SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 26, 1999
-----------------------
MARK IV INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-8862 23-1733979
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(Commission File Number) (IRS Employer Identification No.)
501 John James Audubon Pkwy., Amherst, New York 14226-0810
- ------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 689-4972
--------------------
___________________________________________________________________________
(Former name or former address, if changed since last report.)
<PAGE>2
Item 2 - Acquisition or Disposition of Assets
- ---------------------------------------------
On February 26, 1999, Mark IV Industries, Inc. ("Mark IV" or the "Company")
completed the sale of its Automotive Filter Business to Arvin Industries,Inc.
("Arvin") for $276.0 million. The sale was completed in accordance with the
terms of the related Purchase Agreement dated as of February 8, 1999. The
purchase price was paid in cash, less the assumption of approximately $6.0
million of debt, and is subject to adjustment based upon an audit of the
Closing Balance Sheet in accordance with the provisions of the Purchase
Agreement.
The Company's Automotive Filter Business was part of its Purolator Products
Company ("Purolator"), which was acquired by Mark IV in 1994. All assets,
liabilities and operations of Purolator that were unrelated to its Automotive
Filter Business were transferred out of Purolator into other subsidiaries of
Mark IV immediately prior to the Closing. The Purolator entity, made up
solely of the Automotive Filter Business, with annual revenue of approximately
$345.0 million, was then sold to Arvin. As a result, Mark IV continues its
ownership of Purolator's specialty filtration operations, which have annual
revenue of approximately $150.0 million, and serve industrial, transportation,
petroleum, chemical and consumer markets around the world.
During the Company's fiscal quarter ended February 28, 1999, the Company also
sold several smaller business units for net cash consideration of
approximately $15.0 million.
The proceeds from these divestitures will be used initially to reduce
indebtedness outstanding under the Company's Credit Agreement, with the
balance invested in short-term securities. Thereafter, the proceeds will be
utilized to fund strategic acquisitions, and/or to repurchase shares of the
Company's common stock or subordinated debentures, as market conditions
warrant.
<PAGE>3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
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(a) Financial Statements of Business Acquired. - Not applicable.
(b) Pro Forma Financial Information.
The Pro Forma (unaudited) Consolidated Statements of Income for the
fiscal year ended February 28, 1998 and the nine-month period ended
November 30, 1998 set forth below present the Company's results of
operations for such periods as if the Company had disposed of its
Automotive Filter Business as of the beginning of such periods. Such
statements also give effect to the Company's dispositions of its other
smaller business units as if they also had occurred as of the beginning
of such periods. Interest costs have been allocated to the discontinued
operations based upon the net proceeds received for such transactions,
and the weighted average interest rate of the Company's outstanding
long-term debt.
The Pro Forma (unaudited) Consolidated Condensed Balance Sheet as of
November 30, 1998 set forth below presents the financial position of the
Company as if it had disposed of the businesses as of that date. Such
balance sheet combines the Company's unaudited Consolidated Condensed
Balance Sheet as of November 30, 1998, with appropriate adjustments to
reflect the transactions identified above and the utilization of the net
proceeds to reduce long-term debt.
The Pro Forma Financial Statements have been prepared on the basis of
preliminary estimates which are subject to adjustment. The Pro Forma
Financial Statements may not be indicative of the results that actually
would have been achieved if the dispositions had been effected on the
dates indicated, or the results which may be achieved in the future.
The Pro Forma Financial Statements should be read in conjunction with
the Consolidated Financial Statements of the Company.
<PAGE>4
<TABLE>
<CAPTION>
MARK IV INDUSTRIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE YEAR ENDED FEBRUARY 28, 1998
(Amounts in Thousands, Except Per Share Data)
Pro Forma
As Reported (1) Adjustments (2) Pro Forma
-------------- --------------- ---------
<S> <C> <C> <C>
Net sales from continuing operations $2,210,200 $(365,900) $1,844,300
---------- --------- ----------
Operating costs:
Cost of products sold 1,497,000 (273,600) 1,223,400
Selling and administration 346,500 (43,200) 303,300
Research and development 48,500 (5,100) 43,400
Depreciation and amortization 79,900 (13,600) 66,300
---------- --------- ----------
Total operating costs 1,971,900 (335,500) 1,636,400
---------- --------- ----------
Operating income 238,300 (30,400) 207,900
Interest expense 61,600 (18,000) 43,600
---------- --------- ----------
Income from continuing operations,
before provision for taxes 176,700 (12,400) 164,300
Provision for taxes 67,500 (4,700) 62,800
---------- --------- ----------
Income from continuing operations $ 109,200 $ (7,700) $ 101,500
========== ========= ==========
Income from continuing operations
per share of common stock:
Basic $ 1.70 $ 1.58
========== ==========
Diluted $ 1.66 $ 1.55
========== ==========
Weighted average number of shares
outstanding:
Basic 64,100 64,100
========== ==========
Diluted 67,400 67,400
========== ==========
</TABLE>
See notes following.
<PAGE>5
MARK IV INDUSTRIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE NINE MONTH PERIOD ENDED NOVEMBER 30, 1998
(Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Pro Forma
As Reported (3) Adjustments (2) Pro Forma
-------------- -------------- ---------
<S> <C> <C> <C>
Net sales $1,763,200 $ (278,800) $1,484,400
---------- ---------- ----------
Operating costs:
Cost of products sold (including
repositioning charge) 1,275,700 (213,300) 1,062,400
Selling and administration 270,500 (33,100) 237,400
Research and development 42,500 (4,100) 38,400
Depreciation and amortization 73,600 (12,000) 61,600
---------- ---------- ----------
Total operating costs 1,662,300 (262,500) 1,399,800
---------- ---------- ----------
Operating income 100,900 (16,300) 84,600
Interest expense 50,100 (13,500) 36,600
---------- ---------- ----------
Income before provision for taxes 50,800 (2,800) 48,000
Provision for income taxes 16,000 (1,000) 15,000
---------- ---------- ----------
Income from continuing operations $ 34,800 $ (1,800) $ 33,000
========== ========== ==========
Income from continuing operations
per share of common stock:
Basic:
Before repositioning charge $ 1.29 $ 1.26
Repositioning charge (.69) (.69)
---------- ----------
Total $ .60 $ .57
========== ==========
Diluted:
Before repositioning charge $ 1.22 $ 1.19
Repositioning charge (.60) (.60)
---------- ----------
Total $ .62 $ .59
========== ==========
Weighted average number of shares
outstanding:
Basic 57,900 57,900
========== ==========
Diluted 66,500 66,500
========== ==========
</TABLE>
See notes following.
<PAGE>6
MARK IV INDUSTRIES, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED)
November 30, 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
Pro Forma
As Reported (4) Adjustments (5) Pro Forma
-------------- -------------- ---------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments $ 1,300 $ - $ 1,300
Accounts receivable 460,300 (62,300) 398,000
Inventories 364,300 (67,500) 296,800
Other current assets 144,700 6,700 151,400
---------- --------- ----------
Total current assets 970,600 (123,100) 847,500
Pension and other non-current assets 239,300 (58,700) 180,600
Property, plant and equipment, net 664,900 (105,100) 559,800
Cost in excess of net assets acquired 431,300 (64,700) 366,600
---------- --------- ----------
TOTAL ASSETS $2,306,100 $(351,600) $1,954,500
========== ========= ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current
maturities of debt $ 66,200 $ (6,300) $ 59,900
Accounts payable 232,000 (22,800) 209,200
Compensation related liabilities 78,600 (3,600) 75,000
Accrued interest 11,700 (100) 11,600
Other current liabilities 107,400 (1,300) 106,100
---------- --------- ----------
Total current liabilities 495,900 (34,100) 461,800
---------- --------- ----------
Long-Term Debt:
Senior debt 161,900 (131,400) 30,500
Subordinated debentures 772,700 (148,200) 624,500
---------- --------- ----------
Total long-term debt 934,600 (279,600) 655,000
---------- --------- ----------
Other non-current liabilities 263,800 (30,300) 233,500
---------- --------- ----------
Stockholders' Equity:
Preferred stock - - -
Common stock 500 - 500
Additional paid-in capital 452,300 - 452,300
Retained earnings 190,900 (7,600) 183,300
Foreign currency translation adjustment (31,900) - (31,900)
---------- --------- ----------
Total stockholders' equity 611,800 (7,600) 604,200
---------- --------- ----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $2,306,100 $(351,600) $1,954,500
========== ========= ==========
</TABLE>
See notes following.
<PAGE>7
MARK IV INDUSTRIES, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(1) Represents the Company's Consolidated Statement of Income for its fiscal
year ended February 28, 1998, as presented in its Annual Report on Form
10-K for the year then ended.
(2) Represents the elimination of the results of operations of the Purolator
Automotive Filter Business and the Company's smaller discontinued
operations for the period, and the allocation of the net proceeds to
reduce interest expense as if the transactions had occurred at the
beginning of the period.
(3) Represents the Company's Consolidated Statement of Income for the nine-
month period ended November 30, 1998, as presented in its Quarterly
Report on Form 10-Q for the period then ended.
(4) Represents the Company's unaudited Consolidated Condensed Balance Sheet
as of November 30, 1998 as presented in its Quarterly Report on Form 10-
Q for the period then ended.
(5) Represents the elimination of the net assets of the discontinued
businesses, and the application of the net proceeds to pay down
indebtedness under the Company's Credit Agreement, and to repurchase
certain of the Company's outstanding subordinated debentures.
Item 7(c) Exhibits
- -------------------
10.1 * Copy of Purchase Agreement, dated as of February 8, 1999, between
Mark IV Industries, Inc. and Arvin Industries, Inc. (exclusive of
Schedules and Ancillary Agreements).
_______
* Filed herewith by direct transmission pursuant to the EDGAR Program.
<PAGE>8
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MARK IV INDUSTRIES, INC.
BY: /s/ Richard L. Grenolds
------------------------
Richard L. Grenolds
Vice President and Chief
Accounting Officer
Dated: March 15, 1999
--------------
Exhibit 10.1
PURCHASE AGREEMENT
BY AND BETWEEN
MARK IV INDUSTRIES, INC.
AND
ARVIN INDUSTRIES, INC.
Dated February 8, 1999
<PAGE>1
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is made on this 8th day of
February, 1999, by and among Mark IV Industries, Inc., a Delaware corporation
with offices at One Towne Centre, 501 John James Audubon Parkway, Amherst, New
York, 14226 (the "Seller"); and Arvin Industries, Inc., an Indiana corporation
with offices at One Noblitt Plaza, Columbus, Indiana 47201 (the "Buyer").
RECITALS:
--------
Seller is the owner of all the issued and outstanding common stock of
Purolator Products Company, a Delaware corporation with offices at One Towne
Centre, 501 John James Audubon Parkway, Amherst, New York ("PPC").
PPC, together with its wholly owned subsidiaries, Purolator Products
NA, Inc., a Delaware corporation and Facet Advanced Technology Company, a
Delaware corporation, and M Filter OY ("M Filter"), an indirect wholly owned
subsidiary of Seller which is organized under the laws of Finland, are
collectively engaged in the design, manufacture, marketing and distribution of
a complete line of automotive oil, air and fuel filters and related parts for
use primarily in automobiles and light commercial vehicles and, to a lesser
extent, in heavy duty trucks and off-road equipment (hereinafter the
"Automotive Filter Business").
In addition to PPC, Purolator Products NA, Inc., Facet Advanced
Technology Company and M-Filter, certain direct and indirect wholly-owned
subsidiaries, engaged in the distribution (but not the manufacture) of
automotive oil, air and fuel filters and, as a consequence, such direct and
indirect wholly-owned foreign subsidiaries (hereinafter the "Foreign
Distributors") own certain inventory, other assets and related liabilities
which are attributable to the Automotive Filter Business. Schedule A attached
hereto contains a list of the Foreign Distributors together with an
approximation of the amount of inventory, other assets and related
liabilities, if any, owned by such Foreign Distributors which are attributable
to the Automotive Filter Business as of November 30, 1998 (respectively, the
"Foreign Distributors' Assets" and the "Foreign Distributors' Liabilities").
In addition to the Automotive Filter Business, PPC is also engaged in
certain other businesses, either directly through the ownership of
manufacturing facilities and operations which are separately identified as
divisions of PPC or indirectly through the ownership of direct and indirect
subsidiaries which are engaged in such other businesses (all such other
businesses being hereinafter referred to as the "Retained Businesses").
Schedule B attached hereto contains a list of the divisions and subsidiaries
of PPC which constitute the Retained Businesses.
<PAGE>2
The Seller desires to sell the Automotive Filter Business to the Buyer
and the Buyer desires to purchase the Automotive Filter Business from the
Seller upon the terms and conditions set forth herein. Accordingly, prior to
the closing of the sale of the Automotive Filter Business to Buyer, PPC will
transfer to a wholly owned subsidiary of PPC (such subsidiary being
hereinafter referred to as "Holdco"), all of the Retained Businesses and
certain other rights and properties (the "Shared Properties") which are
currently owned by PPC and used by both the Automotive Filter Business and
certain of the Retained Businesses such that, following such transfers, all of
the assets used or held for us primarily in the Automotive Filter Business
(other than the Shared Properties and the Foreign Distributors' Assets) will
be legally owned by PPC and its wholly owned subsidiaries, Purolator Products
NA, Inc., Facet Advanced Technology Company and M Filter (each of PPC (but
only to the extent of the business and operations of PPC which are primarily
related to the Automotive Filter Business) and such corporations being
hereinafter referred to individually as an "Automotive Filter Company" and
collectively as the "Automotive Filter Companies"). In addition, effective at
the closing of the sale of the Automotive Filter Business to Buyer, the
Automotive Filter Companies shall be granted certain rights to use of the
Shared Properties by Seller and its affiliates. Schedule C attached hereto
contains a list of the Shared Properties.
In addition, prior to the closing of the transactions contemplated by
this Agreement, PPC will transfer (at Seller's expense) all the issued and
outstanding stock of Holdco to Seller, without recourse, representation or
warranty.
<PAGE>3
CONSIDERATION:
-------------
NOW, THEREFORE, in consideration of the foregoing and the covenants
and agreements hereinafter set forth, the Seller and the Buyer hereby agree as
follows:
ARTICLE 1 SALE OF THE AUTOMOTIVE FILTER BUSINESS
- ------------------------------------------------
1.01 Pre-Closing Transfers of Retained Businesses. Buyer acknowledges and
- -------------------------------------------------
agrees that Seller does not intend to sell to Buyer and Buyer does not intend
to purchase, any of the stock, interests, assets or businesses which comprise
the Retained Businesses. Furthermore, Buyer acknowledges that Seller does not
intend to sell to Buyer and Buyer does not intend to purchase any of the
Shared Properties; provided that, Buyer will be provided certain rights to use
the Shared Properties as contemplated by certain of the agreements referred to
in Section 3.02 hereof. Finally, Buyer acknowledges that it is intended by
Seller that all of the rights, properties and assets of the Automotive Filter
Business (other than ownership of the Shared Properties and the Foreign
Distributors' Assets) will be owned legally and beneficially by PPC or another
Automotive Filter Company at the closing of the transactions contemplated by
this Agreement. Accordingly, Buyer hereby acknowledges and agrees that prior
to the closing of the transactions contemplated by this Agreement, Seller
will, at its expense, take any and all action necessary to cause the Retained
Businesses to be transferred by PPC to Holdco without recourse, representation
or warranty and to cause the Shared Properties to be transferred to Holdco by
the Automotive Filter Companies without recourse, representation or warranty.
1.02 Transfer of Assets to PPC or for the benefit of Buyer at Closing.
- ----------------------------------------------------------------------
Seller agrees at Closing to:
(a) cause all the issued and outstanding capital stock of M
Filter to be transferred to PPC, free and clear of any liens, claims or
encumbrances of any nature;
(b) transfer to PPC all right, title and interest in a certain
lease for warehouse premises in Vancouver, Canada presently used in the
Automotive Filter Business (hereinafter the "Vancouver Warehouse Lease");
<PAGE>4
(c) cause the Foreign Distributors' Assets to be sold at Closing
to the Buyer or any of its foreign affiliates as Buyer may direct to Seller
prior to Closing, free and clear of any liens, claims or encumbrances of any
nature except for the Foreign Distributors' Liabilities which shall be assumed
by Buyer or its affiliates. The purchase price for the Foreign Distributors'
Assets to be paid at Closing shall be the book value thereof as of November
30, 1998, less the amount of the Foreign Distributors' Liabilities as shown in
Schedule A (the "Foreign Distributors' Assets Purchase Price") and shall be
payable in U.S. dollars for the account of Seller by wire transfer of
immediately available funds to the parties listed in Schedule A in the
respective amounts set forth therein. Notwithstanding anything contained in
this Agreement to the contrary, any changes in the amount of the Foreign
Distributors' Assets and Foreign Distributors' Liabilities between November
30, 1998 and the Closing Date shall be included in the calculation of Net
Assets as defined in Section 2.03(e) of this Agreement for purposes of making
the purchase price adjustments referred to in Article 2 of this Agreement,
and;
(d) transfer to PPC all right, title and interest, in and to all
assets of Seller or its Affiliates used or held for use in the Automotive
Filter Business (other than the Shared Properties or any other assets referred
to in the Ancillary Agreement).
