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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Quaker State Corporation
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(Name of Issuer)
Capital Stock, $1.00 par value
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(Title of Class of Securities)
747410108
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(CUSIP Number)
Sheldon G. Adelman
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
June 28, 1996
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement o. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 3d-(a) for other parties to whom copies are to be sent.
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The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP NO. 747410108 13D PAGE 2 OF 6 PAGES
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1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Sheldon G. Adelman
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
00 (See Item 3)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
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7 SOLE VOTING POWER
2,421,342
NUMBER OF -------------------------------------------------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY -0-
EACH -------------------------------------------------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH
1,400,934
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10 SHARED DISPOSITIVE POWER
-0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,421,342
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.76
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP NO.
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ITEM 1. SECURITY AND ISSUER.
The class of equity securities to which this statement relates
is the common stock, $1.00 par value per share ("Common Stock"), of Quaker State
Corporation, a Delaware corporation (the "Company"), which has its principal
executive offices at 225 East John Carpenter Freeway, Irving, Texas 75062.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is filed by Sheldon G. Adelman. Mr. Adelman's
business address is 1215 Valley Belt Road, Cleveland, Ohio 44131-1415. Mr.
Adelman is Chairman and Chief Executive Officer of Blue Coral, Inc., a Delaware
corporation ("Blue Coral"), and a manufacturer and distributor of wholesale and
retail car care products. The address of Blue Coral's principal business and
principal office is 1215 Valley Belt Road, Cleveland, Ohio 44131-1415. Mr.
Adelman is a citizen of the United States.
Mr. Adelman has not, during the last five years, been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, Federal or
state securities laws, or finding any violations with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
This statement relates to the acquisition by Mr. Adelman of Common Stock of the
Company pursuant to the Agreement and Plan of Merger among the Company, QSBC
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Quaker State (the "Subsidiary"), Blue Coral and the Blue Coral Stockholders
(defined therein) dated as of June 7, 1996 (the "Merger Agreement"). In
connection with the consummation of the transactions contemplated by the Merger
Agreement on June 28, 1996, Subsidiary was merged with and into Blue Coral,
with Blue Coral as the surviving corporation (the "Merger"), and Blue Coral
became a wholly owned subsidiary of the Company ("Blue Coral Subsidiary"). On
June 28, 1996, pursuant to the Merger Agreement, the 13,092 shares of Blue
Coral common stock beneficially owned by Mr. Adelman were converted into
2,120,076 shares of Common Stock of the Company, and Mr. Adelman acquired an
additional 23,571 shares of Common Stock of the Company in exchange for his
equity interest in Blue Coral International Limited, a majority owned
subsidiary of Blue Coral of which Mr. Adelman was a minority stockholder.
Accordingly, in connection with the transactions contemplated by the Merger
Agreement, Mr. Adelman acquired an aggregate of 2,143,647 shares of Common
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Stock. Of the aggregate 2,143,647 shares of Common Stock acquired by Mr. Adelman
pursuant to the Merger, 1,400,934 shares were delivered to Mr. Adelman at the
closing of the Merger on June 28, 1996 (the "Delivered Shares"), and 742,713
shares were deposited into escrow pursuant to the Escrow Agreement described in
Item 6 below (the "Escrowed Shares").
The foregoing response to this Item 3 is qualified in its
entirety by reference to the Merger Agreement, the full text of which is filed
as Exhibit 1 hereto and incorporated herein by reference.
ITEM 4. PURPOSE OF TRANSACTION.
Mr. Adelman acquired beneficial ownership of the shares of
Common Stock as the result of the consummation of transactions contemplated by
the Merger Agreement as discussed in Item 3. Such shares were acquired in the
ordinary course of business for investment purposes and not for the purpose of
changing or influencing control of the issuer.
In connection with, and after consummation of, the Merger,
pursuant to the Merger Agreement, the Company (i) will immediately cause Mr.
Adelman to be elected to the Board of Directors of Blue Coral Subsidiary and
(ii) will use its best efforts to cause Mr. Adelman to be elected to the Board
of Directors of the Company no later than October 31, 1996 and to be re-elected
to the Board of Directors of the Company for so long as Mr. Adelman owns not
less than 75% of the 2,120,076 shares of Common Stock acquired by him in
exchange for his shares of Blue Coral common stock as described in Item 3.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Mr. Adelman owns beneficially and of record 1,400,934
shares of Common Stock, and Mr. Adelman is deemed to beneficially own an
additional 1,020,408 shares of Common Stock held in escrow over which he has
voting control. Accordingly, Mr. Adelman is the beneficial owner of 2,421,342
shares of Common Stock which represents approximately 6.76% of the Common Stock
outstanding. Mr. Adelman disclaims beneficial ownership with respect to 277,695
of the Escrowed Shares that, subject to the terms of the Escrow Agreement, are
to be distributed to other Blue Coral Stockholders.
(b) Subject to the terms of the Standstill Agreement
dated as of June 28, 1996 by and between the Company and Mr. Adelman (the
"Standstill Agreement"), Mr. Adelman has the sole power to vote and to dispose
of the 1,400,934 shares of Common Stock he owns beneficially and of record. Mr.
Adelman has the
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power to vote the 1,020,408 Escrowed Shares, but does not have the power to
dispose of such shares.
(c) Except as described herein, Mr. Adelman has not
effected any transaction in Common Stock in the past 60 days.
(d) Not applicable.
(e) Not applicable.
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ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERTAKINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER.
In accordance with the Merger Agreement, 1,020,408 shares of
Common Stock acquired by the Blue Coral Stockholders in exchange for their
shares of Blue Coral common stock are being held in escrow pursuant to the
Escrow Agreement dated as of June 28, 1996, among the Company, the Blue Coral
Stockholders and the United States Trust Company of New York, as escrow agent
(the "Escrow Agreement"). Mr. Adelman, as the Blue Coral Stockholders'
Representative under the Escrow Agreement, has the right to direct the Escrow
Agent in the exercise of the voting of the Escrowed Shares. In the absence of
any instruction by Mr. Adelman, the Escrowed Shares are voted by the Escrow
Agent in accordance with the recommendation of management of the Company.
Subject to the terms of the Merger Agreement and the Escrow Agreement, any
shares of Common Stock held in escrow will be distributed to Mr. Adelman and the
other Blue Coral Stockholders on June 28, 1998.
Mr. Adelman has entered into the Standstill Agreement with the Company pursuant
to which he has agreed, among other things, (i) not to transfer the Delivered
Shares without the consent of the Company, (ii) to vote the Delivered Shares in
accordance with the recommendation of management of the Company so long as he
continues to be a member of the Board of Directors of the Company, and (iii)
not to take any action, without the consent of the Company, to acquire any
additional shares of Common Stock, participate in any solicitation of proxies
with respect to the Common Stock, enter into any voting arrangements (other
than the Standstill Agreement) or otherwise act, alone or in concert with
others, to seek to exercise any control over the Company. The Standstill
Agreement terminates on June 28, 2000. This description of the Standstill
Agreement is qualified in its entirety by reference to the Standstill
Agreement, the full text of which is filed as Exhibit 3 hereto and incorporated
herein.
In connection with the Merger, Mr. Adelman and the other Blue
Coral Stockholders obtained certain demand and incidental registration rights
with respect to the shares of Common Stock they acquired in the Merger pursuant
to the Registration Rights Agreement among the Company and the Blue Coral
Stockholders dated as of June 28, 1996 (the "Registration Rights Agreement").
Except for the Merger Agreement, the Escrow Agreement, the
Standstill Agreement and the Registration Rights Agreement, there are no
contracts, arrangements, understandings or relationships (legal or otherwise)
between Mr. Adelman and any other persons with respect to any securities of the
Company.
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The following are filed as exhibits to this statement:
1. Agreement and Plan of Merger among Quaker State
Corporation, QSBC Acquisition Corp., Blue Coral, Inc. and the Blue Coral
Stockholders (defined therein) dated as of June 7, 1996. The Disclosure Schedule
to the Agreement and Plan of Merger has been omitted, but it will be furnished
supplementally to the Securities and Exchange Commission on request.
2. Escrow Agreement among Quaker State Corporation,
the Blue Coral Stockholders and the United States Trust Company of New York, as
Escrow Agent, dated as of June 28, 1996.
3. Standstill Agreement dated as of June 28, 1996 by
and between Quaker State Corporation and Sheldon G. Adelman.
4. Registration Rights Agreement among Quaker State
Corporation and the Blue Coral Stockholders, dated June 28, 1996.
[REMAINDER OF PAGE INTENTIONALLY
LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
/s/ Sheldon G. Adelman
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Sheldon G. Adelman
Date: July 5, 1996
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Exhibit #1
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AGREEMENT AND PLAN OF MERGER
AMONG
QUAKER STATE CORPORATION
QSBC ACQUISITION CORP.
BLUE CORAL, INC.
AND THE BLUE CORAL STOCKHOLDERS
(as defined herein)
Dated as of June 7, 1996
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS.....................................................................................1
ARTICLE II
THE MERGER.....................................................................................15
2.1 The Merger................................................................................15
2.2 Certificate of Incorporation..............................................................15
2.3 By Laws...................................................................................15
2.4 Directors and Officers....................................................................16
2.5 Effective Time............................................................................16
2.6 Further Assurances........................................................................16
ARTICLE III
CONVERSION OF SHARES...........................................................................17
3.1 Blue Coral Common Stock...................................................................17
3.2 Dissenting Shares.........................................................................19
3.3 Subsidiary Common Stock...................................................................19
3.4 Exchange of Shares........................................................................20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BLUE CORAL AND THE BLUE CORAL STOCKHOLDERS..................................................22
4.1 Organization, etc.........................................................................22
4.2 Authorization and Binding Obligation......................................................23
4.3 Capitalization............................................................................24
4.4 Consents and Approvals; No Conflicts......................................................25
4.5 Governmental Approvals and Authorizations.................................................26
4.6 Compliance with Laws......................................................................26
4.7 Real Property.............................................................................27
4.8 Personal Property.........................................................................29
4.9 Intellectual Property.....................................................................30
4.10 Contracts................................................................................31
4.11 Major Customers..........................................................................32
4.12 Product Warranties.......................................................................33
4.13 Personnel Information....................................................................33
4.14 Employee Benefit Plans...................................................................34
4.15 Litigation...............................................................................37
4.16 Transaction with Affiliates..............................................................37
4.17 Financial Statements.....................................................................38
4.18 Absence of Undisclosed Liabilities.......................................................38
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4.19 Absence of Changes or Events.............................................................38
4.20 Insurance................................................................................40
4.21 Taxes....................................................................................41
4.22 Environmental Matters....................................................................42
4.23 Financing Statements.....................................................................44
4.24 Car+ Liabilities.........................................................................44
4.25 [Intentionally Omitted]..................................................................44
4.26 Finders and Investment Bankers; Expenses.................................................44
4.27 Investment Intent........................................................................44
4.28 Bank Accounts............................................................................45
4.29 Releases.................................................................................45
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE SUBSIDIARY...............................................................46
5.1 Organization and Standing.................................................................46
5.2 Authorization and Binding Obligation......................................................46
5.3 Consents and Approvals; No Conflicts......................................................47
5.4 Litigation................................................................................47
5.5 Finders and Investment Bankers............................................................47
5.6 Financial Statements and Reports..........................................................48
5.7 Stock Issuance............................................................................48
ARTICLE VI
COVENANTS......................................................................................49
6.1 Information Prior to Closing..............................................................49
6.2 Conduct of Business.......................................................................49
6.3 Third-Party Consents......................................................................53
6.4 Renewal of Contracts......................................................................53
6.5 Financial Statements......................................................................53
6.6 Blue Coral Deferred Compensation Plan.....................................................54
6.7 Supplements to Schedules..................................................................54
ARTICLE VII
FURTHER AGREEMENTS.............................................................................54
7.1 Compliance with GCL; Filings..............................................................54
7.2 Rule 144..................................................................................55
7.3 Election of Adelman.......................................................................56
7.4 Additional Agreements.....................................................................56
7.5 Acquisition Proposals.....................................................................56
7.6 Public Announcements......................................................................57
7.7 Consent of the Parent.....................................................................57
7.8 Transfer Taxes............................................................................57
7.9 Treatment of Books and Records............................................................58
7.10 Purchase or Sale of NicSand..............................................................58
7.11 Sale of the McKay Property...............................................................59
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7.12 Release of Special Shares................................................................59
7.13 Officers' and Directors' Insurance;
Indemnification of Officers and Directors......................................................60
7.14 Surviving Corporation Common Stock.......................................................60
ARTICLE VIII
CLOSING CONDITIONS.............................................................................60
8.1 Conditions Precedent to the Obligations of
All Parties....................................................................................61
8.2 Additional Conditions to the Obligation of
Blue Coral.....................................................................................63
8.3 Conditions Precedent to Obligations of the
Parent and the Subsidiary......................................................................64
ARTICLE IX
CLOSING........................................................................................67
9.1 Time and Place............................................................................67
9.2 Filings at the Closing....................................................................67
9.3 Additional Transaction at the Closing.....................................................67
ARTICLE X
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS......................................................................................67
ARTICLE XI
INDEMNIFICATION................................................................................68
11.1 Indemnification by Blue Coral Stockholders...............................................68
11.2 Indemnification by the Parent and the
Surviving Corporation..........................................................................70
11.3 Limitation on Indemnity Obligation.......................................................70
11.4 Claims on Escrow Deposit; Release of Parent
Capital Stock..................................................................................72
11.5 The Blue Coral Stockholders' Representative..............................................72
11.6 Third-Party Claims.......................................................................72
ARTICLE XII
TERMINATION RIGHTS.............................................................................74
12.1 Termination..............................................................................74
12.2 Procedure and Effect of Termination......................................................75
ARTICLE XIII
TAX MATTERS....................................................................................75
13.1 Election.................................................................................75
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13.2 Forms....................................................................................75
13.3 Allocation...............................................................................77
13.4 Modification; Revocation.................................................................79
13.5 Consistent Treatment.....................................................................79
13.6 Taxes and Expenses Resulting from Elections..............................................79
13.7 Other Tax Matters........................................................................80
ARTICLE XIV
OTHER PROVISIONS...............................................................................81
14.1 Amendment and Modification...............................................................81
14.2 Waiver of Compliance; Consents...........................................................81
14.3 Confidentiality..........................................................................82
14.4 Legend...................................................................................83
14.5 Benefit and Assignment...................................................................83
14.6 No Third-Party Beneficiaries.............................................................83
14.7 Entire Agreement.........................................................................84
14.8 Headings.................................................................................84
14.9 Choice of Law............................................................................84
14.10 Notices.................................................................................84
14.11 Counterparts............................................................................85
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SCHEDULES
Schedule 1.5 Adelman Policies
Schedule 1.17 Separation Agreements
Schedule 1.57 Knowledge
Schedule 1.79 Ownership Schedule
Schedule 1.119 Specified Receivables
Schedule 4.1(a) Blue Coral Qualification
Schedule 4.1(b) Blue Coral Subsidiaries;
Qualification
Schedule 4.1(c) Third Party Interests
Schedule 4.3 Capitalization
Schedule 4.4 Consents and Approvals; No
Conflicts
Schedule 4.5 Governmental Approvals and
Authorization
Schedule 4.7(a) Owned Real Property
Schedule 4.7(b) Real Property Leases
Schedule 4.7(c)&(d) Ordinances, etc.
Schedule 4.7(e) Injunctions, etc.
Schedule 4.7(f) Real Property Liens
Schedule 4.8 Personal Property
Schedule 4.9(a) Intellectual Property Assets
Schedule 4.9(b) Licenses of Intellectual Property
Schedule 4.10 Contracts
Schedule 4.11(a)&(b) Major Customers
Schedule 4.12 Product Warranties
Schedule 4.13 Services Agreements
Schedule 4.14 Plans
Schedule 4.15 Litigation
Schedule 4.16 Affiliate Transactions
Schedule 4.17(a) Financial Statements
Schedule 4.17(b) Employee and Stockholder
Receivables
Schedule 4.19 Adverse Changes
Schedule 4.20 Insurance
Schedule 4.21(a) Taxes
Schedule 4.21(b) S Qualification
Schedule 4.22 Environmental Matters
Schedule 4.23 Financing Statements
Schedule 4.27(b) Accredited Investors
Schedule 4.28 Bank Accounts
Schedule 6.3 Third Party Consents
Schedule 8.3(o) Indebtedness to be Repaid
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EXHIBITS
Exhibit 8.1(e) Form of Escrow Agreement
Exhibit 8.1(f) NicSand Letter
Exhibit 8.2(d) Form of Opinion of Debevoise & Plimpton
Exhibit 8.2(f) Form of Registration Rights Agreement
Exhibit 8.3(u)(i) Form of Opinion of Baker & Hostetler
Exhibit 8.3(k) Moshontz Release
Exhibit 8.3(m) Form of Standstill Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 7, 1996 (the
"Agreement"), among QUAKER STATE CORPORATION, a Delaware corporation (the
"Parent"), QSBC ACQUISITION CORP., a Delaware corporation and a wholly-owned
subsidiary of the Parent (the "Subsidiary"), BLUE CORAL, INC., a Delaware
corporation ("Blue Coral"), SHELDON ADELMAN ("Adelman") and each of the other
stockholders of Blue Coral, other than the Selling Stockholders, listed on
SCHEDULE 4.3 hereto (such stockholders (other than the Selling Stockholders),
together with Adelman, the "Blue Coral Stockholders").
ARTICLE I
DEFINITIONS
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Unless otherwise stated, the following terms when used herein
have the meanings assigned to them below.
1.1 "Accredited Investor" has the meaning set forth in
Regulation D under the Securities Act.
1.2 "Additional Section 338 Form" has the meaning set forth in
Section 13.2(c) hereof.
1.3 "Adelman" has the meaning set forth in the
preamble to this Agreement.
1.4 "Adelman Family Stockholders" means Adelman
and Joel Adelman.
1.5 "Adelman Policies" means the insurance poli cies listed on
SCHEDULE 1.5 hereto.
1.5A "Adjustment Event" has the meaning set forth
in Section 3.1(e) hereof.
1.6 "Affiliate" means a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the Person specified.
1.7 "Applicable Law" means all applicable pro visions of all
(I) constitutions, treaties, statutes, laws (including, but not limited to, the
common law), rules, regulations, ordinances, codes or orders of any Governmental
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Authority and (II) orders, decisions, rulings, injunctions, judgments, awards
and decrees or consents of or agreements with any Governmental Authority.
1.8 "Average Trading Price" has the meaning
specified in Section 3.1(e) hereof.
1.9 "Base Consideration" means the excess of (I) $100,451,502
OVER (II) the sum of (T) the NicSand Amount PLUS (U) the Estimated 338 Amount
PLUS (V) the BCI Acquisition Amount PLUS (W) the Blue Coral Expense Amount PLUS
(X) any Uncollected Amount PLUS (Y) any Excess Transaction Cost Amount PLUS (Z)
any Special Obligation Payment Amount.
1.10 "BCI" means Blue Coral International
Limited, a United Kingdom corporation.
1.11 "BCI Acquisition Amount" means the sum of (I) $693,000
plus (II) the amount of any United Kingdom Transfer Taxes incurred by the Parent
in connection with the purchase provided for in Section 9.3 hereof.
1.12 "Blue Coral" has the meaning set forth in
the preamble to this Agreement.
1.13 "Blue Coral Balance Sheet" means the audited combined
balance sheet as of December 31, 1995 of Blue Coral and the Persons named
therein, certified by Arthur Andersen LLP.
1.14 "Blue Coral Credit Agreement" means the
Credit Agreement between Blue Coral and National City Bank
dated August 18, 1994, as amended.
1.15 "Blue Coral Common Stock" means the common stock, par
value $10.00 per share, of Blue Coral.
1.16 "Blue Coral Deferred Compensation Plan"
means the Blue Coral, Inc. Cumulative Net Income Deferred
Compensation Plan, as amended.
1.17 "Blue Coral Expense Amount" means the sum of (I) all
amounts paid, payable or accrued by Blue Coral or any Blue Coral Subsidiary
after December 31, 1995 to or in respect of Michael Moshontz in respect of the
Moshontz Agreements and in connection with obtaining the Moshontz Release,
including, without limitation, the $3,031,500 paid to Moshontz on January 4,
1996 in consideration of 4,005
2
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shares of Blue Coral Common Stock (except, with respect to any such amounts so
paid or payable, to the extent such amounts were accrued on the Blue Coral
Balance Sheet), (II) all amounts paid, payable or accrued by Blue Coral, any
Blue Coral Subsidiary or the Parent in connection with eliminating all of Blue
Coral's obligations, whether or not yet accrued, under the Sokol Agreement,
including, without limitation, any such amounts paid by the Parent or Blue Coral
under the Sokol Employment Agreement, (III) all amounts (including non-cash
assets) distributed or accrued as being distributable by Blue Coral to any Blue
Coral Stockholder or to any taxing authority on behalf of any Blue Coral
Stockholder during the period from January 1, 1996 to and including the Closing
Date, other than (without duplication) (X) the Permitted Distributions and (Y)
any such distributions that were accrued on the Blue Coral Balance Sheet, (IV)
all amounts paid under the Blue Coral Deferred Compensation Plan from January 1,
1996 to and including, and all amounts payable or accrued thereunder on, the
Closing Date, (V) all amounts paid, payable or accrued by Blue Coral in
satisfaction of its obligations under the agreement referred to in Section
8.3(t) hereof and (VI) all amounts paid, payable or accrued by Blue Coral, any
Blue Coral Subsidiary or the Parent in respect of severance, termination or
other separation compensation or benefits that are or may become payable in
respect of, or are for the benefit of, any individual identified on SCHEDULE
1.17 hereto, including, without limitation, any such amounts paid, payable or
accrued by Blue Coral, any Blue Coral Subsidiary or the Parent in satisfaction
of any liabilities, obligations or commitments arising in connection with or
under any separation, termination or other severance commitment, arrangement or
agreement described on SCHEDULE 1.17 hereto.
1.18 "Blue Coral Loan Agreement" means the letter agreement
dated as of May 25, 1990 between Blue Coral and National City Bank, as amended
March 31, 1995.
1.19 "Blue Coral Statement" has the meaning set
forth in Section 8.3(f) hereof.
1.20 "Blue Coral Stockholders" has the meaning
set forth in the preamble to this Agreement.
1.21 "Blue Coral Stockholders' Representative"
has the meaning set forth in Section 11.5 hereof.
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1.22 "Blue Coral Subsidiary" means any corporation,
partnership, limited liability company or other entity of which Blue Coral owns,
directly or indirectly, at least a majority of the securities or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other Persons performing similar functions of such
corporation, partnership, limited liability company or other entity, including,
with out limitation, NicSand and BCI. Car+ S.A. shall not be deemed a Blue Coral
Subsidiary for any purpose under this Agreement.
1.23 "Board" has the meaning set forth in Section
4.2(b) hereof.
