
5.15. Performance Obligation Instruments..................................... --
5.16. Foreign Exchange Contracts............................................. --
5.17. Standard Motor Products Purchase Price Adjustment and Consigned
Inventory.............................................................. --
5.18 Further Assurances/Consents and Approvals.............................. --
5.19. Other Agreements....................................................... __
5.20. Buyer Investigation; No Representations or Warranties.................. --
5.21 Indemnification for AlliedSignal Lawsuit and Bosch Infringement Claim.. --
5.22 Third Party Debt....................................................... --
5.23 Assignment of Bonds to Buyer........................................... --
5.24 Transition Services Agreement.......................................... --
5.25 Asbestos Claims........................................................ --
5.26 Environmental Insurance Policy......................................... --
5.27 Friable Asbestos Remediation........................................... --
6. EMPLOYEE MATTERS................................................................... __
6.1. Certain Definitions.................................................... __
6.2. Employment............................................................. __
6.3. Representations Regarding Employee Benefit Plans....................... __
6.4. Employee Benefit Plans................................................. __
6.5 Cooper Employee Stock Purchase Plan.................................... --
7. TAX MATTERS........................................................................ __
7.1. Representations and Warranties Regarding Tax Matters................... __
7.2. Tax Indemnity.......................................................... __
7.3. Section 338 Elections.................................................. __
7.4. Tax Return Filings for Pre-Closing Periods............................. __
7.5. Tax Refunds............................................................ __
7.6. Wage Reporting......................................................... __
7.7. Cooperation and Exchange of Information................................ __
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TABLE OF CONTENTS (CONTINUED)
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8. CONDITIONS TO OBLIGATION TO CLOSE......................................... __
8.1. Conditions to Obligation of Buyer............................. __
8.2. Conditions to Obligation of Seller............................ __
8.3. Waiver; Right to Proceed...................................... __
9. SURVIVAL; INDEMNIFICATION................................................. __
9.1. In General.................................................... __
9.2. Survival of Representations, Warranties and Covenants......... __
9.3. Limits on Indemnification..................................... __
9.4. Indemnification by Seller..................................... __
9.5. Indemnification by Buyer...................................... __
9.6. Third Party Claims............................................ __
10. TERMINATION............................................................... __
10.1. Termination of Agreement...................................... __
10.2. Effect of Termination......................................... __
11. MISCELLANEOUS............................................................. __
11.1. No Third-Party Beneficiaries.................................. __
11.2. Entire Agreement.............................................. __
11.3. Successors and Assigns........................................ __
11.4. Counterparts.................................................. __
11.5. Headings...................................................... __
11.6. Notices....................................................... __
11.7. Governing Law................................................. __
11.8. Amendments and Waivers........................................ __
11.9. Severability.................................................. __
11.10. Construction.................................................. __
11.11. Incorporation of Exhibits and Schedules....................... __
11.12. Bulk Transfer Laws............................................ __
11.13. Deceptive Trade Practices Waiver.............................. __
11.14. Specific Performance
12. DISPUTE RESOLUTION
12.1 Meeting of Senior Officers.................................... __
12.2 Binding Arbitration........................................... __
Exhibits
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I - Certain Definitions
II - List of Champion Subsidiaries
III - List of Related Companies
IV - Peg Statement of Net Assets
V - Historical Financial Statements
VI - Other Agreements
(a) Canadian Asset Transfer Agreement
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TABLE OF CONTENTS (CONTINUED)
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VII - Allocation of Purchase Price [to be agreed by the parties]
VIII - Seller's Knowledge
IX - Confidentiality Agreement
X - Working Layer Policies
Disclosure Schedules
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PURCHASE AND SALE AGREEMENT
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THIS PURCHASE AND SALE AGREEMENT (the "Agreement") dated as of August
17, 1998, is by and between Cooper Industries, Inc., a corporation organized
under the laws of Ohio ("Seller"), and Federal-Mogul Corporation, a corporation
organized under the laws of Michigan; Federal-Mogul Comercio Internacional, S.A.
a Brazilian corporation; Federal-Mogul Pty. Ltd., an Australian limited company;
and Federal-Mogul Global Growth Ltd., a limited company incorporated under the
laws of England and Wales (collectively "Buyer").
WHEREAS, Seller owns all of the issued and outstanding shares of
common stock (the "Champion Common Stock") of Champion Spark Plug Company, a
Delaware corporation ("Champion");
WHEREAS, Seller and its Affiliates also own shares of the Related
Companies as set forth on Disclosure Schedule 3.2;
WHEREAS, certain individuals who are employees of Seller or the
Champion Companies own Nominal Shares of the Champion Subsidiaries; and
WHEREAS, Seller desires to sell and Buyer desires to purchase (i) the
Champion Common Stock, (ii) the shares of the Related Companies which are owned
by Seller or its Affiliates as set forth in Disclosure Schedule 3.2, (iii) the
Nominal Shares of the Champion Subsidiaries, and (iv) certain assets and
liabilities of the Canadian Division.
NOW THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
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1. CERTAIN DEFINITIONS.
Unless otherwise defined in this Agreement, capitalized terms shall
have the meaning ascribed to such terms in Exhibit I attached hereto. All
references in Exhibit I to the Agreement, Sections and Disclosure Schedules are
references to this Agreement and its sections and disclosure schedules unless
otherwise specified.
2. PURCHASE AND SALE.
2.1. Purchase and Sale. Upon the terms and subject to the conditions
of this Agreement, at the Closing, (i) Seller shall sell, assign, and otherwise
transfer to Buyer, and Buyer shall purchase, acquire and accept all of the
Champion Common Stock, free and clear of all Encumbrances; (ii) Seller shall
(and shall cause its Affiliates to) sell, assign and otherwise transfer to Buyer
(or to Buyer's designated Affiliate) and Buyer (or its designated Affiliate)
shall purchase, acquire and accept the shares of the Related Companies, which
are owned by Seller and its Affiliates as set forth in Disclosure Schedule 3.2,
free and clear of all Encumbrances; and (iii) Seller shall cause the individuals
who own the Nominal Shares of the Champion Subsidiaries to sell, assign and
otherwise transfer to Buyer (or its designee) and Buyer (or its designee) shall
purchase (at no additional cost to Buyer), acquire and accept the Nominal
Shares, free and clear of all Encumbrances. At the Closing, Seller shall also
cause its Affiliate, Cooper Industries (Canada) Inc., to transfer to Buyer or
its designated Affiliate certain assets and liabilities of the Canadian Division
pursuant to the Canadian Asset Transfer Agreement, free and clear of all
Encumbrances other than Permitted Encumbrances.
2.2. Purchase Price. In consideration for the sale, assignment, and
transfer of the Champion Common Stock, the shares of the Related Companies and
such assets and liabilities of the Canadian Division, Buyer shall pay to Seller
the closing payment as provided in Section 2.2(a), plus or minus as the case may
be, the Purchase Price Adjustment as provided in Section 2.2(b).
(a) Closing Payment. At Closing, Buyer will pay Seller
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
$1,900,000,000. If Buyer provides Seller a federal reference number no later
than 11 a.m., Central Standard Time, on the Closing Date then no interest shall
be due from Buyer to Seller on the closing payment. If Buyer does not provide
Seller a federal reference number until after 11 a.m., Central Standard Time, on
the Closing Date then Buyer shall pay to Seller interest on the closing payment
at an annual rate equal to 6% per annum from and including the Closing Date to
but not including the next business day following the Closing Date.
(b) Purchase Price Adjustment. Within five (5) business days
following the date on which the Final Closing Statement of Net Assets is
determined, either Buyer will pay Seller the Positive Purchase Price Adjustment
or Seller will pay Buyer the Negative Purchase Price Adjustment, in either case,
together with interest thereon at the rate of 6% per annum from and including
the Closing Date until but not including the date paid (the "Purchase Price
Adjustment"). A "Positive Purchase Price Adjustment" means the amount by which
the combined net assets for the Champion Companies shown on the Final Closing
Statement of Net Assets is more than the combined net assets amount shown on the
Peg Statement of Net Assets. A "Negative Purchase Price Adjustment" means the
amount by which the combined net assets for the Champion Companies shown on the
Final Closing Statement of Net Assets is less than the combined net assets
amount shown on the Peg Statement of Net Assets.
(c) Method of Payment. All payments pursuant to this Section 2.2
shall be in U.S. Dollars and be made in immediately available funds by wire
transfer pursuant to instructions provided in writing by the recipient of the
funds.
2.3. Closing Statement of Net Assets. Within 75 days following the
Closing Date, Buyer shall prepare and deliver to Seller a combined statement of
net assets of the Champion Companies as of the close of business on the Closing
Date (the "Preliminary Closing Statement of Net Assets"). The Preliminary
Closing Statement of Net Assets and the final statement of net assets as of
Closing as determined in accordance with Sections 2.3, 2.4, 2.5, 2.6 and 2.7
(the
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
"Final Closing Statement of Net Assets") shall be prepared using the same
principles, practices and procedures that were used in preparing the statement
of net assets dated March 31, 1998, which is attached hereto as Exhibit IV (the
"Peg Statement of Net Assets"). Any change in accounting principles, practices
and procedures after March 31, 1998 (including any changes required by GAAP)
will not apply in determining the Preliminary and Final Closing Statements of
Net Assets. Notwithstanding the foregoing, the following paragraphs (a) through
(n) shall take precedence over such principles, practices and procedures in the
preparation of the Preliminary and Final Closing Statements of Net Assets:
(a) The asset and liability amounts included in the Preliminary and
Final Closing Statements of Net Assets will be the same as those included in the
Peg Statement of Net Assets except as necessary to reflect those changes in the
asset and liability amounts that result from new transactions and actual changes
in facts and circumstances occurring during the period after (but not including)
March 31, 1998, (the "Peg Date") through and including the Closing Date (the
"Change Period"), subject to paragraphs (b) through (n) below which shall take
precedence. For example, any liability which is not accrued or is under-accrued
or over-accrued as of the Peg Date, absent a change in facts and circumstances
during the Change Period, will be recorded so that it is under-accrued or
over-accrued in an equal dollar amount as of the Closing Date.
(b) The quantities of inventory used to determine the inventory
amount to be included in the Preliminary and Final Closing Statements of Net
Assets will be based on the results of a physical inventory of the Champion
Companies to be taken as of the close of business on the Closing Date in
accordance with the normal procedures of the Champion Companies. The physical
inventory will be taken by Buyer (or its representatives) and observed by Seller
(or its representatives). Each party shall bear its own expenses with respect to
the physical inventory. The physical inventory quantities will be priced
utilizing the same standard costs on a full absorption basis which were used to
determine the inventory amount reflected in the Peg
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Statement of Net Assets and, in the case of items which were not on hand as of
the Peg Date, in accordance with the normal procedures of the Champion
Companies. The Peg Statement of Net Assets does not, and the Preliminary and
Final Closing Statements of Net Assets will not, include any reserve or accrual
for inventory shrinkage or deferred variances. The Peg Statement of Net Assets
does, and the Preliminary and Final Closing Statements of Net Assets will,
include an aggregate inventory allowance of $56,447,327 for all other inventory
valuation matters including excess, obsolete and slow moving inventory and
deferred revaluation.
(c) The Peg Statement of Net Assets does not, and the Preliminary and
Final Closing Statements of Net Assets will not, include (i) the inventory
consigned to Standard Motor Products pursuant to Section 7.20 of the Asset
Exchange Agreement dated as of March 28, 1998 among Standard Motor Products and
certain Champion Companies, (ii) any receivable for the purchase price
adjustment that may be due from Standard Motor Products pursuant to Section
7.20(e) of such Asset Exchange Agreement; and (iii) any payable for the purchase
price adjustment that may be due to Standard Motor Products pursuant to Section
2.9(b) of such Asset Exchange Agreement.
(d) The Peg Statement of Net Assets and the Preliminary and Final
Closing Statements of Net Assets will include reserves or accruals for
uncollectible accounts receivable in the amount of $18,110,111.
(e) No amortization expense shall be recorded for the Change Period
and no depreciation expense shall be recorded for the period from March 31, 1998
through September 30, 1998. As a result, the accumulated depreciation and
amortization balances reflected in the Preliminary and Final Closing Statements
of Net Assets will be the same as the amounts included in the Peg Statement of
Net Assets adjusted only for any depreciation expense for the period after
September 30, 1998 and for asset sales or other dispositions in the ordinary
course of business and for translation.
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(f) The Peg Statement of Net Assets does, and the Preliminary and
Final Closing Statements of Net Assets will, include payables and receivables
for state, provincial or local income or franchise taxes for those jurisdictions
where a Champion Company files a separate Tax Return (as opposed to a Tax Return
filed on a consolidated or combined basis with Seller or its Affiliates) and
include payables and receivables for foreign income and franchise taxes
(excluding the refund to be received by Champion Zundkerzen Deutschland
Niederlassung Deutschland der Champion Spark Plug Company). The Peg Statement of
Net Assets does not, and the Preliminary and Final Closing Statements of Net
Assets will not, include payables or receivables for (i) U.S. federal income
taxes and state, provincial or local income or franchise taxes for those
jurisdictions where a Champion Company files a Tax Return on a consolidated or
combined basis with Seller or its Affiliates or (ii) any deferred tax balances.
(g) The Peg Statement of Net Assets does not include any cash;
however, the Preliminary and Final Closing Statements of Net Assets will include
any cash in the accounts of the Champion Companies as of the effective time of
Closing.
(h) Subject to paragraph (i) below, the Peg Statement of Net Assets
does not, and the Preliminary and Final Closing Statements of Net Assets will
not, include any inter- and intra-company payables or receivables between (i)
the Champion Companies on the one hand, and (ii) Seller or its Affiliates on the
other hand; provided, however, the Peg Statement of Net Assets does, and the
Preliminary and Final Closing Statements of Net Assets will, include receivables
and liabilities on the books of the Champion Companies that are paid by Seller
or its Affiliates but not yet booked as inter- and intra-company payables or
receivables for items shown on Disclosure Schedule 2.3(h) or for items which
provide a direct and measurable benefit to the company on whose behalf the
liability was paid.
(i) The Peg Statement of Net Assets does not, but the Preliminary and
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Final Closing Statements of Net Assets will, include: (i) a receivable for the
amount due, if any, as of the Closing Date from Cooper Italia S.p.A. to Champion
Automotive S.p.A. relating to the Italian law spinoff (which shall hereafter be
referred to as the "scissione") of Cooper Italia S.p.A. from Champion Automotive
S.p.A. (formerly known as Cooper Industries Italia S.p.A.) and representing the
increase from January 1, 1998 until the effective date of the scissione in the
net assets of the non- automotive business transferred to Cooper Italia S.p.A.
based on the statutory books, or (ii) a payable for the amount due, if any, as
of the Closing Date from Champion Automotive S.p.A. to Cooper Italia S.p.A.
relating to the scissione and representing the decrease from January 1, 1998
until the effective date of the scissione of the net assets of the non-
automotive business transferred to Cooper Italia S.p.A. based on the statutory
books.
(j) Subject to paragraph (k) below, the Peg Statement of Net Assets
does not, and the Preliminary and Final Closing Statements of Net Assets will
not, include any assets or liabilities with respect to the qualified employee
defined benefit plans and qualified employee defined contribution plans listed
on Disclosure Schedule 6.3(a). The Peg Statement of Net Assets does, and the
Preliminary and Final Closing Statements of Net Assets will, include accruals
for retiree medical and other benefits under employee welfare benefit plans and
accruals for tax withholding and employer matching contributions under the
Cooper Industries, Inc. Savings and Stock Ownership Plan.
(k) The Peg Statement of Net Assets includes an accrual of $2,589,068
for, and the Preliminary and Final Closing Statements of Net Assets will include
an accrual for, the total cash withholdings collected by the Champion Companies
from ESPP Participants pursuant to the 1997 ESPP plus related accrued interest.
(l) The Peg Statement of Net Assets does not, and the Preliminary and
Final Closing Statements of Net Assets will not, include any reserve or accrual
for the AlliedSignal Lawsuit or any reserves, accruals or other amounts relating
to items that Seller is
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
obligated to indemnify or reimburse Buyer pursuant to Section 5.21.
(m) Subject to paragraph (n) below, the Peg Statement of Net Assets
does not; however, the Preliminary and Final Closing Statements of Net Assets
will, include any third party debt of the Champion Companies including the third
party debt set forth in Disclosure Schedule 2.3(m).
(n) The Peg Statement does not, and the Preliminary and Final Closing
Statements of Net Assets will not, include the third party debt of the Champion
Companies relating to the industrial development revenue bonds described in
Section 5.23 of this Agreement.
2.4. Seller's Review of Preliminary Closing Statement of Net Assets.
Seller shall have 60 days following receipt of the Preliminary Closing Statement
of Net Assets to review such statement. If Seller determines that it has not
been prepared in accordance with the provisions of Section 2.3, then within the
60-day period allowed for Seller's review, Seller shall send a letter to Buyer
("Seller's Letter") setting forth in reasonable detail the adjustments that
Seller determines are appropriate. During such 60-day period, Buyer shall grant
Seller and its representatives reasonable access during normal business hours to
the books and records of the Champion Companies including any working papers or
other documents prepared by Buyer or its accountants or auditors with respect to
the Preliminary Closing Statement of Net Assets. If Seller does not prepare and
furnish Seller's Letter to Buyer within the 60 days allowed, then the
Preliminary Closing Statement of Net Assets as prepared by Buyer will become the
Final Closing Statement of Net Assets.
2.5. Buyer Response to Seller's Letter. Buyer will have 30 days
following receipt of Seller's Letter, if any, to review such letter and prepare
a written response ("Buyer's Letter") setting forth Buyer's position with
respect to each adjustment proposed by Seller in Seller's Letter. If Buyer does
not prepare and furnish Buyer's Letter to Seller within the 30 days allowed,
then all of the adjustments set forth in Seller's Letter shall be deemed to have
been accepted by Buyer, and
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
the Final Closing Statement of Net Assets shall be determined by adjusting the
Preliminary Closing Statement of Net Assets for all of the adjustments set forth
in Seller's Letter.
2.6. Conference to Resolve Proposed Adjustments. As soon as
practicable, but not later than 30 days following the receipt by Seller of
Buyer's Letter, if any, the parties shall confer, whether by telephone or in
person, and endeavor to mutually resolve any of Seller's adjustments not agreed
to in Buyer's Letter. If the parties reach agreement on these adjustments, if
any, then the Final Closing Statement of Net Assets shall be determined by
adjusting the Preliminary Closing Statement of Net Assets for the adjustments
agreed to in Buyer's Letter and those mutually resolved by the parties.
2.7. Resolution by Accounting Arbitrator. If the parties do not meet
within the 30 day period set forth in Section 2.6, or they fail to agree to meet
at some later date, or they meet but are unable to resolve to their mutual
satisfaction all of the adjustments set forth in Seller's Letter, then the
parties shall jointly engage the Atlanta office of the firm of Pricewaterhouse
Coopers (the "Accounting Arbitrator") to resolve any of Seller's adjustments
which remain unresolved. The parties shall furnish the Accounting Arbitrator
with a copy of the Agreement, the Peg Statement of Net Assets, the Preliminary
Closing Statement of Net Assets, Seller's Letter, Buyer's Letter and any other
relevant correspondence between the parties. The Accounting Arbitrator shall,
within 45 days from the date such documents are furnished, complete its review
and render a written report setting forth its conclusion with respect to each of
Seller's adjustments which were unresolved between the parties. The Accounting
Arbitrator shall be granted access to the books and records of the Champion
Companies as well as the working papers or other documents which either party or
its accountants or auditors may have that relate to the Preliminary Closing
Statement of Net Assets and any other documents or information which the
Accounting Arbitrator may deem appropriate. The Accounting Arbitrator's review
shall be limited to the purpose of determining whether, in respect of each of
those items and amounts as to which Buyer and Seller do not agree, Seller's
proposed adjustment or Buyer's position with respect to Seller's proposed
adjustment is more nearly in accordance with the terms of this
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Agreement. The parties shall have the right to submit written materials to the
Accounting Arbitrator in accordance with procedures to be set forth in the
engagement letter between the parties and the Accounting Arbitrator. In arriving
at its determination the Accounting Arbitrator must select for each adjustment
either Seller's proposed adjustment or Buyer's position with respect to Seller's
proposed adjustment. The decision by the Accounting Arbitrator shall be in
writing (including an explanation of the reasons for the determination) and
shall be delivered to both Buyer and Seller. The Accounting Arbitrator's
decision shall be conclusive and binding upon the parties and may be entered and
enforced in any court of competent jurisdiction. The parties agree to submit to
the jurisdiction of any such court solely for the enforcement of such award or
decision. The party that proposes a total adjustment that differs more from the
Accounting Arbitrator's award shall pay the fees and expenses of the Accounting
Arbitrator, so that if in arbitration, the first party has argued for a total
adjustment of $100,000, the second party for a total adjustment of $30,000 and
the Accounting Arbitrator awards a $50,000 adjustment, the first party shall pay
such fees and expenses. If the Accounting Arbitrator is engaged, the Final
Closing Statement of Net Assets will be determined by adjusting the Preliminary
Closing Statement of Net Assets for those of Seller's adjustments accepted by
Buyer's Letter, those mutually agreed to by the parties and those determined by
the Accounting Arbitrator.
2.8. Notices Relating to the Closing Statement of Net Assets.
Notwithstanding Section 11.6, all notices and other communications under
Sections 2.4, 2.5, 2.6 and 2.7 shall be delivered to the individuals listed
below and shall be sufficiently given for all purposes hereunder if in writing
and delivered personally, sent by documented overnight delivery services, or
certified mail return receipt requested:
If to Seller: Cooper Industries, Inc.
600 Travis
Suite 5800
Houston, Texas 77002
Attn: Terry A. Klebe,
Vice President and Controller
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
If to Buyer: Federal-Mogul Corporation
26555 Northwestern Highway
Southfield, Michigan 48034
Attn: Charles B. Grant,
Vice President, Corporate Development
All such notices shall be deemed given upon date of delivery to the
recipient.
2.9. Closing.
(a) Time and Place of Closing. The closing of the contemplated
transactions (the "Closing") shall take place at the offices of Seller at 600
Travis, Suite 5800, Houston, Texas at 9:00 a.m. local time on the fifth business
day following the satisfaction or waiver of all conditions to the obligations of
the parties to consummate the transactions contemplated by this Agreement (other
than conditions with respect to actions the respective parties will take at the
Closing itself) or such other place, date and time as the parties may mutually
determine (the "Closing Date"). Closing shall be effective as of the close of
business on the Closing Date.
(b) Deliveries by Seller. At the Closing, Seller shall deliver to
Buyer: (i) stock certificates representing the Champion Common Stock endorsed in
blank or accompanied by duly executed assignment documents; (ii) stock
certificates representing the shares of the Related Companies, that are owned by
Seller or its Affiliates as set forth in Disclosure Schedule 3.2, endorsed in
blank or accompanied by duly executed assignment documents; (iii) stock
certificates representing the shares of Cooper Automotive France, S.A. that are
owned by Diane K. Schumacher (and Joel Campbell, Philippe Charton and Roland
Blackburn if Buyer requests their resignation as a director of Cooper Automotive
France, S.A.) endorsed in blank or accompanied by duly executed assignment
documents; (iv) stock certificates representing the shares of Cooper Automotive,
Taiwan, Inc. that are owned by Diane K. Schumacher, Alan J.
11
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Hill, David A. White, Jr. and Gordon A. Ulsh endorsed in blank or accompanied by
duly executed assignment documents; (v) the resignations of those officers and
members of the Boards of Directors of Champion, the Champion Subsidiaries and
the Related Companies as requested by Buyer at least 5 business days prior to
Closing; (vi) the stock books, stock ledgers, minute books and corporate seals
of Champion, the Champion Subsidiaries and the Related Companies (including
stock certificates representing the shares of the Champion Subsidiaries and
subsidiaries of the Related Companies); provided that any of the foregoing items
shall be deemed to have been delivered to Buyer if delivered to or otherwise
located at the offices of Champion, the Champion Subsidiaries or the Related
Companies or at the offices of their foreign legal counsel and Seller provides
Buyer with an affidavit setting forth the location of such items (provided that
at Buyer's reasonable request, Seller will provide any of the foregoing items at
Closing except for those items relating to joint venture companies in which the
Champion Companies have an equity interest); (vii) the various certificates,
agreements, instruments and documents referred to in Section 8.1; (viii) the
Other Agreements duly executed by Seller or its appropriate Affiliate; and (ix)
all other instruments, agreements and documents required to be delivered by
Seller or its Affiliates at or before the Closing pursuant to this Agreement or
the Other Agreements.
