1
EXHIBIT 2
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AGREEMENT AND PLAN OF MERGER
AMONG
QUAKER STATE CORPORATION
QSBC ACQUISITION CORP.
BLUE CORAL, INC.
AND THE BLUE CORAL STOCKHOLDERS
(as defined herein)
Dated as of June 7, 1996
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..................................................... 1
ARTICLE II THE MERGER......................................................15
2.1 The Merger.......................................................15
2.2 Certificate of Incorporation.....................................15
2.3 By Laws..........................................................15
2.4 Directors and Officers...........................................16
2.5 Effective Time...................................................16
2.6 Further Assurances...............................................16
ARTICLE III CONVERSION OF SHARES...........................................17
3.1 Blue Coral Common Stock..........................................17
3.2 Dissenting Shares................................................19
3.3 Subsidiary Common Stock..........................................19
3.4 Exchange of Shares...............................................20
ARTICLE IV REPRESENTATIONS AND WARRANTIESOF BLUE CORAL
AND THE BLUE CORAL STOCKHOLDERS.............................................22
4.1 Organization, etc...............................................22
4.2 Authorization and Binding Obligation............................23
4.3 Capitalization..................................................24
4.4 Consents and Approvals; No Conflicts............................25
4.5 Governmental Approvals and Authorizations.......................26
4.6 Compliance with Laws............................................26
4.7 Real Property...................................................27
4.8 Personal Property...............................................29
4.9 Intellectual Property...........................................30
4.10 Contracts.......................................................31
4.11 Major Customers.................................................32
4.12 Product Warranties..............................................33
4.13 Personnel Information...........................................33
4.14 Employee Benefit Plans..........................................34
4.15 Litigation......................................................37
4.16 Transaction with Affiliates.....................................37
4.17 Financial Statements............................................38
4.18 Absence of Undisclosed Liabilities..............................38
4.19 Absence of Changes or Events....................................38
4.20 Insurance.......................................................40
4.21 Taxes...........................................................41
4.22 Environmental Matters...........................................42
4.23 Financing Statements............................................44
4.24 Car+ Liabilities................................................44
4.25 [Intentionally Omitted].........................................44
4.26 Finders and Investment Bankers; Expenses........................44
4.27 Investment Intent...............................................44
4.28 Bank Accounts...................................................45
4.29 Releases........................................................45
ARTICLE V REPRESENTATIONS AND WARRANTIESOF THE PARENT AND THE SUBSIDIARY...46
5.1 Organization and Standing........................................46
5.2 Authorization and Binding Obligation.............................46
5.3 Consents and Approvals; No Conflicts.............................47
5.4 Litigation.......................................................47
5.5 Finders and Investment Bankers...................................47
5.6 Financial Statements and Reports.................................48
5.7 Stock Issuance...................................................48
ARTICLE VI COVENANTS........................................................49
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6.1 Information Prior to Closing.....................................49
6.2 Conduct of Business..............................................49
6.3 Third-Party Consents.............................................53
6.4 Renewal of Contracts.............................................53
6.5 Financial Statements.............................................53
6.6 Blue Coral Deferred Compensation Plan............................54
6.7 Supplements to Schedules.........................................54
ARTICLE VII FURTHER AGREEMENTS..............................................54
7.1 Compliance with GCL; Filings.....................................54
7.2 Rule 144.........................................................55
7.3 Election of Adelman..............................................56
7.4 Additional Agreements............................................56
7.5 Acquisition Proposals............................................56
7.6 Public Announcements.............................................57
7.7 Consent of the Parent............................................57
7.8 Transfer Taxes...................................................57
7.9 Treatment of Books and Records...................................58
7.10 Purchase or Sale of NicSand.....................................58
7.11 Sale of the McKay Property......................................59
7.12 Release of Special Shares.......................................59
7.13 Officers' and Directors' Insurance; Indemnification of
Officers and Directors........................................60
7.14 Surviving Corporation Common Stock..............................60
ARTICLE VIII CLOSING CONDITIONS..............................................60
8.1 Conditions Precedent to the Obligations of All Parties...........61
8.2 Additional Conditions to the Obligation of Blue Coral............63
8.3 Conditions Precedent to Obligations of the Parent and
the Subsidiary................................................64
ARTICLE IX CLOSING..........................................................67
9.1 Time and Place...................................................67
9.2 Filings at the Closing...........................................67
9.3 Additional Transaction at the Closing............................67
ARTICLE X SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.............67
ARTICLE XI INDEMNIFICATION..................................................68
11.1 Indemnification by Blue Coral Stockholders......................68
11.2 Indemnification by the Parent and the Surviving Corporation.....70
11.3 Limitation on Indemnity Obligation..............................70
11.4 Claims on Escrow Deposit; Release of Parent Capital Stock.......72
11.5 The Blue Coral Stockholders' Representative.....................72
11.6 Third-Party Claims..............................................72
ARTICLE XII TERMINATION RIGHTS..............................................74
12.1 Termination.....................................................74
12.2 Procedure and Effect of Termination.............................75
ARTICLE XIII TAX MATTERS....................................................75
13.1 Election........................................................75
13.2 Forms...........................................................75
13.3 Allocation......................................................77
13.4 Modification; Revocation........................................79
13.5 Consistent Treatment............................................79
13.6 Taxes and Expenses Resulting from Elections.....................79
13.7 Other Tax Matters...............................................80
ARTICLE XIV OTHER PROVISIONS................................................81
14.1 Amendment and Modification......................................81
14.2 Waiver of Compliance; Consents..................................81
14.3 Confidentiality.................................................82
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14.4 Legend.........................................................83
14.5 Benefit and Assignment.........................................83
14.6 No Third-Party Beneficiaries...................................83
14.7 Entire Agreement...............................................84
14.8 Headings.......................................................84
14.9 Choice of Law..................................................84
14.10 Notices........................................................84
14.11 Counterparts...................................................85
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SCHEDULES
Schedule 1.5 Adelman Policies
Schedule 1.17 Separation Agreements
Schedule 1.57 Knowledge
Schedule 1.79 Ownership Schedule
Schedule 1.119 Specified Receivables
Schedule 4.1(a) Blue Coral Qualification
Schedule 4.1(b) Blue Coral Subsidiaries; Qualification
Schedule 4.1(c) Third Party Interests
Schedule 4.3 Capitalization
Schedule 4.4 Consents and Approvals; No Conflicts
Schedule 4.5 Governmental Approvals and Authorization
Schedule 4.7(a) Owned Real Property
Schedule 4.7(b) Real Property Leases
Schedule 4.7(c)&(d) Ordinances, etc.
Schedule 4.7(e) Injunctions, etc.
Schedule 4.7(f) Real Property Liens
Schedule 4.8 Personal Property
Schedule 4.9(a) Intellectual Property Assets
Schedule 4.9(b) Licenses of Intellectual Property
Schedule 4.10 Contracts
Schedule 4.11(a)&(b) Major Customers
Schedule 4.12 Product Warranties
Schedule 4.13 Services Agreements
Schedule 4.14 Plans
Schedule 4.15 Litigation
Schedule 4.16 Affiliate Transactions
Schedule 4.17(a) Financial Statements
Schedule 4.17(b) Employee and Stockholder Receivables
Schedule 4.19 Adverse Changes
Schedule 4.20 Insurance
Schedule 4.21(a) Taxes
Schedule 4.21(b) S Qualification
Schedule 4.22 Environmental Matters
Schedule 4.23 Financing Statements
Schedule 4.27(b) Accredited Investors
Schedule 4.28 Bank Accounts
Schedule 6.3 Third Party Consents
Schedule 8.3(o) Indebtedness to be Repaid
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EXHIBITS
Exhibit 8.1(e) Form of Escrow Agreement
Exhibit 8.1(f) NicSand Letter
Exhibit 8.2(d) Form of Opinion of Debevoise & Plimpton
Exhibit 8.2(f) Form of Registration Rights Agreement
Exhibit 8.3(u)(i) Form of Opinion of Baker & Hostetler
Exhibit 8.3(k) Moshontz Release
Exhibit 8.3(m) Form of Standstill Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 7, 1996 (the "Agreement"),
among QUAKER STATE CORPORATION, a Delaware corporation (the "Parent"), QSBC
ACQUISITION CORP., a Delaware corporation and a wholly-owned subsidiary of the
Parent (the "Subsidiary"), BLUE CORAL, INC., a Delaware corporation ("Blue
Coral"), SHELDON ADELMAN ("Adelman") and each of the other stockholders of Blue
Coral, other than the Selling Stockholders, listed on Schedule 4.3 hereto (such
stockholders (other than the Selling Stockholders), together with Adelman, the
"Blue Coral Stockholders").
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DEFINITIONS
Unless otherwise stated, the following terms when used herein have the
meanings assigned to them below.
1.1 "Accredited Investor" has the meaning set forth in Regulation D under
the Securities Act.
1.2 "Additional Section 338 Form" has the meaning set forth in Section
13.2(c) hereof.
1.3 "Adelman" has the meaning set forth in the preamble to this Agreement.
1.4 "Adelman Family Stockholders" means Adelman and Joel Adelman.
1.5 "Adelman Policies" means the insurance policies listed on Schedule 1.5
hereto.
1.5A "Adjustment Event" has the meaning set forth in Section 3.1(e)
hereof.
1.6 "Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the Person specified.
1.7 "Applicable Law" means all applicable provisions of all (i)
constitutions, treaties, statutes, laws (including, but not limited to, the
common law), rules, regulations, ordinances, codes or orders of any
Governmental Authority and (ii) orders, decisions, rulings, injunctions,
judgments, awards and decrees or consents of or agreements with any
Governmental Authority.
1.8 "Average Trading Price" has the meaning specified in Section 3.1(e)
hereof.
1.9 "Base Consideration" means the excess of (i) $100,451,502 over (ii) the
sum of (t) the NicSand Amount plus (u) the Estimated 338 Amount plus (v) the
BCI Acquisition Amount plus (w) the Blue Coral Expense Amount plus (x) any
Uncollected Amount plus (y) any Excess Transaction Cost Amount plus (z) any
Special Obligation Payment Amount.
1.10 "BCI" means Blue Coral International Limited, a United Kingdom
corporation.
1.11 "BCI Acquisition Amount" means the sum of (i) $693,000 plus (ii) the
amount of any United Kingdom Transfer Taxes incurred by the Parent in
connection with the purchase provided for in Section 9.3 hereof.
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1.12 "Blue Coral" has the meaning set forth in the preamble to this
Agreement.
1.13 "Blue Coral Balance Sheet" means the audited combined balance sheet as
of December 31, 1995 of Blue Coral and the Persons named therein, certified by
Arthur Andersen LLP.
1.14 "Blue Coral Credit Agreement" means the Credit Agreement between Blue
Coral and National City Bank dated August 18, 1994, as amended.
1.15 "Blue Coral Common Stock" means the common stock, par value $10.00 per
share, of Blue Coral.
1.16 "Blue Coral Deferred Compensation Plan" means the Blue Coral, Inc.
Cumulative Net Income Deferred Compensation Plan, as amended.
1.17 "Blue Coral Expense Amount" means the sum of (i) all amounts paid,
payable or accrued by Blue Coral or any Blue Coral Subsidiary after December
31, 1995 to or in respect of Michael Moshontz in respect of the Moshontz
Agreements and in connection with obtaining the Moshontz Release, including,
without limitation, the $3,031,500 paid to Moshontz on January 4, 1996 in
consideration of 4,005 shares of Blue Coral Common Stock (except, with respect
to any such amounts so paid or payable, to the extent such amounts were accrued
on the Blue Coral Balance Sheet), (ii) all amounts paid, payable or accrued by
Blue Coral, any Blue Coral Subsidiary or the Parent in connection with
eliminating all of Blue Coral's obligations, whether or not yet accrued, under
the Sokol Agreement, including, without limitation, any such amounts paid by
the Parent or Blue Coral under the Sokol Employment Agreement, (iii) all
amounts (including non-cash assets) distributed or accrued as being
distributable by Blue Coral to any Blue Coral Stockholder or to any taxing
authority on behalf of any Blue Coral Stockholder during the period from
January 1, 1996 to and including the Closing Date, other than (without
duplication) (x) the Permitted Distributions and (y) any such distributions
that were accrued on the Blue Coral Balance Sheet, (iv) all amounts paid under
the Blue Coral Deferred Compensation Plan from January 1, 1996 to and
including, and all amounts payable or accrued thereunder on, the Closing Date,
(v) all amounts paid, payable or accrued by Blue Coral in satisfaction of its
obligations under the agreement referred to in Section 8.3(t) hereof and (vi)
all amounts paid, payable or accrued by Blue Coral, any Blue Coral Subsidiary
or the Parent in respect of severance, termination or other separation
compensation or benefits that are or may become payable in respect of, or are
for the benefit of, any individual identified on Schedule 1.17 hereto,
including, without limitation, any such amounts paid, payable or accrued by
Blue Coral, any Blue Coral Subsidiary or the Parent in satisfaction of any
liabilities, obligations or commitments arising in connection with or under any
separation, termination or
other severance commitment, arrangement or agreement described on Schedule 1.17
hereto.
1.18 "Blue Coral Loan Agreement" means the letter agreement dated as of May
25, 1990 between Blue Coral and National City Bank, as amended March 31, 1995.
1.19 "Blue Coral Statement" has the meaning set forth in Section 8.3(f)
hereof.
1.20 "Blue Coral Stockholders" has the meaning set forth in the preamble to
this Agreement.
1.21 "Blue Coral Stockholders' Representative" has the meaning set forth in
Section 11.5 hereof.
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1.22 "Blue Coral Subsidiary" means any corporation, partnership, limited
liability company or other entity of which Blue Coral owns, directly or
indirectly, at least a majority of the securities or other ownership interests
having by the terms thereof ordinary voting power to elect a majority of the
board of directors or other Persons performing similar functions of such
corporation, partnership, limited liability company or other entity, including,
without limitation, NicSand and BCI. Car+ S.A. shall not be deemed a Blue
Coral Subsidiary for any purpose under this Agreement.
1.23 "Board" has the meaning set forth in Section 4.2(b) hereof.
1.24 "Business Day," whether or not initially capitalized, means every day
of the week excluding Saturdays, Sundays and federal holidays.
1.25 "Business Restriction" means any non-competition, non-solicitation or
similar agreement, understanding or commitment to which Blue Coral or any Blue
Coral Subsidiary is a party or of which it has Knowledge which limits or
restricts Blue Coral's or any Blue Coral Subsidiary's ability to engage in any
business or to solicit or hire any Person or entity.
1.26 "Certificate" has the meaning set forth in Section 3.4(a) hereof.
1.27 "Certificate of Merger" has the meaning set forth in Section 2.5
hereof.
1.28 "Closing" means the closing of the Merger.
1.29 "Closing Date" means the date on which the Closing occurs.
1.30 "Code" means the Internal Revenue Code of 1986, as amended, together
with all regulations and rulings issued thereunder by any Governmental
Authority.
1.31 "Computer Programs" means all computer software, firmware, programs
and source disks, program documentation, tapes, manuals, forms, guides and
other materials with respect thereto.
1.32 "Contracts" means all agreements, licenses, contracts, leases and
commitments of the following types (and all amendments thereto), written or
oral, to which Blue Coral or any of the Blue Coral Subsidiaries is a party or
by which any of them or any of their respective properties is bound as of the
date hereof:
(a) Mortgages, etc. Mortgages, indentures, security agreements and other
agreements and instruments relating to the borrowing of money or advances of
credit;
(b) Partnership. Partnership or joint venture agreements;
(c) Employment. Employment agreements, consulting agreements and
noncompetition agreements;
(d) Collective Bargaining; Plans. Collective bargaining agreements and
Plans;
(e) Sales Agency, etc. Material sales agency, manufacturer's
representative or distributorship agreements, supply agreements, marketing
agreements, advertising agreements, licenses and any agreements relating to
Intellectual Property Assets;
(f) Capital Expenditures. Agreements or commitments for capital
expenditures in excess of $100,000 individually or $300,000 in the aggregate;
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(g) Keepwell Agreements. Agreements to provide funds or to make any
investment (in the form of a loan, capital contribution or otherwise) in any
entity or business;
(h) Agreements with Affiliates. Agreements or commitments with any officer
or director of Blue Coral or any of the Blue Coral Subsidiaries or any Person
who owns more than 5% of the capital stock or other equity interest in Blue
Coral or any Blue Coral Subsidiary;
(i) Business Restrictions. Contracts or commitments containing any
Business Restrictions;
(j) Purchase of Materials, etc. Any agreement, order or commitment for
the purchase of materials, supplies, or services, or for the sale of products,
or services, in any case, having an unexpired term of more than 12 months or
involving aggregate payments in excess of $200,000; and
(k) Other Agreements. All other agreements, contracts and commitments
(excluding purchase orders and sales orders created in the ordinary course of
business consistent with past practice), written or oral, including all Real
Property Leases to which Blue Coral or any of the Blue Coral Subsidiaries is a
party or by which any of their respective properties is bound, any one (or
series) of which in any way involves payments or receipts of more than $200,000
in the course of the year following the date hereof.
1.33 "Dissenting Shares" has the meaning set forth in Section 3.2 hereof.
1.34 "Effective Time" has the meaning set forth in Section 2.5 hereof.
1.35 "Employees" has the meaning set forth in Section 4.14 hereof.
1.36 "Environmental Laws" means all Applicable Laws relating to the
protection of human health or the environment.
1.37 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with the regulations and rulings issued thereunder by any
Governmental Authority.
1.38 "Escrow Agent" means the Escrow Agent under the Escrow Agreement.
1.39 "Escrow Agreement" means the agreement, dated the Closing Date, among
the Parent, the Blue Coral Stockholders and the Escrow Agent, in the form
attached as Exhibit 8.1(e) hereto.
1.40 "Escrow Amount" has the meaning set forth in Section 3.1(c) hereof.
1.41 "Escrow Deposit" has the meaning set forth in Section 3.1(c) hereof.
1.41A "Estimated 338 Amount" has the meaning set forth in Section 13.6
hereof.
1.42 "Excess Transaction Cost Amount" means the excess, if any, of (x) the
Transaction Costs over (y) the Transaction Cost Cap.
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1.43 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
1.44 "Exchange Agent" has the meaning set forth in Section 3.4 hereof.
1.45 "Financial Statements" means (i) the Blue Coral Balance Sheet, the
audited combined balance sheets for Blue Coral and the Persons named therein as
of October 31, 1993 and October 31, 1994, together, in each case (including the
Blue Coral Balance Sheet), with the related statements of operations and cash
flows for the fiscal period then ended, certified, in each case, by Arthur
Andersen LLP, and (ii) the Unaudited Statements.
1.46 "Form 8023" has the meaning set forth in Section 13.2(a) hereof.
1.47 "GAAP" means United States generally accepted accounting principles
consistently applied.
1.48 "GCL" means the General Corporation Law of the State of Delaware.
1.49 "Government Approvals" has the meaning set forth in Section 4.5
hereof.
1.50 "Governmental Authority" means any nation or government, any state or
other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, in each case to the extent the same has jurisdiction over the
Person or property in question, including, but not limited to, any government
authority, agency, board, commission, court, department or instrumentality of
the United States, any State of the United States, the United Kingdom, France
or any political subdivision thereof, and any tribunal or arbitrator(s) of
competent jurisdiction, and any self-regulatory groups of which Blue Coral or
any Blue Coral Subsidiary is a member or is subject.
1.51 "Hazardous Substance" means asbestos-containing material and any and
all hazardous or toxic substances, materials or wastes as defined or listed
under the Resource Conservation and Recovery Act, the Toxic Substances Control
Act, the Comprehensive Environmental Response, Compensation and Liability Act
or any comparable state statute or any regulation promulgated under any of such
federal or state statutes.
1.52 "Household Special Obligation" means any obligation of Blue Coral or
any Blue Coral Subsidiary to indemnify any Person under the Asset Purchase
Agreement by and between Powerworks Company and Blue Coral, dated as of
March 15, 1996 (as the same is amended at any time prior to the Effective
Time).
1.53 "HSRA" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the regulations adopted thereunder.
1.54 "Intellectual Property" means United States (federal and state) and
foreign trademarks, service marks, trade names, trade dress, copyrights, and
similar rights, including registrations and applications to register or renew
the registration of any of the foregoing, the United States and foreign letters
patent and patent applications, and inventions, processes, designs, formulae,
trade secrets, jingles, know-how, confidential business and technical
information, Computer Programs, data and documentation, and all similar
intangible property rights, tangible embodiments of any of the foregoing (in
any medium including electronic media), and licenses or permits to use any of
the foregoing.
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1.55 "Intellectual Property Assets" has the meaning set forth in Section
4.9(a) hereof.
1.56 "IRS" means the Internal Revenue Service of the United States.
1.57 "Knowledge" means, with respect to any Blue Coral Stockholder, the
actual knowledge of such Blue Coral Stockholder, and, with respect to Blue
Coral or any Blue Coral Subsidiary, the actual or constructive knowledge of any
of the officers set forth on Schedule 1.57 hereof.
1.58 "Liens" means all debts, liens, security interests, mortgages,
pledges, judgments, trusts, adverse claims, liabilities, encumbrances and other
impairments of title of any kind other than Permitted Encumbrances.
1.59 "Losses" has the meaning set forth in Section 11.1 hereof.
1.60 "Material Adverse Effect" means a material adverse effect on the
business, assets, properties, liabilities, revenues, income before provision
for income taxes, operations or condition, financial or otherwise, of Blue
Coral and the Blue Coral Subsidiaries taken as a whole, or of the Parent and
its subsidiaries, taken as a whole, as the case may be; it being understood and
agreed that any increase in Blue Coral's borrowings under the Blue Coral Credit
Agreement which is consistent with its historical borrowing practices shall not
constitute a Material Adverse Effect on the liabilities of Blue Coral and the
Blue Coral Subsidiaries, taken as a whole. In determining whether any
individual event would result in a Material Adverse Effect, notwithstanding
that such event does not of itself have such effect, a Material Adverse Effect
shall be deemed to have occurred if the cumulative effect of such event and all
other then existing events would result in a Material Adverse Effect.
