<PAGE> 1
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: June 17, 1996
BORG-WARNER AUTOMOTIVE, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-12162 13-3404508
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
200 South Michigan Avenue, Chicago, Illinois 60604
(Address of principal executive offices)
Registrant's telephone number, including area code: 312/322-8500
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
On June 17, 1996, Borg-Warner Automotive, Inc., through its wholly-owned
subsidiaries, Borg-Warner Automotive Air/Fluid Systems Corporation and
Borg-Warner Automotive Air/Fluid Systems Corporation of Michigan (collectively,
the "Company"), acquired certain of the assets of Coltec Industries Inc
("Coltec"). The acquisition was made pursuant to an Agreement of Purchase and
Sale dated as of May 31, 1996 (the "Agreement") by and among the Company and
Coltec, Holley Automotive Group, Ltd., Holley Automotive Inc, Coltec Automotive
Inc, and Holley Automotive Systems GmbH. The acquisition included the purchase
of the operations and substantially all of the operating assets of three of
Coltec's automotive original equipment manufacturing businesses: Holley
Automotive, Coltec Automotive and Performance Friction Products (collectively,
the "Coltec Automotive OEM Business Group"). The Coltec Automotive OEM Business
Group designs, engineers and manufacture a broad line of air and fluid
management products and systems, such as air induction systems, solenoids and
actuators for transmissions, braking suspension and steering systems, mechanical
and electrical air pumps, oil pumps, and wet friction materials and
synchronizers for manual transmissions and transfer cases. The Company intends
to continue the operations of the Coltec Automotive OEM Business Group.
The consideration paid by the Company for the transaction consisted of
$283 million U.S. Dollars in cash, subject to any adjustments determined
pursuant to the Agreement. The consideration paid was determined, in part,
based upon projected future cash flow streams of the Coltec Automotive OEM
Business Group.
The source of the consideration paid at closing, together with payment of
other costs and expenses related to the transaction, was borrowings under the
Company's Credit Agreement dated as of December 7, 1994, as amended, among the
Company, as Borrower, the Lenders listed therein, as Lenders, Chemical Bank and
The Bank of Nova Scotia, as Co-Arrangers, Chemical Bank, as Administrative
Agent and The Bank of Nova Scotia as Documentation Agent.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of business acquired:
(i) Coltec Automotive OEM Business Group Combined Financial
Statements as of December 31, 1995 and 1994 and March 31, 1996
and 1995 (unaudited) together with Manually Signed Report of
Independent Public Accountants dated June 14, 1996.
(b) Pro forma financial information:
(i) The Unaudited Pro Forma Condensed Consolidated Statement of
Earnings for the year ended December 31, 1995 of Borg-Warner
Automotive, Inc. and Consolidated Subsidiaries and Coltec
Automotive OEM Business Group.
<PAGE> 3
(ii) Unaudited Pro Forma Condensed Consolidated Statement of Earnings
for the three months ended March 31, 1996 of Borg-Warner Automotive,
Inc. and Consolidated Subsidiaries and Coltec Automotive OEM Business
Group.
(iii) Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 1996
of Borg-Warner Automotive, Inc. and Consolidated Subsidiaries and
Coltec Automotive OEM Business Group.
(c) Exhibits
10.1 Agreement of Purchase and Sale dated as of May 31, 1996 by and among
Coltec Industries Inc, Holley Automotive Group, Ltd., Holley
Automotive Inc, Coltec Automotive Inc, and Holley Automotive Systems
GmbH and Borg-Warner Automotive, Inc., Borg-Warner Automotive
Air/Fluid Systems Corporation and Borg-Warner Automotive Air/Fluid
Systems Corporation of Michigan.
23.1 Consent of Independent Public Accountants
<PAGE> 4
COLTEC AUTOMOTIVE OEM BUSINESS GROUP
COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994
AND MARCH 31, 1996 AND 1995 (UNAUDITED)
TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE> 5
Report of Independent Public Accountants
To the Board of Directors
of Coltec Industries Inc:
We have audited the accompanying combined balance sheets of the Coltec
Automotive OEM Business Group (as described in Note 1 to the combined
financial statements) as of December 31, 1995 and 1994, and the related
combined statements of income, cash flows and stockholder's equity for
each of the two years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Coltec
Automotive OEM Business Group as of December 31, 1995 and 1994, and the
results of its operations and its cash flows for each of the two years
in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
June 14, 1996.
<PAGE> 6
COLTEC AUTOMOTIVE OEM BUSINESS GROUP
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
AND AS OF MARCH 31, 1996 AND 1995 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
As of March 31 As of December 31
---------------- -----------------
1996 1995 1995 1994
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Cash $ 1,134 $ 742 $ 414 $ 126
Accounts receivable, net:
Trade, less allowance for doubtful
accounts of $29 23,843 25,765 20,334 23,512
Related party 61 69 270 200
Inventories 14,588 10,380 11,840 8,325
Deferred income taxes 579 422 579 422
Prepaid and other current assets 223 343 220 432
------- ------- ------- -------
Total Current Assets 40,428 37,721 33,657 33,017
------- ------- ------- -------
Property, plant and equipment, net 26,157 21,696 24,568 21,688
Goodwill, net of accumulated amortization
of $3,007, $2,897, $2,979 and $2,869 3,779 3,982 3,830 4,033
Other assets 2,338 2,687 2,189 2,538
------- ------- ------- -------
Total Assets $72,702 $66,086 $64,244 $61,276
======= ======= ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Cash overdraft $ 6,357 $ 7,208 $ 6,009 $ 6,196
Accounts payable:
Trade 12,643 12,855 9,107 10,944
Related party 9,365 1,871 9,905 11,064
Other 824 804 932 899
Accrued liabilities 7,282 7,923 6,529 6,548
------- ------- ------- -------
Total Current Liabilities 36,471 30,661 32,482 35,651
------- ------- ------- -------
Deferred income taxes 2,799 2,304 2,799 2,304
------- ------- ------- -------
Total Liabilities 39,270 32,965 35,281 37,955
------- ------- ------- -------
Stockholder's Equity:
Coltec investment 33,432 33,121 28,963 23,321
------- ------- ------- -------
Total Liabilities and Stockholder's Equity $72,702 $66,086 $64,244 $61,276
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE> 7
COLTEC AUTOMOTIVE OEM BUSINESS GROUP
COMBINED INCOME STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
AND FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, December 31,
------------------- -------------------
1996 1995 1995 1994
-------- -------- -------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $66,465 $69,781 $255,078 $275,743
Cost of sales 51,219 50,756 188,020 196,755
Selling, general and administrative expense 2,696 3,146 11,211 11,680
Research and development 2,819 3,147 11,857 11,082
Corporate office cost 1,529 1,605 5,865 6,344
------- ------- -------- --------
Operating income 8,202 11,127 38,125 49,882
Other income/(expense) 309 41 201 (338)
------- ------- -------- --------
Income before income taxes 8,511 11,168 38,326 49,544
Provision for income taxes 2,979 3,931 13,503 17,460
------- ------- -------- --------
Net Income $ 5,532 $ 7,237 $ 24,823 $ 32,084
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 8
COLTEC AUTOMOTIVE OEM BUSINESS GROUP
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, December 31,
-------------------- --------------------
1996 1995 1995 1994
--------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,532 $ 7,237 $ 24,823 $ 32,084
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 1,495 1,382 5,222 5,065
Deferred income taxes - - 338 40
(Gain) Loss on disposal of property, plant
and equipment (3) (4) 104 965
(Increase) decrease in accounts receivable (3,300) (2,122) 3,108 (10,492)
(Increase) decrease in inventories (2,748) (2,055) (3,515) 694
(Increase) decrease in prepaids and other
current assets (3) 89 212 (124)
Increase (decrease) in accounts payable 2,888 (7,377) (2,963) 9,195
Increase (decrease) in accrued liabilities 753 1,375 (19) 1,807
Increase (decrease) in other liabilities - - - (102)
------- ------- -------- --------
Net cash provided by operating activities 4,614 (1,475) 27,310 39,132
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (3,033) (1,341) (8,016) (2,734)
Sale of property, plant and equipment 3 6 13 4
------- ------- -------- --------
Net cash used by investing activities (3,030) (1,335) (8,003) (2,730)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash transactions with Coltec (1,212) 2,414 (18,832) (35,690)
Change in cash overdraft 348 1,012 (187) (722)
------- ------- -------- --------
Net cash used by financing activities (864) 3,426 (19,019) (36,412)
Net change in cash 720 616 288 (10)
Beginning of year balance of cash 414 126 126 136
------- ------- -------- --------
End of year balance of cash $ 1,134 $ 742 $ 414 $ 126
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 9
COLTEC AUTOMOTIVE OEM BUSINESS GROUP
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
Balance January 1, 1994 $ 28,440
Net income 32,084
Net transactions with Coltec (37,203)
--------
Balance December 31, 1994 23,321
Net income 24,823
Net transactions with Coltec (19,181)
--------
Balance December 31, 1995 $ 28,963
========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 10
COLTEC AUTOMOTIVE OEM BUSINESS GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
These combined financial statements of the Coltec Automotive OEM Business
Group ("Combined Group") include the accounts of Holley Automotive Inc and
Coltec Automotive Inc, wholly-owned subsidiaries of Coltec Industries Inc
and Performance Friction Products, a wholly-owned subsidiary of Stemco Inc,
which is a wholly-owned subsidiary of Coltec Industries Inc ("Parent
Company"), as well as certain other accounts of the Parent Company that
directly relate to the operations of the Combined Group. Intercompany
accounts and activity within the Combined Group are eliminated in
combination. Transactions between the Combined Group and the Parent Company
are reflected in "Coltec investment" (Stockholder's Equity) in the
accompanying combined financial statements. Such transactions include
payment for services, current income taxes, and non-cash transactions
relating to pensions and deferred taxes.
Performance Friction Products is incorporated in Texas and has 1,000 shares
of $1 par value common stock authorized, issued and outstanding at December
31, 1995 and 1994. Holley Automotive Inc and Coltec Automotive Inc were
both incorporated in Delaware in November 1995 with 1,000 shares of $1 par
value common stock authorized, issued and outstanding at December 31, 1995.
All activity related to the capitalization of these entities has been
included in "Coltec investment" (Stockholder's Equity) in the accompanying
combined financial statements.
The Combined Group designs, develops and manufactures fuel injection
components and solenoids used in transmission and suspension systems,
emission-control air pumps and oil pumps for automobiles and synchronizers,
clutch plates and other transmission components for trucks, construction
equipment and automobiles. The primary customers for these products are in
the automotive original equipment market. The majority of the Combined
Group's sales are to three large automotive OEM customers comprising 35%,
33% and 23% in 1995, respectively and 31%, 39% and 23% in 1994,
respectively.
The interim financial statements as of and for the three months ended March
31, 1996 and 1995 have been prepared by the Company without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes that the disclosures are adequate to make
the information presented not misleading when read in conjunction with the
financial statements and notes thereto as of and for the years ended December
31, 1995 and 1994. The unaudited interim financial statements presented
reflect all adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair statement of
the results of operations and statements of financial position for the
interim periods presented. These results are not necessarily indicative of a
full year's results of operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES
Inventories are valued at the lower of cost, determined on a last-in,
first-out ("LIFO") basis, or market. Cost elements included in inventory
are material, labor and manufacturing overhead primarily using standard
cost, which approximates actual cost. The excess of current cost over LIFO
cost at December 31, 1995 and 1994 was approximately $1,071,000 and
$960,000, respectively.
<PAGE> 11
COLTEC AUTOMOTIVE OEM BUSINESS GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
Costs incurred by the Combined Group for certain engineering and tooling
projects for which customer reimbursement is anticipated are capitalized in
inventory. Most projects are generally completed within one year.
Provisions for losses are provided at the time the Combined Group
anticipates engineering and tooling losses to exceed anticipated customer
reimbursement.
Components of inventories at December 31 were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
Finished goods $ 55 $ 19
Work in progress 10,631 7,165
Raw materials and supplies 176 176
Tooling 2,049 1,925
LIFO reserve (1,071) (960)
------- ------
$11,840 $8,325
======= ======
</TABLE>
In the totals above, certain purchased components have been classified as
work in process.
PROPERTY, PLANT AND EQUIPMENT
Depreciation and amortization of property, plant and equipment are generally
provided by using the straight-line method, based on estimated useful lives
of the assets. For federal income tax purposes, most assets are depreciated
using allowable accelerated methods.
The ranges of estimated useful lives used in computing depreciation and
amortization for financial reporting purposes were as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Land improvements 5-40
Buildings and improvements 10-45
Machinery and equipment 3-20
Leasehold improvements Generally life of lease
</TABLE>
Renewals and betterments are capitalized by additions to the related asset
accounts, while repair and maintenance costs are charged to operations as
incurred.
<PAGE> 12
COLTEC AUTOMOTIVE OEM BUSINESS GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
At December 31, property, plant and equipment consisted of (in thousands):
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Land and land improvements $ 1,050 $ 1,050
Buildings and improvements 9,535 9,561
Machinery and equipment 60,678 63,872
Leasehold improvements 426 426
Construction in progress 6,548 1,883
---------- ----------
78,237 76,792
Less: accumulated depreciation and amortization (53,669) (55,104)
---------- ----------
$ 24,568 $ 21,688
========== ==========
</TABLE>
GOODWILL
Goodwill represents the excess of purchase price over the net assets
acquired. Goodwill is being amortized on a straight-line basis over 30 to
40 years. The Combined Group continually evaluates whether later events and
circumstances have occurred that indicate the remaining useful life of
goodwill may warrant revision or that the remaining balance of goodwill may
not be recoverable. When factors indicate that goodwill should be evaluated
for possible impairment, the Combined Group uses an estimate of undiscounted
operating income over the remaining life of the goodwill in determining
whether any such impairment exists.
ENVIRONMENTAL EXPENDITURES
Expenditures that related to an existing condition caused by past
operations, and which do not contribute to current or future revenue
generation, are accrued when it is probable that an obligation has been
incurred and the amount can be reasonably estimated. Expenditures incurred
for environmental compliance with respect to pollution prevention and
ongoing monitoring programs are expensed as incurred. Expenditures that
increase the value of the property are capitalized.
RESEARCH AND DEVELOPMENT
Costs incurred in connection with the development of new products and
manufacturing methods are charged to operations as incurred.
FAIR VALUE OF FINANCIAL INSTRUMENTS
For all financial instruments, the carrying value is a reasonable estimate
of fair value due to the short-term nature of such instruments.
<PAGE> 13
COLTEC AUTOMOTIVE OEM BUSINESS GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
period. Actual results could differ from those estimates.
3. RELATED PARTY TRANSACTIONS
The Combined Group has been charged a corporate office cost by the Parent
Company for its share of the Parent Company's selling, general and
administrative expense. The corporate office charge was based on the
Combined Group's sales.
The Combined Group also has limited transactions with other related parties
who are all ultimately owned by the Parent Company. Sales to such related
parties totaled approximately $1,648,000 in 1995 and $1,251,000 in 1994.
Purchases from related parties totaled approximately $7,549,000 in 1995 and
$6,839,000 in 1994.
4. INCOME TAXES
The Combined Group is included in the filing of a consolidated U.S. federal
income tax return with the Parent Company. The Combined Group is charged or
credited with the amount of tax it would pay or receive on a separate return
basis, and payments and refunds are settled with the Parent Company.
Effective January 1, 1993, the Combined Group adopted statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires
that the deferred tax provision be determined under the liability method.
Under this method, deferred tax assets and liabilities are recognized based
on differences between the financial statement and tax bases of assets and
liabilities using presently enacted tax rates.
<PAGE> 14
COLTEC AUTOMOTIVE OEM BUSINESS GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
The significant components of the net deferred income tax liability at
December 31 were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------------- ------------
<S> <C> <C>
Deferred income tax liabilities:
Depreciation and basis difference $1,929 $1,507
Compensation and deferred benefits 396 435
Intangible assets 112 54
Inventory 99 149
------------- -----------
2,536 2,145
------------- -----------
Deferred income tax assets:
General and accrued expenses (306) (253)
Allowance for doubtful accounts (10) (10)
------------- -----------
(316) (263)
------------- -----------
Net deferred income tax liability $2,220 $1,882
============= ===========
</TABLE>
There was no valuation allowance required as of December 31, 1995 and 1994.
The provision for U.S. Federal income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Current $13,165 $17,420
Deferred 338 40
------- -------
$13,503 $17,460
======= =======
</TABLE>
Reconciliation of the U.S. Federal statutory income tax rate to the Combined
Group's effective income tax rate is as follows:
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
U.S. Federal statutory rate 35.0% 35.0%
Other .2 .2
---- ----
Effective income tax rates 35.2% 35.2%
==== ====
</TABLE>
Provisions for state income taxes are included in selling, general and
administrative expenses and amounted to $3,074,000 in 1995 and $4,251,000 in
1994.
<PAGE> 15
COLTEC AUTOMOTIVE OEM BUSINESS GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
5. PENSION AND RETIREMENT PLANS
The Combined Group, through plans sponsored by the Parent Company, provides
pension benefit plans for substantially all employees. The benefits under
these plans are based primarily on years of service and either final average
salary or fixed amounts for each year of service. The Combined Group's
funding policy is consistent with the funding requirements of the Employee
Retirement Income Security Act ("ERISA") of 1974, as amended. Plan assets
consist principally of publicly traded equity and fixed-income securities
held in a master trust administered by the Parent Company.
Assumptions as of January 1 used to develop the net periodic pension cost
for the plans were:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Discount rate for benefit obligations 9.0% 7.5%
Expected long-term rate of
return on assets 9.0% 8.5%
Rate of increase in
compensation levels 5.0% 5.0%
</TABLE>
The components of net period pension cost were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Service cost - benefits earned $ 802 $ 962
Interest cost on projected benefit obligation 2,112 2,023
Actual return on assets (6,648) 278
Amortization and deferral, net 3,753 (3,880)
------ ------
Net periodic pension cost (credit) $ 19 $ (617)
====== ======
</TABLE>
<PAGE> 16
COLTEC AUTOMOTIVE OEM BUSINESS GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
As of December 31, the status of Combined Group's pension plans was as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Actuarial present value of projected
benefit obligation:
Vested employees $27,827 $23,789
Nonvested employees 1,286 958
------- -------
Accumulated benefit obligation (ABO) 29,113 24,747
Additional amounts related to
projected salary increases 1,038 880
------- -------
Total projected benefit obligation 30,151 25,627
Plan assets at fair value 31,443 28,436
------- -------
Projected benefit obligation less than
plan assets (1,292) (2,809)
Unamortized net asset existing at
date of adoption of FAS. No. 87 72 201
Unrecognized net gain 1,178 2,421
Amendments (2,147) (2,021)
------- -------
Prepaid pension recorded in the
combined balance sheets $(2,189) $(2,208)
======= =======
</TABLE>
Discount rates of 7.5% and 9.0% were used as of December 31, 1995 and 1994,
respectively, for the valuation of the actuarial present value of benefit
obligations.
The Combined Group, through the Parent Company as plan sponsor, also
provides defined contribution pension plans ("401-K") for all hourly and
salaried employees. Under the terms of these plans, all eligible employees
may contribute up to 15% of their annual earnings to the plan. The Combined
Group provides one 401-K plan that covers all salaried employees which
provides a dollar for dollar match up to the first 6% of employee
contributions, depending on company profits. The Combined Group also
provides hourly 401-K plans for the various plants with matching employer
contributions to the plans ranging from 0% to 1.5% of the annual participant
contributions. The aggregate cost of the defined contribution pension plans
charged to operations was approximately $1,018,000 and $1,060,000 for the
years ended December 31, 1995 and 1994, respectively.
<PAGE> 17
COLTEC AUTOMOTIVE OEM BUSINESS GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
6. OTHER POSTRETIREMENT BENEFITS
The Combined Group provides retiree health care and insurance benefits to
its eligible retired employees and a limited number of active employees
through a plan sponsored by the Parent Company. Effective January 1, 1993,
the Parent Company adopted Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pension."
("FAS 106") using the delayed recognition transition option whereby the
transition obligation is being amortized on a straight-line basis over 20
years. FAS 106 requires that the cost of postretirement benefits be
recognized in the financial statements during the years the employees
provide services.
The Combined Group's accumulated postretirement benefit obligation, none of
which is funded, and the postretirement benefit cost liability as of
December 31 were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------ ------
<C> <C> <C>
Actuarial present value of projected accumulated
postretirement benefit obligation
Retirees $(395) $(318)
Fully eligible active participants (67) (71)
Other active participants (4) (45)
----- -----
Total (466) (434)
Unamortized transition obligation 195 435
Unrecognized net gain (loss) (26) 329
Unrecognized prior service cost 114 -
----- -----
Postretirement benefit cost (liability) asset $(183) $ 330
===== =====
</TABLE>
The components of postretirement benefit cost were as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<C> <C> <C>
Service cost - benefits earned $ 3 $ 5
Interest cost on accumulated postretirement
benefit obligation 34 48
Amortization of transition obligation 184 24
Amortization and deferral, net 223 70
---- ----
Postretirement benefit cost $444 $147
==== ====
</TABLE>
<PAGE> 18
COLTEC AUTOMOTIVE OEM BUSINESS GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
Discount rates of 7.5% and 9.0% were used in determining the accumulated
postretirement benefit obligation at December 31, 1995 and 1994,
respectively. The health care cost trend rates used in determining the
accumulated postretirement benefit obligation at December 31, 1995 were 9.8%
in 1996 gradually declining to 5.0% in 2005. The effect of a 1% increase in
the health care cost trend rates in each year would be to increase the total
service and interest cost components of the postretirement benefit cost for
1995 by approximately $4,000 and to increase the accumulated postretirement
benefit obligation at December 31, 1995 by approximately $34,000.
7. COMMITMENTS AND CONTINGENCIES
The Combined Group is contingently liable for pending actions in various
lawsuits. In the opinion of legal counsel, this contingent liability is not
significant in relation to the financial position or future results of
operations of the Combined Group.
The Combined Group is obligated under non-cancellable operating lease
commitments expiring on various dates after December 31, 1995 as follows (in
thousands):
<TABLE>
<S> <C>
1996 $584
1997 287
1998 73
1999 54
2000 54
</TABLE>
Rent expense for 1995 and 1994 was approximately $757,000 and $795,000,
respectively.
8. SUBSEQUENT EVENT
In April 1996, the Parent Company announced that it had reached an agreement
for the sale of substantially all of the operating assets of the Combined
Group to Borg-Warner Automotive, Inc. The sale is expected to close in the
second quarter of 1996, subject to regulatory approval and other conditions.
Under the terms of the agreement, the Parent Company will receive $283
million in cash for the Combined Group.
<PAGE> 19
PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data for the year ended
December 31, 1995 and the three months ended March 31, 1996, and certain
financial ratios derived therefrom, give effect to the Coltec Acquisition. The
unaudited pro forma statement of operations data give effect to the Coltec
Acquisition as if it had occurred on January 1, 1995 with respect to the year
ended December 31, 1995, and as if it had occurred on January 1, 1996 with
respect to the three-month period ended March 31, 1996 and the unaudited pro
forma balance sheet data give effect to the Coltec Acquisition as if it had
occurred on March 31, 1996. The unaudited pro forma combined financial
statements do not purport to be indicative of the results of operations or
financial position of the Company that would have actually been obtained had the
Coltec Acquisition been completed as of the assumed dates and for the periods
presented, or which may be obtained in the future. The unaudited pro forma
combined financial data should be read in conjunction with the separate
historical consolidated financial statements of the Company and the notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this Prospectus or incorporated by
reference herein.
For 1996, the Company expects that the sales contribution from the Coltec
Divisions will be less than their 1995 sales because of the timing of certain
new and expiring programs. The Company also expects that there will be a similar
impact with respect to the earnings contribution from these operations in 1996
because of lower volume, a change in the product mix of the businesses, and
price reductions partially offset by cost reductions and productivity gains.
This trend is expected to continue through 1997, after which new programs are
expected to positively impact sales and earnings trends.
7
<PAGE> 20
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
HISTORICAL -----------------------------
------------------------------ DIVISION OF
COMPANY COLTEC DIVISIONS(1) EXPENSES(2) ACQUISITION(3) PRO FORMA
-------- -------------------- ------------ --------------- ----------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
Net sales..................$1,329.1 $255.1 -- -- $1,584.2
Cost of sales.............. 1,044.9 183.6 -- -- 1,228.5
Depreciation............... 68.0 5.0 -- -- 73.0
Selling, general and
administrative
expenses................. 97.8 28.3 (5.3)(a) -- 120.8
Minority interest.......... 2.0 0.0 2.0
Goodwill amortization...... 9.6 0.2 (0.2)(b) 8.0(a) 17.6
Equity in affiliate
earnings and other
income................... (18.6) (0.3) -- -- (18.9)
------- ------- ------- ------- -------
Earnings before
interest and finance
charges and income
taxes............... 125.4 38.3 5.5 (8.0) 161.2
Interest expense and
finance charges.......... 14.2 0.0 0.0 25.8(b) 40.0
Earnings before income
taxes............... 111.2 38.3 5.5 (33.8) 121.2
Provision for income
taxes.................... 37.0 13.5 (13.5)(c) 3.8(c) 40.8
------- ------- ------- ------- -------
Net earnings.......... $ 74.2 $ 24.8 $ 19.0 ($37.6) $ 80.4
======= ======= ======= ======== =======
Earnings per share......... $ 3.15 -- -- -- $ 3.41
======= =======
Average shares outstanding
(thousands).............. 23,562 -- -- -- 23,562
======= =======
</TABLE>
- ---------------
(1) Coltec Divisions' combined historical income statement, including
certain revenues and expenses not acquired in the Coltec Acquisition.