(c) Deliveries by Buyer. At the Closing, Buyer will deliver to
Seller: (i) the closing payment pursuant to Section 2.2(a); (ii) the various
certificates, agreements, instruments and other documents referred to in Section
8.2; (iii) the Other Agreements duly executed by Buyer or its appropriate
Affiliate, and (iv) such other instruments, agreements and documents required to
be delivered by Buyer or its Affiliates at or before the Closing pursuant to
this Agreement or the Other Agreements.
2.10. Allocation of Purchase Price. The parties shall allocate the
aggregate purchase price described in Section 2.3 among the Champion Common
Stock, the common stock of Moog Automotive Products, Inc. (the "Moog Common
Stock"), the stock of the Related Companies (other than the Moog Common Stock),
and the assets of the Canadian Division in accordance
12
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
with the relative fair market values of such stock and such assets. For purposes
of this allocation, the relative fair market values of the stock and the assets
described in the immediately preceding sentence shall be determined by reference
to an appraisal (the "Appraisal") prepared by a nationally recognized accounting
firm, investment bank, or other valuation professional (the "Appraiser"), which
Appraiser shall be selected by Buyer subject to the approval of Seller, which
approval shall not be unreasonably withheld. The cost of the Appraiser shall be
borne equally by Seller and Buyer. The parties agree that the Appraisal shall be
obtained as promptly as possible and, in any event, within 60 days after the
Final Closing Statement of Net Assets is determined.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer that the statements contained
in this Section 3 are true and correct as of the date of this Agreement and will
be true and correct in all respects on the Closing Date. Nothing in the
Disclosure Schedules shall be deemed adequate to disclose an exception to a
representation or warranty made herein, however, unless the Disclosure Schedule
identifies the exception with reasonable particularity. Without limiting the
generality of the foregoing, the mere listing of a document or other item shall
not be deemed adequate to disclose an exception to a representation or warranty
made herein (unless the representation or warranty has to do with the existence
of the document or other item itself).
3.1. Organization of Seller and the Champion Companies. Each of
Seller, Champion, the Champion Subsidiaries and the Related Companies is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. Each of Champion, the Champion
Subsidiaries and the Related Companies: (i) has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted; and (ii) is duly qualified and in good standing
to do business in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except in such jurisdictions
13
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
where the failure to be so duly qualified and in good standing would not have a
Material Adverse Effect and except for Qingdao Precision Universal Joint Company
Limited which no longer holds a valid business license as described in
Disclosure Schedule 3.2. Seller has heretofore delivered to Buyer complete
copies of the certificate of incorporation and by-laws (or similar
organizational documents), as currently in effect, of the Champion Companies.
The Champion Companies do not own, directly or indirectly, any capital stock or
other equity securities of any corporation or have any direct or indirect equity
ownership in any business other than the Champion Subsidiaries, the subsidiaries
of the Related Companies as set forth in Disclosure Schedule 3.2 and 9,600 Class
A Preferred Shares of General Parts, Inc. which are owned by Moog Automotive
Company.
3.2. Capitalization. The authorized capital stock of Champion
consists of 1,000 shares of Champion Common Stock, 1,000 shares of which are
issued and outstanding as of the date hereof, and 1,000 shares of preferred
stock, none of which are issued and outstanding as of the date hereof. Seller
owns all of the shares of Champion Common Stock. Disclosure Schedule 3.2 sets
forth for each of the Champion Subsidiaries and the Related Companies: (i) its
name and jurisdiction of incorporation, (ii) the number of shares of each class
of its authorized capital stock, and (iii) the number of issued and outstanding
shares of each class of its capital stock, the names of the holders thereof, and
the number of shares held by each such holder. All of the issued and outstanding
shares of the Champion Companies are validly issued, fully paid and
nonassessable, except for the shares of Cooper Automotive do Brasil, Ltda. as
described in Disclosure Schedule 3.2. Except pursuant to this Agreement, there
are no outstanding subscriptions, options, warrants, conversion rights, exchange
rights, or other agreements or commitments obligating Seller or the Champion
Companies to issue, transfer, sell or otherwise cause to become outstanding, any
capital stock or other equity interests of the Champion Companies. Seller has
good title to all of the shares of Champion Common Stock, and Seller and its
Affiliates (including the Champion Companies) which hold the shares of the
Champion Subsidiaries and Related Companies as set forth in Disclosure Schedule
3.2 have good title to such shares, free and clear of all Encumbrances. At
Closing, (i) Seller shall transfer to Buyer good title to the shares of
14
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Champion Common Stock, free and clear of all Encumbrances; (ii) Seller shall or
shall cause its Affiliates to transfer to Buyer or its designated Affiliate good
title to all the shares of the Related Companies which are owned by Seller or
its Affiliates, free and clear of all Encumbrances; and (iii) Seller shall cause
the individuals who own the Nominal Shares of the Champion Subsidiaries to
transfer to Buyer (or its designee) good title to such shares free and clear of
all Encumbrances. Except as set forth in Disclosure Schedule 3.2, there are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of any capital stock of any of the Champion Companies. Certain
transfers of the shares of or equity interests in Crucetas Mexicanas, S.A. de
C.V., Frenos Hidraulicos Automotrices, S.A. de C.V., Qingdao Precision Universal
Joint Company Limited and Guangzhou Champion Spark Plug Co. Ltd. are subject to
rights of first refusal and the prior approval of the boards of directors of
such companies.
3.3. Authorization of Transaction and Validity of Agreement. Seller
has all requisite power and authority to execute and deliver this Agreement and
to perform its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by the respective boards of directors of Seller,
Cooper Industries (Canada) Inc., and those Affiliates of Seller which are
transferring shares of the Related Companies to Buyer or its designated
Affiliates and no other corporate proceedings on the part of Seller or its
Affiliates are necessary to authorize this Agreement and to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Seller and (assuming it is duly and validly executed by Buyer)
constitutes a valid and binding agreement of Seller, enforceable against Seller
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by general equitable principles.
3.4. Consents, Approvals and Filings. Seller and its Affiliates are
not required to give any notice to, make any filing with, or obtain any material
consent, authorization or approval
15
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
from any Governmental Authority in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby except: (i) those set out on Disclosure Schedule 3.4; and
(ii) the filings required under the Hart-Scott-Rodino Act and similar laws of
foreign jurisdictions.
3.5. Non-Contravention. Neither the execution and the delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will: (i) conflict with or breach any provision of the certificate of
incorporation or by-laws (or similar organizational documents) of Seller, its
Affiliates, or the Champion Companies; (ii) to Seller's Knowledge, violate any
statute, regulation, rule, injunction, judgment, order or decree of any
Governmental Authority applicable to Seller, its Affiliates or the Champion
Companies or any of their respective assets; and (iii) except as set forth in
Disclosure Schedule 3.5, result in a breach of, constitute a default under, or
give rise to any right of termination or acceleration under, any provision of
any material agreement, contract, lease, license, or instrument by which the
Champion Companies are bound or by which any of their assets is subject.
3.6. Financial Statements. The following financial statements of the
Business are attached hereto as Exhibit V (collectively, the "Financial
Statements"): (i) the audited combined balance sheets as of December 31, 1996
and 1997 and the audited combined income statements and statements of cash flows
for the years ended December 31, 1995, 1996 and 1997; and (ii) the unaudited
combined balance sheet, income statement and statement of cash flows for the
interim period ended March 31, 1998. Except as set forth in Disclosure Schedule
3.6, the Financial Statements have been prepared in accordance with GAAP applied
on a consistent basis. The Financial Statements present fairly in all material
respects the financial condition and the results of operations of the Champion
Companies as of the respective dates and for the respective periods for which
they have been prepared.
3.7. Absence of Certain Changes. Except as set forth in Disclosure
Schedule 3.7,
16
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
since March 31, 1998, the Champion Companies have conducted their respective
businesses only in the ordinary course consistent with past practices. Without
limiting the generality of the foregoing, since March 31, 1998, the Champion
Companies have not taken any action that would constitute a violation of any of
the provisions under Section 5.1 of this Agreement except as set forth in
Disclosure Schedule 3.7.
3.8. Undisclosed Liabilities. The Champion Companies do not have any
material liabilities of the type required to be reflected in a statement of net
assets prepared in accordance with GAAP except for: (i) liabilities reflected or
reserved against in the combined balance sheet as of March 31, 1998, included in
the Financial Statements or disclosed in the notes to the Financial Statements
for the year ended December 31, 1997 and liabilities not so reflected and
reserved against due to the fact that the Financial Statements do not comply
with GAAP for a reason described in Disclosure Schedule 3.6, (ii) liabilities
that have arisen in the ordinary course after March 31, 1998; and (iii)
liabilities which have been disclosed to Buyer in one of the disclosure
schedules to this Agreement, including Disclosure Schedule 3.8.
3.9. Litigation. Except as set forth in Disclosure Schedule 3.9, (i)
none of the Champion Companies is a party to any pending (nor is there as of the
date hereof, to Seller's Knowledge, any threatened) lawsuit, governmental
proceeding or arbitration proceeding (nor is Seller or any Affiliate of Seller
party to any pending lawsuit, governmental proceeding or arbitration proceeding
that affects or could affect any of the Champion Companies or their assets);
(ii) there are not any judgments, decrees, directives, rulings or orders of any
Governmental Authority binding on any of the Champion Companies (or Seller or
any Affiliate of Seller that affects or could affect any of the Champion
Companies or their assets); and (iii) there are no pending or, to Seller's
Knowledge, threatened governmental investigations, actions, charges, complaints,
claims, demands, inquiries or proceedings concerning the Champion Companies.
After Closing, Buyer and its Affiliates shall assume responsibility for the
matters set forth in Disclosure Schedule 3.9 (except for the AlliedSignal
Lawsuit and Bosch Infringement Claim which are subject to Section 5.21).
17
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
3.10. Compliance With Applicable Law. Except as set forth in Disclosure
Schedule 3.10 (and except with respect to environmental matters which are
addressed in Section 3.11 hereof), to Seller's Knowledge, (i) the Champion
Companies are in compliance with all laws, ordinances, rules, regulations,
decrees and orders of all Governmental Authorities applicable to the operation
of the Business, except where the failure to be in compliance is not reasonably
likely to have a Material Adverse Effect, and (ii) the Champion Companies hold
all Permits necessary to conduct the Business as currently conducted, except
where the failure to hold such Permits would not be reasonably likely to have a
Material Adverse Effect.
3.11. Environmental Matters.
(a) Except as set forth in Disclosure Schedule 3.11(a), the Champion
Companies are now in compliance in all material respects with all Environmental
Laws, and have been in compliance with Environmental Laws except where the
failure to be in compliance is not reasonably likely to have a Material Adverse
Effect.
(b) Except as set forth in Disclosure Schedule 3.11(b), the Champion
Companies have made all material filings and possess all material Environmental
Permits necessary to conduct the Business as it is presently being conducted and
in compliance with all applicable Environmental Laws, such Environmental Permits
are in full force and effect, and the Champion Companies are in compliance in
all material respects with all of the terms, conditions and requirements of such
Environmental Permits.
(c) [Intentionally omitted]
(d) Except as set forth in Disclosure Schedule 3.11(d), (i) none of
the Champion Companies has received any formal complaint or notice from any
Governmental
18
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Authority or any other Person alleging any past or present violation of any
Environmental Law in connection with the operation of the Business and which is
currently unresolved, (ii) as of the date hereof, there is no investigative
proceeding against the Champion Companies by any Governmental Authority in
connection with the past or present operation of the Business, and (iii) there
are no pending Environmental Claims involving the Champion Companies or the
Business.
(e) Except as set forth in Disclosure Schedule 3.11(e), none of the
Champion Companies has been subject to any administrative or judicial
enforcement action pursuant to any Environmental Law either now or at any time
during the past three years in connection with the Business or the Champion
Companies.
(f) Except as set forth in Disclosure Schedule 3.11(f), none of the
Champion Companies is subject to any remedial obligation or other response
action under a currently issued and applicable administrative order, decree, or
agreement pursuant to any Environmental Law.
(g) Except as set forth in Disclosure Schedule 3.11(g), no real
property currently or formerly owned, leased, operated or used by the Champion
Companies (including real property used for off-site disposal of any Regulated
Material) is listed on any federal list of Superfund or National Priorities List
sites or similar governmental lists regarding waste sites at which there has
been a Release or threatened Release of Regulated Materials.
(h) Except as set forth in Disclosure Schedule 3.11(h), there are no
(i) underground storage tanks (as defined under the Resource Conservation and
Recovery Act or any equivalent Environmental Law), or (ii) capacitors,
transformers or other equipment or fixtures containing polychlorinated biphenyls
("PCBs") (other than light fixtures which contain PCBs), located in, at, under
or on the Owned Real Property or the Leased Real Property.
19
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(i) Except as set forth in Disclosure Schedule 3.11(i), there are no
facts, actions, activities, circumstances, conditions, occurrences, events or
incidents, including any Release, threatened Release, generation, treatment,
storage, transportation, or the presence of Regulated Materials, that are
reasonably likely to (i) result in any Environmental Liability that would cause
a Material Adverse Effect, or (ii) prevent or interfere with the operation of
the Business as it is currently being conducted, in compliance with all
applicable Environmental Laws.
3.12. Material Contracts; No Defaults. Except as set forth in
Disclosure Schedule 3.12 or reflected in the Financial Statements, no Champion
Company is a party to any: (i) indenture, mortgage, note or other agreement
relating to the borrowing of money by a Champion Company other than payables
arising in the ordinary course of business; (ii) guaranty by a Champion Company
of an obligation of a third party for the borrowing of money; (iii) payment
bond, performance bond or letter of credit under which a Champion Company is
liable; (iv) agreement which involves an obligation of a Champion Company of
more than $1 million in any twelve-month period; (v) joint venture or
partnership agreement, or (vi) agreement which involves consideration of more
than $1 million and which relates to the sale of assets outside the ordinary
course of business within the last twelve months (collectively, the "Material
Contracts"). There is not under any of the Material Contracts any existing
breach or default by any Champion Company, or to Seller's Knowledge, any other
party thereto, except such breaches or defaults which will not have a Material
Adverse Effect.
3.13. Assets. Except with respect to real property which is addressed
in Section 3.14, the Champion Companies (or with respect to the Canadian
Division, Cooper Industries (Canada), Inc.) have good title to, or hold by valid
lease or license all of the assets, properties, contracts, rights and licenses
used to operate the Business as presently conducted (in each case free and clear
of all Encumbrances other than Permitted Encumbrances) except for: (i) the
assets and contract rights of Seller and its Affiliates used to provide
corporate administrative services to the Champion Companies including employee
benefits administration, cash management, risk
20
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
management and insurance, legal services, legal compliance programs, public
relations, tax reporting, internal and external audit, traffic agreements and
provision and maintenance of computer hardware and software; and (ii) cases in
which the failure to own or to have a valid lease or license will not have a
Material Adverse Effect. At Closing, Cooper Industries (Canada) Inc. will
transfer to Buyer or its designated Affiliate good title to the "Transferred
Assets" of the Canadian Division pursuant to the Canadian Asset Transfer
Agreement, free and clear of all Encumbrances other than Permitted Encumbrances.
Each of the leases and other agreements relating to personal property is in full
force and effect and constitute a legal, valid and binding obligation of the
respective parties thereto, and there is not under any of such leases or
agreements any existing monetary default or material non-monetary default by a
Champion Company, or to Seller's Knowledge, any other party thereto.
3.14. Real Property.
(a) Disclosure Schedule 3.14(a) sets forth a list of all the real
property of the Business that is owned by the Champion Companies (or with
respect to the Canadian Division, which is owned by Cooper Industries (Canada)
Inc.) (the "Owned Real Property"). The Champion Companies (or with respect to
the Canadian Division, Cooper Industries (Canada) Inc.) have good title to the
Owned Real Property, free and clear of all Encumbrances other than Permitted
Encumbrances. At Closing, Cooper Industries (Canada) Inc. shall transfer to
Buyer or its designated Affiliate good title to the Owned Real Property of the
Canadian Division, free and clear of all Encumbrances other than Permitted
Encumbrances. There are no appropriation, condemnation, eminent domain or like
proceedings relating to the Owned Real Property and, to Seller's Knowledge, none
are threatened.
(b) Disclosure Schedule 3.14(b) lists all real property of the
Business that is leased by the Champion Companies (or with respect to the
Canadian Division, which is leased by Cooper Industries (Canada) Inc.) (the
"Leased Real Property"). The Champion
21
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Companies (or with respect to the Canadian Division, Cooper Industries (Canada)
Inc.) have a valid leasehold interest in the Leased Real Property. At Closing,
Cooper Industries (Canada) Inc. shall assign to Buyer or its designated
Affiliate the interest of Cooper Industries (Canada) Inc. under those leases for
the Leased Real Property to which Cooper Industries (Canada) Inc. is a party.
There are no existing material defaults by any Champion Company, or to Seller's
Knowledge, by any other party, under any leases for the Leased Real Property.
3.15. Intellectual Property.
(a) The Champion Companies own or have the right to use each material
item of Intellectual Property used by them in the Business as presently
conducted.
(b) Disclosure Schedule 3.15(b) lists all patents, copyrights,
trademarks, service marks, and registrations and applications therefor, relating
to the Business which are owned by the Champion Companies. No license,
sublicense or permission to use any such item of Intellectual Property has been
granted to any Person except as set forth in Disclosure Schedule 3.15(b) (in
each such case identifying the item licensed, the licensee, and the date of the
license agreement or other agreement which allows the Person to use such item).
(c) Disclosure Schedule 3.15(c) lists all patents, copyrights,
trademarks, service marks, and registrations and applications therefor, which
are not owned by the Champion Companies but are used or licensed for use by them
in the Business as presently conducted. Disclosure Schedule 3.15(c) identifies
the item licensed or used, the owner or licensor, and the date of the license
agreement or other agreement which allows the Champion Company to use such item.
There is no material default by a Champion Company or, to Seller's Knowledge,
any other party under such licenses or other agreements and each such item of
Intellectual Property will continue to be available for use on terms and
conditions substantially identical to those existing prior to Closing without
additional restrictions as to its use occurring because of Closing.
22
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(d) Except as set forth in Disclosure Schedule 3.15(d), no
proceedings have been instituted against the Champion Companies alleging that
any material item of Intellectual Property used in the Business infringes upon
or otherwise violates the rights of any Person. Except as set forth in
Disclosure Schedule 3.15(d), to the Knowledge of Seller, within the past five
years none of the Champion Companies has materially interfered with, infringed
upon, misappropriated or otherwise come into conflict with any Intellectual
Property rights of third parties, and to the Knowledge of Seller, no third party
has materially interfered with, infringed upon, misappropriated or otherwise
come into conflict with any of the Intellectual Property rights of any of the
Champion Companies.
3.16. Labor Matters. Disclosure Schedule 3.16(a) lists all collective
bargaining agreements with labor unions or associations representing employees
of the Champion Companies. No labor strike, lockout, slowdown or work stoppage
against the Champion Companies is pending or, to Seller's Knowledge, threatened.
Disclosure Schedule 3.16(b) lists all unfair labor practice charges against the
Champion Companies within the United States that are either pending or that were
made within the 3 year period before the date of this Agreement. To Seller's
Knowledge, there are no material pending unfair labor practice charges outside
the United States.
3.17. Insurance. Disclosure Schedule 3.17 lists and briefly describes
all current property and casualty insurance policies (i) which are owned or held
by Seller or its Affiliates and which cover a Champion Company, or (ii) which
are owned or held by a Champion Company. Seller agrees that it shall maintain
such policies, or policies which in the aggregate are substantially similar
thereto, until Closing.
3.18. Sufficiency of Assets. Except for the assets of Seller and its
Affiliates used to provide corporate and administrative services to the Champion
Companies as described in Section
23
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
3.13(i), the assets, properties, contract rights and licenses of the Champion
Companies and the assets of the Canadian Division to be transferred to Buyer or
its designated Affiliate (i) constitute all of the assets, properties, contract
rights and licenses that are used to operate the Business in substantially the
same manner as such operations are presently conducted and are reasonably
sufficient to operate the Business as a going concern, and (ii) the operating
condition of such assets and properties is sufficient to operate the Business in
substantially the same manner as such operations are presently conducted.
3.19. Brokers, Finders, etc. Other than Merrill Lynch & Co. whose
fees will be paid by Seller, Seller has not retained any broker, finder or agent
in connection with the transactions contemplated by this Agreement who would
have a valid claim for a fee or commission in connection with such transactions
for which Buyer or its Affiliates may be held liable.
3.20. Product Liability. None of the Champion Companies has any
liability arising out of any injury to individuals or property as a result of
the ownership, possession or use of any product manufactured, sold, leased or
delivered by any of the Champion Companies except: (i) for any asbestos related
actions or claims; (ii) for any environmental matters which are addressed in
Section 3.11; and (iii) with respect to matters not covered by clauses (i) and
(ii) above, except to the extent accrued or reserved against on the Final
Closing Statement of Net Assets. To Seller's Knowledge, there are no such
pending product liability claims against the Champion Companies except as set
forth on Disclosure Schedule 3.20.
3.21. Product Warranty. To Seller's Knowledge, (i) except as set
forth in Section 3.21 of the Disclosure Schedule, none of the products
manufactured, sold, leased, or delivered by the Champion Companies prior to
Closing is currently the subject of a product recall and (ii) the accrual
included in the Financial Statements for product warranty claims is adequate.
3.22. Disclosure Schedules. All Disclosure Schedules attached hereto
are true,
24
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
correct and complete as of the date of this Agreement, and will be true, correct
and complete as of the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Seller that the statements contained
in this Section 4 are true and correct as of the date of this Agreement and will
be true and correct in all material respects on the Closing Date.
4.1. Organization of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation.
4.2. Authorization of Transaction and Validity of Agreement. Buyer
has all requisite power and authority to execute and deliver this Agreement and
to perform its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by the respective boards of directors of Buyer and
the designated Affiliates of Buyer which will acquire shares of the Related
Companies or the assets of the Canadian Division and no other corporate
proceedings on the part of Buyer or its Affiliates are necessary to authorize
this Agreement and to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Buyer and
(assuming it is duly and validly executed by Seller) constitutes a valid and
binding agreement of Buyer, enforceable against Buyer in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
generally and by general equitable principles.
25
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
4.3. Consents, Approvals and Filings. Buyer and its Affiliates are
not required to give any notice to, make any filing with, or obtain any consent,
authorization or approval from any Governmental Authority in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby except: (i) those set out on Disclosure
Schedule 4.3; (ii) the filings required under the Hart-Scott-Rodino Act and
similar laws of foreign jurisdictions; and (iii) where the failure to give
notice, to file, or to obtain any consent, authorization or approval would not
have a material adverse effect on Buyer's ability to consummate the transactions
evidenced hereby.
4.4. Non-Contravention. Neither the execution and the delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will: (i) conflict with or breach any provision of the certificate of
incorporation or by-laws (or similar organizational documents) of Buyer or its
designated Affiliates that acquire the Related Companies or the Canadian
Division; (ii) violate any statute, regulation, rule, injunction, judgment,
order or decree of any Governmental Authority applicable to Buyer, its
Affiliates or any of their assets; (iii) result in a breach of, constitute a
default under, or give rise to any right of termination or acceleration under,
any provision of any agreement, contract, lease, license, or instrument to which
Buyer or its Affiliates is a party, is bound or by which any of their assets is
subject, except in the case of clauses (ii) and (iii) for violations, breaches,
defaults or rights of termination or acceleration would not have a material
adverse effect on Buyer's ability to consummate the transactions evidenced
hereby.
4.5. Brokers, Finders, etc. Other than Chase Securities, Inc., whose
fees will be paid by Buyer, Buyer has not retained any broker, finder, or agent
in connection with the transactions contemplated by this Agreement who would
have a valid claim for a fee or commission in connection with such transactions
for which Seller or its Affiliates may be held liable.
4.6. Availability of Funds. Buyer will have available on the Closing
Date sufficient
26
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
funds to enable it to consummate the transactions contemplated by this
Agreement.
