EXECUTION COPY
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STOCK AND ASSET PURCHASE AGREEMENT
between
ITT INDUSTRIES, INC.
and
COOPER-STANDARD AUTOMOTIVE INC.
Dated as of December 4, 2005
================================================================================
TABLE OF CONTENTS
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Page ---- ARTICLE I SALE AND TRANSFER OF TRANSFERRED SUBSIDIARY
STOCK AND PARTNERSHIP INTERESTS.............................1 1.1.
Sale and Transfer of Transferred Subsidiary Stock and Partnership
Interests.....................1 ARTICLE II SALE OF ASSETS AND
ASSUMPTION OF
LIABILITIES...........................................................2
2.1. Sale of
Assets..................................................................................2
2.2. Assumption of Liabilities; Excluded
Liabilities.................................................2 2.3.
Transfer of Purchased Assets and Assumed
Liabilities............................................3 2.4.
Required
Consents...............................................................................3
ARTICLE III PURCHASE PRICE AND
ADJUSTMENTS........................................................................4
3.1. Purchase
Price..................................................................................4
3.2. Payment of Purchase
Price.......................................................................4
3.3. Determination of Closing Adjusted Net Working
Capital...........................................4 3.4. Settlement
of Purchase
Price....................................................................6
3.5. Allocation of Purchase
Price....................................................................6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
ITT..................................................................7
4.1. Corporate
Existence.............................................................................7
4.2. Corporate
Authority.............................................................................8
4.3. FHS Company
Stock...............................................................................9
4.4. Governmental Approvals, Notices and
Consents....................................................9 4.5.
Financial
Statements............................................................................9
4.6. Absence of Certain
Changes.....................................................................10
4.7.
Properties.....................................................................................10
4.8.
Contracts......................................................................................12
4.9.
Litigation.....................................................................................13
4.10. Intellectual Property
Rights...................................................................13
4.11.
Insurance......................................................................................14
4.12. Tax
Matters....................................................................................14
4.13. Employment and
Benefits........................................................................16
4.14. Compliance with Laws;
Permits..................................................................19
4.15. Labor
Matters..................................................................................19
4.16. Environmental
Matters..........................................................................19
4.17. Transferred
Assets.............................................................................20
-i- 4.18. Undisclosed
Liabilities........................................................................21
4.19. Finders;
Brokers...............................................................................21
4.20. Investment Canada
Act..........................................................................21
4.21. Design
Defects.................................................................................21
ARTICLE V REPRESENTATIONS OF
PURCHASER...........................................................................21
5.1. Corporate
Existence............................................................................21
5.2. Corporate
Authority............................................................................21
5.3. Governmental Approvals and
Consents............................................................22
5.4. Purchase for
Investment........................................................................23
5.5. Financial
Capacity.............................................................................23
5.6. Tax
Matters....................................................................................23
5.7. Investment
Canada..............................................................................23
5.8. Finders;
Brokers...............................................................................23
ARTICLE VI AGREEMENTS OF PURCHASER AND
ITT.......................................................................23
6.1. Operation of the
Business......................................................................23
6.2. Investigation of
Business......................................................................26
6.3. Reasonable Best Efforts; No Inconsistent
Action................................................26 6.4.
Public
Disclosures.............................................................................28
6.5. Access to Records, Personnel and Real
Property.................................................28 6.6.
Employee Relations and
Benefits................................................................30
6.7. Intercompany
Transactions......................................................................47
6.8.
Non-Competition................................................................................48
6.9. Non-Solicitation;
Confidentiality..............................................................48
6.10. Use of the ITT Name and
Marks..................................................................49
6.11. Intellectual Property License
Agreement........................................................50
6.12. Tax
Matters....................................................................................51
6.13. Post-Closing
Arrangements......................................................................55
6.14. Insurance
Matters..............................................................................55
6.15. German Real
Property...........................................................................56
6.16. Certain Environmental
Matters..................................................................56
6.17. Real
Property..................................................................................56
6.18. Software
......................................................................................56
6.19.
Financing......................................................................................57
ARTICLE VII CONDITIONS TO
CLOSING................................................................................58
7.1. Conditions Precedent to Obligations of Purchaser and
ITT.......................................58 7.2. Conditions
Precedent to Obligation of
ITT......................................................58 7.3.
Conditions Precedent to Obligation of
Purchaser................................................59 ARTICLE
VIII
CLOSING.............................................................................................59
8.1. Closing
Date...................................................................................59
8.2. Purchaser
Obligations..........................................................................60
-ii- 8.3. ITT
Obligations................................................................................60
ARTICLE IX
INDEMNIFICATION.......................................................................................61
9.1.
Indemnification................................................................................61
9.2. Certain
Limitations............................................................................63
9.3. Procedures for
Claims..........................................................................66
9.4. Tax
Indemnification............................................................................70
9.5. Certain Claims
Procedures......................................................................71
9.6.
Arbitration....................................................................................71
9.7. Remedies
Exclusive.............................................................................71
9.8.
Mitigation.....................................................................................71
ARTICLE X
TERMINATION............................................................................................71
10.1. Termination
Events.............................................................................71
10.2. Effect of
Termination..........................................................................72
ARTICLE XI MISCELLANEOUS AGREEMENTS OF THE
PARTIES...............................................................72
11.1. Notices
.......................................................................................72
11.2. Bulk
Transfers.................................................................................73
11.3.
Severability...................................................................................73
11.4. Further Assurances; Further Cooperation; Asset
Returns.........................................73 11.5.
Counterparts...................................................................................73
11.6. Expenses
......................................................................................74
11.7. No Other Representations or
Warranties.........................................................74
11.8.
Non-Assignability..............................................................................74
11.9. Amendment;
Waiver..............................................................................74
11.10. Schedules and
Exhibits.........................................................................74
11.11. Third
Parties..................................................................................75
11.12. Governing
Law..................................................................................75
11.13. Consent to Jurisdiction; Waiver of Jury
Trial..................................................75 11.14.
Interpretation; Absence of
Presumption.........................................................76
11.15. Entire
Agreement...............................................................................76
11.16. Section Headings; Table of
Contents............................................................76
11.17. Specific
Performance...........................................................................76
11.18. Planning Act
(Ontario).........................................................................76
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-iii-
EXHIBITS
EXHIBIT A
Entity Sellers
EXHIBIT B
Indirect Subsidiary
EXHIBIT C
Asset Sellers
EXHIBIT D
Purchased Assets
EXHIBIT E
Excluded Liabilities
EXHIBIT F
Reference Net Working Capital Statement
EXHIBIT G
Excluded Assets
EXHIBIT H
Excluded FHS Company Liabilities
EXHIBIT I
Allocation of Purchase Price
EXHIBIT J
Individuals Having Actual Knowledge
Annex A
Definitions
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SCHEDULES
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Schedule 1.1 Conveyance Documents for Entity Purchase Transfers
Schedule 2.3(a) Conveyance Documents for Asset Purchase Transfers
Schedules 2.3(b)(i) and (ii) Forms of French Implementing
Agreements Schedule 3.3(b) Reserve Policy Schedule 4.2 Corporate
Authority Schedules 4.3(a), (b) and (c) FHS Company Stock Schedule
4.4 Governmental Approvals, Notices and Consents Schedule 4.5(a)
Financial Statements Schedule 4.5(b) Interim Financial Statements
Schedule 4.6 Certain Changes Schedule 4.7(b) Owned and Leased Real
Property Schedule 4.7(b)(vii) French Real Property Schedule 4.8
Contracts Schedule 4.9 Legal Proceedings Schedules 4.10(a), (b) and
(c) Intellectual Property Rights and Claims Schedule 4.11 Insurance
Schedule 4.12 Tax Matters Schedule 4.13(a) U.S. and Canada 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) Canada Employee
Benefit Arrangements Schedules 4.13(i)(i), (ii) and (iii) Mexico
Employees Schedules 4.13(j)(i) and (ii) EC Business Employees
Schedule 4.13(k) People's Republic of China Employee Schedule
4.13(l)(i) Employee Benefit Claims Schedule 4.13(l)(ii) Transaction
Employment Payments Schedule 4.14(a) Compliance with Laws Schedule
4.14(b) Permits Schedule 4.15 Labor Matters Schedule 4.16
Environmental Matters Schedule 4.17 Transferred Assets Schedule
4.18 Undisclosed Liabilities Schedule 5.2 Purchaser Corporate
Authority Schedule 6.1 Conduct of Business -v- Schedule 6.3(a)(iii)
Landlord Consents Schedule 6.5(c) Environmental Work Schedule
6.6(e) Severance Benefits - United States Schedule 6.6(q)(viii)
Canada Business Severance Policies and Practices Schedule 6.12(e)
French Tax Matters Schedules 6.13(i) and (ii) Transition
Arrangements Schedule 6.17 Real Property Schedule 6.18 Excluded
Software Schedule 7.1(b)(ii) Regulatory Authorizations Schedule
9.3(c) Baseline Environmental Assessments
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-vi-
STOCK AND ASSET PURCHASE AGREEMENT
This Stock and Asset Purchase Agreement, dated as of December 4,
2005,
between ITT INDUSTRIES, INC., an Indiana corporation ("ITT"), and
Cooper-Standard Automotive Inc., an Ohio corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, certain Subsidiaries of ITT are engaged, in part or in
whole,
in the Business (as defined in Annex A hereto); and
WHEREAS, Purchaser, directly and through one or more of its
Subsidiaries, desires to purchase, and ITT desires to sell, and to
cause (i) its
Subsidiaries listed on Exhibit A (collectively with ITT, the
"Entity Sellers")
and any nominee holders therefor to sell to Purchaser or any
Subsidiary of
Purchaser designated by Purchaser at least two days prior to the
Closing (the
"Designated Entity Purchasers"), on the terms and subject to the
conditions of
this Agreement, all of the outstanding shares of capital stock of
the
Subsidiaries of ITT listed on part 1 of Exhibit A (such shares, the
"Transferred
Subsidiary Stock") and all of the partnership interests in the
Subsidiaries of
ITT listed on part 2 of Exhibit A (the "Partnership Interests")
(such purchase,
the "Entity Purchase") and (ii) its Subsidiaries listed on Exhibit
C
(collectively with ITT, the "Asset Sellers" and, together with the
Entity
Sellers, collectively the "Sellers") to sell to Purchaser or the
Subsidiary of
Purchaser set forth on Exhibit C (the "Designated Asset Purchasers"
and,
together with the Designated Entity Purchasers, the "Designated
Purchasers"), on
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, the
"Purchase"); and
WHEREAS, capitalized terms used and not defined in this Agreement
shall
have the meaning set forth in Annex A hereto; and
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 AND PARTNERSHIP
INTERESTS
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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, ITT
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,
2
assign, transfer, convey and deliver to the applicable 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, (i) ITT shall
or shall cause
the applicable Entity Sellers to deliver to the applicable
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 the Transferred Subsidiary Stock (with
respect to
Transferred Subsidiaries which have not issued stock certificates),
and (ii) the
applicable Entity Seller and any nominee therefor and the
applicable 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 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. Schedule 1.1 lists
the conveyance
or transfer documents to be executed, delivered and/or filed at
Closing in order
to effect each transfer of Transferred Subsidiary Stock or
Partnership
Interests.
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, ITT shall or shall cause the applicable Asset Sellers to
sell, assign,
transfer, convey and deliver to the applicable 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.
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.
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, 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"). 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").
3
2.3.
Transfer of Purchased Assets and Assumed Liabilities.
-----------------------------------------------------
(a)
The 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
ITT, to be
executed (upon the terms and subject to the conditions hereof) on
the Closing
Date by the applicable Asset Seller and the applicable Designated
Asset
Purchaser, and such other conveyance, transfer and assumption
documents as may
be required in such jurisdictions to effect the conveyance of all
right, title
and interest in the applicable Purchased Assets. Schedule 2.3(a)
lists the
conveyance, transfer and assumption documents to be executed,
delivered and/or
filed at Closing in connection with the Asset Purchase in each such
jurisdiction.
(b)
With respect to the French branch of ITT Automotive Europe
GmbH & Co. KG ("ITTAE"), (i) as soon as practicable after the
date hereof, ITTAE
and the applicable Designated Asset Purchaser shall execute the
French
Implementing Agreements in the forms set forth in Schedule
2.3(b)(i) and (ii) on
the Closing Date ITTAE and the applicable Designated Asset
Purchaser shall
execute the French Implementing Agreements in the forms set forth
in Schedule
2.3(b)(ii) in order to effect the transfer of title to the
Purchased Assets and
the assumption of Assumed Liabilities to which the French
Implementing
Agreements relate. To the extent of any inconsistency, the terms
hereof shall
prevail over the terms in the French Implementing Agreements. No
Seller or any
applicable Designated Purchaser shall bring any claim based on the
French
Implementing Agreements unless the claim is solely related to
perfecting or
recording the transfer of title to any applicable Designated
Purchaser in the
relevant Purchased Assets or the assumption of relevant Assumed
Liabilities by
the applicable Designated Purchaser in accordance with the terms of
this
Agreement.
