1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
RPM, INC.
RPM OF ILLINOIS, INC.
RUST-OLEUM CORPORATION
AND
CERTAIN SHAREHOLDERS OF RUST-OLEUM CORPORATION
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TABLE OF CONTENTS
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Parties and Recitals . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
THE MERGER
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Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Effective Time . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Effects of the Merger . . . . . . . . . . . . . . . 2
Section 1.4 Articles of Incorporation
and By-laws . . . . . . . . . . . . . . . . . . . 2
Section 1.5 Directors . . . . . . . . . . . . . . . . . . . . . 2
Section 1.6 Officers . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.7 Conversion of Securities . . . . . . . . . . . . . . 3
Section 1.8 Parent to Make Cash Available . . . . . . . . . . . 3
Section 1.9 No Further Ownership Rights
in Class A Common Stock . . . . . . . . . . . . . 4
Section 1.10 Closing of Company Transfer Books . . . . . . . . . 4
Section 1.11 Dissenting Shares . . . . . . . . . . . . . . . . . 4
Section 1.12 Lost Certificates . . . . . . . . . . . . . . . . . 5
Section 1.13 Further Assurances . . . . . . . . . . . . . . . . . 5
Section 1.14 Closing . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT
----------------------------------------
Section 2.1 Organization, Standing and Power . . . . . . . . . . 6
Section 2.2 Authority; Non-Contravention . . . . . . . . . . . . 6
Section 2.3 Interested Shareholder . . . . . . . . . . . . . . . 8
Section 2.4 Financial Ability . . . . . . . . . . . . . . . . . 8
Section 2.5 Brokers . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
Section 3.1 Organization, Standing and Power . . . . . . . . . . 8
Section 3.2 Capital Structure . . . . . . . . . . . . . . . . . 9
Section 3.3 Title to Common Stock . . . . . . . . . . . . . . . 9
Section 3.4 Authority; Non-Contravention . . . . . . . . . . . . 10
Section 3.5 Financial Statements . . . . . . . . . . . . . . . . 11
Section 3.6 Absence of Certain Changes or Events
Since Balance Sheet Date . . . . . . . . . . . . . 11
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Section 3.7 Minimum Net Worth . . . . . . . . . . . . . . . . . 12
Section 3.8 Title to Real Estate . . . . . . . . . . . . . . . . 13
Section 3.9 Availability of Material Contracts. . . . . . . . . 13
Section 3.10 Executive Compensation & Benefit Plans . . . . . . . 13
Section 3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.12 Patents, Trade Names, Trademarks
and Other Rights . . . . . . . . . . . . . . . . . 14
Section 3.13 Environmental Matters . . . . . . . . . . . . . . . 15
Section 3.14 Litigation . . . . . . . . . . . . . . . . . . . . . 17
Section 3.15 Collective Bargaining Arrangements . . . . . . . . . 17
Section 3.16 Brokers . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING SUB
--------------------------------------------
Section 4.1 Organization and Standing . . . . . . . . . . . . . 17
Section 4.2 Capital Structure . . . . . . . . . . . . . . . . . 18
Section 4.3 Authority; Non-Contravention . . . . . . . . . . . . 18
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
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Section 5.1 Conduct of Business by the Company
Pending the Merger . . . . . . . . . . . . . . . . 19
Section 5.2 Conduct of Business of Sub
Pending the Merger . . . . . . . . . . . . . . . . 21
ARTICLE VI
ADDITIONAL AGREEMENTS
---------------------
Section 6.1 Stockholder Approval . . . . . . . . . . . . . . . . 21
Section 6.2 Access to Information . . . . . . . . . . . . . . . 22
Section 6.3 Fees and Expenses . . . . . . . . . . . . . . . . . 23
Section 6.4 Reasonable Efforts . . . . . . . . . . . . . . . . . 23
Section 6.5 Public Announcements . . . . . . . . . . . . . . . . 24
Section 6.6 Transfer Taxes . . . . . . . . . . . . . . . . . . . 24
Section 6.7 Indemnification of Directors
and Officers . . . . . . . . . . . . . . . . . . . 24
Section 6.8 Cafeteria Plan . . . . . . . . . . . . . . . . . . . 25
Section 6.9 Termination of Employees . . . . . . . . . . . . . . 25
Section 6.10 Improvements Act Filings . . . . . . . . . . . . . . 25
Section 6.11 Financial Statements . . . . . . . . . . . . . . . . 26
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ARTICLE VII
CONDITIONS PRECEDENT TO THE MERGER
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Section 7.1 Conditions to Each Party's Obligation
to Effect the Merger . . . . . . . . . . . . . . . 26
(a) Stockholder Approval . . . . . . . . . . . . 26
(b) No Order . . . . . . . . . . . . . . . . . . . 26
(c) Improvements Act Waiting Period . . . . . . . 26
(d) Escrow Agreement . . . . . . . . . . . . . . . 26
(e) Other Approvals . . . . . . . . . . . . . . . 26
Section 7.2 Conditions to Obligation of the Company
to Effect the Merger . . . . . . . . . . . . . . . 27
(a) Performance of Obligations;
Representations and Warranties . . . . . . 27
(b) Officers' Certificate . . . . . . . . . . . . 27
(c) Opinion of Counsel . . . . . . . . . . . . . . 27
(d) Solvency Certificate . . . . . . . . . . . . . 27
(e) Other Documents . . . . . . . . . . . . . . . 27
Section 7.3 Conditions to Obligations of Parent
and Sub to Effect the Merger . . . . . . . . . . . 27
(a) Performance of Obligations;
Representations and Warranties . . . . . . 28
(b) Third Party Consents . . . . . . . . . . . . 28
(c) Officers Certificate . . . . . . . . . . . . 28
(d) Opinion of Sidley & Austin . . . . . . . . . . 28
(e) Opinion of Katten, Muchin & Zavis . . . . . . 28
(f) Opinion of General Counsel of Company . . . . 28
(g) Other Documents . . . . . . . . . . . . . . . 28
(h) Certain Company Loans . . . . . . . . . . . . 29
(i) Termination of Supplemental
Pension Plan . . . . . . . . . . . . . . . 29
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 8.1 Termination . . . . . . . . . . . . . . . . . . . . . 29
Section 8.2 Effect of Termination . . . . . . . . . . . . . . . . 30
Section 8.3 Amendment . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . 30
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ARTICLE IX
GENERAL PROVISIONS
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Section 9.1 Non-Survival of Representations,
Warranties and Agreements . . . . . . . . . . . . 31
Section 9.2 Several Liability . . . . . . . . . . . . . . . . . 31
Section 9.3 Provisions Relating to
Tax Representation . . . . . . . . . . . . . . . 31
Section 9.4 Notices . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.5 Interpretation . . . . . . . . . . . . . . . . . . 34
Section 9.6 Counterparts . . . . . . . . . . . . . . . . . . . 34
Section 9.7 Entire Agreement; No Third-Party
Beneficiaries . . . . . . . . . . . . . . . . . . 34
Section 9.8 Governing Law . . . . . . . . . . . . . . . . . . . 34
Section 9.9 Assignment . . . . . . . . . . . . . . . . . . . . 35
Section 9.10 Severability . . . . . . . . . . . . . . . . . . . 35
Section 9.11 Enforcement of this Agreement . . . . . . . . . . . 35
Section 9.12 Trustee Liability . . . . . . . . . . . . . . . . . 35
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AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of May 3, 1994 (this
"Agreement"), among RPM, Inc., an Ohio corporation, ("Parent"), RPM of
Illinois, Inc. an Illinois corporation and a wholly-owned subsidiary of Parent
("Sub"), Rust-Oleum Corporation, an Illinois corporation (the "Company") (Sub
and the Company being hereinafter collectively referred to as the "Constituent
Corporations") and the individuals and other entities set forth on Exhibit I
hereto (the "Named Shareholders").
W I T N E S S E T H:
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WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have approved and declared advisable the merger of Sub and the
Company (the "Merger"), upon the terms and subject to the conditions set forth
herein, whereby each issued and outstanding share of Class A Common Stock, no
par value, of the Company ("Class A Common Stock") not owned directly or
indirectly by the Company will be converted into an amount per share equal to
the Total Merger Consideration (as hereinafter defined) divided by the total
number of issued and outstanding shares of Class A Common Stock at the
Effective Time (as hereinafter defined);
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the
conditions hereof, and in accordance with the provisions of the Business
Corporation Act of the State of Illinois (the "IBCA"), Sub shall be merged with
and into the Company at the Effective Time (as hereinafter defined). At the
election of Parent, any direct wholly-owned subsidiary of Parent may be
substituted for Sub as a constituent corporation in the Merger. In such event,
the parties agree to execute an appropriate amendment to this Agreement in
order to reflect the foregoing.
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Following the Merger, the separate corporate existence of Sub shall cease
and the Company shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
Sub in accordance with the IBCA.