1.03 Sale of the PPC Shares. Subject to the terms and conditions of this
- ---------------------------
Agreement, at the Closing (as hereinafter defined in Section 3.01 hereof)
Seller will sell, transfer, convey and assign to Buyer and Buyer will
purchase, acquire and accept from Seller, all the Seller's right, title and
interest in and to one thousand five hundred (1,500) shares of common stock,
without any par value per share, of PPC (the "PPC Shares").
ARTICLE 2 PURCHASE PRICE
- ---------------------------
2.01 Purchase Price. The aggregate purchase price to be paid by the
-------------------
Buyer to the Seller for the PPC Shares shall be equal to Two Hundred Seventy
Six Million Dollars ($276,000,000), less any indebtedness of M Filter,
determined as of the Closing Date, for money borrowed from any financial
institution and the Foreign Distributors' Assets Purchase Price (the "Initial
Purchase Price"), adjusted as described in this ARTICLE 2. For purposes of
determining the amount which is payable by the Buyer to the Seller at the
Closing, the Initial Purchase Price shall be adjusted in the manner provided
for in Section 2.04 hereof (the Initial Purchase Price, as adjusted pursuant
to Section 2.04 hereof, being hereinafter referred to as the "Estimated
Purchase Price"). The Estimated Purchase Price shall be adjusted in the
manner provided by Section 2.06 hereof for purposes of determining the amount,
if any, which is payable by Buyer to Seller or by Seller to Buyer after the
determination of the amount of the Closing Net Assets (as hereinafter defined)
is made (the Estimated Purchase Price, as adjusted pursuant to Section 2.06
hereof, being hereinafter referred to as the "Final Purchase Price").
<PAGE>5
2.02 Payment of Purchase Price. At the Closing, the Buyer shall pay
-------------------------------
the Estimated Purchase Price (determined by adjusting the Initial Purchase
Price in the manner provided for by Section 2.04 hereof) to the Seller by
wire transfer of immediately available funds to an account specified by Seller
in writing. Any adjustments to the Estimated Purchase Price provided for by
Section 2.06 to reflect the Final Purchase Price shall be paid by the Buyer to
the Seller or by the Seller to the Buyer (as the case may be) as provided for
in Section 2.06 hereof.
2.03 Definitions Relating to Purchase Price Adjustments. For purposes
---------------------------------------------------------
of calculating the adjustments to the Initial Purchase Price and the
adjustments to the Estimated Purchase Price provided for by this ARTICLE 2 and
for purposes of this Agreement, the following terms shall have the following
meanings:
(a) Closing Balance Sheet means a statement, prepared by Buyer
in accordance with the provisions of Section 2.07 hereof, delivered to Seller
in accordance with the provisions of 2.07 hereof and containing a written
statement, in balance sheet format, of the Closing Net Assets;
(b) Closing Net Assets means, subject to Section 2.07 hereof,
the "Net Assets" of the Automotive Filter Companies determined, as of the
Closing Date, according to the principles set forth in Section 2.03(e) hereof;
(c) Estimated Balance Sheet means an unaudited statement
prepared by Seller and delivered to Buyer at least ten (10) days prior to the
Closing Date, and containing a written statement, in balance sheet format, of
the Estimated Net Assets;
(d) Estimated Net Assets means the "Net Assets" of the
Automotive Filter Companies determined, according to the principles set forth
in Section 2.03(e) hereof, as of December 31, 1998 and set forth in the
Estimated Balance Sheet;
(e) Net Assets means the aggregate net assets of the Automotive
Filter Companies calculated, as of a specified date, in a manner which is
consistent with the manner in which the aggregate net assets of the Automotive
Filter Companies, determined as of November 30, 1998 was calculated; provided,
however, that notwithstanding anything to the contrary contained herein, for
purposes of determining the amount of the Net Assets as of any specified date,
the following valuation criteria shall be utilized:
(i) no liabilities shall be included to reflect any currently
payable Income Taxes (as defined in Section 4.22(b) hereof); provided however
that, in the event that the tax year of any of the Automotive Filter Companies
relating to any foreign, state or local Income Taxes payable by any such
Automotive Filter Companies does not end on the Closing Date, a liability
shall be included to reflect the amount of any such foreign, state or local
Income Taxes which would be payable by the Automotive Filter Companies for the
portion of their then current Income Tax year which ends on the Closing Date,
which liability shall be computed on an interim, closing-of-the books basis,
treating the Closing Date as the end of the tax year (except that exemptions,
allowances and deductions otherwise calculated on an annual basis (such as
deductions for real estate taxes, depreciation and depletion) shall be
apportioned on a per diem basis) and in a manner consistent with Seller's past
practices;
<PAGE>6
(ii) a net liability in an amount equal to Twenty Four Million
Seven Hundred Thousand Dollars ($24,700,000) shall be used to provide for all
net deferred tax liabilities;
(iii) no liabilities shall be included to reflect accrued
defined benefit pension plan expenses;
(iv) a liability in an amount equal to Three Million Six
Hundred Thousand Dollars ($3,600,000) shall be used to reflect the accrued
liability for retiree medical and retiree life insurance benefits payable to
current and former employees of the Automotive Filter Business;
(v) a reserve for excess and obsolete inventory shall be
included to provide for a reduction of the carrying value of such inventory to
its estimated net realizable value, determined in a manner which is consistent
with the procedures described in Schedule 2.03(e)(v);
(vi) a reserve in an amount equal to One Million Three Hundred
Thousand Dollars ($1,300,000) shall be included to reflect severance and other
costs related to the repositioning charge of Six Million One Hundred Thousand
Dollars ($6,100,000) reflected in the unaudited balance sheet of the
Automotive Filter Companies which is dated as of November 30, 1998 (the
"November 30 Balance Sheet"), a copy of which is attached hereto as Schedule
2.03(e)(vi);
(vii) an amount equal to One Hundred Seventy Six Million Six
Hundred Thousand Dollars ($176,600,000) to reflect the goodwill of the
Automotive Filter Business;
(viii) no liabilities shall be included with respect to any
indebtedness of any of the Automotive Filter Companies for money borrowed from
any financial institution;
(ix) a liability in an amount equal to the aggregate incentive
plan bonuses referred to in Section 8.11(b) shall be included; and
<PAGE>7
(x) No liabilities shall be included with respect to the
following matters:
1. the Lemelson claim set forth on Schedule 4.15, Item 11;
2. the Subaru claim set forth on Schedule 4.15, Item 10;
and
3. the Fayetteville on-site environmental response actions
claim set forth as Item 2 on Schedule 4.19(c); except to the extent of the
amount of the reserves for the above referenced matters which are contained in
the November 30 Balance Sheet.
(f) Net Cash Balance means the difference between the aggregate
amount of loans, advances or other disbursements of cash or cash equivalents
made by Seller to the Automotive Filter Companies between December 31, 1998
and the Closing Date and the aggregate amount of the repayments, withdrawals,
dividends, loans advances or other disbursements of cash made by the
Automotive Filter Companies to Seller between December 31, 1998 and the
Closing Date. Notwithstanding the foregoing, the transfers of any real
property, personal property or other tangible or intangible assets
contemplated by Section 1.01 shall not be deemed or construed to have any
effect on the calculation of the Net Cash Balance whatsoever, except to the
extent that such transfers result in an increase or decrease in the cash of
the Automotive Filter Companies. If the aggregate amount of loans, advances
or other disbursements of cash made by Seller to the Automotive Filter
Companies between December 31, 1998 and the Closing Date: (i) exceeds the
aggregate amount of repayments, withdrawals, dividends, loans, advances or
other disbursements of cash made by the Automotive Filter Companies to Seller
during such period, the Net Cash Balance shall be a positive number and, as
provided in Section 2.04 below, shall operate to increase the amount of cash
otherwise payable to Seller at the Closing; or (ii) is less than the aggregate
amount of repayments, withdrawals, dividends, loans, advances or other
disbursements of cash made by the Automotive Filter Companies to Seller during
such period, the Net Cash Balance shall be a negative number and, as provided
in Section 2.04 below, shall operate to decrease the amount of cash otherwise
payable to Seller at the Closing; and
<PAGE>8
(g) Preliminary Net Assets means an amount equal to the $351.8
Million Net Assets of the Automotive Filter Companies which are reflected in
the November 30 Balance Sheet.
2.04 Calculation of Estimated Purchase Price. The Estimated Purchase
----------------------------------------------
Price shall be calculated as of the Closing Date by adjusting the amount of
the Initial Purchase Price as follows:
(a) if the Estimated Net Assets is: (i) greater than the Preliminary
Net Assets, the Initial Purchase Price shall be increased, on a
dollar-for-dollar basis, by the amount of any such excess; or (ii) less than
Preliminary Net Assets, the Initial Purchase Price shall be reduced, on a
dollar-for-dollar basis by the amount of such difference; and
(b) if the Net Cash Balance is: (i) a positive number, the Initial
Purchase Price shall be increased, on a dollar-for-dollar basis, by the amount
of the Net Cash Balance; or (ii) a negative number, the Initial Purchase Price
shall be decreased on a dollar-for-dollar basis, by the amount of the Net Cash
Balance. An example of the procedures for calculating the Estimated Purchase
Price and the post-closing adjustment referred to in Section 2.06 is set forth
on Schedule 2.04.
2.05 Pre-Closing Deliveries of Financial Information. At least ten (10)
----------------------------------------------------
days prior to the Closing, Seller shall provide Buyer a copy of the Estimated
Balance Sheet. In addition, beginning February 8, 1999, Seller shall provide
to Buyer, a written statement of the Net Cash Balance for the period beginning
January 1, 1999 and ending February 5, 1999, on February 15, 1999, Seller
shall provide to Buyer a written statement of the Net Cash Balance for the
week ending February 12, 1999 and, in the event that the Closing shall not
have occurred, on February 22, 1999, Seller shall provide to Buyer a written
statement of the Net Cash Balance for the week ending February 19, 1999. The
written statement of the Net Cash Balance shall be provided to Buyer on a
daily basis beginning three (3) days prior to the anticipated Closing Date.
Seller shall also, promptly following a request from Buyer, provide to Buyer
copies of such additional documents as may reasonably be requested by Buyer
for the purpose of verifying the amount of the Estimated Net Assets as
contained in the Estimated Balance Sheet which is delivered to the Buyer or
for the purpose of verifying the statements of the Net Cash Balance which are
provided to the Buyer.
<PAGE>9
2.06 Post-Closing Adjustment.
-----------------------------
(a) The Final Purchase Price shall be calculated based upon the
final calculation of the Closing Net Assets (as determined pursuant to Section
2.07 below). If the Closing Net Assets, as determined as provided in Section
2.07 below: (i) exceeds the Estimated Net Assets plus or minus the Net Cash
Balance, then the Final Purchase Price shall be equal to: (A) the Estimated
Purchase Price plus (B) the amount by which the Closing Net Assets exceeds the
Estimated Net Assets plus or minus the Net Cash Balance; or (ii) is less than
the Estimated Net Assets plus or minus the Net Cash Balance, then the Final
Purchase Price shall be equal to: (A) the Estimated Purchase Price minus (B)
the amount by which the Closing Net Assets is less than the Estimated Net
Assets plus or minus the Net Cash Balance.
(b) If the Final Purchase Price as calculated pursuant to the
provisions of Section 2.06(a) above exceeds the Estimated Purchase Price, the
amount by which the Final Purchase Price exceeds the Estimated Purchase Price
shall be paid by Buyer to the Seller. If the Final Purchase Price as
calculated pursuant to Section 2.06(a) above is less than the Estimated
Purchase Price, the amount by which the Estimated Purchase Price exceeds the
Final Purchase Price shall be paid by the Seller to the Buyer.
(c) All payments required to be made pursuant to Section 2.06(b)
above shall be paid to the party entitled to receive the same in cash or
immediately available funds promptly, but in no event later than ten (10)
business days following the determination of the Closing Net Assets as
contemplated in Section 2.07 below, by delivery to such account as the party
entitled to payment shall specify in writing, of an amount equal to the sum of
any such payment together with interest thereon from, and including the
Closing Date to, but excluding, the date of such payment at a variable rate
per annum equal to the rate announced publicly by Bank of America National
Trust and Savings Association from time to time as its "base rate". The date
on which such payment shall occur is referred to herein as the "Supplemental
Closing".
2.07 Calculation of Closing Net Assets.
---------------------------------------
(a) As soon as practicable following the Closing, Buyer shall, with
the cooperation and assistance of Seller, prepare a balance sheet containing a
statement of the Closing Net Assets which it shall deliver to a nationally
recognized firm of certified public accountants engaged by the Buyer ("Buyer's
Accountants") to perform an audit of the same. As soon as practicable
thereafter, but in no event later than ninety (90) days following the Closing
Date, Buyer's Accountants shall deliver an audited balance sheet to the Seller
containing a statement of the Closing Net Assets, determined according to the
principles set forth in this Agreement (hereinafter the "Proposed Closing
Balance Sheet").
(b) The Proposed Closing Balance Sheet shall be subject to
verification and examination by Seller and, in order to facilitate such
verification and examination, Buyer shall, at such reasonable times and places
as may be requested by Seller, deliver copies of all supporting documents to
Seller and its representatives and provide to Seller and its representatives
the right to examine or take copies of any work papers (other than proprietary
work papers) used by Buyer in the preparation of the Proposed Closing Balance
Sheet.
<PAGE>10
(c) Seller shall have a period of forty five (45) days after
delivery of the Proposed Closing Balance Sheet to Seller, to present in
writing to Buyer any objections Seller may have to the accuracy of the
Proposed Closing Balance Sheet, which objections shall be set forth in
reasonable detail. If no objections are raised within such forty five (45)
day period, the Proposed Closing Balance Sheet shall be deemed to be accepted
and approved by Seller, the Net Assets as contained in the Proposed Closing
Balance Sheet shall be deemed to be the Closing Net Assets and any amounts
required to be paid by Section 2.06(b) hereof shall be paid by Seller or
Buyer, as the case may be at a Supplemental Closing held at the same place as
is provided in Section 3.01 hereof, ten (10) business days following the
expiration of such forty-five (45) day period, or at such other place and at
such other time and date as may be mutually agreed upon in writing by Buyer
and Seller.
(d) If Seller shall disagree as to the accuracy of the Closing Net
Assets as contained in the Proposed Closing Balance Sheet, Seller shall
present to Buyer written notice within the forty five (45) day period
described in Section 2.07(c) specifying such disagreement. Following receipt
of such notice by Buyer, Buyer and Seller shall use their best efforts to
promptly resolve the matter or matters in disagreement. If Seller and Buyer
resolve the matter or matters in disagreement, the Seller and the Buyer shall
either confirm or revise the original Proposed Closing Balance Sheet and
Closing Net Assets whereupon the statement of the Net Assets of the Automotive
Filter Companies as contained in the confirmed or revised Proposed Closing
Balance Sheet shall be deemed to be the Closing Net Assets, shall be final and
binding upon the parties hereto and any amounts required to be paid by Section
2.06(b) hereof shall be paid by Seller or Buyer, as the case may be, at a
Supplemental Closing held at the same place as is provided in Section 3.01
hereof, ten (10) business days following the date on which Buyer and Seller
are able to resolve their disagreement with respect to the Proposed Closing
Balance Sheet or at such other place and at such other time and date as may be
mutually agreed upon in writing by Buyer and Seller.
(e) If Seller and Buyer are unable to resolve the matter or matters
in disagreement within ninety (90) days following Buyer's receipt of written
notice from Seller of Seller's disagreement with the accuracy of the Closing
Net Assets or the Proposed Closing Balance Sheet, then the Buyer and the
Seller shall select a mutually acceptable, neutral, independent accounting
firm (the "Arbitrator"), and submit such disputes to arbitration. The
Arbitrator shall decide all points in dispute and provide written notice of
its decision (which need not assert the basis therefor) within thirty (30)
days of its appointment, and its determinations shall be final, conclusive and
binding on Buyer and Seller with respect to the final determination of the
Closing Net Assets and the Proposed Closing Balance Sheet. The fees and
expenses of the Arbitrator shall be shared equally by Buyer and Seller.
(f) Notwithstanding anything to the contrary contained in this
Section 2.07, during the period that the determination of the Closing Net
Assets shall remain in dispute, unless otherwise required by a validly issued
order of a court of competent jurisdiction, neither party shall be required to
pay to the other party the amount that would otherwise be payable hereunder if
no such disagreement were to exist.
<PAGE>11
(g) During and with respect to the audit and reviews referred to in
this Section 2.07, Seller and Buyer shall: (i) fully cooperate with all
reasonable requests of Seller, Buyer and the Buyer's Accountants, as the case
may be; and (ii) upon reasonable request make available to Seller, Buyer and
the Buyer's Accountants, all work papers, (excluding proprietary programs and
information of Seller and Buyer) supporting schedules, documents and other
information (including access to all appropriate knowledgeable personnel of
Seller) upon which the Closing Balance Sheet is prepared and the Closing Net
Assets is determined.
