<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 1-1175
----------------------------------------------------------
Cooper Industries, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-4156620
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 Travis, Suite 5800 Houston, Texas 77002
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(713) 209-8400
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since lastreport.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Number of shares outstanding of issuer's common stock as of November 6, 1998 was
103,456,225.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COOPER INDUSTRIES, INC.
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(in millions, except per share data)
<S> <C> <C> <C> <C>
REVENUES ................................... $ 924.0 $ 830.3 $ 2,769.3 $ 2,576.9
Cost of sales .............................. 621.8 554.4 1,863.5 1,733.7
Selling and administrative expenses ........ 151.0 138.0 462.5 442.9
Goodwill amortization ...................... 11.2 8.1 32.4 23.9
Nonrecurring gains ......................... -- (23.2) -- (93.0)
Nonrecurring charges ....................... -- 3.8 -- 40.5
Interest expense ........................... 34.8 19.4 87.5 70.3
--------- --------- --------- ---------
Income from continuing operations before
income taxes.......................... 105.2 129.8 323.4 358.6
Income taxes ............................... 37.9 48.2 116.4 133.2
--------- --------- --------- ---------
Income from continuing operations .......... 67.3 81.6 207.0 225.4
Income from discontinued operations,
net of income taxes .................... 25.9 20.9 84.2 60.3
--------- --------- --------- ---------
NET INCOME ............................. $ 93.2 $ 102.5 $ 291.2 $ 285.7
========= ========= ========= =========
INCOME PER COMMON SHARE:
Basic:
Income from continuing operations ...... $ 0.59 $ 0.68 $ 1.76 $ 1.93
Income from discontinued operations .... 0.23 0.17 .72 0.52
--------- --------- --------- ---------
Net Income ............................. $ 0.82 $ 0.85 $ 2.48 $ 2.45
========= ========= ========= =========
Diluted:
Income from continuing operations ...... $ 0.59 $ 0.67 $ 1.74 $ 1.87
Income from discontinued operations .... 0.22 0.17 0.71 0.49
--------- --------- --------- ---------
Net income ............................. $ 0.81 $ 0.84 $ 2.45 $ 2.36
========= ========= ========= =========
CASH DIVIDENDS PER COMMON SHARE ............ $ 0.33 $ 0.33 $ 0.99 $ 0.99
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 3
COOPER INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---------- ----------
ASSETS (in millions)
<S> <C> <C>
Cash and cash equivalents ....................................... $ 19.2 $ 30.3
Receivables ..................................................... 673.5 596.4
Inventories ..................................................... 522.0 484.8
Other ........................................................... 75.9 106.6
---------- ----------
Total current assets ................................... 1,290.6 1,218.1
---------- ----------
Net assets of discontinued operations ........................... 1,900.0 1,973.7
Property, plant and equipment, less accumulated depreciation .... 701.9 673.3
Intangibles, less accumulated amortization ...................... 1,454.9 1,279.0
Investments in marketable equity securities ..................... 243.6 274.8
Deferred income taxes and other assets .......................... 241.1 88.4
---------- ----------
Total assets ........................................... $ 5,832.1 $ 5,507.3
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt ................................................. $ 97.2 $ 139.0
Accounts payable ................................................ 358.8 397.3
Accrued liabilities ............................................. 487.9 426.8
Accrued income taxes ............................................ 12.8 5.5
Current maturities of long-term debt ............................ 247.1 58.3
---------- ----------
Total current liabilities .............................. 1,203.8 1,026.9
---------- ----------
Long-term debt .................................................. 2,025.7 1,272.2
Postretirement benefits other than pensions ..................... 236.3 241.9
Other long-term liabilities ..................................... 200.3 282.8
---------- ----------
Total liabilities ...................................... 3,666.1 2,823.8
---------- ----------
Common stock, $5.00 par value ................................... 615.0 615.0
Capital in excess of par value .................................. 675.2 679.8
Retained earnings ............................................... 1,691.0 1,514.5
Common stock held in treasury, at cost .......................... (832.6) (149.7)
Unearned employee stock ownership plan compensation ............. (46.9) (66.5)
Accumulated other non-owner changes in equity ................... 64.3 90.4
---------- ----------
Total shareholders' equity ............................. 2,166.0 2,683.5
---------- ----------
Total liabilities and shareholders' equity ............. $ 5,832.1 $ 5,507.3
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 4
COOPER INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------
1998 1997
-------- --------
(in millions)
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................ $ 291.2 $ 285.7
Less income from discontinued operations .............................. (84.2) (60.3)
-------- --------
Income from continuing operations ..................................... 207.0 225.4
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization ......................................... 101.1 92.0
Deferred income taxes ................................................. 3.0 (4.9)
Gain on the sale of Kirsch ............................................ -- (69.8)
Gain on exchange of DECS .............................................. -- (23.2)
Nonrecurring asset write-down ......................................... -- 24.2
Changes in assets and liabilities: (1)
Receivables ....................................................... (51.8) (63.6)
Inventories ....................................................... (21.0) 5.4
Accounts payable and accrued liabilities .......................... (48.6) (47.3)
Accrued income taxes .............................................. 7.6 29.4
Other assets and liabilities, net ................................. (7.0) 5.7
-------- --------
Net cash provided by operating activities ................... 190.3 173.3
Cash flows from investing activities:
Cash paid for acquired businesses ..................................... (269.3) (140.7)
Capital expenditures .................................................. (102.9) (83.1)
Cash paid for TLG, plc common stock ................................... (42.4) --
Proceeds from the disposition of business ............................. -- 216.0
Proceeds from sales of property, plant and equipment .................. 5.4 4.7
-------- --------
Net cash used in investing activities ....................... (409.2) (3.1)
Cash flows from financing activities:
Proceeds from issuances of debt ....................................... 1,216.5 287.2
Repayments of debt .................................................... (270.9) (263.6)
Dividends ............................................................. (115.8) (117.7)
Acquisition of treasury stock ......................................... (733.2) (141.4)
Activity under stock plans ............................................ 39.9 13.2
-------- --------
Net cash provided by (used in) financing activities ......... 136.5 (222.3)
Cash provided by discontinued operations .................................. 72.5 52.2
Effect of exchange rate changes on cash and cash equivalents .............. (1.2) (1.5)
-------- --------
Decrease in cash and cash equivalents ..................................... (11.1) (1.4)
Cash and cash equivalents, beginning of period ............................ 30.3 16.1
-------- --------
Cash and cash equivalents, end of period .................................. $ 19.2 $ 14.7
======== ========
</TABLE>
(1) Net of the effects of acquisitions, divestitures and translation.
The accompanying notes are an integral part of these statements.
-4-
<PAGE> 5
COOPER INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DISCONTINUED OPERATION - AUTOMOTIVE PRODUCTS SEGMENT
In April 1998, Cooper Industries, Inc. ("Cooper") announced that it
engaged an investment banking firm to assist in the evaluation of options for
exiting the automotive business. On October 9, 1998, the sale of the Automotive
Products segment to Federal-Mogul Corporation was consummated with Cooper
receiving $1.9 billion in proceeds. The book value of the Automotive Products
segment assets less the liabilities assumed by the buyer plus costs related to
the transaction resulted in a small loss before income taxes. The loss before
income taxes was offset by income tax benefits derived through the sale of the
common stock of the entity holding the Automotive Products segment.
As a consequence of treating this segment as a discontinued operation,
Cooper's results of operations and the related footnote information for all
periods presented herein and when presented elsewhere in the future will exclude
the results of the Automotive Products segment from continuing operations'
revenues and other components of income and expense. The discontinued segment
results prior to the measurement date are presented separately in a single
caption, "Income from discontinued operations, net of income taxes". Net income
remains unchanged.
In order to facilitate an understanding of Cooper's continuing
operations, Cooper has elected to restate the Consolidated Balance Sheet as of
December 31, 1997, the Consolidated Statement of Cash Flows for the nine months
ended September 30, 1997 and all related footnote disclosures. The net assets of
discontinued operations have been segregated into a single line, "Net assets of
discontinued operations", in the Consolidated Balance Sheets. The cash flow from
the discontinued operations is summarized into a single line "Cash provided by
discontinued operations" in the Consolidated Statements of Cash Flows. No cash
or debt has been allocated to the discontinued operations.
Operating results from discontinued operations were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- -------------------------
1998 1997(1) 1998 1997(1)
--------- --------- ----------- -----------
(in millions, except per share data)
<S> <C> <C> <C> <C>
Revenues ............................... $ 473.7 $ 466.6 $ 1,400.8 $ 1,423.8
========= ========= =========== ===========
Income before income taxes ............. $ 43.0 $ 35.6 $ 139.1 $ 102.3
Income taxes ........................... 17.1 14.7 54.9 42.0
--------- --------- ----------- -----------
Income from discontinued operations .... $ 25.9 $ 20.9 $ 84.2 $ 60.3
========= ========= =========== ===========
Diluted income per common share
from discontinued operations ....... $ 0.22 $ 0.17 $ 0.71 $ 0.49
========= ========= =========== ===========
</TABLE>
(1) The three months and nine months income from discontinued operations in
1997 include $6 million after income taxes ($.05 per diluted share) and
$26.9 million after income taxes ($.22 per diluted share) of nonrecurring
charges, respectively. Income from discontinued operations does not include
an allocation of interest expense or corporate overhead expenses.
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<PAGE> 6
NOTE 2. ACCOUNTING POLICIES
Basis of Presentation - The financial information presented as of any
date other than December 31 has been prepared from the books and records without
audit. Financial information as of December 31 has been derived from the audited
financial statements of the Company, but does not include all disclosures
required by generally accepted accounting principles. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial information for the periods
indicated, have been included. For further information regarding the Company's
accounting policies, refer to the Consolidated Financial Statements and related
notes for the year ended December 31, 1997 filed in a Form 8-K with the
Securities and Exchange Commission concurrent with this filing.
Income per Common Share - In the fourth quarter of 1997, the Company
adopted Statement of Financial Accounting Standards No. 128, Earnings Per Share.
The new accounting standard required all prior periods' income per Common share
to be restated based on a new computational method for average shares
outstanding. Adopting the new standard had no impact on previously reported
fully diluted, currently referred to as diluted, income per Common share for the
quarter and nine months ended September 30, 1997. Adopting the new standard
increased previously reported primary, currently referred to as basic, income
per common share $.01 for the quarter and $.02 for the nine months ended
September 30, 1997. Unlike primary earnings per share, basic earnings per share
excludes the dilutive effects of common stock equivalents.
Net Income and Other Non-Owner Changes in Equity - Effective January 1,
1998, Cooper adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("SFAS No. 130"). The adoption of this statement
had no impact on net income or shareholders' equity. SFAS No. 130 requires the
reporting of comprehensive income, which includes net income plus non-owner
changes in equity, including unrealized gains or losses on investments, the
minimum pension liability adjustment and foreign currency translation. The
components of net income and other non-owner changes in equity, net of related
taxes, were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- --------------------
1998 1997 1998 1997
------- -------- -------- --------
(in millions)
<S> <C> <C> <C> <C>
Net income .......................... $ 93.2 $ 102.5 $ 291.2 $ 285.7
Foreign currency translation
gains (losses).................... -- (3.1) (9.4) (5.3)
Unrealized losses on investments .... (17.0) (8.0) (16.7) (1.0)
Reclassification adjustment for
investment gains realized
in net income..................... -- (14.4) -- (14.4)
------- -------- -------- --------
Net income and other non-owner
changes in equity................... $ 76.2 $ 77.0 $ 265.1 $ 265.0
======= ======== ======== ========
</TABLE>
Recently Issued Accounting Standards - In March 1998, the AICPA issued
SOP 98-1, Accounting for the Costs of Computer Software Developed for or
Obtained For Internal Use. The SOP requires companies to capitalize qualifying
computer software costs incurred during the application development stage. The
SOP is effective for fiscal years beginning after December 15, 1998 and permits
early adoption. The Company adopted the SOP in the first quarter of 1998. The
adoption had no impact on net income as the Company's policy was materially
consistent with the requirements of the SOP.
-6-
<PAGE> 7
In April 1998, the AICPA issued SOP 98-5, Accounting for the Costs of
Start-up Activities. The SOP requires that all costs of start-up activities be
expensed as incurred. The SOP is effective for fiscal years beginning after
December 15,1998 and permits early adoption. The Company adopted this standard
in the second quarter of 1998. The adoption had no impact on net income as the
Company's policies are consistent with this standard.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Financial
Instruments and Hedging Activities ("SFAS No. 133"). SFAS No. 133 requires that
all derivatives be recognized as assets and liabilities and measured at fair
value. The accounting for changes in the fair value of a derivative depends on
the intended use of the derivative and the resulting designation. The SFAS is
effective for fiscal years beginning after June 15, 1999 and early adoption is
permitted. The Company is currently evaluating the effects of the new standard.
The Company does not anticipate that the new standard will have an impact on net
income. However, the new standard requirement to mark to market certain of the
Company's financial instruments utilized to hedge currency and commodity price
risks will result in fluctuations in the fair value being included in
shareholders' equity, net of tax. Due to the Company's policies regarding
financial instruments, it is not likely that the adoption of the new standard
will have a material effect on the Company's Consolidated Balance Sheets.
NOTE 3. ACQUISITIONS AND DIVESTITURES
During the first nine months of 1998, the Company completed three
acquisitions in its Tools & Hardware segment and two small acquisitions in its
Electrical Products segment. In March 1998, the Company acquired INTOOL for a
total cost of $217.5 million. INTOOL manufactures and sells pneumatic and
electric assembly tools, precision-drilling equipment, fastening systems and
portable and fixed mounted tools used in industrial, automotive, aerospace and
energy markets and had annual revenues of approximately $117 million. The other
acquisitions included two small businesses in France and Germany that extend the
global product lines of the Company's Power Tools division and two small
Electrical Products businesses in Mexico. The acquisitions have been accounted
for as purchase transactions and the results of the acquisitions are included in
the Company's consolidated income statements from the date of acquisition.
On September 4, 1998, the Company announced an offer by the Company to
acquire TLG, plc (Thorn Lighting Group) in a transaction valued at approximately
$535 million. On September 28, 1998, the Company announced that its offer to
acquire TLG, plc had expired and would not be extended due to a rival bid made
to acquire TLG, plc for approximately $585 million. During the third quarter of
1998, the Company acquired common stock of TLG, plc for $42.4 million. The
common stock was tendered to the rival bidder in October 1998. The Company will
realize a gain of approximately $2 million after income taxes in the fourth
quarter of 1998 from the sale of the common stock.
NOTE 4. NONRECURRING INCOME AND EXPENSES
On May 30, 1997, the Company completed the sale of the Kirsch window
treatment division. The sale resulted in a gain before income taxes of $69.8
million. During the third quarter of 1997, the Company exchanged a portion of
its DECS(sm)(Debt Exchangeable for Common Stock) for Wyman-Gordon Company
("Wyman-Gordon") common stock and realized a gain before income taxes of $23.2
million. During the second quarter of 1997, the Company incurred a charge of
$36.7 million for actions management committed to during the quarter after
concluding an evaluation of geographic manufacturing and distribution facilities
within the Tools & Hardware segment and information systems relating to year
2000 compliance efforts. The charge included adjustments to the carrying value
of assets of $24.2 million and accruals for continuing obligations for replaced
systems and facility consolidations of $12.5 million. The charge, discussed in
further detail below, decreased operating earnings of the Electrical Products
segment by $15.9 million, the Tools & Hardware segment by $18.7 million and
increased general corporate expenses by $2.1 million. In
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<PAGE> 8
the third quarter of 1997, the Company recorded a charge of $3.8 million in the
Tools & Hardware segment primarily related to severance obligations for facility
consolidations committed to in the second quarter of 1997 and announced in the
third quarter of 1997.
The nonrecurring items resulted in a net gain of $21.0 million after
income taxes in the second quarter of 1997 ($.17 per diluted share), a net gain
of $12.0 million after income taxes in the third quarter of 1997 ($.10 per
diluted share) and a net gain after income taxes for the nine months ended
September 30, 1997 of $33.0 million ($.27 per diluted share).
The Company began a consolidation of international manufacturing and
distribution in the Tools & Hardware segment in the second quarter of 1997.
Adjustments to the carrying value of assets and accruals, detailed above, were
recorded for projects committed to by management. Severance and certain other
costs are not expensed until the affected employees are notified even though
management has committed to the projects. At September 30, 1998, remaining cash
expenditures and anticipated additional charges related to these projects are
insignificant.
The Company also completed, during the second quarter of 1997, its
initial analysis of the impact of existing system capabilities to function at
the turn of the century. Three of the Company's seven divisions are implementing
new enterprise systems with the remaining four divisions modifying or replacing
existing software. Where possible, businesses have abandoned home-grown or
highly customized applications with purchased, year 2000 compliant replacements
or upgrades. In some situations, operations abandoned existing software and
migrated to consolidated hardware and software that is year 2000 compliant. The
Company recorded a $27.2 million charge in the second quarter of 1997 related to
the adjustment in the carrying value of abandoned hardware and software. While
depreciation is reduced by the effect of the write-down, depreciation of new
systems, as well as expenses related to revising current software to be year
2000 compliant and implementation of new systems, are likely to exceed the
reduction in depreciation in most future periods.
NOTE 5. INVENTORIES
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(in millions)
<S> <C> <C>
Raw materials ...................................... $ 196.3 $ 192.5
Work-in-process .................................... 128.6 119.2
Finished goods ..................................... 269.1 246.8
Perishable tooling and supplies .................... 18.1 18.6
-------- --------
612.1 577.1
Excess of current standard cost over LIFO costs .... (90.1) (92.3)
-------- --------
Net inventories ......................... $ 522.0 $ 484.8
======== ========
</TABLE>
NOTE 6. LONG-TERM DEBT
On October 9, 1998, the Company completed the sale of its automotive
business to Federal-Mogul Corporation and received $1.9 billion in proceeds. The
Company used approximately $1.4 billion of the proceeds to reduce debt and
invested approximately $.5 billion in short-term investments.
-8-
<PAGE> 9
During the nine months ended September 30, 1998, the Company issued
$250 million of five-year medium term notes at an average interest rate of 6.1%
under an existing shelf registration statement. At September 30, 1998, all notes
registered under the shelf registration statement had been issued. The issuance
of additional notes will require the filing of a new registration statement.
In December 1995, the Company issued DECS(sm) (Debt Exchangeable for
Common Stock). At maturity, the DECS are mandatorily exchangeable into shares of
Wyman-Gordon common stock or, at the Company's option, into cash in lieu of
shares. The DECS are a hedge of the Company's investment in Wyman-Gordon common
stock and will result in the Company realizing a minimum after-tax gain of $85
million upon redemption of the remaining DECS. This unrealized gain, plus any
net appreciation of the investment in Wyman-Gordon common stock offset by the
appreciation attributable to the DECS, is included in shareholders' equity as an
unrealized gain on investments in marketable equity securities, net of tax.
During the first nine months of 1998, the market value of the Wyman-Gordon
common stock exchangeable into the DECS declined. Accordingly, at September 30,
1998, the carrying value of the DECS equals the original issuance value of $189
million. The Company intends to transfer the Wyman-Gordon common stock late in
the fourth quarter of 1998 to redeem the remaining outstanding DECS.
NOTE 7. COMMON AND PREFERRED STOCK
During the first nine months of 1998, the Company repurchased
14,131,100 shares of its Common stock at a cost of $733.2 million. The Company
reissued 1,038,392 treasury shares during 1998 primarily in connection with the
exercise of employee stock options and the Company's dividend reinvestment
program. On November 3, 1998, the Company's Board of Directors authorized the
purchase of up to $500 million in Common stock.
-9-
<PAGE> 10
NOTE 8. NET INCOME PER COMMON SHARE
Basic and diluted net income per Common share are computed based on the
following information:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
(in millions)
<S> <C> <C> <C> <C>
BASIC:
Net income ...................................... $ 93.2 $ 102.5 $ 291.2 $ 285.7
======== ======== ======== ========
Weighted average Common shares
Outstanding ................................. 113.5 121.0 117.2 116.6
======== ======== ======== ========
DILUTED:
Net income ...................................... $ 93.2 $ 102.5 $ 291.2 $ 285.7
Interest expense related to the
7.05% Convertible Subordinated
Debentures, net of tax ...................... -- -- -- 5.8
-------- -------- -------- --------
Net income and effect of assumed
Conversions.................................. $ 93.2 $ 102.5 $ 291.2 $ 291.5
======== ======== ======== ========
Weighted average Common shares
Outstanding ................................. 113.5 121.0 117.2 116.6
Incremental shares from assumed conversions:
Options, performance-based stock
awards and other employee awards ........ 1.2 1.5 1.6 1.4
Additional shares assuming
conversion of the 7.05% Convertible
Subordinated Debentures ................. -- -- -- 5.7
-------- -------- -------- --------
Weighted average Common shares and
Common share equivalents .................... 114.7 122.5 118.8 123.7
======== ======== ======== ========
</TABLE>
-10-
<PAGE> 11
NOTE 9. INDUSTRY SEGMENT REVENUES
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -----------------------
1998 1997 1998 1997
-------- -------- ---------- ----------
(in millions)
<S> <C> <C> <C> <C>
Electrical Products .... $ 724.0 $ 646.4 $ 2,153.9 $ 1,919.8
Tools & Hardware ....... 200.0 183.9 615.4 559.7
-------- -------- ---------- ----------
Subtotal ......... 924.0 830.3 2,769.3 2,479.5
Kirsch ................. -- -- -- 97.4
-------- -------- ---------- ----------
Total ............ $ 924.0 $ 830.3 $ 2,769.3 $ 2,576.9
======== ======== ========== ==========
</TABLE>
NOTE 10. SUMMARY OF NONCASH INVESTING AND FINANCING ACTIVITIES
The following noncash transactions have been excluded from the Consolidated
Statements of Cash Flows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1998 1997
-------- --------
(in millions)
<S> <C> <C>
Assets acquired and liabilities assumed or incurred from
the acquisition of businesses:
Fair value of assets acquired ................................ $ 302.2 $ 152.4
Cash used to acquire businesses .............................. (269.3) (140.7)
-------- --------
Liabilities assumed or incurred ........................ $ 32.9 $ 11.7
======== ========
Conversion of 7.05% Convertible Subordinated Debentures
for Cooper Common stock .......................................... $ -- $ 610.0
Exchange of DECS for Wyman-Gordon common stock ....................... $ -- $ 33.8
</TABLE>
-11-
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
DISCONTINUED OPERATIONS:
In April 1998, Cooper Industries, Inc. ("Cooper") announced that it
engaged an investment banking firm to assist in the evaluation of options for
exiting the automotive business. On October 9, 1998, the sale of the Automotive
Products segment to Federal-Mogul Corporation was consummated with Cooper
receiving $1.9 billion in proceeds. The book value of the Automotive Products
segment assets less the liabilities assumed by the buyer plus costs related to
the transaction resulted in a small loss before income taxes. The loss before
income taxes was offset by income tax benefits derived through the sale of the
common stock of the entity holding the Automotive Products segment.
Operating results from discontinued operations were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ---------------------
1998 1997(1) 1998 1997(1)
-------- --------- --------- ---------
(in millions, except per share data)
<S> <C> <C> <C> <C>
Revenues................................ $ 473.7 $ 466.6 $ 1,400.8 $ 1,423.8
======== ========= ========= =========
Income before income taxes.............. $ 43.0 $ 35.6 $ 139.1 $ 102.3
Income taxes ........................... 17.1 14.7 54.9 42.0
-------- --------- --------- ---------
Income from discontinued operations .... $ 25.9 $ 20.9 $ 84.2 $ 60.3
======== ========= ========= =========
Diluted income per common share
from discontinued operations........ $ 0.22 $ 0.17 $ 0.71 $ 0.49
======== ========= ========= =========
</TABLE>
(1) The three months and nine months income from discontinued operations in
1997 include $6 million after income taxes ($.05 per diluted share) and
$26.9 million after income taxes ($.22 per diluted share) of nonrecurring
charges, respectively. Income from discontinued operations does not include
an allocation of interest expense or corporate overhead expenses.
The discontinued Automotive Products segment revenues for the third
quarter of 1998 increased 2% from the prior year period. Higher steering and
suspension and worldwide original equipment sales were offset by weak domestic
aftermarket demand for ignition, brake and wiper products and European
aftermarket ignition products. Also, revenues were affected by the bankruptcy of
a large customer in the first quarter of 1998. The customer was converted to a
cash basis beginning in the first quarter of 1998, significantly reducing sales
volume to this customer compared to the third quarter of 1997.
For the first nine months of 1998, the discontinued Automotive Products
segment revenues decreased 2% from the prior year period. Increased sales to
worldwide original equipment manufacturers and improved steering and suspension
sales were more than offset by weak domestic aftermarket demand in most product
lines. The net impact of the exchange of Auto's temperature control business for
the brake business of Standard Motor Products resulted in lower revenues during
the period as a result of disruption in the marketplace during the transition.
Also, revenues were affected by the bankruptcy of a large customer significantly
reducing sales volume to this customer compared to 1997.
Excluding 1997 nonrecurring charges, income before income taxes for the
three months and nine months ended September 30, 1998 decreased approximately 5%
compared to the same periods last year. The impact of an unfavorable mix of
relatively less sales to the higher-margin aftermarket contributed to the
-12-
<PAGE> 13
decrease in earnings. Also earnings were unfavorably affected by the bankruptcy
of a large customer in the first quarter and an increase in the allowance for
doubtful accounts related to the customer.
Excluding $6.0 million of nonrecurring charges in 1997, income from
discontinued operations, net of tax, for the third quarter of $25.9 million was
4% below the prior year. Diluted share earnings for discontinued operations for
the third quarter of $.22 was equal to the prior year, excluding $.05 per share
of nonrecurring charges in 1997.
Excluding nonrecurring charges of $26.9 million in 1997 for the first
nine months, income from discontinued operations, net of tax, decreased 3%
compared to the prior year period. Diluted share earnings from discontinued
operations for the first nine months of 1998 of $.71 equaled the prior year
share earnings, excluding $.22 per share of nonrecurring charges in the first
nine months of 1997.
The discussion that follows has been written to place primary emphasis
on the results of Cooper's continuing operations.
RESULTS OF CONTINUING OPERATIONS:
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1997
Comparison of the results of continuing operations for the three months
ended September 30, 1998 with the three months ended September 30, 1997 requires
the consideration of the following items:
o During the third quarter of 1998, the Company substantially completed
a $500 million stock repurchase program that had been authorized in
August 1998. The purchases of Company Common stock under this
authorization were in anticipation of receiving the proceeds from the
disposition of the Automotive Products segment. The Company has
purchased $733.2 million of its Common stock during 1998. The Common
stock repurchases significantly increased the Company's debt level
and related interest expense during the quarter. While net income is
impacted by the increased interest expense, average shares were also
reduced, which negated the impact on earnings per share.
o The third quarter 1997 results from continuing operations include a
gain on the exchange of a portion of the Company's DECS of $23.2
million before income taxes. The 1997 third quarter results from
continuing operations also include a charge of $3.8 million before
income taxes primarily related to actions management committed to in
the second quarter of 1997 that could not be accrued until a later
date. The aggregate of these two items increased continuing income
before income taxes by $19.4 million, continuing income by $12.0
million and diluted earnings per share by $.10 for the three months
ended September 30, 1997.
o In addition to the gain and charge discussed above, the 1997 results
of discontinued operations include nonrecurring charges totaling $6.0
million after income taxes or $.05 per diluted share. As a result,
the 1997 net income includes $6.0 million related to nonrecurring
items and diluted earnings per share includes $.05 related to
nonrecurring items.
Net income for the third quarter of 1998 was $93.2 million compared
with net income of $102.5 million in 1997 (which included net nonrecurring gains
of $6.0 million as discussed above). Third quarter diluted share earnings
decreased 4% to $.81 from $.84 in 1997 (which included net nonrecurring gains of
$.05 per share as discussed above).
Continuing income decreased 18% to $67.3 million on revenues of $924
million compared to 1997 continuing income of $81.6 million, including $12.0 of
net nonrecurring gains, on revenues of $830 million. Diluted share earnings from
continuing operations decreased 12% to $.59 from $.67 in 1997. Excluding net
nonrecurring gains of $.10 per share from the 1997 third quarter, continuing
diluted share earnings increased 4% to $.59 from $.57.
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<PAGE> 14
REVENUES:
Revenues for the third quarter of 1998 increased 11% compared to the
third quarter of 1997. After excluding the effects of acquisitions, revenues
were 1% above the third quarter of last year. During the third quarter of 1998,
the strengthening of the U.S. dollar against most foreign currencies decreased
reported revenues less than the Company has experienced in several previous
quarters. The Company estimates that the impact was less than 1/2%.
Revenues in the Electrical Products segment increased 12% from the
third quarter of 1997. Excluding acquisitions, revenues were 3% ahead of 1997.
Revenue growth from circuit protection and lighting products and new product
introductions was offset by soft demand for hazardous duty electrical
construction materials and power equipment products other than transformers.
These businesses were adversely affected by the absence of large project orders,
weak demand from utilities for products other than transformers, the economic
conditions in Asia and increased competitive pressure in certain domestic
product lines.
Tools & Hardware segment revenues increased 9% compared to the third
quarter of 1997. Adjusted for recent acquisitions, revenues were 9% below last
year. Strong shipments of assembly equipment in international markets and sales
of new products were offset by weakness in demand from the aerospace, industrial
and electronics markets. In addition, revenues were impacted by lower exports
due to the strong U.S. dollar (which reduced reported revenues for the segment
by an estimated 1%) and weak economic conditions in Brazil. The implementation
of new integrated business systems also negatively impacted shipments during the
quarter.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES:
Income from continuing operations before income taxes decreased 19% to
$105.2 million for the third quarter of 1998 compared to $129.8 million for the
same period of 1997. Excluding net nonrecurring gains of $19.4 million in the
third quarter of last year, 1998 income from continuing operations before income
taxes decreased 5%. Increases in segment operating earnings were more than
offset by the increase in interest expense. Cost of sales, as a percentage of
revenues, increased five tenths of a point from the comparable 1997 quarter. An
unfavorable mix of power equipment products and competitive conditions for
certain electrical product lines accounted for the increase. Selling and
administrative expenses, as a percentage of sales, were lower than the prior
year period by three tenths of a point. This decrease in selling and
administrative expenses as a percentage of revenues for 1998 was due primarily
to the benefit of company-wide cost improvement actions. Interest expense
increased $15.4 million over the same period of last year due to additional debt
incurred to fund Common stock repurchases and acquisitions, including the
expenditure of a majority of a $500 million authorized Common stock repurchase
in anticipation of receiving the proceeds from the divestiture of the Automotive
businesses.
Operating earnings of the Electrical Products segment increased over
the third quarter of 1997. Excluding acquisitions, operating earnings were flat
compared to last year. Increased sales of circuit protection and lighting
products were offset by lower sales and margins of power equipment and hazardous
duty electrical construction materials due to unfavorable product mix and
competitive pricing pressures.
Excluding 1997 nonrecurring charges, the Tools & Hardware segment's
third quarter operating earnings increased over the prior year. Without the
impact of acquisitions, earnings declined year-to-year primarily the result of
reduced sales to domestic industrial markets, unfavorable product line mix and
higher manufacturing costs related to disruptions from implementing new business
systems.
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<PAGE> 15
INCOME TAXES:
The continuing effective tax rate for the third quarter was 36.0%
compared to 37.1% for the same period of 1997. The rate reduction from 37.1% to
36.0% resulted from the Company's continuing tax planning efforts.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1997
Comparison of the results of continuing operations for the nine months
ended September 30, 1998 with the nine months ended September 30, 1997 requires
the consideration of the following items:
o During the third quarter of 1998, the Company substantially completed
a $500 million stock repurchase program that had been authorized in
August 1998. The purchases of Company Common stock under this
authorization were in anticipation of receiving the proceeds from the
disposition of the Automotive Products segment. The Company has
purchased $733.2 million of its Common stock during 1998. The common
stock repurchases significantly increased the Company's debt level
and related interest expense during the quarter. While net income is
impacted by the increased interest expense, average shares were also
reduced, which negated the impact on earnings per share.
o The results from continuing operations for the nine months ended
September 30, 1997 include a gain on the exchange of a portion of the
Company's DECS of $23.2 million before income taxes and a gain of
$69.8 million before income taxes from the disposition of the
Company's Kirsch window treatment business. The 1997 nine month
results from continuing operations also include charges of $40.5
million before income taxes primarily related to actions management
committed to during the second and third quarters of 1997 (See Note 4
of Notes to Consolidated Financial Statements). The aggregate of
these items increased continuing income before income taxes by $52.5
million, continuing income by $33.0 million and diluted earnings per
share by $.27 for the nine months ended September 30, 1997.
o In addition to the gain and charges discussed above, the results of
discontinued operations included nonrecurring charges of $26.9
million after income taxes or $.22 per diluted share. As a result,
the 1997 net income includes a total of $6.1 million related to
nonrecurring items and diluted earnings per share includes $.05
related to nonrecurring items.
Net income for the first nine months of 1998 increased 2% to $291.2
million compared with net income of $285.7 million in 1997 (which included net
nonrecurring gains of $6.1 million as discussed above). Diluted share earnings
increased 4% to $2.45 from $2.36 in 1997 (which included net nonrecurring gains
of $.05 as discussed above).
Continuing income decreased 8% to $207.0 million on revenues of $2.77
billion compared with 1997 continuing net income of $225.4 million, including
net nonrecurring gains of $33.0 million, on revenues of $2.58 billion. Diluted
share earnings from continuing operations decreased 7% to $1.74 from $1.87 for
the first nine months of 1997. Excluding net nonrecurring gains of $.27 per
share recorded during the first nine months of 1997, continuing diluted share
earnings increased 9% to $1.74 from $1.60 for the same period of last year.
REVENUES:
Revenues for the first nine months of 1998 increased 8% (increased 12%
excluding Kirsch revenues in 1997) compared to the first nine months of 1997.
After excluding the effects of acquisitions and divestitures, revenues increased
1% from the same period of last year. Overall, the Company estimates that the
strengthening of the U.S. dollar against most foreign currencies decreased
reported revenues by approximately 1% from the first nine months of 1997.
-15-
<PAGE> 16
Revenues in the Electrical Products segment increased 12% from the
first nine months of 1997. Excluding the impact of acquisitions, revenues
increased 3% over the same period of last year. The increase was driven by
strong sales of circuit protection and lighting products. Sales of newly
introduced products across all of the businesses contributed to the growth in
revenues. Partially offsetting this impact were shortfalls in hazardous duty
construction materials and power equipment other than transformers due to the
absence of large project orders, weak demand from utilities for products other
than transformers and the continuing economic crisis in Asia.
Tools & Hardware segment revenues increased 10% compared to the same
period of 1997. Adjusted for recent acquisitions, revenues decreased 4% from
last year. Softening demand in industrial, electronics and aerospace markets,
lower exports due to the strong U.S. dollar and weak economic conditions in
Brazil resulted in the decline. Absent the impact of acquisitions and
unfavorable currency effects, Tools & Hardware revenues declined less than 2%
when compared to the prior year.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES:
Income from continuing operations before income taxes for the first
nine months of 1998 decreased 10% to $323.4 million compared to $358.6 million
for the same period of 1997. Excluding net nonrecurring gains of $52.5 million
recorded in the first nine months of 1997, continuing income before income taxes
increased 6% over the prior year. Increases in segment operating earnings were
partially offset by an increase in interest expense. Cost of sales, as a
percentage of revenues, was unchanged from the prior year. Selling and
administrative expenses, as a percentage of revenues, declined five tenths of a
point from the 1997 level. Excluding Kirsch in 1997, which had relatively higher
selling and administrative expenses, selling and administrative expenses
declined one tenth of a point. The decrease in selling and administrative
expenses as a percentage of sales was due to ongoing efforts to control costs
across the businesses. Interest expense increased $17.2 million from the same
period of last year as additional debt incurred to fund acquisitions and stock
repurchases more than offset the impact of the conversion during 1997 of $610
million of the Company's 7.05% Convertible Subordinated Debentures to Cooper
Common stock.
Excluding 1997 nonrecurring charges, operating earnings of the
Electrical Products segment reflected an increase compared to the first nine
months of 1997 both before and after the impact of acquisitions. Excluding
acquisitions and 1997 nonrecurring charges, the improvement in earnings was
driven by increased shipments of circuit protection and lighting products,
partially offset by slightly lower sales of hazardous duty electrical
construction materials and power equipment other than transformers and
unfavorable product mix.
Excluding Kirsch and 1997 nonrecurring gains and charges, the Tools &
Hardware segment's operating earnings for the first nine months of 1998
reflected a significant increase over the same prior year period. Without the
impact of acquisitions, earnings were slightly above last year driven by
improved operating efficiencies.
INCOME TAXES:
The continuing effective tax rate for the first nine months was 36.0%
compared to 37.1% for the same period of 1997. The rate reduction from 37.1% to
36.0% resulted from the Company's continuing tax planning efforts.
EARNINGS OUTLOOK:
The following sets forth Cooper's general business outlook for 1998,
based on current expectations, and updates the Company's earnings outlook set
forth in the Company's Form 10-Q for the quarter ended June 30, 1998 to reflect
the softening demand in certain industrial markets and the divestiture of the
Automotive Products segment on October 9, 1998. The statements are forward
looking and actual results may differ materially. The following comparative
figures for 1998 include the effects of acquisitions made
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<PAGE> 17
during 1997 and 1998, exclude 1997 nonrecurring items and reflect the Automotive
Products segment, which was sold October 9, 1998, as a discontinued operation.
Also, the Kirsch division is excluded from the Tools & Hardware segment.
Both the Electrical Products and Tools & Hardware segment revenues are
each expected to increase by approximately ten to fifteen percent with
Electrical Products at the lower end of the range. The Company expects operating
earnings for the Electrical Products segment to increase approximately five
percent. Operating earnings for the Tools & Hardware segment are expected to
increase approximately fifteen percent.
The Company does not anticipate that the lower interest expense and
lower average shares in the fourth quarter of 1998, resulting from the repayment
of debt and the purchase of the Company's Common stock with the proceeds from
the divestiture, will replace the earnings of the discontinued Automotive
Products segment in the fourth quarter of 1998. In the fourth quarter of 1997,
the discontinued operations earned $.20 per diluted common share.
The above statements are forward looking, and actual results may differ
materially. The above statements are based on a number of assumptions, risks and
uncertainties. The primary economic assumptions include, without limitation, (1)
modest growth in the domestic economy; (2) a modest improvement in European
markets; (3) no further deterioration in the Far East markets or U.S. industrial
markets; (4) a modest increase in construction spending worldwide; (5) no
significant change in raw material costs; and (6) no significant adverse changes
in the relationship of the currencies of Western European countries to the U.S.
dollar. The estimates also assume, without limitation, no significant change in
competitive conditions and such other risk factors as are discussed from time to
time in the Company's periodic filings with the Securities and Exchange
Commission.
LIQUIDITY AND CAPITAL RESOURCES:
On October 9, 1998, the Company completed the sale of its automotive
business to Federal-Mogul Corporation and received $1.9 billion in proceeds. The
Company used approximately $1.4 billion of the proceeds to reduce debt and
approximately $.5 billion was invested in short-term investments.
The Company's operating working capital (defined as receivables and
inventories less accounts payable) increased $153 million during the first nine
months of 1998 compared to an increase of $85 million in the first nine months
of 1997. Operating working capital turnover for the year-to-date of 4.9 turns
equaled the turnover in 1997 for the same period. Operating working capital,
excluding acquisitions, increased primarily due to an increase in accounts
receivable driven by a slowdown in domestic customer payouts and the timing of
accounts payable disbursements.
Cash flows from operating activities in the first nine months of 1998
totaled $190 million as cash generated from earnings was sufficient to offset
increases in operating working capital. These funds, along with a net increase
in debt of $946 million, cash received from the exercise of stock options of $40
million, and cash provided by discontinued operations of $73 million, were used
to fund acquisitions of $269 million, an investment in Thorn, plc (Thorn
Lighting Group) common stock of $42 million, capital expenditures of $103
million, dividends of $116 million and purchases of the Company's Common stock
of $733 million. During the first nine months of 1997, cash flows from operating
activities totaled $173 million. The cash flows from operating activities,
proceeds from the sale of Kirsch of $216 million, $24 million of additional
debt, cash received from the exercise of stock options of $13 million, and $52
million of cash provided by discontinued operations, provided funding for
acquisitions of $141 million, capital expenditures of $83 million, dividends of
$118 million and stock repurchases of $141 million during the first nine months
of 1997.
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<PAGE> 18
In connection with acquisitions accounted for as purchases, the Company
records, to the extent appropriate, accruals for the costs of closing duplicate
facilities, severing redundant personnel and integrating the acquired businesses
into existing Company operations. Cash flows from operating activities are
reduced by the amounts expended against the various accruals established in
connection with each acquisition. Spending against these accruals for the nine
months ended September 30, 1998 and September 30, 1997 was $10.4 million and
$5.9 million, respectively. There were no significant additions to these
accruals during the first nine months of 1998.
During the nine months ended September 30, 1998, the Company issued
$250 million of five-year medium-term notes at an average interest rate of 6.1%
under an existing shelf registration statement. At September 30, 1998, all notes
registered under the shelf registration statement had been issued. The issuance
of additional notes will require the filing of a new registration statement.
The Company is reshaping its capital structure to offset the
discontinued Automotive Products segment's contribution to earnings per share
and to maintain a strong balance sheet that provides capacity for future growth.
