1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported): September 25, 1998
ITT INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
INDIANA 1-5627 13-5158950
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
4 WEST RED OAK LANE
WHITE PLAINS, NEW YORK 10604
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (914) 641-2000
(Former name or former address, if changed since last report):
Exhibit Index Appears on Page 12.
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ITEM 2. Acquisition or Disposition of Assets
On September 25, 1998, the Registrant and certain of its direct and
indirect subsidiaries completed the sale to Continental AG and certain of its
subsidiaries of the Registrant's business of designing, developing,
manufacturing, marketing and selling brake systems and chassis modules for the
automotive industry worldwide (the "Brake and Chassis Business") for
approximately $1.93 billion in cash pursuant to a Stock and Asset Purchase
Agreement dated as of July 24, 1998. The Brake and Chassis Business was
conducted through various direct and indirect subsidiaries and joint ventures in
which the Registrant held an ownership interest.
On September 28, 1998, the Registrant and certain of its direct and
indirect subsidiaries completed the sale to Valeo SA and certain of its
subsidiaries of the Registrant's business of designing, developing,
manufacturing, marketing and selling electrical motors and actuators, air
management and engine cooling products, wiper and washer systems, lamps, power
antennas, switches and sensors for the automotive industry worldwide (the
"Electrical Systems Business") for approximately $1.7 billion in cash pursuant
to a Stock and Asset Purchase Agreement dated as of June 25, 1998. The
Electrical Systems Business was conducted through various direct and indirect
subsidiaries and joint ventures in which the Registrant held an ownership
interest.
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ITEM 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information
See Annex A following signature page hereto.
(c) Exhibits
Exhibit No. Description
2.1 Stock and Asset Agreement dated as of July 24, 1998
between ITT Industries, Inc. and Continental AG
(without schedules).
2.2 Stock and Asset Agreement dated as of June 25, 1998
between ITT Industries, Inc. and Valeo SA (without
schedules) (incorporated by reference to Exhibit
10(b) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998.
2.3 Press Release, dated September 25, 1998, announcing
completion of the sale of the Brake and Chassis
Business.
2.4 Press Release, dated September 28, 1998, announcing
completion of the sale of the Electrical Business.
4
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
ITT INDUSTRIES, INC.
By: /s/ ROBERT W. BEICKE
-------------------------------------------------
Its: Vice President, Associate General Counsel and
Assistant Secretary
Date: October 13, 1998
[PRO FORMA FINANCIAL INFORMATION]
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ANNEX A
PRO FORMA FINANCIAL INFORMATION
On September 28, 1998, the Company closed the sale of its automotive Electrical
Systems business to Valeo, SA of France for approximately $1.7 billion. This
transaction followed the sale of the Company's Brake and Chassis unit to
Continental AG of Germany for approximately $1.93 billion completed on September
25, 1998. The sales of these two units, as well as the previous sales of several
other small automotive units, will be accounted for as a discontinued operation.
The following unaudited pro forma consolidated condensed income statements for
the six months ended June 30, 1998; and years ended December 31, 1997; 1996; and
1995 and the pro forma consolidated condensed balance sheet as of June 30, 1998
have been prepared to reflect the following: (a) the deletion of the sales,
expenses, assets and liabilities of the discontinued operation, (b) the proceeds
received and the after-tax gain recognized on the sale, liabilities retained,
transaction costs and obligations related to the sale, and (c) the application
of the proceeds to pay current taxes and transaction costs, to pay down debt and
to repurchase the Company's common stock. The use of the proceeds to pay down
debt and repurchase common stock reflect management's current estimates and
plans which, among other factors, are based on consideration of current market
conditions. The actual use of proceeds may differ from the pro forma disclosures
contained herein depending on changes in management's evaluation of the most
efficient use of these funds. The unaudited pro forma consolidated income
statements and the unaudited pro forma balance sheet were prepared as if the
sales of the discontinued operation and the application of the proceeds had
occurred on January 1, 1995; and June 30, 1998, respectively.
The pro forma financial data are provided for informational purposes only in
response to requirements of the Securities and Exchange Commission and do not
purport to be indicative of the Company's financial position or results which
would actually have been obtained had such transactions been completed as of the
dates or for the periods presented, or which may be obtained in the future.
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ITT INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED INCOME STATEMENT
(IN MILLIONS, EXCEPT PER SHARE)
YEAR ENDED DECEMBER 31, 1995
------------------------------------------
ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- ---------
Net sales $ 8,884.2 $ (5,202.6) $ 3,681.6
----------- ---------- -----------
Cost of sales 7,155.0 (4,506.8) 2,648.2
Selling, general, and administrative expenses 767.6 (160.1) 607.5
Research, development, and engineering expenses 513.9 (260.8) 253.1
Other operating expenses (income) 237.0 (22.6) 214.4
----------- ---------- -----------
Total costs and expenses 8,673.5 (4,950.3) 3,723.2
----------- ---------- -----------
Operating income (loss) 210.7 (252.3) (41.6)
Interest expense (175.2) 55.0 (120.2)
Interest income 40.0 -- 40.0
Miscellaneous income (expense), net (4.6) 4.4 (.2)
----------- ---------- -----------
Income (loss) before income taxes 70.9 (192.9) (122.0)
Income tax (expense) benefit (50.2) 75.1 24.9
----------- ---------- -----------
Income (loss) from continuing operations $ 20.7 $ (117.8) $ (97.1)
=========== ========== ===========
EARNINGS PER SHARE:
Income (loss) - continuing operations
Basic $ .03 -- $ (1.45)
Diluted $ .03 -- $ (1.43)
Average Common Shares - Basic 110.6 (31.5) 79.1
Average Common Shares - Diluted 111.6 (31.5) 80.1
- -------
The accompanying notes to the unaudited pro forma consolidated condensed
financial statements are an integral part of the above statement.
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ITT INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED INCOME STATEMENT
(IN MILLIONS, EXCEPT PER SHARE)
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------
ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- ---------
Net sales $ 8,718.1 $ (5,031.6) $ 3,686.5
----------- ---------- -----------
Cost of sales 6,948.4 (4,318.0) 2,630.4
Selling, general, and administrative expenses 739.4 (175.3) 564.1
Research, development, and engineering expenses 535.2 (266.9) 268.3
Other operating expenses (income) (13.3) (9.0) (22.3)
----------- ---------- -----------
Total costs and expenses 8,209.7 (4,769.2) 3,440.5
----------- ---------- -----------
Operating income 508.4 (262.4) 246.0
Interest expense (169.0) 55.0 (114.0)
Interest income 32.7 -- 32.7
Miscellaneous income (expense), net (1.1) 2.1 1.0
----------- ---------- -----------
Income before income taxes 371.0 (205.3) 165.7
Income tax expense (148.4) 82.1 (66.3)
----------- ---------- -----------
Income from continuing operations $ 222.6 $ (123.2) $ 99.4
=========== ========== ===========
EARNINGS PER SHARE:
Income - continuing operations
Basic $ 1.89 -- $ 1.15
Diluted $ 1.85 -- $ 1.12
Average Common Shares - Basic 117.9 (31.5) 86.4
Average Common Shares - Diluted 120.4 (31.5) 88.9
- --------
The accompanying notes to the unaudited pro forma consolidated condensed
financial statements are an integral part of the above statement.
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ITT INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED INCOME STATEMENT
(IN MILLIONS, EXCEPT PER SHARE)
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------
ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- ---------
Net sales $ 8,777.1 $ (4,627.1) $ 4,150.0
----------- ---------- -----------
Cost of sales 6,916.4 (3,991.3) 2,925.1
Selling, general, and administrative expenses 805.3 (141.6) 663.7
Research, development, and engineering expenses 496.9 (230.3) 266.6
Special charge 239.0 (102.3) 136.7
Other operating expenses (income) 18.7 (2.1) 16.6
----------- ---------- -----------
Total costs and expenses 8,476.3 (4,467.6) 4,008.7
----------- ---------- -----------
Operating income 300.8 (159.5) 141.3
Interest expense (133.2) 55.0 (78.2)
Interest income 17.5 -- 17.5
Miscellaneous income (expense), net 1.3 (7.4) (6.1)
----------- ---------- -----------
Income before income taxes 186.4 (111.9) 74.5
Income tax expense (72.7) 43.7 (29.0)
----------- ---------- -----------
Income from continuing operations $ 113.7 $ (68.2) $ 45.5
=========== ========== ===========
EARNINGS PER SHARE:
Income - continuing operations
Basic $ .96 -- $ .52
Diluted $ .94 -- $ .51
Average common shares - basic 118.4 (31.5) 86.9
Average common shares - diluted 121.0 (31.5) 89.5
- --------
The accompanying notes to the unaudited pro forma consolidated condensed
financial statements are an integral part of the above statement.
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ITT INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED INCOME STATEMENT
(IN MILLIONS, EXCEPT PER SHARE)
SIX MONTHS ENDED JUNE 30, 1998
------------------------------------------
ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- ---------
Net sales $ 4,297.9 $ (2,104.5) $ 2,193.4
----------- ---------- -----------
Cost of sales 3,346.1 (1,805.1) 1,541.0
Selling, general, and administrative expenses 431.4 (71.6) 359.8
Research, development, and engineering expenses 228.2 (101.1) 127.1
Other operating expenses (income) 23.9 14.1 38.0
----------- ---------- -----------
Total costs and expenses 4,029.6 (1,963.7) 2,065.9
----------- ---------- -----------
Operating income 268.3 (140.8) 127.5
Interest expense (73.4) 27.5 (45.9)
Interest income 10.6 -- 10.6
Miscellaneous income (expense), net (.7) (1.3) (2.0)
----------- ---------- -----------
Income before income taxes 204.8 (114.6) 90.2
Income tax expense (79.9) 44.7 (35.2)
----------- ---------- -----------
Income from continuing operations $ 124.9 $ (69.9) $ 55.0
=========== ========== ===========
EARNINGS PER SHARE:
Income - continuing operations
Basic $ 1.05 -- $ .63
Diluted $ 1.03 -- $ .61
Average common shares - basic 118.4 (31.5) 86.9
Average common shares - diluted 121.8 (31.5) 90.3
- ----------
The accompanying notes to the unaudited pro forma consolidated condensed
financial statements are an integral part of the above statement.
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ITT INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
JUNE 30, 1998
---------------------------------------------
ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- ---------
ASSETS
Current Assets:
Cash and short-term investments $ 141.1 $ 508.1 $ 649.2
Receivables, net 1,464.1 (656.1) 808.0
Inventories, net 805.7 (213.7) 592.0
Other current assets 137.3 (40.9) 96.4
---------- ---------- ----------
Total current assets 2,548.2 (402.6) 2,145.6
Plant, property, and equipment, net 1,894.9 (996.3) 898.6
Deferred U.S. income taxes 260.4 22.8 283.2
Goodwill, net 1,144.5 (251.6) 892.9
Other assets 434.5 (83.7) 350.8
---------- ---------- ----------
$ 6,282.5 $ (1,711.4) $ 4,571.1
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 732.1 $ (344.3) $ 387.8
Accrued expenses 883.4 (80.9) 802.5
Accrued taxes 212.7 103.6 316.3
Notes payable, commercial paper and current
maturities of long-term debt 1,685.5 (1,114.1) 571.4
---------- ---------- ----------
Total current liabilities 3,513.7 (1,435.7) 2,078.0
Pension and postretirement costs 927.4 (532.7) 394.7
Long-term debt 502.9 (1.0) 501.9
Deferred foreign, state and local income taxes 41.3 (46.7) (5.4)
Other liabilities 407.7 (22.3) 385.4
---------- ---------- ----------
5,393.0 (2,038.4) 3,354.6
Shareholders' Equity:
Cumulative Preferred Stock: Authorized 50,000,000 shares,
no par value, none issued -- -- --
Common stock:
Authorized 200,000,000 shares, $1 par value per share
Outstanding 86,945,259 118.4 (31.5) 86.9
Capital surplus 387.6 (387.6) --
Accumulated other comprehensive income:
Unrealized gain on investment securities 2.0 -- 2.0
Cumulative translation adjustments 103.6 (181.6) (78.0)
---------- ---------- ----------
105.6 (181.6) (76.0)
Retained earnings 277.9 927.7 1,205.6
---------- ---------- ----------
889.5 327.0 1,216.5
---------- ---------- ----------
$ 6,282.5 $ (1,711.4) $ 4,571.1
========== ========== ==========
The accompanying notes to the unaudited pro forma consolidated condensed
financial statements are an integral part of the above statement.
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ITT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1) INCOME STATEMENT ADJUSTMENTS
All pre-tax adjustments, with the exception of interest expense, reflect the
removal of the revenues and expenses of the discontinued operations.
The adjustment to interest expense in all periods reflects the use of $1.1
billion of proceeds from the sales of the discontinued operations to pay down
general corporate debt with an average interest rate of 5%.
The income tax expense adjustments were based on the following effective rates
for the applicable periods presented: 1995 - 39%; 1996 - 40%; 1997 - 39%;
1998 - 39%.
The unaudited pro forma consolidated condensed income statements do not include
ITT Industries' previously discontinued operations, extraordinary items or the
cumulative effect of accounting changes.
2) AVERAGE COMMON SHARES
The pro forma average common shares assume that $1.1 billion of proceeds from
the sale were used to repurchase 31.5 million shares of common stock at the
average market price for the six month period ended June 30, 1998, of $35.
3) BALANCE SHEET ADJUSTMENTS
The adjustments to the pro forma balance sheet reflect the sales of the
discontinued operations as if they had occurred as of June 30, 1998, by
eliminating the assets sold to and liabilities assumed by Valeo and Continental,
as well as adjustments for the related subsequent cash flow activities that
management reasonably expects by the first quarter of 1999.
Approximately $3.15 billion of the total proceeds of $3.67 billion are reflected
as being used for the following: stock repurchases of $1.1 billion, pay down of
short-term debt of $1.1 billion, payment of accrued taxes of $842.3 million and
payments of accrued liabilities of $106.6 million. As a result of the stock
repurchase, common stock, capital surplus and retained earnings were reduced by
$31.5 million, $387.7 million and $680.8 million, respectively. The $1.5 billion
after-tax gain on the sales of the discontinued operations was reflected as an
addition to retained earnings.
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EXHIBIT INDEX
Exhibit No. Description Page
2.1 Stock and Asset Agreement dated as of July 24, 1998
between ITT Industries, Inc. and Continental AG
(without schedules).
2.2 Stock and Asset Agreement dated as of June 25, 1998
between ITT Industries, Inc. and Valeo SA (without
schedules) (incorporated by reference to Exhibit
10(b) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998.
2.3 Press Release, dated September 25, 1998, announcing
completion of the sale of the Brake and Chassis
Business.
2.4 Press Release, dated September 28, 1998, announcing
completion of the sale of the Electrical Business.
1
Exhibit 2.1
EXECUTION COPY
STOCK AND ASSET PURCHASE AGREEMENT
between
ITT INDUSTRIES, INC.
and
CONTINENTAL AG
Dated as of July 24, 1998
2
31
TABLE OF CONTENTS
Page
ARTICLE I
SALE AND TRANSFER OF TRANSFERRED
SUBSIDIARY STOCK, PARTNERSHIP INTERESTS AND
JOINT VENTURE INTERESTS......................................................................................... 3
1.1 Sale and Transfer of Transferred Subsidiary Stock and Partnership Interests.................. 3
1.2 Sale, Transfer and Assignment of Joint Venture Interests..................................... 4
ARTICLE II
SALE OF ASSETS AND ASSUMPTION OF LIABILITIES................................. 5
2.1 Sale of Assets............................................................................... 5
2.2 Assumption of Liabilities; Excluded Liabilities.............................................. 6
2.3 Transfer of Purchased Assets and Assumed Liabilities......................................... 6
2.4 Required Consents............................................................................ 7
ARTICLE III
PURCHASE PRICE AND ADJUSTMENTS........................................ 9
3.1 Purchase Price............................................................................... 9
3.2 Payment of Purchase Price.................................................................... 10
3.3 Determination of Closing Balance Sheet....................................................... 10
3.4 Settlement of Purchase Price................................................................. 14
3.5 Allocation of Purchase Price................................................................. 15
3.6 Collection and Payment of Receivables........................................................ 16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ITTI.................................... 17
4.1 Corporate Existence.......................................................................... 17
4.2 Corporate Authority.......................................................................... 18
4.3 Brake Company Stock, Partnership Interests and Joint Venture Interests....................... 20
4.4 Governmental Approvals and Consents.......................................................... 21
4.5 Financial Statements......................................................................... 22
4.6 Absence of Certain Changes................................................................... 23
4.7 Properties................................................................................... 23
4.8 Contracts.................................................................................... 25
4.9 Litigation................................................................................... 27
4.10 Intellectual Property Rights................................................................. 27
4.11 Insurance.................................................................................... 30
4.12 Tax Matters.................................................................................. 30
4.13 Employment and Benefits...................................................................... 33
4.14 Compliance with Laws......................................................................... 39
4.15 Labor Matters................................................................................ 39
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Page
4.16 Environmental Matters........................................................................ 40
4.17 Transferred Assets........................................................................... 41
4.18 Undisclosed Liabilities...................................................................... 41
4.19 Receivables.................................................................................. 42
4.20 Inventories.................................................................................. 42
4.21 Customers.................................................................................... 43
4.22 Suppliers.................................................................................... 44
4.23 Finders; Brokers............................................................................. 44
ARTICLE V
REPRESENTATIONS OF PURCHASER......................................... 45
5.1 Corporate Existence.......................................................................... 45
5.2 Corporate Authority.......................................................................... 45
5.3 Governmental Approvals and Consents.......................................................... 47
5.4 Purchase for Investment...................................................................... 47
5.5 Financial Capacity........................................................................... 48
5.6 Finders; Brokers............................................................................. 48
ARTICLE VI
AGREEMENTS OF PURCHASER AND ITTI....................................... 48
6.1 Operation of the Business.................................................................... 48
6.2 Investigation of Business.................................................................... 53
6.3 Best Efforts; No Inconsistent Action......................................................... 54
6.4 Public Disclosures........................................................................... 58
6.5 Access to Records and Personnel.............................................................. 58
6.6 Employee Relations and Benefits.............................................................. 60
6.7 Pro Forma Transactions; Intercompany Transactions............................................ 85
6.8 German Reorganization........................................................................ 86
6.9 U.S. Real Property Matters................................................................... 87
6.10 Non-Competition.............................................................................. 89
6.11 Non-Solicitation; Confidentiality............................................................ 90
6.12 Jointly Developed Intellectual Property...................................................... 91
6.13 Use of the ITT Name and Marks................................................................ 91
6.14 Tax Matters.................................................................................. 93
6.15 Intellectual Property License Agreement...................................................... 98
6.16 Post-Closing Arrangements....................................................................102
6.17 No Other Representations or Warranties.......................................................102
6.18 Insurance Matters............................................................................103
6.19 No Solicitation or Negotiation...............................................................104
6.20 Audited Financial Statements.................................................................105
ARTICLE VII
CONDITIONS TO CLOSING............................................107
7.1 Conditions Precedent to Obligations of Purchaser and ITTI....................................107
7.2 Conditions Precedent to Obligation of ITTI...................................................109
7.3 Conditions Precedent to Obligation of Purchaser..............................................110
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Page
ARTICLE VIII
CLOSING...................................................111
8.1 Closing Date.................................................................................111
8.2 Purchaser Obligations........................................................................111
8.3 ITTI Obligations.............................................................................112
ARTICLE IX
INDEMNIFICATION...............................................114
9.1 Indemnification..............................................................................114
9.2 Certain Limitations..........................................................................120
9.3 Procedures for Third-Party Claims............................................................122
9.4 Tax Indemnification..........................................................................124
9.5 Certain Claims Procedures....................................................................127
9.6 Arbitration..................................................................................127
9.7 Remedies Exclusive...........................................................................129
9.8 Mitigation...................................................................................129
ARTICLE X
TERMINATION.................................................129
10.1 Termination Events...........................................................................129
10.2 Effect of Termination........................................................................130
ARTICLE XI
MISCELLANEOUS AGREEMENTS OF THE PARTIES...................................131
11.1 Notices......................................................................................131
11.2 Bulk Transfers...............................................................................132
11.3 Severability.................................................................................132
11.4 Further Assurances; Further Cooperation; Asset Returns.......................................132
11.5 Counterparts.................................................................................133
11.6 Expenses.....................................................................................134
11.7 Non-Assignability............................................................................134
11.8 Amendment; Waiver............................................................................134
11.9 Schedules and Exhibits.......................................................................135
11.10 Third Parties................................................................................136
11.11 Governing Law................................................................................136
11.12 Consent to Jurisdiction; Waiver of Jury Trial................................................136
11.13 Interpretation; Absence of Presumption.......................................................137
11.14 Entire Agreement.............................................................................137
11.15 Section Headings; Table of Contents..........................................................138
11.16 Specific Performance.........................................................................138
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EXHIBITS
Page
EXHIBIT A Entity Sellers
EXHIBIT B Entity Sellers Transferring Joint Venture Interests
EXHIBIT C Asset Sellers
EXHIBIT D Purchased Assets
EXHIBIT E Excluded Liabilities
EXHIBIT G Excluded Assets
EXHIBIT H Certain Excluded Brake Company Liabilities
EXHIBIT M Certain Excluded Brake Company Assets
Annex A Definitions
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SCHEDULES
Schedule 1.1 Conveyance Documents for Entity
Purchase Transfers
Schedule 1.2 Conveyance Documents for Joint
Venture Purchase Transfers
Schedule 2.3 Conveyance Documents for Asset
Purchase Transfers
Schedule 3.1(a) Budgeted GPA
Schedule 4.1 Corporate Existence
Schedule 4.2 Corporate Authority
Schedule 4.3 Brake Company Stock, Partnership
Interests and Joint Venture Interests
Schedule 4.4 Governmental Approvals and Consents
Schedule 4.5 Financial Statements
Schedule 4.6 Certain Changes
Schedule 4.7(b) Owned and Leased Real Property
Schedule 4.8 Contracts
Schedule 4.9 Legal Proceedings
Schedule 4.10(a), (b) and (c) Intellectual Property Rights and Claims
Schedule 4.11(a) and (b) Insurance
Schedule 4.12 Tax Matters
Schedule 4.13(a) U.S. Employee Benefit Arrangements
Schedule 4.13(b) U.S. Pension Plans - United States
Schedule 4.13(c) Prohibited Transactions - United States
Schedule 4.13(d) Termination and Reportable Events -
United States
Schedule 4.13(e) Funding and Qualification - United
States
Schedule 4.13(f) Multi-Employer Plans - United States
Schedule 4.13(g) U.S. Welfare Plans - United States
Schedule 4.13(h) Reports and Disclosure - United States
Schedule 4.13(i) Continuation Coverage - United States
Schedule 4.13(j) Argentina - Employee and Pension Plan
Matters
Schedule 4.13(k) UK Employees and Benefit
Arrangements
Schedule 4.13(l) UK Pension Arrangements
Schedule 4.14 Compliance with Laws
Schedule 4.15 Labor Matters
Schedule 4.16 Environmental Matters
Schedule 4.17 Transferred Assets
Schedule 4.18 Undisclosed Liabilities
Schedule 4.19 Receivables
Schedule 4.20 Inventories
Schedule 4.21 Customers
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Schedule 4.22 Suppliers
Schedule 6.1 Conduct of Business
Schedule 6.6(f) Severance Benefits - United States
Schedule 6.6(k)(iii) Hourly Pension Plans
Schedule 6.6(l)(ii)(E) Salaried Retirement Plan
Schedule 6.6(l)(iv)(E) Excess Pension Plan
Schedule 6.6(p) UK Pension Arrangements
Schedule 6.7(a) Pro Forma Transactions
Schedule 6.7(b)(ii) ITT Automotive du Brasil Ltd. Loan
Schedule 6.8 Description of German Reorganization
Schedule 6.16(a) Leasing Arrangements
Schedule 6.16(b) Terms of Aftermarket Wipers Supply
Arrangement
Schedule 6.16(c) Terms of Aftermarket Friction Supply
Arrangement
Schedule 6.16(d) Other Transition Arrangements
Schedule 7.1(b) Consents of Governmental Authorities
Schedule 9.1(e) Field Recall
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Tab, F4, Tab [Control F6] Para # [sp sp] [Shift Tab]
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STOCK AND ASSET PURCHASE AGREEMENT
This Stock and Asset Purchase Agreement, dated as of July 24, 1998
(hereinafter, the "Agreement"), between ITT INDUSTRIES, INC., an Indiana
corporation ("ITTI"), and CONTINENTAL AG, a corporation organized under the laws
of Germany ("Purchaser").
W I T N E S S E T H:
WHEREAS, certain direct and indirect Subsidiaries of ITTI are engaged,
in part or in whole, in the business of designing, developing, manufacturing,
marketing and selling brake systems and chassis modules for the automotive
industry worldwide (such business is hereinafter referred to as the "Business";
it being understood, however, that the Business does not include ITTI's
Automotive Electrical Systems, Fluid Handling, Shock Absorber or Brake Friction
Products Businesses or the businesses comprising its Fluid Technology and
Defense and Electronics segments (including the Cannon Business (such businesses
as defined in Annex A hereto and such segments as described in ITTI's Annual
Report on Form 10-K for the year ended December 31, 1997, and all of such
businesses and segments the "Excluded Businesses")); and
WHEREAS, subsequent to the date hereof and prior to the Closing (as
defined in Section 8.1), ITTI shall cause certain of its Subsidiaries to be
restructured as described in Sections 6.7 and 6.8; and
WHEREAS, Purchaser, through one or more of its direct or indirect
Subsidiaries, desires to purchase, and ITTI desires to sell, or to cause (i) its
direct or indirect Subsidiaries listed on Exhibit A (collectively with ITTI, the
"Entity Sellers") and any nominee holders therefor to sell to Purchaser and/or
the respective purchasers to be identified by Purchaser
10
2
following the date hereof (the "Designated Entity Purchasers"), on the terms and
subject to the conditions of this Agreement, (A) all of the outstanding shares
of capital stock of the Subsidiaries listed on Exhibit A (such shares, the
"Transferred Subsidiary Stock") and all of the partnership interests in the
partnerships listed on Exhibit A (such partnership interests, including balances
on all accounts attributable to such partnership interests, the "Partnership
Interests", and such Subsidiaries and partnerships, the "Transferred
Subsidiaries" or the "Brake Companies") (such purchase, the "Entity Purchase")
and (B) all of the ownership interests in the joint ventures listed on Exhibit B
(such interests, the "Joint Venture Interests" and such joint ventures, the
"Joint Ventures" and such purchase, the "Joint Venture Purchase") and (ii) its
direct or indirect subsidiaries listed on Exhibit C-1 (the "Non-IP Asset
Sellers") and Exhibit C-2 (the "Intellectual Property Transferors" and,
collectively with the Non-IP Asset Sellers, the "Asset Sellers" and, together
with the Entity Sellers, collectively the "Sellers") to sell to Purchaser and/or
the respective purchasers to be identified by Purchaser following the date
hereof in respect of Exhibit C-1 (the "Designated Non-IP Purchasers") and
Exhibit C-2 (the "Designated IP Transferees" and, collectively with the
Designated Non-IP Purchasers, the "Designated Asset Purchasers" and, together
with the Designated Entity Purchasers, collectively the "Designated
Purchasers"), upon the terms and subject to the conditions of this Agreement,
certain assets and certain liabilities of the Asset Sellers as specified in this
Agreement (such purchase, the "Asset Purchase" and, together with the Entity
Purchase and the Joint Venture Purchase, the "Purchase"); and
WHEREAS, capitalized terms used and not defined in this Agreement shall
have the meaning set forth in Annex A hereto; and
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NOW, THEREFORE, in consideration of the premises and the mutual
promises contained herein, the parties hereby agree as follows:
ARTICLE I
SALE AND TRANSFER OF TRANSFERRED
SUBSIDIARY STOCK, PARTNERSHIP INTERESTS AND
JOINT VENTURE INTERESTS
1.1 Sale and Transfer of Transferred Subsidiary Stock and
Partnership Interests.
Subject to the satisfaction or waiver of the conditions set
forth in this Agreement, at the Closing and as of the Closing Date, ITTI shall
or shall cause the applicable Entity Sellers (including any persons holding
shares in the Transferred Subsidiaries on behalf of the Entity Sellers) to sell,
assign, transfer, convey and deliver to Purchaser and/or the respective
Designated Entity Purchasers, and Purchaser shall or shall cause the applicable
Designated Entity Purchasers to purchase and acquire, all the Transferred
Subsidiary Stock and all the Partnership Interests. In connection therewith,
ITTI shall or shall cause the applicable Entity Sellers to deliver to Purchaser
and/or the respective Designated Entity Purchasers (with respect to Transferred
Subsidiaries which have issued stock certificates) certificates representing the
Transferred Subsidiary Stock, duly endorsed, or accompanied by stock powers duly
executed, with all necessary stock transfer stamps attached thereto and
canceled, and such other evidence of the Partnership Interests, and/or ITTI or
the applicable Entity Seller and any nominee therefor and Purchaser or the
respective Designated Entity Purchaser shall execute, deliver and/or file such
other assignments, deeds, share transfer forms, endorsements, notarial deeds of
transfer or other instruments or documents, duly stamped where necessary, as
required by the jurisdiction of organization of each Transferred
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Subsidiary and all other documents related to the Transferred Subsidiary Stock
or the Partnership Interests as Purchaser may reasonably request to effectuate
such sale, assignment, transfer, conveyance and delivery, whether or not listed
on Schedule 1.1. Schedule 1.1 lists the conveyance documents to be executed,
delivered and/or filed at Closing in order to effect each transfer of
Transferred Subsidiary Stock or Partnership Interests. It is understood and
agreed that notwithstanding the transfer of the Transferred Subsidiary Stock,
whether or not the Pro Forma Transactions are consummated prior to closing, ITTI
shall retain the Excluded Brake Company Assets.
1.2 Sale, Transfer and Assignment of Joint Venture Interests.
Subject to the satisfaction or waiver of the conditions set forth in
this Agreement, at the Closing and as of the Closing Date, ITTI shall or shall
cause the applicable Entity Sellers and any nominee holders therefor to sell,
assign, transfer, convey and deliver to Purchaser and/or the respective
Designated Entity Purchasers, and Purchaser shall or shall cause the applicable
Designated Entity Purchasers to purchase and acquire, all the Joint Venture
Interests held by ITTI and/or the Entity Sellers together with all ITTI's or the
applicable Entity Seller's, as the case may be, right, title and interest in and
to the applicable partnership agreement, joint venture agreement, limited
liability company agreement or similar agreement governing such Joint Venture
(each a "Joint Venture Agreement"). In connection therewith, ITTI shall or shall
cause the applicable Entity Sellers to deliver to Purchaser and/or the
applicable Designated Entity Purchaser such evidence of the Joint Venture
Interests, and/or ITTI or the applicable Entity Seller and any nominee therefor
and Purchaser and/or the applicable Designated Entity Purchaser shall execute,
deliver and/or file such other assignments, deeds, transfer forms, endorsements,
notarial deeds of transfer or other
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instruments or documents, duly stamped if necessary, as required by the
jurisdiction of organization of each Joint Venture and all other documents
related to the Joint Venture Interests as Purchaser may reasonably request to
effect such sale, assignment, transfer, conveyance and delivery, whether or not
listed on Schedule 1.2. Schedule 1.2 lists the conveyance documents to be
executed, delivered and/or filed at Closing in connection with each transfer
comprising the Joint Venture Purchase.
ARTICLE II
SALE OF ASSETS AND ASSUMPTION OF LIABILITIES
2.1 Sale of Assets.
Subject to the satisfaction or waiver of the conditions set
forth in this Agreement, at the Closing and as of the Closing Date, except as
set forth in the following sentence, ITTI shall or shall cause the Asset Sellers
to sell, assign, transfer, convey and deliver to Purchaser and/or the respective
Designated Asset Purchasers, and Purchaser shall or shall cause the applicable
Designated Asset Purchasers to purchase and acquire, all of the Asset Sellers'
right, title and interest in the Purchased Assets. The parties agree that
[Alfred] Teves GmbH & Co. oHG ("Teves") will sell, assign, transfer, convey and
deliver to Purchaser or the respective Designated Asset Purchaser, and Purchaser
shall or shall cause the applicable Designated Asset Purchaser to purchase and
acquire, all of Teves' right, title and interest in the Purchased Assets located
in Belgium (other than Real Property) (the "Belgian Assets") immediately prior
to the Closing but as of the Closing Date.
As of the Closing, risk of loss as to the Purchased Assets
shall pass from the Asset Sellers to Purchaser except as may otherwise be
provided herein.
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2.2 Assumption of Liabilities; Excluded Liabilities.
Subject to the satisfaction or waiver of the conditions set
forth in this Agreement, at the Closing and as of the Closing Date, except as
set forth in the following sentence, Purchaser or the respective Designated
Asset Purchaser shall assume and shall agree to pay, perform and discharge when
due all liabilities and obligations of the Asset Sellers relating to the
Business or the Purchased Assets other than the Excluded Liabilities (as defined
below), whether fixed, absolute, matured, unmatured, accrued or contingent, now
existing or arising after the date hereof, including all liabilities and
obligations under the Contracts assigned pursuant to Section 2.1 to the extent
such Contracts are assigned, including to the extent such liabilities and
obligations are unpaid, undelivered or unperformed on the Closing Date (the
"Assumed Liabilities"). The parties agree that Purchaser or the respective
Designated Asset Purchaser shall assume and shall agree to pay, perform and
discharge when due all Assumed Liabilities relating to the Belgian Assets, other
than the Excluded Liabilities, immediately prior to the Closing but as of the
Closing Date. It is expressly agreed that the Asset Sellers will retain, and
neither Purchaser nor any of its Subsidiaries shall assume, the liabilities
described in Exhibit E (collectively, the "Excluded Liabilities").
2.3 Transfer of Purchased Assets and Assumed Liabilities.
(a) At the Closing, ITTI shall convey or cause to be conveyed
to Purchaser title to the Owned Real Property in Virginia, Michigan and North
Carolina by delivery of special warranty deeds duly executed and acknowledged in
proper statutory form for recording subject only to Permitted Liens.
(b) At the Closing, the patents and patent applications
included in the Purchased Assets shall be assigned to the Designated IP
Transferees by one of the Intellectual
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Property Transferors, each of whom own certain of such patents and patent
applications, by delivery of one or more assignment documents which (i) recite
all of the patents and patent applications included in the Purchased Assets,
(ii) are signed by each of the Intellectual Property Transferors and (iii) make
a general assignment of each signatory's right, title and interest in the
recited patents and patent applications. The Intellectual Property Transferors
shall furnish Purchaser with such necessary information and reasonable
assistance as Purchaser may reasonably request in connection with the
preparation and filing of documents with any Governmental Authority for
recording its ownership interest in the Intellectual Property included in the
Purchased Assets.