Coltec Divisions reflects certain reclassifications to conform to the
Company presentation. Depreciation and goodwill amortization are
presented as separate captions.
(2) Adjustments to reflect the retention of certain revenues and expenses of
the Coltec Divisions by Coltec.
(a) Adjustment to eliminate the 1995 overfunded pension plan benefit of
($0.6) million, and $5.9 million corporate office service charge from
Coltec.
(b) Adjustment to eliminate the 1995 goodwill amortization of $0.2
million.
(c) Adjustment to eliminate the Coltec Divisions' income tax expense.
(3) Adjustments to record the purchase of the Coltec Divisions.
(a) Reflects the goodwill amortization relating to the Company's excess
of the purchase price over the historical book value, assuming no
allocation to tangible assets and liabilities. For pro forma
purposes, a composite life of 30 years is assumed. Actual
amortization may differ depending on the final allocation of the
purchase price.
(b) Reflects the interest expense that would have been incurred had the
Coltec Acquisition and the anticipated borrowings to finance the
Coltec Acquisition occurred at the beginning of fiscal year 1995. The
interest rate was assumed to equal the Company's cost of borrowing
five-year fixed rate funds under its revolving credit facility, at
9.0%.
(c) Reflects the income tax impact of the Coltec Divisions' results of
operations and the related pro forma adjustments. The tax rate
reflects the United States statutory rate plus applicable state
income tax rates.
8
<PAGE> 21
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
HISTORICAL ----------------------------
----------------------------- DIVISION OF
COMPANY COLTEC DIVISIONS(1) EXPENSES(2) ACQUISITION(3) PRO FORMA
------- ------------------- ----------- -------------- ---------
(DOLLARS IN MILLIONS)
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $348.9 $66.4 -- -- $ 415.3
Cost of sales...................... 277.5 49.8 -- -- 327.3
Depreciation....................... 18.4 1.4 -- -- 19.8
Selling, general and administrative
expenses......................... 30.8 6.8 (1.3)(a) -- 36.3
Minority interest.................. 0.7 0.0 -- -- 0.7
Goodwill amortization.............. 2.6 0.0 -- 2.0(a) 4.6
Equity in affiliate earnings and
other income..................... (4.1) (0.2) -- -- (4.3)
------- ------ ----- ------ ---------
Earnings before interest and
finance charges and income
taxes......................... 23.0 8.6 1.3 (2.0) 30.9
Interest expense and finance
charges.......................... 3.5 0.0 -- 4.6(b) 8.1
------- ------ ----- ------ ---------
Earnings before income taxes..... 19.5 8.6 1.3 (6.6) 22.8
Provision for income taxes......... 7.2 3.0 (3.0)(b) 1.3(c) 8.5
------- ------ ----- ------ ---------
Net earnings..................... $ 12.3 $ 5.6 $ 4.3 ($ 7.9) $ 14.3
======= ============== ========= ========== ========
Earnings per share................. $ 0.52 -- -- -- $ 0.61
======= ========
Average shares outstanding
(thousands)...................... 23,495 -- -- -- 23,495
======= ========
</TABLE>
- ---------------
(1) Coltec Divisions' combined historical income statement, including
certain revenues and expenses not acquired in the Coltec Acquisition.
Coltec Divisions reflects certain reclassifications to conform to the
Company presentation. Depreciation and goodwill amortization are
presented as separate captions.
(2) Adjustments to reflect the retention of certain revenues and expenses of
the Coltec Divisions by Coltec.
(a) Adjustment to eliminate the 1996 overfunded pension plan benefit of
($0.2) million and $1.5 million corporate office service charge from
Coltec.
(b) Adjustment to eliminate the Coltec Divisions' income tax expense.
(3) Adjustments to record the purchase of the Coltec Divisions.
(a) Reflects the goodwill amortization relating to the Company's excess
of the purchase price over the historical book value, assuming no
allocation to tangible assets and liabilities. For pro forma
purposes, a composite life of 30 years is assumed. Actual
amortization may differ depending on the final allocation of the
purchase price.
(b) Reflects the interest expense that would have been incurred had the
Coltec Acquisition and the anticipated borrowings to finance the
Coltec Acquisition occurred at the beginning of fiscal year 1996. The
interest rate was assumed to equal the Company's cost of borrowing
five-year fixed rate funds under its revolving credit facility, at
6.4%.
(c) Reflects the income tax impact of the Coltec Divisions' results of
operations and the related pro forma adjustments, assuming a 38% tax
rate. The tax rate reflects the United States statutory rate plus
applicable state income tax rates.
9
<PAGE> 22
Unaudited Pro Forma Consolidated Balance Sheet
as of March 31, 1996
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments
------------------------ ----------------------------------
Coltec Division of
Company Divisions(1) Assets(2) Acquisition(3) Pro Forma
------- ------------ --------- -------------- ---------
(dollars in millions)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash..................................... $ 10.5 $ 1.1 $ (1.1)(2a) $ - $ 10.5
Short-term securities.................... 5.9 - - - 5.9
Receivables.............................. 112.0 23.9 (2.0) - 133.9
Inventories.............................. 104.8 14.6 0.7 (2a) - 120.1
Prepayments.............................. 9.0 0.8 (0.8)(2a) - 9.0
-------- ----- ------- ------- --------
Total current assets................. 242.2 40.4 (3.2) - 279.4
Property, plant and equipment at cost.... 930.1 80.9 - (54.7)(3a) 956.3
Less accumulated depreciation............ 417.1 54.7 - (54.7)(3a) 417.1
-------- ----- ------- ------- --------
Net property, plant and equipment.... 513.0 26.2 - - 539.2
Investments and advances................. 139.3 - - - 139.3
Goodwill................................. 312.0 3.8 (3.8)(2c) 238.4(3b) 550.4
Deferred income tax asset................ 40.7 - - - 40.7
Other noncurrent assets.................. 114.2 2.3 (2.3)(2d) - 114.2
-------- ----- ------- -------- --------
Total other assets................... 606.2 6.1 $ (6.1) 238.4 844.6
-------- ----- ------- -------- --------
$1,361.4 $72.7 $ (9.3) $ 238.4 $1,663.2
======== ===== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable............................ $ 44.8 $ - $ - $ - $ 44.8
Accounts payable and accrued expenses.... 208.1 36.5 (23.7)(2b) 1.2(3b) 222.1
Income taxes payable..................... 27.2 - - - 27.2
-------- ----- ------- -------- --------
280.1 36.5 $(23.7) 1.2 294.1
Long-term debt........................... 89.8 - - 287.8(3c) 377.6
Long-term liabilities:
Retirement-related liabilities......... 336.7 - - - 336.7
Other.................................. 50.5 2.8 (2.8) - 50.5
-------- ----- ------- -------- --------
Total long-term liabilities.......... 387.2 2.8 (2.8) - 387.2
Capital stock............................ 0.2 - - - 0.2
Other stockholders' equity............... 604.1 33.4 17.2 (50.6)(3d) 604.1
-------- ----- ------- -------- --------
Total stockholders' equity........... 604.3 33.4 17.2 (50.6) 604.3
-------- ----- ------- -------- --------
$1,361.4 $72.7 $ (9.3) $238.4 $1,663.2
======== ===== ======= ======== ========
</TABLE>
(1) Consists of historical balance sheet of the Coltec Divisions, including
certain assets and liabilities not acquired by the Company in the Coltec
Acquisition.
(2) Adjustments to reflect the retention of certain assets and liabilities of
the Coltec Divisions by Coltec.
(a) Reflects the elimination of a cash balance, the LIFO reserve and certain
prepaid assets retained by Coltec.
(b) Reflects the elimination of certain liabilities retained by Coltec,
including $5.1 million of accrued expenses, $7.2 million of trade and
other accounts payable and $11.4 million of liabilities to other Coltec
units.
(c) Reflects the elimination of Coltec historical goodwill.
(d) Reflects the elimination of pension asset retained by Coltec.
(3) Adjustment to record the purchase of the Coltec Division.
(a) Reflects the elimination of accumulated depreciation of the Coltec
Divisions as required by the purchase method of accounting.
(b) The Coltec Acquisition is accounted for under the purchase method
of accounting and, accordingly, an allocation of purchase cost to the
Company's assets and liabilities is made to reflect fair values.
<TABLE>
<S> <C>
Amount paid to Coltec...................................................... $283.0
Adjustments to purchase price to reflect expenses incurred and
adjustments required pursuant to the purchase agreement................... 4.8
------
Total purchase cost........................................................ $287.8
Net book value of assets acquired.......................................... 50.6
------
Pro forma unallocated excess of purchase cost over net assets acquired..... $237.2
------
Allocation for assumption of certain liabilities........................... 1.2
------
Pro forma goodwill......................................................... $238.4
======
</TABLE>
(c) Reflects the bank financing required as if the Coltec Acquisition had
occurred on March 31, 1996. The total purchase price was $287.8
million which included $283 million paid to Coltec and $4.8 million in
other acquisition costs.
(d) Reflects the elimination of the equity accounts of the Coltec Divisions.
10
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
BORG-WARNER AUTOMOTIVE, INC.
By: GASPARE G. RUGGIRELLO
Gaspare G. Ruggirello
Assistant Secretary
Dated: June 17, 1996
<PAGE> 24
EXHIBIT INDEX
Page
10.1 Agreement of Purchase and Sale dated as of May 31, 1996 by and among
Coltec Industries Inc, Holley Automotive Group, Ltd., Holley
Automotive Inc, Coltec Automotive Inc, and Holley Automotive Systems
GmbH and Borg-Warner Automotive, Inc., Borg-Warner Automotive
Air/Fluid Systems Corporation and Borg-Warner Automotive Air/Fluid
Systems Corporation of Michigan.
23.1 Consent of Independent Public Accountants
<PAGE> 1
EXHIBIT 10.1
AGREEMENT OF PURCHASE AND SALE
by and among
COLTEC INDUSTRIES INC,
HOLLEY AUTOMOTIVE INC,
HOLLEY AUTOMOTIVE GROUP, LTD.,
COLTEC AUTOMOTIVE INC, and
HOLLEY AUTOMOTIVE SYSTEMS GmbH
and
BORG-WARNER AUTOMOTIVE, INC.,
BORG-WARNER AUTOMOTIVE AIR/FLUID SYSTEMS CORPORATION, and
BORG-WARNER AUTOMOTIVE AIR/FLUID
SYSTEMS CORPORATION OF MICHIGAN
Dated: May 31, 1996
<PAGE> 2
APPENDIX A
1.1 DEFINITIONS. As used herein, the terms below shall have the following
meanings. Any of these terms, unless the context otherwise requires, may be
used in the singular or plural depending upon the reference.
"AAA" shall have the meaning set forth in Section 7.7(c) of this
Agreement.
"ACTIVE WARREN UNION REPRESENTED EMPLOYEES" shall have the meaning set
forth in Section 8.1(b) of this Agreement.
"ADJUSTMENT" shall have the meaning set forth in Section 2.6 of this
Agreement.
"AFFILIATE" shall have the meaning set forth in the Securities and
Exchange Act of 1934, as amended, and the rules and regulations thereunder.
"APPROVAL CONTACT" shall have the meaning set forth in Section 4.3 of this
Agreement.
"APPROVED ENCUMBRANCES" shall have the meaning set forth in Section 4.8 of
this Agreement.
"ARBITRATION PANEL" shall have the meaning set forth in Section 7.7(c) of
this Agreement.
"ASSETS" shall have the meaning set forth in Section 2.2 of this
Agreement.
"ASSUMED LIABILITIES" shall have the meaning set forth in Section 2.4 of
this Agreement.
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, 11 U.S.C.
101 et seq., as such may be amended from time to time.
"BOOKS AND RECORDS" shall mean (i) all records and lists pertaining to the
Assets, (ii) all records and lists of customers, suppliers, distributors or
personnel pertaining to the Business, (iii) all product, business and marketing
plans of the Business, marketing research data and sales and promotional
materials of the Business and (iv) all books, ledgers, files, reports, plans,
drawings and operating records of every kind pertaining to the Business.
"BUSINESS" shall mean the automotive, truck and off-road vehicle
components and systems business of the Operating Units including all Products.
"BWADC PLANS" shall have the meaning set forth in Section 8.4(d) of this
Agreement.
"BWA SUBSIDIARY" shall mean a subsidiary of Borg Warner Automotive, Inc.
or a subsidiary of such a subsidiary.
"CLOSING" AND "CLOSING DATE" shall have the meanings set forth in Section
6.1 of this Agreement.
"CLOSING DATE BALANCE SHEET" shall have the meaning set forth in Section
7.9 of this Agreement
"CODE" shall mean the Internal Revenue Code of 1986, as such may be
amended from time to time.
A-1
<PAGE> 3
"COLTEC" means Coltec Industries Inc and the Operating Units.
"COLTEC PENSION PLANS" shall have the meaning set forth in Section
8.3(b)(i) of this Agreement.
"COLTEC SAVINGS PLAN" shall have the meaning set forth in Section 8.4 of
this Agreement.
"COLTEC WELFARE BENEFIT PLANS" shall have the meaning set forth in Section
8.5(e) of this Agreement.
"CONFIDENTIALITY AGREEMENT" shall have the meaning set forth in Section
4.1 of this Agreement.
"CONTRACTS" shall mean all written contracts, arrangements and agreements,
and all oral agreements, including those described in Schedules 2.2(d) and
2.2(e), to which Coltec Industries Inc or the Operating Units is a party and
which relate to the Business or the Assets.
"DAMAGES" shall mean all liabilities, damages, losses, penalties, fines,
judgments, claims, costs and expenses (including interest, amounts paid in
settlement, reasonable attorneys' fees and reasonable consultants' and experts'
fees). The term "Damages" is not limited to matters asserted by third parties,
but includes Damages incurred or sustained by Coltec or Purchaser in the
absence of third party claims.
"DEDUCTIBLE" shall have the meaning set forth in Section 9.2 of this
Agreement.
"DEFAULT" shall mean an occurrence which constitutes a material breach or
material default under a contract, order or other commitment, after the
expiration of any grace period provided without cure.
"DETERMINATION" shall have the meaning set forth in Section 10.4(a)(ii) of
this Agreement.
"DISPUTE" shall have the meaning set forth in Section 7.7 of this
Agreement.
"ENCUMBRANCES" shall mean any claim, lien, pledge, option, easement,
security interest, deed or trust, mortgage, right-of-way, encroachment,
building or use or other restriction, conditional sales agreement, right of
first refusal, encumbrance or other right of third parties, or any other
encumbrance, restriction or limitation, whether voluntarily incurred or arising
by operation of law, including any agreement to give any of the foregoing in
the future, and any contingent sale or other title retention agreement in the
nature thereof.
"ENVIRONMENTAL INSPECTION" shall have the meaning set forth in Section
4.14 of this Agreement.
"ENVIRONMENTAL LAWS" shall mean (i) any applicable federal, state and
local law, statute, ordinance, rule, regulation, code or requirements relating
to pollution (or the cleanup of the environment), or the protection of air,
surface water, groundwater, drinking water, land (including its surface and
subsurface), human health, the environment or any other natural resource, or
concerning the use, storage, recycling, treatment, generation, transportation,
processing, handling, production or disposal of hazardous, toxic or polluting
wastes or substances, in each case as amended on or before the Closing Date,
and (ii) any common law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance, trespass and
strict liability) that may impose liability or obligation for or related to the
A-2
<PAGE> 4
investigation, remediation or clean-up of the threatened, alleged or actual
presence of hazardous, toxic or polluting waste or substance.
"ENVIRONMENTAL NOTICE" shall have the meaning set forth in Section
3.1(t)(i) of this Agreement.
"ERISA" shall have the meaning set forth in Section 3.1(o)(ii) of this
Agreement.
"EXCLUDED ASSETS" shall have the meaning set forth in Section 2.3 of this
Agreement.
"EXCLUDED BOOKS AND RECORDS" shall have the meaning set forth in Section
2.3(g) of this Agreement.
"EXCLUDED INTELLECTUAL PROPERTY" shall have the meaning set forth in
Section 2.3(b) of this Agreement.
"EXCLUDED LIABILITIES" shall have the meaning set forth in Section 2.5 of
this Agreement.
"FACILITY" and "FACILITIES" shall mean the building and improvements
situated on the Real Property-Owned and the Real Property-Leased.
"FINAL NET PURCHASED WORKING CAPITAL" shall have the meaning set forth in
Section 2.7(a) of this Agreement.
"FINAL NET PURCHASED WORKING CAPITAL STATEMENT" shall have the meaning set
forth in Section 2.7(b) of this Agreement.
"FINANCIAL STATEMENTS" shall have the meaning set forth in Section
3.1(h)(i) of this Agreement.
"FIRM" shall have the meaning set forth in Section 2.7(d) of this
Agreement.
"FORMER WARREN EMPLOYEES" shall have the meaning set forth in Section
8.1(a)(iv) of this Agreement.
"FTC" shall mean the Federal Trade Commission.
"GAAP" shall mean generally accepted accounting principles on the date of
this Agreement, consistently applied.
"GENERAL MOTORS" shall have the meaning set forth in Section 2.2(f) of
this Agreement.
"GERMAN APPROVAL" shall mean the approval Purchaser must receive from the
Bundeskartellamt (Federal Cartel Office) under the Gesetz Gegen
Wetbewerbs-beschrankungen of 20 February 1990 (Act Against Restraints of
Competition) prior to the Closing Date.
"GOVERNMENTAL BODY" or "GOVERNMENTAL BODIES" shall mean any federal,
state, county, municipal, local or foreign government and any governmental
agency, bureau, commission, authority, body, court (or other judicial body),
administrative or executive agency, legislative or quasi-legislative body,
commission, council or other agency.
"GYLON AND HY-CARB LICENSE AGREEMENTS" shall have the meaning set forth in
Section 6.2(d).
A-3
<PAGE> 5
"HAZARDOUS MATERIALS" shall mean any pollutants or contaminants, or any
hazardous or toxic substances, wastes, or materials, including petroleum or
petroleum products, PCBs and asbestos, defined as such or governed by any
applicable Environmental Law.
"HOLLEY AUTOMOTIVE LICENSE AGREEMENT" shall have the meaning set forth in
Section 6.2(c).
"HOLLEY UAW PENSION PLAN" shall have the meaning set forth in Section
8.1(a)(ii) of this Agreement.
"HOURLY PENSION PLAN" shall have the meaning set forth in Section 8.3(b)
of this Agreement.
"HSR ACT" shall have the meaning set forth in Section 3.1(g) of this
Agreement.
"INCORPORATED OPERATING UNITS" shall mean all of the Operating Units other
than Performance Friction Products.
"INDEMNIFICATION NOTICE" shall have the meaning set forth in Section
9.3(a) of this Agreement.
"INDEMNITEE" shall have the meaning set forth in Section 9.3(a) of this
Agreement.
"INDEMNITOR" shall have the meaning set forth in Section 9.3(a) of this
Agreement.
"INTELLECTUAL PROPERTY" shall mean (whether Coltec Industries Inc and/or
any of the Operating Units is owner, inventor, employer of an inventor,
licensor, licensee or otherwise) the following:
(a) all know-how, formulae, drawings, software, specifications, technical
or business information, trade secrets, and the like owned, controlled
or used by Coltec Industries Inc and/or any of the Operating Units
solely in connection with or directly relating to the Business,
including such property relating to GYLON and HY-CARB Products
heretofore manufactured at the Performance Friction Products facility
in Longview, Texas but excluding any other such property utilized by
Coltec Industries Inc and all Affiliates thereof (other than the
Operating Units);
(b) all trademarks, trade names, service marks, logos, applications
therefor and the like used by Coltec Industries Inc and/or any of the
Operating Units which are set forth in Appendix B hereof and any other
name or mark that has such a near resemblance thereto as may be likely
to cause confusion or mistake to the public, or to otherwise deceive
the public, but, other than as set forth in the License Agreements,
excluding any right to the marks/names "COLTEC", "COLTEC INDUSTRIES",
"GARLOCK", "STEMCO", "GYLON", "HOLLEY", "HOLLEY AUTOMOTIVE", "HOLLEY
PERFORMANCE PRODUCTS", "HY- CARB" and any corporate logo (design) of
Coltec, Garlock, Holley, Hy-Carb or Stemco associated therewith or
incorporating any of such names or logos and any other name or mark
that has such a near resemblance thereto as may be likely to cause
confusion or mistake to the public, or to otherwise deceive the
public;
(c) all patents, applications therefor and the like owned, controlled or
used by Coltec Industries Inc and/or any of the Operating
A-4
<PAGE> 6
Units solely in connection with or relating to the Business which are
set forth in Appendix B hereof, but, other than as set forth in the
License Agreements, excluding any patent or application therefor or the
like covering the "GYLON" or "HY-CARB" Products; and
(d) all copyrights, mask works or other intellectual property used by Coltec
Industries Inc and/or any of the Operating Units exclusively in connection
with or relating exclusively to the Business which are set forth on
Appendix B.
"INVENTORIES" shall have the meaning set forth in Section 2.2(a) of this
Agreement.
"KNOWLEDGE" of a given person or party shall mean the actual knowledge of
such person or party and such person's or party's subsidiaries, operating units
and divisions.
"LAW" shall mean any statute, common law, rule, regulation, ordinance,
code, order, judgment, writ, injunction, decree or other governmental
requirement.
"LICENSE AGREEMENTS" shall mean the Holley Automotive License Agreement
and the Gylon and Hy-Carb License Agreements.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
Assets or Business, as currently conducted; provided that to the extent the
Business is not currently conducted in a commercially reasonable manner,
"Material Adverse Effect" shall mean a material adverse effect on the Assets or
Business, assuming it was or is conducted consistent with commercially
reasonable practices.
"MATERIAL CONTRACT" shall mean (i) all Contracts, including leases,
relating to Real Property-Owned and Real Property-Leased, (ii) all Contracts
for the purchase, lease or sale of goods or the provision or receipt of
services in excess of $100,000 in actual or potential aggregate payments, (iii)
all Contracts requiring more than one (1) year to perform, (iv) all Contracts
granting a power of attorney, (v) all non-competition and non-solicitation
Contracts, (vi) all partnership agreements, distribution agreements and similar
agreements, and (vii) all Contracts of guaranty or indebtedness.
"NET PURCHASED WORKING CAPITAL" shall mean the current Assets comprised of
the items set forth on Schedule 2.7(a) to this Agreement, minus the current
Assumed Liabilities comprised of the items set forth on Schedule 2.7(a) to this
Agreement.
"NON-ACTIVE WARREN UNION REPRESENTED EMPLOYEES" shall have the meaning set
forth in Section 8.1(a)(iv) of this Agreement.
"NON-COVERED PERSONS" shall have the meaning set forth in Section 8.5(d)
of this Agreement.
"NON-REPRESENTED EMPLOYEES" shall have the meaning set forth in Section
8.2(a) of this Agreement.
"NON-UNION REPRESENTED EMPLOYEES" shall have the meaning set forth in
Section 8.2(a) of this Agreement.
"OPERATING UNITS" shall mean the following subsidiaries or divisions of
Coltec Industries Inc: Holley Automotive Inc. (including the assets of the
former Coltec automotive division), Holley Automotive Group Ltd., Holley
A-5
<PAGE> 7
Automotive Systems GmbH, Coltec Automotive Inc, and Performance Friction
Products (a division of Stemco Inc, an indirect, wholly-owned subsidiary of
Coltec Industries Inc).
"ORDER" shall have the meaning set forth in Section 3.1(e)(iii) of this
Agreement.
"OWNERSHIP" shall mean such ownership as confers upon the person having
good and marketable title to and control over the thing or right owned, free
and clear of any and all Encumbrances except Permitted Encumbrances and
Approved Encumbrances.
"PATENT LICENSE AGREEMENT" shall have the meaning set forth in Section
6.3(e) of this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PCBs" shall have the meaning set forth in Section 3(t)(iv) of this
Agreement.
"PERMITS" shall mean all licenses, permits, franchises, approvals,
registrations, authorizations, consents or orders of, or filings with, any
governmental authority, whether foreign, federal, state or local, necessary for
the present conduct of, or relating to, the operation of the Business.
"PERMITTED ENCUMBRANCES" shall have the meaning set forth in Section
3.1(j)(ii) of this Agreement.
"PRODUCT INVENTORY" shall mean all costs of producing goods for sale to
customers of the Business less any amounts relating to the costs of tooling,
samples and prototypes.
"PRODUCT RECALL CAMPAIGN" shall mean a systematic effort by Purchaser, a
customer or a governmental agency to remedy a breach of Coltec's warranty or as
required in order to comply with laws, regulations, orders or other applicable
government requirements to replace or correct Products.
"PRODUCTS" shall mean all automotive, truck or off-road vehicle products
currently developed, currently being developed, manufactured or sold by the
Operating Units including, without limitation, throttle body assemblies, upper
intake module assemblies, air induction assemblies, manifold assemblies,
modulators, solenoids and assemblies, emission controls, engine accessories,
air injection pumps, engine oil pumps, synchronizers, friction products and
materials, and fuel introduction, regulation, and metering systems (other than
carburetors and stand alone fuel injection systems).
"PROPOSED SETTLEMENT" shall have the meaning set forth in Section 9.5 of
this Agreement.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.6 of this
Agreement.
"PURCHASER" shall have the meaning set forth in the opening paragraph of
this Agreement.
"PURCHASER'S WELFARE BENEFIT PLANS" shall have the meaning set forth in
Section 8.5(a) of this Agreement.
"REAL PROPERTY" shall mean the Real Property-Owned and the Real
Property-Leased.
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"REAL PROPERTY - OWNED" shall have the meaning set forth in Section 2.2(b)
of this Agreement and as listed on Schedule 2.2(b)(1).