Section 1.2 EFFECTIVE TIME. As soon as practicable after the
satisfaction or waiver of the conditions to the Merger set forth herein,
Articles of Merger shall be executed by each Constituent Corporation and filed
with the Secretary of State of the State of Illinois in accordance with the
requirements of the IBCA. The Merger shall become effective when the
Certificate of Merger (the "Certificate of Merger") with respect to the Merger
is issued by the Secretary of State of the State of Illinois; PROVIDED,
HOWEVER, that, this Agreement may be amended to provide for a later date of
effectiveness of the Merger not more than 30 days after the date the
Certificate of Merger is issued by the Secretary of State of the State of
Illinois. When used in this Agreement, the term "Effective Time" shall mean
the later of the date and time at which the Certificate of Merger is issued by
the Secretary of State of the State of Illinois or such later time established
by any such amendment.
Section 1.3 EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in Section 11.50 of the IBCA.
Section 1.4 ARTICLES OF INCORPORATION AND BY-LAWS. The
Articles of Incorporation and By-laws of Sub, as in effect immediately prior to
the Effective Time, shall be the Articles of Incorporation and By-laws of the
Surviving Corporation until thereafter changed or amended as provided therein
or by applicable law.
Section 1.5 DIRECTORS. The directors of Sub immediately
prior to the Effective Time shall become the directors of the Surviving
Corporation and shall hold office until their respective successors are duly
elected and qualified, or their earlier death, resignation or removal.
Section 1.6 OFFICERS. The officers of the Company
immediately prior to the Effective Time shall become the officers of the
Surviving Corporation and shall hold office until their respective successors
are duly elected and qualified, or until their earlier death, resignation or
removal; provided, however, that at the Effective Time Messrs. Donald C.
Fergusson, Leonard P. Judy, Wilbert B. Bartelt, Jeffrey A. Bott, Michael T.
Murphy, James J. Mahoney, Richard W. Manning and William R. McCarrell will
cease being Chairman of the Board and President, Chief Executive Officer,
Executive Vice President, Vice President - Finance & Treasurer, Vice President
and Secretary & General
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Counsel, Vice President - Consumer Business Group, Vice President - Operations
and President & General Manager of Rust-Oleum Concrete Protection Systems,
Inc., respectively, and Messrs. Thomas C. Sullivan and James A. Karman will
become President, and Treasurer and Secretary, respectively.
Section 1.7 CONVERSION OF SECURITIES. As of the Effective
Time, by virtue of the Merger and without any action on the part of any
shareholder of the Company:
(a) All shares of Common Stock (as hereinafter defined) that
are held in the treasury of the Company or by any wholly-owned
Subsidiary (as hereinafter defined) of the Company shall be cancelled
and retired without payment of any consideration therefor and without
any conversion thereof and shall cease to exist.
(b) Each issued and outstanding share of capital stock of Sub
shall be converted into and become one fully paid and nonassessable
share of Common Stock, without par value of the Surviving Corporation.
(c) Each share of Class A Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be
cancelled in accordance with Section 1.7(a) and other than Dissenting
Shares (as defined in Section 1.11), if any) shall be converted into
the right to receive an amount of cash equal to $176,500,000, minus
the aggregate of any dividends paid by the Company after the date
hereof (the "Total Merger Consideration"), divided by the total number
of issued and outstanding shares of Class A Common Stock at the
Effective Time.
Section 1.8 PARENT TO MAKE CASH AVAILABLE. Parent shall make
available to Sub, which in turn shall make available to Bank One Evanston, NA
as Exchange Agent hereunder (the "Exchange Agent") on the date of the Effective
Time, cash equal to the Total Merger Consideration. As soon as practicable
after the Effective Time, the Exchange Agent shall distribute to holders of
shares of Class A Common Stock converted into the right to receive cash
pursuant to Section 1.7, upon surrender to the Exchange Agent of one or more
certificates representing shares of Class A Common Stock (the "Certificates")
for cancellation, a check for an amount equal to the Total Merger Consideration
divided by the total number of issued and outstanding shares of Class A Common
Stock at the Effective Time, for each share of Class A Common Stock so
converted. In no event shall the holder of any such surrendered Certificates
be entitled to receive interest on any of the funds to be received in the
Merger. If such check is to be sent to a person other than the
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person in whose name the Certificates are registered, it shall be a condition
of the exchange that the person requesting such exchange shall pay to the
Exchange Agent any transfer or other taxes required by reason of the delivery
of such check to a person other than the registered holder of the Certificates
surrendered, or shall establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not applicable. Notwithstanding the foregoing,
neither the Exchange Agent nor any party hereto shall be liable to a holder of
a Certificate for any amount paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
Section 1.9 NO FURTHER OWNERSHIP RIGHTS IN CLASS A COMMON
STOCK. All cash paid upon the surrender for exchange of Certificates in
accordance with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Class A Common Stock,
subject, however, to the Surviving Corporation's obligation to pay any
dividends or make any other distribution with a record date prior to the
Effective Time which may have been declared or made by the Company on such
shares of Class A Common Stock in accordance with the terms of this Agreement.
Section 1.10 CLOSING OF COMPANY TRANSFER BOOKS. At the
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of shares of Class A Common Stock shall thereafter be made. If, after
the Effective Time, Certificates are presented to the Surviving Corporation,
they shall be cancelled and exchanged as provided in this Article I.
Section 1.11 DISSENTING SHARES. Notwithstanding anything in
this Agreement to the contrary, shares of Class A Common Stock which
immediately prior to the Effective Time are held by shareholders who have
properly exercised dissenters' rights under Sections 11.65 and 11.70 of the
IBCA (the "Dissenting Shares") shall not be converted into the right to receive
cash as provided in Section 1.7(c) hereof, but the holders of Dissenting Shares
shall be entitled to receive such consideration as shall be determined pursuant
to Sections 11.65 and 11.70 of the IBCA; PROVIDED, HOWEVER, that, if any such
holder shall withdraw or lose such holder's right to dissent and payment under
the IBCA, such holder's outstanding Shares shall thereupon be deemed to have
been converted as of the Effective Time into the right to receive cash, without
any interest thereon, as provided in Section 1.7(c) and such Shares shall no
longer be Dissenting Shares. The Company shall give Parent prompt notice of
any demands for payment under Section 11.70 of the IBCA received by the
Company. Except as required by applicable law, prior to the Effective Time,
the Company shall not, except with the prior written consent of Parent, make
any
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payment with respect to, or settle or offer to settle, any such demands.
Section 1.12 LOST CERTIFICATES. In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such certificate to be lost, stolen or
destroyed, the Exchange Agent shall pay to such person the amount of cash
payable to the holder of such lost, stolen or destroyed certificate determined
in accordance with Section 1.7(c). When authorizing such payment in exchange
for any lost, stolen or destroyed Certificate, the person to whom the cash is
to be paid shall, as a condition precedent to the payment thereof, give the
Surviving Corporation a bond satisfactory to the Surviving Corporation in such
sum as it may direct or otherwise indemnify the Surviving Corporation in a
manner satisfactory to the Surviving Corporation against any claim that may be
made against Parent, Sub or the Surviving Corporation with respect to the
Certificate alleged to have been lost, stolen or destroyed.
Section 1.13 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 either of the Constituent Corporations, 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 execute and deliver, in
the name and on behalf of either of the Constituent Corporations in the Merger,
all such deeds, bills of sale, assignments and assurances and do, in the name
and on behalf of such Constituent Corporations, all such other acts and things
necessary, desirable or proper to vest, perfect or confirm its right, title or
interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of such Constituent Corporation and otherwise to carry out
the purposes of this Agreement.
Section 1.14 CLOSING. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Sidley & Austin, One First National Plaza, Chicago, Illinois at 10:00 A.M.,
local time, on the second business day after the day on which the last of the
conditions set forth in Article VII hereof shall have been fulfilled or waived
or at such other time and place as Parent and the Company shall agree.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT
----------------------------------------
Parent represents and warrants to the Company and to each
Named Shareholder as follows:
Section 2.1 ORGANIZATION, STANDING AND POWER. Parent is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Ohio and has the requisite corporate power and authority
to carry on its business as now being conducted. Parent is duly qualified to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect.
For purposes of this Agreement (a) "Material Adverse Change" or "Material
Adverse Effect" means, when used with respect to Parent or the Company, as the
case may be, any change or effect that is or, so far as can reasonably be
determined, may be materially adverse to the assets, condition (financial or
otherwise) or results of operations of Parent and its Subsidiaries taken as a
whole, or the Company and its Subsidiaries taken as a whole, as the case may
be, and (b) "Subsidiary" means any corporation, partnership, joint venture or
other legal entity of which Parent or the Company, as the case may be (either
alone or through or together with any other Subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation, partnership, joint venture or
other legal entity.
Section 2.2 AUTHORITY; NON-CONTRAVENTION. (a) Parent has
all requisite power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent. Without limiting the foregoing, no vote or approval by
the stockholders of Parent of this Agreement or the transactions contemplated
hereby is required pursuant to any law, rule or regulation, the Articles of
Incorporation or Code of Regulations of Parent, the rules of any securities
exchange on which any securities of Parent are listed, any contract, agreement
or other instrument or otherwise. This Agreement has been duly executed and
delivered by Parent and (assuming the valid authorization, execution and
delivery of this Agreement by the Company) constitutes a valid and binding
obligation of Parent enforceable against Parent in accordance with its terms.