1.61 "McKay Amount" means $976,262.
1.62 "McKay Proceeds" means the amount of cash proceeds received by the
Parent or the Surviving Corporation in connection with its sale of the McKay
Property in accordance with Section 7.11(a) hereof, which amount shall be
either reduced by the net Tax cost incurred or increased by the net Tax benefit
realized as a result of such sale, as reasonably determined by the Parent,
taking into account any payments pursuant to Section 7.11(b) hereof.
1.63 "McKay Property" means that certain real property, together with all
improvements thereon, located at 1920 and 1950 Randolph Street and 5900, 5910
and 5920 Wilmington Street in Los Angeles, California and all appurtenant
rights and easements relating thereto.
1.64 "Merger" has the meaning set forth in Section 2.1 hereof.
1.65 "Merger Consideration" has the meaning set forth in Section 3.1(a)
hereof.
1.66 "Moshontz Agreements" means (i) the Option Agreement between Michael
Moshontz and Blue Coral, dated July 20, 1994, as amended, (ii) the promissory
note issued to Mr. Moshontz by Blue Coral, dated January 4, 1996 and (iii) all
other agreements between Blue Coral and Mr. Moshontz or any affiliate of Mr.
Moshontz that are referred to in Sections 4(b)(i) through (v), inclusive, of
the Moshontz Release.
1.67 "Moshontz Release" has the meaning set forth in Section 8.3(k)
hereof.
13
1.68 "Multiemployer Plan" has the meaning set forth in Section 4.14
hereof.
1.69 "NicSand" means NicSand, Inc., an Ohio corporation.
1.70 "NicSand Agreement" means the Agreement Relating to Transfer of
Shares, dated as of May 11, 1987, by and among Blue Coral, Sandusky and
NicSand, as the same may be amended from time to time hereafter.
1.71 "NicSand Amount" means $3,532,980.
1.72 "NicSand Escrow Amount" has the meaning set forth in Section 3.1(b)
hereof.
1.73 "NicSand Note" means any debt instrument delivered to Blue Coral by
Sandusky upon a Sandusky Purchase.
1.73A "NicSand Purchase" has the meaning set forth in Section 7.10(b)
hereof.
1.74 "NicSand Shares" means the common stock, without par value, of
NicSand.
1.75 "Non-Scheduled Intellectual Property" means all Intellectual Property
other than United States (federal and state) and foreign trademarks, service
marks, trade names, trade dress, copyrights, and similar rights, including
registrations and applications to register or renew the registration of any of
the foregoing, the United States and foreign letters patent and patent
applications, Computer Programs and licenses or permits to use any of the
foregoing.
1.76 "NYSE" has the meaning set forth in Section 3.1(e) hereof.
1.77 "Outstanding Blue Coral Shares" means the shares of Blue Coral Common
Stock issued and outstanding immediately prior to the Effective Time.
1.78 "Owned Real Property" means all real property and interests in real
property owned by Blue Coral or any Blue Coral Subsidiary, together with all
easements and other appurtenances for the benefit thereof.
1.79 "Ownership Schedule" means the schedule attached hereto as Schedule
1.79, which lists each Blue Coral Stockholder's proportionate ownership of the
Outstanding Blue Coral Shares, after giving effect to Adelman's purchase of the
Blue Coral Common Stock in the manner referred to in Section 8.3(n) hereof;
1.80 "Parent" has the meaning set forth in the preamble to this Agreement.
1.81 "Parent Capital Stock" means the capital stock of the Parent, par
value $1.00 per share.
1.82 "Parent Indemnitees" has the meaning set forth in Section 11.1
hereof.
1.83 "Parent Reports" has the meaning set forth in Section 5.6 hereof.
1.84 "Parent Returns" has the meaning set forth in Section 13.7 hereof.
14
1.85 "Parent's Board" has the meaning set forth in Section 5.2(b) hereof.
1.86 "Permitted Distributions" means one or more distributions by Blue
Coral, which, in the aggregate, equal no more than $3,001,480.
1.87 "Permitted Encumbrances" means any Liens (i) arising under the Blue
Coral Credit Agreement or the Blue Coral Loan Agreement, (ii) for Taxes,
assessments, water and sewer charges, license fees, and all other fees, special
assessments and charges assessed or imposed by a public body upon the assets of
Blue Coral or any Blue Coral Subsidiary or any part thereof or the operation
thereof, provided such fees, assessments or Taxes are not yet due and payable,
(iii) for mechanics', carriers', workmen's, repairmen's or other similar Liens
arising or incurred in the ordinary course of business for sums not yet due and
payable or (iv) for minor imperfections of title which do not, individually or
in the aggregate, materially impair the value or the continued use and
operation of the assets to which they relate.
1.88 "Per Share Price" means the quotient of (i) the Base Consideration
divided by (ii) the number of Outstanding Blue Coral Shares.
1.89 "Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
1.90 "Plans" has the meaning set forth in Section 4.14 hereof.
1.91 "Real Property Lease" means any lease, sublease, license or occupancy
agreement, including any amendments thereto, pursuant to which Blue Coral or
any Blue Coral Subsidiary is the lessee, sublessee, licensee or occupant of
real property used in, held for use in connection with, necessary for the
conduct of, or otherwise material to, the business of Blue Coral or any Blue
Coral Subsidiary, together with all easements and other appurtenances for the
benefit thereof.
1.92 "Remaining BCI Shares" means all of the shares of capital stock of
BCI not owned by Blue Coral immediately prior to the Closing.
1.93 "Sandusky" means James Sandusky.
1.94 "Sandusky Notice" has the meaning set forth in Section 7.10(a)
hereof.
1.95 "SEC" means the Securities and Exchange Commission.
1.96 "Sandusky Purchase" means any purchase by Sandusky of the NicSand
Shares owned by the Surviving Corporation.
1.97 "Section 338 Forms" has the meaning set forth in Section 13.2(a)
hereof.
1.98 "Section 338(h)(10) Election" means an election pursuant to section
338(h)(10) of the Code, and any comparable or corresponding election with
respect to any state or local Taxes, as applicable to Blue Coral.
1.99 "Section 338 Taxes" has the meaning set forth in Section 13.6 hereof.
1.100 "Securities Act" means the Securities Act of 1933, as amended.
15
1.101 "Selling Stockholders" means (i) the GST-Exempt Trust f/b/o Joel
Adelman dated February 17, 1992 (Robert G. Markey and Michael G. Turk,
co-trustees), (ii) the Sheldon G. Adelman Trust f/b/o Joel Adelman dated
February 17, 1992 (Robert G. Markey and Michael G. Turk, co-trustees), (iii)
the Trust f/b/o Joel Adelman under the Sheldon G. Adelman Irrevocable Trust
Agreement dated December 27, 1995 (Robert G. Markey, trustee) and (iv) the
Trust f/b/o Joel Adelman under the Terry G. Adelman Irrevocable Trust Agreement
dated December 27, 1995 (Robert G. Markey, trustee).
1.102 "Sokol Agreement" means the Executive Phantom Stock Agreement
between Brian Sokol and Blue Coral, dated November 1, 1994.
1.103 "Sokol Employment Agreement" has the meaning set forth in Section
8.3(1) hereof.
1.104 "Special Obligation" means any obligation of Blue Coral or any Blue
Coral Subsidiary to indemnify any Person under (i) the Acquisition Agreement by
and between Blue Coral, MEDO Industries, Inc. and Baker & Hostetler, dated as
of August 24, 1995, (ii) the Asset Purchase Agreement by and between Blue Coral
and Namico, Inc., dated as of June 26, 1995, (iii) the Asset Purchase Agreement
by and between Blue Coral and 133-31-002 Corp., dated January 13, 1995, (iv)
the Asset Purchase Agreement by and between Blue Coral and Airosol Company,
Inc., dated as of January 13, 1995, (v) the Agreement and Sale of Assets
between Blue Coral and Waterbury Companies, Inc. dated October 29, 1991, as
amended on November 11, 1991, (vi) the Agreement between Blue Coral and Castrol
Limited, dated August 6, 1987 and (vii) the Indemnification Agreement by and
among Blue Coral Chemical Company, Peterson Group, Inc. and Ronald N. Peterson,
dated December 30, 1992.
1.105 "Special Obligation Payment Amount" means the aggregate amount, if
any, of all payments made, payable or accrued by Blue Coral in respect of the
Special Obligations and the Household Special Obligations during the period
from January 1, 1996 to and including the Closing Date.
1.106 "Special Shares" has the meaning set forth in Section 3.1(d) hereof.
1.107 "Stockholder Returns" has the meaning set forth in Section 13.7
hereof.
1.108 "Subsidiary" has the meaning set forth in the preamble to this
Agreement.
1.109 "Subsidiary Common Stock" has the meaning set forth in Section 3.3
hereof.
1.110 "Surviving Corporation" has the meaning set forth in Section 2.1
hereof.
1.111 "Surviving Corporation Common Stock" has the meaning set forth in
Section 3.3 hereof.
1.112 "Tax" means any federal, state, local or foreign income,
alternative, minimum, accumulated earnings, personal holding company, franchise,
unincorporated business, capital stock, profits, windfall profits, gross
receipts, sales, use, value added, transfer, registration, stamp, premium,
excise, customs duties, severance, environmental (including taxes under Section
59A of the Code), real property, personal property, ad valorem, occupancy,
license, occupation, employment, payroll, social security, disability,
unemployment, workers' compensation, withholding, estimated or similar tax,
duty, fee, assessment or other governmental charge or deficiencies thereof
(including all interest and penalties thereon and additions thereto).
16
1.113 "Tax Dispute Resolution Mechanism" has the meaning set forth in
Section 13.3(b) hereof.
1.114 "Third Party Interests" means, as of any date of determination, all
of the then outstanding beneficial or record interests in the capital stock and
other equity interests of the Blue Coral Subsidiaries which are not so owned by
Blue Coral or any Blue Coral Subsidiary.
1.115 "Transaction Cost Cap" means $1,600,000.
1.116 "Transaction Costs" means the costs and expenses incurred by Blue
Coral, the Blue Coral Subsidiaries and the Blue Coral Stockholders (but only to
the extent paid or payable by Blue Coral or any Blue Coral Subsidiary) in
connection with the transactions contemplated by this Agreement, including, but
not limited to, legal and accounting fees and fees payable by Blue Coral to
McDonald & Company Securities, Inc.
1.117 "Transfer Taxes" means all sales (including, without limitation,
bulk sales), use, value added, documentary, stamp, gross receipts, registration,
transfer, conveyance, excise, recording, license and other similar Taxes and
fees imposed by any Governmental Authority.
1.118 "Unaudited Statements" means the unaudited consolidated balance
sheet for Blue Coral and the Blue Coral Subsidiaries as of March 31, 1996 and
the related statements of operations and cash flows for the three-month period
then ended.
1.119 "Uncollected Amount" means the aggregate amount of all of the
receivables listed on Schedule 1.119 hereto that are uncollected as of the
Closing Date.
1.120 "Valley Belt Property" means that certain real property located at
1400 Valley Belt Road, Brooklyn, Ohio, together with all improvements thereon
and all appurtenant rights and easements relating thereto.
1.121 "Valley Belt Purchase Agreement" means the Purchase Agreement, made
as of March 18, 1996, by and between the Valley Belt Limited Partnership and
Blue Coral, which agreement has or will be assigned to J&W Adelman, Ltd.
II
THE MERGER
2.1 The Merger. In accordance with the provisions of this Agreement and
the GCL, at the Effective Time (i) the Subsidiary shall be merged with and into
Blue Coral (the "Merger"), and Blue Coral shall be the surviving corporation of
the Merger (hereinafter sometimes called the "Surviving Corporation") and shall
continue its corporate existence under the laws of the State of Delaware; (ii)
the name, identity, existence, rights, privileges, powers, franchises,
properties and assets of Blue Coral shall continue unaffected and unimpaired;
and (iii) the separate existence of the Subsidiary shall cease, and all of the
rights, privileges, powers, franchises, properties and assets of the Subsidiary
shall be vested in Blue Coral.
2.2 Certificate of Incorporation. The Certificate of Incorporation of the
Subsidiary in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided therein or by law.
17
2.3 By Laws. The By Laws of the Subsidiary in effect immediately prior to
the Effective Time shall be the By Laws of the Surviving Corporation until
thereafter amended, altered or repealed as provided therein.
2.4 Directors and Officers. The directors and officers of the Subsidiary
immediately prior to the Effective Time shall be the directors and officers,
respectively, of the Surviving Corporation, each to hold office in accordance
with the Certificate of Incorporation and By Laws of the Surviving Corporation
until his or her successor is appointed and qualified or until his or her
earlier death, resignation or removal.
2.5 Effective Time. The Merger shall become effective simultaneously with
the filing of a Certificate of Merger with the Secretary of State of the State
of Delaware in accordance with Sections 251 and 103 of the GCL (the
"Certificate of Merger"). The Certificate of Merger shall be filed
simultaneously with the Closing. The date and time when the Merger shall
become effective is hereinafter referred to as the "Effective Time".
2.6 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of Blue Coral
acquired or to be acquired as a result of the Merger, or (b) otherwise to carry
out the purposes of this Agreement, the Surviving Corporation and its proper
officers and directors or their designees shall be authorized to solicit in the
name of Blue Coral any third party consents or other documents required to be
delivered by any third party, to execute and deliver, in the name and on behalf
of Blue Coral, all such deeds, bills of sale, assignments and assurances and
do, in the name and on behalf of Blue Coral, all such other acts and things
necessary, desirable or proper to vest, perfect or confirm the Surviving
Corporation's right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of Blue Coral acquired or
to be acquired as a result of the Merger and otherwise to carry out the
purposes of this Agreement.
III
CONVERSION OF SHARES
3.1 Blue Coral Common Stock. All Outstanding Blue Coral Shares held by
any Blue Coral Stockholder as of immediately prior to the Effective Time
(except for (i) any shares of Blue Coral Common Stock then owned beneficially
or of record by the Parent or the Subsidiary or any other subsidiary of the
Parent, (ii) shares of Blue Coral held in the treasury of Blue Coral or by any
Blue Coral Subsidiary, and (iii) Dissenting Shares) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the following (such amounts, in the aggregate, the "Merger
Consideration"):
(i) subject to Section 3.1(b) hereof, the right to receive cash from the
Parent in an amount equal to 50% of the product of (x) the Per Share Price
times (y) the number of Outstanding Blue Coral Shares held by such Blue Coral
Stockholder; and
(ii) subject to Sections 3.1(c) and 3.1(d) hereof, the right to receive
such number of shares of Parent Capital Stock, rounded up or down to the
nearest whole share, as have a value (as determined pursuant to Section 3.1(e)
hereof) equal to 50% of the product of (x) the Per Share Price times (y) the
number of Outstanding Blue Coral Shares held by such Blue Coral Stockholder.
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(a) Notwithstanding anything in Section 3.1(a) hereof to the contrary, the
Parent shall withhold from the Blue Coral Stockholders, on a proportionate
basis in accordance with the Ownership Schedule, an aggregate amount equal to
$6,423,600 of the Merger Consideration otherwise payable to the Blue Coral
Stockholders under Section 3.1(a)(i) hereof (such amount, the "NicSand Escrow
Amount"). At the Effective Time, the Parent shall deliver the NicSand Escrow
Amount to the escrow agent referred to in Section 8.1(f) hereof and the NicSand
Escrow Amount shall thereafter be released to the Blue Coral Stockholders only
as provided in the Indemnification and Escrow Agreement described in Section
8.1(f) hereof.
(b) Notwithstanding anything in Section 3.1(a) hereof to the contrary, the
Parent shall withhold an amount equal to $15,000,000 (the "Escrow Amount") of
the Merger Consideration otherwise payable to the Blue Coral Stockholders under
Section 3.1(a)(ii) hereof by withholding from the shares of Parent Capital
Stock otherwise payable to the Blue Coral Stockholders pursuant to Section
3.1(a)(ii) hereof, on a proportionate basis in accordance with the Ownership
Schedule, such number of shares of Parent Capital Stock as have a value, as
determined in the same manner as set forth in Section 3.1(e) hereof, equal to
the Escrow Amount (such withheld shares of Parent Capital Stock, the "Escrow
Deposit"). At the Effective Time, the Parent shall deliver the Escrow Deposit
to the Escrow Agent and the Escrow Deposit shall thereafter be released to the
Blue Coral Stockholders or the Parent, as the case may be, only as provided in
Section 11.4(b) hereof and the Escrow Agreement.
(c) Notwithstanding anything in Section 3.1(a) hereof to the contrary, the
Parent shall withhold from the Blue Coral Stockholders, on a proportionate
basis in accordance with the Ownership Schedule, 20,000 shares of Parent
Capital Stock, or the equivalent number of shares after giving effect to any
Adjustment Event prior to the Closing (the "Special Shares"), otherwise payable
to the Blue Coral Stockholders as part of the Merger Consideration under
Section 3.1(a)(ii) hereof. The Special Shares shall thereafter only be
released to the Blue Coral Stockholders in accordance with Section 7.12 hereof.
(d) For purposes of Sections 3.1(a)(ii), and 3.1(c) hereof, and subject to
the next sentence of this Section 3.1(e), each share of Parent Capital Stock
shall be valued based on a per share price equal to the average of the closing
prices of Parent Capital Stock, as reported on the New York Stock Exchange (the
"NYSE"), for the 60 trading days immediately preceding the second business day
prior to the Closing Date (the "Measuring Period"); provided that if such value
is less than $13.30 per share, then such value shall be deemed to be $13.30
(such amount, the "Collar Low"); and if such value exceeds $14.70 per share,
then such value shall be deemed to be $14.70 (such amount, the "Collar High";
such value, as determined taking into account this proviso, the "Average
Trading Price"). Notwithstanding the foregoing, in the event that prior to the
Closing Date, the total number of outstanding shares of Parent Capital Stock is
changed by reason of a recapitalization, reclassification, stock split or stock
dividend (any such event, an "Adjustment Event"), the closing prices of the
Parent Capital Stock during the Measuring Period shall be calculated as though
such Adjustment Event occurred on the first day of the Measuring Period and the
Collar Low and the Collar High shall be appropriately adjusted to reflect such
Adjustment Event.
(e) Each Outstanding Blue Coral Share which is then owned beneficially or
of record by the Parent or the Subsidiary or any other direct or indirect
subsidiary of the Parent shall, by virtue of the Merger and without any action
on the part of the holder thereof, be canceled and retired and cease to exist,
without any conversion thereof.
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(f) Each share of Blue Coral Common Stock held in Blue Coral's treasury or
by any Blue Coral Subsidiary immediately prior to the Effective Time shall, by
virtue of the Merger, be canceled and retired and cease to exist, without any
conversion thereof.
(g) The holders of certificates representing Outstanding Blue Coral Shares
shall, as of the Effective Time, cease to have any rights as stockholders of
Blue Coral, except such rights, if any, as they may have pursuant to the GCL,
and, except as aforesaid, their sole right shall be the right to receive their
pro rata share of the Merger Consideration, as determined and paid in the
manner set forth in this Agreement.
3.2 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, Outstanding Blue Coral Shares which are held by stockholders who
shall have effectively dissented from the Merger and perfected their appraisal
rights in accordance with the provisions of Section 262 of the GCL (the
"Dissenting Shares"), shall not be converted into or be exchangeable for the
right to receive the Merger Consideration, but the holders thereof shall be
entitled to payment from the Surviving Corporation of the appraised value of
such shares in accordance with the provisions of Section 262 of the GCL;
provided, however, that if any such holder shall have failed to perfect such
appraisal rights or shall have effectively withdrawn or lost such rights, his
or her Outstanding Blue Coral Shares shall thereupon be converted into and
exchangeable for, at the Effective Time, their pro rata share of the Merger
Consideration, as determined and paid in the manner set forth in this
Agreement, without any interest thereon.
3.3 Subsidiary Common Stock. Each share of common stock, par value $.01
per share, of the Subsidiary (the "Subsidiary Common Stock"), issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and exchangeable for one fully paid and non-assessable share of common
stock, par value $10 per share, of the Surviving Corporation ("Surviving
Corporation Common Stock"). From and after the Effective Time, each
outstanding certificate theretofore representing shares of Subsidiary Common
Stock shall be deemed for all purposes to evidence ownership of and to
represent the number of shares of Surviving Corporation Common Stock into which
such shares of Subsidiary Common Stock shall have been converted. Promptly
after the Effective Time, the Surviving Corporation shall issue to the Parent a
stock certificate or certificates representing 1,000 shares of Surviving
Corporation Common Stock in exchange for the certificate or certificates which
formerly represented shares of Subsidiary Common Stock, which shall be
canceled.
3.4 Exchange of Shares. On the Closing Date, each holder of an
outstanding certificate or certificates which prior thereto represented
Outstanding Blue Coral Shares (the "Certificates") shall, subject to Section
3.1(b) hereof and upon surrender to the Surviving Corporation or, at the
Parent's election, a bank or trust company that the Parent may designate to
act as exchange agent for the Merger (either the Surviving Corporation or such
bank or trust company, the "Exchange Agent") of such Certificate or
Certificates and acceptance thereof by the Exchange Agent, be entitled to the
Merger Consideration into which the aggregate number of shares of Blue Coral
Common Stock previously represented by such Certificate or Certificates
surrendered shall have been converted pursuant to this Agreement. The
Exchange Agent shall accept such Certificates upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose, with the
reasonable agreement of the Blue Coral Stockholders' Representative, to effect
an orderly exchange thereof in accordance with normal exchange practices. On
the Closing Date, the Exchange Agent shall deliver all funds and shares to
which each holder of Blue Coral Common Stock is entitled to receive pursuant
to this Section 3.4. The Parent shall furnish to the Exchange Agent all funds
and shares of the Parent Capital Stock required to make such payments. No
20
interest will be paid or accrued on the Merger Consideration upon the surrender
of the Certificates. All payments in respect of shares of Blue Coral Common
Stock which are made in accordance with the terms hereof shall be deemed to
have been made in full satisfaction of all rights pertaining to such shares.