The Company has targeted a 35% to 45% debt-to-capitalization ratio, with excess
cash being utilized to fund acquisitions or to purchase shares of the Company's
Common stock. At September 30, 1998, the Company's debt-to-total capitalization
ratio was 52.2% compared to 32.9% at September 30, 1997. Excluding the DECS,
which are mandatorily exchangeable into shares of Wyman-Gordon common stock or,
at the Company's option, into cash in lieu of shares, the Company's
debt-to-total capitalization ratio was 50.2% at September 30, 1998 compared to
27.1% at September 30, 1997. On October 9, 1998, the Company received $1.9
billion in proceeds from the disposition of the Automotive Products segment and
repaid approximately $1.4 billion of debt reducing the debt-to-capitalization to
the lower end of the targeted range. On November 3, 1998, the Company's Board of
Directors authorized the purchase of up to $500 million in Common stock. The
Company anticipates, through Common stock repurchases and acquisitions, to be
within the targeted range by December 31, 1998.
BACKLOG:
Sales backlog represents the dollar amount of all firm open orders for
which all terms and conditions pertaining to the sale have been approved such
that a future sale is reasonably expected. Sales backlog by segment was as
follows:
<TABLE>
<CAPTION>
September 30,
-------------------
1998 1997
-------- --------
(in millions)
<S> <C> <C>
Electrical Products .... $ 287.0 $ 273.7
Tools & Hardware ....... 83.9 71.0
-------- --------
$ 370.9 $ 344.7
======== ========
</TABLE>
YEAR 2000:
The Year 2000 problem arises because many information systems and
devices containing embedded technology use two digits rather than four digits to
identify a year. Calculations in date-sensitive systems using two digits could
result in system failures and errors that disrupt normal business operations as
the year 2000 approaches.
Early in 1997, the Company conducted an assessment of year 2000
compliance of all of its major information technology systems, non-information
technology systems with date-sensitive software and embedded microprocessors and
products the Company manufactured or sold to customers. The Company developed
detailed plans to resolve all major issues by the end of 1998. As of September
30, 1998, the
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<PAGE> 19
Company estimates that it is over 75% complete with its efforts to remediate
current systems or implement new systems that are year 2000 compliant. By
December 31, 1998, the Company estimates that it will be 90% to 95% complete in
this effort with the majority of the remaining effort related to migrating
recently acquired businesses onto year 2000 compliant systems.
The Company expects that only three of its seven divisions will be
involved in any significant compliance efforts in 1999. The projects that will
continue into 1999 include completing lower priority information technology
systems projects and replacing systems in recently acquired business units.
Efforts in 1999 will become less focused on systems projects and more focused on
identifying areas of additional business risk and developing contingency plans
where appropriate.
The Company has substantially completed its efforts to detect and
correct noncompliant embedded technology. The Company's assessment of the
products it has delivered to customers is substantially complete.
The Company has initiated formal communications with its key suppliers
and service providers to determine the potential risk to the Company's
operations if these third parties fail to solve year 2000 issues. Four of the
Company's divisions have completed their assessment of suppliers and service
providers. Three divisions have not yet completed their assessment of suppliers
and service providers, but expect to do so by the end of 1998. If the Company
determines that there is a risk to its operations because a key third party may
not be year 2000 compliant, it expects to develop contingency plans to address
this risk by the end of the first quarter of 1999. The extent of this risk
cannot be determined with any degree of certainty due to the number of small
suppliers and service providers used by the Company and the reliance of all
operations on basic utility service providers.
The Company has not significantly increased its total annual capital
expenditures over historical levels as a result of the year 2000 compliance
efforts, although like most companies, its investment in information technology
has become a larger percentage of annual capital expenditures. The Company
estimates that it will have total capital expenditures related to year 2000
compliance of approximately $75 million, and that it has incurred and will
continue to incur into mid-1999 approximately $1 to $2 million each quarter in
expense related to year 2000 efforts. The Company has incurred approximately 75%
of the capital expenditures as of September 30, 1998. The majority of these
expenditures relate to new systems installations. Although the timing of new
systems installations was influenced by the year 2000 problem, the Company would
have installed these systems in any event. The above costs for year 2000
compliance efforts do not include costs relating to the Company's Automotive
Products segment, which was sold to Federal-Mogul Corporation on October 9, 1998
and is treated as a discontinued operation in the consolidated financial
statements.
The likely worst case scenario of the year 2000 problem for the Company
is that the Company will not complete the information technology systems
projects that are scheduled through 1999 on time because of a severe shortage of
qualified information systems personnel, both internally and externally. The
Company recognizes that completion of these projects could also be affected for
other reasons that are unknown to the Company at this time. The Company believes
that it is unlikely that such projects would be delayed beyond a point in time
where the Company would suffer material adverse effects from noncompliance. For
this reason, the Company has not developed a contingency plan for this risk. In
the unlikely event that the remaining information technology systems projects
are not completed before significant problems are encountered, the Company's
results of operations could be adversely affected. The Company has not
determined whether such adverse effect would be material.
In addition to the internal risks specific to the Company and the risks
posed by third parties that the company deals with directly, there are a number
of other year 2000 risks and uncertainties that could affect the Company. These
risks include utility and communication failures and governmental, economic and
market responses to the year 2000 problem. While the Company continues to
believe that these year 2000
-19-
<PAGE> 20
matters will not have a material adverse impact on its results of operations,
liquidity or financial condition, the ultimate impact on the Company of the year
2000 problem remains uncertain.
The Company's year 2000 project capital expenditures, estimated
percentage of completion and estimated completion dates are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, including the availability of certain resources, third-party
modification plans and other factors. There can be no guarantee that these
estimates will be achieved and actual results could differ materially from those
anticipated.
EURO CONVERSION:
On January 1, 1999, the euro will become the common currency of eleven
of the fifteen member states of the European Union. After the introduction of
the euro, the national currencies will remain legal tender in the participating
countries until mid-year 2002. During the dual currency phase, businesses must
be capable of conducting commercial transactions in either the euro or the
national currency. After the dual currency phase, all businesses in
participating countries must conduct all transactions in the euro and must
convert their financial records and reports to be euro based. The euro
introduction may affect cross-border competition by creating cross-border price
transparency, beginning with the dual currency phase on January 1, 1999.
The Company estimates that less than 10% of its 1998 revenues will come
from countries that will adopt the euro. The Company expects that the impact of
the dual currency phase will not be material to its results of operations. The
Company has assessed its information technology systems and believes that on or
before January 1, 1999 they will be capable of meeting the dual currency phase
requirements. The Company is assessing the risk to its business of the final
phase of the euro conversion which begins during 2002, and currently is unable
to determine whether the final phase of the euro conversion will have a material
effect on the Company's operations. The costs of the euro dual currency phase
are included with the year 2000 capital expenditures and expenses and are not
significant.
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<PAGE> 21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On November 13, 1996, AlliedSignal Inc. instituted an action
in the United States District Court, District of Delaware,
against the Company's wholly-owned subsidiary Cooper
Automotive, Inc. (now named Cooper Automotive Products, Inc.)
("Cooper Automotive") alleging infringement of a process for
the manufacture of platinum tipped spark plug center
electrodes. On June 11, 1998, the trial jury found Cooper
Automotive liable for patent infringement and awarded
AlliedSignal $39,210,409 in damages. Before the judge entered
a verdict, AlliedSignal and Cooper Automotive entered into a
settlement agreement resolving the dispute on a mutually
acceptable basis involving the grant of a license to Cooper
Automotive. The settlement did not have a material adverse
effect on the Company's financial position or results of
operations. As noted in the Company's Form 8-K filed on
October 9, 1998, the Company has completed the sale of its
automotive products business (including the sale of Cooper
Automotive) to Federal-Mogul.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10. Material Contracts
(i) Purchase and Sale Agreement between
Cooper Industries, Inc. and
Federal-Mogul Corporation dated
August 17, 1998.
(ii) Form of Management Continuity
Agreement dated August 4, 1998,
between Cooper Industries, Inc. and
key management personnel which
applies if there is a change in
control of the Company.
(iii) Cooper Industries, Inc. Supplemental
Excess Defined Benefit Plan (August
1, 1998 Restatement).
(iv) Cooper Industries Inc. Supplemental
Excess Defined Contribution Plan
(August 1, 1998 Restatement).
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedules for the
years ended December 31, 1997, 1996 and
1995.
27.3 Restated Financial Data Schedules for the
year-to-date periods ended June 30, 1998,
March 31, 1998 and September 30, 1997.
27.4 Restated Financial Data Schedules for the
year-to-date periods ended June 30, 1997 and
March 31, 1997.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated July 23,
1998, setting forth the Company's results of
operations for the second quarter of 1998.
The Company filed a report on Form 8-K dated August
18, 1998, which included a copy of a press release
announcing that the Company had signed an agreement
to sell its automotive business to Federal-Mogul
Corporation for approximately $1.9 billion.
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<PAGE> 22
The Company filed a report on Form 8-K dated
September 4, 1998, which included a copy of a press
release announcing that the Company and TLG plc
(Thorn Lighting Group) had jointly announced an
agreed offer by the Company to acquire Thorn in a
transaction valued at approximately $535 million.
The Company filed a report on Form 8-K dated
September 28, 1998, which included a copy of a press
release announcing that its offer to acquire TLG plc
(Thorn Lighting Group) for approximately $535 million
has expired and will not be extended because of an
offer by a rival bidder to acquire TLG plc for
approximately $585 million.
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<PAGE> 23
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Cooper Industries, Inc.
---------------------------------
(Registrant)
Date: November 13, 1998 /s/ D. Bradley McWilliams
- ------------------------------------- ---------------------------------
D. Bradley McWilliams
Senior Vice President and
Chief Financial Officer
Date: November 13, 1998 /s/ Terry A. Klebe
- ------------------------------------- ---------------------------------
Terry A. Klebe
Vice President and Controller
and Chief Accounting Officer
23
<PAGE> 24
Exhibit Index
Exhibit No.
10. Material Contracts
(i) Purchase and Sale Agreement between Cooper
Industries, Inc. and Federal-Mogul Corporation dated
August 17, 1998.
(ii) Form of Management Continuity Agreement dated August
4, 1998, between Cooper Industries, Inc. and key
management personnel which applies if there is a
change in control of the Company.
(iii) Cooper Industries, Inc. Supplemental Excess Defined
Benefit Plan (August 1, 1998 Restatement).
(iv) Cooper Industries, Inc. Supplemental Excess Defined
Contribution Plan (August 1, 1998 Restatement).
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedules for the years ended December
31, 1997, 1996 and 1995.
27.3 Restated Financial Data Schedules for the year-to-date periods
ended June 30, 1998, March 31, 1998, September 30, 1997.
27.4 Restated Financial Data Schedules for the year-to-date
periods ended June 30, 1997 and March 31, 1997.
<PAGE> 1
EXHIBIT 10(i)
PURCHASE AND SALE AGREEMENT
BETWEEN
COOPER INDUSTRIES, INC.
AND
FEDERAL-MOGUL CORPORATION
DATED
AUGUST 17, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
1. CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
2. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
2.1. Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
2.2. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
2.3. Closing Statement of Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
2.4. Seller's Review of Preliminary Closing Statement of Net Assets . . . . . . . . . . . . . . . . . __
2.5. Buyer's Response to Seller's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
2.6. Meeting to Resolve Proposed Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
2.7. Resolution by Accounting Arbitrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
2.8. Notices Relating to the Closing Statement of Net Assets . . . . . . . . . . . . . . . . . . . . __
2.9. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
2.10. Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.1. Organization of Seller and the Champion Companies . . . . . . . . . . . . . . . . . . . . . . . __
3.2. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.3. Authorization of Transaction and Validity of Agreement . . . . . . . . . . . . . . . . . . . . . __
3.4. Consents, Approvals and Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.5. Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.7. Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.8. Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.9. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.10. Compliance with Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.11. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.12. Material Contracts; No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.13. Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.14. Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.15. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.16. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.17. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.18. Sufficiency of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.19. Brokers, Finders, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.20. Product Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.21. Product Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
3.22. Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
4.1. Organization of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
4.2. Authorization of Transaction and Validity of Agreement . . . . . . . . . . . . . . . . . . . . . __
4.3. Consents, Approvals and Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
4.4. Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
4.5. Brokers, Finders, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
4.6. Availability of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
</TABLE>
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TABLE OF CONTENTS (CONTINUED)
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4.7. Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5. COVENANTS OF SELLER AND BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.1. Business Covenants of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.2. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.3. Consents; Filings; Fulfill Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.4. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.5. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.6. Use of the Cooper Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.7. Company Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.8. Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.9. Transfer Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.10. Disclosure Supplements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.11. WARN Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.12. Assumption of Certain Seller Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.13. Inter- and Intra-Company Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.14. Patent and Trademark Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.15. Performance Obligation Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.16. Foreign Exchange Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.17. Standard Motor Products Purchase Price Adjustment and Consigned Inventory . . . . . . . . . . . __
5.18. Further Assurances/Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.19. Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.20. Buyer Investigation; No Representations or Warranties . . . . . . . . . . . . . . . . . . . . . __
5.21. Indemnification for AlliedSignal Lawsuit and Bosch Infringement Claim . . . . . . . . . . . . . __
5.22. Third Party Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.23. Assignment of Bonds to Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.24. Transition Services Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.25. Asbestos Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.26. Environmental Insurance Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
5.27. Friable Asbestos Remediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
6. EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
6.1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
6.2. Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
6.3. Representations Regarding Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . __
6.4. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
6.5. Cooper Employee Stock Purchase Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
7. TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
7.1. Representations and Warranties Regarding Tax Matters . . . . . . . . . . . . . . . . . . . . . . __
7.2. Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
7.3. Section 338 Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
7.4. Tax Return Filings for Pre-Closing Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . __
7.5. Tax Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
</TABLE>
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TABLE OF CONTENTS (CONTINUED)
<TABLE>
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7.6. Wage Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
7.7. Cooperation and Exchange of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
8. CONDITIONS TO OBLIGATION TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
8.1. Conditions to Obligation of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
8.2. Conditions to Obligation of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
8.3. Waiver; Right to Proceed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
9. SURVIVAL; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
9.1. In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
9.2. Survival of Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . __
9.3. Limits on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
9.4. Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
9.5. Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
9.6. Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
10. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
10.1. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
10.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
11.1. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
11.2. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
11.3. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
11.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
11.5. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
11.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
11.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
11.8. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
11.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
11.10. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
11.11. Incorporation of Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
11.12. Bulk Transfer Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
11.13. Deceptive Trade Practices Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
11.14. Specific Performance
12. DISPUTE RESOLUTION
12.1. Meeting of Senior Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
12.2. Binding Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
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<S> <C> <C>
I - Certain Definitions
II - List of Champion Subsidiaries
III - List of Related Companies
IV - Peg Statement of Net Assets
V - Historical Financial Statements
</TABLE>
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TABLE OF CONTENTS (CONTINUED)
<TABLE>
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VI - Other Agreements
(a) Canadian Asset Transfer Agreement
VII - Allocation of Purchase Price [to be agreed by the parties]
VIII - Seller's Knowledge
IX - Confidentiality Agreement
X - Working Layer Policies
DISCLOSURE SCHEDULES
</TABLE>
- iv -
<PAGE> 6
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "AGREEMENT") dated as of August
17, 1998, is by and between Cooper Industries, Inc., a corporation organized
under the laws of Ohio ("SELLER"), and Federal-Mogul Corporation, a corporation
organized under the laws of Michigan; Federal-Mogul Comercio Internacional,
S.A. a Brazilian corporation; Federal-Mogul Pty. Ltd., an Australian limited
company; and Federal-Mogul Global Growth Ltd., a limited company incorporated
under the laws of England and Wales (collectively "BUYER").
WHEREAS, Seller owns all of the issued and outstanding shares of
common stock (the "CHAMPION COMMON STOCK") of Champion Spark Plug Company, a
Delaware corporation ("CHAMPION");
WHEREAS, Seller and its Affiliates also own shares of the Related
Companies as set forth on Disclosure Schedule 3.2;
WHEREAS, certain individuals who are employees of Seller or the
Champion Companies own Nominal Shares of the Champion Subsidiaries; and
WHEREAS, Seller desires to sell and Buyer desires to purchase (i) the
Champion Common Stock, (ii) the shares of the Related Companies which are owned
by Seller or its Affiliates as set forth in Disclosure Schedule 3.2, (iii) the
Nominal Shares of the Champion Subsidiaries, and (iv) certain assets and
liabilities of the Canadian Division.
NOW THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
agree as follows:
<PAGE> 7
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
1. CERTAIN DEFINITIONS.
Unless otherwise defined in this Agreement, capitalized terms shall
have the meaning ascribed to such terms in Exhibit I attached hereto. All
references in Exhibit I to the Agreement, Sections and Disclosure Schedules are
references to this Agreement and its sections and disclosure schedules unless
otherwise specified.
2. PURCHASE AND SALE.
2.1. PURCHASE AND SALE. Upon the terms and subject to the
conditions of this Agreement, at the Closing, (i) Seller shall sell, assign,
and otherwise transfer to Buyer, and Buyer shall purchase, acquire and accept
all of the Champion Common Stock, free and clear of all Encumbrances; (ii)
Seller shall (and shall cause its Affiliates to) sell, assign and otherwise
transfer to Buyer (or to Buyer's designated Affiliate) and Buyer (or its
designated Affiliate) shall purchase, acquire and accept the shares of the
Related Companies, which are owned by Seller and its Affiliates as set forth in
Disclosure Schedule 3.2, free and clear of all Encumbrances; and (iii) Seller
shall cause the individuals who own the Nominal Shares of the Champion
Subsidiaries to sell, assign and otherwise transfer to Buyer (or its designee)
and Buyer (or its designee) shall purchase (at no additional cost to Buyer),
acquire and accept the Nominal Shares, free and clear of all Encumbrances. At
the Closing, Seller shall also cause its Affiliate, Cooper Industries (Canada)
Inc., to transfer to Buyer or its designated Affiliate certain assets and
liabilities of the Canadian Division pursuant to the Canadian Asset Transfer
Agreement, free and clear of all Encumbrances other than Permitted
Encumbrances.
2.2. PURCHASE PRICE. In consideration for the sale, assignment,
and transfer of the Champion Common Stock, the shares of the Related Companies
and such assets and liabilities of the Canadian Division, Buyer shall pay to
Seller the closing payment as provided in Section 2.2(a), plus or minus as the
case may be, the Purchase Price Adjustment as provided in Section 2.2(b).
(a) CLOSING PAYMENT. At Closing, Buyer will pay
Seller $1,900,000,000. If Buyer provides Seller a federal reference number no
later than 11 a.m., Central Standard Time,
- 2 -
<PAGE> 8
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
on the Closing Date then no interest shall be due from Buyer to Seller on the
closing payment. If Buyer does not provide Seller a federal reference number
until after 11 a.m., Central Standard Time, on the Closing Date then Buyer
shall pay to Seller interest on the closing payment at an annual rate equal to
6% per annum from and including the Closing Date to but not including the next
business day following the Closing Date.
(b) PURCHASE PRICE ADJUSTMENT. Within five (5)
business days following the date on which the Final Closing Statement of Net
Assets is determined, either Buyer will pay Seller the Positive Purchase Price
Adjustment or Seller will pay Buyer the Negative Purchase Price Adjustment, in
either case, together with interest thereon at the rate of 6% per annum from
and including the Closing Date until but not including the date paid (the
"PURCHASE PRICE ADJUSTMENT"). A "POSITIVE PURCHASE PRICE ADJUSTMENT" means the
amount by which the combined net assets for the Champion Companies shown on the
Final Closing Statement of Net Assets is more than the combined net assets
amount shown on the Peg Statement of Net Assets. A "NEGATIVE PURCHASE PRICE
ADJUSTMENT" means the amount by which the combined net assets for the Champion
Companies shown on the Final Closing Statement of Net Assets is less than the
combined net assets amount shown on the Peg Statement of Net Assets.
(c) METHOD OF PAYMENT. All payments pursuant to
this Section 2.2 shall be in U.S. Dollars and be made in immediately available
funds by wire transfer pursuant to instructions provided in writing by the
recipient of the funds.
2.3. CLOSING STATEMENT OF NET ASSETS. Within 75 days following
the Closing Date, Buyer shall prepare and deliver to Seller a combined
statement of net assets of the Champion Companies as of the close of business
on the Closing Date (the "PRELIMINARY CLOSING STATEMENT OF NET ASSETS"). The
Preliminary Closing Statement of Net Assets and the final statement of net
assets as of Closing as determined in accordance with Sections 2.3, 2.4, 2.5,
2.6 and 2.7 (the "FINAL CLOSING
- 3 -
<PAGE> 9
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
STATEMENT OF NET ASSETS") shall be prepared using the same principles,
practices and procedures that were used in preparing the statement of net
assets dated March 31, 1998, which is attached hereto as Exhibit IV (the "PEG
STATEMENT OF NET ASSETS"). Any change in accounting principles, practices and
procedures after March 31, 1998 (including any changes required by GAAP) will
not apply in determining the Preliminary and Final Closing Statements of Net
Assets. Notwithstanding the foregoing, the following paragraphs (a) through
(n) shall take precedence over such principles, practices and procedures in the
preparation of the Preliminary and Final Closing Statements of Net Assets:
(a) The asset and liability amounts included in the
Preliminary and Final Closing Statements of Net Assets will be the same as
those included in the Peg Statement of Net Assets except as necessary to
reflect those changes in the asset and liability amounts that result from new
transactions and actual changes in facts and circumstances occurring during the
period after (but not including) March 31, 1998, (the "PEG DATE") through and
including the Closing Date (the "CHANGE PERIOD"), subject to paragraphs (b)
through (n) below which shall take precedence. For example, any liability
which is not accrued or is under-accrued or over-accrued as of the Peg Date,
absent a change in facts and circumstances during the Change Period, will be
recorded so that it is under-accrued or over-accrued in an equal dollar amount
as of the Closing Date.
(b) The quantities of inventory used to determine
the inventory amount to be included in the Preliminary and Final Closing
Statements of Net Assets will be based on the results of a physical inventory
of the Champion Companies to be taken as of the close of business on the
Closing Date in accordance with the normal procedures of the Champion Companies.
The physical inventory will be taken by Buyer (or its representatives) and
observed by Seller (or its representatives). Each party shall bear its own
expenses with respect to the physical inventory. The physical inventory
quantities will be priced utilizing the same standard costs on a full absorption
basis which were used to determine the inventory amount reflected in the Peg
Statement of Net Assets and, in the case of items which were not on hand as of
the Peg Date, in accordance with the normal
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<PAGE> 10
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
procedures of the Champion Companies. The Peg Statement of Net Assets does
not, and the Preliminary and Final Closing Statements of Net Assets will not,
include any reserve or accrual for inventory shrinkage or deferred variances.
The Peg Statement of Net Assets does, and the Preliminary and Final Closing
Statements of Net Assets will, include an aggregate inventory allowance of
$56,447,327 for all other inventory valuation matters including excess,
obsolete and slow moving inventory and deferred revaluation.
(c) The Peg Statement of Net Assets does not, and
the Preliminary and Final Closing Statements of Net Assets will not, include
(i) the inventory consigned to Standard Motor Products pursuant to Section 7.20
of the Asset Exchange Agreement dated as of March 28, 1998 among Standard Motor
Products and certain Champion Companies, (ii) any receivable for the purchase
price adjustment that may be due from Standard Motor Products pursuant to
Section 7.20(e) of such Asset Exchange Agreement; and (iii) any payable for the
purchase price adjustment that may be due to Standard Motor Products pursuant
to Section 2.9(b) of such Asset Exchange Agreement.
(d) The Peg Statement of Net Assets and the
Preliminary and Final Closing Statements of Net Assets will include reserves or
accruals for uncollectible accounts receivable in the amount of $18,110,111.
(e) No amortization expense shall be recorded for
the Change Period and no depreciation expense shall be recorded for the period
from March 31, 1998 through September 30, 1998. As a result, the accumulated
depreciation and amortization balances reflected in the Preliminary and Final
Closing Statements of Net Assets will be the same as the amounts included in
the Peg Statement of Net Assets adjusted only for any depreciation expense for
the period after September 30, 1998 and for asset sales or other dispositions
in the ordinary course of business and for translation.
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<PAGE> 11
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(f) The Peg Statement of Net Assets does, and the
Preliminary and Final Closing Statements of Net Assets will, include payables
and receivables for state, provincial or local income or franchise taxes for
those jurisdictions where a Champion Company files a separate Tax Return (as
opposed to a Tax Return filed on a consolidated or combined basis with Seller
or its Affiliates) and include payables and receivables for foreign income and
franchise taxes (excluding the refund to be received by Champion Zundkerzen
Deutschland Niederlassung Deutschland der Champion Spark Plug Company). The
Peg Statement of Net Assets does not, and the Preliminary and Final Closing
Statements of Net Assets will not, include payables or receivables for (i) U.S.
federal income taxes and state, provincial or local income or franchise taxes
for those jurisdictions where a Champion Company files a Tax Return on a
consolidated or combined basis with Seller or its Affiliates or (ii) any
deferred tax balances.
(g) The Peg Statement of Net Assets does not
include any cash; however, the Preliminary and Final Closing Statements of Net
Assets will include any cash in the accounts of the Champion Companies as of
the effective time of Closing.
(h) Subject to paragraph (i) below, the Peg
Statement of Net Assets does not, and the Preliminary and Final Closing
Statements of Net Assets will not, include any inter- and intra-company
payables or receivables between (i) the Champion Companies on the one hand, and
(ii) Seller or its Affiliates on the other hand; provided, however, the Peg
Statement of Net Assets does, and the Preliminary and Final Closing Statements
of Net Assets will, include receivables and liabilities on the books of the
Champion Companies that are paid by Seller or its Affiliates but not yet booked
as inter- and intra-company payables or receivables for items shown on
Disclosure Schedule 2.3(h) or for items which provide a direct and measurable
benefit to the company on whose behalf the liability was paid.
(i) The Peg Statement of Net Assets does not, but
the Preliminary and Final Closing Statements of Net Assets will, include: (i) a
receivable for the amount due, if any, as of the
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<PAGE> 12
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Closing Date from Cooper Italia S.p.A. to Champion Automotive S.p.A. relating
to the Italian law spinoff (which shall hereafter be referred to as the
"scissione") of Cooper Italia S.p.A. from Champion Automotive S.p.A. (formerly
known as Cooper Industries Italia S.p.A.) and representing the increase from
January 1, 1998 until the effective date of the scissione in the net assets of
the non-automotive business transferred to Cooper Italia S.p.A. based on the
statutory books, or (ii) a payable for the amount due, if any, as of the
Closing Date from Champion Automotive S.p.A. to Cooper Italia S.p.A. relating
to the scissione and representing the decrease from January 1, 1998 until the
effective date of the scissione of the net assets of the non-automotive
business transferred to Cooper Italia S.p.A. based on the statutory books.
(j) Subject to paragraph (k) below, the Peg
Statement of Net Assets does not, and the Preliminary and Final Closing
Statements of Net Assets will not, include any assets or liabilities with
respect to the qualified employee defined benefit plans and qualified employee
defined contribution plans listed on Disclosure Schedule 6.3(a). The Peg
Statement of Net Assets does, and the Preliminary and Final Closing Statements
of Net Assets will, include accruals for retiree medical and other benefits
under employee welfare benefit plans and accruals for tax withholding and
employer matching contributions under the Cooper Industries, Inc. Savings and
Stock Ownership Plan.
(k) The Peg Statement of Net Assets includes an
accrual of $2,589,068 for, and the Preliminary and Final Closing Statements of
Net Assets will include an accrual for, the total cash withholdings collected
by the Champion Companies from ESPP Participants pursuant to the 1997 ESPP plus
related accrued interest.
(l) The Peg Statement of Net Assets does not, and
the Preliminary and Final Closing Statements of Net Assets will not, include
any reserve or accrual for the AlliedSignal Lawsuit or any reserves, accruals
or other amounts relating to items that Seller is obligated to indemnify or
reimburse Buyer pursuant to Section 5.21.
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<PAGE> 13
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(m) Subject to paragraph (n) below, the Peg
Statement of Net Assets does not; however, the Preliminary and Final Closing
Statements of Net Assets will, include any third party debt of the Champion
Companies including the third party debt set forth in Disclosure Schedule
2.3(m).
(n) The Peg Statement does not, and the Preliminary
and Final Closing Statements of Net Assets will not, include the third party
debt of the Champion Companies relating to the industrial development revenue
bonds described in Section 5.23 of this Agreement.
2.4. SELLER'S REVIEW OF PRELIMINARY CLOSING STATEMENT OF NET
ASSETS. Seller shall have 60 days following receipt of the Preliminary Closing
Statement of Net Assets to review such statement. If Seller determines that it
has not been prepared in accordance with the provisions of Section 2.3, then
within the 60-day period allowed for Seller's review, Seller shall send a
letter to Buyer ("Seller's Letter") setting forth in reasonable detail the
adjustments that Seller determines are appropriate. During such 60-day period,
Buyer shall grant Seller and its representatives reasonable access during
normal business hours to the books and records of the Champion Companies
including any working papers or other documents prepared by Buyer or its
accountants or auditors with respect to the Preliminary Closing Statement of
Net Assets. If Seller does not prepare and furnish Seller's Letter to Buyer
within the 60 days allowed, then the Preliminary Closing Statement of Net
Assets as prepared by Buyer will become the Final Closing Statement of Net
Assets.
2.5. BUYER RESPONSE TO SELLER'S LETTER. Buyer will have 30 days
following receipt of Seller's Letter, if any, to review such letter and prepare
a written response ("BUYER'S LETTER") setting forth Buyer's position with
respect to each adjustment proposed by Seller in Seller's Letter. If Buyer
does not prepare and furnish Buyer's Letter to Seller within the 30 days
allowed, then all of the adjustments set forth in Seller's Letter shall be
deemed to have been accepted by Buyer, and the Final Closing Statement of Net
Assets shall be determined by adjusting the Preliminary Closing Statement of
Net Assets for all of the adjustments set forth in Seller's Letter.
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<PAGE> 14
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
2.6. CONFERENCE TO RESOLVE PROPOSED ADJUSTMENTS. As soon as
practicable, but not later than 30 days following the receipt by Seller of
Buyer's Letter, if any, the parties shall confer, whether by telephone or in
person, and endeavor to mutually resolve any of Seller's adjustments not agreed
to in Buyer's Letter. If the parties reach agreement on these adjustments, if
any, then the Final Closing Statement of Net Assets shall be determined by
adjusting the Preliminary Closing Statement of Net Assets for the adjustments
agreed to in Buyer's Letter and those mutually resolved by the parties.
2.7. RESOLUTION BY ACCOUNTING ARBITRATOR. If the parties do not
meet within the 30 day period set forth in Section 2.6, or they fail to agree
to meet at some later date, or they meet but are unable to resolve to their
mutual satisfaction all of the adjustments set forth in Seller's Letter, then
the parties shall jointly engage the Atlanta office of the firm of
Pricewaterhouse Coopers (the "ACCOUNTING ARBITRATOR") to resolve any of
Seller's adjustments which remain unresolved. The parties shall furnish the
Accounting Arbitrator with a copy of the Agreement, the Peg Statement of Net
Assets, the Preliminary Closing Statement of Net Assets, Seller's Letter,
Buyer's Letter and any other relevant correspondence between the parties. The
Accounting Arbitrator shall, within 45 days from the date such documents are
furnished, complete its review and render a written report setting forth its
conclusion with respect to each of Seller's adjustments which were unresolved
between the parties. The Accounting Arbitrator shall be granted access to the
books and records of the Champion Companies as well as the working papers or
other documents which either party or its accountants or auditors may have that
relate to the Preliminary Closing Statement of Net Assets and any other
documents or information which the Accounting Arbitrator may deem appropriate.
The Accounting Arbitrator's review shall be limited to the purpose of
determining whether, in respect of each of those items and amounts as to which
Buyer and Seller do not agree, Seller's proposed adjustment or Buyer's position
with respect to Seller's proposed adjustment is more nearly in accordance with
the terms of this Agreement. The parties shall have the right to submit
written materials to the Accounting Arbitrator in accordance with procedures to
be set forth in the engagement letter between the parties and the Accounting
Arbitrator. In arriving at its determination the Accounting Arbitrator must
select
- 9 -
<PAGE> 15
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
for each adjustment either Seller's proposed adjustment or Buyer's position
with respect to Seller's proposed adjustment. The decision by the Accounting
Arbitrator shall be in writing (including an explanation of the reasons for the
determination) and shall be delivered to both Buyer and Seller. The Accounting
Arbitrator's decision shall be conclusive and binding upon the parties and may
be entered and enforced in any court of competent jurisdiction. The parties
agree to submit to the jurisdiction of any such court solely for the
enforcement of such award or decision. The party that proposes a total
adjustment that differs more from the Accounting Arbitrator's award shall pay
the fees and expenses of the Accounting Arbitrator, so that if in arbitration,
the first party has argued for a total adjustment of $100,000, the second party
for a total adjustment of $30,000 and the Accounting Arbitrator awards a
$50,000 adjustment, the first party shall pay such fees and expenses. If the
Accounting Arbitrator is engaged, the Final Closing Statement of Net Assets
will be determined by adjusting the Preliminary Closing Statement of Net Assets
for those of Seller's adjustments accepted by Buyer's Letter, those mutually
agreed to by the parties and those determined by the Accounting Arbitrator.
2.8. NOTICES RELATING TO THE CLOSING STATEMENT OF NET ASSETS.
Notwithstanding Section 11.6, all notices and other communications under
Sections 2.4, 2.5, 2.6 and 2.7 shall be delivered to the individuals listed
below and shall be sufficiently given for all purposes hereunder if in writing
and delivered personally, sent by documented overnight delivery services, or
certified mail return receipt requested:
If to Seller: Cooper Industries, Inc.
600 Travis
Suite 5800
Houston, Texas 77002
Attn: Terry A. Klebe,
Vice President and Controller
If to Buyer: Federal-Mogul Corporation
26555 Northwestern Highway
Southfield, Michigan 48034
Attn: Charles B. Grant,
Vice President, Corporate Development
- 10 -
<PAGE> 16
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
All such notices shall be deemed given upon date of delivery to the
recipient.
2.9. CLOSING.
(a) TIME AND PLACE OF CLOSING. The closing of the
contemplated transactions (the "CLOSING") shall take place at the offices of
Seller at 600 Travis, Suite 5800, Houston, Texas at 9:00 a.m. local time on the
fifth business day following the satisfaction or waiver of all conditions to
the obligations of the parties to consummate the transactions contemplated by
this Agreement (other than conditions with respect to actions the respective
parties will take at the Closing itself) or such other place, date and time as
the parties may mutually determine (the "CLOSING DATE"). Closing shall be
effective as of the close of business on the Closing Date.
(b) DELIVERIES BY SELLER. At the Closing, Seller
shall deliver to Buyer: (i) stock certificates representing the Champion Common
Stock endorsed in blank or accompanied by duly executed assignment documents;
(ii) stock certificates representing the shares of the Related Companies, that
are owned by Seller or its Affiliates as set forth in Disclosure Schedule 3.2,
endorsed in blank or accompanied by duly executed assignment documents; (iii)
stock certificates representing the shares of Cooper Automotive France, S.A.
that are owned by Diane K. Schumacher (and Joel Campbell, Philippe Charton and
Roland Blackburn if Buyer requests their resignation as a director of Cooper
Automotive France, S.A.) endorsed in blank or accompanied by duly executed
assignment documents; (iv) stock certificates representing the shares of Cooper
Automotive, Taiwan, Inc. that are owned by Diane K. Schumacher, Alan J. Hill,
David A. White, Jr. and Gordon A. Ulsh endorsed in blank or accompanied by duly
executed assignment documents; (v) the resignations of those officers and
members of the Boards of Directors of Champion, the Champion Subsidiaries and
the Related Companies as requested by Buyer at least 5 business days prior to
Closing; (vi) the stock
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<PAGE> 17
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
books, stock ledgers, minute books and corporate seals of Champion, the
Champion Subsidiaries and the Related Companies (including stock certificates
representing the shares of the Champion Subsidiaries and subsidiaries of the
Related Companies); provided that any of the foregoing items shall be deemed to
have been delivered to Buyer if delivered to or otherwise located at the
offices of Champion, the Champion Subsidiaries or the Related Companies or at
the offices of their foreign legal counsel and Seller provides Buyer with an
affidavit setting forth the location of such items (provided that at Buyer's
reasonable request, Seller will provide any of the foregoing items at Closing
except for those items relating to joint venture companies in which the
Champion Companies have an equity interest); (vii) the various certificates,
agreements, instruments and documents referred to in Section 8.1; (viii) the
Other Agreements duly executed by Seller or its appropriate Affiliate; and (ix)
all other instruments, agreements and documents required to be delivered by
Seller or its Affiliates at or before the Closing pursuant to this Agreement or
the Other Agreements.
(c) DELIVERIES BY BUYER. At the Closing, Buyer
will deliver to Seller: (i) the closing payment pursuant to Section 2.2(a);
(ii) the various certificates, agreements, instruments and other documents
referred to in Section 8.2; (iii) the Other Agreements duly executed by Buyer
or its appropriate Affiliate, and (iv) such other instruments, agreements and
documents required to be delivered by Buyer or its Affiliates at or before the
Closing pursuant to this Agreement or the Other Agreements.
2.10. ALLOCATION OF PURCHASE PRICE. The parties shall allocate
the aggregate purchase price described in Section 2.3 among the Champion Common
Stock, the common stock of Moog Automotive Products, Inc. (the "MOOG COMMON
STOCK"), the stock of the Related Companies (other than the Moog Common Stock),
and the assets of the Canadian Division in accordance with the relative fair
market values of such stock and such assets. For purposes of this allocation,
the relative fair market values of the stock and the assets described in the
immediately preceding sentence shall be determined by reference to an appraisal
(the "APPRAISAL") prepared by a nationally recognized accounting firm,
investment bank, or other valuation professional (the "APPRAISER"), which
Appraiser
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<PAGE> 18
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
shall be selected by Buyer subject to the approval of Seller, which approval
shall not be unreasonably withheld. The cost of the Appraiser shall be borne
equally by Seller and Buyer. The parties agree that the Appraisal shall be
obtained as promptly as possible and, in any event, within 60 days after the
Final Closing Statement of Net Assets is determined.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer that the statements contained
in this Section 3 are true and correct as of the date of this Agreement and
will be true and correct in all respects on the Closing Date. Nothing in the
Disclosure Schedules shall be deemed adequate to disclose an exception to a
representation or warranty made herein, however, unless the Disclosure Schedule
identifies the exception with reasonable particularity. Without limiting the
generality of the foregoing, the mere listing of a document or other item shall
not be deemed adequate to disclose an exception to a representation or warranty
made herein (unless the representation or warranty has to do with the existence
of the document or other item itself).
3.1. ORGANIZATION OF SELLER AND THE CHAMPION COMPANIES. Each of
Seller, Champion, the Champion Subsidiaries and the Related Companies is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Each of Champion, the Champion
Subsidiaries and the Related Companies: (i) has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted; and (ii) is duly qualified and in good
standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification necessary, except in such jurisdictions where the failure to
be so duly qualified and in good standing would not have a Material Adverse
Effect and except for Qingdao Precision Universal Joint Company Limited which
no longer holds a valid business license as described in Disclosure Schedule
3.2. Seller has heretofore delivered to Buyer complete copies of the
certificate of incorporation and by-laws (or similar organizational documents),
as currently in effect, of the
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<PAGE> 19
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Champion Companies. The Champion Companies do not own, directly or indirectly,
any capital stock or other equity securities of any corporation or have any
direct or indirect equity ownership in any business other than the Champion
Subsidiaries, the subsidiaries of the Related Companies as set forth in
Disclosure Schedule 3.2 and 9,600 Class A Preferred Shares of General Parts,
Inc. which are owned by Moog Automotive Company.
3.2. CAPITALIZATION. The authorized capital stock of Champion
consists of 1,000 shares of Champion Common Stock, 1,000 shares of which are
issued and outstanding as of the date hereof, and 1,000 shares of preferred
stock, none of which are issued and outstanding as of the date hereof. Seller
owns all of the shares of Champion Common Stock. Disclosure Schedule 3.2 sets
forth for each of the Champion Subsidiaries and the Related Companies: (i) its
name and jurisdiction of incorporation, (ii) the number of shares of each class
of its authorized capital stock, and (iii) the number of issued and outstanding
shares of each class of its capital stock, the names of the holders thereof,
and the number of shares held by each such holder. All of the issued and
outstanding shares of the Champion Companies are validly issued, fully paid
and nonassessable, except for the shares of Cooper Automotive do Brasil, Ltda.
as described in Disclosure Schedule 3.2. Except pursuant to this Agreement,
there are no outstanding subscriptions, options, warrants, conversion rights,
exchange rights, or other agreements or commitments obligating Seller or the
Champion Companies to issue, transfer, sell or otherwise cause to become
outstanding, any capital stock or other equity interests of the Champion
Companies. Seller has good title to all of the shares of Champion Common
Stock, and Seller and its Affiliates (including the Champion Companies) which
hold the shares of the Champion Subsidiaries and Related Companies as set forth
in Disclosure Schedule 3.2 have good title to such shares, free and clear
- 14 -
<PAGE> 20
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
of all Encumbrances. At Closing, (i) Seller shall transfer to Buyer good title
to the shares of Champion Common Stock, free and clear of all Encumbrances;
(ii) Seller shall or shall cause its Affiliates to transfer to Buyer or its
designated Affiliate good title to all the shares of the Related Companies
which are owned by Seller or its Affiliates, free and clear of all
Encumbrances; and (iii) Seller shall cause the individuals who own the Nominal
Shares of the Champion Subsidiaries to transfer to Buyer (or its designee) good
title to such shares free and clear of all Encumbrances. Except as set forth
in Disclosure Schedule 3.2, there are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of any capital stock of
any of the Champion Companies. Certain transfers of the shares of or equity
interests in Crucetas Mexicanas, S.A. de C.V., Frenos Hidraulicos Automotrices,
S.A. de C.V., Qingdao Precision Universal Joint Company Limited and Guangzhou
Champion Spark Plug Co. Ltd. are subject to rights of first refusal and the
prior approval of the boards of directors of such companies.