1.24 "Business Day," whether or not initially capitalized,
means every day of the week excluding Saturdays, Sundays and federal holidays.
1.25 "Business Restriction" means any non-competition,
non-solicitation or similar agreement, understanding or commitment to which
Blue Coral or any Blue Coral Subsidiary is a party or of which it has Knowledge
which limits or restricts Blue Coral's or any Blue Coral Subsidiary's ability to
engage in any business or to solicit or hire any Person or entity.
1.26 "Certificate" has the meaning set forth in
Section 3.4(a) hereof.
1.27 "Certificate of Merger" has the meaning set
forth in Section 2.5 hereof.
1.28 "Closing" means the closing of the Merger.
1.29 "Closing Date" means the date on which the
Closing occurs.
1.30 "Code" means the Internal Revenue Code of 1986, as
amended, together with all regulations and rulings issued thereunder by any
Governmental Authority.
1.31 "Computer Programs" means all computer software,
firmware, programs and source disks, program documentation, tapes, manuals,
forms, guides and other materials with respect thereto.
1.32 "Contracts" means all agreements, licenses,
contracts, leases and commitments of the following types
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(and all amendments thereto), written or oral, to which Blue Coral or any of the
Blue Coral Subsidiaries is a party or by which any of them or any of their
respective properties is bound as of the date hereof:
(a) MORTGAGES, ETC. Mortgages, indentures, security agreements and
other agreements and instruments relating to the borrowing of money or
advances of credit;
(b) PARTNERSHIP. Partnership or joint venture agreements;
(c) EMPLOYMENT. Employment agreements, consulting agreements and
noncompetition agreements;
(d) COLLECTIVE BARGAINING; PLANS. Collective bargaining agreements and
Plans;
(e) SALES AGENCY, ETC. Material sales agency, manufacturer's
representative or distributorship agreements, supply agreements, marketing
agreements, adver tising agreements, licenses and any agreements relating
to Intellectual Property Assets;
(f) CAPITAL EXPENDITURES. Agreements or commitments for capital
expenditures in excess of $100,000 individually or $300,000 in the
aggregate;
(g) KEEPWELL AGREEMENTS. Agreements to provide funds or to make any
investment (in the form of a loan, capital contribution or otherwise) in
any entity or business;
(h) AGREEMENTS WITH AFFILIATES. Agreements or commitments with any
officer or director of Blue Coral or any of the Blue Coral Subsidiaries or
any Person who owns more than 5% of the capital stock or other equity
interest in Blue Coral or any Blue Coral Subsidiary;
(i) BUSINESS RESTRICTIONS. Contracts or commitments containing any
Business Restrictions;
(j) PURCHASE OF MATERIALS, ETC. Any agreement, order or commitment for
the purchase of materials, supplies, or services, or for the sale of
products, or services, in any case, having an unexpired term of more than
12 months or involving aggregate payments in excess of $200,000; and
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(k) OTHER AGREEMENTS. All other agreements, contracts and commitments
(excluding purchase orders and sales orders created in the ordinary course
of business consistent with past practice), written or oral, including all
Real Property Leases to which Blue Coral or any of the Blue Coral
Subsidiaries is a party or by which any of their respective properties is
bound, any one (or series) of which in any way involves payments or
receipts of more than $200,000 in the course of the year following the date
hereof.
1.33 "Dissenting Shares" has the meaning set
forth in Section 3.2 hereof.
1.34 "Effective Time" has the meaning set forth
in Section 2.5 hereof.
1.35 "Employees" has the meaning set forth in
Section 4.14 hereof.
1.36 "Environmental Laws" means all Applicable Laws relating
to the protection of human health or the environment.
1.37 "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, together with the regulations and rulings issued
thereunder by any Governmental Authority.
1.38 "Escrow Agent" means the Escrow Agent under the Escrow
Agreement.
1.39 "Escrow Agreement" means the agreement, dated the Closing
Date, among the Parent, the Blue Coral Stockholders and the Escrow Agent, in the
form attached as EXHIBIT 8.1(E) hereto.
1.40 "Escrow Amount" has the meaning set forth in
Section 3.1(c) hereof.
1.41 "Escrow Deposit" has the meaning set forth
in Section 3.1(c) hereof.
1.41A "Estimated 338 Amount" has the meaning set
forth in Section 13.6 hereof.
1.42 "Excess Transaction Cost Amount" means the excess, if
any, of (X) the Transaction Costs over (Y) the Transaction Cost Cap.
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1.43 "Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.44 "Exchange Agent" has the meaning set forth
in Section 3.4 hereof.
1.45 "Financial Statements" means (I) the Blue Coral Balance
Sheet, the audited combined balance sheets for Blue Coral and the Persons named
therein as of October 31, 1993 and October 31, 1994, together, in each case
(including the Blue Coral Balance Sheet), with the related statements of
operations and cash flows for the fiscal period then ended, certified, in each
case, by Arthur Andersen LLP, and (II) the Unaudited Statements.
1.46 "Form 8023" has the meaning set forth in
Section 13.2(a) hereof.
1.47 "GAAP" means United States generally accepted accounting
principles consistently applied.
1.48 "GCL" means the General Corporation Law of
the State of Delaware.
1.49 "Government Approvals" has the meaning set
forth in Section 4.5 hereof.
1.50 "Governmental Authority" means any nation or government,
any state or other political subdivision thereof or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, in each case to the extent the same has jurisdiction
over the Person or property in question, including, but not limited to, any
government authority, agency, board, commission, court, department or
instrumentality of the United States, any State of the United States, the United
Kingdom, France or any political subdivision thereof, and any tribunal or
arbitrator(s) of competent jurisdiction, and any self-regulatory groups of which
Blue Coral or any Blue Coral Subsidiary is a member or is subject.
1.51 "Hazardous Substance" means asbestos-containing material
and any and all hazardous or toxic substances, materials or wastes as defined
or listed under the Resource Conservation and Recovery Act, the Toxic Substances
Control Act, the Comprehensive Environmental Response, Compensation and
Liability Act or any comparable state statute or any regulation promulgated
under any of such federal or state statutes.
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1.52 "Household Special Obligation" means any obligation of
Blue Coral or any Blue Coral Subsidiary to indemnify any Person under the Asset
Purchase Agreement by and between Powerworks Company and Blue Coral, dated as of
March 15, 1996 (as the same is amended at any time prior to the Effective Time).
1.53 "HSRA" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the regulations adopted thereunder.
1.54 "Intellectual Property" means United States (federal and
state) and foreign trademarks, service marks, trade names, trade dress,
copyrights, and similar rights, including registrations and applications to
register or renew the registration of any of the foregoing, the United States
and foreign letters patent and patent applications, and inventions, processes,
designs, formulae, trade secrets, jingles, know-how, confidential business and
technical information, Computer Programs, data and documentation, and all
similar intangible property rights, tangible embodiments of any of the foregoing
(in any medium including electronic media), and licenses or permits to use any
of the foregoing.
1.55 "Intellectual Property Assets" has the meaning set forth
in Section 4.9(a) hereof.
1.56 "IRS" means the Internal Revenue Service of
the United States.
1.57 "Knowledge" means, with respect to any Blue Coral
Stockholder, the actual knowledge of such Blue Coral Stockholder, and, with
respect to Blue Coral or any Blue Coral Subsidiary, the actual or constructive
knowledge of any of the officers set forth on SCHEDULE 1.57 hereof.
1.58 "Liens" means all debts, liens, security interests,
mortgages, pledges, judgments, trusts, adverse claims, liabilities, encumbrances
and other impairments of title of any kind other than Permitted Encumbrances.
1.59 "Losses" has the meaning set forth in Section 11.1
hereof.
1.60 "Material Adverse Effect" means a material adverse effect
on the business, assets, properties, liabilities, revenues, income before
provision for income taxes, operations or condition, financial or otherwise, of
Blue Coral and the Blue Coral Subsidiaries taken as a whole,
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<PAGE> 16
or of the Parent and its subsidiaries, taken as a whole, as the case may be; it
being understood and agreed that any increase in Blue Coral's borrowings under
the Blue Coral Credit Agreement which is consistent with its historical
borrowing practices shall not constitute a Material Adverse Effect on the
liabilities of Blue Coral and the Blue Coral Subsidiaries, taken as a whole. In
determining whether any individual event would result in a Material Adverse
Effect, notwithstanding that such event does not of itself have such effect, a
Material Adverse Effect shall be deemed to have occurred if the cumulative
effect of such event and all other then existing events would result in a
Material Adverse Effect.
1.61 "McKay Amount" means $976,262.
1.62 "McKay Proceeds" means the amount of cash proceeds
received by the Parent or the Surviving Corporation in connection with its sale
of the McKay Property in accordance with Section 7.11(a) hereof, which amount
shall be either reduced by the net Tax cost incurred or increased by the net Tax
benefit realized as a result of such sale, as reasonably determined by the
Parent, taking into account any payments pursuant to Section 7.11(b) hereof.
1.63 "McKay Property" means that certain real property,
together with all improvements thereon, located at 1920 and 1950 Randolph Street
and 5900, 5910 and 5920 Wilmington Street in Los Angeles, California and all
appurtenant rights and easements relating thereto.
1.64 "Merger" has the meaning set forth in Section 2.1
hereof.
1.65 "Merger Consideration" has the meaning set
forth in Section 3.1(a) hereof.
1.66 "Moshontz Agreements" means (I) the Option Agreement
between Michael Moshontz and Blue Coral, dated July 20, 1994, as amended, (II)
the promissory note issued to Mr. Moshontz by Blue Coral, dated January 4, 1996
and (III) all other agreements between Blue Coral and Mr. Moshontz or any
affiliate of Mr. Moshontz that are referred to in Sections 4(b)(i) through (v),
inclusive, of the Moshontz Release.
1.67 "Moshontz Release" has the meaning set forth
in Section 8.3(k) hereof.
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1.68 "Multiemployer Plan" has the meaning set forth in
Section 4.14 hereof.
1.69 "NicSand" means NicSand, Inc., an Ohio corporation.
1.70 "NicSand Agreement" means the Agreement Relating to
Transfer of Shares, dated as of May 11, 1987, by and among Blue Coral, Sandusky
and NicSand, as the same may be amended from time to time hereafter.
1.71 "NicSand Amount" means $3,532,980.
1.72 "NicSand Escrow Amount" has the meaning set
forth in Section 3.1(b) hereof.
1.73 "NicSand Note" means any debt instrument delivered to
Blue Coral by Sandusky upon a Sandusky Purchase.
1.73A "NicSand Purchase" has the meaning set
forth in Section 7.10(b) hereof.
1.74 "NicSand Shares" means the common stock,
without par value, of NicSand.
1.75 "Non-Scheduled Intellectual Property" means all
Intellectual Property other than United States (federal and state) and foreign
trademarks, service marks, trade names, trade dress, copyrights, and similar
rights, including registrations and applications to register or renew the
registration of any of the foregoing, the United States and foreign letters
patent and patent applications, Computer Programs and licenses or permits to use
any of the foregoing.
1.76 "NYSE" has the meaning set forth in Sec-
tion 3.1(e) hereof.
1.77 "Outstanding Blue Coral Shares" means the shares of Blue
Coral Common Stock issued and outstanding immediately prior to the Effective
Time.
1.78 "Owned Real Property" means all real property and
interests in real property owned by Blue Coral or any Blue Coral Subsidiary,
together with all easements and other appurtenances for the benefit thereof.
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1.79 "Ownership Schedule" means the schedule attached hereto
as Schedule 1.79, which lists each Blue Coral Stockholder's proportionate
ownership of the Outstanding Blue Coral Shares, after giving effect to Adelman's
purchase of the Blue Coral Common Stock in the manner referred to in Section
8.3(n) hereof;
1.80 "Parent" has the meaning set forth in the
preamble to this Agreement.
1.81 "Parent Capital Stock" means the capital stock of the
Parent, par value $1.00 per share.
1.82 "Parent Indemnitees" has the meaning set forth in
Section 11.1 hereof.
1.83 "Parent Reports" has the meaning set forth in
Section 5.6 hereof.
1.84 "Parent Returns" has the meaning set forth in
Section 13.7 hereof.
1.85 "Parent's Board" has the meaning set forth in
Section 5.2(b) hereof.
1.86 "Permitted Distributions" means one or more distributions
by Blue Coral, which, in the aggregate, equal no more than $3,001,480.
1.87 "Permitted Encumbrances" means any Liens (I) arising
under the Blue Coral Credit Agreement or the Blue Coral Loan Agreement, (II) for
Taxes, assessments, water and sewer charges, license fees, and all other fees,
special assessments and charges assessed or imposed by a public body upon the
assets of Blue Coral or any Blue Coral Subsidiary or any part thereof or the
operation thereof, provided such fees, assessments or Taxes are not yet due and
payable, (III) for mechanics', carriers', workmen's, repairmen's or other
similar Liens arising or incurred in the ordinary course of business for sums
not yet due and payable or (IV) for minor imperfections of title which do not,
individually or in the aggregate, materially impair the value or the continued
use and operation of the assets to which they relate.
1.88 "Per Share Price" means the quotient of (I) the Base
Consideration divided by (II) the number of Outstanding Blue Coral Shares.
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1.89 "Person" means an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
1.90 "Plans" has the meaning set forth in Section 4.14
hereof.
1.91 "Real Property Lease" means any lease, sublease, license
or occupancy agreement, including any amendments thereto, pursuant to which Blue
Coral or any Blue Coral Subsidiary is the lessee, sublessee, licensee or
occupant of real property used in, held for use in connection with, necessary
for the conduct of, or otherwise material to, the business of Blue Coral or any
Blue Coral Subsidiary, together with all easements and other appurtenances for
the benefit thereof.
1.92 "Remaining BCI Shares" means all of the shares of capital
stock of BCI not owned by Blue Coral immediately prior to the Closing.
1.93 "Sandusky" means James Sandusky.
1.94 "Sandusky Notice" has the meaning set forth
in Section 7.10(a) hereof.
1.95 "SEC" means the Securities and Exchange Commission.
1.96 "Sandusky Purchase" means any purchase by Sandusky of the
NicSand Shares owned by the Surviving Corporation.
1.97 "Section 338 Forms" has the meaning set
forth in Section 13.2(a) hereof.
1.98 "Section 338(h)(10) Election" means an election pursuant
to section 338(h)(10) of the Code, and any comparable or corresponding election
with respect to any state or local Taxes, as applicable to Blue Coral.
1.99 "Section 338 Taxes" has the meaning set
forth in Section 13.6 hereof.
1.100 "Securities Act" means the Securities Act
of 1933, as amended.
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1.101 "Selling Stockholders" means (I) the GST-Exempt Trust
f/b/o Joel Adelman dated February 17, 1992 (Robert G. Markey and Michael G.
Turk, co-trustees), (II) the Sheldon G. Adelman Trust f/b/o Joel Adelman dated
February 17, 1992 (Robert G. Markey and Michael G. Turk, co-trustees), (III)
the Trust f/b/o Joel Adelman under the Sheldon G. Adelman Irrevocable Trust
Agreement dated December 27, 1995 (Robert G. Markey, trustee) and (IV) the
Trust f/b/o Joel Adelman under the Terry G. Adelman Irrevocable Trust Agreement
dated December 27, 1995 (Robert G. Markey, trustee).
1.102 "Sokol Agreement" means the Executive
Phantom Stock Agreement between Brian Sokol and Blue Coral, dated
November 1, 1994.
1.103 "Sokol Employment Agreement" has the
meaning set forth in Section 8.3(1) hereof.
1.104 "Special Obligation" means any obligation of Blue Coral
or any Blue Coral Subsidiary to indemnify any Person under (I) the Acquisition
Agreement by and between Blue Coral, MEDO Industries, Inc. and Baker &
Hostetler, dated as of August 24, 1995, (II) the Asset Purchase Agreement by and
between Blue Coral and Namico, Inc., dated as of June 26, 1995, (III) the Asset
Purchase Agreement by and between Blue Coral and 133-31-002 Corp., dated January
13, 1995, (IV) the Asset Purchase Agreement by and between Blue Coral and
Airosol Company, Inc., dated as of January 13, 1995, (V) the Agreement and Sale
of Assets between Blue Coral and Waterbury Companies, Inc. dated October 29,
1991, as amended on November 11, 1991, (VI) the Agreement between Blue Coral and
Castrol Limited, dated August 6, 1987 and (VII) the Indemnification Agreement by
and among Blue Coral Chemical Company, Peterson Group, Inc. and Ronald N.
Peterson, dated December 30, 1992.
1.105 "Special Obligation Payment Amount" means the aggregate
amount, if any, of all payments made, payable or accrued by Blue Coral in
respect of the Special Obligations and the Household Special Obligations during
the period from January 1, 1996 to and including the Closing Date.
1.106 "Special Shares" has the meaning set forth
in Section 3.1(d) hereof.
1.107 "Stockholder Returns" has the meaning set
forth in Section 13.7 hereof.
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1.108 "Subsidiary" has the meaning set forth in
the preamble to this Agreement.
1.109 "Subsidiary Common Stock" has the meaning
set forth in Section 3.3 hereof.
1.110 "Surviving Corporation" has the meaning set
forth in Section 2.1 hereof.
1.111 "Surviving Corporation Common Stock" has the meaning set
forth in Section 3.3 hereof.
1.112 "Tax" means any federal, state, local or foreign income,
alternative, minimum, accumulated earnings, personal holding company, franchise,
unincorporated business, capital stock, profits, windfall profits, gross
receipts, sales, use, value added, transfer, registration, stamp, premium,
excise, customs duties, severance, environmental (including taxes under Section
59A of the Code), real property, personal property, ad valorem, occupancy,
license, occupation, employment, payroll, social security, disability,
unemployment, workers' compensation, withholding, estimated or similar tax,
duty, fee, assessment or other governmental charge or deficiencies thereof
(including all interest and penalties thereon and additions thereto).
1.113 "Tax Dispute Resolution Mechanism" has the meaning set
forth in Section 13.3(b) hereof.
1.114 "Third Party Interests" means, as of any date of
determination, all of the then outstanding beneficial or record interests in
the capital stock and other equity interests of the Blue Coral Subsidiaries
which are not so owned by Blue Coral or any Blue Coral Subsidiary.
1.115 "Transaction Cost Cap" means $1,600,000.
1.116 "Transaction Costs" means the costs and expenses
incurred by Blue Coral, the Blue Coral Subsidiaries and the Blue Coral
Stockholders (but only to the extent paid or payable by Blue Coral or any Blue
Coral Subsidiary) in connection with the transactions contemplated by this
Agreement, including, but not limited to, legal and accounting fees and fees
payable by Blue Coral to McDonald & Company Securities, Inc.
1.117 "Transfer Taxes" means all sales (including, without
limitation, bulk sales), use, value added, documentary, stamp, gross receipts,
registration,
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transfer, conveyance, excise, recording, license and other similar Taxes and
fees imposed by any Governmental Authority.
1.118 "Unaudited Statements" means the unaudited consolidated
balance sheet for Blue Coral and the Blue Coral Subsidiaries as of March 31,
1996 and the related statements of operations and cash flows for the three-month
period then ended.
1.119 "Uncollected Amount" means the aggregate amount of all
of the receivables listed on SCHEDULE 1.119 hereto that are uncollected as of
the Closing Date.
1.120 "Valley Belt Property" means that certain real property
located at 1400 Valley Belt Road, Brooklyn, Ohio, together with all improvements
thereon and all appurtenant rights and easements relating thereto.
1.121 "Valley Belt Purchase Agreement" means the Purchase
Agreement, made as of March 18, 1996, by and between the Valley Belt Limited
Partnership and Blue Coral, which agreement has or will be assigned to J&W
Adelman, Ltd.
ARTICLE II
THE MERGER
----------
2.1 THE MERGER. In accordance with the provisions of this
Agreement and the GCL, at the Effective Time (I) the Subsidiary shall be merged
with and into Blue Coral (the "Merger"), and Blue Coral shall be the surviving
corporation of the Merger (hereinafter sometimes called the "Surviving
Corporation") and shall continue its corporate existence under the laws of the
State of Delaware; (II) the name, identity, existence, rights, privileges,
powers, franchises, properties and assets of Blue Coral shall continue
unaffected and unimpaired; and (III) the separate existence of the Subsidiary
shall cease, and all of the rights, privileges, powers, franchises, properties
and assets of the Subsidiary shall be vested in Blue Coral.
2.2 CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the Subsidiary in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as provided therein or by law.
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2.3 BY LAWS. The By Laws of the Subsidiary in effect
immediately prior to the Effective Time shall be the By Laws of the Surviving
Corporation until thereafter amended, altered or repealed as provided therein.
2.4 DIRECTORS AND OFFICERS. The directors and officers of the
Subsidiary immediately prior to the Effective Time shall be the directors and
officers, respectively, of the Surviving Corporation, each to hold office in
accor dance with the Certificate of Incorporation and By Laws of the Surviving
Corporation until his or her successor is appointed and qualified or until his
or her earlier death, resignation or removal.
2.5 EFFECTIVE TIME. The Merger shall become effective
simultaneously with the filing of a Certificate of Merger with the Secretary of
State of the State of Delaware in accordance with Sections 251 and 103 of the
GCL (the "Certificate of Merger"). The Certificate of Merger shall be filed
simultaneously with the Closing. The date and time when the Merger shall become
effective is hereinafter referred to as the "Effective Time".
2.6 FURTHER ASSURANCES. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (A) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
Blue Coral acquired or to be acquired as a result of the Merger, or (B)
otherwise to carry out the purposes of this Agreement, the Surviving Corporation
and its proper officers and directors or their designees shall be authorized to
solicit in the name of Blue Coral any third party consents or other documents
required to be delivered by any third party, to execute and deliver, in the name
and on behalf of Blue Coral, all such deeds, bills of sale, assignments and
assurances and do, in the name and on behalf of Blue Coral, all such other acts
and things necessary, desirable or proper to vest, perfect or confirm the
Surviving Corporation's right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of Blue Coral
acquired or to be acquired as a result of the Merger and otherwise to carry out
the purposes of this Agreement.
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ARTICLE III
CONVERSION OF SHARES
--------------------
3.1 BLUE CORAL COMMON STOCK. (a) All Outstanding Blue Coral
Shares held by any Blue Coral Stockholder as of immediately prior to the
Effective Time (except for (I) any shares of Blue Coral Common Stock then owned
beneficially or of record by the Parent or the Subsidiary or any other
subsidiary of the Parent, (II) shares of Blue Coral held in the treasury of Blue
Coral or by any Blue Coral Subsidiary, and (III) Dissenting Shares) shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the following (such amounts, in the aggregate, the "Merger
Consideration"):
(i) subject to Section 3.1(b) hereof, the right to receive
cash from the Parent in an amount equal to 50% of the product of (X)
the Per Share Price TIMES (Y) the number of Outstanding Blue Coral
Shares held by such Blue Coral Stockholder; and
(ii) subject to Sections 3.1(c) and 3.1(d) hereof, the right
to receive such number of shares of Parent Capital Stock, rounded up or
down to the nearest whole share, as have a value (as determined
pursuant to Section 3.1(e) hereof) equal to 50% of the product of (X)
the Per Share Price TIMES (Y) the number of Outstanding Blue Coral
Shares held by such Blue Coral Stockholder.