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(b) The execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby and compliance with
the provisions hereof will not, conflict with, or result in any violation of,
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to the loss of a material benefit under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of Parent under, any provision of (i) the Articles of Incorporation or
Code of Regulations (true and complete copies of which as of the date hereof
have been delivered to the Company) of Parent, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Parent or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or any of its respective properties or assets, other than,
in the case of clauses (ii) or (iii), any such conflicts, violations, defaults,
rights, liens, security interests, charges or encumbrances that, individually
or in the aggregate, would not have a Material Adverse Effect on Parent,
materially impair the ability of Parent to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated hereby.
(c) No filing or registration with, or authorization, consent
or approval of, any domestic (federal and state), foreign or supranational
court, commission, governmental body, regulatory agency, authority or tribunal
(a "Governmental Entity") is required by or with respect to Parent in
connection with the execution and delivery of this Agreement by Parent or is
necessary for the consummation of the Merger and the other transactions
contemplated by this Agreement, except for (i) in connection, or in compliance,
with the provisions of laws governing creation of Sub, (ii) the filing of the
Articles of Merger with the Secretary of State of the State of Illinois and
appropriate documents with the relevant authorities of other states in which
the Company is qualified to do business, (iii) such filings and consents as may
be required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval triggered by
the Merger or the transactions contemplated by this Agreement, (iv) such
filings as may be required in connection with the Transfer Taxes described in
Section 6.6, (v) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the
corporation, takeover or "Blue Sky" laws of various states, (vi) such filings
and approvals as may be required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "Improvements Act") and (vii) such other
consents, orders, authorizations, registrations,
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declarations and filings the failure of which to be obtained or made would not,
individually or in the aggregate have a Material Adverse Effect on Parent,
materially impair the ability of Parent to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated hereby.
Section 2.3 INTERESTED SHAREHOLDER. Neither Parent nor any
affiliate of Parent is an "Interested Shareholder" as defined in Section
7.85(c)(2) of the IBCA or an "interested shareholder" as defined in Section
11.75(c)(6) of the IBCA.
Section 2.4 FINANCIAL ABILITY. Parent has the financial
ability to consummate the transactions contemplated by this Agreement and has
furnished the Company with evidence thereof.
Section 2.5 BROKERS. No broker, investment banker or other
person is entitled to any broker's, finder's or other similar fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Sub other than any broker,
investment banker or other person the fees and expenses of which, to the extent
payable, have been or will be paid or caused to be paid by Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
THE COMPANY AND CERTAIN SHAREHOLDERS
------------------------------------
The Company and each Named Shareholder represent and warrant
to Parent and Sub, except as set forth in the Disclosure Letter from the
Company to Parent dated as of the date hereof relating to this Agreement (the
"Disclosure Letter") as follows:
Section 3.1 ORGANIZATION, STANDING AND POWER. The Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Illinois and has the requisite corporate power and
authority to carry on its business as now being conducted. The Company is duly
qualified to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. The Disclosure Letter includes a list of all of
the Company's Subsidiaries, all of which are wholly-owned.
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Section 3.2 CAPITAL STRUCTURE. The authorized capital stock
of the Company consists of 10,000,000 shares of Class A Common Stock and
1,000,000 shares of Class B Common Stock, no par value ("Class B Common
Stock"). The Class A Common Stock and the Class B Common Stock are hereinafter
referred to as the "Common Stock". At the time of close of business on April
30, 1994, (i) 6,639,285 shares of Class A Common Stock and 473,225 shares of
Class B Common Stock were issued and outstanding and (ii) no shares of Common
Stock were held by the Company in its treasury. All outstanding shares of
capital stock of the Company are, and all shares of capital stock which are to
be issued by the Company as contemplated by Section 6.1 of this Agreement will
be, validly issued, fully paid and nonassessable and not subject to preemptive
rights. At the date hereof, the issued and outstanding shares of capital stock
of the Company are held of record as shown in the Disclosure Letter. Section
6.1 of this Agreement contemplates that each outstanding share of Class B
Common Stock will be converted into one share of Class A Common Stock prior to
the Effective Time. Except for the obligations of the Company under the
Rust-Oleum Corporation 1984 Long-Term Incentive Program, as amended (the "LTI
Program"), and the Company's Articles of Incorporation, and as contemplated by
Section 6.1 of this Agreement, there are no options, warrants, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company is a party or by which it is bound obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company. There are no
outstanding stock appreciation rights ("SARs"). True and correct copies of
the LTI Program and all amendments thereto have been furnished to Parent.
Section 3.3 TITLE TO COMMON STOCK. Each of the Named
Shareholders is the beneficial owner of the number of shares of Class A Common
Stock set forth opposite his, her or its name in Schedule 3.2 of the Disclosure
Letter, free and clear of any liens, encumbrances, claims, limitations or
restrictions other than such as may exist under the agreements or instruments,
as amended, referred to on such Schedule 3.2, or under the partnership
agreements, as amended, with respect to the partnerships referred to in such
Schedule 3.2. The Rust-Oleum Corporation 1984 Voting Trust, Renewed and
Extended as of January 19, 1993 is the record owner of the number of shares of
Class A Common Stock set forth opposite its name in Schedule 3.2 of the
Disclosure Letter, free and clear of any liens, encumbrances, claims,
limitations or restrictions other than any which may arise from the terms of
the instrument creating such voting trust.
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Section 3.4 AUTHORITY; NON-CONTRAVENTION. (a) The Board of
Directors of the Company has approved this Agreement and directed that it be
submitted to the shareholders of the Company, and the Company has all requisite
power and authority to enter into this Agreement and, subject to approval of
this Agreement by the shareholders of the Company, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, subject to such approval of this Agreement by the
shareholders of the Company. This Agreement has been duly executed and
delivered by the Company and (assuming the valid authorization, execution and
delivery of this Agreement by Parent and Sub) constitutes a valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms.
(b) The execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby and compliance with
the provisions hereof will not, conflict with, or result in any violation of,
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to the loss of a material benefit under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company under, any provision of (i) the Articles of Incorporation
or By-laws of the Company (true and complete copies of which as of the date
hereof have been delivered to Parent), (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to the Company or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any of its properties or assets, other than, in the case of
clause (ii) or (iii), any such conflicts, violations, defaults, rights, liens,
security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company, materially
impair the ability of the Company to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated hereby.
(c) No filing or registration with, or authorization, consent
or approval of, any Governmental Entity is required by or with respect to the
Company in connection with the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions contemplated
hereby, except for (i) the filing of the Articles of Merger with the Secretary
of State of the State of Illinois and appropriate documents with the relevant
authorities of other states in which the Company is
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qualified to do business, (ii) such filings and consents as may be required
under any environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, (iii) such filings as may be
required in connection with the Transfer Taxes described in Section 6.6, (iv)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the corporation, takeover or
"Blue Sky" laws of various states, (v) such filings and approvals as may be
required under the Improvements Act, and (vi) such other consents, approvals,
orders, authorizations, registrations, declarations and filings the failure of
which to be obtained or made would not, individually or in the aggregate, have
a Material Adverse Effect on the Company, materially impair the ability of the
Company to perform its obligations hereunder or prevent the consummation of any
of the transactions contemplated hereby.
Section 3.5 FINANCIAL STATEMENTS. Included in the Disclosure
Letter are true and correct copies of (i) the consolidated balance sheets of
the Company and its Subsidiaries as at October 31, 1992 and 1993 (such balance
sheet as of October 31, 1993 being herein called the "1993 Balance Sheet") and
the related statements of income, of shareholders' investment and of cash flows
for the fiscal years then ended, together with appropriate notes to such
financial statements, all accompanied by the report thereon of KPMG Peat
Marwick, independent certified public accountants, and (ii) the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of March 31,
1994 and the related statement of income for the five months period then ended.
Such balance sheets and statements of income, of shareholders' investment and
of cash flows, subject in the case of unaudited statements to normal year-end
adjustments and to any other adjustments described therein, have been prepared
in accordance with generally accepted accounting principles consistently
applied and present fairly the financial position of the Company and its
Subsidiaries as at the date of such balance sheets and the results of
operations and changes in financial position for the fiscal periods then ended.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS SINCE BALANCE
SHEET DATE. Between March 31, 1994 and the date hereof there has been:
(a) no increase in the indebtedness for borrowed money
incurred by the Company and no incurrence of any other obligation or
liability (fixed or contingent) except for trade obligations and
borrowings for seasonal working capital requirements, in each case
incurred in the ordinary course of business consistent with past
practice;
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(b) no Material Adverse Change with respect to the
Company;
(c) no sale, transfer or other disposition by the Company
or mortgage or pledge of, or imposition of any lien, charge or
encumbrance on, any of its properties or assets, other than
transactions (including the sale of capital assets) in the ordinary
course of business consistent with past practice;
(d) no contribution to the capital of the Company, no
dividend or other distribution or payment in respect of, and no
subdivision, consolidation or other recapitalization of, the capital
stock of the Company and no declaration or authorization of any of the
foregoing;
(e) no proceedings with respect to the merger, consolidation,
liquidation or reorganization of the Company; and
(f) no loan by the Company to any shareholder, director,
officer or employee of the Company other than travel, expense or other
advances to employees in the ordinary course of business consistent
with the past practice.