With respect to any Certificate alleged to have been lost, stolen or destroyed,
the owner or owners of such Certificate shall be entitled to the consideration
set forth above upon delivery to the Exchange Agent of an affidavit of such
owner or owners setting forth such allegation and a bond sufficient to
indemnify the Parent and the Surviving Corporation against any claim that may
be made against either or both of them on account of the alleged loss, theft or
destruction of any such Certificate or the delivery of the payment set forth
above.
(a) If consideration is to be delivered to a Person other than the Person
in whose name the Certificate surrendered in exchange therefor is registered,
it shall be a condition to delivery of the consideration that the Certificate
so surrendered shall be properly endorsed or otherwise in proper form for
transfer and that the Person requesting such consideration shall pay any
transfer or other taxes required by reason of the payment to a Person other
than the registered holder of the Certificate surrendered or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable.
(b) Until surrendered in accordance with the provisions of this Section
3.4, from and after the Effective Time, each Certificate (other than (i)
Certificates representing shares of Blue Coral Common Stock owned beneficially
or of record by the Parent, the Subsidiary or any other subsidiary of the
Parent, (ii) Certificates representing shares of Blue Coral Common Stock held
in Blue Coral's treasury or by any Blue Coral Subsidiary and (iii) Dissenting
Shares in respect of which appraisal rights are perfected) shall represent for
all purposes the right to receive its pro rata portion of the Merger
Consideration, as determined and paid in the manner set forth in this
Agreement, without any interest thereon.
(c) After the Effective Time there shall be no transfers on the stock
transfer books of the Surviving Corporation of the shares of Blue Coral Common
Stock that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation,
they shall be canceled and exchanged for the consideration referred to in
Section 3.4(c) hereof.
IV
REPRESENTATIONS AND WARRANTIES
OF BLUE CORAL AND THE BLUE CORAL STOCKHOLDERS
Each of Blue Coral and the Blue Coral Stockholders, severally with respect
to itself and not jointly, hereby represents and warrants to the Parent and the
Subsidiary as follows:
4.1 Organization, etc. (a) Blue Coral is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. Blue Coral
is duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified or licensed would not have a
Material Adverse Effect. Each jurisdiction where Blue Coral is so qualified is
listed on Schedule 4.1(a) hereto. Except as set forth on Schedule 4.1(b)
hereto, Blue Coral does not have any subsidiaries and, except as set forth on
Schedule 4.1(b) hereto, Blue Coral does not own any capital stock
21
of or equity interests in any corporation, partnership, joint venture or other
entity. Blue Coral has heretofore delivered or made available to the Parent
accurate and complete copies of the Certificate of Incorporation and By Laws of
Blue Coral, as amended and in effect on the date hereof, and Blue Coral's
minute books, which minute books accurately reflect in all material respects
all actions taken on or prior to the date hereof at the meetings of its
stockholders and the Board and all committees thereof, except as set forth on
Schedule 4.1(a) hereto. The stock certificate books and ledgers of Blue Coral,
which have been made available to the Parent, are true, correct and complete,
and accurately reflect, at the date hereof, the ownership of the issued and
outstanding capital stock of Blue Coral.
(b) Each Blue Coral Subsidiary is listed on Schedule 4.1(b) hereto, is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to carry out
its business as now being conducted. Each Blue Coral Subsidiary is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified or licensed would not have a Material Adverse
Effect. Each jurisdiction where each Blue Coral Subsidiary is so qualified is
listed on Schedule 4.1(b) hereto. Blue Coral has heretofore delivered to the
Parent accurate and complete copies of the Certificate of Incorporation and By
Laws of each Blue Coral Subsidiary, as amended and in effect on the date
hereof. The minute books of each Blue Coral Subsidiary, which have been made
available to the Parent, contain a true, complete and correct record in all
material respects of all corporate actions taken on or prior to the date hereof
at the meetings of such Blue Coral Subsidiary's respective stockholders and
board of directors and all committees thereof. The stock certificate books and
ledgers of each Blue Coral Subsidiary, which have been made available to the
Parent, are true, correct and complete, and accurately reflect, at the date
hereof, the ownership of the issued and outstanding capital stock of each Blue
Coral Subsidiary.
(c) Except for the Third Party Interests, all of which are set forth on
Schedule 4.1(c) hereto, Blue Coral owns of record and beneficially 100% of the
issued and outstanding capital stock and all other equity interests in each
Blue Coral Subsidiary, free and clear of any Liens, except for any Liens
arising under the Blue Coral Credit Agreement or the Blue Coral Loan Agreement.
To the extent the Parent supplies funds to Blue Coral in the manner referred
to in Section 8.3(o) hereof, all such Liens will be removed as of the Closing
Date. As of the closing and the transfer of the Remaining BCI Shares to Quaker
State in accordance with Section 9.3 hereof, Blue Coral and the Parent will
collectively own of record and beneficially 100% of the issued and outstanding
capital stock and all equity interests in each Blue Coral Subsidiary, other
than any NicSand Shares owned by Sandusky, free and clear of any Liens.
4.2 Authorization and Binding Obligation. (a) Each of Blue Coral and such
Blue Coral Stockholder has all necessary power and authority (corporate or
otherwise) to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Blue Coral has all necessary corporate power
and authority to prepare, file and distribute the Information Statement. Blue
Coral and such Blue Coral Stockholder's execution, delivery and performance of
this Agreement has been duly and validly authorized by all necessary action on
the part of Blue Coral and such Blue Coral Stockholder and this Agreement has
been duly executed and delivered by Blue Coral and such Blue Coral Stockholder.
With respect to each Blue Coral Stockholder that is a trust, the trustee of
such trust has all requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby on behalf of
such trust. Except for the actions referred to in Section 4.2(b) hereof, which
actions are in full force and effect, and the giving of notice in accordance
with Section 228(d) of the GCL, no other
22
corporate action or proceedings on the part of Blue Coral are necessary to
authorize this Agreement or the consummation of the transactions contemplated
hereby. This Agreement constitutes the valid and binding obligation of Blue
Coral and such Blue Coral Stockholder, enforceable against Blue Coral and such
Blue Coral Stockholder in accordance with its terms.
(b) The Blue Coral Board of Directors (the "Board") has authorized the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and has voted to recommend adoption of this
Agreement and authorization of the Merger by the stockholders of Blue Coral and
has not withdrawn such authorization. Adelman and Blue Coral each represents
that Adelman, as the beneficial and record owner of in excess of 50% of the
issued and outstanding Blue Coral Common Stock, has executed and not withdrawn
an action by written consent in lieu of meeting of stockholders approving and
adopting the Merger, this Agreement and the transactions contemplated hereby.
A true and complete copy of such approvals by the Board and Adelman have been
delivered to the Parent.
4.3 Capitalization. (a) The authorized Blue Coral Common Stock and other
authorized capital stock of Blue Coral and each of the Blue Coral Subsidiaries
is as set forth on Schedule 4.3 hereto. All issued and outstanding shares of
Blue Coral Common Stock and other equity interests of Blue Coral and each of
the Blue Coral Subsidiaries are duly authorized, validly issued, fully paid,
non-assessable and free of preemptive rights. Schedule 4.3 hereto sets forth
the name of each Person who owns beneficially or of record any shares of Blue
Coral Common Stock, each Person who owns beneficially or of record any shares
of capital stock and other equity interests of any Blue Coral Subsidiary and,
in the case of Blue Coral and each Blue Coral Subsidiary, the number of shares
owned by each such Person.
(b) Except as set forth on Schedule 4.3 hereto, there are not now, and at
the Effective Time there will not be, any options, warrants, calls,
subscriptions, or other rights or other agreements or commitments of any nature
whatsoever (either firm or conditional) obligating Blue Coral or any of the
Blue Coral Subsidiaries to issue, transfer, deliver or sell, or cause to be
issued, transferred, delivered or sold, any additional shares of Blue Coral
Common Stock or other equity interest of Blue Coral or any of the Blue Coral
Subsidiaries, or any securities or obligations convertible into or exchangeable
for any such Blue Coral Common Stock or other equity interests, or obligating
Blue Coral or any of the Blue Coral Subsidiaries to grant, extend or enter into
any such agreement or commitment and no authorization therefor has been given
or made. Except for the arrangements described in Schedule 4.3 hereto, which
arrangements will be terminated prior to the Closing Date without further
liability to Blue Coral or any Blue Coral Subsidiary, there are no contractual
arrangements that obligate Blue Coral or any Blue Coral Subsidiary to (i)
repurchase, redeem or otherwise acquire any of its capital stock or its other
equity interests or (ii) pay any Person any consideration that is calculated
with reference to the consideration to be paid to the Blue Coral Stockholders
under this Agreement. Schedule 4.3 lists each agreement which gives any Person
any right to acquire or dispose of any NicSand Shares or which restricts the
transferability of NicSand Shares.
4.4 Consents and Approvals; No Conflicts. Except for applicable
requirements of the HSRA and as set forth on Schedule 4.4 hereto and, in the
case of Blue Coral, the approvals referred to in Section 4.2(b) hereof, the
giving of notice in accordance with Section 228(d) of the GCL and the filing
and recordation of the Certificate of Merger as required by the GCL (i) there
is no legal impediment to Blue Coral's or such Blue Coral Stockholder's
consummation of the transactions contemplated by this Agreement, and (ii)
except as set forth on Schedule 4.4 hereto, no filing with, and no permit,
authorization, consent or approval of, any Governmental Authority or other
third party is necessary for the consummation by Blue Coral or such Blue Coral
Stockholder of the transactions contemplated by this Agreement. Neither the
23
execution and delivery of this Agreement by Blue Coral or such Blue Coral
Stockholder, nor the consummation by Blue Coral or such Blue Coral Stockholder
of the transactions contemplated hereby, nor compliance by Blue Coral or such
Blue Coral Stockholder with, any of the provisions hereof will (i) result in
any violation of any provision of the charter or by-laws of Blue Coral or any
Blue Coral Subsidiary, (ii) violate any Applicable Law to which Blue Coral or
any of the Blue Coral Subsidiaries or such Blue Coral Stockholder is a party or
by which any of their respective properties is bound or (iii) except as set
forth on Schedule 4.4 hereto, result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default or give rise to
a right of any Person to terminate, cancel or accelerate the payment or
performance of any liability, obligation or commitment under any contract,
agreement, note, bond, mortgage, indenture, license, lease, franchise, permit,
Plan or other instrument or obligation to which Blue Coral, any of the Blue
Coral Subsidiaries or such Blue Coral Stockholder is a party, or by which any
of their respective properties are bound, except, in the case of Blue Coral or
any Blue Coral Subsidiary, where such violation, breach or default or right of
termination, cancellation or acceleration would not have a Material Adverse
Effect.
4.5 Governmental Approvals and Authorizations. Except as set forth in
Schedule 4.5 hereto, all material approvals, permits, qualifications,
authorizations, licenses, franchises, consents, orders, registrations or other
approvals (collectively, the "Governmental Approvals") of all Governmental
Authorities which are necessary in order to permit Blue Coral and the Blue
Coral Subsidiaries to carry on their respective businesses have been obtained
and are in full force and effect. Each of the Governmental Approvals is listed
on Schedule 4.5 hereto and Blue Coral has delivered to the Parent true and
complete copies of all such material Governmental Approvals, including any and
all amendments and other modifications to such items. There has been no
violation, cancellation, suspension, revocation or default of any Governmental
Approval or any notice of violation, cancellation, suspension, revocation,
default or dispute affecting any Governmental Approval, except for any such
violation, cancellation, suspension, revocation, default or dispute which would
not have a Material Adverse Effect. To the Knowledge of Blue Coral and each
Blue Coral Subsidiary, no reasonable basis exists for any action referred to in
the immediately preceding sentence, including, without limitation, as a result
of the consummation of the transactions contemplated by this Agreement (subject
only to the required consents listed in Section 4.4 hereof or Schedule 4.4
hereto).
4.6 Compliance with Laws. Neither Blue Coral nor any Blue Coral
Subsidiary is in conflict with or in violation or breach of or default under
(a) any Applicable Law or (b) any provision of its organizational documents,
and since December 31, 1992, neither Blue Coral nor any Blue Coral Subsidiary
has received any written notice or, to the Knowledge of Blue Coral and each
Blue Coral Subsidiary, any other notice alleging any such conflict, violation,
breach or default, except for any such violations, breaches or defaults which
would not, individually or in the aggregate, have a Material Adverse Effect.
4.7 Real Property. Schedule 4.7(a) hereto contains a complete and
correct list of all Owned Real Property. Except as set forth in Schedule
4.7(a) hereto, Blue Coral and the Blue Coral Subsidiaries, as the case may be,
have good and marketable fee simple title in the Owned Real Property, including
the buildings, structures and other improvements thereon, free and clear of all
Liens, except for Permitted Encumbrances and applicable building, zoning and
similar laws, ordinances, rules and regulations, none of which, individually or
in the aggregate, materially impair the value or the continued use of the Owned
Real Property to which they relate. Blue Coral has delivered to the Parent
true and correct copies of any title insurance commitments, title insurance
policies and surveys in Blue Coral's or any Blue Coral Subsidiary's possession
relating to each parcel of Owned Real Property.
24
(a) Schedule 4.7(b) hereto contains a complete and correct list of all
Real Property Leases and all amendments thereto. Except for the Owned Real
Property and the Real Property Leases, and except as set forth on Schedule
4.7(b) hereto, no real property is used or occupied by Blue Coral or any Blue
Coral Subsidiary.
(b) Except as set forth on Schedule 4.7(c) hereto, the improvements upon
each parcel of Owned Real Property and the current use and operation of such
real property conform in all material respects to all restrictive covenants,
conditions, easements, building, subdivision and similar codes and federal,
state and local laws, regulations, rules, orders and ordinances (other than
Environmental Laws) and neither Blue Coral nor any Blue Coral Subsidiary has
received any written, or to the Knowledge of Blue Coral and the Blue Coral
Subsidiaries, any other notice of any violation or claimed violation of any
such restrictive covenant, condition or easement, or any building, subdivision
or similar code, or any federal, state or local law, regulation, rule, order or
ordinance. Except as set forth on Schedule 4.7(c) hereto, the Owned Real
Property is zoned for the purposes for which it is currently being used by Blue
Coral or the Blue Coral Subsidiaries, as the case may be. Except as set forth
on Schedule 4.7(c) hereto, the improvements on the Owned Real Property are in
good working condition and repair, ordinary wear and tear excepted.
(c) Except as set forth on Schedule 4.7(d) hereto, the improvements upon
each parcel of real property leased by Blue Coral or any Blue Coral Subsidiary,
as the case may be, and the current use and operation of such real property
conform in all material respects to all restrictive covenants, conditions,
easements, building, subdivision and similar codes and federal, state and local
laws, regulations, rules, orders and ordinances (other than Environmental Laws)
and neither Blue Coral nor any Blue Coral Subsidiary has received any written
notice of any violation or claimed violation of any such restrictive covenant,
condition or easement, or any building, subdivision or similar code, or any
federal, state or local law, regulation, rule, order or ordinance. Except as
set forth on Schedule 4.7(d) hereto, the premises which are the subject of the
Real Property Leases are zoned for the purposes for which they are currently
being used by Blue Coral or the Blue Coral Subsidiaries, as the case may be.
The improvements on the real property premises which are the subject of the
Real Property Leases are in good working condition and repair, ordinary wear
and tear excepted.
(d) Neither Blue Coral nor any Blue Coral Subsidiary has any Knowledge of
or has received notice of any pending, threatened or contemplated action to
take by eminent domain or otherwise to condemn any portion of the Owned Real
Property or any portion of any premises which are the subject of the Real
Property Leases. Except as set forth on Schedule 4.7(e) hereto, there exists
no writ, injunction, decree, order or judgment, nor any litigation, pending or
to the Knowledge of Blue Coral and each Blue Coral Subsidiary, threatened,
relating to the ownership, use, lease, occupancy or operation of the Owned
Real Property or any of the premises which are the subject of the Real
Property Leases.
(e) Each Real Property Lease is legal, valid, binding, enforceable and, to
the Knowledge of Blue Coral or any Blue Coral Subsidiary, in full force and
effect. None of Blue Coral, any Blue Coral Subsidiary or, to the Knowledge of
Blue Coral or any Blue Coral Subsidiary, any other party is in default,
violation or breach under any Real Property Lease, no event has occurred and is
continuing that constitutes or, with notice or the passage of time or both,
would constitute a material default, violation or breach by Blue Coral or any
Blue Coral Subsidiary thereunder and, to the Knowledge of Blue Coral or any
Blue Coral Subsidiary, no event has occurred and is continuing that constitutes
or, with notice or the passage of time or both, would constitute a material
default, violation or breach by any party other than Blue Coral or any Blue
Coral Subsidiary thereunder. Neither Blue Coral nor
25
any Blue Coral Subsidiary has received any written notice of a default, offset
or counterclaim under any Real Property Lease or any other written
communication asserting non-compliance with any Real Property Lease. Except as
set forth on Schedule 4.7(f) hereof, Blue Coral and the Blue Coral
Subsidiaries, as the case may be, have the exclusive right to use and occupy
the premises leased under each Real Property Lease to which Blue Coral or any
Blue Coral Subsidiary, as the case may be, is a party. Blue Coral and the Blue
Coral Subsidiaries enjoy peaceful and undisturbed possession of the premises
leased by Blue Coral and the Blue Coral Subsidiaries, as the case may be, under
each Real Property Lease. Except as set forth on Schedule 4.7(f) hereto, the
Owned Real Property and the Real Property Leases are free and clear of all
Liens, except for Permitted Encumbrances and lessors' interests in the Real
Property Leases. Blue Coral has delivered to the Parent complete and correct
copies of all written Real Property Leases and true and correct memoranda of
the terms of all oral Real Property Leases, together, in the case of any
subleases or similar occupancy agreements, with copies of all overleases.
4.8 Personal Property. Blue Coral and each of the Blue Coral Subsidiaries
has good and valid title to all tangible personal property which it owns,
including, without limitation, all tangible personal property reflected on the
Blue Coral Balance Sheet as being owned by Blue Coral or such Blue Coral
Subsidiary, as the case may be, except for tangible personal property disposed
of in the ordinary course of business, consistent with past practice, since
December 31, 1995, in each case free and clear of all Liens, except for
Permitted Encumbrances or as set forth on Schedule 4.8 hereto. Except as set
forth in Schedule 4.8 hereto, the tangible personal property of Blue Coral and
the Blue Coral Subsidiaries is all of the tangible personal property used to
conduct the business of Blue Coral and the Blue Coral Subsidiaries as presently
conducted. Blue Coral and the Blue Coral Subsidiaries have maintained all such
material tangible personal property in good repair, working order and operating
condition, subject only to ordinary wear and tear, except where the failure to
so be in good repair would not have a Material Adverse Effect.
4.9 Intellectual Property. (a) Schedule 4.9(a) hereto contains a complete
and correct list and description of all Intellectual Property (other than any
Non-Scheduled Intellectual Property) which is used or held for use in the
business of Blue Coral and the Blue Coral Subsidiaries as presently conducted
(the "Intellectual Property Assets", it being understood that the term
Intellectual Property Assets shall include all Non-Scheduled Intellectual
Property). Each Intellectual Property Asset is either owned or validly
licensed by Blue Coral or one of the Blue Coral Subsidiaries, and Schedule
4.9(a) hereto identifies which Intellectual Property Assets (other than any
Non-Scheduled Intellectual Property) are so owned, which are so licensed and
which such Blue Coral entity is the owner or licensee of each such Intellectual
Property Asset. Except as set forth on Schedule 4.9(a) hereto, there is no
pending or, to the Knowledge of Blue Coral and each Blue Coral Subsidiary,
threatened proceeding or litigation affecting, or with respect to, any
Intellectual Property Asset. Blue Coral and each Blue Coral Subsidiary is in
material compliance with the terms of any license of any Intellectual Property
Asset and neither Blue Coral nor any Blue Coral Subsidiary has received any
written notice of, and to the Knowledge of Blue Coral and the Blue Coral
Subsidiaries, there is not, any infringement or unlawful use of any
Intellectual Property Assets. Except as disclosed on Schedule 4.9(a) hereto,
to the Knowledge of Blue Coral and each Blue Coral Subsidiary, the conduct of
the business of Blue Coral and the Blue Coral Subsidiaries as presently
conducted does not materially infringe the rights of any third party in respect
of any Intellectual Property. Except as disclosed in Schedule 4.9(a) hereto,
each Intellectual Property Asset owned by Blue Coral or any Blue Coral
Subsidiary is owned free and clear of all Liens. Neither Blue Coral nor any
Blue Coral Subsidiary has sold or otherwise disposed of any of the Intellectual
Property Assets to any Person (other than pursuant to a license
26
or sublicense listed on Schedule 4.9(b) hereto) and, except as disclosed on
Schedule 4.9(a) hereto, neither Blue Coral nor any Blue Coral Subsidiary has
agreed to indemnify any Person for any patent, trademark or copyright
infringement. The Intellectual Property Assets listed in Schedule 4.9(a)
hereto include all Intellectual Property (other than Non-Scheduled Intellectual
Property) used in, held for use in or necessary to the business of Blue Coral
and the Blue Coral Subsidiaries as presently conducted. Schedule 4.9(a) hereto
indicates which of the Intellectual Property Assets have been registered with,
filed in or issued by, as the case may be, the United States Patent and
Trademark Office and United States Copyright Office or other filing offices,
domestic or foreign.
(b) Schedule 4.9(b) hereto contains a complete and correct list of all
agreements pursuant to which Blue Coral or any Blue Coral Subsidiary licenses
or sublicenses, as the case may be, any Intellectual Property Asset for use by
any Person other than Blue Coral or any Blue Coral Subsidiary. Except as
disclosed on Schedule 4.9(b) hereto, either Blue Coral or one of the Blue Coral
Subsidiaries owns each Intellectual Property Asset so licensed or sublicensed.