(b) Notwithstanding anything in Section 3.1(a) hereof to the
contrary, the Parent shall withhold from the Blue Coral Stockholders, on a
proportionate basis in accordance with the Ownership Schedule, an aggregate
amount equal to $6,423,600 of the Merger Consideration otherwise payable to the
Blue Coral Stockholders under Section 3.1(a)(i) hereof (such amount, the
"NicSand Escrow Amount"). At the Effective Time, the Parent shall deliver the
NicSand Escrow Amount to the escrow agent referred to in Section 8.1(f) hereof
and the NicSand Escrow Amount shall thereafter be released to the Blue Coral
Stockholders only as provided in the Indemnification and Escrow Agreement
described in Section 8.1(f) hereof.
(c) Notwithstanding anything in Section 3.1(a) hereof to the
contrary, the Parent shall withhold an amount equal to $15,000,000 (the "Escrow
Amount") of the Merger Consideration otherwise payable to the Blue Coral Stock-
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holders under Section 3.1(a)(ii) hereof by withholding from the shares of Parent
Capital Stock otherwise payable to the Blue Coral Stockholders pursuant to
Section 3.1(a)(ii) hereof, on a proportionate basis in accordance with the
Ownership Schedule, such number of shares of Parent Capital Stock as have a
value, as determined in the same manner as set forth in Section 3.1(e) hereof,
equal to the Escrow Amount (such withheld shares of Parent Capital Stock, the
"Escrow Deposit"). At the Effective Time, the Parent shall deliver the Escrow
Deposit to the Escrow Agent and the Escrow Deposit shall thereafter be released
to the Blue Coral Stockholders or the Parent, as the case may be, only as
provided in Section 11.4(b) hereof and the Escrow Agreement.
(d) Notwithstanding anything in Section 3.1(a) hereof to the
contrary, the Parent shall withhold from the Blue Coral Stockholders, on a
proportionate basis in accordance with the Ownership Schedule, 20,000 shares of
Parent Capital Stock, or the equivalent number of shares after giving effect to
any Adjustment Event prior to the Closing (the "Special Shares"), otherwise
payable to the Blue Coral Stockholders as part of the Merger Consideration under
Section 3.1(a)(ii) hereof. The Special Shares shall thereafter only be released
to the Blue Coral Stockholders in accordance with Section 7.12 hereof.
(e) For purposes of Sections 3.1(a)(ii), and 3.1(c) hereof,
and subject to the next sentence of this Section 3.1(e), each share of Parent
Capital Stock shall be valued based on a per share price equal to the average of
the closing prices of Parent Capital Stock, as reported on the New York Stock
Exchange (the "NYSE"), for the 60 trading days immediately preceding the second
business day prior to the Closing Date (the "Measuring Period"); PROVIDED that
if such value is less than $13.30 per share, then such value shall be deemed to
be $13.30 (such amount, the "Collar Low"); and if such value exceeds $14.70 per
share, then such value shall be deemed to be $14.70 (such amount, the "Collar
High"; such value, as determined taking into account this proviso, the "Average
Trading Price"). Notwithstanding the foregoing, in the event that prior to the
Closing Date, the total number of outstanding shares of Parent Capital Stock is
changed by reason of a recapitalization, reclassification, stock split or stock
dividend (any such event, an "Adjustment Event"), the closing prices of the
Parent Capital Stock during the Measuring Period shall be calculated as though
such Adjustment Event occurred on the first day of the Measuring Period and the
Collar Low and the
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Collar High shall be appropriately adjusted to reflect such Adjustment Event.
(f) Each Outstanding Blue Coral Share which is then owned
beneficially or of record by the Parent or the Subsidiary or any other direct or
indirect subsidiary of the Parent shall, by virtue of the Merger and without any
action on the part of the holder thereof, be canceled and retired and cease to
exist, without any conversion thereof.
(g) Each share of Blue Coral Common Stock held in Blue Coral's
treasury or by any Blue Coral Subsidiary immediately prior to the Effective Time
shall, by virtue of the Merger, be canceled and retired and cease to exist,
without any conversion thereof.
(h) The holders of certificates representing Outstanding Blue
Coral Shares shall, as of the Effective Time, cease to have any rights as
stockholders of Blue Coral, except such rights, if any, as they may have
pursuant to the GCL, and, except as aforesaid, their sole right shall be the
right to receive their pro rata share of the Merger Consideration, as determined
and paid in the manner set forth in this Agreement.
3.2 DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, Outstanding Blue Coral Shares which are held by
stockholders who shall have effectively dissented from the Merger and perfected
their appraisal rights in accordance with the provisions of Section 262 of the
GCL (the "Dissenting Shares"), shall not be converted into or be exchangeable
for the right to receive the Merger Consideration, but the holders thereof shall
be entitled to payment from the Surviving Corporation of the appraised value of
such shares in accordance with the provisions of Section 262 of the GCL;
PROVIDED, HOWEVER, that if any such holder shall have failed to perfect such ap-
praisal rights or shall have effectively withdrawn or lost such rights, his or
her Outstanding Blue Coral Shares shall thereupon be converted into and
exchangeable for, at the Effective Time, their pro rata share of the Merger
Consideration, as determined and paid in the manner set forth in this
Agreement, without any interest thereon.
3.3 SUBSIDIARY COMMON STOCK. Each share of common stock,
par value $.01 per share, of the Subsidiary (the "Subsidiary Common Stock"),
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger and without any action on the part of the holder
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thereof, be converted into and exchangeable for one fully paid and
non-assessable share of common stock, par value $10 per share, of the Surviving
Corporation ("Surviving Corporation Common Stock"). From and after the
Effective Time, each outstanding certificate theretofore representing shares of
Subsidiary Common Stock shall be deemed for all purposes to evidence ownership
of and to represent the number of shares of Surviving Corporation Common Stock
into which such shares of Subsidiary Common Stock shall have been converted.
Promptly after the Effective Time, the Surviving Corporation shall issue to the
Parent a stock certificate or certificates representing 1,000 shares of
Surviving Corporation Common Stock in exchange for the certificate or
certificates which formerly represented shares of Subsidiary Common Stock, which
shall be canceled.
3.4 EXCHANGE OF SHARES. (a) On the Closing Date, each holder
of an outstanding certificate or certificates which prior thereto represented
Outstanding Blue Coral Shares (the "Certificates") shall, subject to Section
3.1(b) hereof and upon surrender to the Surviving Corporation or, at the
Parent's election, a bank or trust company that the Parent may designate to act
as exchange agent for the Merger (either the Surviving Corporation or such bank
or trust company, the "Exchange Agent") of such Certificate or Certificates and
acceptance thereof by the Exchange Agent, be entitled to the Merger
Consideration into which the aggregate number of shares of Blue Coral Common
Stock previously represented by such Certificate or Certificates surrendered
shall have been converted pursuant to this Agreement. The Exchange Agent shall
accept such Certificates upon compliance with such reasonable terms and con-
ditions as the Exchange Agent may impose, with the reasonable agreement of the
Blue Coral Stockholders' Representative, to effect an orderly exchange thereof
in accordance with normal exchange practices. On the Closing Date, the Exchange
Agent shall deliver all funds and shares to which each holder of Blue Coral
Common Stock is entitled to receive pursuant to this Section 3.4. The Parent
shall furnish to the Exchange Agent all funds and shares of the Parent Capital
Stock required to make such payments. No interest will be paid or accrued on the
Merger Consideration upon the surrender of the Certificates. All payments in
respect of shares of Blue Coral Common Stock which are made in accordance with
the terms hereof shall be deemed to have been made in full satisfaction of all
rights pertaining to such shares. With respect to any Certificate alleged to
have been lost, stolen or destroyed, the owner or owners of such Certificate
shall be entitled to the consideration set
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forth above upon delivery to the Exchange Agent of an affidavit of such owner
or owners setting forth such allegation and a bond sufficient to indemnify the
Parent and the Surviving Corporation against any claim that may be made against
either or both of them on account of the alleged loss, theft or destruction of
any such Certificate or the delivery of the payment set forth above.
(b) If consideration is to be delivered to a Person other than
the Person in whose name the Certificate surrendered in exchange therefor is
registered, it shall be a condition to delivery of the consideration that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the Person requesting such consideration shall pay
any transfer or other taxes required by reason of the payment to a Person other
than the registered holder of the Certificate surrendered or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable.
(c) Until surrendered in accordance with the provisions of
this Section 3.4, from and after the Effective Time, each Certificate (other
than (I) Certificates reprssenting shares of Blue Coral Common Stock owned
beneficially or of record by the Parent, the Subsidiary or any other subsidiary
of the Parent, (II) Certificates representing shares of Blue Coral Common Stock
held in Blue Coral's treasury or by any Blue Coral Subsidiary and (III)
Dissenting Shares in respect of which appraisal rights are perfected) shall rep-
resent for all purposes the right to receive its pro rata portion of the Merger
Consideration, as determined and paid in the manner set forth in this Agreement,
without any interest thereon.
(d) After the Effective Time there shall be no transfers on
the stock transfer books of the Surviving Corporation of the shares of Blue
Coral Common Stock that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for the consideration referred
to in Section 3.4(c) hereof.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
OF BLUE CORAL AND THE BLUE CORAL STOCKHOLDERS
---------------------------------------------
Each of Blue Coral and the Blue Coral Stockholders, severally
with respect to itself and not jointly, hereby represents and warrants to the
Parent and the Subsidiary as follows:
4.1 ORGANIZATION, ETC. (a) Blue Coral is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. Blue
Coral is duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except
where the failure to be so qualified or licensed would not have a Material
Adverse Effect. Each jurisdiction where Blue Coral is so qualified is listed on
SCHEDULE 4.1(A) hereto. Except as set forth on SCHED ULE 4.1(B) hereto, Blue
Coral does not have any subsidiaries and, except as set forth on SCHEDULE 4.1(B)
hereto, Blue Coral does not own any capital stock of or equity interests in any
corporation, partnership, joint venture or other entity. Blue Coral has
heretofore delivered or made available to the Parent accurate and complete
copies of the Certificate of Incorporation and By Laws of Blue Coral, as amended
and in effect on the date hereof, and Blue Coral's minute books, which minute
books accurately reflect in all material respects all actions taken on or prior
to the date hereof at the meetings of its stockholders and the Board and all
committees thereof, except as set forth on SCHEDULE 4.1(A) hereto. The stock
certificate books and ledgers of Blue Coral, which have been made available to
the Parent, are true, correct and complete, and accurately reflect, at the date
hereof, the ownership of the issued and outstanding capital stock of Blue Coral.
(b) Each Blue Coral Subsidiary is listed on SCHEDULE 4.1(B)
hereto, is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry out its business as now being conducted. Each Blue Coral Subsidiary is
duly qualified or licensed and in good standing to do business in each
jurisdiction
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in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified or licensed would not have a Material Adverse Effect.
Each jurisdiction where each Blue Coral Subsidiary is so qualified is listed on
SCHEDULE 4.1(B) hereto. Blue Coral has heretofore delivered to the Parent
accurate and complete copies of the Certificate of Incorporation and By Laws of
each Blue Coral Subsidiary, as amended and in effect on the date hereof. The
minute books of each Blue Coral Subsidiary, which have been made available to
the Parent, contain a true, complete and correct record in all material respects
of all corporate actions taken on or prior to the date hereof at the meetings of
such Blue Coral Subsidiary's respective stockholders and board of directors and
all committees thereof. The stock certificate books and ledgers of each Blue
Coral Subsidiary, which have been made available to the Parent, are true,
correct and complete, and accurate ly reflect, at the date hereof, the ownership
of the issued and outstanding capital stock of each Blue Coral Subsidiary.
(c) Except for the Third Party Interests, all of which are set
forth on SCHEDULE 4.1(C) hereto, Blue Coral owns of record and beneficially 100%
of the issued and outstanding capital stock and all other equity interests in
each Blue Coral Subsidiary, free and clear of any Liens, except for any Liens
arising under the Blue Coral Credit Agreement or the Blue Coral Loan Agreement.
To the extent the Parent supplies funds to Blue Coral in the manner referred to
in Section 8.3(o) hereof, all such Liens will be removed as of the Closing Date.
As of the closing and the transfer of the Remaining BCI Shares to Quaker State
in accordance with Section 9.3 hereof, Blue Coral and the Parent will
collectively own of record and beneficially 100% of the issued and outstanding
capital stock and all equity interests in each Blue Coral Subsidiary, other than
any NicSand Shares owned by Sandusky, free and clear of any Liens.
4.2 AUTHORIZATION AND BINDING OBLIGATION. (a) Each of Blue
Coral and such Blue Coral Stockholder has all necessary power and authority
(corporate or otherwise) to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. Blue Coral has all necessary corporate
power and authority to prepare, file and distribute the Information Statement.
Blue Coral and such Blue Coral Stockholder's execution, delivery and performance
of this Agreement has been duly and validly authorized by all necessary action
on the part of Blue Coral and such Blue
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Coral Stockholder and this Agreement has been duly executed and delivered by
Blue Coral and such Blue Coral Stockholder. With respect to each Blue Coral
Stockholder that is a trust, the trustee of such trust has all requisite power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby on behalf of such trust. Except for the actions
referred to in Section 4.2(b) hereof, which actions are in full force and
effect, and the giving of notice in accordance with Section 228(d) of the GCL,
no other corporate action or proceedings on the part of Blue Coral are necessary
to authorize this Agreement or the consummation of the transactions contemplated
hereby. This Agreement constitutes the valid and binding obligation of Blue
Coral and such Blue Coral Stockholder, enforceable against Blue Coral and such
Blue Coral Stockholder in accordance with its terms.
(b) The Blue Coral Board of Directors (the "Board") has
authorized the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and has voted to recommend adoption of
this Agreement and authorization of the Merger by the stock holders of Blue
Coral and has not withdrawn such authorization. Adelman and Blue Coral each
represents that Adelman, as the beneficial and record owner of in excess of 50%
of the issued and outstanding Blue Coral Common Stock, has executed and not
withdrawn an action by written consent in lieu of meeting of stockholders
approving and adopting the Merger, this Agreement and the transactions
contemplated hereby. A true and complete copy of such approvals by the Board and
Adelman have been delivered to the Parent.
4.3 CAPITALIZATION. (a) The authorized Blue Coral Common Stock
and other authorized capital stock of Blue Coral and each of the Blue Coral
Subsidiaries is as set forth on SCHEDULE 4.3 hereto. All issued and outstanding
shares of Blue Coral Common Stock and other equity interests of Blue Coral and
each of the Blue Coral Subsidiaries are duly authorized, validly issued, fully
paid, non-assessable and free of preemptive rights. SCHEDULE 4.3 hereto sets
forth the name of each Person who owns beneficially or of record any shares of
Blue Coral Common Stock, each Person who owns beneficially or of record any
shares of capital stock and other equity interests of any Blue Coral Subsidiary
and, in the case of Blue Coral and each Blue Coral Subsidiary, the number of
shares owned by each such Person.
(b) Except as set forth on SCHEDULE 4.3 hereto,
there are not now, and at the Effective Time there will not
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be, any options, warrants, calls, subscriptions, or other rights or other
agreements or commitments of any nature whatsoever (either firm or conditional)
obligating Blue Coral or any of the Blue Coral Subsidiaries to issue, trans fer,
deliver or sell, or cause to be issued, transferred, delivered or sold, any
additional shares of Blue Coral Common Stock or other equity interest of Blue
Coral or any of the Blue Coral Subsidiaries, or any securities or obligations
convertible into or exchangeable for any such Blue Coral Common Stock or other
equity interests, or obligating Blue Coral or any of the Blue Coral Subsidiaries
to grant, extend or enter into any such agreement or commitment and no
authorization therefor has been given or made. Except for the arrangements
described in SCHEDULE 4.3 hereto, which arrangements will be terminated prior to
the Closing Date without further liability to Blue Coral or any Blue Coral
Subsidiary, there are no contractual arrangements that obligate Blue Coral or
any Blue Coral Subsidiary to (I) repurchase, redeem or otherwise acquire any of
its capital stock or its other equity interests or (II) pay any Person any
consideration that is calculated with reference to the consideration to be paid
to the Blue Coral Stockholders under this Agreement. SCHEDULE 4.3 lists each
agreement which gives any Person any right to acquire or dispose of any NicSand
Shares or which restricts the transferability of NicSand Shares.
4.4 CONSENTS AND APPROVALS; NO CONFLICTS. Except for
applicable requirements of the HSRA and as set forth on SCHEDULE 4.4 hereto and,
in the case of Blue Coral, the approvals referred to in Section 4.2(b) hereof,
the giving of notice in accordance with Section 228(d) of the GCL and the filing
and recordation of the Certificate of Merger as required by the GCL (I) there is
no legal impediment to Blue Coral's or such Blue Coral Stockholder's
consummation of the transactions contemplated by this Agreement, and (II) except
as set forth on SCHEDULE 4.4 hereto, no filing with, and no permit,
authorization, consent or approval of, any Govern mental Authority or other
third party is necessary for the consummation by Blue Coral or such Blue Coral
Stockholder of the transactions contemplated by this Agreement. Neither the
execution and delivery of this Agreement by Blue Coral or such Blue Coral
Stockholder, nor the consummation by Blue Coral or such Blue Coral Stockholder
of the transactions contemplated hereby, nor compliance by Blue Coral or such
Blue Coral Stockholder with, any of the provisions hereof will (I) result in any
violation of any provision of the charter or by-laws of Blue Coral or any Blue
Coral Subsidiary, (II) violate any Applicable Law to which Blue Coral or
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any of the Blue Coral Subsidiaries or such Blue Coral Stockholder is a party or
by which any of their respective properties is bound or (III) except as set
forth on SCHEDULE 4.4 hereto, result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default or give rise to
a right of any Person to terminate, cancel or accelerate the payment or
performance of any liability, obligation or commitment under any contract,
agreement, note, bond, mortgage, indenture, license, lease, franchise, permit,
Plan or other instrument or obligation to which Blue Coral, any of the Blue
Coral Subsidiaries or such Blue Coral Stockholder is a party, or by which any of
their respective properties are bound, except, in the case of Blue Coral or any
Blue Coral Subsidiary, where such violation, breach or default or right of
termination, cancellation or acceleration would not have a Material Adverse
Effect.
4.5 GOVERNMENTAL APPROVALS AND AUTHORIZATIONS. Except as set
forth in SCHEDULE 4.5 hereto, all material approvals, permits, qualifications,
authorizations, licenses, franchises, consents, orders, registrations or other
approvals (collectively, the "Governmental Approvals") of all Governmental
Authorities which are necessary in order to permit Blue Coral and the Blue Coral
Subsidiaries to carry on their respective businesses have been obtained and are
in full force and effect. Each of the Governmental Approvals is listed on
SCHEDULE 4.5 hereto and Blue Coral has delivered to the Parent true and complete
copies of all such material Governmental Approvals, including any and all
amendments and other modifications to such items. There has been no violation,
cancellation, suspension, revocation or default of any Governmental Approval or
any notice of violation, cancellation, suspension, revocation, default or
dispute affecting any Governmental Approval, except for any such violation,
cancellation, suspension, revocation, default or dispute which would not have a
Material Adverse Effect. To the Knowledge of Blue Coral and each Blue Coral
Subsidiary, no reasonable basis exists for any action referred to in the
immediately preceding sentence, including, without limitation, as a result of
the consummation of the transactions contemplated by this Agreement (subject
only to the required consents listed in Section 4.4 hereof or SCHEDULE 4.4
hereto).
4.6 COMPLIANCE WITH LAWS. Neither Blue Coral nor any Blue
Coral Subsidiary is in conflict with or in violation or breach of or default
under (A) any Applicable Law or (B) any provision of its organizational
documents, and since December 31, 1992, neither Blue Coral nor any Blue Coral
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Subsidiary has received any written notice or, to the Knowledge of Blue Coral
and each Blue Coral Subsidiary, any other notice alleging any such conflict,
violation, breach or default, except for any such violations, breaches or
defaults which would not, individually or in the aggregate, have a Material
Adverse Effect.
4.7 REAL PROPERTY. (a) SCHEDULE 4.7(A) hereto contains a
complete and correct list of all Owned Real Property. Except as set forth in
SCHEDULE 4.7(A) hereto, Blue Coral and the Blue Coral Subsidiaries, as the case
may be, have good and marketable fee simple title in the Owned Real Property,
including the buildings, structures and other improvements thereon, free and
clear of all Liens, except for Permitted Encumbrances and applicable building,
zoning and similar laws, ordinances, rules and regulations, none of which,
individually or in the aggregate, materially impair the value or the continued
use of the Owned Real Property to which they relate. Blue Coral has delivered to
the Parent true and correct copies of any title insurance commitments, title
insurance policies and surveys in Blue Coral's or any Blue Coral Subsidiary's
possession relating to each parcel of Owned Real Property.
(b) SCHEDULE 4.7(B) hereto contains a complete and correct
list of all Real Property Leases and all amendments thereto. Except for the
Owned Real Property and the Real Property Leases, and except as set forth on
SCHEDULE 4.7(B) hereto, no real property is used or occupied by Blue Coral or
any Blue Coral Subsidiary.
(c) Except as set forth on SCHEDULE 4.7(C) hereto, the
improvements upon each parcel of Owned Real Property and the current use and
operation of such real property conform in all material respects to all
restrictive covenants, conditions, easements, building, subdivision and similar
codes and federal, state and local laws, regulations, rules, orders and
ordinances (other than Environmental Laws) and neither Blue Coral nor any Blue
Coral Subsidiary has received any written, or to the Knowledge of Blue Coral
and the Blue Coral Subsidiaries, any other notice of any violation or claimed
violation of any such restrictive covenant, condition or easement, or any
building, subdivision or similar code, or any federal, state or local law,
regulation, rule, order or ordinance. Except as set forth on SCHEDULE 4.7(C)
hereto, the Owned Real Property is zoned for the purposes for which it is
currently being used by Blue Coral or the Blue Coral Subsidiaries, as the case
may be. Except as set forth on SCHEDULE 4.7(C) hereto, the
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improvements on the Owned Real Property are in good working condition and
repair, ordinary wear and tear excepted.
(d) Except as set forth on SCHEDULE 4.7(D) hereto, the
improvements upon each parcel of real property leased by Blue Coral or any Blue
Coral Subsidiary, as the case may be, and the current use and operation of such
real property conform in all material respects to all restrictive covenants,
conditions, easements, building, subdivision and similar codes and federal,
state and local laws, regulations, rules, orders and ordinances (other than
Environmental Laws) and neither Blue Coral nor any Blue Coral Subsidiary has
received any written notice of any violation or claimed violation of any such
restrictive covenant, condition or easement, or any building, subdivision or
similar code, or any federal, state or local law, regulation, rule, order or
ordinance. Except as set forth on SCHEDULE 4.7(D) hereto, the premises which are
the subject of the Real Property Leases are zoned for the purposes for which
they are currently being used by Blue Coral or the Blue Coral Subsidiaries, as
the case may be. The improvements on the real property premises which are the
subject of the Real Property Leases are in good working condition and repair,
ordinary wear and tear excepted.