"REAL PROPERTY - LEASED" shall have the meaning set forth in Section
2.2(b) of this Agreement and as listed on Schedule 2.2(b)(2).
"REAL PROPERTY TAXES" shall mean state and/or local taxes assessed on the
ownership of or interests in real property and/or improvements thereon,
including, without limitation, ad valorem taxes, general assessments and
special assessments.
"REFERENCE NET PURCHASED WORKING CAPITAL" shall have the meaning set forth
in Section 2.7(a) of this Agreement.
"RELATED AGREEMENTS" shall mean all agreements, other than this Agreement,
which are executed and delivered in connection with this Agreement, including
the bills of sale delivered under Section 6.2, the License Agreements, the
Patent License Agreement and the assumption agreement to be delivered under
Section 6.3(b).
"RESOLUTION NOTICE" shall have the meaning set forth in Section 7.7(a) of
this Agreement.
"SALARIED EMPLOYEES" shall have the meaning set forth in Section 8.2(a) of
this Agreement.
"SALARIED PENSION PLAN" shall have the meaning set forth in Section 8.3(b)
of this Agreement.
"SAVINGS PLAN MEMBERS" shall have the meaning set forth in Section 8.4(a)
of this Agreement.
"TAX" or "TAXES" shall mean all United States federal, state or local, and
any foreign or other tax, levy, impost, fee assessments, impositions or other
similar government charges, including income, estimated income, business,
occupation, franchise, real property, payroll, personal property, sales,
transfer, stamp, use, employment, commercial rent or withholding, occupancy,
premium, gross receipts, profits, windfall profits, deemed profits, license,
lease, occupation, capital, production, corporation, ad valorem, excise, duty
or other taxes including interest, penalties and additions in connection
therewith.
"TERMINATION FEE" shall have the meaning set forth in Section 10.3(c) of
this Agreement.
"THIRD PARTY CLAIM" shall have the meaning set forth in Section 9.4 of
this Agreement.
"TITLE COMMITMENT" shall have the meaning set forth in Section 4.8 of this
Agreement.
"TITLE COMPANY" shall have the meaning set forth in Section 4.8 of this
Agreement.
"UAW AGREEMENT" shall have the meaning set forth in Section 8.1(a)(i) of
this Agreement.
"UAW PENSION AGREEMENT" shall have the meaning set forth in Section
8.1(a)(iii) of this Agreement.
"UAW UNION" shall have the meaning set forth in Section 8.1(a)(i) of this
Agreement.
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"WARN" shall have the meaning set forth in Section 8.13(a).
"WARREN PLANT" shall have the meaning set forth in Section 8.1(a)(i) of
this Agreement.
"WARREN UNION REPRESENTED EMPLOYEES" shall have the meaning set forth in
Section 8.1(a)(i) of this Agreement.
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AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE ("Agreement") is dated as of May ___,
1996, and is by and among Coltec Industries Inc, a Pennsylvania corporation,
Holley Automotive Group, Ltd., a U.K. corporation, Holley Automotive Inc, a
Delaware corporation, Coltec Automotive Inc, a Delaware corporation, and Holley
Automotive Systems GmbH, a corporation organized under German law
(collectively, together with the Performance Friction Products Division of
Coltec Industries Inc's indirect, wholly-owned subsidiary Stemco Inc,
hereinafter called "Coltec"), and Borg-Warner Automotive Air/Fluid Systems
Corporation, a Delaware corporation ("BW"), Borg-Warner Automotive Air/Fluid
Systems Corporation of Michigan, a Delaware corporation ("BW-MI"), and
Borg-Warner Automotive, Inc. ("Borg-Warner"), a Delaware corporation. (BW,
BW-MI and Borg-Warner are sometimes referred to together as "Purchaser".)
RECITAL
WHEREAS, Purchaser desires to purchase the Business (as hereinafter
defined) from Coltec and Coltec desires to sell the Business to Purchaser, and
to effect such transaction Purchaser desires to purchase and assume from Coltec
and Coltec desires to sell and assign or cause to sell and assign to Purchaser,
the Assets and the Assumed Liabilities (as hereinafter defined) all on the
terms and conditions set forth in this Agreement.
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, and intending to be legally bound hereby, Purchaser and
Coltec hereby agree as follows:
ARTICLE I
GENERAL PROVISIONS
1.1 Definitions. Appendix A to this Agreement sets forth the definitions
of certain terms used in this Agreement. Those terms shall have the meanings
set forth on Appendix A where used herein and identified with initial capital
letters.
1.2 Other Definitions and Meanings, Interpretations. For purposes of this
Agreement, the term "parties" means (except where the context otherwise
requires) Coltec and Purchaser. The term "person" includes any natural person,
firm, association, partnership, corporation, limited liability company, joint
venture, trust, unincorporated organization, governmental or regulatory agency
or other entity other than the parties. The term "including" means "including
but not limited to." The table of contents and the headings of the Articles
and Sections of this Agreement have been included herein for convenience of
reference only and shall not be deemed to affect the meaning of the operative
provisions of this Agreement. "Agreement" includes this Agreement together
with all Schedules and Appendices attached hereto.
ARTICLE II
PURCHASE AND SALE
2.1 Transaction. Subject to the terms and conditions of this Agreement,
at the Closing (a) Purchaser will purchase from Coltec and Coltec will sell,
transfer and assign to Purchaser, all of the Assets, free and clear of all
Encumbrances except for Approved Encumbrances and Permitted Encumbrances; (b)
Purchaser will pay to Coltec the Purchase Price as herein provided; and (c)
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Purchaser will assume and be directly and solely responsible for the Assumed
Liabilities. Notwithstanding such transaction, Coltec will retain the Excluded
Assets and retain and be directly and solely responsible for the Excluded
Liabilities. BW-MI will purchase all of the Assets which are located in the
State of Michigan and BW will purchase all other Assets. Borg-Warner will
guarantee all of BW's and BW-MI's obligations under this Agreement.
2.2 Assets. For purposes hereof the term "Assets" means all assets,
properties and rights of every type and description owned or leased by Coltec
which relate to the Operating Units' conduct of the Business as the same exists
on the Closing Date, and which are located at the Facilities or on the Real
Property, but excluding the Excluded Assets. Without limiting the generality
of the foregoing, the Assets will include all of Coltec's right, title and
interest in and to the following assets as of the Closing:
(a) all inventories of raw materials, finished goods, work in process, parts,
accessories, supplies and packaging of the Business ("Inventories");
(b) the Real Property-Owned, all as more fully described on Schedule
2.2(b)(1), and Real Property-Leased, all as more fully described on
Schedule 2.2(b)(2), used in the Business as office, manufacturing,
engineering and development, and warehouse facilities, together with and
including all structures, improvements, buildings, building equipment,
fixtures, easements and other appurtenances, oil and mineral rights owned
by Coltec and oil wells, if any, leasehold interests as lessor, sublessor,
lessee or sublessee, rentals, royalties and any other rights of Coltec
pertaining to such Real Property. In each case, easements benefiting the
Real Property are listed on Schedule 2.2(b)(3);
(c) all personal property of the Business (whether as owner, lessor, lessee
or otherwise), including all trade fixtures, machinery and equipment
(including a plate and framed filter press for the Water Valley location,
which will be purchased by Coltec and installed at the Water Valley
location), tools, dies, furniture and office equipment, and vehicles for
employees, owned or leased by Coltec for use in the Business (all items of
such personal property which are material to the research and development
and manufacturing aspects of the Business, including computer systems, are
listed or described on Schedules 2.2(c)(1) (owned personal property) and
2.2(c)(2) (leased property);
(d) all supplier lists and all orders and Contracts and commitments for the
purchase of goods and/or services by the Business, including all such
items relating to the purchase of capital, products and supplies (all such
Contracts, other than blanket purchase orders which impose no obligation
to purchase, in an amount in excess of $100,000 or which require more than
one (1) year to perform are listed or described on Schedule 2.2(d));
(e) all orders, bids and proposals for the sale of Products by the Business,
other than blanket orders which impose no obligation to sell, in an amount
in excess of $100,000, and all other Material Contracts, are as listed or
described on Schedule 2.2(e);
(f) all other orders, bids, proposals and Contracts relating to the Business,
including all leases for machinery and equipment, vehicle leases for the
employee fleet vehicles and all other leases, and all causes of action,
rights of action and warranty and product liability claims against other
persons (including
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General Motors Corporation's ("General Motors") air pump business claim
referred to in Section 2.8 below) relating to the Business except to the
extent related to the Excluded Assets or the Excluded Liabilities;
(g) all trade and other accounts receivable of the Business;
(h) all Intellectual Property and all applications therefor;
(i) all Permits of the Business and all applications therefor, to the extent
the transfer of such Permits is permitted under applicable Law;
(j) all Books and Records used or held for use in the conduct of the Business
or otherwise relating to the Assets, other than the Excluded Books and
Records, it being understood that Coltec Industries Inc and the Operating
Units may retain copies of the Books and Records;
(k) all deposits and prepayments and similar items of or related to the
assets described in Sections 2.2(a), (b), (c), (d) and (f) which are
reflected on the Final Net Purchased Working Capital Statement, including
all prepaid expenses, deferred charges, advance payments, deposits on
molds and tooling and other prepaid items;
(l) all customer lists used in the Business; and
(m) goodwill of the Business.
2.3 Excluded Assets. For purposes hereof, the term "Excluded Assets"
means the following rights, properties and assets of Coltec as the same shall
exist as of the Closing:
(a) all intercompany receivables between any of the Operating Units, on the
one hand, and Coltec Industries Inc or its Affiliates, on the other hand;
(b) all the (i) tradenames and trademarks "Coltec Industries", "Coltec",
"Holley", "Holley Automotive", "Holley Performance Products", "Garlock",
"Gylon" "Hy-Carb" and "Stemco" and the corporate names and logos (design)
associated therewith or incorporating any of such names or logos and any
other name or mark that has such a near resemblance thereto as may be
likely to cause confusion or mistake to the public, or to otherwise
deceive the public, (ii) all the patents and applications therefor and the
like owned or controlled by Coltec Industries Inc or its Affiliates other
than those used solely in connection with or directly relating to the
Business including, but not limited to, such patents covering the "GYLON"
and "HY-CARB" Products, and (iii) know-how, formulae, drawings, software,
specifications, technical or business information, trade secrets, and the
like owned or controlled by Coltec Industries Inc or its Affiliates other
than in connection with the Business including, but not limited to, such
property relating to GYLON and HY-CARB Products heretofore manufactured by
Coltec Industries Inc or its Affiliates other than at the Performance
Friction Products facility in Longview, Texas (the "Excluded Intellectual
Property");
(c) all cash and cash equivalent items, other than as described on
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Schedule 2.7(a) and provided in Section 2.2(k), held by Coltec
as of the Closing;
(d) any assets or rights under Coltec pension plans;
(e) all refunds or credits, if any, of Taxes for all periods on or
prior to the Closing Date;
(f) all life insurance policies of officers, directors and other
employees of Coltec and all other insurance policies relating to
Coltec, including those relating to the operation of the Business;
(g) the minute books, stock transfer books and corporate seal of
Coltec Industries Inc and the Incorporated Operating Units, all
Books and Records of Coltec relating to Taxes or employee benefit
matters (includin any federal, state and local income and
franchise Tax returns) and any other Books and Records relating
primarily to the Excluded Assets or the Excluded Liabilities
(the "Excluded Books and Records");
(h) any assets, except the Real Property, which are owned by Coltec
Industries Inc and/or its Affiliates and used by the Operating
Units but which are not used exclusively in the operation of the
Business (all material assets which are excluded under this
clause (h) are generally described or identified on Schedule 2.3
to this Agreement); and
(i) all of Coltec's rights under this Agreement, the Related
Agreements, the Confidentiality Agreement and any other
agreements,instruments or documents executed by or delivered to
Coltec in connection with this Agreement and the transactions
contemplated hereby and thereby.
2.4 Assumed Liabilities. For purposes hereof, the term "Assumed
Liabilities" means only the following liabilities but excluding the Excluded
Liabilities:
(a) all accounts payable of the Business which arose in the ordinary
course of the Business and which are reflected in the Final Net
Purchased Working Capital Statement prepared pursuant to Section
2.7(b) below;
(b) all liabilities and obligations of Coltec which arise in respect
of periods subsequent to the Closing under (i) the Real Property
leases listed or described on Schedule 2.2(b)(2), (ii) the person
al property leases listed or described on Schedule 2.2(c)(2),
(iii) the orders, bids proposals and Material Contracts listed
or described on Schedule 2.2(e) ,and (iv) all other purchase
orders, Permits which have been assigned to Purchaser pursuant
to this Agreement and Contracts included in the Assets, except,
(1) with respect to clause (iv) only, such liabilities or
obligations will be Assumed Liabilities only to the extent that
they are consistent with the representation and warranty set
forth in the last sentence of Section 3.1(m) below and are
consistent with the operations of the Business in the ordinary
course, as reflected on the March 31, 1996 Financial Statements,
and (2) with respect to clauses (i) through (iv), to the extent
such liabilities relate to the period preceding the Closing Date
(e.g., (1) liabilities or obligations with respect
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to a default by Coltec on or before the Closing Date under a
Contract will not be an Assumed Liability and (2) liabilities or
obligations with respect to delivery of products or services to
Coltec prior to Closing but not paid for by Coltec prior to
Closing will not be an Assumed Liability, unless they are
accounts payable which are assumed under clause (a) above); and
(c) all liabilities and obligations arising out of Purchaser's
obligations under Article VIII hereof only to the extent
specifically provide therein.
The liabilities and obligations assumed by Purchaser under this Agreement
include only those Assumed Liabilities delineated above. Purchaser shall have
no liability for and shall not be responsible for any Excluded Liabilities.
2.5 Excluded Liabilities. For the purposes hereof, the term "Excluded
Liabilities" means the following: (a) intercompany payables owed by any
Operating Unit to Coltec Industries Inc; (b) the lease at 1748 Northwood Drive,
Troy, Michigan (the former administrative headquarters of Coltec Automotive
Inc), the premises known as 2968 Waterview Drive, Rochester Hills, Michigan and
all liabilities with respect to Real Property and/or operations no longer used
in the Business, including those described on Schedule 2.5(b); (c) all other
liabilities and obligations of Coltec or its Affiliates or with respect to the
Assets or the Business (including the matters referenced in the Schedules
hereto and amounts payable to General Motors in respect of the air pump
business referred to in Section 2.8(d) below), other than the Assumed
Liabilities; (d) any liability arising from Coltec's participation in the
Midwest Pension Plan; and (e) all obligations retained or indemnifiable by
Coltec under Section 9.2(a)(4) below.
2.6 Purchase Price. For purposes hereof, the term "Purchase Price" means
Two Hundred Eighty Three Million U.S. Dollars ($283,000,000), plus or minus the
amount of the adjustment determined pursuant to Section 2.7 of this Agreement,
if any (the "Adjustment"), the other adjustments described in Section 2.8 and,
if applicable, any adjustment pursuant to Section 10.3(a)(iii).
2.7 Adjustment to Purchase Price. The Adjustment will be determined as
follows:
(a) The Purchase Price shall be increased or decreased dollar-for-
dollar following the Closing Date to the extent that the Net
Purchased Working Capital of the Business as of the Closing Date (the
"Final Net Purchased Working Capital") does not equal the amount of
the Net Purchased Working Capital which is calculated in accordance
with GAAP, except as disclosed on Schedule 2.7(b), and is shown on
Schedule 2.7(a) (the "Reference Net Purchased Working Capital"). If
the Final Net Purchased Working Capital exceeds the Reference Net
Purchased Working Capital, Purchaser shall pay Coltec Industries Inc
the difference and if the Final Net Purchased Working Capital is less
than the Reference Net Purchased Working Capital, Coltec Industries
Inc shall pay Purchaser the difference, in each case in immediately
available funds at the times provided below. For purposes of
calculating Final Net Purchased Working Capital, (i) the total amount
by which Product Inventory exceeds $720,000 will not be considered a
current Asset and will not be counted towards Final Net Purchased
Working Capital (provided that if the Closing occurs prior to the
last day of a month, any portion of such excess Product Inventory
which is sold in the ordinary course of business by Purchaser in the
calendar month in which the Closing occurs will be considered a
current Asset and will be counted towards Final Net Purchased
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Working Capital if the customer pays the full purchase price for such
Product Inventory in the ordinary course of Purchaser's business), and
(ii) amounts paid or payable by Coltec to General Motors in respect of
Coltec's purchase of the air pump business referred to in Section
2.8(d) below will not be counted unless Purchaser has paid or
specifically agreed in writing to pay any such amount, in which case
the amount paid or to be paid by Purchaser will be considered a
current Assumed Liability.
(b) The Reference Net Purchased Working Capital has been calculated from
Coltec's March 31, 1996 Financial Statements. The Final Net Purchased
Working Capital will be calculated on the basis of the Closing Date
Balance Sheet, after applying the GAAP exceptions which are identified
on Schedule 2.7(b). Coltec Industries Inc and Purchaser shall prepare
a statement identifying their calculation of the Final Net Purchased
Working Capital (the "Final Net Purchased Working Capital Statement").
In connection with the preparation of the Final Net Purchased Working
Capital Statement, Purchaser shall, at no cost to Coltec, give
representatives of Coltec Industries Inc access to the appropriate
books and records of the Business and cause appropriate personnel of
Purchaser to provide reasonable assistance.
(c) The Final Net Purchased Working Capital Statement and Final Net
Purchased Working Capital determination shall be approved by Coltec
Industries Inc and Purchaser as soon as possible, but not later than
sixty (60) days, after the completion of the Closing Date Balance
Sheet. The appropriate party will pay to the other the amount of the
Adjustment, if any, required by this Section 2.7 within seven days
after completion of the Final Net Purchased Working Capital Statement.
If Coltec Industries Inc and Purchaser cannot agree on the Final Net
Purchased Working Capital Statement within such sixty (60) day period,
(i) if the total amount of all disputed items is less than 33% of the
total amount of all non-disputed items, the amount of the Adjustment
which is not in dispute shall be paid by the appropriate party within
such seven-day period; (ii) if the total amount of all disputed items
equals or exceeds 33% of the total amount of all non-disputed items,
no payment will be made by either party until the Adjustment is
finalized under clause (d) below; and (iii) the parties will submit
their dispute to arbitration pursuant to clause (d) below.
(d) If the parties cannot agree on the Adjustment pursuant to clause (c)
above within the time period provided therein, the parties shall use
their best efforts to attempt to resolve the disputed items and make
the required payments within 10 days after the end of such sixty (60)
day period. Any items remaining in dispute at the end of such period
will be referred by the parties to a big six accounting firm which is
selected by the parties (the "Firm"). If the parties cannot agree on
the selection of a Firm, their respective accounting firms will
together select a Firm which has no material relationship with Coltec
or Purchaser or their respective Affiliates. The Firm shall hear
arguments from both parties and will then make a final, binding, and
non-appealable determination on the disputed items so submitted within
30 days of its receipt of the parties' statements, adjust the Final
Net Purchased Working Capital Statement to reflect that determination
and calculate the Final Net Purchased Working Capital and the final
Adjustment. The parties shall promptly
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respond to all requests of the Firm with a view to minimizing any
delay in the decision date. The amount of the final Adjustment as so
determined, less undisputed amounts previously paid, shall be paid by
the appropriate party within ten days of such determination.
2.8 Other Closing Adjustments. In addition to the Adjustment, the parties
shall execute and deliver to each other a closing statement setting forth the
closing adjustments to be made to the Purchase Price as follows:
(a) The current year's ad valorem real estate and personal property Taxes
shall be prorated per diem as of the Closing Date on a calendar year
basis in accordance with the local custom or in its absence generally
accepted accounting principles, consistently applied. If the Tax
bills for the current year have not been issued as of the Closing
Date, the current year's Taxes will be estimated on the basis of the
prior year's Tax bills and an appropriate readjustment will be made as
soon as practicable after the Closing when the current year's Tax
bills become available.
(b) Vacation and Holiday pay obligations as set forth in Schedule 8.8
hereto.
(c) Purchaser will pay Coltec Industries Inc $1,600,000 as a reimbursement
to Coltec Industries Inc for sums paid and payable by Coltec to
General Motors and resulting from Coltec's purchase of the air pump
business of General Motors; Coltec will assign to Purchaser any
amounts payable after the Closing Date (irrespective of whether such
payment is attributable to periods preceding or following the Closing
Date), and any claims of Coltec against General Motors, relating to
the air pump business acquired by Coltec from General Motors, in
accordance with Section 2.2(f) above.
2.9 Payment of Purchase Price. At the Closing, Purchaser will pay the
Purchase Price pursuant to Section 2.10. The Purchase Price shall be allocated
among and (subject to Section 2.10) paid by BW, BW-MI and Borg-Warner in such
manner as they desire.
2.10 Method of Payment. All payments hereunder shall be made by delivery
to the recipient by depositing, by bank wire transfer, the required amount (in
immediately available funds) in an account of a payee or payees designated by
Coltec Industries Inc (or, in the case of an Adjustment payable to Purchaser,
by Purchaser), which account shall be designated by the payee for such purpose
at least five (5) business days prior to the date of the required payment.
2.11 Allocation of Purchase Price. The Purchase Price shall be allocated
as set forth in Schedule 2.11 hereto. Each party hereto agrees (i) that any
such allocation shall be consistent with the requirements of Section 1060 of
the Code and the regulations thereunder and (ii) to complete jointly and to
file separately Form 8594 with its federal income tax return consistent with
such allocation for the tax year in which the Closing Date occurs.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Coltec. Coltec Industries Inc and
each Incorporated Operating Unit hereby jointly and severally represents and
warrants to Purchaser, as of the date hereof and as of the Closing Date, the
following:
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(a) Organization and Existence. Coltec Industries Inc and each of the
Incorporated Operating Units is a corporation duly organized, validly
existing and in good standing under the laws of the state or
jurisdiction of its formation and each of Coltec Industries Inc and
the Incorporated Operating Units have all requisite corporate
power and authority to carry on the Business as it is currently being
conducted and to own, lease and operate the Assets. Coltec Industries
Inc and each of the Incorporated Operating Units is duly qualified to
do business as a foreign corporation and is in good standing under the
laws of each state or other jurisdiction in which either the ownership
or use of the properties owned or used by it in the conduct of the
Business, or the nature of the activities conducted by it in respect
of the Business, requires such qualification, except where the failure
to be so qualified could not reasonably be expected to have a Material
Adverse Effect.
(b) Power and Authority. Coltec Industries Inc and each of the
Incorporated Operating Units has full corporate power and authority
to enter into, execute, deliver and perform this Agreement and all
Related Agreements to which it is a party.
(c) Authorization. The execution, delivery and performance of this
Agreement and the Related Agreements by Coltec Industries Inc and each
of the Incorporated Operating Units, as applicable, each have been
duly authorized by all requisite corporate action on the part of
Coltec Industries Inc and each such Incorporated Operating Unit.
(d) Binding Effect. This Agreement and the Related Agreements, upon
execution and delivery by Coltec Industries Inc and each of the
Incorporated Operating Units, will each be duly executed and delivered
by Coltec and (assuming due execution and delivery hereof and thereof
by Purchaser) will be valid and binding obligations of Coltec
Industries Inc or such Incorporated Operating Unit, enforceable
against it in accordance with their respective terms, except to the
extent that enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally and by general principles of
equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity).
(e) No Default. Except as otherwise set forth in this Agreement or the
Schedules hereto, Coltec Industries Inc and each of the Incorporated
Operating Units has the absolute unrestricted right and capacity to
execute and deliver this Agreement and the Related Agreements to which
it is a party and to perform its obligations hereunder and
thereunder. Neither the execution and delivery of this Agreement or
the Related Agreements, the consummation of the transactions
contemplated hereby or thereby, nor Coltec's full performance of its
obligations hereunder or thereunder will directly or indirectly (with
or without notice or lapse of time or both):
(i) conflict with, contravene, violate or breach, or otherwise
constitute or give rise to a Default under, the terms or
provisions of the articles of incorporation or bylaws of Coltec
Industries Inc or any of the Incorporated Operating Units, each
as currently in effect, or of any Contract, commitment or other
obligation to which Coltec Industries Inc or any of the Operating
Units is a party or by which the Assets or Business are bound
which could reasonably be expected to have a Material Adverse
Effect;
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(ii) except as it relates to matters which are the subject of trade
law or trade regulation regarding mergers and acquisitions
generally, contravene, conflict with or result in a violation of
any of the terms of, or to the knowledge of Coltec, give any
Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify any Governmental Authorization relating to
the Business or the Assets that could reasonably be expected to
have a Material Adverse Effect;
(iii) except as it relates to matters which are the subject of trade
law or trade regulation regarding mergers and acquisitions
generally, contravene, conflict with or result in a violation of,
or give any Governmental Body or other person the right to
challenge any transaction contemplated by this Agreement or to
exercise any remedy or obtain any relief under, any Law or order
of any court, tribunal or other Governmental Body ("Order") to
which Coltec is a party or to which the Business or any Asset is
subject; or
(iv) result in the imposition or creation of any Encumbrance upon or
with respect to any Asset.
(f) Finders. Coltec has not engaged and is not directly or indirectly
obligated to any person acting as a broker or finder or in any similar
capacity in connection with the transactions contemplated hereby, except
Morgan Stanley whose fees shall be paid by Coltec.
(g) No Consents. Except for an anticipated filing of a premerger
notification report under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and except for the German Approval,
and except as set forth on Schedule 3.1(g), no notice, consent, approval,
order or authorization of, or registration, declaration or filing with,
any Governmental Body or person under or pursuant to any Material Contract
is required to be obtained in connection with (x) the execution and
delivery of this Agreement and the Related Agreements by Coltec or (y) the
consummation by Coltec of the transactions contemplated hereby and
thereby.