No such license or sublicense conflicts with or will result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination or cancellation) under any
material contract or agreement pursuant to which Blue Coral or any Blue Coral
Subsidiary licenses any Intellectual Property Asset from any Person.
4.10 Contracts. Schedule 4.10 hereto lists all Contracts as of the date
of this Agreement, except the Real Property Leases which are listed in Schedule
4.7(b) hereto, employment agreements and other Contracts which are listed on
Schedule 4.13 hereto and the policies relating to insurance which are listed on
Schedule 4.20 hereto.
(a) Blue Coral has delivered to the Parent true and complete copies of all
written Contracts and true and complete memoranda describing, in summary
fashion, the material terms of all oral Contracts listed in Schedule 4.10
hereto, together with a complete and correct copy or description, as the case
may be, of all amendments thereto and, with respect to any Contract for the
purchase of real property a true and complete copy of all title insurance
commitments, surveys, environmental reports and leases relating to the real
property to be purchased under such Contract. To the Knowledge of Blue Coral
or the Blue Coral Subsidiary that is a party to each Contract, such Contract is
valid, in full force and effect binding and enforceable by Blue Coral or the
Blue Coral Subsidiary party thereto, as the case may be, in accordance with its
respective terms. Blue Coral and the Blue Coral Subsidiaries have complied in
all material respects with the terms of all Contracts, including, without
limitation, all such terms requiring the filing of statements (financial or
otherwise) and the payment of any amounts, and are not in default under any
Contract. Neither Blue Coral nor any Blue Coral Subsidiary has granted or been
granted any waiver or forbearance with respect to any of the Contracts. To the
Knowledge of Blue Coral or the Blue Coral Subsidiary that is a party thereto,
as the case may be, no other contracting party is in material default under any
of the Contracts. The Contracts which are listed in Schedules 4.7(b), 4.10,
4.13 and 4.20 hereto, together with those contracts, agreements, commitments or
similar understandings not required to be listed on such schedules because of
any applicable dollar or temporal thresholds contained in the definition of the
term "Contracts," include all contracts, agreements, commitments and similar
understandings used in conducting the business of Blue Coral and the Blue Coral
Subsidiaries as presently conducted.
(b) Schedule 4.10 hereto identifies any Business Restriction contained in
any Contract.
27
(c) Except as disclosed on Schedule 4.10 hereto, no claim has been or
hereafter will be made pursuant to (i) any Household Special Obligation or (ii)
any Special Obligation.
(d) Neither Blue Coral nor any Blue Coral Subsidiary has any obligation of
any kind (i) to Michael Moshontz except pursuant to the Moshontz Agreements or
(ii) to Brian Sokol except pursuant to the Sokol Agreement, other than salary
and ordinary course employee benefit and related obligations to Mr. Sokol
arising in the ordinary course of his employment by Blue Coral.
4.11 Major Customers. Schedule 4.11(a) hereto sets forth for the
twelve-month period ended March 31, 1996, (i) the names and addresses of the 10
largest customers of Blue Coral and the Blue Coral Subsidiaries, taken as a
whole (based on the aggregate value of products ordered from Blue Coral and the
Blue Coral Subsidiaries by such customers during such period), and (ii) the
amount for which each such customer was invoiced during such period. None of
Blue Coral, any of the Blue Coral Subsidiaries or such Blue Coral Stockholder
has received any written or, to the Knowledge of any such Person, any other
notice that any such customer of Blue Coral or any of the Blue Coral
Subsidiaries (x) has ceased, or will cease, to purchase the products of Blue
Coral or any of the Blue Coral Subsidiaries, as the case may be, (y) has
materially reduced, or will materially reduce, purchases of the products of
Blue Coral or any of the Blue Coral Subsidiaries, as the case may be, or (z)
has sought, or is seeking, to materially reduce the price it will pay for the
products of Blue Coral or any of the Blue Coral Subsidiaries, as the case may
be.
(a) Except as set forth on Schedule 4.11(b) hereto, none of Blue Coral,
any of the Blue Coral Subsidiaries or such Blue Coral Stockholder has received
any written or, to the Knowledge of any such Person, any other notice that any
Person with whom Blue Coral or any of the Blue Coral Subsidiaries does business
will not continue to do business with the Surviving Corporation or any of the
Blue Coral Subsidiaries after the Closing Date on terms and conditions
substantially the same as those prevailing during the past 12 months.
4.12 Product Warranties. Schedule 4.12 hereto sets forth (i) all product
warranties issued by Blue Coral or any of the Blue Coral Subsidiaries since
January 1, 1993, (ii) a summary of all amounts paid by Blue Coral or any Blue
Coral Subsidiary in respect of warranty claims asserted against Blue Coral or
any of the Blue Coral Subsidiaries since January 1, 1993, and (iii) a summary
of any asserted or unasserted claims of such nature of which Blue Coral or any
Blue Coral Subsidiary has Knowledge.
4.13 Personnel Information. (a) Schedule 4.13 hereto contains a true and
complete list of (i) all individuals employed as of March 31, 1996 by Blue
Coral or any Blue Coral Subsidiary and all directors, sales representatives,
independent contractors and other personnel providing services as of March 31,
1996 to Blue Coral or any Blue Coral Subsidiary in connection with the
operation of the business thereof as of March 31, 1996, and, (ii) all
employment, consulting and other service or compensatory plans, contracts and
arrangements, other than any such plan, contract or arrangement (x) which may
be terminated upon no more than thirty days' notice without any liability or
obligation of Blue Coral or any Blue Coral Subsidiary or (y) which provides for
annual payments not exceeding $50,000 in the aggregate (the "Services
Agreements"). Except pursuant to the terms of a Services Agreement listed on
Schedule 4.13 hereto, there are no plans, contracts, agreements or other
arrangements which provide for the accrual or payment of any compensation or
benefit to or in respect of any Person in the form of phantom stock or units
convertible into or exchangeable for any equity security, of Blue Coral or any
Blue Coral Subsidiary or otherwise measure or base the compensation or benefits
paid, payable or accrued by any Person with reference to the equity value or
equity securities of Blue Coral or any Blue Coral Subsidiary. Blue
28
Coral has provided or made available to the Parent true and complete copies of
all Services Agreements.
(b) Except as set forth in Schedule 4.13 hereto, neither Blue Coral nor
any Blue Coral Subsidiary is a party to or bound by any collective bargaining
or other labor agreement or arrangement, and there are no labor unions or other
organizations representing, or to the Knowledge of Blue Coral and each Blue
Coral Subsidiary, purporting to represent or attempting to represent any
employees employed by Blue Coral or any Blue Coral Subsidiary. Blue Coral has
provided to the Parent true and complete copies of each collective bargaining
or other labor agreement listed on Schedule 4.13 hereto and any amendments or
addenda thereto. Except as set forth on Schedule 4.13 hereto, since January 1,
1993, there has not occurred or, to the Knowledge of Blue Coral and each Blue
Coral Subsidiary, been threatened any strike, slowdown, picketing, work
stoppage, concerted refusal to work overtime or other similar labor activity
with respect to any employees or former employees of Blue Coral or any Blue
Coral Subsidiary. Except as set forth on Schedule 4.13 hereto, there are no
labor disputes currently subject to any grievance procedure, arbitration or
litigation and there is no representation petition pending or, to the Knowledge
of Blue Coral and each Blue Coral Subsidiary, threatened with respect to any
employee of Blue Coral or any Blue Coral Subsidiary. Since January 1, 1993,
Blue Coral and each Blue Coral Subsidiary have each complied in all material
respects with all Applicable Laws pertaining to the employment or termination
of employment of its respective employees, including, without limitation, all
such Applicable Laws relating to labor relations, equal employment
opportunities, fair employment practices, prohibited discrimination or
distinction and other similar employment activities.
4.14 Employee Benefit Plans. Schedule 4.14 hereto contains a true and
complete list of each "employee benefit plan", within the meaning of Section
3(3) of ERISA, and each other employment, severance, retention, change in
control, bonus, incentive or deferred compensation, stock, stock option,
phantom stock or other equity-based, performance, retirement, welfare, fringe
benefit or other similar plan, program, agreement, understanding, arrangement,
policy, trust, fund or other funding arrangement, whether written or unwritten
and whether or not subject to the provisions of ERISA, (x) that is or has been
maintained or contributed to by Blue Coral or any Blue Coral Subsidiary or to
which Blue Coral or any Blue Coral Subsidiary is a party, contributes or is or
has been obligated to contribute or by which Blue Coral or any Blue Coral
Subsidiary is or has been bound or with respect to which Blue Coral or any Blue
Coral Subsidiary may have any liability or obligation and (y) that provides or
may provide benefits or compensation to or in respect of any employee, former
employee or retiree of Blue Coral or any Blue Coral Subsidiary or the
beneficiaries or dependents of any such employee, former employee or retiree
(collectively, the "Employees") or under which any Employee is or may become
eligible to participate or derive a benefit (together with the Services
Agreements, the "Plans"). No trade or business (whether or not incorporated)
is or has been as of any date within the preceding six years treated as a
single employer together with Blue Coral or any Blue Coral Subsidiary pursuant
to Section 414 of the Code.
With respect to each Plan, Blue Coral has provided to the Parent true and
complete copies of: (i) such Plan if written, or a description of such Plan if
not written, and (ii) to the extent applicable to such Plan, all trust
agreements, insurance contracts or other funding arrangements, the two most
recent actuarial and trust reports (if applicable), the two most recent Forms
5500 required to have been filed with the IRS and all schedules thereto, the
most recent IRS determination letter, all current summary plan descriptions,
all material communications received from or sent to the IRS, the Pension
Benefit Guaranty Corporation or the Department of Labor (including a written
description of any oral communication) since January 1, 1993, any actuarial
study of any post-employment life or medical benefits provided under
29
any such Plan, if any, statements or other communications regarding withdrawal
or other multiemployer plan liabilities, if any, and all amendments and
modifications to any such document. Neither Blue Coral nor any Blue Coral
Subsidiary has communicated to any Employee any intention or commitment to
modify any Plan or to establish or implement any other employee or retiree
benefit or compensation plan, agreement or arrangement.
Except as set forth on Schedule 4.14 hereto, (a) neither Blue Coral nor
any Blue Coral Subsidiary has incurred or reasonably expects to incur (either
directly or indirectly, including as a result of any indemnification
obligation) any liability or obligation under or pursuant to Title I or IV of
ERISA or the penalty, excise tax or joint and several liability provisions of
the Code relating to employee pension benefit plans and, to the Knowledge of
Blue Coral and each Blue Coral Subsidiary, no event, transaction or condition
has occurred or exists which could result in any such liability of Blue Coral,
any Blue Coral Subsidiary or, following the Closing, the Parent, the Surviving
Corporation or any of their respective Affiliates, (b) each Plan intended to be
qualified under section 401(a) of the Code, and the trust (if any) forming a
part thereof, has received a favorable determination letter from the IRS as to
its qualification under the Code, or a timely filed application for such a
determination letter either is presently pending with the IRS or still may be
filed with the IRS within the time required to be eligible to make retroactive
plan changes as contemplated by section 401(b) of the Code, and no fact or
condition exists or has occurred which could reasonably be expected to result
in the disqualification of any such Plan or adversely affect the tax-exempt
status of any such trust, (c) there are no pending or, to the Knowledge of Blue
Coral and each Blue Coral Subsidiary, threatened claims by or on behalf of any
of the Plans, by or on behalf of any Employee or otherwise involving any such
Plan or the assets of any Plan (other than routine claims for benefits, all of
which have been adequately reserved for on the Financial Statements), (d) to
the Knowledge of Blue Coral and each Blue Coral Subsidiary, no condition exists
and no event has occurred with respect to any Plan that is a multiemployer plan
(as defined in Section 4001(a)(3) of ERISA) (a "Multiemployer Plan") which
presents a risk of the incurrence by Blue Coral or any Blue Coral Subsidiary of
any complete or partial withdrawal liability under Subtitle E of Title IV of
ERISA or any contingent liability under section 4204 of ERISA and (e) no
Multiemployer Plan is in "reorganization" or "insolvent" within the meaning of
Section 4241 or 4245 of ERISA, respectively. Each of the Plans has been
operated and administered in all material respects in compliance with its
terms, all Applicable Laws, including but not limited to ERISA and the Code,
and all applicable collective bargaining agreements. No Plan is a "multiple
employer plan" within the meaning of Section 4063 or 4064 of ERISA. All
contributions and premiums required to have been made by Blue Coral and each
Blue Coral Subsidiary to or in respect of any Plan under the terms of any such
Plan or its related trust, insurance contract or other funding arrangement, or
pursuant to Applicable Law (including, without limitation, ERISA and the Code)
or any collective bargaining agreement have been timely made. No Plan is
subject to the minimum funding requirements of Section 412 of the Code or
Section 302 of ERISA or Title IV of ERISA, other than a Multiemployer Plan.
Except to the extent set forth in Schedule 4.14 hereto, no Employee is or
may become entitled to post-employment benefits of any kind by reason of
employment with Blue Coral or any Blue Coral Subsidiary, including, without
limitation, death or medical benefits (whether or not insured), other than (x)
coverage mandated by section 4980B of the Code, (y) retirement benefits payable
under any Plan qualified under section 401(a) of the Code or (z) deferred
compensation fully reflected in the Blue Coral Balance Sheet or accrued and
payable solely pursuant to the Blue Coral Deferred Compensation Plan. Except
to the extent set forth in Schedule 4.14 hereto, the consummation of the
transactions contemplated by this Agreement will not result in an increase in
the amount of compensation or benefits or the acceleration of the vesting or
timing of payment of any compensation or benefits payable to or in respect of
any Employee.
30
4.15 Litigation. Except as set forth in Schedule 4.15 hereto, there is no
claim, litigation, proceeding or investigation pending or, to the Knowledge of
Blue Coral, each Blue Coral Subsidiary and such Blue Coral Stockholder,
threatened, against or affecting the business or any of the assets of Blue
Coral or any Blue Coral Subsidiary, or which seeks to enjoin or prohibit, or
otherwise questions the validity of, any action taken or to be taken in
connection with this Agreement. Except as set forth in Schedule 4.15 hereto,
there are no citations, fines or penalties heretofore asserted against Blue
Coral or any of the Blue Coral Subsidiaries under Applicable Law which remain
unpaid. As to the matters set forth on Schedule 4.15 hereto, the insurance
coverage of Blue Coral and the Blue Coral Subsidiaries provided by the policies
listed on Schedule 4.20 hereto and any other insurance policies that cover such
matters (including, without limitation, as to deductibles and self-insured
retentions) is of a type customarily maintained by similar companies with
respect to similar matters.
4.16 Transaction with Affiliates. Except as set forth in Schedule 4.16
hereto, no Affiliate of Blue Coral or of a Blue Coral Subsidiary (other than
another Blue Coral Subsidiary) (i) owns any assets used, held for use or
necessary in the business of Blue Coral or any Blue Coral Subsidiary as
presently conducted, (ii) possesses, directly or indirectly, any financial
interest in or is a partner, director, officer or employee of any partnership,
corporation, firm, association or business organization which is a client,
supplier, customer, lessor, lessee or competitor of Blue Coral or any Blue
Coral Subsidiary or (iii) is a party to any Contract other than employment
contracts set forth in Schedule 4.13 hereto.
4.17 Financial Statements. (a) Schedule 4.17(a) hereto contains true and
complete copies of the Financial Statements. The Financial Statements have
been prepared in accordance with GAAP consistently applied from period to
period, except that the unaudited interim combined financial statements are
subject to normal year-end audit adjustments, none of which will be material,
and do not contain footnotes. The Financial Statements fairly present in all
material respects the financial condition of Blue Coral and the Blue Coral
Subsidiaries on a combined basis at the respective dates thereof, and the
results of operations and cash flows of Blue Coral and the Blue Coral
Subsidiaries for the periods indicated.
(b) Schedule 4.17(b) hereto lists all accounts receivable from any
Employee or a stockholder of Blue Coral or a Blue Coral Subsidiary that are
reflected as assets on the Blue Coral Balance Sheet.
(c) The Blue Coral Statement will contain a good faith estimate of the
Blue Coral Expenses, the Uncollected Amount, the BCI Acquisition Amount, the
Special Obligation Amount and the Transaction Costs as of the Closing Date.
4.18 Absence of Undisclosed Liabilities. Except as specifically
identified in the schedules hereto and except for (a) liabilities as and to
the extent reflected or reserved against on the Blue Coral Balance Sheet, (b)
liabilities incurred since March 31, 1996, in the ordinary course of business,
consistent with past practice, including, without limitation, liabilities
incurred in the ordinary course of business, consistent with past practice
under any of the Contracts listed on Schedules 4.7(b), 4.10, 4.13 and 4.20
hereto, any of the product warranties listed on Schedule 4.12 hereto and any
Plans listed on Schedule 4.14 hereto and (c) liabilities incurred by Blue Coral
or any Blue Coral Subsidiary since the date of this Agreement pursuant to any
Contract entered into or renewed or permitted under Section 6.2 hereof, neither
Blue Coral nor any Blue Coral Subsidiary has any material liabilities or
obligations of any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due.
31
4.19 Absence of Changes or Events. Except as disclosed in Schedule 4.19
hereto or as expressly permitted by this Agreement, since December 31, 1995,
there has not been any material adverse change in the business, assets,
properties, liabilities, revenues, income before provision for income taxes,
operations or condition, financial or otherwise of Blue Coral and the Blue
Coral Subsidiaries taken as a whole; it being understood and agreed that any
increase in Blue Coral's borrowings under the Blue Coral Credit Agreement which
is consistent with its historical borrowing practices shall not constitute such
a material adverse change on the liabilities of Blue Coral and the Blue Coral
Subsidiaries, taken as a whole. Without limiting the foregoing, except as set
forth on Schedule 4.19 hereto, since December 31, 1995, none of Blue Coral or
the Blue Coral Subsidiaries has:
(a) purchased, sold or leased, or agreed to purchase, sell or lease, any
material asset;
(b) granted or committed to grant any bonus, commission or other form of
incentive compensation or increased or committed to increase the compensation
or fees payable to or in respect of any Employee, director, officer, sales
representative, independent contractor, consultant or Affiliate of Blue Coral
or any Blue Coral Subsidiary except (i) with respect to any Employee or sales
representative, in the ordinary course of business consistent with past
practice, (ii) as set forth on Schedule 4.13 hereto or (iii) to the extent
required under the express terms of any employment or collective bargaining
agreements as in effect on the date hereof;
(c) except as set forth on Schedule 4.13 hereto or as permitted under
Section 4.19(b) hereof, entered into, adopted or amended, or committed to enter
into, adopt or amend, any employment, consulting, retention, change-in-control,
severance, collective bargaining, bonus or other incentive compensation,
profit-sharing, health, group insurance or other welfare, stock, stock option,
phantom stock, or other equity-based, pension, retirement, vacation, severance,
deferred compensation or other employment, compensation or benefit plan,
policy, agreement, trust, fund or arrangement for the benefit of any Employee
or any current or former director, sales representative, independent
contractor, agent, consultant or Affiliate of Blue Coral or any Blue Coral
Subsidiary (whether or not legally binding);
(d) made any loans to any Person, other than loans or advances to
Employees not in excess of $100,000 in the aggregate and extensions of credit
to customers in the ordinary course of business consistent with past practice;
(e) except for the receivables listed on Schedule 1.119 hereto, none of
which have been written off since December 31, 1995, written off any
receivables except in the ordinary course of business consistent with past
practices;
(f) declared, made, set aside or paid any dividend, distribution, or
payment on, or any purchase or redemption of, any capital stock or other equity
interest of Blue Coral or any Blue Coral Subsidiary, or made any commitment
therefor, except for (i) the Permitted Distributions, (ii) the purchase of
4,005 shares of Blue Coral Common Stock from Michael Moshontz on January 4,
1996 and (iii) payments in respect of the Moshontz Agreement and the Moshontz
Release;
(g) issued or sold any capital stock or other equity interests of Blue
Coral or any Blue Coral Subsidiary, or any subscriptions, options, warrants,
calls, conversions or other rights, agreements, commitments, arrangements or
understandings of any kind obligating Blue Coral or any Blue Coral Subsidiary,
contingently or otherwise, to issue or sell, or cause to be issued or sold, any
capital stock or other equity interest of Blue Coral or any Blue Coral
Subsidiary;
32
(h) made any material change (for book or Tax purposes) in any method of
accounting or accounting practice;
(i) suffered the loss of any key Employee or key independent contractor
or, other than in the ordinary course of business consistent with past
practice, retained any new key Employees or independent contractors; or
(j) entered into any material transaction not in the ordinary course of
business or agreed (whether or not in writing) to do any of the foregoing.
4.20 Insurance. The assets owned by Blue Coral and the Blue Coral
Subsidiaries are insured against loss, damage or injury in amounts listed in
Schedule 4.20 hereto, which lists all insurance policies held by Blue Coral and
the Blue Coral Subsidiaries relating to the business of Blue Coral and the Blue
Coral Subsidiaries, including, without limitation, keyman life insurance
policies, if any, on any executive officer of Blue Coral or any Blue Coral
Subsidiary, together with the policy limits, the type of coverage, the location
of the property covered, the annual premium, the premium payment dates and the
expiration date of each of the policies. Copies of all such insurance policies
have been furnished to the Parent. All such insurance policies are in full
force and effect and all premiums due thereon have been paid. No notice of
termination or premium increase has been received under any such insurance
policy.