2.4.
Required Consents. Notwithstanding anything to the contrary
contained in this Agreement, to the extent that the sale,
conveyance, transfer,
assignment or delivery or attempted sale, conveyance, transfer,
assignment or
delivery to any Designated Purchaser of any Purchased Asset
(including any
Contract) or the transfer of any Business Employee 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 relating to the foregoing shall
not be
satisfied, the Closing shall occur notwithstanding the foregoing
without any
adjustment to the Purchase Price on account of such required
authorization,
approval, consent, negative clearance or waiver. Following the
Closing, the
parties shall use their reasonable best efforts, and shall
cooperate with each
other, to obtain promptly such authorizations, approvals, consents,
negative
clearances or waivers; provided, however, that neither ITT nor
Purchaser nor any
of their respective Affiliates shall be required to pay any
consideration
therefor or waive any rights in connection therewith, other than
filing,
4
recordation or similar fees payable to any Governmental Authority,
which fees
shall be shared equally by ITT and Purchaser. Pending or in the
absence of such
authorization, approval, consent, negative clearance or waiver, the
parties
shall cooperate with each other in any reasonable and lawful
arrangements
designed to provide to the applicable Designated Purchaser the
benefits and
liabilities of use of such Purchased Asset. If such authorization,
approval,
consent, negative consent or waiver for the sale, conveyance,
transfer,
assignment or delivery of any such Purchased Asset is obtained, ITT
shall cause
the applicable Asset Seller to promptly convey, transfer, assign
and deliver, or
cause to be conveyed, transferred, assigned and delivered, such
Purchased Asset
to such Designated Purchaser.
ARTICLE III
PURCHASE PRICE AND ADJUSTMENTS
------------------------------
3.1.
Purchase Price. The aggregate purchase price for the Transferred
Subsidiary Stock, the Partnership Interests and the Purchased
Assets shall be an
amount (the "Purchase Price") equal to U.S. $205,000,000.00 (two
hundred five
million U.S. dollars) (the "Initial Purchase Price") plus or minus
the
difference between the Closing Adjusted Net Working Capital (as
defined in
Section 3.3(a)(i)(C)) and the Target Net Working Capital.
3.2.
Payment of Purchase Price. On the Closing Date, Purchaser shall
pay to ITT the Initial Purchase Price. 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 ITT no
later than the
second Business Day prior to the Closing.
3.3.
Determination of Closing Adjusted Net Working Capital.
(a)
Closing Adjusted Net Working Capital shall be determined
following the Closing Date as follows:
(i)
As soon as practicable after the Closing Date, but in no
event later than 90 days thereafter, Purchaser shall prepare and
deliver to ITT
a statement of adjusted Net Working Capital (the "Closing Net
Working Capital
Statement") which shall be presented in the same three-column
format as the
Reference Net Working Capital Statement. As used in this Agreement,
"Net Working
Capital" means the current assets less the current liabilities of
the Business,
excluding (w) cash and cash equivalents, (x) deferred income tax
assets/liabilities (y) income tax receivables/payables and (z)
financial
indebtedness. The Closing Net Working Capital Statement shall be
prepared in
accordance with the same accounting principles, procedures,
policies and methods
that were employed in preparing the Financial Statements and the
Reference Net
Working Capital Statement and shall present:
(A) in column 1, a statement of Net Working Capital as of
immediately prior to the Closing;
5
(B) in column 2, (1) (x) the assets of the FHS Companies
in column 1 which are retained by the Sellers in accordance with
the
terms of this Agreement and (y) the assets of the Asset Sellers in
column 1 which are not Purchased Assets and (2) (x) the liabilities
of
the FHS Companies in column 1 which are Excluded FHS Company
Liabilities and (y) the liabilities of the Asset Sellers in column
1
which are Excluded Liabilities (including, for the avoidance of
doubt,
any deferred tax liabilities); and
(C) in column 3, an amount equal to the amount in column 1
less the amount in column 2 (Net Working Capital shown in column 3,
the "Closing Adjusted Net Working Capital").
Column 1 of the Closing Net Working Capital Statement
shall present fairly in all material respects Net Working Capital
as it
would appear in a balance sheet of the Business as of the Closing
Date
in conformity with U.S. generally accepted accounting principles
applied on a basis consistent with the Financial Statements
("GAAP")
(subject to the provisions of Section 3.3(b)). ITT shall cooperate
fully with Purchaser in the preparation of the Closing Net Working
Capital Statement.
(b)
In preparing the Closing Net Working Capital Statement:
(i) the parties shall assume that the Business will continue as a
going concern
at its present locations; (ii) the reserves for loss contracts will
be
determined as described in Schedule 3.3(b); (iii) the reserves for
warranties
will be determined as described in Schedule 3.3(b); (iv) the
reserves for
liabilities in respect of compliance with Environmental Laws will
be determined
as described in Schedule 3.3(b); and (v) the reserves for the
workers'
compensation liabilities will be determined as described in
Schedule 3.3(b). The
Financial Statements, Interim Financial Statements and the
Reference Net Working
Capital Statement have been prepared using the same assumptions.
(c)
ITT may dispute the Closing Adjusted Net Working Capital
as shown on the Closing Net Working Capital Statement by notifying
Purchaser in
writing within 30 days after receipt of the Closing Net Working
Capital
Statement. During such 30-day period employees of ITT shall be
entitled to
access to the work papers of Purchaser and its accountants prepared
in
connection with the Closing Net Working Capital Statement and shall
be entitled
to review and discuss such work papers with Purchaser and its
accountants. Any
notice delivered in accordance with this Section 3.3(c) shall
specify the amount
of the proposed adjustment for each item in dispute and the
substance 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 in accordance with
GAAP and are
not inconsistent with those used in preparing the Financial
Statements). If ITT
does not so notify Purchaser within such period, the Closing
Adjusted Net
Working Capital as shown on the Closing Net Working Capital
Statement shall be
final, binding and conclusive on the parties. If ITT does so notify
Purchaser,
Purchaser and ITT 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.
6
(d)
If Purchaser and ITT 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 Purchaser of
such notice,
then either party may submit the items remaining in dispute for
resolution to
KPMG or to such other accounting firm of international recognition
mutually
acceptable to Purchaser and ITT other than public accountants used
by ITT or
Purchaser (the "Independent Accounting Firm"). At a reasonable time
and place in
advance of a hearing before the Independent Accounting Firm: (i)
Purchaser and
ITT shall each make available to the other all business records or
documents in
its respective possession, custody or control that the other party
believes in
good faith to be relevant to the resolution of any disputed
amounts; and, (ii)
Purchaser and ITT shall make available for examination any current
employee,
advisor or agent that the other party believes in good faith to
have information
relevant to any disputed amount. Based upon the information
provided to it by
Purchaser and ITT and such other information as the Independent
Accounting Firm
deems appropriate, the Independent Accounting Firm shall within a
reasonable
period of time determine and report to ITT and Purchaser upon such
remaining
disputed items, and such determination shall be final, binding and
conclusive on
the parties hereto. No adjustment to the calculation of Closing
Adjusted Net
Working Capital shall be made unless the amount of such adjustment
exceeds
$100,000. The fees and disbursements of the Independent Accounting
Firm shall be
borne half by Purchaser and half by ITT.
3.4.
Settlement of Purchase Price.
(a)
If the Closing Adjusted Net Working Capital as finally
determined pursuant to Section 3.3(c) or (d) exceeds the Target Net
Working
Capital, Purchaser shall, within five Business Days after such
final
determination, pay such excess to ITT.
(b)
If the Closing Adjusted Net Working Capital as finally
determined pursuant to Section 3.3(c) or (d) is less than the
Target Net Working
Capital, ITT shall, within five Business Days after such final
determination,
pay such difference to Purchaser.
(c)
The party making such payment pursuant to Section 3.4(a)
or 3.4(b), as the case may be, shall pay interest thereon to the
other party for
the period from the Closing Date to the date of payment at the
London Inter-Bank
Offer Rate for deposits in U.S. dollars for a period of six months
appearing on
Page 3750 of the Telerate screen on the Closing Date plus 25 basis
points.
Payment of such excess (or difference) and interest thereon shall
be made by
wire transfer in immediately available funds to such account or
accounts as are
designated in writing by the party entitled to receive such payment
no later
than the second Business Day prior to the date on which such
payment is due. No
item forming the basis of any adjustment pursuant to this Section
3.4 shall
serve as the basis for any claim for indemnification under Article
IX.
3.5.
Allocation of Purchase Price. The Purchase Price allocations
among the Purchased Assets and the Transferred Subsidiaries shall
be made in a
manner consistent with the allocations set forth on part 1 of
Exhibit I. The
parties will negotiate in good faith to agree on or before the
Closing Date to a
further allocation of the Purchase Price allocated to Sellers in
Canada, France
and the United States (as set forth on part 1 of Exhibit I) among
the respective
Transferred Subsidiaries and Purchased Assets. Such further
allocation, if
agreed, shall be set
7
forth on part 2 of Exhibit I (such further allocation the,
"Detailed
Allocation"). For the purposes of all Taxes, Purchaser and ITT
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 without
the consent of the other party except as required by applicable law
or as
required by a final "determination" within the meaning of Section
1313 of the
Code; provided, however, that if the parties are unable to reach
agreement as to
a further allocation of the Purchase Price allocated to Sellers in
Canada,
France and the United States among the respective Transferred
Subsidiaries and
Purchased Assets, each shall file its Tax Returns as it determines
proper, but
in any case consistent with part 1 of Exhibit I. For purposes of
Taxes in
Canada, Purchaser and ITT agree that the Purchase Price of the
Purchased Assets
sold by ITT Industries of Canada L.P. ("ITT Canada") shall include
the aggregate
amount of accounts payable and other indebtedness, if any, which
are Assumed
Liabilities in respect of the Purchased Assets sold by ITT Canada
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.
If the Detailed Allocation is agreed to, Purchaser shall prepare
an allocation schedule of Purchase Price and Assumed Liabilities
among the
classes of Purchased Assets, in accordance with the rules under
Section 1060 of
the Code and the Treasury Regulations thereunder, along with the
first draft of
any form required by any foreign jurisdiction to report such
allocations which
is necessitated by the transactions contemplated by this Agreement
with respect
to the Purchased Assets, which shall be sent to ITT at the earlier
of (i) 30
days following agreement between the parties as to the Closing Net
Working
Capital Statement or (ii) 90 days prior to the due date, including
extensions,
for filing the applicable foreign income tax return for the taxable
year in
which the Closing takes place, all such forms to be consistent with
the Detailed
Allocation. Within 30 days after the receipt of such allocation
schedule, ITT
shall propose any changes to such allocation schedule or shall
indicate its
concurrence therewith, which concurrence will not be unreasonably
withheld. If
ITT shall propose any changes to such allocation schedule,
Purchaser shall have
30 days to review such changes and indicate concurrence therewith,
which
concurrence will not be unreasonably withheld.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ITT
-------------------------------------
ITT represents and warrants to Purchaser as follows:
4.1.
Corporate Existence. Each of the Sellers and the FHS Companies
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 and
the FHS Companies (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 by it, and (b) is duly authorized, qualified or licensed
to do
business in every jurisdiction wherein, by reason of the nature of
the Business,
the same is required, except where the failure of the foregoing to
be
8
true and correct would not, individually or in the aggregate, have
a Business
Material Adverse Effect.
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 ITT
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) and shareholders, if
necessary, of ITT, and
will be duly authorized by such other Sellers, by all requisite
corporate,
shareholder, partnership or other action prior to the Closing, and
each of the
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 ITT, 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 the applicable Seller 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)
and an implied covenant of good faith and fair dealing and except
as otherwise
set forth on Schedule 4.2. Except (a) for required filings under
the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act")
and any other applicable laws or regulations relating to antitrust,
competition
or merger controls (collectively, "Antitrust Regulations"), (b) the
filings that
may be required under the U.S. securities laws and (c) as set forth
in Schedule
4.2 or Schedule 4.4, the execution, delivery and/or filing of this
Agreement and
the other Transaction Documents by each of the applicable Sellers
party thereto
and the consummation by 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 any Seller, (ii) 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 a
loss of a material benefit under, or result in the creation of any
pledge, lien,
claim, charge, security interest, option, mortgage, easement,
pre-emption right
or other encumbrance (collectively, "Liens") under, any Disclosed
Contract or
any material license or permit to which any Seller is subject or is
a party, or
(iii) violate, conflict with or result in any (A) material breach
under any
provision of any judgment, order, decree, statute, law, ordinance,
rule or
regulation of the United States, Mexico, Canada, Germany or France
applicable to
the Business or the Sellers or (B) breach under any provision of
any other
judgment, order, decree, statute, law, ordinance, rule or
regulation applicable
to any of the Sellers or any of their respective properties or
assets, except,
in the case of clauses (ii) and (iii)(B), to the extent that any
such breach,
default, termination, cancellation, acceleration, loss, Lien,
violation,
conflict or breach would not, individually or in the aggregate,
have a Business
Material Adverse Effect.