(h) Financial Statements.
(i) The financial statements for the years ended December 31, 1993,
1994 and 1995 and the quarter ended March 31, 1996 (collectively,
the "Financial Statements") attached as Appendix C fairly and
accurately present in accordance with GAAP, except as disclosed
on Schedule 2.7(b), the financial position, results of operations
and cash flows of the Operating Units, as of December 31, 1993,
1994 and 1995, and March 31, 1996, respectively, and for the
periods then ended. The Closing Date Balance Sheet will fairly
present the financial condition of the Business as of the Closing
Date in accordance with GAAP.
(ii) The exceptions listed on Schedule 2.7(b) are the same exceptions
to GAAP as have been employed by the Business during the periods
covered by the Financial Statements in calculating Net Purchased
Working Capital and which were used in preparing the Reference
Net Purchased Working Capital. The Reference Net Purchased
Working Capital calculation identified on Schedule 2.7(a) fairly
and accurately presents, and the Final Net Purchased Working
Capital Statement will fairly and accurately present, the Net
Purchased Working Capital of the Operating Units as of the March
31, 1996 (with respect to Net Purchased Reference Working
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Capital) and the Closing Date (with respect to Net Purchased
Working Capital), in accordance with GAAP, except as disclosed
on Schedule 2.7(b).
(iii) To the Knowledge of Coltec, the Operating Units do not have any
liability, whether real or contingent, liquidated or
unliquidated, asserted or unasserted that, individually or when
aggregated with other liabilities, could reasonably be expected
to have a Material Adverse Effect that: (a) is required under
GAAP to be accrued on, or disclosed in the notes to, the
Financial Statements and is not so accrued or disclosed, (b) is
required by GAAP to be accrued on, or disclosed in the notes to,
the financial statements delivered under Section 7.9 below and is
not so accrued or disclosed or (c) has not been disclosed in the
Schedules attached to this Agreement.
(i) Inventories and Accounts Receivable.
(i) Except as otherwise disclosed in Schedule 3.1(i), Coltec owns all
Inventories of the Business and all such Inventories are valued on
the books of Coltec in accordance with GAAP, except as disclosed on
Schedule 2.7(b). All such Inventories consist of a quality and
quantity usable and salable in the ordinary course of business of
the Business except for obsolete items and items of below-standard
quality, all of which have been or will be written off or written
down to net realizable value in the March 31, 1996 Financial
Statements or on the Final Net Purchased Working Capital Statement.
All Inventories not written off have been priced at the lower of cost
or market on a first in first out basis in accordance with GAAP,
except as disclosed on Schedule 2.7(b).
(ii) All accounts receivable relating to the Business reflected on the
Final Net Purchased Working Capital Statement (a) represent valid
obligations arising from sales actually made or services actually
performed, (b) have arisen in the ordinary course of business of the
Operating Units, and (c) will be collected in full, without any
setoff, within 90 days after the day on which such accounts
receivable first become due and payable. There is no contest, or
right of setoff other than returns in the ordinary course of business
of the Business, under any Contract with any maker of any such
accounts receivable relating to the validity or amount of such
accounts receivable. Coltec guarantees payment to Purchaser of any
accounts receivable on the Closing Date which are not collected by
Purchaser in the ordinary course of business (without resorting to
litigation or extraordinary expense or effort on Purchaser's part).
Upon payment of such amount by Coltec Industries Inc to Purchaser,
Purchaser shall transfer to Coltec Industries Inc all accounts
receivable so paid for by Coltec Industries Inc, free and clear of
all liens, claims or Encumbrances. Such payment by Coltec Industries
Inc will not be applied to reduce the deductible under Article IX
below.
(j) Title to Owned Property.
(i) Except as specifically set forth in Schedule 3.1(j)(i), Coltec
has, and at the Closing will have, good and marketable title to the
Assets owned by Coltec other than the Real Property, free and clear
of all Encumbrances except (a) Encumbrances for current taxes not yet
due and payable and (b) minor imperfections of
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<PAGE> 20
title or minor Encumbrances which do not materially detract
from the value of the property subject thereto or impair the
continued use thereof by the Operating Units.
(ii) Except as set forth in Schedule 3.1(j)(ii) ("Permitted
Encumbrances"), Coltec and/or the Operating Units owns outright
and has good, valid, marketable and indefeasible fee simple title
to the Real Property-Owned and at Closing such title will be held
free and clear of all Encumbrances, except (a) Encumbrances for
current taxes not yet due and payable without regard to grace
periods; (b) Permitted Encumbrances; and (c) Approved Encumbrances.
Except as set forth on Schedule 3.1(j)(ii), none of the Real
Property-Owned is owned, individually or jointly, by any person
other than Coltec Industries Inc or a subsidiary or Affiliate of
Coltec Industries Inc and all Real Property-Owned which is owned,
individually or jointly, by a Coltec Affiliate other than Coltec
Industries Inc or an Incorporated Operating unit is identified on
Schedule 3.1(j)(ii).
(iii) Coltec is the holder of the leasehold interest which comprises the
Real Estate-Leased and has a good, valid recorded marketable
and indefeasible lessee's interest as defined in the relevant
lease, and such leasehold interest is held free and clear of all
Encumbrances except (a) Encumbrances for current taxes not yet
due and payable without regard to grace periods, (b) Permitted
Encumbrances and (c) Approved Encumbrances. Except as set forth on
Schedule 3.1(j)(ii), none of the Real Property-Leased is leased or
occupied, individually or jointly, by any person other than Coltec
or a subsidiary or Affiliate of Coltec, and all Real Estate-Leased
which is leased or occupied by a Coltec Affiliate other than Coltec
Industries Inc or an Incorporated Operating Unit is identified on
Schedule 3.1(j)(ii).
(iv) The buildings (and improvements), plants, structures, and machinery
and equipment have been maintained for the five year period
prior to the date hereof in accordance with Coltec's standard
maintenance practices and are adequate for the uses to which they
are being put. The buildings (and improvements), plants,
structures, and machinery and equipment are sufficient for the
continued conduct of the Business as presently conducted. To the
Knowledge of the applicable Coltec plant manager or Facilities
manager, there are no structural defects in any Facility except for
such defects as would not, either individually or in the aggregate,
have a material adverse effect on the use or value of such
Facility.
(k) Liabilities. Except as otherwise disclosed in Schedule 3.1(k), neither
Coltec Industries Inc nor any of the Operating Units is in Default of its
obligations under any note, bond, debenture, mortgage, indenture, security
agreement, guaranty or other instrument of indebtedness affecting the
Business or the Assets.
(l) Litigation. Except as otherwise disclosed in Schedule 3.1(l) or Schedule
3.1(n), (i) there presently exists no litigation, proceedings, actions,
administrative or arbitration proceeding or claims, at law or in equity,
or investigations pending or, to Coltec's Knowledge, threatened against or
affecting the Assets, the Business or the Assumed Liabilities; and (ii)
neither Coltec Industries Inc nor any of the Operating Units is subject to
any notice, writ, injunction,
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consent agreement, order, award or decree or other action or instrument
of any court, agency or other Governmental Body or arbitrational tribunal
affecting the Assets, the Business or the Assumed Liabilities. Except as
otherwise disclosed in Schedule 3.1(l) or Schedule 3.1(n), there is no
dispute with any person that could reasonably be expected to have a
Material Adverse Effect.
(m) Contracts. Except as otherwise disclosed in Schedule 3.1(m)(1), (i) each
of the Material Contracts is valid, in full force and effect and binding
upon Coltec and, to Coltec's Knowledge, the other party or parties thereto
in accordance with its terms; (ii) to Coltec's Knowledge, no party thereto
has terminated, cancelled or substantially modified any Material Contract
or given notice with respect thereto, (iii) to Coltec's Knowledge, no
party to any Material Contract is in Default of its obligations under any
such Material Contract, and (iv) to Coltec's Knowledge, no written demand
for adequate assurance of performance under any Material Contract has been
received by Coltec. To Coltec's Knowledge, no event has occurred which,
through the passage of time or the giving of notice or both, or otherwise
could constitute a Default, under any contract, agreement, lease, permit
or other document pertaining to the Business, including the Material
Contracts, which Default could reasonably be expected to have a Material
Adverse Effect or adversely affect Coltec's ability to perform its
obligations under this Agreement and/or the Related Agreements. Schedules
2.2(d) and 2.2(e) set forth all Material Contracts and Coltec has provided
to or made available for inspection by Purchaser true, correct and
complete copies of all written Material Contracts and all leases of real
or personal property which are to be assumed by Purchaser pursuant to this
Agreement. Any unwritten Material Contracts or real or personal property
leases are accurately described in Schedules 2.2(d) or 2.2(e). Except as
otherwise disclosed in Schedule 3.1(m)(2), none of the purchase orders,
bids or other Contracts with customers of the Business which are being
assumed by Purchaser involve a sale of Products or services at a loss to
Coltec and, assuming that Purchaser operates the Business consistent with
past practice of Coltec and on commercially reasonable terms, will not
involve a sale of Products at a loss to Purchaser.
(n) Intellectual Property. Except as otherwise disclosed in Appendix B or in
Schedule 3.1(n), (i) Coltec Industries Inc and/or any of the Operating
Units has Ownership of the Intellectual Property, (ii) Coltec Industries
Inc and/or the Operating Units has not granted any rights or interest to
any person in connection with any of the Intellectual Property, (iii)
Coltec Industries Inc and/or any of the Operating Units is not obligated
to pay any amount, whether as a royalty, license, fee or other payment to
any person with regard to any intellectual property rights of any others
in connection with the Business, and (iv) Coltec is not aware of any
actual, potential or threatened infringement by Coltec in connection with
the Business. The patents, trademarks, copyrights, tradenames and
applications therefor listed in Appendix B are the only United States or
foreign patents, trademarks, copyrights, tradenames and applications
therefor, other than the Excluded Intellectual Property that are used
solely in connection with or relate directly to the Business. There are
no trademarks, tradenames or the like used in conjunction with any
Products used in the Business and existing on the Closing Date, other than
the trademarks listed on Appendix B. Other than in the ordinary course of
the Business with customers or potential joint venture partners, neither
Coltec Industries Inc, nor any of the Operating Units, and to the
Knowledge of Coltec, none of their respective employees has entered into
any agreement that requires the transfer,
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assignment or disclosure of Intellectual Property to anyone other
than Coltec Industries Inc and/or any of the Operating Units. All
patents constituting part of the Intellectual Property are, to the
Knowledge of Coltec, valid and enforceable. To the Knowledge of Coltec,
no Intellectual Property is infringed or has been challenged or
threatened, and no patent constituting part of the Intellectual Property
is involved in any interference, reissue, reexamination or opposition
proceeding. The Intellectual Property and the matters which are the
subject of the License Agreements are sufficient to conduct the
Business as it is presently conducted. Except for the License Agreements
or as otherwise contemplated or required by the transactions contemplated
hereby, no Coltec Affiliate has granted a waiver, covenant not to sue or
license to the Operating Units as to the use of any intellectual property.
(o) Employee Benefits.
(i) Schedule 3.1(o)(i) identifies the following in connection with the
employees of Coltec related to the conduct of the Business: (A) any
collective bargaining agreement not otherwise referenced in this
Agreement or any employment agreements not terminable on 30 days
notice; and (B) any agreements that contain any severance or
termination pay liabilities or obligations.
(ii) Each employee benefit plan (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) which
covers or has covered any of the employees of Coltec related
to the conduct of Business and any trust created thereunder:
(A) is, and has been in compliance with all the applicable
requirements of ERISA,
(B) has satisfied all of the applicable provisions of the Code,
(C) has never been involved in a non-exempt prohibited transaction,
(D) has not incurred any accumulated funding deficiency under
ERISA and the Code or any funding liability to the PBGC, and
(E) is not a "multi-employer plan" as defined in Section 3(37)
or Section 4001(a)(3) of ERISA.
(iii) Coltec has informed the employees of the Operating Units in
writing at various times prior to the Closing Date that on and
after January 1, 1998 retirees will pay 100% of the cost for any
retiree welfare benefit coverage under the Coltec Welfare
Benefit Plans. Further, no retirement benefit obligation
exists under the Coltec Welfare Benefit Plans for employees of
the Operating Units who are eligible to retire on or after
January 1, 1998 which would require the accrual of such
obligation in compliance with the provisions of Statement of
Financial Accounting Standards No. 106.
(iv) Coltec has satisfied all of the withdrawal liability to the
Midwest Pension Plan incurred as a result of its cessation of
contributions and withdrawal therefrom.
(p) Compliance with Laws. To the Knowledge of Coltec and except as otherwise
disclosed in Schedule 3.1(p), the Business has been
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conducted in compliance with all Laws material to the conduct of the
Business and/or the use, construction and operation of the Real
Property and/or the Assets and the transfer to and operation of the
Real Property by Purchaser in the manner the Real Property is
currently operated shall not violate any Laws, and Coltec has not
received any notice, claim, order or complaint from any Governmental
Body or other person alleging that Coltec has failed to comply with
any Laws.
(q) Payment of Taxes; Tax Liens. Except as otherwise disclosed in
Schedule 3.1(q), (i) all Tax returns, reports and declarations
required to be filed by Coltec Industries Inc and/or the Operating
Units with respect to the Business with due dates (including
extensions) prior to the Closing Date have been or will be filed on or
before the Closing Date and to the Knowledge of Coltec, such
returns, reports and declarations are accurate and complete in all
material respects, (ii) all Taxes indicated as due and payable prior
to the Closing on such returns, reports and declarations have or will
be paid when due; and (iii) the Assets are not encumbered as the
result of the nonpayment of any Taxes except for Taxes not yet due and
payable.
(r) No Material Adverse Events. Except as otherwise disclosed in Schedule
3.1(r), (i) the Business has been conducted only in the ordinary and
usual course since December 31, 1995; (ii) no event or events have
occurred since December 31, 1995 that could reasonably be expected to
have a Material Adverse Effect; and (iii) to the Knowledge of Coltec,
no event or events are threatened and there has been no damage, loss
or destruction which could reasonably be expected to have a Material
Adverse Effect.
(s) Permits. Coltec has all Permits necessary for the conduct of the
Business. Except as set forth in Schedule 3.1(s), Coltec and/or the
Operating Units, as applicable, is in compliance with, and has applied
for renewal or reissuance of, all Permits material to the conduct of
the Business as currently conducted, the ownership or use of the
Assets as required by any Governmental Body or under law, and all such
Permits are valid and in full force and effect and to the Knowledge of
Coltec, no proceeding is pending or to the Knowledge of Coltec,
threatened, to revoke, modify or limit any such Permit. To the
Knowledge of Coltec and except as set forth in Schedule 3.1(s), no
event has occurred or circumstance exists that may (with or without
notice or lapse of time) (i) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Permit which could reasonably be expected to have a
Material Adverse Effect or (ii) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of,
or any material modification to, any Permit. To the Knowledge of
Coltec, except as set forth in Schedule 3.1(s), no notice has been
received by Coltec from any Governmental Body or any other person
regarding any actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any Permit which
could reasonably be expected to have a Material Adverse Effect or any
actual proposed, possible, or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to any such
Permit.
(t) Environmental Matters. Except as otherwise disclosed in Schedule
3.1(t):
(i) To the Knowledge of Coltec, Coltec has not received any notice,
citation claim, assessment, proposed assessment or demand or
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other communication ("Environmental Notices") related to or alleging
any, violation of the Environmental Laws by or related to the
Operating Units or the Assets which has not been resolved in
accordance with applicable Law.
(ii) Coltec has not received any Environmental Notice that it is or may be
responsible for the investigation, correction or clean-up of any
substance or condition resulting directly or indirectly, and whether
in whole or in part, from the ownership or operations of the Assets.
(iii) None of the Real Property has been the site of a "release" or a
"threatened release", as those terms are defined under any
Environmental Law.
(iv) No Hazardous Materials exist at or about the Real Property, except
in the form of materials held in stock for incorporation into or
incorporated into Products and in any common and ordinary materials
out of which buildings on the Real Property are constructed (in no
case do any poly- or mono-chlorinated biphenyls ("PCBs") or urea
formaldehyde foam exist at or about the Real Property, nor is any
asbestos present at or about the Real Property other than asbestos
that might be found in common or ordinary building materials which
are in sound condition and properly maintained and which, unless
disturbed, will not release asbestos fibers).
(v) While Coltec has owned or operated the Real Property, Coltec and the
Real Property have been in compliance with all applicable
Environmental Laws then in effect.
(vi) To Coltec's Knowledge, no environmental health or safety hazards
(other than those which are normally present in businesses similar
to the Business which are operated lawfully and in accordance with
commercially reasonable practices) exist on or with respect to the
Real Property or the Business or the operations conducted on the
Real Property, and there are no underground storage tanks on the
Real Property, except as set forth on Schedule 3.1(t).
(u) Facilities.
(i) Schedule 2.2(b)(1) and (2) set forth a correct list and a complete and
accurate legal description of the Real Property-Owned and Real
Property-Leased. The Real Property constitutes all of the real
estate and buildings used by the Operating Units in the Business as
necessary to achieve the results reflected on the Financial
Statements.
(ii) Except as set forth in Schedule 3.1(u)(ii), (a) there are no current
leases, subleases, options or other agreements, granting to any third
person the right to purchase or lease the Real Property-Owned or, to
the Knowledge of Coltec the Real Property-Leased; and (b) there are
no written or oral agreements to permit third persons to use or
occupy the Real Property-Owned, or, to the Knowledge of Coltec,
the Real Property-Leased.
(iii) Except as disclosed on Schedule 3.1(u)(iii), there are no existing
property tax abatement programs or other governmental assistance
programs with respect to the Real Properties. Schedule 3.1(u) sets
forth all documents to
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which Coltec is a party relating to any such programs. Coltec
will use commercially reasonable efforts to assist Purchaser in
obtaining the benefit of all such programs.
(iv) There is no pending, and Coltec has received no written
notice and has no Knowledge of threatened condemnation,
expropriation, eminent domain, special assessment or similar
proceeding affecting the Real Property.
(v) Coltec has furnished copies of any and all engineering and
geologic reports and environmental reports prepared in the three
years prior to Closing by or for Coltec with respect to the Real
Property. The certificates of occupancy, required for Coltec's
use and occupancy of the Real Property, have been obtained and
are valid and in effect. Except as shown on the survey required
by Section 4.8(b), none of the structures or improvements
necessary to the Business and erected on the Real Property
encroaches on the property of others.
(vi) Except as disclosed on Schedule 3.1(u)(vi), Coltec has direct
access to publicly dedicated rights-of-way and, to Coltec's
Knowledge, there do not exist any claims to such access that
could reasonably be expected to have a Material Adverse Effect.
(vii) Private and public utilities servicing the Real Property have
capacity to meet the utility requirements of the Facilities to
the extent presently operated on a year-round basis. All public
utilities are installed and operating, and all installation and
connection charges have been paid in full. All equipment owned
by Coltec or its Affiliates which is used in the furnishing of
utilities, including electric gas, water, telephone, storm sewer
and sanitary sewer services are located within the boundaries of
the Real Property as described in Schedules 2.2(b)(1) and
2.2(b)(2). Coltec has no contracts or other arrangements with
respect to the furnishing of utilities or municipal services such
as fire and police protection except as set forth in Schedule
3.1(u)(vii), and all such contracts, if any, are in good standing
and are assignable. Schedule 3.1(u) lists the third-party
suppliers of natural gas to the Facilities.
(viii) Except as set forth in Schedule 3.1(u)(viii), to Coltec's
knowledge there are no outstanding requirements or
recommendations by the fire underwriters or rating boards, or any
insurance company requiring or recommending any repairs or work
to be done with reference to the Real Property.
(v) Assets. Except for the Excluded Assets, the License Agreements, the
transitional services, if any, to be rendered under Section 4.7 below
and the additional items set forth on Schedule 3.1(v), the Assets
constitute all of the property and property rights of Coltec necessary
to the use and the conduct of the Business in the manner and to the
extent presently conducted.
(w) Labor Matters. Except to the extent set forth on Schedule 3.1(w):
(i) there is no unfair labor practice charge or complaint against the
Operating Units or the Business pending or, to Coltec's
Knowledge, threatened before the National Labor Relations Board;
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(ii) no grievance or arbitration proceeding arising out of or under the UAW
Agreement is pending and, to Coltec's Knowledge, no such claim has
been threatened; and
(iii)there are no administrative charges or court complaints against the
Operating Units or the Business concerning alleged employment
discrimination or other employment related matters pending or, to
Coltec's Knowledge, threatened before the U.S. Equal Employment
Opportunity Commission or any state or Federal court or agency.
(x) Other Schedules. The schedules referenced in Article II hereof are
accurate and complete in all material respects.
(y) Disclosure. No representation or warranty of Coltec in this Agreement
omits to state a material fact necessary to make the statements herein, in
light of the circumstances in which they were made, not misleading.
(z) Insurance. Coltec has not received any written notice or been informed
in writing directly or indirectly by Coltec's existing insurance carriers
or any insurance organization (a) threatening a suspension, revocation,
modification or cancellation of any insurance policy that relates to the
Assets or a material increase in any premium in connection therewith or
(b) informing Coltec that any existing coverage will or may not be
available in the future on substantially the same terms as now in effect.
(aa) Knowledge of Inaccuracy. None of the Coltec employees listed on Schedule
3.1(aa) has any Knowledge of any fact or circumstance that would
constitute a breach of any representation or warranty of Purchaser
contained in Section 3.2 or make any representation of Purchaser contained
in Section 3.2 untrue or incomplete or which would constitute a ground for
terminating this Agreement pursuant to Sections 10.3 or 10.4 hereof.
Purchaser shall have the burden of proving the Knowledge required under
this Section 3.1(aa).
3.2 Purchaser's Representations and Warranties. Purchaser, jointly and
severally, hereby represents and warrants to Coltec as of the date hereof and as
of the Closing Date the following:
(a) Organization and Existence. Each of BW, BW-MI and Borg-Warner is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, has all requisite corporate
power and authority to carry on its business as it is currently being
conducted and to own, lease and operate its businesses, assets and
properties. Borg-Warner and BW are, and on the Closing Date BW-MI will
be, duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in
which either the ownership or use of the assets and properties owned
or used by it in conducting its businesses, or the nature of the
activities conducted by it, requires such qualification.
(b) Power and Authority. Each of BW, BW-MI and Borg-Warner has full
corporate power and authority to enter into, execute, deliver and
perform this Agreement and all Related Agreements to which it is a
party.
(c) Authorization. The execution, delivery and performance of this
Agreement and any Related Agreements by BW, BW-MI and Borg-Warner have
been duly authorized by all requisite corporate actions on its part.
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(d) Binding Effect. This Agreement and the Related Agreements, upon
execution and delivery by Purchaser, will be duly executed and delivered
by Purchaser and (assuming due execution and delivery hereof and thereof
by Coltec) will be valid and binding obligations of Purchaser enforceable
against Purchaser in accordance with their respective terms, except to the
extent that enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding
at law or in equity).
(e) No Default. Except as otherwise set forth in this Agreement or the
schedules hereto, Purchaser has the absolute unrestricted right and
capacity to execute and deliver this Agreement and the Related Agreements
to which it is a party and to perform its obligations hereunder and
thereunder. Neither the execution and delivery of this Agreement or the
Related Agreements, the consummation of the transactions contemplated
hereby or thereby, nor Purchaser's full performance of its obligations
hereunder or thereunder will directly or indirectly (with or without
notice or lapse of time or both):
(i) conflict with, contravene, violate or breach, or otherwise constitute
or give rise to a Default under, the terms and provisions of BW's,
BW-MI's or Borg-Warner's certificate of incorporation or bylaws, each
as currently in effect, or any contract, agreement, document,
instrument, commitment or other obligation to which such corporation
is a party or by which its assets, properties or businesses is bound
which, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect on Purchaser's assets or business;
(ii) except as it relates to matters which are the subject of trade law or
trade regulation regarding mergers and acquisitions generally,
contravene, conflict with or result in a violation of the terms of, or
to the Knowledge of Purchaser, give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any
Governmental Authorization relating to any of the businesses, assets
or properties of the Purchaser that could reasonably be expected to
have a Material Adverse Effect on the Purchaser's business or assets;
or
(iii) except as it relates to matters which are the subject of trade
law or trade regulation regarding mergers and acquisitions generally,
contravene, conflict with or result in a violation, or give any
Governmental Body or other person the right to challenge any
transaction contemplated by this Agreement or the Related Agreements
or to exercise any remedy or obtain any relief under, any Law or
Order to which any of BW, BW-MI or Borg-Warner is a party or by which
its assets, properties or businesses is bound that could reasonably
be expected to have a Material Adverse Effect on the Purchaser's
business or assets.
(f) Finders. Purchaser has not engaged and is not directly or indirectly
obligated to any person acting as a broker or finder or in any similar
capacity in connection with the transactions contemplated hereby, other
than Merrill Lynch Pierce Fenner and Smith Incorporated, whose fees shall
be paid by Purchaser.
(g) No Consents. Except for an anticipated filing of a pre-merger
notification report under the HSR Act, and except for the German
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Approval, and except as set forth on Schedule 3.2(g), no notice, consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Body or person under or pursuant to any contract,
agreement, instrument, document, commitment or other obligation to which
Purchaser is a party or by which any of its assets, properties or
businesses is bound is required to be obtained or made in connection with
(x) the execution and delivery of this Agreement and the Related Agreements
by Purchaser or (y) the consummation by Purchaser of the transactions
contemplated hereby and thereby.