(c) The other Purchased Assets shall be sold, conveyed,
transferred, assigned and delivered, and the Assumed Liabilities shall be
assumed, pursuant to transfer and assumption agreements or other instruments in
such form as is necessary to effect a conveyance of the Purchased Assets and an
assumption of the Assumed Liabilities in the jurisdictions in which such
transfers are to be made, and which shall be reasonably satisfactory to
Purchaser and ITTI, to be executed (upon the terms and subject to the conditions
hereof) on the Closing Date by the respective Asset Seller and the respective
Designated Asset Purchaser, and such other conveyance and assumption documents
as may be required in such jurisdictions, whether or not listed on Schedule 2.3.
Schedule 2.3 lists the conveyance and assumption documents to be executed,
delivered and/or filed at Closing in connection with the Asset Purchase in each
such jurisdiction.
2.4 Required Consents.
(a) Notwithstanding anything to the contrary contained in this
Agreement, to the extent that the sale, conveyance, transfer, assignment or
delivery or attempted sale,
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conveyance, transfer, assignment or delivery to any Designated Purchaser of any
Joint Venture Interest or any Purchased Asset (including any Contract) (each a
"Transferred Asset") is prohibited by any applicable law or would require any
governmental or third-party authorizations, approvals, consents or waivers and
such authorizations, approvals, consents or waivers shall not have been obtained
prior to the Closing, this Agreement shall not constitute a sale, conveyance,
transfer, assignment or delivery, or an attempted sale, conveyance, transfer,
assignment or delivery thereof if any of the foregoing would constitute a breach
of applicable law or the rights of any third party; provided, however, that,
except to the extent that a condition to closing set forth in Article VII, if
any, relating to the foregoing shall not be satisfied (in which case the Closing
shall not occur unless waived by Purchaser), the Closing shall occur
notwithstanding the foregoing without any adjustment to the Purchase Price on
account of such required authorization, except as provided in Section 2.4(b).
Following the Closing, the parties shall use their reasonable best efforts, and
shall cooperate with each other, to obtain promptly such authorizations,
approvals, consents or waivers; provided, however, that neither ITTI nor
Purchaser nor any of their respective Affiliates shall be required to pay any
consideration therefor, other than filing, recordation or similar fees payable
to any Governmental Authority, which fees shall be paid by ITTI. Pending or in
the absence of such authorization, approval, consent or waiver, the parties
shall cooperate with each other in any reasonable and lawful arrangements
designed to provide to the respective Designated Purchaser the benefits and
liabilities of use of such Transferred Asset (such arrangements a "Contract
Transition Arrangement").
(b) If such authorization, approval, consent or waiver for the
sale, conveyance, transfer, assignment or delivery of any such Transferred Asset
is obtained, ITTI shall cause
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the applicable Entity Seller or Asset Seller, as the case may be, to promptly
convey, transfer, assign and deliver, or cause to be conveyed, transferred,
assigned and delivered, such Transferred Asset to such Designated Purchaser. In
the event that (i) the Closing occurs notwithstanding the existence of an
injunction, order or decree in any jurisdiction and any portion of the Business
is not transferred to Purchaser or a Designated Purchaser on account of such
injunction, order or decree, or (ii) by the Closing Date any Joint Venture
Interest cannot be transferred because another party in such Joint Venture shall
have exercised preemptive rights in respect of such Joint Venture Interest, the
Initial Purchase Price shall be reduced by an amount equal to the amount
allocable to such Joint Venture Interest or portion of the Business as set forth
on Exhibit I. If, by the 120th day following the Closing Date, any necessary
consent or waiver with respect to any Joint Venture Interest is not obtained and
no Contract Transition Arrangement has been put into place, or another party in
such Joint Venture shall have exercised preemptive rights in respect of such
Joint Venture Interest, then ITTI shall pay to Purchaser in accordance with
Section 3.4(c) the amount allocable to such Joint Venture Interest as set forth
on Exhibit I.
ARTICLE III
PURCHASE PRICE AND ADJUSTMENTS
3.1 Purchase Price. The aggregate purchase price for the Transferred
Subsidiary Stock, the Partnership Interests, the Purchased Assets and the Joint
Venture Interests shall be an amount (the "Purchase Price") equal to
U.S.$1,930,000,000 (one billion, nine hundred and thirty million U.S. dollars)
(the "Initial Purchase Price") minus (a) the excess, if any of the Budgeted GPA
for the period from January 1, 1998 through the Closing Date over the Actual GPA
for the period from January 1, 1998 through the Closing Date and (b) the excess,
if any,
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of $310 million over the Adjusted Audited Net Worth of the Business as of
December 31, 1997.
3.2 Payment of Purchase Price. On the Closing Date, Purchaser
shall pay to ITTI the Initial Purchase Price, less any amounts to be deducted in
accordance with Section 2.4(b). Such amount shall be payable in United States
dollars in immediately available federal funds to such bank account or accounts,
in the United States, as shall be designated by ITTI no later than the second
Business Day prior to the Closing.
3.3 Determination of Closing Balance Sheet.
(a) The Closing Balance Sheet shall be determined following
the Closing Date as follows:
(i) As soon as practicable after the Closing Date, but in no
event later than 60 days thereafter, ITTI shall prepare and deliver to Purchaser
an adjusted consolidated balance sheet (the "Closing Balance Sheet") which shall
be presented in the same three-column format and include at least the same line
items as the Reference Balance Sheet. The Closing Balance Sheet shall be
prepared in accordance with the same accounting principles, procedures, policies
and methods that were employed in preparing the Audited Financial Statements and
shall present:
(A) in column 1, a consolidated balance sheet of the
shareholders' (or partnership holders') equity in the Transferred
Subsidiaries, the Entity Sellers' equity in the Joint Ventures and the
assets and liabilities of the Asset Sellers in respect of the Business
as of immediately prior to the Closing, including a line item for
Actual GPA;
(B) in column 2, to the extent included in column 1,
(1) (x) the assets of the Brake Companies in column 1 which are set
forth on Exhibit M and all other
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assets of the Brake Companies in column 1 which are retained by the
Sellers in accordance with the terms of this Agreement (collectively,
the "Excluded Brake Company Assets") and (y) the assets of the Asset
Sellers in column 1 which are not Purchased Assets, (2) the amount of
any deferred tax asset reflected in column 1, (3) the amount by which
the reserves reflected in column 1 are less than the reserves stated in
the 1997 Financial Statements other than (x) any such reduction
properly attributable exclusively to the utilization of such reserves
for the purpose for which they have been established (e.g. pursuant to
the Cost Improvement Plan described in the Offering Memorandum,
including the Cost Base Initiative program) and (y) any such reduction
properly attributable to a bona fide change in facts and circumstances
since December 31, 1997 warranting such reduction (rather than a change
in ITTI's policies with respect to establishing or maintaining reserves
or a re-evaluation of the underlying facts and circumstances) and (4)
(x) the liabilities of the Brake Companies in column 1 which are set
forth on Exhibit H and all other liabilities of the Brake Companies in
column 1 that are for the account of the Sellers in accordance with the
terms of this Agreement (collectively, the "Excluded Brake Company
Liabilities") and (y) the liabilities of the Asset Sellers in column 1
which are Excluded Liabilities; and
(C) in column 3, an amount equal to the amount in
column 1 less the amount in column 2 (the "Closing Adjusted Net
Worth").
Columns 1 and 3 of the Closing Balance Sheet shall
present fairly in all material respects the shareholders' (or
partnership holders') equity in the Transferred Subsidiaries, the
Entity Sellers' equity in the Joint Ventures and the assets and
liabilities of the Asset Sellers in respect of the Business as of
immediately prior to the
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Closing and the Closing Adjusted Net Worth, respectively, in conformity
with United States generally accepted accounting principles applied on
a basis consistent with the Audited Financial Statements ("GAAP")
(subject to the provisions of Section 3.3(b)). Purchaser shall
cooperate fully with ITTI in the preparation of the Closing Balance
Sheet. The Closing Balance Sheet shall be accompanied by the
unqualified opinion of Arthur Andersen LLP ("ITTI's Accountants") that
each of column 1 and column 3 of the Closing Balance Sheet presents
fairly in all material respects the shareholders' (or partnership
holders') equity in the Transferred Subsidiaries, the Entity Sellers'
equity in the Joint Ventures and the assets and liabilities of the
Asset Sellers in respect of the Business as of immediately prior to the
Closing and the Closing Adjusted Net Worth, respectively, in conformity
with GAAP applied on a basis consistent with the preparation of the
Audited Financial Statements (subject to the provisions of Section
3.3(b)), subject, in the case of the column 3 balance sheet, to such
limitations and qualifications as are customary for a pro forma balance
sheet (it being understood that such "opinion" in the case of column 3
may take the form of a comfort letter), and it being further understood
in all cases that such opinion or comfort letter shall not be disclosed
to any person (other than Purchaser's legal and financial advisors) for
any purpose without the prior written consent of ITTI. Without limiting
the generality of the foregoing, Purchaser shall provide ITTI and its
representatives with reasonable access, during normal business hours,
to the facilities, personnel and accounting records of the Business, to
the extent reasonably necessary to permit ITTI to prepare the Closing
Balance Sheet. KPMG Peat Marwick LLP ("Purchaser's Accountants") shall
be permitted to observe ITTI's Accountants in conducting the audit
procedures
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necessary to prepare the Closing Balance Sheet and the report of ITTI's
Accountants thereon and, in connection therewith, ITTI shall (i) cause
ITTI's Accountants, officers, employees and agents to afford
Purchaser's Accountants reasonable access to the offices, properties,
books and records and employees of ITTI and its Subsidiaries and (ii)
furnish Purchaser's Accountants reasonable access to, and copies of,
such financial and operating data and other documents and information
regarding the assets, properties and goodwill of the Business as
Purchaser's Accountants may reasonably request.
(b) In computing the Closing Adjusted Net Worth the parties
shall assume that the Business will continue as a going concern, and shall not
take into account (i) any of the plans which Purchaser intends to initiate
(other than plans initiated by ITTI, the Brake Companies or the Asset Sellers in
respect of the Business prior to the Closing) following the Closing with respect
to any of the Brake Companies, the Joint Ventures, the Purchased Assets or the
Business or (ii) any facts or circumstances that are unique or particular to
Purchaser.
(c) Purchaser may dispute the Closing Adjusted Net Worth as
shown on the Closing Balance Sheet by notifying ITTI in writing within 30 days
after receipt of the Closing Balance Sheet. During such 30-day period
Purchaser's Accountants and employees of Purchaser shall be entitled to access
to ITTI's and ITTI's Accountants' work papers prepared in connection with the
Closing Balance Sheet and shall be entitled to review and discuss such work
papers with ITTI and ITTI's Accountants. Any notice delivered in accordance with
this Section 3.3(c) shall specify in reasonable detail the nature of any
disagreement so asserted, which disagreement shall not relate to the principles,
policies, methods and procedures underlying such calculation (so long as such
principles, policies, methods and procedures are
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in accordance with GAAP and are not inconsistent with those used in preparing
the Financial Statements). If Purchaser does not so notify ITTI within such
period, the Closing Balance Sheet prepared by ITTI shall be final, binding and
conclusive on the parties. If Purchaser does so notify ITTI, Purchaser and ITTI
shall attempt to reconcile their differences, and any resolution by them as to
any disputed amounts shall be final, binding and conclusive on the parties
hereto.
(d) If Purchaser and ITTI are unable to reach a resolution
with respect to all of the items specified in the notice referred to in Section
3.3(c) within 20 days after the date of receipt by ITTI of such notice, then
either party may submit the items remaining in dispute for resolution to
PricewaterhouseCoopers LLC or to such other accounting firm of international
recognition mutually acceptable to Purchaser and ITTI (the "Independent
Accounting Firm"), which shall, within 20 days after such submission or such
longer period as the Independent Accounting Firm may reasonably require,
determine and report to ITTI and Purchaser upon such remaining disputed items,
and such determination shall be final, binding and conclusive on the parties
hereto. The fees and disbursements of the Independent Accounting Firm shall be
allocated between Purchaser and ITTI in the same proportion that the aggregate
amount of such remaining disputed items so submitted to the Independent
Accounting Firm that is unsuccessfully disputed by each such party (as finally
determined by the Independent Accounting Firm) bears to the total amount of such
remaining disputed items so submitted.
3.4 Settlement of Purchase Price.
(a) If Actual GPA for the period from January 1, 1998 through
the Closing Date as finally determined pursuant to Section 3.3(c) or (d) is less
than the Budgeted GPA for
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such period ITTI shall, within five Business Days after such final
determination, pay such difference to Purchaser.
(b) If the Adjusted Audited Net Worth as finally determined
pursuant to Section 6.20 is less than $310 million, ITTI shall, within five
Business Days after such final determination, pay such difference to Purchaser.
(c) ITTI shall pay interest on any payment pursuant to Section
3.4(a) or 3.4(b) to Purchaser for the period from the Closing Date to the date
of payment at the London Inter-Bank Offer Rate ("LIBOR") for six month deposits
in U.S. dollars as quoted on Telerate Page 3750 on the Closing Date plus 25
basis points. Payment of such difference and interest thereon shall be made by
wire transfer of United States dollars in immediately available funds to such
account or accounts as are designated in writing by Purchaser no later than the
second Business Day prior to the date on which such payment is due.
3.5 Allocation of Purchase Price.
The Purchase Price allocations among the Purchased Assets,
Transferred Subsidiaries and the Joint Ventures shall be made in a manner
consistent with the allocations set forth on Exhibit I. For the purposes of all
Taxes, Purchaser and ITTI agree to report the transactions contemplated by this
Agreement in a manner consistent with the allocations under this Section 3.5 and
Exhibit I, and that none of them will take any position inconsistent with such
allocations on any Tax Return, in any refund claim, in any litigation, or
otherwise, without the consent of the other party except as required by a final
"determination" within the meaning of Section 1313 of the Code or similar
concepts under non-U.S. Tax law.
Purchaser shall prepare an allocation schedule of Purchase
Price and Assumed Liabilities among the classes of Purchased Assets, along with
the first draft of Internal
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Revenue Service Form 8594, and any similar form required by any foreign
jurisdiction which is necessitated by the transactions contemplated by this
Agreement with respect to the Purchased Assets, which shall be sent to ITTI at
the earlier of (i) 60 days following agreement between the parties as to the
Closing Balance Sheet or (ii) 90 days prior to the due date, including
extensions, for filing the federal income tax return for ITTI or the Designated
Purchaser of the U.S. Business, whichever files its return earlier, for the
taxable year in which the Closing takes place. Within 30 days after the receipt
of such allocation schedule and Form 8594, ITTI shall propose any changes to
such allocation schedule and Form 8594 or shall indicate its concurrence
therewith, which concurrence will not be unreasonably withheld.
3.6 Collection and Payment of Receivables.
In the event the Closing occurs on one of the dates
specifically enumerated in Section 8.1, or if the Closing occurs on any other
date and the parties so agree, Purchaser shall pay to ITTI at or prior to the
close of business on the fourth Business Day following the 25th of the month in
which the Closing occurs an amount equal to the total amount of cash payments
made by original equipment manufacturers and received in Germany or the United
States by Purchaser, any Designated Purchaser or any Brake Company on the 25th
day and the two Business Days immediately following the 25th day of the month in
which the Closing occurs in respect of trade receivables in respect of original
equipment manufacturers outstanding on the Closing Date. All cash payments in
respect of such trade receivables made on the Closing Date shall in any case be
for the account of ITTI. Such payment shall be payable in the currency in which
it is received in immediately available funds to such bank account or accounts,
in the United States or Germany, as shall be designated by ITTI no later than
the second Business Day prior to the date on which such payment is due and shall
be
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accompanied by a certificate of the chief financial officer of Purchaser
certifying that the amount of such payment represents all cash payments received
in Germany or the United States by Purchaser, any Designated Purchaser or any
Brake Company during such period in respect of such trade receivables. ITTI and
ITTI's Accountants shall be entitled to access to the work papers of Purchaser
and, if applicable, Purchaser's Accountants prepared in connection with the
calculation of the payment due pursuant to this Section 3.6 and shall be
entitled to review and discuss such work papers with Purchaser and, if
applicable, Purchaser's Accountants. In connection with the foregoing, Purchaser
shall collect or cause to be collected such trade receivables in the ordinary
course of business and shall not take any action reasonably expected to defer
collection of Receivables during such period.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ITTI
ITTI represents and warrants to Purchaser as follows:
4.1 Corporate Existence.
Each of the Sellers, the Brake Companies and, to the knowledge
of ITTI, the Joint Ventures is duly organized and validly existing and, where
applicable, in good standing under the laws of the jurisdiction of its
organization. Each of the Sellers, the Brake Companies and, to the knowledge of
ITTI, the Joint Ventures (a) has the requisite corporate, partnership or similar
power and authority to own, lease and operate its properties and assets,
including in the case of the Asset Sellers the properties and assets included in
the Purchased Assets, and to carry on the Business as the same is now being
conducted, and (b) is duly authorized, qualified or licensed to do business and,
except as set forth in Schedule 4.1, is in good standing in every jurisdiction
wherein, by reason of the nature of the Business, the same
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is required, except, in the case of clause (b), where the failure of the
foregoing to be true and correct would not, individually or in the aggregate,
have a material adverse effect on the conduct of the Business. ITTI has
previously provided Purchaser true and complete copies, as in effect on the date
of this Agreement, of the certificate of incorporation, bylaws, partnership or
joint venture agreement or similar organizational documents (each of which are
in full force and effect) of each Brake Company and each Joint Venture.
4.2 Corporate Authority.
This Agreement and the other agreements, instruments and
documents to be executed, delivered and/or filed in connection herewith
(collectively with this Agreement, the "Transaction Documents") by ITTI and the
other Sellers and the consummation of the transactions contemplated hereby and
thereby involving such persons have been or, in the case of the other Sellers
and the Transaction Documents other than this Agreement, will be prior to the
Closing, duly authorized by the Board of Directors (or a duly authorized
committee or representative thereof) of ITTI, and will be duly authorized by
such other Sellers, by all requisite corporate, shareholder, partnership or
other action prior to the Closing. ITTI has full power and authority to execute
and deliver this Agreement and to perform its obligations hereunder, and each of
the other Sellers has or will have at or prior to the Closing full power and
authority to execute, deliver and/or file the Transaction Documents to which it
is a party and to perform its obligations hereunder or thereunder. This
Agreement has been duly executed and delivered by ITTI, and the other
Transaction Documents will be duly executed, delivered and/or filed by each of
the Sellers party thereto and this Agreement constitutes, and each of the other
Transaction Documents when so executed, delivered and/or filed will constitute,
a valid and legally binding obligation of ITTI and/or the applicable Seller
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party thereto, enforceable against it in accordance with its terms except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law). Except (a) for required filings under the HSR
Act, European Union merger control and any other applicable laws or regulations
relating to antitrust or competition (collectively, "Antitrust Regulations"),
(b) the filing of this Agreement with the Securities and Exchange Commission and
(c) as set forth in Schedule 4.2, the execution, delivery and/or filing of this
Agreement and the other Transaction Documents by ITTI and/or each of the Sellers
party thereto and the consummation by ITTI and each of the Sellers of the
transactions contemplated hereby and thereby will not (i) violate or conflict
with any provision of the respective certificate of incorporation or by-laws or
similar organizational documents of ITTI, any Brake Company, any Joint Venture
(to the knowledge of ITTI) or any Seller, (ii) result in any breach or
constitute any default (with or without notice or lapse of time, or both) under,
or require any consent or give rise to a right of termination, cancellation,
acceleration or amendment of any obligation or a loss of a benefit under, or
result in the creation of any pledge, lien, claim, charge, security interest,
option or other encumbrance (collectively, "Liens") under, any Disclosed
Contract or any license or permit to which ITTI, any Brake Company, any Joint
Venture (to the knowledge of ITTI) or any Seller or any of their respective
properties or assets in respect of the Business is subject or is a party, or
(iii) violate, conflict with or result in any breach under any provision of any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to ITTI, any Brake Company, any Joint Venture (to the knowledge of ITTI) or any
of the Sellers or any of their respective properties or assets, except, in the
case
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of clauses (ii) and (iii), to the extent that any such breach, default,
termination, cancellation, acceleration, amendment, loss, Lien, violation,
conflict, breach or loss would not have or would not be reasonably likely to
have, individually or in the aggregate, a material adverse effect on the
business, operations, assets or financial condition of the Business, taken as a
whole, or a material adverse effect on the ability of ITTI and each of the
Sellers, taken as a whole, to consummate the transactions contemplated hereby (a
"Seller Material Adverse Effect").
4.3 Brake Company Stock, Partnership Interests and Joint Venture
Interests.
All of the outstanding shares of capital stock of or
partnership interests in the Brake Companies, including the Partnership
Interests (the "Brake Company Stock"), and the Joint Venture Interests, have
been validly issued and, to the extent applicable, are fully paid and
nonassessable and are owned by ITTI and/or one or more of the Sellers free and
clear of all Liens, except for the liabilities, if any, of general partners with
respect to Brake Companies in partnership form. Schedule 4.3 sets forth as of
the date of this Agreement and as of the Closing Date, for each of the Brake
Companies and the Joint Ventures the authorized capital stock, the number of
shares of outstanding capital stock or the nominal amount of the shares or the
fixed partnership capital outstanding, as the case may be, the number of shares
of such outstanding capital stock or partnership capital owned by ITTI and its
Subsidiaries and the name of each such owner. None of the shares of Brake
Company Stock or, to the knowledge of ITTI, any Joint Venture Interests was
issued in violation of any preemptive rights. There are no outstanding options,
warrants, calls or other rights of any kind relating to the sale, transfer,
registration, issuance or voting of any Brake Company Stock or any Joint Venture
Interests, or any securities convertible into or exercisable or
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exchangeable for shares of Brake Company Stock or any Joint Venture Interests.
There are no "phantom stock" or other rights to participate in the revenues,
profits, assets or equity (or the value thereof) of any Brake Company or any
Joint Venture ("Equity Equivalents") which have been issued, granted or entered
into by ITTI or any of the Brake Companies or, to the knowledge of ITTI, the
Joint Ventures, or any securities convertible into or exercisable or
exchangeable for or evidencing the right to purchase any Brake Company Stock,
Joint Venture Interests or Equity Equivalents. Upon consummation of the
transactions contemplated by this Agreement, Purchaser or the applicable
Designated Purchaser, assuming it shall have purchased the shares of Brake
Company Stock or the Joint Venture Interests in good faith and without notice of
any adverse claim, will own the shares of Brake Company Stock and the Joint
Venture Interests free and clear of all Liens.
4.4 Governmental Approvals and Consents.
None of ITTI, any Seller, any Brake Company or, to the
knowledge of ITTI, any Joint Venture is subject to any order, judgment or decree
which would prevent the consummation of the Purchase. No claim, legal action,
suit, arbitration, governmental investigation, action or other legal or
administrative proceeding is pending or, to the knowledge of ITTI, threatened
against ITTI, any Seller, any Brake Company or, to the knowledge of ITTI, any
Joint Venture which would enjoin or delay the consummation of the Purchase.
Except as set forth in Schedule 4.4 hereto and except for any consents required
under any Antitrust Regulations, no material consent, approval, order or
authorization of, license or permit from, notice to or registration, declaration
or filing with, any United States or foreign, federal, state, provincial,
municipal or local government, court of competent
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jurisdiction, administrative agency or commission or other governmental or
regulatory authority or instrumentality ("Governmental Authority"), is required
on the part of ITTI or any Seller in connection with the execution, delivery
and/or filing of this Agreement or any of the other Transaction Documents or the
consummation of the transactions contemplated hereby and thereby, except for
such consents, approvals, orders or authorizations, licenses or permits, filings
or notices which have been obtained and remain in full force and effect.
4.5 Financial Statements.
(a) Schedule 4.5 contains copies of the unaudited pro forma
consolidated balance sheets of the Business as of December 31, 1996 and December
31, 1997 and the related consolidated statements of income for the fiscal years
ended on such dates (collectively, the "Financial Statements"). The Financial
Statements present fairly in all material respects the financial condition and
the results of operations of the Business as of such dates and for such periods
in accordance with GAAP, except that they will not include all of the
information required to be included in the footnotes required by GAAP. It is
understood and agreed that this Section 4.5(a) speaks only as of the date of
this Agreement.
(b) ITTI makes no representation with respect to any financial
information delivered to Purchaser other than as contained in or pursuant to
this Agreement.
(c) The Audited Financial Statements (i) were prepared in
accordance with the books of account and other financial records of the
Business, (ii) present fairly in all material respects the financial condition
and the results of operations of the Business as of such dates and for such
periods in accordance with GAAP, (iii) have been prepared in accordance with
GAAP and (iv) include all adjustments (consisting only of normal recurring
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adjustments) that are necessary in accordance with GAAP for a fair presentation
of the consolidated financial condition of the Business and the results of the
operations of the Business. It is understood and agreed that the representations
in this Section 4.5(c) are made only as of the Closing Date.
4.6 Absence of Certain Changes.
Except as set forth in Schedule 4.6 or as otherwise permitted
pursuant to this Agreement, since December 31, 1997, (i) the Business has been
conducted in all material respects in the ordinary course and in substantially
the same manner as previously conducted and (ii) there has been no Seller
Material Adverse Effect, other than as a result of the public announcement of
ITTI's intent to sell the Business (including ITTI's intent to sell the Business
to Purchaser), changes in prevailing interest rates, changes in general economic
conditions affecting the industry in which the Business operates or changes in
GAAP. Except as set forth in Schedule 4.6, since December 31, 1997, none of the
Brake Companies or the Asset Sellers in respect of the Business has taken any of
the actions referred to in any of Sections 6.1(b), (c), (d), (e), (f), (i), (j),
(l) or (m).
4.7 Properties.
(a) The Brake Companies, the Joint Ventures (to the knowledge
of ITTI) and the Asset Sellers have, or at the Closing will have, good title to
the personal property (including Intellectual Property) owned by the Brake
Companies, the Joint Ventures (to the knowledge of ITTI) or by the Asset Sellers
in respect of the Business, free and clear of all Liens, except (i) as disclosed
in the Financial Statements, (ii) Liens for taxes, assessments and other
governmental charges not yet due and payable or, if due, (A) not delinquent or
(B) being contested in good faith by appropriate proceedings during which
collection or
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enforcement against the property is stayed, (iii) mechanics', workmen's,
repairmen's, warehousemen's, carriers' or other like Liens, including all
statutory Liens, arising or incurred in the ordinary course of business, (iv)
original purchase price conditional sales contracts and equipment leases with
third parties entered into in the ordinary course of business and (v) Liens that
do not materially interfere with or affect the value or use of the underlying
asset (such Liens, charges and encumbrances described in clauses (i) through (v)
hereof are referred to herein as "Permitted Liens").
(b) Schedule 4.7(b) contains a list of all material real
property and material interests in real property owned by the Brake Companies,
the Joint Ventures (to the knowledge of ITTI) or the Asset Sellers in respect of
the Business ("Owned Real Property") or leased by the Brake Companies, the Joint
Ventures (to the knowledge of ITTI) or the Asset Sellers in respect of the
Business as lessee or lessor ("Leased Real Property" and, together with Owned
Real Property, the "Real Property"), including all buildings, structures and
other improvements situated thereon. Schedule 4.7(b) sets forth a list of all
material leases for any Leased Real Property. Except with respect to Real
Property situated in the United States, which will be addressed in accordance
with Section 6.9, and except as set forth in Schedule 4.7(b):
(i) the Brake Companies or the Asset Sellers have full and
unrestricted title in, and possession of, or an unrestricted title to,
the Owned Real Property;
(ii) the Brake Companies or the Asset Sellers have not
disposed of, or taken any steps to dispose of, the Owned Real Property
and are not under any commitment to dispose of it in whole or in part;
and
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(iii) the Owned Real Property is not subject to any material
Liens and no application for the registration of any material Liens has
been filed, nor have the Brake Companies or the Asset Sellers granted,
or are committed to grant, any such material Liens or are committed to
subject the Owned Real Property to any such material Liens. All
mortgages listed in Schedule 4.7(b) secure only liabilities of the
Business which are not Excluded Liabilities or otherwise retained for
the account of the Sellers; proper releases are available for all
Mortgages that no longer secure any underlying debt. None of ITTI or
any of the Sellers of Real Property located in the United States is a
"non-foreign person" within the meaning of Section 1445 of the Code and
ITTI shall deliver to Purchaser on the Closing Date an affidavit in the
form annexed hereto as Exhibit L.
4.8 Contracts.
(a) Except as otherwise disclosed in Schedules 4.7(b) (Owned
and Leased Real Property), 4.10(a) (Intellectual Property Rights), 4.10(b)
(Licenses), 4.13 (Employment Benefits) and 4.15 (Labor Matters) (the "Covered
Schedules") and Schedule 4.8, there are no commitments, contracts or groups of
related contracts, indentures or agreements to which any Brake Company or to
which any Asset Seller in respect of the Business is a party or by which any
Brake Company or any Asset Seller in respect of the Business is bound that
relates to the Business (hereinafter "Contracts") that (i) involve commitments
by any Brake Company or Asset Seller for terms of 12 months or longer and that
involve or are reasonably likely to involve payment by any Brake Company or
Asset Seller or to any Brake Company or Asset Seller in each case of more than
US$20,000,000 in the aggregate in the case of any individual Contract or group
of related Contracts, (ii) involve obligations of any Brake Company or any
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Asset Seller in respect of the Business for borrowed money or to maintain
deposits or advances of any kind or evidenced by bonds, debentures, notes or
similar instruments or guarantees or capital lease obligations or any other
obligations upon which interest charges are customarily paid, other than those
entered into in the ordinary course of business or those that involve
commitments to lend not in excess of US$25,000,000, (iii) involve any
non-compete agreement that will be applicable to any Brake Company or Designated
Asset Purchaser in respect of the Business following the Closing, (iv)
constitute material joint venture or partnership agreements or (v) constitute
equipment or machinery financial leases in respect of equipment or machinery
with an original asset value in excess of $5,000,000, in any of the foregoing
cases, excluding intercompany payables to be capitalized effective as of the
Closing Date pursuant to Section 6.7(b). Contracts disclosed in Schedule 4.8 are
hereafter referred to as the "Disclosed Contracts".
(b) ITTI has furnished or made available or will make
available prior to Closing to Purchaser a true and correct copy or summary of
the material terms of each Disclosed Contract. Each Contract (including each
Contract listed on the Covered Schedules) is valid and binding on the respective
parties thereto and in full force and effect according to its terms, except
where the failure to be in full force and effect would not, individually or in
the aggregate, have a Business Material Adverse Effect, and the Brake Companies
and the Asset Sellers that are parties thereto are not in default or breach
under any such Contract, except where such default or breach would not,
individually or in the aggregate, have a Business Material Adverse Effect. Upon
consummation of the transactions contemplated by this Agreement, except to the
extent that any consents set forth on Schedule 4.2 are not obtained or any
rights of preemption are exercised, each Disclosed Contract and each Contract
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set forth on Schedule 4.10(a) or 4.10(b) shall continue in full force and effect
without penalty or other adverse consequence.
(c) Notwithstanding anything to the contrary contained herein,
the representations contained in this Section 4.8 shall not be deemed to have
been breached or otherwise rendered untrue or incorrect as a result of the
failure to itemize any Contract entered into subsequent to the date hereof in
conformity with Section 6.1 or otherwise in the ordinary course of business.
4.9 Litigation.
Except as set forth in Schedules 4.9 or 4.10(c), as of the
date of this Agreement, there are no actions, suits, proceedings or
investigations pending or, to the knowledge of ITTI, threatened in law or in
equity, or before any Governmental Authority, against any Brake Company, Joint
Venture (to the knowledge of ITTI) or Asset Seller in respect of the Business
which are reasonably likely to result in liability for such Brake Company, Joint
Venture (to the knowledge of ITTI) or Asset Seller that would, individually or
in the aggregate, have a Seller Material Adverse Effect. None of the matters set
forth in Schedule 4.9 or 4.10(c) is reasonably likely to affect the legality,
validity or enforceability of this Agreement or the consummation of the
transactions contemplated hereby in any material respect.
4.10 Intellectual Property Rights.
(a) As of the date of this Agreement, Schedule 4.10(a)
contains a list of all the patents, copyright registrations, mask work
registrations and applications therefor included in the Purchased Assets, a list
of all of the trademark and service mark registrations and applications therefor
owned by the Brake Companies and a list of all Contracts involving
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licenses granted by the Sellers or any of their Subsidiaries to any third party
with respect to any item of Intellectual Property included in the Purchased
Assets or owned by a Brake Company.
(b) As of the date of this Agreement, Schedule 4.10(b)
contains a list of all Contracts that grant a license for the use of
Intellectual Property (other than for the use of software) granted to any Brake
Company or Asset Seller in respect of the Business.
(c) As of the date of this Agreement, except as set forth in
Schedule 4.10(c) (i) within the past five years there has been no claim asserted
or threatened against any Seller asserting the invalidity, misuse or
unenforceability of any of the Intellectual Property included in the Purchased
Assets or challenging any Seller's right to the use or ownership of any of such
Intellectual Property, (ii) within the past five years there have not been any
charges of infringement or misappropriation of any Intellectual Property of any
third party relating to the operation of the Business, (iii) no actions are
pending before any Governmental Authority against the Brake Companies, or any
Seller in respect of the Business, claiming or charging the foregoing, and (iv)
to the knowledge of ITTI the material Intellectual Property (x) included in the
Purchased Assets and (y) owned by the Brake Companies is subsisting, valid and
enforceable.
(d) Except for the licensed use of computer software, the
Intellectual Property owned by the Brake Companies or the Sellers in respect of
the Business or included in the Purchased Assets or the Contracts listed in
Schedule 4.10(b) and the Intellectual Property licensed to the Brake Companies
pursuant to Section 6.15 comprise all of the Intellectual Property rights owned
by or licensed to ITTI, the Brake Companies or their Subsidiaries
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necessary for the conduct and operation of the Business in all material respects
as of the date hereof.
(e) Except as is not likely to have a Seller Material Adverse
Effect, the Brake Companies or the Sellers have performed such acts and have
paid such fees and annuities to maintain the items of Intellectual Property
listed in Schedule 4.10(a) in full force and effect throughout the world as have
been decided to be maintained by Seller or the Brake Companies in the ordinary
course of business.