4.7. Investment. Buyer is not acquiring the Champion Common Stock
(and by virtue thereof the shares of the Champion Subsidiaries) and Buyer and
its designated Affiliates are not acquiring the shares of the Related Companies
with a view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act of 1933, as amended. Buyer acknowledges that
it has received, or has had access to, all information necessary or advisable to
enable it and its Affiliates to make a decision concerning the purchase of the
Champion Common Stock and the shares of the Related Companies.
5. COVENANTS OF SELLER AND BUYER.
5.1. Business Covenants of Seller. Except for transactions set forth
on Disclosure Schedule 3.7 and for transactions contemplated by this Agreement,
during the period from the date of this Agreement and continuing until the
Closing Date, Seller will cause the Champion Companies to carry on their
respective businesses in the ordinary course consistent with past practice.
Without limiting the generality of the foregoing, and except for transactions
set forth on Disclosure Schedule 3.7 and for transactions contemplated by this
Agreement, Seller will not, without the prior consent of Buyer (which shall not
be unreasonably withheld or delayed), cause or permit the Champion Companies to:
(a) authorize for issuance, issue, sell or deliver (whether through
the issuance or granting of options, warrants, subscriptions or otherwise) any
stock of any class or any other securities (including indebtedness having the
right to vote) or equity equivalents (including stock appreciation rights) to
Persons other than another Champion Company, except pursuant to any Champion
Benefit Arrangement providing for the issuance of Seller's stock;
(b) acquire by merging or consolidating with, or by purchasing a
27
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
substantial portion of the assets of, or acquiring by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof;
(c) sell, lease or otherwise dispose of any of its material assets,
except in the ordinary course of business consistent with past practices;
(d) amend its charter or by-laws (or similar organizational
documents) except for changes made to a company's name in connection with the
transactions contemplated hereunder;
(e) make any capital expenditures which in the aggregate exceed $2
million (excluding any capital expenditures reflected in any capital
authorizations, additions or budgets previously disclosed to Buyer);
(f) create, incur or assume any long-term debt;
(g) except in the ordinary course of business consistent with past
practice, create, incur or assume any short-term debt to Persons other than
another Champion Company or to Cooper Finance Inc. in the ordinary course of
daily cash management activities consistent with past practices;
(h) assume, guarantee, endorse or otherwise become liable or
responsible for the obligations of any other Person other than another Champion
Company;
(i) permit any of its current insurance policies to be canceled or
terminated or any of the coverage thereunder to lapse, unless simultaneously
with such termination, cancellation or lapse, replacement policies providing
coverage substantially similar to or greater than coverage remaining under those
canceled, terminated or lapsed are in full force
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
and effect;
(j) except as required by law, or pursuant to the terms of any
collective bargaining agreement; (i) enter into, adopt, amend or terminate any
Champion Employee Plan, Champion Benefit Arrangement or Champion International
Plan; or (ii) increase the compensation or fringe benefits of any director,
officer or other employee, except such increases as are granted in the ordinary
course of business consistent with past practice (which shall include normal
periodic performance reviews and related compensation and benefit increases); or
(k) agree to take any of the foregoing actions.
Notwithstanding the provisions of this Section 5.1, nothing in this
Agreement shall be construed or interpreted to (i) prevent Seller and the
Champion Companies from making, accepting or settling intercompany advances to,
from or with one another, or engaging in any other transaction incidental to
their normal cash management procedures including short-term investments in time
deposits, certificates of deposit and bankers acceptances made in the ordinary
course of business; or (ii) prevent the Champion Companies from paying
dividends.
5.2. Access to Information.
(a) Between the date of this Agreement and the Closing Date, Seller
will give Buyer (or its authorized representatives) reasonable access to all
books, records, plants, offices, warehouses and other facilities and properties
of the Champion Companies during regular business hours and upon reasonable
notice, and will reasonably permit Buyer to make copies of such books and
records. Buyer shall not (and shall cause its authorized representatives not to)
conduct any such investigation in a manner which interferes unreasonably with
the operation of the Business.
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(b) With respect to any environmental due diligence: (i) Buyer shall
not conduct any soil, groundwater, air or other sampling upon any Owned Real
Property, Leased Real Property or any property otherwise used by the Champion
Companies (including off-site locations), without Seller's prior written consent
(which shall not be unreasonably withheld), and (ii) Buyer shall notify Seller
prior to contacting any Governmental Authority concerning environmental matters
relating to the Business and keep Seller apprised of any material communications
with or any material inquiries or requests made by any Governmental Authority.
Buyer shall conduct such environmental due diligence of the Champion Companies
as Buyer, in its sole discretion, deems reasonable and appropriate, and Seller
shall cooperate in good faith with such investigation. Buyer shall indemnify,
defend and hold Seller harmless from any and all material liability (excluding
consequential damages) from environmental conditions to the extent they arise
directly out of or are aggravated by the performance of Buyer's environmental
inspection.
(c) All information provided or obtained by Buyer under this Section
5.2 shall be subject to the terms and conditions of the Confidentiality
Agreement between Seller and Buyer dated April 21, 1998 attached hereto as
Exhibit IX.
5.3. Consents; Filings; Fulfill Conditions.
(a) Each of the parties hereto will use its reasonable best efforts
to obtain consents of all Persons necessary for the consummation of the
transactions contemplated by this Agreement.
(b) Each of the parties hereto will use its reasonable best efforts
(i) to file expeditiously all filings or submissions required under the
Hart-Scott-Rodino Act in order that Seller and Buyer may consummate the
transactions contemplated by this Agreement, and (ii) to make all such other
filings, notifications and requests for consent, approval or permission that may
be required by any statute, Law, Environmental Law, regulation or judicial
decree of any
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
jurisdiction in connection with the transactions contemplated by this Agreement
and the Other Agreements. Buyer and Seller shall each furnish to the other such
necessary information and reasonable assistance as the other may request in
connection with the preparation of any such filings, submissions, notifications
and requests. Buyer and Seller shall each keep the other apprised of any
communications with and any inquiries or requests for additional information
made by any Governmental Authority. Buyer and Seller shall, upon the request of
any Governmental Authority, supply such authority with any additional requested
information as expeditiously as is reasonably possible, and shall use their
reasonable best efforts to cause the satisfaction or termination of the
applicable waiting period or any extension thereof under the Hart-Scott-Rodino
Act or any other applicable pre-merger notification laws.
(c) Seller and Buyer shall each use its reasonable best efforts (i)
to cause to be fulfilled the conditions to their respective obligations set
forth in Sections 8.1 and 8.2 and (ii) to take, or cause to be taken, such other
actions as are necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement.
5.4. Fees and Expenses. Whether or not the transactions contemplated
by this Agreement are consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses.
5.5. Public Announcements. Neither Buyer nor Seller (nor any of their
respective Affiliates) will 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 or
delayed); provided, however, either party hereto may make any public disclosure
it believes in good faith and upon advice of counsel is required by applicable
law or stock exchange rules or regulations in which case the disclosing party
will use its reasonable efforts to advise the other party prior to making the
disclosure.
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
5.6. Use of the Cooper Name. No interest in or right to use the
"Cooper" name is being conveyed pursuant to this Agreement, and following the
Closing Date, Buyer and its Affiliates (including the Champion Companies) shall
not use the "Cooper" name as part of any trade name, corporate name, assumed or
fictitious name, trademark or service mark; provided, however, the Champion
Companies may sell, use and distribute the existing supply of products and
materials bearing the "Cooper" name including signage, packaging, sales aids,
sales literature and stationery. Promptly, but in no event later than 30 days
after the Closing Date, Buyer shall, or shall cause its Affiliates to, take such
actions as are necessary to change the name of any Champion Company which
includes the name "Cooper" so that "Cooper" does not appear in the Champion
Company's name.
5.7. Company Books and Records. After the Closing Date, Buyer shall,
and shall cause its Affiliates to, (i) permit Seller and its employees or agents
to inspect and copy all books, records and other documents of the Champion
Companies which relate to the period prior to the Closing Date, (ii) maintain
and preserve all such books, records and other documents at least for the
greater of 7 years after the Closing Date or any applicable statutory or
regulatory retention period, and (iii) notify Seller before any such books,
records and other documents are disposed of and allow Seller the right to obtain
the originals of such books, records or other documents prior to their disposal.
5.8. Insurance Coverage.
(a) As of the Closing Date, Seller or its Affiliates shall
cancel insurance coverage and claims service contracts relating to self insured
programs applicable to the Champion Companies for occurrences (with respect to
any "occurrence" policies) or claims made (with respect to any "claims-made"
policies) after the Closing Date (other than insurance policies in the name of a
Champion Company); provided, however, that the remaining insurance coverage
shall be available to the Champion Companies with respect to insured occurrences
on or prior to
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
the Closing Date relating to the Business if and only to the extent that Buyer
and its Affiliates including the Champion Companies have assumed or paid the
loss or liability attributed to such occurrences. If after the Closing, Seller
or one of its Affiliates actually receives cash proceeds (excluding any return
of premium or reimbursed attorney's or investigation or other fees) from an
insurer that are attributable to such insurance coverage with respect to any
insured occurrences on or prior to the Closing Date, then such cash proceeds
shall be paid to Buyer (net of any deductible, co-payment, retro fees, self-
insured premiums, defense costs or other charges paid or payable to the
insurance carrier or other third parties or obligations to reimburse the
insurance carrier for which Seller, or any of its Affiliates, is liable and
which relate to the insured occurrences) to the extent that Buyer or its
Affiliates have assumed or paid the loss or liability attributed to such
occurrences.
(b) Buyer shall reimburse Seller for any administrative costs, retro
fees, premiums, self-insured or deductible loss costs or other expenses that
Seller or its Affiliates is charged after the Closing by an insurance carrier
relating to insurance coverage applicable to the Champion Companies prior to
Closing. Buyer shall indemnify Seller for any claims by insurance carriers for
indemnity arising from or out of claims by or against any Champion Companies,
acts or omissions of any Champion Company, or related to the Business. Within 30
days of Closing, the Buyer shall replace any applicable outstanding certificates
of insurance provided to Persons in connection with the Business with a new
certificate of insurance for the requisite coverage.
(c) The obligations of Seller and its Affiliates under this Section
5.8 hereunder shall not include prosecuting or defending litigation relating to
claims of the Champion Companies unless Seller elects to engage in such
litigation upon a request by Buyer to do so, which litigation would be conducted
at Buyer's expense.
5.9. Transfer Costs. Regardless of which party is required to pay the
following transfer costs under applicable law, Buyer and Seller shall equally
share the cost of (i) any sales,
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
use, value added, transfer, documentary, registration or stamp and any
recording, notarial or filing, and other similar taxes, fees and expenses
(including all applicable stock transfer, real estate transfer taxes, and
including any penalties, interest and additions to such Tax) incurred in
connection with this Agreement and the transactions contemplated hereby; (ii)
any license fees or other costs and expenses payable to a licensor or lessor in
order to assign, license, sublicense, lease, sublease or otherwise transfer any
computer hardware or software used in the Business to Buyer or its Affiliates
including the Champion Companies, and (iii) any fees for appraisals obtained for
the purpose of supporting the allocation of the Purchase Price pursuant to
Section 2.10. Notwithstanding the foregoing, any value added taxes or Canadian
General Sales Taxes will be fully paid by the party customarily responsible
therefor to the extent such taxes are recoverable by credit or otherwise.
5.10. Disclosure Supplements. If, prior to Closing, Seller notifies
Buyer in writing of any condition, event or development causing a breach of any
of the representations and warranties of Seller in this Agreement and such
condition, event or development has had a Material Adverse Effect upon the
financial condition of the Champion Companies taken as a whole, then Buyer may
have the right to terminate this Agreement pursuant to Section 10.1(b). Unless
Buyer terminates this Agreement within 10 days of the date of Seller's notice
pursuant to Section 10.1(b) by reason of such condition, event or development,
Seller's written notice will be deemed to have amended the disclosure schedules
or otherwise qualify the relevant representations and warranties so as to cure
any breach of the relevant representations and warranties.
5.11. WARN Act. Buyer agrees to indemnify, defend and hold harmless
the Seller Indemnified Parties from any Adverse Consequences arising from the
failure to comply with the Worker Adjustment and Retraining Notification Act
relating to a "plant closing" or "mass layoff" (as those terms are defined in
such Act), by Buyer or the Champion Companies, occurring on or after the Closing
Date. Seller agrees to indemnify, defend and hold harmless Buyer Indemnified
Parties from any Adverse Consequences arising from the failure to comply with
the WARN Act
34
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
relating to a "plant closing" or "mass layoff," by Seller or the Champion
Companies, occurring on or prior to the Closing Date.
5.12. Assumption of Certain Seller Obligations.
(a) "Seller's Company Obligations" shall mean any obligation,
commitment, liability or responsibility of Seller, its Affiliates or its or
their Predecessors (whether or not also an obligation, commitment, liability, or
responsibility of or claim against, in whole or in part, the Champion Companies)
arising, undertaken or created in connection with, on behalf of or for the
benefit of the Champion Companies, or arising from the conduct of the Business,
and relating to (i) any employment or severance agreements (with the employees
set forth on Disclosure Schedule 5.12(i), (ii) any stock purchase or asset
purchase agreements concerning the acquisition or divestiture of any shares or
assets of the Champion Companies or of the Business (including the obligations
of Seller and its Affiliates under the agreements set forth in Disclosure
Schedule 5.12(ii)); (iii) any labor or collective bargaining agreements relating
to the Champion Companies; (iv) any contracts with any Governmental Authority
relating to the Champion Companies; (v) any licenses or leases of computer
hardware and software relating to the Champion Companies (including the licenses
or leases set forth on Disclosure Schedule 5.12(v)); (vi) Performance Obligation
Instruments, Outstanding FX Contracts and Additional FX Contracts; (vii) the
orders and decrees with the Governmental Authorities relating to the Champion
Companies described in Disclosure Schedules 3.9 and 3.11 except to the extent
Seller is obligated to reimburse or indemnify Buyer and its Affiliates for
liabilities relating to such orders and decrees pursuant to this Agreement;
(viii) fees, expenses and costs incurred in the recruitment and relocation of
employees including the excess of any advances made or costs incurred by Seller
or its Affiliates over proceeds received on disposition of the property relating
to home sale assistance program or employee relocation policy; (ix) the
commitments for charitable contributions set forth on Disclosure Schedule
5.12(ix); (x) the operation of and products manufactured or sold by the Wagner
industrial brake business including all liabilities arising from
35
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
or related to asbestos in such industrial brakes regardless of when the
industrial brakes were manufactured or sold which business was sold by Seller to
Magnetek, Inc. pursuant to an Agreement for Sale of Stock dated as of December
30, 1986; (xi) the contingent fees payable to Seller's outside counsel to the
extent such fees relate to harbor maintenance tax refunds that are received by
the Champion Companies and estimated savings recognized by the Champion
Companies for 1998 harbor maintenance taxes if such taxes would have been paid
consistent with past practice; (xii) retrospectively rated casualty insurance
policies in the name of a Champion Company including those policies set forth in
Disclosure Schedule 5.12(xii); (xiii) the agreement with Sprint for telephone
services, voice and data communications; (xiv) regional supply agreements for
the purchase of office supplies/MRO materials; (xv) any agreements for motor
contract carriage relating to the Champion Companies; (xvi) the agreement with
Donlen Corp. and GE Capital Fleet Services for the acquisition, maintenance and
disposal of vehicles; and (xvii) costs incurred by Seller for travel
arrangements for Employees.
(b) Buyer expressly agrees that it shall assume Seller's Company
Obligations (except for the liabilities described in Section 5.12(a)(x)) to the
extent related solely to the Champion Companies and shall discharge the same in
accordance with their terms. Buyer shall cause one of its designated Affiliates
to assume the Seller's Company Obligations described in Section 5.12(a)(x). For
purposes of clarification, after the Closing the Champion Companies will not be
eligible to participate in the agreements and programs referred to in clauses
(xiv) through (xvii) above, however, the Buyer will assume any liability for
charges under such agreements including those which the Champion Companies may
incur during the transition period following Closing when Buyer is establishing
comparable arrangements for the Champion Companies. Seller shall retain the cash
proceeds for any rebates relating to the agreements and programs referred to in
clauses (xvi) and (xvii) above. Buyer acknowledges that it will be liable for
all continuing obligations of Seller after the Closing with respect to the
Seller Company Obligations referred to in clauses (i) through (xiii) above.
Buyer agrees that it will cause the Champion Companies to continue to
participate in Seller's agreement with Sprint for telephone
36
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
services, voice and data communications until the current agreement expires on
April 30, 2000 and the Champion Companies will continue to receive the discounts
and service credits related to their use of the Sprint services.
(c) After the Closing Date and upon Seller's request, and for no
further consideration, Buyer shall use and shall cause any Affiliate of Buyer to
use its reasonable best efforts to obtain full releases of Seller and any of its
Affiliates from liability under the Seller's Company Obligations assumed by the
Buyer pursuant to paragraph (b) above, provided, however, that until Buyer
obtains such releases, Buyer shall not take, and shall not permit any Affiliate
of Buyer to take, any action that has the effect of amending or otherwise
modifying any provisions of any of the Seller's Company Obligations assumed by
the Buyer for which Seller or any of its Affiliates may have continuing
liability, either primary or contingent, except for amendments or modifications
which do not (i) increase in any material respect any liability of Seller or any
of its Affiliates thereunder, or (ii) extend the period of time during which
Seller or any of its Affiliates will be obligated or liable thereunder.
5.13. Payment for Inter- and Intra-Company Accounts.
(a) Subject to paragraph (b) below, effective as of the Closing, (i)
Buyer shall be deemed to have acquired from Seller and its Affiliates, all
inter-and intra-company payables and loans that are due to Seller and its
Affiliates from the Champion Companies and (ii) Seller shall be deemed to have
acquired from the Champion Companies all inter- and intra-company payables and
loans that are due to the Champion Companies from the Seller and its Affiliates.
Seller and Buyer agree that the consideration payable under Section 2.2 hereof
is net and inclusive of the amount of inter- and intra-company accounts deemed
transferred pursuant to this Section 5.13. Notwithstanding the foregoing, any
liabilities on the books of the Champion Companies that are paid by Seller or
its Affiliates but not yet booked as inter- and intra-company payables or
receivables (a) for items shown on Disclosure Schedule 2.3(h), or (b) for items
not
37
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
shown on Disclosure Schedule 2.3(h) but which provide a direct and measurable
benefit to the Champion Company on whose behalf the liability was paid, shall be
settled after Closing in cash within 45 days after the date of the invoice which
Seller shall issue to Buyer for such amounts. If Buyer fails to pay such invoice
in full within 30 days of the invoice date, then interest shall accrue on the
amount due and payable at the rate of 9% per annum.
(b) Within five (5) business days following the date on which the
Final Closing Statement of Net Assets is determined (i) if there is a receivable
due to Champion Automotive S.p.A. under clause (i) of Section 2.3(i), Seller
shall cause Cooper Italia S.p.A. to pay Champion Automotive S.p.A. the amount of
the receivable, if any, due from Cooper Italia S.p.A. to Champion Automotive
S.p.A. set forth in the Final Closing Statement of Net Assets, or (ii) if there
is a receivable due to Cooper Italia S.p.A. under clause (ii) of Section 2.3(i),
Buyer shall cause Champion Automotive S.p.A. to pay Cooper Italia S.p.A. the
amount of the payable, if any, due from Champion Automotive S.p.A. to Cooper
Italia S.p.A. set forth in the Final Closing Statement of Net Assets.
5.14. Patent and Trademark Matters. Seller agrees to cooperate with
Buyer in transferring registrations to and perfecting the title of the Champion
Companies in the Intellectual Property used in the Business. In respect of any
Intellectual Property listed on Disclosure Schedule 3.15(b) which is registered
in name of Seller or its Affiliates, Seller shall execute all documents
necessary to perfect title to such Intellectual Property in the Champion
Companies prior to Closing. If such Intellectual Property is registered in the
United States, Seller shall complete and file the documents necessary to record
the transfer of such registrations of title with the United States Patent and
Trademark Office prior to Closing and Seller shall pay any government fees or
professional fees relating thereto. If such Intellectual Property is registered
outside the United States, Seller shall deliver the documents, duly executed by
Seller, to foreign legal counsel prior to Closing with instructions and any
authorizations necessary to record the transfer of such registrations with the
appropriate Governmental Authorities and Seller shall pay
38
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
any professional or recording fees relating thereto that are incurred before the
Closing Date. After Closing, Seller shall complete the recordation of transfer
of registrations outside the United States, and Buyer will reimburse Seller for
one-half of any professional and recording fees incurred by Seller after Closing
in connection therewith.
5.15. Performance Obligation Instruments. Buyer shall use
commercially reasonable efforts, on or as soon as practicable after the Closing
Date, to replace all "Performance Obligation Instruments" (as defined below)
existing on the Closing Date, or to obtain the full release of Seller and its
Affiliates from any liability related thereto. Without limiting Buyer's
obligations under Section 5.12, Buyer shall reimburse Seller and its Affiliates
for any liability that Seller or its Affiliates incur in connection with any
Performance Obligation Instruments as a result of such Performance Obligation
Instrument not being so replaced (or otherwise terminated) or as a result of the
failure to obtain the full release of Seller and its Affiliates from any
liability related thereto including the value of payments made under a claim or
drawing together with associated costs and fees to maintain, renew or extend
such instruments. "Performance Obligation Instruments" shall mean, collectively,
each commercial letter of credit, standby letter of credit, bond, bank
guarantee, guarantees of Industrial Development Revenue Bonds, guarantees of
leases and other contracts, or other similar types of instrument and bid,
payment, performance or other bond or surety, in each case that relates solely
to the Business and including those specifically described on Disclosure
Schedule 5.15 or that may be created after the date hereof in the ordinary
course of conducting the Business consistent with past practices (and as to
which Seller has notified Buyer in writing prior to the Closing Date.) If, by
March 31, 1999, Buyer has not obtained releases or effected the complete
replacement of any outstanding Performance Obligation Instrument such that
Seller and its Affiliates are fully released from any liability related thereto,
Buyer shall obtain and deliver to Seller letters of credit in favor of Seller,
from financial institutions reasonably acceptable to Seller and on terms
reasonably satisfactory to Seller, which fully cover the liabilities under each
such Performance Obligation Instrument. Seller or its Affiliates may elect not
to renew or extend any Performance Obligation
39
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Instrument to the extent (a) required by any applicable law; (b) reasonably
necessary to avoid a material Adverse Consequence to Seller or its Affiliates or
(c) Buyer has not obtained and delivered to Seller letters of credit required
because of Buyer's failure to effectuate any replacement required under this
Section 5.15. Seller shall use reasonable efforts to notify Buyer prior to
Seller's renewal or extension of any Performance Obligation Instruments provided
that, notwithstanding anything to the contrary in this Agreement, in no event
shall Seller incur any liability whatsoever for failure to so notify. Any
election by Seller or its Affiliates not to renew or extend a Performance
Obligation Instrument shall not affect any indemnification obligation of Buyer.
Furthermore, Buyer acknowledges and agrees that Seller has no obligation or
intention to renew or extend a Performance Obligation Instrument beyond the
first anniversary of the Closing Date.
5.16. Foreign Exchange Contracts.
(a) On or as soon as practicable after the Closing Date, Buyer shall
use commercially reasonable efforts to obtain the full release of Seller and its
Affiliates from any liability under the "Outstanding FX Contracts" and
"Additional FX Contracts" (as such terms are defined below). Until such time as
Buyer obtains such release, the procedures set forth in Section 5.16(b) shall
apply to the settlement of such foreign exchange contracts.