3.3. AUTHORIZATION OF TRANSACTION AND VALIDITY OF AGREEMENT.
Seller has all requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the respective boards of directors of
Seller, Cooper Industries (Canada) Inc., and those Affiliates of Seller which
are transferring shares of the Related Companies to Buyer or its designated
Affiliates and no other corporate proceedings on the part of Seller or its
Affiliates are necessary to authorize this Agreement and to consummate the
transactions so contemplated. This Agreement has been duly and validly
executed and delivered by Seller and (assuming it is duly and validly executed
by Buyer) constitutes a valid and binding agreement of Seller, enforceable
against Seller in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization or other
similar laws affecting creditors' rights generally and by general equitable
principles.
3.4. CONSENTS, APPROVALS AND FILINGS. Seller and its Affiliates
are not required to give any notice to, make any filing with, or obtain any
material consent, authorization or approval from any Governmental Authority in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby except: (i) those set
out on Disclosure Schedule 3.4; and (ii) the filings required under the Hart-
Scott-Rodino Act and similar laws of foreign jurisdictions.
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<PAGE> 21
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
3.5. NON-CONTRAVENTION. Neither the execution and the delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will: (i) conflict with or breach any provision of the certificate of
incorporation or by-laws (or similar organizational documents) of Seller, its
Affiliates, or the Champion Companies; (ii) to Seller's Knowledge, violate any
statute, regulation, rule, injunction, judgment, order or decree of any
Governmental Authority applicable to Seller, its Affiliates or the Champion
Companies or any of their respective assets; and (iii) except as set forth in
Disclosure Schedule 3.5, result in a breach of, constitute a default under, or
give rise to any right of termination or acceleration under, any provision of
any material agreement, contract, lease, license, or instrument by which the
Champion Companies are bound or by which any of their assets is subject.
3.6. FINANCIAL STATEMENTS. The following financial statements of
the Business are attached hereto as Exhibit V (collectively, the "FINANCIAL
STATEMENTS"): (i) the audited combined balance sheets as of December 31, 1996
and 1997 and the audited combined income statements and statements of cash
flows for the years ended December 31, 1995, 1996 and 1997; and (ii) the
unaudited combined balance sheet, income statement and statement of cash flows
for the interim period ended March 31, 1998. Except as set forth in Disclosure
Schedule 3.6, the Financial Statements have been prepared in accordance with
GAAP applied on a consistent basis. The Financial Statements present fairly in
all material respects the financial condition and the results of operations of
the Champion Companies as of the respective dates and for the respective
periods for which they have been prepared.
3.7. ABSENCE OF CERTAIN CHANGES. Except as set forth in
Disclosure Schedule 3.7, since March 31, 1998, the Champion Companies have
conducted their respective businesses only in the ordinary course consistent
with past practices. Without limiting the generality of the foregoing, since
March 31, 1998, the Champion Companies have not taken any action that would
constitute a violation of any of the provisions under Section 5.1 of this
Agreement except as set forth in Disclosure Schedule 3.7.
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<PAGE> 22
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
3.8. UNDISCLOSED LIABILITIES. The Champion Companies do not have
any material liabilities of the type required to be reflected in a statement of
net assets prepared in accordance with GAAP except for: (i) liabilities
reflected or reserved against in the combined balance sheet as of March 31,
1998, included in the Financial Statements or disclosed in the notes to the
Financial Statements for the year ended December 31, 1997 and liabilities not
so reflected and reserved against due to the fact that the Financial Statements
do not comply with GAAP for a reason described in Disclosure Schedule 3.6, (ii)
liabilities that have arisen in the ordinary course after March 31, 1998; and
(iii) liabilities which have been disclosed to Buyer in one of the disclosure
schedules to this Agreement, including Disclosure Schedule 3.8.
3.9. LITIGATION. Except as set forth in Disclosure Schedule 3.9,
(i) none of the Champion Companies is a party to any pending (nor is there as
of the date hereof, to Seller's Knowledge, any threatened) lawsuit,
governmental proceeding or arbitration proceeding (nor is Seller or any
Affiliate of Seller party to any pending lawsuit, governmental proceeding or
arbitration proceeding that affects or could affect any of the Champion
Companies or their assets); (ii) there are not any judgments, decrees,
directives, rulings or orders of any Governmental Authority binding on any of
the Champion Companies (or Seller or any Affiliate of Seller that affects or
could affect any of the Champion Companies or their assets); and (iii) there
are no pending or, to Seller's Knowledge, threatened governmental
investigations, actions, charges, complaints, claims, demands, inquiries or
proceedings concerning the Champion Companies. After Closing, Buyer and its
Affiliates shall assume responsibility for the matters set forth in Disclosure
Schedule 3.9 (except for the AlliedSignal Lawsuit and Bosch Infringement Claim
which are subject to Section 5.21).
3.10. COMPLIANCE WITH APPLICABLE LAW. Except as set forth in
Disclosure Schedule 3.10 (and except with respect to environmental matters
which are addressed in Section 3.11 hereof), to Seller's Knowledge, (i) the
Champion Companies are in compliance with all laws, ordinances, rules,
regulations, decrees and orders of all Governmental Authorities applicable to
the operation of the Business, except where the failure to be in compliance is
not reasonably likely to have a Material
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Adverse Effect, and (ii) the Champion Companies hold all Permits necessary to
conduct the Business as currently conducted, except where the failure to hold
such Permits would not be reasonably likely to have a Material Adverse Effect.
3.11. ENVIRONMENTAL MATTERS.
(a) Except as set forth in Disclosure Schedule
3.11(a), the Champion Companies are now in compliance in all material respects
with all Environmental Laws, and have been in compliance with Environmental
Laws except where the failure to be in compliance is not reasonably likely to
have a Material Adverse Effect.
(b) Except as set forth in Disclosure Schedule
3.11(b), the Champion Companies have made all material filings and possess all
material Environmental Permits necessary to conduct the Business as it is
presently being conducted and in compliance with all applicable Environmental
Laws, such Environmental Permits are in full force and effect, and the Champion
Companies are in compliance in all material respects with all of the terms,
conditions and requirements of such Environmental Permits.
(c) [Intentionally omitted]
(d) Except as set forth in Disclosure Schedule
3.11(d), (i) none of the Champion Companies has received any formal complaint
or notice from any Governmental Authority or any other Person alleging any past
or present violation of any Environmental Law in connection with the operation
of the Business and which is currently unresolved, (ii) as of the date hereof,
there is no investigative proceeding against the Champion Companies by any
Governmental Authority in connection with the past or present operation of the
Business, and (iii) there are no pending Environmental Claims involving the
Champion Companies or the Business.
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(e) Except as set forth in Disclosure Schedule
3.11(e), none of the Champion Companies has been subject to any administrative
or judicial enforcement action pursuant to any Environmental Law either now or
at any time during the past three years in connection with the Business or the
Champion Companies.
(f) Except as set forth in Disclosure Schedule
3.11(f), none of the Champion Companies is subject to any remedial obligation
or other response action under a currently issued and applicable administrative
order, decree, or agreement pursuant to any Environmental Law.
(g) Except as set forth in Disclosure Schedule
3.11(g), no real property currently or formerly owned, leased, operated or used
by the Champion Companies (including real property used for off-site disposal
of any Regulated Material) is listed on any federal list of Superfund or
National Priorities List sites or similar governmental lists regarding waste
sites at which there has been a Release or threatened Release of Regulated
Materials.
(h) Except as set forth in Disclosure Schedule
3.11(h), there are no (i) underground storage tanks (as defined under the
Resource Conservation and Recovery Act or any equivalent Environmental Law), or
(ii) capacitors, transformers or other equipment or fixtures containing
polychlorinated biphenyls ("PCBs") (other than light fixtures which contain
PCBs), located in, at, under or on the Owned Real Property or the Leased Real
Property.
(i) Except as set forth in Disclosure Schedule
3.11(i), there are no facts, actions, activities, circumstances, conditions,
occurrences, events or incidents, including any Release, threatened Release,
generation, treatment, storage, transportation, or the presence of Regulated
Materials, that are reasonably likely to (i) result in any Environmental
Liability that would cause a Material Adverse Effect, or (ii) prevent or
interfere with the operation of the Business as it is currently being
conducted, in compliance with all applicable Environmental Laws.
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<PAGE> 25
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
3.12. MATERIAL CONTRACTS; NO DEFAULTS. Except as set forth in
Disclosure Schedule 3.12 or reflected in the Financial Statements, no Champion
Company is a party to any: (i) indenture, mortgage, note or other agreement
relating to the borrowing of money by a Champion Company other than payables
arising in the ordinary course of business; (ii) guaranty by a Champion Company
of an obligation of a third party for the borrowing of money; (iii) payment
bond, performance bond or letter of credit under which a Champion Company is
liable; (iv) agreement which involves an obligation of a Champion Company of
more than $1 million in any twelve-month period; (v) joint venture or
partnership agreement, or (vi) agreement which involves consideration of more
than $1 million and which relates to the sale of assets outside the ordinary
course of business within the last twelve months (collectively, the "MATERIAL
CONTRACTS"). There is not under any of the Material Contracts any existing
breach or default by any Champion Company, or to Seller's Knowledge, any other
party thereto, except such breaches or defaults which will not have a Material
Adverse Effect.
3.13. ASSETS. Except with respect to real property which is
addressed in Section 3.14, the Champion Companies (or with respect to the
Canadian Division, Cooper Industries (Canada), Inc.) have good title to, or
hold by valid lease or license all of the assets, properties, contracts, rights
and licenses used to operate the Business as presently conducted (in each case
free and clear of all Encumbrances other than Permitted Encumbrances) except
for: (i) the assets and contract rights of Seller and its Affiliates used to
provide corporate administrative services to the Champion Companies including
employee benefits administration, cash management, risk management and
insurance, legal services, legal compliance programs, public relations, tax
reporting, internal and external audit, traffic agreements and provision and
maintenance of computer hardware and software; and (ii) cases in which the
failure to own or to have a valid lease or license will not have a Material
Adverse Effect. At Closing, Cooper Industries (Canada) Inc. will transfer to
Buyer or its designated Affiliate good title to the "Transferred Assets" of the
Canadian Division pursuant to the Canadian Asset Transfer Agreement, free and
clear of all Encumbrances other than Permitted Encumbrances. Each of the
leases and other agreements relating to personal property is in full force and
effect and constitute a legal, valid and binding obligation of the respective
parties thereto, and there is not under any of such
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<PAGE> 26
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
leases or agreements any existing monetary default or material non-monetary
default by a Champion Company, or to Seller's Knowledge, any other party
thereto.
3.14. REAL PROPERTY.
(a) Disclosure Schedule 3.14(a) sets forth a list
of all the real property of the Business that is owned by the Champion
Companies (or with respect to the Canadian Division, which is owned by Cooper
Industries (Canada) Inc.) (the "OWNED REAL PROPERTY"). The Champion Companies
(or with respect to the Canadian Division, Cooper Industries (Canada) Inc.)
have good title to the Owned Real Property, free and clear of all Encumbrances
other than Permitted Encumbrances. At Closing, Cooper Industries (Canada) Inc.
shall transfer to Buyer or its designated Affiliate good title to the Owned
Real Property of the Canadian Division, free and clear of all Encumbrances
other than Permitted Encumbrances. There are no appropriation, condemnation,
eminent domain or like proceedings relating to the Owned Real Property and, to
Seller's Knowledge, none are threatened.
(b) Disclosure Schedule 3.14(b) lists all real
property of the Business that is leased by the Champion Companies (or with
respect to the Canadian Division, which is leased by Cooper Industries (Canada)
Inc.) (the "LEASED REAL PROPERTY"). The Champion Companies (or with respect to
the Canadian Division, Cooper Industries (Canada) Inc.) have a valid leasehold
interest in the Leased Real Property. At Closing, Cooper Industries (Canada)
Inc. shall assign to Buyer or its designated Affiliate the interest of Cooper
Industries (Canada) Inc. under those leases for the Leased Real Property to
which Cooper Industries (Canada) Inc. is a party. There are no existing
material defaults by any Champion Company, or to Seller's Knowledge, by any
other party, under any leases for the Leased Real Property.
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<PAGE> 27
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
3.15. INTELLECTUAL PROPERTY.
(a) The Champion Companies own or have the right to
use each material item of Intellectual Property used by them in the Business as
presently conducted.
(b) Disclosure Schedule 3.15(b) lists all patents,
copyrights, trademarks, service marks, and registrations and applications
therefor, relating to the Business which are owned by the Champion Companies.
No license, sublicense or permission to use any such item of Intellectual
Property has been granted to any Person except as set forth in Disclosure
Schedule 3.15(b) (in each such case identifying the item licensed, the
licensee, and the date of the license agreement or other agreement which allows
the Person to use such item).
(c) Disclosure Schedule 3.15(c) lists all patents,
copyrights, trademarks, service marks, and registrations and applications
therefor, which are not owned by the Champion Companies but are used or
licensed for use by them in the Business as presently conducted. Disclosure
Schedule 3.15(c) identifies the item licensed or used, the owner or licensor,
and the date of the license agreement or other agreement which allows the
Champion Company to use such item. There is no material default by a Champion
Company or, to Seller's Knowledge, any other party under such licenses or other
agreements and each such item of Intellectual Property will continue to be
available for use on terms and conditions substantially identical to those
existing prior to Closing without additional restrictions as to its use
occurring because of Closing.
(d) Except as set forth in Disclosure Schedule
3.15(d), no proceedings have been instituted against the Champion Companies
alleging that any material item of Intellectual Property used in the Business
infringes upon or otherwise violates the rights of any Person. Except as set
forth in Disclosure Schedule 3.15(d), to the Knowledge of Seller, within the
past five years none of the Champion Companies has materially interfered with,
infringed upon, misappropriated
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
or otherwise come into conflict with any Intellectual Property rights of third
parties, and to the Knowledge of Seller, no third party has materially
interfered with, infringed upon, misappropriated or otherwise come into
conflict with any of the Intellectual Property rights of any of the Champion
Companies.
3.16. LABOR MATTERS. Disclosure Schedule 3.16(a) lists all
collective bargaining agreements with labor unions or associations representing
employees of the Champion Companies. No labor strike, lockout, slowdown or
work stoppage against the Champion Companies is pending or, to Seller's
Knowledge, threatened. Disclosure Schedule 3.16(b) lists all unfair labor
practice charges against the Champion Companies within the United States that
are either pending or that were made within the 3 year period before the date
of this Agreement. To Seller's Knowledge, there are no material pending unfair
labor practice charges outside the United States.
3.17. INSURANCE. Disclosure Schedule 3.17 lists and briefly
describes all current property and casualty insurance policies (i) which are
owned or held by Seller or its Affiliates and which cover a Champion Company,
or (ii) which are owned or held by a Champion Company. Seller agrees that it
shall maintain such policies, or policies which in the aggregate are
substantially similar thereto, until Closing.
3.18. SUFFICIENCY OF ASSETS. Except for the assets of Seller and
its Affiliates used to provide corporate and administrative services to the
Champion Companies as described in Section 3.13(i), the assets, properties,
contract rights and licenses of the Champion Companies and the assets of the
Canadian Division to be transferred to Buyer or its designated Affiliate (i)
constitute all of the assets, properties, contract rights and licenses that are
used to operate the Business in substantially the same manner as such
operations are presently conducted and are reasonably sufficient to operate the
Business as a going concern, and (ii) the operating condition of such assets
and properties is sufficient to operate the Business in substantially the same
manner as such operations are presently conducted.
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<PAGE> 29
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
3.19. BROKERS, FINDERS, ETC. Other than Merrill Lynch & Co.
whose fees will be paid by Seller, Seller has not retained any broker, finder or
agent in connection with the transactions contemplated by this Agreement who
would have a valid claim for a fee or commission in connection with such
transactions for which Buyer or its Affiliates may be held liable.
3.20. PRODUCT LIABILITY. None of the Champion Companies has any
liability arising out of any injury to individuals or property as a result of
the ownership, possession or use of any product manufactured, sold, leased or
delivered by any of the Champion Companies except: (i) for any asbestos related
actions or claims; (ii) for any environmental matters which are addressed in
Section 3.11; and (iii) with respect to matters not covered by clauses (i) and
(ii) above, except to the extent accrued or reserved against on the Final
Closing Statement of Net Assets. To Seller's Knowledge, there are no such
pending product liability claims against the Champion Companies except as set
forth on Disclosure Schedule 3.20.
3.21. PRODUCT WARRANTY. To Seller's Knowledge, (i) except as set
forth in Section 3.21 of the Disclosure Schedule, none of the products
manufactured, sold, leased, or delivered by the Champion Companies prior to
Closing is currently the subject of a product recall and (ii) the accrual
included in the Financial Statements for product warranty claims is adequate.
3.22. DISCLOSURE SCHEDULES. All Disclosure Schedules attached
hereto are true, correct and complete as of the date of this Agreement, and will
be true, correct and complete as of the Closing Date.
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<PAGE> 30
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Seller that the statements contained
in this Section 4 are true and correct as of the date of this Agreement and
will be true and correct in all material respects on the Closing Date.
4.1. ORGANIZATION OF BUYER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
4.2. AUTHORIZATION OF TRANSACTION AND VALIDITY OF AGREEMENT.
Buyer has all requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the respective boards of directors of
Buyer and the designated Affiliates of Buyer which will acquire shares of the
Related Companies or the assets of the Canadian Division and no other corporate
proceedings on the part of Buyer or its Affiliates are necessary to authorize
this Agreement and to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Buyer and
(assuming it is duly and validly executed by Seller) constitutes a valid and
binding agreement of Buyer, enforceable against Buyer in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
generally and by general equitable principles.
4.3. CONSENTS, APPROVALS AND FILINGS. Buyer and its Affiliates
are not required to give any notice to, make any filing with, or obtain any
consent, authorization or approval from any Governmental Authority in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby except: (i) those set
out on Disclosure Schedule 4.3; (ii) the filings required under the
Hart-Scott-Rodino Act and similar laws of foreign jurisdictions; and (iii)
where the failure to give notice, to file, or to obtain any consent,
authorization or approval would not have a material adverse effect on Buyer's
ability to consummate the transactions evidenced hereby.
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<PAGE> 31
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
4.4. NON-CONTRAVENTION. Neither the execution and the delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will: (i) conflict with or breach any provision of the certificate of
incorporation or by-laws (or similar organizational documents) of Buyer or its
designated Affiliates that acquire the Related Companies or the Canadian
Division; (ii) violate any statute, regulation, rule, injunction, judgment,
order or decree of any Governmental Authority applicable to Buyer, its
Affiliates or any of their assets; (iii) result in a breach of, constitute a
default under, or give rise to any right of termination or acceleration under,
any provision of any agreement, contract, lease, license, or instrument to
which Buyer or its Affiliates is a party, is bound or by which any of their
assets is subject, except in the case of clauses (ii) and (iii) for violations,
breaches, defaults or rights of termination or acceleration would not have a
material adverse effect on Buyer's ability to consummate the transactions
evidenced hereby.
4.5. BROKERS, FINDERS, ETC. Other than Chase Securities, Inc.,
whose fees will be paid by Buyer, Buyer has not retained any broker, finder, or
agent in connection with the transactions contemplated by this Agreement who
would have a valid claim for a fee or commission in connection with such
transactions for which Seller or its Affiliates may be held liable.
4.6. AVAILABILITY OF FUNDS. Buyer will have available on the
Closing Date sufficient funds to enable it to consummate the transactions
contemplated by this Agreement.
4.7. INVESTMENT. Buyer is not acquiring the Champion Common
Stock (and by virtue thereof the shares of the Champion Subsidiaries) and Buyer
and its designated Affiliates are not acquiring the shares of the Related
Companies with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act of 1933, as amended. Buyer
acknowledges that it has received, or has had access to, all information
necessary or advisable to enable it and its Affiliates to make a decision
concerning the purchase of the Champion Common Stock and the shares of the
Related Companies.
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<PAGE> 32
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
5. COVENANTS OF SELLER AND BUYER.
5.1. BUSINESS COVENANTS OF SELLER. Except for transactions set
forth on Disclosure Schedule 3.7 and for transactions contemplated by this
Agreement, during the period from the date of this Agreement and continuing
until the Closing Date, Seller will cause the Champion Companies to carry on
their respective businesses in the ordinary course consistent with past
practice. Without limiting the generality of the foregoing, and except for
transactions set forth on Disclosure Schedule 3.7 and for transactions
contemplated by this Agreement, Seller will not, without the prior consent of
Buyer (which shall not be unreasonably withheld or delayed), cause or permit
the Champion Companies to:
(a) authorize for issuance, issue, sell or deliver
(whether through the issuance or granting of options, warrants, subscriptions
or otherwise) any stock of any class or any other securities (including
indebtedness having the right to vote) or equity equivalents (including stock
appreciation rights) to Persons other than another Champion Company, except
pursuant to any Champion Benefit Arrangement providing for the issuance of
Seller's stock;
(b) acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or acquiring by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof;
(c) sell, lease or otherwise dispose of any of its
material assets, except in the ordinary course of business consistent with past
practices;
(d) amend its charter or by-laws (or similar
organizational documents) except for changes made to a company's name in
connection with the transactions contemplated hereunder;
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<PAGE> 33
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(e) make any capital expenditures which in the
aggregate exceed $2 million (excluding any capital expenditures reflected in
any capital authorizations, additions or budgets previously disclosed to
Buyer);
(f) create, incur or assume any long-term debt;
(g) except in the ordinary course of business
consistent with past practice, create, incur or assume any short-term debt to
Persons other than another Champion Company or to Cooper Finance Inc. in the
ordinary course of daily cash management activities consistent with past
practices;
(h) assume, guarantee, endorse or otherwise become
liable or responsible for the obligations of any other Person other than
another Champion Company;
(i) permit any of its current insurance policies to
be canceled or terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse, replacement
policies providing coverage substantially similar to or greater than coverage
remaining under those canceled, terminated or lapsed are in full force and
effect;
(j) except as required by law, or pursuant to the
terms of any collective bargaining agreement; (i) enter into, adopt, amend or
terminate any Champion Employee Plan, Champion Benefit Arrangement or Champion
International Plan; or (ii) increase the compensation or fringe benefits of any
director, officer or other employee, except such increases as are granted in
the ordinary course of business consistent with past practice (which shall
include normal periodic performance reviews and related compensation and
benefit increases); or
(k) agree to take any of the foregoing actions.
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<PAGE> 34
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Notwithstanding the provisions of this Section 5.1, nothing
in this Agreement shall be construed or interpreted to (i) prevent Seller and
the Champion Companies from making, accepting or settling intercompany advances
to, from or with one another, or engaging in any other transaction incidental
to their normal cash management procedures including short-term investments in
time deposits, certificates of deposit and bankers acceptances made in the
ordinary course of business; or (ii) prevent the Champion Companies from paying
dividends.
5.2. ACCESS TO INFORMATION.
(a) Between the date of this Agreement and the
Closing Date, Seller will give Buyer (or its authorized representatives)
reasonable access to all books, records, plants, offices, warehouses and other
facilities and properties of the Champion Companies during regular business
hours and upon reasonable notice, and will reasonably permit Buyer to make
copies of such books and records. Buyer shall not (and shall cause its
authorized representatives not to) conduct any such investigation in a manner
which interferes unreasonably with the operation of the Business.
(b) With respect to any environmental due
diligence: (i) Buyer shall not conduct any soil, groundwater, air or other
sampling upon any Owned Real Property, Leased Real Property or any property
otherwise used by the Champion Companies (including off-site locations),
without Seller's prior written consent (which shall not be unreasonably
withheld), and (ii) Buyer shall notify Seller prior to contacting any
Governmental Authority concerning environmental matters relating to the
Business and keep Seller apprised of any material communications with or any
material inquiries or requests made by any Governmental Authority. Buyer
shall conduct such environmental due diligence of the Champion Companies as
Buyer, in its sole discretion, deems reasonable and appropriate, and Seller
shall cooperate in good faith with such investigation. Buyer shall indemnify,
defend and hold Seller harmless from any and all material liability (excluding
consequential damages) from environmental conditions to the extent they arise
directly out of or are aggravated by the performance of Buyer's environmental
inspection.
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<PAGE> 35
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(c) All information provided or obtained by Buyer
under this Section 5.2 shall be subject to the terms and conditions of the
Confidentiality Agreement between Seller and Buyer dated April 21, 1998
attached hereto as Exhibit IX.
5.3. CONSENTS; FILINGS; FULFILL CONDITIONS.
(a) Each of the parties hereto will use its
reasonable best efforts to obtain consents of all Persons necessary for the
consummation of the transactions contemplated by this Agreement.
(b) Each of the parties hereto will use its
reasonable best efforts (i) to file expeditiously all filings or submissions
required under the Hart-Scott-Rodino Act in order that Seller and Buyer may
consummate the transactions contemplated by this Agreement, and (ii) to make
all such other filings, notifications and requests for consent, approval or
permission that may be required by any statute, Law, Environmental Law,
regulation or judicial decree of any jurisdiction in connection with the
transactions contemplated by this Agreement and the Other Agreements. Buyer
and Seller shall each furnish to the other such necessary information and
reasonable assistance as the other may request in connection with the
preparation of any such filings, submissions, notifications and requests.
Buyer and Seller shall each keep the other apprised of any communications with
and any inquiries or requests for additional information made by any
Governmental Authority. Buyer and Seller shall, upon the request of any
Governmental Authority, supply such authority with any additional requested
information as expeditiously as is reasonably possible, and shall use their
reasonable best efforts to cause the satisfaction or termination of the
applicable waiting period or any extension thereof under the Hart-Scott-Rodino
Act or any other applicable pre-merger notification laws.
(c) Seller and Buyer shall each use its reasonable
best efforts (i) to cause to be fulfilled the conditions to their respective
obligations set forth in Sections 8.1 and 8.2 and (ii) to
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<PAGE> 36
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
take, or cause to be taken, such other actions as are necessary, proper or
advisable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement.
5.4. FEES AND EXPENSES. Whether or not the transactions
contemplated by this Agreement are consummated, all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses.
5.5. PUBLIC ANNOUNCEMENTS. Neither Buyer nor Seller (nor any of
their respective Affiliates) will issue any press release or otherwise make any
public statement with respect to the transactions contemplated hereby without
the prior written consent of the other party (which shall not be unreasonably
withheld or delayed); provided, however, either party hereto may make any
public disclosure it believes in good faith and upon advice of counsel is
required by applicable law or stock exchange rules or regulations in which case
the disclosing party will use its reasonable efforts to advise the other party
prior to making the disclosure.
5.6. USE OF THE COOPER NAME. No interest in or right to use the
"Cooper" name is being conveyed pursuant to this Agreement, and following the
Closing Date, Buyer and its Affiliates (including the Champion Companies) shall
not use the "Cooper" name as part of any trade name, corporate name, assumed or
fictitious name, trademark or service mark; provided, however, the Champion
Companies may sell, use and distribute the existing supply of products and
materials bearing the "Cooper" name including signage, packaging, sales aids,
sales literature and stationery. Promptly, but in no event later than 30 days
after the Closing Date, Buyer shall, or shall cause its Affiliates to, take
such actions as are necessary to change the name of any Champion Company which
includes the name "Cooper" so that "Cooper" does not appear in the Champion
Company's name.
5.7. COMPANY BOOKS AND RECORDS. After the Closing Date, Buyer
shall, and shall cause its Affiliates to, (i) permit Seller and its employees
or agents to inspect and copy all books, records and other documents of the
Champion Companies which relate to the period prior to the Closing
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<PAGE> 37
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Date, (ii) maintain and preserve all such books, records and other documents at
least for the greater of 7 years after the Closing Date or any applicable
statutory or regulatory retention period, and (iii) notify Seller before any
such books, records and other documents are disposed of and allow Seller the
right to obtain the originals of such books, records or other documents prior
to their disposal.
5.8. INSURANCE COVERAGE.
(a) As of the Closing Date, Seller or its
Affiliates shall cancel insurance coverage and claims service contracts
relating to self insured programs applicable to the Champion Companies for
occurrences (with respect to any "occurrence" policies) or claims made (with
respect to any "claims-made" policies) after the Closing Date (other than
insurance policies in the name of a Champion Company); provided, however, that
the remaining insurance coverage shall be available to the Champion Companies
with respect to insured occurrences on or prior to the Closing Date relating to
the Business if and only to the extent that Buyer and its Affiliates including
the Champion Companies have assumed or paid the loss or liability attributed to
such occurrences. If after the Closing, Seller or one of its Affiliates
actually receives cash proceeds (excluding any return of premium or reimbursed
attorney's or investigation or other fees) from an insurer that are
attributable to such insurance coverage with respect to any insured occurrences
on or prior to the Closing Date, then such cash proceeds shall be paid to Buyer
(net of any deductible, co-payment, retro fees, self-insured premiums, defense
costs or other charges paid or payable to the insurance carrier or other third
parties or obligations to reimburse the insurance carrier for which Seller, or
any of its Affiliates, is liable and which relate to the insured occurrences)
to the extent that Buyer or its Affiliates have assumed or paid the loss or
liability attributed to such occurrences.
(b) Buyer shall reimburse Seller for any
administrative costs, retro fees, premiums, self- insured or deductible loss
costs or other expenses that Seller or its Affiliates is charged after the
Closing by an insurance carrier relating to insurance coverage applicable to
the Champion Companies prior to Closing. Buyer shall indemnify Seller for any
claims by insurance carriers for
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
indemnity arising from or out of claims by or against any Champion Companies,
acts or omissions of any Champion Company, or related to the Business. Within
30 days of Closing, the Buyer shall replace any applicable outstanding
certificates of insurance provided to Persons in connection with the Business
with a new certificate of insurance for the requisite coverage.
(c) The obligations of Seller and its Affiliates
under this Section 5.8 hereunder shall not include prosecuting or defending
litigation relating to claims of the Champion Companies unless Seller elects to
engage in such litigation upon a request by Buyer to do so, which litigation
would be conducted at Buyer's expense.
5.9. TRANSFER COSTS. Regardless of which party is required to
pay the following transfer costs under applicable law, Buyer and Seller shall
equally share the cost of (i) any sales, use, value added, transfer,
documentary, registration or stamp and any recording, notarial or filing, and
other similar taxes, fees and expenses (including all applicable stock
transfer, real estate transfer taxes, and including any penalties, interest and
additions to such Tax) incurred in connection with this Agreement and the
transactions contemplated hereby; (ii) any license fees or other costs and
expenses payable to a licensor or lessor in order to assign, license,
sublicense, lease, sublease or otherwise transfer any computer hardware or
software used in the Business to Buyer or its Affiliates including the Champion
Companies, and (iii) any fees for appraisals obtained for the purpose of
supporting the allocation of the Purchase Price pursuant to Section 2.10.
Notwithstanding the foregoing, any value added taxes or Canadian General Sales
Taxes will be fully paid by the party customarily responsible therefor to the
extent such taxes are recoverable by credit or otherwise.
5.10. DISCLOSURE SUPPLEMENTS. If, prior to Closing, Seller
notifies Buyer in writing of any condition, event or development causing a
breach of any of the representations and warranties of Seller in this Agreement
and such condition, event or development has had a Material Adverse Effect upon
the financial condition of the Champion Companies taken as a whole, then Buyer
may have the right to terminate this Agreement pursuant to Section 10.1(b).
Unless Buyer terminates this
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<PAGE> 39
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Agreement within 10 days of the date of Seller's notice pursuant to Section
10.1(b) by reason of such condition, event or development, Seller's written
notice will be deemed to have amended the disclosure schedules or otherwise
qualify the relevant representations and warranties so as to cure any breach of
the relevant representations and warranties.
5.11. WARN ACT. Buyer agrees to indemnify, defend and hold
harmless the Seller Indemnified Parties from any Adverse Consequences arising
from the failure to comply with the Worker Adjustment and Retraining
Notification Act relating to a "plant closing" or "mass layoff" (as those terms
are defined in such Act), by Buyer or the Champion Companies, occurring on or
after the Closing Date. Seller agrees to indemnify, defend and hold harmless
Buyer Indemnified Parties from any Adverse Consequences arising from the
failure to comply with the WARN Act relating to a "plant closing" or "mass
layoff," by Seller or the Champion Companies, occurring on or prior to the
Closing Date.
5.12. ASSUMPTION OF CERTAIN SELLER OBLIGATIONS.
(a) "SELLER'S COMPANY OBLIGATIONS" shall mean any
obligation, commitment, liability or responsibility of Seller, its Affiliates
or its or their Predecessors (whether or not also an obligation, commitment,
liability, or responsibility of or claim against, in whole or in part, the
Champion Companies) arising, undertaken or created in connection with, on
behalf of or for the benefit of the Champion Companies, or arising from the
conduct of the Business, and relating to (i) any employment or severance
agreements (with the employees set forth on Disclosure Schedule 5.12(i), (ii)
any stock purchase or asset purchase agreements concerning the acquisition or
divestiture of any shares or assets of the Champion Companies or of the
Business (including the obligations of Seller and its Affiliates under the
agreements set forth in Disclosure Schedule 5.12(ii)); (iii) any labor or
collective bargaining agreements relating to the Champion Companies; (iv) any
contracts with any Governmental Authority relating to the Champion Companies;
(v) any licenses or leases of computer hardware and software relating to the
Champion Companies (including the licenses or leases set forth
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
on Disclosure Schedule 5.12(v)); (vi) Performance Obligation Instruments,
Outstanding FX Contracts and Additional FX Contracts; (vii) the orders and
decrees with the Governmental Authorities relating to the Champion Companies
described in Disclosure Schedules 3.9 and 3.11 except to the extent Seller is
obligated to reimburse or indemnify Buyer and its Affiliates for liabilities
relating to such orders and decrees pursuant to this Agreement; (viii) fees,
expenses and costs incurred in the recruitment and relocation of employees
including the excess of any advances made or costs incurred by Seller or its
Affiliates over proceeds received on disposition of the property relating to
home sale assistance program or employee relocation policy; (ix) the
commitments for charitable contributions set forth on Disclosure Schedule
5.12(ix); (x) the operation of and products manufactured or sold by the Wagner
industrial brake business including all liabilities arising from or related to
asbestos in such industrial brakes regardless of when the industrial brakes
were manufactured or sold which business was sold by Seller to Magnetek, Inc.
pursuant to an Agreement for Sale of Stock dated as of December 30, 1986; (xi)
the contingent fees payable to Seller's outside counsel to the extent such fees
relate to harbor maintenance tax refunds that are received by the Champion
Companies and estimated savings recognized by the Champion Companies for 1998
harbor maintenance taxes if such taxes would have been paid consistent with
past practice; (xii) retrospectively rated casualty insurance policies in the
name of a Champion Company including those policies set forth in Disclosure
Schedule 5.12(xii); (xiii) the agreement with Sprint for telephone services,
voice and data communications; (xiv) regional supply agreements for the
purchase of office supplies/MRO materials; (xv) any agreements for motor
contract carriage relating to the Champion Companies; (xvi) the agreement with
Donlen Corp. and GE Capital Fleet Services for the acquisition, maintenance and
disposal of vehicles; and (xvii) costs incurred by Seller for travel
arrangements for Employees.
(b) Buyer expressly agrees that it shall assume
Seller's Company Obligations (except for the liabilities described in Section
5.12(a)(x)) to the extent related solely to the Champion Companies and shall
discharge the same in accordance with their terms. Buyer shall cause one of
its designated Affiliates to assume the Seller's Company Obligations described
in Section 5.12(a)(x). For purposes of clarification, after the Closing the
Champion Companies will not be
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<PAGE> 41
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
eligible to participate in the agreements and programs referred to in clauses
(xiv) through (xvii) above, however, the Buyer will assume any liability for
charges under such agreements including those which the Champion Companies may
incur during the transition period following Closing when Buyer is establishing
comparable arrangements for the Champion Companies. Seller shall retain the
cash proceeds for any rebates relating to the agreements and programs referred
to in clauses (xvi) and (xvii) above. Buyer acknowledges that it will be
liable for all continuing obligations of Seller after the Closing with respect
to the Seller Company Obligations referred to in clauses (i) through (xiii)
above. Buyer agrees that it will cause the Champion Companies to continue to
participate in Seller's agreement with Sprint for telephone services, voice and
data communications until the current agreement expires on April 30, 2000 and
the Champion Companies will continue to receive the discounts and service
credits related to their use of the Sprint services.
(c) After the Closing Date and upon Seller's
request, and for no further consideration, Buyer shall use and shall cause any
Affiliate of Buyer to use its reasonable best efforts to obtain full releases
of Seller and any of its Affiliates from liability under the Seller's Company
Obligations assumed by the Buyer pursuant to paragraph (b) above, provided,
however, that until Buyer obtains such releases, Buyer shall not take, and
shall not permit any Affiliate of Buyer to take, any action that has the effect
of amending or otherwise modifying any provisions of any of the Seller's
Company Obligations assumed by the Buyer for which Seller or any of its
Affiliates may have continuing liability, either primary or contingent, except
for amendments or modifications which do not (i) increase in any material
respect any liability of Seller or any of its Affiliates thereunder, or (ii)
extend the period of time during which Seller or any of its Affiliates will be
obligated or liable thereunder.
5.13. PAYMENT FOR INTER- AND INTRA-COMPANY ACCOUNTS.
(a) Subject to paragraph (b) below, effective as of
the Closing, (i) Buyer shall be deemed to have acquired from Seller and its
Affiliates, all inter- and intra-company payables
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
and loans that are due to Seller and its Affiliates from the Champion Companies
and (ii) Seller shall be deemed to have acquired from the Champion Companies
all inter- and intra-company payables and loans that are due to the Champion
Companies from the Seller and its Affiliates. Seller and Buyer agree that the
consideration payable under Section 2.2 hereof is net and inclusive of the
amount of inter- and intra-company accounts deemed transferred pursuant to this
Section 5.13. Notwithstanding the foregoing, any liabilities on the books of
the Champion Companies that are paid by Seller or its Affiliates but not yet
booked as inter- and intra-company payables or receivables (a) for items shown
on Disclosure Schedule 2.3(h), or (b) for items not shown on Disclosure
Schedule 2.3(h) but which provide a direct and measurable benefit to the
Champion Company on whose behalf the liability was paid, shall be settled after
Closing in cash within 45 days after the date of the invoice which Seller shall
issue to Buyer for such amounts. If Buyer fails to pay such invoice in full
within 30 days of the invoice date, then interest shall accrue on the amount
due and payable at the rate of 9% per annum.
(b) Within five (5) business days following the
date on which the Final Closing Statement of Net Assets is determined (i) if
there is a receivable due to Champion Automotive S.p.A. under clause (i) of
Section 2.3(i), Seller shall cause Cooper Italia S.p.A. to pay Champion
Automotive S.p.A. the amount of the receivable, if any, due from Cooper Italia
S.p.A. to Champion Automotive S.p.A. set forth in the Final Closing Statement
of Net Assets, or (ii) if there is a receivable due to Cooper Italia S.p.A.
under clause (ii) of Section 2.3(i), Buyer shall cause Champion Automotive
S.p.A. to pay Cooper Italia S.p.A. the amount of the payable, if any, due from
Champion Automotive S.p.A. to Cooper Italia S.p.A. set forth in the Final
Closing Statement of Net Assets.
5.14. PATENT AND TRADEMARK MATTERS. Seller agrees to cooperate
with Buyer in transferring registrations to and perfecting the title of the
Champion Companies in the Intellectual Property used in the Business. In
respect of any Intellectual Property listed on Disclosure Schedule 3.15(b)
which is registered in name of Seller or its Affiliates, Seller shall execute
all documents necessary to perfect title to such Intellectual Property in the
Champion Companies prior to Closing.
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
If such Intellectual Property is registered in the United States, Seller shall
complete and file the documents necessary to record the transfer of such
registrations of title with the United States Patent and Trademark Office prior
to Closing and Seller shall pay any government fees or professional fees
relating thereto. If such Intellectual Property is registered outside the
United States, Seller shall deliver the documents, duly executed by Seller, to
foreign legal counsel prior to Closing with instructions and any authorizations
necessary to record the transfer of such registrations with the appropriate
Governmental Authorities and Seller shall pay any professional or recording
fees relating thereto that are incurred before the Closing Date. After
Closing, Seller shall complete the recordation of transfer of registrations
outside the United States, and Buyer will reimburse Seller for one-half of any
professional and recording fees incurred by Seller after Closing in connection
therewith.