3.7 MINIMUM NET WORTH. Net Worth shall be no less than
$30,000,000 at the Effective Time. For purposes of this Section 3.7 the
following terms shall have the meanings ascribed below: (a) "Net Worth" shall
mean the consolidated net worth of the Company and its Subsidiaries calculated
by deducting (i) the total liabilities determined in accordance with generally
accepted accounting principles consistent with the methods and principles used
to prepare the financial statements of the Company as of March 31, 1994
described in Section 3.5 (the "Agreed Accounting Principles"), from (ii) the
total assets determined in accordance with the Agreed Accounting Principles.
For the purposes hereof, Net Worth shall be calculated without reflection of
any expenses or expense accruals relating to (i) any costs or expenses incurred
in connection with this Agreement or the transactions contemplated hereby, (ii)
any costs or expenses incurred in connection with or arising as a result of the
termination of the Rust-Oleum Corporation Supplemental Pension Plan as required
by Section 7.3(g), (iii) any compensation expense associated with awards under
Section 12 or Section 13 of the Rust-Oleum Corporation 1984 Long-Term Incentive
Program, as amended, and (iv) any expense arising from the termination of any
employees of the Company on or prior to the Effective Time at the direction of
Parent as provided in Section 6.9. It is understood that the shareholders of
the Company or
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any of them shall be entitled, but shall not be obligated, to make one or more
contributions to the capital of the Company for the purpose of satisfying the
foregoing representation and warranty. It is further understood that on or
prior to the Effective Time the Company shall be entitled to reverse any and
all previously accrued provisions for income taxes payable, and the full
benefit of any such reversal shall be reflected in Net Worth at the Effective
Time for the purposes of determining compliance with this Section 3.7.
Section 3.8 TITLE TO REAL ESTATE. The Disclosure Letter
contains a list of each parcel of real estate owned by the Company (the "Real
Estate"). The Company has good and marketable title to all of the Real Estate,
subject to no mortgage, lien, security interest or other encumbrance of any
kind except for (i) liens for taxes not yet due and payable or (ii) such
easements, restrictions, defects in title, covenants and similar charges that
do not render title to the property unmarketable or interfere in any material
respect with the existing use of the property subject thereto.
Section 3.9 AVAILABILITY OF MATERIAL CONTRACTS. Included in
the Disclosure Letter is a list of all loan or credit agreements, notes, bonds,
mortgages, indentures, leases or other contracts, agreements or instruments,
and all permits, concessions, franchises or licenses, in each case, which are
applicable to the Company and which are believed by the management of the
Company to be material to the business or assets of the Company. Parent, by
its execution of this Agreement, acknowledges that it has been provided the
opportunity to review copies of any and all items on such list that it may have
requested. For the purposes hereof, the management of the Company shall be
limited to the eight most senior executives of the Company as identified in the
Disclosure Letter.
Section 3.10 EXECUTIVE COMPENSATION AND BENEFIT PLANS. (a)
Included in the Disclosure Letter is a list of all material plans, programs,
agreements and other arrangements providing any remuneration or benefits to any
current management level employee of the Company, true and correct copies of
which have been made available to Parent. Such list also includes the current
annual salary and amounts paid under the LTI Program for fiscal year ended
October 31, 1993, under the Company's Short-Term Incentive Plan (the "STIP")
and under the Company's CBG Regional Sales Directors Short-Term Incentive
Program, for fiscal year ended October 31, 1993 to each such management level
employee.
(b) Neither the Company nor any Subsidiary of the Company
maintains, or is required to contribute to, any "employee pension benefit plan"
(as such term is defined in Section 3(2) of
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the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), on
behalf of any employees of the Company or any Subsidiary of the Company other
than a plan provided to Parent as described in Section 3.10(a). The Company
has made available to Parent, with respect to each of such plans correct and
complete copies of (i) all plan documents, amendments and trust agreements,
(ii) the most recent Annual Report (Form 5500 Series) and accompanying
schedules, as filed and (iii) the current summary plan description.
(c) The Company does not contribute, and is not obligated to
contribute, to any multiemployer plan (within the meaning of section 4001 of
ERISA) with respect to employees of the Company or any Subsidiary of the
Company.
Section 3.11 TAXES. The Company and each of the Subsidiaries
has filed all Tax Returns required to have been filed on or before the date
hereof, and all Taxes required to have been paid on or before the date hereof
by the Company and each Subsidiary have been timely paid. Neither the Company
nor any of the Subsidiaries has agreed in writing to waive any statute of
limitations in respect of Taxes of the Company or such Subsidiary. The Tax
Returns referred to above relating to United States federal and state income
Taxes have been examined by the Internal Revenue Service or the appropriate
state taxing authority or the period for assessment of the Taxes in respect of
which such Tax Returns were required to be filed has expired. No issues that
have been raised in writing by the relevant taxing authority in connection with
the examination of the Tax Returns referred to above are currently pending.
All deficiencies asserted or assessments made in writing as a result of any
examination of the Tax Returns referred to above by a taxing authority have
been paid in full. For the purposes of this Section 3.11, "Subsidiaries" shall
mean the Subsidiaries of the Company listed in the Disclosure Letter; "Tax"
(and, with correlative meaning, "Taxes") shall mean any federal, state, local
or foreign income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, withholding, alternative or add-on minimum, ad
valorem, transfer or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or charge of any kind whatsoever, together with
any interest or penalty, imposed by any governmental authority; and "Tax
Return" shall mean any return, report or similar statement required to be filed
with respect to any Tax (including any attached schedules), including, without
limitation, any information return, claim for refund, amended return and
declaration of estimated Tax.
Section 3.12 PATENTS, TRADE NAMES, TRADEMARKS AND OTHER
RIGHTS. (a) The Disclosure Letter contains as of the date
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of this Agreement a list and description of (i) all United States and foreign
patents and patent applications, all United States, state and foreign
trademarks, service marks and trade names for which registrations have been
issued or applied for, and all other United States, state and foreign
trademarks, service marks and trade names, owned by the Company or in which the
Company holds any right, license or interest (other than such trademarks,
service marks and trade names which have not been used by the Company since
January 1, 1993); (ii) all material agreements, commitments, contracts,
understandings, licenses, assignments and indemnities relating or pertaining to
any asset, property or right of the character described in the preceding clause
to which the Company is a party; (iii) all material licenses or agreements
pertaining to know-how, trade secrets, inventions, disclosures or uses of ideas
to which the Company is a party; and (iv) all registered assumed or fictitious
names under which the Company is conducting business.
(b) No proceedings are pending or, to the knowledge of the
Company, threatened against the Company which challenge the validity or
ownership of any trademark, trade name or servicemark or the ownership of any
other right or property referred to in this Section 3.12, and to the knowledge
of the Company there is not any infringing use of any of the same by any other
person.
(c) To the knowledge of the Company, the operations,
activities, products, equipment, machinery or processes of the Company do not
infringe the patents, trademarks, servicemarks, trade names, copyrights or
other property rights of any other person.
Section 3.13 ENVIRONMENTAL MATTERS. (a) Except where
failure to comply or resulting liability would not have a Material Adverse
Effect on the Company, to the knowledge of the Company:
(i) neither the Company nor any Subsidiary of the Company has
received during the past five years any notice of violation by the
Company or any such Subsidiary of any Environmental Law from any
governmental authority which has not been complied with;
(ii) since January 1, 1989, no notice under applicable
Environmental Laws reporting the accidental release of any hazardous
substance into the environment has been filed by or on behalf of the
Company or any of its Subsidiaries;
(iii) neither the Company nor any Subsidiary of the Company
has received any notice from any governmental authority alleging that
the Company or any Subsidiary of the
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Company is a liable party under the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 ET
SEQ. ("CERCLA"), any state superfund laws or laws relating to
environmental clean-up.
For the purposes hereof, "Environmental Laws" shall mean federal and state laws
and regulations governing the protection of the environment, such as the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section Section 9601, ET SEQ., as amended (CERCLA); the Resource Conversation
and Recovery Act, as amended, 42 U.S.C. Section Section 6901 ET SEQ.; the Clean
Water Act, 33 U.S.C. Section Section 1251 ET SEQ.; the Clean Air Act, 42 U.S.C.
Section Section 7401 ET SEQ.; the Toxic Substances Control Act, 15 U.S.C.
Section Section 2601 ET SEQ.; and the Safe Drinking Water Act, 42 U.S.C.
Section Section 300f through 300j.
(b) Prior to the Effective Time, Parent, at its sole cost and
expense shall have the right to perform, and the Company shall grant reasonable
access necessary to perform, an inspection of each or any parcel included in
the Real Estate. The Company shall provide reasonable information as requested
by Parent to confirm the Company's compliance with Environmental Laws. This
inspection and review shall be known as the "Phase I Environmental Assessment".
If requested by Parent, the Company shall allow ambient air quality, soil,
surface water and groundwater sampling at the Real Estate, or any parcel
included the Real Estate (the "Phase II Environmental Assessment"). If
Parent determines to conduct any Phase II Environmental Assessment, Parent
shall submit to the Company for approval its proposed scope of work. The Phase
II Environmental Assessment shall be completed prior to the Effective Time.