(b) Seller has set forth on Disclosure Schedule 5.16 all outstanding
foreign exchange contracts entered into by Seller or its Affiliates on or before
the date hereof which relate exclusively to the Business (the "Outstanding FX
Contracts"). For each Outstanding FX Contract: (i) Buyer shall deliver on the
"Maturity Date" to the "Bank" designated on such schedule the amount
of the currency sold (which is designated in such schedule as a negative number)
40
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
in the currency designated in such schedule; and (ii) Seller shall direct each
Bank designated in such schedule to deliver to Buyer, or a Buyer Affiliate as
instructed by Buyer, the amount of the currency purchased (which is designated
in such schedule as a positive number) in the currency designated in such
schedule. Any delivery instructions under this Section 5.16 shall be provided in
writing no later than two business days before the applicable Maturity Date. For
any foreign exchange contract entered into by Seller or its Affiliates after the
date hereof on behalf of or for the benefit of the Champion Companies in the
ordinary course of the Business consistent with past practices that requires
delivery after the Closing Date ("Additional FX Contracts"), (i) Seller shall
promptly notify Buyer in writing of any Additional FX Contracts, (ii) Buyer
shall timely deliver the amount of the currency sold thereunder in accordance
with the terms thereof, and (iii) Seller shall direct the Bank to each such
Additional FX Contract to deliver timely to Buyer or a Buyer Affiliate (as Buyer
may instruct) the currency purchased thereunder in accordance with the terms
thereof. On and after the Closing Date, Buyer shall be entitled to all rights of
Seller under all Outstanding FX Contracts and Additional FX Contracts (including
the right to receive all payments due to Seller and its Affiliates thereunder in
accordance with the terms thereof), and Seller shall take such actions as Buyer
may reasonably request on or after the Closing Date to provide Buyer with the
benefit of all rights and remedies available to Seller and its Affiliates under
each Outstanding FX Contract and Additional FX Contract.
5.17. Standard Motor Products Purchase Price Adjustment and Consigned
Inventory. Seller and Buyer confirm and agree that Seller has the right to
receive any and all payments due from Standard Motor Products pursuant to
Sections 7.20(d), (e) and (f) of the Asset Exchange Agreement dated as of March
28, 1998 among Standard Motor Products and certain Champion Companies. If Buyer
or its Affiliates receive any such payments from Standard Motor Products, the
Buyer shall and shall cause its Affiliates promptly to remit any such payments
to Seller, but in no event later than five business days following the receipt
of such payments by Buyer or its Affiliates. If Buyer or its Affiliates fail to
timely remit such payments to Seller, Buyer shall pay Seller interest on such
amount at the rate of nine percent (9%) per annum from the due date of such
remittance. Seller agrees that it shall be responsible for the purchase price
adjustment, if any, that may be due to Standard Motor Products pursuant to
Section 2.9(b) of such Asset Exchange Agreement.
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
5.18. Further Assurances/Consents and Approvals.
(a) Seller and Buyer agree that, from time to time, whether before,
at or after the Closing Date, each of them will, and will cause their respective
Affiliates to, execute and deliver such further instruments of conveyance and
transfer and take such other action (including any action associated with
providing notice to, making filings with or obtaining the consent of appropriate
Governmental Authorities with respect to, or causing the transfer, of any
Environmental Permits) as may be reasonably necessary to carry out the purposes
and intents hereof.
(b) This Agreement and the transactions contemplated hereby shall not
constitute an assignment, sale, conveyance, transfer or lease of any interest in
any contract, lease or other agreement if an assignment, sale, conveyance,
transfer, lease or an attempt to make such an assignment, sale, conveyance,
transfer or lease (a) without the consent of or notice to a third party would
constitute a breach or violation or affect adversely the rights of Seller, Buyer
or their respective Affiliates thereunder or (b) is restricted or prohibited by
law, including any Environmental Law. Any transfer, sale, conveyance, assignment
or lease to Buyer or its Affiliates (including the Champion Companies) of any
interest in any contract, lease or other agreements that requires filing with,
notice to or the consent of a third party shall be made subject to such filing
or notice being given or such consent or approval being obtained. If such
consent or approval is not obtained on or prior to the Closing Date, Seller and
Buyer shall continue to use commercially reasonable efforts to obtain any such
approval or consent until the earliest of (i) such time as such consent or
approval has been obtained or (ii) the date Seller reasonably determines that
the third party will not provide its consent or approval. In the event Seller
reasonably determines that the third party will not provide its consent or
approval, Seller will cooperate with Buyer and its Affiliates in any lawful and
feasible arrangement to provide that Buyer and its Affiliates shall receive the
benefits under any such contract, lease or other
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
agreement, including performance by Seller as agent, provided that Buyer and its
Affiliates shall undertake to pay, satisfy and indemnify the Seller against the
corresponding liabilities for the enjoyment of such benefit as if such consent
or approval has been obtained. Buyer shall reimburse Seller for any costs and
expenses it incurs after the Closing Date in seeking to obtain or obtaining any
consent or approval.
5.19. Other Agreements. At Closing, the parties hereto shall or shall
cause their respective Affiliates to execute and deliver the following
agreements (collectively, the "Other Agreements"):
(a) Canadian Asset Transfer Agreement;
(b) Assignments or subleases of computer hardware and
software;
(c) Transition Services Agreement; and
(d) Such other agreements or documents as are reasonably
required to consummate the transactions contemplated by this Agreement.
5.20. Buyer Investigation: No Representations or Warranties.
(a) BUYER HEREBY ACKNOWLEDGES THAT IT HAS INDEPENDENTLY
EVALUATED AND CONDUCTED DUE DILIGENCE SATISFACTORY TO BUYER WITH RESPECT TO THE
ASSETS OF THE "CHAMPION COMPANIES" (INCLUDING, BUT NOT LIMITED TO, THE
OPERATIONS, FACILITIES, CONTRACTS, CUSTOMER FILES, INTELLECTUAL PROPERTY,
FINANCIAL INFORMATION AND PROSPECTS OF THE BUSINESS), AND HAS BEEN REPRESENTED
BY, AND HAD THE ASSISTANCE OF, COUNSEL IN THE CONDUCT OF SUCH DUE DILIGENCE, THE
43
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
PREPARATION AND NEGOTIATION OF THIS AGREEMENT AND THE ANCILLARY DOCUMENTS, AND
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY.
(b) SELLER HAS MADE AVAILABLE TO BUYER AND ITS REPRESENTATIVES CERTAIN
INFORMATION AND RECORDS RELATING TO THE ASSETS OF THE "CHAMPION COMPANIES". IT
IS UNDERSTOOD AND AGREED BY THE PARTIES THAT NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, HAS BEEN MADE BY SELLER OR ITS AGENTS REGARDING THE ACCURACY
OR COMPLETENESS OF ANY SUCH INFORMATION OR RECORDS, EXCEPT AS EXPRESSLY SET
FORTH IN THIS AGREEMENT OR ANY OF THE "OTHER AGREEMENTS", AND THAT SELLER WILL
NOT HAVE OR BE SUBJECT TO ANY LIABILITY TO BUYER OR ANY OTHER "PERSON" RESULTING
FROM THE DISTRIBUTION TO BUYER, OR BUYER'S USE, OF ANY SUCH INFORMATION OR
RECORDS, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT. FURTHERMORE, BUYER
AGREES THAT ANY REPRESENTATIONS OR WARRANTIES MADE BY SELLER OR ITS AFFILIATES
WITH RESPECT TO THE STOCK OF THE CHAMPION COMPANIES OR THE ASSETS OF THE
CHAMPION COMPANIES BEING ACQUIRED BY BUYER OR ITS AFFILIATES BY VIRTUE OF THE
ACQUISITION OF THE STOCK OF THE CHAMPION COMPANIES OR ASSETS OF THE CANADIAN
DIVISION ARE SET FORTH IN THIS AGREEMENT AND THE OTHER AGREEMENTS, AND THAT
EXCEPT AS SO SET FORTH, THERE IS NO REPRESENTATION OR WARRANTY OF ANY KIND,
EXPRESS OR IMPLIED. EXCEPT AS EXPRESSLY SET FORTH IN SECTION 3.11 OF THIS
AGREEMENT, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER TO THE BUYER
REGARDING THE PRESENCE OR ABSENCE OF ANY HAZARDOUS SUBSTANCES, ASBESTOS
CONTAINING MATERIALS, UNDERGROUND STORAGE TANKS OR PCBS IN, AT OR UNDER ANY OF
THE ASSETS OF THE "CHAMPION COMPANIES" OR THE
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
ACCURACY OR COMPLETENESS OF ANY STATEMENTS, DOCUMENTS OR REPORTS REGARDING
ENVIRONMENTAL MATTERS RECEIVED FROM SELLER; HOWEVER, TO SELLER'S KNOWLEDGE, NO
SUCH STATEMENT, DOCUMENT OR REPORT REGARDING ENVIRONMENTAL MATTERS IS MATERIALLY
INACCURATE OR INCOMPLETE.
5.21. Indemnification for AlliedSignal Lawsuit and Bosch Infringement
Claim.
(a) Cooper Automotive Company is a defendant in a lawsuit known as
AlliedSignal, Inc. v. Cooper Automotive, Inc., Case No. 96-540 SLR (United
States District Court, District of Delaware) involving a patent infringement
claim relating to the process of manufacturing platinum-tipped spark plugs
("AlliedSignal Lawsuit"). Seller shall use commercially reasonable efforts to
obtain and deliver to Buyer at Closing a license agreement, in a form reasonably
acceptable to Buyer, granting Cooper Automotive Company the right to make, use,
sell, offer for sale or import any product, process or invention of whatever
nature covered by the patent(s) that are the basis of AlliedSignal's claim. If
Seller is able to deliver such license agreement to Buyer (whether on or after
Closing), Seller shall indemnify the Buyer Indemnified Parties for any royalties
or other amounts due under such license agreement. If Seller is not able to
deliver such license agreement to Buyer (whether on or after Closing), Seller
shall, for the remaining term of the patent(s)' life, indemnify, defend and hold
harmless the Buyer Indemnified Parties from and against all Adverse Consequences
relating to the AlliedSignal Lawsuit.
(b) Robert Bosch GmbH has accused certain Champion Companies of
infringing Bosch's European Patent No. EP523062 relating to a glow plug having a
ferro-cobalt alloy (the "Bosch Infringement Claim"). Seller shall use
commercially reasonable efforts to obtain and deliver to Buyer at Closing a
license agreement, in a form reasonably acceptable to Buyer, granting Champion
Automotive (U.K.) Ltd and Champion Automotive S.p.A. the right to make, use,
sell, offer for sale or import any product, process or invention of whatever
nature covered by
45
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
the patent(s) that are the basis of Bosch's claim. If Seller is not able to
deliver such license agreement to Buyer (whether on or after Closing), Seller
shall, for the remaining term of the patent(s)' life, indemnify, defend and hold
harmless the Buyer Indemnified Parties from and against all Adverse Consequences
relating to the Bosch Infringement Claim.
(c) Notwithstanding Section 5.21(a), if the final judgment for the
AlliedSignal Lawsuit (including all applicable appeals) does not enjoin or
otherwise prohibit any of the Champion Companies from manufacturing platinum
tipped spark plugs using the platinum ball welding method used by the Champion
Companies, which was the subject of the AlliedSignal Lawsuit, then Seller's
indemnity obligations for the AlliedSignal Lawsuit shall cease, except for
Seller's obligation to satisfy any claims for damages.
(d) For purposes of determining the Seller's indemnity obligations
under this Section 5.21, the provisions of Section 9.6(b) shall apply. Buyer and
its Affiliates shall cooperate fully with Seller and assist Seller, from and
after the Closing Date, regarding all aspects of any judicial, quasi-judicial,
administrative, legal or equitable proceedings relating to the AlliedSignal
Lawsuit. Such cooperation shall include (a) complying with all requests from the
Seller for information from the Champion Companies which relates to the
AlliedSignal Lawsuit and (b) causing employees, officers and directors of the
Champion Companies (i) to make themselves available for interviews by and
consultations with attorneys and other representatives for Seller; (ii) to
testify at any depositions, hearings, trials or any other proceedings in
connection with the AlliedSignal Lawsuit; and (iii) to analyze documents,
testimony or other information relating to the AlliedSignal Lawsuit. Buyer shall
provide such cooperation and information without the issuance of a subpoena,
discovery request or other formal legal process. All travel and out-of-pocket
expenses associated with such cooperation shall be borne by Seller, excluding
cost of time expended by officers, employees and directors of Buyer and its
Affiliates.
5.22. Third Party Debt. Seller shall use its reasonable best efforts
to pay off all
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
foreign third party debt set forth on Disclosure Schedule 2.3(m) before Closing.
Following the Closing, the Buyer and its Affiliates will be responsible for the
third party debt of the Champion Companies set forth in Disclosure Schedule
2.3(m) and the obligations of the Champion Companies relating to the industrial
development revenue bonds described in Section 5.23 below.
5.23. Assignment of Bonds to Buyer. Seller holds and is entitled to
receive payments under the following industrial development revenue bonds:
(a) $7,200,000 City of Scottsville, Kentucky Industrial Building
Revenue Bond (Wagner Electric Corporation Project) Series 1994;
(b) $7,600,000 City of Glasgow, Kentucky Industrial Building Revenue
Bond (Wagner Electric Corporation Project);
(c) $20,000,000 Industrial Development Board of the Town of Sparta,
Tennessee Revenue Bond (Wagner Lighting Division of Cooper Automotive, Inc.
Project) Series 1995; and
(d) $4,100,000 Industrial Development Board of the City of
Smithville, Tennessee Revenue Bond (Moog Automotive, Inc. Project) Series 1995.
The payments due to Seller under these bonds are funded by real
estate lease payments from certain Champion Companies. At Closing, Seller shall
assign to Buyer, or its designated Affiliate, all of Seller's rights and
interest under such bonds including the right to receive any payment due
thereunder after the Closing Date.
5.24. Transition Services Agreement. The parties shall commence
negotiating a mutually acceptable agreement pursuant to which Seller and its
Affiliates shall assist Buyer and its Affiliates in certain areas, such as
employee benefits, claims management and environmental in the
47
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
transition of the Business to Buyer's control after Closing.
5.25. Asbestos Claims.
(a) EIS Liabilities. To the extent that Buyer or its applicable
Affiliate is not fully indemnified by Standard Motor Products Company or its
successors for Adverse Consequences arising from Asbestos Claims due to products
manufactured or sold prior to March 28, 1998, by Standard Motor Products
Company, its Affiliates, and their Predecessors in accordance with that certain
Asset Exchange Agreement, dated as of March 28, 1998, among SMP Motor Products,
Ltd., Standard Motor Products, Inc., Cooper Industries (Canada) Inc., Moog
Automotive Company, and Moog Automotive Products, Inc. and for Adverse
Consequences arising from Asbestos Claims due to products manufactured by Seller
or its Affiliates after March 28, 1998, through the Closing Date that are sold
under the tradenames formerly used by Standard Motor Products Company, Seller
shall indemnify, defend and hold Buyer and its Affiliates harmless from and
against such Adverse Consequences.
(b) Insurance Claims. Seller shall make available (and shall cause
its Affiliates to make available) to Buyer and the Champion Companies the rights
of Seller and its Affiliates to any benefits, including insurance proceeds, of
or arising out of any insurance policy that covers Asbestos Claims. Buyer shall
(or shall cause its Affiliates to) promptly notify Seller and submit any
Asbestos Claims to the relevant insurance company or companies on behalf of and
in the name of either Pneumo Abex Corporation or Moog Automotive Products, Inc.,
as successor by merger with Wagner Electric Corporation. Buyer acknowledges that
certain Insurance Agreement that is Exhibit 2.6 (b) (iii) to the Asset Purchase
Agreement dated as of November 21, 1994, by and between Pneumo Abex Corporation
and Wagner Electric Corporation and agrees to abide by its terms.
(c) Indemnity for Denied Claims under Working Layer Policies.
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(i) Subject to Section 5.25(c)(ii) and (e), to the extent that an
insurance carrier (a "Denying Carrier") denies Buyer or the Champion Companies
access to an insurance policy under or as a result of which coverage for
Asbestos Claims is being provided as of the Closing Date as set forth on Exhibit
X (collectively, the "Working Layer Policies") on the basis that Buyer or such
Champion Company is not, and does not succeed to the rights of, one or more of
the insureds under the policy, Seller shall indemnify, defend and hold Buyer and
the Champion Companies harmless against Adverse Consequences for Asbestos Claims
in the proportion equal to the percentage of participation the Seller or its
Affiliates is then achieving from the Denying Carrier under the then existing
agreement with the Denying Carrier, or, in the absence of an agreement with the
Denying Carrier as to the percentage of participation, could reasonably expect
to achieve from the Denying Carrier (the "Working Layer Policy Indemnity").
(ii) At Seller's option upon written notice to Buyer, which Seller
may exercise in whole or in part from time to time and in lieu of the Working
Layer Policy Indemnity for the Asbestos Claims for which the option is
exercised, Buyer shall (or Buyer shall cause its applicable Affiliate to) assign
to Seller or its designated Affiliate (the "Claim Assignee"), which the Claim
Assignee shall assume, the liability for any Asbestos Claim, for which the
option is exercised, made before the Abex Termination Date for Abex Products or
made before the tenth anniversary of the Closing Date for other applicable
products for which coverage to Buyer or the Champion Companies is being denied
to the extent that neither Buyer nor any of its Affiliates have been paid by an
insurance carrier or another responsible third party (the "Uncompensated
Claims"). Although, upon exercising such option, the Claim Assignee will have
assumed liability for the Uncompensated Claims, Buyer shall indemnify and hold
harmless the Claim Assignee from that amount of the Uncompensated Claim that the
Buyer would have paid on the claim had the insurance not been denied. In other
words, Buyer shall indemnify and hold harmless the Claim Assignee for that
portion of the Uncompensated Claim that the Denying Carrier would not have paid
even if the claim were accepted.
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(d) Subsequent Layer Policies.
(i) With respect to coverage for Asbestos Claims under any
policy other than the Working Layer Policies (the "Subsequent Layer Policies"),
Seller shall use its best efforts to support Buyer in pursuing coverage under
the Subsequent Layer Policies whether in the name of Buyer or any of its
Affiliates (including the Champion Companies) or in the name of Seller or any of
its Affiliates for the benefit of Buyer and its Affiliates, including the
Champion Companies. Subject to Section 5.25(d)(ii) and (e), to the extent that
an insurance carrier (a "Subsequent Layer Denying Carrier") denies Buyer or the
Champion Companies access to a Subsequent Layer Policy on the basis that Buyer
or such Champion Company is not, and does not succeed to the rights of, one or
more insureds under the policy, Seller shall indemnify, defend and hold Buyer
and the Champion Companies harmless against Adverse Consequences for Asbestos
Claims in the proportion equal to the percentage of participation Seller or its
Affiliates is then achieving from the Subsequent Layer Denying Carrier under the
then existing agreement with the Subsequent Layer Denying Carrier, or, in the
absence of an agreement with the Subsequent Layer Denying Carrier as to the
percentage of participation, could reasonably expect to achieve from the
Subsequent Layer Denying Carrier (the "Subsequent Layer Indemnity").
(ii) At Seller's option upon written notice to Buyer, which
Seller may exercise from time to time and in lieu of the Subsequent Layer
Indemnity for the Asbestos Claims for which the option is exercised, Buyer shall
(or Buyer shall cause its applicable Affiliate (including the Champion
Companies)) to assign to Seller or its designated Affiliate (the "Subsequent
Layer Claim Assignee"), which the Subsequent Layer Claim Assignee shall assume,
the liability for any Asbestos Claim, for which the option is exercised, made
before the Abex Termination Date for Abex Products or made before the tenth
anniversary of the Closing Date for other applicable products for which coverage
to Buyer or the Champion Companies is being denied to the extent that neither
Buyer nor any of its Affiliates have been paid by an
50
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
insurance carrier or another responsible third party (the "Subsequent Layer
Uncompensated Claims"). Although, upon exercising such option, the Subsequent
Layer Claim Assignee will have assumed liability for the Subsequent Layer
Uncompensated Claims, Buyer shall indemnify and hold harmless the Subsequent
Layer Claim Assignee from that amount of the Subsequent Layer Uncompensated
Claim that the Buyer would have paid on the claim had the insurance not been
denied. In other words, Buyer shall indemnify and hold harmless the Subsequent
Layer Claim Assignee for that portion of the Subsequent Layer Uncompensated
Claim that the Denying Carrier would not have paid even if the claim were
accepted.
(e) Limitations. Seller's obligation to indemnify, defend and hold
Buyer and the Champion Companies harmless against Adverse Consequences for
Asbestos Claims:
(i) shall not apply (A) with respect to Asbestos Claims for
products manufactured or sold by Pneumo Abex Corporation or its Predecessors
prior to December 30, 1994 (the "Abex Products"), unless the Seller is notified
of the specific Asbestos Claim on or before the date twelve years and six months
after the Closing Date (the "Abex Termination Date") and (B) with respect to all
other Asbestos Claims, unless the Seller is notified of the specific Asbestos
Claim on or before the tenth anniversary of the Closing Date, and
(ii) shall cease with respect to any Denying Carrier or
Subsequent Layer Denying Carrier, upon such Denying Carrier or Subsequent Layer
Denying Carrier acknowledging the right of Buyer or the applicable Champion
Company to access to the applicable policies under which coverage for Asbestos
Claims may be made.
Seller's obligations pursuant to Section 5.25(d) and the Subsequent Layer
Claim Assignee's obligation to assume liability upon the exercises of the option
shall cease when the Adverse Consequences (A) indemnified by Seller and its
Affiliates, (B) assumed by the
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Subsequent Layer Claim Assignee (for which the Subsequent Layer Claim Assignee
is not indemnified by Buyer), and (C) paid by any and all carriers under the
Subsequent Layer Policies, in the aggregate after totaling the amounts in
subsections (A), (B) and (C) immediately above, reaches $50,000,000 (the "Stop
Loss Point").
Notwithstanding anything in this Section 5.25 to the contrary, in
determining Seller's obligation to indemnify, defend and hold Buyer and the
Champion Companies harmless against any Adverse Consequences for Asbestos Claims
resulting from the denial of coverage by a Denying Carrier and Subsequent Layer
Denying Carrier, the amount that Seller or its Affiliates achieves or could
reasonably expect to achieve is net of any self insurance retention,
retrospective premiums, fronting mechanisms or other self insurance programs.
(f) Buyer's Indemnity. Buyer shall indemnify, defend, and hold Seller
and its Affiliates harmless against Adverse Consequences (regardless whether the
claim is made against Seller or its Affiliates or Buyer and its Affiliates):
(i) for any Asbestos Claim related to any Abex Product if the
notice of the specific claim is not provided to Seller on or before the Abex
Termination Date, and
(ii) for any other Asbestos Claim if the notice of the specific
claim is not provided to the Seller on or before the tenth anniversary of the
Closing Date, and
(iii) for any Asbestos Claim upon reaching the Stop Loss Point, and
(iv) for any Asbestos Claim denied by any Denying Carrier or
Subsequent Layer Denying Carrier, upon such carrier acknowledging Buyer's or any
of its Affiliates' access to the policy, and
(v) for any retrospective premium, fronting mechanisms or claim
handling arrangements associated with an Asbestos Claim under a policy that the
carrier
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
acknowledges Buyer or its Affiliates had access.
Notwithstanding anything herein to the contrary, Buyer shall be
responsible for and shall indemnify and hold Seller and its Affiliates harmless
against any Adverse Consequences incurred in connection with bringing suit or
participating in any mediation, arbitration or other alternative dispute
resolution proceeding against any insurance carrier in pursuit of coverage for
Asbestos Claims.
(g) Cooperation. With respect to pursuit of insu-rance coverage
for Asbestos Claims, Buyer agrees use its best efforts to commence suit and
pursue coverage in the suit against any Denying Carrier or Subsequent Layer
Denying Carrier, unless otherwise agreed by the Parties. Buyer and Seller will
(and will cause their Affiliates to) cooperate with the other and its counsel in
connection with the pursuit of insurance coverage, the pursuit of indemnity from
SMPC, and the defense of Asbestos Claims, including, making available their
personnel, and providing such testimony and access to their books and records as
shall be reasonably necessary. Each party shall (and each party shall cause its
Affiliates to) negotiate using its best efforts and in good faith with any
carrier regarding coverage for Asbestos Claims. Further, each party shall
consult with the other in its discussions and negotiations with the applicable
carriers. Buyer shall on a quarterly basis provide a report to Seller regarding
the Asbestos Claims including a description of the claims made, status of
pending claims and claims which are disposed. Neither party (nor its Affiliates)
which a carrier acknowledges is or has succeeded to the rights of one or more of
the insureds under an Working Layer Policy or a Subsequent Layer Policy shall
enter into agreements with such carrier as to coverage levels, without the
consent of the other party, which consent shall not be unreasonably withheld or
delayed. If requested by Seller, Buyer shall (and shall cause its Affiliates to)
assign to Seller to the extent that Seller or its Affiliates have indemnified
Buyer or its Affiliates for Asbestos Claims or assumed liabilities associated
with Asbestos Claims any rights or claims of Buyer or its Affiliates against any
other Person associated
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
with such Asbestos Claims.