(h) Litigation. There presently exists no litigation, proceedings, actions,
administrative or arbitration proceedings or claims, at law or in equity,
or to the Knowledge of Purchaser, threatened against, relating to or
effecting Purchaser or its businesses, assets and properties, which could
reasonably be expected to result in the issuance of an order restraining,
enjoining or otherwise prohibiting or making illegal the consummation of
any of the transactions contemplated by this Agreement and the Related
Agreements.
(i) Financing. Purchaser has sufficient cash and/or available credit
facilities (and has provided Coltec with evidence thereof prior to the
date hereof) or commitments therefor (copies of which have been furnished
to Coltec prior to the date hereof) to pay the Purchase Price and to make
all of the necessary payments, including payments of fees and expenses, in
connection with the transactions contemplated by this Agreement and the
Related Agreements.
(j) Knowledge of Inaccuracy. None of the employees of Borg-Warner who are
listed on Schedule 3.2(j) has any Knowledge of any fact or circumstance
that would make any representation or warranty of Coltec contained in
Section 3.1 untrue or incomplete or which would constitute a grounds for
terminating this Agreement pursuant to Sections 10.3 or 10.4 hereof.
Coltec shall have the burden of proving the Knowledge required under this
Section 3.2(j).
3.3 Survival. The covenants, representations and warranties of each party
contained in this Agreement will survive the execution and delivery of this
Agreement and the Closing until the fifth anniversary of the Closing Date.
Subject to the provisions of Article IX of this Agreement, the termination of
the covenants, representations and warranties provided herein shall not affect
the rights of a party in respect of a claim made by such party if a Notice is
given in the manner and at the times required under Section 9.3 hereof by such
party and received by the other party on or prior to the expiration of the
survival period provided herein.
ARTICLE IV
ACTIONS BEFORE CLOSING
4.1 Access to Records and Facilities. Coltec hereby covenants to
Purchaser that, between the date hereof and the Closing and subject to the
Purchaser's obligation of confidentiality imposed by the Confidentiality
Agreement dated December 19, 1995, between Coltec and Borg-Warner (the
"Confidentiality Agreement"), Coltec will afford duly authorized employees,
agents, attorneys, accountants, consultants and other representatives of
Purchaser, displaying appropriate credentials, access, upon reasonable notice
and at agreed upon times, to all of the Operating Units, Assets, properties,
books and nonprivileged records of the Business and will permit such
representatives to make, at Purchaser's cost, reasonable physical and
environmental inspections thereof (including those referred to in Section 4.14
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below), the scope and extent of which will be subject to the reasonable
approval of Coltec, including inspections regarding the Business' environmental
practices, the environmental condition of the Assets and the Business'
compliance with Environmental Laws (including sampling and analysis of
materials), and of the Assets located thereon and to make abstracts from, or
take copies of, such books, records, or other documentation, or to obtain
temporary possession of any thereof as may be reasonably required by Purchaser,
and Coltec will furnish to Purchaser such information concerning the Business
and the Operating Units' assets, liabilities, or condition as Purchaser may
reasonably request. Coltec shall provide Purchaser access and permit Purchaser
to interview employees, customers, suppliers and other third parties regarding
the Business. With respect to Purchaser's right to access and review any
records relating to the employees of the Operating Units, such access and
review shall be subject to the terms and conditions set forth in this Section
4.1 and, in all cases, shall be subject to all privacy statutes and
non-disclosure provisions of applicable Laws. Notwithstanding anything
contained herein, the parties shall not use any information exchanged during
the course of negotiations and investigations concerning this transaction in a
manner that would constitute a violation of Law. Purchaser shall obtain all
necessary permits, licenses, and approvals, if any, required for the
inspections contemplated by this Section 4.1, and shall comply with all
applicable statutes, regulations or ordinances in conducting such inspections.
4.2 Interim Conduct of the Business. Coltec hereby covenants to Purchaser
that, from the date hereof to the Closing, Coltec will conduct the Business
only in the ordinary and usual course subject to Purchaser's approval of
certain transactions pursuant to Section 4.3 below. Without limiting the
generality of the foregoing, Coltec hereby covenants to Purchaser that, insofar
as the Business is concerned, Coltec will:
(a) use its reasonable commercial efforts to preserve substantially
intact the Business' relationships with suppliers, customers,
employees, agents, consultants, creditors and others having business
dealings with the Business or the Divisions (such efforts will include
(i) continuing its ordinary course treatment of such persons and (ii)
reasonable transition activities);
(b) maintain in full force and effect its existing policies of
insurance which materially affect the Business;
(c) maintain all Intellectual Property to be included as part of the
Assets in substantially the same standing as exists on the date hereof
and continue the prosecution of all applications therefor; and
(d) continue performance in the ordinary course of its obligations
under contracts, commitments or other obligations to be included as
part of the Assets.
(e) All hazardous waste accumulation containers, including, but not
limited to, trash cans, dumpsters, drums and tanks, will be emptied
and the contents removed from the Real Property on or before the
Closing by Coltec.
4.3 Purchaser's Approval of Certain Transactions. Coltec hereby covenants
to Purchaser that, except as may otherwise be required under this Agreement,
from the date hereof to the Closing, insofar as the Business is concerned,
Coltec will not do any of the following without the prior written approval of
Purchaser which approval will not be unreasonably withheld or delayed.
Purchaser shall nominate an individual ("Approval Contact") to receive requests
for approval of the following actions. The Approval Contact or his or her
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designee shall approve or disapprove such requests by Coltec whether made
orally or in writing within 5 business days of receiving such request. If the
Approval Contact does not approve or disapprove Coltec's request within 5
business days, the request shall be deemed approved:
(a) incur or permit the incurrence of any debt, borrow money or incur
any obligation or other liability which would constitute an Assumed
Liability, except in the ordinary course of the Business;
(b) purchase, lease, transfer, dispose, encumber or subject to any
lien, any of the Real Property or interest therein;
(c) purchase or lease any Assets, other than in the ordinary course of the
Business, having a value exceeding Five Hundred Thousand Dollars
($500,000) in the aggregate or transfer or sell any Assets, other than
in the ordinary course of business of the Business, having a value
exceeding One Hundred Thousand Dollars ($100,000) in the aggregate;
(d) enter into any lease of personal property or any renewals thereof
involving a term of more than one year or rental obligation exceeding
One Hundred Thousand Dollars ($100,000) per annum in the aggregate;
(e) permit to be incurred any Encumbrances of any of the Assets except as
may be permitted by this Agreement;
(f) except for normal merit or cost-of-living increases and changes in job
responsibilities in accordance with the past practices of Coltec and
except as required in the UAW Agreement, increase the rate of
compensation for any of the employees of Coltec related to the conduct
of the Business or otherwise enter into or modify or amend any
employment, consulting or managerial services agreement affecting or
relating to the Business which are to be assumed by Purchaser;
(g) commence, enter into or alter any pension, retirement, profit-
sharing, employee stock option or stock purchase, bonus, deferred
compensation, incentive compensation, life insurance, health
insurance, fringe benefit or other employee benefit plan or
arrangement which will affect employees of Coltec related to the
conduct of the Business after Closing;
(h) make any new commitments or increase any previous commitments for
capital expenditures for the Business exceeding Five Hundred Thousand
Dollars ($500,000) in any individual case or Two Million Dollars
($2,000,000) in the aggregate, provided that any new commitment or any
increase in a previous commitment for capital expenditures which is
not specifically contemplated in Coltec's 1996 capital budget for the
Business which was furnished to Purchaser prior to the date of this
Agreement will require Purchaser's advance written approval, which
will not be unreasonably withheld;
(i) either accelerate or delay the sale of Products; or sell, buy or
dispose of any inventory all except in the ordinary course of the
Business;
(j) enter into any transaction, contract or commitment or Permit outside
of the ordinary course of the Business which will become an Assumed
Liability, waive any right of substantial value or
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cancel any debt or claim affecting any Asset, other than intercompany debt
and except in the ordinary course of the Business; or
(k) sell, assign, transfer, license or convey any of the Intellectual
Property except consistent with past practice and in the ordinary course
of the Business.
4.4 Consents to Assignment.
(a) Each of Purchaser and Coltec shall (i) take all commercially reasonable
steps necessary or desirable, and proceed diligently and in good faith
and use all commercially reasonable efforts, as promptly as practicable to
obtain all consents, approvals or actions of, to make all filings with and
to give all notices to all Governmental Bodies or any other person required
of Purchaser and Coltec to consummate the transactions contemplated hereby,
(ii) provide such other information and communications to such Governmental
Bodies or other persons as such Governmental Bodies or other persons may
reasonably request in connection therewith, and (iii) provide reasonable
cooperation to the other party in obtaining all consents, approvals or
actions of, making all filings with and giving all notices to each
Governmental Body or other persons required to consummate the transactions
contemplated hereby and the Related Agreements. Coltec shall not agree to
any modification of any contract, agreement or Permit without the written
consent of Purchaser in the course of obtaining any such consent, which
consent shall not be unreasonably withheld or delayed by Purchaser. Coltec
shall bear the cost of obtaining consents to the assignment of Permits,
contracts and other agreements which relate to the Business. Each party
shall bear its own individual costs in obtaining any other consent, permit
or approval. All costs associated with assigning or transferring the
ownership of the Intellectual Property shall be borne by Purchaser.
(b) Subject to the following sentence, if Coltec is unable to obtain any
consent, approval or waiver of the assignment to Purchaser of any
Contract or Permit as required by this Agreement, the provisions of Section
7.2 below will apply. If Coltec is unable to obtain any consent, approval
or waiver referred to in Section 5.1(d) below, the condition precedent set
forth in Section 5.1(d) will not be deemed to be satisfied unless Coltec,
at or before Closing, provides Purchaser with a reasonable and lawful
arrangement which, in Purchaser's reasonable opinion, provides Purchaser
with all of the rights and benefits which Purchaser would have received had
such consent, approval or waiver been obtained for the entire duration that
such rights and benefits would have accrued to Purchaser had such consent,
approval or waiver been obtained, without cost or penalty to Purchaser, and
Coltec will indemnify and hold Purchaser harmless (pursuant to Section
9.2(a)(3) below, without any minimum dollar limitation) against any Damage
suffered by Purchaser if such arrangement does not provide such rights and
benefits to Purchaser (provided, however, that Coltec will only be
obligated to indemnify and hold Purchaser harmless with respect to such
Damages to the extent that the Damages relate to the validity or
enforceability of the arrangement which is made in lieu of the consent,
approval or waiver, as opposed to claims related to the actual benefits,
rights and obligations conferred by the arrangement). Purchaser will, at
Coltec's request, pay Coltec or a third party any payments which would have
been payable by Purchaser after the Closing Date in respect of the Permit,
Contract or other item associated with a consent, approval 22
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or waiver which is not obtained (e.g., rent under a lease which is not
assigned) and for which a substitute arrangement is provided under
this Section 4.4(b) (provided that (i) Coltec uses such payment to
cover the amount which would have been payable under the Permit,
Contract or other item to which the consent, approval or waiver
related (e.g., rent, but not the cost of securing a sublease or other
arrangement), (ii) Purchaser will pay only the actual amount paid by
Coltec or charged by the third party in clause (i) and no other amount
and (iii) Purchaser will not pay more than the amount of payments
which were required under the Permit, Contract or other item
associated with the consent, approval or waiver which was not
obtained).
4.5 Government Notification. Coltec hereby covenants to Purchaser, and
Purchaser hereby covenants to Coltec, that the parties will proceed promptly
with the preparation and filing of any required notification and documentation
under Title II of the HSR Act and the rules of the FTC thereunder.
Additionally, the parties shall cooperate with preparing and filing all
requests for additional information made by the appropriate antitrust review
authority having jurisdiction over the HSR filing. Purchaser and Coltec
Industries Inc will share equally and pay to the FTC the appropriate filing fee
totalling the full amount required under the rules of the FTC for a single
application for one acquiring person, which fee shall not exceed Forty Five
Thousand Dollars ($45,000) in the aggregate. Purchaser shall pay all required
filing fees in excess of one half of such aggregate amount. Purchaser, at its
own expense, shall prepare for and file any notification or documentation
required for the German Approval. Coltec shall cooperate fully, at no cost,
with Purchaser's efforts to obtain the German Approval.
4.6 Parties' Reasonable Commercial Efforts. From the date hereof to the
Closing, the parties will cooperate and use their respective commercially
reasonable efforts to cause the conditions set forth in Article V to be
satisfied on or before the Closing Date, including, without limitation,
obtaining, without cost or penalty to or imposition of adverse condition upon,
Purchaser, any required consents to assignment to Purchaser of all rights and
obligations under any leases or contracts and Permits and to consummate and
make effective the transactions contemplated by this Agreement and the Related
Agreements.
4.7 Transition Services Agreement. If required to assist Purchaser, the
parties will negotiate a Transition Services Agreement to be executed on or
before Closing whereby Coltec Industries Inc will provide certain interim
administrative services and assistance, similar in nature and scope to those
currently provided, at Purchaser's expense and option for a six month period
following Closing, for which Coltec Industries Inc will be reimbursed for all
costs and expenses (including overhead) it incurs in providing such services.
4.8 Title Commitment and Survey.
(a) Coltec shall deliver to Purchaser commitments for a 1992 Form B ALTA
Owner's (or in the case of Real Property--Leased a Leasehold) Title
Insurance Policy (the "Title Commitments") issued by Chicago Title
Insurance Corporation (the "Title Company") in form satisfactory to
Purchaser. The Title Commitments with respect to each parcel of Real
Property which will commit the insurer to insure that, with respect to
Real Property--Owned, the fee simple absolute title to the parcel of
Real Property described therein is marketable and valid and vested in
Purchaser and, with respect to Real Property--Leased, that the
leasehold is good and marketable subject to the rights of the lessor
under the lease, and the lessor named in the lease was the owner of
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the Real Property--Leased on the date of the signing of the lease and
the recording of notice of the lease in the appropriate governmental title
registry, subject in each case only to the Permitted Encumbrances in
respect of such Real Property and to all exceptions which Purchaser has
approved (the "Approved Encumbrances") and to no other exceptions, printed
or otherwise. Each Title Commitment will be accompanied by readable copies
of all documents cited as exceptions to title therein (the "Underlying
Documents"), which will be certified by the Title Company as true, correct
and complete copies of the Underlying Documents as recorded on the land
records. At the Closing, Coltec will deliver to Purchaser the title
insurance policies covered by the Title Commitments. In lieu of a policy
the Title Company may issue a "mark up commitment" indicating that the
Title Company's requirements have been satisfied and that a policy as
required hereunder will be issued promptly following the Closing. Such
title insurance policies shall (i) be in the amounts set forth on Schedule
4.8(a) (which amounts, however, shall not be binding for the purpose of
allocating the Purchase Price), (ii) be issued by the Title Company, (iii)
show in Schedule A thereof the approved survey description of such Real
Property and each easement appurtenant thereto, with the standard printed
exceptions deleted, and otherwise show in Schedule B thereof only the
Permitted Encumbrances and the Approved Encumbrances, and (iv) shall be
accompanied by the endorsements listed on Schedule 4.8(a) and contain such
endorsements as may reasonably be requested by Purchaser. No title
insurance will be necessary for the property located in Kettering, England.
(b) Coltec shall also deliver a current ALTA boundary survey of each Real
Property certified to Purchaser and the Title Company (and such other
persons as Purchaser may require) by a registered land surveyor or engineer
containing legal descriptions of each Real Property and showing (1) all
adjacent and interior public streets and roadways, (2) the exact location
of all access roads, and entry buildings and points of all utilities to the
Real Property, (3) the exact location of all buildings and improvements,
(4) the exact location of all recorded or visible easements on or servicing
the Real Property, and (5) the number of parking spaces. The surveys will
certify to Purchaser, the Title Company, and such other persons or entities
as Purchaser may desire that no portion of any Real Property lies within a
federally designated flood plain, except as shown; and that there are no
encroachments either onto or off of the Real Property, except as shown.
The legal description of the Real Property set forth in the Title
Commitment will conform exactly to the legal descriptions set forth in the
survey required under this Section 4.8(b). No survey will be necessary for
the property located in Kettering, England.
(c) If objection to the title to any Real Property is made by Purchaser within
ten days after the date of receipt of the Title Commitment, together
with all Underlying Documents thereto, and the survey referred to in
Section 4.8(b), that the title is not in the condition required for
performance under this Agreement or the title and survey disclose a
condition of the Property which, if enforced, would impair the ability of
the Purchaser to operate the Real Property in the manner in which it is
currently operated to achieve the economic results reflected in the
Financial Statements (including those delivered under Section 7.9 below),
Coltec will have ten days from the time that it is notified in writing of
the particular defect claimed to provide Purchaser with a revised Title
Commitment evidencing that such defect has been remedied and/or, with
Purchaser's consent, insured over in a manner satisfactory to Purchaser.
If Coltec is unable to obtain such revised Title Commitment within such ten
day
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period and the defect is other than a lien or encumbrance securing a
liquidated amount and if the subject Real Property is identified on
Schedule 4.8(c), Purchaser will have the option to (1) proceed with
this transaction, in which event the subject Real Property will be
retained by Coltec at no cost or penalty to Purchaser and will be
leased (or subleased) to Purchaser for a period not to exceed 12
months for a monthly rent in an amount set forth on Schedule 4.8(c),
until such time as Purchaser is ready to move the Business operations
from such Real Property to a new location; (2) reduce the Purchase
Price by the amount set forth on Schedule 4.8(c) as the assumed value
of such Real Property; or (3) terminate this Agreement, in which case
neither Coltec nor Purchaser will have any liability to the other. If
the defect is other than a lien or encumbrance securing a liquidating
amount and if the Real Property is not identified on Schedule 4.8(c),
Purchaser will have the ability to terminate this Agreement, in which
case neither Coltec nor Purchaser will have any liability to the
other. If the defect is a lien or encumbrance securing a liquidated
amount, Coltec shall pay and satisfy or bond and obtain title
insurance over the defect at or before Closing, and if necessary shall
use the Closing proceeds or the appropriate portion thereof for that
purpose.
4.9 Certificates of Occupancy. Coltec will cooperate in Purchaser's
application(s) for certificates of occupancy necessary for Purchaser's
operation of the Business after Closing with respect to the Facilities. Prior
to Closing, Coltec will (a) furnish information reasonably necessary to
complete Purchaser's application for the said certificates pertaining to the
Facilities and (b) subject to the provisions of Section 4.1 hereof, provide
reasonable access to the Facilities for such inspection upon reasonable prior
notice. Subject to Section 10.3(a)(iii)(C), in the event, as a result of such
inspections, the relevant Governmental Body issues a report requiring repairs
or modifications to any Facility, Coltec agrees to complete all such required
repairs or modifications and the Closing shall be delayed until the repairs and
modifications are complete and the Governmental Body has approved same.
4.10 Notification. Between the date of this Agreement and the Closing
Date, each party will promptly notify the other party in writing if either
becomes aware of any fact or condition that causes or constitutes a breach of
any of its covenants or representations and warranties as of the date of this
Agreement, or if Coltec or Purchaser becomes aware of the occurrence after the
date of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a breach of any such
covenant or such representation or warranty had such representation or warranty
been made as of the time of occurrence or discovery of such fact or condition.
Should any such fact or condition require any change in the Schedules attached
to this Agreement if the Schedules were dated the date of the occurrence or
discovery of any such fact or condition, the applicable party will promptly
deliver to the other updated Schedules specifying such changes, which updated
Schedules must be reasonably satisfactory to the other party.
4.11 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Article X, Coltec will not, directly or indirectly,
solicit (including furnishing any information concerning the Business),
initiate or encourage any inquiries or proposals from, or negotiate with,
provide any non-public information to, or consider the merits of any
unsolicited inquires or proposals from, any person (other than Purchaser)
relating to any transaction involving the sale of Assets (other than in the
ordinary course of Business) or the Business.
4.12 Communications to Employees. Prior to the Closing Date, Coltec and
Purchaser shall consult with each other before issuing any written
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communications or otherwise making any public statements to employees of Coltec
relating to the transactions contemplated by this Agreement, and prior to
communicating with labor unions concerning any notice requirements contained in
the collective bargaining agreements which are affected by this Agreement. All
such communications will be jointly approved, such approval not to be
unreasonably withheld. Coltec shall have the sole responsibility for the
matters covered by Section 8.13 below.
4.13 Environmental Transfer Laws. Prior to the Closing Date, Coltec, at
Coltec's sole expense, shall comply with the provisions of Environmental Laws
that require the submission of notice to Purchaser or to any Governmental Body
in connection with the transfer of title to the Assets and to the Business
("Environmental Transfer Laws") and shall deliver to Purchaser on or prior to
the Closing Date documents reasonably satisfactory to Purchaser that
demonstrate compliance in such regard with such Environmental Transfer Laws and
any documents required by such Environmental Transfer Laws that may be
necessary to convey title to each of the Assets and the Business. Purchaser
will cooperate to the extent reasonably necessary to effect Coltec's compliance
in such regard with such Environmental Transfer Laws.
4.14 Environmental Reviews and Inspections. Between the date of this
Agreement and the Closing, Purchaser, at its cost and expense, may have one or
more independent consultants perform reasonable environmental inspections,
reviews and audits of the Real Properties and the Facilities and the machinery
and equipment located at the Facilities (the "Environmental Inspection"),
including tests of air, soil (including surface and subsurface materials),
surface water and ground water, or any equipment located at the Facilities.
Purchaser will promptly restore any disturbance to the Assets which results
from the Environmental Inspection to the same or reasonably similar
predisturbed condition. Coltec will cooperate with Purchaser in such testing
activities, including making Coltec employees available to Purchaser and its
consultants. Purchaser shall obtain all necessary permits, licenses, and
approvals, if any, required for the inspections contemplated by this Section
4.1, and shall comply with all applicable statutes, regulations or ordinances
in conducting such inspections.
4.15 Work Plan. As far in advance of the Closing as is commercially
practicable, Purchaser will deliver to Coltec a list showing defects, required
repairs and other conditions (other than environmental matters) relating to the
Real Property and the Facilities which Purchaser identifies during its physical
inspection of the Real Properties and the Facilities, a copy of which shall be
added as Schedule 4.15 to this Agreement. Coltec will develop a work plan for
the items set forth on such Schedule, which will be subject to Purchaser's
review and approval, which will not be unreasonably withheld. Subject to
Coltec's right to terminate this Agreement pursuant to Section 10.3(a)(iii)(C)
(in which case the provisions of such Section 10.3(a)(iii)(C) will apply),
Coltec will correct all defects and make all repairs and modifications required
under the work plan in a workmanlike manner, and will complete such work as
soon as commercially practicable, either before or after the Closing, and
Purchaser will have the right to approve such work after completion by Coltec
(such approval not to be unreasonably withheld). To the extent Coltec makes
the corrections, repairs and modifications referred to in the preceding
sentence in the manner required by that sentence, Coltec will have no further
liability solely with respect to the defect or condition warranting such
repair, correction or modification. Purchaser will use commercially reasonable
efforts to cooperate (at no cost to Purchaser) with Coltec in making any
corrections, repairs and modifications required by this Section 4.15.
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ARTICLE V
CONDITIONS
5.1 Conditions to Purchaser's Obligations. The obligation of Purchaser to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of each of the following conditions (any of which may be waived by
Purchaser in whole or in part) at or before the Closing:
(a) The representations and warranties of Coltec contained in this
Agreement shall be true, accurate and complete in all material
respects as of the date hereof and as of the Closing as if such
representations and warranties had been made anew as of the Closing,
provided, however, that to the extent that the representations or
warranties of Coltec are qualified by exceptions which do not have a
Material Adverse Effect, if such exceptions could either individually
or in the aggregate reasonably be expected to have a Material Adverse
Effect, then this condition will be deemed to have not been satisfied
(Coltec will use commercially reasonable efforts to provide Purchaser
with advance written notice before the Closing Date of the items which
come within the scope of this proviso);
(b) Coltec shall have materially performed and complied with all
agreements and conditions required by this Agreement to be performed
or satisfied by Coltec on or prior to the Closing and Coltec shall
have delivered to Purchaser all documents, certificates and
instruments required to be delivered by Coltec under the terms of this
Agreement;
(c) Coltec shall have taken or caused to be taken all corporate and other
proceedings or actions in connection with the transactions
contemplated by this Agreement;
(d) Coltec shall have obtained all of the material consents and approvals
(including as to transfer of Permits), or effective waivers thereof,
identified by an asterisk on Schedule 3.1(g) with the exception of any
such consents, approvals or waivers listed thereon which in any way
relate to the UAW Agreement and except as provided in Section 4.4(b);
(e) Coltec will cause its Affiliates to assign any Assets which are
jointly owned or owned solely by such Affiliate, and will deliver to
Purchaser such transfer documents as Purchaser reasonably requests;
(f) Coltec shall have obtained and delivered to Purchaser the Title
Commitments as required by Section 4.8 of this Agreement and Coltec
shall have advised Purchaser in writing that the transfer to and
operation of the Real Property by Purchaser in the manner the Real
Property is currently operated will not violate or cause the
revocation of any Permits, except for such violations or revocations
which would not, individually or in the aggregate, have a Material
Adverse Effect;
(g) Coltec shall obtain, at Coltec's sole cost and expense, and deliver to
Purchaser an estoppel certificate from the landlord under each lease
of Real Property-Leased constituting an Assumed Liability stating (a)
that such lease is in full force and effect and has not been amended,
modified or supplemented other than as set forth on Schedule 2.2(b),
(b) that all rent and other sums and charges payable under such lease
are current and setting
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forth the date through which such payments have been made, (c) the
amount of any tenant security or other similar deposit held by or on
behalf of such landlord under such lease, (d) that no notice of
default on the part of Coltec or termination notice has been served
under such lease that remain outstanding, (e) that to such landlord's
knowledge, no uncured material default or termination event or
condition exists under such lease and (f) that the consummation of the
transactions provided for herein will not constitute a default under
such lease or grounds for the termination thereof; and
(h) Purchaser will have conducted its physical inspection of the Real
Properties and Facilities pursuant to Section 4.1 above and the
Environmental Inspection pursuant to Section 4.14 above and will be
satisfied, in its reasonable discretion, (i) with all aspects of the
Real Property and the Facilities, including but not limited to, its
physical condition, suitability for the operation of the Business,
zoning, permit and licensing status (including the transferability
thereof), compliance with Laws, contractual arrangements for utilities
and city services, and title and survey matters, which shall include
Purchaser's review of the boundaries of the Real Property, of the
inclusion of the buildings, equipment and machinery which constitute
Assets within such boundaries or on appropriate and insurable
appurtenant easements, of the Real Property's access to public streets
and ways, and of the availability of utilities through lines directly
from public roads or utility company rights of way or properly
recorded and insurable private easements, and (ii) with the results of
its Environmental Inspection. Purchaser will use commercially
reasonable efforts to conduct and complete such physical inspection
and the Environmental Inspection as soon as practicable after the date
of this Agreement. If Purchaser is unsatisfied with the results of
such physical inspection or the Environmental Investigation, it will
be free to terminate this Agreement without any liability. Purchaser
will advise Coltec on or before June 3, 1996 as to its decision as to
whether the condition specified in clause (i) of the first sentence on
this Section 5.1(h) has been satisfied; provided, however, such date
may at Purchaser's election be extended to the date 10 days after
Purchaser's receipt of the Title Commitment, Underlying Documents and
survey described in Sections 4.8(a) and (b). If Purchaser has not
timely notified Coltec as to whether the condition specified in clause
(i) of the first sentence of this Section 5.1(h) has been satisfied,
then the condition shall be deemed to have been waived.