(h) All fees and expenses of Seller relating to the matters
described in this Section 2.07 shall be borne by Seller, and all fees and
expenses of the Buyer relating to the matters described in this Section 2.07
(including the fees, expenses and disbursements of Buyer's Accountants) shall
be borne by Buyer.
ARTICLE 3 CLOSING
-----------------
3.01 Time and Place of Closing. Unless this Agreement has been
------------------------------
terminated pursuant to the provisions of Section 12.01, the closing of the
sale and purchase of the PPC Shares as contemplated by this Agreement (the
"Closing") shall take place at the offices of Lippes, Silverstein, Mathias &
Wexler LLP, 700 Guaranty Building, 28 Church Street, Buffalo, New York, on the
second business day following the latest to occur of: (a) the expiration (or
early termination) of the waiting period (or any extensions thereof)
established by the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended (the "HSR Act"); (b) the satisfaction of the conditions to Seller's
obligation to close the transactions contemplated by this Agreement as more
particularly set forth in ARTICLE 9 hereof; and (c) the satisfaction of the
conditions to Buyer's obligation to close the transactions contemplated by
this Agreement as more particularly set forth in ARTICLE 10 hereof; or at such
other place, date and time as the parties hereto may agree. For purposes of
this Agreement, the date on which the Closing occurs is referred to as the
"Closing Date".
3.02 Deliveries by Seller. At the Closing, Seller will deliver to Buyer
--------------------------
(unless previously delivered):
(a) stock certificates evidencing all of the PPC Shares, duly
endorsed for transfer to the Buyer or accompanied by duly executed stock
powers providing for the transfer of the PPC Shares to the Buyer;
(b) stock certificates representing all of the issued and
outstanding shares of capital stock of each of Purolator Products NA, Inc., M
Filter and Facet Advanced Technology Company (collectively the "Subsidiary
Shares");
(c) certificates representing PPC's 39.27% ownership interest in
Purolator India Limited, a corporation organized under the laws of India
("Purolator India") and copies of any organizational documents in Seller's
possession with respect to Purolator India;
(d) a true and complete copy of a Joint Venture Agreement, dated as
of September 19, 1989 between Facet Advanced Technology Company and Filtration
Management Incorporated (the "Purodenso Agreement" and the "Purodenso Joint
Venture") as the same has been amended together with copies of any other
organizational documents and all material correspondence pertaining to the
Purodenso Agreement;
<PAGE>12
(e) the corporate minute books and stock ledgers of each of the
Automotive Filter Companies,;
(f) the written resignation of the officers and directors of each of
the Automotive Filter Companies;
(g) duly executed original copies of the various agreements for use
of Shared Properties, licensing of patents and trademarks and other
transitional services, all as more particularly identified in Schedule 3.02(g)
(collectively, the "Ancillary Agreements") which Ancillary Agreements shall be
in form and substance reasonably satisfactory to each of Buyer and Seller;
(h) true and complete copies of all assignments, bills of sale and
other instruments of transfer entered into for the purpose of effecting the
transactions described in Section 1.01 hereof;
(i) Bills of Sale and such other documentation as may be reasonably
necessary to effect the transfer of the M-Filter Stock, the Vancouver
Warehouse Lease, the Foreign Distributors' Assets and any other transfers
contemplated by Section 1.02 hereof; and
(j) the documentation identified in ARTICLE 10 hereof which is
required to be delivered to Buyer in satisfaction of the conditions to the
Buyer's obligation to close the transactions contemplated by this Agreement
and any other documentation reasonably requested by Buyer.
3.03 Deliveries by Buyer. At the Closing, Buyer will deliver to Seller
-------------------------
(unless previously delivered):
(a) an amount equal to the Estimated Purchase Price, by wire
transfer of immediately available funds to such account or accounts as may be
designated by the Seller in writing;
(b) amounts equal to the Foreign Distributors' Assets Purchase Price
as provided in Section 1.02(c) hereof;
(c) duly executed copies of each of the Ancillary Agreements;
(d) duly executed Assignment and Assumption agreements to effect the
assumption by PPC of the obligations arising under the terms of the Vancouver
Warehouse Lease and the assumption by Buyer or its affiliates of the Foreign
Distributors' Liabilities; and
(e) the documentation identified in ARTICLE 9 hereof which is
required to be delivered to Seller in satisfaction of the conditions to the
Seller's obligation to close the transactions contemplated by this Agreement
and any other documentation reasonably requested by Seller.
<PAGE>13
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER
--------------------------------------------------
Seller hereby represents and warrants to Buyer as follows:
4.01 Organization of Seller. Seller is a corporation, duly
----------------------------
incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to carry on its
business as presently conducted. Seller is qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
failure of Seller to be so qualified would have a material adverse effect on
the Automotive Filter Companies taken as a whole.
4.02 Organization of the Automotive Filter Companies. Each of the
-----------------------------------------------------
Automotive Filter Companies is a corporation, duly incorporated, validly
existing and in good standing under the laws of the jurisdiction in which it
was incorporated and has the corporate power and authority to carry on its
business as presently conducted. Each of the Automotive Filter Companies is
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the failure of such Automotive Filter Company to be
so qualified would have a material adverse effect on the Automotive Filter
Companies taken as a whole.
4.03 Authorization by Seller. Seller has full corporate power and
-----------------------------
authority to enter into, execute and deliver this Agreement and each of the
other documents and instruments to be executed and delivered by Seller
pursuant to this Agreement and to carry into effect the transactions
contemplated hereunder and thereunder. The execution, delivery and
performance of this Agreement and each of the other documents and instruments
to be executed and delivered by Seller pursuant to this Agreement and the
consummation of the transactions contemplated hereunder and thereunder have
been duly authorized by all necessary corporate action on the part of Seller.
No other corporate act or proceeding on the part of Seller or the Seller's
shareholders is necessary to authorize the execution and delivery of this
Agreement and each of the other documents and instruments to be executed and
delivered by Seller pursuant to this Agreement, or the consummation by Seller
of the transactions contemplated hereby and thereby.
4.04 Ownership of Automotive Filter Company Equity Interests.
-------------------------------------------------------------
(a) Schedule 4.04(a) attached hereto contains a statement of: (i)
the total number, class and par value of each class of capital stock which
each Automotive Filter Company is authorized to issue; and (ii) the total
number, class and par value of each class of capital stock of each Automotive
Filter Company which is issued and outstanding together with the identity of
the owner (or owners) of all the issued and outstanding shares of each class
of capital stock of each such Automotive Filter Company;
(b) Except as otherwise set forth in Schedule 4.04(b) attached
hereto, Seller is the owner of and has good and marketable title to all the
issued and outstanding capital stock of PPC, free and clear of all liens,
claims, encumbrances or other restrictions or limitations of any kind or
nature.
(c) Except as otherwise set forth in Schedule 4.04(c) attached
hereto, PPC is the owner of and has good and marketable title to all the
issued and outstanding capital stock of Purolator Products NA, Inc. and Facet
Advanced Technology Company, free and clear of all liens, claims, encumbrances
or other restrictions or limitations of any kind or nature. As of the
Closing, PPC will be the owner of, and will have good and marketable title to,
all the issued and outstanding capital stock of M Filter, free and clear of
all liens, claims, encumbrances or other restrictions or limitations of any
kind or nature.
<PAGE>14
(d) Except as otherwise set forth in Schedule 4.04(d) attached
hereto: (i) PPC is the owner of 39.27% of the capital stock of Purolator India
and Facet Advanced Technology Company is the owner of and has good and
marketable title to a fifty percent (50%) equity interest in the Purodenso
Joint Venture, in each case, free and clear of all liens, claims, encumbrances
or other restrictions or limitations of any kind or nature with respect to
such equity interest; (ii) no Automotive Filter Company owns, directly or
indirectly, any capital stock or other securities, or any direct or indirect
equity or ownership interest in any person, other than the Purodenso Joint
Venture and other than the Automotive Filter Companies (including any joint
venture, partnership or similar interest); and (iii) no Automotive Filter
Company is subject to any obligation to provide funds to or make any
investment (in the form of loans, capital contributions or otherwise) in any
person. The Purodenso Joint Venture and Purolator India are hereinafter
referred to as the "Joint Ventures").
4.05 Options or Other Rights. There is no existing subscription, option,
-----------------------------
warrant, call, commitment or other agreement entitling any third party to, and
there are no convertible or exchangeable securities outstanding which, upon
conversion or exchange would require the issuance of any additional shares of
capital stock or other equity interests in or indebtedness of any of the
Automotive Filter Companies or any other securities convertible into or
exchangeable for shares of capital stock or other equity interests in any of
the Automotive Filter Companies. None of the Automotive Filter Companies is a
party to any agreement which would require such Automotive Filter Company to
repurchase, redeem or otherwise acquire any of the issued and outstanding
shares of capital stock or other equity interests of such Automotive Filter
Company. None of the PPC Shares or the Subsidiary Shares is subject to any
first refusal, repurchase or similar rights.
4.06 Certificates of Incorporation and By-Laws; Partnership Agreement.
----------------------------------------------------------------------
With respect to each Automotive Filter Company, the Seller has heretofore
delivered to the Buyer true and complete copies of the Certificate of
Incorporation (or any other substantially equivalent documentation which has
been filed, in connection with the organization of any such Automotive Filter
Company, with the governmental authorities of the jurisdiction in which any of
such Automotive Filter Companies have been incorporated or organized) (such
Certificate of Incorporation or substantially equivalent documentation being
hereinafter referred to as "Incorporation Documents") and the By-Laws (or any
other substantially equivalent documentation regulating the internal affairs
of such Automotive Filter Company) (such By-Laws or substantially equivalent
documentation being hereinafter referred to as the "By-Laws") as the same are
in effect on and as of the date hereof, including all amendments and
restatements thereto. In addition, except as set forth in Schedule 4.06
attached hereto, the Seller has heretofore made the minute books of each
Automotive Filter Company available to the Buyer for inspection by the Buyer
and its representatives. At Closing, Seller will deliver to Buyer the
original minute books of each Automotive Filter Company, which shall be
complete and contain all formal proceedings of the shareholders and directors
of each such entity.
<PAGE>15
The Seller has heretofore delivered to the Buyer true and complete copies
of the certificate of partnership of Purodenso filed with the Secretary of
State of the State of Delaware and the Purodenso Agreement and the equivalent
organizational documents of Purolator India, to the extent they shall be in
Seller's possession, as the same are in effect on and as of the date hereof,
including all amendments and restatements thereto. There are no agreements or
understandings with respect to the Purodenso Joint Venture and Purolator India
to which Seller or any Automotive Filter Company is a party or any of their
assets are bound other than as set forth in Schedule 4.06 of this Agreement.
4.07 Binding Agreements. This Agreement constitutes and, when executed and
delivered on the Closing Date, each of the other documents to be executed and
delivered by Seller to Buyer will constitute, valid and binding obligations of
Seller enforceable against Seller in accordance with their respective terms,
except that: (a) such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditor's rights; and (b) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
4.08 No Violation. Except as set forth in Schedule 4.08 attached hereto,
------------------
neither the execution and delivery of this Agreement nor the consummation by
Seller of the transactions contemplated hereby will:
(a) violate any statute or law, or any rule or regulation of any
governmental authority; or
(b) violate any order, writ, injunction or decree of any court or
governmental agency which is applicable to the Seller, the PPC Shares, any
Automotive Filter Company or their respective assets; or
(c) violate or conflict with or constitute a default under (or an
event which, with notice or lapse of time, or both, would constitute a default
under), or will result in the termination of, or accelerate the performance
required by, or result in the creation of any lien, security interest, charge
or encumbrance upon or trigger any first refusal, repurchase or similar right
with respect to, the PPC Shares, the Subsidiary Shares or any interest of the
Automotive Filter Companies in either of the Joint Ventures or any of the
assets of any of the Automotive Filter Companies under any term or provision
of: (i) the Incorporation Documents and By-Laws of Seller or the Incorporation
Documents and By-Laws of any of the Automotive Filter Companies or the
organizational documents of the Purodenso Joint Venture or Purolator India; or
(ii) any lease, contract, commitment, understanding, arrangement, agreement or
restriction of any kind or character: (A) to which Seller, any of its
subsidiaries or any of the Automotive Filter Companies is a party; or (B) by
which the Seller, the PPC Shares, any of the Automotive Filter Companies or
any of their assets or properties may be bound (including, without limitation,
the Purodenso Agreement) except, to the extent that the existence of any
violation described in Sections 4.08(a), (b), or (c), above and the existence
of any conflict, default, termination, acceleration of performance or creation
of any lien, security interest, charge or encumbrance as described in Section
4.08(c), above would not have a material adverse effect on the Automotive
Filter Companies taken as a whole.
<PAGE>16
4.09 Financial Statements. Seller has heretofore delivered to Buyer the
--------------------------
November 30 Balance Sheet and a pro forma income statement for the nine (9)
month period ending November 30, 1998, a copy of which is attached hereto as
Schedule 4.09. The November 30 Balance Sheet has been prepared in accordance
with generally accepted accounting principles and fairly presents the assets
and liabilities and financial position of the Automotive Filter Companies as
of November 30, 1998 utilizing the valuation criteria contained in Section
2.03(e). The pro forma income statement for the nine (9) month period ending
November 30, 1998 has been prepared using generally accepted accounting
principles as modified for pro forma adjustments, and fairly presents the
income of the Automotive Filter Business on such a pro forma basis for the
period reflected therein.
4.10 Absence of Certain Changes. Except for the pre-closing transfer
--------------------------------
of assets as more particularly described in Section 1.01 hereof and except as
and to the extent set forth in Schedule 4.10 attached hereto, from November
30, 1998 through the date hereof and through the Closing Date the operations
of the Automotive Filter Business have been conducted in the ordinary course
consistent with past practice and no Automotive Filter Company (nor the Seller
with respect to the Automotive Filter Business) has or will have:
(a) amended its Incorporation Documents or its By-Laws; or
(b) merged with or into or consolidated with any other person, firm,
corporation or other entity; or
(c) subdivided or reclassified any shares of its capital stock;
(d) issued, sold, purchased or redeemd or issued options or rights
to subscribe to, or entered into any contracts or commitments to issue, sell,
purchase or redeem any shares of its capital stock or other equity interests
or any securities convertible into or exchangeable for any of its shares of
capital stock or other equity interests;
(e) declared or paid any dividends or declared or made any
distributions of any kind (other than cash distributions) to its stockholders
or other owners of any of its outstanding equity interests or made any direct
or indirect redemption, retirement, purchase or other acquisition of any
shares of its capital stock or other equity interests except for cash receipts
remitted to the Seller in connection with the ordinary cash management
practices of the Seller or acquired any equity securities or options or rights
to acquire equity securities of any person;
(f) entered into or amended any written employment agreement with
any employee of any of the Automotive Filter Companies; entered into or
amended any agreement with any labor union or association representing any
employee or entered into or amended in any material respect, any employee
benefit plan or arrangement relating to any employees of any of the Automotive
Filter Companies;
<PAGE>17
(g) suffered any adverse change in its financial condition, assets,
liabilities or business other than changes which arise as a result of changes
in the economy in general and changes which individually and in the aggregate
do not have a material adverse effect on the Automotive Filter Companies taken
as a whole;
(h) sold, transferred or otherwise disposed of any of its assets,
properties, or rights other than in the ordinary course of the conduct of its
business or canceled any claims which are material to its business;
(i) disposed of or permitted to lapse any patent, patent
application, trademark, trademark registration, trademark application, assumed
name, service mark, trade name or copyright application, copyright
registration or license, or permitted to lapse or is in breach of (or with
notice, lapse of time or both will be in breach of or permit to lapse) any
agreement under which it has any right or license relating to the business of
the Automotive Filter Companies other than any of the foregoing which would
not have a material adverse effect on the Automotive Filter Companies taken as
a whole;
(j) made any single capital expenditure in excess of Two Hundred
Fifty Thousand Dollars ($250,000.00) or made any commitment to make capital
expenditures in excess of Two Hundred Fifty Thousand Dollars ($250,000.00),
except for commitments to make such capital expenditures which have been made
in the ordinary course of the business of such Automotive Filter Company and
are reflected in the November 30 Balance Sheet;
(k) made any material change in any method of accounting or
accounting practice or policy or in its manner of keeping its books, accounts
or records;
(l) made any material changes in its product warranty or return
policies;
(m) granted any general increase in the compensation or benefits of
any of its officers or employees other than in the ordinary course of
business, (including any such increase pursuant to any bonus, pension, profit
sharing, severance, medical and welfare or other plan or commitment);
(n) made any loan or advance to any of its officers, directors or
employees other than advances of expenses made in the ordinary course of its
business and cash receipts remitted to Seller in accordance with the regular
cash management policies of the Seller and the Automotive Filter Companies;
and
(o) agreed, whether in writing or otherwise, to take any of the
actions set forth in this Section 4.10.