(f) To the knowledge of ITTI, no person is engaging in any
activity that infringes upon the Intellectual Property included in the Purchased
Assets or owned by the Brake Companies or misappropriates the rights of the
Brake Companies or an Asset Seller therein.
(g) All computer software material to the Business, to the
knowledge of ITTI, is either: (i) Year 2000 Compliant or (ii) expected to be
Year 2000 Compliant, as commercially required.
(h) All products sold or produced by the Business (including
electronic brake systems) are and all machinery material to the Business is, to
the knowledge of ITTI, Year 2000 Compliant.
(i) Except as set forth in Schedule 4.10(a) or (b), neither
any Brake Company nor any Seller has (i) received any notice of breach or
default pursuant to the formal notice provisions of, (ii) received any notice of
termination or cancellation of, nor (iii) granted to any third party any rights
which could reasonably be expected to result in damages based on a conflict with
the material terms of, any Contract listed in Schedule 4.10(a) or (b).
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4.11 Insurance.
Schedules 4.11(a) and (b) collectively set forth the material
insurance policies owned or held directly by the Brake Companies or the Asset
Sellers relating solely to the Business. All such policies are legal, valid,
binding, enforceable in accordance with their terms and in full force and
effect; no Brake Company or Asset Seller in respect of the Business is in breach
or default thereunder; and no event has occurred which, with notice or the lapse
of time, would constitute such a breach or default or permit termination or
modification under any such policy other than to the extent any such policy is
due to expire in accordance with its terms. Schedule 4.11(b) sets forth such
insurance policies with respect to which ITTI bears the ultimate risk of all or
part of loss.
4.12 Tax Matters.
Except as set forth in Schedule 4.12:
(a) Each of the Brake Companies and the Asset Sellers in
respect of the Business and, to the knowledge of ITTI, Shanghai Automotive Brake
Systems Co., Ltd. (the "China Joint Venture") and ITT Automotive Teyes Co. Ltd.
(the "Taiwan Joint Venture"), has duly filed all material Tax Returns on a
timely basis (after giving effect to any valid extension of time in which to
make such filings) that it is required to have filed and all such Tax Returns
are true, correct and complete in all material respects.
(b) All material amounts required to be shown on such Tax
Returns as due and Taxes otherwise due from the Brake Companies or Asset Sellers
in respect of the Business or, to the knowledge of ITTI, the China Joint Venture
and the Taiwan Joint Venture, either directly, or as part of the consolidated
tax return of another taxpayer, have been fully and timely paid.
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(c) No waivers of statute of limitations have been given or
requested with respect to the Tax Returns covering any Brake Company or Asset
Seller in respect of the Business or, to the knowledge of ITTI, the China Joint
Venture or the Taiwan Joint Venture, with respect to any Taxes payable by it.
(d) There are no material liens for Taxes upon any assets of
any of the Brake Companies or the Purchased Assets or, to the knowledge of ITTI,
the China Joint Venture or the Taiwan Joint Venture, other than with respect to
Taxes not yet due and payable.
(e) None of the Brake Companies or, to the knowledge of ITTI,
the China Joint Venture or the Taiwan Joint Venture, is a party to any Tax
allocation or sharing agreement pursuant to which it will have any obligation to
make any payments after the Closing.
(f) Each of the Brake Companies and, to the knowledge of ITTI,
the China Joint Venture and the Taiwan Joint Venture, has, or has caused to be,
duly and timely withheld from or on behalf of its respective employees, all
income, social security, unemployment insurance and other employment taxes or
obligations of any kind whatsoever and has either paid over to the appropriate
taxing authority, or set aside, all material amounts required to be collected or
withheld.
(g) No deficiency for any material Tax has been assessed with
respect to any of the Brake Companies or Asset Sellers in respect of the
Business or, to the knowledge of ITTI, the China Joint Venture or the Taiwan
Joint Venture, which has not been paid in full. No adjustment relating to any
Tax Return described in Section 4.12(a) hereof has been proposed formally by any
taxing authority. There are no requests for information currently outstanding
that could affect the Taxes of any Brake Company or Asset Seller in respect of
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the Business or, to the knowledge of ITTI, the China Joint Venture or the Taiwan
Joint Venture, except with respect to audits disclosed on Schedule 4.12. There
are no pending audits, actions or proceedings with respect to Taxes of any of
the Brake Companies or Asset Sellers in respect of the Business or, to the
knowledge of ITTI, the China Joint Venture or the Taiwan Joint Venture, nor have
any of the Brake Companies or Asset Sellers in respect of the Business, or to
the knowledge of ITTI, the China Joint Venture or the Taiwan Joint Venture,
received any notice from any taxing authority that it intends to conduct such an
audit, action or proceeding. There are no proposed reassessments of any property
owned by any Brake Company or Asset Seller in respect of the Business or, to the
knowledge of ITTI, the China Joint Venture or the Taiwan Joint Venture. No power
of attorney that is currently in force has been granted with respect to any
matter relating to Taxes that could affect any Brake Company or Asset Seller in
respect of the Business or, to the knowledge of ITTI, the China Joint Venture or
the Taiwan Joint Venture.
(h) No Brake Company has any liability for the Taxes of any
person (other than for each Brake Company, any of the Brake Companies) under
Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or
foreign law).
(i) No consent under Section 341(f) of the Code has been filed
with respect to any of the Brake Companies or Asset Sellers in respect of the
Business.
(j) Metallwarenfabrik oHG, with respect to its Belgian branch,
has been and, for the period until the consummation of the German
Reorganization, will be a non-resident taxpayer in Belgium.
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4.13 Employment and Benefits. Defined terms used in this Section 4.13
not defined elsewhere in this Agreement or not defined in this Section 4.13 are
as defined in Section 6.6(a).
(a) U.S. Employee Benefit Arrangements. Schedule 4.13(a) sets
forth a list of all U.S. Employee Benefit Arrangements. Except as disclosed on
Schedule 4.13(a), none of the Asset Sellers currently provides, or has ever in
the past provided, retiree medical or life insurance benefits to any U.S. Hourly
Business Employee or any U.S. Hourly Former Business Employee pursuant to any
plan, program or arrangement, including, without limitation, any U.S. Employee
Benefit Arrangement. True and complete copies of each written U.S. Employee
Benefit Arrangement and a written summary of the material terms of each oral
U.S. Employee Benefit Arrangement have been provided to Purchaser by ITTI.
(b) U.S. Pension Plans - United States. With respect to the
United States, except as disclosed on Schedule 4.13(b), each U.S. Pension Plan
listed on Schedule 4.13(a) is in material compliance with the provisions of
ERISA, with its governing documents, the applicable provisions of the Code, and
all other applicable laws.
(c) Prohibited Transactions - United States. With respect to
the United States, except as disclosed on Schedule 4.13(c), no U.S. Pension
Plan, nor any trust created thereunder, nor any trustee or administrator
thereof, has engaged in a transaction which might subject such U.S. Pension
Plan, trustee or administrator thereof, or any party dealing with such U.S.
Pension Plan, to the tax or penalty for prohibited transactions imposed by
Section 4975 of the Code or to a civil penalty imposed by Section 502 of ERISA.
(d) Termination and Reportable Events - United States. With
respect to the United States, except as disclosed on Schedule 4.13(d), since
September 2, 1974, no U.S.
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Pension Plan subject to Title IV of ERISA has been completely or partially
terminated, nor to the best knowledge of ITTI has there been any filing of any
notice of intent to terminate under Section 4041 of ERISA or any other receipt
by ITTI of notice of the institution by the Pension Benefit Guaranty Corporation
of any proceeding under Section 4042 of ERISA involving a U.S. Pension Plan, nor
has there been any reportable event, as such term is defined in Section 4043 of
ERISA, with respect to any such U.S. Pension Plan since the effective date of
Section 4043.
(e) Funding and Qualification - United States. With respect to
the United States, except as disclosed on Schedule 4.13(e), (i) no U.S. Pension
Plan or associated trust has incurred any accumulated funding deficiency, as
such term is defined in Section 412 of the Code, whether or not waived, since
the effective date of Section 412; (ii) all contributions required to be made to
the U.S. Hourly Pension Plans on or prior to the Closing Date shall have been
paid by the date due or accrued on the Closing Balance Sheet; and (iii) each
U.S. Pension Plan has been determined by the Internal Revenue Service to be
qualified within the meaning of Section 401(a) of the Code, and has been
administered in compliance with ERISA and the Code, and nothing has occurred
which would adversely affect the qualified status of any U.S. Pension Plan.
(f) No Multiemployer Plan - United States. With respect to the
United States, except as disclosed on Schedule 4.13(f) as of the Closing Date,
ITTI does not maintain or contribute to and for the immediately preceding five
years has not maintained or contributed to any multiemployer plan as defined in
ERISA with respect to any U.S. Business Employee or any U.S. Former Business
Employee.
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(g) U.S. Welfare Plans - United States. With respect to the
United States, except as disclosed on Schedule 4.13(g), each U.S. Welfare Plan
listed on Schedule 4.13(a) is in material compliance with the provisions of
ERISA and with its governing documents.
(h) Reports and Disclosure - United States. With respect to
the United States, except as disclosed on Schedule 4.13(h), all material reports
and documents with respect to the U.S. Pension Plans and the U.S. Welfare Plans
that are required by ERISA to be filed or distributed have been timely filed or
distributed.
(i) Continuation Coverage - United States. With respect to the
United States, except as disclosed on Schedule 4.13(i), with respect to the U.S.
Business, ITTI is in material compliance with the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), and all other laws which
require the continuation of benefit coverage upon the happening of certain
events, such as the termination of employment or change in beneficiary or
dependent status.
(j) Argentina - Employee and Pension Plan Matters. With
respect to Argentina, Schedule 4.13(j) identifies by name and title the single
person employed by ITT Automotive Argentina, S.A. ("ITTAA"). With respect to
Argentina, and except as disclosed on Schedule 4.13(j), ITTAA is in material
compliance with respect to the making of all payments involving salaries and
pension plan contributions and is not a debtor regarding any legal obligations
arising out of its capacity as employer and, to the best knowledge of ITTI,
there is no demand for payment or lawsuit filed against or any investigation
pending involving ITTAA arising out of obligations as an employer or pension
plan obligations.
(k) UK Employees and Benefit Arrangements. (i) With respect to
the United Kingdom, full and accurate details are contained in Schedule 4.13(k)
of:
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(A) the UK Employees (including details of their
respective salaries, ages, length of service and notice periods);
(B) all terms of employment or benefits provided of
general application or of application to a particular grade or category
of UK Employee;
(C) the terms of all current procedural, collective
or other agreements between the UK Brake Company and any trade union or
other body representing the UK Employees or any of them; and
(D) the terms of all share incentive schemes, share
option schemes or profit sharing, bonus or other incentive schemes
applicable to any of the UK Employees.
(ii) With respect to the United Kingdom, the UK Brake Company
has in relation to each of the UK Employees complied in all material respects
with all obligations owed to and in respect of the UK Employees including under
legislation, regulations, codes of conduct, codes of practice, collective
agreements, terms and conditions of employment, orders, agreements with third
parties, and awards relevant to their conditions of service or to the relations
between it and the UK Employees or any recognized trade union or body
representing the UK Employees and has complied in all material respects with all
its obligations concerning the health and safety at work of each of the UK
Employees and has not incurred any liability to any UK Employee in respect of
any accident or injury.
(l) UK Pension Arrangements. (i) With respect to the United
Kingdom, the UK Brake Company has not been a party to any agreement, arrangement
or understanding (whether contractual or otherwise) for the provision by the UK
Brake Company of any relevant benefits (as defined in section 612(1) of the
Income and Corporation Taxes Act
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1988) for any past or present officer or employee, or for any dependant of any
such person, in connection with which the UK Brake Company is liable to make any
payment, except under the UK Pension Scheme and the other arrangements listed in
Schedule 4.13(l).
(ii) With respect to the United Kingdom, except as may be
disclosed in Schedule 4.13(l):
(A) no undertakings or assurances have been given to
all or any of the past or present officers or employees of the UK Brake
Company as to the continuance, introduction, increase or improvement or
any retirement or death benefits (whether or not there is any legal
obligation to do so); and
(B) no power or discretion has been exercised since
January 1, 1995 under the UK Pension Scheme to augment or provide in
respect of any officer or employee of the UK Brake Company at the date
of this Agreement a benefit which would not otherwise have been
augmented or provided under the UK Pension Scheme in respect of such
officer or employee.
(iii) With respect to the United Kingdom, the UK Pension
Scheme is approved as an exempt approved scheme within the meaning of Chapter 1
of Part XIV of the Income and Corporation Taxes Act 1988; save for any
obligations under or as a result of article 119 of the Treaty of Rome, it has at
all times in all material respects complied with and been duly administered in
accordance with all applicable legislation, regulations and requirements
(including, without limitation, the requirements of the Pension Schemes Office
of the Inland Revenue and the Occupational Pensions Board); and there is in
force an appropriate contracting-out certificate (within the meaning of section
7 of the Pension Schemes Act 1993) and, to the best knowledge of ITTI, nothing
material has been done or
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omitted to be done which will or may result in the UK Pension Scheme ceasing to
be approved as an exempt approved scheme.
(iv) With respect to the United Kingdom, save for any
obligations under or as a result of article 119 of the Treaty of Rome, the UK
Brake Company has duly complied in all material respects with its obligations
under the UK Pension Scheme; all material amounts currently due from the UK
Brake Company to the trustees of the UK Pension Scheme have been paid.
(v) With respect to the United Kingdom, all lump sum benefits
(other than a refund of contributions with interest where appropriate) payable
under the UK Pension Scheme on the death of a member thereof while in an
employment to which the UK Pension Scheme relates or during a period of sickness
or disability of a member thereof are fully insured under a policy effected with
an insurance company.
(vi) With respect to the United Kingdom, the UK Brake Company
has no obligation or liability (actual or contingent, present or future) to
contribute to any personal pension scheme (as defined in section 630 of the
Income and Corporation Taxes Act 1988) in respect of any of the UK employees.
(m) German Pension Arrangements. With respect to Germany, and
the pension plans maintained for employees of the Business located there, there
will be no changes to the actuarial assumptions, the actuarial methods or the
accounting treatment used to determine the line item "pension reserve-unfunded"
shown on the December 31, 1997 Audited Financial Statements and the Reference
Balance Sheet, and as it will be shown on the Closing Balance Sheet.
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4.14 Compliance with Laws.
Except as set forth in Schedule 4.14, the Business is
conducted by the Brake Companies, the Joint Ventures (to the knowledge of ITTI)
and the Asset Sellers in compliance with all statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto, except for
such violations or failures so to comply, if any, that, individually or in the
aggregate, would not result in Business Losses in excess of $10 million or would
not be reasonably likely to have a material adverse effect on the business,
operations, assets or financial condition of the Business taken as a whole (a
"Business Material Adverse Effect"). The foregoing shall not apply in respect of
matters covered in Sections 4.9, 4.10, 4.13, 4.15 and 4.16.
4.15 Labor Matters.
Except as described in Schedule 4.15, no Brake Company or
Asset Seller in respect of the Business is presently a party to any collective
bargaining agreement, subject to a legal duty to bargain with any labor
organization on behalf of employees or the object of any attempt to organize
employees for collective bargaining or similar purposes or presently operating
under an expired collective bargaining agreement. Since January 1, 1995, no
Brake Company or Asset Seller in respect of the Business is or has been a party
to or subject to any pending strike, work stoppage, organizing attempt,
picketing, boycott or similar activity. Since January 1, 1995, the Brake
Companies and the Asset Sellers in respect of the Business have complied in all
material respects with all applicable federal, state and local laws, ordinances,
rules and regulations and requirements relating to the employment, payment and
termination of labor, including the provisions thereof relative to wages, hours,
severance, vacation, collective bargaining, employee benefits, and employee
benefit plans, contributions,
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unemployment, withholding taxes and occupational health and safety and equal
opportunity and non-discrimination laws (including the Americans with
Disabilities Act), except as would not have a Seller Material Adverse Effect.
4.16 Environmental Matters.
Except (a) as disclosed in Schedule 4.16 or (b) as would not,
individually or in the aggregate, result in Business Losses in excess of US$5
million or as would not be reasonably likely to have a material adverse effect
on the business, operations, assets or financial condition of the business taken
as a whole: (i) the Brake Companies and the Asset Sellers in respect of the
Business are, and since the date which is five years prior to the Closing Date
have been, in compliance with all applicable Environmental Laws; (ii) the Brake
Companies and the Asset Sellers in respect of the Business are, and since the
date which is five years prior to the Closing Date have been, in compliance with
and possess all applicable Environmental Permits required under such
Environmental Laws to operate the Business as it is currently operated, and as
of the date of this Agreement there are no proceedings pending or, to the
knowledge of ITTI, threatened to revoke, rescind or alter any such Environmental
Permits; (iii) to the knowledge of ITTI, there are no Materials of Environmental
Concern at any property owned or operated by any Brake Company or Asset Seller
in respect of the Business that are in a condition or concentration that is
reasonably likely to result in liability of any Brake Company or Asset Seller in
respect of the Business under any applicable Environmental Law; (iv) no Brake
Company or Asset Seller in respect of the Business has received any written
notification alleging that it is liable for the handling, storage, treatment,
transportation, release or disposal of Materials of Environmental Concern at any
location under any applicable Environmental Law, or any request for information
pursuant to section
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104(e) of CERCLA or similar state or foreign statute concerning disposal of
Materials of Environmental Concern at any location; and (v) none of the Brake
Companies nor any of the Asset Sellers in respect of the Business has entered
into any written agreement to resolve any liability alleged under any applicable
Environmental Law, or to investigate or remediate any Materials of Environmental
Concern. Notwithstanding the generality of any other representations and
warranties in this Agreement, this Section 4.16 shall be deemed to contain the
only representations and warranties in this Agreement with respect to matters
relating to Environmental Laws or to Materials of Environmental Concern.
4.17 Transferred Assets.
Except as set forth in Schedules 4.17, 6.1 and 6.7(a), or as
specifically provided or disclosed elsewhere in this Agreement, the transfer of
the Brake Company Stock, the Joint Venture Interests and the Purchased Assets
(together with the rights and services made available in any arrangements
entered into in accordance with Sections 2.4, 6.15 and 6.16), will constitute a
conveyance of all the assets, properties and rights owned by the Sellers and
necessary to conduct the Business (it being understood that the Business does
not include the Excluded Businesses) in all material respects as currently
conducted.
4.18 Undisclosed Liabilities.
The Business does not have any liabilities or obligations of
any nature or kind whatsoever (whether absolute, accrued, contingent or
otherwise), except (i) as are reserved against or reflected in the December 31,
1997 balance sheet included in the Financial Statements (or described in the
notes thereto), (ii) liabilities incurred in the ordinary course of business
since December 31, 1997, (iii) liabilities disclosed in Schedules 4.9, 4.10,
4.12, 4.13, 4.15, 4.16, 4.18 and 6.7(a), (iv) intercompany liabilities that will
be capitalized as of the
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Closing Date in accordance with Section 6.7(b), (v) liabilities under Contracts
disclosed in the Schedules to this Agreement, (vi) liabilities under Contracts
not required to be disclosed in the Schedules to this Agreement, (vii)
liabilities in respect of warranty obligations and general liability claims,
(viii) the Excluded Liabilities and the Excluded Brake Company Liabilities and
(ix) with respect to the period from the date hereof through the Closing Date,
such other liabilities which would not, in the aggregate, have a Business
Material Adverse Effect.
4.19 Receivables.
Schedule 4.19 sets forth a summary of aging of the Receivables
of the Brake Companies and the Asset Sellers in respect of the Business as of
December 31, 1997 showing separately those Receivables that as of such date had
been outstanding (a) 30 days or less, (b) 31 to 60 days, (c) 61 to 90 days, (d)
91 to 120 days and (e) more than 121 days. Except to the extent, if any,
reserved for on the December 31, 1997 balance sheet included in the Financial
Statements, all Receivables reflected on such balance sheet arose from, and the
Receivables existing on the Closing Date will have arisen from, the sale of
Inventory or services to persons not affiliated with the Sellers, the Brake
Companies or any Joint Venture (or, to the extent to affiliated persons, in
transactions on terms consistent with those that would be entered into in arm's
length transactions) and in the ordinary course of the Business consistent with
past practice.
4.20 Inventories.
(a) Subject to amounts reserved therefor on the December 31,
1997 balance sheet included in the Financial Statements, the values at which all
Inventories are carried on such balance sheet reflect the historical inventory
valuation policy of the Brake Companies and the Asset Sellers in respect of the
Business of stating such Inventories at the lower of
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standard cost (determined on the first-in, first-out method) or market value.
Except as set forth in Schedule 4.20, a Brake Company or an Asset Seller, as the
case may be, has good title to the Inventories free and clear of all Liens other
than Permitted Liens. The Inventories do not consist of any items held on
consignment except that a portion of the Inventories relating to the aftermarket
business are held by third parties for sale on a consignment basis. Except as
set forth on Schedule 4.20, none of the Brake Companies nor any Asset Seller in
respect of the business is under any obligation or liability with respect to
accepting returns of items of Inventory or merchandise in the possession of
their customers other than in the ordinary course of business consistent with
past practice. No Brake Company or Asset Seller has acquired or committed to
acquire or manufacture Inventory for sale which it does not reasonably believe
is of a quality and quantity usable in the ordinary course of business within a
reasonable period of time.
(b) Except for items that are obsolete or damaged (as to which
adequate reserves have been established in accordance with GAAP), the
Inventories are in good and merchantable condition in all material respects, are
suitable and useable for the purposes for which they are intended (whether or
not actually so used) and are in all material respects in a condition such that
they can be sold in the ordinary course of business consistent with past
practice.
4.21 Customers.
As of the date of this Agreement, since January 1, 1998,
except as disclosed in Schedule 4.21, none of the Sellers in respect of the
Business nor the Brake Companies has received formal written notice that any of
the ten largest customers (by revenue) of the Business for the twelve-month
period ended December 31, 1997 has cancelled or intends to
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cancel any Contract (which notice is reasonably likely to result in any
cancellation) to use or purchase the products, equipment, goods or services sold
by the Business. As of the Closing Date, except as disclosed to Purchaser prior
to the Closing Date, none of the Sellers in respect of the Business nor the
Brake Companies has, since the date of this Agreement, received any notice that
any of such customers has ceased or intends to cease to use the products,
equipment, goods or services of the Business as a result of a bona fide default
or breach by any of the Brake Companies or the Sellers in respect of the
Business.
4.22 Suppliers.
As of the date of this Agreement, since January 1, 1998,
except as disclosed in Schedule 4.22, none of the Sellers in respect of the
Business nor the Brake Companies has received any formal written notice that any
of the ten largest suppliers (by expense) to the Business for the twelve-month
period ended December 31, 1997 has cancelled or intends to cancel any Contract
(which notice is reasonably likely to result in any cancellation) to sell goods
to the Business. As of the Closing Date, except as disclosed to Purchaser prior
to the Closing Date, none of the Sellers in respect of the Business nor the
Brake Companies has, since the date of this Agreement, received any notice that
any of such suppliers has ceased or intends to cease to sell such goods to the
Business after the Closing Date as a result of a bona fide default or breach by
any of the Brake Companies or the Asset Sellers in respect of the Business.
4.23 Finders; Brokers.
With the exception of fees and expenses payable to Goldman,
Sachs & Co. and Lazard Freres & Co. LLC, which shall be ITTI's sole
responsibility, none of ITTI or any of the Brake Companies, the Joint Ventures
(to the knowledge of ITTI) or any Seller has
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employed any finder or broker in connection with the Purchase who would have a
valid claim for a fee or commission from Purchaser or any of the Brake Companies
or the Joint Ventures in connection with the Purchase.
ARTICLE V
REPRESENTATIONS OF PURCHASER
Purchaser represents and warrants to ITTI as follows:
5.1 Corporate Existence.
Purchaser and each of the Designated Purchasers is duly
organized and validly existing and, where applicable, in good standing, under
the laws of the jurisdiction of its organization and has the requisite power and
authority to execute and deliver this Agreement (in the case of Purchaser) and
the other Transaction Documents to which it is a party and to perform its
obligations hereunder and thereunder.
5.2 Corporate Authority.
This Agreement and the other Transaction Documents to which
Purchaser and/or any Designated Purchaser is a party and the consummation of the
transactions contemplated hereby and thereby involving such persons have been
or, in the case of the other Transaction Documents, will be prior to the
Closing, duly authorized by the Board of Directors (or a duly authorized
committee or representative thereof) of Purchaser and such Designated Purchaser,
and will be duly authorized by each Designated Purchaser by all requisite
corporate, shareholder, partnership or other action prior to the Closing, and
Purchaser and each Designated Purchaser has or, in the case of the Designated
Purchasers, will have at or prior to the Closing full power and authority to
execute, deliver and/or file the Transaction Documents to which it is a party
and to perform its obligations hereunder or
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thereunder. This Agreement has been duly executed and delivered by Purchaser,
and the other Transaction Documents will be duly executed, delivered and/or
filed by Purchaser and any Designated Purchaser party thereto, and (assuming due
authorization by the applicable Seller) this Agreement constitutes, and the
other Transaction Documents when so executed, delivered and/or filed will
constitute, a valid and legally binding obligation of Purchaser and/or any
Designated Purchaser party thereto, enforceable against it or them, as the case
may be, in accordance with its terms except as enforceability may be affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law).
The execution, delivery and/or filing of this Agreement and the other
Transaction Documents by Purchaser and/or any Designated Purchaser party thereto
and the consummation by Purchaser and/or any Designated Purchaser of the
transactions contemplated hereby and thereby will not (A) violate or conflict
with any provision of the respective certificate of incorporation or by-laws or
similar organizational documents of Purchaser and/or any Designated Purchaser,
(B) result in any breach or constitute any material default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation of any Lien under any contract,
indenture, mortgage, lease, note or other agreement or instrument to which
Purchaser and/or any Designated Purchaser is subject or is a party, or (C)
violate, conflict with or result in any breach under any provision of any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Purchaser and/or any Designated Purchaser or any of their respective
properties or assets, except, in the case of clauses (B) and (C), to the extent
that any such
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default, violation, conflict, breach or loss would not, individually or in the
aggregate, have a material adverse effect on the ability of Purchaser and/or any
Designated Purchaser to consummate the transactions contemplated hereby and
thereby (a "Purchaser Material Adverse Effect").
5.3 Governmental Approvals and Consents.
Neither Purchaser nor any Designated Purchaser is subject to
any order, judgment or decree which would prevent the consummation of the
Purchase. No claim, legal action, suit, arbitration, governmental investigation,
action or other legal or administrative proceeding is pending or, to the
knowledge of Purchaser, threatened against Purchaser or any Designated Purchaser
which would enjoin or delay the consummation of the Purchase. Except for any
consents required under any applicable Antitrust Regulations, no consent,
approval, order or authorization of, license or permit from, notice to or
registration, declaration or filing with, any Governmental Authority, is
required on the part of Purchaser or any Designated Purchaser in connection with
the execution, delivery and/or filing of this Agreement or any of the other
Transaction Documents or the consummation of the transactions contemplated
hereby and thereby except for such consents, approvals, orders or authorizations
of, licenses or permits, filings or notices which have been obtained and remain
in full force and effect and those with respect to which the failure to have
obtained or to remain in full force and effect would not, individually or in the
aggregate, have a Purchaser Material Adverse Effect.
5.4 Purchase for Investment.
Purchaser is aware that no shares of capital stock or other
securities being acquired pursuant to the transactions contemplated hereby are
registered under the Securities
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Act of 1933, as amended (the "Securities Act"), or under any state or foreign
securities laws. Neither Purchaser nor any Designated Purchaser is an
underwriter, as such term is defined under the Securities Act, and Purchaser and
any Designated Purchaser are purchasing such shares solely for investment, with
no present intention to make any distribution of any such shares to any person,
and neither Purchaser nor any Designated Purchaser will sell or otherwise
dispose of shares except in compliance with the registration requirements or
exemption provisions under the Securities Act and the rules and regulations
promulgated thereunder, or any other applicable securities laws.
5.5 Financial Capacity.
Purchaser has available and will have available on the Closing
Date sufficient funds to enable it to consummate the transactions contemplated
hereby.
5.6 Finders; Brokers.
With the exception of fees and expenses payable to Deutsche
Bank Securities, which shall be Purchaser's sole responsibility, none of
Purchaser or any of its Subsidiaries has employed any finder or broker in
connection with the Purchase who would have a valid claim for a fee or
commission from ITTI in connection with the Purchase.
ARTICLE VI
AGREEMENTS OF PURCHASER AND ITTI
6.1 Operation of the Business.
Except as otherwise contemplated by this Agreement or as
disclosed in Schedule 6.1, ITTI covenants that until the Closing it will, and it
will cause the Brake Companies, the Joint Ventures in which it has a controlling
interest, consistent with its fiduciary duties, and the Asset Sellers in respect
of the Business to use their reasonable best
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efforts to continue, in a manner consistent with the past practice of the
Business, to keep available the services of their employees, to maintain and
preserve intact the Business in all material respects and to maintain in all
material respects the ordinary and customary relationships of the Business with
its suppliers, customers and others having business relationships with it with a
view toward preserving for Purchaser to and after the Closing Date the Business,
the Purchased Assets and the goodwill associated therewith. Until the Closing,
ITTI shall, and it shall cause the Brake Companies, the Joint Ventures in which
it has a controlling interest, consistent with its fiduciary duties, and the
Asset Sellers in respect of the Business to, continue to operate and conduct the
Business in the ordinary course consistent with past practice, and ITTI shall
use its reasonable best efforts to cause the Brake Companies, the Joint Ventures
in which it has a controlling interest, consistent with its fiduciary duties,
and the Asset Sellers in respect of the Business not to, without the prior
written approval of Purchaser (which approval shall not be unreasonably
withheld) or as otherwise contemplated by this Agreement and Schedules 6.1,
6.7(a) and 6.8, take any of the following actions:
(a) with respect to any Brake Company or Joint Venture, amend
its charter or by-laws (or comparable organizational documents), issue
or agree to issue any additional shares of capital stock of any class
or series or any additional partnership interests (other than shares or
partnership interests to be transferred to Purchaser or any Designated
Entity Purchaser at the Closing) or issue or enter into or agree to
issue or enter into any Equity Equivalents, or any securities
convertible into or exercisable or exchangeable for shares of capital
stock or partnership interests, or issue any notes, bonds or other
securities or any options, warrants or other rights to acquire any
shares
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of capital stock, partnership interests or Equity Equivalents, or sell,
transfer or otherwise dispose of or encumber any shares of capital
stock of any class or series or partnership interests of any Brake
Company or Joint Venture;
(b) with respect to any Brake Company, Joint Venture or Asset
Seller in respect of the Business, sell, transfer, lease, sublease,
license or otherwise dispose of or encumber any of its properties or
assets pertaining to the Business, other than sales of Inventory in the
ordinary course of business consistent with past practice;
(c) except in the ordinary course of business consistent with
past practice or as required by law or contractual obligations, permit
any Brake Company, Joint Venture or Asset Seller in respect of the
Business to (i) create, incur or assume any Indebtedness in excess of
$10 million in the aggregate, (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently
or otherwise) for any Indebtedness or other obligations of any person
other than any Brake Company or Asset Seller in respect of the Business
in excess of $10 million in the aggregate together with amounts under
clause (i) or (iii) make any material loans, advances or capital
contributions to or investments in any person other than its
Subsidiaries and other Brake Companies (except for customary loans or
advances to employees);
(d) (i) grant any increase in the compensation of employees of
the Business, except for increases in the compensation of employees (A)
in the ordinary course of business consistent with past practice, (B)
as a result of collective bargaining or (C) as required by applicable
law from time to time in effect or by any Benefit Plan as in effect on
the date hereof, (ii) hire new employees other than in the ordinary
course of
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business consistent with past practice, (iii) enter into any new
employment, severance, consulting or other compensation agreement with
any existing director, officer or employee or (iv) commit to any
additional pension, profit-sharing, deferred compensation, group
insurance, severance pay, retirement or other employee benefit plan,
fund or similar arrangement or amend in any material respect or commit
itself to amend in any material respect any of such plans, funds or
similar arrangements;
(e) cancel any material third party Indebtedness owed to such
Brake Company or Asset Seller in respect of the Business;
(f) acquire by merging or consolidating with, or by purchasing
a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire any assets (other
than inventory) which are material, individually or in the aggregate,
to the Business taken as a whole;
(g) make any Tax elections, other than U.S. Tax elections;
(h) allow any of the assets or properties of the Business to
be subjected to any Lien, other than Permitted Liens and Liens that
will be released at or prior to the Closing;
(i) except in the ordinary course of business consistent with
past practice, discharge or otherwise obtain the release of any Lien or
pay or otherwise discharge any liability, other than current
liabilities reflected on the December 31, 1997 balance sheet included
on Schedule 4.5 and current liabilities incurred in the ordinary course
of business consistent with past practice since December 31, 1997;
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(j) make any capital expenditure or commitment for any capital
expenditure that would result in the aggregate capital expenditures for
the year in which such expenditure or commitment is made exceeding the
cumulative Budgeted GPA for such year;
(k) enter into any material agreement, arrangement or
transaction with any director, officer, employee, shareholder or
partner (or with any relative, beneficiary, spouse or Affiliate of such
person) of any Joint Venture or any Brake Company;
(l) with respect to its financial statements maintained in
accordance with GAAP, write down or write up (or fail to write down or
write up in accordance with GAAP consistent with past practice) the
value of any Inventories or Receivables or revalue any assets of the
Business other than in the ordinary course of business consistent with
past practice and in accordance with GAAP;
(m) with respect to its financial statements maintained in
accordance with GAAP, make any material change in any method of
accounting or accounting practice or policy used by any Joint Venture
or any Brake Company, other than such changes required by GAAP;
(n) amend, modify or consent to the termination of any
Disclosed Contract or the rights of any Brake Company or Joint Venture
thereunder, other than in the ordinary course of business consistent
with past practice;
(o) take any action to accelerate the collection of trade
receivables due from original equipment manufacturers; and
(p) agree, whether in writing or otherwise, to do any of the
foregoing.
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6.2 Investigation of Business.