(h) Disclaimer. Other than pursuant to Section 3.17, Seller does not
make any representation or warranty as to the financial condition of any
carrier, the adequacy of insurance coverage, the identity or number of parties
that may make claims under the policies, whether pertaining to the Working Layer
Policies or the Subsequent Layer Policies. The parties acknowledge that other
Persons may have claims under these policies.
(i) Assignment. Buyer or a Champion Company may assign its rights and
obligations under this Section 5.25 to an Affiliate of Buyer provided it obtains
Seller's prior written consent, which shall not be unreasonably withheld or
delayed. However, Buyer shall continue to have responsibility for its indemnity
of Seller and its Affiliates under this Section 5.25 and Buyer shall bear the
risk of and indemnify, defend and hold Seller and its Affiliates harmless
against any Adverse Consequences for Asbestos Claims arising from any carrier
denying either party or their Affiliates access to an insurance policy as a
result of such assignment.
(j) Confidentiality. Except for any disclosure required by law, rule
of any stock exchange, or the requirement of any Governmental Authority, the
covenants and agreements of the parties pursuant to this Section 5.25, including
the amounts paid by Cooper or its Affiliates to Buyer or its Affiliates based on
what percentage of participation could be reasonably expected to be achieved, is
confidential and shall not at any time be disclosed by either party (and each
party shall cause its Affiliates not to disclose it at any time) to any other
Person.
5.26. Environmental Insurance Policy. Seller shall purchase an
environmental insurance policy in a form reasonably acceptable to both parties.
In the event Buyer elects to be a co-insured under such policy, Seller and Buyer
shall share equally the cost of the premium of the policy and any related
premium taxes. Further, in the event that a claim is made under such policy, the
related $250,000 deductible shall be paid by Buyer and shall apply to the
aggregate
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
amount of Adverse Consequences suffered by the Buyer Indemnified Parties as
described in Section 9.3. Notwithstanding anything to the contrary contained in
this Agreement, a copy of this Agreement may be disclosed to the insurer,
whether such policy is purchased jointly by Buyer and Seller or solely by
Seller.
5.27. Friable Asbestos Remediation. Within sixty (60) days after the
Closing, a qualified contractor(s) or consultant(s) shall have conducted surveys
to identify friable asbestos, if any, at all of the active and inactive, in
whole or in part, Owned Real Property and Leased Real Property (to the extent
the Champion Companies have any obligation for facility or asbestos maintenance
at any Leased Real Property). Prior to the Closing, Seller and Buyer shall have
mutually agreed upon the choice of the contractor(s) or consultant(s) and shall
share equally the expenses related to such survey services to be performed by
the contractor(s) or consultant(s). Seller and Buyer shall agree upon (i) the
scope of services to be performed by such contractor(s) or consultant(s), and
(ii) the agreement to be executed with, and the terms of retainer of, such
contractor(s) or consultant(s). The surveys shall include an estimate of the
costs of remediation (including full or partial encapsulation, removal, any air
monitoring during the remediation or other action) of any identified friable
asbestos. With regard to any friable asbestos identified in the surveys, Seller
shall, at its option, either (a) promptly reimburse Buyer the amount of money
required to conduct such remediation of any friable asbestos to the minimum
extent required by applicable Environmental Law, or (b) conduct such remediation
itself to the minimum extent required by applicable Environmental Law, using a
qualified contractor(s) or consultant(s), which contractor(s) or consultant(s),
and the terms of their retainer, shall be reasonably acceptable to Buyer. Seller
shall complete as soon as reasonably practicable its obligations in the
immediately preceding sentence, and then notwithstanding anything to the
contrary contained in this Agreement, Seller shall have no further liability or
obligation whatsoever (including Environmental Liability) to the Buyer
Indemnified Parties arising out of any friable asbestos at the Owned Real
Property and Leased Real Property. Seller and Buyer shall mutually agree
regarding access to the facilities for the conduct of the surveys and such
remediation.
55
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
6. EMPLOYEE MATTERS.
6.1. Certain Definitions. For the purpose of this Agreement, the
following capitalized terms have the meanings ascribed to such terms as set
forth below:
(a) "Benefit Plan" means, collectively, each Champion Employee Plan
listed on Disclosure Schedule 6.3(a), each Champion International Plan listed on
Disclosure Schedule 6.3(d) and each Champion Benefit Arrangement listed on
Disclosure Schedule 6.3(b).
(b) "Champion Benefit Arrangement" means any employment, severance
or similar contract, arrangement or policy, or any plan or arrangement providing
for severance ben efits, insurance coverage (including any self-insured
arrangements), disability benefits, supplemental unemployment benefits, vacation
benefits, pension or retirement benefits, deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation rights, fringe benefits, or other
forms of compensation or any post-retirement benefits, compensation or benefits
that (i) is not a Champion Employee Plan, (ii) is entered into or maintained, as
the case may be, by Seller or any of its Affiliates including the Champion
Companies, and (iii) covers any Employee or Former Employee in the United
States.
(c) "Champion Employee Plan" means any "employee benefit plan", as
defined in Section 3(3) of ERISA that (i) is subject to any provision of ERISA,
(ii) is maintained, administered or contributed to by Seller or any of its
Affiliates including the Champion Companies, and (iii) covers any Employee or
Former Employee.
(d) "Champion International Plan" means any employment, severance or
similar contract, arrangement or policy or any plan or arrangement providing for
severance benefits, insurance coverage (including any self-insured
arrangements), disability benefits, supplemental unemployment benefits, vacation
benefits, pension or retirement benefits, deferred
56
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
compensation, profit-sharing, bonuses, stock options, stock appreciation rights,
fringe benefits or other forms of compensation or any post-retirement benefits,
compensation or benefits that (i) is not a Champion Employee Plan or a Champion
Benefit Arrangement, (ii) is maintained or contributed to by Seller or any of
its Affiliates including the Champion Companies, and (iii) covers any Employee
or Former Employee.
(e) "Employee" means any individual who, on the Closing Date, is
employed by Seller or the Champion Companies in the Business in any active or
inactive status and whose current employment has not been terminated.
(f) "Former Employee" means any individual previously employed in the
Business by Seller, the Champion Companies, or any of their Affiliates or
Predecessors and who retired or whose employment has been otherwise terminated
prior to the Closing Date and who is not an Employee.
6.2. Employment. As of the Closing Date, every Employee will be
permitted to continue as an employee of Champion, the Champion Subsidiaries and
the Related Companies, as the case may be, or shall be permitted to become an
employee of Buyer or the Affiliate of Buyer which acquires the assets of the
Canadian Division. The employment of Employees by Champion, the Champion
Subsidiaries, the Related Companies, Buyer or its Affiliates shall be on the
same terms, at the same salary or wage levels, and with substantially similar
benefits as provided to the Employees prior to Closing; provided that nothing
herein shall prevent Buyer or its Affiliates (including the Champion Companies)
from altering such terms, salary, wages or benefits after the Closing except as
specifically provided herein.
6.3. Representations Regarding Employee Benefit Plans. Seller
represents and warrants to Buyer that the statements contained in this Section
6.3 are true and correct as of the date of this Agreement and will be true and
correct on the Closing Date:
57
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(a) Disclosure Schedule 6.3(a) identifies each Champion Employee
Plan. Seller has furnished or made available to Buyer: (i) true and complete
copies of such Champion Em ployee Plans (and, if applicable, related trust
agreements or funding contracts); (ii) the most recent annual report (Form 5500
series) or financial report prepared in connection with any such Champion
Employee Plan relating to Employees and Former Employees; (iii) the summary plan
description (if any) currently in effect for Employees covered under each such
Champion Employee Plan; (iv) a written description of each such Champion
Employee Plan in effect for Employees and Former Employees for which there is no
summary plan description or plan; and (v) the most recent financial statements
and actuarial reports or statement (if any) prepared in connection with each
such Champion Employee Plan and relating to Employees and Former Employees. Each
such Champion Employee Plan has been maintained in compliance in all material
respects with its terms and with the requirements prescribed by any applicable
statutes, orders, rules and regulations including but not limited to ERISA and
the Internal Revenue Code.
(b) Disclosure Schedule 6.3(b) identifies each material Champion
Benefit Arrangement. Seller has furnished or made available to Buyer true and
complete copies of or, if no written document exists, descriptions of each such
Champion Benefit Arrangement. Each such Champion Benefit Arrangement has been
maintained in compliance in all material respects with its terms and with the
requirements prescribed by any applicable statutes, orders, rules and
regulations.
(c) Disclosure Schedule 6.3(c) identifies each Multiemployer Pension
Plan to which the Seller or any of its Affiliates including the Champion
Companies have made contributions in the most recent five calendar years with
respect to Employees and Former Employees and the most recently determined
liability for withdrawal from each Multiemployer Plan which has been provided to
the Seller.
58
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(d) Disclosure Schedule 6.3(d) identifies each material Champion
International Plan. Seller has furnished or made available to Buyer true and
complete copies of or, if no written document exists, descriptions of each such
Champion International Plan. Each such Champion International Plan has been
maintained in all material respects in compliance with its terms and with the
requirements prescribed by any and all applicable statutes, orders, rules and
regulations.
(e) Except as set forth on Disclosure Schedule 6.3(e), there are no
actions, suits, arbitrations or other proceedings pending (other than routine
claims for benefits) with respect to any Champion Employee Plan, Champion
Benefit Arrangement or Champion International Plan which would be reasonably
likely to have a Material Adverse Effect.
(f) Neither Seller, a Champion Company nor any Benefit Plan has
engaged in any prohibited transaction, as defined in Section 4975 of the
Internal Revenue Code or Section 406 of ERISA, which could subject any Benefit
Plan to any material tax or penalty imposed under Section 4975(a) of the
Internal Revenue Code or Section 502(i) of ERISA.
(g) Except as set forth on Disclosure Schedule 6.3(g), the Benefit
Plan documents provided to Buyer describe all currently effective benefits and
all benefits which Seller or any Champion Company has undertaken to provide in
the future under such plans. Neither Seller nor any Champion Company has made
any material written or oral, implied or express representations that are
inconsistent with the terms of the documents provided to Buyer. Further, neither
Seller nor any Champion Company has made any material written or oral, express
or implied representations regarding the continuation of any Benefit Plan after
the Closing Date. There are no amendments to the benefit formulas of the
Automotive Hourly Plans (as defined in Section 6.4(a)) or the Cooper Salaried
Plan (as defined in Section 6.4(c)) that have been approved and that increase
benefits after the Closing Date.
59
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(h) Disclosure Schedule 6.3(a) specifically identifies each Champion
Employee Plan that is represented to be a qualified plan under Section 401(a) of
the Internal Revenue Code. With respect to each Champion Employee Plan so
identified unless noted to the contrary on Disclosure Schedule 6.3(a), the IRS
has issued a favorable determination letter to such plan to the effect that the
form of such Champion Employee Plan (or predecessor plan) satisfies the
requirements of Section 401(a) of the Internal Revenue Code. For all years
subsequent to the establishment of each such qualified plan (or predecessor
plan) and with respect to which Seller's and each Champion Company's tax returns
or such Champion Employee Plan's and trust's returns are open to audit, the plan
has satisfied in all material respects, in form and operation, the qualification
requirements of Section 401(a) of the Internal Revenue Code, and no action which
has been taken or not taken with respect to such plan subsequent to such date
has had or will have any adverse impact on the continued qualification of such
plan through the Closing Date. Each such Champion Employee Plan is in compliance
in all material respects with the special nondiscrimination rules under sections
401(k)(3) and (m) of the Internal Revenue Code, if applicable. The IRS has not
revoked any letter of determination or opinion letter to which reference is made
above, nor has the IRS threatened any such revocation.
(i) Funding Status.
(1) No "accumulated funding deficiency" within the meaning of
either Section 412 of the Internal Revenue Code or ERISA Section 302 exists with
respect to any Champion Employee Plan nor would there exist any such deficiency
but for the application of an alternative minimum funding standard. No waiver of
the minimum funding standards imposed by the Code with respect to any such plan
has been issued.
(2) Except for the liabilities associated with the employment
continuity agreements listed on Disclosure Schedule 5.12(i), the actuarial
present values of all accrued deferred compensation entitlements of Employees
and Former Employees of Seller or any
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Champion Company and their respective beneficiaries, other than entitlements
accrued pursuant to funded retirement plans subject to the provisions of Section
412 of the Internal Revenue Code or Section 302 of ERISA, have been fully
reflected on the Financial Statements of Seller and the Champion Companies. Such
entitlements include, without limitation, any entitlements under any executive
compensation or supplemental retirement agreement.
(j) Neither Seller nor any Champion Company has engaged in any
transaction with respect to any Benefit Plan which may result in the imposition
on Seller or any Champion Company of any excise tax under Sections 4971, 4972,
4975, and 4976 through 4980 of the Code, or otherwise incurred a liability for
any excise tax, other than excise taxes which have heretofore been paid or have
been accrued, and, in either case are fully reflected in the Financial
Statement, and neither Seller nor any Champion Company is now, nor at any time
will be by virtue of any action taken prior to the Closing Date, subject to a
requirement to provide security under Section 401(a)(29) of the Code, nor shall
any asset of Seller or any Champion Company be subject to a lien by reason of
the provisions of Section 412(n) of the Code. The execution by Seller of the
employment continuity agreements listed on Disclosure Schedule 5.12(i) shall not
constitute a transaction which may result in the imposition of an excise tax.
61
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
6.4. Employee Benefit Plans.
(a) Domestic Defined Benefit Pension Plans
(i) Before the Closing Date, Seller shall:
A. merge the Champion Spark Plug Company UAW Pension
Plan, the Moog Automotive, Inc. Pension Plan and Trust for UAW Employees, the
Moog Automotive, Inc. United Rubber, Cork, Linoleum and Plastic Workers Pension
Plan, the Morenci Engineered Rubber Products Pension Plan, and the Pension Plan
for Bargaining Unit Employees at Winchester, Virginia, (collectively the
"Automotive Hourly Plans", and individually the "Automotive Hourly Plan") to
form the Champion Spark Plug Company consolidated Defined Benefit Pension Plan
(the "Champion Pension Plan");
B. provide for coverage of Employees and Former Employees
participating in the Salaried Employees Retirement Plan of Cooper Industries,
Inc. (the "Cooper Salaried Plan") immediately prior to the Closing Date under
the Champion Pension Plan on the Closing Date immediately after the Closing with
benefits, rights, and features in accordance with Section 411(d)(6) of the Code;
and
C. cause Champion to assume the plan sponsorship of the
Champion Pension Plan.
(ii) Seller shall amend the Cooper Salaried Plan to cause a
transfer of assets and liabilities attributable to Employees and Former
Employees under the Cooper Salaried Plan as of the Salaried Plan Transfer Date
(as hereinafter defined) to the Champion Pension Plan. The assets transferred
from the Cooper Salaried Plan to the Champion Pension Plan shall be equal to the
sum of:
A. the Transfer Plan Liabilities (as hereinafter
62
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
defined) attributable to the Employees and Former Employees under the Cooper
Salaried Plan.
B. an amount which when added to the sum of the amount
calculated under the provisions of clause (a) above, and the market value of the
assets of the Champion Pension Plan as of the Salaried Plan Transfer Date (as
hereinafter defined) will equal the Full Funding Liabilities (as hereinafter
defined) of the Champion Pension Plan.
The date as of which the Transfer Plan Liabilities of the Cooper
Salaried Plan are calculated shall be called the "Salaried Plan Transfer Date"
and shall occur after the Closing Date and on the last day of the month in which
the Closing Date occurs. The "Transfer Plan Liabilities" of the Cooper Salaried
Plan to be transferred to the Champion Pension Plan shall be the actuarial
present value of the accrued plan benefits with respect to the Employees and
Former Employees who participated in the Cooper Salaried Plan immediately prior
to the Closing Date calculated as of the Salaried Plan Transfer Date and
pursuant to Section 414(1) of the Internal Revenue Code and the regulations
thereunder. Such calculations will be made and certified to be accurate by the
Cooper Salaried Plan's actuary. As soon as practicable following the Closing
Date but no later than 60 days after the Closing Date, Buyer and Seller will
work together to furnish to the Cooper Salaried Plan's actuary the data needed
by the Cooper Salaried Plan's actuary to determine the Transfer Plan
Liabilities. Such data shall include the Social Security number, account
balance, date of birth, date of hire, gender and annual pensionable compensation
of each participant as of the Salaried Plan Transfer Date (collectively, the
"Demographic Data").
"Full Funding Liabilities" means, with respect to Employees and
Former Employees, the sum of the Salaried Full Funding Liabilities and the
Hourly Full Funding Liabilities as those terms are hereinafter defined.
"Salaried Full Funding Liabilities" means the actuarial accrued
liability with respect to all Employees and Former Employees who participated in
the Cooper Salaried Plan immediately
63
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
prior to the Closing determined as of the Salaried Plan Transfer Date by the
Cooper Salaried Plan's actuary in accordance with the actuarial assumptions,
methods and factors set forth on Disclosure Schedule 6.4(a) using the
Demographic Data used to calculate the Transfer Plan Liabilities. The Cooper
Salaried Plan's actuary shall, within ninety (90) days of the date Buyer and
Seller furnish the required Demographic Data, determine the Transfer Plan
Liabilities and the Salaried Full Funding Liabilities as of the Salaried Plan
Transfer Date and shall deliver a report to Seller, at Seller's expense, setting
forth the details of the determination of the values of the Transfer Plan
Liabilities and the Salaried Full Funding Liabilities.
The "Hourly Full Funding Liabilities" means the actuarial accrued
liability with respect to all Employees and Former Employees who participated in
the Automotive Hourly Plans prior to the date said Automotive Hourly Plans were
merged to form the Champion Pension Plan determined in accordance with the
actuarial assumptions methods and factors set forth on Disclosure Schedule 6.4
(a) and the following procedures. Using the participant data used for the
January 1, 1998 actuarial valuations for each of the Automotive Hourly Plans,
the actuary for the Automotive Hourly Plans shall calculate the actuarial
accrued liability or actuarial reserve for each Plan as of January 1, 1998 using
the actuarial assumptions, methods and factors set forth on Disclosure Schedule
6.4 (a). This January 1, 1998 actuarial accrued liability or actuarial reserve
for each Automotive Hourly Plan shall be adjusted to take into consideration the
time period between January 1, 1998 and the Salaried Plan Transfer Date using
the actuarial assumptions, methods and factors set forth on Disclosure Schedule
6.4 (a), and further adjusted for actual benefit payments made from January 1,
1998 through the Salaried Plan Transfer Date to produce an adjusted actuarial
accrued liability or actuarial reserve for each Automotive Hourly Plan. The
adjusted actuarial accrued liability or actuarial reserve for all Automotive
Hourly Plans will be aggregated to produce the Hourly Full Funding Liabilities.
The Automotive Hourly Plan's actuary shall within ninety (90) days of the
Salaried Plan Transfer Date deliver a report to Seller at Seller's expense
setting forth the details of the determination of the Hourly Full Funding
Liabilities.
64
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Upon receipt of the reports prepared by the respective actuaries,
Seller shall deliver to Buyer for its review a copy of the reports and the
underlying information necessary to prepare the reports. Buyer shall have
fourteen (14) days to notify Seller in writing of any objections regarding the
determination of the Full Funding Liabilities. If Buyer does not timely notify
Seller of any objections, the calculations shall be final and binding on all
parties. If Buyer timely notifies Seller of any objections resulting from
Buyer's review of the respective actuaries' reports which Seller and Buyer
cannot resolve within thirty days of the date Buyer notifies Seller of such
objections, Seller and Buyer shall appoint an actuarial firm satisfactory to
both parties (the cost of which shall be shared equally by Seller and Buyer) to
resolve such objections, which resolution shall be final and binding on both
parties. As soon as practicable following the Salaried Plan Transfer Date, but
not prior to the date on which the Buyer and Seller reach agreement on the Full
Funding Liabilities and not prior to the date on which the Buyer has provided
all documentation requested by the trustee of the Cooper Salaried Plan, Seller
shall cause assets of the Cooper Salaried Plan equal to the sum of the Transfer
Plan Liabilities and the amount determined pursuant to 6.4(a) (ii) B plus
interest at the rate of 7.25% per annum and adjusted for benefit payments made
to Employees and Former Employees who participated in the Cooper Salaried Plan
immediately prior to the Closing, from the Salaried Plan Transfer Date to the
date such assets are actually conveyed, to be conveyed to the Champion Pension
Plan. Until the assets of the Cooper Salaried Plan are transferred to the
Champion Pension Plan, Seller will continue to process distributions required to
be made to Employees and Former Employees under the Cooper Salaried Plan on and
after the Closing Date in accordance with its terms and procedure.
(b) Retirement Savings Plan. Certain Employees and Former Employees
participate in the Cooper Industries, Inc. Retirement Savings and Stock
Ownership Plan ("Cooper Retirement Savings Plan"), which is composed of a
qualified, 401(k), defined contribution profit sharing plan and an employee
stock ownership plan. Seller shall cause the assets and liabilities of the
Cooper Retirement Savings Plan attributable to such Employees and
65
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Former Employees to be transferred as provided in this Section 6.4(b) from the
Cooper Retirement Savings Plan to a qualified, 401(k) defined contribution
profit sharing plan prepared by Seller to be adopted by Champion effective as of
the Closing Date (the "Champion Retirement Savings Plan") which shall provide
that such Employees' and Former Employees' periods of service credited under the
Cooper Retirement Savings Plan will be transferred to and credited for all
purposes under the Champion Retirement Savings Plan. The Champion Retirement
Savings Plan shall provide benefits, rights and features to the Employees and
Former Employees in accordance with Section 411(d)(6) of the Code.
No later than thirty days following the Closing Date, Buyer shall
designate a trustee with respect to the Champion Retirement Savings Plan and
provide Seller with the information necessary to cause a transfer of assets to
the designated trustee. As soon as possible thereafter, the assets and
liabilities of the Cooper Retirement Savings Plan shall be transferred in-kind
to the designated trustee of the Champion Retirement Savings Plan in an amount
equal to the total of all account balances of said Employees and Former
Employees under the Cooper Retirement Savings Plan as of the close of business
on the day immediately prior to the transfer.
(c) Qualified Domestic Hourly Defined Contribution Plans. Certain
Employees and Former Employees participate or have participated in the Champion
Employee Plans listed on Disclosure Schedule 6.4(c). Prior to the Closing Date,
Seller shall cause Champion to assume sponsorship and maintain the Champion
Employee Plans listed on Disclosure Schedule 6.4(c) for the benefit of such
Employees and Former Employees.
No later than thirty days following the Closing Date, Buyer shall
designate a trustee or trustees with respect to the Champion Employee Plans
listed on Disclosure Schedule 6.4(c) and provide Seller with the information
necessary to cause a transfer of assets to the designated trustee or trustees.
As soon as practicable thereafter, Seller shall cause the assets of the Champion
Employee Plans listed on Disclosure Schedule 6.4(c) to be transferred in kind to
66
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
the trustee or trustees designated by Buyer.
Certain Former Employees participate or have participated in the
Temperature Control Division 401(k) Plan. Prior to the Closing Date, Seller
shall cause Champion to assume sponsorship and maintain the Temperature Control
Division 401(k) Plan for the benefit of such Former Employees and accept the
transfer of the insurance contract by which the plan is funded.
(d) Supplemental Pension Plans. Certain Employees and Former
Employees participate in either or both of the Cooper Industries, Inc.
Supplemental Excess Defined Benefit Plan (the "Cooper Supplemental DB Plan") and
the Cooper Industries, Inc. Supplemental Excess Defined Contribution Plan (the
"Cooper Supplemental DC Plan"), both of which are non-qualified and unfunded
pension plans. Such plans are designed to provide benefits that cannot be paid
from the Cooper Salaried Plan or the Cooper Retirement Savings Plan due to
provisions of the Internal Revenue Code. Effective as of the Closing Date,
Seller shall cause Champion to adopt two new supplemental plans which shall be
substantially similar to the Cooper Supplemental DB Plan and the Cooper
Supplemental DC Plan, respectively. These two new pension plans (the "Champion
Supplemental DB Plan" and the "Champion Supplemental DC Plan") shall recognize
all service previously credited under the Cooper Supplemental DB Plan and the
Cooper Supplemental DC Plan, respectively, as in effect immediately prior to the
Closing Date, and assume all obligations to provide benefits to the eligible
Employees and Former Employees and their eligible beneficiaries and dependents.