5.15. PERFORMANCE OBLIGATION INSTRUMENTS. Buyer shall use
commercially reasonable efforts, on or as soon as practicable after the Closing
Date, to replace all "PERFORMANCE OBLIGATION INSTRUMENTS" (as defined below)
existing on the Closing Date, or to obtain the full release of Seller and its
Affiliates from any liability related thereto. Without limiting Buyer's
obligations under Section 5.12, Buyer shall reimburse Seller and its Affiliates
for any liability that Seller or its Affiliates incur in connection with any
Performance Obligation Instruments as a result of such Performance Obligation
Instrument not being so replaced (or otherwise terminated) or as a result of
the failure to obtain the full release of Seller and its Affiliates from any
liability related thereto including the value of payments made under a claim or
drawing together with associated costs and fees to maintain, renew or extend
such instruments. "PERFORMANCE OBLIGATION INSTRUMENTS" shall mean,
collectively, each commercial letter of credit, standby letter of credit, bond,
bank guarantee, guarantees of Industrial Development Revenue Bonds, guarantees
of leases and other contracts, or other similar types of instrument and bid,
payment, performance or other bond or surety, in each case that relates solely
to the Business and including those specifically described on Disclosure
Schedule 5.15 or that may be created after the date hereof in the ordinary
course of conducting the Business consistent with past practices (and as to
which Seller has notified Buyer in writing prior to the Closing Date.) If, by
March 31, 1999, Buyer has not obtained releases or effected the complete
replacement of any
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<PAGE> 44
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
outstanding Performance Obligation Instrument such that Seller and its
Affiliates are fully released from any liability related thereto, Buyer shall
obtain and deliver to Seller letters of credit in favor of Seller, from
financial institutions reasonably acceptable to Seller and on terms reasonably
satisfactory to Seller, which fully cover the liabilities under each such
Performance Obligation Instrument. Seller or its Affiliates may elect not to
renew or extend any Performance Obligation Instrument to the extent (a)
required by any applicable law; (b) reasonably necessary to avoid a material
Adverse Consequence to Seller or its Affiliates or (c) Buyer has not obtained
and delivered to Seller letters of credit required because of Buyer's failure
to effectuate any replacement required under this Section 5.15. Seller shall
use reasonable efforts to notify Buyer prior to Seller's renewal or extension
of any Performance Obligation Instruments provided that, notwithstanding
anything to the contrary in this Agreement, in no event shall Seller incur any
liability whatsoever for failure to so notify. Any election by Seller or its
Affiliates not to renew or extend a Performance Obligation Instrument shall not
affect any indemnification obligation of Buyer. Furthermore, Buyer
acknowledges and agrees that Seller has no obligation or intention to renew or
extend a Performance Obligation Instrument beyond the first anniversary of the
Closing Date.
5.16. FOREIGN EXCHANGE CONTRACTS.
(a) On or as soon as practicable after the Closing
Date, Buyer shall use commercially reasonable efforts to obtain the full
release of Seller and its Affiliates from any liability under the "Outstanding
FX Contracts" and "Additional FX Contracts" (as such terms are defined below).
Until such time as Buyer obtains such release, the procedures set forth in
Section 5.16(b) shall apply to the settlement of such foreign exchange
contracts.
(b) Seller has set forth on Disclosure Schedule
5.16 all outstanding foreign exchange contracts entered into by Seller or its
Affiliates on or before the date hereof which relate exclusively to the
Business (the "OUTSTANDING FX CONTRACTS"). For each Outstanding FX Contract:
(i) Buyer shall deliver on the "Maturity Date" to the "Bank" designated on such
schedule the amount
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<PAGE> 45
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
of the currency sold (which is designated in such schedule as a negative
number) in the currency designated in such schedule; and (ii) Seller shall
direct each Bank designated in such schedule to deliver to Buyer, or a Buyer
Affiliate as instructed by Buyer, the amount of the currency purchased (which
is designated in such schedule as a positive number) in the currency designated
in such schedule. Any delivery instructions under this Section 5.16 shall be
provided in writing no later than two business days before the applicable
Maturity Date. For any foreign exchange contract entered into by Seller or its
Affiliates after the date hereof on behalf of or for the benefit of the
Champion Companies in the ordinary course of the Business consistent with past
practices that requires delivery after the Closing Date ("ADDITIONAL FX
CONTRACTS"), (i) Seller shall promptly notify Buyer in writing of any
Additional FX Contracts, (ii) Buyer shall timely deliver the amount of the
currency sold thereunder in accordance with the terms thereof, and (iii) Seller
shall direct the Bank to each such Additional FX Contract to deliver timely to
Buyer or a Buyer Affiliate (as Buyer may instruct) the currency purchased
thereunder in accordance with the terms thereof. On and after the Closing
Date, Buyer shall be entitled to all rights of Seller under all Outstanding FX
Contracts and Additional FX Contracts (including the right to receive all
payments due to Seller and its Affiliates thereunder in accordance with the
terms thereof), and Seller shall take such actions as Buyer may reasonably
request on or after the Closing Date to provide Buyer with the benefit of all
rights and remedies available to Seller and its Affiliates under each
Outstanding FX Contract and Additional FX Contract.
5.17. STANDARD MOTOR PRODUCTS PURCHASE PRICE ADJUSTMENT AND
CONSIGNED INVENTORY. Seller and Buyer confirm and agree that Seller has the
right to receive any and all payments due from Standard Motor Products pursuant
to Sections 7.20(d), (e) and (f) of the Asset Exchange Agreement dated as of
March 28, 1998 among Standard Motor Products and certain Champion Companies.
If Buyer or its Affiliates receive any such payments from Standard Motor
Products, the Buyer shall and shall cause its Affiliates promptly to remit any
such payments to Seller, but in no event later than five business days
following the receipt of such payments by Buyer or its Affiliates. If Buyer or
its Affiliates fail to timely remit such payments to Seller, Buyer shall pay
Seller interest on such amount at the rate of nine percent (9%) per annum from
the due date of such
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<PAGE> 46
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
remittance. Seller agrees that it shall be responsible for the purchase price
adjustment, if any, that may be due to Standard Motor Products pursuant to
Section 2.9(b) of such Asset Exchange Agreement.
5.18. FURTHER ASSURANCES/CONSENTS AND APPROVALS.
(a) Seller and Buyer agree that, from time to time,
whether before, at or after the Closing Date, each of them will, and will cause
their respective Affiliates to, execute and deliver such further instruments of
conveyance and transfer and take such other action (including any action
associated with providing notice to, making filings with or obtaining the
consent of appropriate Governmental Authorities with respect to, or causing the
transfer, of any Environmental Permits) as may be reasonably necessary to carry
out the purposes and intents hereof.
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(b) This Agreement and the transactions
contemplated hereby shall not constitute an assignment, sale, conveyance,
transfer or lease of any interest in any contract, lease or other agreement if
an assignment, sale, conveyance, transfer, lease or an attempt to make such an
assignment, sale, conveyance, transfer or lease (a) without the consent of or
notice to a third party would constitute a breach or violation or affect
adversely the rights of Seller, Buyer or their respective Affiliates thereunder
or (b) is restricted or prohibited by law, including any Environmental Law.
Any transfer, sale, conveyance, assignment or lease to Buyer or its Affiliates
(including the Champion Companies) of any interest in any contract, lease or
other agreements that requires filing with, notice to or the consent of a third
party shall be made subject to such filing or notice being given or such
consent or approval being obtained. If such consent or approval is not
obtained on or prior to the Closing Date, Seller and Buyer shall continue to
use commercially reasonable efforts to obtain any such approval or consent
until the earliest of (i) such time as such consent or approval has been
obtained or (ii) the date Seller reasonably determines that the third party
will not provide its consent or approval. In the event Seller reasonably
determines that the third party will not provide its consent or approval,
Seller will cooperate with Buyer and its Affiliates in any lawful and feasible
arrangement
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
to provide that Buyer and its Affiliates shall receive the benefits under any
such contract, lease or other agreement, including performance by Seller as
agent, provided that Buyer and its Affiliates shall undertake to pay, satisfy
and indemnify the Seller against the corresponding liabilities for the
enjoyment of such benefit as if such consent or approval has been obtained.
Buyer shall reimburse Seller for any costs and expenses it incurs after the
Closing Date in seeking to obtain or obtaining any consent or approval.
5.19. OTHER AGREEMENTS. At Closing, the parties hereto shall or
shall cause their respective Affiliates to execute and deliver the following
agreements (collectively, the "OTHER AGREEMENTS"):
(a) Canadian Asset Transfer Agreement;
(b) Assignments or subleases of computer hardware
and software;
(c) Transition Services Agreement; and
(d) Such other agreements or documents as are
reasonably required to consummate the transactions contemplated by this
Agreement.
5.20. BUYER INVESTIGATION: NO REPRESENTATIONS OR WARRANTIES.
(a) BUYER HEREBY ACKNOWLEDGES THAT IT HAS
INDEPENDENTLY EVALUATED AND CONDUCTED DUE DILIGENCE SATISFACTORY TO BUYER WITH
RESPECT TO THE ASSETS OF THE "CHAMPION COMPANIES" (INCLUDING, BUT NOT LIMITED
TO, THE OPERATIONS, FACILITIES, CONTRACTS, CUSTOMER FILES, INTELLECTUAL
PROPERTY, FINANCIAL INFORMATION AND PROSPECTS OF THE BUSINESS), AND HAS BEEN
REPRESENTED BY, AND HAD THE
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<PAGE> 48
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
ASSISTANCE OF, COUNSEL IN THE CONDUCT OF SUCH DUE DILIGENCE, THE PREPARATION
AND NEGOTIATION OF THIS AGREEMENT AND THE ANCILLARY DOCUMENTS, AND THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY.
(b) SELLER HAS MADE AVAILABLE TO BUYER AND ITS
REPRESENTATIVES CERTAIN INFORMATION AND RECORDS RELATING TO THE ASSETS OF THE
"CHAMPION COMPANIES". IT IS UNDERSTOOD AND AGREED BY THE PARTIES THAT NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, HAS BEEN MADE BY SELLER OR ITS
AGENTS REGARDING THE ACCURACY OR COMPLETENESS OF ANY SUCH INFORMATION OR
RECORDS, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY OF THE "OTHER
AGREEMENTS", AND THAT SELLER WILL NOT HAVE OR BE SUBJECT TO ANY LIABILITY TO
BUYER OR ANY OTHER "PERSON" RESULTING FROM THE DISTRIBUTION TO BUYER, OR
BUYER'S USE, OF ANY SUCH INFORMATION OR RECORDS, EXCEPT AS EXPRESSLY PROVIDED
IN THIS AGREEMENT. FURTHERMORE, BUYER AGREES THAT ANY REPRESENTATIONS OR
WARRANTIES MADE BY SELLER OR ITS AFFILIATES WITH RESPECT TO THE STOCK OF THE
CHAMPION COMPANIES OR THE ASSETS OF THE CHAMPION COMPANIES BEING ACQUIRED BY
BUYER OR ITS AFFILIATES BY VIRTUE OF THE ACQUISITION OF THE STOCK OF THE
CHAMPION COMPANIES OR ASSETS OF THE CANADIAN DIVISION ARE SET FORTH IN THIS
AGREEMENT AND THE OTHER AGREEMENTS, AND THAT EXCEPT AS SO SET FORTH, THERE IS
NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED. EXCEPT AS
EXPRESSLY SET FORTH IN SECTION 3.11 OF THIS AGREEMENT, SELLER MAKES NO
REPRESENTATIONS OR WARRANTIES WHATSOEVER TO THE BUYER REGARDING THE PRESENCE OR
ABSENCE OF ANY HAZARDOUS SUBSTANCES, ASBESTOS CONTAINING MATERIALS, UNDERGROUND
STORAGE TANKS OR PCBS IN, AT OR UNDER ANY OF THE ASSETS OF THE "CHAMPION
COMPANIES" OR THE ACCURACY
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<PAGE> 49
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
OR COMPLETENESS OF ANY STATEMENTS, DOCUMENTS OR REPORTS REGARDING ENVIRONMENTAL
MATTERS RECEIVED FROM SELLER; HOWEVER, TO SELLER'S KNOWLEDGE, NO SUCH
STATEMENT, DOCUMENT OR REPORT REGARDING ENVIRONMENTAL MATTERS IS MATERIALLY
INACCURATE OR INCOMPLETE.
5.21. INDEMNIFICATION FOR ALLIEDSIGNAL LAWSUIT AND BOSCH
INFRINGEMENT CLAIM.
(a) Cooper Automotive Company is a defendant in a
lawsuit known as AlliedSignal, Inc. v. Cooper Automotive, Inc., Case No.
96-540 SLR (United States District Court, District of Delaware) involving a
patent infringement claim relating to the process of manufacturing
platinum-tipped spark plugs ("AlliedSignal Lawsuit"). Seller shall use
commercially reasonable efforts to obtain and deliver to Buyer at Closing a
license agreement, in a form reasonably acceptable to Buyer, granting Cooper
Automotive Company the right to make, use, sell, offer for sale or import any
product, process or invention of whatever nature covered by the patent(s) that
are the basis of AlliedSignal's claim. If Seller is able to deliver such
license agreement to Buyer (whether on or after Closing), Seller shall
indemnify the Buyer Indemnified Parties for any royalties or other amounts due
under such license agreement. If Seller is not able to deliver such license
agreement to Buyer (whether on or after Closing), Seller shall, for the
remaining term of the patent(s)' life, indemnify, defend and hold harmless the
Buyer Indemnified Parties from and against all Adverse Consequences relating to
the AlliedSignal Lawsuit.
(b) Robert Bosch GmbH has accused certain Champion
Companies of infringing Bosch's European Patent No. EP523062 relating to a glow
plug having a ferro-cobalt alloy (the "Bosch Infringement Claim"). Seller
shall use commercially reasonable efforts to obtain and deliver to Buyer at
Closing a license agreement, in a form reasonably acceptable to Buyer, granting
Champion Automotive (U.K.) Ltd and Champion Automotive S.p.A. the right to
make, use, sell, offer for sale or import any product, process or invention of
whatever nature covered by the patent(s) that are the basis of Bosch's claim.
If Seller is not able to deliver such license agreement to Buyer
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<PAGE> 50
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(whether on or after Closing), Seller shall, for the remaining term of the
patent(s)' life, indemnify, defend and hold harmless the Buyer Indemnified
Parties from and against all Adverse Consequences relating to the Bosch
Infringement Claim.
(c) Notwithstanding Section 5.21(a), if the final
judgment for the AlliedSignal Lawsuit (including all applicable appeals) does
not enjoin or otherwise prohibit any of the Champion Companies from
manufacturing platinum tipped spark plugs using the platinum ball welding
method used by the Champion Companies, which was the subject of the
AlliedSignal Lawsuit, then Seller's indemnity obligations for the AlliedSignal
Lawsuit shall cease, except for Seller's obligation to satisfy any claims for
damages.
(d) For purposes of determining the Seller's
indemnity obligations under this Section 5.21, the provisions of Section 9.6(b)
shall apply. Buyer and its Affiliates shall cooperate fully with Seller and
assist Seller, from and after the Closing Date, regarding all aspects of any
judicial, quasi-judicial, administrative, legal or equitable proceedings
relating to the AlliedSignal Lawsuit. Such cooperation shall include (a)
complying with all requests from the Seller for information from the Champion
Companies which relates to the AlliedSignal Lawsuit and (b) causing employees,
officers and directors of the Champion Companies (i) to make themselves
available for interviews by and consultations with attorneys and other
representatives for Seller; (ii) to testify at any depositions, hearings,
trials or any other proceedings in connection with the AlliedSignal Lawsuit;
and (iii) to analyze documents, testimony or other information relating to the
AlliedSignal Lawsuit. Buyer shall provide such cooperation and information
without the issuance of a subpoena, discovery request or other formal legal
process. All travel and out-of-pocket expenses associated with such
cooperation shall be borne by Seller, excluding cost of time expended by
officers, employees and directors of Buyer and its Affiliates.
5.22. THIRD PARTY DEBT. Seller shall use its reasonable best
efforts to pay off all foreign third party debt set forth on Disclosure
Schedule 2.3(m) before Closing. Following the Closing, the
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<PAGE> 51
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Buyer and its Affiliates will be responsible for the third party debt of the
Champion Companies set forth in Disclosure Schedule 2.3(m) and the obligations
of the Champion Companies relating to the industrial development revenue bonds
described in Section 5.23 below.
5.23. ASSIGNMENT OF BONDS TO BUYER. Seller holds and is entitled
to receive payments under the following industrial development revenue bonds:
(a) $7,200,000 City of Scottsville, Kentucky Industrial
Building Revenue Bond (Wagner Electric Corporation Project) Series 1994;
(b) $7,600,000 City of Glasgow, Kentucky Industrial Building
Revenue Bond (Wagner Electric Corporation Project);
(c) $20,000,000 Industrial Development Board of the Town of
Sparta, Tennessee Revenue Bond (Wagner Lighting Division of Cooper Automotive,
Inc. Project) Series 1995; and
(d) $4,100,000 Industrial Development Board of the City of
Smithville, Tennessee Revenue Bond (Moog Automotive, Inc. Project) Series 1995.
The payments due to Seller under these bonds are funded by real estate
lease payments from certain Champion Companies. At Closing, Seller shall
assign to Buyer, or its designated Affiliate, all of Seller's rights and
interest under such bonds including the right to receive any payment due
thereunder after the Closing Date.
5.24. TRANSITION SERVICES AGREEMENT. The parties shall commence
negotiating a mutually acceptable agreement pursuant to which Seller and its
Affiliates shall assist Buyer and its Affiliates in certain areas, such as
employee benefits, claims management and environmental in the transition of the
Business to Buyer's control after Closing.
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<PAGE> 52
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
5.25. ASBESTOS CLAIMS.
(a) EIS LIABILITIES. To the extent that Buyer or
its applicable Affiliate is not fully indemnified by Standard Motor Products
Company or its successors for Adverse Consequences arising from Asbestos Claims
due to products manufactured or sold prior to March 28, 1998, by Standard Motor
Products Company, its Affiliates, and their Predecessors in accordance with
that certain Asset Exchange Agreement, dated as of March 28, 1998, among SMP
Motor Products, Ltd., Standard Motor Products, Inc., Cooper Industries (Canada)
Inc., Moog Automotive Company, and Moog Automotive Products, Inc. and for
Adverse Consequences arising from Asbestos Claims due to products manufactured
by Seller or its Affiliates after March 28, 1998, through the Closing Date that
are sold under the tradenames formerly used by Standard Motor Products Company,
Seller shall indemnify, defend and hold Buyer and its Affiliates harmless from
and against such Adverse Consequences.
(b) INSURANCE CLAIMS. Seller shall make available
(and shall cause its Affiliates to make available) to Buyer and the Champion
Companies the rights of Seller and its Affiliates to any benefits, including
insurance proceeds, of or arising out of any insurance policy that covers
Asbestos Claims. Buyer shall (or shall cause its Affiliates to) promptly notify
Seller and submit any Asbestos Claims to the relevant insurance company or
companies on behalf of and in the name of either Pneumo Abex Corporation or
Moog Automotive Products, Inc., as successor by merger with Wagner Electric
Corporation. Buyer acknowledges that certain Insurance Agreement that is
Exhibit 2.6 (b) (iii) to the Asset Purchase Agreement dated as of November 21,
1994, by and between Pneumo Abex Corporation and Wagner Electric Corporation
and agrees to abide by its terms.
(c) INDEMNITY FOR DENIED CLAIMS UNDER WORKING LAYER
POLICIES.
(i) Subject to Section 5.25(c)(ii) and
(e), to the extent that an insurance carrier (a "DENYING CARRIER") denies Buyer
or the Champion Companies access to an
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<PAGE> 53
insurance policy under or as a result of which coverage for Asbestos Claims is
being provided as of the Closing Date as set forth on Exhibit X (collectively,
the "WORKING LAYER POLICIES") on the basis that Buyer or such Champion Company
is not, and does not succeed to the rights of, one or more of the insureds
under the policy, Seller shall indemnify, defend and hold Buyer and the
Champion Companies harmless against Adverse Consequences for Asbestos Claims in
the proportion equal to the percentage of participation the Seller or its
Affiliates is then achieving from the Denying Carrier under the then existing
agreement with the Denying Carrier, or, in the absence of an agreement with the
Denying Carrier as to the percentage of participation, could reasonably expect
to achieve from the Denying Carrier (the "WORKING LAYER POLICY INDEMNITY") .
(ii) At Seller's option upon written
notice to Buyer, which Seller may exercise in whole or in part from time to
time and in lieu of the Working Layer Policy Indemnity for the Asbestos Claims
for which the option is exercised, Buyer shall (or Buyer shall cause its
applicable Affiliate to) assign to Seller or its designated Affiliate (the
"CLAIM ASSIGNEE"), which the Claim Assignee shall assume, the liability for any
Asbestos Claim, for which the option is exercised, made before the Abex
Termination Date for Abex Products or made before the tenth anniversary of the
Closing Date for other applicable products for which coverage to Buyer or the
Champion Companies is being denied to the extent that neither Buyer nor any of
its Affiliates have been paid by an insurance carrier or another responsible
third party (the "UNCOMPENSATED CLAIMS"). Although, upon exercising such
option, the Claim Assignee will have assumed liability for the Uncompensated
Claims, Buyer shall indemnify and hold harmless the Claim Assignee from that
amount of the Uncompensated Claim that the Buyer would have paid on the claim
had the insurance not been denied. In other words, Buyer shall indemnify and
hold harmless the Claim Assignee for that portion of the Uncompensated Claim
that the Denying Carrier would not have paid even if the claim were accepted.
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<PAGE> 54
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(d) SUBSEQUENT LAYER POLICIES.
(i) With respect to coverage for
Asbestos Claims under any policy other than the Working Layer Policies (the
"SUBSEQUENT LAYER POLICIES"), Seller shall use its best efforts to support
Buyer in pursuing coverage under the Subsequent Layer Policies whether in the
name of Buyer or any of its Affiliates (including the Champion Companies) or in
the name of Seller or any of its Affiliates for the benefit of Buyer and its
Affiliates, including the Champion Companies. Subject to Section 5.25(d)(ii)
and (e), to the extent that an insurance carrier (a "SUBSEQUENT LAYER DENYING
CARRIER") denies Buyer or the Champion Companies access to a Subsequent Layer
Policy on the basis that Buyer or such Champion Company is not, and does not
succeed to the rights of, one or more insureds under the policy, Seller shall
indemnify, defend and hold Buyer and the Champion Companies harmless against
Adverse Consequences for Asbestos Claims in the proportion equal to the
percentage of participation Seller or its Affiliates is then achieving from the
Subsequent Layer Denying Carrier under the then existing agreement with the
Subsequent Layer Denying Carrier, or, in the absence of an agreement with the
Subsequent Layer Denying Carrier as to the percentage of participation, could
reasonably expect to achieve from the Subsequent Layer Denying Carrier (the
"SUBSEQUENT LAYER INDEMNITY").
(ii) At Seller's option upon written
notice to Buyer, which Seller may exercise from time to time and in lieu of the
Subsequent Layer Indemnity for the Asbestos Claims for which the option is
exercised, Buyer shall (or Buyer shall cause its applicable Affiliate
(including the Champion Companies)) to assign to Seller or its designated
Affiliate (the "SUBSEQUENT LAYER CLAIM ASSIGNEE"), which the Subsequent Layer
Claim Assignee shall assume, the liability for any Asbestos Claim, for which
the option is exercised, made before the Abex Termination Date for Abex
Products or made before the tenth anniversary of the Closing Date for other
applicable products for which coverage to Buyer or the Champion Companies is
being denied to the extent that neither Buyer nor any of its Affiliates have
been paid by an insurance carrier or another responsible third party (the
"SUBSEQUENT LAYER UNCOMPENSATED CLAIMS"). Although, upon exercising such
option, the Subsequent Layer Claim Assignee will have assumed liability for
the Subsequent Layer
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<PAGE> 55
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Uncompensated Claims, Buyer shall indemnify and hold harmless the Subsequent
Layer Claim Assignee from that amount of the Subsequent Layer Uncompensated
Claim that the Buyer would have paid on the claim had the insurance not been
denied. In other words, Buyer shall indemnify and hold harmless the Subsequent
Layer Claim Assignee for that portion of the Subsequent Layer Uncompensated
Claim that the Denying Carrier would not have paid even if the claim were
accepted.
(e) LIMITATIONS. Seller's obligation to indemnify,
defend and hold Buyer and the Champion Companies harmless against Adverse
Consequences for Asbestos Claims:
(i) shall not apply (A) with respect to
Asbestos Claims for products manufactured or sold by Pneumo Abex Corporation or
its Predecessors prior to December 30, 1994 (the "ABEX PRODUCTS"), unless the
Seller is notified of the specific Asbestos Claim on or before the date twelve
years and six months after the Closing Date (the "ABEX TERMINATION DATE") and
(B) with respect to all other Asbestos Claims, unless the Seller is notified of
the specific Asbestos Claim on or before the tenth anniversary of the Closing
Date, and
(ii) shall cease with respect to any
Denying Carrier or Subsequent Layer Denying Carrier, upon such Denying Carrier
or Subsequent Layer Denying Carrier acknowledging the right of Buyer or the
applicable Champion Company to access to the applicable policies under which
coverage for Asbestos Claims may be made.
Seller's obligations pursuant to Section 5.25(d) and the Subsequent
Layer Claim Assignee's obligation to assume liability upon the exercises of the
option shall cease when the Adverse Consequences (A) indemnified by Seller and
its Affiliates, (B) assumed by the Subsequent Layer Claim Assignee (for which
the Subsequent Layer Claim Assignee is not indemnified by Buyer), and (C) paid
by any and all carriers under the Subsequent Layer Policies, in the aggregate
after totaling the amounts in subsections (A), (B) and (C) immediately above,
reaches $50,000,000 (the "STOP LOSS POINT").
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<PAGE> 56
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Notwithstanding anything in this Section 5.25 to the contrary, in
determining Seller's obligation to indemnify, defend and hold Buyer and the
Champion Companies harmless against any Adverse Consequences for Asbestos
Claims resulting from the denial of coverage by a Denying Carrier and
Subsequent Layer Denying Carrier, the amount that Seller or its Affiliates
achieves or could reasonably expect to achieve is net of any self insurance
retention, retrospective premiums, fronting mechanisms or other self insurance
programs.
(f) BUYER'S INDEMNITY. Buyer shall indemnify,
defend, and hold Seller and its Affiliates harmless against Adverse
Consequences (regardless whether the claim is made against Seller or its
Affiliates or Buyer and its Affiliates):
(i) for any Asbestos Claim related to
any Abex Product if the notice of the specific claim is not provided to Seller
on or before the Abex Termination Date, and
(ii) for any other Asbestos Claim if the
notice of the specific claim is not provided to the Seller on or before the
tenth anniversary of the Closing Date, and
(iii) for any Asbestos Claim upon
reaching the Stop Loss Point, and
(iv) for any Asbestos Claim denied by
any Denying Carrier or Subsequent Layer Denying Carrier, upon such carrier
acknowledging Buyer's or any of its Affiliates' access to the policy, and
(v) for any retrospective premium,
fronting mechanisms or claim handling arrangements associated with an Asbestos
Claim under a policy that the carrier acknowledges Buyer or its Affiliates had
access.
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<PAGE> 57
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Notwithstanding anything herein to the contrary, Buyer shall be
responsible for and shall indemnify and hold Seller and its Affiliates harmless
against any Adverse Consequences incurred in connection with bringing suit or
participating in any mediation, arbitration or other alternative dispute
resolution proceeding against any insurance carrier in pursuit of coverage for
Asbestos Claims.
(g) COOPERATION. With respect to pursuit of
insurance coverage for Asbestos Claims, Buyer agrees use its best efforts to
commence suit and pursue coverage in the suit against any Denying Carrier or
Subsequent Layer Denying Carrier, unless otherwise agreed by the Parties.
Buyer and Seller will (and will cause their Affiliates to) cooperate with the
other and its counsel in connection with the pursuit of insurance coverage, the
pursuit of indemnity from SMPC, and the defense of Asbestos Claims, including,
making available their personnel, and providing such testimony and access to
their books and records as shall be reasonably necessary. Each party shall
(and each party shall cause its Affiliates to) negotiate using its best efforts
and in good faith with any carrier regarding coverage for Asbestos Claims.
Further, each party shall consult with the other in its discussions and
negotiations with the applicable carriers. Buyer shall on a quarterly basis
provide a report to Seller regarding the Asbestos Claims including a
description of the claims made, status of pending claims and claims which are
disposed. Neither party (nor its Affiliates) which a carrier acknowledges is
or has succeeded to the rights of one or more of the insureds under an Working
Layer Policy or a Subsequent Layer Policy shall enter into agreements with
such carrier as to coverage levels, without the consent of the other party,
which consent shall not be unreasonably withheld or delayed. If requested by
Seller, Buyer shall (and shall cause its Affiliates to) assign to Seller to the
extent that Seller or its Affiliates have indemnified Buyer or its Affiliates
for Asbestos Claims or assumed liabilities associated with Asbestos Claims any
rights or claims of Buyer or its Affiliates against any other Person associated
with such Asbestos Claims.
(h) DISCLAIMER. Other than pursuant to Section
3.17, Seller does not make any representation or warranty as to the financial
condition of any carrier, the adequacy of insurance coverage, the identity or
number of parties that may make claims under the policies, whether
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<PAGE> 58
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
pertaining to the Working Layer Policies or the Subsequent Layer Policies.
The parties acknowledge that other Persons may have claims under these
policies.
(i) ASSIGNMENT. Buyer or a Champion Company may
assign its rights and obligations under this Section 5.25 to an Affiliate of
Buyer provided it obtains Seller's prior written consent, which shall not be
unreasonably withheld or delayed. However, Buyer shall continue to have
responsibility for its indemnity of Seller and its Affiliates under this
Section 5.25 and Buyer shall bear the risk of and indemnify, defend and hold
Seller and its Affiliates harmless against any Adverse Consequences for
Asbestos Claims arising from any carrier denying either party or their
Affiliates access to an insurance policy as a result of such assignment.
(j) CONFIDENTIALITY. Except for any disclosure
required by law, rule of any stock exchange, or the requirement of any
Governmental Authority, the covenants and agreements of the parties pursuant to
this Section 5.25, including the amounts paid by Cooper or its Affiliates to
Buyer or its Affiliates based on what percentage of participation could be
reasonably expected to be achieved, is confidential and shall not at any time
be disclosed by either party (and each party shall cause its Affiliates not to
disclose it at any time) to any other Person.
5.26. ENVIRONMENTAL INSURANCE POLICY. Seller shall purchase an
environmental insurance policy in a form reasonably acceptable to both parties.
In the event Buyer elects to be a co-insured under such policy, Seller and
Buyer shall share equally the cost of the premium of the policy and any related
premium taxes. Further, in the event that a claim is made under such policy,
the related $250,000 deductible shall be paid by Buyer and shall apply to the
aggregate amount of Adverse Consequences suffered by the Buyer Indemnified
Parties as described in Section 9.3. Notwithstanding anything to the contrary
contained in this Agreement, a copy of this Agreement may be disclosed to the
insurer, whether such policy is purchased jointly by Buyer and Seller or solely
by Seller.
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<PAGE> 59
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
5.27. FRIABLE ASBESTOS REMEDIATION. Within sixty (60) days after
the Closing, a qualified contractor(s) or consultant(s) shall have conducted
surveys to identify friable asbestos, if any, at all of the active and
inactive, in whole or in part, Owned Real Property and Leased Real Property (to
the extent the Champion Companies have any obligation for facility or asbestos
maintenance at any Leased Real Property). Prior to the Closing, Seller and
Buyer shall have mutually agreed upon the choice of the contractor(s) or
consultant(s) and shall share equally the expenses related to such survey
services to be performed by the contractor(s) or consultant(s). Seller and
Buyer shall agree upon (i) the scope of services to be performed by such
contractor(s) or consultant(s), and (ii) the agreement to be executed with, and
the terms of retainer of, such contractor(s) or consultant(s). The surveys
shall include an estimate of the costs of remediation (including full or
partial encapsulation, removal, any air monitoring during the remediation or
other action) of any identified friable asbestos. With regard to any friable
asbestos identified in the surveys, Seller shall, at its option, either (a)
promptly reimburse Buyer the amount of money required to conduct such
remediation of any friable asbestos to the minimum extent required by
applicable Environmental Law, or (b) conduct such remediation itself to the
minimum extent required by applicable Environmental Law, using a qualified
contractor(s) or consultant(s), which contractor(s) or consultant(s), and the
terms of their retainer, shall be reasonably acceptable to Buyer. Seller shall
complete as soon as reasonably practicable its obligations in the immediately
preceding sentence, and then notwithstanding anything to the contrary contained
in this Agreement, Seller shall have no further liability or obligation
whatsoever (including Environmental Liability) to the Buyer Indemnified Parties
arising out of any friable asbestos at the Owned Real Property and Leased Real
Property. Seller and Buyer shall mutually agree regarding access to the
facilities for the conduct of the surveys and such remediation.
6. EMPLOYEE MATTERS.
6.1. CERTAIN DEFINITIONS. For the purpose of this Agreement, the
following capitalized terms have the meanings ascribed to such terms as set
forth below:
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<PAGE> 60
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(a) "BENEFIT PLAN" means, collectively, each
Champion Employee Plan listed on Disclosure Schedule 6.3(a), each Champion
International Plan listed on Disclosure Schedule 6.3(d) and each Champion
Benefit Arrangement listed on Disclosure Schedule 6.3(b).
(b) "CHAMPION BENEFIT ARRANGEMENT" means any
employment, severance or similar contract, arrangement or policy, or any plan
or arrangement providing for severance benefits, insurance coverage (including
any self-insured arrangements), disability benefits, supplemental unemployment
benefits, vacation benefits, pension or retirement benefits, deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation
rights, fringe benefits, or other forms of compensation or any post-retirement
benefits, compensation or benefits that (i) is not a Champion Employee Plan,
(ii) is entered into or maintained, as the case may be, by Seller or any of its
Affiliates including the Champion Companies, and (iii) covers any Employee or
Former Employee in the United States.
(c) "CHAMPION EMPLOYEE PLAN" means any "employee
benefit plan", as defined in Section 3(3) of ERISA that (i) is subject to any
provision of ERISA, (ii) is maintained, administered or contributed to by
Seller or any of its Affiliates including the Champion Companies, and (iii)
covers any Employee or Former Employee.
(d) "CHAMPION INTERNATIONAL PLAN" means any
employment, severance or similar contract, arrangement or policy or any plan or
arrangement providing for severance benefits, insurance coverage (including any
self-insured arrangements), disability benefits, supplemental unemployment
benefits, vacation benefits, pension or retirement benefits, deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation
rights, fringe benefits or other forms of compensation or any post-retirement
benefits, compensation or benefits that (i) is not a Champion Employee Plan or
a Champion Benefit Arrangement, (ii) is maintained or contributed to by Seller
or any of its Affiliates including the Champion Companies, and (iii) covers any
Employee or Former Employee.
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<PAGE> 61
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(e) "EMPLOYEE" means any individual who, on the
Closing Date, is employed by Seller or the Champion Companies in the Business
in any active or inactive status and whose current employment has not been
terminated.
(f) "FORMER EMPLOYEE" means any individual
previously employed in the Business by Seller, the Champion Companies, or any
of their Affiliates or Predecessors and who retired or whose employment has
been otherwise terminated prior to the Closing Date and who is not an Employee.
6.2. EMPLOYMENT. As of the Closing Date, every Employee will be
permitted to continue as an employee of Champion, the Champion Subsidiaries and
the Related Companies, as the case may be, or shall be permitted to become an
employee of Buyer or the Affiliate of Buyer which acquires the assets of the
Canadian Division. The employment of Employees by Champion, the Champion
Subsidiaries, the Related Companies, Buyer or its Affiliates shall be on the
same terms, at the same salary or wage levels, and with substantially similar
benefits as provided to the Employees prior to Closing; provided that nothing
herein shall prevent Buyer or its Affiliates (including the Champion Companies)
from altering such terms, salary, wages or benefits after the Closing except as
specifically provided herein.
6.3. REPRESENTATIONS REGARDING EMPLOYEE BENEFIT PLANS. Seller
represents and warrants to Buyer that the statements contained in this Section
6.3 are true and correct as of the date of this Agreement and will be true and
correct on the Closing Date:
(a) Disclosure Schedule 6.3(a) identifies each
Champion Employee Plan. Seller has furnished or made available to Buyer: (i)
true and complete copies of such Champion Employee Plans (and, if applicable,
related trust agreements or funding contracts); (ii) the most recent annual
report (Form 5500 series) or financial report prepared in connection with any
such Champion Employee Plan relating to Employees and Former Employees; (iii)
the summary plan description (if
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<PAGE> 62
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
any) currently in effect for Employees covered under each such Champion
Employee Plan; (iv) a written description of each such Champion Employee Plan
in effect for Employees and Former Employees for which there is no summary plan
description or plan; and (v) the most recent financial statements and actuarial
reports or statement (if any) prepared in connection with each such Champion
Employee Plan and relating to Employees and Former Employees. Each such
Champion Employee Plan has been maintained in compliance in all material
respects with its terms and with the requirements prescribed by any applicable
statutes, orders, rules and regulations including but not limited to ERISA and
the Internal Revenue Code.
(b) Disclosure Schedule 6.3(b) identifies each
material Champion Benefit Arrangement. Seller has furnished or made available
to Buyer true and complete copies of or, if no written document exists,
descriptions of each such Champion Benefit Arrangement. Each such Champion
Benefit Arrangement has been maintained in compliance in all material respects
with its terms and with the requirements prescribed by any applicable statutes,
orders, rules and regulations.
(c) Disclosure Schedule 6.3(c) identifies each
Multiemployer Pension Plan to which the Seller or any of its Affiliates
including the Champion Companies have made contributions in the most recent
five calendar years with respect to Employees and Former Employees and the most
recently determined liability for withdrawal from each Multiemployer Plan which
has been provided to the Seller.
(d) Disclosure Schedule 6.3(d) identifies each
material Champion International Plan. Seller has furnished or made available
to Buyer true and complete copies of or, if no written document exists,
descriptions of each such Champion International Plan. Each such Champion
International Plan has been maintained in all material respects in compliance
with its terms and with the requirements prescribed by any and all applicable
statutes, orders, rules and regulations.
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<PAGE> 63
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(e) Except as set forth on Disclosure Schedule
6.3(e), there are no actions, suits, arbitrations or other proceedings pending
(other than routine claims for benefits) with respect to any Champion Employee
Plan, Champion Benefit Arrangement or Champion International Plan which would
be reasonably likely to have a Material Adverse Effect.
(f) Neither Seller, a Champion Company nor any
Benefit Plan has engaged in any prohibited transaction, as defined in Section
4975 of the Internal Revenue Code or Section 406 of ERISA, which could subject
any Benefit Plan to any material tax or penalty imposed under Section 4975(a)
of the Internal Revenue Code or Section 502(i) of ERISA.
(g) Except as set forth on Disclosure Schedule
6.3(g), the Benefit Plan documents provided to Buyer describe all currently
effective benefits and all benefits which Seller or any Champion Company has
undertaken to provide in the future under such plans. Neither Seller nor any
Champion Company has made any material written or oral, implied or express
representations that are inconsistent with the terms of the documents provided
to Buyer. Further, neither Seller nor any Champion Company has made any
material written or oral, express or implied representations regarding the
continuation of any Benefit Plan after the Closing Date. There are no
amendments to the benefit formulas of the Automotive Hourly Plans (as defined
in Section 6.4(a)) or the Cooper Salaried Plan (as defined in Section 6.4(c))
that have been approved and that increase benefits after the Closing Date.
(h) Disclosure Schedule 6.3(a) specifically
identifies each Champion Employee Plan that is represented to be a qualified
plan under Section 401(a) of the Internal Revenue Code. With respect to each
Champion Employee Plan so identified unless noted to the contrary on Disclosure
Schedule 6.3(a), the IRS has issued a favorable determination letter to such
plan to the effect that the form of such Champion Employee Plan (or predecessor
plan) satisfies the requirements of Section 401(a) of the Internal Revenue
Code. For all years subsequent to the establishment of each such qualified
plan (or predecessor plan) and with respect to which Seller's and each Champion
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<PAGE> 64
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Company's tax returns or such Champion Employee Plan's and trust's returns are
open to audit, the plan has satisfied in all material respects, in form and
operation, the qualification requirements of Section 401(a) of the Internal
Revenue Code, and no action which has been taken or not taken with respect to
such plan subsequent to such date has had or will have any adverse impact on
the continued qualification of such plan through the Closing Date. Each such
Champion Employee Plan is in compliance in all material respects with the
special nondiscrimination rules under sections 401(k)(3) and (m) of the
Internal Revenue Code, if applicable. The IRS has not revoked any letter of
determination or opinion letter to which reference is made above, nor has the
IRS threatened any such revocation.
(i) Funding Status.
(1) No "accumulated funding deficiency" within
the meaning of either Section 412 of the Internal Revenue Code or ERISA Section
302 exists with respect to any Champion Employee Plan nor would there exist any
such deficiency but for the application of an alternative minimum funding
standard. No waiver of the minimum funding standards imposed by the Code with
respect to any such plan has been issued.
(2) Except for the liabilities associated with
the employment continuity agreements listed on Disclosure Schedule 5.12(i), the
actuarial present values of all accrued deferred compensation entitlements of
Employees and Former Employees of Seller or any Champion Company and their
respective beneficiaries, other than entitlements accrued pursuant to funded
retirement plans subject to the provisions of Section 412 of the Internal
Revenue Code or Section 302 of ERISA, have been fully reflected on the
Financial Statements of Seller and the Champion Companies. Such entitlements
include, without limitation, any entitlements under any executive compensation
or supplemental retirement agreement.
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<PAGE> 65
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(j) Neither Seller nor any Champion Company has
engaged in any transaction with respect to any Benefit Plan which may result in
the imposition on Seller or any Champion Company of any excise tax under
Sections 4971, 4972, 4975, and 4976 through 4980 of the Code, or otherwise
incurred a liability for any excise tax, other than excise taxes which have
heretofore been paid or have been accrued, and, in either case are fully
reflected in the Financial Statement, and neither Seller nor any Champion
Company is now, nor at any time will be by virtue of any action taken prior to
the Closing Date, subject to a requirement to provide security under Section
401(a)(29) of the Code, nor shall any asset of Seller or any Champion Company
be subject to a lien by reason of the provisions of Section 412(n) of the Code.
The execution by Seller of the employment continuity agreements listed on
Disclosure Schedule 5.12(i) shall not constitute a transaction which may result
in the imposition of an excise tax.