Parent has provided the Company with the names of each consultant or contractor
to be employed by Parent to conduct the Phase I and the Phase II Environmental
Assessment. Parent and the Company shall cooperate to assert and maintain any
available privileges, including attorney-client privilege, regarding the
information and reports generated during the Phase I and the Phase II
Environmental Assessments. Parent shall arrange with those performing any
Environmental Assessment to submit to the Company, simultaneously with
submission to Parent, all analytical results, draft reports or final reports of
any Phase I and Phase II Environmental Assessment that may be performed. No
final report of any Environmental Assessment shall be prepared until Parent and
the Company have approved the final draft, which approval shall not be
unreasonably withheld. Neither Parent nor the Company shall disclose any
information, draft report or final report prepared during any Phase I or Phase
II Environmental Assessment to any party, including governmental authorities,
without the written consent of the other, unless disclosure is necessary to
enforce the terms of this Agreement or required by valid legal process. Parent
shall conduct the activities
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authorized by this Section 3.13(b) in such a manner so as not to interfere
unreasonably with the Company's ongoing operations and shall use reasonable
efforts to minimize any disruption to such operations. Parent shall restore
the Real Estate to substantially the same condition it was in prior to the
Environmental Assessments.
Section 3.14 LITIGATION. As of the date hereof, there are no
lawsuits, claims, suits, proceedings or investigations pending or, to the
knowledge of the Company, threatened against the Company which are reasonably
expected to have a Material Adverse Effect on the Company.
Section 3.15 COLLECTIVE BARGAINING ARRANGEMENTS. The Company
is not a party to or bound by any employee collective bargaining agreement; nor
is the Company a party to or affected by or, to the knowledge of the Company,
threatened with, any dispute or controversy with a union or with respect to
unionization or collective bargaining involving the employees of the Company.
Section 3.16 BROKERS. No broker, investment banker or other
person, other than Lehman Brothers, Inc., the fees and expenses of which will
be paid by the Company, is entitled to any broker's, finder's or other similar
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company.
Pursuant to an engagement letter between the Company and Lehman Brothers, Inc.,
the Company has agreed to pay Lehman Brothers, Inc. the sum of $1,400,000 upon
consummation of the Merger, a copy of which will be delivered to Parent prior
to the Effective Time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING SUB
--------------------------------------------
Parent and Sub jointly and severally represent and warrant to
the Company and to each Named Shareholder as follows:
Section 4.1 ORGANIZATION AND STANDING. Sub is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Illinois. Sub was organized solely for the purpose of Parent's
acquisition of the Company and engaging in the transactions contemplated by
this Agreement and has not engaged in any business since it was incorporated
which is not in connection with the acquisition of the Company and with this
Agreement.
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Section 4.2 CAPITAL STRUCTURE. The authorized capital stock
of Sub consists of 1,000 Common Shares, without par value, 100 of which are
validly issued and outstanding, fully paid and nonassessable and are owned by
Parent free and clear of all liens, claims and encumbrances.
Section 4.3 AUTHORITY; NON-CONTRAVENTION. (a) Sub has the
requisite power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement, the performance by Sub of its obligations hereunder and the
consummation of the transactions contemplated hereby have been duly authorized
by its Board of Directors and Parent as its sole shareholder, and, except for
the corporate filings required by state law, no other corporate proceedings on
the part of Sub are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Sub and (assuming the due authorization, execution and delivery
hereof by the Company) constitutes a valid and binding obligation of Sub
enforceable against Sub in accordance with its terms.
(b) The execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby and compliance with
the provisions hereof will not, conflict with, or result in any violation of,
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to the loss of a material benefit under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of Sub under, any provision of (i) the Certificate of Incorporation or
By-laws (true and complete copies of which as of the date hereof have been
delivered to the Company) of Sub, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Sub or (iii) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Sub or
any of its properties or assets, other than, in the case of clauses (ii) or
(iii), any such conflicts, violations, defaults, rights, liens, security
interests, charges or encumbrances that, individually or in the aggregate,
would not have a Material Adverse Effect on Sub, materially impair the ability
of Sub to perform its obligations hereunder or prevent the consummation of any
of the transactions contemplated hereby.
(c) No filing or registration with, or authorization,
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consent or approval of, any Governmental Entity is required by or with respect
to the Sub in connection with the execution and delivery of this Agreement by
the Sub or the consummation by the Sub of the transactions contemplated hereby,
except for (i) the filing of the Articles of Merger with the Secretary of State
of the State of Illinois and (ii) such filings and approvals as may be required
under the Improvements Act.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
Section 5.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE
MERGER. During the period from the date of this Agreement through the
Effective Time, the Company shall, and shall cause its Subsidiaries to, in all
material respects carry on their respective businesses in, and not enter into
any material transaction other than in accordance with, the ordinary course
and, to the extent consistent therewith, use all reasonable efforts to preserve
intact their current business organizations, keep available the services of
their current officers and employees and preserve their relationships with
customers, suppliers and others having business dealings with them. Without
limiting the generality of the foregoing, and, except as otherwise expressly
contemplated by this Agreement including the Disclosure Letter, the Company
shall not, and shall not permit any of its Subsidiaries to, without the prior
written consent of Parent:
(a) (x) declare, set aside or pay any dividends on, or make
any other actual, constructive or deemed distributions in respect of,
any of its capital stock, or otherwise make any payments to
shareholders of the Company in their capacity as such, other than (1)
ordinary quarterly dividends by the Company consistent with past
practice in an amount not in excess of $.165 per share of Common
Stock, (2) dividends declared prior to the date of this Agreement or
(3) dividends payable to the Company declared by any of the Company's
Subsidiaries; (y) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital
stock (other than the conversion of the Class B Common Stock into
shares of Class A Common Stock as contemplated by Section 6.1); or (z)
purchase, redeem or otherwise acquire any shares of capital stock of
the Company or any of its Subsidiaries or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
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(b) issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its capital stock, any other voting securities or equity equivalent
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities or equity
equivalent (other than, in the case of the Company, the issuance of Common
Stock during the period from the date of this Agreement through the Effective
Time (y) in accordance with the terms of the LTI Program or (z) in connection
with the vesting of any Class B Common Stock or the conversion of Class B
Common Stock into Class A Common Stock as contemplated by Section 6.1);
(c) amend its Articles of Incorporation or amend in any material
respects its By-laws;
(d) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or agree
to acquire any assets, in each case that are material, individually or in the
aggregate, to the Company and its Subsidiaries taken as a whole;
(e) except in the ordinary course of business consistent with past
practice, sell, lease or otherwise dispose of or agree to sell, lease or
otherwise dispose of, any of its assets that are material, individually or in
the aggregate, to the Company and its Subsidiaries taken as a whole;
(f) except in the ordinary course of business consistent with past
practice, (y) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others or (z) make any loans, advances or capital contributions
to, or investments in, any other person, other than to the Company or any
wholly-owned Subsidiary of the Company;
(g) alter through merger, liquidation, reorganization, restructuring
or in any other fashion the corporate structure or ownership of any Subsidiary
of the Company; or
(h) enter into or adopt, or amend any existing, severance plan,
agreement or arrangement or, other than
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in the ordinary course of business, enter into or amend any employee
benefit plan or employment or consulting agreement (including, without
limitation, the plans, programs, agreements and arrangements referred
to in Section 3.10) except compensation increases to employees other
than management level employees associated with promotions and annual
reviews in the ordinary course of business.
Section 5.2 CONDUCT OF BUSINESS OF SUB PENDING THE MERGER.
During the period from the date of this Agreement through the Effective Time,
Sub shall not engage in any activities of any nature except as provided in or
contemplated by this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
---------------------
Section 6.1 STOCKHOLDER APPROVAL. Within one business day of
the termination or expiration of the waiting period under the Improvements Act,
the holders of all of the outstanding shares of Class A Common Stock shall
execute a consent in writing pursuant to Section 7.10(a) of the IBCA approving
a proposal to convert, effective upon the execution of such consent by the
holders of all of the outstanding shares of Class A Common Stock, all of the
outstanding shares of Class B Common Stock into an equal number of shares of
Class A Common Stock as provided in the Company's Articles of Incorporation.
Promptly after the execution of the foregoing consent by the holders of all of
the outstanding shares of Class A Common Stock, the Company shall deliver to
all shareholders of the Company entitled to vote upon the Merger a notice in
writing informing such shareholders of the proposed execution of a written
consent pursuant to Section 7.10(a) of the IBCA with respect to the Merger.
Promptly thereafter, but at least five days after the delivery of the foregoing
notice, holders of at least two-thirds of the outstanding Class A Common Stock
shall execute a consent in writing pursuant to Section 7.10(a) of the IBCA
approving this Agreement. Promptly after the effective date of such consent as
provided above, the Company shall give written notice of the taking of the
action contained in such consent without a meeting to all holders of Common
Stock who did not execute such consent. Such notice shall include (i) a copy
of the Descriptive Memorandum dated February, 1994, (ii) the consolidated
financial statements of the Company and its Subsidiaries referred to in Section
3.5 and (iii) the fairness opinion delivered by Lehman Brothers, Inc. In
addition, such notice shall inform such
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shareholders of their right to dissent and the procedure to dissent.