9
4.3.
FHS Company Stock . Except as set forth in Schedule 4.3(a), all
of the outstanding shares of capital stock of or partnership
interests in the
FHS Companies (the "FHS Company Stock"), have been validly issued
and, to the
extent applicable, are fully paid as required by any applicable
jurisdiction and
nonassessable and are owned by ITT or one or more of its
Subsidiaries free and
clear of all Liens, except for Permitted Liens and the liabilities,
if any, of
general partners with respect to FHS Companies in partnership form.
No present
or former shareholder of any of the FHS Companies registered in
Germany has ever
received any direct or indirect shareholders' distribution giving
rise to any
repayment claims. Schedule 4.3(b) sets forth as of the date of this
Agreement,
for each of the FHS Companies 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 and the name of
each owner
thereof. Except as set forth in Schedule 4.3(c), there are no
outstanding
options, warrants, calls or other rights of any kind relating to
the sale,
transfer, registration, issuance or voting of any FHS Company Stock
or any
securities convertible into or exercisable or exchangeable for
shares of FHS
Company Stock. There are no "phantom stock" or other rights to
participate in
the revenues, profits, assets or equity (or the value thereof) of
any FHS
Company ("Equity Equivalents") or any securities convertible into
or exercisable
or exchangeable for or evidencing the right to purchase any FHS
Company Stock or
Equity Equivalents.
4.4.
Governmental Approvals, Notices and Consents. No Seller or,
prior to the Closing, any Transferred Subsidiary is subject to any
order,
judgment or decree, which would prevent the consummation of the
Purchase. As of
the date of this Agreement, no claim, legal action, suit,
arbitration,
governmental investigation, action or other legal or administrative
proceeding
is pending or, to the knowledge of ITT, threatened against any
Seller which
would enjoin or delay the consummation of the Purchase. Except as
set forth in
Schedule 4.4 hereto and except for any consents, authorizations or
negative
clearances required under any Antitrust Regulations, no 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
jurisdiction,
administrative agency or commission or other governmental or
regulatory
authority or instrumentality ("Governmental Authority"), is
required on the part
of any Seller or, prior to the Closing, any Transferred Subsidiary
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, permits, filings, notices, registrations
or
declarations 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 Business
Material Adverse Effect.
4.5.
Financial Statements.
(a)
Schedule 4.5(a) contains copies of the audited combined
balance sheets of the Business as of December 31, 2003 and December
31, 2004 and
the related combined statements of income and cash flows for the
three years
ended December 31, 2004 (collectively, the "Financial Statements").
Subject to
Section 4.5(c) and the assumptions described in Schedule 3.3(b),
the Financial
Statements present fairly in all material respects the financial
condition and
10
the results of operations of the Business as of such dates and for
such periods
in accordance with GAAP.
(b)
Schedule 4.5(b) contains the unaudited combined balance
sheet of the Business as of September 30, 2005 (the "Balance Sheet
Date") and
the unaudited combined income statement for the period from January
1, 2005
until September 30, 2005 (together, the "Interim Financial
Statements"). Subject
to normal year-end adjustments, to Section 4.5(c) and the
assumptions described
in Schedule 3.3(b), the Interim Financial Statements present fairly
in all
material respects the financial condition and results of operations
as of the
dates and for such periods in accordance with GAAP, except that
they do not
include all of the information required to be included in the
footnotes required
by GAAP.
(c)
All of the Financial Statements and Interim Financial
Statements are qualified by the fact that the Business has not
operated as a
separate "stand alone" entity within ITT. As a result, the Business
received
certain allocated charges and credits as discussed more fully in
the notes
accompanying the Financial Statements. Such charges and credits do
not
necessarily reflect the amounts, which would have resulted from
arms-length
transactions.
4.6.
Absence of Certain Changes. Except as set forth in Schedule 4.6
or as otherwise permitted pursuant to this Agreement, since the
Balance Sheet
Date, (a) the Business has been conducted in all material respects
in the
ordinary course and in substantially the same manner as previously
conducted and
(b) there has been no material adverse effect on the business,
results of
operations, assets or financial condition of the Business, taken as
a whole,
other than as a result of (i) the execution and delivery of this
Agreement (or
the announcement thereof), (ii) Sellers' compliance with the terms
of this
Agreement, (iii) changes in general economic conditions (including
changes in
interest rates) to the extent such changes do not have a
disproportionate impact
on the Business, in the industry in which the Business operates to
the extent
such changes do not have a disproportionate impact on the Business,
in law or
applicable regulations or the official interpretations thereof or
in GAAP or
(iv) any outbreak or substantial worsening of hostilities,
terrorist activities
or war (whether declared or not declared) or armed conflicts (a
"Seller Material
Adverse Effect").
4.7.
Properties.
(a)
The FHS Companies and the Asset Sellers have, or at the
Closing will have, good title to the personal property owned by the
FHS
Companies or by the Asset Sellers in respect of the Business, free
and clear of
all Liens, except (i) as disclosed in the Financial Statements and
Interim
Financial Statements, (ii) Liens for taxes, assessments, utilities
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 enforcement against the property is stayed, (iii)
mechanics',
workmen's, repairmen's, warehousemen's, carriers', landlords',
construction 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 affect the
value or use
of the underlying asset (such Liens,
11
charges and encumbrances described in clauses (i) through (v)
hereof are
referred to herein as "Permitted Liens").
(b)
As of the date of this Agreement, Schedule 4.7(b) contains
a list of all real property owned by the FHS Companies or the Asset
Sellers in
respect of the Business ("Owned Real Property") or leased to or by
the FHS
Companies 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"). Except as set forth in Schedule 4.7(b):
(i)
the FHS Companies or the Asset Sellers have good,
valid and marketable title to the Owned Real Property;
(ii)
the FHS Companies or the Asset Sellers are not under
any contractual commitment to dispose of or encumber the Owned Real
Property in whole or in part;
(iii) the Owned Real Property is not subject to any Liens,
other than Permitted Liens;
(iv)
with respect to each lease and sublease relating to
Leased Real Property, except where the failure of any of the
following
to be true and correct would not, individually or in the aggregate,
have a Business Material Adverse Effect: (A) no FHS Company nor any
Asset Seller is in default thereon beyond any applicable notice,
grace
or cure period; (B) neither the FHS Companies nor any of the Asset
Sellers have received a written notice of default with respect to
such
lease or sublease; (C) neither the FHS Companies nor any of the
Asset
Sellers have received a written notice of termination with respect
to
such lease or have declared or agreed to terminate any lease; and
(D)
no such lease or sublease has been assigned, sublet, licensed,
mortgaged, deeded in trust or otherwise encumbered by the FHS
Companies
or the Asset Sellers;
(v)
with respect to each parcel of Owned Real Property,
except where the failure of any of the following to be true and
complete would not, individually or in the aggregate, have a
Business
Material Adverse Effect, (A) there are no pending or, to the
knowledge
of ITT, threatened condemnation, expropriation, or other
proceedings,
disputes or lawsuits that are reasonably expected to curtail or
interfere with the use of the Owned Real Property as currently
used,
(B) there has been no casualty or damage to the Owned Real Property
that would reasonably be expected to curtail or interfere with the
use
of the Owned Real Property as currently used and (C) there are no
leases, subleases, licenses, concessions, options or other
agreements
granting to any party or parties the right of use or occupancy, or
the
right to purchase, any of the Owned Real Property or any portion
thereof;
(vi)
with respect to the Owned Real Property located in
Germany, (A) there are no agreements which should have been entered
into the land register (Grundbuch), (B) there are no obligations or
restrictions in the building encumbrance
12
register (Baulastenverzeichnis), if such register exists, nor
material
duties or obligations (Duldungs-, Nutzungs- und
Handlungspflichten),
including but not limited to maintenance obligations
(Instandhaltungspflichten), nor rights of way or access (Wegerechte
und Rechte zum Betreten oder Befahren) with respect to such Owned
Real
Property, (C) the land register extracts dated October 24, 2005 and
October 25, 2005 are true, correct and complete with respect to
issues
which require registration and (D) there are no unpaid, due and
owing
installments or special assessments; and
(vii) with respect to the Owned Real Property located in
France, the only restrictions and obligations other than those set
by
applicable law, including local zoning rules, are those specific to
the
industrial zone in which such Owned Real Property is located, a
copy of
which are attached as Schedule 4.7(b)(vii). Except as set forth in
Schedule 4.7(b)(vii), the land register extracts dated June 8, 2005
and
are true, correct and complete with respect to the actual legal
status.
(c)
The sale and transfer of the Real Property in Ontario will
comply with the provisions of the Planning Act (Ontario).
4.8.
Contracts.
(a)
Except as otherwise disclosed in Schedules 4.7(b) (Owned
and Leased Real Property), 4.10(b) (Licenses), 4.13 (Employment
Benefits) and
4.15 (Labor Matters) (the "Covered Schedules") and Schedule 4.8, as
of the date
of this Agreement, there are no commitments, contracts, indentures
or
agreements, made orally or evidenced in writing, to which any FHS
Company or to
which any Asset Seller in respect of the Business is a party or by
which any FHS
Company or any Asset Seller in respect of the Business is bound
that relates to
the Business (hereinafter "Contracts") that (i) involve the
purchase or lease of
products, equipment or services by any FHS Company or Asset Seller
and that
require payment by any FHS Company or Asset Seller of more than
U.S.$10,000,000
after the date of this Agreement, (ii) involve material obligations
of any FHS
Company or any Asset Seller in respect of the Business for borrowed
money or
evidenced by bonds, debentures, notes or similar instruments or
guarantees or
capital lease obligations or any other material obligations upon
which interest
charges are customarily paid, other than those entered into in the
ordinary
course of business, excluding intercompany payables to be
capitalized effective
as of the Closing Date pursuant to Section 6.7(a), (iii) involve
any non-compete
agreement that will materially impair the operation of the Business
following
the Closing, (iv) constitute material joint venture or partnership
agreements,
in any of the foregoing cases or (v) constitute obligations to
acquire, sell or
distribute goods with respect to ITT or its Affiliates. Contracts
disclosed or
required to be disclosed in the Covered Schedules or in Schedule
4.8 are
hereafter referred to as the "Disclosed Contracts".
(b)
ITT has furnished or made available to Purchaser a true
and correct copy or summary of the material terms of each Disclosed
Contract.
Each Disclosed Contract is valid 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 FHS Companies and the Asset Sellers that are parties thereto
are not in
default or breach
13
under any such Disclosed Contract, except where such default or
breach would
not, individually or in the aggregate, have a Business Material
Adverse Effect.
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 ITT, threatened
before any
Governmental Authority against any FHS Company or any Asset Seller
in respect of
the Business which are reasonably likely to result in liability for
such FHS
Company or Asset Seller that would, individually or in the
aggregate, have a
Business Material Adverse Effect.
4.10.
Intellectual Property Rights.
(a)
As of the date of this Agreement, Schedule 4.10(a)
contains a list of all the patents, trademark registrations,
material
unregistered trademarks, copyright registrations, mask work
registrations and
applications for any of the foregoing included in the Purchased
Assets or owned
by the FHS Companies (together with all other Intellectual Property
included in
the Purchased Assets or owned by the FHS Companies the "Transferred
Intellectual
Property Assets"). The Transferred Intellectual Property Assets are
owned by
ITT, ITTME or the FHS Companies.
(b)
As of the date of this Agreement, Schedule 4.10(b)
contains a list of all Contracts (i) involving licenses granted by
the Sellers
or any FHS Company to any third party with respect to any material
Transferred
Intellectual Property Assets (except for non-exclusive licenses
granted in the
ordinary course of business) and (ii) that grant a license for the
use of third
party Intellectual Property (other than for the use of commercial
off-the-shelf
personal computer software) to ITT or any Affiliate of ITT in
respect of the
Business. Such agreements are valid and enforceable, except to the
extent that
any invalidity or unenforceability of any of the foregoing
agreements would not
give rise to a Business Material Adverse Effect.
(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 made
against any Seller or any FHS Company asserting the invalidity,
misuse or
unenforceability of any of the Transferred Intellectual Property
Asset or
challenging any Seller's or any FHS Company's right to the use or
ownership of
any of such Transferred Intellectual Property Asset; (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; and (iii) to the knowledge of ITT, the conduct of the
Business as
currently conducted does not infringe any Intellectual Property of
any third
party.
(d)
ITT and ITTA have conducted the Business in compliance
with the Amended Injunction entered by the court in K-Tube
Corporation v.