<PAGE>18
4.11 Title to Personal Property; Encumbrances; Etc. Except as set forth
---------------------------------------------------
in Schedule 4.11 attached hereto, each Automotive Filter Company has good and
valid title to the personal property which it purports to own and, on the
Closing Date, will have good and valid title to the personal property which it
purports to own in each case, free and clear of any liens, charges or
encumbrances.
4.12 Real Property.
-------------------
(a) Schedule 4.12(a) hereto contains a list of the address of each
parcel of real property in connection with the Automotive Filter Business
owned, used or held for use by the Automotive Filter Companies (hereinafter
the "Real Property") and includes a statement of: (i) the approximate square
footage of each such parcel of Real Property and a general description of all
improvements thereon; (ii) whether such Real Property is owned or leased;
(iii) in the case of any Real Property which is owned by any of the Automotive
Filter Companies (or to be transferred to any Automotive Filter Company in
accordance with Section 1.01), the identity of the owner of such Real
Property; and (iv) in the case of any Real Property which is or will be leased
by any of the Automotive Filter Companies from any third party, the identity
of the lessee and the lessor of such Real Property.
(b) Except as otherwise set forth in Schedule 4.12(b) attached
hereto, each Automotive Filter Company that is identified in Schedule 4.12(a)
as the owner of any Real Property has or will have at the Closing Date good,
marketable and insurable fee simple title to the Real Property which the
Automotive Filter Company is identified as the owner of, free and clear of all
liens, charges or other encumbrances.
(c) Except as otherwise set forth in Schedule 4.12(c) attached
hereto, with respect to each parcel of Real Property which is identified in
Schedule 4.12(a) as being leased by an Automotive Filter Company, the
Automotive Filter Company that is identified in Schedule 4.12(a) as the lessee
of such Real Property has or will have at the Closing Date a valid and
enforceable leasehold interest in such Real Property and, except as otherwise
set forth in Schedule 4.12(c) attached hereto, there are no defaults (or
events or conditions which with notice, lapse of time or both would constitute
a default) by Seller or any Automotive Filter Company under the terms of any
lease of any Real Property except for defaults which would not have a material
adverse effect on the Automotive Filter Companies taken as a whole and, to the
knowledge of the Seller, there are no defaults with respect to the obligations
of the lessor of such Real Property. Prior to the date hereof, Seller has
delivered to Buyer true and complete copies of each lease of any Real Property
listed in Schedule 4.12(a) as leased.
(d) Except as otherwise set forth in Schedule 4.12(d) attached
hereto, the use, occupancy and ownership (or leasing) by any Automotive Filter
Company of any buildings, structures or other improvements located at any Real
Property which is identified in Schedule 4.12(a) is in compliance with all
applicable laws, including, without limitation, any zoning ordinances or any
other codes or regulations other than any noncompliance which would not,
individually or in the aggregate, impair the ability of the Automotive Filter
Companies to use the same consistent with past practice and neither Seller nor
any of the Automotive Filter companies has received notice of any such
violation.
<PAGE>19
(e) Except as otherwise set forth in Schedule 4.12(e) attached
hereto, none of the Real Property is subject to any pending or, to the
knowledge of Seller, threatened condemnation or similar proceeding by any
public or quasi-public agency or other authority which would impair the right
or ability of the Automotive Filter Company that (as described in Schedule
4.12(a) attached hereto) is the owner or lessee of any such Real Property, to
use such Real Property consistent with past practice.
(f) Except as otherwise set forth in Schedule 4.12(f) attached
hereto, all of the Real Property and improvements thereon is benefited by all
easements or other rights (including utility service) necessary for the
Automotive Filter Company which is identified in Schedule 4.12(a) attached
hereto as the owner or lessee of such Real Property, to use such Real Property
consistent with past practice.
(g) There is no actual or, to the knowledge of Seller, pending,
imposition of any assessments for public improvements with respect to any Real
Property, except for customary annual assessments under state and local law,
and, to Seller's knowledge no such improvements have been constructed or
planned that would be paid for by means of assessments upon any Real Property.
(h) No termination rights have been exercised or, to Seller's
knowledge threatened by any party with respect to any leases of the Real
Property.
4.13 Leases. Schedule 4.13 attached hereto contains a list of each
------------
lease relating to any personal property used by any of the Automotive Filter
Companies in the conduct of its business which provides for annual lease
payments in excess of Two Hundred Fifty Thousand Dollars ($250,000.00) whose
term is in excess of one (1) year and which is not cancelable upon thirty (30)
or fewer days' notice without any liability, penalty or premium (other than
nominal cancellation fee or charge) (the "Leases"). Prior to the date hereof,
Seller has delivered to Buyer true and complete copies of the Leases including
all amendments thereof and all modifications thereto. Except as set forth in
Schedule 4.13 attached hereto, no default (or event or condition which with
notice, lapse of time, or both would constitute a default) has occurred under
the terms of any of the Leases with respect to the obligations of any of the
Automotive Filter Companies or any other parties to such Leases other than any
such default which would not have a material adverse effect on the Automotive
Filter Companies taken as a whole.
<PAGE>20
4.14 Patents, Trademarks, Trade Names, Etc.
-------------------------------------------
(a) Schedule 4.14(a) attached hereto contains a complete list and a
general description of all patents, inventions, trademarks, service marks,
trademark registrations, mask works, mask works registrations, trade names,
assumed names, copyrights, copyright registrations and in each case
applications therefore, and license agreements (other than licenses related to
commercial off-the-shelf software) presently owned, held or used by any of the
Automotive Filter Companies in connection with the Automotive Filter Business
or with respect to which any of the Automotive Filter Companies owns or holds
any license (hereinafter collectively the "Patents and Trademarks"). Except as
set forth in Schedule 4.14(a), to the knowledge of Seller, the use by any of
the Automotive Filter Companies of the Patents and Trademarks or any other
intellectual property right used by any Automotive Filter Company does not
violate any provision of applicable law or infringe upon the rights of any
person, firm, corporation or other entity and the Seller has not received
notice of any claim of any violation or infringement.
(b) Except as set forth in Schedule 4.14(b): (i) the Patents and
Trademarks constitute all of the intellectual property rights which are
currently capable of being registered and which are: (A) owned by any of the
Automotive Filter Companies and used in the Automotive Filter Business or (B)
used in the business and operation of any of the Automotive Filter Companies;
(ii) an Automotive Filter Company owns the entire right, title and interest in
and to such Patents and Trademarks; (iii) the Patents and Trademarks are
sufficient to conduct the business and operations of the Automotive Filter
Business as presently conducted in all material respects; (iv) there are no
pending or, to Seller's knowledge, threatened interferences, reexaminations,
oppositions or protests relating to any such Patents and Trademarks and Seller
knows of no basis for any such interference; (v) there are no disputes pending
or, to the knowledge of Seller threatened with former or present employees of
the Automotive Filter Business involving rights to any of the Patents and
Trademarks or any other intellectual property right used by any of the
Automotive Filter Companies; and (vi) to Seller's knowledge, no person is
infringing upon or has misappropriated any of the Patents and Trademarks or
any other intellectual property right used by any of the Automotive Filter
Companies.
<PAGE>21
4.15 Litigation. Except as set forth in Schedule 4.15 attached hereto,
----------------
there are no actions, suits or written claims (including without limitation,
product liability claims or claims that any of the Automotive Filter Companies
has breached or otherwise failed to perform its obligations under any product
or service warranties described in Section 4.27 hereof) or legal,
administrative, equitable or arbitration proceedings or outstanding orders,
judgments, injunctions, awards or decrees of any court, any governmental or
regulatory body or any arbitration tribunal pending or, to the Seller's
knowledge, threatened against or involving Seller, any of the Automotive
Filter Companies or any of their assets which: (a) seek to prevent the
consummation of the transactions contemplated by this Agreement; or (b) relate
to the any of the Automotive Filter Companies and which, if adversely decided,
would have a material adverse effect on the Automotive Filter Companies taken
as a whole.
4.16 Banks and Brokers. Schedule 4.16 attached hereto sets forth the
-----------------------
name of each bank, trust company, securities or other broker or other
financial institution: (a) with which the Seller has any account, lock box,
safe deposit box or vault for the exclusive purpose of providing or
maintaining banking or other financial services to any of the Automotive
Filter Companies; and (b) with which any of the Automotive Filter Companies
has any account, lock box, safe deposit box or vault.
4.17 Employee Benefit Plans.
----------------------------
(a) Except for any individual employment, consulting or severance
contracts disclosed in Schedule 4.21 attached hereto, Schedule 4.17(a)
attached hereto sets forth a list, for each Automotive Filter Company, of:
(i) each plan, fund or program constituting an "employee
welfare plan" (hereinafter the "Employee Welfare Plans") within the meaning of
Section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), including, without limitation, basic and supplemental life
insurance, health insurance (including medical, dental and hospitalization),
accidental death and dismemberment insurance, business travel and accident
insurance, short and long term disability insurance programs; and
(ii) each "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA (the "Employee Pension Plans") including, without
limitation, pension, profit sharing, and 401(k) retirement plans;
which is: (w) maintained, assumed or contributed to by Seller for the benefit
of any employee of any of the Automotive Filter Companies; or (x) maintained,
assumed or contributed to by any Automotive Filter Company for the benefit of
its employees or any employees of any of the Automotive Filter Companies
(individually a "Plan" and collectively, the "Plans").
(b) Except as otherwise set forth in Schedule 4.17(b) attached
hereto, Seller has previously delivered to Buyer: (i) complete copies of all
plan documents which set forth the terms of each of the Plans and where
applicable, complete copies of any related trusts; (ii) a general description
of any of the Plans with respect to which no formal plan document has been
adopted; and (iii) where applicable, the most recent Form 5500, as filed with
the Internal Revenue Service ("IRS") together with all attachments thereto,
relating to the Plans.
<PAGE>22
(c) To the knowledge of Seller, each of the Plans which is intended
to conform to the requirements of the Code and ERISA is in compliance with the
applicable requirements of the Code and ERISA and, to the knowledge of Seller,
has been administered in all material respects, in substantial compliance with
the applicable requirements of the Code and ERISA.
(d) Except as set forth in Schedule 4.17(d) attached hereto: (i) to
the knowledge of Seller there has been no prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to
any of the Plans; (ii) to the knowledge of Seller, neither the Seller nor any
of the Automotive Filter Companies have incurred, directly or indirectly, any
liability under Title IV of ERISA (other than, in the case of the Seller,
liability for premium payments to the Pension Benefit Guaranty Corporation
arising in the ordinary course); (iii) to the knowledge of Seller, no
reportable event (within the meaning of Section 4043 of ERISA) has occurred at
any time during the last five (5) years or is expected to occur with respect
to any of the Plans which are subject to Title IV of ERISA except for plan
mergers which have occurred with respect to certain of the plans which are
employee pension benefit plans within the meaning of Section 3(2) of ERISA,
which mergers have not had any material adverse effect on the ability of such
employee pension benefit plans to pay to employees of the Automotive Filter
Companies that are participants in such employee pension benefit plans, the
amount that employees of the Automotive Filter Companies have accrued under
such employee pension benefit plans; (iv) none of the Plans has incurred an
accumulated funding deficiency (within the meaning of Section 302 of ERISA or
Section 412 of the Code), whether or not waived, as of the most recently ended
plan year of such Plan; (v) none of the assets of the Seller or any of the
Automotive Filter Companies is the subject of any lien arising under Section
302(f) of ERISA or Section 412(n) of the Code; (vi) neither the Seller nor any
of the Automotive Filter Companies have been required to post any security
under Section 307 of ERISA or Section 401(a)(29) of the Code; and (vii) none
of the Plans is a multi-employer plan (within the meaning of Sections 3(37) or
4001(a)(3) of ERISA) or a single employer pension plan (within the meaning of
Section 4001(a)(15) of ERISA) for which the Seller or any of the Automotive
Filter Companies could incur liability under Sections 4063 or 4064 of ERISA.
4.18 Consents and Approvals. Except for consents listed in Schedules
---------------------------
4.18 and 4.19(a) attached hereto and for the filing of pre-merger notification
documentation under the HSR Act and the expiration of all applicable waiting
periods thereunder, no permit, consent, approval or authorization of, or
declaration, filing or registration with, any governmental agency or authority
or any other person, firm or corporation is necessary or required to be
obtained in connection with the execution and delivery by Seller of this
Agreement or the consummation by Seller of the transactions contemplated
hereby, except where the failure to obtain any such permit, consent, approval
or authorization or where the failure to make any such declaration, filing or
registration would not have a material adverse effect on the Automotive Filter
Companies taken as a whole. Schedule 4.18 attached hereto also contains a
list of all consents, approvals, authorizations, declarations, filings, or
registrations which, are required to be obtained by any of the Automotive
Filter Companies from any governmental agency or authority in connection with
the conduct of their respective businesses (hereinafter the "Permits and
Consents") other than any Permit or Consent which, if not held or obtained by
any of the Automotive Filter Companies, would not have a material adverse
effect on the Automotive Filter Companies taken as a whole. All such Permits
and Consents are in full force and effect and the Automotive Filter Companies
are in compliance with the terms thereof other than instances of
non-compliance with such Permits and Consents which, individually or in the
aggregate, would not have a material adverse effect on the Automotive Filter
Companies taken as a whole.
<PAGE>23
4.19 Environmental Protection.
------------------------------
(a) Except as set forth in Schedule 4.19(a) attached hereto, to the
knowledge of Seller, each Automotive Filter Company has obtained and maintains
in full force and effect all permits, licenses and other authorizations which:
(i) are required to be obtained by any such Automotive Filter Company under
all federal, state, local and foreign laws relating to human health, safety,
pollution or protection of the environment, (hereinafter referred to as
"Environmental Laws"), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases into the environment
(including, without limitation, ambient air, surface water, ground water or
land) of any substances identified in any such Environmental Laws (such
substances being hereinafter referred to as "Regulated Materials"); and (ii)
relate to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of Regulated Materials; except for those
permits, licenses or other authorizations required to be obtained by any
Automotive Filter Company under the terms of the Environmental Laws which, if
not obtained, would not have a material adverse effect on the Automotive
Filter Companies taken as a whole.
(b) Except as set forth in Schedule 4.19(b) attached hereto, to the
knowledge of Seller, each Automotive Filter Company is in material compliance
with: (i) all terms and conditions of all permits, licenses and
authorizations required under the terms of any Environmental Laws; (ii) all
other limitations, restrictions, conditions, standards, prohibitions,
requirements and obligations contained in any of the Environmental Laws as
applicable to such Automotive Filter Company; and (iii) all plans, orders,
decrees, judgments, injunctions, notices or demand letters applicable to such
Automotive Filter Company and issued, entered, promulgated or approved under
any of the Environmental Laws.
(c) Except as set forth in Schedule 4.19(c) attached hereto,
neither Seller nor any of its subsidiaries, nor any of the Automotive Filter
Companies has received any written notice that any past or present conditions,
circumstances, activities, practices, incidents or actions of any of the
Automotive Filter Company (or, to the knowledge of the Seller, any predecessor
to an Automotive Filter Company) relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of any
Regulated Material or relating to any emission, discharge, release or
threatened release into the environment of any Regulated Material: (i) will
interfere with or prevent compliance or continued compliance by any of the
Automotive Filter Companies with any of the Environmental Laws or any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder; (ii) will give
rise to any common law or legal liability; or (iii) will otherwise form the
basis of any claim, action, demand, suit, proceeding, hearing, study or
investigation, unless the alleged violation or noncompliance with any
Environmental Laws which forms the basis of any notice described above in this
Section 4.19(c), if uncured or unsettled, could not reasonably be expected to
have a material adverse effect on the Automotive Filter Companies taken as a
whole.
<PAGE>24
(d) Except as set forth in Schedule 4.19(d) attached hereto, there
is no civil, criminal or administrative action, suit, demand, claim, hearing,
notice or demand letter, notice of violation, investigation or proceeding
pending or to the knowledge of Seller, threatened against Seller or any
Automotive Filter Company with respect to the Automotive Filter Business
relating in any way to any violation of any of the Environmental Laws or any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder.
(e) None of the Real Property is listed on or, to the knowledge of
Seller, has been proposed for listing on the National Priorities List, the
CERCLIS or any similar list of sites of suspected or known environmental
contamination (including contamination consisting of the release of any
Regulated Material) maintained by any governmental agency. Except as set
forth on Schedule 4.19(e), no Automotive Filter Company or, to Seller's
knowledge, any predecessor of any Automotive Filter Company has been named as
a "potentially responsible party" with respect to, or received any request or
demand from any party concerning, its potential involvement in or at any site
at which conditions exist which may give rise to remedial action under any
applicable Environmental Laws.
4.20 Insurance. Schedule 4.20 attached hereto contains a general
---------------
description (including the amount of any applicable deductibles) of all
policies of fire, liability, workmen's compensation and other forms of
insurance owned or held by Seller or any Automotive Filter Company and issued
with respect to or covering risks associated with the assets, properties or
business of each Automotive Filter Company. All such policies are in full
force and effect, all premiums with respect thereto covering all periods up to
and including the Closing Date have been or will be paid when due, and no
notice of cancellation or termination has been received with respect to any
such policy. Such policies are valid, outstanding and enforceable policies;
will remain in full force and effect through the respective dates set forth in
Schedule 4.20 without the payment of additional premiums; and will not, with
respect to all periods up to and including the Closing Date, in any way be
affected by, or terminate or lapse by reason of, the transactions contemplated
by this Agreement except to the extent set forth in Schedule 4.20. The Seller
and the Automotive Filter Companies have not been denied any insurance
coverage.