Thereafter, the Cooper Supplemental DB Plan, the Cooper Supplemental DC Plan and
the Seller shall not have any further obligation to provide any benefits to any
Employee or Former Employee.
(e) Welfare Benefit Plans. Certain Employees and Former Employees are
covered by welfare benefit plans maintained by Seller providing medical, dental,
life insurance, long term disability, short term disability, accidental death
and dismemberment, and severance benefits ("Cooper's Welfare Benefit Plans").
Effective as of the Closing Date, subject to the
67
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
paragraph immediately below, Employees and Former Employees, and all eligible
beneficiaries and dependents of the Employees and Former Employees, shall cease
to be covered under Cooper's Welfare Benefit Plans and shall be covered under
welfare benefit plans maintained by Buyer ("Buyer's Welfare Benefit Plans").
Buyer's Welfare Benefit Plans shall provide Employees and Former Employees with
welfare benefits substantially similar to those provided to them immediately
prior to the Closing Date under Cooper's Welfare Benefit Plans. Buyer shall
retain the right to amend or terminate Buyer's Welfare Benefit Plans as they
pertain to said Employees and Former Employees; provided, however, Buyer shall
provide the Employees listed on Disclosure Schedule 6.4(e) with up to five years
of coverage (depending on their years of service as set forth in such Disclosure
Schedule 6.4(e)) for retiree medical benefits under Buyer's Welfare Benefit
Plans on terms substantially similar to those available to Buyer's active
employees.
At the request of Buyer, Seller shall continue to provide coverage
under Cooper's Welfare Benefit Plans which are self-insured and which are
specified by Buyer at least fifteen days prior to the Closing Date, including
the administration of claims and payment of benefits, as appropriate, on behalf
of the Employees and Former Employees and their beneficiaries and dependents for
a period ending on the later of December 31, 1998 or the day which is 60 days
after the Closing Date in order to allow Buyer time to install or establish
welfare benefit plans for such employees. Buyer shall reimburse Seller for all
payments relating to claims which are paid pursuant to this Section 6.4(e) and
for all out-of-pocket costs and administrative expenses incurred by Seller in
connection with such claim administration services within thirty (30) days after
an invoice for such reimbursement is mailed to Buyer.
(f) Champion Benefit Arrangements. Certain Employees and Former
Employees are covered by certain Champion Benefit Arrangements providing the
benefits described in Disclosure Schedule 6.3(b) ("Employee Benefits").
Effective as of the Closing Date or as soon as practicable thereafter, Buyer
shall cause the Company to provide Employees and
68
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Former Employees with benefits that are substantially similar to the
benefits provided to them immediately prior to the Closing Date under the
Champion Benefit Arrangements. Buyer shall assume all obligations to Employees
for Employee Benefits accrued under the applicable Champion Benefit Arrangement
prior to the Closing Date.
(g) Champion Canadian Plans. With respect to the Champion
International Plans that cover Employees and Former Employees in Canada, the
assets and liabilities of such Champion International Plans shall be transferred
to Buyer or its Affiliate in accordance with the provisions of the Canadian
Asset Transfer Agreement.
(h) Champion Australian Plans. Certain Employees and Former Employees
participate in the Cooper Industries (Australian) Employees Superannuation Fund
(the "Cooper Australian Plan"), a defined contribution pension plan that is
qualified under Australian law. On or before the Closing Date, Seller shall
cause Cooper Automotive Pty Ltd to adopt the Champion Australia Pty Ltd
Employees Superannuation Fund, a defined contribution pension plan, that is
substantially similar to the Cooper Australian Plan (the "Champion Australian
Plan"). As of the effective date of the Champion Australian Plan, all Employees
who participate in the Cooper Australian Plan shall participate in the Champion
Australian Plan for benefit accruals on and after said effective date and all
benefit accruals of Employees under the Cooper Australian Plan shall cease as of
the end of the day prior to the effective date of the Champion Australian Plan.
As required by Australian law, each Employee and Former Employee who
participates in the Cooper Australian Plan will be given the opportunity to
elect in writing to have his accrued benefit under the Cooper Australian Plan
transferred to the Champion Australian Plan. For each Employee and Former
Employee who elects to transfer his accrued benefits to the Champion Australian
Plan, the Champion Australian Plan shall provide that such Employees' and Former
Employees' periods of service credited under the Cooper Australian Plan shall be
transferred to and credited for all purposes under the Champion Australian Plan.
As soon as practicable following the Closing Date, the assets and
liabilities of the
69
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Cooper Australian Plan for each Employee and Former Employee who elected to have
his accrued benefit transferred to the Champion Australian Plan shall be
transferred to the Champion Australian Plan. The assets and liabilities to be so
transferred shall be equal to the total of all of the account balances of each
such Employee and Former Employee under the Cooper Australian Plan. However, if
at the time such assets and liabilities are transferred, the proceeds of the AMP
Ltd. demutualization have not been allocated to participant accounts a pro rata
share of such proceeds shall also be transferred to the Champion Australian
Plan.
6.5. Cooper Employee Stock Purchase Plan.
(a) Certain Employees and Former Employees are participating in
the 1997 offering of Seller's Employee Stock Purchase Plan (the "1997 ESPP").
Such Employees and Former Employees are hereinafter called "ESPP Participants".
Under the 1997 ESPP, the ESPP Participants were granted on July 1, 1997, options
to purchase shares of Seller's common stock on September 10, 1999. The Champion
Companies are performing the payroll administration for the ESPP Participants in
accordance with Seller's 1997 ESPP Standard Administration Manual. Before the
Closing Date and subject to Closing, Seller will cause the 1997 ESPP to be
modified for the ESPP Participants in order to provide each participant with the
option of: (i) withdrawing from the 1997 ESPP and receiving a refund of all
contributions plus accrued interest less applicable taxes; or (ii) remaining an
ESPP Participant with the option to purchase the number of full shares of
Seller's common stock that may be purchased at the option price with the amount
(exclusive of accrued interest) credited to the participant as of a date
specified by Seller or to withdraw from the ESPP as of the last date that a
withdrawal is permitted. ESPP Participants that elect to remain in the 1997 ESPP
will not receive a refund of contributions or certificates for Seller's common
stock until after the exercise date (September 10, 1999) for the 1997 ESPP.
(b) Effective on or before the Closing Date, the Champion Companies
70
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
shall terminate payroll administration for the 1997 ESPP and, within 30 days
after the Closing Date, Buyer shall pay Seller the total cash withheld by the
Champion Companies from ESPP Participants pursuant to the 1997 ESPP prior to the
Closing Date plus related interest accrued on behalf of the ESPP Participants up
to the date on which the payment is made. The payment shall be accompanied by a
list (in paper and established electronic format) showing with respect to each
ESPP Participant the name, most recent address, total cash withholdings and
related accrued interest under the 1997 ESPP as of the Closing Date. Seller
shall promptly inform Buyer of the value of Seller's common stock as of
September 10, 1999. Buyer, on Seller's behalf, shall determine and collect the
required tax withholding from the ESPP Participants based on the value of
Seller's common stock as of September 10, 1999, and remit such tax withholdings
to Seller no later than October 8, 1999 and any accrued interest, together with
an updated list setting forth the current names and addresses of the ESPP
Participants and the tax withheld with respect to each such ESPP Participant.
Buyer shall not be required to pay any employment taxes with respect to the 1997
ESPP, Seller will pay the employer's matching FICA contribution directly to the
tax authorities.
7. TAX MATTERS.
7.1. Representations and Warranties Regarding Tax Matters. Seller
represents and warrants to Buyer that the statements contained in this Section
7.1 are true and correct as of the date of this Agreement and will be true and
correct in all respects on the Closing Date.
(a) All Tax Returns required to be filed on or prior to the
Closing Date by Champion, the Champion Subsidiaries and the Related Companies,
or by Seller or its Affiliates with respect to any activities of the Canadian
Division, have been or will be filed in accordance with all applicable laws, and
all Taxes shown to be due on any such Tax Returns have been or will be paid
prior to the Closing Date. Except as set forth on Schedule 7.1(a), to the best
of the Seller's Knowledge, none of the foregoing Tax Returns contains any
position which is or would
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
be subject to penalties under Section 6662 of the Internal Revenue Code (or any
corresponding provision of state, local or foreign Tax Law).
(b) Except as set forth on Disclosure Schedule 7.1(b), no
material deficiency or adjustment in respect of any Taxes claimed against
Champion, the Champion Subsidiaries or the Related Companies, or against Seller
or its Affiliates with respect to the Canadian Division, remains unpaid and no
material claim or assessment for any such deficiency or adjustment is pending
and there are no ongoing or pending Tax Proceedings with any taxing authorities
with respect to Champion, the Champion Subsidiaries or the Related Companies, or
Seller or its Affiliates with respect to the Canadian Division.
(c) To Seller's Knowledge, there are no Encumbrances on any of
the assets of the Champion Companies that arose in connection with any failure
(or alleged failure) to pay any Taxes, except for Encumbrances related to real
and personal property Taxes not yet due or for Taxes that are being contested in
good faith through appropriate proceedings and for which appropriate reserves
have been established.
(d) The income attributable to the income, assets or operations
of the Canadian Division while the same are or have been owned by Cooper
Industries (Canada) Inc. will, to the extent permitted by law, be included in
income Tax Returns filed by Cooper Industries (Canada) Inc. or in income Tax
Returns filed by an affiliated, consolidated, unitary or combined group of
companies of which the Seller or its Affiliates are a member.
(e) Except as set forth on Disclosure Schedule 7.1(e) neither
Champion, the Champion Subsidiaries or the Related Companies are bound by any
tax indemnity, tax allocation, tax sharing, or similar agreement. Except for the
tax indemnity and tax allocation agreements contained in the various acquisition
and divestiture agreements set forth in Disclosure Schedule 5.12(ii), all such
agreements will be terminated with respect to the Champion Companies as of the
Closing Date and will have no further effect for any taxable year (whether
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PURCHASE AND SALE AGREEMENT BETWEEN
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current, future, or past).
(f) Except as set forth on Disclosure Schedule 7.1(f), none of
the Champion Companies has, or has had, a permanent establishment (as defined by
any applicable tax treaty) or other taxable presence in any country other than
the United States.
(g) Except as set forth in Disclosure Schedule 7.1(g), none of
the Champion Companies is a party to any joint venture, partnership or other
arrangement or contract that could be treated as a partnership for United States
tax purposes.
(h) Except as set forth in Disclosure Schedule 7.1(h), none of
the Champion Companies has granted any power of attorney with respect to matters
relating to Taxes.
(i) Except as set forth in Disclosure Schedule 7.1(i), there is
no closing agreement, compromise, or settlement with any taxing authority that
is binding on any of the Champion Companies for any taxable period ending after
the Closing Date.
(j) Except as set forth in Disclosure Schedule 7.1(j), there are
no requests for rulings or determinations relating to any of the Champion
Companies pending with any taxing authority.
(k) Disclosure Schedule 7.1(k) sets forth the following
information: (i) the amount of any operating loss, net capital loss, and unused
credits of the Champion Companies; and (ii) the amount of any deferred gain or
loss allocable to any of the Champion Companies arising out of any intercompany
or intergroup transaction.
(l) Except as set forth in Disclosure Schedule 7.1(l), none of
the Champion Companies has ever been owned by or affiliated with any entity,
other than Seller or an
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
entity affiliated with Seller and except for the group of which Seller is
currently a member none of the Champion Companies has ever been a member of an
affiliated group of corporations within the meaning of Internal Revenue Code
Section 1504.
(m) Each asset in respect of which any of the Champion Companies
claims any depreciation, amortization or similar expense is owned for tax
purposes by the applicable Champion Company.
(n) None of the Champion Companies has any excess loss account
as defined in Treasury Regulation ss.1.15012-19.
7.2. Tax Indemnity.
(a) Seller shall be liable for, and shall indemnify, defend and
hold harmless the Buyer Indemnified Parties from and against:
(i) Any and all income Taxes (including, without
limitation, U.S. federal and state income taxes on capital gains) imposed with
respect to the sale of the Champion Common Stock, the shares of the Related
Companies, the Nominal Shares of the Champion Subsidiaries and the assets of the
Canadian Division under the terms of this Agreement;
(ii) Any and all Taxes relating to the Canadian Division
while the same was owned by Cooper Industries (Canada) Inc., or any Predecessor,
except to the extent a reserve or accrual in respect of Taxes is included in the
Final Closing Statement of Net Assets;
(iii) Any and all Taxes with respect to Champion, the
Champion Subsidiaries and the Related Companies for any taxable period ending on
or before the Closing Date, except to the extent a reserve or accrual in respect
of Taxes is included in the Final Closing Statement of Net Assets;
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PURCHASE AND SALE AGREEMENT BETWEEN
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(iv) Notwithstanding anything to the contrary contained
in this Section 7.2(a), if any of the Indemnified Parties pays any Preclosing
Creditable Foreign Tax (as defined below), the provisions of Section 7.2(a)(ii)
shall not apply if, and to the extent that, as a result of the payment of the
applicable Preclosing Creditable Foreign Tax, any of the Buyer Indemnified
Parties actually receives a foreign tax credit under the applicable provisions
of the Internal Revenue Code (including, without limitation, any limitation
under Internal Revenue Code Section 904) which results in the reduction (on a
present value basis) of Taxes payable in the United States which would have
otherwise been payable by a Buyer Indemnified Party (in the absence of such
foreign tax credit) for any taxable period ending after the Closing Date and
otherwise properly allocable to Buyer under this Section 7 generally. A
Preclosing Creditable Foreign Tax is a Tax (x) which is paid by a Buyer
Indemnified Party, (y) which is incurred with respect to Champion, the Champion
Subsidiaries, or any of the Related Companies and in respect of a taxable period
ending on or before the Closing Date, and (z) which is eligible for a credit
under the foreign tax credit provisions of the Internal Revenue Code (Internal
Revenue Code Sections 901 though 960). Nothing in the first sentence of this
Section 7.2(a)(iii) shall be construed to relieve Seller of its obligation to
make an indemnification payment (hereinafter the "Provisional Payment") in
accordance with the terms of this Section 7.2 to a Buyer Indemnified Party if
Buyer Indemnified Party pays any Taxes for any period ending on or before the
Closing Date for which a current foreign tax credit is not available; provided,
however, that after the Provisional Payment has been made by the Seller and
received by a Buyer Indemnified Party, Buyer Indemnified Party shall reimburse
the Seller when, and to the extent, that a Buyer Indemnified Party receives a
credit under Sections 901 through 960 of the Internal Revenue Code which is
related to the Taxes associated with the Provisional Payment.
(b) Notwithstanding any other provision of this Agreement, Buyer
shall be liable for and shall indemnify, defend and hold harmless the Seller
Indemnified Parties from and against: (i) any Taxes relating to the Canadian
Division while the same was owned by Cooper Industries (Canada) Inc. or any
Predecessor, but only to the extent a reserve or accrual in respect of such
Taxes is included in the Final Closing Statement of Net Assets; (ii) any Taxes
due with
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
respect to the Canadian Division for any period subsequent to the Closing Date;
and (iii) any Taxes with respect to Champion, the Champion Subsidiaries and the
Related Companies for any taxable period ending after the Closing Date.
(c) Any liability for or refund of Taxes for a taxable period
beginning before the Closing Date and ending after the Closing Date (a "Straddle
Period") with respect to a Champion Company shall be apportioned between Seller
and Buyer based on the actual operations of the Champion Company during that
portion of such period ending on the Closing Date (the "Pre- Closing Straddle
Period") and the portion of such period beginning on the date following the
Closing Date, and for purposes of Sections 7.2(a), 7.2(b), 7.2(e) and 7.5, each
such portion of a Straddle Period shall be deemed to be a taxable period.
Anything herein to the contrary notwithstanding, Buyer shall prepare (in a
manner consistent with prior practice) and file all Straddle Period Tax Returns
and shall pay all Taxes due with respect thereto; provided, however, that Seller
shall pay Buyer the amount of Taxes calculated as due for the Pre-Closing
Straddle Period except to the extent that a reserve or accrual in respect of
such Taxes is included in the Final Closing Statement of Net Assets. To the
extent Buyer or any of its Affiliates, including Champion, the Champion
Subsidiaries and the Related Companies, receives (whether by way of payment,
credit, or otherwise) any refund of Taxes allocable to a Pre-Closing Straddle
Period, Buyer shall promptly upon receipt thereof remit the same to Seller.
(d) At least thirty days prior to the due date for the payment
of Taxes for a Straddle Period, Buyer shall present Seller with a schedule
detailing the computation of Taxes for the Pre-Closing Straddle Period together
with a copy of the relevant Tax Return and any supporting documentation
reasonably requested by Seller. Within 20 days after Buyer presents Seller with
such schedule, Seller shall pay Buyer the amount of the Pre-Closing Straddle
Period Tax as computed by Buyer except to the extent that a liability in respect
of such Taxes is included in the Final Closing Statement of Net Assets. In
making the computation Seller shall receive full credit for
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
any estimated tax payments or other prepayments or credits against Taxes made by
Seller or its Affiliates on or before the Closing Date and Buyer shall receive
full credit for any estimated tax payments or other prepayments or credits
against Taxes made by Buyer or its Affiliates after the Closing Date. If Seller
disputes Buyer's computation of the Pre-Closing Straddle Period Tax, Seller
shall not be relieved of its obligation to pay, in the first instance, any such
disputed amount. Whether any such disputed amount was in fact due from Seller
shall be resolved by the Accounting Arbitrator in accordance with the procedures
set out in Section 2.7 which shall be deemed modified as necessary to
accommodate the resolution of the dispute between the parties. If upon such
resolution it is determined that any of such disputed amount was not payable to
Buyer and such amount has nevertheless been paid to Buyer, then Buyer shall
refund to Seller such amount, plus interest at the rate required to be paid
under Section 6621 of the Internal Revenue Code.
(e) Any franchise tax shall be allocated to the taxable period
during which the right to do business obtained by the payment of such franchise
tax relates, regardless of whether such franchise tax is measured by income,
operations, assets or capital relating to another taxable period.
(f) Any deduction, loss or credit of Champion, the Champion
Subsidiaries or the Related Companies generated in any taxable period prior to
the Closing Date, the economic benefit of which is realized in a taxable period
ending after the Closing Date shall be for the account of Seller, and Buyer
shall remit to Seller as additional consideration the amount of any such
benefit. If any deduction or expense of Champion, the Champion Subsidiaries or
the Related Companies is denied or provision is disallowed by a governmental
taxing authority in respect of a period prior to the Closing Date and a benefit
is obtained in a period after the Closing Date by Champion, the Champion
Subsidiaries or the Related Companies, or Buyer or its Affiliates (or their
successors in title), Buyer shall pay to Seller an amount equal to the tax
savings produced by such benefit.
(g) Buyer shall cause Champion, the Champion Subsidiaries and
the Related Companies to elect, where permitted by law, to carry forward any net
operating loss, net
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
capital loss, charitable contribution or other item arising after the Closing
Date that could, in the absence of such an election, be carried back to a
taxable period of Champion, the Champion Subsidiaries or the Related Companies
ending on or before the Closing Date in which Champion, the Champion
Subsidiaries or the Related Companies filed a consolidated, combined or unitary
tax return with Seller or its Affiliates. Buyer, on its own behalf and on behalf
of its Affiliates, hereby waives any right to use or apply any net operating
loss, net capital loss, charitable contribution or other item of Champion, the
Champion Subsidiaries or the Related Companies for any taxable period ending on
any date following the Closing Date to part or all of the period prior to the
Closing Date and any refund of Taxes relating to a carry back of such items to
part or all of a taxable period prior to the Closing Date shall be retained by
Seller. Nothing in this Section 7.2(g) shall be construed to preclude Buyer from
utilizing the foreign tax credits described in Section 7.2(d)(iv).
(h) Buyer agrees that it will not pay a dividend or cause or
allow a dividend to be paid by the Champion Subsidiaries or Related Companies
until after the close of the taxable year of each of the Champion Subsidiaries
or Related Companies in which the Closing occurs.
(i) Buyer shall cause Champion Automotive (U.K.) Ltd. to remain
at all times in a "group" as such term is defined by the Inland Revenue.
(j) Buyer and Seller agree that any obligation to prepare 1998
personal returns for any Employee of the Champion Companies working outside of
the United States shall be an obligation of the Buyer.
7.3. Section 338 Elections. Except for the CFC Section 338 Elections
as defined and described in the immediately succeeding sentence, Buyer or its
Affiliates shall not make an election to have the provisions of Section 338 of
the Internal Revenue Code or similar provisions of state law (collectively
"Section 338 Elections") apply to the acquisition of Champion, the
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Champion Subsidiaries or the Related Companies. Nothing in the immediately
preceding sentence shall be construed to preclude Buyer from making Section 338
Elections (to the extent otherwise allowed under applicable law) in respect of
the following entities: Cooper Automotive Pty. Ltd., Cooper Automotive
Electrical do Brasil Ltda., Champion Automotive (U.K.) Ltd. (the "CFC Section
338 Elections"); provided, however, that the parties acknowledge that as of the
date of this Agreement Champion Automotive (U.K.) Ltd. is a partership for U.S.
federal income tax purpose.
7.4. Tax Return Filings for Pre-Closing Periods.
(a) Buyer shall prepare (in a manner consistent with prior
practice) and submit to Seller for Seller's review and filing not later than 10
days prior to the due date for the filing thereof, all non-income Tax Returns
for the Canadian Division that are required to be filed (after the Closing Date)
with respect to any period for which the Canadian Division was owned by Cooper
Industries (Canada) Inc., together with Buyer's check in payment of all Taxes in
respect of such Tax Returns but only to the extent a reserve or accrual for such
Taxes was included in the Final Closing Statement of Net Assets. After reviewing
and modifying (to the extent Seller in its sole discretion determines is
appropriate) such Tax Returns, Seller shall file such Tax Returns and Seller
shall pay or cause to be paid all Taxes shown as due thereon. Seller shall
promptly send to Buyer copies of all such Tax Returns, to the extent modified by
Seller, and copies of documentation showing such filing and payment. Buyer shall
include Seller's name on all 1998 IRS Forms 5471 for the Champion Companies.
(b) Buyer shall prepare (in a manner consistent with prior
practice) and submit to Seller for its review and approval not later than 10
days prior to the due date for the filing thereof, all Tax Returns for Champion,
the Champion Subsidiaries and the Related Companies that are required to be
filed (after the Closing Date) for any taxable period ending on or before the
Closing Date; provided that Seller shall prepare and file any such Tax Returns
of Champion, the Champion Subsidiaries and the Related Companies that are
required to include, on
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
a consolidated or combined basis, the operations of Champion, the Champion
Subsidiaries or the Related Companies for any taxable period ending on or before
the Closing Date. After reviewing and modifying (to the extent Seller in its
sole discretion determines is appropriate) such Tax Returns, Seller shall return
such Tax Returns to Buyer together with a check in payment of all Taxes shown as
due thereon (reduced to the extent a reserve or accrual in respect of such Taxes
was included on the Final Closing Statement of Net Assets) not less than two (2)
days prior to the due date thereof (provided that Buyer is in compliance with
the immediately preceding sentence). Buyer shall promptly file each such Tax
Return (as resubmitted to it by Seller) and pay all Taxes shown as due thereon,
and Buyer shall send Seller copies of documentation showing such filing and
payment.
7.5. Tax Refunds. Seller shall be entitled to any refunds or credits
of Taxes attributable to (i) Seller, its Affiliates, Champion, the Champion
Subsidiaries or the Related Companies with respect to any taxable period ending
on or before the Closing Date; (ii) Champion's registered branch in Germany
(Champion Zundkerzen Deutschland Nierderlassung Deutschland der Champion Spark
Plug Company) with respect to any taxable period ending on or before the Closing
Date; and (iii) the Canadian Division for any period while the Canadian Division
was owned by Cooper Industries (Canada) Inc., its Affiliates or any
Predecessors. If Buyer or any of its Affiliates, including Champion, the
Champion Subsidiaries or the Related Companies, receives any such refund or
credit of Taxes by way of payment, credit or otherwise, to which Seller is
entitled under this Paragraph), Buyer shall promptly upon receipt thereof remit
the same to Seller. Any refunds or credits of Taxes of any Champion Company
relating to taxable periods beginning after the Closing Date shall belong to
Buyer.