Sterling Stainless Tube et al, No. C-90-1653-JLQ, on April 4, 1995,
as modified
by the Settlement Agreement Under Seal entered into by K-Tube
Corporation,
Sterling Stainless Tube Corporation, ITTA and ITT on July 25, 1996
and
subsequently approved by the court.
14
(e)
The Transferred Intellectual Property Assets, the Licensed
Intellectual Property and licenses set forth in Schedule 4.10(b)
comprise all of
the material Intellectual Property rights owned by or, other than
in respect of
software, licensed to the Sellers or their Affiliates and used in
the conduct
and operation of the Business as of the date hereof. To the
knowledge of ITT,
there are no Intellectual Property rights currently used by the
Business other
than the Transferred Intellectual Property Assets, the Licensed
Intellectual
Property and the licenses set forth in Schedule 4.10(b).
(f)
Neither ITT nor any of its Affiliates owns Intellectual
Property which is not owned by an FHS Company or is Purchased
Assets and (i) is
based on inventions, discoveries, designs or writings made in whole
or part by a
person who was an employee or independent contractor of the
Business or any
predecessor thereof at the time of such making or by a group of
persons at least
some of whom were employees or independent contractors of the
Business or any
predecessor thereof, at the time of such making or (ii) is or
relates to a
tradename, trademark or service mark used exclusively in the
Business or (iii)
was purchased by the Business or any predecessor thereof
specifically for the
Business.
4.11.
Insurance. Schedule 4.11 sets forth the material insurance
policies owned or held directly by the FHS Companies or the Asset
Sellers
relating solely to the Business.
4.12.
Tax Matters. Except as set forth in Schedule 4.12:
(a)
Each of the FHS Companies has duly filed or will duly file
all significant 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 on or before the Closing Date. The Tax Returns are true,
correct and
complete.
(b)
Each of the FHS Companies has paid or will have paid, all
material Taxes for all periods or portions thereof ending on or
before the
Closing, or adequate reserves (in conformity with GAAP applied on a
consistent
basis and consistent with such entity's past custom and practice)
have been
established therefor, and the FHS Companies have no material
liability for Taxes
in excess of the amounts so paid or reserves so established.
(c)
No waivers of statute of limitations have been given or
requested with respect to the Tax Returns covering any FHS Company
with respect
to any Taxes payable by it.
(d)
No written claim or other written communication has been
received from any taxing authority with respect to any FHS Company
in a
jurisdiction where such FHS Company does not file Tax Returns to
the effect
that, or inquiring as to whether, such FHS Company is or may be
subject to
taxation by that jurisdiction.
(e)
There are no material liens for Taxes upon the Purchased
Assets, other than with respect to Taxes not yet due and payable.
15
(f)
None of the FHS Companies has agreed or is required to
include in income any adjustment under Section 481(a) or Section
482 of the Code
(or an analogous provision of state, local or foreign law) by
reason of a change
in accounting method or otherwise.
(g)
None of the FHS Companies 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.
(h)
Each of the FHS Companies 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 amounts required to be
collected or
withheld.
(i)
As of the date of this Agreement, no deficiency for any
material Tax has been assessed with respect to any of the FHS
Companies, which
has not been paid in full. There are no pending audits with respect
to Taxes of
any of the FHS Companies, nor have the FHS Companies received any
written notice
from any taxing authority that it intends to conduct such an audit.
(j)
No FHS Company has any liability for the Taxes of any
person (other than any of the FHS Companies) under Treas. Reg.
ss.1.1502-6 (or
any similar provision of state, local or foreign law).
(k)
Only with respect to periods for which the applicable
statute of limitations has not expired, none of the FHS Companies
is or has been
a party to any "listed transaction" as defined in Treas. Reg. ss.
1.6011-4(b)(2)
or to any other transaction that is a "reportable transaction"
within the
meaning of Treas. Reg. ss. 1.6011-4(b).
(l)
None of the FHS Companies that is not a United States
person is engaged in the conduct of a trade or business within the
United States
or treated as or considered to be so engaged.
(m)
None of the FHS Companies has any material Tax liability
as a result of its transfer pricing practices other than
liabilities shown in
the balance sheet of the Business.
(n)
Each FHS Company incorporated in a country that imposes
such a Tax is duly registered for the purposes of VAT or other
similar Tax in
its country of incorporation.
(o)
ITT Canada is (A) a Canadian Partnership within the
meaning and for the purposes of the Income Tax Act (Canada) and (B)
registered
for purposes of the goods and services tax pursuant to Part IX of
the Excise Tax
Act (Canada) and Chapter VIII of an Act respecting the Quebec Sales
Tax and its
registration numbers are: 86947 7703RT0001 and Quebec Enterprise
Number (NEQ)
3361927547 and Identification number 1205484805 and File TQ0001,
respectively.
16
(p)
None of the Transferred Subsidiary Stock, Partnership
Interests or Purchased Assets other than the Purchased Assets being
sold by ITT
Canada is taxable Canadian property, within the meaning of the
Income Tax Act
(Canada).
4.13.
Employment and Benefits.
(a)
U.S. Employee Benefit Arrangements and Canada Employee
Benefit Arrangements. Schedule 4.13(a) sets forth a list of all
material U.S.
Employee Benefit Arrangements and all material Canada Employee
Benefit
Arrangements. True and complete copies of, where applicable, (i)
each written
U.S. Employee Benefit Arrangement and Canada Employee Benefit
Arrangement, (ii)
the most recent Form 5500, (iii) the most recent summary plan
description and
any summary of material modifications thereto and (iv) the most
recent actuarial
valuation have been provided to Purchaser by ITT.
(b)
U.S. Pension Plans - United States. Except as disclosed on
Schedule 4.13(b), each U.S. Pension Plan listed on Schedule 4.13(a)
has been
operated in compliance with the terms of each such U.S. Pension
Plan, with the
provisions of ERISA, the applicable provisions of the Code, and all
other
applicable laws, except where the failure to comply would not,
individually or
in the aggregate, have a Business Material Adverse Effect.
(c)
Prohibited Transactions - United States. Except as
disclosed on Schedule 4.13(c), no U.S. Pension Plan, or U.S.
Business Welfare
Benefits Program, nor any trust created thereunder, nor any trustee
or
administrator thereof, has engaged in a transaction which would
subject such
U.S. Pension Plan, U.S. Business Welfare Benefits Program, any
trustee or
administrator thereof to a tax or penalty or prohibited
transactions imposed by
Section 4975 of the Code or to a civil penalty imposed by Section
502 of ERISA,
that would, individually or in the aggregate, have a Business
Material Adverse
Effect.
(d)
Termination and Reportable Events - United States. Except
as disclosed on Schedule 4.13(d), since January 1, 2000, no U.S.
Pension Plan
has been completely or partially terminated, nor to the knowledge
of ITT, has
there been any filing of any notice of intent to terminate under
Section 4041 of
ERISA or any other receipt by ITT 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, in each case, that would result in a liability that would,
individually or
in the aggregate, have a Business Material Adverse Effect. Except
as disclosed
on Schedule 4.13(d), no U.S. Pension Plan is subject to Title IV of
ERISA or
Section 412 of the Code.
(e)
Funding and Qualification - United States. Except as
disclosed on Schedule 4.13(e), (i) no U.S. Pension Plan or
associated trust has
incurred an accumulated funding deficiency, as such term is defined
in Section
412 of the Code, whether or not waived, except where such
deficiency would not,
individually or in the aggregate, have a Business Material Adverse
Effect; (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 Net
17
Working Capital Statement; and (iii) each U.S. Pension Plan that is
intended to
qualify under Section 401(a) of the Code, has been determined by
the Internal
Revenue Service to be qualified within the meaning of Section
401(a) of the Code
and nothing has occurred which would reasonably be expected to
adversely affect
the qualified status of any such U.S. Pension Plan.
(f)
No Multiemployer Plan - United States. Except as disclosed
on Schedule 4.13(f) as of the Closing Date, ITT does not maintain
or contribute
to and for the immediately preceding five years has not contributed
to any
Multiemployer Plan with respect to any U.S. Business Employee or
any U.S. Former
Business Employee, nor does it have any liability (contingent or
otherwise) with
respect to any Multiemployer Plan with respect to any U.S. Business
Employee or
any U.S. Former Business Employee.
(g)
U.S. Welfare Plans - United States. Except as disclosed on
Schedule 4.13(g), (i) the U.S. Business Welfare Benefits Program
has been
operated in compliance with the terms of the U.S. Business Welfare
Benefits
Program and with the provisions of ERISA, the applicable provisions
of the Code,
and all other applicable laws, except where the failure to so
comply would not,
individually or in the aggregate, have a Business Material Adverse
Effect and
(ii) no U.S. Business Welfare Benefits Program provides
post-retirement medical
or life insurance benefits after termination of an employee's
employment, except
to the extent required by Section 4980B of the Code.
(h)
Canada Employee Benefit Arrangements. Except as disclosed
on Schedule 4.13(h), each Canada Employee Benefit Arrangement and
each fund, if
any, maintained thereunder has been established, operated,
administered,
maintained and invested, as the case may be, in compliance with all
laws and
governing documents applicable thereto, and where required, duly
registered in
compliance with such laws, except where the failure to so comply
would not,
individually or in the aggregate, have a Business Material Adverse
Effect.
(i)
Employees - Mexico.
(i)
Saltillo Shelter Arrangement - Mexico Payroll. As of
the date of this Agreement, there are five individuals, identified
on Schedule
4.13(i)(i) (the "Mexico Subsidiary Employees"), employed in Mexico
with
responsibilities relating to the Saltillo shelter arrangement who
are on the
payroll of a Mexico Subsidiary of ITT.
(ii)
Guaymas Shelter Arrangement. As of the date of this
Agreement, there is a single individual, identified on Schedule
4.13(i)(ii) (the
"Guaymas Employee") employed in Mexico with responsibilities
relating to the
Guaymas shelter arrangement who is on the payroll of a Mexico
Subsidiary of ITT.
(iii) Mexico FHS Company. The Mexico FHS Company does not
have any employees hired directly and/or indirectly. Subject to
Section
4.13(i)(i), and (ii), all persons employed in Mexico who carry out
any work for
the benefit of the Mexico FHS Company are hired or retained
directly or
indirectly by independent corporations named Manufacturas
18
Zapaliname, S.A. de C.V. and Maquilas Teta Kawi, S.A. de C.V.,
pursuant to the
terms of the agreements identified on Schedule 4.13(i)(iii).
(j)
EC Business Employees.
(i)
Employment Conditions. There are no deviations in
the employment conditions of the EC Business Employees from
applicable law and
collective bargaining agreements that would result in a liability,
individually
or in the aggregate, that would have a Business Material Adverse
Effect, except
as disclosed on Schedule 4.13(j)(i).
(ii)
Shop Agreements and Pension Plans. As of the date of
this Agreement, Schedule 4.13(j)(ii) sets forth a list of (x) all
significant
shop agreements (Betriebsvereinbarungen or, outside of Germany,
equivalent
collective agreement) and material collective bargaining and
similar agreements
conferring rights or claims to employees applicable to the EC
Business Employees
and (y) material Employee Benefit Arrangements, other than
national, local,
state or statutory social security, applicable to the EC Business
Employees
(collectively the "EC Collective Agreements"). True and complete
copies of
material shop agreements and material Employee Benefit Arrangements
applicable
to the EC Business Employees have been provided to Purchaser by
ITT. Such EC
Collective Agreements have at all times complied and been duly
administered in
accordance with all applicable laws, regulations and requirements
relevant to
each such EC Collective Agreement (including without limitation
works council's
co-determination rights, case law of the relevant courts and tax
regulations),
except where the failure to so comply would not, individually or in
the
aggregate, have a Business Material Adverse Effect.
(k)
People's Republic of China Employee. As of the date of
this Agreement, there are six individuals, identified on Schedule
4.13 (k) who
upon registration of ITT Automotive-Fluid Handlings Systems
(Suzhou) Co., Ltd
(the "PRC-based FHS Company") will become employees of the
PRC-based FHS
Company.
(l)
General Matters Respecting Employees and Employee Benefit
Arrangements.
(i)
Claims. Except as disclosed on Schedule 4.13(l)(i),
as of the date of this Agreement, there are no actions, suits,
claims pending
(other than routine claims for benefits) or, to the knowledge of
ITT, threatened
against any Employee Benefit Arrangement, ITT, any FHS Company, any
Asset Seller
in respect of the Business or the assets of any Employee Benefit
Arrangement by
any Governmental Authority or by or otherwise involving any current
or former
employee of any FHS Company or Asset Seller or their predecessors
that would
result in a liability, individually or when aggregated with claims
arising out
of common facts, that would have a Business Material Adverse
Effect.