4.21 Taxes. (a) Except as set forth in Schedule 4.21(a) hereto, Blue
Coral, Blue Coral Chemical Company and each Blue Coral Subsidiary have duly
filed all Tax returns and forms required to be filed, and have paid in full or
collected or withheld and remitted all Taxes required to be paid, collected or
withheld, except to the extent that the failure to so file or pay relates to a
Tax authority in a jurisdiction in which such Person's level of activity or
property is immaterial and except for Taxes that are being contested in good
faith by appropriate proceedings and for which adequate reserves have been
established and are being maintained in accordance with GAAP. All such Tax
returns or forms are complete and correct in all material respects. Except as
set forth in Schedule 4.21(a) hereto, neither Blue Coral nor any Blue Coral
Subsidiary is currently involved in an audit with respect to Taxes or has
received written notice of commencement of any audit with respect to Taxes by
any Governmental Authority, no Governmental Authority has notified Blue Coral
or any Blue Coral Subsidiary that such Governmental Authority is now asserting
against Blue Coral or any Blue Coral Subsidiary any deficiency or claim for
Taxes and none of Blue Coral, Blue Coral Chemical Company or the Blue Coral
Subsidiaries has executed any waiver of the statute of limitations for any
taxable period. Except as set forth on Schedule 4.21(a) hereto, none of Blue
Coral, Blue Coral Chemical Company or the Blue Coral Subsidiaries (a) is or has
been a member of any consolidated, combined, unitary or similar group for Tax
purposes, (b) is bound by any Tax sharing, allocation or similar agreement,
(c) has at any time filed a consent under section 341(f) of the Code, (d) is
or has been a "United States real property holding corporation" (as defined
in section 897(c)(2) of the Code) during the applicable period specified in
section 897(c)(1)(A)(ii) of the Code, and (e) will as a result of the
transactions contemplated by this Agreement make or become obligated to make
any parachute payment as defined in section 280G of the Code. None of the
assets of Blue Coral or any Blue Coral Subsidiary (i) is property required to
be treated as being owned by any other Person under the "safe harbor lease"
provisions of former section 168(f)(8) of the Internal Revenue Code of 1954, as
amended, or (ii) has been financed with or directly or indirectly secures any
bond or debt the interest on which is tax-exempt under section 103(a) of the
Code.
(b) Blue Coral is now and has been at all times since November 1, 1987 an
S Corporation for federal income tax purposes within the
33
meaning of Section 1361(a) of the Code pursuant to an election to be an S
Corporation filed by Blue Coral prior to January 1, 1987. Schedule 4.21(b)
sets forth all taxing jurisdictions in which Blue Coral, Blue Coral Chemical
Company and each Blue Coral Subsidiary has filed Returns (or otherwise been
treated as taxable) and the taxable year in which Blue Coral, Blue Coral
Chemical Company and such Blue Coral Subsidiary began filing Returns. Schedule
4.21(b) sets forth each jurisdiction in which a valid S corporation election
for Blue Coral is in effect or Blue Coral is otherwise treated as an S
corporation for state or local Tax purposes and the date beginning with which
such election or treatment has been continuously in effect.
(c) Blue Coral did not incur any Tax, including, without limitation, Tax
on built-in-gain under Section 1374(a) of the Code, upon the sale of its
Household Products Division on March 15, 1996.
(d) Solely for purposes of determining the Taxes that the Blue Coral
Stockholders are obligated to pay or indemnify against pursuant to Section 7.8
or Section 13.6, Schedule 4.21(d) sets forth all Taxing jurisdictions in which
Blue Coral or Blue Coral Chemical Company is required pursuant to the
applicable Tax law to file Tax returns.
4.22 Environmental Matters. Except as set forth on Schedule 4.22 hereto,
Blue Coral's and each Blue Coral Subsidiary's operation and use of its assets,
the Owned Real Property and the premises which are the subject of the Real
Property Leases are in compliance in all respects with all Environmental Laws,
except to the extent that any such noncompliance (i) would not have a Material
Adverse Effect or (ii) has arisen as a result of any act or omission of any
Person other than Blue Coral or any Blue Coral Subsidiary and as to which
neither Blue Coral nor any Blue Coral Subsidiary has Knowledge. Blue Coral and
the Blue Coral Subsidiaries have obtained all environmental, health and safety
permits necessary for the operation of the business of Blue Coral and the Blue
Coral Subsidiaries as presently conducted, and all such permits are in full
force and effect and Blue Coral and each Blue Coral Subsidiary are in
compliance in all respects with the terms and conditions of each such permit,
except, in each case, to the extent that any such noncompliance would not have
a Material Adverse Effect. Except as set forth on Schedule 4.22 hereto,
neither Blue Coral nor any Blue Coral Subsidiary has received any notice of,
nor to the Knowledge of Blue Coral and each Blue Coral Subsidiary is there, any
administrative or judicial investigation, proceeding or action with respect to
any material violation, alleged or proven, of Environmental Laws by Blue Coral
or any Blue Coral Subsidiary or otherwise involving the Owned Real Property or
the operations conducted on the premises subject to the Real Property Leases.
(a) Except as set forth on Schedule 4.22 hereto, none of Blue Coral or any
of the Blue Coral Subsidiaries has taken or failed to take any action that has
resulted in or will result in any liability or obligation relating to (x) the
environmental conditions on, under, or about the assets of Blue Coral or any
Blue Coral Subsidiary, the Owned Real Property, the premises which are the
subject of the Real Property Leases or any properties owned, leased, operated
or used by Blue Coral or any of the Blue Coral Subsidiaries or any predecessor
of Blue Coral or any of the Blue Coral Subsidiaries at the present time or in
the past, including, without limitation, the air, soil and groundwater
conditions at such properties or (y) the past or present use, management,
handling, transport, treatment, generation, storage, disposal or release of
any Hazardous Substances, except in the case of clauses (x) and (y) above, to
the extent such liability or obligation would not have a Material Adverse
Effect.
(b) Except as set forth on Schedule 4.22 hereto, there has been no release
(nor, to the Knowledge of Blue Coral and each Blue Coral Subsidiary, is there
any substantial threat of a release) of any Hazardous Substance at or from the
Owned Real Property or the premises which are the
34
subject of the Real Property Leases in amounts or concentrations requiring
remediation under current Environmental Laws or that would violate current
Environmental Laws. Blue Coral and each of the Blue Coral Subsidiaries has
disclosed and made available to the Parent all material information, including,
without limitation, all studies, analyses and test results, in the possession,
custody or control of or otherwise known to Blue Coral or to any of the Blue
Coral Subsidiaries relating to (x) the environmental conditions on, under, or
about the assets of Blue Coral or any Blue Coral Subsidiary, the Owned Real
Property, the premises which are the subject of the Real Property Leases or any
properties owned, leased, operated or used by Blue Coral or any of the Blue
Coral Subsidiaries or any predecessor thereto at the present time or in the
past, and (y) any Hazardous Substances used, managed, handled, transported,
treated, generated, stored or released by Blue Coral or any of the Blue Coral
Subsidiaries or any other Person on, under, about or from any of the properties
or assets of Blue Coral or any of the Blue Coral Subsidiaries or in connection
with the operation of Blue Coral's or any of the Blue Coral Subsidiaries'
businesses. Except as set forth on Schedule 4.22 hereto, there are no
underground storage tanks, or underground piping associated with such tanks, on
the Owned Real Property or on the premises which are the subject of the Real
Property Leases.
4.23 Financing Statements. The material assets owned by Blue Coral and
the Blue Coral Subsidiaries are and have been located in the states of Arizona,
California, Ohio and the United Kingdom, since they were acquired by Blue Coral
or any Blue Coral Subsidiary. All financing statements and similar instruments
filed by any party with respect to such assets are listed in Schedule 4.23
hereto.
4.24 Car+ Liabilities. Neither Car+ S.A. nor any subsidiary of Car+ S.A.
has incurred any liability of any nature, whether known or unknown, absolute,
accrued, contingent or otherwise, and whether due or to become due, which is
now or in the future will be a material liability of Blue Coral and the Blue
Coral Subsidiaries, taken as a whole.
4.25 [Intentionally Omitted]
4.26 Finders and Investment Bankers; Expenses. Other than $1,050,000
payable to McDonald & Company, neither Blue Coral nor any Blue Coral Subsidiary
has incurred any liability to any broker, finder or agent for any fees,
commissions or similar compensation with respect to the transactions
contemplated by this Agreement and no Blue Coral Stockholder has incurred any
such liability that will become a liability of the Parent, the Subsidiary, Blue
Coral or any Blue Coral Subsidiary.
4.27 Investment Intent. (a) Each Blue Coral Stockholder is acquiring the
shares of Parent Capital Stock issued to such Blue Coral Stockholder by the
Parent pursuant to this Agreement for such Blue Coral Stockholder's own account
and not directly or indirectly with a view to, or for sale in connection with,
any distribution thereof. Such Blue Coral Stockholder acknowledges that (i)
the Parent Capital Stock has not been registered under the Securities Act, (ii)
the Parent Capital Stock may not be resold unless such Parent Capital Stock is
subsequently registered under the Securities Act or an exemption from such
registration is available, (iii) restrictive legends in the form set forth in
Section 14.4 hereof shall be placed on the certificates representing the
Parent Capital Stock and (iv) a notation shall be made in the appropriate
records of the Parent indicating that the Parent Capital Stock is subject to
restrictions on transfer and appropriate stop-transfer instructions will be
issued to the Parent's stock transfer agent with respect to Parent Capital
Stock.
(b) Each Blue Coral Stockholder is an Accredited Investor. Each Blue
Coral Stockholder's residence is set forth on Schedule 4.27(b) hereto. In
addition, (i) each Blue Coral Stockholder has been granted the opportunity
35
to ask questions of, and receive answers from, representatives of the Parent
concerning the Parent and the terms and conditions of the acquisition of Parent
Capital Stock contemplated by this Agreement and to obtain any additional
information that such Blue Coral Stockholder deems necessary, (ii) such Blue
Coral Stockholder's knowledge and experience in financial business matters is
such that such Blue Coral Stockholder is capable of evaluating the merits and
risks of the investment in the Parent Capital Stock and (iii) such Blue Coral
Stockholder has carefully reviewed the terms and provisions of this Agreement
and has evaluated the restrictions and obligations contained herein.
4.28 Bank Accounts. Schedule 4.28 hereto sets forth a complete and correct
list containing the names of each bank in which Blue Coral and each Blue Coral
Subsidiary has an account or safe deposit or lock box, the account or box
number, as the case may be, and the name of every Employee authorized to draw
thereon or having access thereto.
4.29 Releases. (a) Effective on the Closing Date, each Blue Coral
Stockholder hereby irrevocably waives and releases all known and unknown claims
it may have against Blue Coral, the Parent, any of the Blue Coral Subsidiaries,
any subsidiary of the Parent or any present and former directors, officers,
agents and Employees of Blue Coral, the Parent, any Blue Coral Subsidiary or
any subsidiary of the Parent, from any and all actions, claims, causes of
action or liabilities of any nature, in law or equity, known or unknown, and
whether or not heretofore asserted, which such Blue Coral Stockholder ever had,
now has or hereafter can, shall or may have against any of the foregoing for,
upon or by reason of any matter, cause or thing whatsoever from the formation
of Blue Coral and each Blue Coral Subsidiary to the date this representation
and warranty is made, other than with respect to any severance arrangement for
any of the Blue Coral Stockholders described on Schedule 4.14 hereto. Without
limiting the generality of the foregoing, effective as of the Closing Date,
each Blue Coral Stockholder hereby agrees and acknowledges that the agreements
listed in Item 1.E of Schedule 4.19 hereto shall be terminated in all respects
without any further obligation or liability of Blue Coral.
(b) Effective on the Closing Date, Ronald Peterson hereby irrevocably
waives and releases all rights he may have against Blue Coral, any Blue Coral
Subsidiary, the Parent or any subsidiary of the Parent to receive any bonus or
other compensation based on the performance of Blue Coral or any division of
Blue Coral with respect to any period from and after the Closing Date under the
bonus arrangement listed in Section II of Schedule 4.13 hereto.
V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE SUBSIDIARY
The Parent and the Subsidiary, jointly and severally, represent and
warrant to Blue Coral and the Blue Coral Stockholders as follows:
5.1 Organization and Standing. Each of the Parent and the Subsidiary is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and each has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted.
5.2 Authorization and Binding Obligation. (a) Each of the Parent and the
Subsidiary has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Parent and the Subsidiary
and the consummation by the Parent and the Subsidiary of the transactions
contemplated hereby have been duly and validly authorized and
36
approved by all necessary corporate action on the part of each of the Parent
and the Subsidiary and, immediately prior to the Effective Time, no other
corporate action or proceedings on the part of the Parent or the Subsidiary
will be necessary to authorize this Agreement or the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of the Parent and the Subsidiary and, upon such execution and
delivery, will constitute a valid and binding obligation, enforceable against
the Parent and the Subsidiary in accordance with its terms, except as limited
by laws affecting the enforcement of creditors' rights generally or equitable
principles.
(b) The Subsidiary's Board of Directors (the "Subsidiary's Board") and
the Parent's Board of Directors (the "Parent's Board") have authorized the
Subsidiary's and Parent's respective execution and delivery of this Agreement
and the Subsidiary's and the Parent's respective performance of the
transactions contemplated hereby, and the Subsidiary's Board has voted to
recommend approval of this Agreement by the Parent.
5.3 Consents and Approvals; No Conflicts. Except for applicable
requirements of the HSRA, the Securities Act, applicable state securities laws
and filing and recordation of the Certificate of Merger as required by the GCL,
no filing with, and no permit, authorization, consent or approval of, any
public body or authority is necessary for the consummation by the Parent and
the Subsidiary of the transactions contemplated by this Agreement. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby, nor compliance by the Parent or the
Subsidiary with any of the provisions hereof will (a) result in any violation
of any provision of the charter or by-laws of the Parent or the Subsidiary, (b)
violate any Applicable Law to which the Parent or the Subsidiary is a party or
by which any of their respective properties is bound, or (c) result in a
material violation or breach of, or constitute (with or without due notice or
lapse of time or both) a material default (or give rise to any right of
termination, cancellation or acceleration) under, any material contract,
agreement, note, bond, mortgage, indenture, license, lease, franchise, permit,
Plan or other instrument or obligation to which the Parent or the Subsidiary
is a party, or by which either of them or any of their respective properties is
bound.
5.4 Litigation. There is no claim, litigation, proceeding or
investigation pending or, to the best of the Parent's or the Subsidiary's
knowledge, threatened, which seeks to enjoin or prohibit, or otherwise
questions the validity of, any action taken or to be taken by the Parent or
the Subsidiary in connection with this Agreement.
5.5 Finders and Investment Bankers. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried on without
the intervention of any Person acting on behalf of the Parent or the
Subsidiary in such manner as to give rise to any valid claim against Blue
Coral or any of the Blue Coral Stockholders for any broker's fee or finder's
fee or similar compensation.
5.6 Financial Statements and Reports. The Parent has filed all required
forms, reports and documents with the SEC required to be filed by it pursuant
to the Securities Act and the Exchange Act, and the rules and regulations
promulgated thereunder, all of which have complied in all material respects
with the applicable requirements of the Securities Act and the Exchange Act,
respectively, and such rules and regulations. The Parent has previously
furnished to Blue Coral for delivery to the Blue Coral Stockholders copies of
all such forms, reports and documents filed by the Parent with the SEC since
January 1, 1994 (hereinafter collectively referred to as the "Parent Reports").
None of the Parent Reports, including, without limitation, any financial
statements or schedules included therein, at the time filed, contained any
untrue statement of a material fact or omitted to state a
37
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Parent included in the Parent
Reports complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with GAAP applied on a consistent basis
(except as otherwise noted in such financial statements) and present fairly in
all material respects the financial position, results of operations, cash flows
and changes in financial position of the Parent and its consolidated
subsidiaries as of the dates or the periods indicated, subject, in the case of
unaudited interim consolidated financial statements, to normal year-end
adjustments.
5.7 Stock Issuance. The Parent Capital Stock to be issued pursuant to this
Agreement has been duly authorized for issuance and when issued and delivered
by the Parent in accordance with the provisions of this Agreement will be
validly issued, fully paid and non-assessable and listed on the NYSE. The
Parent Capital Stock issued under this Agreement will not be subject to any
preemptive or similar rights.
VI
COVENANTS
6.1 Information Prior to Closing. (a) Subject to Section 14.3 hereof,
during the period from the date hereof to the Closing Date, Blue Coral will and
will cause each of the Blue Coral Subsidiaries to make the management of Blue
Coral and the Blue Coral Subsidiaries available to the Parent and its
authorized representatives at reasonable times and provide the Parent and its
accountants, legal counsel and other authorized representatives reasonable
access during normal business hours to, and permit such Persons to review, the
properties, books, Contracts, accounts and records of Blue Coral and the Blue
Coral Subsidiaries, and to provide such other information to the Parent and its
authorized representatives as shall have been reasonably requested by the
Parent or such authorized representatives concerning Blue Coral or any Blue
Coral Subsidiary. The rights of the Parent under this Section 6.1 shall be
exercised in such a manner as to minimize interference with the conduct of the
business of Blue Coral and the Blue Coral Subsidiaries.
(b) Subject to Section 14.3 hereof, the Parent and the Subsidiary will
provide each Blue Coral Stockholder with the opportunity to ask questions of,
and receive answers from, representatives of the Parent and the Subsidiary
regarding the terms and conditions of the acquisition of Parent Capital
Stock pursuant to this Agreement and to obtain any additional information
regarding the Parent and the Subsidiary as such Blue Coral Stockholder deems
necessary to evaluate the transactions contemplated by this Agreement,
including the acquisition of shares of Parent Capital Stock as contemplated
hereby.
6.2 Conduct of Business. During the period from the date hereof to the
Closing Date, Blue Coral covenants and agrees that it will and will cause the
Blue Coral Subsidiaries to carry on their businesses in, and only in, the
ordinary course of business, in substantially the same manner as heretofore
conducted, and to use their reasonable commercial efforts to preserve intact
their present business organization, keep available the services of their
respective officers and Employees, sales agents and independent contractors,
and preserve their relationships with customers, suppliers, distributors,
contractors, licensors, licensees and others having business dealings with
them, to the end that their goodwill and going business shall be maintained
following the Closing. Blue Coral will promptly advise the Parent in writing
of any change in the financial condition, operations or business of Blue Coral
or any Blue Coral Subsidiary that Blue Coral or any
38
Blue Coral Subsidiary recognizes is or is likely to be materially adverse.
Without limiting the generality of the foregoing, except as expressly
permitted by this Agreement or with the prior written consent of the Parent,
Blue Coral covenants and agrees that it will not, and it will not permit any
Blue Coral Subsidiary to, do or agree to do, on or after the date hereof, any
of the following, on or before the Closing:
(a) amend their respective certificates of incorporation or by-laws or
other organizational documents;
(b) subject to the exercise of Blue Coral's fiduciary obligations to its
stockholders under Applicable Law after advice of counsel with respect to such
obligations, rescind, modify, amend or otherwise change or affect any of the
resolutions of the Board recommending adoption of this Agreement and
authorization of the Merger;
(c) issue, sell, transfer, assign, pledge, convey or dispose of any
capital stock or other equity interest, including, without limitation, any
subscriptions, options, warrants, calls, conversions or other rights,
agreements, commitments, arrangements or understandings of any kind obligating
Blue Coral or any Blue Coral Subsidiary, contingently or otherwise, to issue or
sell, or cause to be issued or sold, any capital stock or other equity interest
of Blue Coral or any Blue Coral Subsidiary;
(d) except for any payment referred to in Section 4.19(f)(i), (ii) or
(iii) hereof, split, combine or reclassify any shares of any class of its
capital stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any class of its capital stock, or redeem or otherwise acquire any shares of
such capital stock;
(e) write off any receivables except in the ordinary course of business
consistent with past practice, provided that in no event shall Blue Coral or
any Blue Coral Subsidiary write off any of the receivables listed on Schedule
1.119 hereto;
(f) sell, assign, lease or otherwise transfer or dispose of any assets
except in the ordinary course of business consistent with past practice, unless
the same shall be replaced with assets of equal or greater value and utility
and except that (i) Blue Coral may assign all of its rights under the Valley
Belt Purchase Agreement to J&W Adelman, Ltd. and (ii) Blue Coral may lease the
Valley Belt Property from J&W Adelman, Ltd. pursuant to the lease agreement
described in Section 8.3(i) hereof.
(g) (i) except in the ordinary course of business consistent with past
practice under existing lines of credit, create, incur, assume, maintain or
permit to exist any long-term debt, including obligations in respect of capital
leases, or create, incur, assume, maintain or permit to exist any short-term
borrowing in an aggregate amount for Blue Coral and the Blue Coral Subsidiaries
exceeding $50,000; (ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the
obligations of any other Person, except for assumptions, guarantees or
endorsements by Blue Coral of the obligations of any Blue Coral Subsidiary
(other than Car+) in the ordinary course of business consistent with past
practice; (iii) make any loans, advances or capital contributions to, or
investments in, any other Person (other than customary loans or advances in the
ordinary course of business consistent with past practice to Employees not to
exceed $50,000 in the aggregate and extensions of credit made to customers on a
trade receivable basis in the ordinary course of business consistent with past
practice; (iv) waive, release, grant or transfer any material rights or
materially modify or change any existing license, lease, contract or other
document material to Blue Coral or any of the Blue Coral Subsidiaries; or (v)
create, assume or permit to exist any Lien upon their
39
assets, except for those in existence on the date of this Agreement and
except for those additional Liens created in the ordinary course of business
consistent with past practice, all of which Liens, other than Permitted
Encumbrances, will be removed on or prior to the Closing Date;
(h) except for the lease of the Valley Belt Property pursuant to the
agreement described in Section 8.3(i) hereof, enter into any Contract other
than in the ordinary course of business consistent with the past practices of
the business of Blue Coral or any Blue Coral Subsidiary;
(i) fail to timely make all payments required to be paid under any
Contract when due and otherwise pay all liabilities and satisfy all
obligations, in each case in a manner consistent with past practice, except, in
any such case, where such payment, liability or obligation is being contested
in good faith in appropriate proceedings;
(j) fail to maintain their inventories of spare parts and expendable
supplies, if any, at levels consistent with past practice;
(k) (i) increase or modify or agree to increase or modify the
compensation, bonuses or other benefits or perquisites of any Employee of Blue
Coral or any Blue Coral Subsidiary, except for salary increases granted in the
ordinary course of business consistent with past practice or pursuant to the
terms of any Services Agreement or collective bargaining agreement as in effect
on the date hereof; (ii) pay or commit to pay any compensation, bonus, pension
or other retirement benefit or allowance, fringe benefit or other benefit not
required by the terms of an existing Plan, Services Agreement or collective
bargaining agreement as in effect on the date hereof or otherwise in the
ordinary course of business consistent with past practice; (iii) amend or
commit to amend any Plan; or (iv) institute or enter into or commit to
institute or enter into any additional bonus, profit-sharing, incentive, stock
option, phantom stock or other equity-based benefit, deferred compensation,
severance, retention, change in control, pension, retirement, health, welfare,
group insurance or other employee or retiree benefit plan, agreement, trust,
fund or arrangement, or any additional employment or consulting agreement with
or for the benefit of any Person;
(l) make any payment whatsoever to any Blue Coral Stockholder other than
(i) Employee compensation paid in accordance with Section 6.2(g)(iii),
6.2(k)(i) or 6.2(k)(ii) hereof or (ii) any payment referred to in Section
4.19(f)(i), (ii) or (iii) hereof;
(m) enter into any agreement, commitment or contract with respect to the
purchase of capital assets involving an amount in excess of $50,000
individually or $150,000 in the aggregate;
(n) make any new elections, or make any changes to current elections, with
respect to Taxes;
(o) fail to maintain their books and records in accordance with GAAP; and
(p) take or fail to take any action that would cause any of its
representations and warranties not to be true and correct on the Closing Date
in the manner required by Section 8.3(b) hereof.