4.21 Contracts and Commitments.
-------------------------------
(a) Except for leases required to be disclosed pursuant to Sections
4.12 and 4.13 hereof, Plans required to be disclosed pursuant to Section
4.17(a) hereof and insurance policies required to be disclosed by Section 4.20
hereof, Schedule 4.21(a) attached hereto contains a list of each contract,
subcontract, agreement, commitment, option, note, bond, mortgage, indenture,
deed of trust, guarantee, franchise or license which:
(i) (A) requires payments in excess of Five Hundred Thousand
Dollars ($500,000.00); (B) contains the terms and conditions: (I) upon which
any person is employed or engaged as an officer, general manager, or
consultant; or (II) upon which any severance or other termination payments are
payable; (C) provides preferential rights to purchase any material quantity of
any assets; (D) limits the freedom of any party to engage in any business in
any geographic area; (E) contains any "change in control" provision which
would be breached by the consummation of the transactions contemplated by this
Agreement; or (F) contains the terms of any guaranty of the payment or
performance of any liabilities or obligations the cost of the payment or
performance of which liabilities or obligations exceeds, in the aggregate, an
amount equal to Five Hundred Thousand Dollars ($500,000); and
(ii) (A) Seller is a party to and relates primarily to any
Automotive Filter Company (hereinafter individually referred to as a "Seller
Contract" and collectively as the "Seller Contracts"); or (B) any Automotive
Filter Company is a party to or the beneficiary of (hereinafter individually
referred to as a "Automotive Filter Company Contract" and collectively as the
"Automotive Filter Company Contracts").
<PAGE>25
(b) Prior to the date hereof Seller has delivered or otherwise made
available to Buyer, true and complete copies of the Seller Contracts and the
Automotive Filter Company Contracts including all amendments thereof and
modifications thereto.
(c) Except as set forth in Schedule 4.21(c) attached hereto, each of
the Seller Contracts and the Automotive Filter Company Contracts are valid,
binding and in full force and effect and enforceable in accordance with its
terms except to the extent that: (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors rights; and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefore may be brought;
(d) Except as set forth in Schedule 4.21(d) attached hereto, Seller
is not in material default (and no event or condition exists which, with
notice, lapse of time or both would constitute a material default) with
respect to any of its obligations under any of the Seller Contracts, and, to
the knowledge of Seller, there is no basis for any claim that any other
parties to any of the Seller Contracts is in material default with respect to
its obligations under such Seller Contracts; and
(e) Except as set forth in Schedule 4.21(e) attached hereto, none of
the Automotive Filter Companies is in material default (and no event or
condition exists which, with notice, lapse of time or both would constitute a
material default) with respect to the obligations of any Automotive Filter
Company under any of the Automotive Filter Company Contracts and, to the
knowledge of Seller, there is no basis for any claim that any other party to
any of the Automotive Filter Company Contracts is in material default with
respect to its obligations under such Automotive Filter Company Contracts.
(f) To Seller's knowledge, all other agreements, arrangements and
understandings to which any of the Automotive Filter Companies is a party are
in full force and effect and are valid and binding obligations of the
applicable Automotive Filter Company, except to the extent that the failure of
any such contract to be valid and binding would not individually or in the
aggregate have a material adverse effect on the Automotive Filter Companies
taken as a whole.
4.22 Tax Matters.
-----------------
(a) Except as set forth in Schedule 4.22 attached hereto, the
Seller and each of the Automotive Filter Companies has or will have filed or
caused to be filed with the appropriate governmental agencies all Tax Returns
(as hereinafter defined) required to be filed by such entity prior to the
Closing Date with respect to the Automotive Filter Business and with respect
to the Automotive Filter Companies and their respective operations and assets
for all periods ending on or prior to such date. In addition, except as
otherwise set forth in Schedule 4.22 attached hereto, Seller has or will have
paid, or caused to be paid in full, all Taxes shown to be due on such Tax
Returns for such periods and the Automotive Filter Companies have withheld,
collected or otherwise provided for all Taxes (including income, payroll and
employment taxes) required to have been held or collected and paid or
deposited as of the Closing Date as required by applicable law. Following the
Closing Date, Seller will pay or cause to be paid, in full, all Income Taxes
(as hereinafter defined), if any, attributable to the Automotive Filter
Companies and their respective operations and assets and either: (i) shown to
be due on such Tax Returns, or (ii) otherwise due or claimed to be due from
the Seller or any Automotive Filter Company by any taxing authority for all
periods and portions thereof up to and including the Closing Date to the
extent that a liability for current Income Taxes (excluding deferred Income
Taxes) has not been accrued on the Closing Balance Sheet. There are no liens
with respect to Taxes upon any of the assets of any of the Automotive Filter
Companies.
<PAGE>26
(b) For the purposes of this Agreement: (i) "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, excise, property, sales and franchise taxes (including any
interest, penalties or additions attributable to or imposed on or with respect
to any such assessment) imposed by the United States or any other
jurisdiction, and any state, province, county, local or other government,
taxing authority, or subdivision thereof; (ii) "Income Taxes" shall mean all
taxes (including any interest, penalties or additions attributable or imposed
on or with respect to such taxes) imposed by the United States or any other
jurisdiction or by any state, province, county, local or other government,
taxing authority or subdivision thereof, solely with respect to any income of
Seller or any of the Automotive Filter Companies excluding, specifically, any
sales taxes, transfer taxes, real or personal property taxes; and (iii) "Tax
Return" shall mean any return, report, information return or other document
(including any related or supporting information) filed or required to be
filed with any governmental entity or other authority in connection with the
determination, assessment or collection of any Taxes (whether or not such
Taxes are imposed on Seller or an Automotive Filter Company) or the
administration of any laws, regulations or administrative requirements
relating to any Taxes.
4.23 Labor Relations; Employees Schedule 4.23 attached hereto contains a
-------------------------------
list of each contract or other agreement between any Automotive Filter Company
(or Seller or any of its subsidiaries to which employees of the Automotive
Filter Business are subject) and any labor union or other association
representing any employees of the Automotive Filter Business (each such
contract being hereinafter referred to as a "Labor Agreement"). Prior to the
date hereof, Seller has delivered to the Buyer true and complete copies of
each Labor Agreement listed in Schedule 4.23 attached hereto. Except as set
forth in Schedule 4.23 attached hereto, none of the Automotive Filter
Companies has, at any time during the last three (3) years, experienced any
labor disputes or any work stoppage, slow down, picketing or lockout. In
addition, except to the extent set forth in Schedule 4.23 attached hereto: (a)
there is no unfair labor practice charge, or complaint or other action against
any of the Automotive Filter Companies pending or, to the knowledge of Seller,
threatened before the National Labor Relations Board, and none of the
Automotive Filter Companies is subject to any order to bargain by the National
Labor Relations Board; (b) there is no, and during the past three (3) years
there has not been any labor strike, slow down, picketing or lockout or work
stoppage actually pending or, to the knowledge of Seller, threatened against
or affecting any Automotive Filter Company; (c) no question concerning
representation is pending or to the Seller's knowledge is threatened
respecting employees of any of the Automotive Filter Companies; and (d) no
written grievance which might have a material adverse effect on the Automotive
Filter Companies taken as a whole is pending. Schedule 4.23 attached hereto
also includes an accurate list of all salaried employees of the Automotive
Filter Companies that are based in North America (other than manufacturing
salaried employees) and the salary of each. Seller has provided Buyer with an
accurate list of those employees of any Automotive Filter Company who have
requested long term or short term disability leave.
<PAGE>27
4.24 Customers and Suppliers. Except as set forth in Schedule 4.24
----------------------------
attached hereto, to the knowledge of Seller, none of the Automotive Filter
Companies is engaged in any dispute or any negotiation regarding the
termination of any existing arrangement with any customer or supplier of any
of the Automotive Filter Companies except for disputes or negotiations with
customers or suppliers of any of the Automotive Filter Companies which,
individually or in the aggregate, will not have a material adverse effect on
the Automotive Filter Companies taken as a whole. In addition, except as set
forth in Schedule 4.24 attached hereto, to the knowledge of the Seller,
neither Seller nor any of the Automotive Filter Companies has received notice
of any customer's or supplier's intention to terminate or change any existing
relationship with any Automotive Filter Company in any manner which would have
a material adverse effect on the Automotive Filter Companies taken as a whole.
4.25 Compliance with Law. Except for matters pertaining to the Plans
-------------------------
which are provided for in Section 4.17 and matters pertaining to Environmental
Laws which are provided for in Section 4.19, the business and operations of
each of the Automotive Filter Companies is conducted in accordance with all
applicable laws, regulations and other requirements of all national
governmental authorities, and of all states, municipalities and other
political subdivisions and agencies thereof, having jurisdiction over the
business of the Automotive Filter Companies, including, without limitation,
all Permits and Consents and such laws, regulations and requirements relating
to employment of unauthorized aliens, antitrust, consumer protection, currency
exchange, equal opportunity, health, occupational safety, pension and
securities, except for deviations from such laws arising from the operations
of the Automotive Filter Companies which, individually or in the aggregate,
would not have a material adverse effect on the Automotive Filter Companies
taken as a whole. Except as set forth in Schedule 4.25 attached hereto, none
of the Automotive Filter Companies has received any written notification of
any asserted failure by any of the Automotive Filter Companies to comply with
any such laws, rules or regulations.
4.26 Brokers and Finders. Except as set forth in Schedule 4.26 attached
-------------------------
hereto, neither Seller nor any of its officers, directors or employees, as the
case may be, nor any of the Automotive Filter Companies, has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated by this
Agreement. Seller will be solely responsible for the fees payable to any
persons listed on Schedule 4.26.
4.27 Product Warranties. The standard product or service warranties,
------------------------
indemnifications and guarantees which each of the Automotive Filter Companies
extends to its customers in the ordinary course of the conduct of their
respective businesses, copies of which have been delivered to Buyer, are
identified in Schedule 4.27 attached hereto. Schedule 4.27 also contains a
general description of any product or service warranties, indemnifications or
guarantees extended by any of the Automotive Filter Companies to any customer,
the terms of which are materially different from the standard product or
service warranties, indemnifications or guarantees otherwise described in
Schedule 4.27 attached hereto. No warranties, indemnifications or guarantees
are now in effect or outstanding with respect to products or services
manufactured, produced or performed by any of the Automotive Filter Companies
in the ordinary course of conduct of their respective businesses, except for
warranties implied by law and warranties, indemnifications and guarantees of
the types identified in Schedule 4.27 attached hereto.
<PAGE>28
4.28 Potential Conflicts of Interest. Except as set forth in Schedule
-------------------------------------
4.28 attached hereto, no contract, agreement or arrangement (excluding
employment agreements and rights arising under any of the Plans) providing for
the purchase or sale of any goods or services or relating to any interest in
any property, whether real or personal, or tangible or intangible, which is
used by or relates to any of the Automotive Filter Companies exists between:
(a) Seller and any of the Automotive Filter Companies; (b) Seller and any
officers or directors of any of the Automotive Filter Companies; or (c)
between any of the Automotive
Filter Companies and any officers or directors of any of the Automotive Filter
Companies. Except as set forth in Schedule 4.28 attached hereto, none of the
officers or directors of Seller and none of the stockholders, officers or
directors of any of the Automotive Filter Companies has any cause of action or
other claim whatsoever against any of the Automotive Filter Companies.
4.29 Accounts Receivable and Accounts Payable. All accounts receivable
---------------------------------------------
of the Automotive Filter Companies represent sales actually made in the
ordinary course of business or valid claims. The accounts payable of the
Company reflected in the Closing Balance Sheet arose, or will arise, from bona
fide transactions in the ordinary course of business.
4.30 Unimpaired Operation. At Closing, the Automotive Filter Companies
--------------------------
will hold all assets of Seller and its affiliates which are used in, held for
use by or related to the Automotive Filter Business (other than the Shared
Properties), except for those assets which, if not held by the Automotive
Filter Companies would not, individually or in the aggregate, have a material
adverse effect on the Automotive Filter Companies as a whole.
4.31 Absence of Questionable Payments. To the knowledge of Seller, none
--------------------------------------
of the Automotive Filter Companies nor any of their directors, officers,
agents, employees or any other persons acting on their behalf has: (a) used
any corporate or other funds for unlawful contributions, payments, gifts or
entertainment, or made any unlawful expenditures relating to political
activity to government officials or others or established or maintained any
unlawful or unrecorded funds in violation of Section 104 of the Foreign
Corrupt Practices Act of 1977 (15 USC Par. 78dd-2), as amended, or any other
applicable foreign, federal or state law; or (b) accepted or received any
unlawful contributions, payments, expenditures or gifts.
4.32 Representations and Warranties on the Closing Date; Disclosure. The
--------------------------------------------------------------------
representations and warranties contained in this ARTICLE 4 shall be true and
complete on and as of the Closing Date with the same force and effect as
though made on the Closing Date. Disclosure of any fact or information in any
Schedule required by this ARTICLE 4 shall be deemed for purposes of this
Agreement to be disclosure on any other Schedule required by any Section of
this Agreement on which such item could have been listed pursuant to this
Agreement.
<PAGE>29
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER
-------------------------------------------------
Buyer represents and warrants to Seller as follows:
5.01 Organization. Buyer is a corporation duly organized, validly
-----------------
existing and in good standing under the laws of Indiana, and has the corporate
power and authority to carry on its business as presently conducted.
5.02 Authorization by Buyer. The Buyer has full corporate power and
----------------------------
authority to enter into, execute and deliver this Agreement and each of the
other documents and instruments to be executed and delivered by Buyer pursuant
to this Agreement and to carry into effect the transactions contemplated
hereunder and thereunder. The execution and delivery of this Agreement and
each of the other documents and instruments to be executed and delivered by
the Buyer pursuant to this Agreement and the consummation of the transactions
contemplated hereunder and thereunder have been duly authorized by all
necessary corporate action on the part of Buyer. No other corporate act or
proceeding on the part of Buyer or its stockholders is necessary to authorize
the execution and delivery of this Agreement and each of the other documents
and instruments to be executed and delivered by Buyer pursuant to this
Agreement or the consummation of the transactions contemplated hereby and
thereby.
5.03 Binding Agreements. This Agreement constitutes, and, when executed
------------------------
and delivered on the Closing Date, each of the other documents and instruments
to be executed and delivered by Buyer to Seller will constitute valid and
binding obligations of Buyer, enforceable against Buyer in accordance with its
terms except that: (a) such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect affecting the enforcement of creditors' rights generally; and, (b)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
5.04 No Violation. Neither the execution and delivery of this
------------------
Agreement, nor the consummation by Buyer of the transactions contemplated
hereby will: (a) to the knowledge of Buyer, violate any statute or law, or
any rule or regulation of any governmental authority; (b) violate any order,
writ, injunction or decree of any court or governmental authority; or (c)
violate or conflict with or constitute a default under (or an event which,
with notice or lapse of time, or both, would constitute a default under) or
will result in the termination of, or accelerate the performance required by,
or result in the creation of any material lien, security interest, charge or
encumbrance upon any of the material assets of Buyer under any term or
provision of: (i) the Articles of Incorporation or By-Laws of Buyer; or (ii)
any material lease, contract, commitment, understanding, arrangement,
agreement or restriction of any kind or character to which Buyer is a party or
by which Buyer or any of its assets or properties may be bound or affected.
<PAGE>30
5.05 Litigation. There are no actions, suits or claims or legal,
----------------
administrative, equitable or arbitration proceedings or outstanding orders,
judgments, injunctions, awards or decrees of any court, any governmental or
regulatory body or arbitration tribunal pending, or to the knowledge of Buyer,
threatened against or involving Buyer which: (a) seek to prevent the
consummation of the transactions contemplated by this Agreement; or (b) or
relate to the business or operations of the Buyer and which, if adversely
decided, would have a material adverse effect on the business, assets or
financial condition of the Buyer.
5.06 Consents and Approvals. Except for the filing of pre-merger
----------------------------
notification documentation under the HSR Act and the expiration of all
applicable waiting periods thereunder, no permit, consent, approval or
authorization of, or declaration, filing or registration with, any
governmental agency or authority or any other person, firm or corporation is
necessary or required to be obtained in connection with the execution and
delivery by Buyer of this Agreement or the consummation by Buyer of the
transactions contemplated hereby.
5.07 Purchase for Investment. Buyer is purchasing the PPC Shares for
-----------------------------
investment and not for resale or distribution and the Buyer will not sell,
transfer, offer for sale, pledge, hypothecate or otherwise dispose of any of
the PPC Shares in violation of any applicable securities laws or regulations.
5.08 Brokers and Finders. Except as set forth in Schedule 5.08, neither
-------------------------
Buyer, nor any of its officers, directors or employees, as the case may be,
has employed any broker or finder or incurred any liability for any brokerage
fees, commissions or finders fees in connection with the transactions
contemplated by this Agreement. Buyer will be solely responsible for the fees
payable to any persons listed in Schedule 5.08.