(e) Neither Blue Coral nor any Blue Coral Subsidiary has any
Knowledge of or has received notice of any pending, threatened or contemplated
action to take by eminent domain or otherwise to condemn any portion of the
Owned Real Property or any portion of any premises which are the subject of the
Real Property Leases. Except as set forth on SCHEDULE 4.7(E) hereto, there
exists no writ, injunction, decree, order or judgment, nor any litigation,
pending or to the Knowledge of Blue Coral and each Blue Coral Subsidiary,
threatened, relating to the ownership, use, lease, occupancy or operation of the
Owned Real Property or any of the premises which are the subject of the Real
Property Leases.
(f) Each Real Property Lease is legal, valid, binding,
enforceable and, to the Knowledge of Blue Coral or any Blue Coral Subsidiary, in
full force and effect. None of Blue Coral, any Blue Coral Subsidiary or, to the
Knowledge of Blue Coral or any Blue Coral Subsidiary, any other party is in
default, violation or breach under any Real Property Lease, no event has
occurred and is continuing that constitutes or, with notice or the passage of
time or both, would constitute a material default, violation or breach by Blue
Coral or any Blue Coral Subsidiary thereunder
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and, to the Knowledge of Blue Coral or any Blue Coral Subsidiary, no event has
occurred and is continuing that constitutes or, with notice or the passage of
time or both, would constitute a material default, violation or breach by any
party other than Blue Coral or any Blue Coral Subsidiary thereunder. Neither
Blue Coral nor any Blue Coral Subsidiary has received any written notice of a
default, offset or counterclaim under any Real Property Lease or any other
written communication asserting non-compliance with any Real Property Lease.
Except as set forth on SCHEDULE 4.7(F) HEREOF, Blue Coral and the Blue Coral
Subsidiaries, as the case may be, have the exclusive right to use and occupy the
premises leased under each Real Property Lease to which Blue Coral or any Blue
Coral Subsidiary, as the case may be, is a party. Blue Coral and the Blue Coral
Subsidiaries enjoy peaceful and undisturbed possession of the premises leased by
Blue Coral and the Blue Coral Subsidiaries, as the case may be, under each Real
Property Lease. Except as set forth on SCHEDULE 4.7(F) hereto, the Owned Real
Property and the Real Property Leases are free and clear of all Liens, except
for Permitted Encumbrances and lessors' interests in the Real Property Leases.
Blue Coral has delivered to the Parent complete and correct copies of all
written Real Property Leases and true and correct memoranda of the terms of all
oral Real Property Leases, together, in the case of any subleases or similar
occupancy agreements, with copies of all overleases.
4.8 PERSONAL PROPERTY. Blue Coral and each of the Blue Coral
Subsidiaries has good and valid title to all tangible personal property which it
owns, including, without limitation, all tangible personal property reflected on
the Blue Coral Balance Sheet as being owned by Blue Coral or such Blue Coral
Subsidiary, as the case may be, except for tangible personal property disposed
of in the ordinary course of business, consistent with past practice, since
December 31, 1995, in each case free and clear of all Liens, except for
Permitted Encumbrances or as set forth on SCHEDULE 4.8 hereto. Except as set
forth in SCHEDULE 4.8 hereto, the tangible personal property of Blue Coral and
the Blue Coral Subsidiaries is all of the tangible personal property used to
conduct the business of Blue Coral and the Blue Coral Subsidiaries as presently
conducted. Blue Coral and the Blue Coral Subsidiaries have maintained all such
material tangible personal property in good repair, working order and operating
condition, subject only to ordinary wear and tear, except where the failure to
so be in good repair would not have a Material Adverse Effect.
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4.9 INTELLECTUAL PROPERTY. (a) SCHEDULE 4.9(A) hereto contains
a complete and correct list and description of all Intellectual Property (other
than any Non-Scheduled Intellectual Property) which is used or held for use in
the business of Blue Coral and the Blue Coral Subsidiaries as presently
conducted (the "Intellectual Property Assets", it being understood that the term
Intellectual Property Assets shall include all Non-Scheduled Intellectual
Property). Each Intellectual Property Asset is either owned or validly licensed
by Blue Coral or one of the Blue Coral Subsidiaries, and SCHEDULE 4.9(A) hereto
identifies which Intellectual Property Assets (other than any Non-Scheduled
Intellectual Property) are so owned, which are so licensed and which such Blue
Coral entity is the owner or licensee of each such Intellectual Property Asset.
Except as set forth on SCHEDULE 4.9(A) hereto, there is no pending or, to the
Knowledge of Blue Coral and each Blue Coral Subsidiary, threatened proceeding or
litigation affecting, or with respect to, any Intellectual Property Asset. Blue
Coral and each Blue Coral Subsidiary is in material compliance with the terms of
any license of any Intellectual Property Asset and neither Blue Coral nor any
Blue Coral Subsidiary has received any written notice of, and to the Knowledge
of Blue Coral and the Blue Coral Subsidiaries, there is not, any infringement or
unlawful use of any Intellectual Property Assets. Except as disclosed on
SCHEDULE 4.9(A) hereto, to the Knowledge of Blue Coral and each Blue Coral
Subsidiary, the conduct of the business of Blue Coral and the Blue Coral
Subsidiaries as presently conducted does not materially infringe the rights of
any third party in respect of any Intellectual Property. Except as disclosed in
SCHEDULE 4.9(A) hereto, each Intellectual Property Asset owned by Blue Coral or
any Blue Coral Subsidiary is owned free and clear of all Liens. Neither Blue
Coral nor any Blue Coral Subsidiary has sold or otherwise disposed of any of the
Intellectual Property Assets to any Person (other than pursuant to a license or
sublicense listed on SCHEDULE 4.9(B) hereto) and, except as disclosed on SCHED-
ULE 4.9(A) hereto, neither Blue Coral nor any Blue Coral Subsidiary has agreed
to indemnify any Person for any patent, trademark or copyright infringement.
The Intellectual Property Assets listed in SCHEDULE 4.9(A) hereto include all
Intellectual Property (other than Non-Scheduled Intellectual Property) used in,
held for use in or necessary to the business of Blue Coral and the Blue Coral
Subsidiaries as presently conducted. SCHEDULE 4.9(A) hereto indicates which of
the Intellectual Property Assets have been registered with, filed in or issued
by, as the case may be, the United States Patent and Trademark Office and United
States
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Copyright Office or other filing offices, domestic or foreign.
(b) SCHEDULE 4.9(B) hereto contains a complete and correct
list of all agreements pursuant to which Blue Coral or any Blue Coral Subsidiary
licenses or sublicenses, as the case may be, any Intellectual Property Asset for
use by any Person other than Blue Coral or any Blue Coral Subsidiary. Except as
disclosed on SCHEDULE 4.9(B) hereto, either Blue Coral or one of the Blue Coral
Subsidiaries owns each Intellectual Property Asset so licensed or sublicensed.
No such license or sublicense conflicts with or will result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination or cancellation) under any
material contract or agreement pursuant to which Blue Coral or any Blue Coral
Subsidiary licenses any Intellectual Property Asset from any Person.
4.10 CONTRACTS. (a) SCHEDULE 4.10 hereto lists all Contracts
as of the date of this Agreement, except the Real Property Leases which are
listed in SCHEDULE 4.7(B) hereto, employment agreements and other Contracts
which are listed on SCHEDULE 4.13 hereto and the policies relating to insurance
which are listed on SCHEDULE 4.20 hereto.
(b) Blue Coral has delivered to the Parent true and complete
copies of all written Contracts and true and complete memoranda describing, in
summary fashion, the material terms of all oral Contracts listed in SCHEDULE
4.10 hereto, together with a complete and correct copy or description, as the
case may be, of all amendments thereto and, with respect to any Contract for the
purchase of real property a true and complete copy of all title insurance
commitments, surveys, environmental reports and leases relating to the real
property to be purchased under such Contract. To the Knowledge of Blue Coral or
the Blue Coral Subsidiary that is a party to each Contract, such Contract is
valid, in full force and effect binding and enforceable by Blue Coral or the
Blue Coral Subsidiary party thereto, as the case may be, in accordance with its
respective terms. Blue Coral and the Blue Coral Subsidiaries have complied in
all material respects with the terms of all Contracts, including, without
limitation, all such terms requiring the filing of statements (financial or
otherwise) and the payment of any amounts, and are not in default under any
Contract. Neither Blue Coral nor any Blue Coral Subsidiary has granted or been
granted any waiver or forbearance with respect to any of the Contracts. To the
Knowledge of Blue
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Coral or the Blue Coral Subsidiary that is a party thereto, as the case may be,
no other contracting party is in material default under any of the Contracts.
The Contracts which are listed in SCHEDULES 4.7(B), 4.10, 4.13 AND 4.20 hereto,
together with those contracts, agreements, commitments or similar
understandings not required to be listed on such schedules because of any
applicable dollar or temporal thresholds contained in the definition of the term
"Contracts," include all contracts, agreements, commitments and similar
understandings used in conducting the business of Blue Coral and the Blue Coral
Subsidiaries as presently conducted.
(c) SCHEDULE 4.10 hereto identifies any Business
Restriction contained in any Contract.
(d) Except as disclosed on SCHEDULE 4.10 hereto, no claim has
been or hereafter will be made pursuant to (I) any Household Special Obligation
or (II) any Special Obligation.
(e) Neither Blue Coral nor any Blue Coral Subsidiary has any
obligation of any kind (I) to Michael Moshontz except pursuant to the Moshontz
Agreements or (II) to Brian Sokol except pursuant to the Sokol Agreement, other
than salary and ordinary course employee benefit and related obligations to Mr.
Sokol arising in the ordinary course of his employment by Blue Coral.
4.11 MAJOR CUSTOMERS. (a) SCHEDULE 4.11(A) hereto sets forth
for the twelve-month period ended March 31, 1996, (I) the names and addresses of
the 10 largest customers of Blue Coral and the Blue Coral Subsidiaries, taken
as a whole (based on the aggregate value of products ordered from Blue Coral and
the Blue Coral Subsidiaries by such customers during such period), and (II) the
amount for which each such customer was invoiced during such period. None of
Blue Coral, any of the Blue Coral Subsidiaries or such Blue Coral Stockholder
has received any written or, to the Knowledge of any such Person, any other
notice that any such customer of Blue Coral or any of the Blue Coral
Subsidiaries (X) has ceased, or will cease, to purchase the products of Blue
Coral or any of the Blue Coral Subsidiaries, as the case may be, (Y) has
materially reduced, or will materially reduce, purchases of the products of Blue
Coral or any of the Blue Coral Subsidiaries, as the case may be, or (Z) has
sought, or is seeking, to materially reduce the price it will pay for the
products
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of Blue Coral or any of the Blue Coral Subsidiaries, as the
case may be.
(b) Except as set forth on SCHEDULE 4.11(B) hereto, none of
Blue Coral, any of the Blue Coral Subsidiaries or such Blue Coral Stockholder
has received any written or, to the Knowledge of any such Person, any other
notice that any Person with whom Blue Coral or any of the Blue Coral
Subsidiaries does business will not continue to do business with the Surviving
Corporation or any of the Blue Coral Subsidiaries after the Closing Date on
terms and conditions substantially the same as those prevailing during the past
12 months.
4.12 PRODUCT WARRANTIES. SCHEDULE 4.12 hereto sets forth (I)
all product warranties issued by Blue Coral or any of the Blue Coral
Subsidiaries since January 1, 1993, (II) a summary of all amounts paid by Blue
Coral or any Blue Coral Subsidiary in respect of warranty claims asserted
against Blue Coral or any of the Blue Coral Subsidiaries since January 1, 1993,
and (III) a summary of any asserted or unasserted claims of such nature of which
Blue Coral or any Blue Coral Subsidiary has Knowledge.
4.13 PERSONNEL INFORMATION. (a) SCHEDULE 4.13 hereto contains
a true and complete list of (I) all individuals employed as of March 31, 1996
by Blue Coral or any Blue Coral Subsidiary and all directors, sales representa-
tives, independent contractors and other personnel providing services as of
March 31, 1996 to Blue Coral or any Blue Coral Subsidiary in connection with the
operation of the business thereof as of March 31, 1996, and, (II) all employ-
ment, consulting and other service or compensatory plans, contracts and
arrangements, other than any such plan, contract or arrangement (X) which may
be terminated upon no more than thirty days' notice without any liability or
obligation of Blue Coral or any Blue Coral Subsidiary or (Y) which provides for
annual payments not exceeding $50,000 in the aggregate (the "Services
Agreements"). Except pursuant to the terms of a Services Agreement listed on
SCHEDULE 4.13 hereto, there are no plans, contracts, agreements or other
arrangements which provide for the accrual or payment of any compensation or
benefit to or in respect of any Person in the form of phantom stock or units
convertible into or exchangeable for any equity security, of Blue Coral or any
Blue Coral Subsidiary or otherwise measure or base the compensation or benefits
paid, payable or accrued by any Person with reference to the equity value or
equity securities of Blue Coral or any Blue Coral Subsidiary. Blue Coral
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has provided or made available to the Parent true and complete copies of all
Services Agreements.
(b) Except as set forth in SCHEDULE 4.13 hereto, neither Blue
Coral nor any Blue Coral Subsidiary is a party to or bound by any collective
bargaining or other labor agreement or arrangement, and there are no labor
unions or other organizations representing, or to the Knowledge of Blue Coral
and each Blue Coral Subsidiary, purporting to represent or attempting to
represent any employees employed by Blue Coral or any Blue Coral Subsidiary.
Blue Coral has provided to the Parent true and complete copies of each
collective bargaining or other labor agreement listed on SCHEDULE 4.13 hereto
and any amendments or addenda thereto. Except as set forth on SCHEDULE 4.13
hereto, since January 1, 1993, there has not occurred or, to the Knowledge of
Blue Coral and each Blue Coral Subsidiary, been threatened any strike, slowdown,
picketing, work stoppage, concerted refusal to work overtime or other similar
labor activity with respect to any employees or former employees of Blue Coral
or any Blue Coral Subsidiary. Except as set forth on SCHEDULE 4.13 hereto, there
are no labor disputes currently subject to any grievance procedure, arbitration
or litigation and there is no representation petition pending or, to the
Knowledge of Blue Coral and each Blue Coral Subsidiary, threatened with respect
to any employee of Blue Coral or any Blue Coral Subsidiary. Since January 1,
1993, Blue Coral and each Blue Coral Subsidiary have each complied in all
material respects with all Applicable Laws pertaining to the employment or
termination of employment of its respective employees, including, without
limitation, all such Applicable Laws relating to labor relations, equal employ-
ment opportunities, fair employment practices, prohibited discrimination or
distinction and other similar employment activities.
4.14 EMPLOYEE BENEFIT PLANS. SCHEDULE 4.14 hereto contains a
true and complete list of each "employee benefit plan", within the meaning of
Section 3(3) of ERISA, and each other employment, severance, retention, change
in control, bonus, incentive or deferred compensation, stock, stock option,
phantom stock or other equity-based, performance, retirement, welfare, fringe
benefit or other similar plan, program, agreement, understanding, arrangement,
policy, trust, fund or other funding arrangement, whether written or unwritten
and whether or not subject to the provisions of ERISA, (X) that is or has been
maintained or contributed to by Blue Coral or any Blue Coral Subsidiary or to
which Blue Coral or any Blue Coral Subsidiary is a
34
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party, contributes or is or has been obligated to contribute or by which Blue
Coral or any Blue Coral Subsidiary is or has been bound or with respect to which
Blue Coral or any Blue Coral Subsidiary may have any liability or obligation and
(Y) that provides or may provide benefits or compensation to or in respect of
any employee, former employee or retiree of Blue Coral or any Blue Coral
Subsidiary or the beneficiaries or dependents of any such employee, former
employee or retiree (collectively, the "Employees") or under which any Employee
is or may become eligible to participate or derive a benefit (together with the
Services Agreements, the "Plans"). No trade or business (whether or not incor-
porated) is or has been as of any date within the preceding six years treated as
a single employer together with Blue Coral or any Blue Coral Subsidiary pursuant
to Section 414 of the Code.
With respect to each Plan, Blue Coral has provided to the
Parent true and complete copies of: (I) such Plan if written, or a description
of such Plan if not written, and (II) to the extent applicable to such Plan, all
trust agreements, insurance contracts or other funding arrangements, the two
most recent actuarial and trust reports (if applicable), the two most recent
Forms 5500 required to have been filed with the IRS and all schedules thereto,
the most recent IRS determination letter, all current summary plan descriptions,
all material communications received from or sent to the IRS, the Pension
Benefit Guaranty Corporation or the Department of Labor (including a written
description of any oral communication) since January 1, 1993, any actuarial
study of any post-employment life or medical benefits provided under any such
Plan, if any, statements or other communications regarding withdrawal or other
multiemployer plan liabilities, if any, and all amendments and modifications to
any such document. Neither Blue Coral nor any Blue Coral Subsidiary has
communicated to any Employee any intention or commitment to modify any Plan or
to establish or implement any other employee or retiree benefit or compensation
plan, agreement or arrangement.
Except as set forth on SCHEDULE 4.14 hereto, (A) neither Blue
Coral nor any Blue Coral Subsidiary has incurred or reasonably expects to incur
(either directly or indirectly, including as a result of any indemnification
obligation) any liability or obligation under or pursuant to Title I or IV of
ERISA or the penalty, excise tax or joint and several liability provisions of
the Code relating to employee pension benefit plans and, to the Knowledge of
Blue Coral and each Blue Coral Subsidiary, no event, transaction
35
<PAGE> 43
or condition has occurred or exists which could result in any such liability of
Blue Coral, any Blue Coral Subsidiary or, following the Closing, the Parent, the
Surviving Corporation or any of their respective Affiliates, (B) each Plan
intended to be qualified under section 401(a) of the Code, and the trust (if
any) forming a part thereof, has received a favorable determination letter from
the IRS as to its qualification under the Code, or a timely filed application
for such a determination letter either is presently pending with the IRS or
still may be filed with the IRS within the time required to be eligible to make
retroactive plan changes as contemplated by section 401(b) of the Code, and no
fact or condition exists or has occurred which could reasonably be expected to
result in the disqualification of any such Plan or adversely affect the
tax-exempt status of any such trust, (C) there are no pending or, to the Knowl-
edge of Blue Coral and each Blue Coral Subsidiary, threatened claims by or on
behalf of any of the Plans, by or on behalf of any Employee or otherwise
involving any such Plan or the assets of any Plan (other than routine claims for
benefits, all of which have been adequately reserved for on the Financial
Statements), (D) to the Knowledge of Blue Coral and each Blue Coral Subsidiary,
no condition exists and no event has occurred with respect to any Plan that is a
multiemployer plan (as defined in Section 4001(a)(3) of ERISA) (a "Multiemployer
Plan") which presents a risk of the incurrence by Blue Coral or any Blue Coral
Subsidiary of any complete or partial withdrawal liability under Subtitle E of
Title IV of ERISA or any contingent liability under section 4204 of ERISA and
(E) no Multiemployer Plan is in "reorganization" or "insolvent" within the
meaning of Section 4241 or 4245 of ERISA, respectively. Each of the Plans has
been operated and administered in all material respects in compliance with its
terms, all Applicable Laws, including but not limited to ERISA and the Code, and
all applicable collective bargaining agreements. No Plan is a "multiple employer
plan" within the meaning of Section 4063 or 4064 of ERISA. All contributions and
premiums required to have been made by Blue Coral and each Blue Coral Subsidiary
to or in respect of any Plan under the terms of any such Plan or its related
trust, insurance contract or other funding arrangement, or pursuant to
Applicable Law (including, without limitation, ERISA and the Code) or any
collective bargaining agreement have been timely made. No Plan is subject to the
minimum funding requirements of Section 412 of the Code or Section 302 of ERISA
or Title IV of ERISA, other than a Multiemployer Plan. Except to the extent set
forth in SCHEDULE 4.14 hereto, no Employee is or may become entitled to
post-employment benefits of any kind by reason of
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employment with Blue Coral or any Blue Coral Subsidiary, including, without
limitation, death or medical benefits (whether or not insured), other than (X)
coverage mandated by section 4980B of the Code, (Y) retirement benefits payable
under any Plan qualified under section 401(a) of the Code or (Z) deferred
compensation fully reflected in the Blue Coral Balance Sheet or accrued and
payable solely pursuant to the Blue Coral Deferred Compensation Plan. Except to
the extent set forth in SCHEDULE 4.14 hereto, the consummation of the
transactions contemplated by this Agreement will not result in an increase in
the amount of compensation or benefits or the acceleration of the vesting or
timing of payment of any compensation or benefits payable to or in respect of
any Employee.
4.15 LITIGATION. Except as set forth in SCHEDULE 4.15 hereto,
there is no claim, litigation, proceeding or investigation pending or, to the
Knowledge of Blue Coral, each Blue Coral Subsidiary and such Blue Coral
Stockholder, threatened, against or affecting the business or any of the assets
of Blue Coral or any Blue Coral Subsidiary, or which seeks to enjoin or
prohibit, or otherwise questions the validity of, any action taken or to be
taken in connection with this Agreement. Except as set forth in SCHEDULE 4.15
hereto, there are no citations, fines or penalties heretofore asserted against
Blue Coral or any of the Blue Coral Subsidiaries under Applicable Law which
remain unpaid. As to the matters set forth on SCHEDULE 4.15 hereto, the
insurance coverage of Blue Coral and the Blue Coral Subsidiaries provided by the
policies listed on SCHEDULE 4.20 hereto and any other insurance policies that
cover such matters (including, without limitation, as to deductibles and
self-insured retentions) is of a type customarily maintained by similar
companies with respect to similar matters.
4.16 TRANSACTION WITH AFFILIATES. Except as set forth in
SCHEDULE 4.16 hereto, no Affiliate of Blue Coral or of a Blue Coral Subsidiary
(other than another Blue Coral Subsidiary) (I) owns any assets used, held for
use or necessary in the business of Blue Coral or any Blue Coral Subsidiary as
presently conducted, (II) possesses, directly or indirectly, any financial
interest in or is a partner, director, officer or employee of any partnership,
corporation, firm, association or business organization which is a client,
supplier, customer, lessor, lessee or competitor of Blue Coral or any Blue Coral
Subsidiary or (III) is a party to any Contract other than employment contracts
set forth in SCHEDULE 4.13 hereto.