(ii)
Transaction Employment Payments. Except as disclosed
on Schedule 4.13(l)(ii), the execution of this Agreement and the
consummation of
the transactions contemplated hereby will not, by contract,
operation of law or
otherwise, (A) entitle any
19
employee or former employee of any FHS Company or any Asset Seller
in respect of
the Business or their predecessors to any payment or other
employment right or
benefit, (B) increase the amount of compensation or benefits of any
such
employee or former employee or (C) accelerate the exercisability or
vesting of
any compensation, stock incentive or other benefit.
4.14.
Compliance with Laws; Permits.
(a)
Except as may be indicated in Schedule 4.14(a), the
Business is conducted by the FHS Companies 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 have a
Seller Material
Adverse Effect.
(b)
Except as may be indicated in Schedule 4.14(b) and except
as, individually or in the aggregate, would not have a Business
Material Adverse
Effect, FHS Companies and the Asset Sellers hold all governmental
permits,
licenses, authorizations and consents ("Permits") required 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 ITT, threatened
to revoke or
rescind any such Permits.
4.15.
Labor Matters. As of the date of this Agreement, except as
described in Schedule 4.15, no FHS Company or Asset Seller in
respect of the
Business is a party to any collective bargaining agreement, subject
to a legal
duty to bargain with any labor organization on behalf of employees
or, to the
knowledge of ITT, the object of any attempt to organize employees
for collective
bargaining or similar purposes or presently operating under an
expired
collective bargaining agreement. Except as described in Schedule
4.15, since
January 1, 2004, no FHS Company or Asset Seller in respect of the
Business is or
has been a party to or subject to any strike, work stoppage,
picketing,
boycotts, or to the knowledge of ITT, any organizing attempt, or
similar
activity.
4.16.
Environmental Matters. Except as disclosed in Schedule 4.16: (a)
the Asset Sellers in respect of the Business and the FHS Companies
are and have
been in compliance with all applicable Environmental Laws, other
than any
failures to comply that would not have a Business Material Adverse
Effect; (b)
the Asset Sellers in respect of the Business and the FHS Companies
are in
compliance with and possess all applicable Environmental Permits to
operate the
Business as it is currently operated, other than any failures to
comply or
possess that would not have a Business Material Adverse Effect; and
as of the
date of this Agreement there are no proceedings pending or, to the
knowledge of
ITT, threatened to revoke or rescind any such Environmental Permits
other than
such Environmental Permits the absence of which would not have a
Business
Material Adverse Effect; (c) there have been no Releases by any FHS
Company or
any Asset Seller or, to the knowledge of ITT, any other person, of
Materials of
Environmental Concern at, on, from or under (i) any property owned,
leased or
operated by any FHS Company or Asset Seller in respect of the
Business or (ii)
any property to which any FHS Company or Asset Seller in respect of
the Business
or any of their respective predecessors in interest have sent waste
for
disposal, in either case (i) or case (ii) under circumstances that
are
reasonably
20
likely to result in liability of any Asset Seller in respect of the
Business or
any FHS Company under any applicable Environmental Laws, other than
as would not
have a Business Material Adverse Effect; (d) no Asset Seller in
respect of the
Business nor any FHS Company has received any written notification,
claim,
subpoena, or summons, or to the knowledge of ITT has been
threatened with any of
the foregoing, alleging that it is (i) liable under any applicable
Environmental
Laws, including for disposal of Materials of Environmental Concern
at any
location, or (ii) in violation of any Environmental Law, nor has
any of them
received any request for information pursuant to section 104(e) of
CERCLA or
similar state or foreign statute concerning disposal of Materials
of
Environmental Concern at any location, other than such
notifications, claims,
subpoenas, summonses or threats thereof or such requests as would
not have a
Business Material Adverse Effect; (e) none of the Asset Sellers in
respect of
the Business nor any FHS Company has entered into any written
agreement to
resolve any liability alleged under any applicable Environmental
Laws, or to
investigate, monitor or remediate any Materials of Environmental
Concern, other
than such written agreements as would not have a Business Material
Adverse
Effect; (f) no Asset Seller in respect of the Business nor any FHS
Company uses
or has used any underground storage tanks at any property owned,
leased or
operated by any of them, and to the knowledge of ITT there are no
underground
storage tanks at any such property, in any case that are required
to be
investigated, retrofitted, abated, remediated or removed under
applicable
Environmental Law, other than as would not have a Business Material
Adverse
Effect; (g) no Asset Seller in respect of the Business, nor any FHS
Company,
nor, to the knowledge of ITT, any of their respective predecessors
in interest
(i) has ever manufactured, produced, installed, or to the knowledge
of ITT,
sold, conveyed or otherwise put into the stream of commerce, any
product,
merchandise, manufactured good, part, component or other item
comprised of or
containing asbestos or (ii) has been the subject of any claims or
litigation
arising out of the alleged exposure to asbestos or
asbestos-containing material,
other than in either case (i) or case (ii) as would not have a
Business Material
Adverse Effect; and (h) ITT has made available to Purchaser all
material reports
of environmental assessments, studies and similar environmental
documents
(including without limitation Phase I and Phase II environmental
investigation
reports) in the possession of Sellers dating from January 1, 2000
and, to the
knowledge of ITT, prior thereto, relating to any (i) facilities or
real property
owned, operated or leased by any Asset Seller in respect of the
Business or any
FHS Company or (ii) material environmental liability of any Asset
Seller in
respect of the Business, or any FHS Company or any of their
respective
predecessors in interest. Notwithstanding 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 Materials of Environmental
Concern.
4.17.
Transferred Assets. Except as set forth in Schedule 4.17 and
except for such other Contracts or rights that will terminate at
the Closing
pursuant to Section 6.7, the transfer of the Transferred Subsidiary
Stock, the
Partnership Interests and the Purchased Assets (together with the
rights and
services made available in any arrangements entered into in
accordance with
Sections 2.4, 6.11 and 6.13), will constitute a conveyance of all
of the assets,
properties and rights owned by the Sellers and used in the Business
in all
material respects as currently conducted.
4.18.
Undisclosed Liabilities. As of the date of this Agreement, the
Business does not have any liabilities or obligations of any nature
or kind
whatsoever (whether known or unknown, absolute, accrued, contingent
or
otherwise), except (i) as are set forth or reflected in the
Financial Statements
or the Interim Financial Statements (or described in the notes
thereto), (ii)
liabilities incurred in the ordinary course of business since the
Balance Sheet
Date which would not, in the aggregate, have a Seller Material
Adverse Effect,
(iii) liabilities disclosed in Schedule 4.18 or any other Schedule
hereto, (iv)
intercompany liabilities that will be capitalized as of the Closing
Date in
accordance with Section 6.7(a), (v) liabilities under contracts or
agreements
disclosed in the Schedules to this Agreement, (vi) liabilities
under contracts
or agreements not required to be disclosed in the Schedules to this
Agreement,
(vii) liabilities in respect of warranty obligations, (viii)
general product
liability claims to be indemnified by ITT pursuant to Section
9.1(a)(v), (ix)
the Excluded Liabilities and the Excluded FHS Company Liabilities,
and (x) such
other liabilities which would not, individually or in the
aggregate, have a
Seller Material Adverse Effect.
4.19.
Finders; Brokers. With the exception of fees and expenses
payable to Lazard Freres & Co. LLC, which shall be ITT's sole
responsibility,
none of ITT or any of the FHS Companies or Asset Sellers has
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 FHS Companies in
connection with the
Purchase.
4.20.
Investment Canada Act. ITT Canada does not provide any of the
services and does not engage in any of the activities of a business
described in
Subsection 14.1(5) of the Investment Canada Act (Canada). 4.21.
Design Defects.
To the knowledge of ITT, there are no defects in the design of any
of the
products of the Business that could give rise to a claim for
personal injury
(including wrongful death) and/or property damage.
ARTICLE V
REPRESENTATIONS OF PURCHASER
----------------------------
Purchaser represents and warrants to ITT as follows:
5.1.
Corporate Existence. Purchaser and each of the other Designated
Purchasers is duly organized and validly existing and, where
applicable, in good
standing, under the laws of the jurisdiction of its organization.
5.2.
Corporate Authority. This Agreement and the other Transaction
Documents to which Purchaser and the other Designated Purchasers 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
22
Directors (or a duly authorized committee or representative
thereof) of such
Designated Purchasers, 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 other Designated Purchaser has
or, in the
case of the other 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
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 the applicable Designated Purchaser party thereto, and
this Agreement
constitutes, and the other Transaction Documents when so executed,
delivered
and/or filed will constitute, a valid and legally binding
obligation of the
applicable Designated Purchaser 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)
and an implied covenant of good faith and fair dealing. Except for
required
filings under the HSR Act and any other Antitrust Regulations and
as set forth
in Schedule 5.2, the execution, delivery and/or filing of this
Agreement and the
other Transaction Documents by each of the applicable Designated
Purchasers
party thereto and the consummation by each of the Designated
Purchasers 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 any Designated Purchaser or
(ii) violate,
conflict with or result in any (A) material breach under any
provision of any
judgment, order, decree, statute, law, ordinance, rule or
regulation of the
United States, Mexico, Canada, Germany or France or (B) breach
under any
provision of other judgment, order, decree, statute, law,
ordinance, rule or
regulation applicable to any of the Sellers or any of their
respective
properties or assets, except, in the case of clause (ii)(B), to the
extent that
any such violation, conflict or breach would not, individually or
in the
aggregate, have a material adverse effect on the ability of any
Designated
Purchaser to consummate the transactions contemplated hereby and
thereby (a
"Purchaser Material Adverse Effect").
5.3.
Governmental Approvals and Consents. No Designated Purchaser is
subject to any order, judgment or decree, which would prevent the
consummation
of the Purchase. As of the date of this Agreement, 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 any
Designated Purchaser that 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 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, permits, filings, notices, registrations or
declarations 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.
23
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 Act of
1933, as amended
(the "Securities Act"), or under any state or foreign securities
laws. Neither
Purchaser nor any other Designated Purchaser is an "underwriter,"
as such term
is defined under the Securities Act, and Purchaser and the other
Designated
Purchasers 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 other 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 will have on the Closing Date
sufficient funds to enable it to pay the Purchase Price and to
consummate the
transactions contemplated hereby.
5.6.
Tax Matters. The applicable Designated Asset Purchaser is
registered for purposes of the goods and services tax pursuant to
Part IX of the
Excise Tax Act (Canada) and any similar provision of provincial
law, and its
registration number is as follows: 104987714RC0001.
5.7.
Investment Canada. Purchaser is a "WTO investor" within the
meaning of the Investment Canada Act.
5.8.
Finders; Brokers. 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 any Seller in connection
with the
Purchase.
ARTICLE VI
AGREEMENTS OF PURCHASER AND ITT
-------------------------------
6.1.
Operation of the Business. Except as otherwise expressly
contemplated by this Agreement or as disclosed in Schedule 6.1, ITT
covenants
that until the Closing it will, and it will cause the FHS Companies
and the
Asset Sellers in respect of the Business to, use their reasonable
best efforts
to continue, in a manner consistent with the past practice, 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. Until the Closing, ITT
shall, and it
shall cause the FHS Companies and the Asset Sellers in respect of
the Business
to, (i) continue to operate and conduct the Business in the
ordinary course
consistent with past practice, and (ii) make capital expenditures
in an amount
no less than $900,000 per month for each month (or part thereof on
a pro rata
basis) after the date hereof through the Closing Date, and ITT
shall cause the
FHS Companies and the Asset Sellers in respect of the Business not
to, without
the prior written approval of Purchaser (which approval
24
shall not be unreasonably withheld or delayed) or as otherwise
expressly
contemplated by this Agreement, including Schedule 6.1, take any of
the
following actions:
(a) with respect to any FHS Company, 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 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 options, warrants or other rights to acquire any
shares 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 FHS
Company;
(b) with respect to any FHS Company or Asset Seller in respect
of the Business, lease, license, sell, transfer or otherwise
dispose of
or encumber any of its properties or assets pertaining to the
Business,
other than 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 FHS Company or Asset Seller in respect of the Business to (i)
create, incur or assume any material long-term or short-term debt
(including obligations in respect of capital leases), except loans
and
advances among ITT and its Subsidiaries, (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether
directly,
contingently or otherwise) for any material obligations of any
person
other than any FHS Company or Asset Seller in respect of the
Business,
(iii) make any material loans, advances or capital contributions to
or
investments in any person other than its Subsidiaries and other FHS
Companies (except for customary loans or advances to employees), or
(iv) create or incur any Liens (other than Permitted Liens) on the
Purchased Assets or any assets of any FHS Company;
(d) except as a result of collective bargaining or as required
by applicable law, (i) grant any significant increase in the
compensation of employees of the FHS Companies, other than
increases in
the compensation of employees in the ordinary course of business
consistent with past practice or as required by any benefit plan as
in
effect on the date hereof, (ii) hire new employees other than in
the
ordinary course of business consistent with past practice, (iii)
enter
into any new material employment, severance, consulting or other
compensation agreement with any existing director, officer or
employee
or (iv) commit to any additional material 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
FHS Company or Asset Seller in respect of the Business;
25
(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) other than in the ordinary course of business, settle (other
than a settlement that involves only the payment of money and which
payment is made prior to the Closing Date or is reflected on the
Closing Net Working Capital Statement) any litigation or other
proceeding or make or enter into any agreement with respect to any
recall;
(h) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization
or
other reorganization with respect to any FHS Company or Asset
Seller;
(i) permit any FHS Company to (i) to declare, set aside or pay
any non-cash dividends or distributions on, or make any other
non-cash
distributions (whether in securities or other property) in respect
of,
its capital stock or Partnership Interests (other than dividends
and
distributions to a wholly owned FHS Company) or (ii) split, combine
or
reclassify any of its outstanding capital stock or Partnership
Interests;
(j) make any material change in the accounting methods, policies
or practices followed by the Business (in all cases, other than
such
changes that are required by law or GAAP);
(k) other than in the ordinary course of business, (i)
materially amend or terminate or waive compliance with the terms of
or
breaches under any Contract required to be disclosed in Schedule
4.8 or
(ii) enter into any Contract that would be required to be disclosed
in
Schedule 4.8 if in effect on the date of this Agreement;
(l) change, or agree to change, any business policies of the FHS
Companies or the Asset Sellers in respect of the Business which
relate
to personnel or labor relations, in each case in any material
respect
other than in the ordinary course of business (other than changes
required by law or industry wide collective bargaining agreements);
(m) other than with respect to consolidated, combined or unitary
Tax Returns and only with respect to the FHS Companies, amend any
Tax
Return, make any election relating to Taxes, change any election
relating to Taxes already made, change any accounting method
relating
to Taxes, enter into any closing agreement relating to Taxes,
accept or
settle any claim or assessment relating to Taxes, or, without
consultation with Purchaser, consent to any extension of the period
of
limitations on assessment of any Tax; or
(n) agree, whether in writing or otherwise, to do any of the
foregoing.