5.2 Conditions to Coltec's Obligations. The obligation of Coltec to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions (any of which may be waived by Coltec
in whole or in part) at or before the Closing:
(a) The representations and warranties of Purchaser contained in this
Agreement shall be true, accurate and complete in all material
respects as of the date hereof and as of the Closing as if such
representations and warranties had been made anew as of the Closing;
(b) Purchaser shall have materially performed and complied with all
agreements and conditions required by this Agreement to be performed
or satisfied by Purchaser on or prior to the Closing, and Purchaser
shall have delivered all documents, certificates
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and instruments required to be delivered by Purchaser under the terms
of this Agreement;
(c) Purchaser shall have taken or caused to be taken all corporate and
other proceedings or actions in connection with the transactions
contemplated by this Agreement; and
(d) Purchaser shall have obtained all of the material consents and
approvals, or effective waivers thereof, identified by an asterisk on
Schedule 3.2(g).
5.3 Conditions to Coltec's and Purchaser's Obligations. The obligations of
Coltec and Purchaser to consummate the transactions contemplated by this
Agreement are subject to the satisfaction of the following conditions at or
before the Closing:
(a) All requisite governmental approvals and authorizations necessary for
consummation of the transactions contemplated hereby, including the
German Approval, shall have been duly issued or granted and the
applicable waiting periods prescribed by Title II of the HSR Act and
the rules of the FTC thereunder shall have expired; and
(b) there shall not have been issued and in effect any injunction or
similar legal order prohibiting or restraining consummation of any of
the transactions herein contemplated and no legal action or
governmental investigation which might reasonably be expected to
result in any such injunction or order shall be pending.
ARTICLE VI
CLOSING
6.1 Time, Date and Place of Closing. The closing ("Closing") will occur
at 10:00 a.m. (Central Time) on the second business day following the latter of
(a) the date on which the applicable HSR Act and German Approval waiting
periods have expired or terminated and all Closing conditions have been
satisfied or waived and (b) the date on which the deliveries in Section 6.2 are
made by Coltec, or such other date as the parties may agree in writing (the
"Closing Date"). The Closing will take place at the offices of Borg-Warner
Automotive, Inc, 200 South Michigan Avenue, Chicago, Illinois, or at such other
place as the parties may agree in writing. The Closing will be deemed to have
occurred as of 11:59 p.m. (Central Time) on the Closing Date.
6.2 Deliveries by Coltec. At the Closing, Coltec will deliver to
Purchaser the following:
(a) General warranty deeds granting to Purchaser good and marketable title
to the Real Property-Owned and an assignment of the leasehold in the
Real Property-Leased including Coltec's interests as lessor,
sublessor, lessee or sublessee (subject in each case only to Permitted
Encumbrances and Approved Encumbrances) together with, to the extent
the same are held by Coltec, all rights, privileges, easements and
appurtenances thereto, and all affidavits, governmental forms and
other documents required in connection therewith to convey such title
to Purchaser subject only to Approved Encumbrances and Permitted
Encumbrances.
(b) Bills of sale and other instruments of conveyance, assignment and
transfer, as appropriate or as Purchaser may reasonably request,
pursuant to which Coltec conveys, or causes Stemco Inc, on behalf of
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its Performance Friction Products Division, to convey, ownership of
the Assets (including Contracts and Permits) to Purchaser as provided
herein.
(c) An executed license agreement in the same form as that attached as
Exhibit 6.2(c) governing Purchaser's use of the "Holley Automotive"
marks in connection with the Business (the "Holley Automotive License
Agreement").
(d) Executed license agreements in the same form as that attached as
Exhibit 6.2(d) with regard to "GYLON" and "HY-CARB" Products
and the use of the GYLON and HY-CARB marks by the Purchaser in
conjunction with such Products (the "Gylon and Hy-Carb License
Agreements").
(e) An executed Patent License Agreement.
(f) An instrument conveying and assigning the patents and applications set
forth on Appendix B.
(g) Title policies pursuant to the Title Commitments will be issued
effective as of the recording of the deeds and leasehold assignments
will be issued as provided in Section 4.8(a) above.
(h) Such other documents including certificates of good standing as
Purchaser may reasonably request to effectuate the transactions
contemplated by this Agreement.
6.3 Deliveries by the Purchaser. At the Closing, the Purchaser will
deliver to Coltec the following:
(a) The payment to be made at Closing pursuant to Section 2.6.
(b) An agreement whereby the Purchaser will assume and agree to pay and
discharge the Assumed Liabilities.
(c) The executed License Agreements.
(d) Such other documents including certificates of good standing as Coltec
may reasonably request to effectuate the transactions contemplated by
this Agreement.
(e) An executed license agreement regarding certain rights to be granted
back to Coltec Industries Inc under certain patents that are to be
assigned to Purchaser pursuant to this Agreement, in the form of
Exhibit 6.3(e) (the "Patent License Agreement").
ARTICLE VII
ACTIONS AFTER CLOSING
7.1 Further Conveyances. After the Closing, except as agreed to in Section
4.4, Coltec will, without further cost or expense to Purchaser, execute and
deliver to Purchaser (or cause to be executed and delivered to Purchaser), such
additional instruments of conveyance, and Coltec will take such other and
further actions as Purchaser may reasonably request to more completely sell,
transfer and assign to Purchaser and vest in Purchaser ownership of the Assets
as contemplated herein.
7.2 Further Consents to Assignment. To the extent Coltec shall have failed
to obtain prior to Closing the consent or approval (or an effective waiver
thereof) of any person or persons in respect of any item described in
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Section 4.4 hereof (other than a consent or approval referred to in Schedule
3.1(g), unless Purchaser has agreed to waive the condition that such consent or
approval be delivered), after the Closing:
(a) Coltec will use its commercially reasonable efforts to obtain from
such person or persons the required consents or approvals (or
effective waivers thereof); and
(b) if the parties are unable to obtain any such consent, approval or
waiver, then (i) this Agreement shall not constitute or be deemed to
be a contract to assign the same if an attempted assignment without
such consent, approval or waiver would constitute a breach of such
item or create in the issuer or any party thereto the right or power
to cancel or terminate such item and (ii) Coltec will cooperate with
Purchaser in any reasonable arrangement designed to provide Purchaser
with the benefit of the rights of Coltec under such item at no cost or
penalty to Purchaser, including enforcement (at Coltec's expense) of
any and all rights of Coltec against such person as Purchaser may
reasonably request (provided, however, that Coltec will only be
obligated to pay for the enforcement or defense of any claim under
such an arrangement to the extent that the claim relates to the
validity or enforceability of the arrangement which is made in lieu of
the consent, approval or waiver, as opposed to claims related to the
actual benefits, rights, and obligations conferred by the
arrangement).
7.3 Access to Former Employees. After the Closing, Purchaser will make
available to Coltec, Purchaser's (or its subsidiaries') employees who may
reasonably be needed in order to defend or prosecute any legal or administrative
action to which Coltec is a party or any matter referred to in Section 7.8
below. Coltec will pay or reimburse Purchaser for its reasonable costs and
expenses which may be incurred in connection therewith (including a per diem
charge which reflects the actual out of pocket cost to Purchaser of such
employee). Purchaser shall not be required, however, to maintain in its employ
after Closing any employee by reason of this Section 7.3.
7.4 Use of Trademark. After the Closing, other than as permitted by the
License Agreements, Purchaser will not use the trademarks or tradenames of the
Excluded Intellectual Property in any way; except Purchaser shall be permitted
(a) for the period of up to six (6) months after Closing, to use "Coltec" and
"Holley" and the associated corporate logo (design) in the building, equipment,
furniture, stationery, office supplies and the like existing on the Closing
Date, and (b) for the period of up to six (6) months after Closing or until such
items are consumed, whichever is earlier, to use "Coltec", and "Holley" and the
associated corporate logo (design) on the inventory of Products and the
corresponding packaging therefor existing on the Closing Date.
7.5 Warranty Claims. After the Closing, Purchaser shall honor, for
Products manufactured and sold by Coltec or the Operating Units prior to the
Closing Date in the conduct of the Business, those warranty claims made in
accordance with written warranties given by Coltec or the Operating Units to
their customers (a) which, when aggregated with the cost of all prior claims
for such model number, are expected to cost no more than $100,000 in any one
calendar year and (b) which, when aggregated with the cost of all prior claims
for such model number, are expected to cost more than $100,000 in any one
calendar year and are approved in advance by Coltec, by repairing or replacing
defective Products. With regard to such warranty claims, Coltec shall reimburse
Purchaser within ten (10) business days after Purchaser's invoice date for the
actual and reasonable costs incurred by Purchaser in performing such warranty
work, provided that Purchaser shall provide to Coltec, upon request,
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documentation reasonably supporting such costs. Purchaser shall make available
for inspection by Coltec, on reasonable notice, records relating to the need
for such work, the cost of performing such work and the applicability of
Coltec's written warranties to such warranty work. As to any warranty claim
which Purchaser expects, in good faith, to cost more than $100,000 when
aggregated with the cost of all prior claims for such model number in any one
calendar year, Purchaser shall notify Coltec of such claim in writing. If
Coltec does not give a written response regarding such claim within 30 days
after receipt of such notification, such claim shall be considered approved for
purposes of this Section 7.5 and Coltec shall be required to reimburse
Purchaser. If Coltec denies liability for such warranty claim, Purchaser may
determine to honor or deny such claim without prejudicing any of its rights or
remedies hereunder. Purchaser shall not be responsible for any product recall
obligations or product liability of Coltec for Products sold prior to the
Closing.
7.6 Covenant Not to Compete/Nonsolicitation. Until the fifth anniversary
of the Closing, Coltec shall not, anywhere in the World, as an owner,
consultant, joint venturer, member of a limited liability company, general
partner, controlling shareholder of a privately-held corporation or shareholder
to the extent of twenty-five percent (25%) or more of the outstanding shares of
a publicly-held corporation, either directly or indirectly, engage or
participate in or assist others in engaging or participating in the business of
designing, manufacturing and/or marketing products that are directly competitive
with the Business as conducted as of the Closing or the Products existing or
under development as of the Closing; except the Licensee under the Patent
License Agreement and its sublicensees and/or assigns thereunder, provided the
Patent License Agreement has not been terminated, may engage and participate in
the business of designing, manufacturing and marketing the products expressly
licensed in Sections 3.1, 3.2, 3.3 and 3.4 of the Patent License Agreement
subject to the restrictions stated therein. For two (2) years after the Closing
Date, Coltec shall not without Purchaser's prior written consent, directly or
indirectly, solicit for employment, hire as an employee, consultant or
contractor or otherwise engage any employee who was employed by Coltec related
to the Business within six (6) months of the date hereof unless such person is
no longer employed by Purchaser at the time Coltec solicits such employee for
employment. Coltec shall not at any time sell, license or otherwise transfer
Gylon or Hy-Carb technology for use as a friction material in powertrain
components used in automotive vehicles, trucks, or off-road vehicles.
Notwithstanding anything contained herein, Coltec and its Affiliates shall have
the unrestricted right to sell, license or otherwise transfer Gylon or Hy-Carb
technology except as provided in the immediately preceding sentence and to
manufacture, use and sell Gylon and Hy-Carb products, other than Products of the
Business, to third parties. Purchaser, its Affiliates, successors and assigns
shall only make, use and sell Gylon and Hy-Carb Products for use as a friction
material in powertrain components of automotive vehicles, trucks and off-road
vehicles.
7.7 Dispute Resolution. If, after the Closing, but before the expiration
of the applicable survival periods set forth in Section 3.3 of this Agreement,
the parties should have any dispute arising out of or relating to this Agreement
or the parties' respective rights and duties hereunder (excluding only those
matters relating to the Adjustment to the Purchase Price that are to be resolved
in accordance with the process described in Section 2.7 hereof) (in each case a
"Dispute"), then the parties will resolve such Dispute in the following manner:
(a) Either party may at any time deliver to the other a written notice
identifying a Dispute (the "Resolution Notice"). The Resolution
Notice shall initiate the dispute resolution mechanism contemplated by
this Section 7.7. Within fifteen (15) days after delivery of the
Resolution Notice, the receiving party shall submit to the other a
written response. The Resolution Notice and the response thereto
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shall state with particularity the facts and conditions giving rise to
the Dispute and shall include (i) a statement of each party's position
and a summary of arguments supporting that position and (ii) the name
and title of the persons who will represent that party in the
negotiations contemplated by Section 7.7(b) below.
(b) Within thirty (30) days after delivery of the Resolution Notice, the
designated representatives of both parties shall attempt in good faith
to resolve the Dispute and shall meet at a mutually acceptable time
and place, and thereafter as they reasonably deem necessary, to
attempt to resolve the Dispute. All negotiations pursuant to this
Section 7.7(b) shall be confidential and shall be treated as
compromise and settlement negotiations for purposes of applicable
rules of evidence.
(c) If the representatives of the parties are unable to resolve the
Dispute through negotiations within ninety (90) days after delivery of
the Resolution Notice, then the Dispute shall be resolved by final and
binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA"), as the same may
be modified by the terms of this Agreement. Within ten (10) days of
the expiration of the ninety (90) day period referenced in this
Section 7.7(c), the demanding party may initiate arbitration by making
a written demand for arbitration on the other party and simultaneously
filing copies of the demand, together with the required fees, with the
office of the AAA in Chicago, Illinois. Within ten (10) business days
after receipt of such demand by the other party, each party shall
designate one arbitrator (who shall have had no material business
relationship with the designating party within the last three (3)
calendar years) and the two arbitrators named by the parties will,
within ten (10) business days thereafter, select a third arbitrator
(the three arbitrators being collectively referred to herein as the
"Arbitration Panel"). The Arbitration Panel shall cause a hearing to
be held within sixty (60) calendar days after the date the third
arbitrator is selected and shall render an award within ninety (90)
calendar days from the commencement date of the hearing based on the
unanimous or majority decision of the arbitrators.
(d) The place of arbitration shall be Chicago, Illinois. The parties
expressly covenant and agree to be bound by the decision of the
Arbitration Panel and accept any such decision as the final
determination of the matter in dispute. Any decision, award and/or
judgment rendered by the Arbitration Panel may be entered in any court
having competent jurisdiction. In no event shall any demand for
arbitration be made after the date that institution of legal or
equitable proceedings based upon the claim, dispute or other matter
would be barred by this Agreement. The expenses and fees of the
Arbitration Panel shall be borne as set forth in the award of the
Arbitration Panel. Each party shall bear its own legal fees and
expenses.
(e) The Arbitration Panel is empowered to award any damages it believes
are reasonable under the circumstances, but it is not empowered to
award punitive damages.
(f) The procedures specified in this Section 7.7 shall be the sole and
exclusive procedures for the resolution of a Dispute; provided,
however, that a party, without prejudice to the above procedures, may
seek a preliminary injunction or other provisional judicial relief, if
in its sole judgment such action is necessary to avoid irreparable
damage or to preserve the status quo.
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7.8 Access to Records. Coltec and the Purchaser each agree to maintain and
make reasonably available to the other, in such form as the other shall
reasonably request, all books and records of or relating to the Business which
are kept by such party and are reasonably necessary in connection with (i)
responding to inquiries regarding the Business from regulatory (including Tax)
authorities; (ii) the preparation of Tax returns and/or claims for refunds;
(iii) audits of Tax returns or claims for refund; (iv) responding to inquiries
from any customer or supplier of the Business; (v) any litigation involving
the Business to which Purchaser or Coltec or any of their respective Affiliates
is or becomes a party; (vi) any liability, claim or other litigation,
investigation or proceeding, whether pending, threatened or existing hereafter,
which may involve Purchaser or Coltec or any of their respective Affiliates, or
(viii) any indemnification obligation set forth in this Agreement. Each party
agrees to retain all such records for a period of ten years or in accordance
with past practice, whichever is longer, and to offer to turn such records over
to the other party before destroying them.
7.9 Financial Statements. Coltec will, within sixty (60) days after the
Closing Date, deliver to Purchaser audited financial statements for the Business
for the years ended December 31, 1994 and December 31, 1995, unaudited interim
financial statements for the Business for the quarters ended March 31, 1995 and
March 31, 1996 and an audited balance sheet for the Business as of the Closing
Date (the "Closing Date Balance Sheet"), together with the accountant's reports
with respect to such financial statements. Such financial statements will be in
accordance with GAAP (except, with respect to the interim financial statements,
for non-recurring normal audit adjustments), and will be in conformance with the
requirements of Regulation S-X (Form and Content of and Requirements for
Financial Statements, Securities Act of 1993, Securities Exchange Act of 1934,
etc.). Coltec's auditors will provide Purchaser with access to the workpapers
relating to such financial statements.
ARTICLE VIII
EMPLOYEES AND EMPLOYEE BENEFITS
8.1 Union Represented Employees - Warren Plant
(a) Assignment - Assumption. At the Closing:
(i) Coltec shall, except for the matters set forth in Section 8.1(a)(ii)
through (iv) below, assign to a BWA Subsidiary and the BWA Subsidiary
shall offer to assume the collective bargaining agreement, the
supplemental agreements and the letters of understanding listed in
Schedule 8.1(a) (collectively the "UAW Agreement") which agreement,
made November 1, 1994, is applicable to the hourly-rated production,
tool maker and maintenance personnel (the "Warren Union Represented
Employees") located at Coltec's Warren, Michigan Plant ("Warren
Plant"); provided however that such assignment and assumption shall
not be effective if the International Union, United Automobile,
Aerospace and Agricultural Implement Workers of America UAW and its
Local Union No. 983 (collectively, the "UAW Union") does not accept
the BWA Subsidiary's offer to assume the UAW Agreement pursuant to
Section 8.1(a)(v) below,
(ii) Coltec shall not assign, and neither the Purchaser nor the BWA
Subsidiary shall assume or have any liability for, the rights,
obligations and liabilities of the Holley Detroit Hourly Employees'
Pension Plan, a/k/a Coltec Industries Inc Non- Contributory Pension
Plan for Hourly Employees of Holley Automotive Division ("Holley UAW
Pension Plan"). Coltec shall retain the rights, obligations and
liabilities of the Holley UAW
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Pension Plan,
(iii)Coltec shall not assign, and neither the Purchaser nor the BWA
Subsidiary shall assume or have any liability for, the terms and
conditions of Article 19 of the UAW Agreement relating to the Pension
Supplement and the Agreement Regarding Pension Plan Amendment made
November 1, 1994 (collectively the "UAW Pension Agreement"). Coltec
shall retain the obligations and liabilities of the UAW Pension
Agreement and shall, in the manner more fully described in Section
8.3(a) below, fulfill the terms and conditions of Article 19 of the
UAW Agreement relating to the Pension Supplement and the Agreement
Regarding Pension Plan Amendment under the Holley UAW Pension Plan,
(iv) Coltec shall not assign, and neither the Purchaser nor the BWA
Subsidiary shall assume or have liability for, any group insurance
policies, obligations and liability of any kind (including, but not
limited to, those relating to health, dental, prescription drug, life,
accidental death and dismemberment and sickness and accident) under
the UAW Agreement with respect to (A) the Warren Union Represented
Employees who are not in active employment status at the Warren Plant
on the day immediately prior to the Closing Date (the "Non-Active
Warren Union Represented Employees") and (B) the terminated or retired
Warren Union Represented Employees (the "Former Warren Employees") and
(C) the Active Warren Union Represented Employees to the extent not
provided for in Section 8.5 below. Coltec shall retain such group
insurance, obligations and liabilities in the manner more fully
described in Section 8.5 below, and
(v) The BWA Subsidiary shall inform the UAW Union that it is willing to
assume the UAW Agreement subject to the exceptions set forth in
Section 8.1(a)(ii) through (iv) above.
(b) Employment. All of the Warren Union Represented Employees who are in
active employment status at the Warren Plant on the day immediately prior
to the Closing Date (the "Active Warren Union Represented Employees") shall
cease their employment status with Coltec at the Closing and simultaneously
therewith shall be offered employment by the BWA Subsidiary under the terms
and conditions of the UAW Agreement subject to the provisions of Section
8.1(a) above. Any Non-Active Warren Union Represented Employee who had a
right to return to employment at the Warren Plant under the UAW Agreement
(such as an employee on layoff status or on an approved medical or
disability leave of absence, etc.), all of whom are listed in Schedule
8.1(b), shall be extended an employment offer by the BWA Subsidiary at the
time each such employee is eligible, if at all, under the UAW Agreement to
return to work, and if employed, shall for the purposes of events which
occur after such date of employment be considered an Active Warren Union
Represented Employee.
8.2 Hourly Paid Non-Union Represented Employees and Salaried Employees.
(a) Employment. All of the hourly paid employees of Coltec related to the
Business who are not represented by a collective bargaining agent (the
"Non-Union Represented Employees") and all of the employees of Coltec
related to the Business who are paid on a salaried or commission basis (the
"Salaried Employees") (collectively, the "Non-Represented Employees") who
were engaged in the conduct of the Business and in active employment status
on the day immediately prior to the Closing
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Date (the "Active Non-Represented Employees") shall cease their employment
with Coltec at the Closing and simultaneously therewith shall be offered
employment with the BWA Subsidiary. Non-Represented Employees who were
not in active employment status and who on the Closing Date had rights to
return to employment (the "Non-Active Non-Represented Employees") under
Coltec's policies (such as employees on an approved medical or disability
leave of absence, approved personal leave of absence or employees having
recall rights pursuant to a written layoff policy, etc.) all of whom are
listed in Schedule 8.2(a) will be offered employment by the BWA Subsidiary
at the time that each such employee is eligible to return to work or
additional employment in the applicable job classification is deemed
warranted by the BWA Subsidiary, provided that at that time a right to
return to employment would have existed for such employee under Coltec's
policies had they been in effect. If such Non-Active Non-Represented
Employee is employed by the BWA Subsidiary pursuant to the preceding
sentence, such employee shall for the purposes of events which occur after
such date of employment be considered an Active Non-Represented Employee.
(b) Wage Rates. The BWA Subsidiary shall make each Active Non-Represented
Employee an offer of employment at the same current base hourly rate of
pay or current base monthly salary, as applicable, that was in effect for
such employee immediately prior to the Closing Date. The BWA Subsidiary
shall have the unlimited right to adjust any individual Non-Represented
Employee's wage rate at any time after employment is accepted.