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<PAGE> 66
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
6.4. EMPLOYEE BENEFIT PLANS.
(a) DOMESTIC DEFINED BENEFIT PENSION PLANS
(i) Before the Closing Date, Seller
shall:
A. merge the Champion Spark
Plug Company UAW Pension Plan, the Moog Automotive, Inc. Pension Plan and Trust
for UAW Employees, the Moog Automotive, Inc. United Rubber, Cork, Linoleum and
Plastic Workers Pension Plan, the Morenci Engineered Rubber Products Pension
Plan, and the Pension Plan for Bargaining Unit Employees at Winchester,
Virginia, (collectively the "AUTOMOTIVE HOURLY PLANS", and individually the
"AUTOMOTIVE HOURLY PLAN") to form the Champion Spark Plug Company consolidated
Defined Benefit Pension Plan (the "CHAMPION PENSION PLAN");
B. provide for coverage of
Employees and Former Employees participating in the Salaried Employees
Retirement Plan of Cooper Industries, Inc. (the "COOPER SALARIED PLAN")
immediately prior to the Closing Date under the Champion Pension Plan on the
Closing Date immediately after the Closing with benefits, rights, and features
in accordance with Section 411(d)(6) of the Code; and
C. cause Champion to assume
the plan sponsorship of the Champion Pension Plan.
(ii) Seller shall amend the Cooper
Salaried Plan to cause a transfer of assets and liabilities attributable to
Employees and Former Employees under the Cooper Salaried Plan as of the
Salaried Plan Transfer Date (as hereinafter defined) to the Champion Pension
Plan. The assets transferred from the Cooper Salaried Plan to the Champion
Pension Plan shall be equal to the sum of:
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<PAGE> 67
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
A. the Transfer Plan
Liabilities (as hereinafter defined) attributable to the Employees and Former
Employees under the Cooper Salaried Plan.
B an amount which when added
to the sum of the amount calculated under the provisions of clause (a) above,
and the market value of the assets of the Champion Pension Plan as of the
Salaried Plan Transfer Date (as hereinafter defined) will equal the Full
Funding Liabilities (as hereinafter defined) of the Champion Pension Plan.
The date as of which the Transfer Plan Liabilities of the Cooper
Salaried Plan are calculated shall be called the "SALARIED PLAN TRANSFER DATE"
and shall occur after the Closing Date and on the last day of the month in
which the Closing Date occurs. The "TRANSFER PLAN LIABILITIES" of the Cooper
Salaried Plan to be transferred to the Champion Pension Plan shall be the
actuarial present value of the accrued plan benefits with respect to the
Employees and Former Employees who participated in the Cooper Salaried Plan
immediately prior to the Closing Date calculated as of the Salaried Plan
Transfer Date and pursuant to Section 414(1) of the Internal Revenue Code and
the regulations thereunder. Such calculations will be made and certified to be
accurate by the Cooper Salaried Plan's actuary. As soon as practicable
following the Closing Date but no later than 60 days after the Closing Date,
Buyer and Seller will work together to furnish to the Cooper Salaried Plan's
actuary the data needed by the Cooper Salaried Plan's actuary to determine the
Transfer Plan Liabilities. Such data shall include the Social Security number,
account balance, date of birth, date of hire, gender and annual pensionable
compensation of each participant as of the Salaried Plan Transfer Date
(collectively, the "Demographic Data").
"FULL FUNDING LIABILITIES" means, with respect to Employees and
Former Employees, the sum of the Salaried Full Funding Liabilities and the
Hourly Full Funding Liabilities as those terms are hereinafter defined.
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
"SALARIED FULL FUNDING LIABILITIES" means the actuarial accrued
liability with respect to all Employees and Former Employees who participated
in the Cooper Salaried Plan immediately prior to the Closing determined as of
the Salaried Plan Transfer Date by the Cooper Salaried Plan's actuary in
accordance with the actuarial assumptions, methods and factors set forth on
Disclosure Schedule 6.4(a) using the Demographic Data used to calculate the
Transfer Plan Liabilities. The Cooper Salaried Plan's actuary shall, within
ninety (90) days of the date Buyer and Seller furnish the required Demographic
Data, determine the Transfer Plan Liabilities and the Salaried Full Funding
Liabilities as of the Salaried Plan Transfer Date and shall deliver a report to
Seller, at Seller's expense, setting forth the details of the determination of
the values of the Transfer Plan Liabilities and the Salaried Full Funding
Liabilities.
The "HOURLY FULL FUNDING LIABILITIES" means the actuarial accrued
liability with respect to all Employees and Former Employees who participated
in the Automotive Hourly Plans prior to the date said Automotive Hourly Plans
were merged to form the Champion Pension Plan determined in accordance with the
actuarial assumptions methods and factors set forth on Disclosure Schedule 6.4
(a) and the following procedures. Using the participant data used for the
January 1, 1998 actuarial valuations for each of the Automotive Hourly Plans,
the actuary for the Automotive Hourly Plans shall calculate the actuarial
accrued liability or actuarial reserve for each Plan as of January 1, 1998
using the actuarial assumptions, methods and factors set forth on Disclosure
Schedule 6.4 (a). This January 1, 1998 actuarial accrued liability or
actuarial reserve for each Automotive Hourly Plan shall be adjusted to take
into consideration the time period between January 1, 1998 and the Salaried
Plan Transfer Date using the actuarial assumptions, methods and factors set
forth on Disclosure Schedule 6.4 (a), and further adjusted for actual benefit
payments made from January 1, 1998 through the Salaried Plan Transfer Date to
produce an adjusted actuarial accrued liability or actuarial reserve for each
Automotive Hourly Plan. The adjusted actuarial accrued liability or actuarial
reserve for all Automotive Hourly Plans will be aggregated to produce the
Hourly Full Funding Liabilities. The Automotive Hourly Plan's actuary shall
within ninety (90) days of the Salaried Plan Transfer Date deliver a report to
Seller at Seller's expense setting forth the details of the determination of
the Hourly Full Funding Liabilities.
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<PAGE> 69
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Upon receipt of the reports prepared by the respective actuaries,
Seller shall deliver to Buyer for its review a copy of the reports and the
underlying information necessary to prepare the reports. Buyer shall have
fourteen (14) days to notify Seller in writing of any objections regarding the
determination of the Full Funding Liabilities. If Buyer does not timely notify
Seller of any objections, the calculations shall be final and binding on all
parties. If Buyer timely notifies Seller of any objections resulting from
Buyer's review of the respective actuaries' reports which Seller and Buyer
cannot resolve within thirty days of the date Buyer notifies Seller of such
objections, Seller and Buyer shall appoint an actuarial firm satisfactory to
both parties (the cost of which shall be shared equally by Seller and Buyer) to
resolve such objections, which resolution shall be final and binding on both
parties. As soon as practicable following the Salaried Plan Transfer Date, but
not prior to the date on which the Buyer and Seller reach agreement on the Full
Funding Liabilities and not prior to the date on which the Buyer has provided
all documentation requested by the trustee of the Cooper Salaried Plan, Seller
shall cause assets of the Cooper Salaried Plan equal to the sum of the Transfer
Plan Liabilities and the amount determined pursuant to 6.4(a) (ii) B plus
interest at the rate of 7.25% per annum and adjusted for benefit payments made
to Employees and Former Employees who participated in the Cooper Salaried Plan
immediately prior to the Closing, from the Salaried Plan Transfer Date to the
date such assets are actually conveyed, to be conveyed to the Champion Pension
Plan. Until the assets of the Cooper Salaried Plan are transferred to the
Champion Pension Plan, Seller will continue to process distributions required
to be made to Employees and Former Employees under the Cooper Salaried Plan on
and after the Closing Date in accordance with its terms and procedure.
(b) RETIREMENT SAVINGS PLAN. Certain Employees and
Former Employees participate in the Cooper Industries, Inc. Retirement Savings
and Stock Ownership Plan ("COOPER RETIREMENT SAVINGS PLAN"), which is composed
of a qualified, 401(k), defined contribution profit
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<PAGE> 70
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
sharing plan and an employee stock ownership plan. Seller shall cause the
assets and liabilities of the Cooper Retirement Savings Plan attributable to
such Employees and Former Employees to be transferred as provided in this
Section 6.4(b) from the Cooper Retirement Savings Plan to a qualified, 401(k)
defined contribution profit sharing plan prepared by Seller to be adopted by
Champion effective as of the Closing Date (the "CHAMPION RETIREMENT SAVINGS
PLAN") which shall provide that such Employees' and Former Employees' periods
of service credited under the Cooper Retirement Savings Plan will be
transferred to and credited for all purposes under the Champion Retirement
Savings Plan. The Champion Retirement Savings Plan shall provide benefits,
rights and features to the Employees and Former Employees in accordance with
Section 411(d)(6) of the Code.
No later than thirty days following the Closing Date, Buyer
shall designate a trustee with respect to the Champion Retirement Savings Plan
and provide Seller with the information necessary to cause a transfer of assets
to the designated trustee. As soon as possible thereafter, the assets and
liabilities of the Cooper Retirement Savings Plan shall be transferred in-kind
to the designated trustee of the Champion Retirement Savings Plan in an amount
equal to the total of all account balances of said Employees and Former
Employees under the Cooper Retirement Savings Plan as of the close of business
on the day immediately prior to the transfer.
(c) QUALIFIED DOMESTIC HOURLY DEFINED CONTRIBUTION
PLANS. Certain Employees and Former Employees participate or have participated
in the Champion Employee Plans listed on Disclosure Schedule 6.4(c). Prior to
the Closing Date, Seller shall cause Champion to assume sponsorship and
maintain the Champion Employee Plans listed on Disclosure Schedule 6.4(c) for
the benefit of such Employees and Former Employees.
No later than thirty days following the Closing Date, Buyer
shall designate a trustee or trustees with respect to the Champion Employee
Plans listed on Disclosure Schedule 6.4(c) and provide Seller with the
information necessary to cause a transfer of assets to the designated trustee
or trustees. As soon as practicable thereafter, Seller shall cause the assets
of the Champion Employee Plans listed on Disclosure Schedule 6.4(c) to be
transferred in kind to the trustee or trustees designated by Buyer.
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<PAGE> 71
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Certain Former Employees participate or have participated in
the Temperature Control Division 401(k) Plan. Prior to the Closing Date,
Seller shall cause Champion to assume sponsorship and maintain the Temperature
Control Division 401(k) Plan for the benefit of such Former Employees and
accept the transfer of the insurance contract by which the plan is funded.
(d) SUPPLEMENTAL PENSION PLANS. Certain Employees
and Former Employees participate in either or both of the Cooper Industries,
Inc. Supplemental Excess Defined Benefit Plan (the "COOPER SUPPLEMENTAL DB
PLAN") and the Cooper Industries, Inc. Supplemental Excess Defined Contribution
Plan (the "COOPER SUPPLEMENTAL DC PLAN"), both of which are non-qualified and
unfunded pension plans. Such plans are designed to provide benefits that
cannot be paid from the Cooper Salaried Plan or the Cooper Retirement Savings
Plan due to provisions of the Internal Revenue Code. Effective as of the
Closing Date, Seller shall cause Champion to adopt two new supplemental plans
which shall be substantially similar to the Cooper Supplemental DB Plan and the
Cooper Supplemental DC Plan, respectively. These two new pension plans (the
"CHAMPION SUPPLEMENTAL DB PLAN" and the "CHAMPION SUPPLEMENTAL DC PLAN") shall
recognize all service previously credited under the Cooper Supplemental DB Plan
and the Cooper Supplemental DC Plan, respectively, as in effect immediately
prior to the Closing Date, and assume all obligations to provide benefits to
the eligible Employees and Former Employees and their eligible beneficiaries
and dependents. Thereafter, the Cooper Supplemental DB Plan, the Cooper
Supplemental DC Plan and the Seller shall not have any further obligation to
provide any benefits to any Employee or Former Employee.
(e) WELFARE BENEFIT PLANS. Certain Employees and
Former Employees are covered by welfare benefit plans maintained by Seller
providing medical, dental, life insurance, long
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<PAGE> 72
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
term disability, short term disability, accidental death and dismemberment, and
severance benefits ("COOPER'S WELFARE BENEFIT PLANS"). Effective as of the
Closing Date, subject to the paragraph immediately below, Employees and Former
Employees, and all eligible beneficiaries and dependents of the Employees and
Former Employees, shall cease to be covered under Cooper's Welfare Benefit
Plans and shall be covered under welfare benefit plans maintained by Buyer
("BUYER'S WELFARE BENEFIT PLANS"). Buyer's Welfare Benefit Plans shall provide
Employees and Former Employees with welfare benefits substantially similar to
those provided to them immediately prior to the Closing Date under Cooper's
Welfare Benefit Plans. Buyer shall retain the right to amend or terminate
Buyer's Welfare Benefit Plans as they pertain to said Employees and Former
Employees; provided, however, Buyer shall provide the Employees listed on
Disclosure Schedule 6.4(e) with up to five years of coverage (depending on
their years of service as set forth in such Disclosure Schedule 6.4(e)) for
retiree medical benefits under Buyer's Welfare Benefit Plans on terms
substantially similar to those available to Buyer's active employees.
At the request of Buyer, Seller shall continue to provide
coverage under Cooper's Welfare Benefit Plans which are self-insured and which
are specified by Buyer at least fifteen days prior to the Closing Date,
including the administration of claims and payment of benefits, as appropriate,
on behalf of the Employees and Former Employees and their beneficiaries and
dependents for a period ending on the later of December 31, 1998 or the day
which is 60 days after the Closing Date in order to allow Buyer time to install
or establish welfare benefit plans for such employees. Buyer shall reimburse
Seller for all payments relating to claims which are paid pursuant to this
Section 6.4(e) and for all out-of-pocket costs and administrative expenses
incurred by Seller in connection with such claim administration services within
thirty (30) days after an invoice for such reimbursement is mailed to Buyer.
(f) CHAMPION BENEFIT ARRANGEMENTS. Certain
Employees and Former Employees are covered by certain Champion Benefit
Arrangements providing the benefits described in Disclosure Schedule 6.3(b)
("EMPLOYEE BENEFITS"). Effective as of the Closing Date or as soon
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<PAGE> 73
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
as practicable thereafter, Buyer shall cause the Company to provide Employees
and Former Employees with benefits that are substantially similar to the
benefits provided to them immediately prior to the Closing Date under the
Champion Benefit Arrangements. Buyer shall assume all obligations to Employees
for Employee Benefits accrued under the applicable Champion Benefit Arrangement
prior to the Closing Date.
(g) CHAMPION CANADIAN PLANS. With respect to the
Champion International Plans that cover Employees and Former Employees in
Canada, the assets and liabilities of such Champion International Plans shall
be transferred to Buyer or its Affiliate in accordance with the provisions of
the Canadian Asset Transfer Agreement.
(h) CHAMPION AUSTRALIAN PLANS. Certain Employees
and Former Employees participate in the Cooper Industries (Australian)
Employees Superannuation Fund (the "COOPER AUSTRALIAN PLAN"), a defined
contribution pension plan that is qualified under Australian law. On or before
the Closing Date, Seller shall cause Cooper Automotive Pty Ltd to adopt the
Champion Australia Pty Ltd Employees Superannuation Fund, a defined
contribution pension plan, that is substantially similar to the Cooper
Australian Plan (the "CHAMPION AUSTRALIAN PLAN"). As of the effective date of
the Champion Australian Plan, all Employees who participate in the Cooper
Australian Plan shall participate in the Champion Australian Plan for benefit
accruals on and after said effective date and all benefit accruals of Employees
under the Cooper Australian Plan shall cease as of the end of the day prior to
the effective date of the Champion Australian Plan. As required by Australian
law, each Employee and Former Employee who participates in the Cooper
Australian Plan will be given the opportunity to elect in writing to have his
accrued benefit under the Cooper Australian Plan transferred to the Champion
Australian Plan. For each Employee and Former Employee who elects to transfer
his accrued benefits to the Champion Australian Plan, the Champion Australian
Plan shall provide that such Employees' and Former Employees' periods of
service credited under the Cooper Australian Plan shall be transferred to and
credited for all purposes under the Champion Australian Plan.
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
As soon as practicable following the Closing Date, the
assets and liabilities of the Cooper Australian Plan for each Employee and
Former Employee who elected to have his accrued benefit transferred to the
Champion Australian Plan shall be transferred to the Champion Australian Plan.
The assets and liabilities to be so transferred shall be equal to the total of
all of the account balances of each such Employee and Former Employee under the
Cooper Australian Plan. However, if at the time such assets and liabilities
are transferred, the proceeds of the AMP Ltd. demutualization have not been
allocated to participant accounts a pro rata share of such proceeds shall also
be transferred to the Champion Australian Plan.
6.5. COOPER EMPLOYEE STOCK PURCHASE PLAN.
(a) Certain Employees and Former Employees are
participating in the 1997 offering of Seller's Employee Stock Purchase Plan
(the "1997 ESPP"). Such Employees and Former Employees are hereinafter called
"ESPP PARTICIPANTS". Under the 1997 ESPP, the ESPP Participants were granted
on July 1, 1997, options to purchase shares of Seller's common stock on
September 10, 1999. The Champion Companies are performing the payroll
administration for the ESPP Participants in accordance with Seller's 1997 ESPP
Standard Administration Manual. Before the Closing Date and subject to
Closing, Seller will cause the 1997 ESPP to be modified for the ESPP
Participants in order to provide each participant with the option of: (i)
withdrawing from the 1997 ESPP and receiving a refund of all contributions plus
accrued interest less applicable taxes; or (ii) remaining an ESPP Participant
with the option to purchase the number of full shares of Seller's common stock
that may be purchased at the option price with the amount (exclusive of accrued
interest) credited to the participant as of a date specified by Seller or to
withdraw from the ESPP as of the last date that a withdrawal is permitted.
ESPP Participants that elect to remain in the 1997 ESPP will not receive a
refund of contributions or certificates for Seller's common stock until after
the exercise date (September 10, 1999) for the 1997 ESPP.
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<PAGE> 75
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(b) Effective on or before the Closing Date, the
Champion Companies shall terminate payroll administration for the 1997 ESPP
and, within 30 days after the Closing Date, Buyer shall pay Seller the total
cash withheld by the Champion Companies from ESPP Participants pursuant to the
1997 ESPP prior to the Closing Date plus related interest accrued on behalf of
the ESPP Participants up to the date on which the payment is made. The payment
shall be accompanied by a list (in paper and established electronic format)
showing with respect to each ESPP Participant the name, most recent address,
total cash withholdings and related accrued interest under the 1997 ESPP as of
the Closing Date. Seller shall promptly inform Buyer of the value of Seller's
common stock as of September 10, 1999. Buyer, on Seller's behalf, shall
determine and collect the required tax withholding from the ESPP Participants
based on the value of Seller's common stock as of September 10, 1999, and remit
such tax withholdings to Seller no later than October 8, 1999 and any accrued
interest, together with an updated list setting forth the current names and
addresses of the ESPP Participants and the tax withheld with respect to each
such ESPP Participant. Buyer shall not be required to pay any employment taxes
with respect to the 1997 ESPP, Seller will pay the employer's matching FICA
contribution directly to the tax authorities.
7. TAX MATTERS.
7.1. REPRESENTATIONS AND WARRANTIES REGARDING TAX MATTERS.
Seller represents and warrants to Buyer that the statements contained in this
Section 7.1 are true and correct as of the date of this Agreement and will be
true and correct in all respects on the Closing Date.
(a) All Tax Returns required to be filed on or
prior to the Closing Date by Champion, the Champion Subsidiaries and the
Related Companies, or by Seller or its Affiliates with respect to any
activities of the Canadian Division, have been or will be filed in accordance
with all applicable laws, and all Taxes shown to be due on any such Tax Returns
have been or will be paid prior to the Closing Date. Except as set forth on
Schedule 7.1(a), to the best of the Seller's Knowledge, none of the foregoing
Tax Returns contains any position which is or would be subject to penalties
under Section 6662 of the Internal Revenue Code (or any corresponding provision
of state, local or foreign Tax Law).
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<PAGE> 76
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(b) Except as set forth on Disclosure Schedule
7.1(b), no material deficiency or adjustment in respect of any Taxes claimed
against Champion, the Champion Subsidiaries or the Related Companies, or
against Seller or its Affiliates with respect to the Canadian Division, remains
unpaid and no material claim or assessment for any such deficiency or
adjustment is pending and there are no ongoing or pending Tax Proceedings with
any taxing authorities with respect to Champion, the Champion Subsidiaries or
the Related Companies, or Seller or its Affiliates with respect to the Canadian
Division.
(c) To Seller's Knowledge, there are no
Encumbrances on any of the assets of the Champion Companies that arose in
connection with any failure (or alleged failure) to pay any Taxes, except for
Encumbrances related to real and personal property Taxes not yet due or for
Taxes that are being contested in good faith through appropriate proceedings
and for which appropriate reserves have been established.
(d) The income attributable to the income, assets
or operations of the Canadian Division while the same are or have been owned by
Cooper Industries (Canada) Inc. will, to the extent permitted by law, be
included in income Tax Returns filed by Cooper Industries (Canada) Inc. or in
income Tax Returns filed by an affiliated, consolidated, unitary or combined
group of companies of which the Seller or its Affiliates are a member.
(e) Except as set forth on Disclosure Schedule
7.1(e) neither Champion, the Champion Subsidiaries or the Related Companies are
bound by any tax indemnity, tax allocation, tax sharing, or similar agreement.
Except for the tax indemnity and tax allocation agreements contained in the
various acquisition and divestiture agreements set forth in Disclosure Schedule
5.12(ii), all such
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<PAGE> 77
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
agreements will be terminated with respect to the Champion Companies as of the
Closing Date and will have no further effect for any taxable year (whether
current, future, or past).
(f) Except as set forth on Disclosure Schedule
7.1(f), none of the Champion Companies has, or has had, a permanent
establishment (as defined by any applicable tax treaty) or other taxable
presence in any country other than the United States.
(g) Except as set forth in Disclosure Schedule
7.1(g), none of the Champion Companies is a party to any joint venture,
partnership or other arrangement or contract that could be treated as a
partnership for United States tax purposes.
(h) Except as set forth in Disclosure Schedule
7.1(h), none of the Champion Companies has granted any power of attorney with
respect to matters relating to Taxes.
(i) Except as set forth in Disclosure Schedule
7.1(i), there is no closing agreement, compromise, or settlement with any
taxing authority that is binding on any of the Champion Companies for any
taxable period ending after the Closing Date.
(j) Except as set forth in Disclosure Schedule
7.1(j), there are no requests for rulings or determinations relating to any of
the Champion Companies pending with any taxing authority.
(k) Disclosure Schedule 7.1(k) sets forth the
following information: (i) the amount of any operating loss, net capital loss,
and unused credits of the Champion Companies; and (ii) the amount of any
deferred gain or loss allocable to any of the Champion Companies arising out of
any intercompany or intergroup transaction.
(l) Except as set forth in Disclosure Schedule
7.1(l), none of the Champion Companies has ever been owned by or affiliated
with any entity, other than Seller or an entity
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<PAGE> 78
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
affiliated with Seller and except for the group of which Seller is currently a
member none of the Champion Companies has ever been a member of an affiliated
group of corporations within the meaning of Internal Revenue Code Section 1504.
(m) Each asset in respect of which any of the
Champion Companies claims any depreciation, amortization or similar expense is
owned for tax purposes by the applicable Champion Company.
(n) None of the Champion Companies has any excess
loss account as defined in Treasury Regulation Section 1.15012-19.
7.2. TAX INDEMNITY.
(a) Seller shall be liable for, and shall indemnify, defend
and hold harmless the Buyer Indemnified Parties from and against:
(i) Any and all income Taxes (including,
without limitation, U.S. federal and state income taxes on capital gains)
imposed with respect to the sale of the Champion Common Stock, the shares of
the Related Companies, the Nominal Shares of the Champion Subsidiaries and the
assets of the Canadian Division under the terms of this Agreement;
(ii) Any and all Taxes relating to the
Canadian Division while the same was owned by Cooper Industries (Canada) Inc.,
or any Predecessor, except to the extent a reserve or accrual in respect of
Taxes is included in the Final Closing Statement of Net Assets;
(iii) Any and all Taxes with respect to
Champion, the Champion Subsidiaries and the Related Companies for any taxable
period ending on or before the Closing Date, except to the extent a reserve or
accrual in respect of Taxes is included in the Final Closing Statement of Net
Assets;
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<PAGE> 79
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(iv) Notwithstanding anything to the contrary
contained in this Section 7.2(a), if any of the Indemnified Parties pays any
Preclosing Creditable Foreign Tax (as defined below), the provisions of
Section 7.2(a)(ii) shall not apply if, and to the extent that, as a result of
the payment of the applicable Preclosing Creditable Foreign Tax, any of the
Buyer Indemnified Parties actually receives a foreign tax credit under the
applicable provisions of the Internal Revenue Code (including, without
limitation, any limitation under Internal Revenue Code Section 904) which
results in the reduction (on a present value basis) of Taxes payable in the
United States which would have otherwise been payable by a Buyer Indemnified
Party (in the absence of such foreign tax credit) for any taxable period ending
after the Closing Date and otherwise properly allocable to Buyer under this
Section 7 generally. A Preclosing Creditable Foreign Tax is a Tax (x) which is
paid by a Buyer Indemnified Party, (y) which is incurred with respect to
Champion, the Champion Subsidiaries, or any of the Related Companies and in
respect of a taxable period ending on or before the Closing Date, and (z) which
is eligible for a credit under the foreign tax credit provisions of the
Internal Revenue Code (Internal Revenue Code Sections 901 though 960). Nothing
in the first sentence of this Section 7.2(a)(iii) shall be construed to relieve
Seller of its obligation to make an indemnification payment (hereinafter the
"Provisional Payment") in accordance with the terms of this Section 7.2 to a
Buyer Indemnified Party if Buyer Indemnified Party pays any Taxes for any
period ending on or before the Closing Date for which a current foreign tax
credit is not available; provided, however, that after the Provisional Payment
has been made by the Seller and received by a Buyer Indemnified Party, Buyer
Indemnified Party shall reimburse the Seller when, and to the extent, that a
Buyer Indemnified Party receives a credit under Sections 901 through 960 of the
Internal Revenue Code which is related to the Taxes associated with the
Provisional Payment.
(b) Notwithstanding any other provision of this
Agreement, Buyer shall be liable for and shall indemnify, defend and hold
harmless the Seller Indemnified Parties from and against: (i) any Taxes
relating to the Canadian Division while the same was owned by Cooper Industries
(Canada) Inc. or any Predecessor, but only to the extent a reserve or accrual
in respect of such Taxes is included in the Final Closing Statement of Net
Assets; (ii) any Taxes due with respect to the Canadian Division for any period
subsequent to the Closing Date; and (iii) any Taxes with respect to Champion,
the Champion Subsidiaries and the Related Companies for any taxable period
ending after the Closing Date.
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<PAGE> 80
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(c) Any liability for or refund of Taxes for a
taxable period beginning before the Closing Date and ending after the Closing
Date (a "STRADDLE PERIOD") with respect to a Champion Company shall be
apportioned between Seller and Buyer based on the actual operations of the
Champion Company during that portion of such period ending on the Closing Date
(the "PRE-CLOSING STRADDLE PERIOD") and the portion of such period beginning on
the date following the Closing Date, and for purposes of Sections 7.2(a),
7.2(b), 7.2(e) and 7.5, each such portion of a Straddle Period shall be deemed
to be a taxable period. Anything herein to the contrary notwithstanding, Buyer
shall prepare (in a manner consistent with prior practice) and file all
Straddle Period Tax Returns and shall pay all Taxes due with respect thereto;
provided, however, that Seller shall pay Buyer the amount of Taxes calculated
as due for the Pre- Closing Straddle Period except to the extent that a reserve
or accrual in respect of such Taxes is included in the Final Closing Statement
of Net Assets. To the extent Buyer or any of its Affiliates, including
Champion, the Champion Subsidiaries and the Related Companies, receives
(whether by way of payment, credit, or otherwise) any refund of Taxes allocable
to a Pre-Closing Straddle Period, Buyer shall promptly upon receipt thereof
remit the same to Seller.
(d) At least thirty days prior to the due date for
the payment of Taxes for a Straddle Period, Buyer shall present Seller with a
schedule detailing the computation of Taxes for the Pre-Closing Straddle Period
together with a copy of the relevant Tax Return and any supporting
documentation reasonably requested by Seller. Within 20 days after Buyer
presents Seller with such schedule, Seller shall pay Buyer the amount of the
Pre-Closing Straddle Period Tax as computed by Buyer except to the extent that
a liability in respect of such Taxes is included in the Final Closing Statement
of Net Assets. In making the computation Seller shall receive full credit for
any estimated tax payments or other
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
prepayments or credits against Taxes made by Seller or its Affiliates on or
before the Closing Date and Buyer shall receive full credit for any estimated
tax payments or other prepayments or credits against Taxes made by Buyer or its
Affiliates after the Closing Date. If Seller disputes Buyer's computation of
the Pre-Closing Straddle Period Tax, Seller shall not be relieved of its
obligation to pay, in the first instance, any such disputed amount. Whether
any such disputed amount was in fact due from Seller shall be resolved by the
Accounting Arbitrator in accordance with the procedures set out in Section 2.7
which shall be deemed modified as necessary to accommodate the resolution of
the dispute between the parties. If upon such resolution it is determined that
any of such disputed amount was not payable to Buyer and such amount has
nevertheless been paid to Buyer, then Buyer shall refund to Seller such amount,
plus interest at the rate required to be paid under Section 6621 of the
Internal Revenue Code.
(e) Any franchise tax shall be allocated to the
taxable period during which the right to do business obtained by the payment of
such franchise tax relates, regardless of whether such franchise tax is
measured by income, operations, assets or capital relating to another taxable
period.
(f) Any deduction, loss or credit of Champion, the
Champion Subsidiaries or the Related Companies generated in any taxable period
prior to the Closing Date, the economic benefit of which is realized in a
taxable period ending after the Closing Date shall be for the account of
Seller, and Buyer shall remit to Seller as additional consideration the amount
of any such benefit. If any deduction or expense of Champion, the Champion
Subsidiaries or the Related Companies is denied or provision is disallowed by
a governmental taxing authority in respect of a period prior to the Closing
Date and a benefit is obtained in a period after the Closing Date by Champion,
the Champion Subsidiaries or the Related Companies, or Buyer or its Affiliates
(or their successors in title), Buyer shall pay to Seller an amount equal to
the tax savings produced by such benefit.
(g) Buyer shall cause Champion, the Champion
Subsidiaries and the Related Companies to elect, where permitted by law, to
carry forward any net operating loss, net capital loss, charitable contribution
or other item arising after the Closing Date that could, in the absence of such
an election, be carried back to a taxable period of Champion, the Champion
Subsidiaries or the
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Related Companies ending on or before the Closing Date in which Champion, the
Champion Subsidiaries or the Related Companies filed a consolidated, combined
or unitary tax return with Seller or its Affiliates. Buyer, on its own behalf
and on behalf of its Affiliates, hereby waives any right to use or apply any
net operating loss, net capital loss, charitable contribution or other item of
Champion, the Champion Subsidiaries or the Related Companies for any taxable
period ending on any date following the Closing Date to part or all of the
period prior to the Closing Date and any refund of Taxes relating to a carry
back of such items to part or all of a taxable period prior to the Closing Date
shall be retained by Seller. Nothing in this Section 7.2(g) shall be construed
to preclude Buyer from utilizing the foreign tax credits described in Section
7.2(d)(iv).
(h) Buyer agrees that it will not pay a dividend or
cause or allow a dividend to be paid by the Champion Subsidiaries or Related
Companies until after the close of the taxable year of each of the Champion
Subsidiaries or Related Companies in which the Closing occurs.
(i) Buyer shall cause Champion Automotive (U.K.)
Ltd. to remain at all times in a "group" as such term is defined by the Inland
Revenue.
(j) Buyer and Seller agree that any obligation to
prepare 1998 personal returns for any Employee of the Champion Companies
working outside of the United States shall be an obligation of the Buyer.
7.3. SECTION 338 ELECTIONS. Except for the CFC Section 338
Elections as defined and described in the immediately succeeding sentence,
Buyer or its Affiliates shall not make an election to have the provisions of
Section 338 of the Internal Revenue Code or similar provisions of state law
(collectively "Section 338 Elections") apply to the acquisition of Champion,
the Champion Subsidiaries or the Related Companies. Nothing in the immediately
preceding sentence shall be construed to preclude Buyer from making Section 338
Elections (to the extent otherwise allowed under applicable law) in respect of
the following entities: Cooper Automotive Pty. Ltd., Cooper Automotive
Electrical do Brasil Ltda., Champion Automotive (U.K.) Ltd. (the "CFC Section
338
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Elections"); provided, however, that the parties acknowledge that as of the date
of this Agreement Champion Automotive (U.K.) Ltd. is a partnership for U.S.
federal income tax purpose.
7.4. TAX RETURN FILINGS FOR PRE-CLOSING PERIODS.
(a) Buyer shall prepare (in a manner consistent
with prior practice) and submit to Seller for Seller's review and filing not
later than 10 days prior to the due date for the filing thereof, all non-income
Tax Returns for the Canadian Division that are required to be filed (after the
Closing Date) with respect to any period for which the Canadian Division was
owned by Cooper Industries (Canada) Inc., together with Buyer's check in
payment of all Taxes in respect of such Tax Returns but only to the extent a
reserve or accrual for such Taxes was included in the Final Closing Statement
of Net Assets. After reviewing and modifying (to the extent Seller in its sole
discretion determines is appropriate) such Tax Returns, Seller shall file such
Tax Returns and Seller shall pay or cause to be paid all Taxes shown as due
thereon. Seller shall promptly send to Buyer copies of all such Tax Returns,
to the extent modified by Seller, and copies of documentation showing such
filing and payment. Buyer shall include Seller's name on all 1998 IRS Forms
5471 for the Champion Companies.
(b) Buyer shall prepare (in a manner consistent
with prior practice) and submit to Seller for its review and approval not later
than 10 days prior to the due date for the filing thereof, all Tax Returns for
Champion, the Champion Subsidiaries and the Related Companies that are required
to be filed (after the Closing Date) for any taxable period ending on or before
the Closing Date; provided that Seller shall prepare and file any such Tax
Returns of Champion, the Champion Subsidiaries and the Related Companies that
are required to include, on a consolidated or combined basis, the operations of
Champion, the Champion Subsidiaries or the Related Companies for any taxable
period ending on or before the Closing Date. After reviewing and modifying (to
the extent Seller in its sole discretion determines is appropriate) such Tax
Returns, Seller shall return such Tax Returns to Buyer together with a check in
payment of all Taxes shown as due thereon (reduced to the extent a reserve or
accrual in respect of such Taxes was included on the Final Closing Statement
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
of Net Assets) not less than two (2) days prior to the due date thereof
(provided that Buyer is in compliance with the immediately preceding sentence).
Buyer shall promptly file each such Tax Return (as resubmitted to it by Seller)
and pay all Taxes shown as due thereon, and Buyer shall send Seller copies of
documentation showing such filing and payment.
7.5. TAX REFUNDS. Seller shall be entitled to any refunds or
credits of Taxes attributable to (i) Seller, its Affiliates, Champion, the
Champion Subsidiaries or the Related Companies with respect to any taxable
period ending on or before the Closing Date; (ii) Champion's registered branch
in Germany (Champion Zundkerzen Deutschland Nierderlassung Deutschland der
Champion Spark Plug Company) with respect to any taxable period ending on or
before the Closing Date; and (iii) the Canadian Division for any period while
the Canadian Division was owned by Cooper Industries (Canada) Inc., its
Affiliates or any Predecessors. If Buyer or any of its Affiliates, including
Champion, the Champion Subsidiaries or the Related Companies, receives any such
refund or credit of Taxes by way of payment, credit or otherwise, to which
Seller is entitled under this Paragraph), Buyer shall promptly upon receipt
thereof remit the same to Seller. Any refunds or credits of Taxes of any
Champion Company relating to taxable periods beginning after the Closing Date
shall belong to Buyer.
7.6. WAGE REPORTING. Pursuant to the alternative procedure
prescribed by Section 5 of Revenue Procedure 96-60: (i) Seller and Buyer shall
report on a "predecessor-successor" basis with respect to employees of Seller
who are employed by Buyer or its Affiliates after the Closing, (ii) Buyer will
assume Seller's entire obligation to prepare, file and furnish Forms W-2 for
the year ended December 31, 1998, with respect to such employees, (iii) Seller
and its Affiliates shall be relieved of any obligation to provide Forms W-2 to
such persons for such year, and (iv) Seller and Buyer will work in good faith
to adopt similar procedures under applicable state or local laws. The parties
shall cooperate with each other in preparing filings and forms relating to
these procedures, and Seller shall provide Buyer with any information in its
possession which Buyer needs to satisfy its obligations under this Section.
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
7.7. COOPERATION AND EXCHANGE OF INFORMATION.
(a) Seller and Buyer shall each (i) provide the
other party with such information and assistance as may be reasonably requested
by the other party in connection with the preparation and filing of any Tax
Returns (including Buyer's completion of Seller's federal, state and foreign
tax information packages prepared in a manner consistent with the packages
customarily prepared for periods ending prior to the Closing), any audit or
examination by any taxing authority, any judicial or administrative proceeding,
or any other reasonable business purpose relating to liability for Taxes with
respect to the Champion Companies; (ii) retain for the applicable statute of
limitations period (including any extensions) such material records or
information as may be relevant to such Tax Returns, audits, examinations or
proceedings including without limitation all Tax Returns and related schedules
and work papers; (iii) provide the other party with reasonable access to, and
allow the other party to make copies of such records or information, and prior
to disposing of any such records or information allow the other party the right
to obtain the originals of such records or information; (iv) provide the other
party with a copy of any final determination of any audit, examination or
proceeding that affects the amount required to be shown on any Tax Return of
the other party for any period. Buyer agrees to cause the Champion Companies
to provide Seller with all information reasonably necessary for Seller to
compute and defend research and development tax credits,
transaction-by-transaction foreign sales corporation commissions, and transfer
pricing for periods for which Seller has responsibility; (v) provide such
documentation, information or other materials currently in Seller's possession
necessary to determine, (A) the tax basis of the Champion Companies and the
Related Companies assets, (B) the current and accumulated earnings and profits
of each of the Champion Companies; (C) tax pools related to the earnings and
profits of the Champion Companies and the Related Companies; and (vi) copies of
all Forms 8832 filed for the Champion Companies and the Related Companies.
(b) Subject to the final sentence in this
paragraph, in the case of any audit, examination, judicial or administrative
proceeding, or other proceeding with respect to Taxes ("TAX
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
PROCEEDING") for which Seller is or may be liable pursuant to this Agreement,
Buyer shall promptly notify Seller, and Seller, at Seller's expense, shall have
the right to control the conduct and resolution of such Tax Proceeding,
provided, however, that Seller shall consult with Buyer with respect to the
resolution of any issue relating to or that could affect any Taxes or taxable
periods with respect to which Buyer may be liable under this Agreement or
otherwise, and Seller shall not settle any such issue, or otherwise take any
position with respect to such an issue, without the prior written consent of
Buyer. Buyer shall execute or cause to be executed powers of attorney or other
documents necessary to enable Seller to take all actions desired by Seller (to
the extent that such actions are consistent with the terms of this paragraph)
with respect to such Tax Proceeding to the extent such Tax Proceeding may
affect the amount of Taxes for which Seller is or may be liable pursuant to
this Agreement. If Seller elects to exercise its right to control the conduct
and resolution of any Tax Proceeding pursuant to the terms of this paragraph,
Seller shall within thirty calendar days of receiving notice of such Tax
Proceeding from Buyer (or sooner, if the circumstances of the Tax Proceeding so
require) notify Buyer of its intent to do so. If Seller elects not to control
the conduct and resolution of any such Tax Proceeding, fails to comply with the
notice provision of the immediately preceding sentence, or contests its
indemnity obligation under Section 7.2, then Buyer may direct the conduct and
resolution (including settlement or compromise) of such Tax Proceeding. Any
such resolution by Buyer shall not affect Seller's indemnity obligations under
Section 7.2, provided, however, that Seller shall not be obligated to indemnify
Buyer for expenses (including, but not limited to, legal fees) incurred by
Buyer in connection with a Tax Proceeding to the extent such expenses relate to
the contest of Taxes or asserted Taxes with respect to which Seller has
acknowledged its indemnity obligation under Section 7.2. In any event, each of
Buyer and Seller may participate, at its own expense, in any such Tax
Proceeding. Buyer shall have the right, at its expense, to control the conduct
and resolution of any Tax Proceedings relating to any Taxes for any taxable
period ending after the Closing Date with respect to the Champion Companies;
provided, however, Buyer shall consult with Seller with respect to the
resolution of any issue relating to or which could affect a Straddle Period and
Buyer shall not settle any such issue, or file any amended return relating to
any such issue, without the prior written consent of Seller.
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
7.8. Sales and Other Tax. The payment of all transfer,
documentary, recording, notarial, sales, use, registration, stamp, and other
similar taxes, fees, and expenses (including, but not limited to, all
applicable stock transfer or real estate transfer taxes, and including any
penalties, interest, and additions to such Tax) incurred in connection with
this Agreement and the transactions contemplated hereby shall be borne equally
by Buyer and Seller as provided in Section 5.9. Buyer and Seller shall
cooperate in timely making and filing all Tax Returns that may be required to
comply with the applicable laws relating to such Taxes.