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4.17 FINANCIAL STATEMENTS. (a) SCHEDULE 4.17(A) hereto
contains true and complete copies of the Financial Statements. The Financial
Statements have been prepared in accordance with GAAP consistently applied from
period to period, except that the unaudited interim combined financial
statements are subject to normal year-end audit adjustments, none of which will
be material, and do not contain footnotes. The Financial Statements fairly
present in all material respects the financial condition of Blue Coral and the
Blue Coral Subsidiaries on a combined basis at the respective dates thereof, and
the results of operations and cash flows of Blue Coral and the Blue Coral
Subsidiaries for the periods indicated.
(b) SCHEDULE 4.17(B) hereto lists all accounts receivable from
any Employee or a stockholder of Blue Coral or a Blue Coral Subsidiary that are
reflected as assets on the Blue Coral Balance Sheet.
(c) The Blue Coral Statement will contain a good faith
estimate of the Blue Coral Expenses, the Uncollected Amount, the BCI Acquisition
Amount, the Special Obligation Amount and the Transaction Costs as of the
Closing Date.
4.18 ABSENCE OF UNDISCLOSED LIABILITIES. Except as
specifically identified in the schedules hereto and except for (A) liabilities
as and to the extent reflected or reserved against on the Blue Coral Balance
Sheet, (B) liabilities incurred since March 31, 1996, in the ordinary course of
business, consistent with past practice, including, without limitation,
liabilities incurred in the ordinary course of business, consistent with past
practice under any of the Contracts listed on SCHEDULES 4.7(B), 4.10, 4.13 AND
4.20 hereto, any of the product warranties listed on SCHEDULE 4.12 hereto and
any Plans listed on SCHEDULE 4.14 hereto and (C) liabilities incurred by Blue
Coral or any Blue Coral Subsidiary since the date of this Agreement pursuant to
any Contract entered into or renewed or permitted under Section 6.2 hereof,
neither Blue Coral nor any Blue Coral Subsidiary has any material liabilities or
obligations of any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due.
4.19 ABSENCE OF CHANGES OR EVENTS. Except as disclosed in
SCHEDULE 4.19 hereto or as expressly permitted by this Agreement, since December
31, 1995, there has not been any material adverse change in the business,
assets, properties, liabilities, revenues, income before provision
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for income taxes, operations or condition, financial or otherwise of Blue Coral
and the Blue Coral Subsidiaries taken as a whole; it being understood and agreed
that any increase in Blue Coral's borrowings under the Blue Coral Credit
Agreement which is consistent with its historical borrowing practices shall not
constitute such a material adverse change on the liabilities of Blue Coral and
the Blue Coral Subsidiaries, taken as a whole. Without limiting the foregoing,
except as set forth on SCHEDULE 4.19 hereto, since December 31, 1995, none of
Blue Coral or the Blue Coral Subsidiaries has:
(a) purchased, sold or leased, or agreed to
purchase, sell or lease, any material asset;
(b) granted or committed to grant any bonus, commission or
other form of incentive compensation or increased or committed to
increase the compensation or fees payable to or in respect of any
Employee, director, officer, sales representative, independent
contractor, consultant or Affiliate of Blue Coral or any Blue Coral
Subsidiary except (I) with respect to any Employee or sales
representative, in the ordinary course of business consistent with past
practice, (II) as set forth on SCHEDULE 4.13 hereto or (III) to the
extent required under the express terms of any employment or collective
bargaining agreements as in effect on the date hereof;
(c) except as set forth on Schedule 4.13 hereto or as
permitted under Section 4.19(b) hereof, entered into, adopted or
amended, or committed to enter into, adopt or amend, any employment,
consulting, retention, change-in-control, severance, collective
bargaining, bonus or other incentive compensation, profit-sharing,
health, group insurance or other welfare, stock, stock option, phantom
stock, or other equity-based, pension, retirement, vacation, severance,
deferred compensation or other employment, compensation or benefit
plan, policy, agreement, trust, fund or arrangement for the benefit of
any Employee or any current or former director, sales representative,
independent contractor, agent, consultant or Affiliate of Blue Coral or
any Blue Coral Subsidiary (whether or not legally binding);
(d) made any loans to any Person, other than loans or
advances to Employees not in excess of $100,000 in the aggregate and
extensions of credit to
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customers in the ordinary course of business consistent
with past practice;
(e) except for the receivables listed on SCHEDULE 1.119
hereto, none of which have been written off since December 31, 1995,
written off any receivables except in the ordinary course of business
consistent with past practices;
(f) declared, made, set aside or paid any dividend,
distribution, or payment on, or any purchase or redemption of, any
capital stock or other equity interest of Blue Coral or any Blue Coral
Subsidiary, or made any commitment therefor, except for (I) the
Permitted Distributions, (II) the purchase of 4,005 shares of Blue
Coral Common Stock from Michael Moshontz on January 4, 1996 and (III)
payments in respect of the Moshontz Agreement and the Moshontz Release;
(g) issued or sold any capital stock or other equity interests
of Blue Coral or any Blue Coral Subsidiary, or any subscriptions,
options, warrants, calls, conversions or other rights, agreements,
commitments, arrangements or understandings of any kind obligating Blue
Coral or any Blue Coral Subsidiary, contingently or otherwise, to issue
or sell, or cause to be issued or sold, any capital stock or other
equity interest of Blue Coral or any Blue Coral Subsidiary;
(h) made any material change (for book or Tax
purposes) in any method of accounting or accounting
practice;
(i) suffered the loss of any key Employee or key independent
contractor or, other than in the ordinary course of business consistent
with past practice, retained any new key Employees or independent
contractors; or
(j) entered into any material transaction not in the ordinary
course of business or agreed (whether or not in writing) to do any of
the foregoing.
4.20 INSURANCE. The assets owned by Blue Coral and the Blue
Coral Subsidiaries are insured against loss, damage or injury in amounts listed
in SCHEDULE 4.20 hereto, which lists all insurance policies held by Blue Coral
and the Blue Coral Subsidiaries relating to the business of Blue Coral and the
Blue Coral Subsidiaries, including, without
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limitation, keyman life insurance policies, if any, on any executive officer of
Blue Coral or any Blue Coral Subsidiary, together with the policy limits, the
type of coverage, the location of the property covered, the annual premium, the
premium payment dates and the expiration date of each of the policies. Copies of
all such insurance policies have been furnished to the Parent. All such
insurance policies are in full force and effect and all premiums due thereon
have been paid. No notice of termination or premium increase has been received
under any such insurance policy.
4.21 TAXES. (a) Except as set forth in SCHEDULE 4.21(A)
hereto, Blue Coral, Blue Coral Chemical Company and each Blue Coral Subsidiary
have duly filed all Tax returns and forms required to be filed, and have paid in
full or collected or withheld and remitted all Taxes required to be paid,
collected or withheld, except to the extent that the failure to so file or pay
relates to a Tax authority in a jurisdiction in which such Person's level of
activity or property is immaterial and except for Taxes that are being contested
in good faith by appropriate proceedings and for which adequate reserves have
been established and are being maintained in accordance with GAAP. All such Tax
returns or forms are complete and correct in all material respects. Except as
set forth in SCHEDULE 4.21(A) hereto, neither Blue Coral nor any Blue Coral
Subsidiary is currently involved in an audit with respect to Taxes or has
received written notice of commencement of any audit with respect to Taxes by
any Governmental Authority, no Governmental Authority has notified Blue Coral or
any Blue Coral Subsidiary that such Governmental Authority is now asserting
against Blue Coral or any Blue Coral Subsidiary any deficiency or claim for
Taxes and none of Blue Coral, Blue Coral Chemical Company or the Blue Coral
Subsidiaries has executed any waiver of the statute of limitations for any
taxable period. Except as set forth on SCHEDULE 4.21(A) hereto, none of Blue
Coral, Blue Coral Chemical Company or the Blue Coral Subsidiaries (A) is or has
been a member of any consolidated, combined, unitary or similar group for Tax
purposes, (B) is bound by any Tax sharing, allocation or similar agreement, (C)
has at any time filed a consent under section 341(f) of the Code, (D) is or has
been a "United States real property holding corporation" (as defined in section
897(c)(2) of the Code) during the applicable period specified in section
897(c)(1)(A)(ii) of the Code, and (E) will as a result of the transactions
contemplated by this Agreement make or become obligated to make any parachute
payment as defined in section 280G of the Code. None of the assets of Blue Coral
or any Blue Coral
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Subsidiary (I) is property required to be treated as being owned by any other
Person under the "safe harbor lease" provisions of former section 168(f)(8) of
the Internal Revenue Code of 1954, as amended, or (II) has been financed with or
directly or indirectly secures any bond or debt the interest on which is
tax-exempt under section 103(a) of the Code.
(b) Blue Coral is now and has been at all times since November
1, 1987 an S Corporation for federal income tax purposes within the meaning of
Section 1361(a) of the Code pursuant to an election to be an S Corporation filed
by Blue Coral prior to January 1, 1987. SCHEDULE 4.21(B) sets forth all taxing
jurisdictions in which Blue Coral, Blue Coral Chemical Company and each Blue
Coral Subsidiary has filed Returns (or otherwise been treated as taxable) and
the taxable year in which Blue Coral, Blue Coral Chemical Company and such Blue
Coral Subsidiary began filing Returns. Schedule 4.21(b) sets forth each
jurisdiction in which a valid S corporation election for Blue Coral is in effect
or Blue Coral is otherwise treated as an S corporation for state or local Tax
purposes and the date beginning with which such election or treatment has been
continuously in effect.
(c) Blue Coral did not incur any Tax, including, without
limitation, Tax on built-in-gain under Section 1374(a) of the Code, upon the
sale of its Household Products Division on March 15, 1996.
(d) Solely for purposes of determining the Taxes that the Blue
Coral Stockholders are obligated to pay or indemnify against pursuant to Section
7.8 or Section 13.6, SCHEDULE 4.21(D) sets forth all Taxing jurisdictions in
which Blue Coral or Blue Coral Chemical Company is required pursuant to the
applicable Tax law to file Tax returns.
4.22 ENVIRONMENTAL MATTERS. (a) Except as set forth on
SCHEDULE 4.22 hereto, Blue Coral's and each Blue Coral Subsidiary's operation
and use of its assets, the Owned Real Property and the premises which are the
subject of the Real Property Leases are in compliance in all respects with all
Environmental Laws, except to the extent that any such noncompliance (I) would
not have a Material Adverse Effect or (II) has arisen as a result of any act or
omission of any Person other than Blue Coral or any Blue Coral Subsidiary and as
to which neither Blue Coral nor any Blue Coral Subsidiary has Knowledge. Blue
Coral and the Blue Coral Subsidiaries have obtained all environmental,
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health and safety permits necessary for the operation of the business of Blue
Coral and the Blue Coral Subsidiaries as presently conducted, and all such
permits are in full force and effect and Blue Coral and each Blue Coral
Subsidiary are in compliance in all respects with the terms and conditions of
each such permit, except, in each case, to the extent that any such
noncompliance would not have a Material Adverse Effect. Except as set forth on
SCHEDULE 4.22 hereto, neither Blue Coral nor any Blue Coral Subsidiary has
received any notice of, nor to the Knowledge of Blue Coral and each Blue Coral
Subsidiary is there, any administrative or judicial investigation, proceeding or
action with respect to any material violation, alleged or proven, of
Environmental Laws by Blue Coral or any Blue Coral Subsidiary or otherwise
involving the Owned Real Property or the operations conducted on the premises
subject to the Real Property Leases.
(b) Except as set forth on SCHEDULE 4.22 hereto, none of Blue
Coral or any of the Blue Coral Subsidiaries has taken or failed to take any
action that has resulted in or will result in any liability or obligation
relating to (X) the environmental conditions on, under, or about the assets of
Blue Coral or any Blue Coral Subsidiary, the Owned Real Property, the premises
which are the subject of the Real Property Leases or any properties owned,
leased, operated or used by Blue Coral or any of the Blue Coral Subsidiaries or
any predecessor of Blue Coral or any of the Blue Coral Subsidiaries at the
present time or in the past, including, without limitation, the air, soil and
groundwater conditions at such properties or (Y) the past or present use,
management, handling, transport, treatment, generation, storage, disposal or
release of any Hazardous Substances, except in the case of clauses (x) and (y)
above, to the extent such liability or obligation would not have a Material
Adverse Effect.
(c) Except as set forth on SCHEDULE 4.22 hereto, there has
been no release (nor, to the Knowledge of Blue Coral and each Blue Coral
Subsidiary, is there any substantial threat of a release) of any Hazardous
Substance at or from the Owned Real Property or the premises which are the
subject of the Real Property Leases in amounts or concentrations requiring
remediation under current Environmental Laws or that would violate current
Environmental Laws. Blue Coral and each of the Blue Coral Subsidiaries has
disclosed and made available to the Parent all material information, including,
without limitation, all studies, analyses and test results, in the possession,
custody
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or control of or otherwise known to Blue Coral or to any of the Blue Coral
Subsidiaries relating to (X) the environmental conditions on, under, or about
the assets of Blue Coral or any Blue Coral Subsidiary, the Owned Real Property,
the premises which are the subject of the Real Property Leases or any properties
owned, leased, operated or used by Blue Coral or any of the Blue Coral
Subsidiaries or any predecessor thereto at the present time or in the past, and
(Y) any Hazardous Substances used, managed, handled, transported, treated,
generated, stored or released by Blue Coral or any of the Blue Coral
Subsidiaries or any other Person on, under, about or from any of the properties
or assets of Blue Coral or any of the Blue Coral Subsidiaries or in connection
with the operation of Blue Coral's or any of the Blue Coral Subsidiaries'
businesses. Except as set forth on SCHEDULE 4.22 hereto, there are no
underground storage tanks, or underground piping associated with such tanks, on
the Owned Real Property or on the premises which are the subject of the Real
Property Leases.
4.23 FINANCING STATEMENTS. The material assets owned by Blue
Coral and the Blue Coral Subsidiaries are and have been located in the states of
Arizona, California, Ohio and the United Kingdom, since they were acquired by
Blue Coral or any Blue Coral Subsidiary. All financing statements and similar
instruments filed by any party with respect to such assets are listed in
SCHEDULE 4.23 hereto.
4.24 CAR+ LIABILITIES. Neither Car+ S.A. nor any subsidiary of
Car+ S.A. has incurred any liability of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise, and whether due or to become due,
which is now or in the future will be a material liability of Blue Coral and the
Blue Coral Subsidiaries, taken as a whole.
4.25 [INTENTIONALLY OMITTED]
4.26 FINDERS AND INVESTMENT BANKERS; EXPENSES. Other than
$1,050,000 payable to McDonald & Company, neither Blue Coral nor any Blue Coral
Subsidiary has incurred any liability to any broker, finder or agent for any
fees, commissions or similar compensation with respect to the transactions
contemplated by this Agreement and no Blue Coral Stockholder has incurred any
such liability that will become a liability of the Parent, the Subsidiary, Blue
Coral or any Blue Coral Subsidiary.
4.27 INVESTMENT INTENT. (a) Each Blue Coral Stockholder is
acquiring the shares of Parent Capital Stock
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issued to such Blue Coral Stockholder by the Parent pursuant to this Agreement
for such Blue Coral Stockholder's own account and not directly or indirectly
with a view to, or for sale in connection with, any distribution thereof. Such
Blue Coral Stockholder acknowledges that (I) the Parent Capital Stock has not
been registered under the Securities Act, (II) the Parent Capital Stock may not
be resold unless such Parent Capital Stock is subsequently registered under the
Securities Act or an exemption from such registration is available, (III)
restrictive legends in the form set forth in Section 14.4 hereof shall be placed
on the certificates representing the Parent Capital Stock and (IV) a notation
shall be made in the appropriate records of the Parent indicating that the
Parent Capital Stock is subject to restrictions on transfer and appropriate
stop-transfer instructions will be issued to the Parent's stock transfer agent
with respect to Parent Capital Stock.
(b) Each Blue Coral Stockholder is an Accredited Investor.
Each Blue Coral Stockholder's residence is set forth on SCHEDULE 4.27(B) hereto.
In addition, (I) each Blue Coral Stockholder has been granted the opportunity to
ask questions of, and receive answers from, representatives of the Parent
concerning the Parent and the terms and conditions of the acquisition of Parent
Capital Stock contemplated by this Agreement and to obtain any additional
information that such Blue Coral Stockholder deems necessary, (II) such Blue
Coral Stockholder's knowledge and experience in financial business matters is
such that such Blue Coral Stockholder is capable of evaluating the merits and
risks of the investment in the Parent Capital Stock and (III) such Blue Coral
Stockholder has carefully reviewed the terms and provisions of this Agreement
and has evaluated the restrictions and obligations contained herein.
4.28 BANK ACCOUNTS. SCHEDULE 4.28 hereto sets forth a complete
and correct list containing the names of each bank in which Blue Coral and each
Blue Coral Subsidiary has an account or safe deposit or lock box, the account or
box number, as the case may be, and the name of every Employee authorized to
draw thereon or having access thereto.
4.29 RELEASES. (a) Effective on the Closing Date, each Blue
Coral Stockholder hereby irrevocably waives and releases all known and unknown
claims it may have against Blue Coral, the Parent, any of the Blue Coral
Subsidiaries, any subsidiary of the Parent or any present and former directors,
officers, agents and Employees of Blue
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Coral, the Parent, any Blue Coral Subsidiary or any subsidiary of the Parent,
from any and all actions, claims, causes of action or liabilities of any nature,
in law or equity, known or unknown, and whether or not heretofore asserted,
which such Blue Coral Stockholder ever had, now has or hereafter can, shall or
may have against any of the foregoing for, upon or by reason of any matter,
cause or thing whatsoever from the formation of Blue Coral and each Blue Coral
Subsidiary to the date this representation and warranty is made, other than with
respect to any severance arrangement for any of the Blue Coral Stockholders
described on Schedule 4.14 hereto. Without limiting the generality of the
foregoing, effective as of the Closing Date, each Blue Coral Stockholder hereby
agrees and acknowledges that the agreements listed in Item 1.E of SCHEDULE 4.19
hereto shall be terminated in all respects without any further obligation or
liability of Blue Coral.
(b) Effective on the Closing Date, Ronald Peterson hereby
irrevocably waives and releases all rights he may have against Blue Coral, any
Blue Coral Subsidiary, the Parent or any subsidiary of the Parent to receive any
bonus or other compensation based on the performance of Blue Coral or any
division of Blue Coral with respect to any period from and after the Closing
Date under the bonus arrangement listed in Section II of SCHEDULE 4.13 hereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
OF THE PARENT AND THE SUBSIDIARY
--------------------------------
The Parent and the Subsidiary, jointly and severally,
represent and warrant to Blue Coral and the Blue Coral Stockholders as follows:
5.1 ORGANIZATION AND STANDING. Each of the Parent and the
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and each has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
5.2 AUTHORIZATION AND BINDING OBLIGATION. (a) Each of the
Parent and the Subsidiary has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
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Parent and the Subsidiary and the consummation by the Parent and the Subsidiary
of the transactions contemplated hereby have been duly and validly authorized
and approved by all necessary corporate action on the part of each of the Parent
and the Subsidiary and, immediately prior to the Effective Time, no other
corporate action or proceedings on the part of the Parent or the Subsidiary will
be necessary to authorize this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
of the Parent and the Subsidiary and, upon such execution and delivery, will
constitute a valid and binding obligation, enforceable against the Parent and
the Subsidiary in accordance with its terms, except as limited by laws affecting
the enforcement of creditors' rights generally or equitable principles.
(b) The Subsidiary's Board of Directors (the "Subsidiary's
Board") and the Parent's Board of Directors (the "Parent's Board") have
authorized the Subsidiary's and Parent's respective execution and delivery of
this Agreement and the Subsidiary's and the Parent's respective performance of
the transactions contemplated hereby, and the Subsidiary's Board has voted to
recommend approval of this Agreement by the Parent.
5.3 CONSENTS AND APPROVALS; NO CONFLICTS. Except for
applicable requirements of the HSRA, the Securities Act, applicable state
securities laws and filing and recordation of the Certificate of Merger as
required by the GCL, no filing with, and no permit, authorization, consent or
approval of, any public body or authority is necessary for the consummation by
the Parent and the Subsidiary of the transactions contemplated by this
Agreement. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby, nor compliance by the
Parent or the Subsidiary with any of the provisions hereof will (A) result in
any violation of any provision of the charter or by-laws of the Parent or the
Subsidiary, (B) violate any Applicable Law to which the Parent or the
Subsidiary is a party or by which any of their respective properties is bound,
or (C) result in a material violation or breach of, or constitute (with or
without due notice or lapse of time or both) a material default (or give rise
to any right of termination, cancellation or acceleration) under, any material
contract, agreement, note, bond, mortgage, indenture, license, lease,
franchise, permit, Plan or other instrument or obligation to which the Parent
or the Subsidiary is a party, or by which either of them or any of their
respective properties is bound.
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5.4 LITIGATION. There is no claim, litigation, proceeding or
investigation pending or, to the best of the Parent's or the Subsidiary's
knowledge, threatened, which seeks to enjoin or prohibit, or otherwise questions
the validity of, any action taken or to be taken by the Parent or the Subsidiary
in connection with this Agreement.
5.5 FINDERS AND INVESTMENT BANKERS. All negotiations relating
to this Agreement and the transactions contemplated hereby have been carried on
without the intervention of any Person acting on behalf of the Parent or the
Subsidiary in such manner as to give rise to any valid claim against Blue Coral
or any of the Blue Coral Stockholders for any broker's fee or finder's fee or
similar compensation.
5.6 FINANCIAL STATEMENTS AND REPORTS. The Parent has filed all
required forms, reports and documents with the SEC required to be filed by it
pursuant to the Securities Act and the Exchange Act, and the rules and
regulations promulgated thereunder, all of which have complied in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act, respectively, and such rules and regulations. The Parent has previously
furnished to Blue Coral for delivery to the Blue Coral Stockholders copies of
all such forms, reports and documents filed by the Parent with the SEC since
January 1, 1994 (hereinafter collectively referred to as the "Parent Reports").
None of the Parent Reports, including, without limitation, any financial
statements or schedules included therein, at the time filed, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Parent included in the Parent Reports complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with GAAP applied on a consistent basis (except as otherwise noted
in such financial statements) and present fairly in all material respects the
financial position, results of operations, cash flows and changes in financial
position of the Parent and its consolidated subsidiaries as of the dates or the
periods indicated, subject, in the case of unaudited interim consolidated
financial statements, to normal year-end adjustments.
5.7 STOCK ISSUANCE. The Parent Capital Stock to be issued
pursuant to this Agreement has been duly authorized
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for issuance and when issued and delivered by the Parent in accordance with the
provisions of this Agreement will be validly issued, fully paid and
non-assessable and listed on the NYSE. The Parent Capital Stock issued under
this Agreement will not be subject to any preemptive or similar rights.