Section 6.2. ACCESS TO INFORMATION. (a) The Company shall,
and shall cause each of its Subsidiaries to, afford to Parent, and to Parent's
accountants, counsel, financial advisers and other representatives, reasonable
access and permit them to make such inspections as they may reasonably require
during normal business hours during the period from the date of this Agreement
through the Effective Time to all their respective properties, books,
contracts, commitments and records and, during such period, the Company shall,
and shall cause each of its Subsidiaries to, furnish promptly to Parent (i)
access to each report, schedule, registration statement and other document
filed by it during such period pursuant to the requirements of federal or state
laws and (ii) all other information concerning its business, properties and
personnel as Parent may reasonably request. In no event shall the Company be
required to supply to Parent, or to Parent's accountants, counsel, financial
advisors or other representatives, any information relating to indications of
interest from, or discussions with, any other potential acquirors of the
Company which were received or conducted prior to the date hereof.
(b) Except as required by law, Parent and its directors,
officers, employees, associates, agents and advisors (collectively
"Representatives") will hold, and Parent will cause its subsidiaries and
affiliates to hold, any information concerning the Company (whether prepared by
the Company, its advisors or otherwise and irrespective of the form of
communication) which has been or will be furnished to it or its Representatives
by or on behalf of the Company (the "Evaluation Material") in confidence and
will not disclose any of the Evaluation Material in any manner whatsoever and
will ensure that such subsidiaries, affiliates and Representatives do not
disclose such information to others without the prior written consent of the
Company; provided, however, that Parent may disclose Evaluation material only
to such of its subsidiaries, affiliates and Representatives who need to know
such information. Evaluation Material shall be deemed to include all notes,
analyses, compilations, studies, interpretations or other documents prepared by
Parent or its subsidiaries, affiliates or Representatives which contain,
reflect or are based upon, in whole or in part, the information furnished to
Parent or its subsidiaries, affiliates or Representatives. Neither Parent nor
any of its Subsidiaries, affiliates or Representatives shall use any Evaluation
Material in any manner that is detrimental to the Company, including without
limitation, by using any Evaluation Material in connection with any
solicitation of any of the customers of the Company or otherwise for the
purpose of
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obtaining a competitive advantage. In the event of termination of this
Agreement for any reason, Parent shall, and shall cause its subsidiaries,
affiliates and Representatives to, promptly return or destroy all Evaluation
Material and any copies made of such documents. Parent FURTHER agrees not to,
and to cause its subsidiaries, affiliates and Representatives to whom it has
made the Evaluation Material available or with whom it has discussed the
Company or its employees not to, solicit to employ any of the current officers
or employees of the Company so long as they are employed by the Company without
obtaining prior written consent of the Company. In the event that this
Agreement terminates, Parent agrees that this Section 6.2(b) shall survive for
a period of three years from the date hereof.
Section 6.3 FEES AND EXPENSES. (a) Whether or not the Merger
is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses. In the event that the Merger is
consummated, the Company agrees that all costs and expenses incurred by the
Company in connection with this Agreement and the transactions contemplated
hereby shall be reflected on the books and records of the Company as expenses
applicable to the period ending at the Effective Time.
(b) To the extent that the costs and expenses of Lehman
Brothers, Sidley & Austin and Hewitt Associates incurred by the Company in
connection with this transaction exceed $2,000,000, such costs and expenses
shall be paid by the Named Shareholders.
Section 6.4 REASONABLE EFFORTS. Upon the terms and subject
to the conditions set forth in this Agreement, each of the parties agrees to
use all reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including (a) the obtaining of all
necessary actions or non-actions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
and the taking of all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by any
Governmental Entity, (b) the obtaining of all necessary consents, approvals or
waivers from holders of Class A Common Stock and third parties, (c) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including
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seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed, and (d) the execution and
delivery of any additional instruments necessary to consummate the transactions
contemplated by this Agreement.
Section 6.5 PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one
hand, and the Company, on the other hand, will consult with each other before
issuing any press release or otherwise making any public statements with
respect to the transactions contemplated by this Agreement, and shall not issue
any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law or by obligations
pursuant to any listing agreement with any national securities exchange.
Section 6.6 TRANSFER TAXES. Parent, Sub and the Company
agree that the Company (prior to the Merger) and the Surviving Corporation
(following the Merger) will pay, and will indemnify the holders of the Common
Stock against, any real property transfer or gains tax, stamp tax, stock
transfer tax, or other similar tax imposed on the Merger or the surrender of
the Common Stock pursuant to the Merger (collectively, "Transfer Taxes"), and
any penalties or interest with respect to the Transfer Taxes. The Company
agrees to cooperate with Sub and Parent in the filing of any returns with
respect to the Transfer Taxes, including supplying promptly upon request by
Parent a complete list of all real property interests held by the Company or
its Subsidiaries and any information with respect to such property that is
reasonably necessary to complete such returns. Not later than ten (10) days
prior to the Effective Time, Parent shall deliver to the Company a schedule
setting forth the portion of the Merger consideration to be allocated to any
real property owned by the Company, and shall consider in good faith changes to
such schedule requested by the Company. The shareholders of the Company shall
be deemed to have agreed to be bound by the allocation established pursuant to
this Section 6.6 in the preparation of any return with respect to the Transfer
Taxes. Parent, Sub and the Company expressly agree that the provisions of this
Section 6.6 are intended to be for the benefit of each party to this Agreement
and those persons holding Common Stock at the Effective Time.
Section 6.7 INDEMNIFICATION OF DIRECTORS AND OFFICERS. From
and after the Effective Time, the Surviving Corporation shall indemnify and
hold harmless all past and present officers and directors of the Company and of
its Subsidiaries for acts or omissions occurring at or prior to the Effective
Time and shall advance reasonable litigation expenses incurred by such officers
and directors in connection with defending any action arising out
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of such acts or omissions to the fullest extent permitted by the IBCA.
Section 6.8 CAFETERIA PLAN. Parent shall cause to be
maintained through December 31, 1994 each cafeteria plan of the Company within
the meaning of Section 125 of the Code so as to prevent the forfeiture of
unused participant account balances under the plan.
Section 6.9 TERMINATION OF EMPLOYEES. (a) Subject to the
receipt by the Company of an agreement, in form and substance satisfactory to
the Company, from Parent indemnifying all officers, directors, employees,
agents and other representatives of the Company, as well as each Named
Shareholder, against all liabilities, costs and expenses, including any and all
fees and expenses of counsel and other costs of defense or investigation,
resulting from or arising in connection with any action taken pursuant to or
otherwise contemplated by this Section 6.9, the Company agrees to terminate,
effective as of the Effective Time, the employment with the Company of any
employee of the Company the termination of whom is requested by Parent in
writing. The parties hereto acknowledge that the rights of individual
employees under applicable law or otherwise will be given due consideration in
the implementation of this Section 6.9.
(b) In the event the Merger is consummated, the Company
agrees that all severance and other costs and expenses incurred by the Company
in connection with the termination of any employee of the Company pursuant to
Section 6.9(a) shall be reflected on the books and records of the Company as
expenses applicable to the period ending at the Effective Time.
Section 6.10 IMPROVEMENTS ACT FILINGS. Parent and the
Company shall promptly (and, in any event, by May 15, 1994) make their
respective filings, and shall thereafter promptly make any required
submissions, under the Improvements Act with respect to the Merger. Each of
Parent, Sub and the Company will use its best efforts to cause the satisfaction
of the waiting period under the Improvements Act. Parent and the Company will
furnish to each other such necessary information and reasonable assistance as
may be requested in connection with their respective preparation of necessary
filings or submissions to any governmental agency, including, without
limitation, any filings necessary under the provisions of the Improvements Act.
The Company and Parent will supply each other with copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between either of them or their respective representatives
and the Federal Trade Commission, the Antitrust Division of the United States
Department of Justice or any other governmental agency or authority or members
of their
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respective staffs with respect to this Agreement or the transactions
contemplated hereby.
6.11 FINANCIAL STATEMENTS. The Company shall use reasonable
efforts to assist Parent in obtaining the services of KPMG Peat Marwick and any
required consent to the use of their report regarding audited financial
statements of the Company as of the Effective Time in such form that they can
be used in connection with Parent's required filings with the Securities and
Exchange Commission. The fees and expenses of KPMG Peat Marwick and all other
costs and expenses associated with the preparation of such audited financial
statements shall be paid by Parent.
ARTICLE VII
CONDITIONS PRECEDENT TO THE MERGER
----------------------------------
Section 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligations of each party to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been
approved by the requisite consent of the holders of Class A Common
Stock as contemplated by Section 6.1(a).
(b) NO ORDER. No Governmental Entity or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, executive order, decree, injunction
or other order which is then in effect and has the effect of making
the Merger or the transactions contemplated hereby illegal.
(c) IMPROVEMENTS ACT WAITING PERIOD. The applicable waiting
period under the Improvements Act shall have expired or been
terminated.