26
6.2.
Investigation of Business.
(a)
Purchaser may, prior to the Closing Date, make or cause to
be made such investigation of the business and properties of the
FHS Companies
and the Asset Sellers in respect of the Business and of their
financial and
legal condition as Purchaser deems necessary or advisable. ITT
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 FHS Companies
and the Asset
Sellers in respect of the Business at reasonable hours to review
information and
documentation relative to the properties, books, contracts,
commitments and
other records of the Business; provided, that such investigation
shall only be
upon reasonable notice, shall not unreasonably disrupt personnel
and operations
of the Business, shall be subject to confidentiality restrictions
required by
law, and shall be at Purchaser's sole risk and expense. All
requests for access
to the offices, properties, books and records of ITT, the Asset
Sellers and the
FHS Companies shall be made to such representatives of ITT as ITT
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, or any Seller or any of their Subsidiaries or Affiliates
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 ITT.
(b)
Purchaser and its representatives will hold in confidence
all confidential information obtained from ITT and its Subsidiaries
or their
respective officers, agents, representatives or employees whether
or not
relating to the Business, in accordance with the provisions of the
letter dated
August 11, 2005 between Purchaser and ITT (the "Confidentiality
Agreement"). The
Confidentiality Agreement and all its provisions shall remain in
full force and
effect following the execution of this Agreement.
6.3.
Reasonable Best Efforts; No Inconsistent Action.
(a)
Subject to the terms and conditions hereof, ITT and
Purchaser agree to use their reasonable 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 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, (ii) to obtain all other Consents listed
on Schedule
4.4 (it being understood that the failure to obtain any such
Consents shall not
cause the condition set forth in Section 7.3(b) to be deemed not to
be
satisfied) and (iii) obtain landlord consents necessary to transfer
the leases
identified in Schedule 6.3(a)(iii) to the FHS Companies that are
currently
occupying the Leased Real Property that is subject to such leases.
Each of ITT
and Purchaser agree that, except as otherwise required by law, (a)
no contact
will be initiated with, or consent sought from, any Governmental
Authority
(other than in respect of antitrust,
27
competition or merger control approval) prior to the Closing Date
without the
prior written consent of the other party, such consent not to be
unreasonably
withheld or delayed, and (b) each party will be given notice of and
a reasonable
opportunity to participate in contacts with Governmental
Authorities regarding
antitrust, competition or merger control matters. ITT and Purchaser
shall
cooperate fully with each other to the extent reasonable in
connection with the
foregoing. Notwithstanding anything to the contrary herein, each of
ITT and
Purchaser agree that with respect to any third-party
authorizations, approvals,
consents or waivers that are required in connection with the
transactions
contemplated by this Agreement that 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
ITT nor any of its Affiliates shall be required to pay any
consideration
therefor or waive any rights in connection therewith.
(b)
Purchaser and ITT shall timely and promptly make all
filings that may be required for the satisfaction of the condition
set forth in
Section 7.1(b) 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 ITT and Purchaser agree to use their reasonable
best efforts
to file Notification and Report Forms under the HSR Act, if
required or
advisable the appropriate filings pursuant to the Competition Act
(Canada) 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. Purchaser
and ITT
agree, and shall cause each of their respective Subsidiaries, to
cooperate and
to use their respective reasonable best efforts to obtain any
government
clearances or negative clearances required for the Closing
(including through
compliance with the review process under the HSR Act and any
applicable foreign
governmental reporting requirements), to respond to, and comply
with, any
governmental requests for information; provided, however, that
Purchaser shall
not be required by anything contained in this Agreement to sell or
otherwise
dispose of, or hold 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) or withdraw from doing
business in a
particular jurisdiction (it being understood that ITT shall have no
obligation
whatsoever to retain, sell or otherwise dispose of, any portion of
the Business
in order to satisfy its obligations under this Section 6.3).
(c)
Purchaser and ITT each agree that if either receives a
request for information or documentary material from any such
Governmental
Authority with respect to the transactions contemplated by this
Agreement, then
such party will, and will cause each of its Affiliates to, use its
reasonable
best efforts to make, or cause to be made, as soon as practicable
and after
prompt consultation with the other party, an appropriate response
in compliance
with such request. 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 Sections 6.2(b) and 6.9). Each
party shall,
subject to applicable law, permit counsel for the other party to
review in
advance any proposed written communication to, and promptly inform
the other
party of any communication with, any Governmental Authority
28
challenging the consummation, lawfulness or enforceability of the
of
transactions contemplated by this Agreement. Each of the parties
agrees to offer
the other Party the opportunity to participate in all telephonic
calls and all
meetings with a Governmental Authority in which these matters are
discussed.
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, antitrust, competition, or merger control law.
(d)
Each of Purchaser and ITT 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, which
challenges the
transactions contemplated hereby and (iii) any event or
circumstance which, to
its knowledge, would constitute a breach of its respective
representations and
warranties in this Agreement that would result in the failure to
satisfy the
condition in Section 7.3(a) or Section 7.2(a), as applicable;
provided, however,
that the failure of ITT or Purchaser to comply with this Section
6.3(d) shall
not subject ITT or Purchaser to any liability hereunder except as
and to the
extent ITT or Purchaser would be responsible for a breach of such
representations and warranties pursuant to Article IX (including,
the
limitations on recovery and the time periods for bringing claims
thereunder).
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.
6.5.
Access to Records, Personnel and Real Property.
(a)
Except as otherwise provided in Section 6.12 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 or the
possession of the
FHS Companies (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 the
29
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
the first paragraph of the Confidentiality Agreement shall not be
deemed to be
confidential information for purposes of this Section 6.5.
(c)
Purchaser shall provide reasonable access to the Owned
Real Property located at New Lexington, Ohio and at Hockenheim,
Germany to ITT
and its agents, independent contractors and other representatives
and designees
to the extent necessary or appropriate for completing the
environmental work
specified on Schedule 6.5(c); provided, however, that:
(i)
ITT and ITT's representatives and its and their agents,
employees and representatives shall not unreasonably interfere with
the usual
operation of such Owned Real Property by Purchaser or any
occupants, it being
understood that, prior to Purchaser's altering the nature or extent
of such
operation from the nature and extent of such operations on such
Owned Real
Property as of the date hereof, Purchaser shall notify ITT of and
consult with
ITT concerning such proposed alteration, and shall make any such
alteration in a
manner that does not materially affect the completing of the work
specified on
Schedule 6.5(c);
(ii)
ITT and ITT's representatives and its and their agents,
employees and representatives shall exercise due care and ordinary
prudence in
performing such environmental work and ITT shall undertake
commercially
reasonable efforts to restore such Owned Real Property to such
condition as
existed prior to such environmental work, insofar as the nature and
extent of
the operation of such Owned Real Property is consistent with the
nature and
extent of the operation of such Owned Real Property as of the date
hereof, and
it being understood that such obligation to restore shall not
require ITT to
undertake any measure that is inconsistent with or contrary to its
agreements
and obligations with respect to such work; and
(iii) After the date hereof, before conducting such
environmental work, each of ITT's third-party representatives
conducting such
work on such Owned Real Property shall maintain workers'
compensation insurance
in accordance with applicable law, and such third-party
representative
conducting any such environmental work on such Owned Real Property
shall
maintain (a) commercial general liability insurance with limits of
at least one
million dollars ($1,000,000) for bodily or personal injury or
death, and (b)
property damage insurance in the amount of at least one million
dollars
($1,000,000). ITT shall deliver to Purchaser evidence of such
workers'
compensation insurance carried by ITT's third-party representatives
and a
certificate evidencing the commercial general liability and
property damage
insurance carried by ITT's third-party representatives before such
third-party
representative conducts any such environmental work on such Owned
Real Property.
Each such insurance policy shall be written by a reputable
insurance company
having a rating of at least "A" by Best's Rating Guide (or a
comparable rating
by a successor rating service).
30
6.6.
Employee Relations and Benefits.
--------------------------------
(a) Employment - United States.
---------------------------
(i)
Subject to Section 6.6(a)(iv), all U.S.
Business Employees employed by the U.S. FHS Companies as of the
Closing Date
will continue to be employed by the U.S. FHS Companies on and
immediately after
the Effective Benefits Time. Commencing effective as of the
Effective Benefits
Time, the terms of employment of U.S. Business Employees shall
include
compensation and employee benefits as provided in Section
6.6(a)(ii) to the
extent provided therein.
(ii)
Purchaser shall, or shall cause the U.S. FHS
Companies to, for the period commencing at the Effective Benefits
Time and
ending on December 31, 2006, (x) provide employee benefits under
plans, programs
and arrangements which, in the aggregate, will provide benefits to
the U.S.
Salaried Transitioned Employees and the U.S. Non-Bargaining Hourly
Transitioned
Employees which are, taking into account and not in limitation of
the
obligations of Purchaser under Sections 6.6(b)(v), 6.6(d) and
6.6(e), no less
favorable in the aggregate to those benefits provided to the U.S.
Salaried
Business Employees and the U.S. Non-Bargaining Hourly Business
Employees
pursuant to the plans, programs and arrangements of ITT and/or the
FHS Companies
in effect on the Closing Date or, at Purchaser's option such
benefits that are
the same as those benefits provided to similarly situated employees
of Purchaser
and, (y) provide the U.S. Salaried Transitioned Employees and the
U.S.
Non-Bargaining Hourly Transitioned Employees, with base salaries
and working
conditions (which constitute principal places of employment, and
hour
requirements (flex time, etc.) as of the Closing Date) that are at
least
equivalent to the base salaries and working conditions of the U.S.
Salaried
Business Employees and the U.S. Non-Bargaining Hourly Business
Employees as of
the Closing Date.
(iii) Purchaser shall, or shall cause a U.S. FHS
Company to assume and to comply in all respects with the terms of
the collective
bargaining agreements identified on Schedule 4.15 ("U.S. Bargaining
Agreements")
in accordance with their terms and applicable law, commencing on
and after the
Closing Date.
(iv)
Nothing in this Agreement shall require
Purchaser or the U.S. FHS Companies 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 for any
reason at its
expense 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.
(b) Employee Welfare Benefits-United States.
----------------------------------------
31
(i)
ITT 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. For purposes of this Agreement, claims under any
medical, dental,
vision, hospital or prescription drug plan or any other U.S.
Business Welfare
Benefits Program will be deemed to be incurred on the date that the
service
giving rise to such claim is performed and not when such claim is
made.
(ii)
Purchaser shall be or shall cause the U.S. FHS
Companies 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 plans in which any of the Business Employees or U.S.
Former Business
Employees participate on or after the Effective Benefits Time (the
"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 such plans, as such
terms may exist
from time to time, and incurred from and subsequent to the
Effective Benefits
Time.