ARTICLE VI
COVENANTS
---------
6.1 INFORMATION PRIOR TO CLOSING. (a) Subject to Section 14.3
hereof, during the period from the date hereof to the Closing Date, Blue Coral
will and will cause each of the Blue Coral Subsidiaries to make the management
of Blue Coral and the Blue Coral Subsidiaries available to the Parent and its
authorized representatives at reasonable times and provide the Parent and its
accountants, legal counsel and other authorized representatives reasonable
access during normal business hours to, and permit such Persons to review, the
properties, books, Contracts, accounts and records of Blue Coral and the Blue
Coral Subsidiaries, and to provide such other information to the Parent and its
authorized representatives as shall have been reasonably requested by the Parent
or such authorized representatives concerning Blue Coral or any Blue Coral
Subsidiary. The rights of the Parent under this Section 6.1 shall be exercised
in such a manner as to minimize interference with the conduct of the business of
Blue Coral and the Blue Coral Subsidiaries.
(b) Subject to Section 14.3 hereof, the Parent and the
Subsidiary will provide each Blue Coral Stockholder with the opportunity to ask
questions of, and receive answers from, representatives of the Parent and the
Subsidiary regarding the terms and conditions of the acquisition of Parent
Capital Stock pursuant to this Agreement and to obtain any additional
information regarding the Parent and the Subsidiary as such Blue Coral
Stockholder deems necessary to evaluate the transactions contemplated by this
Agreement, including the acquisition of shares of Parent Capital Stock as
contemplated hereby.
6.2 CONDUCT OF BUSINESS. During the period from the date
hereof to the Closing Date, Blue Coral covenants and agrees that it will and
will cause the Blue Coral Subsidiaries to carry on their businesses in, and only
in, the ordinary course of business, in substantially the same
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manner as heretofore conducted, and to use their reasonable commercial efforts
to preserve intact their present business organization, keep available the
services of their respective officers and Employees, sales agents and
independent contractors, and preserve their relationships with customers,
suppliers, distributors, contractors, licensors, licensees and others having
business dealings with them, to the end that their goodwill and going business
shall be maintained following the Closing. Blue Coral will promptly advise the
Parent in writing of any change in the financial condition, operations or
business of Blue Coral or any Blue Coral Subsidiary that Blue Coral or any Blue
Coral Subsidiary recognizes is or is likely to be materially adverse. Without
limiting the generality of the foregoing, except as expressly permitted by this
Agreement or with the prior written consent of the Parent, Blue Coral covenants
and agrees that it will not, and it will not permit any Blue Coral Subsidiary
to, do or agree to do, on or after the date hereof, any of the following, on or
before the Closing:
(a) amend their respective certificates of
incorporation or by-laws or other organizational
documents;
(b) subject to the exercise of Blue Coral's fiduciary
obligations to its stockholders under Applicable Law after advice of
counsel with respect to such obligations, rescind, modify, amend or
otherwise change or affect any of the resolutions of the Board
recommending adoption of this Agreement and authorization of the
Merger;
(c) issue, sell, transfer, assign, pledge, convey or dispose
of any capital stock or other equity interest, including, without
limitation, any subscriptions, options, warrants, calls, conversions
or other rights, agreements, commitments, arrangements or under-
standings of any kind obligating Blue Coral or any Blue Coral
Subsidiary, contingently or otherwise, to issue or sell, or cause to be
issued or sold, any capital stock or other equity interest of Blue
Coral or any Blue Coral Subsidiary;
(d) except for any payment referred to in Section 4.19(f)(i),
(ii) or (iii) hereof, split, combine or reclassify any shares of any
class of its capital stock, declare, set aside or pay any dividend or
other distribution (whether in cash, stock or property or any
combination thereof) in respect of any class of its
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capital stock, or redeem or otherwise acquire any
shares of such capital stock;
(e) write off any receivables except in the ordinary course
of business consistent with past practice, PROVIDED that in no event
shall Blue Coral or any Blue Coral Subsidiary write off any of the
receivables listed on SCHEDULE 1.119 hereto;
(f) sell, assign, lease or otherwise transfer or dispose of
any assets except in the ordinary course of business consistent with
past practice, unless the same shall be replaced with assets of equal
or greater value and utility and except that (I) Blue Coral may assign
all of its rights under the Valley Belt Purchase Agreement to J&W
Adelman, Ltd. and (II) Blue Coral may lease the Valley Belt Property
from J&W Adelman, Ltd. pursuant to the lease agreement described in
Section 8.3(i) hereof.
(g) (I) except in the ordinary course of business consistent
with past practice under existing lines of credit, create, incur,
assume, maintain or permit to exist any long-term debt, including
obligations in respect of capital leases, or create, incur, assume,
maintain or permit to exist any short-term borrowing in an aggregate
amount for Blue Coral and the Blue Coral Subsidiaries exceeding
$50,000; (II) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other Person, except for assumptions, guarantees or
endorsements by Blue Coral of the obligations of any Blue Coral
Subsidiary (other than Car+) in the ordinary course of business
consistent with past practice; (III) make any loans, advances or
capital contributions to, or investments in, any other Person (other
than customary loans or advances in the ordinary course of business
consistent with past practice to Employees not to exceed $50,000 in
the aggregate and extensions of credit made to customers on a trade
receivable basis in the ordinary course of business consistent with
past practice; (IV) waive, release, grant or transfer any material
rights or materially modify or change any existing license, lease,
contract or other document material to Blue Coral or any of the Blue
Coral Subsidiaries; or (V) create, assume or permit to exist any Lien
upon their assets, except for those in existence on the date of this
Agreement and except for those additional Liens
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created in the ordinary course of business consistent with past
practice, all of which Liens, other than Permitted Encumbrances, will
be removed on or prior to the Closing Date;
(h) except for the lease of the Valley Belt Property pursuant
to the agreement described in Section 8.3(i) hereof, enter into any
Contract other than in the ordinary course of business consistent with
the past practices of the business of Blue Coral or any Blue Coral
Subsidiary;
(i) fail to timely make all payments required to be paid under
any Contract when due and otherwise pay all liabilities and satisfy all
obligations, in each case in a manner consistent with past practice,
except, in any such case, where such payment, liability or obligation
is being contested in good faith in appropriate proceedings;
(j) fail to maintain their inventories of spare parts and
expendable supplies, if any, at levels consistent with past practice;
(k) (I) increase or modify or agree to increase or modify the
compensation, bonuses or other benefits or perquisites of any Employee
of Blue Coral or any Blue Coral Subsidiary, except for salary increases
granted in the ordinary course of business consistent with past
practice or pursuant to the terms of any Services Agreement or
collective bargaining agreement as in effect on the date hereof; (II)
pay or commit to pay any compensation, bonus, pension or other
retirement benefit or allowance, fringe benefit or other benefit not
required by the terms of an existing Plan, Services Agreement or
collective bargaining agreement as in effect on the date hereof or
otherwise in the ordinary course of business consistent with past
practice; (III) amend or commit to amend any Plan; or (IV) institute
or enter into or commit to institute or enter into any additional
bonus, profit-sharing, incentive, stock option, phantom stock or
other equity-based benefit, deferred compensation, severance,
retention, change in control, pension, retirement, health, welfare,
group insurance or other employee or retiree benefit plan, agreement,
trust, fund or arrangement, or any additional employment or
consulting agreement with or for the benefit of any Person;
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(l) make any payment whatsoever to any Blue Coral Stockholder
other than (I) Employee compensation paid in accordance with Section
6.2(g)(iii), 6.2(k)(i) or 6.2(k)(ii) hereof or (II) any payment
referred to in Section 4.19(f)(i), (ii) or (iii) hereof;
(m) enter into any agreement, commitment or contract with
respect to the purchase of capital assets involving an amount in excess
of $50,000 individually or $150,000 in the aggregate;
(n) make any new elections, or make any changes
to current elections, with respect to Taxes;
(o) fail to maintain their books and records in
accordance with GAAP; and
(p) take or fail to take any action that would cause any of
its representations and warranties not to be true and correct on the
Closing Date in the manner required by Section 8.3(b) hereof.
6.3 THIRD-PARTY CONSENTS. Blue Coral covenants and agrees that
it will and will cause each Blue Coral Subsidiary to use all reasonable
commercial efforts to obtain the consent of any third parties or Governmental
Authorities required to be obtained or made in connection with the transactions
contemplated by this Agreement, including, without limitation, those consents
set forth on SCHEDULE 6.3 hereto.
6.4 RENEWAL OF CONTRACTS. Blue Coral covenants and agrees that
it will and will cause each Blue Coral Subsidiary to use all reasonable
commercial efforts to renew any Contract which by its terms expires or
terminates between the date of this Agreement and the Closing Date, provided
that any such renewal shall be on terms and conditions which are consistent with
the past practice of Blue Coral and the Blue Coral Subsidiaries.
6.5 FINANCIAL STATEMENTS. Blue Coral covenants and agrees that
it will deliver to the Parent, within 30 days after the end of each month until
the Closing Date, unaudited consolidated statements of operations and cash flows
for the business of Blue Coral and the Blue Coral Subsidiaries for the month
then ended, along with a consolidated balance sheet of the business of Blue
Coral and the Blue Coral Subsidiaries as of the end of such month. All financial
statements furnished pursuant to this Section
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shall be true and complete in all material respects and fairly represent the
financial position, results of operations, cash flows and changes in financial
position as of the dates and for the periods covered by such statements subject
to normal year-end audit adjustments, none of which will be material. Blue Coral
covenants and agrees that it will and will cause each Blue Coral Subsidiary to
furnish to the Parent any and all other information customarily prepared
concerning the financial condition of Blue Coral or any Blue Coral Subsidiary
that the Parent or the Parent's representatives may reasonably request.
6.6 BLUE CORAL DEFERRED COMPENSATION PLAN. Blue Coral
covenants and agrees that, prior to the Closing Date, it will or will cause the
Blue Coral Subsidiaries to honor, pay, perform and discharge, in full, all
benefits, compensation, expenses and other amounts due under or in respect of
the Blue Coral Deferred Compensation Plan including, without limitation, all
such amounts due to the participants and beneficiaries thereunder.
6.7 SUPPLEMENTS TO SCHEDULES. Any party may at any time, or
from time to time after the date hereof, but not later than five Business Days
prior to the Closing Date, supplement or amend the Schedules required by this
Agreement with respect to any matter arising after the date hereof which if
existing or occurring at the date hereof would have been required to be set
forth or described in such a Schedule. No supplement or amendment to such
Schedules shall have any effect for the purpose of determining the satisfaction
of the conditions to the obligation of the other parties under Article VIII
hereof, but any matter arising after the date hereof and disclosed in an amended
or supplemented Schedule pursuant to this Section 6.7 shall not form the basis
for any claim for indemnification pursuant to Article XI hereof if the
transactions contemplated hereby are consummated. Each of the representations
and warranties made herein shall be deemed repeated at the Closing, subject to
such changes thereto as shall have been made in accordance with this Section
6.7. A party to whom a disclosure is made prior to the Closing of a matter
arising prior to the date hereof which was required to have been disclosed
herein shall not, by proceeding with the Closing, be deemed to have waived the
breach of this Agreement, or any of its other rights hereunder, including rights
to indemnity, resulting from such failure to disclose.
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ARTICLE VII
FURTHER AGREEMENTS
------------------
7.1 COMPLIANCE WITH GCL; FILINGS. (a) As soon as practicable
and in any event within 3 days after the date of this Agreement, Blue Coral will
prepare and deliver to each Blue Coral Stockholder a notice, in accordance with
Sections 228(d) and 262(d)(2) of the GCL, regarding (I) the execution of this
Agreement, (II) the Board's authorization of the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and its
vote to recommend adoption of this Agreement and authorization of the Merger by
the stockholders of Blue Coral, (III) Adelman's execution, as the beneficial and
record owner of in excess of 50% of the issued and outstanding Blue Coral Common
Stock, of an action by written consent in lieu of a meeting of stockholders
approving and adopting the Merger and (IV) the availability of appraisal rights
under Section 262 of the GCL.
(b) As promptly as practicable, each of Blue Coral, the Blue
Coral Stockholders, the Parent and the Subsidiary each shall properly prepare
and file any filings required under any Federal, state, county, local or
municipal law relating to the Merger and the transactions contemplated herein
(such filings, together with the filings previously required under the HSRA,
are, collectively, the "Filings"). Blue Coral further covenants and agrees to
cause the Blue Coral Subsidiaries to properly prepare and file any required
Filings. The Parent and the Subsidiary, on the one hand, and Blue Coral, on the
other, shall promptly notify the other of the receipt of any comments on, or
any request for amendments or supplements to, the Filings by any governmental
official, and each of Blue Coral, the Parent and the Subsidiary will supply the
other with copies of all correspondence between it and each of its subsidiaries
and representatives, on the one hand, and any appropriate governmental
official, on the other hand, with respect to the Filings. The Filings, when
filed, shall comply as to form in all material respects with Applicable Law.
7.2 RULE 144. Subject to the proviso at the end of this
sentence, for the period ending on the third anniversary of the Closing Date,
the Parent will file the reports required to be filed by it under the Exchange
Act and the rules and regulations adopted by the Securities and Exchange
Commission thereunder to the extent required from time to time to enable any
Blue Coral Stockholder who
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receives shares of the Parent Capital Stock in accordance with this Agreement to
sell such shares without registration under the Securities Act within the
limitations of the exemption provided by (A) Rule 144 under the Securities Act,
as such rule may be amended from time to time, or (B) any successor rule or
regulation hereafter adopted by the Securities and Exchange Commission; PROVIDED
that this covenant shall have no force and effect at any time when the Parent is
not a publicly traded company.
7.3 ELECTION OF ADELMAN. If the Closing occurs pursuant to
this Agreement, (I) the Parent shall cause Adelman to be elected to the Board of
Directors of the Surviving Corporation immediately after the Closing and (II)
the Parent shall use its best efforts to cause Adelman (X) to be elected to the
Parent's Board no later than October 31, 1996 and (Y) to be re-elected to the
Parent's Board for so long as Adelman holds, beneficially and of record, not
less than 75% of the shares of Parent Capital Stock issued to him on the
Effective Date pursuant to Section 3.1 hereof.
7.4 ADDITIONAL AGREEMENTS. (a) Subject to the terms and
conditions herein provided, each of the parties hereto, agrees to use (and Blue
Coral shall cause the Blue Coral Subsidiaries to use) their commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement and to cooperate with one another in connection with the foregoing,
including using its commercially reasonable efforts to obtain all necessary
consents, approvals and authorizations as are required to be obtained under
Applicable Law, to defend all lawsuits or other legal proceedings challenging
this Agreement or the consummation of the transactions contemplated hereby, to
cause to be lifted or rescinded any injunction or restraining order or other
order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, and to effect all necessary registrations and
Filings.
(b) Without limiting the generality of Section 7.4(a) above,
prior to the Closing Blue Coral covenants and agrees to use its reasonable best
efforts to perform all of its obligations under the Amended and Restated
Agreement by and between Blue Coral and Airosol Company, Inc., dated May 29,
1996.
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7.5 ACQUISITION PROPOSALS. (a) None of Blue Coral, any Blue
Coral Stockholder or any of Blue Coral's employees, representatives or agents
(collectively, the "Blue Coral Representatives") shall, directly or indirectly,
solicit or initiate inquiries or proposals from or enter into any agreement with
respect to, or provide any confidential information to or participate in any
discussions or negotiations with, any Persons or group (other than the Parent,
the Subsidiary and their respective subsidiaries and their respective directors,
officers, employees, representatives and agents) concerning any sale of
material assets or shares of Blue Coral Common Stock, any assets or shares of
capital stock of any Blue Coral Subsidiary (other than, in the case of Adelman,
pursuant to Adelman's performance of his obligations under Sections 8.3(n) and
9.3 hereof) or any merger, consolidation or similar transaction involving Blue
Coral or any Blue Coral Subsidiary. Blue Coral and each Blue Coral Stockholder
will immediately cease and Blue Coral will cause to be terminated by the Blue
Coral Subsidiaries any existing activities, discussions or negotiations with any
third parties conducted heretofore with respect to any of the foregoing. Blue
Coral or the applicable Blue Coral Stockholder will notify the Parent
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, such Person or any of the Blue Coral
Representatives, and will promptly request each Person which has heretofore
executed a confidentiality agreement in connection with its consideration of an
acquisition of Blue Coral, any Blue Coral Subsidiary or any material portion of
their assets or stock to return or destroy all confidential information
furnished to such Person by or on behalf of Blue Coral, any Blue Coral
Subsidiary or any of the Blue Coral Representatives.
7.6 PUBLIC ANNOUNCEMENTS. The Parent, Blue Coral and each of
the Blue Coral Stockholders will consult with one another before issuing any
press release or otherwise making any public statement with respect to this
Agreement or the Merger and shall not issue any such press release or make any
such public statement prior to such consultation without the consent of the
Parent and Blue Coral, except based on the advice of counsel for Blue Coral or
the Parent, as the case may be, as required by Applicable Law.
7.7 CONSENT OF THE PARENT. The Parent, as the sole
shareholder of the Subsidiary, by executing this Agreement hereby consents to
the execution, delivery and performance of this Agreement by the Subsidiary and
such
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consent shall be treated for all purposes as a vote duly adopted at a meeting of
the shareholders of the Subsidiary held for such purpose.
7.8 TRANSFER TAXES. (a) The Blue Coral Stockholders shall be
responsible for the timely payment of, and shall indemnify and hold harmless the
Parent Indemnitees against, all Transfer Taxes imposed by Governmental Authority
that is or should be listed on Schedule 4.21(d) or by the United Kingdom,
arising out of or in connection with or attributable to the transactions
effected pursuant to this Agreement except to the extent, in the case of
Transfer Taxes imposed by the United Kingdom, such Taxes were included in the
BCI Acquisition Amount. The Parent shall be responsible for, and shall indemnify
the Blue Coral Stockholders against, all other Transfer Taxes arising out of or
in connection with or attributable to the transactions effected pursuant to this
Agreement.
(b) As between the Blue Coral Stockholders, on the one hand,
and the Parent Indemnitees, on the other hand, the party that has the primary
responsibility under applicable law for filing any Tax return required to be
filed in respect of Transfer Taxes shall prepare and timely file such Tax
return, PROVIDED that such party's preparation of such Tax return shall be
subject to the other party's approval, which approval shall not be withheld or
delayed unreasonably.
(c) The Blue Coral Stockholders and the Parent Indemnitees
will cooperate with each other in attempting to minimize Transfer Taxes.
7.9 TREATMENT OF BOOKS AND RECORDS. For a period of three
years after the Closing Date, at least 30 days prior to discarding or destroying
any books or records relating to the business of Blue Coral, the Parent shall
give the Blue Coral Stockholders' Representative notice of its intended action
and an opportunity for the Blue Coral Stockholders' Representative at its sole
expense to retain any of the books or records proposed to be discarded or
destroyed by the Parent or Blue Coral, as the case may be. Prior to the
destruction of any such books or records, the Blue Coral Stockholders'
Representative shall have the right, upon reasonable advance request and at its
sole expense, to have access to such books and records during normal business
hours to enable any or all of the Blue Coral Stockholders to fulfill their Tax
or other ordinary course of business obligations.
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7.10 PURCHASE OR SALE OF NICSAND. (a) As soon as practicable
after the Closing Date, the Parent will notify Sandusky in writing (the
"Sandusky Notice") that (i) the Merger has occurred, (ii) Sandusky's rights
under Section 4(a) of the NicSand Agreement have been triggered and (iii) the
"Company Value" of NicSand within the meaning of Section 4(a) of the NicSand
Agreement is $10,706,000.
(b) If Sandusky does not purchase the NicSand Shares owned by
Blue Coral in accordance with Section 4(a) of the NicSand Agreement, the
Surviving Corporation shall promptly give Sandusky written notice that it will
purchase the NicSand Shares owed by Sandusky pursuant to Section 4(b) of the
NicSand Agreement and the Surviving Corporation shall thereafter use
commercially reasonable efforts to close such purchase transaction as promptly
as practicable (such purchase, the "NicSand Purchase").
7.11 SALE OF THE MCKAY PROPERTY. (a) As soon as practicable
after the Closing Date, the Surviving Corpora tion shall undertake to sell the
McKay Property in such manner and on such terms and conditions, including,
without limitation, as to the absence of any indemnities, as the Surviving
Corporation, in its sole discretion, shall deem appropriate. From time to time
following the date of this Agreement, the Surviving Corporation shall provide
the Blue Coral Stockholders' Representative with notice as to the status of its
efforts to sell the McKay Property, as contemplated by this Section 7.11.
(b) Upon the Surviving Corporation's sale of the McKay
Property, as contemplated by Section 7.11(a) hereof, the Surviving Corporation
will provide the Blue Coral Stockholders' Representative with notice of such
sale and a statement of the McKay Proceeds realized in connection with such
sale. To the extent the McKay Proceeds from any such sale exceed the sum of (i)
the McKay Amount PLUS (ii) all costs and expenses incurred by the Parent in
connection with the undertaking under Section 7.11(a) hereof (the "McKay
Transaction Costs") (any such excess, the "McKay Excess"), the Surviving
Corporation shall, within 10 Business Days following the closing of any such
sale, pay to each Blue Coral Stockholder: an amount equal to the product of (i)
50% of the McKay Excess TIMES (ii) the fraction applicable to such Blue Coral
Stockholder set forth on the Ownership Schedule. Alternatively, to the extent
the McKay Proceeds from any such sale are less than the sum of (i) the McKay
Amount PLUS (ii) the McKay Transaction Costs (any such deficiency, the "McKay
Deficiency"), the Blue Coral
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Stockholders shall, within 10 Business Days following the closing of any such
sale, be jointly and severally obligated to pay to the Surviving Corporation an
amount equal to 50% of the McKay Deficiency.
7.12 RELEASE OF SPECIAL SHARES. If, on or prior to the third
anniversary of the Closing Date, the restricted shares referred to in Section
8.3(1) hereof (or their equivalent) have vested, the Blue Coral Stockholders
shall have no further interest in the Special Shares and the Blue Coral
Stockholders shall be deemed to have forfeited that portion of the Merger
Consideration represented by the Special Shares. If, on or prior to the third
anniversary of the Closing Date, such shares (or their equivalent) have not so
vested or have become incapable of so vesting, the Parent shall promptly deliver
to each Blue Coral Stockholder such number of the Special Shares as equals the
product of (i) the number of Special Shares TIMES (ii) the fraction applicable
to such Blue Coral Stockholder set forth on the Ownership Schedule.
7.13 OFFICERS' AND DIRECTORS' INSURANCE; INDEMNIFICATION OF
OFFICERS AND DIRECTORS. The Parent agrees that for the entire period from the
Effective Time until at least six years after the Effective Time (a) the
certificate of incorporation and the by-laws of the Surviving Corporation shall
contain the provisions with respect to indemnification and exculpation from
liability set forth in Blue Coral's Certificate of Incorporation and By-Laws as
of the date of this Agreement, which provisions shall not be amended, repealed
or otherwise modified during such period in any manner that would adversely
affect the rights thereunder of individuals who on or prior to the Effective
Time were directors, officers, employees or agents of Blue Coral unless such
modification is required by Applicable Law and (b) the Surviving Corporation
shall either (x) maintain in effect Blue Coral's current directors' and
officers' liability insurance covering those persons who are currently covered
on the date of this Agree ment by Blue Coral's directors' and officers'
liability insurance policy (a copy of which has been heretofore delivered to the
Parent) or (y) cause the Surviving Corporation's directors' and officers'
liability insurance then in effect to cover those persons who are covered on the
date of this Agreement by Blue Coral's directors' and officers' liability
insurance policy with respect to those matters covered by, and subject to the
same terms and limitations imposed by, the directors' and officers' liability
insurance
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policy that the Parent generally provides for its own directors and officers.