8. CONDITIONS TO OBLIGATION TO CLOSE.
8.1. CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties of Seller
set forth in this Agreement shall be true and correct in all material respects
as of the Closing Date;
(b) Seller shall have performed and complied with
all of its covenants hereunder in all material respects through the Closing;
(c) there shall not be any injunction, judgment,
decree or order of any court of competent jurisdiction in effect preventing
consummation of any of the transactions contemplated by this Agreement;
(d) Seller shall have delivered to Buyer a
certificate to the effect that each of the conditions specified above in
clauses (a) through (c) is satisfied in all respects;
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(e) the waiting period (and any extensions thereof)
under the Hart-Scott-Rodino Act and any other applicable pre-merger
notification laws shall have expired or otherwise been terminated; and
(f) the relevant parties shall have entered into
the Other Agreements.
8.2. CONDITIONS TO OBLIGATION OF SELLER. The obligation of
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties of Buyer set
forth in this Agreement shall be true and correct in all material respects as
of the Closing Date;
(b) Buyer shall have performed and complied with
all of its covenants hereunder in all material respects through the Closing;
(c) there shall not be any injunction, judgment,
decree or order of any court or other Governmental Authority threatened or in
effect preventing consummation of any of the transactions contemplated by this
Agreement;
(d) Buyer shall have delivered to Seller a
certificate to the effect that each of the conditions specified above in
clauses (a) through (c) is satisfied in all respects;
(e) the applicable waiting period (and any
extensions thereof) under the Hart-Scott-Rodino Act and any other applicable
pre-merger notification laws shall have expired or otherwise been terminated;
and
(f) the relevant parties shall have entered into
the Other Agreements.
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
8.3. WAIVER; RIGHT TO PROCEED. If any of the conditions
specified in Section 8.1 hereof have not been satisfied, Buyer, in addition to
any other rights that may be available to it, may waive its rights to have such
conditions satisfied at Closing and may proceed with the transactions
contemplated hereby. If any of the conditions specified in Section 8.2 hereof
have not been satisfied at Closing, Seller, in addition to any other rights
that may be available to it, may waive its rights to have such conditions
satisfied and may proceed with the transactions contemplated hereby. Any such
waiver by Buyer or Seller, as the case may be, shall in no way diminish or
eliminate any other rights that may be available to the waiving party related
to or as a result of the waived condition or conditions not having been
satisfied at Closing.
9. SURVIVAL; INDEMNIFICATION.
9.1. IN GENERAL.
(a) The indemnification provisions in this
Agreement and the specific performance remedy in Section 11.14 hereof are the
sole and exclusive remedies after the Closing of any Seller Indemnified Party
or Buyer Indemnified Party with respect to any and all claims relating to the
subject matter of this Agreement (including claims for any breach of a
representation, warranty, covenant or agreement in this Agreement). Except for
the right to seek indemnification on the terms and subject to the conditions of
this Section 9 or specific performance under Section 11.14, each of Seller, on
behalf of itself and any other Person who is a Seller Indemnified Party, and
Buyer, on behalf of itself and any other Person who is a Buyer Indemnified
Party, hereby irrevocably waives any and all rights, claims, causes of action
or theories of liability it might otherwise have, which relate to the subject
matter of the Agreement, against any other party hereto or its Affiliates
under or based upon any principle of equity or any federal, state, local or
foreign statute, law, ordinance, rule or regulation (including those relating
to hazardous substances, asbestos-containing materials, underground storage
tanks and PCBs). Without limiting the foregoing, Buyer on behalf of itself and
any other Person who is a Buyer Indemnified Party, waives any rights they may
have to contribution from Seller or any of
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
its Affiliates under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, but only to the extent that such rights
relate to the subject matter of this Agreement.
(b) Seller and Buyer shall treat any
indemnification payment made pursuant to this Agreement as an adjustment to the
purchase price and Seller and Buyer agree not to take any position inconsistent
therewith for any purpose.
(c) Any Indemnified Party seeking indemnification
under this Agreement shall use its reasonable efforts to mitigate losses for
which it seeks indemnification hereunder.
(d) The Indemnified Party shall use reasonable
efforts to pursue insurance claims relating to any claim for which it is
seeking indemnification pursuant to this Agreement. However, the Indemnified
Party is not obligated to pursue an insurance claim if the Indemnified Party,
in its reasonable judgment, believes that the cost of pursuing the insurance
claim together with any corresponding increase in insurance premiums or other
chargebacks to the Indemnified Party would exceed the value of the insurance
claim.
(e) If requested by an Indemnifying Party, the
Indemnified Party shall (and shall cause its Affiliates to) assign to the
Indemnifying Party, to the extent the Indemnified Party has been indemnified,
any rights or claims of the Indemnified Party and its Affiliates against any
other person.
9.2. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) With the exception of the representations and
warranties in Section 3.11, each representation and warranty of the parties
contained in this Agreement or in any schedule, certificate or other document
delivered in connection with this Agreement shall survive the Closing and
continue in effect for a period of 18 months thereafter and then expire. Each
representation and
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
warranty in Section 3.11 shall survive the Closing and continue in effect for a
period of 5 years and then expire. No party may claim indemnification for
breach of a representation or warranty unless the Indemnified Party notifies
the Indemnifying Party in writing of the indemnity claim including a reasonable
description of the claim (whether or not fixed as to liability or liquidated as
to amount) before the survival period expires. Any timely asserted claim for
indemnification for breach of a representation or warranty shall not expire at
the end of the survival period, but shall continue to be valid and assertible
(and the Indemnifying Party's obligation to indemnify the Indemnified Party for
such a claim shall survive) until the claim is finally resolved.
(b) Any covenant or other agreement of the parties
contained in this Agreement or in any schedule, certificate or other document
delivered in connection with this Agreement survives the Closing and continues
until fully performed. The Indemnifying Party's obligation to indemnify the
Indemnified Party for any claims, other than a claim for indemnification for
breach of a representation or warranty, shall survive without limitation.
9.3. LIMITS ON INDEMNIFICATION.
(a) No Indemnified Party may claim indemnification
for breach of a representation or warranty unless and until the aggregate
amount of all Adverse Consequences and Environmental Claims incurred by or
asserted against the Indemnified Party by reason of all such breaches exceeds
$25 million and then only to the extent the aggregate amount of the Adverse
Consequences and Environmental Claims exceeds such threshold amount. The
aggregate indemnification obligations of each of Seller or Buyer for breaches
of representations and warranties shall not exceed $1 billion.
(b) Indemnification claims for breaches of
covenants or other agreements are not subject to any minimums or maximums.
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PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(c) In calculating the amount of Adverse
Consequences or Environmental Claims payable to any Indemnified Party pursuant
to this Agreement, the amount of such Adverse Consequences and Environmental
Claims shall be reduced by: (i) any insurance proceeds actually received by the
Indemnified Party in respect of the Adverse Consequences or Environmental
Claims net of any expenses incurred (including any resulting increase in
insurance premiums) by the Indemnified Party to obtain the insurance proceeds
(provided, however, an Indemnified Party shall not be obligated to institute
any legal proceedings in connection with the collection or pursuit of any
insurance in order to exercise its indemnification remedy under this
Agreement); (ii) the amount accrued or reserved against as a liability on the
Final Closing Statement of Net Assets with respect to such Adverse Consequences
or Environmental Claims less any amounts paid in cash since Closing with
respect thereto and recorded as an accrual or reserve reduction for which
indemnification will not be sought; and (iii) any recoveries from third parties
pursuant to indemnification (or otherwise) with respect thereto net of any
expenses incurred by the Indemnified Party in obtaining such third party
payment.
(d) Notwithstanding anything in this Agreement to
the contrary, no Indemnifying Party shall be liable to an Indemnified Party for
any punitive damages, exemplary damages, lost profits or other consequential
damages (which shall not include natural resource damages) in connection with
any claim for indemnification under this Agreement.
9.4. INDEMNIFICATION BY SELLER. Subject to the qualifications
contained in this Section 9 and subject to Section 5.27, Seller shall
indemnify, defend and hold harmless Buyer, and its Affiliates, and its and
their directors, officers, employees and assigns ("BUYER INDEMNIFIED PARTIES")
from any Adverse Consequences and Environmental Claims incurred by or asserted
against the Buyer Indemnified Parties to the extent such Adverse Consequences
or Environmental Claims arise out of or relate to: (i) a breach by Seller of
its representations, warranties, covenants or other agreements contained in
this Agreement or in any schedule, certificate or other document delivered in
connection with this Agreement; (ii) the Seller's indemnity obligations under
Section 7.2(a); (iii) all liabilities and obligations of Cooper Industries
Norge AS (other than liabilities or obligations relating to the conduct
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<PAGE> 93
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
of any business in or through Cooper Industries Norge AS by Seller or its
Affiliates after the Closing); and (iv) any liabilities and obligations of
Cooper A&S Company and Champion Automotive S.p.A. to the extent such
liabilities and obligations relate to non-automotive businesses conducted by
such companies before the Closing Date. Seller shall also indemnify, defend
and hold harmless the Buyer Indemnified Parties from the Adverse Consequences
and Environmental Claims (a) described in Section 5.21 relating to the
AlliedSignal Lawsuit and the Bosch Infringement Claim and (b) for Asbestos
Claims to the extent provided in Section 5.25.
9.5. INDEMNIFICATION BY BUYER. Subject to the qualifications
contained in this Section 9, Buyer shall (and Buyer shall cause the Champion
Companies and any of Buyer's Affiliates which acquire assets of the Canadian
Division to) indemnify, defend and hold harmless Seller, and its Affiliates,
and its and their directors, officers, employees and assigns ("SELLER
INDEMNIFIED PARTIES") from any Adverse Consequences and Environmental Claims
incurred by or asserted against the Seller Indemnified Parties to the extent
such Adverse Consequences and Environmental Claims arise out of or relate to:
(i) a breach by Buyer of its representations, warranties, covenants or other
agreements contained in this Agreement or in any schedule, certificate or other
document delivered in connection with this Agreement; (ii) Seller's Company
Obligations; (iii) the Buyer's indemnity obligations under Sections 5.11, 5.25
and 7.2(b); (iv) all Environmental Claims; and (v) all liabilities and
obligations of Champion, the Champion Subsidiaries and the Related Companies,
and all liabilities and obligations relating to the Canadian Division that are
assumed by Buyer or its Affiliates, whether arising before, on or after
Closing; provided, however, with respect to clauses (iv) and (v) above, Buyer
shall not have any obligation to indemnify, defend and hold harmless the Seller
Indemnified Parties to the extent any Adverse Consequences or Environmental
Claims are subject to the indemnification provisions of Section 9.4.
9.6. THIRD PARTY CLAIMS. The obligations and liabilities of
the parties with respect to claims for indemnification resulting from the
assertion of liability by a third party are subject to the following terms and
conditions.
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<PAGE> 94
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(a) If any third party shall notify the Indemnified
Party with respect to any matter which may give rise to a claim for
indemnification against the Indemnifying Party (or an Indemnified Party
otherwise discovers such a third party claim), then the Indemnified Party shall
promptly provide written notice of such matter to the Indemnifying Party
describing the matter in reasonable detail; provided, however, a delay by the
Indemnified Party in notifying the Indemnifying Party shall not relieve the
Indemnifying Party from any liability hereunder unless (and then solely to the
extent) the Indemnifying Party's position is actually prejudiced by such delay.
(b) If the Indemnifying Party notifies the
Indemnified Party within 30 days after the Indemnified Party has given notice
of the matter that the Indemnifying Party is assuming all responsibility for
the matter including the defense thereof: (i) the Indemnifying Party shall
reimburse the Indemnified Party for any costs it has incurred relating to the
matter and shall defend the Indemnified Party against the matter with counsel
of the Indemnifying Party's choice provided such counsel is reasonably
satisfactory to the Indemnified Party; (ii) although the Indemnifying Party
shall direct and control the defense of such matter, the Indemnified Party may
retain separate co- counsel at its sole cost and expense; (iii) the Indemnified
Party will not consent to the entry of any judgment or enter into any
settlement with respect to the matter without the prior written consent of the
Indemnifying Party, which shall not be unreasonably withheld or delayed; and
(iv) the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the matter, which judgment or
settlement does not include a provision whereby the plaintiff or claimant in
the matter releases the Indemnified Party from all liability with respect
thereto, without the prior written consent of the Indemnified Party, which
shall not be unreasonably withheld or delayed.
(c) If the Indemnifying Party does not notify the
Indemnified Party within 30 days after the Indemnified Party has given notice
of the matter that the Indemnifying Party is assuming all responsibility
therefor including the defense thereof, the Indemnified Party may defend
against, consent to the entry of any judgment or enter into any settlement with
respect to the matter in any manner the Indemnified Party reasonably deems
appropriate without waiving any right to indemnity therefor by the Indemnifying
Party.
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<PAGE> 95
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(d) The parties shall cooperate in defending any
third-party claim. The defending party shall have reasonable access to the
books, records and personnel which are pertinent to the defense and which are
in the possession or control of the other party.
10. TERMINATION.
10.1. TERMINATION OF AGREEMENT. This Agreement may be terminated
at any time prior to Closing as provided below:
(a) Buyer and Seller may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(b) Buyer may terminate this Agreement by giving
written notice to Seller at any time prior to the Closing: (i) if, pursuant to
Section 5.10 above, Seller has within the then preceding 10 days given Buyer
any notice by means of a disclosure supplement of a condition, event or
development that has had a Material Adverse Effect upon the financial condition
of the Champion Companies taken as a whole; (ii) if there has been a material
breach by Seller of any of its representations, warranties, or covenants
contained in this Agreement, Buyer has notified Seller of the breach, and the
breach has continued without cure for a period of 30 days after the notice of
breach; or (iii) if the Closing shall not have occurred on or before December
31, 1998 by reason of the failure of any condition precedent under Section 8.1
hereof (unless the failure results primarily from Buyer breaching any
representation, warranty, or covenant contained in this Agreement).
Notwithstanding the preceding, the parties acknowledge and Buyer agrees that
the risk of a partial or total loss of the Carquest account or any other
account by the Champion Companies has been taken into account in Buyer's
calculation of the Purchase Price, and any change or occurrence with respect to
any account (including partial or total loss) shall not be deemed a basis for
the termination of this Agreement; and
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<PAGE> 96
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
(c) Seller may terminate this Agreement by giving
written notice to Buyer at any time prior to the Closing: (i) if there has been
a material breach by Buyer of any of its representations, warranties, or
covenants contained in this Agreement, Seller has notified Buyer of the breach,
and the breach has continued without cure for a period of 30 days after the
notice of breach; or (ii) if the Closing shall not have occurred on or before
December 31, 1998, by reason of the failure of any condition precedent under
Section 8.2 hereof (unless the failure results primarily from Seller breaching
any representation, warranty, or covenant contained in this Agreement).
10.2. EFFECT OF TERMINATION. If either party terminates this
Agreement pursuant to Section 10.1 above, all rights and obligations of Seller
and Buyer hereunder shall terminate without any liability of either party to
the other (except for any liability of any party then in breach and except for
any continuing obligations under the Confidentiality Agreement attached hereto
as Exhibit IX).
11. MISCELLANEOUS.
11.1. NO THIRD-PARTY BENEFICIARIES. Except for Sections 9.4 and
9.5 which are intended to benefit and be enforceable by any of the Seller
Indemnified Parties and Buyer Indemnified Parties, as the case may be, this
Agreement does not confer any rights or remedies upon any Person other than the
parties hereto and their respective successors and permitted assigns.
11.2. ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the parties and
supersedes any prior or contemporaneous understandings, agreements, or
representations by or between the parties, written or oral, to the extent they
have related or relate in any way to the subject matter hereof.
11.3. SUCCESSORS AND ASSIGNS. This Agreement is binding upon and
inures to the benefit of the parties hereto and their respective successors and
permitted assigns. No party may assign either this Agreement or any of the
party's rights, interests, or obligations hereunder without the prior
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<PAGE> 97
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
written approval of the other party; provided, however, either party may assign
any of its rights, interests and obligations hereunder to one or more of its
Affiliates without the prior written approval of the other party in which case
the assigning party shall continue to remain liable for the performance of all
its obligations under this Agreement. Any assignment prohibited hereunder is
void.
11.4. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which is deemed an original but all of which together
constitute one and the same instrument.
11.5. HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and do not affect in any way the meaning or
interpretation of this Agreement.
11.6. NOTICES. All notices expressly required under this
Agreement (other than notices provided under Section 2.8 hereof) shall be in
writing and shall be deemed given if delivered personally (upon the recipient's
actual receipt), if mailed by certified mail, return receipt requested (upon
the date of delivery to recipient), if by a nationally recognized air courier
which confirms delivery (upon date of delivery to the recipient), or if sent by
facsimile (upon the sender's receipt of written confirmation showing receipt by
the recipient), to the parties at the following addresses (or at such other
address for a party as shall be specified by notice given pursuant hereto):
(a) If to Seller, at:
Cooper Industries, Inc.
600 Travis, Suite 5800
Houston, Texas 77002
Attention: General Counsel
Fax to: (713) 209-8989
(b) If to Buyer, at:
Federal-Mogul Corporation
26555 Northwestern Highway
Southfield, MI 48034
Attention: General Counsel
Fax to: (248)-354-8103
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<PAGE> 98
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
11.7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without giving
effect to any choice or conflict of law provision or rule, except that the
Federal Arbitration Act 9 U.S.C Sections 1-16 shall govern all questions
relating to the arbitrability of any claim or dispute in connection with this
Agreement including such claims or disputes relating to the purchase price
adjustment pursuant to Section 2 hereof, and to the enforcement of the
arbitration provisions contained in Sections 2 and 12 hereof.
11.8. AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement is valid unless the same shall be in writing and signed by all
the parties hereto. No waiver by any party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to a prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any such prior or subsequent occurrence.
11.9. SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
11.10. CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" means including without limitation. Words (including defined
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<PAGE> 99
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
terms) in the singular shall be held to include the plural and vice versa and
words of one gender shall be held to include the other genders as the context
requires. The terms "hereof", "herein" and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole (including all of the Schedules and Exhibits hereto) and not to any
particular provision of this Agreement, and Section, Exhibit and Schedule
references are to this Agreement unless otherwise specified. It is understood
and agreed that neither the specification of any dollar amount in this
Agreement nor the inclusion of any specific item in the Schedules or Exhibits
is intended to imply that such amounts or higher or lower amounts, or the items
so included or other items, are or are not material, and neither party shall
use the fact of the setting of such amounts or the fact of the inclusion of any
such item in the Schedules or Exhibits in any dispute or controversy between
the parties as to whether any obligation, item or matter is or is not material
for purposes hereof.
11.11. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof. Disclosure of any fact or circumstance in any Schedule or
Exhibit referenced by a particular section or paragraph of the Agreement shall
be deemed to be disclosed with respect to any other paragraph or section
regardless of whether an explicit cross-reference appears.
11.12. BULK TRANSFER LAWS. Buyer acknowledges that Seller will not
comply with the provisions of any bulk transfer laws of any jurisdiction in
connection with the transactions contemplated by this Agreement.
11.13. DECEPTIVE TRADE PRACTICES WAIVER. Buyer waives the
provisions of the Texas Deceptive Trade Practices Act, Chapter 17, subchapter
E, Section 17.41 through 17.63, inclusive (other than 17.555, which is not
waived), Texas Business and Commerce Code, or any similar legislation that
supersedes such act. To evidence its ability to grant this waiver, Buyer
represents and warrants to Seller that Buyer (i) is in the business of seeking
or acquiring, by purchase or lease, goods
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<PAGE> 100
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
or services for commercial or business use, (ii) has assets of $5,000,000 or
more according to its most recent financial statement prepared in accordance
with generally accepted accounting principles, (iii) has knowledge and
experience in financial and business matters that enable it to evaluate the
merits and risk of the transaction contemplated, and (iv) is not in a
significantly disparate bargaining position.
11.14. SPECIFIC PERFORMANCE. Each party acknowledges and agrees
that the other party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Each party agrees that the other
party shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any remedy to which
they may be entitled as set forth in this Agreement.
12. DISPUTE RESOLUTION
12.1. MEETING OF SENIOR OFFICERS. Any claim or dispute between
Seller and Buyer arising out of or in connection with this Agreement or any
alleged breach hereof or thereof except those to which the arbitration
provisions in Section 2.7 apply (a "CLAIM") shall be submitted for resolution
to a senior officer of each of Seller and Buyer, as designated by their
respective chief executive officers, who shall meet within thirty (30) days of
such submission to seek in good faith an amicable settlement. In seeking an
amicable settlement, the parties may consult with a neutral third party
mediator if both parties agree in writing.
12.2. BINDING ARBITRATION.
(a) GOVERNING PRINCIPLES. If any Claim is not
settled by the parties within sixty (60) days after written notice of the Claim
is first given by either party to the other, then either party may submit a
written demand for arbitration and the Claim shall be finally settled by
arbitration under the Commercial Arbitration Rules and the Guidelines for
Expediting Larger, Complex
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<PAGE> 101
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
Commercial Arbitrations of the American Arbitration Association (the "RULES"),
and judgment upon the award rendered by the Arbitrator may be entered in any
court having jurisdiction over it.
(b) SELECTION AND QUALIFICATION OF THE ARBITRATOR.
If the Claim does not exceed $1,000,000, there shall be one arbitrator. If the
Claim is more than $1,000,000, there shall be three arbitrators (all
arbitrators are hereafter collectively referred to as the "ARBITRATOR"). The
parties shall endeavor to agree on the selection of an Arbitrator, but if no
agreement has been reached within thirty (30) days of claimant's demand for
arbitration the Arbitrator shall be selected by the American Arbitration
Association. The Arbitration shall be held in Chicago, Illinois. The
Arbitrator shall conduct himself or themselves as a neutral, and be subject to
disqualification pursuant to Section 19 of the Rules. The Arbitrator shall be
compensated at such Arbitrator's normal hourly or per diem rates for all time
spent in connection with the arbitration proceeding, and pending final award,
appropriate compensation and expenses shall be advanced equally by the parties.
(c) INTERIM RELIEF FROM A COURT. Either party may
request a court to provide interim or provisional relief, and such request
shall not be deemed incompatible with the agreement to arbitrate or as a waiver
of that agreement.
(d) POWERS OF THE ARBITRATOR AND ARBITRATION
PROCEDURES. The Arbitrator shall permit and facilitate such discovery as the
Arbitrator determines is appropriate, including prehearing depositions,
particularly of witnesses who will not appear, and orders to protect the
confidentiality of proprietary information, trade secrets, and other sensitive
information disclosed in discovery. Papers, documents and written
communications shall be delivered by the parties directly to each other, the
Arbitrator, and the American Arbitration Association tribunal administrator.
The Arbitrator shall actively manage the proceeding to make it fair,
expeditious, economical and less burdensome and adversarial than litigation.
The Arbitrator may limit the issues, limit the time for each party to present
its case, exclude testimony and other evidence that it deems irrelevant,
cumulative or inadmissible, and order that the direct testimony of witnesses be
furnished by written sworn statement. All documents that a party proposes to
offer in evidence, except for those objected
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<PAGE> 102
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
to by an opposing party, shall be self-authenticated. There shall be a
stenographic transcript of the proceedings, the cost of which shall be borne
equally by the parties, pending the final award. Any Claim submitted to
arbitration shall be resolved in accordance with Title 9 of the U.S. Code (U.S.
Arbitration Act), which shall govern the interpretation, enforcement and
proceedings pursuant to this arbitration provision.
(e) RENDERING OF AWARD. The award rendered by the
Arbitrator shall be itemized, shall not include punitive damages, exemplary
damages, lost profits or other consequential damages, but may include all or a
part of a party's reasonable attorneys' fees, and shall state the reasoning on
which it rests. Before rendering the final award, the Arbitrator shall submit
to the parties an unsigned draft of the proposed award, and each party may
deliver, within fifteen (15) days after receipt of such draft, a written
statement of alleged errors of fact, computation, law or otherwise. The
Arbitrator may disregard any party's statement to the extent that it is in
substance an application for reargument. With twenty (20) days after receipt
of such party statements, the Arbitrator shall render the final award.
* * * * * * * * * *
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<PAGE> 103
PURCHASE AND SALE AGREEMENT BETWEEN
COOPER INDUSTRIES, INC. AND FEDERAL-MOGUL CORPORATION DATED AUGUST 17, 1998
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
COOPER INDUSTRIES, INC.
By: /s/ David A. White, Jr.
-------------------------------------------
Title: Senior Vice President, Strategic Planning
-----------------------------------------
FEDERAL-MOGUL CORPORATION
By: /s/ Charles B. Grant
-------------------------------------------
Title: Vice President, Corporate Development
-------------------------------------------
FEDERAL-MOGUL COMERCIO
INTERNACIONAL, S.A.
By: /s/ Charles B. Grant
-------------------------------------------
Title: Vice President, Corporate Development
-------------------------------------------
FEDERAL-MOGUL PTY. LTD.
By: /s/ Charles B. Grant
-------------------------------------------
Title: Vice President, Corporate Development
-------------------------------------------
FEDERAL-MOGUL GLOBAL GROWTH LTD.
By: /s/ Charles B. Grant
-------------------------------------------
Title: Vice President, Corporate Development
-------------------------------------------
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<PAGE> 104
EXHIBIT I
CERTAIN DEFINITIONS
"ABEX PRODUCTS" has the meaning set forth in Section 5.25.
"ABEX TERMINATION DATE" has the meaning set forth in Section 5.25.
"ACCOUNTING ARBITRATOR" has the meaning set forth in Section 2.7.
"ADDITIONAL FX CONTRACTS" has the meaning set forth in Section 5.16.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, directives, notices of violation or non-compliance, rulings,
damages, penalties, fines, costs, liabilities, obligations, Taxes, liens,
losses, expenses, and fees, including court costs and reasonable fees and
expenses of attorneys, accountants, consultants and experts.
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or is under common control
with such first Person. Unless otherwise specified, the term "Affiliate", when
used with respect to Seller, shall not include the Champion Companies. Unless
otherwise specified, the term "Affiliate", when used with respect to Buyer,
shall include the Champion Companies and any designee of Buyer which acquires
the Canadian Division.
"ALLIEDSIGNAL LAWSUIT" has the meaning set forth in Section 5.21(a).
"ASBESTOS CLAIM" means a claim arising from personal injury, including
death, resulting from exposure to asbestos-containing products manufactured or
sold prior to the Closing Date by (a) Pneumo Abex Corporation ("Pneumo")
(provided the products were manufactured or sold prior to December 30, 1994),
(b) Wagner Electric Corporation ("WEC"), (c) each of Pneumo and WEC's
Predecessors and successors as of the Closing Date, and (d) for the purpose of
Section 5.25(a) and 5.25(g) only: Standard Motor Products Company ("SMPC"),
SMPC's Affiliates, and SMPC's and its Affiliates' Predecessors.
"AUTOMOTIVE HOURLY PLANS" has the meaning set forth in Section 6.4(a).
"BENEFIT PLAN" has the meaning set forth in Section 6.1(a).
"BOSCH INFRINGEMENT CLAIM" has the meaning set forth in Section 5.21.
"BUSINESS" means the business, activity, and operations historically
or currently conducted by the Champion Companies.
"BUYER" means Federal-Mogul Corporation, a corporation organized under
the laws of Michigan.
<PAGE> 105
EXHIBIT I (CONTINUED)
"BUYER INDEMNIFIED PARTIES" has the meaning set forth in Section 9.4.
"BUYER'S LETTER" has the meaning set forth in Section 2.5.
"BUYER'S WELFARE BENEFIT PLANS" has the meaning set forth in Section
6.4(e).
"CANADIAN ASSET TRANSFER AGREEMENT" means the Asset Transfer Agreement
between Cooper Industries (Canada) Inc. and Buyer or its designated Affiliate
in the form similar to that attached as Exhibit VI hereto, with terms and
conditions mutally agreed.
"CANADIAN DIVISION" means the division of Cooper Industries (Canada)
Inc. that is engaged in the Business.
"CHAMPION" means Champion Spark Plug Company, a corporation organized
under the laws of Delaware.
"CHAMPION AUSTRALIAN PLAN" has the meaning set forth in Section
6.4(h).
"CHAMPION BENEFIT ARRANGEMENT" has the meaning set forth in Section
6.1(c).
"CHAMPION COMMON STOCK" has the meaning set forth in the preamble of
the Agreement.
"CHAMPION COMPANIES" means Champion, the Champion Subsidiaries, the
Related Companies, the Canadian Division and (except for purposes of Sections 2
and 3) their respective Predecessors. Each such company or division is
individually referred to as a "CHAMPION COMPANY".
"CHAMPION EMPLOYEE PLAN" has the meaning set forth in Section 6.1(c).
"CHAMPION INTERNATIONAL PLAN" has the meaning set forth in Section
6.1(d).
"CHAMPION PENSION PLAN" has the meaning set forth in Section 6.4(a).
"CHAMPION RETIREMENT SAVINGS PLAN" has the meaning set forth in
Section 6.4(b).
"CHAMPION SALARIED PLAN" has the meaning set forth in Section 6.4(a).
"CHAMPION SUBSIDIARIES" means the direct and indirect subsidiaries of
Champion as set forth on Exhibit II. Each such company is individually
referred to as a "CHAMPION SUBSIDIARY".
"CHAMPION SUPPLEMENTAL DB PLAN" and "CHAMPION SUPPLEMENTAL DC PLAN"
have the respective meanings set forth in Section 6.4(d).
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<PAGE> 106
EXHIBIT I (CONTINUED)
"CHANGE PERIOD" has the meaning set forth in Section 2.3(a).
"CLOSING" means the closing of the transactions contemplated by the
Agreement.
"CLOSING DATE" means the date on which the Closing actually takes
place.
"COOPER AUSTRALIAN PLAN" has the meaning set forth in Section 6.4(h).
"COOPER RETIREMENT SAVINGS PLAN" has the meaning set forth in Section
6.4(b).
"COOPER SALARIED PLAN" has the meaning set forth in Section 6.4(a).
"COOPER SUPPLEMENTAL DB PLAN" and "COOPER SUPPLEMENTAL DC PLAN" have
the respective meanings set forth in Section 6.4(d).
"COOPER'S WELFARE BENEFIT PLANS" has the meaning set forth in Section
6.4(e).
"EMPLOYEE" has the meaning set forth in Section 6.1(a).
"EMPLOYEE BENEFITS" has the meaning set forth in Section 6.4(f).
"ENCUMBRANCE" means any mortgage, lien, security interest, easement,
encroachment, assessment, judgment, rights of first refusal, purchase options
(and with respect to real property only, third party rights affecting
marketability) and any other encumbrance affecting title.
"ENVIRONMENTAL CLAIMS" means any and all administrative, regulatory or
judicial actions, causes of action, suits, obligations, Environmental
Liabilities, losses, proceedings, decrees, judgments, penalties, fines, fees,
demands, demand letters, orders, directives, claims (including any claims
involving Environmental Liability in tort, strict, absolute or otherwise),
liens, notices of noncompliance or violation, legal and consultant fees and
costs of investigations or proceedings, arising from any Environmental Law.
"ENVIRONMENTAL LAWS" means any and all Laws or Environmental Permits
relating to public or employee health or safety, pollution, natural resources,
or the environment, including any Law relating to: (i) the manufacture,
processing, distribution, generation, use, ownership, management, handling,
collection, treatment, storage, transportation, abatement, remediation
(including assessment, monitoring, operation and maintenance), recovery,
recycling, removal, Release, threat of Release, discharge, or disposal of, or
exposure to, Regulated Materials; (ii) record keeping, notification or
reporting requirements relating to Regulated Materials; or (iii) negligence,
gross negligence, strict liability, intentional tort, toxic tort or any other
theory of liability at law (whether common or statutory) or in equity to the
extent claims thereunder arise from contamination by, exposure to, any Release
or threatened Release of, or conditions or non-compliance relating to,
Regulated Materials in the environment.
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<PAGE> 107
EXHIBIT I (CONTINUED)
"ENVIRONMENTAL LIABILITIES" means any and all Adverse Consequences
arising under any Environmental Law, whether direct or indirect, known or
unknown, joint or several, and whenever arising (including after Closing),
including all fees; forms of financial assurance; fines; penalties; judgments;
capital costs; wetlands mitigation, response, cleanup, removal, treatment,
monitoring, operating and maintenance costs; investigation, remedial and
inspection costs; disbursements; and expenses of counsel, experts, contractors
and consultants, based on, arising out of or otherwise in respect to: (i) the
Champion Companies or property (whether real or personal) or assets currently
or formerly owned, operated, used or leased (including the Owned Real Property
and the Leased Real Property) by the Champion Companies (including off-site
locations); (ii) conditions or Regulated Materials existing, generated, used,
treated, stored, recovered, recycled or Released on, at or under, transported
to or from, or originating from any such property or operation of the Business
(including off-site locations); or (iii) expenditures to cause any such
property, off-site locations, or natural resources affected in any way by such
conditions or Regulated Materials, or any other aspect of the Business to be in
compliance with any requirements of Environmental Laws.
"ENVIRONMENTAL PERMIT" means any Permit, registration, consent,
waiver, exception, variance, exemption, or filing relating in any way to or
required by any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ESPP PARTICIPANTS" has the meaning set forth in Section 6.5.
"1997 ESPP" has the meaning set forth in Section 6.5.
"FINAL CLOSING STATEMENT OF NET ASSETS" has the meaning set forth in
Section 2.3.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 3.6.
"FORMER EMPLOYEE" has the meaning set forth in Section 6.1(f).
"FULL FUNDING LIABILITIES" has the meaning set forth in Section
6.4(a).
"GAAP" means generally accepted United States accounting principles.
"GOVERNMENTAL AUTHORITY" means the United States, any other country,
any national body (including the European Union), any state, province,
municipality, or subdivision of any of the foregoing, any agency, governmental
department, court, entity, commission, board, ministry, bureau, locality or
authority of any of the foregoing, or any quasi- governmental or private body
exercising any regulatory, taxing, importing, exporting, or other governmental
or quasi- governmental function or any arbitrator.
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<PAGE> 108
EXHIBIT I (CONTINUED)
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 or any successor law, and regulations and rules issued
pursuant to that Act or any successor law.
"HOURLY FULL FUNDING LIABILITIES" has the meaning set forth in Section
6.4(a).
"INDEMNIFIED PARTY" means the Person who is entitled to the benefits
of any indemnity provision under this Agreement.
"INDEMNIFYING PARTY" means the party to the Agreement who is obligated
to indemnify the Buyer Indemnified Parties or Seller Indemnified Parties, as
the case may be, pursuant to any provision under this Agreement.
"INTELLECTUAL PROPERTY" means all domestic and foreign patents,
copyrights, trade names, trademarks, service marks and registrations and
applications for any of the foregoing (together with the goodwill associated
with such trade names, trademarks and service marks), trade secrets,
inventions, proprietary processes, research and development information,
designs, confidential and technical information, engineering and technical
drawings, specifications, know- how, formulae and other proprietary property,
rights and interests.
"INTERNAL REVENUE CODE" or "CODE" means the Internal Revenue Code of
1986, the regulations thereunder, any amendments thereto and any successor law.
"KNOWLEDGE" means actual knowledge, after due inquiry, and shall not
include any constructive or imputed knowledge. Any reference to Seller's
Knowledge shall be limited to the actual knowledge of the persons set forth on
Exhibit VIII.
"LAWS" means all laws; statutes; regulations; by-laws, codes;
ordinances; decrees; rules; judicial, arbitral, administrative, ministerial,
departmental or regulatory judgments, orders, decisions, rulings, injunctions,
or awards; policies; voluntary restraints; guidelines; directives; agreements
with, requirements of, or instructions by any Governmental Authority; general
principles of common or civil law; and equity.
"LEASED REAL PROPERTY" has the meaning set forth in Section 3.14(b).
"MATERIAL ADVERSE EFFECT" means a material and adverse effect on the
business, operations or financial condition of the Champion Companies taken as
a whole.
"MATERIAL CONTRACTS" has the meaning set forth in Section 3.12.
"MOOG COMMON STOCK" has the meaning set forth in Section 2.10.
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<PAGE> 109
EXHIBIT I (CONTINUED)
"NEGATIVE PURCHASE PRICE ADJUSTMENT" has the meaning set forth in
Section 2.2(b).
"NOMINAL SHARES" means the shares of Cooper Automotive France, S.A.
and Cooper Automotive, Taiwan, Inc. that are owned by certain individuals and
which will be delivered to Buyer (or its designee) pursuant to Section
2.9(b)(iii) and (iv).
"OTHER AGREEMENTS" has the meaning set forth in Section 5.19.
"OUTSTANDING FX CONTRACTS" has the meaning set forth in Section 5.16.
"OWNED REAL PROPERTY" has the meaning set forth in Section 3.14(a).
"PEG DATE" has the meaning set forth in Section 2.3(a).
"PEG STATEMENT OF NET ASSETS" has the meaning set forth in Section
2.3.
"PERFORMANCE OBLIGATION INSTRUMENTS" has the meaning set forth in
Section 5.15.
"PERMITS" means all licenses, permits, approvals, certificates and
authorizations of any Governmental Authority primarily relating to the
Business.
"PERMITTED ENCUMBRANCES" means any Encumbrance: (i) for Taxes or other
governmental assessments or charges the payment of which is not yet due or
which are being contested in good faith by appropriate proceedings; (ii) of
carriers, warehousemen, mechanics, materialmen or similar encumbrances imposed
by law arising or incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith; (iii) other imperfections of
title or encumbrances, if any, which individually or in the aggregate do not
materially detract from the value of the property subject thereto, or
materially impair the use of such property as presently used in the Business.
Further, with respect to the Owned Real Property and the Leased Real Property,
Permitted Encumbrances shall also include (i) zoning and similar restrictions;
and (ii) such imperfections of title, easements, liens, charges and other
encumbrances as are of record or as would be described on a current survey.
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Authority.
"POSITIVE PURCHASE PRICE ADJUSTMENT" has the meaning set forth in
Section 2.2(b).
"PRE-CLOSING STRADDLE PERIOD" has the meaning set forth in Section
7.2(c).
"PRE-CLOSING CREDITABLE FOREIGN TAX" has the meaning set forth in
Section 7.2(a)(iv).
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<PAGE> 110
EXHIBIT I (CONTINUED)
"PREDECESSOR" means a Person which has previously held an interest to
which the Person to whom the reference is made has succeeded, including a
Person that conveyed, transferred or assigned all or substantially all of its
assets to the Person to whom the reference is made or a Person which was merged
or amalgamated into or consolidated with the Person to whom the reference is
made.
"PRELIMINARY CLOSING STATEMENT OF NET ASSETS" has the meaning set
forth in Section 2.3.
"PROVISIONAL PAYMENT" has the meaning set forth in Section 7.2(a)(iv).
"PURCHASE PRICE ADJUSTMENT" has the meaning set forth in Section
2.2(b).
"REGULATED MATERIALS" means (i) any solid waste, hazardous waste,
pollutant, contaminant or petroleum (including any crude oil or fraction
thereof) and (ii) any hazardous, toxic or other substance, material, liquid,
gas or chemical regulated by or which is the basis for liability under any
Environmental Law.
"RELATED COMPANIES" means the companies set forth on Exhibit III.
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, placing, burying
or disposing into the environment of any Regulated Material.
"SALARIED FULL FUNDING LIABILITIES" has the meaning set forth in
Section 6.4(a).
"SELLER" means Cooper Industries, Inc., a corporation organized under
the laws of Ohio.
"SELLER INDEMNIFIED PARTIES" has the meaning set forth in Section 9.5.
"SELLER'S COMPANY OBLIGATIONS" has the meaning set forth in Section
5.12.
"SELLER'S LETTER" has the meaning set forth in Section 2.4.
"STRADDLE PERIOD" has the meaning set forth in Section 7.2(c).
"TAX" or "TAXES" means all federal, provincial, state, local or
foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental, customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, ad valorem, value added, alternative or add-on
minimum, estimated, or other tax of any kind, including, without limitation,
liability for taxes arising from a consolidated return and imposed by Treasury
Reg. Section 1.1502.6, together with any interest, penalty, or additions,
whether disputed or not.
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<PAGE> 111
EXHIBIT I (CONTINUED)
"TAX PROCEEDING" has the meaning set forth in Section 7.7(b).
"TAX RETURN" means any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Authority in connection with the determination, assessment,
collection, or payment of any Taxes.
"TRANSFER PLAN LIABILITIES" has the meaning set forth in Section
6.4(a).
-8-
<PAGE> 112
EXHIBIT II
LIST OF CHAMPION SUBSIDIARIES
Champion Aviation, Inc.
Champion Interamericana, Ltd.
Champion Automotive S.p.A. (f/k/a Cooper Industries Italia S.p.A.)
Champion Spark Plug Belgium S.A. (as to 56%)
Champion Sparking Plug Company (Ireland) Limited
Cooper A&S Company
Cooper Automotive Company
Cooper Automotive de Mexico, S.A. de C.V.
Cooper Automotive de Venezuela C.A.
Cooper Automotive do Brasil, Ltda.
Cooper Automotive Filtration S.p.A.
Cooper Automotive France, S.A.
Cooper Automotive Iberica, S.A.
Cooper Automotive K.K.
Cooper Automotive Netherlands B.V.
Cooper Automotive of Latin America, S.A. de C.V.
Cooper Automotive of South Africa (Pty.) Limited
Cooper Automotive Products, Inc.
Cooper Automotive S.A.
Cooper Automotive, S.A. de C.V.
Cooper Automotive, Taiwan, Inc.
Cooper Industries Norge AS (in liquidation)
Farloc Argentina S.A.I.C. y F (24%)
Frenos Hidraulicos Automotrices, S.A. de C.V. (49%)
Industrias Cooper de Venezuela, S.A.