(iii) With respect to Purchaser's U.S. Welfare
Benefits Program, Purchaser agrees to waive for U.S. Transitioned
Employees and
U.S. Former Business Employees and their eligible dependents to the
extent
previously waived or satisfied under the applicable U.S. Business
Welfare
Benefits Program (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. 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 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. 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 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)
Subject to the provisions of Section
6.6(a)(ii), 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. Former Business Employee and any dependents thereof any
health
maintenance organization coverage in effect as of the Closing Date.
32
(vi)
With respect to any benefits to which any
U.S. Transitioned Employees or U.S. Former Business Employees or
their spouses,
former spouses, or other qualifying beneficiaries may be entitled
under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
by reason of
qualifying events occurring on or prior to the Closing Date,
Purchaser shall
provide such benefits to any U.S. Transitioned Employees and to any
U.S. 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)
Subject to the next-following sentence,
Purchaser shall (or shall cause a U.S. FHS Company to) 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 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 ITT
and Purchaser.
In the event Purchaser shall reasonably require information
regarding health
coverage not otherwise available in the records of the Business
transferred to
Purchaser in connection with the transactions contemplated herein,
ITT shall
cooperate with Purchaser in providing health coverage information
available in
ITT's records, and permitted by HIPAA to be disclosed to Purchaser.
(viii)
(A) (1) Purchaser shall take all actions
necessary and legally permissible to ensure that, as of the
Effective Benefits
Time, it includes the U.S. Transitioned Employees who are, as of
the Closing
Date, participating in a plan of the U.S. Business Welfare Benefits
Program that
constitutes a "flexible spending" or "health reimbursement" account
arrangement
and that qualifies as a "cafeteria plan" under Section 125 of the
Code and any
flexible spending arrangements thereunder ("U.S. Business FSA") in
the plan of
the U.S. Purchaser's Welfare Benefits Program that constitutes such
an
arrangement and plan ("Purchaser's FSA"). Purchaser shall further
take all
actions necessary and legally permissible to amend such Purchaser's
FSA to
provide that (x) the U.S. Transitioned Employees who elected to
participate in
U.S. Business FSA shall become participants in Purchaser's FSA as
of the
beginning of the U.S. Business FSA plan year and at the level of
coverage
provided under the U.S. Business FSA, except that any U.S.
Transitioned
Employees who continue participation in U.S. Business FSA after the
Effective
Benefits Time as provided in paragraph (2) below shall not be
covered by
Purchaser's FSA for that year; and (y) the U.S. Transitioned
Employees salary
reduction elections shall be taken into account for the remainder
of Purchaser's
FSA's plan year as if made under the U.S. Business FSA.
(2) Purchaser's FSA shall reimburse the
medical expenses incurred by the U.S. Transitioned Employees at any
time during
the U.S. Business FSA's plan year (including claims incurred prior
to the
Effective Benefits Time but unpaid as of the Effective Benefits
Time), up to the
amount of the U.S. Transitioned Employee's election and reduced by
amounts
previously reimbursed by the U.S. Business FSA.
33
(3) As soon as practicable following the
Effective Benefits Time, ITT shall transfer to Purchaser and
Purchaser agrees to
accept, those amounts which represent the debit and credit balances
under the
U.S. Business FSA (a schedule of which shall be provided as soon as
practicable
after the Closing Date) of the U.S. Transitioned Employees who are
to become
covered by Purchaser's FSA and the transfer of such amounts shall
be reflected
on the Closing Net Working Capital Statement taking into account on
a net basis
employees' payroll deductions and claims paid through the Effective
Benefits
Time.
(4) ITT shall take all actions necessary
and legally permissible to amend the U.S. Business FSA to provide
that the U.S.
Transitioned Employees shall cease to be eligible for reimbursement
from the
U.S. Business FSA as of the Effective Benefits Time, except to the
extent that
any U.S. Transitioned Employee elects continuation of coverage
under the U.S.
Business FSA as permitted by Section 4980B of the Code and Section
601 et seq.
of ERISA.
(B) (1) Purchaser shall take all actions
necessary and legally permissible to ensure that, as of the
Effective Benefits
Time, it includes the U.S. Transitioned Employees who are, as of
the Closing
Date, participating in the plan of the U.S. Business Welfare
Benefits Program
that constitutes a "dependent care assistance program" within the
meaning of
Section 129 of the Code and any reimbursement arrangements
thereunder ("U.S.
Business DCAP") in the plan of the U.S. Purchaser's Welfare
Benefits Program
that constitutes such a program and arrangement ("Purchaser's
DCAP"). Purchaser
shall further take all actions necessary and legally permissible to
amend
Purchaser's DCAP to provide that (x) the U.S. Transitioned
Employees who elected
to participate in the U.S. Business DCAP shall become participants
in
Purchaser's DCAP as of the beginning of Seller's DCAP plan year and
at the level
of coverage provided under the U.S. Business DCAP after the
Effective Benefits
Time as provided in paragraph (2) below shall not be covered by
Purchaser's DCAP
for that year; (y) the U.S. Transitioned Employees salary reduction
elections
shall be taken into account for the remainder of Purchaser's DCAP
plan year as
if made under the U.S. Business DCAP; and
(2) Purchaser's DCAP shall reimburse the
dependent care expenses incurred by the U.S. Transitioned Employees
at any time
during the U.S. Business DCAP plan year (including claims incurred
prior to the
Effective Benefits Time but unpaid as of the Effective Benefits
Time), up to the
amount of the U.S. Transitioned Employee's election and reduced by
amounts
previously reimbursed by the U.S. Business DCAP.
(3) ITT shall take all actions necessary
and legally permissible to amend the U.S. Business DCAP to provide
that the U.S.
Transitioned Employees shall cease to be eligible for reimbursement
from the
U.S. Business DCAP as of the Effective Benefits Time.
(4) As soon as practicable following the
Effective Benefits Time, ITT shall transfer to Purchaser and
Purchaser agrees to
accept, those amounts which represent the debit and credit balances
under the
U.S. Business DCAP ( a schedule of which shall be provided as soon
as
practicable after the Closing Date) of the U.S. Transitioned
34
Employees who are to become covered by Purchaser's DCAP and the
transfer of such
amounts shall be reflected on the Closing Net Working Capital
Statement Sheet
taking into account on a net basis employees' payroll deductions
and claims paid
through the Effective Benefits Time.
(c)
Recognition by Purchaser of Prior Service - United States.
Purchaser shall recognize each U.S. Transitioned Employee's service
with ITT or
any FHS Company 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) (A)
eligibility and vesting and (B) with respect to U.S. Hourly
Transitioned
Employees, for all other purposes, including without limitation,
pension
credited service, under all other employee benefit plans and
policies of
Purchaser applicable to U.S. Transitioned Employees, to the extent
such service
was recognized by ITT or any FHS Company 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 ITT or any FHS Company 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.
(d)
Vacation - United States. Purchaser shall allow U.S.
Transitioned Employees to 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 Net Working Capital
Statement.
(e)
Severance Benefits - United States. (i) In the event any
U.S. Transitioned Employee's employment is terminated within one
year after the
Closing Date, Purchaser shall provide to such terminated U.S.
Transitioned
Employee severance and termination pay and benefits determined in
accordance
with the applicable severance and termination pay policies and
practices
covering the U.S. Business Employees on the Closing Date, which
policies and
practices are as set forth in Schedule 6.6(e) (the "U.S. Business
Severance
Policies and Practices"), it being understood by Purchaser that
such pay and
benefits have been provided under such policies and practices in
all cases where
terminated employees have satisfied the eligibility criteria set
forth therein.
(ii)
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 continue to
receive such
severance and termination pay benefits from Purchaser, to the
extent such
severance and termination pay benefits are reflected on the Closing
Net Working
Capital Statement.
(f)
Disability - United States. (i) Any U.S. Transitioned
Employee who is absent from work as of the Effective Benefits Time
due to
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 reasonably affect his or her ability to perform, or to
perform with
restrictions, the
35
position held by such individual with any U.S. FHS Company with
respect to the
Business prior to such Disability.
(ii)
Any U.S. Salaried Transitioned Employee who is
Long Term Disabled as of the Closing Date shall continue to
receive, while
eligible, Long Term Disability benefits under the plan of the U.S.
Business
Welfare Benefits program providing Long Term Disability income
benefits ("U.S.
LTD Plan") subject to and according to the terms of the U.S. LTD
Plan. Subject
to the preceding sentence, Purchaser shall or shall cause the U.S.
FHS Companies
to provide coverage to any U.S. Salaried Transitioned Employee who
is Long Term
Disabled as of the Closing Date under the employee benefit plans,
programs and
arrangement of Purchaser or the U.S. FHS Companies on the same
basis as provided
to any salaried employee of Purchaser or the U.S. FHS Companies who
becomes Long
Term Disabled after the Closing Date.
(g)
Hourly Savings Plans - United States. (i) As of the
Effective Benefits Time, Purchaser will, or will cause a U.S. FHS
Company to,
assume all of ITT's obligations and succeed to all the ITT'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, or by causing
a U.S. FHS
Company to remain the sponsor of, as of the Effective Benefits
Time, the Hourly
Savings Plans and assuming, or causing a U.S. FHS Company to assume
or to remain
the contracting employer with respect to the existing group annuity
insurance
contracts issued by Hartford Life Insurance Company pursuant to
which the
certain assets of the Hourly Savings Plans are held and invested.
(ii)
Assets of the Hourly Savings Plans are presently
held in trust by the Northern Trust Company ("Northern Trust"). As
soon as
practicable but in no event later than ninety days after the
Closing Date
Purchaser will, or will cause U.S. FHS Company to establish a trust
for the
Hourly Savings Plans with such trustee as Purchaser may designate
("Hourly
Savings Plans Trust"). Purchaser shall take, or shall cause the
applicable U.S.
FHS Company to take, such action as shall be necessary to qualify
the Hourly
Savings Plans Trust under the Code and shall take such other
actions in
connection therewith as may be required by ERISA.
(iii) As soon as practicable and upon receipt by ITT and
Northern Trust of copies of (A) an opinion of Purchaser's tax
counsel reasonably
satisfactory to ITT and Northern Trust confirming that the
establishment and
operation of the Hourly Savings Plans Trust do not adversely affect
the
qualification of the Hourly Savings Plans and that, upon submission
to the
Internal Revenue Service of the Hourly Savings Plans Trust, it is
expected that
the Hourly Savings Plans and the Hourly Savings Plans Trust will
continue to be
tax qualified, or (B) a favorable determination letter from the IRS
with respect
to the Hourly Savings Plans Trust, and upon satisfaction by
Purchaser of the
reasonable and customary requirements of Northern Trust, ITT will,
unless
otherwise prohibited by applicable law, cause Northern Trust to
transfer in kind
all such assets then held in trust by Northern Trust as of the date
of transfer
for usual and ordinary fees and expenses, including any charges for
trustees
fees, and benefit payments, with respect to Hourly Savings Plans
and such trust
arrangements.
36
(iv)
ITT agrees that, from the Closing Date until the
transfer as provided in Section 6.6(g)(iii) the assets of the
Hourly Savings
Plan held in trust by Northern Trust will be made available for
benefits
payments and other usual and ordinary fees and expenses, under such
Plan and
trust arrangement, in accordance with the terms of such Plan and
trust
arrangement.
(v)
Purchaser agrees that from the Closing Date until
the transfer as provided in Section 6.6(g)(iii) it shall advise ITT
at least
fifteen days in advance of any amendment of the Hourly Savings Plan
and/or any
communication to participants in the Hourly Savings Plans regarding
any material
change in the terms upon which the common stock of ITT is offered
as an
investment fund under the Hourly Savings Plans and Purchaser and
ITT agree to
cooperate in connection with any administrative or other matters
affecting the
Hourly Savings Plans Trust as a result of or in connection with
such change.
(h)
Hourly Pension Plans - United States. Section 6.6(i),
"Transfer of Hourly Pension Plans-United States", shall be
operative if either
(x) prior to the Closing, the Pension Benefit Guaranty Corporation
("PBGC")
shall have approved the transfer of the Hourly Pension Plans as
contemplated in
Section 6.6(i) or (y) PBGC shall have taken no action to terminate
the Hourly
Pension Plans. Purchaser agrees to cooperate with ITT 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 subject to receipt of
standard
confidentiality agreement from PBGC. In the event ITT shall
determine, in its
sole discretion, that the transfer of the Hourly Pension Plans
cannot be
effectuated without the PBGC threatening to take action to prevent
such transfer
or to terminate such Hourly Pension Plans without (i) the
assumption of
obligations or the incurrence of other liabilities to the PBGC or
the Hourly
Pension Plans by ITT, 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 (any such threatened action, a
"PBGC
Action"), and ITT further determines, also in its sole discretion,
not to assume
such obligations, incur such liabilities or make such additional
contributions,
then Section 6.6(i) shall not be operative and in place thereof
Section 6.6(j),
"Retention of Hourly Pension Plans - United States", shall be
operative.