7.14 SURVIVING CORPORATION COMMON STOCK. The Parent agrees
that on the Closing Date it will not transfer the Surviving Corporation Common
Stock.
ARTICLE VIII
CLOSING CONDITIONS
------------------
8.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ALL PARTIES.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of each of the following
conditions:
(a) Any waiting period (and any extension there of) applicable
to the consummation of the Merger under the HSRA shall have expired or
been terminated.
(b) No preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission nor any
statute, rule, regulation or executive order promulgated or enacted by
any Governmental Authority shall be in ef fect which would (i) make the
consummation of the Merger by the Parent, the Subsidiary or Blue Coral
illegal or (ii) otherwise prevent the consummation of the Merger.
(c) The Parent and Adelman shall have entered into an
employment and non-competition agreement in form and substance
satisfactory to the Parent and Adelman.
(d) If the Surviving Corporation does not serve as the
Exchange Agent, the Parent and the Stockholders' Representative shall
have entered into an agreement regarding the exchange of shares
described in Section 3.4 hereof with such entity that will serve as
the Exchange Agent.
(e) Each of the Blue Coral Stockholders, the Parent, the Blue
Coral Stockholders' Representative and the Escrow Agent shall have
executed and delivered an
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Escrow Agreement in the form attached hereto as EXHIB IT 8.1(e).
(f) Each of the Parent, the Blue Coral Stockholders and a
mutually agreed upon escrow agent shall have entered into an
Indemnification and Escrow Agreement, containing terms and conditions
satisfactory to the Parent and the Blue Coral Stockholders, providing
for the creation of an escrow account with such escrow agent in an
amount equal to the NicSand Escrow Amount; it being understood and
agreed that the purpose of such Indemnification and Escrow Agreement
shall be to provide the Parent with a source of indem nification for
various agreed upon matters relating to NicSand, including (without
limitation and without duplication)(x) upon a Sandusky Purchase, any
shortfall (the "Shortfall") between $13,000,000 and an amount equal to
the sum of (i) the NicSand Amount PLUS (ii) the cash proceeds actually
received by Blue Coral from Sandusky at closing of the Sandusky
Purchase in respect of the NicSand Shares PLUS (iii) all principal
payments actually made upon the maturity of any NicSand Note in respect
of the NicSand Shares PLUS (iv) the amount of any intercompany debt
owing from NicSand to Blue Coral, up to an aggregate of $2,293,536,
which is actually received by Blue Coral in cash, simultaneously with
such closing, or pursuant to principal payments actually made upon the
maturity of the NicSand Note, and (y) any other Losses incurred by Blue
Coral, the Parent or any of their respective Affiliates arising out of
or relating in any way to the termination or modification of any of the
commercial arrangements between Blue Coral and NicSand which are in
existence, or are alleged by Sandusky to be in existence, on the date
hereof, including any such arrangements described in Paragraphs 8, 9
and 10 of the letter attached hereto as EXHIBIT 8.3(f) (such Losses,
the "NicSand Losses"). Such Indemnification and Escrow Agreement will
also provide that (A) Adelman will have the right to conduct and
consummate all negotiations with Sandusky with respect to the buy/sell
arrangements under the NicSand Agreement, and all other matters
reasonably related thereto, subject, in all cases, to the Parent's
reason able review and supervision of such negotiations, (B) any
portion of the NicSand Escrow Amount released to the Blue Coral
Stockholders shall be released with any interest earned thereon in
accordance with the provi sions of such escrow agreement, (C)
immediately following a Sandusky Purchase, such escrow agent shall
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release to the Parent an amount equal to the Shortfall (it being
understood that for purposes of computing the amount of the Shortfall
under this clause (C) only, any NicSand Note delivered upon such
Sandusky Purchase shall be deemed to have been paid in full), (D)
immedi ately following a NicSand Purchase, such escrow agent shall
release to the Parent an amount equal to the excess, if any, of (1) the
sum of (x) the amount paid by the Parent for the NicSand Shares listed
on SCHEDULE 4.1(C) hereto PLUS (y) any NicSand Losses for which the
Parent is then entitled to indemnification under such Indemnification
and Escrow Agreement over (2) the NicSand Amount and (E) immediately
following a payment to the Parent under clause (C) or clause (D) of
this Section 8.3(f), and from time to time thereafter, the escrow agent
shall release to the Blue Coral Stockholders' Representative any
portion of the NicSand Escrow Amount then in escrow that exceeds the
sum of (1) the then unpaid principal of any NicSand Note PLUS (2) an
amount equal to the total Losses, if any, that the Parent reasonably
determines may arise thereafter under clause (y) of this Section
8.3(f).
8.2 ADDITIONAL CONDITIONS TO THE OBLIGATION OF BLUE CORAL. The
obligation of Blue Coral to effect the Merger is also subject to the fulfillment
at or prior to the Effective Time of the following additional conditions:
(a) The Parent and the Subsidiary shall each have performed
each of the respective obligations to be performed by it hereunder on
or prior to the Closing.
(b) The representations and warranties of the Parent and the
Subsidiary set forth in this Agreement that are qualified as to
materiality or Material Adverse Effect shall be true and correct in all
respects and the representations and warranties of the Parent and the
Subsidiary contained in this Agreement that are not so qualified shall
be true and correct in all material respects, in each case when made
and, unless such representation or warranty is made as of a specific
date, at and as of the Effective Time as if made at and as of such
time.
(c) Blue Coral shall have received a certificate, dated the
Closing Date, of the President or any Vice President of the Parent to
the effect that the conditions specified in paragraphs (a) and (b) of
this Section 8.2 have been fulfilled.
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(d) Blue Coral shall have received the opinion of Debevoise &
Plimpton, special counsel to the Parent and the Subsidiary,
substantially in the form attached hereto as EXHIBIT 8.2(d).
(e) If requested to do so, the Parent shall have made
available funds equal to the Blue Coral Expense Amount so as to enable
Blue Coral to pay all or any portion of such Blue Coral Expense Amount.
(f) The Parent and the Blue Coral Stockholders shall have
entered into a Registration Rights Agreement substantially in the form
attached hereto as EXHIBIT 8.2(f).
8.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARENT AND THE
SUBSIDIARY. The obligations of the Parent and the Subsidiary to effect the
Merger are also subject to the fulfillment at or prior to the Effective Time of
the following additional conditions:
(a) Blue Coral and each of the Blue Coral Stock holders shall
have performed each of its respective obligations under this Agreement
required to be performed by it on or prior to the Effective Time
pursuant to the terms hereof.
(b) The representations and warranties of Blue Coral and the
Blue Coral Stockholders contained in this Agreement that are qualified
as to materiality or Material Adverse Effect shall be true and correct
in all respects and the representations and warranties of Blue Coral
and the Blue Coral Stockholders contained in this Agreement that are
not so qualified shall be true and correct in all material respects, in
each case when made and at and as of the Effective Time as if made at
and as of such time.
(c) Blue Coral shall not have received notice from the holder
or holders of more than 2% of the Outstanding Blue Coral Shares that
such holder or holders have exercised or intend to exercise its or
their appraisal rights under Section 262 of the GCL.
(d) The Parent shall have received a certificate, dated the
Closing Date, of Adelman, as the Chief Executive Officer of Blue Coral,
to the effect that the conditions specified in paragraphs (a), (b) and
(c) of this Section 8.3 have been fulfilled.
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(e) There shall not be any action or proceeding commenced by
or before any court or governmental agency or authority in the United
States, or threatened by any governmental agency or authority in the
United States, that challenges the consummation of the Merger or seeks
to impose material limitations on the ability of the Parent to exercise
full rights of ownership of any of the material assets or business of
Blue Coral or seeks material damages from the Parent in connection with
such ownership.
(f) At least five Business Days prior to the Closing Date,
Blue Coral shall have delivered a statement, in form and substance
reasonably satis factory to the Parent, setting forth Blue Coral's good
faith calculation of each of the Blue Coral Expense Amount, the
Uncollected Amount, the Estimated 338 Amount, the Special Obligation
Payment Amount and the Transaction Costs as of the Closing Date,
together with reasonable supporting documentation with respect to such
calculations (such statement, the "Blue Coral Statement").
(g) The Parent shall have received evidence, in form and
substance reasonably satisfactory to the Parent, that Blue Coral has
fully satisfied and discharged all of its obligations under the Blue
Coral Deferred Compensation Plan.
(h) All of the consents listed on SCHEDULE 6.3
hereto shall have been obtained.
(i) Blue Coral and J&W Adelman, Ltd. shall have
entered into a lease agreement, in form and substance
satisfactory to the Parent, with respect to the Valley
Belt Property.
(j) The Parent and the Subsidiary shall each have received the
opinion of (I) Baker & Hostetler, counsel to Blue Coral and the Blue
Coral Stockholders, in substantially the form attached hereto as EXHIB-
IT 8.3(J)(I) AND (II) an opinion of counsel to BCI, in form and
substance reasonably satisfactory to the Parent, opining as to the due
incorporation, good standing, and the absence of conflicts between the
transactions contemplated by this Agreement and the material agreements
to which BCI is a party.
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(k) Blue Coral shall have received an irrevocable and
unconditional release from Michael Moshontz, in the form attached
hereto as EXHIBIT 8.3(k) (such release, the "Moshontz Release").
(l) Blue Coral shall have entered into an employment and
non-competition agreement, in form and substance satisfactory to the
Parent, with each of Brian Sokol (such agreement the "Sokol Employment
Agreement"), Joel Adelman, Ron Peterson and John Lai; it being
understood and agreed that the Sokol Employment Agreement will provide,
among other things, for a restricted stock grant to Brian Sokol of the
number of shares withheld from the Blue Coral Stockholders pursuant to
Section 3.1(d) hereof (or the equivalent), the terms and conditions of
such grant to be agreed to by the Blue Coral Stockholders'
Representative and Sokol.
(m) Adelman shall have entered into a standstill agreement, in
the form attached hereto as EXHIBIT 8.3(m), with respect to his
acquisition and ownership of Parent Capital Stock.
(n) Adelman shall have purchased all of the shares of Blue
Coral Common Stock identified on SCHEDULE 4.3 hereto as being owned by
the Selling Stockholders.
(o) All of the indebtedness reflected on SCHEDULE 8.3(O)
hereto shall have been repaid in full (using funds supplied by the
Parent) and all of the agreements and instruments relating to such
indebtedness, including all security agreements, filings and related
instruments, shall have been terminated without further obligation to
Blue Coral or any Blue Coral Subsidiary to the satisfaction of the
Parent.
(p) Blue Coral shall have received from Adelman an amount
equal to all premium payments made by Blue Coral with respect to the
Adelman Policies that are reflected on the Blue Coral Balance Sheet or
which were paid by Blue Coral after December 31, 1995 and Blue Coral
shall have been irrevocably and unconditionally released, in form and
substance reasonably satisfactory to the Parent, from any obligation to
make any such premium payments in the future with respect to the
Adelman Policies.
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(q) The Parent shall have received certificates from Blue
Coral dated the Closing Date and sworn to under penalty of perjury, to
the effect that it is not a "United States real property holding
corporation" within the meaning of section 897(c)(2) of the Code, each
such certificate to be in form set forth in the Treasury regulations.
(r) Each Blue Coral Stockholder shall have furnished a
certification of non-foreign status, as described in Treasury
Regulations ss.1.1445-2(b)(2).
(s) The Blue Coral Stockholders shall have delivered to Parent
at or before the Closing three completed copies of Form 8023-A as
prepared by the Parent and signed by each Blue Coral Stockholder in
accordance with Section 13.2(b).
(t) The Amended and Restated Agreement by and between Blue
Coral and Airosol Company, dated May 29, 1996, shall be in full force
and effect.
ARTICLE IX
CLOSING
-------
9.1 TIME AND PLACE. The Closing shall take place at the
offices of Debevoise & Plimpton, 875 Third Avenue, New York, N.Y. 10022, at
10:00 a.m., local time, on June 27, 1996, or on such other date as Blue Coral
and the Parent may agree.
9.2 FILINGS AT THE CLOSING. At the Closing, the Parent and
Blue Coral shall cause the Certificate of Merger to be filed and recorded in
accordance with the provisions of Sections 103 and 251 of the GCL, and shall
take any and all other lawful actions and do any and all other lawful things
necessary to cause the Merger to become effective. In addition, at the Closing,
the Parent shall deliver the Escrow Deposit to the Escrow Agent in accordance
with Sec tion 3.1(b) hereof and the Escrow Agreement.
9.3 ADDITIONAL TRANSACTION AT THE CLOSING. At the Closing,
Adelman shall sell the Remaining BCI Shares to Quaker State, free and clear of
all Liens, and Quaker State shall purchase such Remaining BCI Shares for
$693,000.
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ARTICLE X
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------------------
The representations and warranties and covenants contained in
this Agreement or any representations and warranties contained in any
certificate, document or instrument delivered pursuant to this Agreement shall
survive the Closing and continue in effect for two years thereafter except that
(i) the representations and warranties made under Sections 4.10(e), 4.14 and
4.21 hereof shall continue to survive and remain in effect through the date that
is 30 days after the expiration of the statute of limitations applicable to the
subject matter thereof, including all extensions and waivers thereof, (ii) the
representations and warranties made under Section 4.22 hereof shall survive the
Closing and continue in effect for three years after the Closing Date, (iii) the
representa tions and warranties in Sections 4.1(c), 4.10(d), 4.17(b), 4.17(c),
4.26, 4.27(a), 4.27(b) and 4.29 hereof shall survive indefinitely, (iv) all
covenants with respect to Tax matters shall survive and remain in effect through
the date that is 30 days after the expiration of the statute of limitations
applicable to the subject matter thereof and (v) all covenants under Sections
4.10(d), 4.29, 7.10 and 7.11 hereof shall survive the Closing and continue in
effect indefinitely. Unless specified otherwise in this Agreement, the
agreements contained in this Agreement (including the agreements contained in
Article XI hereof) or in any certificate, document or instrument delivered
pursuant to this Agreement shall survive the Closing and continue in effect
indefinitely. Any investigation by or on behalf of any party hereto shall not
constitute a waiver as to enforcement of any representation, warranty or
covenant.
ARTICLE XI
INDEMNIFICATION
---------------
11.1 INDEMNIFICATION BY BLUE CORAL STOCKHOLDERS.
Notwithstanding the Closing and subject to the limitations set forth herein
(including, without limitation, Section 11.4(c) hereof), the Blue Coral
Stockholders, jointly and severally, covenant and agree to defend, indemnify and
hold harmless the Parent, its Affiliates (including, without limitation, the
Surviving Corporation and the Blue Coral Subsidiaries following the Effective
Time) and the officers, directors, employees, agents, advisers and
representatives
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of each such Person (collectively, the "Parent Indemnitees") from and against,
and pay or reimburse each such Person for, any and all claims, liabilities,
obligations, losses (including the loss of any Tax asset), fines, costs,
royalties, proceedings, deficiencies or damages (whether absolute, accrued,
conditional or otherwise, and whether or not resulting from third party claims),
including out-of-pocket expenses and reasonable attorneys' and accountants' fees
incurred in the investigation or defense of any of the same or in asserting any
of their respective rights hereunder (collectively, "Losses"), resulting from or
arising out of:
(a) (i) any breach of any covenant or agreement made by Blue
Coral or any Blue Coral Stockholder under this Agreement or in
any schedule hereto or any certificate, document or other
instrument delivered in connection herewith or (ii) any breach
or inaccuracy of any representation or warranty of Blue Coral
or any Blue Coral Stock holder under this Agreement (other
than the representations and warranties in Sections 4.17(b),
4.17(c), 4.21(c) and 4.26) or in any schedule hereto or any
certificate, document or other instrument delivered in
connection herewith (in the case of any such representation or
warranty, without taking into account any qualification as to
materiality or Material Adverse Effect contained in such
representation or warranty);
(b) any breach or inaccuracy of any representa tion or
warranty of Blue Coral or any Blue Coral Stockholder in
Sections 4.17(b), 4.17(c), 4.21(c) or 4.26 or the schedules
relating thereto (without taking into account any
qualification as to materiality or Material Adverse Effect
contained in such representation or warranty);
(c) to the extent not included in the computation of Base
Consideration, any claim, liability or obligation of any kind
relating to (A) the Moshontz Agreements or the Sokol
Agreement, (B) any Excess Transaction Cost Amount, (C) the
Blue Coral Deferred Compensation Plan, (D) any Household
Special Obligation or (E) any of the liabilities, obligations
or commitments referred to in clause (vi) of Section 1.17
hereof,
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including without limitation under the separation
agreements set forth on SCHEDULE 1.17 hereto;
(d) any failure of any Blue Coral Stockholder to
perform its obligations, when due, under Sec-
tion 7.11(b) hereof;
(e) any failure of any debt of a Blue Coral Subsidiary owed to
Blue Coral prior to or as of the Effective Time to be
respected as such for Tax purposes;
(f) any unpaid Tax enumerated on Schedule 4.21(a) that remains
outstanding on the Closing Date to the extent the aggregate
amount of such Taxes exceeds the aggregate amount of the
reserves for such Taxes reflected on the Blue Coral Balance
Sheet; and
(g) any claim, liability or obligation of Blue Coral for Taxes
arising from its membership in any affiliated group prior to
January 1, 1987.
11.2 INDEMNIFICATION BY THE PARENT AND THE SURVIVING
CORPORATION. Notwithstanding the Closing and subject to the limitations set
forth herein, the Parent and the Surviving Corporation, jointly and severally,
covenant and agree to defend, indemnify and hold harmless each Blue Coral
Stockholder, their respective Affiliates and the officers, directors, employees,
agents, advisers and representatives of each such Person from and against, and
pay or reimburse each such Person for, any and all Losses resulting from or
arising out of (a) any breach of any covenant or agreement made by or on behalf
of the Parent or the Subsidiary under this Agreement or in any schedule hereto
or any certificate, document or other instrument delivered in connection
herewith or any (b) breach or inaccuracy of any representation or warranty of
the Parent or the Subsidiary under this Agreement or in any schedule hereto or
any certificate, document or other instrument delivered in connection herewith
(in the case of any such representation or warranty, without taking into account
any qualification as to materiality or Material Adverse Effect contained in such
representation or warranty).
11.3 LIMITATION ON INDEMNITY OBLIGATION. (a) Notwithstanding
anything in Section 11.1 or 11.2 hereof to the contrary, to the extent
indemnification is sought under Section 11.1(a)(ii) or 11.2(b) hereof, the Blue
Coral
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Stockholders or the Parent and the Surviving Corporation, as the case may be,
shall be required to provide indemnifica tion only to the extent the aggregate
amount of Losses arising under Section 11.1(a)(ii) or 11.2(b) hereof, as the
case may be, exceeds $750,000, and not for any amounts up thereto.
(b) Notwithstanding anything in Section 11.1 or 11.2 hereof to
the contrary, the aggregate amount payable by the Blue Coral Stockholders, on
the one hand, or by the Parent and the Surviving Corporation, on the other,
under Sections 11.1(a)(ii), 11.1(e) or 11.2(b) hereof, as the case may be, with
respect to all Losses arising under such Sections, shall not exceed $15,000,000.
(c) The amount of any Loss for which indemni fication is
provided under this Article XI shall be net of any Tax benefits actually
realized by the Indemnified Party as a result thereof, and shall be increased to
take account of any net Tax cost incurred by the Indemnified Party arising from
the receipt of indemnity payments hereunder. Any indemnity payment under this
Agreement shall be treated as an adjustment to the Base Consideration for Tax
purposes, unless the Parent receives an opinion of a law firm of nationally
recognized standing to the effect that there is not substantial authority for
such treatment. Any indemnity under this Article XI in respect of a Loss that is
deduc tible shall be further increased to take account of any present or future
Tax cost arising from the loss of depre ciation pursuant to any such adjustment
to Base Considera tion. This increase shall be equal to the sum of each "lost"
depreciation deduction multiplied by the current (at the time of the adjustment)
maximum combined federal, state and local income tax rate applicable to
corporations (taking into account only states and localities in which Blue Coral
is then subject to income tax), discounted to present value using a discount
rate equal to the United States Treasury Bill rate and using annual compounding,
taking into account the year in which each such depreciation deduction would
otherwise have been allowed.
(d) The indemnification provisions of this Article XI shall be
the sole and exclusive remedy of the parties against one another with respect to
any claim for monetary relief based upon or arising out of this Agreement.
(e) To the extent any Parent Indemnitee is seeking
indemnification solely in respect of the breach of any representation or
warranty, such Parent Indemnitee shall
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be entitled to indemnity only for those Losses as to which such Parent
Indemnitee has given written notice thereof to the Blue Coral Stockholders'
Representative prior to the termination of the applicable survival period for
such representation or warranty applicable to such Loss pursuant to Article X
hereof. Such Parent Indemnitee may at its option give notice under this Section
11.3(e) as soon as it has become aware of a potential claim in respect of any
breach of such representation or warranty, regardless of whether any Losses have
been suffered, so long as such Parent Indemnitee shall in good faith determine
that such potential claim is not frivolous or that such Parent Indemnitee may be
liable or otherwise incur Losses as a result of such claim or otherwise and
shall give written notice of such claim to the Blue Coral Stockholders'
Representative. Any written notice delivered by such Parent Indemnitee pursuant
to this Section 11.3(e) shall set forth with reasonable specificity the basis of
the claim for Losses and, if practicable, an estimate of the amount thereof.
11.4 CLAIMS ON ESCROW DEPOSIT; RELEASE OF PARENT CAPITAL
STOCK. (a) Without limiting the obligations of the Blue Coral Stockholders under
this Article XI, in the event that any Parent Indemnitee shall be entitled to
indemnifi cation for any Loss under Section 11.1 hereof at any time prior to the
Escrow Date (as defined in the Escrow Agreement), the Parent, on behalf of the
Parent Indemnitee, shall, before pursuing any other monetary remedy, make a
claim on the Escrow Deposit in accordance with the provisions of the Escrow
Agreement.
(b) Within 10 Business Days following the second anniversary
of the Closing Date, the Escrow Agent shall, subject to any limitations in the
Escrow Agreement, deliver to the Blue Coral Stockholders' Representative, on
behalf of the Blue Coral Stockholders, a stock certificate evidencing the number
of shares of Parent Capital Stock equal to the number of shares of Parent
Capital Stock then comprising the Escrow Deposit under the Escrow Agreement.