6.3 Third-Party Consents. Blue Coral covenants and agrees that it will
and will cause each Blue Coral Subsidiary to use all reasonable commercial
efforts to obtain the consent of any third parties or Governmental Authorities
required to be obtained or made in connection with the transactions
contemplated by this Agreement, including, without limitation, those consents
set forth on Schedule 6.3 hereto.
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6.4 Renewal of Contracts. Blue Coral covenants and agrees that it will
and will cause each Blue Coral Subsidiary to use all reasonable commercial
efforts to renew any Contract which by its terms expires or terminates between
the date of this Agreement and the Closing Date, provided that any such
renewal shall be on terms and conditions which are consistent with the past
practice of Blue Coral and the Blue Coral Subsidiaries.
6.5 Financial Statements. Blue Coral covenants and agrees that it will
deliver to the Parent, within 30 days after the end of each month until the
Closing Date, unaudited consolidated statements of operations and cash flows
for the business of Blue Coral and the Blue Coral Subsidiaries for the month
then ended, along with a consolidated balance sheet of the business of Blue
Coral and the Blue Coral Subsidiaries as of the end of such month. All
financial statements furnished pursuant to this Section shall be true and
complete in all material respects and fairly represent the financial position,
results of operations, cash flows and changes in financial position as of the
dates and for the periods covered by such statements subject to normal year-end
audit adjustments, none of which will be material. Blue Coral covenants and
agrees that it will and will cause each Blue Coral Subsidiary to furnish to the
Parent any and all other information customarily prepared concerning the
financial condition of Blue Coral or any Blue Coral Subsidiary that the Parent
or the Parent's representatives may reasonably request.
6.6 Blue Coral Deferred Compensation Plan. Blue Coral covenants and
agrees that, prior to the Closing Date, it will or will cause the Blue Coral
Subsidiaries to honor, pay, perform and discharge, in full, all benefits,
compensation, expenses and other amounts due under or in respect of the Blue
Coral Deferred Compensation Plan including, without limitation, all such
amounts due to the participants and beneficiaries thereunder.
6.7 Supplements to Schedules. Any party may at any time, or from time to
time after the date hereof, but not later than five Business Days prior to the
Closing Date, supplement or amend the Schedules required by this Agreement with
respect to any matter arising after the date hereof which if existing or
occurring at the date hereof would have been required to be set forth or
described in such a Schedule. No supplement or amendment to such Schedules
shall have any effect for the purpose of determining the satisfaction of the
conditions to the obligation of the other parties under Article VIII hereof,
but any matter arising after the date hereof and disclosed in an amended or
supplemented Schedule pursuant to this Section 6.7 shall not form the basis for
any claim for indemnification pursuant to Article XI hereof if the transactions
contemplated hereby are consummated. Each of the representations and
warranties made herein shall be deemed repeated at the Closing, subject to
such changes thereto as shall have been made in accordance with this Section
6.7. A party to whom a disclosure is made prior to the Closing of a matter
arising prior to the date hereof which was required to have been disclosed
herein shall not, by proceeding with the Closing, be deemed to have waived
the breach of this Agreement, or any of its other rights hereunder, including
rights to indemnity, resulting from such failure to disclose.
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VII
FURTHER AGREEMENTS
7.1 Compliance with GCL; Filings. As soon as practicable and in any
event within 3 days after the date of this Agreement, Blue Coral will prepare
and deliver to each Blue Coral Stockholder a notice, in accordance with
Sections 228(d) and 262(d)(2) of the GCL, regarding (i) the execution of this
Agreement, (ii) the Board's authorization of the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and its
vote to recommend adoption of this Agreement and authorization of the Merger by
the stockholders of Blue Coral, (iii) Adelman's execution, as the beneficial
and record owner of in excess of 50% of the issued and outstanding Blue Coral
Common Stock, of an action by written consent in lieu of a meeting of
stockholders approving and adopting the Merger and (iv) the availability of
appraisal rights under Section 262 of the GCL.
(a) As promptly as practicable, each of Blue Coral, the Blue Coral
Stockholders, the Parent and the Subsidiary each shall properly prepare and
file any filings required under any Federal, state, county, local or municipal
law relating to the Merger and the transactions contemplated herein (such
filings, together with the filings previously required under the HSRA, are,
collectively, the "Filings"). Blue Coral further covenants and agrees to cause
the Blue Coral Subsidiaries to properly prepare and file any required Filings.
The Parent and the Subsidiary, on the one hand, and Blue Coral, on the other,
shall promptly notify the other of the receipt of any comments on, or any
request for amendments or supplements to, the Filings by any governmental
official, and each of Blue Coral, the Parent and the Subsidiary will supply the
other with copies of all correspondence between it and each of its subsidiaries
and representatives, on the one hand, and any appropriate governmental
official, on the other hand, with respect to the Filings. The Filings, when
filed, shall comply as to form in all material respects with Applicable Law.
7.2 Rule 144. Subject to the proviso at the end of this sentence, for the
period ending on the third anniversary of the Closing Date, the Parent will
file the reports required to be filed by it under the Exchange Act and the
rules and regulations adopted by the Securities and Exchange Commission
thereunder to the extent required from time to time to enable any Blue Coral
Stockholder who receives shares of the Parent Capital Stock in accordance with
this Agreement to sell such shares without registration under the Securities
Act within the limitations of the exemption provided by (a) Rule 144 under the
Securities Act, as such rule may be amended from time to time, or (b) any
successor rule or regulation hereafter adopted by the Securities and Exchange
Commission; provided that this covenant shall have no force and effect at any
time when the Parent is not a publicly traded company.
7.3 Election of Adelman. If the Closing occurs pursuant to this Agreement,
(i) the Parent shall cause Adelman to be elected to the Board of Directors of
the Surviving Corporation immediately after the Closing and (ii) the Parent
shall use its best efforts to cause Adelman (x) to be elected to the Parent's
Board no later than October 31, 1996 and (y) to be re-elected to the Parent's
Board for so long as Adelman holds, beneficially and of record, not less than
75% of the shares of Parent Capital Stock issued to him on the Effective Date
pursuant to Section 3.1 hereof.
7.4 Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto, agrees to use (and Blue Coral shall cause
the Blue Coral Subsidiaries to use) their commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this
42
Agreement and to cooperate with one another in connection with the foregoing,
including using its commercially reasonable efforts to obtain all necessary
consents, approvals and authorizations as are required to be obtained under
Applicable Law, to defend all lawsuits or other legal proceedings challenging
this Agreement or the consummation of the transactions contemplated hereby, to
cause to be lifted or rescinded any injunction or restraining order or other
order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, and to effect all necessary registrations and
Filings.
(a) Without limiting the generality of Section 7.4(a) above, prior to the
Closing Blue Coral covenants and agrees to use its reasonable best efforts to
perform all of its obligations under the Amended and Restated Agreement by and
between Blue Coral and Airosol Company, Inc., dated May 29, 1996.
7.5 Acquisition Proposals. None of Blue Coral, any Blue Coral
Stockholder or any of Blue Coral's employees, representatives or agents
(collectively, the "Blue Coral Representatives") shall, directly or indirectly,
solicit or initiate inquiries or proposals from or enter into any agreement
with respect to, or provide any confidential information to or participate in
any discussions or negotiations with, any Persons or group (other than the
Parent, the Subsidiary and their respective subsidiaries and their respective
directors, officers, employees, representatives and agents) concerning any sale
of material assets or shares of Blue Coral Common Stock, any assets or shares
of capital stock of any Blue Coral Subsidiary (other than, in the case of
Adelman, pursuant to Adelman's performance of his obligations under Sections
8.3(n) and 9.3 hereof) or any merger, consolidation or similar transaction
involving Blue Coral or any Blue Coral Subsidiary. Blue Coral and each Blue
Coral Stockholder will immediately cease and Blue Coral will cause to be
terminated by the Blue Coral Subsidiaries any existing activities, discussions
or negotiations with any third parties conducted heretofore with respect to any
of the foregoing. Blue Coral or the applicable Blue Coral Stockholder will
notify the Parent immediately if any such inquiries or proposals are received
by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, such Person or any of
the Blue Coral Representatives, and will promptly request each Person which has
heretofore executed a confidentiality agreement in connection with its
consideration of an acquisition of Blue Coral, any Blue Coral Subsidiary or any
material portion of their assets or stock to return or destroy all confidential
information furnished to such Person by or on behalf of Blue Coral, any Blue
Coral Subsidiary or any of the Blue Coral Representatives.
7.6 Public Announcements. The Parent, Blue Coral and each of the Blue
Coral Stockholders will consult with one another before issuing any press
release or otherwise making any public statement with respect to this Agreement
or the Merger and shall not issue any such press release or make any such
public statement prior to such consultation without the consent of the Parent
and Blue Coral, except based on the advice of counsel for Blue Coral or the
Parent, as the case may be, as required by Applicable Law.
7.7 Consent of the Parent. The Parent, as the sole shareholder of the
Subsidiary, by executing this Agreement hereby consents to the execution,
delivery and performance of this Agreement by the Subsidiary and such consent
shall be treated for all purposes as a vote duly adopted at a meeting of the
shareholders of the Subsidiary held for such purpose.
7.8 Transfer Taxes. The Blue Coral Stockholders shall be responsible for
the timely payment of, and shall indemnify and hold harmless the Parent
Indemnitees against, all Transfer Taxes imposed by Governmental Authority that
is or should be listed on Schedule 4.21(d) or by the United Kingdom, arising
out of or in connection with or attributable to the transactions effected
pursuant to this Agreement except to the extent, in the
43
case of Transfer Taxes imposed by the United Kingdom, such Taxes were included
in the BCI Acquisition Amount. The Parent shall be responsible for, and shall
indemnify the Blue Coral Stockholders against, all other Transfer Taxes arising
out of or in connection with or attributable to the transactions effected
pursuant to this Agreement.
(a) As between the Blue Coral Stockholders, on the one hand, and the
Parent Indemnitees, on the other hand, the party that has the primary
responsibility under applicable law for filing any Tax return required to be
filed in respect of Transfer Taxes shall prepare and timely file such Tax
return, provided that such party's preparation of such Tax return shall be
subject to the other party's approval, which approval shall not be withheld or
delayed unreasonably.
(b) The Blue Coral Stockholders and the Parent Indemnitees will cooperate
with each other in attempting to minimize Transfer Taxes.
7.9 Treatment of Books and Records. For a period of three years after the
Closing Date, at least 30 days prior to discarding or destroying any books or
records relating to the business of Blue Coral, the Parent shall give the Blue
Coral Stockholders' Representative notice of its intended action and an
opportunity for the Blue Coral Stockholders' Representative at its sole expense
to retain any of the books or records proposed to be discarded or destroyed by
the Parent or Blue Coral, as the case may be. Prior to the destruction of any
such books or records, the Blue Coral Stockholders' Representative shall have
the right, upon reasonable advance request and at its sole expense, to have
access to such books and records during normal business hours to enable any or
all of the Blue Coral Stockholders to fulfill their Tax or other ordinary
course of business obligations.
7.10 Purchase or Sale of NicSand. As soon as practicable after the
Closing Date, the Parent will notify Sandusky in writing (the "Sandusky
Notice") that (i) the Merger has occurred, (ii) Sandusky's rights under Section
4(a) of the NicSand Agreement have been triggered and (iii) the "Company Value"
of NicSand within the meaning of Section 4(a) of the NicSand Agreement is
$10,706,000.
(a) If Sandusky does not purchase the NicSand Shares owned by Blue Coral
in accordance with Section 4(a) of the NicSand Agreement, the Surviving
Corporation shall promptly give Sandusky written notice that it will purchase
the NicSand Shares owed by Sandusky pursuant to Section 4(b) of the NicSand
Agreement and the Surviving Corporation shall thereafter use commercially
reasonable efforts to close such purchase transaction as promptly as
practicable (such purchase, the "NicSand Purchase").
7.11 Sale of the McKay Property. As soon as practicable after the
Closing Date, the Surviving Corporation shall undertake to sell the McKay
Property in such manner and on such terms and conditions, including, without
limitation, as to the absence of any indemnities, as the Surviving Corporation,
in its sole discretion, shall deem appropriate. From time to time following
the date of this Agreement, the Surviving Corporation shall provide the Blue
Coral Stockholders' Representative with notice as to the status of its efforts
to sell the McKay Property, as contemplated by this Section 7.11.
(a) Upon the Surviving Corporation's sale of the McKay Property, as
contemplated by Section 7.11(a) hereof, the Surviving Corporation will provide
the Blue Coral Stockholders' Representative with notice of such sale and a
statement of the McKay Proceeds realized in connection with such sale. To the
extent the McKay Proceeds from any such sale exceed the sum of (i) the McKay
Amount plus (ii) all costs and expenses incurred by the Parent in connection
with the undertaking under Section 7.11(a) hereof (the "McKay Transaction
Costs") (any such excess, the "McKay Excess"), the Surviving
44
Corporation shall, within 10 Business Days following the closing of any such
sale, pay to each Blue Coral Stockholder: an amount equal to the product of
(i) 50% of the McKay Excess times (ii) the fraction applicable to such Blue
Coral Stockholder set forth on the Ownership Schedule. Alternatively, to the
extent the McKay Proceeds from any such sale are less than the sum of (i) the
McKay Amount plus (ii) the McKay Transaction Costs (any such deficiency, the
"McKay Deficiency"), the Blue Coral Stockholders shall, within 10 Business Days
following the closing of any such sale, be jointly and severally obligated to
pay to the Surviving Corporation an amount equal to 50% of the McKay
Deficiency.
7.12 Release of Special Shares. If, on or prior to the third anniversary
of the Closing Date, the restricted shares referred to in Section 8.3(l) hereof
(or their equivalent) have vested, the Blue Coral Stockholders shall have no
further interest in the Special Shares and the Blue Coral Stockholders shall be
deemed to have forfeited that portion of the Merger Consideration represented
by the Special Shares. If, on or prior to the third anniversary of the Closing
Date, such shares (or their equivalent) have not so vested or have become
incapable of so vesting, the Parent shall promptly deliver to each Blue Coral
Stockholder such number of the Special Shares as equals the product of (i) the
number of Special Shares times (ii) the fraction applicable to such Blue Coral
Stockholder set forth on the Ownership Schedule.
7.13 Officers' and Directors' Insurance; Indemnification of Officers and
Directors. The Parent agrees that for the entire period from the Effective
Time until at least six years after the Effective Time (a) the certificate of
incorporation and the by-laws of the Surviving Corporation shall contain the
provisions with respect to indemnification and exculpation from liability set
forth in Blue Coral's Certificate of Incorporation and By-Laws as of the date
of this Agreement, which provisions shall not be amended, repealed or otherwise
modified during such period in any manner that would adversely affect the
rights thereunder of individuals who on or prior to the Effective Time were
directors, officers, employees or agents of Blue Coral unless such modification
is required by Applicable Law and (b) the Surviving Corporation shall either
(x) maintain in effect Blue Coral's current directors' and officers' liability
insurance covering those persons who are currently covered on the date of this
Agreement by Blue Coral's directors' and officers' liability insurance policy
(a copy of which has been heretofore delivered to the Parent) or (y) cause the
Surviving Corporation's directors' and officers' liability insurance then in
effect to cover those persons who are covered on the date of this Agreement by
Blue Coral's directors' and officers' liability insurance policy with respect
to those matters covered by, and subject to the same terms and limitations
imposed by, the directors' and officers' liability insurance policy that the
Parent generally provides for its own directors and officers.
7.14 Surviving Corporation Common Stock. The Parent agrees that on the
Closing Date it will not transfer the Surviving Corporation Common Stock.
VIII
CLOSING CONDITIONS
8.1 Conditions Precedent to the Obligations of All Parties. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of each of the following
conditions:
(a) Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSRA shall have expired or been
terminated.
45
(b) No preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission nor any statute, rule,
regulation or executive order promulgated or enacted by any Governmental
Authority shall be in effect which would (i) make the consummation of the
Merger by the Parent, the Subsidiary or Blue Coral illegal or (ii) otherwise
prevent the consummation of the Merger.
(c) The Parent and Adelman shall have entered into an employment and
non-competition agreement in form and substance satisfactory to the Parent and
Adelman.
(d) If the Surviving Corporation does not serve as the Exchange Agent, the
Parent and the Stockholders' Representative shall have entered into an
agreement regarding the exchange of shares described in Section 3.4 hereof with
such entity that will serve as the Exchange Agent.
(e) Each of the Blue Coral Stockholders, the Parent, the Blue Coral
Stockholders' Representative and the Escrow Agent shall have executed and
delivered an Escrow Agreement in the form attached hereto as Exhibit 8.1(e).
(f) Each of the Parent, the Blue Coral Stockholders and a mutually agreed
upon escrow agent shall have entered into an Indemnification and Escrow
Agreement, containing terms and conditions satisfactory to the Parent and the
Blue Coral Stockholders, providing for the creation of an escrow account with
such escrow agent in an amount equal to the NicSand Escrow Amount; it being
understood and agreed that the purpose of such Indemnification and Escrow
Agreement shall be to provide the Parent with a source of indemnification for
various agreed upon matters relating to NicSand, including (without limitation
and without duplication)(x) upon a Sandusky Purchase, any shortfall (the
"Shortfall") between $13,000,000 and an amount equal to the sum of (i) the
NicSand Amount plus (ii) the cash proceeds actually received by Blue Coral from
Sandusky at closing of the Sandusky Purchase in respect of the NicSand Shares
plus (iii) all principal payments actually made upon the maturity of any
NicSand Note in respect of the NicSand Shares plus (iv) the amount of any
intercompany debt owing from NicSand to Blue Coral, up to an aggregate of
$2,293,536, which is actually received by Blue Coral in cash, simultaneously
with such closing, or pursuant to principal payments actually made upon the
maturity of the NicSand Note, and (y) any other Losses incurred by Blue Coral,
the Parent or any of their respective Affiliates arising out of or relating in
any way to the termination or modification of any of the commercial
arrangements between Blue Coral and NicSand which are in existence, or are
alleged by Sandusky to be in existence, on the date hereof, including any such
arrangements described in Paragraphs 8, 9 and 10 of the letter attached hereto
as Exhibit 8.3(f) (such Losses, the "NicSand Losses"). Such Indemnification
and Escrow Agreement will also provide that (A) Adelman will have the right to
conduct and consummate all negotiations with Sandusky with respect to the
buy/sell arrangements under the NicSand Agreement, and all other matters
reasonably related thereto, subject, in all cases, to the Parent's reasonable
review and supervision of such negotiations, (B) any portion of the NicSand
Escrow Amount released to the Blue Coral Stockholders shall be released with
any interest earned thereon in accordance with the provisions of such escrow
agreement, (C) immediately following a Sandusky Purchase, such escrow agent
shall release to the Parent an amount equal to the Shortfall (it being
understood that for purposes of computing the amount of the Shortfall under
this clause (C) only, any NicSand Note delivered upon such Sandusky Purchase
shall be deemed to have been paid in full), (D) immediately following a NicSand
Purchase, such escrow agent shall release to the Parent an amount equal to the
excess, if any, of (1) the sum of (x) the amount paid by the Parent for the
NicSand Shares listed on Schedule 4.1(c) hereto plus (y) any NicSand Losses for
which the Parent is
46
then entitled to indemnification under such Indemnification and Escrow
Agreement over (2) the NicSand Amount and (E) immediately following a payment
to the Parent under clause (C) or clause (D) of this Section 8.3(f), and from
time to time thereafter, the escrow agent shall release to the Blue Coral
Stockholders' Representative any portion of the NicSand Escrow Amount then in
escrow that exceeds the sum of (1) the then unpaid principal of any NicSand
Note plus (2) an amount equal to the total Losses, if any, that the Parent
reasonably determines may arise thereafter under clause (y) of this Section
8.3(f).
8.2 Additional Conditions to the Obligation of Blue Coral. The obligation
of Blue Coral to effect the Merger is also subject to the fulfillment at or
prior to the Effective Time of the following additional conditions:
(a) The Parent and the Subsidiary shall each have performed each of the
respective obligations to be performed by it hereunder on or prior to the
Closing.
(b) The representations and warranties of the Parent and the Subsidiary
set forth in this Agreement that are qualified as to materiality or Material
Adverse Effect shall be true and correct in all respects and the
representations and warranties of the Parent and the Subsidiary contained in
this Agreement that are not so qualified shall be true and correct in all
material respects, in each case when made and, unless such representation or
warranty is made as of a specific date, at and as of the Effective Time as if
made at and as of such time.
(c) Blue Coral shall have received a certificate, dated the Closing Date,
of the President or any Vice President of the Parent to the effect that the
conditions specified in paragraphs (a) and (b) of this Section 8.2 have been
fulfilled.