<PAGE>31
ARTICLE 6 COVENANTS OF SELLER
------------------------------
6.01 Access Pending the Closing Date. Seller has and will cause each of
-------------------------------------
the Automotive Filter Companies, to: (a) grant to Buyer and its counsel,
accountants and other representatives, reasonable access during normal
business hours to Seller's facilities relating to the Automotive Filter
Business, the Shared Properties and each parcel of Real Property which is
used by the Automotive Filter Companies in the conduct of their respective
businesses and to all properties, books, contracts, commitments and records of
Seller relating to the Automotive Filter Business and each of the Automotive
Filter Companies; and (b) furnish Buyer and its representatives all such
information as Buyer or its representatives may reasonably request concerning
the Automotive Filter Business and the business and assets of the Automotive
Filter Companies.
6.02 Conduct of Business Prior to the Closing. Except for the
----------------------------------------------
pre-closing transfers contemplated by Section 1.01 hereof, during the period
commencing on the date hereof and ending on the Closing Date: (a) Seller has
not taken any action; and (b) in the case of the Automotive Filter Companies,
Seller will take any and all action necessary to prevent each of the
Automotive Filter Companies from taking any action; that would, in any such
case, cause any of the representations and warranties of Seller contained in
Section 4.10 to be untrue as of the Closing Date. In addition, during the
period beginning on the date hereof and ending on the Closing Date: (w)
Seller will use its reasonable best efforts and (x) in the case of the
Automotive Filter Companies, Seller will take such action as may be necessary
to cause each Automotive Filter Company to use its reasonable best efforts; to
keep intact the business organization and reputation of each such Automotive
Filter Company and to preserve for the Buyer the goodwill of the suppliers,
customers, distributors, sales representatives, employees and others having
business relations with the Automotive Filter Business.
6.03 Termination of Benefit Accruals Under Defined Benefit Plans. Seller
-----------------------------------------------------------------
agrees that, prior to the Closing Date, Seller shall amend the terms of the
master defined benefit pension plan maintained by Seller and known as the Mark
IV Industries, Inc. and Subsidiaries Employees Retirement Income Fund
(hereinafter the "Master Defined Benefit Plan"): (a) to provide that
participants therein who are employees of any of the Automotive Filter
Companies immediately prior to the Closing Date ("Automotive Filter
Participants") shall cease to accrue benefits thereunder on the Closing Date
(or such earlier date as Seller and Buyer may subsequently agree to in
writing), and (b) to provide that Automotive Filter Participants shall be
fully vested (i.e., one hundred percent (100%) vested) in their accrued
benefits under the Master Defined Benefit Plan. Seller agrees to take, or
cause each of the Automotive Filter Companies to take, prior to the Closing
Date, any and all actions (including, without limitation, the delivery of any
notices required under ERISA and the Code and the timely filing of all
required filings with any government agency), which are necessary or
reasonably required to effectuate the intent of this Section 6.03.
<PAGE>32
6.04 No Solicitation. Seller shall not and shall take any and all action
---------------------
necessary to prevent any of Sellers directors, officers, employees or agents
and any directors, officers, employees or agents of any of the Automotive
Filter Companies, as the case may be, from directly or indirectly,
encouraging, soliciting, initiating or entering into any discussions or
negotiations concerning, any disposition of all or any material portion of the
capital stock or assets of the Automotive Filter Companies (other than
pursuant to this Agreement), or any proposal therefor, or from furnishing or
causing to be furnished any information concerning the Automotive Filter
Business to any party in connection with any transaction involving the
acquisition of any stock or assets of any Automotive Filter Company by any
person other than the Buyer.
6.05 Non-Competition. As a part of the inducement to Buyer to enter into
---------------------
this Agreement, Seller hereby agrees that for a period of three (3) years (the
"Covenant Term") from the date hereof, Seller shall not, nor shall any
division of Seller or any corporation which Seller, directly or indirectly
controls the management of or owns more than fifty percent (50%) of the total
number of outstanding shares entitled to vote, or their successors and assigns
(hereinafter referred to as "Seller's Affiliates") without the prior express
written consent of the Buyer, own, manage, operate, or control, directly or
indirectly, any business, firm or corporation which is engaged anywhere in the
world in the manufacture and sale of any automotive products which are or were
manufactured and sold by the Automotive Filter Business prior to the Closing
Date (hereinafter the "Products"). Notwithstanding the foregoing, nothing
herein shall be deemed to limit or otherwise restrict the rights of any
division, subsidiary or affiliate of Seller which is not engaged in the
Automotive Filter Business from continuing, after the Closing Date, to conduct
its business in the same manner as such business was conducted prior to the
Closing Date. In addition, this Section 6.05 shall not be deemed to prohibit
any division, subsidiary or affiliate of Seller from engaging after the
Closing Date in the manufacture and sale of those products listed in Schedule
6.05 attached hereto. In addition, notwithstanding anything to the contrary
contained in this Section 6.05, nothing in this Section 6.05 shall be deemed
to prohibit, limit or otherwise restrict the right of Seller, or any of
Seller's Affiliates, to manufacture and sell products referred to in the
Champion Supply Agreement (one of the Ancillary Agreements) and to purchase
the business and assets of APT, a corporation engaged in the design,
manufacture and sale of automotive and industrial filter products and,
following any such acquisition, nothing contained in this Section 6.05 shall
<PAGE>33
be deemed to prohibit, limit or otherwise restrict the right of Seller or its
affiliate to continue to conduct the business of APT, including, but not
limited to, the manufacture and sale of automotive filter products as
conducted immediately prior to its acquisition by Seller. Ownership or
purchase by Seller at or after the time of Closing, of less than five percent
(5%) of the issued and outstanding capital stock of any enterprise engaged in
the production or sale of Products, the securities of which are listed on a
national securities exchange or included in the national list of
over-the-counter securities shall not be deemed a violation of this Section
6.05. In addition to the rights of Seller to acquire the business and assets
of APT, Seller shall not be deemed to be in violation of this Section 6.05 in
the event that, following the Closing Date, Seller or any of Seller's
Affiliates acquires substantially all the assets of any person, firm or
corporation or a majority of the issued and outstanding capital stock of any
corporation and, following such acquisition, less than fifteen percent (15%)
of the total annual sales of any such acquired company is attributable to
sales of products competitive with the Products. Upon breach by Seller or
Seller's Affiliates of any provision of this Section 6.05, Buyer shall be
entitled to injunctive relief, both preliminarily and permanently, since the
remedy at law would be inadequate and insufficient. For purposes of this
Agreement, it is expressly agreed that the provisions of this Section shall
not limit or restrict the right of any person, firm, corporation or other
entity which acquires control of the Seller or any of the Retained Businesses
to continue to conduct the businesses which any such person was engaged in
immediately prior to the acquisition by any such person of control of Seller
or any of the Retained Businesses. Additionally, Buyer will be entitled to
all such other legal and equitable remedies as may be available to it. In the
event any of the provisions of this Section 6.05 are determined by a court of
competent jurisdiction to be contrary to any applicable statute, law or rule,
or for any reason to be unenforceable as written, such court may modify any of
such provisions so as to permit enforcement thereof as thus modified.
<PAGE>34
ARTICLE 7 COVENANTS OF BUYER
----------------------------
7.01 Obligation to Continue Certain Employee Benefits. The Buyer hereby
------------------------------------------------------
agrees that, at all times during the one (1) year period following the Closing
Date (the "Benefit Continuation Period"), the Buyer shall use its best efforts
to maintain and provide for the employees of each Automotive Filter Company or
take such action as may be necessary to cause each Automotive Filter Company
to maintain and provide for its employees, personnel practices, employee
welfare plans and employee pension plans which provide to the employees of
each such Automotive Filter Company, benefits which in the aggregate are
reasonably comparable to the Employee Welfare Plans and the Employee Pension
Plans which were provided to the employees of such Automotive Filter Company
on the Closing Date as more particularly set forth in Schedule 4.17(a)
attached hereto, provided, that Buyer shall have the right to make any
amendment to or adjustment in any such employee benefits as may be necessary,
in Buyer's judgment, to be in accord with any existing Buyer Employee Welfare
Plan or Employee Pension Plan that may be applicable to other employees of the
Buyer. Buyer and Seller agree to give each other 90 days advance notice (or
such lesser period as may be practicable under the circumstances) of any
change in employee benefits of their respective employees at any of the
facilities covered under the Ancillary Agreements.
7.02 Collective Bargaining Agreements. Buyer acknowledges that M-Filter
--------------------------------------
Company is a party to a Labor Agreement with its employees.
7.03 Insurance Coverage. Buyer acknowledges that the insurance coverage
------------------------
which Seller maintains with respect to the Automotive Filter Companies and the
Automotive Filter Business including, without limitation, general liability,
product liability, auto liability, property, commercial umbrella, excess
umbrella, aircraft products, fiduciary liability, crime liability and workers
compensation insurance coverage is maintained by Seller under policies with
respect to which Seller is the named insured and the Automotive Filter
Companies are additional insureds. Buyer acknowledges that effective as of
the Closing Date, the Seller intends to remove the Automotive Filter Companies
and the Automotive Filter Business from the insurance coverage provided by
such insurance policies to the extent that such insurance coverage relates to
the Automotive Filter Business or the business and assets of any Automotive
Filter Company with respect to any periods arising at any time on or after the
Closing Date. Accordingly, Buyer acknowledges that no insurance protection
shall be available to Buyer with respect to any injury, loss or damage which
Buyer, any of the Automotive Filter Companies, the Automotive Filter Business
or any third party may suffer as a result of any event, occurrence or
circumstance existing or occurring with respect to the Automotive Filter
Business or any of the Automotive Filter Companies at any time on or after the
Closing Date.
<PAGE>35
7.04 Limitation on Representations and Warranties. Buyer acknowledges
--------------------------------------------------
that, except for the representations and warranties of Seller contained in or
made pursuant to ARTICLE 4 hereof, neither Seller nor any of its officers,
employees, agents, stockholders, affiliates, consultants, investment bankers,
legal advisors or other representatives shall be deemed to have made any
representations, warranties or assurances of any kind.
ARTICLE 8 ADDITIONAL COVENANTS OF BUYER AND SELLER
--------------------------------------------------
8.01 Consents and Conditions. Prior to the Closing, Seller will use its
----------------------------
best efforts, at its own cost and expense, to seek to obtain any required
stockholder, third-party and governmental consents to the transactions
contemplated hereunder and to cause each of the conditions to the obligations
of Buyer to close the transactions contemplated hereunder (as more
particularly set forth in ARTICLE 10 hereof) to be satisfied. Buyer will, at
Seller's expense, cooperate with Seller and take such action as Seller may
reasonably request in connection with Seller's efforts to obtain any consent
from any third party to the consummation of the transactions contemplated by
this Agreement.
8.02 Filings. Not later than five (5) days following the date hereof,
------------
Seller and Buyer shall make any and all filings required under the HSR Act.
In addition, Seller shall furnish to the Buyer and Buyer shall furnish to
Seller: (a) such information and reasonable assistance as may reasonably be
requested in connection with the preparation by such other party of any
necessary filings or submissions to any governmental agency, including,
without limitation, any filings necessary under the provisions of the HSR Act;
and (b) copies of all correspondence, filings or communications (or memoranda
setting forth the substance thereof) between such party or its
representatives, on the one hand, and the Federal Trade Commission, the
Antitrust Division of the U.S. Department of Justice or any other governmental
agency or authority or members of their respective staffs, on the other hand,
with respect to this Agreement or the transactions contemplated hereby.
<PAGE>36
8.03 Access After the Closing Date. Seller agrees with Buyer that, on
-----------------------------------
and after the Closing Date, each, seventy-two (72) hours advance notice from
the other, will permit the other and their respective representatives
(including their counsel and auditors), during normal business hours and for a
reasonable business purpose, to have access to and examine all books and
records of the other which pertain to the conduct of the Automotive Filter
Business prior to the Closing including, but not limited to, correspondence,
memoranda, books of account, payroll records, computer records, insurance
policies and the like. The out-of-pocket costs of reviewing and photocopying
any such material (excluding the compensation and related payroll taxes of
employees engaged in the copying of any such materials) shall be borne by the
party requesting such review or photocopies. Any obligations under this
Section shall terminate as to either party three (3) years following the
Closing Date; provided that, to the extent any matter for which information is
requested hereunder is subject to a statute of limitations which expires more
than three (3) years following the Closing Date, the obligations under this
Section shall terminate at the end of the statute of limitations which applies
to any such matter.
8.04 Record Retention. For a period of seven (7) years after the date
----------------------
hereof, or, in the case of books or records pertaining to Taxes, for a period
until the expiration of all applicable statutes of limitation, Buyer and
Seller agree that, prior to the destruction or disposition of any books or
records pertaining to the Automotive Filter Business or the business or assets
of any of the Automotive Filter Companies, each party shall provide not less
than forty five (45) nor more than ninety (90) days prior written notice to
the other of any such proposed destruction or disposal. If the recipient of
such notice desires to obtain any of such documents, it may do so by notifying
the other party in writing at any time prior to the scheduled date for such
destruction or disposal. Such notice must specify the documents which the
requesting party wishes to obtain. The parties shall then promptly arrange
for the delivery of such documents. All out-of-pocket costs associated with
the delivery of the requested documents (excluding the compensation (and
related payroll taxes) of employees engaged in the preparation, copying or
delivery of any such documents) shall be paid by the requesting party.
<PAGE>37
8.05 Tax Returns and Audits.
----------------------------
(a) Seller shall be responsible for filing, or causing to be filed,
within the time and in the manner prescribed by law, all Tax Returns with
respect to any Income Taxes payable by Seller and each of the Automotive
Filter Companies for all taxable periods of Seller and each of the Automotive
Filter Companies ending on or before the Closing Date. Seller shall also be
responsible for filing, or causing to be filed, within the time and in the
manner prescribed by law, all Tax Returns which are required to be filed prior
to the Closing (without regard to any available extensions for the filing of
such Tax Returns) with respect to any Taxes (other than Income Taxes) payable
by Seller and any of the Automotive Filter Companies with respect to any
periods ending on or prior to the Closing Date. Seller shall be responsible
for the payment of all Taxes shown to be due under any Tax Return to be filed
by Seller pursuant to this subparagraph 8.05(a). Seller shall provide Buyer a
copy of any Tax Return relating to Income Taxes which is described above in
this subparagraph and which is required to be signed by Buyer or any of the
Automotive Filter Companies not later than fifteen (15) days prior to the due
date (including extensions) for filing such Tax Return.
(b) Buyer shall be responsible for filing, or causing to be filed,
within the time and in the manner prescribed by law, all Tax Returns relating
to any Taxes (other than Income Taxes) payable by any of the Automotive Filter
Companies, in each case, for all taxable periods beginning on or before the
Closing Date to the extent that such Tax Returns are not required to be filed
by Seller or any of the Automotive Filter Companies pursuant to the provisions
of Section 8.05(a) above. Buyer shall be responsible for the payment of all
Taxes, other than Income Taxes, payable by any of the Automotive Filter
Companies with respect to the Automotive Filter Business or the business,
operations or property of any of the Automotive Filter Companies, to the
extent that the due date (without regard to extensions thereof) for payment of
such Taxes occurs at any time after the Closing Date. Buyer shall be
responsible for filing all Tax Returns with respect to Income Taxes required
to be filed after the Closing Date (without regard to extensions) on behalf of
each of the Automotive Filter Companies in connection with the business,
operations and assets of each of the Automotive Filter Companies for periods
ending after the Closing Date.
<PAGE>38
(c) Seller shall have full control and ultimate discretion over all
actions to be taken or decisions to be made in the course of any audit or
examination, or any subsequent proceedings, including settlement or other
dispositions thereof, other than any adjustment that would result in a
liability of or otherwise adversely affect Buyer or any of the Automotive
Filter Companies following the Closing (in which case such settlement or
disposition shall not be effected without Buyer's consent, which consent shall
not be unreasonably withheld): (i) with respect to any Income Taxes due and
payable by the Seller or any of the Automotive Filter Companies for any period
ending on or prior to the Closing Date; and (ii) with respect to any Taxes
(other than Income Taxes) which are payable in connection with any Tax Returns
which Seller and the Automotive Filter Companies are required to file pursuant
to the provisions of Section 8.05(a) above. Seller shall reimburse Buyer and
each Automotive Filter Company for all reasonable out-of-pocket costs incurred
by Buyer and each Automotive Filter Company in connection with the taking of
any action which Seller requests Buyer or such Automotive Filter Company to
take in the course of such audit, examination or subsequent proceeding. If
any taxing authority shall take any action which may give rise to a claim by
any such taxing authority that: (w) any Automotive Filter Company has not
filed any Tax Return relating to Income Taxes which is required with respect
to any period ending on or before the Closing Date; or (x) any Automotive
Filter Company has not paid in full or owes any Income Taxes for any period
ending on or before the Closing Date, then the Buyer shall promptly notify
Seller thereof in writing; provided, however, that any failure to notify
Seller shall not release Seller from its obligation to file such Tax Returns
or pay such Income Taxes as stated in this Section to the extent Seller would
not be prejudiced thereby.