7.6. Wage Reporting. Pursuant to the alternative procedure prescribed
by Section 5 of Revenue Procedure 96-60: (i) Seller and Buyer shall report on a
"predecessor-successor" basis with respect to employees of Seller who are
employed by Buyer or its Affiliates after the Closing, (ii) Buyer will assume
Seller's entire obligation to prepare, file and furnish Forms W-2 for the year
ended December 31, 1998, with respect to such employees, (iii) Seller and its
Affiliates shall be
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
relieved of any obligation to provide Forms W-2 to such persons for such year,
and (iv) Seller and Buyer will work in good faith to adopt similar procedures
under applicable state or local laws. The parties shall cooperate with each
other in preparing filings and forms relating to these procedures, and Seller
shall provide Buyer with any information in its possession which Buyer needs to
satisfy its obligations under this Section.
7.7. Cooperation and Exchange of Information.
(a) Seller and Buyer shall each (i) provide the other party with
such information and assistance as may be reasonably requested by the other
party in connection with the preparation and filing of any Tax Returns
(including Buyer's completion of Seller's federal, state and foreign tax
information packages prepared in a manner consistent with the packages
customarily prepared for periods ending prior to the Closing), any audit or
examination by any taxing authority, any judicial or administrative proceeding,
or any other reasonable business purpose relating to liability for Taxes with
respect to the Champion Companies; (ii) retain for the applicable statute of
limitations period (including any extensions) such material records or
information as may be relevant to such Tax Returns, audits, examinations or
proceedings including without limitation all Tax Returns and related schedules
and work papers; (iii) provide the other party with reasonable access to, and
allow the other party to make copies of such records or information, and prior
to disposing of any such records or information allow the other party the right
to obtain the originals of such records or information; (iv) provide the other
party with a copy of any final determination of any audit, examination or
proceeding that affects the amount required to be shown on any Tax Return of the
other party for any period. Buyer agrees to cause the Champion Companies to
provide Seller with all information reasonably necessary for Seller to compute
and defend research and development tax credits, transaction-by- transaction
foreign sales corporation commissions, and transfer pricing for periods for
which Seller has responsibility; (v) provide such documentation, information or
other materials currently in Seller's possession necessary to determine, (A) the
tax basis of the Champion Companies and the Related Companies assets, (B) the
current and accumulated earnings and profits of each of the Champion
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Companies; (C) tax pools related to the earnings and profits of the Champion
Companies and the Related Companies; and (vi) copies of all Forms 8832 filed for
the Champion Companies and the Related Companies.
(b) Subject to the final sentence in this paragraph, in the case
of any audit, examination, judicial or administrative proceeding, or other
proceeding with respect to Taxes ("Tax Proceeding") for which Seller is or may
be liable pursuant to this Agreement, Buyer shall promptly notify Seller, and
Seller, at Seller's expense, shall have the right to control the conduct and
resolution of such Tax Proceeding, provided, however, that Seller shall consult
with Buyer with respect to the resolution of any issue relating to or that could
affect any Taxes or taxable periods with respect to which Buyer may be liable
under this Agreement or otherwise, and Seller shall not settle any such issue,
or otherwise take any position with respect to such an issue, without the prior
written consent of Buyer. Buyer shall execute or cause to be executed powers of
attorney or other documents necessary to enable Seller to take all actions
desired by Seller (to the extent that such actions are consistent with the terms
of this paragraph) with respect to such Tax Proceeding to the extent such Tax
Proceeding may affect the amount of Taxes for which Seller is or may be liable
pursuant to this Agreement. If Seller elects to exercise its right to control
the conduct and resolution of any Tax Proceeding pursuant to the terms of this
paragraph, Seller shall within thirty calendar days of receiving notice of such
Tax Proceeding from Buyer (or sooner, if the circumstances of the Tax Proceeding
so require) notify Buyer of its intent to do so. If Seller elects not to control
the conduct and resolution of any such Tax Proceeding, fails to comply with the
notice provision of the immediately preceding sentence, or contests its
indemnity obligation under Section 7.2, then Buyer may direct the conduct and
resolution (including settlement or compromise) of such Tax Proceeding. Any such
resolution by Buyer shall not affect Seller's indemnity obligations under
Section 7.2, provided, however, that Seller shall not be obligated to indemnify
Buyer for expenses (including, but not limited to, legal fees) incurred by Buyer
in connection with a Tax Proceeding to the extent such expenses relate to the
contest of Taxes or asserted Taxes with respect to which Seller has acknowledged
its indemnity obligation under Section 7.2. In any event, each of Buyer and
Seller may participate, at its own expense, in
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
any such Tax Proceeding. Buyer shall have the right, at its expense, to control
the conduct and resolution of any Tax Proceedings relating to any Taxes for any
taxable period ending after the Closing Date with respect to the Champion
Companies; provided, however, Buyer shall consult with Seller with respect to
the resolution of any issue relating to or which could affect a Straddle Period
and Buyer shall not settle any such issue, or file any amended return relating
to any such issue, without the prior written consent of Seller.
7.8. Sales and Other Tax. The payment of all transfer, documentary,
recording, notarial, sales, use, registration, stamp, and other similar taxes,
fees, and expenses (including, but not limited to, all applicable stock transfer
or real estate transfer taxes, and including any penalties, interest, and
additions to such Tax) incurred in connection with this Agreement and the
transactions contemplated hereby shall be borne equally by Buyer and Seller as
provided in Section 5.9. Buyer and Seller shall cooperate in timely making and
filing all Tax Returns that may be required to comply with the applicable laws
relating to such Taxes.
8. CONDITIONS TO OBLIGATION TO CLOSE.
8.1. Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(a) the representations and warranties of Seller set forth in
this Agreement shall be true and correct in all material respects as of the
Closing Date;
(b) Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(c) there shall not be any injunction, judgment, decree or order
of any court of competent jurisdiction in effect preventing consummation of any
of the transactions
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
contemplated by this Agreement;
(d) Seller shall have delivered to Buyer a certificate to the
effect that each of the conditions specified above in clauses (a) through (c) is
satisfied in all respects;
(e) the waiting period (and any extensions thereof) under the
Hart-Scott- Rodino Act and any other applicable pre-merger notification laws
shall have expired or otherwise been terminated; and
(f) the relevant parties shall have entered into the Other
Agreements.
8.2. Conditions to Obligation of Seller. The obligation of Seller to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(a) the representations and warranties of Buyer set forth in
this Agreement shall be true and correct in all material respects as of the
Closing Date;
(b) Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(c) there shall not be any injunction, judgment, decree or order
of any court or other Governmental Authority threatened or in effect preventing
consummation of any of the transactions contemplated by this Agreement;
(d) Buyer shall have delivered to Seller a certificate to the
effect that each of the conditions specified above in clauses (a) through (c) is
satisfied in all respects;
(e) the applicable waiting period (and any extensions thereof)
under the
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Hart-Scott-Rodino Act and any other applicable pre-merger notification laws
shall have expired or otherwise been terminated; and
(f) the relevant parties shall have entered into the Other
Agreements.
8.3. Waiver; Right to Proceed. If any of the conditions specified in
Section 8.1 hereof have not been satisfied, Buyer, in addition to any other
rights that may be available to it, may waive its rights to have such conditions
satisfied at Closing and may proceed with the transactions contemplated hereby.
If any of the conditions specified in Section 8.2 hereof have not been satisfied
at Closing, Seller, in addition to any other rights that may be available to it,
may waive its rights to have such conditions satisfied and may proceed with the
transactions contemplated hereby. Any such waiver by Buyer or Seller, as the
case may be, shall in no way diminish or eliminate any other rights that may be
available to the waiving party related to or as a result of the waived condition
or conditions not having been satisfied at Closing.
9. SURVIVAL; INDEMNIFICATION.
9.1. In General.
(a) The indemnification provisions in this Agreement and the
specific performance remedy in Section 11.14 hereof are the sole and exclusive
remedies after the Closing of any Seller Indemnified Party or Buyer Indemnified
Party with respect to any and all claims relating to the subject matter of this
Agreement (including claims for any breach of a representation, warranty,
covenant or agreement in this Agreement). Except for the right to seek
indemnification on the terms and subject to the conditions of this Section 9 or
specific performance under Section 11.14, each of Seller, on behalf of itself
and any other Person who is a Seller Indemnified Party, and Buyer, on behalf of
itself and any other Person who is a Buyer Indemnified Party, hereby irrevocably
waives any and all rights, claims, causes of action or theories of liability it
might otherwise have, which relate to the subject matter of the Agreement,
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against any other party hereto or its Affiliates under or based upon any
principle of equity or any federal, state, local or foreign statute, law,
ordinance, rule or regulation (including those relating to hazardous substances,
asbestos-containing materials, underground storage tanks and PCBs). Without
limiting the foregoing, Buyer on behalf of itself and any other Person who is a
Buyer Indemnified Party, waives any rights they may have to contribution from
Seller or any of its Affiliates under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, but only to the extent that
such rights relate to the subject matter of this Agreement.
(b) Seller and Buyer shall treat any indemnification payment
made pursuant to this Agreement as an adjustment to the purchase price and
Seller and Buyer agree not to take any position inconsistent therewith for any
purpose.
(c) Any Indemnified Party seeking indemnification under this
Agreement shall use its reasonable efforts to mitigate losses for which it seeks
indemnification hereunder.
(d) The Indemnified Party shall use reasonable efforts to pursue
insurance claims relating to any claim for which it is seeking indemnification
pursuant to this Agreement. However, the Indemnified Party is not obligated to
pursue an insurance claim if the Indemnified Party, in its reasonable judgment,
believes that the cost of pursuing the insurance claim together with any
corresponding increase in insurance premiums or other chargebacks to the
Indemnified Party would exceed the value of the insurance claim.
(e) If requested by an Indemnifying Party, the Indemnified Party
shall (and shall cause its Affiliates to) assign to the Indemnifying Party, to
the extent the Indemnified Party has been indemnified, any rights or claims of
the Indemnified Party and its Affiliates against any other person.
9.2. Survival of Representations, Warranties and Covenants.
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(a) With the exception of the representations and warranties in
Section 3.11, each representation and warranty of the parties contained in this
Agreement or in any schedule, certificate or other document delivered in
connection with this Agreement shall survive the Closing and continue in effect
for a period of 18 months thereafter and then expire. Each representation and
warranty in Section 3.11 shall survive the Closing and continue in effect for a
period of 5 years and then expire. No party may claim indemnification for breach
of a representation or warranty unless the Indemnified Party notifies the
Indemnifying Party in writing of the indemnity claim including a reasonable
description of the claim (whether or not fixed as to liability or liquidated as
to amount) before the survival period expires. Any timely asserted claim for
indemnification for breach of a representation or warranty shall not expire at
the end of the survival period, but shall continue to be valid and assertible
(and the Indemnifying Party's obligation to indemnify the Indemnified Party for
such a claim shall survive) until the claim is finally resolved.
(b) Any covenant or other agreement of the parties contained in
this Agreement or in any schedule, certificate or other document delivered in
connection with this Agreement survives the Closing and continues until fully
performed. The Indemnifying Party's obligation to indemnify the Indemnified
Party for any claims, other than a claim for indemnification for breach of a
representation or warranty, shall survive without limitation.
9.3. Limits on Indemnification.
(a) No Indemnified Party may claim indemnification for breach of
a representation or warranty unless and until the aggregate amount of all
Adverse Consequences and Environmental Claims incurred by or asserted against
the Indemnified Party by reason of all such breaches exceeds $25 million and
then only to the extent the aggregate amount of the Adverse Consequences and
Environmental Claims exceeds such threshold amount. The aggregate
indemnification obligations of each of Seller or Buyer for breaches of
representations and
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PURCHASE AND SALE AGREEMENT BETWEEN
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warranties shall not exceed $1 billion.
(b) Indemnification claims for breaches of covenants or other
agreements are not subject to any minimums or maximums.
(c) In calculating the amount of Adverse Consequences or
Environmental Claims payable to any Indemnified Party pursuant to this
Agreement, the amount of such Adverse Consequences and Environmental Claims
shall be reduced by: (i) any insurance proceeds actually received by the
Indemnified Party in respect of the Adverse Consequences or Environmental Claims
net of any expenses incurred (including any resulting increase in insurance
premiums) by the Indemnified Party to obtain the insurance proceeds (provided,
however, an Indemnified Party shall not be obligated to institute any legal
proceedings in connection with the collection or pursuit of any insurance in
order to exercise its indemnification remedy under this Agreement); (ii) the
amount accrued or reserved against as a liability on the Final Closing Statement
of Net Assets with respect to such Adverse Consequences or Environmental Claims
less any amounts paid in cash since Closing with respect thereto and recorded as
an accrual or reserve reduction for which indemnification will not be sought;
and (iii) any recoveries from third parties pursuant to indemnification (or
otherwise) with respect thereto net of any expenses incurred by the Indemnified
Party in obtaining such third party payment.
(d) Notwithstanding anything in this Agreement to the contrary,
no Indemnifying Party shall be liable to an Indemnified Party for any punitive
damages, exemplary damages, lost profits or other consequential damages (which
shall not include natural resource damages) in connection with any claim for
indemnification under this Agreement.
9.4. Indemnification by Seller. Subject to the qualifications
contained in this Section 9 and subject to Section 5.27, Seller shall indemnify,
defend and hold harmless Buyer, and its Affiliates, and its and their directors,
officers, employees and assigns ("Buyer Indemnified Parties") from any Adverse
Consequences and Environmental Claims incurred by or asserted
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against the Buyer Indemnified Parties to the extent such Adverse Consequences or
Environmental Claims arise out of or relate to: (i) a breach by Seller of its
representations, warranties, covenants or other agreements contained in this
Agreement or in any schedule, certificate or other document delivered in
connection with this Agreement; (ii) the Seller's indemnity obligations under
Section 7.2(a); (iii) all liabilities and obligations of Cooper Industries Norge
AS (other than liabilities or obligations relating to the conduct of any
business in or through Cooper Industries Norge AS by Seller or its Affiliates
after the Closing); and (iv) any liabilities and obligations of Cooper A&S
Company and Champion Automotive S.p.A. to the extent such liabilities and
obligations relate to non-automotive businesses conducted by such companies
before the Closing Date. Seller shall also indemnify, defend and hold harmless
the Buyer Indemnified Parties from the Adverse Consequences and Environmental
Claims (a) described in Section 5.21 relating to the AlliedSignal Lawsuit and
the Bosch Infringement Claim and (b) for Asbestos Claims to the extent provided
in Section 5.25.
9.5. Indemnification by Buyer. Subject to the qualifications
contained in this Section 9, Buyer shall (and Buyer shall cause the Champion
Companies and any of Buyer's Affiliates which acquire assets of the Canadian
Division to) indemnify, defend and hold harmless Seller, and its Affiliates, and
its and their directors, officers, employees and assigns ("Seller Indemnified
Parties") from any Adverse Consequences and Environmental Claims incurred by or
asserted against the Seller Indemnified Parties to the extent such Adverse
Consequences and Environmental Claims arise out of or relate to: (i) a breach by
Buyer of its representations, warranties, covenants or other agreements
contained in this Agreement or in any schedule, certificate or other document
delivered in connection with this Agreement; (ii) Seller's Company Obligations;
(iii) the Buyer's indemnity obligations under Sections 5.11, 5.25 and 7.2(b);
(iv) all Environmental Claims; and (v) all liabilities and obligations of
Champion, the Champion Subsidiaries and the Related Companies, and all
liabilities and obligations relating to the Canadian Division that are assumed
by Buyer or its Affiliates, whether arising before, on or after Closing;
provided, however, with respect to clauses (iv) and (v) above, Buyer shall not
have any obligation to indemnify, defend and hold harmless the Seller
Indemnified Parties to the extent any Adverse
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Consequences or Environmental Claims are subject to the indemnification
provisions of Section 9.4.
9.6. Third Party Claims. The obligations and liabilities of the
parties with respect to claims for indemnification resulting from the assertion
of liability by a third party are subject to the following terms and conditions.
(a) If any third party shall notify the Indemnified Party with
respect to any matter which may give rise to a claim for indemnification against
the Indemnifying Party (or an Indemnified Party otherwise discovers such a third
party claim), then the Indemnified Party shall promptly provide written notice
of such matter to the Indemnifying Party describing the matter in reasonable
detail; provided, however, a delay by the Indemnified Party in notifying the
Indemnifying Party shall not relieve the Indemnifying Party from any liability
hereunder unless (and then solely to the extent) the Indemnifying Party's
position is actually prejudiced by such delay.
(b) If the Indemnifying Party notifies the Indemnified Party
within 30 days after the Indemnified Party has given notice of the matter that
the Indemnifying Party is assuming all responsibility for the matter including
the defense thereof: (i) the Indemnifying Party shall reimburse the Indemnified
Party for any costs it has incurred relating to the matter and shall defend the
Indemnified Party against the matter with counsel of the Indemnifying Party's
choice provided such counsel is reasonably satisfactory to the Indemnified
Party; (ii) although the Indemnifying Party shall direct and control the defense
of such matter, the Indemnified Party may retain separate co-counsel at its sole
cost and expense; (iii) the Indemnified Party will not consent to the entry of
any judgment or enter into any settlement with respect to the matter without the
prior written consent of the Indemnifying Party, which shall not be unreasonably
withheld or delayed; and (iv) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the matter,
which judgment or settlement does not include a provision whereby the plaintiff
or claimant in the matter releases the Indemnified Party from all liability with
respect thereto, without the prior written consent of the Indemnified Party,
which
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shall not be unreasonably withheld or delayed.
(c) If the Indemnifying Party does not notify the Indemnified
Party within 30 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming all responsibility therefor including
the defense thereof, the Indemnified Party may defend against, consent to the
entry of any judgment or enter into any settlement with respect to the matter in
any manner the Indemnified Party reasonably deems appropriate without waiving
any right to indemnity therefor by the Indemnifying Party.
(d) The parties shall cooperate in defending any third-party
claim. The defending party shall have reasonable access to the books, records
and personnel which are pertinent to the defense and which are in the possession
or control of the other party.
10. TERMINATION.
10.1. Termination of Agreement. This Agreement may be terminated at
any time prior to Closing as provided below:
(a) Buyer and Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(b) Buyer may terminate this Agreement by giving written notice
to Seller at any time prior to the Closing: (i) if, pursuant to Section 5.10
above, Seller has within the then preceding 10 days given Buyer any notice by
means of a disclosure supplement of a condition, event or development that has
had a Material Adverse Effect upon the financial condition of the Champion
Companies taken as a whole; (ii) if there has been a material breach by Seller
of any of its representations, warranties, or covenants contained in this
Agreement, Buyer has notified Seller of the breach, and the breach has continued
without cure for a period of 30 days after the notice of breach; or (iii) if the
Closing shall not have occurred on or before December 31, 1998 by reason of the
failure of any condition precedent under Section 8.1 hereof
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PURCHASE AND SALE AGREEMENT BETWEEN
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(unless the failure results primarily from Buyer breaching any representation,
warranty, or covenant contained in this Agreement). Notwithstanding the
preceding, the parties acknowledge and Buyer agrees that the risk of a partial
or total loss of the Carquest account or any other account by the Champion
Companies has been taken into account in Buyer's calculation of the Purchase
Price, and any change or occurrence with respect to any account (including
partial or total loss) shall not be deemed a basis for the termination of this
Agreement; and
(c) Seller may terminate this Agreement by giving written notice
to Buyer at any time prior to the Closing: (i) if there has been a material
breach by Buyer of any of its representations, warranties, or covenants
contained in this Agreement, Seller has notified Buyer of the breach, and the
breach has continued without cure for a period of 30 days after the notice of
breach; or (ii) if the Closing shall not have occurred on or before December 31,
1998, by reason of the failure of any condition precedent under Section 8.2
hereof (unless the failure results primarily from Seller breaching any
representation, warranty, or covenant contained in this Agreement).
10.2. Effect of Termination. If either party terminates this
Agreement pursuant to Section 10.1 above, all rights and obligations of Seller
and Buyer hereunder shall terminate without any liability of either party to the
other (except for any liability of any party then in breach and except for any
continuing obligations under the Confidentiality Agreement attached hereto as
Exhibit IX).
11. MISCELLANEOUS.
11.1. No Third-Party Beneficiaries. Except for Sections 9.4 and 9.5
which are intended to benefit and be enforceable by any of the Seller
Indemnified Parties and Buyer Indemnified Parties, as the case may be, this
Agreement does not confer any rights or remedies upon any Person other than the
parties hereto and their respective successors and permitted assigns.
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11.2. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the parties and
supersedes any prior or contemporaneous understandings, agreements, or
representations by or between the parties, written or oral, to the extent they
have related or relate in any way to the subject matter hereof.
11.3. Successors and Assigns. This Agreement is binding upon and
inures to the benefit of the parties hereto and their respective successors and
permitted assigns. No party may assign either this Agreement or any of the
party's rights, interests, or obligations hereunder without the prior
written approval of the other party; provided, however, either party may assign
any of its rights, interests and obligations hereunder to one or more of its
Affiliates without the prior written approval of the other party in which case
the assigning party shall continue to remain liable for the performance of all
its obligations under this Agreement. Any assignment prohibited hereunder is
void.
11.4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which is deemed an original but all of which together
constitute one and the same instrument.
11.5. Headings. The section headings contained in this Agreement are
inserted for convenience only and do not affect in any way the meaning or
interpretation of this Agreement.
11.6. Notices. All notices expressly required under this Agreement
(other than notices provided under Section 2.8 hereof) shall be in writing and
shall be deemed given if delivered personally (upon the recipient's actual
receipt), if mailed by certified mail, return receipt requested (upon the date
of delivery to recipient), if by a nationally recognized air courier which
confirms delivery (upon date of delivery to the recipient), or if sent by
facsimile (upon the sender's receipt of written confirmation showing receipt by
the recipient), to the parties at the following addresses (or at such other
address for a party as shall be specified by notice given pursuant hereto):
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(a) If to Seller, at:
Cooper Industries, Inc.
600 Travis, Suite 5800
Houston, Texas 77002
Attention: General Counsel
Fax to: (713) 209-8989
(b) If to Buyer, at:
Federal-Mogul Corporation
26555 Northwestern Highway
Southfield, MI 48034
Attention: General Counsel
Fax to: (248)-354-8103
11.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without giving
effect to any choice or conflict of law provision or rule, except that the
Federal Arbitration Act 9 U.S.C Sections 1-16 shall govern all questions
relating to the arbitrability of any claim or dispute in connection with this
Agreement including such claims or disputes relating to the purchase price
adjustment pursuant to Section 2 hereof, and to the enforcement of the
arbitration provisions contained in Sections 2 and 12 hereof.
11.8. Amendments and Waivers. No amendment of any provision of this
Agreement is valid unless the same shall be in writing and signed by all the
parties hereto. No waiver by any party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to a prior or subsequent default, misrepresentation, or breach
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any such prior or subsequent occurrence.
11.9. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or
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PURCHASE AND SALE AGREEMENT BETWEEN
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provision in any other situation or in any other jurisdiction.
11.10. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" means including without limitation. Words (including defined
terms) in the singular shall be held to include the plural and vice versa and
words of one gender shall be held to include the other genders as the context
requires. The terms "hereof", "herein" and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole (including all of the Schedules and Exhibits hereto) and not to any
particular provision of this Agreement, and Section, Exhibit and Schedule
references are to this Agreement unless otherwise specified. It is understood
and agreed that neither the specification of any dollar amount in this Agreement
nor the inclusion of any specific item in the Schedules or Exhibits is intended
to imply that such amounts or higher or lower amounts, or the items so included
or other items, are or are not material, and neither party shall use the fact of
the setting of such amounts or the fact of the inclusion of any such item in the
Schedules or Exhibits in any dispute or controversy between the parties as to
whether any obligation, item or matter is or is not material for purposes
hereof.