(d) Blue Coral shall have received the opinion of Debevoise & Plimpton,
special counsel to the Parent and the Subsidiary, substantially in the form
attached hereto as Exhibit 8.2(d).
(e) If requested to do so, the Parent shall have made available funds
equal to the Blue Coral Expense Amount so as to enable Blue Coral to pay all or
any portion of such Blue Coral Expense Amount.
(f) The Parent and the Blue Coral Stockholders shall have entered into a
Registration Rights Agreement substantially in the form attached hereto as
Exhibit 8.2(f).
8.3 Conditions Precedent to Obligations of the Parent and the Subsidiary.
The obligations of the Parent and the Subsidiary to effect the Merger are also
subject to the fulfillment at or prior to the Effective Time of the following
additional conditions:
(a) Blue Coral and each of the Blue Coral Stockholders shall have
performed each of its respective obligations under this Agreement required to
be performed by it on or prior to the Effective Time pursuant to the terms
hereof.
(b) The representations and warranties of Blue Coral and the Blue Coral
Stockholders contained in this Agreement that are qualified as to materiality
or Material Adverse Effect shall be true and correct in all respects and the
representations and warranties of Blue Coral and the Blue Coral Stockholders
contained in this Agreement that are not so qualified shall be true and correct
in all material respects, in each case when made and at and as of the Effective
Time as if made at and as of such time.
47
(c) Blue Coral shall not have received notice from the holder or holders
of more than 2% of the Outstanding Blue Coral Shares that such holder or
holders have exercised or intend to exercise its or their appraisal rights
under Section 262 of the GCL.
(d) The Parent shall have received a certificate, dated the Closing Date,
of Adelman, as the Chief Executive Officer of Blue Coral, to the effect that
the conditions specified in paragraphs (a), (b) and (c) of this Section 8.3
have been fulfilled.
(e) There shall not be any action or proceeding commenced by or before any
court or governmental agency or authority in the United States, or threatened
by any governmental agency or authority in the United States, that challenges
the consummation of the Merger or seeks to impose material limitations on the
ability of the Parent to exercise full rights of ownership of any of the
material assets or business of Blue Coral or seeks material damages from the
Parent in connection with such ownership.
(f) At least five Business Days prior to the Closing Date, Blue Coral
shall have delivered a statement, in form and substance reasonably satisfactory
to the Parent, setting forth Blue Coral's good faith calculation of each of the
Blue Coral Expense Amount, the Uncollected Amount, the Estimated 338 Amount,
the Special Obligation Payment Amount and the Transaction Costs as of the
Closing Date, together with reasonable supporting documentation with respect to
such calculations (such statement, the "Blue Coral Statement").
(g) The Parent shall have received evidence, in form and substance
reasonably satisfactory to the Parent, that Blue Coral has fully satisfied and
discharged all of its obligations under the Blue Coral Deferred Compensation
Plan.
(h) All of the consents listed on Schedule 6.3 hereto shall have been
obtained.
(i) Blue Coral and J&W Adelman, Ltd. shall have entered into a lease
agreement, in form and substance satisfactory to the Parent, with respect to
the Valley Belt Property.
(j) The Parent and the Subsidiary shall each have received the opinion of
(i) Baker & Hostetler, counsel to Blue Coral and the Blue Coral Stockholders,
in substantially the form attached hereto as Exhibit 8.3(j)(i) and (ii) an
opinion of counsel to BCI, in form and substance reasonably satisfactory to the
Parent, opining as to the due incorporation, good standing, and the absence of
conflicts between the transactions contemplated by this Agreement and the
material agreements to which BCI is a party.
(k) Blue Coral shall have received an irrevocable and unconditional
release from Michael Moshontz, in the form attached hereto as Exhibit 8.3(k)
(such release, the "Moshontz Release").
(l) Blue Coral shall have entered into an employment and non-competition
agreement, in form and substance satisfactory to the Parent, with each of Brian
Sokol (such agreement the "Sokol Employment Agreement"), Joel Adelman, Ron
Peterson and John Lai; it being understood and agreed that the Sokol Employment
Agreement will provide, among other things, for a restricted stock grant to
Brian Sokol of the number of shares withheld from the Blue Coral Stockholders
pursuant to Section 3.1(d) hereof (or the equivalent), the terms and conditions
of such grant to be agreed to by the Blue Coral Stockholders' Representative
and Sokol.
48
(m) Adelman shall have entered into a standstill agreement, in the form
attached hereto as Exhibit 8.3(m), with respect to his acquisition and
ownership of Parent Capital Stock.
(n) Adelman shall have purchased all of the shares of Blue Coral Common
Stock identified on Schedule 4.3 hereto as being owned by the Selling
Stockholders.
(o) All of the indebtedness reflected on Schedule 8.3(o) hereto shall have
been repaid in full (using funds supplied by the Parent) and all of the
agreements and instruments relating to such indebtedness, including all
security agreements, filings and related instruments, shall have been
terminated without further obligation to Blue Coral or any Blue Coral
Subsidiary to the satisfaction of the Parent.
(p) Blue Coral shall have received from Adelman an amount equal to all
premium payments made by Blue Coral with respect to the Adelman Policies that
are reflected on the Blue Coral Balance Sheet or which were paid by Blue Coral
after December 31, 1995 and Blue Coral shall have been irrevocably and
unconditionally released, in form and substance reasonably satisfactory to the
Parent, from any obligation to make any such premium payments in the future
with respect to the Adelman Policies.
(q) The Parent shall have received certificates from Blue Coral dated the
Closing Date and sworn to under penalty of perjury, to the effect that it is
not a "United States real property holding corporation" within the meaning of
section 897(c)(2) of the Code, each such certificate to be in form set forth in
the Treasury regulations.
(r) Each Blue Coral Stockholder shall have furnished a certification of
non-foreign status, as described in Treasury Regulations Section
1.1445-2(b)(2).
(s) The Blue Coral Stockholders shall have delivered to Parent at or
before the Closing three completed copies of Form 8023-A as prepared by the
Parent and signed by each Blue Coral Stockholder in accordance with Section
13.2(b).
(t) The Amended and Restated Agreement by and between Blue Coral and
Airosol Company, dated May 29, 1996, shall be in full force and effect.
IX
CLOSING
9.1 Time and Place. The Closing shall take place at the offices of
Debevoise & Plimpton, 875 Third Avenue, New York, N.Y. 10022, at 10:00 a.m.,
local time, on June 27, 1996, or on such other date as Blue Coral and the
Parent may agree.
9.2 Filings at the Closing. At the Closing, the Parent and Blue Coral
shall cause the Certificate of Merger to be filed and recorded in accordance
with the provisions of Sections 103 and 251 of the GCL, and shall take any and
all other lawful actions and do any and all other lawful things necessary to
cause the Merger to become effective. In addition, at the Closing, the Parent
shall deliver the Escrow Deposit to the Escrow Agent in accordance with Section
3.1(b) hereof and the Escrow Agreement.
9.3 Additional Transaction at the Closing. At the Closing, Adelman shall
sell the Remaining BCI Shares to Quaker State, free and clear of all Liens, and
Quaker State shall purchase such Remaining BCI Shares for $693,000.
49
X
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations and warranties and covenants contained in this
Agreement or any representations and warranties contained in any certificate,
document or instrument delivered pursuant to this Agreement shall survive the
Closing and continue in effect for two years thereafter except that (i) the
representations and warranties made under Sections 4.10(e), 4.14 and 4.21
hereof shall continue to survive and remain in effect through the date that is
30 days after the expiration of the statute of limitations applicable to the
subject matter thereof, including all extensions and waivers thereof, (ii) the
representations and warranties made under Section 4.22 hereof shall survive the
Closing and continue in effect for three years after the Closing Date, (iii)
the representations and warranties in Sections 4.1(c), 4.10(d), 4.17(b),
4.17(c), 4.26, 4.27(a), 4.27(b) and 4.29 hereof shall survive indefinitely,
(iv) all covenants with respect to Tax matters shall survive and remain in
effect through the date that is 30 days after the expiration of the statute of
limitations applicable to the subject matter thereof and (v) all covenants
under Sections 4.10(d), 4.29, 7.10 and 7.11 hereof shall survive the Closing
and continue in effect indefinitely. Unless specified otherwise in this
Agreement, the agreements contained in this Agreement (including the agreements
contained in Article XI hereof) or in any certificate, document or instrument
delivered pursuant to this Agreement shall survive the Closing and continue in
effect indefinitely. Any investigation by or on behalf of any party hereto
shall not constitute a waiver as to enforcement of any representation, warranty
or covenant.
XI
INDEMNIFICATION
11.1 Indemnification by Blue Coral Stockholders. Notwithstanding the
Closing and subject to the limitations set forth herein (including, without
limitation, Section 11.4(c) hereof), the Blue Coral Stockholders, jointly and
severally, covenant and agree to defend, indemnify and hold harmless the
Parent, its Affiliates (including, without limitation, the Surviving
Corporation and the Blue Coral Subsidiaries following the Effective Time) and
the officers, directors, employees, agents, advisers and representatives of
each such Person (collectively, the "Parent Indemnitees") from and against, and
pay or reimburse each such Person for, any and all claims, liabilities,
obligations, losses (including the loss of any Tax asset), fines, costs,
royalties, proceedings, deficiencies or damages (whether absolute, accrued,
conditional or otherwise, and whether or not resulting from third party
claims), including out-of-pocket expenses and reasonable attorneys' and
accountants' fees incurred in the investigation or defense of any of the same
or in asserting any of their respective rights hereunder (collectively,
"Losses"), resulting from or arising out of:
(a) (i) any breach of any covenant or agreement made by Blue Coral or any
Blue Coral Stockholder under this Agreement or in any schedule hereto or any
certificate, document or other instrument delivered in connection herewith or
(ii) any breach or inaccuracy of any representation or warranty of Blue Coral
or any Blue Coral Stockholder under this Agreement (other than the
representations and warranties in Sections 4.17(b), 4.17(c), 4.21(c) and 4.26)
or in any schedule hereto or any certificate, document or other instrument
delivered in connection herewith (in the case of any such representation or
warranty, without taking into account any qualification as to materiality or
Material Adverse Effect contained in such representation or warranty);
50
(b) any breach or inaccuracy of any representation or warranty of Blue
Coral or any Blue Coral Stockholder in Sections 4.17(b), 4.17(c), 4.21(c) or
4.26 or the schedules relating thereto (without taking into account any
qualification as to materiality or Material Adverse Effect contained in such
representation or warranty);
(c) to the extent not included in the computation of Base Consideration,
any claim, liability or obligation of any kind relating to (A) the Moshontz
Agreements or the Sokol Agreement, (B) any Excess Transaction Cost Amount, (C)
the Blue Coral Deferred Compensation Plan, (D) any Household Special Obligation
or (E) any of the liabilities, obligations or commitments referred to in clause
(vi) of Section 1.17 hereof, including without limitation under the separation
agreements set forth on Schedule 1.17 hereto;
(d) any failure of any Blue Coral Stockholder to perform its obligations,
when due, under Section 7.11(b) hereof;
(e) any failure of any debt of a Blue Coral Subsidiary owed to Blue Coral
prior to or as of the Effective Time to be respected as such for Tax purposes;
(f) any unpaid Tax enumerated on Schedule 4.21(a) that remains outstanding
on the Closing Date to the extent the aggregate amount of such Taxes exceeds
the aggregate amount of the reserves for such Taxes reflected on the Blue Coral
Balance Sheet; and
(g) any claim, liability or obligation of Blue Coral for Taxes arising
from its membership in any affiliated group prior to January 1, 1987.
11.2 Indemnification by the Parent and the Surviving Corporation.
Notwithstanding the Closing and subject to the limitations set forth herein,
the Parent and the Surviving Corporation, jointly and severally, covenant and
agree to defend, indemnify and hold harmless each Blue Coral Stockholder, their
respective Affiliates and the officers, directors, employees, agents, advisers
and representatives of each such Person from and against, and pay or reimburse
each such Person for, any and all Losses resulting from or arising out of (a)
any breach of any covenant or agreement made by or on behalf of the Parent or
the Subsidiary under this Agreement or in any schedule hereto or any
certificate, document or other instrument delivered in connection herewith or
any (b) breach or inaccuracy of any representation or warranty of the Parent or
the Subsidiary under this Agreement or in any schedule hereto or any
certificate, document or other instrument delivered in connection herewith (in
the case of any such representation or warranty, without taking into account
any qualification as to materiality or Material Adverse Effect contained in
such representation or warranty).
11.3 Limitation on Indemnity Obligation. Notwithstanding anything in
Section 11.1 or 11.2 hereof to the contrary, to the extent indemnification is
sought under Section 11.1(a)(ii) or 11.2(b) hereof, the Blue Coral Stockholders
or the Parent and the Surviving Corporation, as the case may be, shall be
required to provide indemnification only to the extent the aggregate amount of
Losses arising under Section 11.1(a)(ii) or 11.2(b) hereof, as the case may be,
exceeds $750,000, and not for any amounts up thereto.
(a) Notwithstanding anything in Section 11.1 or 11.2 hereof to the
contrary, the aggregate amount payable by the Blue Coral Stockholders, on the
one hand, or by the Parent and the Surviving Corporation, on the other, under
Sections 11.1(a)(ii), 11.1(e) or 11.2(b) hereof, as the case may be, with
respect to all Losses arising under such Sections, shall not exceed
$15,000,000.
51
(b) The amount of any Loss for which indemnification is provided under
this Article XI shall be net of any Tax benefits actually realized by the
Indemnified Party as a result thereof, and shall be increased to take account
of any net Tax cost incurred by the Indemnified Party arising from the receipt
of indemnity payments hereunder. Any indemnity payment under this Agreement
shall be treated as an adjustment to the Base Consideration for Tax purposes,
unless the Parent receives an opinion of a law firm of nationally recognized
standing to the effect that there is not substantial authority for such
treatment. Any indemnity under this Article XI in respect of a Loss that is
deductible shall be further increased to take account of any present or future
Tax cost arising from the loss of depreciation pursuant to any such adjustment
to Base Consideration. This increase shall be equal to the sum of each "lost"
depreciation deduction multiplied by the current (at the time of the
adjustment) maximum combined federal, state and local income tax rate
applicable to corporations (taking into account only states and localities in
which Blue Coral is then subject to income tax), discounted to present value
using a discount rate equal to the United States Treasury Bill rate and using
annual compounding, taking into account the year in which each such
depreciation deduction would otherwise have been allowed.
(c) The indemnification provisions of this Article XI shall be the sole
and exclusive remedy of the parties against one another with respect to any
claim for monetary relief based upon or arising out of this Agreement.
(d) To the extent any Parent Indemnitee is seeking indemnification solely
in respect of the breach of any representation or warranty, such Parent
Indemnitee shall be entitled to indemnity only for those Losses as to which
such Parent Indemnitee has given written notice thereof to the Blue Coral
Stockholders' Representative prior to the termination of the applicable
survival period for such representation or warranty applicable to such Loss
pursuant to Article X hereof. Such Parent Indemnitee may at its option give
notice under this Section 11.3(e) as soon as it has become aware of a potential
claim in respect of any breach of such representation or warranty, regardless
of whether any Losses have been suffered, so long as such Parent Indemnitee
shall in good faith determine that such potential claim is not frivolous or
that such Parent Indemnitee may be liable or otherwise incur Losses as a result
of such claim or otherwise and shall give written notice of such claim to the
Blue Coral Stockholders' Representative. Any written notice delivered by such
Parent Indemnitee pursuant to this Section 11.3(e) shall set forth with
reasonable specificity the basis of the claim for Losses and, if practicable,
an estimate of the amount thereof.
11.4 Claims on Escrow Deposit; Release of Parent Capital Stock. Without
limiting the obligations of the Blue Coral Stockholders under this Article XI,
in the event that any Parent Indemnitee shall be entitled to indemnification
for any Loss under Section 11.1 hereof at any time prior to the Escrow Date (as
defined in the Escrow Agreement), the Parent, on behalf of the Parent
Indemnitee, shall, before pursuing any other monetary remedy, make a claim on
the Escrow Deposit in accordance with the provisions of the Escrow Agreement.
(a) Within 10 Business Days following the second anniversary of the
Closing Date, the Escrow Agent shall, subject to any limitations in the Escrow
Agreement, deliver to the Blue Coral Stockholders' Representative, on behalf of
the Blue Coral Stockholders, a stock certificate evidencing the number of
shares of Parent Capital Stock equal to the number of shares of Parent Capital
Stock then comprising the Escrow Deposit under the Escrow Agreement.
(b) Notwithstanding anything in this Article XI to the contrary, in the
event that any Parent Indemnitee is entitled to indemnification under this
Article XI at any time after the Escrow Date, no Blue Coral Stockholder (other
than the Adelman Family Stockholders) shall have any indemnification
52
obligation with respect thereto, provided that the Adelman Family Stockholders
shall thereafter remain, jointly and severally, obligated to indemnify all
Parent Indemnitees pursuant to this Article XI, subject to the applicable
limitations set forth in Section 11.3 hereof.
11.5 The Blue Coral Stockholders' Representative. Notwithstanding anything
in this Agreement to the contrary, all rights of the Blue Coral Stockholders
under this Article XI shall be exercisable exclusively by Adelman, and the
Parent and the Surviving Corporation shall be entitled to deal exclusively with
Adelman in respect of all such rights, including, without limitation, the
giving of all notices pursuant to Section 11.6 hereof. Adelman shall be
referred to herein as the "Blue Coral Stockholders' Representative".
11.6 Third-Party Claims. In the case of any claim (a "Claim") asserted by
a third party against a party entitled to indemnification under this Agreement
(the "Indemnified Party"), notice shall be given by the Indemnified Party to
the party required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and the Indemnified Party shall permit the
Indemnifying Party (at the expense of such Indemnifying Party) to assume the
defense of any claim or any litigation resulting therefrom, provided that (i)
the counsel for the Indemnifying Party who shall conduct the defense of such
claim or litigation shall be reasonably satisfactory to the Indemnified Party,
(ii) the Indemnified Party may participate in such defense at such Indemnified
Party's expense, (iii) the failure by any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its indemnification
obligation under this Agreement except to the extent that such omission results
in a failure of actual notice to the Indemnifying Party and such Indemnifying
Party is materially damaged as a result of such failure to give notice and (iv)
the Indemnifying Party shall not agree to any reallocation of purchase price to
the assets of Blue Coral pursuant to any agreement with any third party without
the prior written consent of the Parent. Notice to the Blue Coral
Stockholders' Representative pursuant to this Section 11.6 shall constitute
actual notice to all Blue Coral Stockholders. Except with the prior written
consent of the Indemnified Party, no Indemnifying Party, in the defense of any
such claim or litigation, shall consent to entry of any judgment or order,
interim or otherwise, or enter into any settlement that provides for injunctive
or other nonmonetary relief affecting the Indemnified Party or that does not
include as an unconditional term thereof the giving by each claimant or
plaintiff to such Indemnified Party of a release from all liability with
respect to such claim or litigation. In the event that the Indemnified Party
shall in good faith determine that the conduct of the defense of any claim
subject to indemnification hereunder or any proposed settlement of any such
claim by the Indemnifying Party might be expected to affect adversely the
Indemnified Party's Tax liability or the ability of the Surviving Corporation
to conduct the business of the Surviving Corporation and the Blue Coral
Subsidiaries, taken as a whole, as presently conducted, or that the Indemnified
Party may have available to it one or more defenses or counterclaims that are
inconsistent with one or more of those that may be available to the
Indemnifying Party in respect of such claim or any litigation relating thereto,
the Indemnified Party shall have the right at all times to take over and assume
control over the defense, settlement, negotiations or litigation relating to
any such claim at the sole cost of the Indemnifying Party, provided that if the
Indemnified Party does so take over and assume control, the Indemnified Party
shall not settle such claim or litigation without the written consent of the
Indemnifying Party, such consent not to be unreasonably withheld. In the event
that the Indemnifying Party does not accept the defense of any matter as above
provided, the Indemnified Party shall have the full right to defend against any
such claim or demand and shall be entitled to settle or agree to pay in full
such claim or demand. Notwithstanding the foregoing, the Indemnifying Party
shall still provide indemnification to the Indemnified Party. In any
53
event, the Indemnifying Party and the Indemnified Party shall cooperate in the
defense of any claim or litigation subject to this Section 11.5 and the records
of each shall be available to the other with respect to such defense.
XII
TERMINATION RIGHTS
12.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual consent of the Parent and Blue Coral;
(b) by either the Parent or Blue Coral if the Merger shall not have been
consummated on or before November 30, 1996; provided, however, that the right
to terminate this Agreement shall not be available to any party whose failure
to fulfill any obligation of this Agreement has been the cause of, or resulted
in, the failure of the Merger to have occurred on or before the aforesaid date;
(c) by the Parent, if Blue Coral or any of the Blue Coral Stockholders
shall have materially breached any of its respective covenants herein or if
Blue Coral or any of the Blue Coral Stockholders shall have made a material
misrepresentation;
(d) by Blue Coral, if either the Parent or the Subsidiary shall have
materially breached any of its covenants herein or if either the Parent or the
Subsidiary shall have made a material misrepresentation herein; or
(e) by either the Parent or Blue Coral, if any court of competent
jurisdiction or other governmental agency of competent jurisdiction shall have
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger, and such order, decree, ruling
or other action shall have become final and non-appealable.
12.2 Procedure and Effect of Termination. In the event of termination and
abandonment of the Merger by the Parent or Blue Coral pursuant to Section 12.1
hereof, notice thereof shall forthwith be given to Blue Coral or the Parent,
respectively, and this Agreement shall terminate and the Merger shall be
abandoned, without further action by any of the parties hereto. The Subsidiary
and each of the Blue Coral Stockholders agree that any termination by the
Parent or Blue Coral and the Blue Coral Stockholders' Representative,
respectively, shall be conclusively binding upon it, whether given expressly on
its behalf or not. If this Agreement is terminated as provided herein, no
party hereto shall have any liability or further obligation to any other party
to this Agreement except that any termination shall be without prejudice to the
rights of any party hereto arising out of a breach by any other party of any
covenant or agreement contained in this Agreement, and except that the
provisions of Sections 7.6 and 14.3 hereof shall survive such termination.