(d) Buyer shall have full control and ultimate discretion over all
actions to be taken or decisions to be made in the course of any audit or
examination or any subsequent proceedings, including settlement or other
dispositions thereof (other than any adjustment that would result in a
liability or otherwise adversely affect the Seller or any of its Affiliates
following the Closing in which case such settlement or disposition may not be
effected without Seller's consent, which consent shall not be unreasonably
withheld) with respect to any Taxes (other than Income Taxes) due and payable
for any period beginning on or prior to the Closing Date to the extent that,
pursuant to Section 8.05(b) above, the Buyer is responsible for the filing of
the Tax Returns relating to such Taxes. Buyer shall reimburse Seller for all
reasonable out-of-pocket costs incurred by Seller in connection with the
taking of any action which Buyer requests Seller to take in the course of such
audit, examination or subsequent proceeding.
<PAGE>39
(e) If, in response to any claim which is made by any taxing
authority to the effect that any of the Automotive Filter Companies owes any
additional Income Taxes for any period ending on or before the Closing, Seller
pays any amount to such taxing authority, Buyer shall, upon the reasonable
written request of Seller, file (or take such action as may be necessary to
cause any Automotive Filter Company identified by Seller to file) a claim for
refund with the appropriate taxing authorities with respect to any Income
Taxes for any such period. Seller will provide Buyer or any of the Automotive
Filter Companies identified by Seller as the appropriate party for making a
claim for any such refund, with such information as may be reasonably
necessary to enable Buyer or any of the Automotive Filter Companies identified
by Seller, as the case may be, to file a claim for refund. Buyer and each of
the Automotive Filter Companies shall, at the sole cost of Seller (including
all reasonable out-of-pocket costs incurred by Buyer and each of the
Automotive Filter Companies) promptly take all actions as may be reasonably
requested by Seller to obtain such refund. Buyer acknowledges and agrees that
any and all refunds of any Income Taxes paid or payable by Seller or by any of
the Automotive Filter Companies in connection with the operations of the
Seller and the Automotive Filter Companies prior to the Closing Date shall be
the property of Seller and such refunds, including interest thereon, net of
any additional Income Taxes imposed on Buyer or any of the Automotive Filter
Companies for any period occurring after the Closing Date and which are
attributable to the receipt of such refunds shall be paid by Buyer to Seller
promptly after such refund is either received or credited against such
liability of Buyer or any of the Automotive Filter Companies for Taxes. Buyer
agrees that neither the Buyer nor any of the Automotive Filter Companies have
any right to carry back any loss incurred by any of the Automotive Filter
Companies after the Closing Date to any period prior to the Closing Date.
<PAGE>40
(f) If, in connection with any audit or other investigation by any
taxing authority of any Income Taxes payable by Seller or any Automotive
Filter Company for any period ending on or prior to the Closing Date: (i) any
deduction claimed by Seller or any Automotive Filter Company with respect to
any such pre-closing tax period is disallowed by the taxing authority
conducting such audit or investigation; and (ii) the taxing authority
conducting such audit or investigation agrees that the Buyer or any Automotive
Filter Company will be permitted to use such deduction with respect to such
pre-closing period for purposes of calculating the Taxes due and payable by
the Buyer or any Automotive Filter Company with respect to any period ending
after the Closing Date (any deduction which satisfies the criteria described
in subparagraphs 8.05(f) (i) and (ii) above being hereinafter the "Disallowed
Deduction"); then (iii) the Buyer agrees to pay to Seller an amount equal to
the discounted present value of the benefit of such deduction to the Buyer as
mutually agreed by Buyer and Seller or, in the absence of such agreement, as
determined by a nationally recognized independent accounting firm mutually
acceptable to Buyer and Seller. Seller will provide Buyer or any of the
Automotive Filter Companies identified by Buyer with such information as may
be reasonably requested by Buyer in order to enable Buyer or any of the
Automotive Filter Companies identified by Buyer, to use the Disallowed
Deduction and file a claim for a tax refund for any tax period ending after
the Closing Date in which the Disallowed Deduction may be used.
(g) Each party hereto shall provide the other party with such
assistance as may reasonably be requested by such party in connection with the
preparation of any Tax Return or claim for refund, any audit or other
examination by any taxing authority or any judicial or administrative
proceedings relating to the liability of any of the Automotive Filter
Companies for any Taxes attributable to any period ending on or before the
Closing Date. Seller shall cause all tax sharing or similar agreements to
which any of the Automotive Filter Companies is subject to terminate on the
Closing Date and have no further effect or liability as to any Automotive
Filter Company with respect to any tax period ending on, prior to or after the
Closing Date.
<PAGE>41
8.06 Tax Refunds. Seller shall be entitled to any tax refund received by
----------------
the Buyer or any of the Automotive Filter Companies which is attributable to
any Income Taxes paid by the Seller or any of the Automotive Filter Companies
with respect to any period ending on or prior to the Closing Date and any tax
refund received by the Buyer or any of the Automotive Filter Companies with
respect to any Taxes (other than Income Taxes) paid by Seller for any periods
ending prior to the Closing Date. Buyer agrees to notify Seller upon receipt
of, and forthwith deliver to Seller duly endorsed in the name of Seller, any
tax refund check or other evidence of payment in respect of any such tax
refund, which refund check or other evidence of payment shall not be deposited
into any bank account for collection and pending delivery to Seller shall be
held by Buyer or the Automotive Filter Company to whom such refund was paid,
as the case may be, in trust pending delivery to Seller; provided, however,
that the amount of any additional liability imposed on Buyer or any of the
Automotive Filter Companies for Taxes that are attributable to any such tax
refund is simultaneously paid by Seller to Buyer.
8.07 Confidentiality. Each party hereto will hold and will cause its
---------------------
directors, officers, employees, agents, consultants and advisors to hold in
strict confidence, unless compelled to disclose by judicial or administrative
process or, in the opinion of its counsel, by other requirements of law, all
documents and information concerning the other party furnished to it by such
other party or its representatives in connection with the transactions
contemplated by this Agreement (except to the extent that such information can
be shown to have been: (a) previously lawfully known by the party to which it
was furnished, (b) in the public domain through no fault of such party, or (c)
later lawfully acquired from other sources by the party to which it was
furnished), and each party will not release or disclose such information to
any other person, except its auditors, attorneys, financial advisors, bankers
and other consultants and advisors in connection with this Agreement. If the
transactions contemplated by this Agreement are not consummated, such
confidence shall be maintained except to the extent such information comes
into the public domain through no fault of the party required to hold it in
confidence, and in any event such information shall not be used to the
detriment of, or in relation to any investment in, the other party and all
such documents (including copies thereof and software) shall be returned to
the other party immediately upon the written request of such other party.
<PAGE>42
8.08 Cooperation Regarding Defined Benefit Plan. Administration. Buyer
----------------------------------------------------------------
agrees to cooperate with Seller and to cause each of the Automotive Filter
Companies to cooperate with Seller in connection with Seller's administration,
after the Closing Date, of its master defined benefit plan as applicable to
Automotive Filter Company employees.
8.09 Transfer of 401(k) Plan Assets.
------------------------------------
(a) Certain employees of the Automotive Filter Companies have
accumulated funds for their retirement in an account which is maintained for
the benefit of such Automotive Filter Company employees under the terms of the
Mark IV Savings & Retirement Plan, a master 401(k) plan maintained by Seller
for certain of its employees (the "Master 401(k) Plan"). The assets of the
Master 401(k) Plan are held under the terms of a master trust agreement, dated
as of January 1, 1987, between Mark IV and Marine Midland Bank, N.A. (the
"Master Trust").
(b) As soon as practicable following the Closing, Seller shall take
such action as may reasonably be necessary to amend the Master 401(k) Plan to
provide that each Automotive Filter Company employee who is a participant in
the Master 401(k) Plan shall be 100% vested in his accrued benefit, if any,
determined as of the Closing Date under the terms of the Master 401(k) Plan.
(c) As soon as practicable following the Closing Date, Seller shall
take such action as may be reasonably necessary to provide for the transfer of
the accrued benefit of each employee of any Automotive Filter Company under
the terms of the Master 401(k) Plan to the 401(k) plan established by Buyer
for employees of the Automotive Filter Companies (the "New 401(k) Plan"). In
connection with such transfer, Buyer shall take such action as may reasonably
be necessary or which may be required by the Internal Revenue Service,
including, but not limited to, the adoption of amendments to the New 401(k)
Plan to accommodate such transfer. In addition, the Buyer shall take all
necessary steps to ensure that: (i) the accrued benefit determined under the
terms of the New 401(k) Plan as of the date on which the assets of the Master
401(k) Plan which are attributable to employees of the Automotive Filter
Companies are transferred (as hereinafter provided for) is not less than the
accrued benefit of each such employee determined as of such date under the
terms of the Master 401(k) Plan; (ii) for a period of no less than two (2)
years following the Closing, Participants in the New 401(k) Plan will continue
to be able to hold in the New 401(k) Plan, shares of common stock of the
Seller previously acquired under the Master 401(k) Plan; (iii) Participants in
the New 401(k) Plan will continue to be able to hold in the New 401(k) Plan
until September 30, 1999, shares of common stock of PennzEnergy Company
previously held under the Master 401(k) Plan; and (iv)the New 401(k) Plan
shall continue to conform to all applicable requirements established for
qualification of retirement plans under the terms of Section 401(a) of the
Code.
<PAGE>43
(d) As soon as practicable following the Closing Date, Seller shall
deliver to Buyer, a statement of the amount of the accrued benefit under the
terms of the Master 401(k) Plan of each employee of each Automotive Filter
Company.
(e) As soon as practicable following the Closing Date and the
delivery by Buyer to Seller of a copy of the New 401(k) Plan, a copy of any
amendment to such plan adopted pursuant to Section 8.09(c) hereof, a copy of
the trust established pursuant to the terms of the New 401(k) Plan, a copy of
the most recent IRS determination letter for the New 401(k) Plan and such
other documentation establishing to the reasonable satisfaction of Seller's
counsel that the New 401(k) Plan, as amended, continues to conform to all
applicable requirements established for qualification of retirement plans
under Section 401(a) of the Code, and that the trust established pursuant to
the terms of the New 401(k) Plan conforms to all applicable requirements under
Section 501(a) of the Code and the regulations thereunder, but in no event
prior to the expiration of thirty (30) days following the filing of any
notices of transfer and assumption which may be required under Section 6058(b)
of the Code, Seller shall, direct the trustee of the Master Trust holding the
assets of the Master 401(k) Plan to transfer to the trust established under
the terms of the New 401(k) Plan, an amount, in cash, equal to the aggregate
value of the accounts established under the terms of the Master 401(k) Plan
for all employees of the Automotive Filter Companies minus the aggregate value
of such accounts which is attributable to shares of common stock of the Seller
and shares of common stock of PennzEnergy Company, which portion of such
accounts shall be transferred in kind. For purposes of calculating the amount
to be transferred to the trust established under the terms of the New 401(k)
Plan pursuant to the preceding sentence, the value of such accounts shall be
determined as of the date immediately preceding the date of such transfer,
plus any contributions which are required to be made in respect of such
employees which were not yet paid to the trustee of the Master Trust.
<PAGE>44
(f) In connection with the transfer contemplated by this Section
8.09, Seller and Buyer shall cooperate with each other and make all
appropriate filings required under the Code or the regulations thereunder in
connection with such transfers.
8.10 Public Announcements. Buyer and Seller will consult with each other
--------------------------
before issuing any press releases or otherwise making any public statements
with respect to this Agreement or the transactions contemplated hereby and
shall not issue any press release or make any public statement without the
consent of the remaining party, except as may be required by law.
8.11 Employee Bonuses Due on Sale.
----------------------------------
(a) Seller agrees to pay any incentive to stay bonuses that may be
due to any employee of the Automotive Filter Companies as a result of the
closing of the transactions contemplated by this Agreement as described on
Schedule 8.11.
(b) Buyer will pay incentive bonuses arising under the operating
incentive bonus plan for the Automotive Filter Employees in an aggregate
amount equal to the amount of the incentive plan bonus liability which shall
be accrued on the Closing Balance Sheet. The aggregate amount of such
incentive bonuses shall be allocated among the Automotive Filter Company
employees in a manner to be set forth in a written designation to be delivered
to Buyer by Seller within sixty (60) days following the Closing Date.
(c) Buyer will pay or cause PPC to pay the amount of any severance
obligations which may become due and payable to those Automotive Filter
Company employees listed on Schedule 8.11 pursuant to the severance policies
attached as part of such schedule.
8.12 Post-Closing Cooperation. After the Closing, without further
-----------------------------
consideration: (a) Seller shall take all such further actions and execute,
acknowledge and deliver all such further consents and other documents as Buyer
may reasonably request to facilitate or effect the transactions contemplated
by this Agreement; and (b) Buyer shall, and shall cause each of the
Automotive Filter Companies, to take all such further actions and execute,
acknowledge and deliver all such further consents and other documents as
Seller may reasonably request in order to facilitate the transactions
contemplated by this Agreement.
<PAGE>45
8.13 Termination of Seller Arrangements. Seller shall cause all
----------------------------------------
agreements, arrangements and understandings between or among any of the
Automotive Filter Companies and Seller or any of its Affiliates (other than
matters referred to in this Agreement, the Ancillary Agreements and any other
agreements specifically requested by Buyer to be retained), including, without
limitation, any benefit plan or arrangement in which any employee of any
Automotive Filter Company is a participant, to be terminated as to the
Automotive Filter Companies effective as of the date immediately preceding the
Closing Date, without cost or liability to Buyer or any of the Automotive
Filter Companies.
ARTICLE 9 CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER
----------------------------------------------------------
The obligation of Seller to enter into and complete the Closing is
subject to the fulfillment of the following conditions, any one of more of
which may be waived by it:
9.01 Representations and Covenants.
-----------------------------------
(a) The representations and warranties of Buyer contained in this
Agreement shall be true and correct on and as of the Closing Date with the
same force and effect as though made on and as of the Closing,
(b) Buyer shall have performed and complied with all covenants and
agreements required by this Agreement to be performed or complied with by it
on or prior to the Closing Date.
(c) Buyer shall have delivered to Seller a certificate, dated the
Closing Date and signed by an officer of Buyer, to the foregoing effect and
stating that all conditions to Seller's obligations hereunder have been
satisfied.
9.02 Government Consents; Filings. The waiting period under the HSR Act
----------------------------------
shall have expired and no conditions to the transactions contemplated by this
Agreement shall have been imposed or proposed by any federal or state
governmental agency.
9.03 Substitute Guarantees. Buyer shall deliver to the parties
--------------------------
identified in Schedule 9.03 attached hereto, guarantees in form and substance
reasonably acceptable to Seller and sufficient to cause each of the parties
identified in Schedule 9.03 attached hereto to deliver to Seller a written
acknowledgment from such parties that, effective as of the Closing Date,
Seller is and shall be unconditionally released and discharged from any and
all liabilities and obligations that Seller may have under the terms of any
guarantees previously issued by Seller to such parties.
<PAGE>46
9.04 Litigation. No action, suit or proceeding which seeks to restrain,
---------------
modify or prevent the carrying out of the transactions contemplated hereby or
which seeks damages or a discovery order in connection with such transactions
shall have been instituted before any court or U.S. or foreign governmental or
regulatory body, or instituted or threatened by any U.S. or foreign
governmental or regulatory body and no suit, action or proceeding shall have
been instituted or threatened against Buyer by any person, firm, corporation
or other entity before any court or U.S. or foreign governmental regulatory
body which, if adversely determined against Buyer, would have a material
adverse effect on the business and financial condition of the Buyer.
9.05 Certificate of Buyer. Seller shall have received a certificate of
-------------------------
the Secretary or Assistant Secretary of Buyer, dated the Closing Date setting
forth the resolutions of the Board of Directors of Buyer authorizing the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and certifying that such resolutions were
duly adopted and have not been rescinded or amended as of the Closing Date.
ARTICLE 10 CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER
----------------------------------------------------------
The obligation of Buyer to enter into and complete the Closing is subject
to the fulfillment, on or prior to the Closing Date, of the following
conditions, any one or more of which may be waived by it:
10.01 Representations and Covenants.
-----------------------------------
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date.
(b) Seller shall have performed and complied with all covenants and
agreements required by this Agreement to be performed or complied with by
Seller on or prior to the Closing Date.
(c) Seller shall have delivered to Buyer a certificate, dated the
Closing Date and signed by Seller, to the foregoing effect and stating that
all conditions to Buyer's obligations hereunder have been satisfied.
<PAGE>47
10.02 Government Consents; Filings. The waiting period under the HSR Act
-----------------------------------
shall have expired and no conditions to the transactions contemplated by this
Agreement shall have been imposed or proposed by any federal or state
governmental agency.