(a) Purchaser may, prior to the Closing Date, make or cause to
be made such investigation of the business, properties and assets of the
Business and of its financial and legal condition as Purchaser deems necessary
or advisable. ITTI will, or will cause its Subsidiaries to, permit Purchaser and
its authorized agents or representatives, including its independent accountants,
to have reasonable access to the properties, books and records of the Business
at reasonable hours to review information and documentation relative to the
properties, books, contracts, commitments and other records of the Business and
reasonable access to the officers, directors, employees, agents and accounts of
the Brake Companies and the Asset Sellers in respect of the Business; provided
that such investigation shall only be upon reasonable notice and shall not
unreasonably disrupt personnel and operations of the Business and shall be at
Purchaser's sole risk and expense. All requests for access to the offices,
properties, books and records of ITTI and the Brake Companies shall be made to
such representatives of ITTI as ITTI shall designate, who shall be solely
responsible for coordinating all such requests and all access permitted
hereunder. It is further agreed that neither Purchaser nor its representatives
shall contact any of the employees, customers, suppliers, joint venture partners
or other Subsidiaries or Affiliates of ITTI in connection with the transactions
contemplated hereby, whether in person or by telephone, mail or other means of
communication, without the specific prior authorization of such representatives
of ITTI, which authorization shall not be unreasonably withheld.
(b) Prior to the Closing, Purchaser and its representatives
will hold in confidence all confidential information obtained from ITTI and its
Subsidiaries or their respective officers, agents, representatives or employees
whether or not relating to the
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Business, and following the Closing, Purchaser shall hold in confidence all such
information not relating to the Business, in each case in accordance with the
provisions of the letter dated March 26, 1998 between Purchaser and ITTI (the
"Confidentiality Agreement"). The Confidentiality Agreement and all its
provisions shall remain in full force and effect following the execution of this
Agreement.
(c) At the Closing, ITTI shall assign to Purchaser all of
ITTI's rights relating to the Business under all of the confidentiality
agreements entered into between ITTI and persons other than Purchaser in
connection with or relating to a possible sale of the Business, including the
right to enforce all terms of such confidentiality agreements, but only to the
extent assignable in accordance with the terms thereof, it being understood that
the terms of such confidentiality agreements do not permit ITTI to disclose to
Purchaser the names of the other parties to such agreements. To the extent such
confidentiality agreements are not assignable, ITTI agrees, at the reasonable
request of Purchaser from time to time, to take such action as may be reasonably
necessary to enforce its rights thereunder for the benefit of Purchaser.
Purchaser shall reimburse ITTI for all costs (including labor costs of time
spent by its employees) and expenses reasonably incurred and documented in
connection with any such request or enforcement activities. At the Closing, ITTI
shall deliver to Purchaser executed copies of all such confidentiality
agreements to the extent permitted under such agreements.
6.3 Best Efforts; No Inconsistent Action.
(a) Subject to the terms and conditions hereof, ITTI and
Purchaser agree to use their best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable (i) to consummate and make effective the
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transactions contemplated by this Agreement and to cause the conditions to each
party's obligation to close the transactions contemplated hereby as set forth in
Article VII to be satisfied, including obtaining all licenses, certificates,
permits, approvals, clearances, authorizations, qualifications and orders (each
a "Consent") of any Governmental Authority required for the satisfaction of
Section 7.1(b) to the extent set forth therein and (ii) to obtain all other
Consents listed on Schedules 4.2 and 4.4, (it being understood that the failure
to obtain any such Consents shall not, in and of itself, cause the condition set
forth in Section 7.3(b) to be deemed not to be satisfied). Each of ITTI and
Purchaser agree that (i) no contact will be initiated with, or consent sought
from, any Governmental Authority (other than in respect of antitrust or merger
control approval) prior to the Closing Date without prior consultation with the
other party and (ii) each party will be given notice of and a reasonable
opportunity to participate in contacts with Governmental Authorities regarding
antitrust or merger control matters. ITTI and Purchaser shall cooperate fully
with each other to the extent reasonable in connection with the foregoing.
(b) Purchaser and ITTI shall timely and promptly make all
filings which may be required for the satisfaction of the condition set forth in
Section 7.1(a) by each of them in connection with the consummation of the
transactions contemplated hereby. In furtherance and not in limitation of the
foregoing, each of ITTI and Purchaser agree to use their best efforts to file
Notification and Report Forms under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act") and similar applications with any other
applicable Governmental Authority whose approval is required in connection with
the consummation of the Purchase as promptly as practicable following the date
of this Agreement and in any event no later than 30 days following the date of
this Agreement.
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Purchaser and ITTI agree, and shall cause each of their respective Subsidiaries,
to cooperate and to use their respective best efforts to obtain any government
clearances required for the Closing (including through compliance with the HSR
Act and any applicable foreign governmental reporting requirements), to respond
to any governmental requests for information, and to contest and resist any
action, including any legislative, administrative or judicial action, and to
have vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) that restricts,
prevents or prohibits the consummation of the transactions contemplated by this
Agreement, including by vigorously pursuing all available avenues of
administrative and judicial appeal and all available legislative action. Without
in any way limiting the foregoing, Purchaser and ITTI also agree to take any and
all of the following actions to the extent necessary to obtain the approval of
any Governmental Authority with jurisdiction over the enforcement of any
applicable laws regarding the Purchase: entering into negotiations; making
proposals; entering into and performing agreements or submitting to judicial or
administrative orders; selling or otherwise disposing of, or holding separate
(through the establishment of a trust or otherwise) particular assets or
categories of assets, or businesses of Purchaser or any of its Affiliates
(including the Business); and withdrawing from doing business in a particular
jurisdiction (it being understood that ITTI shall have no obligation whatsoever
to retain following the Closing or to sell prior to the Closing any portion of
the Business in order to satisfy its obligations under this Section 6.3). Each
party shall furnish to each other such necessary information and assistance as
the other party may reasonably request in connection with the preparation of any
necessary filings or submissions by it to any Governmental Authority referred to
in Section 7.1(b) (it being agreed that any such information is subject to
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Section 6.11). Each party shall provide the other party the opportunity to make
copies of all correspondence, filings or communications (or memoranda setting
forth the substance thereof) between such party or its representatives, on the
one hand, and any Governmental Authority, on the other hand, with respect to
this Agreement or the transactions contemplated hereby. Without in any way
limiting the foregoing, the parties hereto will consult and cooperate with one
another, and consider in good faith the views of one another, in connection with
any analyses, appearances, presentations, memoranda, briefs, arguments, opinions
and proposals made or submitted by or on behalf of any party hereto in
connection with proceedings under or relating to the HSR Act or any other
federal, state or foreign merger control, antitrust or fair trade law.
(c) Each of Purchaser and ITTI shall notify and keep the other
advised as to (i) any material communication from the Federal Trade Commission,
the United States Department of Justice or any other Governmental Authority
regarding any of the transactions contemplated hereby, (ii) any litigation or
administrative proceeding pending and known to such party, or to its knowledge
threatened, which challenges the transactions contemplated hereby and (iii) any
event or circumstance which, to its best knowledge, could reasonably be expected
to constitute a breach of its respective representations and warranties in this
Agreement; provided, however, that the failure of ITTI or Purchaser to comply
with this Section 6.3(c) shall not subject ITTI or Purchaser to any liability
hereunder in respect of any claim asserted after the relevant expiration date
for the relevant representation or warranty; and provided, further, that
Purchaser may not separately recover pursuant to Article IX or otherwise for
both a breach of this Section 6.3(c) and any related breach of the relevant
representation or warranty. ITTI shall notify Purchaser as to any material
developments
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affecting the Business or the Purchased Assets, including the matters set forth
in the last sentence of each of Sections 4.21 and 4.22. Subject to the
provisions of Article X hereof, ITTI and Purchaser shall not take any action
inconsistent with their obligations under this Agreement or, without prejudice
to Purchaser's rights under this Agreement, which would materially hinder or
delay the consummation of the transactions contemplated by this Agreement.
6.4 Public Disclosures.
Except to the extent otherwise required by applicable law,
regulation or legal process, prior to the Closing Date, neither party to this
Agreement will issue any press release or make any other public disclosures
concerning the transactions contemplated hereby or the contents of this
Agreement without consulting with the other party, and the parties shall
cooperate as to the timing and contents of any such press release or public
disclosure.
6.5 Access to Records and Personnel.
(a) Except as otherwise provided in Section 6.5(c) and in
Section 6.14 herein, the parties shall retain the books, records, documents,
instruments, accounts, correspondence, writings, evidences of title and other
papers relating to the Business and the Purchased Assets in their possession
(the "Books and Records") for at least ten years following the Closing Date or
for such longer period as may be required by law or any applicable court order
or until the expiration of the relevant representation or warranty under any of
the Transaction Documents.
(b) The parties will allow each other reasonable access to
such Books and Records, and to personnel having knowledge of the whereabouts
and/or contents of such Books and Records, for legitimate business reasons, such
as the preparation of Tax Returns or
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the defense of litigation. Each party shall be entitled to recover from the
other its out-of-pocket costs (including copying costs) incurred in providing
such Books and Records and/or personnel to the other party. The requesting party
will hold in confidence all confidential information identified as such by, and
obtained from, the disclosing party, any of its officers, agents,
representatives or employees, provided, however, that information of the type
which would be excluded from the definition of "Information" in accordance with
Section 4 of the Confidentiality Agreement shall not be deemed to be
confidential information for purposes of this Section 6.5.
(c) Notwithstanding the provisions of subsections (a) and (b)
of this Section 6.5, until the FN Caliper Litigation is either settled or
finally adjudicated, whichever occurs first, Purchaser shall retain and shall
cause the Brake Companies to retain all existing documents relating to (i) the
design and operation of all FN calipers made or sold by the Business on or prior
to December 31, 1993, (ii) the sales of all FN calipers by the Business on or
prior to December 31, 1993 and (iii) license agreements and royalty arrangements
relating to brake components licensed to or by the Business on or prior to
December 31, 1993. Purchaser will provide ITTI and shall cause the Brake
Companies to provide ITTI with access to and copies of any of the aforementioned
documents requested by ITTI for use, in ITTI's sole discretion, in its defense
of the FN Caliper Litigation; and Purchaser will allow ITTI reasonable access to
qualified technical personnel having knowledge of the FN caliper design and
operation on or prior to December 31, 1993, as well as the state of the prior
art with respect to the Lucas patent in suit. ITTI shall reimburse Purchaser for
all costs (including, to the extent disruptive of their work obligations, labor
costs of time spent by
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employees of the Business) and expenses reasonably incurred and documented in
connection with any such request by ITTI.
6.6 Employee Relations and Benefits.
(a) Definitions. Certain terms used in this Section 6.6 and
not defined herein shall have the meaning set forth in Annex A.
(b) Employment - United States.
(i) With respect to the United States, Purchaser shall offer
or cause to be offered employment to all U.S. Business Employees commencing
effective as of the Effective Benefits Time in the same manner and on the same
basis as such U.S. Business Employees were employed by ITTI immediately prior to
the Effective Benefits Time. Such offers of employment shall include
compensation and employee benefits as provided in Section 6.6(b)(ii).
(ii) With respect to the United States, Purchaser shall, or
shall cause the Designated Asset Purchasers to, for the period commencing at the
Effective Benefits Time and ending on the first anniversary thereof, provide
employee benefits under plans, programs and arrangements which, in the
aggregate, will provide benefits to the U.S. Transitioned Employees and U.S.
Hourly Former Business Employees which are, taking into account and not in
limitation of the obligations of Purchaser under Sections 6.6(c)(v), 6.6(e) and
6.6(f) substantially equivalent in the aggregate to those provided to the U.S.
Business Employees and U.S. Hourly Former Business Employees (but, with respect
to U.S. Hourly Former Business Employees, only (A) those welfare benefits to be
provided pursuant to Section 6.6(c)(vi) and (viii), and only the provisions of
Sections 6.6(c)(iii), (iv) and (v) as they relate to such benefits, (B) those
notices and certifications to be provided pursuant to Section
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6.6(vii) and (C) those pension benefits to be provided pursuant to Section
6.6(j)) pursuant to the plans, programs and arrangements of ITTI and/or the
Asset Sellers in effect on the Closing Date and, with respect to the U.S.
Transitioned Employees, base salaries or hourly wages, as the case may be, and
working conditions which are at least equivalent to the base salaries or hourly
wages, as the case may be, and working conditions of such U.S. Business
Employees as of the Closing Date.
(iii) With respect to the United States, nothing in this
Agreement shall require Purchaser or the Designated Asset Purchasers to retain
any U.S. Transitioned Employee for any period of time after the Effective
Benefits Time and, subject to requirements of applicable law, Purchaser reserves
the right, at any time after the Effective Benefits Time, to terminate such
employment and, except as expressly stated in the Agreement, to amend, modify or
terminate any term and condition of employment including, without limitation,
any employee benefit plan, program, policy, practice or arrangement or the
compensation or working conditions of the U.S. Transitioned Employees.
(c) Employee Welfare Benefits - United States.
(i) With respect to the United States, ITTI shall be
responsible for payment of any premiums for the U.S. Business Welfare Benefits
Program relating to periods prior to the Effective Benefits Time and for any
liability for all claims, expenses and treatments, including administrative
expenses related thereto, which are in fact covered and payable under the terms
of the U.S. Business Welfare Benefits Program and incurred prior to the
Effective Benefits Time, irrespective of whether any such claim is filed or
submitted after the Effective Benefits Time.
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(ii) With respect to the United States, Purchaser shall be or
shall cause the Designated Asset Purchasers to be, responsible for payment of
any premiums relating to periods from and subsequent to the Effective Benefits
Time for Purchaser's U.S. Welfare Benefits Program and for any liability for all
claims, expenses and treatments, including administrative expenses related
thereto, which are in fact covered and payable under the terms of Purchaser's
U.S. Welfare Benefits Program, as such terms may exist from time to time, and
incurred from and subsequent to the Effective Benefits Time.
(iii) With respect to the United States and with respect to
Purchaser's U.S. Welfare Benefits Program, Purchaser agrees to waive for U.S.
Transitioned Employees and U.S. Hourly Former Business Employees and their
eligible dependents (A) any eligibility waiting periods and (B) any pre-existing
conditions and actively-at-work exclusions; except that Purchaser may require
any U.S. Transitioned Employee and U.S. Hourly Former Business Employee or any
eligible dependent thereof who, as of the Closing Date, is then in the process
of satisfying any similar exclusion or waiting period under the U.S. Business
Welfare Benefits Program to fully satisfy the balance of the applicable time
period for such exclusion or waiting period under Purchaser's U.S. Welfare
Benefits Program.
(iv) With respect to the United States and with respect to the
calendar year in which the Closing Date occurs, all medical and dental expenses
incurred with respect to any U.S. Transitioned Employee and any U.S. Hourly
Former Business Employee and/or eligible dependents thereof in the portion of
such calendar year preceding the Effective Benefits Time shall be taken into
account for purposes of satisfying any deductible and any out-of-pocket calendar
year limit under the medical and dental coverage of Purchaser's U.S. Welfare
Benefits Program for such calendar year, provided any such expenses were
qualified
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to be taken into account for purposes of satisfying any deductible or any
out-of-pocket calendar year limit under the U.S. Business Welfare Benefits
Program.
(v) With respect to the United States, for the remainder of
the calendar year in which the Closing Date occurs, Purchaser agrees to make
available to any U.S. Transitioned Employee and any U.S. Hourly Former Business
Employee and any dependents thereof any Health Maintenance Organization coverage
in effect as of the Closing Date; provided that any such Health Maintenance
Organization is willing to provide such coverage at a cost not to exceed the
cost that had been charged to the Asset Sellers in respect of the Business prior
to Closing.
(vi) With respect to the United States and with respect to any
benefits to which any U.S. Business Employees or U.S. Former Business Employees
or their spouses, former spouses, or other qualifying beneficiaries may be
entitled under COBRA by reason of qualifying events occurring on or prior to the
date immediately preceding the Closing Date; (1) ITTI shall provide such
benefits to any U.S. Salaried Former Business Employees, and their spouses,
former spouses and other qualifying beneficiaries from and after the Effective
Benefits Time through the remaining period of required coverage, and (2)
Purchaser shall provide such benefits to any U.S. Transitioned Employees and to
any U.S. Hourly Former Business Employees, their spouses, former spouses and
other qualifying beneficiaries from and after the Effective Benefits Time
through the remaining period of required coverage.
(vii) Purchaser shall provide all notices and certifications
required under the Health Insurance Portability and Accountability Act of 1996
("HIPAA") for any U.S. Transitioned Employees and for any U.S. Former Business
Employees and dependents thereof with respect to any terminations of health
coverage governed by HIPAA occurring from and
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after the Effective Benefits Time. Such notices and certifications shall provide
information regarding all periods of health coverage prior to, and from and
after, the Effective Benefits Time under the health plans of ITTI and Purchaser.
In the event Purchaser shall require information regarding health coverage not
otherwise available in the records of the Business transferred to Purchaser in
connection with the transactions contemplated herein, ITTI shall cooperate with
Purchaser in providing health coverage information available in ITTI's records.
(viii) Effective as of the Effective Benefits Time, Purchaser
shall provide the U.S. Transitioned Employees and U.S. Former Business Employees
with a flexible spending account benefits plan (or plans) which is comparable in
all material respects to ITTI's corresponding plan including health and
dependent care features. Following the Effective Benefits Time, ITTI shall cause
the accounts under its flexible spending account plan for each U.S. Transitioned
Employee to be transferred to Purchaser's flexible spending account plan, and
Purchaser agrees that such accounts shall be available to each such U.S.
Transitioned Employee in the same manner they were available under ITTI's
flexible spending account plan. The transfer of such accounts shall be reflected
on the Closing Balance Sheet, taking into account on a net basis employee
payroll deductions and claims paid through the Effective Benefits Time.
(d) Recognition by Purchaser of Prior Service - United States. With
respect to the United States, Purchaser shall recognize each U.S. Transitioned
Employee's service with ITTI or any Asset Seller and their respective Affiliates
and predecessors for purposes of determining (i) eligibility for vacation
benefits, short term disability or weekly accident and sickness benefits, and
severance benefits, and (ii) eligibility and vesting under all other employee
benefit plans and policies of Purchaser applicable to U.S. Transitioned
Employees,
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to the extent such service was recognized by ITTI or any Asset Seller for such
purposes provided that Purchaser shall not be obligated to give credit for such
service to the extent it (i) would result in duplication of any benefits to
which a U.S. Transitioned Employee is entitled to or had previously received
under any comparable plans, programs or arrangements maintained by ITTI or any
Asset Seller on or prior to the Closing Date or by Purchaser after the Closing
Date, or (ii) was not service which was recognized for purposes of such
comparable plans, programs or arrangements.
(e) Vacation - United States. With respect to the United States, U.S.
Transitioned Employees shall receive full credit for all accrued and unused, as
of the Closing Date, vacation benefits to the extent such accrued and unused
vacation benefits are reflected on the Closing Balance Sheet.
(f) Severance Benefits - United States. (i) With respect to the United
States, in the event any U.S. Transitioned Employee is terminated within one
year of the Closing Date, Purchaser shall pay to such terminated U.S.
Transitioned Employee severance and termination pay and benefits in accordance
with the applicable severance and termination pay policies and practices
covering the U.S. Business Employees on the date immediately preceding the
Closing Date, which policies and practices are as set forth in Schedule 6.6(f)
(the "U.S. Business Severance Policies and Practices").
(ii) With respect to the United States, any U.S. Transitioned
Employee entitled, as of the Effective Benefits Time, to severance and
termination pay benefits under the U.S. Business Severance Policies and
Practices shall receive such severance and termination pay benefits from the
Purchaser to the extent such severance and termination pay benefits are
reflected on the Closing Balance Sheet.
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(g) Disability - United States.
(i) Any U.S. Transitioned Employee who is absent from work as
of the Effective Benefits Time due to Disability and any U.S. Salaried Former
Business Employee who is absent from work as of the Effective Benefits Time due
to Long Term Disability shall be considered for return to work or rehire,
including return to work or rehire with restrictions, by Purchaser, under the
same terms as are then applicable to U.S. Transitioned Employees, at such time
as his or her disability does not affect his or her ability to perform, or to
perform with restrictions, the position held by such individual with any U.S.
Asset Seller with respect to the Business prior to such Disability or Long Term
Disability.
(ii) Any U.S. Salaried Transitioned Employee who, as of the
Closing Date, is Short Term Disabled and who after the Closing Date continues
disabled through the remainder of the six month qualifying period for ITTI's
employee benefit plans arrangements applicable to U.S. Salaried Transitioned
Employees who are on Long Term Disability shall, upon completion of such
qualifying period, be treated and considered for all purposes of this Agreement
as a U.S. Salaried Former Business Employee absent from work due to Long Term
Disability, effective from and after the date of completion of such qualifying
period.
(iii) Notwithstanding any other provision of this Section 6.6,
ITTI shall retain any insurance contracts maintained by ITTI in connection with
certain plans of ITTI providing Long Term Disability Benefits to U.S. Hourly
Business Employees and shall provide any Long Term Disability benefits to any
U.S. Hourly Transitioned Employees who become disabled prior to the Effective
Benefits Time. Purchaser shall provide, or cause the Designated Asset Purchasers
to provide, any health and other employee benefits (other than
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Long Term Disability benefits) to any such persons while they qualify as
Disabled in accordance with the terms of this Section 6.6.
(h) Hourly Savings Plans - United States. As of the Effective Benefits
Time, Purchaser will, in the sole discretion of Purchaser, either (i) assume all
of ITTI's obligations and succeed to all the ITTI's rights under the Hourly
Savings Plans with respect to any U.S. Hourly Transitioned Employee and any U.S.
Hourly Former Business Employee by adopting, as of the Effective Benefits Time,
the Hourly Savings Plans and assuming the existing group annuity insurance
contracts issued by Hartford Life Insurance Company ("Hartford") (the "Hourly
Savings Plan Annuity Contracts") pursuant to which the assets of the Hourly
Savings Plans are held and invested or (ii) transfer the Hourly Savings Plans
accounts that pertain to U.S. Hourly Transitioned Employees into savings plans
maintained by Purchaser; provided, however, that ITTI shall be liable for any
payment or special contributions required pursuant to 411(d)(3) of the Code, or
otherwise pursuant to any forfeiture, as a result of any partial termination of
the ITT Automotive Brakes Systems-Culpeper Savings Plan for Hourly Employees or
the ITT Automotive Brakes Systems-Asheville Savings Plan for Hourly Employees.
To accomplish the transfer of the Hourly Savings Plan Annuity Contracts to
Purchaser, in the event Purchaser elects alternative (i) above (the "Annuity
Contracts Transfer") (1) ITTI will furnish proof to Hartford of the Purchase and
the effective date of the transfer of legal ownership and (2) Purchaser will
provide to Hartford a letter certifying that Purchaser assumes the duties and
responsibilities under the Hourly Savings Plan Annuity Contracts that were
previously assumed by ITTI, provided, however, that prior to the Annuity
Contracts Transfer, ITTI shall have received an opinion of Purchaser's tax
counsel satisfactory to ITTI confirming that nothing has occurred since the
Effective Benefits Time that has
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changed the qualified status of the Hourly Savings Plans or a favorable
determination letter from the IRS with respect to the Hourly Savings Plans as
adopted by Purchaser. Upon completion of the Annuity Contracts Transfer, in the
event Purchaser elects alternative (i) above, and, effective as of the Effective
Benefits Time, Purchaser shall assume all of ITTI's obligations and succeed to
all of the ITTI's rights under the Hourly Savings Plan Annuity Contracts. In the
event that Purchaser elects alternative (i) above, Purchaser shall timely
deposit into the Hourly Savings Plan Annuity Contracts all contributions
withheld from participants pay by Purchaser for the Hourly Savings Plans. In the
event that Purchaser elects in accordance with Section 6.6(h)(ii), Purchaser
agrees that it will establish or maintain, effective as of the Effective
Benefits Time, a tax qualified 401(k) defined contribution plan (the
"Purchaser's Hourly Savings Plan") which shall provide (A) for immediate
eligibility for participation of each U.S. Hourly Transitioned Employee who, as
of the date immediately preceding the Closing Date, participates in any of the
Hourly Savings Plans (each an "Hourly Savings Plan Participant") and (B) each
such participant in any of the Hourly Savings Plans with an initial account
balance equal to the amount transferred to Purchaser's Hourly Savings Plan in
respect to each such Hourly Savings Plan participant's interest in any Hourly
Savings Plan in accordance with the terms set forth in this Section 6.6.(h). On
the Closing Date, Seller shall cause all Hourly Savings Plan Participants to
become immediately and fully vested with respect to their Hourly Savings Plan
accounts. Following the Closing Date, effective as of a date to be mutually
agreed to by Purchaser and ITTI (the "Hourly Transfer Date"), provided, however,
that prior to the transfer described in this sentence, ITTI shall have received
an opinion of Purchaser's tax counsel satisfactory to ITTI confirming the tax
qualified status of Purchaser's Hourly Savings Plan or a favorable determination
letter from
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the IRS with respect to Purchaser's Hourly Savings Plan, ITTI shall cause the
transfer by Hartford and the Northern Trust Company, the respective contract
holder and trustee of the Hourly Savings Plans, to the trustee under the
Purchaser's Hourly Savings Plan of cash in an amount representing the entire
account balances of any Hourly Savings Plan participants having account balances
as of the Hourly Transfer Date, determined as of the plan valuation date of each
Hourly Savings Plan immediately preceding the date of account balance transfer.
Purchaser's Hourly Savings Plan shall accept the transfer from the Hourly
Savings Plans of any loans outstanding as of the Hourly Transfer Date and shall
provide for the continued administration of such transferred loans for the
remainder of their terms in accordance with the provisions thereof. In
connection with either Section 6.6(h)(i) or Section 6.6(h)(ii), any assets of
the Hourly Savings Plans presently invested in the common stock of ITTI, The
Hartford Financial Group or Starwood Hotels, shall be liquidated and transferred
as cash.
(i) Hourly Pension Plans - United States. Section 6.6(j), "Transfer of
Hourly Pension Plans - United States", shall be operative provided that, prior
to the Closing, ITTI shall have advised Purchaser that the Pension Benefit
Guaranty Corporation ("PBGC") shall have, in writing, approved or confirmed to
ITTI that the PBGC had no objection to, the transfer of the Hourly Pension Plans
as contemplated in Section 6.6(j). Purchaser agrees to cooperate with ITTI to
provide any and all information requested by PBGC in connection with the PBGC's
review of the proposed transfer of the Hourly Pension Plans, provided that
Purchaser may in that connection require that the PBGC enter into any
confidentiality agreement Purchaser may reasonably require with regard to the
disclosure of Purchaser's confidential financial and other information to the
PBGC. In the event ITTI shall determine, in its sole discretion, that approval
of the transfer of the Hourly Pension Plans of the PBGC
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cannot be obtained without (i) the assumption of obligations to the PBGC by
ITTI, in the form of guarantees to the PBGC or otherwise, and/or (ii) the
contribution of additional trust assets to the Hourly Pension Plans in an amount
satisfactory to the PBGC, and ITTI further determines, also in its sole
discretion, not to assume such obligations or make such additional
contributions, then Section 6.6(j) shall not be operative and in place thereof
Section 6.6(k), "Retention of Hourly Pension Plans - United States", shall be
operative.
(j) Transfer of Hourly Pension Plans - United States. (i) As of the
Effective Benefits Time, Purchaser will assume all ITTI's obligations and
succeed to all ITTI's rights under the Hourly Pension Plans with respect to any
U.S. Hourly Business Employees and any U.S. Hourly Former Business Employees by
adopting as of the Effective Benefits Time, the Hourly Pension Plans, and by
establishing trusts therefor.
(ii) Participation in the Hourly Pension Plans, as adopted by
Purchaser, by U.S. Hourly Business Employees shall not be deemed terminated nor
shall their employment be deemed otherwise interrupted for purposes of the
Hourly Pension Plans, as adopted by Purchaser, by reason of the transaction
contemplated under this Agreement.
(iii) (A) The assets of the Hourly Pension Plans are presently
held in trust in the Investment Master Trust of ITT Industries, Inc. (the
"Industries Master Trust") and the assets of the Hourly Pension Plans are
identified for accounting purposes in accounts in the Industries Master Trust
(the "Plan Accounts"). Northern Trust Company ("Northern Trust") is presently
trustee under said trust. From and after the Closing Date and until the transfer
as hereinafter provided in Section 6.6(j)(iv) such assets shall continue to be
held in the Plan Accounts, upon the terms hereinafter provided.
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(B) ITTI will cause Northern Trust to value, in a
manner consistent with prior practice with respect to the Plan Accounts (based
on the most recent valuation data available to and used by Northern Trust as of
the Valuation Date, as hereinafter defined), the assets of the Hourly Pension
Plans as of the last day of the month in which the Closing Date occurs
("Valuation Date") based on the value of the assets held by the Plan Accounts.
(C) As soon as practicable after the Valuation Date,
ITTI will cause Northern Trust to invest the following specified amount of the
assets held in the Plan Accounts in cash or cash equivalents: an amount equal to
the value of the Plan Accounts as of the Valuation Date as then estimated by
Northern Trust ("Estimated Value"), such amount to be increased by interest for
the period from the Valuation Date to the date the assets held in the Plan
Accounts are invested in cash or cash equivalents, such interest to be equal to
the interest earned for such period for a like amount invested in the Short Term
Investment Fund of Northern Trust used for investment of short term investments
held in the Industries Master Trust ("Northern STIF").
(D) As soon as practicable after Northern Trust has
determined the actual value as of the Valuation Date ("Actual Value"), ITTI will
cause Northern Trust to invest the following specified amount of the assets held
in the Plan Accounts in cash or cash equivalents: an amount equal to the excess,
if any, of the Actual Value over the Estimated Value, such amount of excess to
be increased by interest for the period from the Valuation Date to the date such
specified amounts of assets held in the Plan Accounts are invested in cash or
cash equivalents, such interest to be equal to the interest earned for such
period for a like amount invested in the Northern STIF, less any adjustments by
Northern Trust as of the date of transfer for usual and ordinary fees and
expenses, including any charges for trustee
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fees, actuarial fees, PBGC premiums and benefit payments, with respect to the
Hourly Pension Plans and the Plan Accounts. If the amount of the Actual Value is
less than the Estimated Value, ITTI will cause Northern Trust to reduce assets
held in the Plan Accounts by transferring assets held in the Plan Accounts to
the commingled assets held in the Industries Master Trust in an amount equal to
the difference between the Actual Value and the Estimated Value, such amount to
be increased in accordance with the method of adjustment described in this
Section 6.6(j)(iii)(D).
(E) All such cash or cash equivalents held in the
Plan Accounts shall be invested in the Northern STIF pending the transfer
provided in Section 6.6(j)(iv).
(iv) (A) Purchaser will establish trusts for the Hourly
Pension Plans with such trustee as Purchaser may designate (the "Purchaser's
Trust"). Purchaser shall take such action as shall be necessary to qualify the
Hourly Pension Plans as adopted by Purchaser and to qualify Purchaser's Trusts
under the Code and shall take such other actions in connection therewith as may
be required by ERISA.
(B) As soon as practicable and upon receipt by ITTI
and Northern Trust of copies of an opinion of Purchaser's tax counsel
satisfactory to ITTI and Northern Trust confirming the qualification of such
Plans and Trusts, or favorable determination letters from the IRS with respect
to the Hourly Pension Plans as adopted by Purchaser and Purchaser's Trusts, and
upon satisfaction by Purchaser of the reasonable and customary requirements of
Northern Trust, ITTI will, unless otherwise prohibited by applicable law, cause
Northern Trust to transfer as cash all such assets then held in the Plan
Accounts to Purchaser's Trusts, less any adjustments by Northern Trust as of the
date of transfer for usual and ordinary fees and expenses, including any charges
for trustees fees, actuarial fees, PBGC
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premiums and benefit payments, with respect to the Hourly Pension Plans and the
Plan Accounts.
(v) ITTI agrees that, from the Closing Date until the transfer
as provided in Section 6.6(j)(iv), the assets of the Hourly Pension Plans held
in the Plan Accounts will be made available for benefits payments and other
usual and ordinary fees and expenses, under such Plans and Plan Accounts, in
accordance with the terms of such Plans and Plan Accounts.
(vi) Subsequent to the transfer of assets provided in Section
6.6(j)(iv), any payment of benefits to U.S. Hourly Transitioned Employees,
deferred vested U.S. Hourly Former Business Employees, Disabled U.S. Hourly
Former Business Employees and retired U.S. Hourly Former Business Employees and
any payment of other usual and ordinary fees and expenses under the Hourly
Pension Plans and the Plan Accounts shall be made by the Hourly Pension Plans as
adopted by Purchaser and Purchaser's Trusts.
(k) Retention of Hourly Pension Plans - United States. (i)
Purchaser shall not assume any of the liabilities and obligations of the Hourly
Pension Plans and ITTI shall retain all such liabilities and obligations and
related assets under the Hourly Pension Plans.
(ii) (A) Purchaser agrees that it will establish tax qualified
defined benefit pension plans, effective as of the Effective Benefits Time,
identical to the Hourly Pension Plans in all material respects other than the
substitution of Purchaser as sponsoring employer ("Purchaser's Hourly Pension
Plans").
(B) Purchaser's Hourly Pension Plans shall recognize all
service rendered by U.S. Hourly Transitioned Employees prior to the Effective
Benefits Time which is recognized under the terms of the Hourly Pension Plans
for purposes of determining eligibility and vesting, including, without
limitation, eligibility service for purposes of
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determining eligibility for plan membership, pre-retirement spousal benefits,
early retirement benefits, disability retirement benefits and normal retirement
benefits.
(C) Purchaser's Hourly Pension Plans shall also (x)
recognize as service for benefit accrual purposes all service rendered by U.S.
Hourly Transitioned Employees prior to the Effective Benefits Time which is
recognized as Credited Service (as defined in the Hourly Pension Plans, as in
effect immediately prior to the Effective Benefits Time) under the terms of the
Hourly Pension Plans and (y) provide for an offset in calculating benefits
payable under Purchaser's Hourly Pension Plans of the normal retirement benefit
payable as a single life annuity, if any, by the Hourly Pension Plans with
respect to service recognized under the Hourly Pension Plans covering the same
period of service but in no event shall the amount of such offset be greater
than the amount of the benefit calculated under Purchaser's Hourly Pension Plan
with respect to service prior to the Effective Benefits Time.
(iii) ITTI shall recognize, under the Hourly Pension Plans,
service rendered by U.S. Hourly Transitioned Employees after the Effective
Benefits Time for purposes of determining vesting and early retirement
eligibility in accordance with Schedule 6.6(k)(iii).
(iv) ITTI and Purchaser agree to cooperate in mutually
providing information to the other party hereto regarding participants in the
Hourly Pension Plans and Purchaser's Hourly Pension Plans as necessary or
appropriate for the calculation and determination of benefits under each such
plan.