ZV Zundkerzenvertriebs GmbH (in liquidation)
<PAGE> 113
EXHIBIT III
LIST OF RELATED COMPANIES
Champion Automotive (U.K.) Ltd.
Subsidiaries: Champion Executive Pensions Limited
Firecom Ltd.
[New pension company in U.K. may be incorporated
before closing]
Cooper Automotive Electrical do Brasil Ltda.
Subsidiaries: none
Cooper Automotive Pty. Ltd.
Subsidiaries: Cooper Automotive Products (India) Private Limited
Guangzhou Champion Spark Plug Co., Ltd. (50%)
[New pension company in Australia may be
incorporated before closing]
Moog Automotive Products, Inc.
Subsidiaries: Moog Automotive Company
Moog Automotive Batesville, Inc.
Moog Redevelopment Corporation
Moog Automotive, Ltd.
Qingdao Precision Universal Joint Company Limited
(50%)
Productos de Frenos Automotrices de Calidad, S.A.
de C.V.
Crucetas Mexicanas, S.A. de C.V. (40%)
Veda Manufacturing Pty. Limited (in liquidation)
Champion Spark Plug Belgium S.A. (as to 44%)
<PAGE> 114
PURCHASE AND SALE AGREEMENT
BETWEEN
COOPER INDUSTRIES, INC.
AND
FEDERAL-MOGUL CORPORATION
LIST OF OMITTED EXHIBITS AND DISCLOSURE SCHEDULES
The following exhibits and disclosure schedules to the Purchase and Sale
Agreement have not been filed with the Securities and Exchange Commission
pursuant to Rule 601(b) of Regulation S-K. Cooper Industries, Inc. shall
furnish supplementally a copy of any omitted exhibit or schedule to the
Securities and Exchange Commission upon request.
OMITTED EXHIBITS
Exhibit IV - Peg Statement of Net Assets of the Champion Companies dated
March 31, 1998.
Exhibit V - The following financial statements for the Champion Companies:
Unaudited combined financial statements for the three months
ended March 31, 1998.
Audited combined financial statements as of December 31, 1997
and for the three years then ended.
Exhibit VI - Preliminary draft of Canadian Asset Transfer Agreement between
Cooper Industries (Canada) Inc., as the seller, and the
Federal-Mogul affiliate that will be acquiring the Canadian
automotive business.
Exhibit VII - Allocation of the Purchase Price (to be completed after
closing).
Exhibit VIII - List of individuals at Cooper Industries, Inc. or the Champion
Companies who have "knowledge" for purposes of the
representations and warranties under the Purchase and Sale
Agreement.
Exhibit IX - Confidentiality Agreement with Federal-Mogul Corporation.
Exhibit X - A list of certain insurance policies that provide coverage for
asbestos liabilities.
OMITTED DISCLOSURE SCHEDULES
The following disclosure schedules disclose those matters that are described in
and are required to be disclosed under the corresponding sections of the
Purchase and Sale Agreement: 2.3(h), 2.3(m), 3.2, 3.4, 3.5, 3.6, 3.7, 3.8,
3.9, 3.10, 3.11, 3.12, 3.14, 3.15, 3.16, 3.17, 3.20, 3.21, 5.12, 5.15, 5.16,
6.3, 6.4 and 7.1.
<PAGE> 1
EXHIBIT 10(ii)
MANAGEMENT CONTINUITY AGREEMENT
THIS AGREEMENT, dated as of August 4, 1998, is made by and
between Cooper Industries, Inc., an Ohio corporation (the "Company"), and
_________________________________ (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its shareholders to foster the continued employment of key
management personnel; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive hereby agree
as follows:
1. Defined Terms. The definitions of capitalized terms used
in this Agreement are provided in the last Section hereof.
2. Term of Agreement. The Term of this Agreement shall
commence on the date hereof and shall continue in effect through December 31,
2000; provided, however, that commencing on January 1, 2000 and each January 1
thereafter, the Term shall automatically be extended for one additional year
unless, not later than September 30 of the preceding year, the Company or the
Executive shall have given notice not to extend the Term; and further provided,
however, that if a Change in Control shall have occurred during the Term, the
Term shall expire no earlier than twenty-four (24) months beyond the month in
which such Change in Control occurred. Notwithstanding any other provision
hereof, (a) the Term shall expire upon any termination of the Executive's
employment prior to a Potential Change in Control and (b) the Term shall expire
(and for purposes of the application of the provisions of the Agreement, shall
be deemed to have expired) on the date (or scheduled date, as the case may be)
of the Executive's Retirement.
3. Company's Covenants Summarized. In order to induce the
Executive to remain in the employ of the Company and in consideration of the
Executive's covenants set forth in Section 4 hereof, the Company agrees, under
the conditions described herein, to pay the Executive the Severance Payments
and the other payments and benefits described herein. Except
<PAGE> 2
as provided in Section 9.1 hereof, no Severance Payments shall be payable under
this Agreement unless there shall have been (or, under the terms of the second
sentence of Section 6.1 hereof, there shall be deemed to have been) a
termination of the Executive's employment with the Company following a Change
in Control and during the Term. This Agreement shall not be construed as
creating an express or implied contract of employment and, except as otherwise
agreed in writing between the Executive and the Company, the Executive shall
not have any right to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the Term, the Executive intends to remain in
the employ of the Company until there occurs a Change in Control.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during
any period that the Executive fails to perform the Executive's full-time duties
with the Company as a result of incapacity due to physical or mental illness,
the Company shall pay the Executive's full salary to the Executive at the rate
in effect at the commencement of any such period, together with all
compensation and benefits payable to the Executive under the terms of any
compensation or benefit plan, program or arrangement maintained by the Company
during such period, until the Executive's employment is terminated by the
Company for Disability.
5.2 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
the Executive's full salary to the Executive through the Date of Termination at
the rate in effect immediately prior to the Date of Termination (without giving
effect to any reduction in base salary, which reduction constitutes an event of
Good Reason) or, if higher, the rate in effect immediately prior to the Change
in Control, together with all compensation and benefits payable to the
Executive through the Date of Termination under the terms of the Company's
compensation and benefit plans, programs or arrangements as in effect
immediately prior to the Date of Termination (without giving effect to any
reduction in compensation or benefits, which reduction constitutes an event of
Good Reason) or, if more favorable to the Executive, as in effect immediately
prior to the Change in Control.
5.3 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
to the Executive the Executive's normal post-termination compensation and
benefits as such payments become due. Such post-termination compensation and
benefits shall be determined under, and paid in accordance with, the Company's
retirement, insurance and other compensation or benefit plans, programs and
arrangements as in effect immediately prior to the Date of Termination (without
giving effect to any adverse change in such plans, programs and arrangements,
which adverse change constitutes an event of Good Reason) or, if more favorable
to the Executive, as in effect immediately prior to the Change in Control.
2
<PAGE> 3
6. Severance Payments.
6.1 Subject to Section 6.2 hereof, if (i) the Executive's
employment is terminated following a Change in Control and during the Term,
other than (A) by the Company for Cause, (B) by reason of death, Disability or
Retirement, or (C) by the Executive without Good Reason, then the Company shall
pay the Executive the amounts, and provide the Executive the benefits,
described in this Section 6.1 ("Severance Payments") and Section 6.2, in
addition to any payments and benefits to which the Executive is entitled under
Section 5 hereof. For purposes of this Agreement, the Executive's employment
shall be deemed to have been terminated following a Change in Control by the
Company without Cause or by the Executive with Good Reason, if (i) the
Executive's employment is terminated by the Company without Cause after the
occurrence of a Potential Change in Control and prior to a Change in Control
(whether or not a Change in Control ever occurs) and such termination was at
the request or direction of a Person who has entered into an agreement with the
Company the consummation of which would constitute a Change in Control or (ii)
the Executive terminates his employment for Good Reason after the occurrence of
a Potential Change in Control and prior to a Change in Control (whether or not
a Change in Control ever occurs) and the circumstance or event which
constitutes Good Reason occurs at the request or direction of such Person.
(A) In lieu of any further salary payments
to the Executive for periods subsequent to the Date of Termination and
in lieu of any severance benefit otherwise payable to the Executive,
the Company shall pay to the Executive a lump sum severance payment,
in cash, equal to __________________ [ ] (or, if less, the number of
full and partial years between the Date of Termination and the
Executive's scheduled date of Retirement) times the sum of (i) the
Executive's base salary as in effect immediately prior to the Date of
Termination (without giving effect to any reduction in base salary,
which reduction constitutes an event of Good Reason) or, if higher, in
effect immediately prior to the Change in Control, and (ii) the higher
of (A) the average annual bonus earned by the Executive pursuant to
the annual bonus or incentive plan maintained by the Company in
respect of the three fiscal years ending immediately prior to the
fiscal year in which occurs the Date of Termination (without giving
effect to any reduction in bonus caused by an adverse change in the
Executive's bonus plan participation, which adverse constitutes an
event of Good Reason) or, if higher, immediately prior to the fiscal
year in which occurs the Change in Control or (B) the Executive's
target annual bonus for the fiscal year in which occurs the Date of
Termination (without giving effect to any reduction in bonus caused by
an adverse change in the Executive's bonus plan participation, which
adverse change constitutes an event of Good Reason) or, if higher, the
fiscal year in which occurs the Change in Control.
(B) For the ________________________ [ ]
month period (or, if less, the number of months between the Date of
Termination and the Executive's scheduled date of Retirement)
immediately following the Date of Termination, the Company shall
arrange to provide the Executive and his dependents with life,
disability, accident and
3
<PAGE> 4
health insurance benefits substantially similar to those provided to
the Executive and his dependents immediately prior to the Date of
Termination (without giving effect to any reduction in benefits, which
reduction constitutes an event of Good Reason) or, if more favorable
to the Executive, those provided to the Executive and his dependents
immediately prior to the Change in Control, at no greater cost to the
Executive than the cost to the Executive immediately prior to such
date; provided, however, that, unless the Executive consents to a
different method (after taking into account the effect of such method
on the calculation of "parachute payments" pursuant to Section 6.2
hereof), such health insurance benefits shall be provided through a
third-party insurer. Benefits otherwise receivable by the Executive
pursuant to this Section 6.1 (B) shall be reduced to the extent
benefits of the same type are received by or made available to the
Executive during the ___________________ [ ] (or, if less, the number
of months between the Date of Termination and the Executive's
scheduled date of Retirement) month period following the Executive's
termination of employment (and any such benefits received by or made
available to the Executive shall be reported to the Company by the
Executive); provided, however, that the Company shall reimburse the
Executive for the excess, if any, of the cost of such benefits to the
Executive over such cost immediately prior to the Date of Termination
or, if more favorable to the Executive, the date on which the Change
in Control occurs. If the Severance Payments shall be decreased
pursuant to Section 6.2 hereof, and the Section 6.1(B) benefits which
remain payable after the application of Section 6.2 hereof are
thereafter reduced pursuant to the immediately preceding sentence, the
Company shall, no later than five (5) business days following such
reduction, pay to the Executive the least of (a) the amount of the
decrease made in the Severance Payments pursuant to Section 6.2
hereof, (b) the amount of the subsequent reduction in these Section
6.1(B) benefits, or (c) the maximum amount which can be paid to the
Executive without being, or causing any other payment to be,
nondeductible by reason of section 280G of the Code.
(C) Notwithstanding any provision of any
annual incentive plan to the contrary, the Company shall pay to the
Executive a lump sum amount, in cash, equal to the product of (i) the
target bonus to which the Executive would have been entitled under the
Company's annual incentive plan in respect of the year in which the
Date of Termination occurs and (ii) a fraction, the numerator of which
shall be the number of months (including fractions thereof) from the
first day of the fiscal year during which the Date of Termination
occurs to the Date of Termination, and the denominator of which shall
be twelve (12); provided, however, that if the Date of Termination
occurs during the same year as the Change in Control, the payment
under this Section 6.1(C) shall be offset by any payments received
under the Company's annual incentive plan in connection with such
Change in Control.
(D) In addition to the retirement benefits
to which the Executive is entitled under each Pension Plan or any
successor plan thereto, the Company shall pay the Executive a lump sum
amount, in cash, equal to the sum of (i) the pay related credits
4
<PAGE> 5
the Executive would have accrued under the Salaried Employees'
Retirement Plan of Cooper Industries, Inc. and the Cooper Industries,
Inc., Supplemental Excess Defined Benefit Plan; and (ii) the
Company-Matching Contributions the Executive would have accrued under
the Cooper Industries, Inc., Savings and Stock Ownership Plan and the
Cooper Industries, Inc., Supplemental Excess Defined Contribution Plan
(the plans referred to in subsections (i) and (ii) hereof, "The
Plans"), in each case, during the _____________________ [ ] month (or,
if less, the number of months between the Date of Termination and the
Executive's scheduled date of Retirement) period immediately following
the Executive's Date of Termination based upon: (1) the terms and
provisions of The Plans as in effect immediately prior to the Change
in Control; (2) the lump sum payment set forth in Section 6.1(A)
hereof, which lump sum shall be deemed to have been earned ratably
over such period; and (3) the assumption that the Executive was making
the maximum allowable pre-tax contributions under The Plans during
such period.
(E) The Company shall provide the Executive
with outplacement services suitable to the Executive's position for a
period of one year or, if earlier, until the first acceptance by the
Executive of an offer of employment.
(F) The Company shall continue to maintain
officers' indemnification insurance for the Executive for a period of
five years following the Date of Termination, the terms and conditions
of which shall be no less favorable than the terms and conditions of
the officers' indemnification insurance maintained by the Company for
the Executive immediately prior to the date on which the Change in
Control occurs.
6.2 (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any payment or benefit received or to be received by the
Executive in connection with a Change in Control or the termination of the
Executive's employment (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated with the Company or such
Person) (all such payments and benefits, including the Severance Payments,
being hereinafter called "Total Payments") will be subject (in whole or part)
to the Excise Tax, then, subject to the provisions of subsection (B) of this
Section 6.2, the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Total Payments and any federal, state and
local income and employment taxes and Excise Tax upon the Gross-Up Payment,
shall be equal to the Total Payments. For purposes of determining the amount
of the Gross-Up Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state and locality of the
Executive's residence on the Date of Termination (or if there is no Date of
Termination, then the date on which the Gross-Up Payment is calculated for
purposes of this Section 6.2), net of the maximum reduction in federal income
tax which could be obtained from deduction of such state and local taxes.
5
<PAGE> 6
(B) In the event that the amount of the Total Payments
does not exceed 110% of the largest amount that would result in no portion of
the Total Payments being subject to the Excise Tax (the "Safe Harbor"), then
subsection (A) of this Section 6.2 shall not apply and the noncash Severance
Payments shall first be reduced (if necessary, to zero), and the cash Severance
Benefits shall thereafter be reduced (if necessary, to zero) so that the amount
of the Total Payments is equal to the Safe Harbor; provided, however, that the
Executive may elect to have the cash Severance Payments reduced (or eliminated)
prior to any reduction of the noncash Severance Payments.
(C) For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amount of such Excise
Tax, (i) all of the Total Payments shall be treated as "parachute payments"
within the meaning of section 280G(b)(2) of the Code, unless in the opinion of
tax counsel ("Tax Counsel") reasonably acceptable to the Executive and selected
by the accounting firm which was, immediately prior to the Change in Control,
the Company's independent auditor (the "Auditor"), such other payments or
benefits (in whole or in part) do not constitute parachute payments, including
by reason of section 280G(b)(4)(A) of the Code, (ii) all "excess parachute
payments" within the meaning of section 280G(b)(l) of the Code shall be treated
as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered, within the meaning of section 280G(b)(4)(B) of the
Code, in excess of the Base Amount allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax, and (iii) the value of any
noncash benefits or any deferred payment or benefit shall be determined by the
Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the
Code. Prior to the payment date set forth in Section 6.3 hereof, the Company
shall provide the Executive with its calculation of the amounts referred to in
this Section 6.2(C) and such supporting materials as are reasonably necessary
for the Executive to evaluate the Company's calculations. If the Executive
disputes the Company's calculations (in whole or in part), the reasonable
opinion of Tax Counsel with respect to the matter in dispute shall prevail.
(D) In the event that (i) amounts are paid to the
Executive pursuant to subsection (A) of this Section 6.2, (ii) the Excise Tax
is finally determined to be less than the amount taken into account hereunder
in calculating the Gross-Up Payment, and (iii) after giving effect to such
redetermination, the Severance Payments are to be reduced pursuant to
subsection (B) of this Section 6.2, the Executive shall repay to the Company,
within five (5) business days following the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by the
Executive), to the extent that such repayment results in (i) no portion of the
Total Payments being subject to the Excise Tax and (ii) a dollar-for-dollar
reduction in the Executive's taxable income and wages for
6
<PAGE> 7
purposes of federal, state and local income and employment taxes) plus interest
on the amount of such repayment at the rate provided in section 1274(b)(2)(B)
of the Code. In the event that (x) the Excise Tax is determined to exceed the
amount taken into account hereunder at the time of the termination of the
Executive's employment (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment) and
(y) after giving effect to such redetermination, the Severance Payments should
not have been reduced pursuant to subsection (B) of this Section 6.2, the
Company shall make an additional Gross-Up Payment in respect of such excess and
in respect of any portion of the Excise Tax with respect to which the Company
had not previously made a Gross-Up Payment (plus any interest, penalties or
additions payable by the Executive with respect to such excess and such
portion) within five (5) business days following the time that the amount of
such excess is finally determined.
6.3 The payments provided in subsections (A), (C) and (D) of
Section 6.1 hereof and in Section 6.2 hereof shall be made not later than the
fifth day following the Date of Termination; provided, however, that if the
amounts of such payments, and the limitations on such payments set forth in
Section 6.2 hereof, cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as determined in
good faith by the Executive or, in the case of payments under Section 6.2
hereof, in accordance with Section 6.2 hereof, of the minimum amount of such
payments to which the Executive is clearly entitled and shall pay the remainder
of such payments (together with interest on the unpaid remainder [or on all
such payments to the extent the Company fails to make such payments when due]
at the rate provided in section 1274(b)(2)(B) of the Code) as soon as the
amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth (5th) business day after demand by the Company (together with
interest at the rate provided in section 1274(b)(2)(B) of the Code). At the
time that payments are made under this Agreement, the Company shall provide the
Executive with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including, without
limitation, any opinions or other advice the Company has received from Tax
Counsel, the Auditor or other advisors or consultants (and any such opinions or
advice which are in writing shall be attached to the statement).
6.4 The Company also shall pay to the Executive all legal
fees and expenses incurred by the Executive in disputing in good faith any
issue hereunder relating to the termination of the Executive's employment, in
seeking in good faith to obtain or enforce any benefit or right provided by
this Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within five (5)
business days after delivery of the Executive's written request(s) for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
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<PAGE> 8
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board which was called and held for the
purpose of considering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board) finding that, in the good faith opinion
of the Board, the Executive was guilty of conduct set forth in clause (i) or
(ii) of the definition of Cause herein, and specifying the particulars thereof
in detail.
7.2 Date of Termination. "Date of Termination," with respect
to any purported termination of the Executive's employment after a Change in
Control and during the Term, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is
given (provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period), and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of an arbitrator or a court
of competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, u, that the Date of Termination shall be extended by a notice of
dispute given by the Executive only if such notice is given in good faith and
the Executive pursues the resolution of such dispute with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 7.3 hereof, the Company
shall continue to pay the Executive the full compensation
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<PAGE> 9
in effect when the notice giving rise to the dispute was given (including, but
not limited to, salary) and continue the Executive as a participant in all
compensation, benefit and insurance plans in which the Executive was
participating when the notice giving rise to the dispute was given, until the
Date of Termination, as determined in accordance with Section 7.3 hereof.
Amounts paid under this Section 7.4 are in addition to all other amounts due
under this Agreement (other than those due under Section 5.2 hereof) and shall
not be offset against or reduce any other amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the
Executive's employment with the Company terminates during the Term, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Section
6 hereof or Section 7.4 hereof. Further, the amount of any payment or benefit
provided for in this Agreement (other than Section 6.1(B) hereof) shall not be
reduced by any compensation earned by the Executive as the result of employment
by another employer, by retirement benefits, by offset against any amount
claimed to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death
of the Executive) if the Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the executors, personal representatives or administrators of
the Executive's estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt
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<PAGE> 10
requested, postage prepaid, addressed, if to the Executive, to the address
inserted below the Executive's signature on the final page hereof and, if to
the Company, to the address set forth below, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual receipt:
To the Company:
Cooper Industries, Inc.
P.O. Box 4446
Houston, Texas 77210-4446
Attention: Senior Vice President, Human Resources
11. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or of any lack of compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. This Agreement
supersedes any other agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof which have been made by
either party; provided, however, that this Agreement shall supersede any
agreement setting forth the terms and conditions of the Executive's employment
with the Company only in the event that the Executive's employment with the
Company is terminated on or following a Change in Control by the Company other
than for Cause or by the Executive for Good Reason. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Ohio. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be
reduced to the extent necessary so that the Company may satisfy any applicable
withholding required under federal, state or local law and any additional
withholding to which the Executive has agreed. The obligations of the Company
and the Executive under this Agreement which by their nature may require either
partial or total performance after the expiration of the Term (including,
without limitation, those under Sections 6 and 7 hereof) shall survive such
expiration.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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<PAGE> 11
14. Settlement of Disputes; Arbitration.
14.1 All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Board and shall be in
writing. Any denial by the Board of a claim for benefits under this Agreement
shall be delivered to the Executive in writing and shall set forth the specific
reasons for the denial and the specific provisions of this Agreement relied
upon. The Board shall afford a reasonable opportunity to the Executive for a
review of the decision denying a claim and shall further allow the Executive to
appeal to the Board a decision of the Board within sixty (60) days after
notification by the Board that the Executive's claim has been denied.
14.2 Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Houston, Texas in accordance with the rules of the American Arbitration
Association then in effect; provided, however, that the evidentiary standards
set forth in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding any
provision of this Agreement to the contrary, the Executive shall be entitled to
seek specific performance of the Executive's right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
15. Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in Section 6.2
hereof.
(C) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
(D) "Beneficial Owner" shall have the meaning set forth in
Rule 13d3 under the Exchange Act.
(E) "Board" shall mean the Board of Directors of the Company.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive's incapacity due to physical or
mental illness or any such actual or anticipated failure after the issuance of
a Notice of Termination for Good Reason by the Executive pursuant to Section
7.1 hereof) after a written demand for substantial performance is delivered to
the Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the
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<PAGE> 12
Executive has not substantially performed the Executive's duties, or (ii) the
willful engaging by the Executive in conduct which is demonstrably and
materially injurious to the Company or its subsidiaries, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this definition, (x) no
act, or failure to act, on the Executive's part shall be deemed "willful"
unless done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Company and (y) in the event of a dispute concerning
the application of this provision, no claim by the Company that Cause exists
shall be given effect unless the Company establishes to the Board by clear and
convincing evidence that Cause exists.
(G) A "Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or
its affiliates) representing 25% or more of the combined
voting power of the Company's then outstanding securities,
excluding any Person who becomes such a Beneficial Owner in
connection with a transaction described in clause (i) of
paragraph (III) below; or
(II) the following individuals cease for any
reason to constitute a majority of the number of directors
then serving: individuals who, on the date hereof, constitute
the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or
nomination for election by the Company's shareholders was
approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were
directors on the date hereof or whose appointment, election or
nomination for election was previously so approved or
recommended; or
(III) there is consummated a merger or
consolidation of the Company or any direct or indirect
subsidiary of the Company with any other corporation, other
than (i) a merger or consolidation which results in the
directors of the Company immediately prior to such merger or
consolidation continuing to constitute at least a majority of
the board of directors of the Company, the surviving entity or
any parent thereof, or (ii) a merger or consolidation effected
to implement a recapitalization of the Company (or similar
transaction) in which no Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
(not including in the securities Beneficially Owned by such
Person any securities acquired directly from the Company or
its Affiliates) representing 25% or more of the combined
voting power of the Company's then outstanding securities; or
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<PAGE> 13
(IV) the shareholders of the Company approve
a plan of complete liquidation or dissolution of the Company
or there is consummated an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets, other than a sale or disposition by the
Company of all or substantially all of the Company's assets to
an entity, at least 60% of the combined voting power of the
voting securities of which are owned by shareholders of the
Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale.
(H) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(I) "Company" shall mean Cooper Industries, Inc. and, except
in determining under Section 15(E) hereof whether or not any Change in Control
of the Company has occurred, shall include any successor to its business and/or
assets which assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(J) "Date of Termination" shall have the meaning set forth in
Section 7.2 hereof.
(K) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, the Executive
shall have been absent from the full-time performance of the Executive's duties
with the Company for a period of six (6) consecutive months, the Company shall
have given the Executive a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given, the Executive shall
not have returned to the full-time performance of the Executive's duties.
(L) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(M) "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.
(N) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(O) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, or prior to a Change in
Control under the circumstances described in clauses (ii) and (iii) of the
second sentence of Section 6.1 hereof (treating all references in
13
<PAGE> 14
paragraphs (I) through (VII) below to a "Change in Control" as references to a
"Potential Change in Control"), of any one of the following acts by the
Company, or failures by the Company to act, unless, in the case of any act or
failure to act described in paragraph (I), (V), (VI) or (VII) below, such act
or failure to act is corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof:
(I) the assignment to the Executive of any
duties inconsistent with the Executive's status as a senior
executive officer of the Company or a substantial adverse
alteration in the nature or status of the Executive's
responsibilities or reporting relationship from those in
effect immediately prior to the Change in Control;
(II) a reduction by the Company in the
Executive's annual base salary as in effect on the date hereof
or as the same may be increased from time to time;
(III) the relocation of the Executive's
principal place of employment to a location which increases
the Executive's one-way commuting distance by more than 50
miles or the Company's requiring the Executive to be based
anywhere other than the Executive's principal place of
employment immediately prior to the Change in Control (or
permitted relocation thereof) except for required travel on
the Company's business to an extent substantially consistent
with the Executive's business travel obligations immediately
prior to the Change in Control;
(IV) the failure by the Company to pay to
the Executive any portion of the Executive's current
compensation, or to pay to the Executive any portion of an
installment of deferred compensation under any deferred
compensation program of the Company, within seven (7) days of
the date such compensation is due;
(V) the failure by the Company to continue
in effect any compensation plan in which the Executive
participates immediately prior to the Change in Control which
is material to the Executive's total compensation, including
but not limited to the Stock Incentive Plan, the Amended and
Restated Management Annual Incentive Plan and the Management
Incentive Compensation Deferral Plan or any substitute plans
adopted prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure
by the Company to continue the Executive's participation
therein (or in such substitute or alternative plan) on a basis
not materially less favorable, both in terms of the amount or
timing of payment of benefits provided and the level of the
Executive's participation relative to other participants, as
existed immediately prior to the Change in Control;
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<PAGE> 15
(VI) the failure by the Company to continue
to provide the Executive with benefits substantially similar
to those enjoyed by the Executive under any of the Company's
pension, savings, life insurance, medical, health and
accident, or disability plans in which the Executive was
participating immediately prior to the Change in Control, the
taking of any other action by the Company which would directly
or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit enjoyed
by the Executive at the time of the Change in Control, or the
failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive is
entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect
at the time of the Change in Control;
(VII) any purported termination of the
Executive's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of Section
7.1 hereof; for purposes of this Agreement, no such purported
termination shall be effective. The Executive's right to
terminate the Executive's employment for Good Reason shall not
be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect
to, any act or failure to act constituting Good Reason
hereunder; or
(VIII) any failure of the Company to obtain
assumption of this Agreements, as set forth in Section 9.1
hereof.
For purposes of any determination regarding the existence of
Good Reason, any claim by the Executive that Good Reason
exists shall be presumed to be correct unless the Company
establishes to the Board by clear and convincing evidence that
Good Reason does not exist.
(P) "Gross-Up Payment" shall have the meaning set forth in
Section 6.2 hereof.
(Q) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(R) "Pension Plan" shall mean any tax-qualified, supplemental
or excess benefit pension plan maintained by the Company and any other plan or
agreement entered into between the Executive and the Company which is designed
to provide the Executive with supplemental retirement benefits.
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(S) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their
ownership of stock of the Company or (v) any individual, entity or group whose
ownership of securities of the Company is reported on Schedule 13G pursuant to
Rule 13d-1 promulgated under the Exchange Act (but only for so long as such
ownership is so reported).
(T) "Potential Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
(I) the Company enters into an agreement,
the consummation of which would result in the occurrence of a
Change in Control;
(II) the Company or any Person publicly
announces an intention to take or to consider taking actions
which, if consummated, would constitute a Change in Control;
(III) any Person becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
representing 15% or more of either the then outstanding shares
of common stock of the Company or the combined voting power of
the Company's then outstanding securities (not including in
the securities beneficially owned by such Person any
securities acquired directly from the Company or its
affiliates); or
(IV) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
(U) "Retirement" shall mean the termination of the
Executive's employment in accordance with the Company's mandatory retirement
policy as in effect immediately prior to the Change in Control.
(V) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(W) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(X) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination described
therein).
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<PAGE> 17
(Y) "Total Payments" shall mean those payments so described
in Section 6.2 hereof.
COOPER INDUSTRIES, INC.
By:
------------------------------------
Name: Carl J. Plesnicher, Jr.
Title: Senior Vice President,
Human Resources
----------------------------------------
EXECUTIVE
Address:
17
<PAGE> 1
EXHIBIT 10(iii)
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS DEFINED BENEFIT PLAN
(AUGUST 1, 1998 RESTATEMENT)
<PAGE> 2
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS DEFINED BENEFIT PLAN
(AUGUST 1, 1998 RESTATEMENT)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
ARTICLE I
DEFINITIONS
<S> <C>
1.1 Definitions............................................................................. 2
1.2 Construction............................................................................ 5
ARTICLE II
ELIGIBILITY FOR PLAN PARTICIPATION
2.1 Eligibility of Active Employees......................................................... 6
2.2 Participation of Certain Employees...................................................... 6
2.3 Termination of Participation............................................................ 6
ARTICLE III
AMOUNT OF PLAN BENEFITS
3.1 Benefit Payable to Active Participants.................................................. 9
3.2 Benefit Payable to Participants Formerly Covered
By Another Nonqualified Plan.......................................................... 10
3.3 Cessation of Benefits to Certain Participants........................................... 10
ARTICLE IV
PAYMENT OF PLAN BENEFITS 12
ARTICLE V
BENEFICIARIES 13
ARTICLE VI
ADMINISTRATIVE PROVISIONS
6.1 Administration.......................................................................... 14
6.2 Powers and Authorities of the Committee................................................. 14
6.3 Indemnification......................................................................... 14
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VII
AMENDMENT AND TERMINATION 16
ARTICLE VIII
ADOPTION BY SUBSIDIARIES 17
ARTICLE IX
MISCELLANEOUS
9.1 Non-Alienation of Retirement Rights or Benefits......................................... 18
9.2 Payment of Benefits to Others........................................................... 18
9.3 Plan Non-Contractual.................................................................... 18
9.4 Funding ............................................................................... 19
9.5 Controlling Status...................................................................... 19
9.6 Claims of Other Persons................................................................. 19
9.7 Severability............................................................................ 19
9.8 Governing Law........................................................................... 20
</TABLE>
ii
<PAGE> 4
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS DEFINED BENEFIT PLAN
(AUGUST 1, 1998 RESTATEMENT)
WHEREAS, Cooper Industries, Inc. (hereinafter referred to as
the "Company") established the Cooper Industries, Inc. Supplemental Excess
Defined Benefit Plan (hereinafter referred to as the "Plan"), for the benefit of
a select group of management employees of the Company and its subsidiaries; and
WHEREAS, effective as of the close of business on July 31, 1990, the
Excess Benefit Plan for Participants in the Champion Spark Plug Company Salaried
Employees' Retirement Income Plan, the Champion Spark Plug Company Supplemental
Benefit Plan, and effective as of the close of business on August 31, 1990, the
Restoration of Retirement Income Plan for Certain Participants in the Cameron
Iron Works, Inc. Retirement Plan for Salaried Employees were merged into the
Plan and the Plan was restated; and
WHEREAS, the Plan was amended subsequently on six occasions; and
WHEREAS, the Company desires to amend and restate the Plan again;
NOW, THEREFORE, effective as of August 1, 1998, unless specifically
provided otherwise, the Plan is hereby amended and restated as hereinafter set
forth with respect to Participants employed on and after such date.
<PAGE> 5
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Except as otherwise required by the context, the terms
used in the Plan shall have the meaning hereinafter set forth.
(1) The term "AFFILIATE" shall have the meaning set forth in
Rule 12b-2 under Section 12 of the Exchange Act.
(2) The term "BENEFICIAL OWNER" shall have the meaning set
forth in Rule 13d-3 under the Exchange Act, except that a Person shall
not be deemed to be the Beneficial Owner of any securities which are
properly filed on a Form 13-G.
(3) The term "BENEFICIARY" shall mean the person who, in
accordance with the provisions of Article V, shall be entitled to
receive distribution hereunder in the event a Participant dies before
his interest under the Plan has been distributed to him in full.
(4) The term "CAMERON EXCESS PLAN" shall mean the Restoration
of Retirement Income Plan for Certain Participants in the Cameron Iron
Works, Inc. Retirement Plan for Salaried Employees as in effect on
August 31, 1990.
(5) The term "CHAMPION EXCESS PLAN" shall mean the Excess
Benefit Plan for Participants in the Champion Spark Plug Company
Salaried Employees' Retirement Income Plan as in effect on July 31,
1990.
(6) The term "CHAMPION SALARIED PLAN" shall mean the Champion
Spark Plug Company Salaried Employees' Retirement Income Plan which was
merged with the Cooper Salaried Plan effective July 31, 1990.
(7) The term "CHAMPION SUPPLEMENTAL PLAN" shall mean the
Champion Spark Plug Company Supplemental Benefit Plan.
(8) The term "CHAMPION EXCESS DB PLAN" shall mean the Champion
Spark Plug Company Supplemental Excess Defined Benefit Plan.
(9) A "CHANGE IN CONTROL" shall be deemed to have occurred if
an event described below occurs:
(a) Any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person
any securities acquired directly from the Company or its
affiliates) representing 20% or more of the combined voting
power of the Company's then outstanding securities, excluding
any Person who becomes such a Beneficial Owner in connection
with a transaction described in clause (i) of paragraph (c)
below; or
2
<PAGE> 6
(b) The following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who on the date hereof, constitute the Board and
any new director (other than a director whose initial
assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or
nomination for election by the Company's shareholders was
approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were
directors on the date hereof or whose appointment, election or
nomination for election was previously so approved or
recommended; or
(c) There is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company
with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of
the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity or any parent thereof), at least 60% of
the combined voting power of the securities of the Company or
such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (ii) a
merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company (not including in
the securities Beneficially Owned by such Person any
securities acquired directly from the Company or its
Affiliates) representing 20% or more of the combined voting
power of the Company's then outstanding securities; or
(d) The shareholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at
least 60% of the combined voting power of the voting
securities of which are owned by shareholders of the Company
in substantially the same proportions as their ownership of
the Company immediately prior to such sale.
(10) The term "CHAMPION CLOSING" shall mean the completion of
the sale of the stock of Champion Spark Plug Company and Moog
Automotive Products, Inc. to Federal-Mogul Corporation by the Company
pursuant to a certain purchase and sale agreement dated August 17, 1998
between the Company and Federal-Mogul Corporation.
3
<PAGE> 7
(11) The term "CODE" shall mean the Internal Revenue Code of
1986, as amended from time to time. Reference to a section of the Code
shall include such section and any comparable section or sections of
any future legislation that amends, supplements, or supersedes such
section.
(12) The term "COMPANY" shall mean Cooper Industries, Inc., an
Ohio corporation, its corporate successors, and the surviving
corporation resulting from any merger of Cooper Industries, Inc.
with any other corporation or corporations.
(13) The term "COOPER SALARIED PLAN" shall mean the Salaried
Employees' Retirement Plan of Cooper Industries, Inc., as amended from
time to time.
(14) The term "EMPLOYER" shall mean the Company, McGraw-Edison
Company and, prior to the Champion Closing, Champion Spark Plug Company
and Moog Automotive Products, Inc., as well as any subsidiary of the
Company which may adopt the Plan in accordance with the provisions of
Article VIII.
(15) The term "EXCHANGE ACT" shall mean the Securities
Exchange Act of 1934, as amended from time to time.
(16) The term "LOCAL ADMINISTRATIVE COMMITTEE" shall mean the
administrative committee that administers the Plan as set forth in
Article VI.
(17) The term "MCGRAW DEFERRAL PLAN" shall mean the
McGraw-Edison Supplemental Executive Benefits Plan.
(18) The term "MOOG SERP" shall mean the Moog Automotive, Inc.
Executive Supplemental Plan.
(19) The term "PARTICIPANT" shall mean any employee of an
Employer who is eligible to participate in the Plan pursuant to Article
II of the Plan.
(20) The term "PERSON" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and
14(d) thereof, except that such term shall not include (i) the Company
or any of its Affiliates, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the
Company.
(21) The term "PLAN" shall mean the Cooper Industries, Inc.
Supplemental Excess Defined Benefit Plan as set forth herein and as
amended hereafter from time to time.
4
<PAGE> 8
(22) The term "PLANS ADMINISTRATION COMMITTEE" shall mean the
Cooper Industries Plans Administration Committee established pursuant
to the Plans Management Procedure adopted by the Board of Directors of
the Company to administer the Company's employee benefit plans.
1.2 CONSTRUCTION. Where necessary or appropriate to the meaning hereof,
the singular shall be deemed to include the plural, the plural to include the
singular, the masculine to include the feminine, and the feminine to include the
masculine.
5
<PAGE> 9
ARTICLE II
ELIGIBILITY FOR PLAN PARTICIPATION
2.1 ELIGIBILITY OF ACTIVE EMPLOYEES. Any select management and highly
compensated employee of an Employer:
(i) whose retirement benefits under the Cooper Salaried Plan are
limited by the provisions of Section 415 or Section 401(a)(17)
of the Code; or
(ii) who participates in the Cooper Salaried Plan as well as in the
Cooper Deferral Plan.
shall become a Participant in the Plan automatically upon such limitation or
participation.
2.2 PARTICIPATION OF CERTAIN EMPLOYEES. Notwithstanding the
provisions of Section 2.1, but subject to the provisions of Section 2.3,
individuals who were participants in a plan set forth below as of the applicable
effective date shall become a Participant in the Plan as of the applicable
participation date set forth below; provided, however, that as of the Champion
Closing, Participants who were participants in the Champion Excess Plan and Moog
SERP shall no longer be Participants under the Plan, but shall participate in
the Champion Spark Plug Company Supplemental Excess Defined Benefit Plan.
<TABLE>
<CAPTION>
Plan Effective Date Plan Participation Date
---- -------------- -----------------------
<S> <C> <C>
Champion Supplemental Plan July 31, 1990 August 1, 1990
Cameron Excess Plan August 31, 1990 September 1, 1990
Moog SERP December 31, 1993 January 1, 1994
</TABLE>
2.3 TERMINATION OF PARTICIPATION. Notwithstanding the provisions of
Sections 2.1 and 2.2 effective as of the applicable date hereinafter set forth,
Participants last employed at the following facilities shall cease to be covered
by the Plan.
6
<PAGE> 10
<TABLE>
<CAPTION>
Employer Facility Effective Date
-------- -------- --------------
<S> <C> <C> <C>
1. Belden Wire & Cable Richmond, Indiana August 1, 1993
Company Clinton, Arkansas
Essex Junction, Vermont
Franklin, North Carolina
Monticello, Kentucky
Tompkinsville, Kentucky
Related Sales Offices
2. Gardner Denver Quincy, Illinois January 1, 1994
Machinery Inc. LaGrange, Missouri
Compton, California
Related Sales Offices
3. Cooper Cameron Houston, Texas January 1, 1995
Corporation Berwick, Louisiana
Katy, Texas
Liberty, Texas
Missouri City, Texas
Oklahoma City, Oklahoma
Patterson, Louisiana
Richmond, Texas
Ville Platte, Louisiana
Related Sales and Service
Facilities
4. Cooper Energy Service Mount Vernon, Ohio January 1, 1995
Operations Grove City, Pennsylvania
Springfield, Ohio
Oklahoma City, Oklahoma
Wheat Ridge, Colorado
Alameda, California
Tulsa, Oklahoma
Related Sales Offices
5. Cooper Turbocompressor Buffalo, New York January 1, 1995
Division Sales Offices
6. Wheeling Machine Pine Bluff, Arkansas January 1, 1995
Products Company
7. Champion Spark Plug Boaz, Alabama Date of the Champion
Company Manila, Arkansas Closing
Commerce, California
Hayward, California
</TABLE>
7
<PAGE> 11
<TABLE>
<S> <C>
Ontario, California
Burlington, Iowa
Chicago, Illinois
Michigan City, Indiana
Glasgow, Kentucky
Brighton, Massachusetts
Detroit, Michigan
Troy, Michigan
Berkeley, Missouri
Chesterfield, Missouri
Kansas City, Missouri
St. Louis, Missouri
Batesville, Mississippi
Pontotoc, Mississippi
Mahwah, New Jersey
Toms River, New Jersey
Auburn, New York
Salisbury, North Carolina
Cambridge, Ohio
Cleveland/Solon, Ohio
Hilliard, Ohio
Toledo, Ohio
Burns Flat, Oklahoma
Portland, Oregon
Weatherly, Pennsylvania
Greenville, South Carolina
Liberty, South Carolina
Memphis, Tennessee
Tullahoma, Tennessee
Smithville, Tennessee
Dyersburg, Tennessee
Dallas, Texas
Palestine, Texas
Winchester, Virginia
</TABLE>
8
<PAGE> 12
ARTICLE III
AMOUNT OF PLAN BENEFITS
3.1 BENEFIT PAYABLE TO ACTIVE PARTICIPANTS. Except as set forth below,
the supplemental benefit payable to an eligible Participant under the Plan who
is credited with service for benefit accrual purposes under the Cooper Salaried
Plan, shall be an amount which when added to the retirement benefit payable to
such Participant under the Cooper Salaried Plan equals the retirement benefit
which would have been payable under the Cooper Salaried Plan to the Participant,
if (i) the limitations of Sections 401(a)(17) and 415 of the Code were not in
effect; and/or (ii) the Participant had not deferred any compensation under the
Cooper Deferral Plan or the McGraw Deferral Plan which would have been
considered as compensation for benefit accrual purposes under the Cooper
Salaried Plan and was not so considered. Notwithstanding the foregoing, prior to
the Champion Closing, in no event shall the supplemental benefit of a
Participant who is a former Moog SERP participant and who is listed below (a
"Former Moog SERP Participant") be less than the amount hereinafter set forth,
reduced, however, by 3/12 of one percent for each month that commencement of
benefits precedes attainment of age 60.