10.03 Litigation. No action, suit or proceeding which seeks to
-----------------
restrain, modify or prevent the carrying out of the transactions contemplated
hereby or which seeks damages or a discovery order in connection with such
transaction shall have been instituted before any court or U.S. or foreign
governmental or regulatory body, or instituted or threatened by any U.S. or
foreign governmental or regulatory body, and no suit, action or proceeding
shall have been instituted or threatened by any person, firm, corporation or
other entity against Seller before any court or U.S. or foreign governmental
body which, if adversely determined against Seller, would have a material
adverse effect on the business and financial condition of the Seller.
10.04 Certificate as to Authorization. Buyer shall have received a
---------------------------------------
certificate of the Secretary or an Assistant Secretary of Seller, dated the
Closing Date, setting forth resolutions of the Boards of Directors of Seller
authorizing the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, certifying that such resolutions were
duly adopted and have not been rescinded or amended as of the Closing Date,
and certifying that approval by Seller's shareholders is not required, or has
been obtained, in connection with this Agreement or the transactions
contemplated hereby.
<PAGE>48
ARTICLE 11 SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS
--------------------------------------------------------
11.01 Survival of Representations. Except for the representations and
-----------------------------------
warranties made by Seller pursuant to Sections 4.04, and 4.22 hereof, all
representations and warranties contained in ARTICLE 4 or ARTICLE 5 and made by
any party to this Agreement pursuant hereto shall survive for a period of two
(2) years after the Closing Date. The representations and warranties made by
Seller pursuant to Section 4.04 hereof (hereinafter the "Title Warranties")
shall survive for a period of ten (10) years following the Closing Date, and
the representations and warranties made by Seller pursuant to Section 4.22
hereof and the covenants of Seller contained in Section 8.05 hereof
(hereinafter the "Tax Warranties") shall survive for a period equal to the
applicable statute of limitations with respect to any Taxes referred to
therein.
11.02 Statements as Representations. All statements contained in any
------------------------------------
Schedule delivered pursuant to ARTICLE 4 or ARTICLE 5 hereof shall be deemed
representations and warranties within the meaning of Sections 9.01, 10.01, and
11.01 hereof.
11.03 Indemnification by Seller. Subject to the terms and conditions of
---------------------------------
this Section, Seller hereby agrees to indemnify, defend and hold harmless
Buyer and any parent, subsidiary or affiliate companies of Buyer, including,
without limitation, each of the Automotive Filter Companies (hereinafter the
"Buyer Companies"), from and against all demands, claims, actions or causes of
action, assessments, payments, losses, damages, liabilities, costs and
expenses, including, without limitation, interest, penalties and reasonable
attorneys' fees and expenses (collectively "Damages") asserted against,
resulting to, imposed upon or incurred by the Buyer Companies or any member
thereof, by reason of or resulting from:
(a) any liabilities of Seller or any of the Automotive Filter
Companies arising out of or relating to any activities unrelated to the
conduct of the Automotive Filter Business which, for purposes hereof, shall
include, without limitation, liabilities arising out of or relating to any of
the matters set forth in Schedule 11.03(a) attached hereto;
(b) any liabilities of Seller or any of its affiliates arising as a
result of a breach by Seller or any of Seller's Affiliates of any of their
respective obligations arising under any of the Ancillary Agreements;
(c) any liabilities of any of the Automotive Filter Companies to any
of its officers and directors who have resigned pursuant to the provisions of
this Agreement (other than those liabilities for payment of incentive bonuses
which have been assumed by Buyer pursuant to Section 8.11 hereof);
<PAGE>49
(d) any liabilities for payment to current or former employees of
any of the Automotive Filter Companies, of pension benefits payable to such
employees under the terms of the Master Defined Benefit Plan or of retirement
benefits payable to such employees under the terms of the Master 401(k) Plan
provided that, in the case of liabilities in respect of the Master 401(k)
Plan, the transfer of assets of the Master 401(k) Plan to the New 401(k) Plan
as contemplated by Section 8.09 hereof has not occurred;
(e) any breach of any of the Title Warranties;
(f) any breach of any of the Tax Warranties and any liability of any
of the Automotive Filter Companies for payment of any Taxes with respect to
the conduct of their respective businesses for all periods or portions thereof
ending on or prior to the Closing Date to the extent any such Taxes (excluding
deferred Taxes) are not reflected as a liability on the Closing Balance Sheet.
(g) a breach of any covenant, representation or warranty of Seller
(other than the Title Warranties and the Tax Warranties) contained in or made
pursuant to this Agreement.
For purposes of this Agreement, the claims described in Section
11.03(a) through and including Section 11.03(g)and Section 11.04(a) through
and including Section 11.04(c) shall be referred to individually as a "Claim"
and collectively as "Claims".
The Seller's obligation to indemnify the Buyer Companies as set
forth in the preceding paragraph shall be limited to the Damages (as defined
above) arising from Claims (as defined above) and shall exclude Damages which
may arise as a result of any reorganization or other legal restructuring of
the Buyer or the Buyer Companies and in no event shall any such reorganization
or restructuring be deemed to increase the liability of Seller beyond the
actual Damages arising from any Claims.
The Seller's obligation to indemnify and hold Buyer harmless from
and against any Damages incurred as a result of Claims described in Sections
11.03(a), (b), (c) (d), (e) or (f) hereof shall apply with respect to the full
amount of any and all Damages incurred by Buyer and the Buyer Companies as a
result of such Claims.
<PAGE>50
With respect to Damages incurred by Buyer or any member of the Buyer
Companies and arising from any Claim or Claims described in Section 11.03(g)
hereof, Seller shall have no liability or obligation to indemnify and hold
Buyer or any member of the Buyer Companies harmless from any Damages incurred
by Buyer or any member of the Buyer Companies except to the extent that the
aggregate amount of the Damages incurred by Buyer and the Buyer Companies
arising from any such Claim or from all prior Claims described solely in
Section 11.03(g) hereof, exceeds Two Million Eight Hundred Thousand Dollars
($2,800,000) and then, only to the extent that the amount of such Damages
exceeds Two Million Eight Hundred Thousand Dollars ($2,800,000).
Notwithstanding anything to the contrary contained in this Section
11.03, Seller shall have no obligation to indemnify Buyer or the Buyer
Companies with respect to any Damages incurred as a result of Claims described
in Section 11.03(g) hereof to the extent that the aggregate amount of the
Damages incurred by Buyer or the Buyer Companies with respect to the Claims
described solely in Section hereof exceeds an amount equal to Thirty Five
Million dollars ($35,000,000.00).
11.04 Indemnification by Buyer. Buyer hereby agrees to indemnify,
-------------------------------
defend and hold harmless Seller and any parent, subsidiary or affiliate
companies of Seller (the "Seller Companies") from any Damages arising by
reason of or resulting from:
(a) any claim made against Seller or any member of the Seller
Companies relating to the Automotive Filter Business or any of the businesses,
assets or operations of the Automotive Filter Companies before or after the
Closing Date other than claims which result from any breach by Seller of any
representation or warranty in this Agreement;
(b) any breach by Buyer, any of the Automotive Filter Companies or
any of Buyer's affiliates of any of their respective obligations arising under
any of the Ancillary Agreements; and
(c) any breach of any representation, warranty, covenant or
agreement of Buyer contained in or made pursuant to this Agreement.
<PAGE>51
The Buyer's obligation to indemnify the Seller Companies as set
forth in the preceding paragraph shall be limited to the Damages (as defined
above) arising from Claims (as defined above) and shall exclude Damages which
may arise as a result of any reorganization or other legal restructuring of
the Seller or the Seller Companies and in no event shall any such
reorganization or restructuring be deemed to increase the liability of Buyer
beyond the actual Damages arising from any Claims.
The Buyer's obligation to indemnify and hold the Seller harmless
from and against any Damages incurred as a result of Claims described in
Section 11.04(a) and Section 11.04(b) hereof shall apply with respect to the
full amount of any and all Damages incurred by Seller and the Seller Companies
as a result of such Claims.
With respect to Damages incurred by Seller or any member of the
Seller Companies and arising from any claim or claims described solely in
Section 11.04(c) hereof, Buyer shall have no liability or obligation to
indemnify and hold Seller or any member of the Seller Companies harmless from
any Damages incurred by Seller or any member of the Seller Companies except to
the extent that the aggregate amount of the Damages incurred by Seller and the
Seller Companies arising from any such Claim or Claims described solely in
Section 11.04(c) hereof, exceeds Two Million Eight Hundred Thousand Dollars
($2,800,000) and then, only to the extent that the amount of such excess
exceeds Two Million Eight Hundred Thousand Dollars ($2,800,000) of Damages.
Notwithstanding anything to the contrary contained in this Section
11.04, Buyer shall have no obligation to indemnify Seller or the Seller
Companies with respect to any Damages incurred solely as a result of Claims
described in Section 11.04(c) hereof to the extent that the aggregate amount
of the Damages incurred by Seller or the Seller Companies with respect to the
Claims described solely in Section 11.04(c) hereof exceeds Thirty Five Million
Dollars ($35,000,000.00).
<PAGE>52
11.05 Conditions of Indemnification. The obligations and liabilities of
------------------------------------
Seller under Section 11.03 hereof and the obligations and liabilities of Buyer
under Section 11.04 hereof with respect to Claims relating to third parties
shall be subject to the following terms and conditions:
(a) A party seeking indemnification under this Agreement
("Indemnified Party") will give the party required to provide such
indemnification (the "Indemnifying Party") prompt notice of any such Claim,
and thereafter, provided that the Indemnifying Party acknowledges in writing
to the Indemnified Party that the Indemnifying Party is obligated to indemnify
the Indemnified Party against such Claim, the Indemnifying Party will be
permitted to undertake the defense thereof by representatives chosen by it.
The failure to provide any such notice shall not excuse the Indemnifying Party
from its obligations hereunder, provided that the Claim shall be reduced by
any loss to the Indemnifying Party resulting from such failure to provide
notice.
(b) If the Indemnifying Party, within a reasonable time after notice
of any such Claim, fails to acknowledge in writing its obligation to indemnify
the Indemnified Party with respect to such Claim or fails to diligently
prosecute or settle such Claim, the Indemnified Party will have the right to
undertake the defense, compromise or settlement of such Claim on behalf of and
for the account and risk of the Indemnifying Party, subject to the right of
the Indemnifying Party to participate at its expense in the defense of such
Claim at any time prior to settlement, compromise or final determination
thereof.
(c) Anything in this Section 11.05 to the contrary notwithstanding:
(i) if there is a reasonable probability that a Claim may materially and
adversely affect an Indemnified Party other than as a result of money damages
or other money payments, the Indemnified Party shall have the right, at its
own cost and expense, to defend, and with the consent of the Indemnifying
Party, to compromise or settle such Claim; and (ii) the Indemnifying Party
shall not, without the written consent of the Indemnified Party, its
successors and assigns settle or compromise any Claim or consent to the entry
of any judgment which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Indemnified Party, of a release
from all liability in respect of such Claim.
<PAGE>53
11.06 Termination of Indemnification Obligations. The obligations to
--------------------------------------------------
indemnify and hold harmless a party hereto with respect to any Damages arising
from any Claims: (a) contained in Section 11.03(g) and Section 11.04(c) shall
terminate when the applicable representation or warranty terminates pursuant
to Section 11.01; (b) contained in the provisions of Section 11.03(e) and
Section 11.03(f) shall terminate ninety (90) days following the expiration of
the applicable statute of limitations which applies with respect to the
underlying basis for such Claims; and (c) contained in the provisions of
Sections 11.03(a) through and including Section 11.03(d) or Section 11.04(a)
and Section 11.04(b) shall not terminate; provided that, as to clause (a) and
clause (b) above, such obligations to indemnify and hold harmless shall not
terminate with respect to any representation, warranty or liability with
respect to which the Indemnified Party shall have, prior to the termination of
such indemnity obligation therefor, made a specific Claim relating to a breach
of such representation, warranty or such liability by delivering written
notice (stating in reasonable detail the basis of such Claim) to the
Indemnifying Party.
11.07 Litigation Cooperation.
------------------------------
(a) The Seller shall cooperate with the Buyer and each of the
Automotive Filter Companies and shall cause its officers, employees, agents,
auditors and representatives to cooperate with the Buyer and each of the
Automotive Filter Companies in connection with the investigation, prosecution,
defense and settlement of any judicial or administrative proceeding or claim
which Buyer or any of the Automotive Filter Companies has undertaken the
defense of in connection with the Buyer's obligation to indemnify the Seller
as provided for in Section 11.04 above; provided that the Buyer shall
reimburse the Seller and its officers, employees, agents, auditors and
representatives for the reasonable out-of-pocket costs and expenses incurred
in providing such assistance.
<PAGE>54
(b) The Buyer shall cooperate with the Seller and shall cause its
officers, employees, agents, auditors and representatives to cooperate with
the Seller in connection with the investigation, prosecution, defense and
settlement of any judicial or administrative proceeding or claim which Seller
has undertaken the defense of in connection with the Seller's obligation to
indemnify the Buyer as provided for in Section 11.03 above provided that the
Seller shall reimburse the Buyer and its officers, employees, agents, auditors
and representatives for the reasonable out-of-pocket costs and expenses
incurred in providing such assistance.
11.08 Remedies Cumulative. Except as herein expressly provided, the
--------------------------
remedies provided herein shall be cumulative and shall not preclude assertion
by any party hereto of any other rights or the seeking of any other remedies
against any other party hereto.
ARTICLE 12 MISCELLANEOUS PROVISIONS
-----------------------------------
12.01 Termination. This Agreement may be terminated at any time prior
-------------------
to the Closing without any liability on the part of either Buyer or Seller:
(a) by mutual consent of Seller and Buyer; and (b) by Seller or Buyer at any
time subsequent to February 26, 1999 if the Closing has not occurred by or
before such date.
12.02 Certain Terms. For purposes of this Agreement,
--------------------
(a) the term "knowledge" with respect to Seller means the actual
knowledge of those persons identified in Schedule 12.02 attached hereto;
(b) "material adverse affect" with respect to any of the Automotive
Filter Companies means a material adverse change in the financial condition,
results of operations, business, assets, earnings or revenues of any of the
Automotive Filter Companies.
12.03 Amendment and Modification. Subject to applicable law, this
----------------------------------
Agreement may be amended, modified and supplemented only by written agreement
of the parties hereto at any time with respect to any of the terms contained
herein.
12.04 Waiver of Compliance. Any failure of Seller, on the one hand, or
----------------------------
Buyer, on the other, to comply with any obligation, covenant, agreement or
condition herein may be expressly waived in writing by the Chairman, President
or a Vice President of Buyer or Seller, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent
or other failure.
<PAGE>55
12.05 Notices. All notices, requests, demands and other communications
--------------
required or permitted hereunder shall be in writing and shall be deemed to
have been duly given: (a) if delivered by hand when delivered; (b) if by
telex, telecopy, cable or overnight delivery when received, or (c) if by mail,
five (5) days after being mailed, certified or registered mail, with postage
prepaid:
(i) If to Seller, to:
Mark IV Industries, Inc.
One Towne Centre
501 John James Audubon Parkway
Amherst, NY 14226
Attention: William P. Montague
with a copy to:
Gerald S. Lippes, Esq.
Lippes, Silverstein, Mathias & Wexler LLP
700 Guaranty Building
28 Church Street
Buffalo, New York 14202
or to such other person or address as Seller shall furnish to Buyer in
writing.
(ii) If to Buyer, to:
Arvin Industries, Inc.
One Noblitt Plaza
Columbus, Indiana 47201
Attention: Ronald R. Snyder, Esq.
with a copy to:
Dickstein, Shapiro, Morin & Oshinsky LLP
2101 L Street NW
Washington, D.C. 20037
Attention: Emanuel Faust, Esq.
or to such other person or address as Buyer shall furnish to Seller in
writing.
<PAGE>56
12.06 Assignment. This Agreement and all of the provisions hereof shall
------------------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto without the prior written consent of the other parties.
12.07 Governing Law and Jurisdiction. This Agreement and the legal
--------------------------------------
relations among the parties hereto shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to
its conflicts of law doctrine.
12.08 Counterparts. This Agreement may be executed simultaneously in
--------------------
two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
12.09 Headings. The headings of the Sections and Articles of this
---------------
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
12.10 Entire Agreement. This Agreement, including the Exhibits hereto,
------------------------
the Schedules hereto and the other documents and certificates delivered
pursuant to the terms hereof, sets forth the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein, and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto.
12.11 Third Parties. Except as specifically set forth or referred to
---------------------
herein, nothing herein expressed or implied is intended or shall be construed
to confer upon or give to any person or corporation other than the parties
hereto and their successors or assigns, any rights or remedies under or by
reason of this Agreement.
<PAGE>57
12.12 Severability. The invalidity or illegality of any provision,
-------------------
term, or agreement contained in or made a part of this Agreement shall not
affect the validity of the remainder of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be affixed hereto,
all as of the day and year first above written.
MARK IV INDUSTRIES, INC.
By: /s/ W.P. Montague
-----------------------
Title: President
-----------------------
ARVIN INDUSTRIES, INC.
By: /s/ Richard A. Smith
-----------------------
Title: VP/Finance
-----------------------