(l) Salaried Benefits - United States. (i) Savings Plan. Purchaser
agrees that it will establish or maintain, effective as of the Effective
Benefits Time, a tax qualified 401(k) defined contribution plan ("Purchaser's
Savings Plan") which shall provide (i) for immediate eligibility for
participation of each U.S. Salaried Business Employee who, as of the date
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immediately preceding the Closing Date, participates in the ITT Industries
Investment and Savings Plan for Salaried Employees (respectively "Savings Plan
Participants" and "Salaried Savings Plan") and (ii) each such Savings Plan
Participant with an initial account balance equal to the amount transferred to
Purchaser's Savings Plan in respect of each such Savings Plan Participant's
interest in the Salaried Savings Plan in accordance with the terms set forth in
this Section 6.6(l)(i). On the Closing Date, ITTI shall cause all Salaried
Savings Plan Participants to become immediately and fully vested with respect to
their Salaried Savings Plan accounts. Following the Closing Date, effective as
of a date to be mutually agreed to by Purchaser and ITTI ("Transfer Date"),
provided, however, that prior to the transfer described in this sentence, ITTI
shall have received an opinion of Purchaser's tax counsel satisfactory to ITTI
confirming the tax qualified status of Purchaser's Savings Plan or a favorable
determination letter from the IRS with respect to Purchaser's Savings Plan, ITTI
shall cause the transfer by Banker's Trust Company ("Banker's Trust"), the
trustee under the Salaried Savings Plan, to the trustee under Purchaser's
Savings Plan of cash in an amount representing the entire vested account
balances of any Savings Plan Participants having account balances as of the
Transfer Date, determined as of the plan valuation date of the Salaried Savings
Plan immediately preceding the date of account balance transfer. Purchaser's
Savings Plan shall accept the transfer from the Salaried Savings Plan of any
loans outstanding as of the Transfer Date and shall provide for the continued
administration of such transferred loans for the remainder of their terms in
accordance with the provisions thereof.
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(ii) Salaried Retirement Plan - United States.
(A) Purchaser shall not assume any of the liabilities
and obligations of the ITT Industries Salaried Retirement Plan ("Salaried
Retirement Plan") and ITTI shall retain all such liabilities and obligations and
related assets under the Salaried Retirement Plan.
(B) Purchaser agrees that it will establish a tax
qualified defined benefit pension plan, effective as of the Effective Benefits
Time, substantially comparable to the Salaried Retirement Plan in all material
respects other than the substitution of Purchaser as sponsoring employer
("Purchaser's Salaried Pension Plan").
(C) Purchaser's Salaried Pension Plan shall recognize
all service rendered by U.S. Salaried Transitioned Employees prior to the
Effective Benefits Time which is recognized under the terms of the Salaried
Retirement Plan for purposes of determining eligibility and vesting, including,
without limitation, eligibility service for purposes of determining eligibility
for plan membership, pre-retirement spousal benefits, early retirement benefits
and normal retirement benefits.
(D) Purchaser's Salaried Pension Plan shall also (x)
recognize as service for benefit accrual purposes all service rendered by U.S.
Salaried Transitioned Employees prior to the Effective Benefits Time which is
recognized as Benefit Service (as defined in the Salaried Retirement Plan, as in
effect immediately prior to the Effective Benefits Time) under the terms of the
Salaried Retirement Plan and (y) provide for an offset in calculating benefits
payable under Purchaser's Salaried Pension Plan of the normal retirement benefit
payable as a single life annuity, if any, by the Salaried Retirement Plan with
respect to service recognized under the Salaried Retirement Plan covering the
same period of service, but in no event shall the amount of such offset be
greater than the amount
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of the benefit calculated under Purchaser's Salaried Pension Plan with respect
to service prior to the Effective Benefits Time.
(E) ITTI shall recognize, under the Salaried
Retirement Plan, service rendered by U.S. Salaried Transitioned Employees after
the Effective Benefits Time for purposes of determining vesting and early
retirement eligibility in accordance with Schedule 6.6(l)(ii)(E).
(F) ITTI and Purchaser agree to cooperate in mutually
providing information to the other party hereto regarding participants in the
Salaried Retirement Plan and Purchaser's Salaried Pension Plan as necessary or
appropriate for the calculation and determination of benefits under each such
plan.
(iii) Salaried Post-Retirement Health and Life Insurance Benefits -
United States. (A) Except as provided in subsection (i) of Section
6.6(l)(iii)(B), Purchaser shall assume all the liabilities and obligations
relating to the ITTI's post-retirement health and life insurance coverage for
all U.S. Salaried Transitioned Employees. ITTI shall cause accruals with respect
to all U.S. Salaried Transitioned Employees, other than U.S. Salaried Business
Employees eligible for such coverage on the Closing Date, to be reflected on the
Closing Balance Sheet in amount equal to the accumulated post-retirement benefit
obligation therefore as of the Closing Date determined in accordance with the
assumptions used by ITTI as disclosed in its most recent financial statements.
(B) Purchaser shall not assume any liabilities and
obligations relating to the ITTI's post-retirement health and life insurance
coverage for (i) subject to the provisions of Section 6.6(l)(iii)(D), U.S.
Salaried Business Employees eligible for such
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coverage as of the Closing Date or (ii) U.S. Salaried Former Business Employees
eligible for such coverage as of the Closing Date; and ITTI shall retain all
such liabilities and obligations referred to in this Section 6.6(l)(iii)(B).
(C) ITTI shall retain all funded assets held in
tax-qualified arrangements under ITTI's post-retirement health and life
insurance coverage related to the U.S. Salaried Business Employees and the U.S.
Salaried Former Business Employees.
(D) With respect to any U.S. Salaried Business
Employee who is otherwise eligible for ITTI's post-retirement health coverage as
of the date immediately preceding the Closing Date and who becomes a U.S.
Salaried Transitioned Employee, ITTI shall amend the terms and conditions of
such coverage to provide that such U.S. Salaried Transitioned Employee may not
commence receipt of ITTI's post-retirement health benefits prior to the earlier
of (i) the date such U.S. Salaried Transitioned Employee terminates employment
with Purchaser or (ii) the date such U.S. Salaried Transitioned Employee is no
longer eligible for health coverage under Purchaser's U.S. Welfare Benefits
Program; provided, however, that such amendment by ITTI shall not otherwise
modify the eligibility status of any U.S. Salaried Transitioned Employee with
respect to post-retirement health coverage, which coverage shall be on the same
terms and conditions as apply from time to time to similarly situated retirees
of ITTI.
(iv) Excess and Supplemental Pension Plans - United States.
(A) Purchaser shall not assume any of the liabilities
and obligations of the non-qualified excess and supplemental pension plans
maintained by ITTI with respect to U.S. Salaried Business Employees and U.S.
Salaried Former Business Employees (together
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the "Excess Pension Plan") and ITTI shall retain all such liabilities and
obligations and related assets under the Excess Pension Plan.
(B) Purchaser agrees that it will establish
non-qualified excess and supplemental pension plans, effective as of the
Effective Benefits Time, identical to the Excess Pension Plans in all material
respects other than the substitution of Purchaser as sponsoring employer
(together the "Purchaser's Excess Pension Plan").
(C) Purchaser's Excess Pension Plan shall recognize
all service rendered by U.S. Salaried Transitioned Employees prior to the
Effective Benefits Time which is recognized under the terms of the Excess
Pension Plan for purposes of determining eligibility and vesting, including,
without limitation, eligibility service for purposes of determining eligibility
for plan membership, pre-retirement spousal benefits, early retirement benefits
and normal retirement benefits.
(D) Purchaser's Excess Pension Plan shall also (x)
recognize as service for benefit accrual purposes all service rendered by U.S.
Salaried Transitioned Employees prior to the Effective Benefits Time which is
recognized as Benefit Service (as defined in the Excess Pension Plan, as in
effect immediately prior to the Effective Benefits Time) under the terms of the
Excess Pension Plans and (y) provide for and offset in calculating benefits
payable under Purchaser's Excess Pension Plan of the normal retirement benefit
payable as a single life annuity, if any, by the Excess Pension Plan with
respect to service recognized under the Excess Pension Plan covering the same
period of service, but in no event shall the amount of such offset be greater
than the amount of the benefit calculated under Purchaser's Excess Pension Plan
with respect to service prior to the Effective Benefits Time.
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(E) ITTI shall recognize, under the Excess Pension
Plan, service rendered by U.S. Salaried Transitioned Employees after the
Effective Benefits Time for purposes of determining vesting and early retirement
eligibility in accordance with Schedule 6.6(l)(iv)(E).
(F) ITTI and Purchaser agree to cooperate in mutually
providing information to the other party hereto regarding participants in the
Excess Pension Plan and Purchaser's Excess Pension Plan as necessary or
appropriate for the calculation and determination of benefits under each such
plan.
(v) Excess Savings Plan - United States. With respect to the
United States, Purchaser shall adopt a non-qualified excess savings plan with
terms similar in all material respects to ITTI's non-qualified excess savings
plan and shall be responsible for all liabilities with respect to U.S. Salaried
Transitioned Employees accrued under such plan after the Closing Date. Purchaser
shall assume all liabilities and obligations relating to excess savings plan
benefits of participating U.S. Salaried Transitioned Employees attributable to
service through the Closing Date and ITTI shall cause accruals to be reflected
on the Closing Balance Sheet in an amount equal to the excess savings plan
balances of such U.S. Salaried Transitioned Employees. ITTI shall be responsible
for any excess savings plan benefits with respect to U.S. Salaried Former
Business Employees attributable to service through the Closing Date.
(vi) Deferred Compensation - United States. With respect to
the United States, ITTI shall retain and satisfy all liabilities and obligations
with respect to deferred compensation for U.S. Business Employees and U.S.
Former Business Employees, with respect to deferrals through the Closing Date,
under ITTI's deferred compensation plan.
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(m) Cessation of Participation. Except as specifically provided herein,
all Transitioned Employees will cease participation in all benefit plans and
programs of ITTI as of the Closing Date.
(n) WARN Act. With respect to the United States, the parties hereto
agree that for purposes of the Worker Adjustment and Retraining Notification Act
(the "WARN Act"), the date immediately following the Closing Date shall be the
"Effective Date" as such term is used in the WARN Act. For the period prior to
the Effective Benefits Time, ITTI shall be responsible for any notification (or
pay in lieu of notice) required under the WARN Act to the extent applicable in
connection with the transactions contemplated herein and shall indemnify
Purchaser and hold Purchaser harmless from and against all fines and other
payments which may become due under the WARN Act in connection with said
transactions. Purchaser acknowledges and represents that it has not present
intent to engage in a "mass layoff" or "plant closing" with respect to the U.S.
Business as defined in the WARN Act. Purchaser agrees that from and after the
Effective Benefits Time it shall be responsible for any notification (or pay in
lieu of notice) required under the WARN Act with respect to the U.S. Business
and shall indemnify ITTI and hold ITTI harmless from and against all fines and
other payments which may become due under the WARN Act with respect to the U.S.
Business.
(o) Employment - EC Business Employees. With respect to the EC
Countries, the transfer of employment of the EC Business Employees (other than
any EC Business Employees employed by one of the Brake Companies) will be
effected in accordance with the applicable law of the EC Country in which EC
Business Employee is located and governed by the Transfer Provisions and
accordingly the contract of employment of each EC Business
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Employee, other than any Refusing Employees, shall be assumed by Purchaser with
effect from the Effective Benefits Time which shall be the "time of transfer"
under the Transfer Provisions.
(p) UK Pension Arrangement. The provisions of Schedule 6.6(p) shall
have effect in respect of pensions for employees of the UK Brake Company.
(q) Beneficiaries and Dependents. Any reference in this Section 6.6 to
employees and former employees of the Brake Companies or of any Asset Seller
with respect to the Business shall include, as appropriate or as required by the
context, any beneficiaries or dependents of such employees and former employees
receiving or who may in the future become entitled to receive any benefits by
virtue of such employees' or former employees' employment or former employment
with the Brake Companies or any Asset Seller, including, without limitation, any
such beneficiaries or dependents who are survivors of any former employee who is
deceased as of the date immediately preceding the Closing Date.
(r) No Third Party Rights. No provision of this Section 6.6 shall
create nor is intended to create nor shall be construed to confer:
(i) any third party beneficiary rights in any employee or
former employee, or any beneficiary or dependent thereof, of the Brake Companies
or any Asset Seller or Purchaser in respect of continued employment or resumed
employment or in respect of any benefits that my be provided, directly or
indirectly, under any employee benefit plans, program, policy, practices or
arrangement of the ITTI or Purchaser whether prior to, on, or after the Closing
Date; or
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(ii) any rights, remedies, obligation or liabilities, legal or
equitable, on any person, firm, corporation, organization or other entity other
than ITTI or Purchaser (or their respective successors and assigns).
(s) Cooperation. ITTI and Purchaser agree to cooperate fully with respect
to the actions necessary to effect the transactions contemplated in this Section
6.6 including, without limitation, the provision of records and information as
each may reasonably request from the other.
(t) Indemnification.
(i) Purchaser shall hold harmless, indemnify and defend the ITTI
Indemnified Parties from and against any and all costs, expenses, claims,
damages, lawsuits, reasonable attorney's and accountants' fees and costs,
losses, deficiencies, assessments, administrative orders, fines, penalties,
actions, proceedings, judgments, liabilities and obligations of any kind or
description (a "Benefits and Employment Relationship Claim") asserted against,
incurred or required to be paid by any ITTI Indemnified Party (regardless of
when asserted or by whom), associated with or arising under any employment
relationship, any employment contract or any employee benefit plan, policy,
program or arrangement established, adopted or made, or caused to be
established, adopted or made, applicable to the Transitioned Employees or Former
Business Employees by Purchaser effective at or after the Effective Benefits
Time or liability expressly assumed by Purchaser pursuant to the terms and
conditions set forth in this Section 6.6 of this Agreement or by virtue of the
Entity Purchase.
(ii) ITTI shall hold harmless, indemnify and defend the Purchaser
Indemnified Parties from and against any and all Benefit and Employment
Relationship
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Claims, asserted against, incurred or required to be paid by Purchaser
(regardless of when asserted or by whom), associated with or arising under any
employment relationship, any employment contract or any employee benefit plan,
policy, program or arrangement maintained by ITTI unless (A) expressly assumed
by Purchaser pursuant to this Agreement or (B) Purchaser shall become
responsible therefor by virtue of the Entity Purchase.
(u) Employee Benefit Arrangement - Belgium.
(i) With respect to Belgium, this Section 6.6(u) governs the
agreements of the parties regarding Employee Benefits Arrangements (the "Belgium
Employee Benefit Arrangements") with respect to any Business Employees ("Belgium
Business Employees") employed and Former Business Employees ("Belgium Former
Business Employees") formerly employed by Teves in Belgium. ("Belgium
Transitioned Employees" shall mean Transitioned Employees who were Belgium
Business Employees). Purchaser shall, or shall cause the designated Asset
Purchasers to, commencing effective as of the Effective Benefits Time, provide
employee benefits under plans, programs, and arrangements which, in the
aggregate, will provide benefits to the Belgium Transitioned Employees and
Belgium Former Business Employees substantially equivalent in the aggregate to
those provided to the Belgium Business Employees and Belgium Former Business
Employees on the Closing Date.
(ii) With respect to Belgium, ITTI and Purchaser shall negotiate and
conclude arrangements, after the date of this Agreement but prior to the Closing
Date, regarding the transfer of the Belgium Employee Benefit Arrangements, which
arrangements shall in all respects provide for and accomplish the same transfer
of the Belgium Employee Benefit Arrangements as would have resulted had the
transfer of the Business with respect to Belgium been accomplished through a
sale of stock or partnership interest, with the
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consequence that both ITTI and Purchaser shall have the same respective benefits
and obligations with respect to the Belgium Employee Benefit Arrangements as
would have resulted from such a sale of stock or partnership interest.
6.7 Pro Forma Transactions; Intercompany Transactions.
(a) Pro Forma Transactions. Notwithstanding anything to the contrary
contained in this Article VI or any other provision of this Agreement, ITTI
shall cause the transactions described in Schedule 6.7(a) (the "Pro Forma
Transactions") to be consummated at or prior to the Closing. Purchaser agrees
that no action comprising any portion of the Pro Forma Transactions, nor any
action reasonably taken in connection therewith, shall constitute a breach of
any of Section 4.6, 4.12, 4.13 or 6.1 unless such action is undertaken in a
manner (e.g., in violation of any applicable law) which would otherwise violate
such representation, warranty or covenant.
(b) Intercompany Accounts. (i) Subject to paragraph (ii) below,
effective on or prior to the Closing Date,ITTI will, and will cause its
Subsidiaries to, use their reasonable best efforts to cause all intercompany
payables (other than trade payables) of any Brake Company, on the one hand, to
ITTI or any Subsidiaries of ITTI which are not Asset Sellers in respect of the
Business, on the other hand, to be capitalized.
(ii) Prior to the Closing, ITT Industries Europe N.V. will assign to
Teves its rights and obligations with respect to the repayment by ITT Automotive
do Brasil, Ltda of a loan in the principal amount of $21 million to ITT
Industries Europe N.V., a copy of which is attached hereto as Schedule
6.7(b)(ii).
(c) On or prior to the Closing, the General Relations Agreements and
all understandings, commitments or agreements relating to the use of the "ITT"
name, trademark
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or service mark between ITTI and any Subsidiaries of ITTI which are not Brake
Companies or Asset Sellers in respect of the Business, on the one hand, and the
Brake Companies, Joint Ventures or Asset Sellers in respect of the Business, on
the other hand, shall be terminated.
6.8 German Reorganization.
Notwithstanding anything to the contrary contained in this Article
VI or any other provision of this Agreement, ITTI shall cause the transactions
described in Step 6 of Schedule 6.8 to be consummated at or prior to the Closing
and shall use its best efforts to cause the remaining transactions described in
Schedule 6.8 (such transactions, including Step 6, collectively referred to
herein as the "German Reorganization") to be consummated at or prior to the
Closing, except as otherwise set forth on Schedule 6.8. Purchaser agrees that no
action comprising any portion of the German Reorganization, nor any action
reasonably taken in connection therewith, shall constitute a breach of any of
Section 4.1 or 4.3 (other than the first sentence thereof), with respect to the
Sellers and the Brake Companies involved in the German Reorganization, or
Sections 4.6, 4.12, 4.13 or 6.1 unless such action is undertaken in a manner
(e.g., in violation of any applicable law) which would otherwise violate such
representation, warranty or covenant. ITTI shall and shall cause its
Subsidiaries (a) to consummate the actions described in Steps 6 and 8 of
Schedule 6.8 in the sequence stated in Schedule 6.8 and (b) to consummate the
German Reorganization as expeditiously as possible following the date of this
Agreement. Neither ITTI nor any of its Subsidiaries shall complete or cause to
be completed any binding action which is necessary to consummate Step 8 of
Schedule 6.8 until Step 6 of Schedule 6.8 has been completed for all legal
purposes.
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6.9 U.S. Real Property Matters.
(a) At the Closing, ITTI shall deliver to Purchaser a current
Standard Coverage Policy (1992) (e.g., ALTA) with coverage issued by a title
company reasonably acceptable to Purchaser (the "Title Company") in an amount
equal to the net book value as reflected in the Financial Statements as at
December 31, 1997 of the Real Property located in the United States to be
transferred hereunder, showing good and marketable fee simple title in such Real
Property vested in Purchaser and/or the respective Designated Asset Purchasers,
subject only to Permitted Liens and the standard printed exceptions and
conditions in the policy of title insurance ("Title Policy") and dated as of, or
updated to, the Closing Date. All premiums for the Title Policy will be paid by
ITTI. Except as specifically provided in this Agreement, ITTI makes no express
or implied warranties regarding the condition of title to the Real Property, and
Purchaser shall rely solely on the Title Policy for protection against any title
defects.
(b) (i) ITTI agrees to use its reasonable best efforts to cause
title to the Real Property located in the United States to be promptly examined
by the Title Company, and to cause the Title Company to furnish directly to
Purchaser a copy of the preliminary report of title, and any updates thereof,
together with readable copies of all documents referred to therein. ITTI further
agrees to order the survey and to cause the surveyor to furnish a copy thereof
directly to Purchaser.
(ii) Within 20 days of receipt of such preliminary report of
title, including copies of all underlying documents referenced therein, and each
such update thereof (except updates received within 20 days of the Closing
Date), Purchaser shall notify ITTI of any exceptions to title shown on such
report or update which do not constitute Permitted
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Liens. With respect to updates issued within 20 days of the Closing Date,
Purchaser shall promptly bring to ITTI's attention any exceptions to title shown
thereon which do not constitute Permitted Liens. ITTI shall use its best efforts
to remove any such defect (including the removal of any such defect which may be
eliminated by the payment of money) on or prior to the Closing Date. If such
defect cannot be removed by such best efforts, ITTI shall give Purchaser written
notice to such effect, and ITTI shall in the first instance use its best efforts
to enter into a Contract Transition Arrangement with respect to such property,
and in the absence of any such arrangement, ITTI and Purchaser shall negotiate
in good faith a reduction to the Purchase Price in respect of such property,
provided, however, that Purchaser shall have the option, to be exercised within
15 days after receipt of notice of ITTI's inability (after using such best
efforts) to convey title, to accept as herein provided such title as ITTI may
convey without any such Contract Transition Arrangement or abatement of the
Purchase Price hereunder.
(c) As to the Real Property located in the United States, Purchaser
shall have received a currently dated as-built ALTA survey of the Real Property,
prepared and certified to Purchaser and the Title Company by a certified or
registered surveyor approved by Purchaser. Such survey shall: (i) be in form and
substance reasonably satisfactory to Purchaser and the Title Company; (ii) show
all improvements, the location of all easements, rights of way, sewer and water
lines, building lines and encroachments, the location of all required building
set-back lines and other customary dimensional regulations; and (iii) also show
the location of all abutting or adjoining streets, alleys, curbs and the like.
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6.10 Non-Competition.
(a) Whenever used in this Section 6.10, the term "Competition" means
(i) the design, engineering or manufacture for sale to, or the sale or
distribution to, original equipment automobile manufacturers of products or
services of the kind designed, engineered, manufactured, sold or distributed by
the Business (including any Brake Company or any Asset Seller in respect of the
Business) to such manufacturers as of the Closing Date and such other products
or services as are complementary thereto and/or would reasonably be expected to
be developed as line extensions and (ii) the sale or distribution in the
automotive aftermarket of products of the kind sold or distributed by the
Business (including any Brake Company or any Asset Seller in respect of the
Business) in the automotive aftermarket as of the Closing Date. Such products or
services are herein collectively referred to as "Products".
(b) Neither ITTI nor any of its Subsidiaries shall, for a period of
five years after the Closing Date, directly or indirectly, engage in any
Competition anywhere in the world. Notwithstanding the foregoing, however, ITTI
and its Subsidiaries may, without violating this covenant:
(i) continue to design, engineer, manufacture, sell or
distribute any product or service of the kind currently being designed,
engineered, manufactured, sold or distributed by the Excluded Businesses and
such other products or services as are complementary thereto and/or would
reasonably be expected to be developed as line extensions;
(ii) own as a passive investment not in excess of 5% of the
outstanding capital stock of a corporation which engages in Competition, if such
capital stock is a security actively traded on an established national
securities exchange; and
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(iii) acquire any company or business (an "Acquired Business")
whose operations would contravene this Section 6.10(b) (the "Competing
Operations"), provided that (A) the Competing Operations represent less than 15%
of the total annual sales of such Acquired Business and (B) ITTI or its
Subsidiary divests such Competing Operations (at least to the extent necessary)
so that they represent less than, together with the Competing Operations of any
other Acquired Business, $50 million in total annual sales within one year after
the acquisition of such Acquired Business.
6.11 Non-Solicitation; Confidentiality.
ITTI shall not, and shall cause each of its Subsidiaries not to, (i)
for a period of two years after the Closing solicit or recruit any employees of
the Business other than under the circumstances upon which Purchaser would be
permitted to solicit or recruit employees of ITTI or its Subsidiaries under
Section 7 of the Confidentiality Agreement (it being understood that certain
employees of the Business are parties to letter agreements with ITTI which give
such employees the right to elect to become employees of ITTI within an agreed
period of time following the Closing) or (ii) disclose or furnish to anyone any
confidential information relating to the Business; provided, however, that
information of the type which would be excluded from the definition of
"Information" in accordance with Section 4 of the Confidentiality Agreement
shall not be deemed to be confidential information for purposes of this Section
6.11 and, in any event, such confidential information otherwise may be disclosed
under the same terms and conditions upon which Purchaser would be permitted to
disclose similar information in accordance with the Confidentiality Agreement.
Purchaser shall not, and shall cause each of its Subsidiaries not to, for a
period of two years after the Closing solicit or recruit any employees of ITTI
or any of its Subsidiaries other than
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under the circumstances upon which Purchaser would be permitted to solicit or
recruit employees of ITTI or its Subsidiaries under Section 7 of the
Confidentiality Agreement.
6.12 Jointly Developed Intellectual Property. It is understood that with
respect to Intellectual Property based on trade secrets, know-how, inventions,
discoveries, works of authorship, designs or writings made jointly by an
employee or employees of the Business and an employee or employees of another
business owned by ITTI, ITTI has determined, in the ordinary course of business,
whether or not such Intellectual Property relates primarily to the Business or
to another business owned by ITTI. Schedule 4.10(a) includes all such jointly
developed Intellectual Property relating primarily to the Business. It is agreed
that such determinations are final and binding on the Brake Companies and the
Designated Purchasers and that Purchaser, the Brake Companies and the Designated
Purchasers shall have no rights to any other jointly developed Intellectual
Property.
6.13 Use of the ITT Name and Marks.
(a) Subject to the provisions of, and except as provided in, the ITT
Name and Mark Transition Agreement, Purchaser shall cease and shall cause the
Designated Purchasers, each Brake Company and the Taiwan Joint Venture to cease
all use of the designation "ITT" in any fashion or combination, as well as
eliminate the use of any other designation indicating affiliation with ITTI or
ITT Corporation or any of their respective Subsidiaries, as soon as practicable
after the Closing Date, but not more than 90 days after the Closing Date;
provided, however, that with respect to stationery, checks, contracts, purchase
orders, agreements and other business forms and writings which could result
after the Closing Date in a legal commitment of ITTI or ITT Corporation or any
of their Subsidiaries, Purchaser shall or shall cause the Designated Purchasers,
each Brake Company and the Taiwan Joint Venture
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to cease immediately after the Closing Date any use of the designation "ITT" as
well as of any other designation indicating affiliation after the Closing Date
with ITTI or ITT Corporation or any of their respective Subsidiaries, except to
the extent that applicable law requires such person to continue such use until
such name change is effected, in which case until such time, but in no event
later than one year following the Closing Date. Within 20 business days after
the Closing Date, Purchaser shall notify or shall cause the Designated
Purchasers to notify, in writing, all customers, suppliers and financial
institutions having current business relationships with the Brake Companies that
the Brake Companies have been acquired from the Sellers by the Designated
Purchasers.
(b) Subject to the provisions of, and except as provided in, the ITT
Name and Mark Transition Agreement and as soon as reasonably practicable, but in
any event not later than 90 days after the Closing Date, Purchaser shall cause
each Brake Company and the Taiwan Joint Venture to change its name to a new name
not including ITT and thereafter shall not use and shall cause each Brake
Company and the Taiwan Joint Venture not to use or include ITT as or in their
corporate, popular or trade names.
(c) Subject to the provisions of, and except as provided in, the ITT
Name and Mark Transition Agreement, as of the Closing Date Purchaser shall cease
and shall cause each Designated Purchaser, each Brake Company and the Taiwan
Joint Venture to cease advertising, marketing, selling any products, offering
any services or otherwise using any trademark, service mark or other indication
of origin including ITT or any mark or indication of origin confusingly similar
thereto.
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6.14 Tax Matters.
(a) Tax Returns. ITTI shall prepare and file (or cause to be
prepared and filed) all Tax Returns of the Brake Companies with respect to any
Pre-Closing Period and the Asset Sellers shall prepare and file (or cause to be
prepared and filed) all Tax Returns that relate to the Purchased Assets with
respect to any Pre-Closing Period and each shall timely pay, or cause to be
paid, all Taxes due with respect to such Tax Returns. Purchaser shall be
responsible for the preparation and filing of all Tax Returns of the Brake
Companies with respect to any taxable year which begins after the Closing Date
and shall timely pay all Taxes due with respect to such Tax Returns. Purchaser
shall prepare and file (or cause to be prepared and filed) all Tax Returns of
the Brake Companies with respect to any Straddle Period, including Tax Returns
relating to the sale by Teves of the Belgian Assets (the "Belgian Assets Sale"),
which returns shall be prepared in a manner consistent with prior practice
unless contrary to Tax law, and shall timely pay, or cause to be paid, all Taxes
due with respect to such Tax Returns, including all Taxes whether paid in
installments or otherwise, due with respect to the Belgian Assets Sale, it being
understood that all such Taxes are for the account of ITTI. Except where not
possible in the case of Tax Returns relating to the Belgian Assets Sale,
Purchaser shall, no later than 30 days prior to the due date for the filing of
such Straddle Period Tax Returns (including extensions for filing), provide ITTI
with copies of such Tax Returns for ITTI's review, consent and approval. ITTI
shall provide Purchaser with all necessary information, including but not
limited to calculations of Taxes due, in connection with the Belgian Assets Sale
in a manner such that Purchaser may timely file all Tax Returns relating to the
Belgian Assets Sale. No later than 2 Business Days before the filing of each
Straddle Period Tax Return, ITTI shall pay to Purchaser, in accordance with
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Section 9.4, any amounts owed by ITTI pursuant to Section 9.4 with respect to
Taxes covered by such Straddle Period Tax Returns including, but not limited to
all Taxes, whether paid in installments or otherwise, due with respect to the
Belgian Assets sale. Neither ITTI nor any of its Subsidiaries or Affiliates
shall be responsible for any Taxes of the Brake Companies other than as provided
in this Agreement.
(b) Refunds. Any Tax refunds (including any reduction of Taxes) that
are received by Purchaser or any Brake Company, and any amounts credited against
Tax to which Purchaser or any Brake Company become entitled, that relate to a
Pre-Closing Period shall be for the account of ITTI, and Purchaser shall pay to
ITTI any such refund or the amount of any such credit (including any interest
paid or credited with respect thereto) within five Business Days after receipt
or entitlement thereto. Any such refunds or credits of Taxes of any of the Brake
Companies for any Straddle Period shall be apportioned between ITTI and
Purchaser in the same manner as the liability for such Taxes is apportioned
pursuant to Section 9.4. Purchaser shall, if ITTI so requests and at ITTI's sole
expense, cause the relevant Brake Company to file for any refund or credit to
which ITTI believes it is entitled pursuant to this Section 6.14.
(c) Carrybacks. Purchaser and each Brake Company shall make an
election under Section 172(b)(3) of the Code to relinquish the entire carryback
period with respect to any net operating loss attributable to such Brake Company
for U.S. tax purposes for any taxable period beginning after the Closing Date
that could be carried back to a Pre-Closing Period. Neither ITTI nor any member
of any affiliated group of which ITTI is a member shall be required to pay to
Purchaser or any Brake Company any U.S. refund or credit of U.S. Taxes that
results from the carryback to any Pre-Closing Period of any net operating loss,
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capital loss, or Tax credit attributable to any Brake Company for any taxable
period beginning after the Closing Date.
(d) Cooperation. (i) Notwithstanding provisions to the contrary in
Section 6.5, ITTI shall retain in its possession, and shall provide Purchaser
reasonable access to (including the right to make copies of) all Tax Returns,
Tax records, supporting books and any other materials relating to the Purchased
Assets that might be relevant to Tax matters relating to any taxable period
ending on or prior to the Closing Date until the relevant statute of
limitations, after giving effect to any valid extension thereof, has expired.
After such time, ITTI may dispose of such materials, provided that prior to such
disposition ITTI shall give Purchaser a reasonable opportunity to take
possession of such materials. Purchaser shall retain in its possession, and
shall provide ITTI reasonable access to (including the right to make copies of)
such supporting books and records and any other materials relating to the
Transferred Subsidiaries or the Joint Venture Interests that ITTI may specify
with respect to Tax matters relating to any taxable period ending on or prior to
the Closing Date until the relevant statute of limitations, after giving effect
to any valid extensions thereof, has expired. After such time, Purchaser may
dispose of such material, provided that prior to such disposition Purchaser
shall give ITTI a reasonable opportunity to take possession of such materials.
(ii) Purchaser and ITTI agree to furnish or cause to be furnished
to each other, as promptly as practicable, such information (including access to
books and records) and assistance, including making employees which have been
employed in the Business prior to Closing available on a mutually convenient
basis to provide additional information and explanations to one another of any
material provided, relating to the Purchased Assets or the
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Transferred Subsidiaries or the Joint Venture Interests as is reasonably
necessary for the filing of any Tax Return, amended Tax Returns or claim for
refund, for the determination of a liability for Taxes or a right to a refund of
Taxes, for the representation to or provision of information to parties
subsequently desiring to purchase all or a part of all or any one of the Brake
Companies, Joint Ventures or Purchased Assets from Purchaser, for the
preparation for any audit, and for the prosecution or defense of any claim, suit
or proceeding relating to any adjustment or proposed adjustment with respect to
Taxes or any appraisal of the Purchased Assets. The party requesting such
information and assistance shall reimburse the other party for all reasonable
costs, including out of pocket costs and the labor costs of the time spent by
its employees in responding to such requests.
(iii) Purchaser agrees to make available to ITTI all relevant
employees of the Business who have been employed in the Business prior to
Closing and facilities upon reasonable request and as reasonably required for
purposes of accommodating tax auditors and defending amounts and positions taken
on the Tax Returns with respect to a Pre-Closing Period, including but not
limited to the defense of ITTI's R&D credit claims, with respect to which ITTI
may require that such employees be available for questioning by ITTI's
consultants and/or any IRS auditors or engineers and to provide tours of the
manufacturing and research facilities of the Business; provided, however, that
such assistance shall not materially adversely affect the employee's performance
of his or her duties and responsibilities, which determination shall be made by
the Purchaser in good faith. Relevant employees for purposes of the R&D credit
claims may include, but are not limited to, engineers, product developers,
production managers, quality control personnel, R&D management and staff,
software developers, financial personnel and human resources
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personnel. ITTI shall reimburse Purchaser for all reasonable costs, including
out of pocket costs and the labor costs of the time spent by employees and the
cost of facilities provided at ITTI's request.
(iv) The parties agree that any notice received by Purchaser from
any taxing authorities or jurisdictions which relates to a Pre-Closing Period or
which relate to a Straddle Period will be forwarded to ITTI within ten calendar
days of receipt as described in Section 6.14(g); and any notice received from
any taxing authorities or jurisdictions by ITTI which relates to a taxable
period beginning after the Closing Date or to a Straddle Period will be
forwarded to Purchaser in accordance with Section 6.14(g) within ten calendar
days of receipt.