(i)
Transfer of Hourly Pension Plans- United States. If, prior
to the Effective Benefits Time, no PBGC Action has occurred and the
PBGC has not
otherwise taken any action to terminate the Hourly Pension Plans
then:
(i)
As of the Effective Benefits Time, Purchaser will,
or will cause a U.S. FHS Company to, assume all ITT's obligations
and succeed to
all ITT'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, or
by causing a U.S. FHS Company to remain sponsor of, 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
37
be deemed otherwise interrupted for purposes of the Hourly Pension
Plans as
adopted by Purchaser, by reason of the transactions 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 is presently trustee under
said trust.
From and after the Closing Date and until the transfer as
hereinafter provided
in Section 6.6(i)(iv) such assets shall continue to be held in the
Plan
Accounts, upon the terms hereinafter provided.
(B) ITT 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,
ITT 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 of the Plan Accounts as of the
Valuation Date
("Actual Value"), ITT 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 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, ITT 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(i)(iii)(D).
38
(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(i)(iv).
(iv)
(A) Purchaser will establish trusts for the Hourly Pension
Plans with such trustee as Purchaser may designate (the
"Purchaser's Trusts").
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 ITT
and Northern Trust of copies of an opinion of Purchaser's tax
counsel reasonably
satisfactory to ITT and Northern Trust confirming that the
establishment and
operation of the Purchaser's Trusts do not adversely affect the
qualification of
the Hourly Pension Plans and that, upon submission to the Internal
Revenue
Service of the Purchaser's Trusts, it is expected that the Hourly
Pension Plans
and the Purchaser's Trusts will continue to be tax qualified, 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, ITT
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
premiums and benefit payments, with respect to the Hourly Pension
Plans and the
Plan Accounts.
(v)
ITT agrees that, from the Closing Date until the transfer
as provided in Section 6.6(i)(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(i)(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.
(j)
Retention of Hourly Pension Plans - United States. If ITT,
in its sole discretion, determines that the Hourly Pension Plans
cannot be
transferred to Purchaser without the PBGC taking a PBGC Action or
taking action
to terminate such Hourly Pension Plans then:
(i)
Purchaser shall not assume any of the liabilities
and obligations of the Hourly Pension Plans and ITT shall retain
all such
liabilities and obligations and related assets under the Hourly
Pension Plans.
(ii)
(A) Purchaser agrees that it will or will cause a
U.S. FHS Company to establish tax qualified defined benefit pension
plans,
effective as of the Effective
39
Benefits Time, identical to the Hourly Pension Plans in all
material respects
other than the substitution of Purchaser, or a U.S. FHS Company, 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 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 Plans
with respect to service prior to the Effective Benefits Time.
(iii) ITT 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 and
commencement
of payments under each such plan.
(k)
Salaried Benefits - United States. (i) Savings Plan -
United States. Purchaser agrees that it will, or will cause a U.S.
FHS Company
to, 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 for immediate eligibility for participation of each
U.S. Salaried
Business Employee who, as of the date immediately preceding the
Closing Date,
participates in the ITT Industries Investment and Savings Plan for
Salaried
Employees (the "Salaried Savings Plan"). Pursuant to and in
accordance with
Section 6.6(c), each U.S. Salaried Transitioned Employee will
receive full
credit for such U.S. Salaried Transitioned Employee's service with
ITT or any
FHS Company and their respective Affiliates and Predecessors for
purposes of any
participation requirement, vesting and any benefit determinations
based on age
and years of service under Purchaser's Savings Plan. Purchaser's
Savings Plan
shall accept, subject to applicable law, rollover contributions of
cash, and any
notes representing plan loans to participants, distributed to U.S.
Salaried
Transitioned Employees from the Salaried Savings Plan. Purchaser's
Savings Plan
shall provide for the continued administration of any such plan
loans for the
remainder of their terms in accordance with the provisions thereof.
(ii)
Salaried Retirement Plan - United States. Purchaser
shall not assume any of the liabilities and obligations of the ITT
Industries
Salaried Retirement Plan
40
("Salaried Retirement Plan") and ITT shall retain all such
liabilities and
obligations and related assets under the Salaried Retirement Plan.
(iii) Post-Retirement Health and Life Insurance Benefits -
United States. (A) Purchaser shall not assume any liabilities and
obligations
relating to ITT's post-retirement health and life insurance
coverage for any
individuals, including U.S. Salaried Business Employees eligible
for such
coverage as of the Closing Date, U.S. Salaried Former Business
Employees and
former hourly employees of ITT or its Affiliates whose employment
was terminated
from the Avon, Michigan and Jackson, Michigan locations.
(B) ITT shall retain all funded assets held in tax-
qualified arrangements under ITT's post-retirement health and life
insurance
coverage related to the U.S. Salaried Business Employees and the
U.S. Salaried
Former Business Employees.
(iv)
Excess and Supplemental Pension Plans - United
States.
Purchaser shall not assume any of the liabilities and obligations
of the
non-qualified excess and supplemental pension plans maintained by
ITT with
respect to U.S. Salaried Business Employees and U.S. Salaried
Former Business
Employees (together the "Excess Pension Plan") and ITT shall retain
all such
liabilities and obligations and related assets under the Excess
Pension Plan.
(v)
Excess Savings Plan - United States. Purchaser shall
not assume any of the liabilities and obligations of the
non-qualified excess
savings plan maintained by ITT with respect to U.S. Salaried
Business Employees
and U.S. Salaried Former Business Employees ("Excess Savings Plan")
and ITT
shall retain such liabilities and obligations and related assets
under the
Excess Savings Plan.
(vi)
Deferred Compensation - United States. ITT 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 ITT's
deferred
compensation plan.
(l) Cessation of Participation. Except as specifically provide
herein, all Transitioned Employees will cease participation in all
Employee
Benefit Arrangements as of the Effective Benefits Time; provided,
that with
respect to Business Employees principally employed in Germany, this
shall not
affect participation in benefit plans and programs to be continued
by the German
FHS Companies following Closing.
(m) WARN Act. The parties hereto agree that for purposes of the
Worker Adjustment and Retraining Notification Act of 1988, as
amended, (the
"WARN Act"), the date immediately following the Closing Date shall
be the
"Effective Date of the Sale" as such term is used in the WARN Act.
It is agreed
that prior to, or in connection with, the Closing, Purchaser shall
take no
action to cause the Entity Sellers or any FHS Company to terminate
the
employment of any U.S. Business Employees, and neither the Entity
Sellers nor
any FHS Company shall be under any obligation to terminate any U.S.
Business
Employees prior to or on
41
the Closing Date. Neither the Entity Sellers nor any U.S. FHS
Company shall, at
any time within the 90-day period prior to the Closing Date,
effectuate a "plant
closing" or "mass layoff" as those terms are defined in the WARN
Act or any
state law, with respect to the U.S. Business, without notifying
Purchaser in
advance and without complying with the notice requirements and all
other
provisions of the WARN Act and any state law. Purchaser
acknowledges and
represents that it has no present intent to engage in a "mass
layoff" or "plant
closing" as those terms are defined in the WARN Act or any state
law with
respect to the U.S. Business. Purchaser agrees that between the
Closing Date and
a period ninety (90) calendar days thereafter it will not, with
respect to the
U.S. Business, effect a "plant closing" or "mass layoff" as those
terms are
defined in the WARN Act without complying with the notice
requirements and all
other provisions of the WARN Act and any state law; provided, that
ITT agrees
that it shall, upon Purchaser's reasonable request, cooperate with
Purchaser and
issue any and all notices required by the WARN Act on behalf of
Purchaser and
which Purchaser has approved with respect to any "plant closings"
or "mass
layoffs" which may be anticipated to occur within the ninety (90)
day period
following the Closing Date. A breach by any party of their
respective
obligations set forth above shall give rise to an obligation by the
breaching
party to indemnify, defend and hold harmless the non-breaching
party from and
against any and all claims, actions, suits, demands, proceedings,
losses,
expenses, damages, obligations and liabilities (including costs of
collection,
attorney's fees and other costs of defense) incurred thereby or
caused thereto
under or pursuant to the WARN Act and any analogous state or local
law based on,
arising out of, resulting from or relating to any act or omission
to act by or
of the breaching party with respect to the U.S. Business. Purchaser
shall
indemnify, defend and hold harmless the Entity Sellers and Asset
Sellers from
and against any and all claims, actions, suits, demands,
proceedings, losses,
expenses, damages, obligations and liabilities (including costs of
collection,
attorney's fees and other costs of defense) incurred thereby or
caused thereto
under or pursuant to the WARN Act and any analogous state or local
law arising
out of employment losses which may occur after the Closing Date
within the U.S.
Business and as to which any Entity Seller or Asset Seller should
have given
notice pursuant to the WARN Act to any U.S. Business Employee prior
to the
Closing Date.
(n) Employment - Mexico. (i) Saltillo Shelter Arrangement -
Mexico Payroll. Assuming any Mexico Subsidiary Employees are still
employed at
the Effective Benefits Time, Purchaser will cause any such
employees to be
employed in Mexico upon substantially equivalent terms and
conditions as those
in effect with respect to such individuals on the Closing Date.
(ii)
Guaymas Shelter Arrangement. Assuming the Guaymas
Employee is still employed at the Effective Benefits Time,
Purchaser will cause
such to be employed in Mexico upon substantially equivalent terms
and conditions
as to those in effect with respect to such individual on the
Closing Date.
(o) Employment- EC other than Germany and the Czech Republic.
The transfer of employment of EC Business Employees, other than
those located in
Germany and the Czech Republic, will be effected in accordance with
the
applicable law of the EC country in which the EC Business Employee
is located
and governed by the Transfer Provisions and accordingly the
contract of
employment of each EC Business Employee shall be assumed by
Purchaser with
42
effect from the Effective Benefits Time which shall be the "time of
transfer"
under the Transfer Provisions.
(p) Employment - France - Adjustments Payment. On the Closing
Date, ITT shall pay to Purchaser or ITT shall cause to be reflected
on the
Closing Net Working Capital Statement, an amount equal to the
salaries and
social contributions to be assessed thereon corresponding to (A)
the vacations
accrual of the France Business Employees for the period ending on
the Closing
Date, (B) the accrual of the France Business Employees in respect
of 13th month
or other year-end bonus for the period running from January 1st of
the year in
which the Closing Date occurs through the Closing Date, and (C) to
the extent
only that Purchaser pays the monthly salaries due to the France
Business
Employees in respect of the month during which the Closing shall
occur, that
part of such monthly salaries for the period running from the first
day of the
month during which the Closing Date will occur through the Closing
Date. Subject
to the foregoing, Purchaser alone shall be responsible for any and
all payments
to be made to the France Business Employees after the Closing Date.
(q) Employment and Benefits - Canada.
(i)
Purchaser shall offer employment to all Canada
Salaried Business Employees. Such offers of employment shall
include
compensation and employee benefits as provided in Section
6.6(q)(ii) and shall
offer employment commencing effective as of the Effective Benefits
Time.
(ii)
Purchaser shall for the period commencing at the
Effective Benefits Time and ending on the first anniversary
thereof, (x) provide
employee benefits under plans, programs and arrangements which, in
the
aggregate, will provide benefits to the Canada Salaried
Transitioned Employees
which are, taking into account and not in limitation of the
obligations of
Purchaser under Sections 6.6(q)(v), 6.6(q)(vii) and 6.6(q)(viii),
substantially
equivalent in the aggregate to those benefits provided to the
Canada Salaried
Business Employees pursuant to the plans, programs and arrangements
of ITT
and/or the FHS Companies in effect on the Closing Date or, at
Purchaser's
option, such benefits that are the same as those benefits provided
to similarly
situated employees of Purchaser in Canada (but only to the extent
the provision
of such Purchaser employee benefits would not give rise to claims
of
constructive termination by any such employee), and (y) provide the
Canada
Salaried Transitioned Employees with base salaries and working
conditions (which
constitute principal places of employment, and hour requirements
(flex time,
etc.) as of the Closing Date) which are at least equivalent to the
base salaries
and working conditions of such Canada Salaried Business Employees
as of the
Closing Date.
(iii) Purchaser shall provide (x), taking into account and
not in limitation of the obligations of Purchaser under Sections
6.6(q)(v),
6.6(q)(vii) and 6.6(q)(viii), for the Canada Hourly Transitioned
Employees and
the Canada Hourly Former Business Employees, employee benefits
under plans,
programs and arrangements pursuant to the collective bargaining
agreement
identified on Schedule 4.15 ("Canada Bargaining Agreement")
43
and (y) provide the Canada Hourly Business Employees compensation
and working
conditions pursuant to the Canada Bargaining Agreement.
(iv)
Nothing in this Agreement shall require Purchaser to
retain any Canada Transitioned Employee for any period of time
after the
Effective Benefits Time and,