<TABLE>
<CAPTION>
Former Moog
SERP Monthly Single Life Annuity Payable
Participant at or after Age 60
----------------- -------------------------------------
<S> <C>
L. W. McCurdy $2,213.47
J. A. Passante $628.67
J. F. Collins $698.34
T. M. Smith $297.17
J. C. Corey $688.81
G. Holler $436.97
K. G. Mullen $1,020.42
</TABLE>
9
<PAGE> 13
3.2 BENEFIT PAYABLE TO PARTICIPANTS FORMERLY COVERED BY ANOTHER
NONQUALIFIED PLAN. The supplemental benefit payable to a Participant who was not
credited with service for benefit accrual purposes under the Cooper Salaried
Plan shall be an amount determined as follows:
(a) Prior to the Champion Closing, the benefit payable under the
Plan to any Participant who retired or separated from service prior to
August 1, 1990, and who was covered under the Champion Excess Plan on
July 31, 1990, shall be the amount which such Participant was eligible
to receive under the terms of the Champion Excess Plan in effect as of
the date of such retirement or separation from service.
(b) Prior to the Champion Closing, the benefit payable under the
Plan to any Participant who was a participant in the Champion
Supplemental Plan on July 31, 1990, shall be an amount which such
Participant would have received (i) under the Champion Spark Plug
Company Salaried Employees' Retirement Income Plan (the "Champion
Salaried Plan") if he had been covered under such plan on July 31, 1990
and if all his service with Champion Spark Plug Company or a
predecessor or subsidiary thereof had been covered under the Champion
Salaried Plan, or (ii) under the DeVilbiss Company Salaried Employees
Retirement Plan (the "DeVilbiss Salaried Plan") if all his service with
the Company or a predecessor or subsidiary thereof had been covered
under the DeVilbiss Salaried Plan, or (iii) under the Baron Drawn Steel
Salaried Retirement Plan (the "Baron Salaried Plan") if all his service
with the Company or a predecessor or subsidiary thereof had been
covered under the Baron Salaried Plan; provided, however, that if such
a Participant was covered under more than one of the aforementioned
plans, his benefit shall be determined under the provisions of the plan
which would produce the greatest benefit; and provided further, that
the amount of any benefit payable to a Participant under any plan which
is based on service that is used to determine a benefit hereunder shall
reduce such Participant's Plan benefits.
3.3 CESSATION OF BENEFITS TO CERTAIN PARTICIPANTS. Notwithstanding the
foregoing, benefits otherwise payable under the Plan to certain Participants
listed below shall cease as of the applicable effective date.
(a) Prior to the Champion Closing, in the event that a Participant
who retired or separated from service prior to August 1, 1990 and who
was covered under the Champion Excess Plan on July 31, 1990, engages in
competition with the Company, in the sole judgment of the Plans
Administration Committee, all benefits otherwise payable hereunder to
such Participant shall be forfeited
10
<PAGE> 14
immediately and that no further benefits under the Plan or otherwise
shall be payable or due such Participant. In addition, payments made to
a Participant while such Participant engaged in competition with the
Company shall be refundable to the Company at its request.
(b) Any supplemental benefit credited or payable as of January 1,
1995 to a Participant who is an employee of Cooper Cameron Corporation
or a former employee of the Company who was last employed by the Cooper
Tool Oil Division, the Cooper Energy Services Operations, the Cooper
Turbocompressor Division, or Wheeling Machine Products Company and who
was not employed by the Company on January 1, 1995, shall not be so
credited or payable under the Plan but rather shall be credited and
payable under the Cooper Cameron Corporation Supplemental Excess
Defined Benefit Plan.
(c) Any supplemental benefit credited or payable as of the Champion
Closing to a Participant who is an employee of Champion Spark Plug
Company or a former employee of the Company who was last employed at a
Champion Spark Plug or Moog facility and who is not employed by the
Company on the Champion Closing, shall not be so credited or payable
under the Plan but rather shall be credited and payable under the
Champion Spark Plug Company Supplemental Excess Defined Benefit Plan.
11
<PAGE> 15
ARTICLE IV
PAYMENT OF PLAN BENEFITS
Except as specifically provided hereinafter, the supplemental benefits
determined under Article III shall be paid to a Participant or his Beneficiary,
if applicable, in the same manner and form as, and coincident with, the payment
of the retirement benefits of such Participant, or Beneficiary, under the Cooper
Salaried Plan, utilizing the factor or conditions applicable to the benefit of
such Participant or Beneficiary under the Cooper Salaried Plan. Notwithstanding
the foregoing:
(i) Prior to the Champion Closing, any supplemental benefit that
is determined pursuant to the provisions of Section 3.2 and
that is being paid thereunder to a Participant who is, or was,
not credited with benefit accrual service under the Cooper
Salaried Plan and who is, or was, eligible to such Plan
benefit due to the merger of the Champion Excess Plan, the
Champion Supplemental Plan, the Cameron Excess Plan, or the
Moog Automotive, Inc. Executive Supplemental Plan (a "Merged
Plan") into the Plan, shall be payable to such Participant in
the same manner, form, time, and duration applicable to the
benefits of such Participant under the Merged Plan formerly
covering such Participant.
(ii) Any supplemental benefit that is payable to a Participant who
is a former Moog SERP Participant pursuant to the provisions
of Section 3.1 shall be payable to such Participant in the
same manner, form, time and duration applicable to the
benefits of such Participant under the Moog SERP as of
December 31, 1993.
(iii) In no event shall any benefit of a Participant who is employed
by Cameron Forged Products Company, or a successor thereof, be
distributed to such Participant prior to his termination of
employment with Cameron Forged Products Company, or successor
thereof.
12
<PAGE> 16
ARTICLE V
BENEFICIARIES
In the event a Participant dies before his interest under the Plan has
been distributed to him in full, any remaining interest, or portion thereof,
shall be distributed pursuant to Article IV to his Beneficiary who shall be the
person designated as his beneficiary under the Cooper Salaried Plan, or if such
interest is attributable to the Champion Excess Plan, the Champion Supplemental
Plan, or the Cameron Excess Plan, his Beneficiary shall be his beneficiary
pursuant to the terms of the Champion Excess Plan, the Champion Supplemental
Plan or the Cameron Excess Plan, as the case may be.
13
<PAGE> 17
ARTICLE VI
ADMINISTRATIVE PROVISIONS
6.1 ADMINISTRATION. The Plan shall be administered by the Local
Administrative Committee under the Cooper Salaried Plan which shall administer
it in a manner consistent with the administration of the Cooper Salaried Plan,
as from time to time amended, except that the Plan shall be administered as an
unfunded plan not intended to meet the qualification requirements of Section 401
of the Code.
6.2 POWERS AND AUTHORITIES OF THE COMMITTEE. The Local Administrative
Committee shall have full power and authority to interpret, construe and
administer the Plan and its interpretations and construction hereof, and actions
hereunder, including the timing, form, amount or recipient of any payment to be
made hereunder, shall be binding and conclusive on all persons for all purposes.
The Local Administrative Committee may delegate any of its powers, authorities,
or responsibilities for the operation and administration of the Plan to any
person or committee so designated in writing by it and may employ such
attorneys, agents, and accountants as it may deem necessary or advisable to
assist it in carrying out its duties hereunder. No member of the Local
Administrative Committee shall be liable to any person for any action taken or
omitted in connection with the interpretation and administration of the Plan
unless attributable to his own willful misconduct or lack of good faith. Members
of the Local Administrative Committee shall not participate in any action or
determination regarding their own benefits, if any, payable under the Plan.
6.3 INDEMNIFICATION. In addition to whatever rights of indemnification
a member of the Local Administrative Committee or the Plans Administration
Committee, or any other person or persons to whom any power, authority, or
responsibility is delegated pursuant to Section 6.2, may be entitled under the
articles of incorporation, regulations, or by-laws of the Company,
14
<PAGE> 18
under any provision of law, or under any other agreement, the Company shall
satisfy any liability actually and reasonably incurred by any such member or
such other person or persons, including expenses, attorneys' fees, judgments,
fines, and amounts paid in settlement, in connection with any threatened,
pending, or completed action, suit, or proceeding which is related to the
exercise or failure to exercise by such member or such other person or persons
of any of the powers, authority, responsibilities, or discretion provided under
the Plan.
15
<PAGE> 19
ARTICLE VII
AMENDMENT AND TERMINATION
The Company reserves the right to amend or terminate the Plan at any
time by action of the Plans Administration Committee; provided, however, that no
such action shall adversely affect any Participant who is receiving supplemental
benefits under the Plan or who has accrued a supplemental benefit under the
Plan, unless an equivalent benefit is otherwise provided under another plan or
program sponsored by the Company.
16
<PAGE> 20
ARTICLE VIII
ADOPTION BY SUBSIDIARIES
Any subsidiary of the Company which at the time is not an Employer may,
with the consent of the Company, adopt the Plan and become an Employer
hereunder. Notwithstanding the foregoing, effective as of the effective date
hereinafter set forth, the following subsidiaries shall not be included as an
Employer under the Plan.
<TABLE>
<CAPTION>
Effective Date Subsidiary
-------------- ----------
<S> <C>
August 1, 1993 Belden Wire & Cable Company
January 1, 1994 Gardner Denver Machinery Inc.
May 26, 1994 Cameron Forged Products Company
January 1, 1995 Cooper Cameron Corporation
Champion Closing Champion Spark Plug Company and its
subsidiaries
Champion Closing Moog Automotive Products, Inc. and its
subsidiaries
</TABLE>
17
<PAGE> 21
ARTICLE IX
MISCELLANEOUS
9.1 NON-ALIENATION OF RETIREMENT RIGHTS OR BENEFITS. No benefit under
the Plan shall at any time be subject in any manner to alienation or
encumbrance. If any Participant or Beneficiary shall attempt to, or shall,
alienate or in any way encumber his rights or benefits under the Plan, or any
part thereof, or if by reason of his bankruptcy or other event happening at any
time any such benefits would otherwise be received by anyone else or would not
be enjoyed by him, his interest in all such benefits shall automatically
terminate and the same shall be held or applied to or for the benefit of such
person, his spouse, children, or other dependents as the Local Administrative
Committee may select.
9.2 PAYMENT OF BENEFITS TO OTHERS. If any Participant or Beneficiary to
whom a retirement benefit is payable is unable to care for his affairs because
of illness or accident, any payment due (unless prior claim therefor shall have
been made by a duly qualified guardian or other legal representative) may be
paid to the spouse, parent, brother, or sister, or any other individual deemed
by the Local Administrative Committee to be maintaining or responsible for the
maintenance of such person. Any payment made in accordance with the provisions
of this Section 9.2 shall be a complete discharge of any liability of the Plan
with respect to the benefit so paid.
9.3 PLAN NON-CONTRACTUAL. Nothing contained herein shall be construed
as a commitment or agreement on the part of any person employed by an Employer
to continue his employment with an Employer, and nothing herein contained shall
be construed as a commitment on the part of an Employer to continue the
employment or the annual rate of compensation of any such person for any period,
and all Participants shall remain subject to discharge to the same extent as if
the Plan had never been established.
18
<PAGE> 22
9.4 FUNDING. In order to provide a source of payment for its
obligations under the Plan, the Company may establish a trust fund. Subject to
the provisions of the trust agreement governing such trust fund, the obligation
of an Employer under the Plan to provide a Participant or a Beneficiary with a
benefit constitutes the unsecured promise of such Employer to make payments as
provided herein, and no person shall have any interest in, or a lien or prior
claim upon, any property of the Employer.
9.5 CONTROLLING STATUS. No Participant shall be eligible for a
supplemental retirement benefit under the Plan unless such Participant is a
Participant on the date of his retirement, death, or other termination of
employment.
9.6 CLAIMS OF OTHER PERSONS. The provisions of the Plan shall in no
event be construed as giving any person, firm or corporation any legal or
equitable right as against an Employer, its officers, employees, or directors,
except any such rights as are specifically provided for in the Plan or are
hereafter created in accordance with the terms and provisions of the Plan.
9.7 SEVERABILITY. The invalidity or unenforceability of any particular
provision of the Plan shall not affect any other provision hereof, and the Plan
shall be construed in all respects as if such invalid or unenforceable provision
were omitted herefrom.
19
<PAGE> 23
9.8 GOVERNING LAW. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.
EXECUTED at Houston, Texas, this ___________ day of ___________, 1998.
COOPER INDUSTRIES, INC.
By: /s/ CARL J. PLESNICHER, JR.
---------------------------------
Title: Senior Vice President,
Human Resources
20
<PAGE> 1
EXHIBIT 10(iv)
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS DEFINED CONTRIBUTION PLAN
(AUGUST 1, 1998 RESTATEMENT)
<PAGE> 2
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS DEFINED CONTRIBUTION PLAN
(AUGUST 1, 1998 RESTATEMENT)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE NO.
- ------- -------
<S> <C> <C>
ARTICLE I
DEFINITIONS
1.1 Definitions........................................................... 2
1.2 Construction ......................................................... 4
ARTICLE II
ELIGIBILITY FOR PLAN PARTICIPATION
2.1 Eligibility to Participate............................................ 5
2.2 Cessation of Participation............................................ 5
ARTICLE III
SUPPLEMENTAL CONTRIBUTIONS
3.1 Supplemental Matching Contributions................................... 6
3.2 Supplemental Basic Contributions...................................... 6
3.3 Supplemental Post-Tax Contributions................................... 7
ARTICLE IV
SEPARATE ACCOUNTS
4.1 Types of Separate Accounts............................................ 8
4.2 Interest ............................................................. 8
ARTICLE V
DISTRIBUTION
5.1 Eligibility for Distribution.......................................... 9
5.2 Method of Distribution................................................ 9
5.3 Transfer of Certain Liabilities....................................... 9
ARTICLE VI
BENEFICIARIES 10
ARTICLE VII
ADMINISTRATIVE PROVISIONS
7.1 Administration........................................................ 11
7.2 Powers and Authorities of the Committee............................... 11
7.3 Indemnification....................................................... 11
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
SECTION PAGE NO.
- ------- -------
<S> <C> <C>
ARTICLE VIII
AMENDMENT AND TERMINATION
8.1 Authority to Amend or Terminate Plan.................................. 13
8.2 Termination of Participation of Certain Affiliates.................... 13
ARTICLE IX
MISCELLANEOUS
9.1 Non-Alienation of Benefits............................................ 14
9.2 Payment of Benefits to Others......................................... 14
9.3 Plan Non-Contractual.................................................. 14
9.4 Funding............................................................... 15
9.5 Controlling Status.................................................... 15
9.6 Claims of Other Persons............................................... 15
9.7 Severability.......................................................... 15
9.8 Governing Law......................................................... 15
</TABLE>
ii
<PAGE> 4
COOPER INDUSTRIES, INC.
SUPPLEMENTAL EXCESS DEFINED CONTRIBUTION PLAN
(AUGUST 1, 1998 RESTATEMENT)
WHEREAS, effective as of July 1, 1986, Cooper Industries, Inc.
(hereinafter referred to as the "Company") established the Cooper Industries,
Inc. Supplemental Excess Defined Contribution Plan for the benefit of a select
group of management employees employed by the Company or an affiliate thereof
whose benefits under the Cooper Industries, Inc. Retirement Savings Plan and
Stock Ownership Plan (formerly known as the Cooper Industries, Inc. Employees'
Savings Plan) were limited by the provisions of the Internal Revenue Code of
1986, as amended; and
WHEREAS, the Plan has been amended on five occasions; and
WHEREAS, the Company desires to amend and restate the Plan;
NOW, THEREFORE, effective as of August 1, 1998, unless specifically
provided otherwise, the Company hereby amends and restates the Plan as
hereinafter set forth with respect to Participants employed on and after such
date.
<PAGE> 5
ARTICLE I
DEFINITIONS
1.1. DEFINITIONS. Except as otherwise required by the context,
the terms used in the Plan shall have the meaning hereinafter set forth.
(1) The term "AFFILIATE" shall mean any member of a controlled
group of corporations (as determined under Section 414(b) of the Code)
of which the Company is a member; any member of a group of trades or
businesses under common control (as determined under Section 414(c) of
the Code) with the Company; any member of an affiliated service group
(as determined under Section 414(m) of the Code) of which the Company
is a member; and any other entity which is required to be aggregated
with the Company pursuant to the provisions of Section 414(o) of the
Code.
(2) The term "BASIC CONTRIBUTIONS" shall mean the employee
elective contributions made under the Cooper Savings Plan on behalf of
a Participant.
(3) The term "BENEFICIARY" shall mean the person who, in
accordance with the provisions of Article VI, shall be entitled to
receive distribution hereunder in the event a Participant dies before
his interest under the Plan has been distributed to him in full.
(4) The term "CODE" shall mean the Internal Revenue Code of
1986, as amended from time to time. Reference to a section of the Code
shall include such section and any comparable section or sections of
any future legislation that amends, supplements, or supersedes such
section.
(5) The term "COMPANY" shall mean Cooper Industries, Inc., an
Ohio corporation, its corporate successors, and the surviving
corporation resulting from any merger of Cooper Industries, Inc. with
any other corporation or corporations.
(6) The term "COMPENSATION" shall mean the total wages and
salary, including overtime payments, commissions, severance pay, and
other monetary remuneration, if any, which is included in a
Participant's gross pay with respect to a month for services rendered
to an Employer, but excluding any relocation expense reimbursements as
well as foreign service premiums and allowances, plus Basic
Contributions made on behalf of such Participant under the Cooper
Savings Plan and Supplemental Basic Contributions credited to such
Participant under Section 3.2 of the Plan.
(7) The term "COOPER DEFERRAL PLAN" shall mean the Cooper
Industries, Inc. Management Incentive Compensation Deferral Plan, as
amended from time to time.
2
<PAGE> 6
(8) The term "COOPER SALARIED PLAN" shall mean the Salaried
Employees' Retirement Plan of Cooper Industries, Inc., as amended from
time to time.
(9) The term "COOPER SAVINGS PLAN" shall mean the Cooper
Industries, Inc. Retirement Savings and Stock Ownership Plan, as
amended from time to time.
(10) The term "EMPLOYER" shall mean the Company as well as any
Affiliate which is designated by the Plans Administrative Committee as
a participating employer under the Plan.
(11) The term "LOCAL ADMINISTRATIVE COMMITTEE" shall mean the
administrative committee that administers the Plan as set forth in
Article VII.
(12) The term "MATCHING CONTRIBUTIONS" shall mean the employer
matching contributions allocated under the Cooper Savings Plan to a
Participant.
(13) The term "PARTICIPANT" shall mean any employee of an
Employer who participates in the Plan pursuant to Article II of the
Plan.
(14) The term "PLAN" shall mean the Cooper Industries, Inc.
Supplemental Excess Defined Contribution Plan as set forth herein.
(15) The term "PLANS ADMINISTRATION COMMITTEE" shall mean the
committee appointed by the Chief Executive Officer of the Company
pursuant to the Plans Management Procedures to establish, amend,
terminate, monitor and administer the benefit plants of the Company and
Affiliates pursuant to the provisions of the Plans Management
Procedures.
(16) The term "PLANS MANAGEMENT PROCEDURES" shall mean the
procedures adopted by the Board of Directors of the Company to allocate
and delegate fiduciary responsibilities with respect to the benefit
plans of the Company and Affiliates.
(17) The term "SEPARATE ACCOUNT" shall mean each of the
accounts maintained in the name of a Participant pursuant to Section
4.1.
(18) The term "SUPPLEMENTAL BASIC ACCOUNT" shall mean the
Separate Account to which Supplemental Basic Contributions are credited
in accordance with the provisions of Sections 3.2 and 4.1.
(19) The term "SUPPLEMENTAL BASIC CONTRIBUTIONS" shall mean
the contributions credited to a Participant under the Plan pursuant to
Section 3.2.
3
<PAGE> 7
(20) The term "SUPPLEMENTAL CONTRIBUTIONS" shall mean the
employee contributions made under the Cooper Savings Plan by a
Participant.
(21) The term "SUPPLEMENTAL MATCHING ACCOUNT" shall mean the
Separate Account to which Supplemental Matching Contributions are
credited in accordance with the provisions of Sections 3.1 and 4.1.
(22) The term "SUPPLEMENTAL MATCHING CONTRIBUTIONS" shall mean
the Employer contributions credited to a Participant under the Plan
pursuant to Section 3.1.
(23) The term "SUPPLEMENTAL POST-TAX ACCOUNT" shall mean the
Separate Account in which Supplemental Post-Tax Contributions are
credited in accordance with the provisions of Sections 3.3 and 4.1 of
the Plan.
(24) The term "SUPPLEMENTAL POST-TAX CONTRIBUTIONS" shall mean
the contributions credited to a Participant under the Plan pursuant to
Section 3.3.
1.2 CONSTRUCTION. Where necessary or appropriate to the meaning hereof,
the singular shall be deemed to include the plural, the plural to include the
singular, the masculine to include the feminine, and the feminine to include the
masculine.
4
<PAGE> 8
ARTICLE II
ELIGIBILITY FOR PLAN PARTICIPATION
2.1 ELIGIBILITY TO PARTICIPATE. Any select management and highly
compensated employee of an Employer (i) whose retirement benefits are limited
under the Cooper Savings Plan by the provisions of Section 401(a)(17) or Section
415 of the Code or (ii) who participates in the Cooper Deferral Plan as well as
the Cooper Savings Plan shall become a Participant in the Plan automatically
upon such limitation or participation.
2.2 CESSATION OF PARTICIPATION. As of the applicable effective date
hereinafter set forth, Plan participation of employees of the subsidiaries of
the Company listed below shall cease and Plan coverage to employees of such
subsidiaries shall be closed.
<TABLE>
<CAPTION>
Effective Date Subsidiary
- -------------- ----------
<S> <C>
August 1, 1993 Belden Wire & Cable Company
March 1, 1994 Gardner Denver Machinery Inc.
May 26, 1994 Cameron Forged Products Company
January 1, 1995 Cooper Cameron Corporation and its
subsidiary, Wheeling Machine Products
Company
October 1, 1998 Champion Spark Plug Company and its
subsidiaries
October 1, 1998 Moog Automotive Products, Inc. and its
subsidiaries
</TABLE>
5
<PAGE> 9
ARTICLE III
SUPPLEMENTAL CONTRIBUTIONS
3.1 SUPPLEMENTAL MATCHING CONTRIBUTIONS. The Supplemental Matching
Account of each Participant shall be credited monthly with Supplemental Matching
Contributions equal to the sum of:
(a) the amount with respect to which Matching
Contributions under the Cooper Savings Plan are
limited for a month due to the provisions of Sections
401(a)(17) and 415 of the Code; and
(b) the amount that would have been contributed by an
Employer under the Cooper Savings Plan for such month
if the Participant had not participated in the Cooper
Deferral Plan and had made contributions under the
Cooper Savings Plan with respect to the compensation
deferred under the Cooper Deferral Plan in accordance
with his election in effect for such month under the
Cooper Savings Plan and the provisions of the Cooper
Savings Plan in effect for such month without regard
to any limitations imposed by Sections 401(a)(17) and
415 of the Code.
3.2 SUPPLEMENTAL BASIC CONTRIBUTIONS. The Supplemental Basic Account of
each Participant shall be credited monthly with Supplemental Basic Contributions
equal to the Basic Contributions and Supplemental Contributions deemed to be
Basic Contributions for purposes of Matching Contributions (if any) that would
have been contributed to the Cooper Savings Plan on his behalf for a month
except for the provisions of Sections 401(a)(17) and 415 of the Code and that
were deferred or deducted from his Compensation in accordance with a duly
executed and filed Compensation reduction or deduction authorization form;
provided, however, that in no event shall Supplemental Basic Contributions when
added to the amount of Basic Contributions and Supplemental Contributions deemed
to be Basic Contributions for purposes of Matching Contributions (if any) for
such month under the Cooper Savings Plan exceed six percent of such
Participant's Compensation. Such Supplemental Basic Contributions attributable
to Basic
6
<PAGE> 10
Contributions and Supplemental Basic Contributions attributable to Supplemental
Contributions deemed to be Basic Contributions shall be credited to the pre-tax
Supplemental Basic Account of the Participant. Prior to January 1, 1994,
Supplemental Basic Contributions attributable to Supplemental Contributions
deemed to be Basic Contributions were credited to the post-tax Supplemental
Basic Account of the Participant.
3.3 SUPPLEMENTAL POST-TAX CONTRIBUTIONS. The Supplemental Post-Tax
Account of each Participant shall be credited monthly with Supplemental Post-Tax
Contributions equal to the Supplemental Contributions (excluding these deemed to
be Basic Contributions for purposes of Matching Contributions) that would have
been contributed to the Cooper Savings Plan on his behalf for a month except for
the provisions of Sections 401(a)(17) and Section 415 of the Code and that were
deducted from his Compensation in accordance with a duly executed and filed
Compensation deduction authorization form; provided, however, that in no event
shall Supplemental Post-Tax Contributions when added to Supplemental
Contributions (excluding those deemed to be Basic Contributions for purposes of
Matching Contributions) for such month exceed four percent of such Participant's
Compensation.
7
<PAGE> 11
ARTICLE IV
SEPARATE ACCOUNTS
4.1 TYPES OF SEPARATE ACCOUNTS. Each Participant shall have Separate
Accounts established in his name which shall reflect the type of contributions
as well as interest thereon credited to him pursuant to Article III and Section
4.2. Such Separate Accounts shall be as follows:
(a) a Supplemental Matching Account which shall reflect
the Supplemental Matching Contributions credited to a
Participant pursuant to Section 3.1 and any interest
credited thereon pursuant to Section 4.2;
(b) a Supplemental Basic Account (pre-tax) which shall
reflect the pre-tax Supplemental Basic Contributions
credited to a Participant pursuant to Section 3.2 and
any interest credited thereon pursuant to Section
4.2;
(c) a Supplemental Basic Account (post-tax) which shall
reflect the post-tax Supplemental Basic Contributions
credited to a Participant pursuant to Section 3.2 and
any interest credited thereon pursuant to Section
4.2; and
(d) a Supplemental Post-Tax Account which shall reflect
the Supplemental Post-Tax Contributions credited to a
Participant pursuant to Section 3.3 and any interest
credited thereon pursuant to Section 4.2.
4.2 INTEREST. On and after October 1, 1996, the Separate Account of a
Participant shall be deemed to earn and shall be credited daily with a rate of
interest equal to the average prime rate of Chase Manhattan Bank for the
immediately prior calendar quarter. However, if a grantor trust is established
as set forth in the provisions of Subsection 9.4 and such trust is funded, the
Separate Account of the Participant shall be allocated a pro-rata share of the
investment earnings of such trust.
8
<PAGE> 12
ARTICLE V
DISTRIBUTION
5.1 ELIGIBILITY FOR DISTRIBUTION. The entire balance credited to a
Participant's Supplemental Matching, Supplemental Basic, and Supplemental
Post-Tax Accounts shall be distributed to such Participant or his Beneficiary as
soon as practicable after termination of such Participant's employment with the
Company and Affiliates. However, notwithstanding the foregoing provision, in no
event shall the Separate Accounts of a Participant who is employed by Cameron
Forged Products Company, or a successor thereof, be distributed to such
Participant prior to the termination of employment with Cameron Forged Products
Company, or successor thereof, by such Participant.
5.2 METHOD OF DISTRIBUTION. The benefits payable under the Plan from a
Participant's Supplemental Matching and Supplemental Basic Accounts shall be
paid to the same person in the same manner and form as, and coincident with, the
payment of the benefits of such Participant are payable under the Cooper Savings
Plan
5.3 TRANSFER OF CERTAIN LIABILITIES. As of the applicable effective
date hereinafter set forth, the liabilities of the Separate Accounts of
Participants employed by the following subsidiaries of the Company shall be
transferred to the Plans indicated below:
<TABLE>
<CAPTION>
Effective Date Subsidiary Plan
- -------------- ----
<S> <C> <C>
August 1, 1993 Belden Wire & Cable Company Belden Wire & Cable Company
Supplemental Excess Defined
Contribution Plan
March 1, 1994 Gardner Denver Machinery Inc. Gardner Denver Machinery Inc.
Supplemental Excess Defined
Contribution Plan
January 1, 1995 Cooper Cameron Corporation and its Cooper Cameron Corporation
subsidiary, Wheeling Machine Supplemental Excess Defined
Products Company Contribution Plan
October 1, 1998 Champion Spark Plug Company and its Champion Spark Plug Company
subsidiaries Supplemental Excess Defined
Contribution Plan
October 1, 1998 Moog Automotive Products, Inc. and Champion Spark Plug Company
its subsidiaries Supplemental Excess Defined
Contribution Plan
</TABLE>
9
<PAGE> 13
ARTICLE VI
BENEFICIARIES
In the event a Participant dies before his interest under the Plan has
been distributed to him in full, any remaining interest shall be distributed
pursuant to Article V to his Beneficiary who shall be the person designated as
his beneficiary under the Cooper Savings Plan.
10
<PAGE> 14
ARTICLE VII
ADMINISTRATIVE PROVISIONS
7.1 ADMINISTRATION. The Plan shall be administered by the Local
Administrative Committee under the Cooper Savings Plan which shall administer it
in a manner consistent with the administration of the Cooper Savings Plan, as
from time to time amended, except that the Plan shall be administered as an
unfunded plan not intended to meet the qualification requirements of Section 401
of the Code.
7.2 POWERS AND AUTHORITIES OF THE COMMITTEE. The Local Administrative
Committee shall have full power and authority to interpret, construe and
administer the Plan and its interpretations and construction hereof, and actions
hereunder, including the timing, form, amount or recipient of any payment to be
made hereunder, shall be binding and conclusive on all persons for all purposes.
The Local Administrative Committee may delegate any of its powers, authorities,
or responsibilities for the operation and administration of the Plan to any
person or committee so designated in writing by it and may employ such
attorneys, agents, and accountants as it may deem necessary or advisable to
assist it in carrying out its duties hereunder. No member of the Committee shall
be liable to any person for any action taken or omitted in connection with the
interpretation and administration of the Plan unless attributable to his own
willful misconduct or lack of good faith. Members of the Committee shall not
participate in any action or determination regarding their own benefits, if any,
payable under the Plan.
7.3 INDEMNIFICATION. In addition to whatever rights of indemnification
a member of the Local Administrative Committee or the Plans Administration
Committee, or any other person or persons to whom any power, authority, or
responsibility is delegated pursuant to Section 7.2, may be entitled under the
articles of incorporation, regulations, or by-laws of the Company, under any
provision of law, or under any other agreement, the Company shall satisfy any
liability
11
<PAGE> 15
actually and reasonably incurred by any such member or such other person or
persons, including expenses, attorneys' fees, judgments, fines, and amounts paid
in settlement, in connection with any threatened, pending, or completed action,
suit, or proceeding which is related to the exercise or failure to exercise by
such member or such other person or persons of any of the powers, authority,
responsibilities, or discretion provided under the Plan.
12
<PAGE> 16
ARTICLE VIII
AMENDMENT AND TERMINATION
8.1 AUTHORITY TO AMEND OR TERMINATE PLAN. The Company reserves the
right to amend or terminate the Plan at any time or extend the Plan to any
Affiliate by action of the Plans Administration Committee; provided however,
that no such action shall adversely affect any Participant who is receiving
supplemental benefits under the Plan or whose Separate Accounts are credited
with any contributions thereto, unless an equivalent benefit is provided under
another plan or program sponsored by an Employer or an Affiliate.
8.2 TERMINATION OF PARTICIPATION OF CERTAIN AFFILIATES. Notwithstanding
the foregoing, effective as of the applicable date hereinafter set forth, the
following subsidiaries of the Company shall not be included as an Employer under
the Plan.
<TABLE>
<CAPTION>
Effective Date Subsidiary
- -------------- ----------
<S> <C>
August 1, 1993 Belden Wire & Cable Company
March 1, 1994 Gardner Denver Machinery Inc.
May 26, 1994 Cameron Forged Products Company
January 1, 1995 Cooper Cameron Corporation and its
subsidiary, Wheeling Machine Products
Company
October 1, 1998 Champion Spark Plug Company and its
subsidiaries
October 1, 1998 Moog Automotive Products, Inc. and its
subsidiaries
</TABLE>
13
<PAGE> 17
ARTICLE IX
MISCELLANEOUS
9.1 NON-ALIENATION OF BENEFITS. No benefit under the Plan shall at any
time be subject in any manner to alienation or encumbrance. If any Participant
or Beneficiary shall attempt to, or shall, alienate or in any way encumber his
benefits under the Plan, or any part thereof, or if by reason of his bankruptcy
or other event happening at any time any such benefits would otherwise be
received by anyone else or would not be enjoyed by him, his interest in all such
benefits shall automatically terminate and the same shall be held or applied to
or for the benefit of such person, his spouse, children, or other dependents as
the Local Administrative Committee may select.
9.2 PAYMENT OF BENEFITS TO OTHERS. If any Participant or Beneficiary to
whom a benefit is payable is unable to care for his affairs because of illness
or accident, any payment due (unless prior claim therefor shall have been made
by a duly qualified guardian or other legal representative) may be paid to the
spouse, parent, brother, or sister, or any other individual deemed by the Local
Administrative Committee to be maintaining or responsible for the maintenance of
such person. Any payment made in accordance with the provisions of this Section
9.2 shall be a complete discharge of any liability of the Plan with respect to
the benefit so paid.
9.3 PLAN NON-CONTRACTUAL. Nothing herein contained shall be construed
as a commitment or agreement on the part of any person employed by an Employer
to continue his employment with an Employer, and nothing herein contained shall
be construed as a commitment on the part of an Employer to continue the
employment or the annual rate of compensation of any such person for any period,
and all Participants shall remain subject to discharge to the same extent as if
the Plan had never been established.
14
<PAGE> 18
9.4 FUNDING. In order to provide a source of payment for its
obligations under the Plan, the Company may establish a grantor trust. Subject
to the provisions of the trust agreement governing such grantor trust, the
obligation of an Employer under the Plan to provide a Participant or a
Beneficiary with a benefit constitutes the unsecured promise of such Employer to
make payments as provided herein, and no person shall have any interest in, or a
lien or prior claim upon, any property of an Employer.
9.5 CONTROLLING STATUS. No Participant shall be eligible for a benefit
under the Plan unless such Participant is a Participant on the date of his
retirement, death, or other termination of employment.
9.6 CLAIMS OF OTHER PERSONS. The provisions of the Plan shall in no
event be construed as giving any person, firm or corporation any legal or
equitable right as against an Employer, its officers, employees, or directors,
except any such rights as are specifically provided for in the Plan or are
hereafter created in accordance with the terms and provisions of the Plan.
9.7 SEVERABILITY. The invalidity or unenforceability of any particular
provision of the Plan shall not affect any other provision hereof, and the Plan
shall be construed in all respects as if such invalid or unenforceable provision
were omitted herefrom.
9.8 GOVERNING LAW. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.
Executed at Houston, Texas , this ___________ day of ____________,
1998.
COOPER INDUSTRIES, INC.
By /s/ CARL J. PLESNICHER, JR.
----------------------------------
Title: Senior Vice President,
Human Resources
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 19,200
<SECURITIES> 0
<RECEIVABLES> 673,500
<ALLOWANCES> 0
<INVENTORY> 522,000
<CURRENT-ASSETS> 1,290,600
<PP&E> 1,608,600
<DEPRECIATION> (906,700)
<TOTAL-ASSETS> 5,832,100
<CURRENT-LIABILITIES> 1,203,800
<BONDS> 2,025,700
0
0
<COMMON> 615,000
<OTHER-SE> 1,551,000
<TOTAL-LIABILITY-AND-EQUITY> 5,832,100
<SALES> 2,769,300
<TOTAL-REVENUES> 2,769,300
<CGS> 1,863,500
<TOTAL-COSTS> 1,863,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87,500
<INCOME-PRETAX> 323,400
<INCOME-TAX> 116,400
<INCOME-CONTINUING> 207,000
<DISCONTINUED> 84,200
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 291,200
<EPS-PRIMARY> 2.48
<EPS-DILUTED> 2.45
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1997 JAN-01-1996 JAN-01-1995
<PERIOD-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<CASH> 30,300 16,100 17,700
<SECURITIES> 0 0 0
<RECEIVABLES> 596,400 547,100 609,200
<ALLOWANCES> 0 0 0
<INVENTORY> 484,800 509,500 502,100
<CURRENT-ASSETS> 1,218,100 1,178,200 1,243,500
<PP&E> 1,499,300 1,558,500 1,459,400
<DEPRECIATION> (826,000) (850,500) (761,100)
<TOTAL-ASSETS> 5,507,300 5,318,900 5,461,200
<CURRENT-LIABILITIES> 1,026,900 975,500 964,500
<BONDS> 1,272,200 1,737,700 1,865,300
0 0 0
0 0 0
<COMMON> 615,000 540,200 539,400
<OTHER-SE> 2,068,500 1,427,000 1,248,400
<TOTAL-LIABILITY-AND-EQUITY> 5,507,300 5,318,900 5,461,200
<SALES> 3,415,600 3,380,500 3,052,100
<TOTAL-REVENUES> 3,415,600 3,380,500 3,052,100
<CGS> 2,281,600 2,275,500 2,062,600
<TOTAL-COSTS> 2,281,600 2,275,500 2,062,600
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 90,400 142,100 151,000
<INCOME-PRETAX> 483,200 470,700 297,300
<INCOME-TAX> 173,200 185,600 118,700
<INCOME-CONTINUING> 310,000 285,100 178,600
<DISCONTINUED> 84,600 30,300 (84,600)
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 394,600 315,400 94,000
<EPS-PRIMARY> 3.36 2.94 0.85
<EPS-DILUTED> 3.26 2.77 0.84
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998 JAN-01-1998
<PERIOD-END> SEP-30-1997 JUN-30-1998 MAR-31-1998
<CASH> 14,700 16,600 15,400
<SECURITIES> 0 0 0
<RECEIVABLES> 574,500 710,000 637,000
<ALLOWANCES> 0 0 0
<INVENTORY> 460,600 513,700 518,000
<CURRENT-ASSETS> 1,129,900 1,358,300 1,331,700
<PP&E> 1,442,600 1,570,200 1,530,400
<DEPRECIATION> (813,500) (862,300) (840,300)
<TOTAL-ASSETS> 5,144,100 5,812,700 5,761,800
<CURRENT-LIABILITIES> 850,900 1,199,800 1,219,400
<BONDS> 1,098,500 1,542,000 1,334,700
0 0 0
0 0 0
<COMMON> 615,000 615,000 615,000
<OTHER-SE> 2,022,500 2,018,200 2,148,500
<TOTAL-LIABILITY-AND-EQUITY> 5,144,100 5,812,700 5,761,800
<SALES> 2,576,900 1,845,300 894,100
<TOTAL-REVENUES> 2,576,900 1,845,300 894,100
<CGS> 1,733,700 1,241,700 601,900
<TOTAL-COSTS> 1,733,700 1,241,700 601,900
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 70,300 52,700 25,300
<INCOME-PRETAX> 358,600 218,200 102,000
<INCOME-TAX> 133,200 78,500 36,700
<INCOME-CONTINUING> 225,400 139,700 65,300
<DISCONTINUED> 60,300 58,300 26,700
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 285,700 198,000 92,000
<EPS-PRIMARY> 2.45 1.66 0.77
<EPS-DILUTED> 2.36 1.64 0.76
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 MAR-31-1997
<CASH> 15,200 12,200
<SECURITIES> 0 0
<RECEIVABLES> 567,300 578,200
<ALLOWANCES> 0 0
<INVENTORY> 448,200 513,200
<CURRENT-ASSETS> 1,146,700 1,193,900
<PP&E> 1,410,400 1,566,500
<DEPRECIATION> (799,200) (862,900)
<TOTAL-ASSETS> 5,217,300 5,249,900
<CURRENT-LIABILITIES> 877,000 862,900
<BONDS> 1,109,000 1,580,100
0 0
0 0
<COMMON> 615,000 561,300
<OTHER-SE> 2,050,300 1,624,000
<TOTAL-LIABILITY-AND-EQUITY> 5,217,300 5,249,900
<SALES> 1,746,600 848,400
<TOTAL-REVENUES> 1,746,600 848,400
<CGS> 1,179,300 577,700
<TOTAL-COSTS> 1,179,300 577,700
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 50,900 29,600
<INCOME-PRETAX> 228,800 79,400
<INCOME-TAX> 85,000 29,400
<INCOME-CONTINUING> 143,800 50,000
<DISCONTINUED> 39,400 27,700
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 183,200 77,700
<EPS-PRIMARY> 1.60 0.71
<EPS-DILUTED> 1.52 0.67
</TABLE>