8.3 Retirement Plans
(a) Holley UAW Pension Plan. With respect to the Holley UAW Pension
Plan, Coltec and the Purchaser agree as follows:
(i) As soon as practicable after the Closing, Coltec shall
amend the Holley UAW Pension Plan to provide that the service
of Warren Union Represented Employees with the BWA Subsidiary from
the Closing Date through October 31, 1997 will be counted as
Credited Service under the Holley UAW Pension Plan for the purpose
of computing any benefit, allowance or payment thereunder,
(ii) Coltec shall implement the scheduled January 1, 1997 benefit
increase under the Holley UAW Pension Plan as set forth in the
Agreement Regarding Pension Plan Amendment and shall be solely
responsible for the costs of such increased benefit level,
(iii) Concurrent with October 31, 1997, or at the time that it
is permissible pursuant to any Code and PBGC notice
requirements for the cessation of benefit accruals under
defined benefit pension plans, Coltec will freeze all benefit
accruals under the Holley UAW Pension Plan effective as of
October 31, 1997 and shall treat the Warren Union Represented
Employees as inactive deferred vested participants; provided
however, that all Warren Union Represented Employees who on the
day prior to the Closing Date did not have a vested benefit in
the Holley UAW Pension Plan shall become fully vested in the
benefit they had accrued as of the Closing Date and, if such
employee is employed by the BWA Subsidiary after the Closing
Date, in the benefit he/she accrues based on Credited Service
to the earlier of such employee's termination date or October
31, 1997,
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(iv) If a Warren Union Represented Employee retires from or is separated
from service with the BWA Subsidiary prior to October 31, 1997,
his/her eligibility for a Normal Retirement Benefit and/or Early
Retirement Benefit in accordance with the provisions of the Holley UAW
Pension Plan shall be based on the Credited Service such individual
actually accrued up to the date of retirement. If a Warren Union
Represented Employee retires from or is separated from service with
the BWA Subsidiary after October 31, 1997, he/she shall be entitled to
a deferred vested pension benefit pursuant to the terms of the Holley
UAW Pension Plan based on the Credited Service such individual
actually accrued up through October 31, 1997. Neither the Purchaser
nor the BWA Subsidiary shall be responsible for, or have any
obligations or liabilities with respect to, the Holley UAW Pension
Plan or any pension obligation pertaining to the UAW Agreement and the
Agreement Regarding Pension Plan Amendments for the period from the
Closing Date through October 31, 1997. Coltec shall indemnify and
hold Purchaser and the BWA Subsidiary harmless from and against all
claims related to the Holley UAW Pension Plan and the pension
obligation pertaining to the UAW Agreement and the Agreement Regarding
Pension Plan Amendments. The Purchaser or the BWA Subsidiary, as
applicable, shall provide to Coltec timely and accurate information
when requested to do so by Coltec, regarding the status of employment
of the Warren Union Represented Employees which information is needed
by Coltec for the administration of the Holley UAW Pension Plan after
the Closing and until such time as the Warren Union Represented
Employees terminate their employment with the BWA Subsidiary, and
(v) Within ten (10) days after January 1, 1997, the BWA Subsidiary shall
pay to Coltec a sum of money actuarially determined by Coltec's
actuary, Buck Consultants, based upon the actuarial assumptions used
in the 1995 Actuarial Valuation of the Holley UAW Pension Plan which
amount will equal:
(A) the present value of the cost attributable to the addition of
Credited Service accrued by the Warren Union Represented
Employees under the Holley UAW Pension Plan for service with the
BWA Subsidiary from the Closing Date through October 31, 1997
based on the pension benefit level of $19.00 for each year of
credited service pursuant to Section 8.3 (a)(i) above, and
(B) the present value of the cost attributable to the increase in the
pension benefit level effective as of January 1, 1997 from $19.00
to $20.00 for each year of Credited Service of the Warren Union
Represented Employees under the Holley UAW Pension Plan for
service with the BWA Subsidiary from January 1, 1997 through
October 31, 1997,
provided however that the total amount required to be paid under
this Section 8.3 (a)(v) shall not exceed $40,000.00.
(b) Non-Represented Employees. With respect to the Non-Contributory Pension
Plan for Employees of Coltec Industries Inc (the "Hourly Pension Plan") and
the Retirement Plan For Salaried Employees of Coltec Industries Inc (the
"Salaried Pension Plan"), Coltec and the Purchaser agree as follows:
(i) Concurrent with the Closing Date, or at the time that it is
permissible pursuant to any Code and PBGC notice requirements for
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the cessation of benefit accruals under defined benefit pension plans,
Coltec will freeze all service and benefit accruals effective as of
the Closing Date under the Hourly Pension Plan and the Salaried
Pension Plan (collectively the "Coltec Pension Plans") for all of the
Non-Represented Employees and shall thereafter treat such individuals
as inactive deferred vested participants under the Coltec Pension
Plans; provided however, that all the Non-Represented Employees who on
the day prior to the Closing Date did not have a vested benefit in the
applicable Coltec Pension Plans shall become fully vested in the
benefit that they had accrued under the applicable Coltec Pension
Plans as of the Closing Date,
(ii) Neither the Purchaser nor the BWA Subsidiary shall be responsible for,
or have any obligations or liabilities with respect to, the Coltec
Pension Plans. Coltec shall indemnify and hold Purchaser and the BWA
Subsidiary harmless from and against all claims related to the Coltec
Pension Plans, and
(iii)Non-Represented Employees who are eligible to retire under the
Coltec Pension Plans may elect to retire from Coltec as of the Closing
Date and retain the right to be rehired by the BWA Subsidiary as
provided for in Section 8.2(a). The election to retire from Coltec
must be submitted prior to Closing. A Coltec employee who elects to
retire under this paragraph shall have his or her years of service
with Coltec considered for purposes only of eligibility and vesting
under the BWA Subsidiary's welfare and fringe benefit plans.
8.4 Savings Plans. With respect to the Coltec Industries Inc Retirement
Savings Plan For Salaried Employees and the Coltec Industries Inc Retirement
Accumulation Plan (collectively the "Coltec Savings Plan"), Coltec and the
Purchaser agree as follows:
(a) Coltec shall make all contributions required of it under the
applicable Coltec Savings Plans for the Active Warren Union
Represented Employees and the Active Non-Represented Employees who are
participants in such plans (the "Savings Plans Members") for all
periods of time up to and including the Closing Date and shall cause
the applicable Coltec Savings Plan to fully vest each such Savings
Plans Member in the balance of his/her account as of the Closing Date,
(b) Coltec shall allow any Savings Plans Members with an account balance
under the Coltec Savings Plans to withdraw and/or transfer his/her
account balance distribution.
(c) Neither the Purchaser nor the BWA Subsidiary shall be responsible for,
or have any obligations or liabilities with respect to, the Coltec
Savings Plans. Coltec shall indemnify and hold Purchaser and the BWA
Subsidiary harmless from and against any and all claims related to the
Coltec Savings Plans, and
(d) The Purchaser shall cause the BWA Subsidiary to establish one or more
defined contribution plan(s) to cover the Savings Plans Members or
shall include such groups of employees in currently established
defined contribution plans (the "BWADC Plans"). Under the terms of
the BWADC Plans, the Savings Plans Members shall receive credit for
all service with Coltec for purposes only of eligibility and vesting.
Purchaser shall indemnify and hold Coltec harmless from and against
any and all claims related
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to the BWADC plans.
8.5 Welfare Benefit Plans.
(a) Purchaser Welfare Benefit Plans. The Purchaser agrees to cause the BWA
Subsidiary to establish, effective as of the Closing Date, employee
welfare benefit plans which shall provide the opportunity for health,
medical, dental, vision, life insurance and disability coverages (the
"Purchaser's Welfare Benefit Plans") for the Active Warren Union
Represented Employees as well as the Active Non-Represented Employees.
Purchaser's Welfare Benefit Plans will provide that service with Coltec
prior to the Closing Date will be treated as service for meeting any
applicable waiting periods and waiver periods. Non-Active Warren Union
Represented Employees, and the Non-Active Non-Represented Employees shall
be eligible for coverage under such Purchaser's Welfare Benefit Plans when
the individual employee begins employment with BWA Subsidiary, subject to
the provisions set forth in this Section 8.5(b) through (e).
(b) Welfare Plans for Active Warren Union Represented Employees. Purchaser
agrees that, subject to the acceptance of the offer of assignments set
forth in Section 8.1(a)(i), the Purchaser's Welfare Benefit Plans which
are established for the Active Warren Union Represented Employees shall
provide the same type of benefits as the welfare benefit plans covering
the Active Warren Union Represented Employees immediately prior to the
Closing Date for the remaining term of the UAW Agreement, as applicable,
except that the Purchaser's Welfare Benefit Plans shall not contain
provisions or provide coverage for, and Purchaser shall not have
obligations or liabilities with respect to welfare benefit coverage for:
(i) retirees or former employees (and the dependent(s) of either class)
who were employed at any time prior to the Closing Date as a Warren
Union Represented Employee but who on the day immediately prior to the
Closing Date were not employed by Coltec,
(ii) the Non-Active Warren Union Represented Employees (and their
dependent(s)), until such employee(s) become employed by the BWA
Subsidiary.
(iii)the Active Warren Union Represented Employees (and their
dependent(s)) upon their retirement, if such retirement occurs prior
to January 1, 1998,
(iv) the Active Warren Union Represented Employees (and their dependent(s)
as described in Section 8.5(e)(iii), and
(v) the persons described in Section 8.5(e).
(c) Welfare Benefits Plans For Active Non-Represented Employees. The
Purchaser shall cause the BWA Subsidiary to establish Welfare Benefit
Plans for the Active Non-Represented Employees, the type of benefits
which, at the discretion of the BWA Subsidiary, will either be similar to,
but not necessarily the same as, those presently offered to them by
Coltec, but excluding all provisions relating to retiree welfare benefit
coverages, or similar to, but not necessarily the same as, those offered
by the BWA Subsidiary or related subsidiaries of the Purchaser for new
hires, or a combination of the above two alternatives. The Active
Non-Represented Employees shall receive credit for years of service with
Coltec for purposes only of
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eligibility and vesting under the BWA Subsidiary's Welfare Benefit Plans.
The Purchaser and the BWA Subsidiary shall have the unlimited right to
amend, modify or terminate its Welfare Benefit Plans in the future when and
as it deems appropriate. Further, neither the Purchaser or the BWA
Subsidiary shall provide coverage for nor shall the Purchaser or the BWA
Subsidiary have any obligations or liabilities with respect to welfare
benefit coverages for:
(i) retirees or former employees (and the dependent(s) of either class)
who were employed at any time prior to the Closing Date as
Non-Represented Employees, but who on the date immediately prior to
the Closing Date were not employed by Coltec,
(ii) Non-Active Non-Represented Employees (and their dependent(s)), until
such employee(s) become employed by the BWA Subsidiary,
(iii)the Active Non-Represented Employees (and their dependent(s)) upon
their retirement, if such retirement occurs prior to January 1, 1998,
(iv) the Active Non-Represented Employees (and their dependent(s) as
described in Section 8.5(e)(iii), and
(v) the persons described in Section 8.5(e).
(d) Indemnification by Coltec. Coltec shall indemnify and hold Purchaser and
the BWA Subsidiaries harmless from and against all claims filed by the
individuals set forth in Section 8.5(b)(i) through (v) and Section
8.5(c)(i) through (v) above (the "Non-Covered Persons") and for any other
person or organization seeking to have Purchaser or the BWA Subsidiary
provide coverages under the BWA Subsidiary's Welfare Benefit Plans to the
Non-Covered Persons.
(e) Claims Under Coltec's Welfare Benefit Plans. Coltec shall retain all the
obligations and liabilities of any kind arising under or related to claims
under its health, medical, dental, vision, life insurance and disability
coverages ("Coltec Welfare Benefit Plans") based on charges for covered
expenses incurred:
(i) By the persons described in subsection (b)(i) and (c)(i) above;
(ii) By an Active Warren Union Represented Employee or an Active Non-
Represented Employee (and the eligible dependent(s) of either class)
upon their retirement, if such retirement occurs prior to January 1,
1998;
(iii)By an Active Warren Union Represented Employee or an Active
Non-Represented Employee (and the eligible dependent(s) of either
class), if such person, during the period from and after the Closing
Date and prior to January 1, 1998, makes application for a pension
benefit under either the Holley UAW Pension Plan, the Hourly Pension
Plan or the Salaried Pension Plan while employed by the BWA
Subsidiary; provided, however, that the BWA Subsidiary's Welfare
Benefit Plans will provide primary coverage and the Coltec Welfare
Benefit Plans will provide secondary coverage for that period during
which such person remains employed by the BWA Subsidiary;
(iv) By an Active Warren Union Represented Employee (and his/her eligible
dependent(s)) and/or an Active Non-Represented Employee and his/her
eligible dependents covered under the Coltec Welfare
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Benefit Plans for claims incurred on or prior to 11:59 p.m. (Central
Time) on the Closing Date;
(v) By a Non-Active Warr[Bren Union Represented Employee (and his/her
eligible dependent(s)), which liability for claims shall continue
until the earlier of (A) his/her loss of seniority under the UAW
Agreement and COBRA coverage, or (B) his/her employment with the BWA
Subsidiary;
(vi) By a Non-Active Non-Represented Employee (and his/her eligible
dependent(s)), which liability for claims shall continue until the
earlier of (A) his/her loss of coverages under the applicable Coltec
policy (medical leave, disability leave, personal leave, layoff) and
COBRA coverage, or (B) his/her employment with the BWA Subsidiary; and
(vii)By an Warren Active Union Represented Employee (and his/her eligible
dependent(s)), by an Active Non-Represented Employee (and his/her
eligible dependent(s)), by a Non-Active Warren Union Represented
Employee (and his/her eligible dependent(s)) after such employee
becomes employed by Purchaser, and by a Non-Active Non-Represented
Employee and his/her eligible dependent(s) after such employee become
employed by the Purchaser, (collectively, the "Active Employees"), who
incur a claim(s) after the Closing Date as a result of an injury or
sickness that was treated within twelve (12) months prior to the
Closing Date (a "Pre-Existing Condition"). Coltec shall retain all
the obligations and liabilities related to a Pre-Existing Condition of
such an individual until the earlier of (A) the Pre-Existing Condition
no longer exists, or (B) January 1, 1997, and, provided that, the
individual is not confined for the Pre-Existing Condition on January
1, 1997.
(f) Indemnification by Purchaser. Purchaser shall indemnify and hold
Coltec and the Operating Units harmless from and against all claims
filed by individuals who become employees of the BWA Subsidiaries and
either (i) are not Non-Covered Persons, or (ii) for which Coltec has
not retained any obligations or liabilities under this Section 8.5
which claims seek to have Coltec provide coverage to such person.
8.6 Employment Claims
(a) Claims Filed Prior to Closing Date. Coltec shall be responsible and
liable for any claim, complaint, charge or lawsuit filed prior to the
Closing Date which alleges a violation of any federal, state, county,
local or governmental law, decree, ordinance or regulation applicable
to an act or omission of Coltec pertaining to employment, employment
practices or labor relations.
(b) Claims Filed On or After the Closing Date. The Purchaser shall be
responsible and liable for any claim, complaint, charge or lawsuit
filed on or after the Closing Date which alleges a violation of any
federal, state, county, local or other governmental law, decree,
ordinance or regulation applicable to an act or omission by the BWA
Subsidiary pertaining to employment, employment practices or labor
relations except that:
(i) For any claim, complaint, charge or lawsuit which is filed after
the Closing Date by (A) an individual who was employed by Coltec
prior to the Closing Date, or by a person who was an applicant
for employment with Coltec (but was not hired) prior to the
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Closing Date, and (B) alleges a violation of a federal, state,
county, local or other governmental law, decree, ordinance or
regulation which pertains in part to an act or event that occurred
prior to the Closing Date and relates to employment or employment
practices, Coltec shall be responsible and liable for any monetary
damages that are part of a settlement or court order to the extent
that such damages are attributable to the period prior to the Closing
Date and all attorneys fees and court costs to the same
proportional extent. Coltec and Purchaser shall cooperate in good
faith to develop strategies to minimize each party's potential
exposure with respect to any such claims, complaints, charges or
lawsuits. Purchaser shall not consent to any settlement of nor
concede any issue regarding such claims, complaints, charges or
lawsuits which affects Coltec without the prior written consent of
Coltec, which consent shall not be unreasonably withheld,
(ii) For any unfair labor practice complaint filed within six months after
the Closing Date and any grievance or arbitration claim under the UAW
Agreement filed within ninety (90) days after the Closing Date with
respect to an act or event occurring prior to the Closing Date, Coltec
shall be responsible and liable for any monetary damages that are part
of a court order or Arbitrator's award to the extent that such damages
are attributable to the period prior to the Closing Date. Coltec and
Purchaser shall cooperate in good faith to develop strategies to
minimize each party's potential exposure with respect to such
complaints and/or claims, and
(iii)In the event that the matters contemplated by Section 8.6(b)(i) or
(ii) above occur, the BWA Subsidiary will provide Coltec with any
information, material or documents which Coltec shall request as part
of its defense and Coltec shall not consent to any settlement nor
concede any issue in litigation or arbitration which affects Purchaser
or the BWA Subsidiary without the prior written consent of the BWA
Subsidiary, which consent shall not be unreasonably withheld.
8.7 Worker's Compensation Claims and Worker's Occupational Diseases Claim.
Coltec shall be responsible for the defense and, when it is adjudicated or
administratively determined, liable for any claim which may be asserted by
Active Employees and Non-Covered Persons which arises under the occupational
disease and disablement statutes (or any similar statutes) and regulations
thereof of the states where the Operating Units' facilities are located and is
based on a reported injury sustained solely while employed by Coltec on or
prior to the Closing Date. The BWA Subsidiary shall be responsible for the
defense and, when it is adjudicated or administratively determined, liable for
any claim arising by an Active Employee under the aforementioned occupational
disease and disablement statutes (or any similar statutes) and regulations
thereof which is based on a reported injury sustained solely on or after the
Closing Date. If a claim is asserted on or after the Closing Date by an Active
Employee under the aforementioned occupational disease and disablement statutes
(or any similar statutes) and regulations thereunder and such claim alleges a
reported injury sustained in part before the Closing Date and in part on or
after the Closing Date, the BWA Subsidiary shall be responsible for the defense
of such claim and if an award is adjudicated or administratively determined for
such Active Employee, Coltec shall be liable for and pay to the BWA Subsidiary,
that percentage of the award which is based on the time period from the
determined beginning date of the injury to the Closing Date over that period of
time from the determined beginning date to the date of the award. If such pro
rata amount cannot be determined, the Purchaser and Coltec shall in good faith
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negotiate and agree upon the proration of the award which shall be in accord
with the principles of the preceding sentence.
8.8 Vacation and Holiday Pay. As of the Closing Date, the BWA Subsidiary
will assume all obligations of Coltec to the Active Employees for any vacation
pay entitlement and holiday pay entitlement which exist as of the Closing Date.
The Purchase Price shall be reduced by the amount of such obligation, which
obligation will be determined by Purchaser and Coltec on the basis of Coltec's
books and records in accordance with the existing policies of Coltec regarding
accrual of vacation and holiday pay. The amount so determined will be set
forth on Schedule 8.8 to this Agreement.
8.9 Severance. Neither Coltec, the Purchaser nor the BWA Subsidiary shall
be responsible by virtue of anything contained herein for severance pay to any
Active Warren Union Represented Employee or Active Non-Represented Employee who
declines the BWA Subsidiary's offer of employment. Coltec shall be responsible
for any severance pay due to a Non-Active Warren Union Represented Employee or
a Non-Active Non-Represented Employee who is terminated prior to the Closing
Date or terminated after the Closing Date as a result of the loss of his/her
re-employment right.
8.10 Other Agreements, Plans, Understandings and Practice. Subject to
Article IX but not subject to the Deductible and unless otherwise specifically
assumed by Purchaser in the above provisions of Article VIII, Coltec shall
retain any and all obligations or liabilities with respect to any Coltec
agreement, plan, understanding or practice which provided or promised a
payment, benefit, contribution, prerequisite or service to Active Employees or
Non-Covered Persons and shall indemnify and hold Purchaser and the BWA
Subsidiary harmless from and against all claims related thereto. Purchaser and
the BWA Subsidiary shall jointly and severally indemnify and hold Coltec
harmless from and against any and all claims related in any way to any matter
specifically assumed by Purchaser or the BWA Subsidiary in Article VIII hereof.
8.11 Termination or Layoffs.
(a) With respect to the termination or layoff of any Active Employee
after the Closing Date, the BWA Subsidiary will comply fully with the
Worker Adjustment and Retraining Notification Act of 1988 ("WARN").
(b) With respect to the termination or layoff of any of the employees
of the Business prior to the Closing Date, as well as the
termination of those Active Warren Union Represented employees and
Active Non-Represented Employees who decline Purchaser's offer of
employment, Coltec will comply fully with WARN.
8.12 Obligation to Prepare W-2s. Coltec will prepare and cause to be
filed 1996 Forms W-2 for all periods through and including the Closing Date for
all employees of the Business who are at the time of the Closing Date paid by
Coltec's Corporate Office in New York, New York. Purchaser or the BWA
Subsidiary, as applicable, agrees to assume Coltec's obligation to furnish
Forms W-2 to employees of the Business, other than those referred to above, in
accordance with the Alternative Procedure set forth in Section 5 of Rev. Proc.
84-77, 1984-2 C.B. 753.
8.13 Coltec's Obligations Under the National Labor Relations Act. Nothing
in this Agreement or the Confidentiality Agreement shall limit Coltec from
fulfilling its obligations regarding notice and effects bargaining under the
National Labor Relations Act.
ARTICLE IX
INDEMNIFICATION
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9.1 Indemnification of Coltec. In addition to its indemnification
obligations under Article VIII above, and subject to the provisions of this
Article IX, Purchaser will indemnify, defend and hold Coltec, its officers,
directors, employees, agents, affiliates, attorneys, consultants, successors
and assigns (to the extent the assignment to such assignee is permitted under
Section 11.8 below) harmless from and against any and all Damages arising out
of or resulting from (a) any misrepresentation or breach of a representation or
warranty made by Purchaser for which notice is given by Coltec within the
period specified in Section 3.3 hereof; (b) Purchaser's failure to pay or
satisfy or cause to be paid or satisfied any of the Assumed Liabilities when
due and payable; (c) nonperformance by Purchaser of any obligation or covenant
to be performed on the part of Purchaser under this Agreement; or (d) except
for matters which are indemnifiable by Coltec under Article VIII above or
Section 9.2 below, the operation of the Business or the use or ownership of the
Assets subsequent to Closing. The indemnification under this Section 9.1 will
be on a joint and several basis among all entities which, for purposes of this
Agreement, constitute Purchaser.
9.2 Indemnification of Purchaser.
(a) In addition to its indemnification obligations under Article VIII
above, and subject to the provisions of this Article IX, Coltec will
indemnify, defend and hold Purchaser, its officers, directors,
employees, agents, affiliates, attorneys, consultants, successors and
assigns (to the extent the assignment to such assignee is permitted
under Section 11.8 below) harmless from and against any and all
Damages arising out of or resulting from (1) any misrepresentation or
breach of any representation or warranty by Coltec for which notice is
given by Purchaser within the period specified in Section 3.3 hereof;
(2) the failure of Coltec fully to pay or satisfy or cause to be paid
or satisfied any of the Excluded Liabilities when due and payable; (3)
nonperformance by Coltec of any obligation or covenant to be performed
on the part of Coltec under this Agreement; (4) irrespective of
whether Coltec has made a representation or warranty with respect
thereto and if a representation or warranty has been made,
irrespective of whether it has been breached, any liability, cost or
expense (real or contingent, liquidated or unliquidated) which relates
directly or indirectly to the condition or operation of the Business
or the Assets as of or prior to the Closing Date (Schedule 9.2 sets
forth certain hypothetical examples of indemnification required under
this Section 9.2) except for work plan items completed by Coltec
pursuant to Section 4.15 above and except for any repairs,
modifications and corrections for which Coltec is released from
liability under Section 10.3(a)(iii)(C); (5) non-compliance with
applicable bulk sales laws; or (6) irrespective of whether Coltec has
made a representation or warranty with respect thereto and, if a
representation or warranty has been made, irrespective of whether it
has been breached or whether any item is identified on a Schedule to
this Agreement, any on-site environmental condition including the
presence of any waste materials, existing on or before the Closing
Date with respect to the Assets or the Business or relating to or
emanating from activities, conditions or materials at, of or from the
Assets or Business on or before the Closing Date (including transport
or disposition of substances and waste materials) without regard to
Section 3.3 above; or (7) any matters identified on Schedules 2.5(b),
3.1(l) (other than the Ford Motor Company Zetec Oil Pump situation,
the potential pricing discount on the Ford Motor Company V-6 oil pump
and the Ford Motor Company European Air Pump tooling reimbursement
described in items 7, 12 and 13 respectively on Schedule 3.1(l)),
3.1(n), 3.1(p), 3.1(s), or 3.1(t). Clause (4) of the preceding
sentence reflects the parties' intent that, notwithstanding the
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representations and warranties herein, other than the Assumed
Liabilities, any Damages relating to (i) the operation of the Business
prior to the Closing or (ii) any condition or circumstance affecting
the Facilities or Assets on the Closing Date be retained by and be the
responsibility of Coltec and Purchaser shall be indemnified by Coltec
against such Damages pursuant to this Agreement.
(b) Notwithstanding anything to the contrary contained in this Section 9.2
or elsewhere in this Agreement, Coltec shall have no indemnity
obligations to Purchaser hereunder in respect of Damages suffered,
incurred or sustained by Purchaser under clause Section 9.2 (a) (1) -
(4) unless, until and only to the extent that all such Damages, when
aggregated, exceed $283,000 (the "Deductible"). Coltec's liability
for any Damages suffered, incurred or sustained by the Purchaser shall
be limited to the amount of Damages in excess of the Deductible and
the maximum aggregate liability of Coltec for any claim under Sections
9.2(a)(1) - (4) shall not exceed a sum equal to $141.5 million, which
amount shall be reduced by $14,150,000 on each of the second, third
and fourth anniversaries of the Closing Date. The indemnification
under Sections 9.2(a)(5), (6) and (7) above will be without any
minimum or maximum dollar limitation.
(c) The allocations set forth in Schedule 2.11 to this Agreement will have
no effect on the calculation of Damages or amounts to be indemnified
under this Section 9.2
(d) The indemnification provided under this Section 9.2 will be on a joint
and several basis among all of the entities which, for purposes of
this Agreement, constitute Coltec.
9.3 Notice of Indemnification Claim.
(a) Following the assertion of any claim by a third party or the
occurrence of any event or the discovery of any facts or conditions
which could reasonably be expected to give rise to a claim for
indemnification from an indemnifying party (the "Indemnitor") under
this Article IX, an indemnified party (the "Indemnitee") shall within
a reasonable time thereafter notify the Indemnitor in writing of such
claim, setting forth in reasonable detail the specific facts and
circumstances relating to such claim and the amount of Damages claimed
(or a non-binding, reasonable estimate thereof if the actual amount is
not known or not capable of reasonable calculation) (an
"Indemnification Notice"). The Indemnitor shall in no way be liable
to the Indemnitee for any claim not presented in accordance with the
provisions of this Section 9.3.