(e) Certain Taxes. All sales, use, value added, transfer,
intangible, excise, recording, documentary, stamp, and other similar Taxes or
fees (including any penalties and interest) incurred in connection with the
transactions contemplated by this Agreement shall be paid by Purchaser or the
Designated Purchasers when due. Purchaser and ITTI shall cooperate in minimizing
the amount of such Taxes. Notwithstanding anything in this Section 6.14(e) to
the contrary, Purchaser shall not be responsible for any Taxes or fees
(including penalties and interest) incurred in connection with the consummation
of the Pro Forma Transactions or the German Reorganization.
(f) Cooperation, Employment Taxes. ITTI will cooperate with
Purchaser to file all documents necessary and appropriate to secure the benefits
of Section 3121(a)(1) of the Code and Section 31.3121(a)(1) - 1(b) of the
Treasury Regulations promulgated thereunder, with the result that Purchaser will
be treated as a "successor employer" for purposes of the Federal Insurance
Contributions Act provisions in Chapter 21 of the Code.
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ITTI and Purchaser agree that, after the Closing hereunder, pursuant to the
"Alternative Procedure" provided in Section 5 of Revenue Procedure 96-60, 1996-2
C.B. 399, with respect to filing and furnishing Internal Revenue Service Forms
W-2, W-3 and 941, (i) ITTI shall be relieved from furnishing Forms W-2 to all
Transferred Employees; and (ii) Purchaser shall assume ITTI's obligations to
furnish such forms by such Transitioned Employees for the calendar year which
includes the Closing Date.
(g) Tax Notices. Any written notice, schedules, tax returns, forms,
documents, or other written communications required or to be given to ITTI or
Purchaser pursuant to this Section 6.14 shall be given:
If to ITTI: Vice President & Director of Taxes
ITT Industries, Inc.
4 West Red Oak Lane
White Plains, NY 10604
If to Purchaser: Tax Department
Continental Aktiengesellschaft
Vahrenwalder Strasse 9
30165 Hannover
Germany
6.15 Intellectual Property License Agreement.
(a) Effective as of the Closing Date, ITTI, on behalf of itself and
its Subsidiaries, hereby grants to the Brake Companies and, with respect to the
use of the Purchased Assets, to the Designated Asset Purchasers, an irrevocable,
worldwide perpetual, paid-up, royalty-free, nonexclusive license, with the right
to sublicense Purchaser, its Subsidiaries and Joint Ventures, to manufacture,
use and sell (i) products and to provide services which are made, used, sold,
offered for sale or under development by the Business as of the Closing Date and
(ii) products of the type which are made, used, sold, offered for sale
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or under development by the Business as of the Closing Date under any patents,
patent applications, copyright registrations or applications and mask work
registrations or applications (except any patents, patent applications,
copyright registrations or applications or mask work registrations or
applications which are conveyed to Purchaser or the Designated Purchasers
pursuant to this Agreement), owned by or licensed to (with the right to
sublicense) as of the Closing Date by ITTI or any of its Subsidiaries, subject
to any rights previously granted to third parties and with respect to any
sublicenses granted herein, subject to the terms and conditions of the license
agreement granting ITTI or its Subsidiaries such sublicensing rights.
(b) Effective as of the Closing Date, Purchaser, on behalf of
itself, the Brake Companies and the Designated Asset Purchasers, hereby grants
to ITTI and its Subsidiaries, and their successors and/or assigns of
substantially all of the assets of any of the Sellers' businesses (excluding the
Business), a worldwide, perpetual, paid-up, royalty-free, nonexclusive license,
with the right to sublicense their Subsidiaries, to manufacture, use and sell
(i) products and to provide services which are made, used, sold, offered for
sale or under development by ITTI or its Subsidiaries (excluding the Business)
as of the Closing Date and (ii) products of the type which are made, used, sold,
offered for sale or under development by ITTI or its Subsidiaries (excluding the
Business) as of the Closing Date under any patents, patent applications,
copyright registrations or applications or mask work registrations or
applications which are conveyed to Purchaser or the Designated Purchasers
pursuant to this Agreement, subject to any rights previously granted to third
parties.
(c) Effective as of the Closing Date, ITTI, on behalf of itself and
its Subsidiaries, hereby grants to the Brake Companies and, with respect to the
use of the
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Purchased Assets, to the Designated Asset Purchasers, an irrevocable, worldwide,
perpetual, paid-up, royalty-free, nonexclusive license, with the right to
sublicense Purchaser, its Subsidiaries and Joint Ventures, to manufacture, use
and sell (i) products and to provide services which are made, used, sold,
offered for sale or under development by the Business as of the Closing Date and
(ii) products of the type which are made, used, sold, offered for sale or under
development by the Business as of the Closing Date using any software,
inventions, trade secrets, know-how or copyrights owned by or licensed to (with
the right to sublicense) as of the Closing Date by Seller or any of its
Subsidiaries and which were originally obtained by the Business from Seller or
any of its Subsidiaries and are in the possession of the Business at the Closing
Date, subject to any rights previously granted to third parties and, with
respect to any sublicenses granted herein, subject to the terms and conditions
of the license agreement granting ITTI or its Subsidiaries such sublicensing
rights.
(d) Effective as of the Closing Date, Purchaser, on behalf of
itself, the Brake Companies and the Designated Asset Purchasers, hereby grants
to ITTI and its Subsidiaries, and their successors or assigns of substantially
all of the assets of any of the Sellers' businesses (excluding the Business), a
worldwide, perpetual, paid-up, royalty-free, nonexclusive license with the right
to sublicense their Subsidiaries to manufacture, use and sell (i) products and
to provide services which are made, used, sold, offered for sale or under
development by ITTI or its Subsidiaries (excluding the Business) as of the
Closing Date and (ii) products of the type which are made, used, sold, offered
for sale or under development by the Seller or its Subsidiaries (excluding the
Business) as of the Closing Date using any software, inventions, trade secrets,
know-how or copyrights which are conveyed to Purchaser or the Designated
Purchasers pursuant to this Agreement which were originally obtained by
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ITTI or its Subsidiaries from the Brake Companies or the Sellers of the
Purchased Assets and are in the possession of ITTI or its Subsidiaries, subject
to any rights previously granted to third parties.
(e) It is understood and agreed that the licenses granted above in
this Section 6.15 do not include any right to use trademarks, service marks or
trade names. At the Closing, ITTI and Purchaser will enter into an ITT Name and
Mark Transition Agreement in the form attached hereto as Exhibit J (the "ITT
Name and Mark Transition Agreement").
(f) The licenses granted in subsections (a) through (d) of this
Section 6.15 include have made rights, except with respect to Intellectual
Property, including jointly developed Intellectual Property, that will be
transferred to Valeo pursuant to the June 25, 1998 Stock and Asset Purchase
Agreement between ITTI and Valeo, for which the have made right is limited to
the right to continue to purchase and sell any product being purchased on the
date hereof from a supplier of that product on the date hereof.
(g) Following the Closing, the parties shall use their reasonable
best efforts and shall cooperate with each other to remove any limitations of
the have made right granted in sub-section (f) hereof with respect to the
Intellectual Property that will be transferred to Valeo; provided, however, that
ITTI shall not be required to pay any consideration therefor.
(h) Effective as of the Closing Date, ITTI shall cause its
Subsidiaries to transfer to the Brake Companies and, with respect to the use of
the Purchased Assets, the Designated Asset Purchasers, with no payment due from
any Brake Company or any Designated Asset Purchaser to the Sellers or SAP AG
thereunder, the rights of use of the software used with respect to the Business
under the Value Contract dated as of December 6,
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1996 between SAP AG and ITT Automotive Europe GmbH, on the terms and conditions
set forth in the Value Contract.
6.16 Post-Closing Arrangements.
Between the date of this Agreement and the Closing Date, ITTI and
Purchaser or their respective Subsidiaries will enter into arrangements with
respect to the following matters: (a) reciprocal leasing arrangements between
Purchaser or the relevant Designated Purchaser and ITTI or a Subsidiary of ITTI
designated by ITTI in respect of the office buildings and plants set forth in
Schedule 6.16(a) on the terms set forth in Schedule 6.16(a), (b) a supply
arrangement whereby Teves will purchase from SWF Autoelectric GmbH & Co. KG
("SWF") wiper blades for sale by Teves in its aftermarket business on the terms
set forth in Schedule 6.16(b), (c) a supply arrangement whereby Teves will
purchase from ITT Automotive Italy S.p.A. friction material for sale by Teves in
its aftermarket business on the terms set forth in Schedule 6.16(c) and (d) such
other transition arrangements as are set forth in Schedule 6.16(d).
6.17 No Other Representations or Warranties.
Except for the representations and warranties contained in Article
IV, Purchaser acknowledges that neither ITTI, the Sellers, the Brake Companies,
the other Subsidiaries and Affiliates of ITTI nor any other person makes any
other express or implied representation or warranty with respect to the
Purchased Assets, the assets of the Brake Companies and the Joint Ventures, the
Brake Companies, the Joint Venture Interests or otherwise or with respect to any
other information provided to Purchaser, whether on behalf of ITTI or such other
persons, including as to (a) merchantability or fitness for any particular use
or purpose, (b) the use of the Purchased Assets and the assets of the Brake
Companies and the Joint Ventures
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and the operation of the Business by Purchaser after the Closing in any manner
other than as used and operated by ITTI or (c) the probable success or
profitability of the ownership, use or operation of the Business by Purchaser
after the Closing. Neither ITTI nor any other person will have or be subject to
any liability or indemnification obligation to Purchaser or any other person to
the extent resulting from the distribution to Purchaser, or Purchaser's use of,
any such information, including the Confidential Offering Memorandum dated March
1998 prepared by Goldman, Sachs & Co. and Lazard Freres & Co. LLC related to the
Business (the "Offering Memorandum") and any information, document, or material
made available to Purchaser in certain "data rooms," management presentations or
in any other form in expectation of the transactions contemplated by this
Agreement.
6.18 Insurance Matters. Purchaser acknowledges that, with the exception of
the insurance policies relating to employee benefits to be transferred to
Purchaser pursuant to Section 6.6 and any insurance policies described on
Schedule 4.11(a), the policies and insurance coverage maintained on behalf of
the entities comprising the Business are part of the corporate insurance program
maintained by ITTI (the "ITTI Corporate Policies"), and such coverage will not
be available or transferred to Purchaser, any of the Designated Purchasers or
any of the Brake Companies or Joint Ventures. In furtherance and not in
limitation of the foregoing, Purchaser agrees to cause each Designated Purchaser
and each Brake Company not to bring any claim for recovery under any of the ITTI
Corporate Policies, whether or not such person may be so entitled in accordance
with the terms of such ITTI Corporate Policies. Furthermore, Purchaser agrees
that if at any time in the future it shall sell, directly or indirectly, the
shares of capital stock of any Designated Purchaser or any Brake Company, it
shall obtain the express agreement of the direct or indirect purchaser of such
entity to the
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matters set forth in this Section 6.18. It is understood that ITTI shall be free
at its discretion at any time to cancel or not renew any of the ITTI Corporate
Policies.
6.19 No Solicitation or Negotiation. ITTI agrees that between the
date of this Agreement and the earlier of (i) the Closing and (ii) the
termination of the Agreement, none of ITTI or any of its Subsidiaries (including
the Brake Companies and the Asset Sellers) nor any of their respective
Affiliates, officers, directors, representatives or agents will (a) solicit,
initiate, consider, encourage or accept any other proposals or offers from any
person (i) relating primarily to any acquisition or purchase of all or any
portion of the capital stock of any Brake Company or assets of the Asset Sellers
or any portion of the Business (other than Inventory to be sold in the ordinary
course of business consistent with past practice), (ii) to enter into any
business combination with any Seller or Brake Company in connection with the
Business or (iii) to enter into any other extraordinary business transaction
principally involving or otherwise relating principally to any Brake Company or
any portion of the Business, or (b) participate in any discussions,
conversations, negotiations and other communications regarding, or furnish to
any other person any information with respect to, or otherwise cooperate in any
way, assist or participate in, facilitate or encourage any effort or attempt by
any other person to seek to do any of the foregoing. ITTI immediately shall
cease and cause to be terminated all existing discussions, conversations,
negotiations and other communications with any persons conducted heretofore with
respect to any of the foregoing. ITTI shall notify Purchaser promptly if any
such proposal or offer, or any inquiry or other contact with any person with
respect thereto, is made and shall notify Purchaser of the principal terms and
conditions thereof. ITTI agrees not to, and to cause each Subsidiary not to,
without the prior written consent of Purchaser, release any person from, or
waive any
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provision of, any confidentiality or standstill agreement to which ITTI, any
Brake Company or any Asset Seller, in connection with the Business, is a party.
6.20 Audited Financial Statements. ITTI shall deliver or cause to be
delivered to Purchaser as soon as practicable (a) an audited consolidated
balance sheet of the Business at December 31, 1997 (the "Audited Balance
Sheet"), (b) audited consolidated statements of income, cash flows and changes
in net assets for the Business for the year ended December 31, 1997 presented in
U.S. dollars and prepared in accordance with GAAP, including any footnotes
required by GAAP ((a) and (b) together, the "Audited Financial Statements") and
(c) an adjusted audited consolidated balance sheet of the Business at December
31, 1997 (the "Adjusted Audited Balance Sheet"), which shall be prepared in the
same three-column format and include at least the same line items as the
Reference Balance Sheet and which shall present:
(i) in column 1, the Audited Balance Sheet;
(ii) in column 2, to the extent included in column 1, (A)(1) the
Excluded Brake Company Assets, if any, and (2) the assets of the Asset
Sellers in column 1 which are not Purchased Assets and (B)(1) the Excluded
Brake Company Liabilities and (2) the liabilities of the Asset Sellers in
column 1 which are Excluded Liabilities; and
(iii) in column 3, an amount equal to the amount in column 1 less
the amount in column 2 (the "Adjusted Audited Net Worth").
The Audited Financial Statements and the Adjusted Audited Balance Sheet shall be
accompanied by an unqualified opinion of ITTI's Accountants that they have
audited such financial statements in accordance with GAAP and that such
financial statements present
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fairly, in all material respects, the financial condition of the Business and
the results of operations and cash flows of the Business as of and for the year
ended December 31, 1997, and the Adjusted Audited Net Worth, respectively, in
conformity with GAAP, subject, in the case of the Adjusted Audited Balance
Sheet, to such limitations and qualifications as are customary for a pro forma
balance sheet (it being understood that such "opinion" in the case of the
Adjusted Audited Balance Sheet may take the form of a comfort letter), and it
being further understood in all cases that such opinion or comfort letter shall
not be disclosed to any person (other than Purchaser's legal and financial
advisors) for any purpose without the prior written consent of ITTI. Purchaser's
Accountants shall be permitted to observe ITTI's Accountants in conducting the
audit procedures necessary to prepare the Audited Financial Statements and the
Adjusted Audited Balance Sheet and the report of ITTI's Accountants thereon and,
in connection therewith, ITTI shall (i) cause ITTI's Accountants, officers,
employees and agents to afford Purchaser's Accountants reasonable access to the
offices, properties, books and records and employees of ITTI and its
Subsidiaries and (ii) furnish Purchaser's Accountants reasonable access to, and
copies of, such financial and operating data and other documents and information
regarding the assets, properties and goodwill of the Business as Purchaser's
Accountants may reasonably request. The costs and expenses of ITTI's Accountants
incurred in connection with the audit and preparation of the financial
statements pursuant to this Section 6.20 shall be borne by ITTI. The Audited
Financial Statements and the Adjusted Audited Balance Sheet shall be subject to
the review and dispute resolution procedures of Sections 3.3(c) and (d).
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ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions Precedent to Obligations of Purchaser and ITTI.
The respective obligations of Purchaser and ITTI to consummate and
cause the consummation of the transactions contemplated by this Agreement shall
be subject to the satisfaction (or waiver by the party for whose benefit such
condition exists) at or prior to the Closing Date of each of the following
conditions:
(a) No Injunction, etc. At the Closing Date, there shall be (i) no
injunction, restraining order or decree of any nature of any Governmental
Authority of competent jurisdiction that is in effect that restrains or
prohibits the consummation of any of the transactions contemplated hereby
(it being understood that this clause (i) shall not apply to an
injunction, restraining order or decree that would affect only the ability
of ITTI to transfer the Business in any of Argentina, Japan, Spain,
Malaysia, Hong Kong, Korea, China or Taiwan, provided that the percentage
of the Purchase Price attributable to the Business not transferred in such
country or countries as a result of such injunction, order or decree does
not, based on Exhibit I, in the aggregate exceed 5% of the Initial
Purchase Price) and (ii) no claim, action, suit or arbitration commenced
by any Governmental Authority against the Sellers, the Brake Companies,
Purchaser or any Designated Purchaser which seeks to restrain or
materially and adversely alter the transactions contemplated hereby which
in the reasonable good faith determination of the Sellers or Purchaser
would render it impracticable or unlawful to consummate the transactions
contemplated by this Agreement (it being understood that this clause (ii)
shall not apply to a claim, action, suit or arbitration
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(A) that would affect only the ability of ITTI to transfer the Business in
any of Argentina, Japan, Spain, Malaysia, Hong Kong, Korea, China or
Taiwan, provided that the percentage of the Purchase Price attributable to
the country or countries in which such claim is commenced does not, based
on Exhibit I, in the aggregate exceed 5% of the Initial Purchase Price) or
(B) that would not have a material adverse effect on the business,
operations, assets or financial condition of the Business and the business
of Purchaser taken as a whole, following the Closing Date);
(b) Regulatory Authorizations. All consents or statutorily required
indications of no objection of any Governmental Authorities listed in
Schedule 7.1(b) shall have been obtained, and all waiting periods
applicable under the HSR Act and other applicable antitrust, merger
control or competition laws or regulations shall have expired or been
terminated;
(c) Transition Arrangements. ITTI and Purchaser shall have entered
into, or shall have caused their respective Subsidiaries to enter into,
the agreements and arrangements described in Section 6.16 on substantially
the terms set forth in Schedule 6.16;
(d) German Reorganization. Those matters required to be consummated
on or prior to the Closing in connection with the German Reorganization as
described in Schedule 6.8 shall have been consummated in all material
respects; and
(e) Composants et Instruments Board Approval. The Board of Directors
of Composants et Instruments SA shall have approved the consummation of
the Asset Purchase to the extent it relates to the assets and liabilities
of Composants et Instruments SA.
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(f) ITT Name and Mark Transition Agreement. Purchaser and ITTI shall
have executed the ITT Name and Mark Transition Agreement in accordance
with Section 6.15(e).
7.2 Conditions Precedent to Obligation of ITTI.
The obligation of ITTI to consummate and cause the consummation of
the transactions contemplated by this Agreement shall be subject to the
satisfaction (or waiver by ITTI) at or prior to the Closing Date of each of the
following conditions:
(a) Accuracy of Purchaser's Representations and Warranties. The
representations and warranties of Purchaser contained in this Agreement,
taken as a whole, in each case without regard to any materiality qualifier
therein shall be true and correct, in each case on the date of this
Agreement and on the Closing Date as though made on the Closing Date,
except to the extent such representations and warranties by their terms
speak as of an earlier date, in which case they shall be true and correct
as of such date, except to the extent that the failure of such
representations and warranties to be true and correct would not,
individually or in the aggregate, have a Purchaser Material Adverse Effect
and ITTI shall have received a certificate signed by an officer of
Purchaser to such effect.
(b) Covenants of Purchaser. Purchaser shall have complied in all
material respects with all covenants contained in this Agreement to be
performed by it prior to the Closing; and ITTI shall have received a
certificate signed by an officer of Purchaser to such effect.
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7.3 Conditions Precedent to Obligation of Purchaser.
The obligation of Purchaser to consummate and cause the consummation
of the transactions contemplated by this Agreement shall be subject to the
satisfaction (or waiver by Purchaser) at or prior to the Closing Date of each of
the following conditions:
(a) Accuracy of Representations and Warranties of ITTI. The
representations and warranties of ITTI contained in this Agreement, taken
as a whole, in each case without regard to any materiality qualifier
therein (including the existence or absence of any Seller Material Adverse
Effect or Business Material Adverse Effect) shall be true and correct, in
each case on the date of this Agreement and on the Closing Date as though
made on the Closing Date, except to the extent such representations and
warranties by their terms speak as of an earlier date, in which case they
shall be true and correct as of such date, except to the extent that the
failure of such representations and warranties to be true and correct
would not, individually or in the aggregate, have a Seller Material
Adverse Effect and Purchaser shall have received a certificate signed by
an officer of ITTI to such effect.
(b) Covenants of ITTI. ITTI shall have complied in all material
respects with all covenants contained in this Agreement to be performed by
it prior to the Closing; and Purchaser shall have received a certificate
signed by an officer of ITTI to such effect.
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ARTICLE VIII
CLOSING
8.1 Closing Date.
Unless this Agreement shall have been terminated and the
transactions herein shall have been abandoned pursuant to Article X hereof, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of Simpson Thacher & Bartlett in New York and
Oppenhoff & Radler in Frankfurt am Main, at 10:00 a.m., New York City time, and
in such other places as are necessary to effect the transactions to be
consummated at the Closing, on the earliest date (a) which is any of September
25, October 23, November 20 or December 31, 1998 or January 22, February 19,
March 26, April 23, May 21, June 25 or July 23, 1999 and (b) on which all of the
conditions to the Closing set forth in Article VII hereof are satisfied or
waived, or such other date, time and place as shall be agreed upon by ITTI and
Purchaser (the actual date being herein called the "Closing Date").
Notwithstanding the foregoing, the Closing shall for all purposes be deemed to
occur at the close of business in New York, New York on the Closing Date, except
for the fact that the transfer of the Belgian Assets and the Assumed Liabilities
relating thereto from Teves to the respective Designated Asset Purchaser will be
effected and effective prior to the effectiveness of the transfer of the
partnership interests in Teves to the respective Designated Entity Purchaser.
8.2 Purchaser Obligations.
At the Closing (except with respect to the Belgian Assets, in which
case immediately prior to the Closing), Purchaser shall execute, deliver to ITTI
and/or file, or shall cause one or more of the Designated Purchasers to execute,
deliver to ITTI and/or file the
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following in such form and substance (except for clause (a)) as may be indicated
in any applicable Schedule hereto, or as are reasonably acceptable to ITTI:
(a) the Initial Purchase Price as provided in Section 3.2 hereof;
(b) the documents described in Sections 7.1 and 7.2 hereof;
(c) the assignment and conveyance instruments listed in Schedules 1.1, 1.2
and 2.3; and
(d) such other documents and instruments as counsel for Purchaser and ITTI
mutually agree to be reasonably necessary to consummate the transactions
described herein.
8.3 ITTI Obligations.
At or prior to the Closing, ITTI shall execute, deliver to Purchaser
and/or file, or ITTI shall cause one or more of the Sellers to execute and
deliver to Purchaser and/or to file, the following in such form and substance as
may be indicated in any applicable Schedule hereto, or as are reasonably
acceptable to Purchaser:
(a) prior to the Closing, such instruments of conveyance with
respect to the Belgian Assets as are set forth in Schedule 2.3;
and after having effected the transfer of the Belgian Assets:
(b) the minute books, stock books and stock ledgers (to the extent
such exist) of each of the Brake Companies;
(c) the documents described in Sections 7.1 and 7.3 hereof;
(d) where applicable, the Transferred Subsidiary Stock duly
endorsed or accompanied by stock powers and such other instruments of
assignment and conveyance as may be set forth in Schedule 1.1 hereto;
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(e) any documentation representing the Joint Venture Interests and
such instruments of assignment and conveyance with respect thereto as are
set forth in Schedule 1.2 hereto;
(f) such instruments of conveyance with respect to the Purchased
Assets and Assumed Liabilities as are set forth in Schedule 2.3 hereto;
(g) the Title Policy referred to in Section 6.9;
(h) in respect of Owned Real Property situated in the United States,
a FIRPTA Certificate, in the form attached hereto as Exhibit L, executed
by each of ITTI and the applicable Asset Seller;
(i) an affidavit of title and such other affidavits as may be
required by the Title Company;
(j) to the extent copies thereof are not in the possession or
control of the Brake Companies, copies of all engineering reports,
surveys, soil tests, environmental reports, and any other test results or
reports in ITTI's possession or under ITTI's control concerning the Real
Property located in the United States; and
(k) such other documents and instruments as counsel for Purchaser
and ITTI mutually agree to be reasonably necessary to consummate the
transactions described herein.
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ARTICLE IX
INDEMNIFICATION
9.1 Indemnification.
(a) Following the Closing and subject to the terms and conditions of
this Article IX, ITTI shall indemnify, defend and hold harmless Purchaser and
its Affiliates and their respective officers, directors, employees,
stockholders, assigns and successors (each, a "Purchaser Indemnified Party")
from and against, and shall reimburse each Purchaser Indemnified Party for, all
actual losses (but not punitive damages, except to the extent awarded by a court
of competent jurisdiction in respect of a third party claim), damages,
liabilities, costs and expenses, including interest, penalties, court costs and
reasonable attorneys' fees and expenses, imposed upon or incurred by such
Purchaser Indemnified Party ("Purchaser Losses"), with respect to (i) any
misrepresentation or breach of warranty, (ii) any breach by ITTI of any covenant
or agreement made by ITTI herein or (iii) any Excluded Liabilities or Excluded
Brake Company Liabilities, it being understood that such Purchaser Losses shall
be calculated net of (w) any Tax Benefit realized by such Purchaser Indemnified
Party as set forth more fully in Section 9.3(b) and (x) any recovery from any
third party, including insurance proceeds as set forth more fully in Section
9.3(b), and shall not include (y) any liability reflected on the balance sheet
included in the Financial Statements, the Audited Balance Sheet or the Adjusted
Audited Balance Sheet (in any case unless it is an Excluded Liability or an
Excluded Brake Company Liability) and (z) any adjustments to the Purchase Price
pursuant to Section 3.4(b) with respect to the subject matter in dispute. To the
extent that ITTI's undertakings set forth in this Section 9.1(a) may be
unenforceable, ITTI
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shall contribute the maximum amount that it is permitted to contribute under
applicable law to the payment and satisfaction of all Purchaser Losses.
(b) Following the Closing and subject to the terms and conditions
provided in this Article IX, Purchaser shall indemnify, defend and hold
harmless, ITTI and its Affiliates and their respective officers, directors,
employees, stockholders, assigns and successors (each, a "ITTI Indemnified
Party") from and against, and shall reimburse each ITTI Indemnified Party for,
all actual losses (but not punitive damages, except to the extent awarded by a
court of competent jurisdiction in respect of a third party claim), damages,
liabilities, costs and expenses, including interest, penalties, court costs and
reasonable attorneys' fees and expenses, imposed upon or incurred by such ITTI
Indemnified Party ("ITTI Losses"), with respect to (i) any misrepresentation or
breach of warranty, (ii) any breach of any covenant or agreement made by
Purchaser herein, (iii) any of the Assumed Liabilities or (iv) any operation or
obligation of the Brake Companies, the Purchased Assets or the Joint Venture
Interests (other than Excluded Brake Company Liabilities and Excluded
Liabilities and any liabilities with respect to which Purchaser is entitled to
indemnification pursuant to Section 9.1(a)) including any condition arising
after the Closing Date with respect to the Brake Companies, the Business, the
Purchased Assets or the Joint Venture Interests, it being understood that such
ITTI Losses shall be calculated net of (x) any Tax Benefit realized by any ITTI
Indemnified Party as set forth more fully in Section 9.3(b) and (y) any recovery
from any third party, including insurance proceeds. To the extent that
Purchaser's undertakings set forth in this Section 9.1(b) may be unenforceable,
Purchaser shall contribute the maximum amount that it is permitted to contribute
under applicable law to the payment and satisfaction of all ITTI Losses.
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(c) Anything in this Section 9.1 to the contrary notwithstanding,
the rights and obligations of the parties with respect to indemnification for
any and all Tax matters shall be governed by Section 9.4.
(d) (i) Subject to all of the terms and conditions of this Section
9.1(d), ITTI and Purchaser shall each pay for 50%, on a dollar for dollar basis,
of any Environmental Costs (over and above any reserves therefor reflected on
the Closing Balance Sheet or otherwise transferred to Purchaser at the Closing)
arising out of, relating to or resulting from the remediation or investigation
of any release of Materials of Environmental Concern into the environment at or
prior to the Closing Date with respect to the matters identified in Schedule
4.16 (other than matters covered by Section 9.1(d)(iii)); any duty of ITTI to
indemnify Purchaser pursuant to this Section 9.1(d)(i) shall be limited by
Section 9.1(d)(iv).
(ii) (A) After the Closing Date, Purchaser may investigate, or cause
to be investigated, the nature or extent of any release or threat of release of
Materials of Environmental Concern into the environment with respect to the
matters identified in Schedule 4.16 to the extent that such investigation is
required by Environmental Law or not inconsistent with the exercise of
reasonable business judgment.
(B) Promptly upon receipt thereof, Purchaser shall make available to
ITTI all draft and final environmental or engineering reports, surveys, sampling
data and results, and any other material documents relating to Materials of
Environmental Concern that are the subject of this Section 9.1(d); and shall
also provide ITTI with access to any professionals involved in the preparation
of any of the foregoing or otherwise engaged to address Materials of
Environmental Concern that are the subject of this Section 9.1(d).
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(C) Purchaser shall provide ITTI with a semi-annual cost accounting
of all Environmental Costs (supported with documentation in reasonable detail)
that were incurred during the year covered by the accounting for which Purchaser
believes it is entitled to indemnification pursuant to this Section 9.1(d).
Subject to Section 9.6, within 60 days from the date of receipt of such cost
accounting ITTI shall reimburse Purchaser for such costs in accordance with this
Section 9.1(d).
(D) Purchaser and ITTI agree to cause their respective environmental
professionals to confer at least semi-annually regarding the status of any
investigation, remediation or containment of Materials of Environmental Concern
that are the subject of this Section 9.1(d), or any threatened or pending claims
with respect to such Materials of Environmental Concern.
(E) Subject, in the case of the facility in Varzea Paulista, Brazil
(hereinafter, the "Facility"), to Section 9.1(d)(iii), Purchaser shall undertake
the management of all liabilities related to releases of Materials of
Environmental Concern at the facilities identified on Schedule 4.16 occurring
prior to the Closing Date, regardless of whether such Materials of Environmental
Concern are, as of the Closing Date, within or outside the boundaries of such
facilities. Purchaser shall keep ITTI fully informed as to Purchaser's plans
for, and the status of, such management, which, except to the extent the
specifics of such plans or management are non-discretionary and required by
Environmental Law, shall be subject to the prior approval of ITTI, which
approval shall not be unreasonably withheld.
(F) Purchaser and ITTI shall cooperate in all aspects of the subject
of this Section 9.1(d)(ii), including: (1) developing and implementing
investigative and remedial strategies and (2) preparing, filing, litigating or
negotiating claims related to any insurance
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coverage which may be available to either ITTI or Purchaser, claims by ITTI or
Purchaser against third parties or claims by any third party against ITTI or
Purchaser. Such cooperation shall include, but is not limited to, providing
access to documents, employees, the facilities identified on Schedule 4.16 and
other sources of information that may be relevant to the claim involved.
(iii) (A) Notwithstanding anything contained herein to the contrary,
with respect to the Facility, ITTI and Purchaser shall each pay 50%, on a dollar
for dollar basis, of any Environmental Costs (over and above any reserves for
the Facility reflected on the Closing Balance Sheet or otherwise transferred to
Purchaser at the Closing) arising out of, relating to or resulting from the
remediation or investigation of any on-site release of Materials of
Environmental Concern which release occurred at or prior to the Closing Date;
any duty of ITTI to indemnify Purchaser pursuant to this Section 9.1(d)(iii)(A)
shall be limited by Section 9.1(d)(iv).
(B) Notwithstanding any disclosure on Schedule 4.16, and provided
Purchaser diligently conducts on-site source control, ITTI shall indemnify
Purchaser for any and all Environmental Costs arising out of, relating to or
resulting from the remediation or investigation of any off-site Materials of
Environmental Concern resulting from on-site releases due to operations of the
Facility at or prior to the Closing Date, including, but not limited to, any
migration off-site of such on-site Materials of Environmental Concern after the
Closing Date; any duty of ITTI to indemnify Purchaser pursuant to this Section
9.1(d)(iii)(B) shall be limited by Section 9.1(d)(iv).
(iv) ITTI shall be obligated to make payments to Purchaser pursuant
to Section 9.1(d)(i) and Section 9.1(d)(iii)(A), (A) only for Environmental
Costs incurred within
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five years of the Closing Date; and (B) only for Environmental Costs incurred
within 12 years from the date of a remediation plan pursuant to an enforceable
agreement with a Governmental Authority, the costs of which are quantified in
the plan or in a separate writing of the parties, and which agreement is entered
into within five years of the Closing Date and (1) has been approved by ITTI
(which approval shall not be unreasonably withheld) or (2) required by
Environmental Law. ITTI shall be obligated to make payments to Purchaser
pursuant to Section 9.1(d)(iii)(B), (A) only for Environmental Costs incurred
within two years of the Closing Date and (B) only for Environmental Costs
incurred within 12 years from the date of a remediation plan pursuant to an
enforceable agreement with a Governmental Authority, the costs of which are
quantified in the plan or in a separate writing of the parties, and which
agreement is entered into within two years of the Closing Date and (1) has been
approved by ITTI (which approval shall not be unreasonably withheld) or (2)
required by Environmental Law.
(e)(i) Subject to all of the terms and conditions of this Section
9.1(e), ITTI and Purchaser shall pay in accordance with the following formula
for any Purchaser Losses arising out of, relating to or resulting from the field
recall identified in Schedule 9.1(e):
(A) Purchaser and ITTI shall each pay for 50%, on a dollar for
dollar basis, of the first $10 million of such Purchaser Losses (over and above
any reserves therefor reflected on the Closing Balance Sheet or otherwise
transferred to Purchaser at the Closing); and
(B) Purchaser shall pay 100% of any and all such remaining
Purchaser Losses in excess of such $10 million of Purchaser Losses over and
above any reserves referenced in clause (A).
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(ii) ITTI shall be obligated to make payments to Purchaser pursuant
to this Section 9.1(e) only with respect to Purchaser Losses of which Purchaser
has notified ITTI within five years of the Closing Date.