(d) ESCROW AGREEMENT. The Parent and Named Shareholders
depositing $1,000,000 thereunder shall have executed the Escrow
Agreement (as hereinafter defined).
(e) OTHER APPROVALS. All authorizations, consents, orders,
declarations or approvals of, or filings with, or terminations or
expirations of waiting periods imposed by, any Governmental Entity,
the failure to obtain which would have a Material Adverse Effect on
Parent (assuming the Merger had taken place) shall have been obtained,
shall have occurred or shall have been filed.
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Section 7.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT
THE MERGER. The obligation of the Company to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
additional conditions:
(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND
WARRANTIES. Parent and Sub shall have performed in all material
respects each of their agreements contained in this Agreement required
to be performed on or prior to the Effective Time, each of the
representations and warranties of Parent and Sub contained in this
Agreement that is qualified by materiality shall be true and correct
on and as of the Effective Time as if made on and as of such date and
each of the representations and warranties that is not so qualified
shall be true and correct in all material respects on and as of the
Effective Time as if made on and as of such date, in each case except
as contemplated or permitted by this Agreement.
(b) OFFICERS' CERTIFICATE. Parent shall have furnished to
the Company a certificate, dated the Effective Time, signed by the
appropriate officers of Parent, certifying to the effect that to the
best of the knowledge and belief of each of them, the conditions set
forth in this Section 7.2, insofar as they relate to Parent, have been
satisfied in full.
(c) OPINION OF COUNSEL. The Company shall have received an
opinion of Calfee, Halter & Griswold, in form and substance
satisfactory to the Company, dated the Effective Time, substantially
to the effect set forth in Exhibit II.
(d) SOLVENCY CERTIFICATE. Parent and Sub shall have
furnished a certificate in the form reasonably satisfactory to the
Company and its counsel with respect to the solvency of the Parent and
Sub on and after the consummation of the transactions contemplated
hereby.
(e) OTHER DOCUMENTS. Parent and Sub shall have furnished to
the Company at the Closing such other customary documents,
certificates or instruments as the Company may reasonably request
evidencing compliance by Parent and Sub with the terms of this
Agreement.
Section 7.3 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO
EFFECT THE MERGER. The obligations of Parent and Sub to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following additional conditions:
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(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND
WARRANTIES. The Company shall have performed in all material respects
each of its agreements contained in this Agreement required to be
performed on or prior to the Effective Time, each of the
representations and warranties of the Company contained in this
Agreement that is qualified by materiality shall be true and correct
on and as of the Effective Time as if made on and as of such date and
each of the representations and warranties that is not so qualified
shall be true in all material respects on and as of the Effective Time
as if made on and as of such date, in each case except as contemplated
or permitted by this Agreement.
(b) THIRD PARTY CONSENTS. All required authorizations,
consents or approvals of any third party (other than a Governmental
Entity), the failure to obtain which would have a Material Adverse
Effect on Parent (assuming the Merger had taken place), shall have
been obtained.
(c) OFFICERS' CERTIFICATE. The Company shall have furnished
to Parent a certificate, dated the Effective Time, signed by the
appropriate officers of the Company, certifying to the effect that to
the best of the knowledge and belief of each of them, the conditions
set forth in this Section 7.3, insofar as they relate to the Company,
have been satisfied.
(d) OPINION OF SIDLEY & AUSTIN. Parent shall have received
an opinion of Sidley & Austin, special counsel to the Company, in
form and substance satisfactory to Parent, dated the Effective Time,
substantially to the effect set forth in Exhibit III.
(e) OPINION OF KATTEN, MUCHIN & ZAVIS. Parent shall have
received an opinion of Katten, Muchin & Zavis, special counsel to
certain Named Shareholders in form and substance satisfactory to
Parent, dated the Effective Time, substantially to the effect set
forth in Exhibit IV.
(f) OPINION OF GENERAL COUNSEL OF COMPANY. Parent shall have
received an opinion of Michael T. Murphy, Secretary and General
Counsel of the Company, in form and substance satisfactory to Parent,
dated the Effective Time, substantially to the effect set forth in
Exhibit V.
(g) OTHER DOCUMENTS. The Company shall have furnished to
Parent at the Closing such other customary documents, certificates or
instruments as Parent may reasonably request
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evidencing compliance by the Company with the terms of this Agreement.
(h) CERTAIN COMPANY LOANS. All loans by the Company to the
persons listed in Schedule 7.3 to the Disclosure Letter shall have
been repaid in full.
(i) TERMINATION OF SUPPLEMENTAL PENSION PLAN. The Company
shall have terminated the Rust-Oleum Corporation Supplemental Pension
Plan.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 8.1 TERMINATION. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after any approval by
the shareholders of the Company:
(a) by mutual consent of Parent and the Company;
(b) by Parent if (i) the Company shall have failed to comply
in any material respect with any of its covenants or agreements
contained in this Agreement required to be complied with by the
Company prior to the date of such termination, which failure to comply
has not been cured within five business days following receipt by the
Company of notice of such failure to comply or (ii) the shareholders
of the Company shall have failed to approve this Agreement on or
before December 31, 1994;
(c) by the Company if Parent shall have failed to comply in
any material respect with any of its covenants or agreements contained
in this Agreement required to be complied with by Parent prior to the
date of such termination, which failure to comply has not been cured
within five business days following receipt by Parent of notice of
such failure to comply or;
(d) by either Parent or the Company if (i) the Merger has not
been effected on or prior to the close of business on December 31,
1994; PROVIDED, HOWEVER, that the right to terminate this Agreement
pursuant to this clause 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
prior to the aforesaid date, or (ii) any court of competent
jurisdiction or any governmental, administrative or regulatory
authority, agency or body shall have issued an
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order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable; or
(e) by either Parent or the Company if there has been (i) a
material breach by the other of any representation or warranty that is
not qualified as to materiality or (ii) a breach by the other of any
representation or warranty that is qualified as to materiality, in
each case which breach has not been cured within five business days
following receipt by the breaching party of notice of the breach.
Section 8.2 EFFECT OF TERMINATION. (a) In the event of
termination of this Agreement by either Parent or the Company, as provided in
Section 8.1, this Agreement shall forthwith become void and there shall be no
liability hereunder on the part of the Company, any Named Shareholder, Parent
or Sub or their respective officers or directors (except as set forth in
Section 6.2(b), Section 6.3 and Section 6.5 which shall survive the
termination); PROVIDED, HOWEVER, that nothing contained in this Section 8.2
shall relieve any party hereto from any liability for any breach of any
covenant or agreement contained in this Agreement.
(b) Unless the Closing occurs, the sole and exclusive remedy
of Parent, Sub and the Company for the breach by any other party hereto of any
representation or warranty contained in Articles II, III or IV hereof, as
applicable, shall be to terminate this Agreement as provided in Section 8.1.
Section 8.3 AMENDMENT. This Agreement may be amended by the
parties hereto, by or pursuant to action taken by their respective Boards of
Directors, at any time before or after approval of the Merger by the
shareholders of the Company but, after any such approval by shareholders of the
Company, no amendment shall be made which in any way materially adversely
affects the rights of such shareholders, without the further approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 8.4 WAIVER. At any time prior to the Effective Time,
the parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein which may legally be waived. Any
agreement on the part of a party
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hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
------------------
Section 9.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. None of the representations, warranties or agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except (i) the representation set forth in Section
3.3 (which shall survive indefinitely), (ii) the representation set forth in
Section 3.11 (which shall survive for a period of six years from the Effective
Time) and (iii) for the provisions of Article I and Sections 6.3, 6.6, 6.7, and
6.8 which shall survive indefinitely.
Section 9.2 SEVERAL LIABILITY. Notwithstanding anything
contained in this Agreement to the contrary, the liability of the Named
Shareholders under Section 3.3 shall be several and not joint or joint and
several and shall be determined as if such representation and warranty applied
only to such Named Shareholder and to the shares of Class A Common Stock set
forth opposite its name in Schedule 3.2 of the Disclosure Letter.
Section 9.3 PROVISIONS RELATING TO TAX REPRESENTATION. (a)
To secure the obligations of the Company and the Named Shareholders with
respect to any amount owing by the Company or the Named Shareholders pursuant
to this Agreement as a result of a breach of the representation and warranty
set forth in Section 3.11 (hereinafter, "Tax Losses"), at the Effective Time
the Named Shareholders shall, collectively, deposit, or, if prior to the
Effective Time the trustees under the Rust-Oleum Corporation 1984 Voting Trust
Agreement, Renewed and Extended as of January 19, 1993 (the "Voting Trust")
shall have provided notice to the Exchange Agent that the Voting Trust shall
have been amended to permit the Exchange Agent to deposit funds only out of
funds otherwise distributable to the Named Shareholders under the Voting Trust,
the Exchange Agent shall deposit, an amount of cash equal to One Million
Dollars ($1,000,000) pursuant to an escrow agreement to be entered into among
Parent and each Named Stockholder depositing funds thereunder (the "Escrow
Agreement"). The Escrow Agreement shall provide for the investment of the
funds deposited thereunder in accordance with instructions from Donald C.