11.11. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof. Disclosure of any fact or circumstance in any Schedule or
Exhibit referenced by a particular section or paragraph of the Agreement shall
be deemed to be disclosed with respect to any other paragraph or section
regardless of whether an explicit cross-reference appears.
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11.12. Bulk Transfer Laws. Buyer acknowledges that Seller will not
comply with the provisions of any bulk transfer laws of any jurisdiction in
connection with the transactions contemplated by this Agreement.
11.13. Deceptive Trade Practices Waiver. Buyer waives the provisions
of the Texas Deceptive Trade Practices Act, Chapter 17, subchapter E, Section
17.41 through 17.63, inclusive (other than 17.555, which is not waived), Texas
Business and Commerce Code, or any similar legislation that supersedes such act.
To evidence its ability to grant this waiver, Buyer represents and warrants to
Seller that Buyer (i) is in the business of seeking or acquiring, by purchase or
lease, goods or services for commercial or business use, (ii) has assets of
$5,000,000 or more according to its most recent financial statement prepared in
accordance with generally accepted accounting principles, (iii) has knowledge
and experience in financial and business matters that enable it to evaluate the
merits and risk of the transaction contemplated, and (iv) is not in a
significantly disparate bargaining position.
11.14. Specific Performance. Each party acknowledges and agrees that
the other party would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Each party agrees that the other party shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any remedy to which they may be
entitled as set forth in this Agreement.
12. DISPUTE RESOLUTION
12.1. Meeting of Senior Officers. Any claim or dispute between Seller
and Buyer arising out of or in connection with this Agreement or any alleged
breach hereof or thereof except those to which the arbitration provisions in
Section 2.7 apply (a "Claim") shall be submitted for
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resolution to a senior officer of each of Seller and Buyer, as designated by
their respective chief executive officers, who shall meet within thirty (30)
days of such submission to seek in good faith an amicable settlement. In seeking
an amicable settlement, the parties may consult with a neutral third party
mediator if both parties agree in writing.
12.2. Binding Arbitration.
(a) Governing Principles. If any Claim is not settled by the
parties within sixty (60) days after written notice of the Claim is first given
by either party to the other, then either party may submit a written demand for
arbitration and the Claim shall be finally settled by arbitration under the
Commercial Arbitration Rules and the Guidelines for Expediting Larger, Complex
Commercial Arbitrations of the American Arbitration Association (the "Rules"),
and judgment upon the award rendered by the Arbitrator may be entered in any
court having jurisdiction over it.
(b) Selection and Qualification of the Arbitrator. If the Claim
does not exceed $1,000,000, there shall be one arbitrator. If the Claim is more
than $1,000,000, there shall be three arbitrators (all arbitrators are hereafter
collectively referred to as the "Arbitrator"). The parties shall endeavor to
agree on the selection of an Arbitrator, but if no agreement has been reached
within thirty (30) days of claimant's demand for arbitration the Arbitrator
shall be selected by the American Arbitration Association. The Arbitration shall
be held in Chicago, Illinois. The Arbitrator shall conduct himself or themselves
as a neutral, and be subject to disqualification pursuant to Section 19 of the
Rules. The Arbitrator shall be compensated at such Arbitrator's normal hourly or
per diem rates for all time spent in connection with the arbitration proceeding,
and pending final award, appropriate compensation and expenses shall be advanced
equally by the parties.
(c) Interim Relief from a Court. Either party may request a
court to provide interim or provisional relief, and such request shall not be
deemed incompatible with the agreement to arbitrate or as a waiver of that
agreement.
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(d) Powers of the Arbitrator and Arbitration Procedures. The
Arbitrator shall permit and facilitate such discovery as the Arbitrator
determines is appropriate, including prehearing depositions, particularly of
witnesses who will not appear, and orders to protect the confidentiality of
proprietary information, trade secrets, and other sensitive information
disclosed in discovery. Papers, documents and written communications shall be
delivered by the parties directly to each other, the Arbitrator, and the
American Arbitration Association tribunal administrator. The Arbitrator shall
actively manage the proceeding to make it fair, expeditious, economical and less
burdensome and adversarial than litigation. The Arbitrator may limit the issues,
limit the time for each party to present its case, exclude testimony and other
evidence that it deems irrelevant, cumulative or inadmissible, and order that
the direct testimony of witnesses be furnished by written sworn statement. All
documents that a party proposes to offer in evidence, except for those objected
to by an opposing party, shall be self-authenticated. There shall be a
stenographic transcript of the proceedings, the cost of which shall be borne
equally by the parties, pending the final award. Any Claim submitted to
arbitration shall be resolved in accordance with Title 9 of the U.S. Code (U.S.
Arbitration Act), which shall govern the interpretation, enforcement and
proceedings pursuant to this arbitration provision.
(e) Rendering of Award. The award rendered by the Arbitrator
shall be itemized, shall not include punitive damages, exemplary damages, lost
profits or other consequential damages, but may include all or a part of a
party's reasonable attorneys' fees, and shall state the reasoning on which it
rests. Before rendering the final award, the Arbitrator shall submit to the
parties an unsigned draft of the proposed award, and each party may deliver,
within fifteen (15) days after receipt of such draft, a written statement of
alleged errors of fact, computation, law or otherwise. The Arbitrator may
disregard any party's statement to the extent that it is in substance an
application for reargument. With twenty (20) days after receipt of such party
statements, the Arbitrator shall render the final award.
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* * * * * * * * * *
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
COOPER INDUSTRIES, INC.
By: /s/ David A. White, Jr.
-------------------------
Title: Senior Vice President, Strategic Planning
-----------------------------------------
FEDERAL-MOGUL CORPORATION
By: /s/ Charles B. Grant
-------------------------
Title: Vice President, Corporate Development
-----------------------------------------
FEDERAL-MOGUL COMERCIO
INTERNACIONAL, S.A.
By: /s/ Charles B. Grant
-------------------------
Title: Vice President
-----------------------------------------
FEDERAL-MOGUL PTY. LTD.
By: /s/ Charles B. Grant
-------------------------
Title: Vice President
-----------------------------------------
FEDERAL-MOGUL GLOBAL GROWTH LTD.
By: /s/ Charles B. Grant
-------------------------
Title: Vice President
-----------------------------------------
100
EXHIBIT I
CERTAIN DEFINITIONS
"Abex Products" has the meaning set forth in Section 5.25.
"Abex Termination Date" has the meaning set forth in Section 5.25.
"Accounting Arbitrator" has the meaning set forth in Section 2.7.
"Additional FX Contracts" has the meaning set forth in Section 5.16.
"Adverse Consequences" means all actions, suits, proceedings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, directives, notices of violation or non-compliance, rulings,
damages, penalties, fines, costs, liabilities, obligations, Taxes, liens,
losses, expenses, and fees, including court costs and reasonable fees and
expenses of attorneys, accountants, consultants and experts.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or is under common control
with such first Person. Unless otherwise specified, the term "Affiliate", when
used with respect to Seller, shall not include the Champion Companies. Unless
otherwise specified, the term "Affiliate", when used with respect to Buyer,
shall include the Champion Companies and any designee of Buyer which acquires
the Canadian Division.
"AlliedSignal Lawsuit" has the meaning set forth in Section 5.21(a).
"Asbestos Claim" means a claim arising from personal injury,
including death, resulting from exposure to asbestos-containing products
manufactured or sold prior to the Closing Date by (a) Pneumo Abex Corporation
("Pneumo") (provided the products were manufactured or sold prior to December
30, 1994), (b) Wagner Electric Corporation ("WEC"), (c) each of Pneumo and WEC's
Predecessors and successors as of the Closing Date, and (d) for the purpose of
Section 5.25(a) and 5.25(g) only: Standard Motor Products Company ("SMPC"),
SMPC's Affiliates, and SMPC's and its Affiliates' Predecessors.
"Automotive Hourly Plans" has the meaning set forth in Section
6.4(a).
"Benefit Plan" has the meaning set forth in Section 6.1(a).
"Bosch Infringement Claim" has the meaning set forth in Section 5.21.
"Business" means the business, activity, and operations historically
or currently conducted by the Champion Companies.
101
"Buyer" means Federal-Mogul Corporation, a corporation organized
under the laws of Michigan.
"Buyer Indemnified Parties" has the meaning set forth in Section 9.4.
"Buyer's Letter" has the meaning set forth in Section 2.5.
"Buyer's Welfare Benefit Plans" has the meaning set forth in Section
6.4(e).
"Canadian Asset Transfer Agreement" means the Asset Transfer
Agreement between Cooper Industries (Canada) Inc. and Buyer or its designated
Affiliate in the form similar to that attached as Exhibit VI hereto, with terms
and conditions mutally agreed.
"Canadian Division" means the division of Cooper Industries (Canada)
Inc. that is engaged in the Business.
"Champion" means Champion Spark Plug Company, a corporation organized
under the laws of Delaware.
"Champion Australian Plan" has the meaning set forth in Section
6.4(h).
"Champion Benefit Arrangement" has the meaning set forth in Section
6.1(c).
"Champion Common Stock" has the meaning set forth in the preamble of
the Agreement.
"Champion Companies" means Champion, the Champion Subsidiaries, the
Related Companies, the Canadian Division and (except for purposes of Sections 2
and 3) their respective Predecessors. Each such company or division is
individually referred to as a "Champion Company".
"Champion Employee Plan" has the meaning set forth in Section 6.1(c).
"Champion International Plan" has the meaning set forth in Section
6.1(d).
"Champion Pension Plan" has the meaning set forth in Section 6.4(a).
"Champion Retirement Savings Plan" has the meaning set forth in
Section 6.4(b).
"Champion Salaried Plan" has the meaning set forth in Section 6.4(a).
"Champion Subsidiaries" means the direct and indirect subsidiaries of
Champion as set forth on Exhibit II. Each such company is individually referred
to as a "Champion Subsidiary".
"Champion Supplemental DB Plan" and "Champion Supplemental DC Plan"
have
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EXHIBIT I (CONTINUED)
the respective meanings set forth in Section 6.4(d).
"Change Period" has the meaning set forth in Section 2.3(a).
"Closing" means the closing of the transactions contemplated by the
Agreement.
"Closing Date" means the date on which the Closing actually takes
place.
"Cooper Australian Plan" has the meaning set forth in Section 6.4(h).
"Cooper Retirement Savings Plan" has the meaning set forth in Section
6.4(b).
"Cooper Salaried Plan" has the meaning set forth in Section 6.4(a).
"Cooper Supplemental DB Plan" and "Cooper Supplemental DC Plan" have
the respective meanings set forth in Section 6.4(d).
"Cooper's Welfare Benefit Plans" has the meaning set forth in Section
6.4(e).
"Employee" has the meaning set forth in Section 6.1(a).
"Employee Benefits" has the meaning set forth in Section 6.4(f).
"Encumbrance" means any mortgage, lien, security interest, easement,
encroachment, assessment, judgment, rights of first refusal, purchase options
(and with respect to real property only, third party rights affecting
marketability) and any other encumbrance affecting title.
"Environmental Claims" means any and all administrative, regulatory
or judicial actions, causes of action, suits, obligations, Environmental
Liabilities, losses, proceedings, decrees, judgments, penalties, fines, fees,
demands, demand letters, orders, directives, claims (including any claims
involving Environmental Liability in tort, strict, absolute or otherwise),
liens, notices of noncompliance or violation, legal and consultant fees and
costs of investigations or proceedings, arising from any Environmental Law.
"Environmental Laws" means any and all Laws or Environmental Permits
relating to public or employee health or safety, pollution, natural resources,
or the environment, including any Law relating to: (i) the manufacture,
processing, distribution, generation, use, ownership, management, handling,
collection, treatment, storage, transportation, abatement, remediation
(including assessment, monitoring, operation and maintenance), recovery,
recycling, removal, Release, threat of Release, discharge, or disposal of, or
exposure to, Regulated Materials; (ii) record keeping, notification or reporting
requirements relating to Regulated Materials; or (iii) negligence, gross
negligence, strict liability, intentional tort, toxic tort or any other theory
of liability at law (whether common or statutory) or in equity to the extent
claims thereunder arise
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EXHIBIT I (CONTINUED)
from contamination by, exposure to, any Release or threatened Release of, or
conditions or non-compliance relating to, Regulated Materials in the
environment.
"Environmental Liabilities" means any and all Adverse Consequences
arising under any Environmental Law, whether direct or indirect, known or
unknown, joint or several, and whenever arising (including after Closing),
including all fees; forms of financial assurance; fines; penalties; judgments;
capital costs; wetlands mitigation, response, cleanup, removal, treatment,
monitoring, operating and maintenance costs; investigation, remedial and
inspection costs; disbursements; and expenses of counsel, experts, contractors
and consultants, based on, arising out of or otherwise in respect to: (i) the
Champion Companies or property (whether real or personal) or assets currently or
formerly owned, operated, used or leased (including the Owned Real Property and
the Leased Real Property) by the Champion Companies (including off-site
locations); (ii) conditions or Regulated Materials existing, generated, used,
treated, stored, recovered, recycled or Released on, at or under, transported to
or from, or originating from any such property or operation of the Business
(including off-site locations); or (iii) expenditures to cause any such
property, off-site locations, or natural resources affected in any way by such
conditions or Regulated Materials, or any other aspect of the Business to be in
compliance with any requirements of Environmental Laws.
"Environmental Permit" means any Permit, registration, consent,
waiver, exception, variance, exemption, or filing relating in any way to or
required by any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ESPP Participants" has the meaning set forth in Section 6.5.
"1997 ESPP" has the meaning set forth in Section 6.5.
"Final Closing Statement of Net Assets" has the meaning set forth in
Section 2.3.
"Financial Statements" has the meaning set forth in Section 3.6.
"Former Employee" has the meaning set forth in Section 6.1(f).
"Full Funding Liabilities" has the meaning set forth in Section
6.4(a).
"GAAP" means generally accepted United States accounting principles.
"Governmental Authority" means the United States, any other country,
any national body (including the European Union), any state, province,
municipality, or subdivision of any of the foregoing, any agency, governmental
department, court, entity, commission, board, ministry, bureau, locality or
authority of any of the foregoing, or any quasi-governmental or private body
104
EXHIBIT I (CONTINUED)
exercising any regulatory, taxing, importing, exporting, or other governmental
or quasi-governmental function or any arbitrator.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 or any successor law, and regulations and rules issued
pursuant to that Act or any successor law.
"Hourly Full Funding Liabilities" has the meaning set forth in
Section 6.4(a).
"Indemnified Party" means the Person who is entitled to the benefits
of any indemnity provision under this Agreement.
"Indemnifying Party" means the party to the Agreement who is
obligated to indemnify the Buyer Indemnified Parties or Seller Indemnified
Parties, as the case may be, pursuant to any provision under this Agreement.
"Intellectual Property" means all domestic and foreign patents,
copyrights, trade names, trademarks, service marks and registrations and
applications for any of the foregoing (together with the goodwill associated
with such trade names, trademarks and service marks), trade secrets, inventions,
proprietary processes, research and development information, designs,
confidential and technical information, engineering and technical drawings,
specifications, know-how, formulae and other proprietary property, rights and
interests.
"Internal Revenue Code" or "Code" means the Internal Revenue Code of
1986, the regulations thereunder, any amendments thereto and any successor law.
"Knowledge" means actual knowledge, after due inquiry, and shall not
include any constructive or imputed knowledge. Any reference to Seller's
Knowledge shall be limited to the actual knowledge of the persons set forth on
Exhibit VIII.
"Laws" means all laws; statutes; regulations; by-laws, codes;
ordinances; decrees; rules; judicial, arbitral, administrative, ministerial,
departmental or regulatory judgments, orders, decisions, rulings, injunctions,
or awards; policies; voluntary restraints; guidelines; directives; agreements
with, requirements of, or instructions by any Governmental Authority; general
principles of common or civil law; and equity.
"Leased Real Property" has the meaning set forth in Section 3.14(b).
"Material Adverse Effect" means a material and adverse effect on the
business, operations or financial condition of the Champion Companies taken as a
whole.
"Material Contracts" has the meaning set forth in Section 3.12.
"Moog Common Stock" has the meaning set forth in Section 2.10.
"Negative Purchase Price Adjustment" has the meaning set forth in
Section 2.2(b).
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EXHIBIT I (CONTINUED)
"Nominal Shares" means the shares of Cooper Automotive France, S.A.
and Cooper Automotive, Taiwan, Inc. that are owned by certain individuals and
which will be delivered to Buyer (or its designee) pursuant to Section
2.9(b)(iii) and (iv).
"Other Agreements" has the meaning set forth in Section 5.19.
"Outstanding FX Contracts" has the meaning set forth in Section 5.16.
"Owned Real Property" has the meaning set forth in Section 3.14(a).
"Peg Date" has the meaning set forth in Section 2.3(a).
"Peg Statement of Net Assets" has the meaning set forth in Section
2.3.
"Performance Obligation Instruments" has the meaning set forth in
Section 5.15.
"Permits" means all licenses, permits, approvals, certificates and
authorizations of any Governmental Authority primarily relating to the Business.
"Permitted Encumbrances" means any Encumbrance: (i) for Taxes or
other governmental assessments or charges the payment of which is not yet due or
which are being contested in good faith by appropriate proceedings; (ii) of
carriers, warehousemen, mechanics, materialmen or similar encumbrances imposed
by law arising or incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith; (iii) other imperfections of title
or encumbrances, if any, which individually or in the aggregate do not
materially detract from the value of the property subject thereto, or materially
impair the use of such property as presently used in the Business. Further, with
respect to the Owned Real Property and the Leased Real Property, Permitted
Encumbrances shall also include (i) zoning and similar restrictions; and (ii)
such imperfections of title, easements, liens, charges and other encumbrances as
are of record or as would be described on a current survey.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Authority.
"Positive Purchase Price Adjustment" has the meaning set forth in
Section 2.2(b).
"Pre-Closing Straddle Period" has the meaning set forth in Section
7.2(c).
"Pre-Closing Creditable Foreign Tax" has the meaning set forth in
Section 7.2(a)(iv).
"Predecessor" means a Person which has previously held an interest to
which the Person to whom the reference is made has succeeded, including a Person
that conveyed, transferred or
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EXHIBIT I (CONTINUED)
assigned all or substantially all of its assets to the Person to whom the
reference is made or a Person which was merged or amalgamated into or
consolidated with the Person to whom the reference is made.
"Preliminary Closing Statement of Net Assets" has the meaning set
forth in Section 2.3.
"Provisional Payment" has the meaning set forth in Section
7.2(a)(iv).
"Purchase Price Adjustment" has the meaning set forth in Section
2.2(b).
"Regulated Materials" means (i) any solid waste, hazardous waste,
pollutant, contaminant or petroleum (including any crude oil or fraction
thereof) and (ii) any hazardous, toxic or other substance, material, liquid, gas
or chemical regulated by or which is the basis for liability under any
Environmental Law.
"Related Companies" means the companies set forth on Exhibit III.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, placing, burying
or disposing into the environment of any Regulated Material.
"Salaried Full Funding Liabilities" has the meaning set forth in
Section 6.4(a).
"Seller" means Cooper Industries, Inc., a corporation organized under
the laws of Ohio.
"Seller Indemnified Parties" has the meaning set forth in Section
9.5.
"Seller's Company Obligations" has the meaning set forth in Section
5.12.
"Seller's Letter" has the meaning set forth in Section 2.4.
"Straddle Period" has the meaning set forth in Section 7.2(c).
"Tax" or "Taxes" means all federal, provincial, state, local or
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, ad valorem, value added, alternative or add-on minimum,
estimated, or other tax of any kind, including, without limitation, liability
for taxes arising from a consolidated return and imposed by Treasury Reg.
Section 1.1502.6, together with any interest, penalty, or additions, whether
disputed or not.
"Tax Proceeding" has the meaning set forth in Section 7.7(b).
"Tax Return" means any return (including any information return),
report, statement,
107
EXHIBIT I (CONTINUED)
schedule, notice, form, or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Authority in
connection with the determination, assessment, collection, or payment of any
Taxes.
"Transfer Plan Liabilities" has the meaning set forth in Section
6.4(a).
108
EXHIBIT II
LIST OF CHAMPION SUBSIDIARIES
Champion Aviation, Inc.
Champion Interamericana, Ltd.
Champion Automotive S.p.A. (f/k/a Cooper Industries Italia S.p.A.)
Champion Spark Plug Belgium S.A. (as to 56%)
Champion Sparking Plug Company (Ireland) Limited
Cooper A&S Company
Cooper Automotive Company
Cooper Automotive de Mexico, S.A. de C.V.
Cooper Automotive de Venezuela C.A.
Cooper Automotive do Brasil, Ltda.
Cooper Automotive Filtration S.p.A.
Cooper Automotive France, S.A.
Cooper Automotive Iberica, S.A.
Cooper Automotive K.K.
Cooper Automotive Netherlands B.V.
Cooper Automotive of Latin America, S.A. de C.V.
Cooper Automotive of South Africa (Pty.) Limited
Cooper Automotive Products, Inc.
Cooper Automotive S.A.
Cooper Automotive, S.A. de C.V.
Cooper Automotive, Taiwan, Inc.
Cooper Industries Norge AS (in liquidation)
Farloc Argentina S.A.I.C. y F (24%)
Frenos Hidraulicos Automotrices, S.A. de C.V. (49%)
Industrias Cooper de Venezuela, S.A.
ZV Zundkerzenvertriebs GmbH (in liquidation)
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EXHIBIT III
LIST OF RELATED COMPANIES
Champion Automotive (U.K.) Ltd.
Subsidiaries: Champion Executive Pensions Limited
Firecom Ltd.
[New pension company in U.K. may be incorporated before closing]
Cooper Automotive Electrical do Brasil Ltda.
Subsidiaries: none
Cooper Automotive Pty. Ltd.
Subsidiaries: Cooper Automotive Products (India) Private Limited
Guangzhou Champion Spark Plug Co., Ltd. (50%)
[New pension company in Australia may be incorporated before
closing]
Moog Automotive Products, Inc.
Subsidiaries: Moog Automotive Company
Moog Automotive Batesville, Inc.
Moog Redevelopment Corporation
Moog Automotive, Ltd.
Qingdao Precision Universal Joint Company Limited (50%)
Productos de Frenos Automotrices de Calidad, S.A. de C.V.
Crucetas Mexicanas, S.A. de C.V. (40%)
Veda Manufacturing Pty. Limited (in liquidation)
110
Champion Spark Plug Belgium S.A. (as to 44%)
111
PURCHASE AND SALE AGREEMENT
BETWEEN
COOPER INDUSTRIES, INC.
AND
FEDERAL-MOGUL CORPORATION
List of Omitted Exhibits and Disclosure Schedules
The following exhibits and disclosure schedules to the Purchase and Sale
Agreement have not been filed with the Securities and Exchange Commission
pursuant to Rule 601(b) of Regulation S-K. Federal-Mogul Corporation shall
furnish supplementally a copy of any omitted exhibit or schedule to the
Securities and Exchange Commission upon request.
Omitted Exhibits
Exhibit IV - Peg Statement of Net Assets of the Champion Companies dated March
31, 1998.
Exhibit V - The following financial statements for the Champion Companies:
Unaudited combined financial statements for the three months
ended March 31, 1998.
Audited combined financial statements as of December 31, 1997 and
for the three years then ended.
Exhibit VI - Preliminary draft of Canadian Asset Transfer Agreement
between Cooper Industries (Canada) Inc., as the seller, and
the Federal-Mogul affiliate that will be acquiring the
Canadian automotive business.
Exhibit VII - Allocation of the Purchase Price (to be completed after closing).
Exhibit VIII - List of individuals at Cooper Industries, Inc. or
the Champion Companies who have "knowledge" for purposes of
the representations and warranties under the Purchase and
Sale Agreement.
Exhibit IX - Confidentiality Agreement with Federal-Mogul Corporation.
Exhibit X - A list of certain insurance policies that provide coverage for
asbestos liabilities.
Omitted Disclosure Schedules
The following disclosure schedules disclose those matters that are described in
and are required to be disclosed under the corresponding sections of the
Purchase and Sale Agreement: 2.3(h), 2.3(m), 3.2, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9,
3.10, 3.11, 3.12, 3.14, 3.15, 3.16, 3.17, 3.20, 3.21, 5.12, 5.15, 5.16, 6.3, 6.4
and 7.1.
112