9.2 Certain Limitations.
(a) Notwithstanding anything contained herein to the contrary, the
maximum aggregate liability of ITTI to all Purchaser Indemnified Parties taken
together for all Purchaser Losses under Section 9.1(a)(i) by Purchaser
Indemnified Parties shall be limited to a maximum of 50% of the Purchase Price,
with the exception of breaches of Section 4.3 or Section 4.7 (with respect to
title), with respect to which the maximum aggregate liability of ITTI for all
Purchaser Losses shall be limited to the Purchase Price. Notwithstanding
anything contained herein to the contrary, the maximum aggregate liability of
Purchaser to all ITTI Indemnified Parties taken together for all ITTI Losses
under Section 9.1(b)(i) by ITTI Indemnified Parties shall be limited to a
maximum of 50% of the Purchaser Price.
(b) Notwithstanding anything contained herein to the contrary, ITTI
shall not be obligated to make any indemnification payment under Section
9.1(a)(i) unless and until the aggregate Purchaser Losses sustained by Purchaser
Indemnified Parties collectively (calculated as specified in Section 9.1(a)(i))
exceed 1% of the Purchase Price, and then any indemnification with respect to
Purchaser Losses shall be made by ITTI only to the extent of such excess over
such 1%, with the exception of breaches of Section 4.16 with respect to which
ITTI shall be obligated to make indemnification payments in respect of all
Purchaser Losses above $5 million (other than Purchaser Losses arising in
Brazil, as to which ITTI shall be obligated to make indemnification payments in
respect of all Purchaser Losses). Notwithstanding anything contained herein to
the contrary, (x) Purchaser shall not be
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obligated to make any indemnification payment under Section 9.1(b)(i) unless and
until the aggregate ITTI Losses sustained by ITTI Indemnified Parties
collectively (calculated as specified in Section 9.1(b)(i) exceed 1% of the
Purchase Price, and then any indemnification with respect to ITTI Losses shall
be made by Purchaser only to the extent of such excess over such 1%.
(c) (i) The representations and warranties of ITTI contained in
Section 4.3 of this Agreement shall survive the Closing until the fifth
anniversary of the Closing Date, (ii) the representations and warranties of ITTI
contained in Section 4.12 of this Agreement shall survive the Closing until 60
days after the expiration of the applicable statute of limitations in respect of
such tax matters and (iii) all other representations and warranties of the
parties contained in this Agreement shall survive the Closing until the second
anniversary of the Closing Date.
(d) Claims for Purchaser Losses or ITTI Losses caused by or arising
out of breach of warranty or inaccurate or erroneous representation may be made
only pursuant to Article IX hereof and only by written notice within the
survival period of such representation and warranty provided for in Section
9.2(c).
(e) The obligations to indemnify and hold harmless a party hereto
pursuant to this Article IX shall terminate when the applicable representation,
warranty, covenant or agreement terminates pursuant to Section 9.2(c); provided,
however, that such obligations to indemnify and hold harmless shall not
terminate with respect to any item as to which the person to be indemnified
shall have, before the expiration of the applicable period, previously made a
claim by delivering a notice (stating in reasonable detail the basis of such
claim) to the indemnifying person.
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9.3 Procedures for Third-Party Claims.
(a) Promptly after the receipt by any Indemnified Party of a notice
of any claim, action, suit or proceeding by any third party that may be subject
to indemnification hereunder, including for purposes of this Section 9.3 any Tax
Claim (as defined below) with respect to which notice must be provided within 10
calendar days following receipt thereof, such Indemnified Party shall give
written notice of such claim to the indemnifying party hereunder (the
"Indemnifying Party"), stating the nature and basis of the claim and the amount
thereof, to the extent known, along with copies of the relevant documents
evidencing the claim and the basis for indemnification sought. Failure of the
Indemnified Party to give such notice shall not relieve the Indemnifying Party
from liability on account of this indemnification, except if and to the extent
that the Indemnifying Party is actually prejudiced thereby. The Indemnifying
Party shall have the right to assume the defense of the Indemnified Party
against the third party claim if the Indemnifying Party acknowledges in writing
its obligation to indemnify the Indemnified Party. So long as the Indemnifying
Party has assumed the defense of the third party claim in accordance herewith
and notified the Indemnified Party in writing thereof, (i) the Indemnified Party
may retain separate co-counsel at its sole cost and expense and participate in
the defense of the third party claim, it being understood the Indemnifying Party
shall pay all costs and expenses of counsel for the Indemnified Party for all
periods prior to such time as the Indemnifying Party has notified the
Indemnified Party that it has assumed the defense of such third party claim and
all costs and expenses of separate counsel for the Indemnified Party if there
exists or is reasonably likely to exist a conflict of interest that would make
it inappropriate in the reasonable judgment of the General Counsel of the
Indemnified Party for the same counsel to represent both the
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Indemnified Party and the Indemnifying Party, (ii) the Indemnified Party shall
not file any papers or consent to the entry of any judgment or enter into any
settlement with respect to the third party claim without prior written consent
of the Indemnifying Party (not to be unreasonably withheld or delayed) and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the third party claim without the prior
written consent of the Indemnified Party (not to be unreasonably withheld or
delayed). The parties shall use commercially reasonable efforts to minimize
Losses from claims by third parties and shall act in good faith in responding
to, defending against, settling or otherwise dealing with such claims. The
parties shall also cooperate in any such defense and give each other reasonable
access to all information relevant thereto. Whether or not the Indemnifying
Party shall have assumed the defense, such party shall not be obligated to
indemnify the Indemnified Party hereunder for any settlement entered into
without the Indemnifying Party's prior written consent, which consent shall not
be unreasonably withheld or delayed.
(b) Treatment of Indemnification Payments. Any payment made pursuant
to the indemnification obligations arising under this Agreement shall be treated
as an adjustment to the Purchase Price. Any indemnity payment under this
Agreement shall be decreased by any amounts actually recovered by the
Indemnified Party under insurance policies with respect to such Loss. If the
amount of any Loss for which indemnification is provided under this Agreement
(an "Indemnity Claim") gives rise to a currently realizable Tax Benefit (as
defined below) to the party making the claim, the indemnity payment shall be
reduced by the amount of the Tax Benefit realized by the party making the claim.
To the extent such Indemnity Claim does not give rise to a currently realizable
Tax Benefit to the party making
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the claim, if the amount with respect to which any Indemnity Claim is made gives
rise to a subsequently realized Tax Benefit to the party that made the claim,
such party shall refund to the Indemnifying Party the amount of such Tax Benefit
when, as and if realized. For purposes of this Section 9.3(b), a "Tax Benefit"
means an amount by which the tax liability of the party (or group of
corporations including the party) is reduced (including, without limitation, by
deduction, reduction of income by virtue of increased tax basis or otherwise,
entitlement to refund, credit or otherwise) plus any related interest received
from the relevant taxing authority. Where a party has other losses, deductions,
credits or items available to it ("Other Tax Items"), the determination of any
Tax Benefit shall be calculated by utilizing the Tax Benefits arising from an
Indemnity Claim only after any Other Tax Items have been used in full. In the
event that there should be a determination disallowing the Tax Benefit, the
Indemnifying Party shall be liable to refund to the Indemnified Party the amount
of any related reduction previously allowed or payments previously made to the
Indemnifying Party pursuant to this Section 9.3(b).
9.4 Tax Indemnification.
(a) Indemnification for Taxes. ITTI agrees to indemnify Purchaser
from and against any Losses (other than Losses for which Purchaser is
indemnified pursuant to any other provisions of this Agreement) that (i)
Purchaser may suffer resulting from or caused by any liability of any of the
Brake Companies or Asset Sellers in respect of the Business, or the China Joint
Venture or the Taiwan Joint Venture, for any Taxes of the Brake Companies or
Asset Sellers in respect of the Business, or the China Joint Venture or the
Taiwan Joint Venture, with respect to any Tax year or portion thereof ending on
or before the Closing Date (a "Pre-Closing Period") (or for any Tax year
beginning before and ending after the Closing
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Date (a "Straddle Period") to the extent allocable (determined in accordance
with the last sentence of this Section 9.4(a)) to the portion of such Straddle
Period beginning before and ending on the Closing Date), (ii) all Taxes imposed
as a result of any breach of warranty or misrepresentation and (iii) all Taxes
imposed on any member of any affiliated group with which any Brake Company or
Asset Seller in respect of the Business, or the China Joint Venture or the
Taiwan Joint Venture, files, has filed or should have filed a Tax Return on a
consolidated, combined or unitary basis. Any allocation required to determine
Taxes attributable to a Straddle Period shall be made by means of a closing of
the Books and Records of the Brake Companies, the China Joint Venture and the
Taiwan Joint Venture as of the close of business on the Closing Date and, to the
extent not susceptible to such allocation, by apportionment on the basis of
elapsed days.
(b) Tax Claims. Notwithstanding anything to the contrary in Section
9.3, this Section 9.4(b) shall apply to all claims, audits, examinations and
other proposed changes or adjustments by any taxing authority concerning any
Taxes for which ITTI is or may be liable, in whole or in part, pursuant to this
Agreement (each a "Tax Claim"). With respect to any Tax Claim, ITTI shall, at
its own expense and provided that ITTI acknowledges in writing its liability
under this Agreement to hold Purchaser harmless against the full amount of any
change or adjustment which may be made as a result of such Tax Claim, control
the defense and settlement of such Tax Claim and Purchaser agrees to cooperate
with ITTI in pursuing such Tax Claim. ITTI shall use reasonable efforts to keep
Purchaser informed of all material developments and events relating to such Tax
Claim and Purchaser shall have the right, at its own expense, to observe (but
not to control) the conduct of any Tax Claim, provided, however that if ITTI
does not assume the defense of any such Tax Claim, Purchaser
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may defend the same in such manner as it may deem appropriate, including, but
not limited to, settling such Tax Claim after giving 15 Business Days' prior
written notice to ITTI setting forth the terms and conditions of settlement. In
the event that a potential adjustment as to which ITTI has acknowledged its
liability is present in the same Tax Claim as a potential adjustment for which
Purchaser would be liable, Purchaser shall have the right, at its own expense,
to control such Tax Claim with respect to the latter proposed adjustment. With
respect to any Tax Claim for a Straddle Period that relates to both the portion
of such Straddle Period that ends on the Closing Date and the portion of such
Straddle Period that begins after the Closing Date, (i) each party may
participate in the Tax Claim, and (ii) the Tax Claim shall be controlled by the
party which would bear the burden of the greater portion of the sum of
adjustment and any corresponding adjustment and any corresponding adjustments
that may be reasonably be anticipated for future Tax periods, which
determination shall be made by the parties in good faith. The principles set
forth in the preceding sentence also shall govern for purposes of deciding any
issue that must be decided jointly (in particular, choice of judicial forum) in
situations in which separate issues are otherwise controlled hereunder by
Purchaser and ITTI. With respect to a Tax Claim which involves an issue that
recurs for any taxable period that begins after the Closing Date (whether or not
the subject of a Tax Claim at such time) (i) each party may participate in the
Tax Claim, and (ii) the Tax Claim shall be controlled jointly by the parties
(such Tax Claim a "Joint Control Tax Claim"). Any disputes arising between the
parties with respect to a Joint Control Tax Claim which cannot be resolved
within 30 days of receipt by one party of a written notice from the other party
which specifies in reasonable detail the nature of any disagreement shall be
submitted for resolution to the Independent Accounting Firm which
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shall, within 30 days after such submission, or such longer period as the
Independent Accounting Firm may reasonably require, determine and report to ITTI
and Purchaser upon such disputes, and such determination shall be final, binding
and conclusive on the parties hereto. The fees and disbursements of the
Independent Accounting Firm shall be shared equally between Purchaser and ITTI.
9.5 Certain Claims Procedures.
The Indemnified Party shall notify the Indemnifying Party promptly
of its discovery of any matter giving rise to a claim of indemnity pursuant
hereto. The Indemnified Party shall cooperate and assist the Indemnifying Party
in determining the validity of any claim for indemnity by the Indemnified Party
and in otherwise resolving such matters. Such assistance and cooperation will
include providing access to and copies of information, records and documents
relating to such matters, furnishing employees to assist in the investigation,
defense and resolution of such matters and providing legal and business
assistance with respect to such matters.
9.6 Arbitration.
(a) Subject to Section 9.6(b), following the Closing, any dispute,
controversy or claim arising out of or in connection with this Agreement, or the
breach thereof, shall be finally settled under the Rules of Arbitration of the
International Chamber of Commerce ("ICC"), with the following modifications. The
arbitration shall be conducted by three arbitrators, and shall be conducted in
the English language in New York, New York. The party initiating arbitration
(the "Claimant") shall appoint its arbitrator in its request for arbitration
(the "Request"). The other party (the "Respondent") shall appoint its arbitrator
within 30 days of receipt of the Request and shall notify the Claimant of such
appointment in
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writing. If the Respondent fails to appoint an arbitrator within such 30 day
period, the arbitrator named in the Request shall decide the controversy or
claim as a sole arbitrator. Otherwise, the two arbitrators appointed by the
parties shall appoint a third arbitrator within 30 days after the Respondent has
notified the Claimant of the appointment of the Respondent's arbitrator. When
the third arbitrator has accepted the appointment, the two party-appointed
arbitrators shall promptly notify the parties of the appointment. If the two
arbitrators appointed by the parties fail or are unable to so appoint a third
arbitrator or so to notify the parties, then the appointment of the third
arbitrator shall be made by the ICC, which shall promptly notify the parties of
the appointment. The third arbitrator shall act as chairperson of the panel.
Upon appointment of the third arbitrator, the arbitrators shall proceed to
commence and conduct all proceedings promptly and in accordance with the rules
of the ICC. The arbitral award shall be in writing and shall be final and
binding on the parties. The award may include an award of costs, including
reasonable attorneys' fees and disbursements, but shall not include punitive
damages. In the absence of any award, each party shall bear its own costs and
the fees and expenses of the arbitrator shall be shared equally by the parties.
Judgment upon the award (for purposes of enforcement) may be entered by any
court having jurisdiction thereof or having jurisdiction over the parties or
their assets.
(b) The provisions of Section 9.6(a) shall not apply with respect to
controversies or claims arising out of the provisions of Sections 3.3, 6.20 and,
with respect to Straddle Period Tax Claims and Joint Control Tax Claims, Section
9.4(b), each of which shall be governed by the provisions therein only.
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9.7 Remedies Exclusive.
Except for claims based on fraud, following the Closing the remedies
set forth in this Article IX shall be exclusive and in lieu of any other
remedies that may be available to the Indemnified Parties under any other
agreement or pursuant to any statutory or common law with respect to any Losses
of any kind or nature incurred directly or indirectly resulting from or arising
out of this Agreement or the transactions contemplated hereby.
9.8 Mitigation.
Purchaser and ITTI shall cooperate with each other with respect to
resolving any claim or liability with respect to which one party is obligated to
indemnify the other party hereunder, including by making commercially reasonable
efforts to mitigate or resolve any such claim or liability.
ARTICLE X
TERMINATION
10.1 Termination Events.
Without prejudice to other remedies which may be available to the
parties by law or this Agreement, this Agreement may be terminated and the
transactions contemplated herein may be abandoned:
(a) by mutual consent of the parties hereto;
(b) by any party by notice to the other party if the Closing shall
not have been consummated by the date which is one year following the date
of this Agreement, unless extended by written agreement of the parties
hereto, provided that the party terminating this Agreement shall not be in
material default or breach hereunder and provided further, that the right
to terminate this Agreement under this clause (b) shall
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not be available (i) to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of
the Closing to occur on or before such date or (ii) in the event that the
Closing shall not have occurred as a result of a failure of any
representation to be true and correct, the terminating party shall not
have the right to terminate this Agreement if such party knew of such
breach prior to the date of this Agreement; or
(c) by either party, if any Governmental Authority shall have issued
a final order, decree or ruling enjoining or otherwise prohibiting any of
the transactions contemplated by this Agreement (unless such order, decree
or ruling has been withdrawn, reversed or otherwise made inapplicable) if
the failure to consummate such prohibited transaction (i) could not be
remedied in accordance with Section 2.4 and (ii) would have a material
adverse effect on the business, operations, assets or financial condition
of the Business taken as a whole, following the Closing Date, provided
that the party seeking to terminate this Agreement under this clause (c)
is not then in material breach of this Agreement and provided, further,
that the right to terminate this Agreement under this clause (c) shall not
be available to any party who shall not have used best efforts to avoid
the issuance of such order, decree or ruling.
10.2 Effect of Termination.
In the event of any termination of the Agreement as provided in
Section 10.1 above, this Agreement shall forthwith become wholly void and of no
further force and effect and there shall be no liability on the part of
Purchaser or ITTI, except that (a) the obligations of Purchaser and ITTI under
Sections 6.2(b) (including the survival of the Confidentiality Agreement
pursuant to its terms) and 6.4 and Article XI of this Agreement shall remain in
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full force and effect and (ii) such termination shall not relieve either party
of any liability for any breach of any representation, warranty, covenant or
agreement contained in this Agreement.
ARTICLE XI
MISCELLANEOUS AGREEMENTS OF THE PARTIES
11.1 Notices.
All communications provided for hereunder shall be in writing and
shall be deemed to be given when delivered in person or by private courier with
receipt, when telefaxed and received, or seven days after being deposited in the
United States mail, first-class, registered or certified, return receipt
requested, with postage paid and,
If to Purchaser: Continental Aktiengesellschaft
Vahrenwalder Strasse 9
30165 Hannover
Germany
Attention: Vorstand
Fax: 49-511-938-1102
with a copy to: Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: John J. Madden
Fax: (212) 848-7179
If to ITTI: ITT Industries, Inc.
4 West Red Oak Lane
White Plains, NY 10604
Attention: General Counsel
Fax: (914) 696-2971
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with a copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Gary L. Sellers, Esq.
Fax: (212) 455-2502
or to such other address as any such party shall designate by written notice to
the other parties hereto.
11.2 Bulk Transfers.
Purchaser waives compliance with the provisions of all applicable
laws relating to bulk transfers in connection with the transfer of the Purchased
Assets.
11.3 Severability.
If any provision of this Agreement shall be declared by any court of
competent jurisdiction to be illegal, void or unenforceable, all other
provisions of this Agreement shall not be affected and shall remain in full
force and effect, and ITTI and Purchaser shall negotiate in good faith to
replace such illegal, void or unenforceable provision with a provision that
corresponds as closely as possible to the intentions of the parties as expressed
by such illegal, void or unenforceable provision.
11.4 Further Assurances; Further Cooperation; Asset Returns.
Subject to the terms and conditions hereof, each of the parties
hereto agrees to use its reasonable best efforts to execute and deliver, or
cause to be executed and delivered, all documents and to take, or cause to be
taken, all actions that may be reasonably necessary or appropriate, in the
reasonable opinion of counsel for ITTI and Purchaser, to effectuate the
provisions of this Agreement. Purchaser acknowledges that (a) ITTI is currently
reviewing a possible sale of its Electrical Systems Business and (b) certain of
the Brake Companies and certain of the Asset Sellers conduct activities which
may not be part of the Business and
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which may be part of the Electrical Systems business or another business
conducted by ITTI (a "Retained Business"). Purchaser agrees that if, following
the date of this Agreement, ITTI becomes aware and determines in good faith,
after consultation with Purchaser, that certain assets sold or to be sold,
whether directly or indirectly, to Purchaser properly belong to a Retained
Business or that in order to properly conduct any Retained Business in
accordance with past practice it is reasonably advisable that certain services
or other assistance (it being understood that no such services shall be required
to be provided for a period extending past the one year anniversary of the
Closing Date) be provided to such Retained Business by any Brake Company, Joint
Venture or Designated Purchaser in respect of the Purchased Assets, Purchaser
will negotiate in good faith with ITTI with a view to selling such assets at a
price reasonably approximating the price at which they were bought from ITTI or
providing such services at a rate reasonably consistent with the rate at which
such services were provided prior to the Closing or, if not so provided, at the
rate that would be negotiated in an arm's length transaction. To the extent that
a negotiated agreement cannot be reached within 30 days, any matters in dispute
shall be submitted to binding arbitration in accordance with Section 9.6.
Without limiting the generality of the foregoing, in the event that Purchaser or
any Designated Purchaser receives any assets other than Purchased Assets or
assets of the Brake Companies, Purchaser agrees to promptly return or cause the
return of such assets to ITTI or the applicable Asset Seller at ITTI's expense.
11.5 Counterparts.
This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument. Copies of executed counterparts
transmitted by telecopy, telefax or other
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electronic transmission service shall be considered original executed
counterparts for purposes of this Section 11.5, provided that receipt of copies
of such counterparts is confirmed.
11.6 Expenses.
Whether or not the Closing occurs, ITTI and Purchaser shall each pay
their respective expenses (such as legal, investment banker and accounting fees)
incurred in connection with this Agreement and the transactions contemplated
hereby.
11.7 Non-Assignability.
This Agreement shall inure to the benefit of and be binding on the
parties hereto and their respective successors and permitted assigns. This
Agreement shall not be assigned by either party hereto without the express prior
written consent of the other party, and any attempted assignment, without such
consent, shall be null and void, except that ITTI may assign its rights under
Sections 9.1(b)(iii) and (iv) to any person that acquires all or any portion of
ITTI's business, other than the Business, and except that Purchaser may assign
its rights and obligations hereunder to any Affiliate of Purchaser, provided
that no such assignment shall relieve Purchaser of any of its obligations
hereunder.
11.8 Amendment; Waiver.
This Agreement may be amended, supplemented or otherwise modified
only by a written instrument executed by the parties hereto. No waiver by either
party of any of the provisions hereof shall be effective unless explicitly set
forth in writing and executed by the party so waiving. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement, including
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representations, warranties, covenants, or agreements contained herein, and
in any documents
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delivered or to be delivered pursuant to this Agreement and in connection with
the Closing hereunder. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
11.9 Schedules and Exhibits.
(a) On or prior to the date hereof, each of ITTI and Purchaser has
delivered to the other a disclosure statement setting forth, among other things,
items the disclosure of which is necessary or appropriate either in response to
an express disclosure requirement contained in a provision hereof or an
exception to one or more representations or warranties contained in Article IV
or Article V hereof, as the case may be; provided, however, that neither the
specification of any dollar amount in any representation nor the mere inclusion
of an item in a Schedule as an exception to a representation or warranty shall
be deemed an admission by a party that such item represents an exception or
material fact, event or circumstance or that such item is reasonably likely to
result in a Seller Material Adverse Effect, a Business Material Adverse Effect
or a Purchaser Material Adverse Effect, as the case may be.
(b) All Exhibits and Schedules hereto are hereby incorporated by
reference and made a part of this Agreement. Any fact or item which is clearly
disclosed on any Schedule or Exhibit to this Agreement or in the Financial
Statements in such a way as to make its relevance or applicability to a
representation or representations made elsewhere in this Agreement or to the
information called for by another Schedule or other Schedules (or Exhibit or
other Exhibits) to this Agreement reasonably apparent shall be deemed to be an
exception to such representation or representations or to be disclosed on such
other Schedule
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or Schedules (or Exhibit or Exhibits), as the case may be, notwithstanding the
omission of a reference or cross-reference thereto.
11.10 Third Parties.
This Agreement does not create any rights, claims or benefits
inuring to any person that is not a party hereto nor create or establish any
third party beneficiary hereto, except for ITT Corporation with respect to any
license to use the name or mark "ITT".
11.11 Governing Law.
This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, without giving effect to any rules
governing the conflicts of law (other than New York General Obligations Law,
Section 5-1401), except for the internal matters of any corporation, partnership
or similar entity which shall be governed by the laws of the jurisdictions of
incorporation of such corporation, partnership or similar entity.
11.12 Consent to Jurisdiction; Waiver of Jury Trial.
Except as set forth in Section 9.6 with respect to the matters
described therein or as specifically provided in respect of any part of this
Agreement, each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the United States District Court for the Southern District of
New York located in the borough of Manhattan in the City of New York, or if such
court does not have jurisdiction, the Supreme Court of the State of New York,
New York County, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the parties hereto, further agrees that service of any process, summons, notice
or document by U.S. registered mail to such party's respective address set forth
in Section 11.1 shall be effective service of process for any action, suit or
proceeding in New York with respect to any matters to which it has
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submitted to jurisdiction as set forth above in the immediately preceding
sentence. Each of the parties hereto, irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in (a) the United
States District Court for the Southern District of New York or (b) the Supreme
Court of the State of New York, New York County, and hereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any such court
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum. The parties hereto hereby irrevocably and
unconditionally waive trial by jury in any legal action or proceeding relating
to this Agreement or any other agreement entered into in connection therewith
and for any counterclaim with respect thereto.
11.13 Interpretation; Absence of Presumption.
(a) This agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.
(b) Whenever the words "include", "including" or "includes" appear
in this Agreement, they shall be read to be followed by the words "without
limitation" or words having similar import.
11.14 Entire Agreement.
This Agreement, Annex A, the Schedules and the Exhibits hereto and
the Confidentiality Agreement set forth the entire understanding of the parties
hereto with respect to the subject matter hereof and there are no agreements,
understandings, representations or warranties between the parties or their
respective Subsidiaries other than those set forth or referred to herein.
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11.15 Section Headings; Table of Contents.
The section headings contained in this Agreement and the Table of
Contents to this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
11.16 Specific Performance.
The parties hereto agree that irreparable damage would occur in the
event any provision of this Agreement and the Exhibits hereto was not performed
in accordance with the terms hereof and that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in addition to any other
remedy to which they are entitled at law or in equity.
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IN WITNESS WHEREOF, the parties have caused this Stock and Asset
Purchase Agreement to be duly executed as of the date first above written.
ITT INDUSTRIES, INC.
By: ______________________________
Name:
Title:
CONTINENTAL AG
By: ______________________________
Name:
Title:
______________________________
Name:
Title:
148
EXHIBIT A
Entity Sellers
1. Entity Sellers Transferring Shares
================================================================================
Selling Subsidiary Company being Equity Designated
Sold Interest Entity
Purchaser
- --------------------------------------------------------------------------------
ITT Gesellschaft fur ITT Automotive 100%
Beteiligungen mbH Korea Co. Ltd.
(Germany) (Korea)
- --------------------------------------------------------------------------------
ITT Gesellschaft fur ITT Automotive do 100%
Beteiligungen mbH Brasil (Brazil)
(Germany)
- --------------------------------------------------------------------------------
ITT Gesellschaft fur Newco 2 100%
Beteiligungen mbH
(Germany)
- --------------------------------------------------------------------------------
ITT Delaware Investments ITT Automotive 100%
Inc. (Delaware) Hungary Kft
(Hungary)
- --------------------------------------------------------------------------------
ITT Industries Limited ITT Automotive UK 100%
(England) Limited (England)
- --------------------------------------------------------------------------------
ITT Delaware Investments, ITT Automotive 100%
Inc. (Delaware) Czech Republic s.r.o.
(Czech Republic)
- --------------------------------------------------------------------------------
ITT Automotive, Inc. ITT Automotive 100%
(Delaware) Argentina S.A.
- --------------------------------------------------------------------------------
nominee(1) ITT Automotive
Argentina, S.A.
- --------------------------------------------------------------------------------
ITT Automotive, Inc. ITT Automotive 100%
(Delaware) Japan, Ltd.
(Japan)
================================================================================
- ----------
(1) Two shareholders required under Argentine law.
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2
2. Entity Sellers Transferring Partnership Interests
================================================================================
Selling Subsidiary Partnership Equity Designated
Interest Entity Purchaser
- --------------------------------------------------------------------------------
ITT Automotive Europe GmbH [Alfred] Teves(2) 70%
& Co. KG (Germany) GmbH & Co. OHG
ITT Gesellschaft fur [Alfred] Teves 30%
Beteiligungen mbH (Germany) GmbH & Co. OHG
================================================================================
- ----------
(2) Registration of company name pending with Commercial Register in
Frankfurt.
150
3
EXHIBIT B
Entity Sellers Transferring Joint Venture Interests
================================================================================
Selling Subsidiary Joint Venture Equity Designated
Interest Entity Purchaser
- --------------------------------------------------------------------------------
ITT Industries Europe GmbH FIT Automocion, 34%
(Germany)(3) S.A. (Spain)
- --------------------------------------------------------------------------------
ITT Industries (China) Shanghai 50%
Investment Co., Ltd. (China) Automotive Brake
Systems Co., Ltd.
(China)
- --------------------------------------------------------------------------------
ITT Automotive, Inc. Korea Advanced 40%
(Delaware) Brake System Co.
Ltd. (Korea)
- --------------------------------------------------------------------------------
ITT Industries, Inc. (Delaware) ITT Automotive 51%
Teyes Co. Ltd. (61,199,960
(Taiwan) shares)
- --------------------------------------------------------------------------------
International Standard Electric ITT Automotive 1 share
Corporation Teyes Co. Ltd.
(Taiwan)
- --------------------------------------------------------------------------------
ITT Delaware Investments Inc. ITT Automotive 1 share
Teyes Co. Ltd.
(Taiwan)
- --------------------------------------------------------------------------------
ITT Manufacturing Enterprises, ITT Automotive 1 share
Inc. Teyes Co. Ltd.
(Taiwan)
- --------------------------------------------------------------------------------
ITT AES Enterprises, Inc. ITT Automotive 1 share
Teyes Co. Ltd.
(Taiwan)
================================================================================
- ----------
(3) If down stream merger of ITTIE into ITTG is legally effective as of
closing, the seller will be ITTG.
151
EXHIBIT C-1
Non-Intellectual Property Asset Sellers
================================================================================
Asset Seller Jurisdiction of Designated Asset
Incorporation Purchaser
- --------------------------------------------------------------------------------
ITT Composants et Instruments S.A. France
- --------------------------------------------------------------------------------
ITT Automotive Asia Pacific, Inc.(4) Delaware,
United States
- --------------------------------------------------------------------------------
ITT Automotive, Inc. Delaware,
United States
- --------------------------------------------------------------------------------
[Alfred] Teves Gmbh & Co. OHG(5) Germany
================================================================================
- ----------
(4) This company will be transferring sales offices in Malaysia and Hong Kong.
(5) This company will be transferring the Belgian Assets and the related
Assumed Liabilities prior to the transfer of the interests in it to a
Designated Entity Purchaser.
152
EXHIBIT C-2
Intellectual Property Transferors
================================================================================
Intellectual Property Transferor Jurisdiction of Designated IP
Incorporation Transferee
- --------------------------------------------------------------------------------
ITT Automotive, Inc. Delaware,
United States
- --------------------------------------------------------------------------------
ITT Manufacturing Enterprises, Delaware,
Inc. United States
- --------------------------------------------------------------------------------
ITT Automotive Europe GmbH & Germany
Co. KG
- --------------------------------------------------------------------------------
ITT Industries, Inc. Indiana,
United States
================================================================================
153
EXHIBIT D
Purchased Assets
"Purchased Assets" means all of the assets, properties and rights of
the Asset Sellers used or held for use primarily or exclusively in the Business,
other than Excluded Assets, including the following: (a) land and land
improvements; (b) buildings and other improvements; (c) machinery and equipment
and other tangible personal property; (d) furniture and fixtures; (e) inventory
existing on the Closing Date, including finished goods, work in process,
supplies, parts, containers, recycled materials and raw materials; (f) accounts
receivable; (g) pre-paid expenses and deposits; (h) Contracts; (i) customer
lists and business records; (j) Intellectual Property owned by an Asset Seller
on the Closing Date which (i) is, or is based on trade secrets, known-how,
inventions, discoveries, works of authorship, designs or writings made
exclusively by a person who was an employee of the Business or any predecessor
thereof, at the time of such making or (ii) is, or is based on trade secrets,
know-how inventions, discoveries, works of authorship, designs or writings
jointly made by an employee, employees of the Business and an employee or
employees of another business owned by ITTI or its Affiliates or any predecessor
thereof at the time of such making, if such inventions, discoveries, designs or
writings relate primarily to the Business or (iii) is or relates to a trademark,
service mark or other source identifier used exclusively in the Business, and
the goodwill of the Business symbolized by such trademark, service mark or other
source identifier or (iv) was purchased by the Business specifically or
primarily for the Business or was developed specifically or primarily for the
Business or any predecessor thereof by a Person other than another ITTI business
or its employees; (k) goodwill; (l) sales literature, promotional literature,
and other selling and advertising material and lists of customers and
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2
suppliers; (m) books, records, ledgers and other documents (or copies thereof
whether on paper, computer disk, tape or other storage media); (n) to the extent
transferable, third-party warranties and guarantees; (o) to the extent
transferable, franchises, approvals, permits, licenses, orders, registrations,
certificates, variances, tax abatements and other similar permits or rights; and
(p) all prepaid assets reflected on the Closing Balance Sheet.
155
EXHIBIT E
Excluded Liabilities
(a) Accounts payable to ITTI or to Subsidiaries of ITTI which are not
Brake Companies or Asset Sellers in respect of the Business (other than trade
payables).
(b) Tax liabilities which are for ITTI's account pursuant to Section 6.14.
(c) Liabilities relative to employees and employee benefits other than
those expressly assumed by Purchaser under Section 6.6.
(d) Liabilities arising out of or associated with the Excluded Assets.
(e) Liabilities arising solely as a result of the consummation of the Pro
Forma Transactions or the German Reorganization, other than liabilities related
to the operation of the Business which are not otherwise Excluded Liabilities.
156
EXHIBIT G
Excluded Assets
(a) Cash (excluding petty cash), bank accounts, certificates of deposit
and other cash equivalents;
(b) Accounts receivable from ITTI or Subsidiaries of ITTI which are not
Brake Companies or Asset Sellers in respect of the Business (other than trade
receivables);
(c) All rights to the name or mark "ITT";
(d) All proprietary information of ITTI and ITTI's Affiliates (other than
proprietary information included in the Business), including the following:
(i) all ITTI's proprietary code books and telex encryption devices;
and
(ii) all ITTI's proprietary corporate manuals;
(e) All insurance policies and any rights, claims or choses in action
under such insurance policies other than those policies set forth on Schedule
4.11(a);
(f) All rights to refunds of any Taxes paid by ITTI or any Seller with
respect to periods prior to the Closing;
(g) Intellectual Property other than that specified in subparagraph (j) of
the definition of Purchased Assets; and
(h) Contracts for the use of software and related agreements with software
vendors used by or for multiple business units of ITTI.
157
EXHIBIT H
Certain Excluded Brake Company Liabilities
(a) Liability and defense of Lucas Industries p.l.c. v. ITT Automotive
Europe GmbH (ITTAE) pending in the Regional Court in Munich, Germany relating to
the infringement of Lucas' German Patent No. 25 27 439 by ITTAE's manufacture
and sale of FN calipers (the "FN Caliper Litigation").
(b) Liabilities arising solely as a result of the consummation of the Pro
Forma Transactions or the German Reorganization, other than liabilities related
to the operation of the Business which are not otherwise Excluded Brake Company
Liabilities.