Fergusson, the retention of all income earned upon such funds until the
termination of the Escrow Agreement, the termination of the Escrow Agreement to
be no later than six years
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from the Effective Time, and the disbursement of the funds held on deposit
under the Escrow Agreement. If funds held pursuant to the Escrow Agreement are
insufficient to satisfy Tax Losses, the Named Shareholders shall remain liable
for such Tax Losses in accordance with, and subject to the limitations of, this
Agreement. In no event shall a Named Shareholder be liable with respect to any
Tax Loss relating to a breach of the representation and warranty set forth in
Section 3.11 unless and until reasonable documentation is provided to the Named
Shareholders substantiating such Tax Loss. It is understood that prior to the
Effective Time the Named Shareholders will enter into an agreement providing
for contribution among themselves to the liabilities with respect to the
representations and warranties contained in Section 3.11 in proportion to the
amount of proceeds received by them, respectively.
(b) Parent shall (and after the Effective Time shall cause
the Company and each of the Subsidiaries to) promptly notify the Named
Shareholders in writing upon receipt by Parent, the Company or any of the
Subsidiaries (or any affiliate or agent thereof) of notice of any pending or
threatened federal, state, local or foreign Tax audits, examinations or
assessments which could affect the liability of the Company or any of the Named
Shareholders for a breach of the representation and warranty set forth in
Section 3.11. The Named Shareholders, acting collectively or through an agent
or other representative, shall have the sole right to represent the Company's
or any Subsidiary's interests in any Tax audit or administrative or court
proceeding relating (in whole or in part) to Taxes for which the Company or the
Named Shareholders could be liable pursuant to Section 3.11, and to employ
counsel of the Named Shareholders' choice at the Named Shareholders' expense.
Upon the reasonable request of Parent, the Named Shareholders, acting
collectively or through an agent or other representative, agree to provide
Parent information in reasonable detail regarding the progress of any such Tax
audit or administrative proceeding or court proceeding and to give good faith
consideration to any comments or suggestions of Parent with respect thereto, it
being understood that such consultation and consideration shall not in any way
limit or restrict the discretion of the Named Shareholders in the conduct of
such Tax audit or administrative proceeding or court proceeding. Neither
Parent (nor, after the Effective Time, the Company or any of the Subsidiaries)
nor any affiliate or agent thereof shall agree to settle any claim relating (in
whole or in part) to Taxes for which the Company and the Named Shareholders
could be liable pursuant to Section 3.11 without the prior written consent of
each of the Named Shareholders. Notwithstanding Section 9.1, the agreements in
this paragraph (b) shall survive indefinitely.
(c) After the Effective Time, each of the Parent, the Company
and each Subsidiary (and each affiliate and agent
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thereof) shall cooperate fully in preparing for any audits of, or disputes with
taxing authorities regarding, any Taxes for which the Company and the Named
Shareholders could be liable pursuant to Section 3.11, including, without
limitation, supplying the Named Shareholders or their designated representative
with all necessary documents then in the possession of the Company or any
Subsidiary or affiliate thereof. Neither the Company nor any Subsidiary shall,
after the Effective Time, destroy or dispose of any documents relating to Taxes
for which the Company and the Named Shareholders may be liable pursuant to
Section 3.11 without first offering to deliver the same to the Named
Shareholders. Notwithstanding Section 9.1, the agreements in this paragraph
(c) shall survive indefinitely.
(d) All payments owing by the Named Shareholders in
accordance with the terms of this Agreement as a result of a breach of the
representation and warranty set forth in Section 3.11 shall be reduced by (i)
any Taxes of the Company or any Subsidiary paid on or before the date hereof
that are refunded to the Parent, the Company or any Subsidiary (or any
affiliate or agent thereof) (or are used to reduce future Tax obligations of
any thereof) and (ii) any net Tax benefits arising from the same circumstances
that gave rise to such payments by the Named Shareholders. Notwithstanding
Section 9.1, the agreements in this paragraph (d) shall survive indefinitely.
Section 9.4 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, sent by overnight courier or telecopied (with a confirmatory copy
sent by overnight courier) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
RPM, Inc.
2628 Pearl Road
Medina, Ohio 44258
Attention: Thomas C. Sullivan, Chairman
with copies to:
Calfee, Halter & Griswold
800 Superior Avenue
Suite 1800
Cleveland, Ohio 44114
Attention: William A. Papenbrock
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(b) if to the Company, to
Rust-Oleum Corporation
11 Hawthorn Parkway
Vernon Hills, IL 60061
Attention: Donald C. Fergusson, Chairman
with a copy to:
Thomas A. Cole
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
(c) If to any Named Shareholder, to
c/o Donald C. Fergusson
Rust-Oleum Corporation
11 Hawthorn Parkway
Vernon Hills, Illinois 60061
Section 9.5 INTERPRETATION. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation." As used herein the "knowledge"
of the Company shall mean the actual knowledge of any one of the eight most
senior executives of the Company as identified in the Disclosure Letter.
Section 9.6 COUNTERPARTS. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
Section 9.7 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.
This Agreement, including the documents and instruments referred to herein, (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (b) except for provisions of Sections 1.8, 6.6, 6.7
and 6.8, is not intended to confer upon any person other than the parties any
rights or remedies hereunder.
Section 9.8 GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Illinois,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
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Section 9.9 ASSIGNMENT. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties without the prior written consent of the other parties, except that Sub
may assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to Parent or to any direct or indirect
wholly-owned subsidiary of Parent, but no such assignment shall relieve Sub of
any of its obligations hereunder. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.
Section 9.10 SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule
of law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions be consummated as originally
contemplated to the fullest extent possible.
Section 9.11 ENFORCEMENT OF THIS AGREEMENT. The parties
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions hereof
in any court of the United States or any state having jurisdiction, this being
in addition to any other remedy to which they are entitled at law or in equity.
Section 9.12 TRUSTEE LIABILITY. The parties hereto
acknowledge and agree that any trustee who is a signatory to this Agreement is
not acting in his/her individual capacity when signing on behalf of a trust,
but is acting solely as trustee of that trust and shall not be liable
personally to any other party for an actual or alleged breach of any provision
contained in this Agreement. Each party agrees to look solely to the estate of
the respective trust, and not to the trustee in such trustee's individual
capacity, for any damages, or other remedy for such trust's breach of any
provision contained in this Agreement.
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IN WITNESS WHEREOF, the undersigned have set their hands to
this Agreement or have caused this Agreement to be signed by their respective
officers thereunto duly authorized all as of the date first written above.
RPM, INC.
By Thomas C. Sullivan
------------------------
Thomas C. Sullivan,
Chairman of the Board and
Chief Executive Officer
Attest:
William A. Papenbrock
- - -----------------------------
Name: William A. Papenbrock
Title: Assistant Secretary
RPM OF ILLINOIS, INC.
By Thomas C. Sullivan
----------------------
Thomas C. Sullivan,
President
Attest:
William A. Papenbrock
- - ----------------------------
Name: William A. Papenbrock
Title: Assistant Secretary
RUST-OLEUM CORPORATION
By Donald C. Fergusson
----------------------
Donald C. Fergusson
Chairman and President
Attest:
Michael T. Murphy
- - -----------------------------
Name: Michael T. Murphy
Title: Secretary
-36-
42
DCF INVESTMENTS, L. P.,
A DELAWARE LIMITED
PARTNERSHIP
By: MPF Dynasty Trust for
Donald, General Partner
By: Donald C. Fergusson
-----------------------
Donald C. Fergusson,
not individually but
solely as Trustee
JFP INVESTMENTS, L. P.,
A DELAWARE LIMITED
PARTNERSHIP
By: MPF Dynasty Trust for
Jeanne, General Partner
By: Jeanne F. Pettry
-----------------------
Jeanne F. Pettry,
not individually but
solely as Trustee
SEF INVESTMENTS, L. P.,
A DELAWARE LIMITED
PARTNERSHIP
By: BAH Dynasty Trust for
Sue, General Partner
By: Sue Ellen Fergusson
-----------------------
Sue Ellen Fergusson,
not individually but
solely as Trustee
LAM INVESTMENTS, L. P.,
A DELAWARE LIMITED
PARTNERSHIP
By: BAH Dynasty Trust for
Laurel, General Partner
By: Laurel McKahan
-----------------------
Laurel McKahan
not individually but
solely as Trustee
43
THE JFP DYNASTY TRUST
U/A/D 12/29/93
By: Sue Ellen Fergusson
---------------------------
Sue Ellen Fergusson,
not individually but
solely as Trustee
THE JEANNE F. PETTRY 1988
FAMILY GIFT TRUST
By: Jeanne F. Pettry
---------------------------
Jeanne F. Pettry,
not individually but
solely as Trustee
THE DONALD C. FERGUSSON
1988 FAMILY GIFT TRUST
By: Donald C. Fergusson
---------------------------
Donald C. Fergusson,
not individually but
solely as Trustee
JEANNE F. PETTRY
Jeanne F. Pettry
---------------------------
Jeanne F. Pettry
DONALD C. FERGUSSON
Donald C. Fergusson
---------------------------
Donald C. Fergusson