XIII
TAX MATTERS
13.1 Election. The Parent shall, and the Blue Coral Stockholders shall,
join in all Section 338(h)(10) Elections. Notwithstanding any other provisions
of this Article XIII, a Section 338(h)(10) Election shall be made only as to
Blue Coral and shall not be made as to any Subsidiary, and no election will be
made under Section 338 of the Code as to Blue Coral other than under Section
338(h)(10) of the Code.
54
13.2 Forms. The Parent shall be responsible for the preparation of all
forms and schedules required to be filed in connection with the Section
338(h)(10) Elections ("Section 338 Forms"), including IRS Form 8023-A and all
attachments required to be filed therewith pursuant to applicable Treasury
Regulations ("Form 8023"). The Blue Coral Stockholders' Representative and the
Parent shall cooperate in drafting and finalizing the Section 338 Forms. The
Parent shall be responsible for filing the Section 338 Forms with the proper
taxing authorities, provided that the Blue Coral Stockholders shall be
responsible for filing any Section 338 Form that must be filed with a Tax
return required to be filed by Blue Coral Stockholders or their Affiliates.
(a) For the purpose of executing Form 8023, prior to the signing of this
Agreement Parent shall have furnished the Blue Coral Stockholders'
Representative with four copies (three for the Parent and one for the Blue
Coral Stockholders) of Form 8023 prepared by the Parent, including thereon all
information other than (i) the consideration paid for the Blue Coral Stock,
(ii) the liabilities of Blue Coral on the acquisition date, (iii) the
acquisition date and (iv) the allocation of the purchase price among the Blue
Coral assets. The Parent and the Blue Coral Stockholders' Representative shall
agree upon the form and content of such Form 8023, and at the signing of this
Agreement the Blue Coral Stockholders' Representative shall deliver to the
Parent three copies of such Form 8023 executed by each Blue Coral Stockholder,
and the Parent shall deliver to the Blue Coral Stockholders' Representative one
copy of such Form 8023 executed by the proper party on behalf of the Parent.
Prior to the Closing Date, the Parent shall furnish to the Blue Coral
Stockholders' Representative a supplement to the previously executed Form 8023
containing the information referred to in (i) and (iii) above (using for
purposes of (i) the Base Consideration), which supplement shall be made a part
of the Form 8023 unless the Blue Coral Stockholders receive an opinion of a law
firm of nationally recognized standing to the effect that there is no
reasonable basis for such supplement as so filled out.
55
(b) The Parent shall prepare (i) any corrections, amendments or
supplements to the Form 8023 as executed by the Parent and the Blue Coral
Stockholders pursuant to Section 13.2(b) hereof, including reflecting any
adjustments to the consideration paid for the Blue Coral Common Stock and the
liabilities of Blue Coral on the Closing Date, and (ii) any state or local
reports or forms that are necessary or appropriate for purposes of complying
with the requirements for making the Section 338(h)(10) Elections (each an
"Additional Section 338 Form"). The Blue Coral Stockholders' Representative
and the Parent shall cooperate in drafting and making final each Additional
Section 338 Form. At least 30 days prior to the latest date for the filing of
each Additional Section 338 Form, the Parent shall furnish the Blue Coral
Stockholders' Representative with four copies of such Additional Section 338
Form (three for the Parent and one for the Blue Coral Stockholders'
Representative) prepared by the Parent and shall notify the Blue Coral
Stockholders' Representative of the latest date for the filing of such
Additional Section 338 Form. At least 15 days prior to the latest date for the
filing of each Additional Section 338 Form, the Parent and the Blue Coral
Stockholders' Representative shall agree upon the final form and content of
such Additional Section 338 Form, and the Blue Coral Stockholders'
Representative shall deliver to the Parent three copies of such Additional
Section 338 Form executed by each of the Blue Coral Stockholders. In the event
of failure to agree, any such Additional Section 338 Form shall be filled out
as determined by Parent unless the Blue Coral Stockholders receive an opinion
of a law firm of nationally recognized standing to the effect that there is no
reasonable basis for such Additional Section 338 Form as so filled out.
Notwithstanding the foregoing, with regard to any issue the resolution of which
in the favor of the Parent would increase the Tax liability of the Blue Coral
Stockholders or the indemnity obligation of the Blue Coral Stockholders under
this Agreement, such issue shall be resolved pursuant to the Tax Dispute
Resolution Mechanism. The Parent shall cause each such Additional Section 338
Form to be executed by the proper party on behalf of the Parent, shall deliver
to the Blue Coral Stockholders' Representative one executed copy of such
Additional Section 338 Form and shall file such Additional Section 338 Form
with the applicable Taxing authority.
13.3 Allocation. (a) On or before the fifteenth day of the seventh month
beginning after the month that includes the Closing Date, the Parent shall
provide to the Blue Coral Stockholders' Representative an allocation of the
purchase price for the deemed sale of assets resulting from the making of the
Section 338(h)(10) Elections, together with a report or reports in support of
such allocation prepared by the valuation services group of Coopers & Lybrand
or any other firm or firms of independent appraisers of nationally recognized
reputation selected by the Parent, the fees and expenses of which shall be
borne by the Parent, setting forth the estimated fair market values of the
assets of Blue Coral. The allocations provided herein shall be reflected in an
Additional Section 338 Form filed with the IRS on or before the fifteenth day
of the ninth month beginning after the month that includes the Closing Date. A
disagreement regarding the allocation of the purchase price shall be resolved
pursuant to the Tax Dispute Resolution Mechanism if resolution of such
disagreement in favor of the Parent would increase the Tax liability of the
Blue Coral Stockholders or the indemnity obligation of the Blue Coral
Stockholders under this Agreement. Notwithstanding any of the foregoing, if
Sandusky purchases the NicSand Shares the allocation of purchase price to the
NicSand Shares owned by Blue Coral on the Closing Date shall not be less than
the amount paid by Sandusky for such NicSand Shares.
56
(b) Tax Dispute Resolution Mechanism. Any dispute to be resolved
pursuant to the "Tax Dispute Resolution Mechanism," shall be resolved as
follows: (i) the Parent and the Blue Coral Stockholders' Representative will
in good faith attempt to negotiate a prompt settlement of the dispute; (ii) if
they are unable to negotiate a resolution of the dispute within 15 days, the
dispute will be submitted to the valuation services group of Ernst & Young or
any other firm of independent appraisers of nationally recognized reputation
agreed upon by the Parent and the Blue Coral Stockholders' Representative (the
"Arbitrator"); (iii) the Parent and the Blue Coral Stockholders' Representative
will present their arguments and submit the proposed amount of each item in
dispute to the Arbitrator within 15 days after submission of the dispute to it;
(iv) the Arbitrator shall resolve the dispute, in a fair and equitable manner
and in accordance with applicable Tax law and the provisions of this Agreement,
by selecting, for each item in dispute, the proposed amount for such item
submitted by either the Parent or the Blue Coral Stockholders' Representative
within 25 days after the parties have presented their arguments to the
Arbitrator, whose decision shall be final, conclusive and binding on the Parent
and the Blue Coral Stockholders; and (v) if a dispute shall not be resolved on
or before the date that is three business days prior to the latest date on
which the applicable Additional Section 338 Form may be filed under applicable
Tax law, then the Additional Section 338 Form shall be filed on or prior to
such date reflecting all the disputed items that have been resolved in the
manner so resolved and the unresolved items shall be reflected as submitted by
the Parent in clause (iii) above. An Amendment to such Additional Section 338
Form shall be filed after resolution by the Arbitrator of the remaining
unresolved items. The fees and expenses of the Arbitrator in resolving a
dispute will be borne equally by the Blue Coral Stockholders and the Parent.
13.4 Modification; Revocation. The Parent and the Blue Coral Stockholders
agree that none of them shall, or shall permit any of their Affiliates to, take
any action to modify the Section 338 Forms following the execution thereof, or
to modify or revoke the Section 338(h)(10) Elections following the filing of
the Section 338 Forms, without the written consent of the Blue Coral
Stockholders' Representative and the Parent, as the case may be.
13.5 Consistent Treatment. The Parent and the Blue Coral Stockholders
shall, and shall cause their respective Affiliates to, file all Tax returns in
a manner consistent with the information contained in the Section 338 Forms and
the Additional Section 338 Forms as filed and the allocations provided pursuant
to section 13.3.
13.6 Taxes and Expenses Resulting from Elections. Notwithstanding any
other provision of this Agreement other than the provisions of the next
sentence, the Blue Coral Stockholders shall be responsible for (and Blue Coral
shall have no responsibility for) all Taxes imposed by any Governmental
Authority that is or should be listed on Schedule 4.21(d) resulting from the
making of the Section 338(h)(10) Elections with respect to the Merger
incurred by Blue Coral, including, without limitation, such Taxes on built-in
gain under Section 1374(a) of the Code and such Taxes of the Blue Coral
Stockholders paid by Blue Coral (the "Section 338 Taxes"), and all Taxes
imposed upon the Blue Coral Stockholders by virtue of their ownership of Blue
Coral Common Stock on the Closing Date except as provided in the next sentence.
Blue Coral shall be responsible for (and the Blue Coral Stockholders shall have
no responsibility for) all Taxes imposed on it by any Governmental Authority
not referred to in the preceding sentence (an "Other Governmental Authority")
attributable to the making of a Section 338(h)(10) Election with respect to the
Merger ("Excluded Taxes"), and the Parent shall indemnify the Blue Coral
Stockholders for Taxes imposed on them by any Other Governmental Authority
attributable to the making of a Section 338(h)(10) Election with respect to the
Merger to the extent such Taxes are greater than they would have been had such
Section 338(h)(10) Election not been made.
57
Prior to the Closing, Parent and the Blue Coral Stockholders shall estimate the
amount of the Section 338 Taxes (the "Estimated 338 Taxes") for purposes of
calculating the Base Consideration. If the Section 338 Taxes are greater or
less than the Estimated 338 Taxes, the Blue Coral Stockholders shall pay such
excess to Parent or Parent shall repay such deficiency to the Blue Coral
Stockholders' Representative, as the case may be, in either case as an
adjustment to Base Consideration. Notwithstanding any other provision of this
Agreement, the Parent and its Affiliates (including Blue Coral and its
subsidiaries following the Closing), on the one side, and the Blue Coral
Stockholders and its Affiliates (following the Closing), on the other side,
shall bear their respective administrative, appraisal, legal, accounting and
similar expenses resulting from the making of the Section 338(h)(10) Elections.
13.7 Other Tax Matters. The Blue Coral Stockholders' Representative shall
cause to be prepared and filed all Tax returns (or amendments thereto) of Blue
Coral and the Blue Coral Subsidiaries for Tax periods of Blue Coral and the
Blue Coral Subsidiaries ending before or on the Closing Date that are either
(a) required to be filed on or prior to the Closing Date or (b) are income tax
returns (or amendments thereto) (the "Stockholder Returns"). The Parent shall
cause to be prepared and filed all other Tax returns of Blue Coral and the Blue
Coral Subsidiaries for Tax periods beginning before the Closing Date (the
"Parent Returns"). The Blue Coral Stockholders shall pay (and Blue Coral shall
have no responsibility for) all Taxes incurred by Blue Coral and the Blue Coral
Subsidiaries in respect of the Stockholder Returns or the Parent Returns (i)
that under applicable Tax law are Taxes of the Blue Coral Stockholders payable
by Blue Coral even if Blue Coral is required under applicable Tax law to pay
such Taxes or (ii) that the Blue Coral Stockholders are obligated to pay or
indemnify against pursuant to Article XI, Section 7.8 or Section 13.6., and
Blue Coral shall pay (and the Blue Coral Stockholders shall have no
responsibility for) any other Taxes that under applicable Tax law are Taxes of
Blue Coral and the Blue Coral Subsidiaries in respect of the Stockholder
Returns or in respect of the Parent Returns. In the case of a Parent Return
for a Tax period that begins before and ends after the Closing Date for which
the Blue Coral Stockholders have any liability or obligation hereunder to pay
or reimburse the Parent for the Taxes applicable to such Parent Return, such
liability or obligation of the Blue Coral Stockholders shall be computed, to
the extent practicable, as if the Tax period of Blue Coral for such period
ended on the Closing Date and without regard to the inclusion in such Parent
Return of Tax attributes of the Parent or any of its other Affiliates. The
Blue Coral Stockholders' Representative, Blue Coral and the Parent shall
cooperate with each other and act in good faith in connection with the
preparation and filing of the Stockholder Returns and the Parent Returns and
shall give one another the opportunity to comment on any such Tax return. The
Blue Coral Stockholders' Representative shall notify the Parent, on the one
hand, and the Parent shall notify the Blue Coral Stockholders' Representative,
on the other hand, promptly of any audit, investigation or written inquiry by
any Tax authority as to any Stockholder Return or any Parent Return that could
affect any Stockholder Return. The Blue Coral Stockholders' Representative, at
the expense of the Blue Coral Stockholders, may control or participate in to
the extent they desire any proceedings by a Tax authority with respect to a
Stockholder Return, provided that, the Blue Coral Stockholders shall not agree
with any Tax authority to a reallocation of purchase price among the assets of
Blue Coral without the prior express written consent of Parent. Neither Blue
Coral nor the Parent nor any other Affiliate of the Parent shall (i) file or
cause the filing of an amended Stockholder Return or otherwise agree to any Tax
adjustments with respect to any Stockholder Return or (ii) agree to an
extension of the statute of limitations applicable to any Stockholder Tax
Return, in either case without the prior express written consent of the Blue
Coral Stockholders' Representative.
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XIV
OTHER PROVISIONS
14.1 Amendment and Modification. Subject to Applicable Law, this Agreement
may be amended, modified or supplemented only by mutual written agreement of
the Parent, the Subsidiary, Blue Coral and each of the Blue Coral Stockholders
owning of record in the aggregate a majority of the issued and outstanding
shares of Blue Coral Common Stock.
59
14.2 Waiver of Compliance; Consents. Any failure of the Parent or the
Subsidiary, on the one hand, or, Blue Coral or the Blue Coral Stockholders on
the other hand, to comply with any obligation, covenant, agreement or condition
herein may be waived by Blue Coral or the Parent, respectively, only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires
or permits consent by or on behalf of any party hereto, such consent shall be
given in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 14.2. The Subsidiary hereby agrees
that any consent or waiver of compliance given by the Parent hereunder shall be
conclusively binding upon it, whether given expressly on its behalf or not.
Each of the Blue Coral Stockholders hereby agrees that any consent or waiver of
compliance given by Blue Coral hereunder shall be conclusively binding upon
them, whether given expressly on their behalf or not.
14.3 Confidentiality. Blue Coral, each Blue Coral Stockholder, the Parent
and the Subsidiary shall keep confidential and not use or disclose any
information previously or hereafter obtained by it pursuant to this Agreement
(the party receiving such information is hereinafter referred to as the
"Receiving Party") with respect to the other or such other's parents,
subsidiaries, Affiliates or other related entities (the party, or such party's
parents, subsidiaries, Affiliates or other related entities, with respect to
which the information relates is hereinafter referred to as the "Disclosing
Party") in connection with this Agreement and the negotiations preceding this
Agreement (such information is hereinafter referred to as the "Confidential
Information"), and the Receiving Party will use such Confidential Information
solely in connection with the transactions contemplated by this Agreement, and
if the transactions contemplated hereby are not consummated for any reason, the
Receiving Party shall either return to the Disclosing Party, without retaining
a copy thereof, or destroy any schedules, documents or other written or
electronically stored information constituting Confidential Information (or
prepared based upon such Confidential Information) in connection with this
Agreement and the transactions contemplated hereby and the negotiations
preceding this Agreement. Without limiting the generality of the foregoing,
the Receiving Party shall be permitted to disclose any Confidential Information
to such of its Affiliates, officers, directors, employees, agents, lenders and
representatives (collectively, "Representatives") as have a need to know such
Confidential Information, provided such Representatives shall be informed that
disclosure of such Confidential Information by such Representatives would be in
contravention hereof and the Receiving Party shall be responsible for any
disclosure prohibited hereby by any of its Representatives. Notwithstanding
the foregoing, the Receiving Party shall not be required to keep confidential
or return any information which (i) is known or available through other lawful
sources, not bound by a confidentiality agreement with the Disclosing Party, or
(ii) is or becomes publicly known other than as a result of the disclosure by
the Receiving Party or its Representatives or (iii) is required to be disclosed
pursuant to an order or request of a judicial or governmental authority or a
self-regulatory body or pursuant to any law or regulation in any jurisdiction
(provided the Disclosing Party is given reasonable prior written notice), or
(iv) is developed by the Receiving Party independently of, and is not based
upon, the Confidential Information.
14.4 Legend. Each certificate representing shares of Parent Capital Stock
issued to any Blue Coral Stockholder shall bear upon its face the following
legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
60
LAWS OR UNLESS SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER OR
OTHER DISPOSITION IS EXEMPT FROM REGISTRATION AND IN EACH CASE IS OTHERWISE IN
COMPLIANCE WITH THE ACT AND SUCH LAWS."
The above legend shall be removed, at the Parent's expense, from any shares of
Parent Capital Stock issued to and held by any Blue Coral Stockholder upon (i)
the expiration of the three year period (or if Rule 144 under the Act is
modified to decrease the holding period described in paragraph (k) of Rule 144,
such shorter period specified in paragraph (k) as so modified or contained in
any successor provision) beginning on the date hereof, except where such Blue
Coral Stockholder is an affiliate of the Parent, (ii) the sale of any such
shares pursuant to registration of such shares under the Securities Act or
(iii) the Parent's receipt of an opinion, in form and substance satisfactory to
the Parent, that registration under the Securities Act is not required with
respect to any future sale of such shares by such Blue Coral Stockholder.
14.5 Benefit and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
successors and assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party to this
Agreement without the prior written consent of the other Parties hereto.
Notwithstanding the foregoing, the Parent and the Subsidiary may assign their
respective rights and obligations under this Agreement to any of their
respective Affiliates, provided that any such assignment shall not relieve the
Parent or the Subsidiary, as the case may be, from any of its obligations under
this Agreement.
14.6 No Third-Party Beneficiaries. Except as provided in Section 11.1
hereof with respect to indemnification, nothing in this Agreement shall confer
any rights upon any Person other than the parties hereto and their respective
heirs, successors and permitted assigns.
14.7 Entire Agreement. This Agreement and the exhibits and schedules
hereto embody the entire agreement and understanding of the parties hereto and
supersede any and all prior agreements, arrangements and understandings
relating to the matters provided for herein. No amendment, waiver of
compliance with any provision or condition hereof or consent pursuant to this
Agreement shall be effective unless evidenced by an instrument in writing
signed by the party against whom enforcement of any amendment, waiver or
consent is sought.
14.8 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
14.9 Choice of Law. The construction and performance of this Agreement
shall be governed by the laws of the State of New York without regard to its
principles of conflict of laws, except insofar as the laws of the state of
Delaware are mandatorily applicable to the Merger, and the state and federal
courts of New York shall have exclusive jurisdiction over any controversy or
claim arising out of or relating to this Agreement.
14.10 Notices. All notices, requests, demands, letters, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
sent by next-day or overnight mail or delivery or (d) sent by fax, as follows:
61
To Blue Coral or to the Blue Coral
Stockholders' Representative:
Blue Coral, Inc.
1215 Valley Belt Road
Cleveland, OH 44131-1415
Attention: Mr. Sheldon G. Adelman
Phone: 216-351-3000
Fax: 216-351-6989
With a copy to:
Baker & Hostetler
1900 East Ninth Street
3200 National City Center
Cleveland, OH 44114-3485
Attention: Robert G. Markey
Phone: 216-621-0200
Fax: 216-696-0740
To the Parent or the Subsidiary:
Quaker State Corporation
225 East John Carpenter Freeway
Irving, TX 75062
Attention: Secretary
Phone: 214-868-0400
Fax: 214-868-0440
With a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Richard D. Bohm
Phone: 212-909-6226
Fax: 212-909-6836
or to such other Person or address as any party shall specify by notice in
writing to the party entitled to notice. All such notices, requests, demands,
letters, waivers and other communications shall be deemed to have been received
(w) if by personal delivery on the day after such delivery, (x) if by certified
or registered mail, on the fifth Business Day after the mailing thereof, (y) if
by next-day or overnight mail or delivery, on the day delivered or (z) if by
fax, on the next day following the day on which such fax was sent, provided
that a copy is also sent by certified or registered mail.
14.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
62
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
QUAKER STATE CORPORATION
By: /s/ Herbert M. Baum
--------------------------
Name: Herbert M. Baum
Title: Chairman of the Board
and Chief Executive Officer
QSBC ACQUISITION CORP.
By:/s/ Herbert M. Baum
-------------------------
Name: Herbert M. Baum
Title: Chairman of the Board
and Chief Executive Officer
BLUE CORAL, INC.
By:/s/ Sheldon Adelman
--------------------------
Name: Sheldon Adelman
Title: Chairman of the Board,
Chief Executive Officer and
President
/s/ Sheldon Adelman
-----------------------------
Sheldon Adelman
/s/ Carl Glickman
-----------------------------
Carl Glickman
/s/ Michael Turk
-----------------------------
Michael Turk
/s/ Nick Federico
-----------------------------
Nick Federico
/s/ Lawrence Minich
-----------------------------
Lawrence Minich
GST-EXEMPT TRUST FBO
WENDY ADELMAN
By: /s/ Robert Markey
--------------------------
Co-Trustee
By:/s/ Michael Turk
--------------------------
Co-Trustee
63
/s/ Howard Adelman
--------------------------
Howard Adelman
/s/ Ronald Peterson
--------------------------
Ronald Peterson
/s/ Robert Markey
--------------------------
Robert Markey
/s/ Joel Adelman
--------------------------
Joel Adelman
/s/ Norton Rose
--------------------------
Norton Rose