(c) Tax liabilities incurred (i) as a result of the transfer of the Brake
Companies to Purchaser, other than those Taxes referred to in the first sentence
of Section 6.14(e), and (ii) any Taxes arising as a result of the consummation
of the Pro Forma Transactions or the German Reorganization.
158
EXHIBIT M
Certain Excluded Brake Company Assets
1. All proceeds or accounts receivable resulting from
(a) the sale and transfer prior to the Closing of the Belgian
Assets
(b) the sale of the Czech Electrical Assets
(c) the sale of the Hungarian Electrical Assets
(d) the sale of the Brazilian Fluid Handling Assets
(e) the sale of the UK Fluid Handling Assets
(f) the sale of the Japanese Electrical Assets.
2. Should for reasons based on local laws the separation of the businesses in
the Czech Republic, Hungary, Brazil, the United Kingdom and/or Japan not
be effected or effective prior to Closing, the Czech Electrical Assets,
the Hungarian Electrical Assets, the Brazilian Fluid Handling Assets, the
UK Fluid Handling Assets and the Japanese Electrical Assets, as
applicable, shall be Excluded Brake Company Assets.
159
ANNEX A
"Acquired Business" shall have the meaning set forth in Section
6.10(b)(iii).
"Actual GPA" shall mean the cumulative increase in gross plant additions
from January 1, 1998 through the Closing Date as shown in the work papers
prepared in connection with the audit of the Closing Balance Sheet.
"Actual Value" shall have the meaning set forth in Section 6.6(j)(iii)(D).
"Adjusted Audited Balance Sheet" shall have the meaning set forth in
Section 6.20(c).
"Adjusted Audited Net Worth" shall have the meaning set forth in Section
6.20(c)(iii).
"Affiliate" of a person means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person.
"Agreement" shall have the meaning set forth in the Recitals to the
Agreement.
"Annuity Contracts Transfer" shall have the meaning set forth in Section
6.6(h).
"Antitrust Regulations" shall have the meaning set forth in Section 4.2.
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"Asset Purchase" shall have the meaning set forth in the Recitals to the
Agreement.
"Asset Sellers" shall have the meaning set forth in the Recitals to the
Agreement.
"Assumed Liabilities" shall have the meaning set forth in Section 2.2.
"Audited Balance Sheet" shall have the meaning set forth in Section
6.20(a).
"Audited Financial Statements" has the meaning set forth in Section
6.20(b).
"Banker's Trust" shall have the meaning set forth in Section 6.6(l)(i).
"Belgian Assets" shall have the meaning set forth in Section 2.1.
"Belgian Assets Sale" shall have the meaning set forth in Section 6.14(a).
"Belgium Business Employees" shall have the meaning set forth in Section
6.6(u)(i).
"Belgium Employee Benefit Arrangements" shall have the meaning set forth
in Section 6.6(u)(i).
"Belgium Former Business Employees" shall have the meaning set forth in
Section 6.6(u)(i).
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"Belgium Transitioned Employees" shall have the meaning set forth in
Section 6.6(u)(i).
"Benefits and Employment Relationship Claim" or "Benefits and Employment
Relationship Claims" shall have the meaning set forth in Section 6.6(t)(i).
"Books and Records" shall have the meaning set forth in Section 6.5(a).
"Brake Companies" shall have the meaning set forth in the Recitals to the
Agreement.
"Brake Company Stock" shall have the meaning set forth in Section 4.3.
"Brake Friction Products Business" means the business conducted by various
ITTI Subsidiaries other than the Brake Companies and the Asset Sellers of
designing, developing, manufacturing, marketing and selling disc brake pads,
drums in hat and back plates.
"Budgeted GPA" shall mean the total amount in dollars of gross plant
additions budgeted to be spent by the Business between January 1, 1998 and the
Closing Date, as set forth on Schedule 3.1(a), it being understood that to the
extent the Closing Date shall occur in the middle of a month, the amount of
Budgeted GPA for that month shall equal the product of (a) the Budgeted GPA for
the month in which the Closing occurs and (b) a fraction equal to the number of
days elapsed from the first day of such month through the Closing Date over the
total number of days in the month in which the Closing occurred. In the event
the
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Closing Date shall not have occurred by December 31, 1998, ITTI shall deliver to
Purchaser prior to December 31, 1998 a revised Schedule 3.1(a), modified to
include ITTI's good faith estimate of amounts budgeted to be spent on gross
plant additions between January 1, 1998 and July 31, 1999.
"Business" shall have the meaning set forth in the Recitals to the
Agreement.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which banks in New York and Germany are permitted or required by law to
close.
"Business Employees" means all persons employed as of the Closing Date by
any Brake Company or by any Asset Seller with respect to the Business (i) with
respect to the United States, including those who are not actively-at-work as of
such date on account of (A) layoff, (B) authorized leave of absence, (C) with
respect to such persons paid on an hourly basis, any Disability (meaning any
illness or injury; persons not actively-at-work due to disability are referred
to herein as "Disabled"), and (D) with respect to such persons paid on a
salaried basis, Short Term Disability (meaning any Disability of less than six
months duration as of the date immediately preceding the Closing Date; persons
not actively-at-work due to Short Term Disability are referred to herein as
"Short Term Disabled"); but, with respect to the United States, excluding such
persons, paid on a salaried basis, not actively-at-work as of such date due to
Long Term Disability (meaning any Disability of six months or longer duration as
of the date immediately preceding the Closing Date); (ii) with respect to the
United States, including those who are entitled as of the Effective Benefits
Time to severance
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and termination pay benefits under the U.S. Business Severance Policies and
Practices and with respect to whom such severance and termination pay benefits
are reflected on the Closing Balance Sheet; and (iii) with respect to the UK,
including all persons who may be on temporary leave of absence from work or who
may be entitled to exercise a right to return to work with any Brake Company or
Asset Seller.
"Business Losses" means actual losses (but not punitive damages except to
the extent awarded by a court of competent jurisdiction in respect of a third
party claim), damages, liabilities, costs and expenses, including interest,
penalties, court costs and reasonable attorneys' fees and expenses.imposed upon
or incurred by the Business.
"Business Material Adverse Effect" shall have the meaning set forth in
Section 4.14.
"Cannon Business" means the business conducted by ITTI and certain of its
Subsidiaries (other than the Brake Companies and the Asset Sellers in respect of
the Business) of supplying electronic and optical connectors, switches, test
accessories and cable assemblies for information systems, industrial,
military/aerospace and transportation applications to the industrial and
military/aerospace sectors.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. Sections 9601 et seq., as amended, and all
regulations promulgated thereunder, as in effect on the date of the Closing.
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"China Joint Venture" shall have the meaning set forth in Section 4.12(a).
"Claimant" shall have the meaning set forth in Section 9.6(a).
"Closing" shall have the meaning set forth in Section 8.1.
"Closing Adjusted Net Worth" shall have the meaning set forth in Section
3.3(a)(i)(C).
"Closing Balance Sheet" shall have the meaning set forth in Section
3.3(a)(i).
"Closing Date" shall have the meaning set forth in Section 8.1.
"COBRA" shall have the meaning set forth in Section 4.13(i).
"Code" means the Internal Revenue Code of 1986, as amended.
"Competing Operations" shall have the meaning set forth in Section
6.10(b)(iii).
"Competition" shall have the meaning set forth in Section 6.10(a).
"Confidentiality Agreement" shall have the meaning set forth in Section
6.2(b).
"Consent" shall have the meaning set forth in Section 6.3(a).
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"Contract Transition Arrangement" shall have the meaning set forth in
Section 2.4(a).
"Contracts" shall have the meaning set forth in Section 4.8(a).
"Control" means the ownership of more than 50% of the securities entitling
the person holding such securities to vote on the election of directors.
"Covered Schedules" shall have the meaning set forth in Section 4.8(a).
"Designated Asset Purchasers" shall have the meaning set forth in the
Recitals to the Agreement.
"Designated Entity Purchasers" shall have the meaning set forth in the
Recitals to the Agreement.
"Designated IP Transferees" shall have the meaning set forth in the
Recitals to the Agreement.
"Designated Non-IP Purchasers" shall have the meaning set forth in the
Recitals to the Agreement.
"Designated Purchasers" shall have the meaning set forth in the Recitals
to the Agreement.
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"Disclosed Contracts" shall have the meaning set forth in Section 4.8(a).
"dollars" or "$", when used in this Agreement or any other Transaction
Document, shall mean United States dollars unless otherwise stated.
"EC Business Employee" means a Business Employee employed, as of the
Closing Date, in Belgium, France, Germany, Italy, Portugal, Spain, Sweden or the
United Kingdom (the "EC Countries").
"Effective Benefits Time" means 12:01 AM Eastern Time on the date
immediately following the Closing Date.
"Effective Date" shall have the meaning set forth in Section 6.6(n).
"Electrical Systems Business" means the business conducted by various ITTI
Subsidiaries and Affiliates of designing, developing, manufacturing and selling
wiper and washer systems and modules and their associated components and
electronics; electric motors (and their components), actuators and electric
pumps; single and multicolor lamps and panel modules; single and multifunction
switches, electronic controls and controllers, electric and hydraulic engine
cooling systems, air management systems (and associated components), sensors,
power antennas and park assist systems.
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"Employee Benefit Arrangements" means all plans, schemes, contracts,
agreements, practices, policies or arrangements, oral or written, of ITTI, any
Brake Company, any Asset Seller, or any subsidiary or trade or business (whether
or not incorporated) that is a member of a "control group" of which ITTI, any
Brake Company or Asset Seller is a member or under common control with ITTI, any
Brake Company or Asset Seller within the meaning of Section 414(b) and (c) of
the Internal Revenue Code ("Control Group Member") or in which ITTI, any Brake
Company, any Asset Seller or any Control Group Member participates with respect
to or covering any Business Employee or Business Former Employee (other than
state or statutory social security, unemployment insurance, workers'
compensation or pension arrangements) providing for employment or for benefits
payable on retirement, death or disability and voluntary withdrawal from or
involuntary termination of employment or for any bonuses, deferred compensation,
excess benefits, pensions, retirement benefits, profit sharing,stock bonuses,
stock options, stock purchases, incentive arrangements, life, accident and
health insurance, hospitalization, savings, holiday, vacation, severance pay,
termination indemnity payments, sick pay, leave, disability, company cars,
tuition refund, scholarship, relocation, service awards or any other employee or
executive benefits, including, without limitation, with respect to the United
States, any such plan, scheme, contract, agreement, practice, policy or
arrangement which is an "employee benefit plan" as defined in Section 3(3) of
ERISA, including any "employee welfare benefit plan" as defined in Section 3(1)
of ERISA ("U.S. Welfare Plan") and any employee pension benefit plan as defined
in Section 3(2) of ERISA ("U.S. Pension Plan").
"Entity Purchase" shall have the meaning set forth in the Recitals to the
Agreement.
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"Entity Sellers" shall have the meaning set forth in the Recitals to the
Agreement.
"Environmental Cost" means any costs incurred relating to any claim,
demand, order, suit, obligation, liability, cost (including the cost of any
investigation, testing or remedial action) or expense (including reasonable
attorney's and consultant's fees and expenses) required by any applicable
Environmental Law. Environmental Cost shall not include any costs incurred due
to the change in use of the property.
"Environmental Law" shall mean all foreign, federal, state, and local
laws, statutes, regulations, ordinances, codes, and enforceable orders and
decrees, protecting the quality of the ambient air, soil or subsurface strata,
surface water, or groundwater from exposure to or discharges of Materials of
Environmental Concern, or otherwise related to the environment, natural
resources or human health and safety as affected by any of the foregoing, as are
in effect as of the Closing Date.
"Environmental Permits" shall mean all permits, licenses, registrations,
and other authorizations required under any applicable Environmental Law.
"Equity Equivalents" shall have the meaning set forth in Section 4.3.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor thereto.
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"Estimated Value" shall have the meaning set forth in Section
6.6(j)(iii)C).
"Excess Pension Plan shall have the meaning set forth in Section
6.6(l)(iv)(A).
"Excluded Assets" shall mean the assets set forth on Exhibit G.
"Excluded Brake Company Assets" shall have the meaning set forth in
Section 3.3(a)(i)(B)(1)(x).
"Excluded Brake Company Liabilities" shall have the meaning set forth in
Section 3.3(a)(i)(B)(4)(x).
"Excluded Businesses" shall have the meaning set forth in Recitals to the
Agreement.
"Excluded Liabilities" shall have the meaning set forth in Section 2.2.
"Facility" shall have the meaning set forth in Section 9.1(d)(ii)(E).
"Financial Statements" shall have the meaning set forth in Section 4.5(a).
"Fluid Handling Business" means the business conducted by various ITTI
Subsidiaries and Affiliates other than the Brake Companies and the Asset Sellers
in respect of the Business of designing, developing, manufacturing, marketing
and selling fluid handling
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products including HVAC, air suspension, vacuum, washer fluid, rigid/flexible
couplings, brake or fluid tubing systems and tubing connectors, automobile
interior plastic components, extruded plastic profiles and braised engine parts.
"FN Caliper Litigation" shall have the meaning set forth in Exhibit H.
"Former Business Employees" shall mean (i) all persons who were not
employees of any Brake Company or any Asset Seller with respect to the Business
immediately preceding the Closing Date but who were formerly employed by any
Brake Company or any Asset Seller with respect to the Business or predecessors
thereof and whose service with any Brake Company or any Asset Seller and their
respective affiliates or predecessors terminated prior to the Closing Date
including, without limitation, (A) those who are retired and, (B) with respect
to the United States only, (x) those paid on a salaried basis who are Long Term
Disabled and (y) those on an unauthorized leave of absence and (ii) the Refusing
Employees and those Business Employees employed by any Asset Seller with respect
to the Business who do not accept employment as offered by Purchaser in
accordance with Section 6.6(b)(i); but excluding, with respect to the United
States, those persons who are entitled as of the Effective Benefits Time to
severance and termination pay benefits under the U.S. Business Severance
Policies and Practices and with respect to whom such severance and termination
pay benefits are reflected on the Closing Balance Sheet.
"GAAP" shall have the meaning set forth in Section 3.3(a)(i)(C).
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"General Relations Agreements" shall mean those agreements among the ITTI
Companies Relating to the sharing of technology and research and development
costs.
"German Reorganization" shall have the meaning set forth in Section 6.8.
"Governmental Authority" shall have the meaning set forth in Section 4.4.
"Hartford" shall have the meaning set forth in Section 6.6(h).
"HIPAA" shall have the meaning set forth in Section 6.6(c)(vii).
"Hourly Business Employees" means Business Employees paid on an hourly
basis.
"Hourly Former Business Employees" means Former Business Employees who
were paid on an hourly basis.
"Hourly Pension Plans" means the ITT Automotive Pension Plan for Hourly
Employees at Henderson, NC, the ITT Automotive Pension Plan for Hourly Employees
at Culpeper, VA, the ITT Automotive Pension Plan for Hourly Employees at
Asheville, NC, and the ITT Automotive Pension Plan for Hourly Employees at
Morganton, NC.
"Hourly Savings Plan Annuity Contracts" shall have the meaning set forth
in Section 6.6(h).
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"Hourly Savings Plan Participant" shall have the meaning set forth in
Section 6.6(h).
"Hourly Savings Plans" means the ITT Automotive Brakes Systems - Henderson
Savings Plan for Hourly Employees, the ITT Automotive Brakes Systems - Culpeper
Savings Plan for Hourly Employees, the ITT Automotive Brake Systems - Asheville
Savings Plan for Hourly Employees, and the ITT Automotive Brake Systems -
Morganton Savings Plan for Hourly Employees.
"Hourly Transfer Date" shall have the meaning set forth in Section 6.6(h).
"Hourly Transitioned Employees" means Hourly Business Employees who become
Transitioned Employees.
"HSR Act" shall have the meaning set forth in Section 6.3(b).
"ICC" shall have the meaning set forth in Section 9.6(a).
"Indebtedness" means, with respect to any person, (a) all indebtedness of
such person, whether or not contingent, for borrowed money, (b) all obligations
of such person for the deferred purchase price of property or services, (c) all
obligations of such person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such person (even though the rights and remedies of the seller or
lender under
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such agreement in the event of default are limited to repossession or sale of
such property), (e) all obligations of such person as lessee under leases that
have been or should be, in accordance with GAAP, recorded as capital leases, (f)
all obligations, contingent or otherwise, of such person under acceptance,
letter of credit or similar facilities, (g) all obligations of such person to
purchase, redeem, retire, defease or otherwise acquire for value any capital
stock of such person or any warrants, rights or options to acquire such capital
stock, valued, in the case of redeemable preferred stock, at the greater of its
voluntary or involuntary liquidation preference plus accrued and unpaid
dividends, (h) all Indebtedness of others referred to in clauses (a) through (f)
above guaranteed directly or indirectly in any manner by such person, or in
effect guaranteed directly or indirectly by such person through an agreement (i)
to pay or purchase such Indebtedness or to advance or supply funds for the
payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Indebtedness or to assure
the holder of such Indebtedness against loss, (iii) to supply funds to or in any
other manner invest in the debtor (including any agreement to pay for property
or services irrespective of whether such property is received or such services
are rendered) or (iv) otherwise to assure a creditor against loss, and (i) all
Indebtedness referred to in clauses (a) through (f) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including accounts and
contract rights) owned by such person, even though such person has not assumed
or become liable for the payment of such Indebtedness.
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"Indemnified Party" means a Purchaser Indemnified Party or a ITTI
Indemnified Party, as the case may be.
"Indemnifying Party" shall have the meaning set forth in Section 9.3(a).
"Indemnity Claim" shall have the meaning set forth in Section 9.3(b).
"Independent Accounting Firm" shall have the meaning set forth in Section
3.3(d).
"Industries Master Trust" shall have the meaning set forth in Section
6.6(j)(iii)(A).
"Initial Purchase Price" shall have the meaning set forth in Section 3.1.
"Intellectual Property" shall mean patents and patent applications, trade
names, service marks and trademarks, trademark and service mark registrations,
applications for the registration of trademarks and service marks, copyright
registrations, applications for the registration of copyrights, mask works, mask
work registrations and applications for the registration of mask works,
software, inventions, trade secrets, know-how and copyrights.
"Intellectual Property Transferors" shall have the meaning set forth in
the Recitals to the Agreement.
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"Inventories" means all inventory, merchandise, goods, raw materials,
packaging and supplies related to the Business maintained for sale, held for
sale or stored for sale by or for any Brake Company or any Asset Seller in
respect of the Business on the Closing Date and any prepaid deposits for any of
the same.
"IRS" shall mean the United States Internal Revenue Service.
"ITT Name and Mark Transition Agreement" shall have the meaning set forth
in Section 6.15(e).
"ITTAA" shall have the meaning set forth in Section 4.13(j).
"ITTI" shall have the meaning set forth in the Recitals to the Agreement.
"ITTI Corporate Policies" shall have the meaning set forth in Section
6.18.
"ITTI Indemnified Party" shall have the meaning set forth in Section
9.1(b).
"ITTI Losses" shall have the meaning set forth in Section 9.1(b).
"ITTI's Accountants" shall have the meaning set forth in Section
3.3(a)(i)(C).
"Joint Control Tax Claim" shall have the meaning set forth in Section
9.4(b).
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"Joint Venture Agreement" shall have the meaning set forth in Section 1.2.
"Joint Venture Interests" shall have the meaning set forth in the Recitals
to the Agreement.
"Joint Venture Purchase" shall have the meaning set forth in the Recitals
to the Agreement.
"Joint Ventures" shall have the meaning set forth in the Recitals to the
Agreement.
"the knowledge of" or "the best knowledge of" a party hereto shall mean,
with respect to ITTI, the actual knowledge of the individuals listed on Part 1
of Exhibit K hereto, and with respect to Purchaser, the actual knowledge of the
individuals listed on Part 2 of Exhibit K hereto.
"Leased Real Property" shall have the meaning set forth in Section 4.7(b).
"LIBOR" shall have the meaning set forth in Section 3.4(c).
"Liens" shall have the meaning set forth in Section 4.2.
"Losses" shall mean Purchaser Losses or ITTI Losses, as the case may be.
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"Materials of Environmental Concern" shall mean any hazardous, acutely
hazardous or toxic substance, material, waste or contaminant defined or
regulated under any Environmental Law applicable to the substance, material,
waste or contaminant in the jurisdiction in which such substance, material,
waste or contaminant is located, including without limitation CERCLA and RCRA
where applicable.
"Non-IP Asset Sellers" shall have the meaning set forth in the Recitals to
the Agreement.
"Northern STIF" shall have the meaning set forth in Section
6.6(j)(iii)(C).
"Northern Trust" shall have the meaning set forth in Section
6.6(j)(iii)(A).
"Offering Memorandum" shall have the meaning set forth in Section 6.17.
"Other Tax Items" shall have the meaning set forth in Section 9.3(b).
"Owned Real Property" shall have the meaning set forth in Section 4.7(b).
"Partnership Interests" shall have the meaning set forth in the Recitals
to the Agreement.
"PBGC" shall have the meaning set forth in Section 6.6(i).
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"Permitted Liens" shall have the meaning set forth in Section 4.7(a).
"person" or "Person" means an individual, corporation, partnership,
association, trust, incorporated organization, other entity or group (as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934).
"Plan Accounts" shall have the meaning set forth in Section
6.6(j)(iii)(A).
"Pre-Closing Period" shall have the meaning set forth in Section 9.4(a).
"Pro Forma Transactions" shall have the meaning set forth in Section
6.7(a).
"Products" shall have the meaning set forth in Section 6.10(a).
"Purchase" shall have the meaning set forth in the Recitals to the
Agreement.
"Purchase Price" shall have the meaning set forth in Section 3.1.
"Purchased Assets" shall mean the assets set forth on Exhibit D.
"Purchaser" shall have the meaning set forth in the Recitals to the
Agreement.
"Purchaser Indemnified Party" shall have the meaning set forth in Section
9.1(a).
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"Purchaser Losses" shall have the meaning set forth in Section 9.1(a).
"Purchaser Material Adverse Effect" shall have the meaning set forth in
Section 5.2.
"Purchaser's Accountants" shall have the meaning set forth in Section
3.3(a)(i)(C).
"Purchaser's Excess Pension Plan" shall have the meaning set forth in
Section 6.6(l)(iv)(B).
"Purchaser's Hourly Pension Plans" shall have the meaning set forth in
Section 6.6(k)(ii)(A).
"Purchaser's Hourly Savings Plan" shall have the meaning set forth in
Section 6.6(h).
"Purchaser's Salaried Pension Plan" shall have the meaning set forth in
Section 6.6(l)(ii)(B).
"Purchaser's Savings Plan" shall have the meaning set forth in Section
6.6(l)(i).
"Purchaser's Trust" shall have the meaning set forth in Section
6.6(j)(iv)(A).
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"Purchaser's U.S. Welfare Benefits Program" means the employee welfare
benefits plans, programs, policies, practices or arrangements of Purchaser
offered for U.S. Transitioned Employees in accordance with Section 6.6(b)(ii).
"RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C.
Sections 6901 et seq., as amended, and all regulations promulgated
thereunder, as in effect on the date of the Closing.
"Real Property" shall have the meaning set forth in Section 4.7(b).
"Receivables" means any and all accounts receivable, notes and other
amounts receivable by the Brake Companies or any Asset Seller in respect of the
Business from third parties, including customers, arising from the conduct of
the Business or otherwise before the Closing Date, whether or not in the
ordinary course.
"Reference Balance Sheet" means the three column combined unaudited
balance sheet attached hereto as Exhibit F, showing for illustrative purposes in
the second column thereof the adjustments which would have been made to
determine the Closing Adjusted Net Worth in accordance with the terms of this
Agreement if the restructurings referred to in Sections 6.7 and 6.8 had occurred
prior to Closing and the Closing had occurred on December 31, 1997.
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"Refusing Employee" means an EC Business Employee who (other than EC
Business Employees employed by a Brake Company) does not transfer to or take up
employment with Purchaser as of the Effective Benefits Time.
"Request" shall have the meaning set forth in Section 9.6(a).
"Respondent" shall have the meaning set forth in Section 9.6(a).
"Retained Business" shall have the meaning set forth in Section 11.4.
"Salaried Business Employees" means Business Employees paid on a salaried
basis.
"Salaried Former Business Employees" means Former Business Employees who
were paid on a salaried basis.
"Salaried Retirement Plan" shall have the meaning set forth in Section
6.6(l)(ii)(A).
"Salaried Savings Plan" shall have the meaning set forth in Section
6.6(l)(i).
"Salaried Transitioned Employees" means Salaried Business Employees who
become Transitioned Employees.
"Savings Plan Participants" shall have the meaning set forth in Section
6.6(l)(i).
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"Securities Act" shall have the meaning set forth in Section 5.4.
"Seller Material Adverse Effect" shall have the meaning set forth in
Section 4.2.
"Sellers" shall have the meaning set forth in the Recitals to the
Agreement.
"Shock Absorber Business" means the business conducted by ITTI's Koni
business units including the designing, developing, manufacturing and selling
suspension systems, McPherson struts, high and low pressure gas and hydraulic
shock absorbers and hydraulic and electronically controlled shock absorbers.
"Straddle Period" shall have the meaning set forth in Section
9.4(a).
"Subsidiary" or "Subsidiaries" of Purchaser, ITTI or any other person
means any corporation, partnership or other legal entity of which Purchaser,
ITTI or such other person, as the case may be (either alone or through or
together with any other Subsidiary), owns, directly or indirectly, more than 50%
of the stock or other equity interests the holder of which is generally entitled
to vote for the election of the board of directors or other governing body of
such corporation or other legal entity.
"SWF" shall have the meaning set forth in Section 6.16(b).
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"Taiwan Joint Venture" shall have the meaning set forth in Section
4.12(a).
"Tax" or "Taxes" shall mean any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind imposed by any taxing authority,
including, without limitation: all federal, state, local and foreign taxes or
other charges on or with respect to income, windfall or other profits,
franchise, gross receipts, sales, use, occupation, property, capital stock,
excise, payroll, withholding, ad valorem, stamp, transfer, value added, gains,
employment, social security, workers' compensation, unemployment compensation,
net worth, estimated and other taxes of any nature, including interest,
penalties and other additions to such taxes.
"Tax Benefit" shall have the meaning set forth in Section 9.3(b).
"Tax Claim" shall have the meaning set forth in Section 9.4(b).
"Tax Return" shall mean any return, declaration, deposit and any
accompanying transfer or transmittal forms, report and information statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
"Teves" shall have the meaning set forth in Section 2.1.
"Title Company" shall have the meaning set forth in Section 6.9(a).
"Title Policy" shall have the meaning set forth in Section 6.9(a).
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"Transaction Documents" shall have the meaning set forth in Section 4.2.
"Transfer Date" shall have the meaning set forth in Section 6.6(l)(i).
"Transfer Provisions" means any legislation implementing the provisions of
Directive 77/187/EEC.
"Transferred Asset" shall have the meaning set forth in Section 2.4(a).
"Transferred Subsidiaries" shall have the meaning set forth in the
Recitals to the Agreement.
"Transferred Subsidiary Stock" shall have the meaning set forth in the
Recitals to the Agreement.
"Transitioned Employees" means, from and after the Effective Benefits
Time, (i) all Business Employees employed by any Brake Company; (ii) all
Business Employees employed by any Asset Seller who accept Purchaser's offers of
employment as hereinafter provided and (iii) any U.S. Salaried Former Business
Employee who is not a Business Employee on the Closing Date because of a Long
Term Disability who requests and is granted permission to return to work or is
rehired, including return to work or rehire with restrictions, by Purchaser
pursuant to Section 6.6(g)(i).
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"UK Brake Company" means ITT Automotive UK Limited.
"UK Employees" means employees and officers of the UK Brake Company.
"UK Pension Scheme" means the ITT Industries General Pension Plan
established by a trust deed dated July 4, 1983.
"U.S. Asset Seller" means any Asset Seller of Purchased Assets which are
located in the United States.
"U.S. Business" means the portion of the business related to any Purchased
Assets which are located in the United States.
"U.S. Business Employees" means all Business Employees employed by any
U.S. Asset Seller.
"U.S. Business Severance Policies and Practices" shall have the meaning
set forth in Section 6.6(f).
"U.S. Business Welfare Benefits Program" means ITTI's employee welfare
benefit plans, programs, policies, practices or arrangements in effect with
respect to the U.S. Business Employees and Former U.S. Business Employees
immediately prior to the Closing Date.
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"U.S. Employee Benefit Arrangements" means Employee Benefit Arrangements
with respect to or covering U.S. Business Employees or U.S. Former Business
Employees.
"U.S. Former Business Employees" means all Former Business Employees whose
termination of employment was from any U.S. Asset Seller or any predecessor
thereof.
"U.S. Hourly Business Employees" means all Hourly Business Employees
employed by any U.S. Asset Seller.
"U.S. Hourly Former Business Employees" means all Hourly Former Business
Employees whose termination of employment was from any U.S. Asset Seller or any
predecessor thereof.
"U.S. Hourly Transitioned Employees" means Hourly Transitioned Employees
who were U.S. Hourly Business Employees.
"U.S. Salaried Business Employees" means all Salaried Business Employees
employed by any U.S. Asset Seller.
"U.S. Salaried Former Business Employees" means all Salaried Former
Business Employees whose termination of employment was from any U.S. Asset
Seller or any predecessor thereof.
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"U.S. Salaried Transitioned Employees" means Salaried Transitioned
Employees who were U.S. Salaried Business Employees.
"U.S. Transitioned Employees" means those Transitioned Employees who were
U.S. Business Employees.
"Valuation Date" shall have the meaning set forth in Section
6.6(j)(iii)(B).
"WARN Act" shall have the meaning set forth in Section 6.6(n).
"Year 2000 Compliant" means that the software, products or machinery
provides uninterrupted millennium functionality in that the software, products
or machinery will record, store, process and present calendar dates falling on
or after January 1, 2000, in the same manner, and with the same functionality,
as the software, products or machinery records, stores, processes and presents
calendar dates falling on or before December 31, 1999.
1
EXHIBIT 2.3
[ITT INDUSTRIES LETTERHEAD]
PRESS RELEASE
FOR IMMEDIATE RELEASE
SEPTEMBER 25, 1998 Contact: Tom Glover
ITT Industries
914-641-2160
ITT INDUSTRIES COMPLETES SALE OF AUTOMOTIVE BRAKE AND CHASSIS UNIT
(White Plains, NY) - ITT Industries, Inc. (NYSE:IIN) today announced that
it has closed the sale of its automotive Brake and Chassis business to
Continental AG of Hannover, Germany. The transaction, which was announced on
July 27, 1998, is valued at approximately $1.93 billion. The after-tax cash
proceeds are approximately $1.3 billion.
"The conclusion of this transaction marks another important step in the
execution of our strategy to transform our company," said Travis Engen,
chairman, president and chief executive of ITT Industries. "We intend to use
the proceeds from this transaction to better position ourselves for future
growth in our businesses that have a higher potential for creating shareholder
value."
Engen said the company's previously announced sale of its automotive
Electrical Systems business is on track to be concluded before the end of the
third quarter. The company announced in June that it has signed an agreement to
sell the Electrical Systems business to Valeo SA of France for $1.7 billion.
ITT Industries is a premier global manufacturing company with leading
positions in its fluid technology, defense, electrical connectors and
automotive components businesses. Following the sale of its automotive Brakes
and Chassis and Electrical Systems businesses the company expects annual sales
from ongoing operations of approximately $4.4 billion.
In addition to the New York Stock Exchange, ITT Industries' stock is traded
under the symbol ("IIN") on the Midwest, Pacific, London, Frankfurt and Paris
exchanges.
###
ITT Industries' and its subsidiaries' news releases are available at no
charge via fax and the Internet. For ITT Industries news and information on the
Internet, visit http://www.ittind.com. To receive releases by fax, call
800-758-5804, extension 110006.
1
Exhibit 2.4
[ITT INDUSTRIES LETTERHEAD]
Press Release
FOR IMMEDIATE RELEASE
SEPTEMBER 28, 1998 Contact Tom Glover
ITT Industries
914-641-2160
ITT INDUSTRIES CLOSES SALE OF AUTOMOTIVE ELECTRICAL SYSTEMS UNIT TO VALEO
White Plains, NY-ITT Industries, Inc. (NYSE:IIN) announced today that it
has closed the sale of its automotive Electrical Systems business to Valeo, SA
of France. The transaction, which was announced on June 25, 1998, is valued at
approximately $1.7 billion. On Friday, September 25, 1998, the company completed
the sale of its Brake and Chassis business unit to Continental AG for $1.93
billion. Total after-tax cash proceeds from both transactions is approximately
$2.7 billion.
"With the conclusion of both sales, we are now free to focus on our
strategic growth prospects, including acquisitions that can enhance the
positions of our existing businesses," said Travis Engen, chairman, president
and chief executive of ITT Industries. "Our previously announced $1.1 billion
stock repurchase program is already well underway. Further, we will be able to
substantially improve our capital position to provide the financial flexibility
to grow all of our business lines."
Engen said with both transactions completed in the third quarter as
expected, further details of the result of the divestments will be included in
the third quarter earnings report to be released on October 20, 1998.
ABOUT ITT INDUSTRIES
ITT Industries, Inc. (www.ittind.com) is a global industrial manufacturing
company with leading positions in the markets that it serves. Following the
divestiture of the company's automotive brakes and electrical systems
businesses, the company expects to generate annual global sales of $4.4 billion.
ITT Industries is the world's largest producer of pumps, systems and services to
move, measure and control water and other fluids. The company is also a leading
supplier of sophisticated military defense systems, including night vision
devices, secure communication systems and avionics, and provides advanced
technical and operational services to a broad range of government agencies. ITT
Industries is a leading provider of electrical interconnects for cellular
telephones, aerospace, network communications, "smart cards" for personal data
storage, and PC cards for laptop computers. Further, ITT Industries provides
products for highly-focused automotive markets, such the Koni(R) brand shock
absorbers serving high-end, specialized auto needs in addition to shock
absorbers for trains and bridges, fluid handling products such as brake and fuel
line tubing, and brake friction materials. Based in White Plains, NY, ITT
Industries employes approximately 34,000 people around the world.
In addition to the New York Stock Exchange, ITT Industries' stock is traded
under the symbol ("IIN") on the Midwest, Pacific, London, Frankfurt and Paris
exchanges.
###
ITT Industries' and its subsidiaries' news releases are available at no
charge via fax and the Internet. For ITT Industries news and information on the
Internet, visit http://www.ittind.com. To receive releases by fax, call
800-758-5804, extension 110006.