(b) With respect to a claim for indemnification under Section 9.2(a)(4)
above, the Indemnitee's notice under Section 9.3(a) above must be
given promptly after it discovers, or in the normal course of
operating the Business should have discovered, the facts, circumstance
or condition giving rise to such claim.
(c) Notice of any claim for indemnification under Section 9.1 or 9.2(a)
above must be given no later than the fifth anniversary of the Closing
Date, and any claim brought thereafter is time-barred, except that no
time limitation shall apply to claims made under Section 9.1(b),
9.2(a)(2), 9.2(a)(6) or 9.2(a)(7) above.
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9.4 Third Party Claims.
(a) If the facts or conditions giving rise to the right of indemnification
under this Article IX involve any actual or threatened claim or demand
by a third party against Coltec or Purchaser or a claim by Coltec or
Purchaser against any third party (a "Third Party Claim"), the
Indemnitor shall have thirty (30) days following receipt of the
Indemnification Notice in respect of such Third Party Claim to advise
the Indemnitee as to whether (1) the Indemnitor disputes or accepts,
in whole or in part, its liability to the Indemnitee, (2) the
Indemnitor desires to defend the Indemnitee against such Third Party
Claim and (3) the Indemnitor is financially capable of making the
required indemnification (for purposes of this sentence, a written
notification furnished in good faith by the Indemnitor providing
adequate assurance as to the items described in clauses (1) through
(3) of this sentence will be sufficient, although the Indemnitee will
be entitled to reasonably request that the Indemnitor ratify and
confirm such written assurance from time to time). During such 30 day
period (or such shorter period as Coltec may require to accept its
indemnification obligation) the Indemnitor will either indemnify the
Indemnitee for its costs of investigating and defending the Third
Party Claim or defend the Indemnitee pursuant to this Section 9.4
(without prejudice as to its right to dispute its indemnification
obligation within such 30 day period) (such investigation and defense
will be limited to preventing a default judgment, beginning the
preparation of responsive pleadings and such other actions as are
commercially reasonable under the circumstances). The Indemnitor
shall consult with the Indemnitee before selecting counsel.
(b) In the event the Indemnitor determines to accept the defense of any
such Third Party Claim pursuant to this Section 9.4, the Indemnitee
shall have the right to be represented by its own counsel, its
participation to be subject to the reasonable direction of the
Indemnitor, and the Indemnitee shall provide all requested waivers and
authorities to permit the Indemnitor to defend such Third Party Claim.
Counsel selected by the Indemnitee to act on its behalf in the defense
of a Third Party Claim shall be at the Indemnitee's sole cost and
expense unless (1) the Indemnitor has agreed to pay such expenses, (2)
the Indemnitor has failed to assume the defense of the Third Party
Claim or (3) in the reasonable judgment of the Indemnitee, based upon
the written opinion of its counsel, a conflict of interest exists or
could reasonably be expected to exist between the Indemnitee and the
Indemnitor with respect to the Third Party Claim (in which case the
Indemnitor will not have the right to assume the defense, on behalf of
the Indemnitee, of the Third Party Claim).
(c) If the Indemnitor fails to provide the assurances required under this
Section 9.4, does not have the right, as a result of clause (3) of the
last sentence of Section 9.4(b) above, to undertake the Defense of the
Third Party Claim or fails to undertake the defense of or settle or
pay any Third Party Claim within thirty (30) days following receipt of
the Indemnification Notice in respect of such Third Party Claim, or if
the Indemnitor, after having given notification to the Indemnitee that
it intends to assume the defense, fails within thirty (30) days from
its receipt of the Indemnification Notice to defend, settle (subject
to Section 9.5 below) or pay such Third Party Claim, then the
Indemnitee may take any and all necessary actions to dispose of the
Third Party Claim including the settlement or full payment thereof
upon such terms as it shall deem appropriate, in its sole discretion,
subject to Section 9.5 below with respect to any proposed settlement
thereof.
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9.5 Settlement Proposals.
(a) In the event the Indemnitee desires to settle a Third Party Claim the
defense, settlement or payment of which has not been assumed by the
Indemnitor, but where the Indemnitor has admitted, in writing to the
Indemnitee, that it is liable for such Third Party Claim, the
Indemnitee shall advise the Indemnitor in writing of the amount it
proposes to pay in settlement thereof (the "Proposed Settlement"). If
the Proposed Settlement is unsatisfactory to the Indemnitor (provided
that Indemnitor will not unreasonably withhold its consent to any
proposed settlement), it shall have the right, at its expense, to
contest such claim by giving written notice of such election to the
Indemnitee within ten (10) days after the Indemnitor's receipt of the
advice of the Proposed Settlement. If the Indemnitor does not deliver
such written notice within ten (10) days after receipt of such advice
or if the Indemnitor, after having given such notice to the
Indemnitee, fails forthwith to defend, settle or pay such claim, the
Indemnitee may offer the Proposed Settlement to the third party making
such claim. If the Proposed Settlement is not accepted by the third
party, any new Proposed Settlement which the Indemnitee may wish to
present to the party making such claim shall first be presented to the
Indemnitor who shall have the right, subject to the conditions
hereinabove set forth in Section 9.4, to contest such claim.
(b) In the event that the Indemnitor has not assumed the defense,
settlement or payment of a Third Party Claim and in failing to do so,
has not admitted its liability for such Third Party Claim in writing
to the Indemnitee, then the Indemnitee shall be entitled to settle
such Third Party Claim in any manner which it determines.
(c) The Indemnitor may settle a Third Party Claim that it has agreed to
settle, pay or defend on terms which it may deem reasonable;
provided, however, that the Indemnitor shall not, without the
Indemnitee's prior written consent to any such settlement, which shall
not be unreasonably withheld and shall be given or rejected within 10
days after Indemnitor's request for consent. In no event will the
Indemnitor (i) settle or compromise any such proceeding, claim or
demand, or consent to the entry of any judgment which does not include
as an unconditional term thereof the delivery by the claimant or
plaintiff to the Indemnitee of a written release from all liability in
respect of such proceeding, claim or demand, or (ii) settle or
compromise any such proceeding, claim or demand in any manner that may
adversely affect the Indemnitee.
9.6 Environmental Conditions. Subject to Sections 9.3 and 9.4 above, if
Purchaser makes a claim for indemnification under this Article IX for Damages
arising from any matter or condition referred to in Section 3.1(t) above
(irrespective of whether Coltec has breached a representation or warranty in
that Section), or from any misrepresentation or breach of a representation or
warranty, breach of covenant, or investigation and clean-up or other remediation
of an environmental condition or a material which is a waste material or is
causing pollution or contamination at any Real Property, then Coltec shall have
the right to assume control of the investigation, clean-up or remediation
subject to Purchaser's obligation to comply with (i) governmental or judicial
order or judgment or (ii) lender or insurance company directive on commercially
reasonable terms to an owner-occupier of like industrial properties. If Coltec
exercises its right to assume control of the investigation, clean-up or
remediation, then Coltec shall be responsible for completing the investigation,
clean-up or remediation in compliance with or as required by Environmental Laws
and/or with this Agreement and the representations and warranties herein, to the
extent and in the manner requested by Purchaser in the exercise of reasonable
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commercial judgment, and subject to Purchaser's obligation to comply
with governmental or judicial order or judgment or lender or insurance company
directive on commercially reasonable terms to an owner-occupier of like
industrial properties, and Coltec shall conduct the investigation, clean-up or
remediation promptly, expeditiously and in a workmanlike, non-negligent manner
with as little disruption to Purchaser's use of the Real Property-Owned or Real
Property-Leased as reasonably practicable. Coltec shall discuss with Purchaser
in advance, and provide Purchaser with all documents describing or related to,
its proposed and final plans for investigation, clean-up and remediation.
Coltec shall provide Purchaser with one copy of each document proposed for
submittal to, and of each document submitted to or received from, environmental
regulatory authorities, and with notice of any communication, related to the
plans for or the investigation, clean-up or remediation, or to environmental
conditions or activities at or related to the Business or Assets. Coltec will
provide copies of proposed submittal documents and notice of its proposed
communications reasonably in advance of submittal of each such document or
communication. Purchaser shall have the right to comment on and consult with
Coltec about such plans, documents and communications. Coltec will make any
changes to any plan, document or communication and will provide and make any
additional plan, document or communication as reasonably requested by
Purchaser. Purchaser may retain one or more environmental consultants to
oversee the investigation, clean-up or other remediation conducted by Coltec,
but the bills of such consultants (other than any attorneys) for such oversight
work shall be paid by Purchaser.
9.7 Other Indemnification Claims. Except for Third Party Claims, the
Indemnitor shall have twenty (20) days to advise the Indemnitee of whether it
disputes or accepts liability to the Indemnitee for all other indemnification
claims that are the subject of an Indemnification Notice delivered to the
Indemnitor as provided in Section 9.3 above. Failure to give such notice will
constitute acceptance of responsibility for the claim.
9.8 Exclusive Remedy. From and after the Closing Date, the
indemnification provisions of this Article IX shall be the sole and exclusive
remedy for any breach of this Agreement and the Related Agreements, and no
other remedy shall be had in contract, tort or otherwise by Coltec or Purchaser
and their respective officers, directors, employees, agents, affiliates,
attorneys, consultants, successors and assigns, all such remedies being hereby
expressly waived. In addition to the foregoing, the amount of the
indemnification obligations of Coltec set forth in Section 9.2 hereof shall be
the maximum amount of Coltec's indemnification obligations hereunder, and
Purchaser shall not be entitled to a rescission of this Agreement or any of the
Related Agreements or to any further indemnification rights or claims of any
nature whatsoever, all of which the Purchaser hereby waives.
ARTICLE X
AMENDMENT, WAIVER AND TERMINATION
10.1 Amendment. This Agreement may be amended at any time prior to the
Closing, but only by written instrument executed by Borg-Warner and Coltec
Industries Inc.
10.2 Waiver. Either Coltec Industries Inc or Purchaser may at any time
waive compliance by the other with any covenants or conditions contained in
this Agreement only by written instrument executed by the party waiving such
compliance. No such waiver, however, shall be deemed to constitute the waiver
of any such covenant or condition in any other circumstance or the waiver of
any other covenant or condition.
10.3 Termination.
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(a) This Agreement may be terminated at any time prior to the Closing
Date:
(i) by mutual written consent of Coltec Industries Inc and Purchaser;
(ii) by Purchaser (A) if there is a material breach of any representation
or warranty set forth in Section 3.1 hereof or any covenant or
agreement to be complied with or performed by Coltec pursuant to the
terms of this Agreement which breach has not been cured by Coltec or
waived by Purchaser within 30 days following receipt of written notice
of such breach, (B) in the event that all of the conditions under 5.1
and 5.3 have not been satisfied by the Closing Date or waived by
Purchaser, in accordance with Section 10.2, (C) in accordance with
Section 10.4 or (D) if Purchaser is not satisfied with its physical
inspection of the Facilities or the Environmental Inspection;
(iii)by Coltec Industries Inc (A) if there is a material breach of any
representation or warranty set forth in Section 3.2 hereof or any
covenant or agreement to be complied with or performed by Purchaser
pursuant to the terms of this Agreement which breach has not been
cured by Purchaser or waived by Coltec Industries Inc within 45 days
following receipt of written notice of such breach, (B) in the event
that all of the conditions under 5.2 and 5.3 have not been satisfied
by the Closing Date or waived by Coltec Industries Inc in accordance
with Section 10.2, (C) if the total cost of all modifications and
repairs required in order to obtain certificates of occupancy pursuant
to Section 4.9 above, to satisfy Purchaser's requests under Section
4.15 above following its physical inspection under Section 4.1 above,
and/or to correct title or survey matters under Section 4.8 above
(except for defects consisting of liens or encumbrances securing a
liquidated amount) exceeds $3,000,000 (provided that Purchaser will
have the option of reducing the Purchase Price by $3,000,000, in which
case Coltec Industries Inc will not have the right to terminate this
Agreement and Coltec will have no further liability (whether monetary
or otherwise) for the modifications, repairs and corrections referred
to in this clause (C), which will be identified on a Schedule
10.3(a)(iii) and attached to this Agreement at Closing);
(iv) by Coltec Industries Inc or Purchaser if the Closing shall not have
occurred on or before June 30, 1996, unless (A) the failure to close
relates to a failure to satisfy the condition precedent set forth in
Section 5.3 above, in which case such date will be automatically
extended to August 31, 1996, or (B) the failure to close is the result
of a material breach of this Agreement by the party seeking to
terminate; or
(v) by Purchaser pursuant to Section 4.8(c) above.
(b) In the event of termination of this Agreement:
(i) Each party will redeliver all documents, work papers and other
material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to
the party furnishing the same; and
(ii) The provisions of the Confidentiality Agreement shall continue in
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full force and effect,
(c) In the event this Agreement is terminated by Purchaser for any reason
other than pursuant to Section 10.3(a)(i), (ii), (iv), or (v) or
pursuant to Section 10.4 or by Coltec Industries Inc for any reason
other than pursuant to Section 10.3 (a) (i), (iii) or (iv), then the
terminating party shall pay to the other party not later than three
(3) business days after the effective date of termination, a
termination fee equal to 10% of the Purchase Price (the "Termination
Fee") by wire transfer of immediately available funds to the account
designated in writing by the non-terminating party. The parties
acknowledge that the agreement contained in this Section 10.3(c) is an
integral part of the transactions contemplated by this Agreement;
accordingly, if a party fails to promptly pay the Termination Fee when
due and, in order to obtain such payment, the non-terminating party
commences or initiates a proceeding which results in a judgment or an
award against the terminating party for the Termination Fee, the
terminating party shall pay to the non-terminating party its costs and
expenses (including reasonable attorneys' fees) in connection with
such proceeding, together with interest on the amount of the
Termination Fee at a rate of ten percent (10%) per annum. This
Section 10.3 will constitute the parties' exclusive remedy in the
event or with respect to a termination of this Agreement. Any
termination of this Agreement which does not require the payment of a
Termination Fee will be without liability to the other party.
10.4 Termination Upon Certain Casualties.
(a) (i) In the event the Real Property-Owned or Real Property-Leased shall
be damaged or destroyed by fire or other casualty prior to the Closing
Date, Coltec shall provide Purchaser with notice thereof.
(ii) In the event Purchaser reasonably determines (the "Determination")
that the repair and restoration of the Real Property-Owned or Real
Property-Leased would not be completed within ninety (90) days from
such occurrence and the failure to complete such repair or restoration
within such period would have a Material Adverse Effect, Purchaser may
elect to terminate this Agreement. Purchaser shall make the
Determination within seven (7) business days of receipt of notice from
Coltec under Section 10.4(a)(i). In the event Purchaser elects to
terminate this Agreement, the provisions of Section 10.3(b) shall
apply. In the alternative Purchaser shall have the right to terminate
this Agreement with respect to the parcel of Real Property damaged and
the Purchase Price shall be reduced accordingly, in the amount set
forth on Schedule 4.8(c) or to complete this transaction, in which
case Coltec shall assign and deliver to Purchaser the insurance
proceeds resulting from such casualty.
(iii)If Purchaser has not elected to terminate this Agreement under
Section 10.4(a)(ii), Coltec shall be obligated to repair and restore
such damage prior to Closing; provided however, if the repair and
restoration of the Real Property is not completed prior to Closing,
Purchaser (A) may elect to delay Closing by the period reasonably
necessary to complete such repair and restoration, and Coltec shall be
obligated to complete said repairs; or (B) Purchaser may elect to
proceed with Closing and assume responsibility for completing the
repair and restoration of the Real Property; provided, however, if
Purchaser elects to so repair and restore the Real Property,
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Purchaser shall be granted a credit against the Purchase Price at
Closing in the amount of the cost of such repair as determined by
competitive bidding based on mutually acceptable procedures.
(iv) If Purchaser has not elected to terminate this Agreement under Section
10.4(a)(iii), Coltec shall be obligated to repair and restore such
damage prior to Closing; provided, however, that in no event shall the
aggregate amount of Coltec's obligation under this Section 10.4(a)(iv)
exceed the coverage amounts available to Coltec and/or the Operating
Units under all applicable Insurance Policies of Coltec and the
Operating Units then in full force and effect, plus the amount of any
deductibles payable in respect of such Insurance Policies.
(b) At any time prior to Closing, if any governmental authority shall, under
the power of eminent domain, take any part of the buildings upon the Real
Property-Owned or Real Property-Leased, or so much of the Real
Property-Owned or Real Property-Leased that there is no longer reasonably
sufficient land to provide parking to service the Real Property-Owned or
Real Property-Leased with respect to the operation of the Business as
presently conducted, which, in each case, such taking would have a Material
Adverse Effect, then Purchaser shall have the right to terminate this
Agreement by written notice to Coltec Industries Inc within ten (10) days
after receipt of notice of such taking from Coltec. In the alternative
Purchaser may terminate the Agreement only with respect to the affected
Property, and the Purchase Price shall be reduced accordingly as provided
in Section 4.8(c). Failure to deliver written notice of the exercise of
such right to terminate shall be deemed an election by Purchaser to proceed
to Closing. If Purchaser is entitled to terminate this Agreement based
upon the exercise of a power of eminent domain, but does not so elect, upon
the Closing Date, Coltec shall assign all of its right to any condemnation
award relating to the Real Property to Purchaser and shall reasonably
assist Purchaser in any matter relating to such award.
ARTICLE XI
MISCELLANEOUS
11.1 Confidentiality. Subject to Section 10.3(b)(ii), the Confidentiality
Agreement will continue in effect until Closing. Upon Closing, the terms and
conditions of the Confidentiality Agreement will no longer apply with regard to
the Business being acquired by the Purchaser pursuant to this Agreement;
however, the terms and conditions of the Confidentiality Agreement with regard
to the businesses not being acquired pursuant to this Agreement shall remain in
full force and effect for the period specified in the Confidentiality Agreement.
11.2 Severability; Construction. If any provision of this Agreement shall
finally be determined to be unlawful, then such provision shall, if possible, be
rewritten or construed more narrowly to comply with the intent of the parties
and the law, or alternatively, be deemed to be severed from this Agreement and
every other provision of this Agreement shall remain in full force and effect.
11.3 Expenses. Except as otherwise provided in this Agreement, each party
will bear its own expenses incurred in connection with this Agreement and the
transactions contemplated hereby, whether or not such transactions shall be
consummated. Coltec will be solely responsible for payment of any fees of
Coltec's auditors and fees of Morgan Stanley, and Purchaser will be solely
responsible for payment of any fees of Purchaser's auditors and fees of Merrill
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Lynch Pierce Fenner and Smith Incorporated, resulting from or arising out of
the transactions contemplated hereby. The premiums for the title insurance
policies, and the Title Commitment and survey charges, pursuant to Section 4.8
above, including, but not limited to, charges for title abstract and
examination, shall be paid equally by Purchaser and Coltec Industries Inc
(provided that in no event shall Purchaser pay more than $75,000). The cost of
preparing the financial statements referred to in Section 7.9 above will be
shared equally between Coltec Industries Inc and Purchaser, except that
Purchaser will not be required to pay more than $100,000 for its share, and any
excess will be paid by Coltec. Coltec Industries Inc and Purchaser will each
pay one-half of any fees charged by the second Firm of certified public
accounts referred to in Section 2.7(d) hereof.
11.4 Transfer Taxes. Purchaser and Coltec Industries Inc will each bear
one-half the cost of sales, use, registration, stamp, value added or other
transfer taxes, if any, which may result from the transfer of the Assets from
Coltec Industries Inc and the Operating Units to Purchaser and/or its nominees.
11.5 Bulk Sales. Purchaser and Coltec waive compliance with the
provisions of any laws dealing with bulk sales in any jurisdiction. Coltec
will indemnify and hold Purchaser harmless pursuant to Section 9.2(a)(5) above
with respect to any Damages which may be suffered by Purchaser in respect of
the parties' failure to comply with such laws.
11.6 Notices. All notices, requests and other communications hereunder
shall be in writing and shall be deemed to have been duly given at the time of
receipt if delivered by hand or communicated by electronic transmission, or, if
mailed, three (3) days after mailing registered or certified mail,
return-receipt requested, with postage prepaid:
If to Purchaser, then to:
Borg-Warner Automotive, Inc.
Attention: Chief Executive Officer
200 South Michigan Avenue
Chicago, Illinois 60604
Telefax: (312) 461-0507
with a copy to:
Borg-Warner Automotive, Inc.
Vice President and General Counsel
200 South Michigan Avenue
Chicago, Illinois 60604
Telefax: (312) 322-8621
If to Coltec, then to:
Coltec Industries Inc
430 Park Avenue
New York, New York 10022
Attention: Corporate Secretary
Telefax: (212) 940-0587
provided, however, that if either party shall have designated a different
address by notice to the other given as provided above, then to the last
address so designated.
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11.7 Publicity. Until the Closing, the timing and the content of all
public announcements regarding any aspect of this Agreement (including, but not
limited to, suppliers, customers, distributors, the financial community,
government agencies or the public at large) will be mutually agreed upon in
advance by Purchaser and Coltec Industries Inc, unless otherwise required by
law.
11.8 Assignment. This Agreement shall be binding upon and inure to the
benefit of the successors of each of the parties hereto, but shall not be
assignable by any party without the prior written consent of the other;
provided, that Borg-Warner may assign this Agreement to a wholly owned
subsidiary of Borg-Warner without the consent of Coltec, but only so long as
Borg-Warner agrees to remain fully liable for all covenants and obligations of
Purchaser created herein.
11.9 No Third Parties. Nothing in this Agreement, expressed or implied,
is intended or shall be construed to confer upon any person, other than the
parties and successors and assigns permitted by Section 11.8, any right, remedy
or claim under or by reason of this Agreement.
11.10 Incorporation by Reference. The Schedules and Appendices to the
Agreement constitute integral parts of this Agreement and are hereby
incorporated into this Agreement by this reference.
11.11 Governing Law. This Agreement will be governed by and construed in
accordance with the internal substantive laws of the State of Illinois (without
reference to the choice of law provisions of Illinois law); provided, that all
matters relating to real estate shall be governed by the law of the state in
which the real estate is situated.
11.12 Counterparts. More than one counterpart of this Agreement may be
executed by the parties hereto and each fully executed counterpart shall be
deemed an original without production of the other.
11.13 Complete Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior letters of intent, agreements, covenants,
arrangements, communications, representations, or warranties, whether oral or
written, by any officer, employee, or representative of either party relating
thereto with the exception of the Confidentiality Agreement.
11.14 Purchaser's Consents and Other Actions. For purposes of this
Agreement and all Related Agreements, Borg-Warner shall have the right to act
on behalf of Purchaser, and all consents, waivers and other actions taken or
given by Borg-Warner on behalf of Purchaser shall be binding on Purchaser
without any further action on the part of BW or BW-MI.
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IN WITNESS WHEREOF, the parties each have caused this Agreement to be
executed by their respective duly authorized officers and have caused their
respective corporate seals to be hereunto affixed and attested, all as of the
date first above written.
BORG-WARNER AUTOMOTIVE, INC.
By:JOHN F. FIEDLER
John F. Fiedler
Its: Chairman and Chief Executive Officer
Attest:
By: L.H. HORISZNY
L.H. Horiszny
BORG-WARNER AUTOMOTIVE AIR/FLUID SYSTEMS CORPORATION
By: GARY FUKAYAMA
Gary Fukayama
Its: President
Attest:
By: L.H. HORISZNY
L.H. Horiszny
BORG-WARNER AUTOMOTIVE AIR/FLUID SYSTEMS CORPORATION OF
MICHIGAN
By: GARY FUKAYAMA
Gary Fukayama
Its: President
Attest:
By: L.H. HORISZNY
L.H. Horiszny
COLTEC INDUSTRIES INC
By: ROBERT J. TUBBS
Robert J. Tubbs
Its: Senior Vice President
Attest:
By: DONALD E. O'KEIFE
Donald E. O'Keife
HOLLEY AUTOMOTIVE INC
By: ROBERT J. TUBBS
Robert J. Tubbs
Its: Vice President
Attest:
By: DONALD E. O'KEIFE
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Donald E. O'Keife
COLTEC AUTOMOTIVE INC
By: ROBERT J. TUBBS
Robert J. Tubbs
Its: Vice President
Attest:
By: DONALD E. O'KEIFE
Donald E. O'Keife
HOLLEY AUTOMOTIVE GROUP, LTD.
By: ROBERT J. TUBBS
Robert J. Tubbs
Its: Vice President
Attest:
By: DONALD E. O'KEIFE
Donald E. O'Keife
HOLLEY AUTOMOTIVE SYSTEMS GmbH
By: ROBERT J.TUBBS
Robert J. Tubbs
Its: Attorney-in-fact
Attest:
By: DONALD E. O'KEIFE
Donald E. O'Keife
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Exhibit 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference of our report on the combined financial statements of the Coltec
Automotive OEM Business Group as of December 31, 1995 and 1994 and for the two
years in the period ended December 31, 1995 included in this Form 8-K of
Borg-Warner Automotive, Inc., into Borg-Warner Automotive Inc.'s previously
filed Registration Statements File Nos.33-75564, 33-75566, 33-75568, 33-75572,
33-75574, 33-67822, and 33-67824 dated February 1, 1995; 33-92430, 33-92428,
33-92432, and 33-92426 dated May 17, 1995; 33-92862 and 33-92860 dated May 30,
1995; and 33-92858 dated June 1, 1995 on Form S-8.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
June 28, 1996.