(c) Notwithstanding anything in this Article XI to the
contrary, in the event that any Parent Indemnitee is entitled to indemnification
under this Article XI at any time after the Escrow Date, no Blue Coral
Stockholder (other than the Adelman Family Stockholders) shall have any indem
nification obligation with respect thereto, PROVIDED that the Adelman Family
Stockholders shall thereafter remain, jointly and severally, obligated to
indemnify all Parent
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Indemnitees pursuant to this Article XI, subject to the applicable limitations
set forth in Section 11.3 hereof.
11.5 THE BLUE CORAL STOCKHOLDERS' REPRESENTATIVE.
Notwithstanding anything in this Agreement to the contrary, all rights of the
Blue Coral Stockholders under this Article XI shall be exercisable exclusively
by Adelman, and the Parent and the Surviving Corporation shall be entitled to
deal exclusively with Adelman in respect of all such rights, including, without
limitation, the giving of all notices pursuant to Section 11.6 hereof. Adelman
shall be referred to herein as the "Blue Coral Stockholders' Representative".
11.6 THIRD-PARTY CLAIMS. In the case of any claim (a "Claim")
asserted by a third party against a party entitled to indemnification under this
Agreement (the "Indemnified Party"), notice shall be given by the Indemni fied
Party to the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indem nity may be sought, and the Indemnified Party shall permit the
Indemnifying Party (at the expense of such Indemnifying Party) to assume the
defense of any claim or any litigation resulting therefrom, provided that (i)
the counsel for the Indemnifying Party who shall conduct the defense of such
claim or litigation shall be reasonably satisfactory to the Indemnified Party,
(ii) the Indemnified Party may partici pate in such defense at such Indemnified
Party's expense, (iii) the failure by any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its indemnification
obligation under this Agreement except to the extent that such omission results
in a failure of actual notice to the Indemnifying Party and such Indemni fying
Party is materially damaged as a result of such failure to give notice and (iv)
the Indemnifying Party shall not agree to any reallocation of purchase price to
the assets of Blue Coral pursuant to any agreement with any third party without
the prior written consent of the Parent. Notice to the Blue Coral Stockholders'
Representative pursu ant to this Section 11.6 shall constitute actual notice to
all Blue Coral Stockholders. Except with the prior written consent of the
Indemnified Party, no Indemnifying Party, in the defense of any such claim or
litigation, shall consent to entry of any judgment or order, interim or
otherwise, or enter into any settlement that provides for injunctive or other
nonmonetary relief affecting the Indemnified Party or that does not include as
an unconditional term thereof the giving by each claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such
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claim or litigation. In the event that the Indemnified Party shall in good faith
determine that the conduct of the defense of any claim subject to
indemnification hereunder or any proposed settlement of any such claim by the
Indemnify ing Party might be expected to affect adversely the Indemni fied
Party's Tax liability or the ability of the Surviving Corporation to conduct the
business of the Surviving Cor poration and the Blue Coral Subsidiaries, taken as
a whole, as presently conducted, or that the Indemnified Party may have
available to it one or more defenses or counterclaims that are inconsistent with
one or more of those that may be available to the Indemnifying Party in respect
of such claim or any litigation relating thereto, the Indemnified Party shall
have the right at all times to take over and assume control over the defense,
settlement, negotiations or litigation relating to any such claim at the sole
cost of the Indemnifying Party, provided that if the Indemnified Party does so
take over and assume control, the Indemnified Party shall not settle such claim
or litigation without the written consent of the Indemnifying Party, such
consent not to be unreasonably withheld. In the event that the Indemni fying
Party does not accept the defense of any matter as above provided, the
Indemnified Party shall have the full right to defend against any such claim or
demand and shall be entitled to settle or agree to pay in full such claim or
demand. Notwithstanding the foregoing, the Indemnifying Party shall still
provide indemnification to the Indemnified Party. In any event, the Indemnifying
Party and the Indem nified Party shall cooperate in the defense of any claim or
litigation subject to this Section 11.5 and the records of each shall be
available to the other with respect to such defense.
ARTICLE XII
TERMINATION RIGHTS
------------------
12.1 TERMINATION. This Agreement may be termi
nated at any time prior to the Effective Time:
(a) by mutual consent of the Parent and Blue
Coral;
(b) by either the Parent or Blue Coral if the Merger shall not
have been consummated on or before November 30, 1996; PROVIDED,
HOWEVER, that the right to terminate this Agreement shall not be
available to any party whose failure to fulfill any obligation of this
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Agreement has been the cause of, or resulted in, the
failure of the Merger to have occurred on or before the
aforesaid date;
(c) by the Parent, if Blue Coral or any of the Blue Coral
Stockholders shall have materially breached any of its respective
covenants herein or if Blue Coral or any of the Blue Coral Stockholders
shall have made a material misrepresentation;
(d) by Blue Coral, if either the Parent or the Subsidiary
shall have materially breached any of its covenants herein or if either
the Parent or the Subsidiary shall have made a material
misrepresentation herein; or
(e) by either the Parent or Blue Coral, if any court of
competent jurisdiction or other governmental agency of competent
jurisdiction shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the
Merger, and such order, decree, ruling or other action shall have
become final and non-appealable.
12.2 PROCEDURE AND EFFECT OF TERMINATION. In the
event of termination and abandonment of the Merger by the Parent or Blue Coral
pursuant to Section 12.1 hereof, notice thereof shall forthwith be given to Blue
Coral or the Parent, respectively, and this Agreement shall terminate and the
Merger shall be abandoned, without further action by any of the parties hereto.
The Subsidiary and each of the Blue Coral Stockholders agree that any
termination by the Parent or Blue Coral and the Blue Coral Stockholders'
Representa tive, respectively, shall be conclusively binding upon it, whether
given expressly on its behalf or not. If this Agreement is terminated as
provided herein, no party hereto shall have any liability or further obligation
to any other party to this Agreement except that any termination shall be
without prejudice to the rights of any party hereto arising out of a breach by
any other party of any covenant or agreement contained in this Agreement, and
except that the provisions of Sections 7.6 and 14.3 hereof shall survive such
termination.
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ARTICLE XIII
TAX MATTERS
-----------
13.1 ELECTION. The Parent shall, and the Blue Coral
Stockholders shall, join in all Section 338(h)(10) Elections. Notwithstanding
any other provisions of this Article XIII, a Section 338(h)(10) Election shall
be made only as to Blue Coral and shall not be made as to any Subsidiary, and no
election will be made under Section 338 of the Code as to Blue Coral other than
under Section 338(h)(10) of the Code.
13.2 FORMS. (a) The Parent shall be responsible for the
preparation of all forms and schedules required to be filed in connection with
the Section 338(h)(10) Elections ("SECTION 338 FORMS"), including IRS Form
8023-A and all attachments required to be filed therewith pursuant to applicable
Treasury Regulations ("FORM 8023"). The Blue Coral Stockholders' Representative
and the Parent shall cooperate in drafting and finalizing the Section 338 Forms.
The Parent shall be responsible for filing the Section 338 Forms with the proper
taxing authorities, PROVIDED that the Blue Coral Stockholders shall be
responsible for filing any Section 338 Form that must be filed with a Tax return
required to be filed by Blue Coral Stockholders or their Affiliates.
(b) For the purpose of executing Form 8023, prior to the
signing of this Agreement Parent shall have furnished the Blue Coral
Stockholders' Representative with four copies (three for the Parent and one for
the Blue Coral Stock holders) of Form 8023 prepared by the Parent, including
thereon all information other than (i) the consideration paid for the Blue Coral
Stock, (ii) the liabilities of Blue Coral on the acquisition date, (iii) the
acquisition date and (iv) the allocation of the purchase price among the Blue
Coral assets. The Parent and the Blue Coral Stockholders' Representative shall
agree upon the form and content of such Form 8023, and at the signing of this
Agreement the Blue Coral Stockholders' Representative shall deliver to the
Parent three copies of such Form 8023 executed by each Blue Coral Stockholder,
and the Parent shall deliver to the Blue Coral Stockholders' Representative one
copy of such Form 8023 executed by the proper party on behalf of the Parent.
Prior to the Closing Date, the Parent shall furnish to the Blue Coral
Stockholders' Representative a supplement to the previously executed Form 8023
containing the information referred to in (i) and (iii) above (using for
purposes of
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(i) the Base Consideration), which supplement shall be made a part of the Form
8023 unless the Blue Coral Stockholders receive an opinion of a law firm of
nationally recognized standing to the effect that there is no reasonable basis
for such supplement as so filled out.
(c) The Parent shall prepare (i) any corrections, amendments
or supplements to the Form 8023 as executed by the Parent and the Blue Coral
Stockholders pursuant to Sec tion 13.2(b) hereof, including reflecting any
adjustments to the consideration paid for the Blue Coral Common Stock and the
liabilities of Blue Coral on the Closing Date, and (ii) any state or local
reports or forms that are necessary or appropriate for purposes of complying
with the require ments for making the Section 338(h)(10) Elections (each an
"ADDITIONAL SECTION 338 FORM"). The Blue Coral Stock holders' Representative and
the Parent shall cooperate in drafting and making final each Additional Section
338 Form. At least 30 days prior to the latest date for the filing of each
Additional Section 338 Form, the Parent shall furnish the Blue Coral
Stockholders' Representative with four copies of such Additional Section 338
Form (three for the Parent and one for the Blue Coral Stockholders'
Representative) prepared by the Parent and shall notify the Blue Coral
Stockholders' Representative of the latest date for the filing of such
Additional Section 338 Form. At least 15 days prior to the latest date for the
filing of each Additional Section 338 Form, the Parent and the Blue Coral
Stockholders' Representative shall agree upon the final form and content of such
Additional Section 338 Form, and the Blue Coral Stockholders' Representative
shall deliver to the Parent three copies of such Additional Section 338 Form
executed by each of the Blue Coral Stockholders. In the event of failure to
agree, any such Additional Section 338 Form shall be filled out as determined by
Parent unless the Blue Coral Stockholders receive an opinion of a law firm of
nationally recognized standing to the effect that there is no reasonable basis
for such Additional Section 338 Form as so filled out. Notwithstanding the
foregoing, with regard to any issue the resolution of which in the favor of the
Parent would increase the Tax liability of the Blue Coral Stockholders or the
indemnity obligation of the Blue Coral Stockholders under this Agreement, such
issue shall be resolved pursuant to the Tax Dispute Resolution Mechanism. The
Parent shall cause each such Additional Section 338 Form to be executed by the
proper party on behalf of the Parent, shall deliver to the Blue Coral
Stockholders' Representative one executed copy of such Additional Section 338
Form and
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shall file such Additional Section 338 Form with the applic able Taxing
authority.
13.3 ALLOCATION. (a) On or before the fifteenth day of the
seventh month beginning after the month that includes the Closing Date, the
Parent shall provide to the Blue Coral Stockholders' Representative an
allocation of the purchase price for the deemed sale of assets resulting from
the making of the Section 338(h)(10) Elections, together with a report or
reports in support of such allocation pre pared by the valuation services group
of Coopers & Lybrand or any other firm or firms of independent appraisers of
nationally recognized reputation selected by the Parent, the fees and expenses
of which shall be borne by the Parent, setting forth the estimated fair market
values of the assets of Blue Coral. The allocations provided herein shall be
reflected in an Additional Section 338 Form filed with the IRS on or before the
fifteenth day of the ninth month beginning after the month that includes the
Closing Date. A disagreement regarding the allocation of the purchase price
shall be resolved pursuant to the Tax Dispute Resolution Mechanism if resolution
of such disagreement in favor of the Parent would increase the Tax liability of
the Blue Coral Stockholders or the indemnity obligation of the Blue Coral
Stockholders under this Agreement. Notwithstanding any of the foregoing, if
Sandusky purchases the NicSand Shares the allocation of purchase price to the
NicSand Shares owned by Blue Coral on the Closing Date shall not be less than
the amount paid by Sandusky for such NicSand Shares.
(b) TAX DISPUTE RESOLUTION MECHANISM. Any dispute to be
resolved pursuant to the "TAX DISPUTE RESOLUTION MECHANISM," shall be resolved
as follows: (i) the Parent and the Blue Coral Stockholders' Represen tative will
in good faith attempt to negotiate a prompt settlement of the dispute; (ii) if
they are unable to negotiate a resolution of the dispute within 15 days, the
dispute will be submitted to the valuation services group of Ernst & Young or
any other firm of independent appraisers of nationally recognized reputation
agreed upon by the Parent and the Blue Coral Stockholders' Representative (the
"Arbitrator"); (iii) the Parent and the Blue Coral Stock holders' Representative
will present their arguments and submit the proposed amount of each item in
dispute to the Arbitrator within 15 days after submission of the dispute to it;
(iv) the Arbitrator shall resolve the dispute, in a fair and equitable manner
and in accordance with applicable Tax law and the provisions of this Agreement,
by selecting, for each item in dispute, the proposed amount for such item
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submitted by either the Parent or the Blue Coral Stock holders' Representative
within 25 days after the parties have presented their arguments to the
Arbitrator, whose decision shall be final, conclusive and binding on the Parent
and the Blue Coral Stockholders; and (V) if a dispute shall not be resolved on
or before the date that is three business days prior to the latest date on which
the applicable Additional Section 338 Form may be filed under applicable Tax
law, then the Additional Section 338 Form shall be filed on or prior to such
date reflecting all the disputed items that have been resolved in the manner so
resolved and the unresolved items shall be reflected as submitted by the Parent
in clause (iii) above. An Amendment to such Additional Section 338 Form shall be
filed after resolution by the Arbitrator of the remaining unresolved items. The
fees and expenses of the Arbitrator in resolving a dispute will be borne equally
by the Blue Coral Stock holders and the Parent.
13.4 MODIFICATION; REVOCATION. The Parent and the Blue Coral
Stockholders agree that none of them shall, or shall permit any of their
Affiliates to, take any action to modify the Section 338 Forms following the
execution thereof, or to modify or revoke the Section 338(h)(10) Elections
following the filing of the Section 338 Forms, without the written consent of
the Blue Coral Stockholders' Representative and the Parent, as the case may be.
13.5 CONSISTENT TREATMENT. The Parent and the Blue Coral
Stockholders shall, and shall cause their respective Affiliates to, file all Tax
returns in a manner consistent with the information contained in the Section 338
Forms and the Additional Section 338 Forms as filed and the allocations provided
pursuant to section 13.3.
13.6 TAXES AND EXPENSES RESULTING FROM ELECTIONS.
Notwithstanding any other provision of this Agreement other than the provisions
of the next sentence, the Blue Coral Stockholders shall be responsible for (and
Blue Coral shall have no responsibility for) all Taxes imposed by any
Governmental Authority that is or should be listed on Schedule 4.21(d) resulting
from the making of the Section 338(h)(10) Elections with respect to the Merger
incurred by Blue Coral, including, without limitation, such Taxes on built-in
gain under Section 1374(a) of the Code and such Taxes of the Blue Coral
Stockholders paid by Blue Coral (the "Section 338 Taxes"), and all Taxes imposed
upon the Blue Coral Stockholders by virtue of their ownership of Blue Coral
Common Stock on the Closing Date except as provided in
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the next sentence. Blue Coral shall be responsible for (and the Blue Coral
Stockholders shall have no responsibility for) all Taxes imposed on it by any
Governmental Authority not referred to in the preceding sentence (an "Other
Govern mental Authority") attributable to the making of a Section 338(h)(10)
Election with respect to the Merger ("Excluded Taxes"), and the Parent shall
indemnify the Blue Coral Stockholders for Taxes imposed on them by any Other
Govern mental Authority attributable to the making of a Section 338(h)(10)
Election with respect to the Merger to the extent such Taxes are greater than
they would have been had such Section 338(h)(10) Election not been made. Prior
to the Closing, Parent and the Blue Coral Stockholders shall estimate the amount
of the Section 338 Taxes (the "Estimated 338 Taxes") for purposes of calculating
the Base Considera tion. If the Section 338 Taxes are greater or less than the
Estimated 338 Taxes, the Blue Coral Stockholders shall pay such excess to Parent
or Parent shall repay such deficiency to the Blue Coral Stockholders'
Representative, as the case may be, in either case as an adjustment to Base
Considera tion. Notwithstanding any other provision of this Agree ment, the
Parent and its Affiliates (including Blue Coral and its subsidiaries following
the Closing), on the one side, and the Blue Coral Stockholders and its
Affiliates (following the Closing), on the other side, shall bear their
respective administrative, appraisal, legal, accounting and similar expenses
resulting from the making of the Sec tion 338(h)(10) Elections.
13.7 OTHER TAX MATTERS. The Blue Coral Stock holders'
Representative shall cause to be prepared and filed all Tax returns (or
amendments thereto) of Blue Coral and the Blue Coral Subsidiaries for Tax
periods of Blue Coral and the Blue Coral Subsidiaries ending before or on the
Closing Date that are either (a) required to be filed on or prior to the Closing
Date or (b) are income tax returns (or amendments thereto) (the "Stockholder
Returns"). The Parent shall cause to be prepared and filed all other Tax returns
of Blue Coral and the Blue Coral Subsidiaries for Tax periods beginning before
the Closing Date (the "Parent Returns"). The Blue Coral Stockholders shall pay
(and Blue Coral shall have no responsibility for) all Taxes incurred by Blue
Coral and the Blue Coral Subsidiaries in respect of the Stockholder Returns or
the Parent Returns (i) that under applicable Tax law are Taxes of the Blue Coral
Stockholders payable by Blue Coral even if Blue Coral is required under
applicable Tax law to pay such Taxes or (ii) that the Blue Coral Stockholders
are obligated to pay or indemnify against pursuant to Article XI, Section 7.8 or
Section 13.6., and
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Blue Coral shall pay (and the Blue Coral Stockholders shall have no
responsibility for) any other Taxes that under applicable Tax law are Taxes of
Blue Coral and the Blue Coral Subsidiaries in respect of the Stockholder Returns
or in respect of the Parent Returns. In the case of a Parent Return for a Tax
period that begins before and ends after the Closing Date for which the Blue
Coral Stockholders have any liability or obligation hereunder to pay or
reimburse the Parent for the Taxes applicable to such Parent Return, such
liability or obligation of the Blue Coral Stockholders shall be computed, to the
extent practicable, as if the Tax period of Blue Coral for such period ended on
the Closing Date and without regard to the inclusion in such Parent Return of
Tax attributes of the Parent or any of its other Affiliates. The Blue Coral
Stockholders' Representative, Blue Coral and the Parent shall cooperate with
each other and act in good faith in connection with the preparation and filing
of the Stockholder Returns and the Parent Returns and shall give one another the
opportunity to comment on any such Tax return. The Blue Coral Stockholders'
Representative shall notify the Parent, on the one hand, and the Parent shall
notify the Blue Coral Stockholders' Representative, on the other hand, promptly
of any audit, investigation or written inquiry by any Tax authority as to any
Stockholder Return or any Parent Return that could affect any Stockholder
Return. The Blue Coral Stockholders' Representative, at the expense of the Blue
Coral Stock holders, may control or participate in to the extent they desire any
proceedings by a Tax authority with respect to a Stockholder Return, provided
that, the Blue Coral Stock holders shall not agree with any Tax authority to a
reallocation of purchase price among the assets of Blue Coral without the prior
express written consent of Parent. Neither Blue Coral nor the Parent nor any
other Affiliate of the Parent shall (i) file or cause the filing of an amended
Stockholder Return or otherwise agree to any Tax adjustments with respect to any
Stockholder Return or (ii) agree to an extension of the statute of limitations
applicable to any Stockholder Tax Return, in either case without the prior
express written consent of the Blue Coral Stockholders' Representative.
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ARTICLE XIV
OTHER PROVISIONS
----------------
14.1 AMENDMENT AND MODIFICATION. Subject to Applicable Law,
this Agreement may be amended, modified or supplemented only by mutual written
agreement of the Parent, the Subsidiary, Blue Coral and each of the Blue Coral
Stock holders owning of record in the aggregate a majority of the issued and
outstanding shares of Blue Coral Common Stock.
14.2 WAIVER OF COMPLIANCE; CONSENTS. Any failure of the Parent
or the Subsidiary, on the one hand, or, Blue Coral or the Blue Coral
Stockholders on the other hand, to comply with any obligation, covenant,
agreement or condition herein may be waived by Blue Coral or the Parent, respec
tively, only by a written instrument signed by the party granting such waiver,
but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section 14.2. The Subsidiary
hereby agrees that any consent or waiver of com pliance given by the Parent
hereunder shall be conclusively binding upon it, whether given expressly on its
behalf or not. Each of the Blue Coral Stockholders hereby agrees that any
consent or waiver of compliance given by Blue Coral hereunder shall be
conclusively binding upon them, whether given expressly on their behalf or not.
14.3 CONFIDENTIALITY. Blue Coral, each Blue Coral Stockholder,
the Parent and the Subsidiary shall keep confidential and not use or disclose
any information pre viously or hereafter obtained by it pursuant to this Agree
ment (the party receiving such information is hereinafter referred to as the
"Receiving Party") with respect to the other or such other's parents,
subsidiaries, Affiliates or other related entities (the party, or such party's
parents, subsidiaries, Affiliates or other related entities, with respect to
which the information relates is hereinafter referred to as the "Disclosing
Party") in connection with this Agreement and the negotiations preceding this
Agreement (such information is hereinafter referred to as the "Confi dential
Information"), and the Receiving Party will use such Confidential Information
solely in connection with the transactions contemplated by this Agreement, and
if the
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transactions contemplated hereby are not consummated for any reason, the
Receiving Party shall either return to the Disclosing Party, without retaining a
copy thereof, or destroy any schedules, documents or other written or elec
tronically stored information constituting Confidential Information (or prepared
based upon such Confidential Information) in connection with this Agreement and
the transactions contemplated hereby and the negotiations preceding this
Agreement. Without limiting the generality of the foregoing, the Receiving Party
shall be permitted to disclose any Confidential Information to such of its
Affiliates, officers, directors, employees, agents, lenders and representatives
(collectively, "Representatives") as have a need to know such Confidential
Information, provided such Representatives shall be informed that disclosure of
such Confidential Information by such Representatives would be in contravention
hereof and the Receiving Party shall be responsible for any disclosure
prohibited hereby by any of its Representatives. Notwithstanding the foregoing,
the Receiving Party shall not be required to keep confidential or return any
information which (i) is known or available through other lawful sources, not
bound by a confidentiality agreement with the Disclosing Party, or (ii) is or
becomes publicly known other than as a result of the disclosure by the Receiving
Party or its Representatives or (iii) is required to be disclosed pursuant to an
order or request of a judicial or governmental authority or a self-regulatory
body or pursuant to any law or regulation in any jurisdiction (provided the
Disclosing Party is given reasonable prior written notice), or (iv) is developed
by the Receiving Party independently of, and is not based upon, the Confidential
Information.
14.4 LEGEND. Each certificate representing shares of Parent
Capital Stock issued to any Blue Coral Stockholder shall bear upon its face the
following legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR UNLESS SUCH OFFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM
REGISTRATION AND IN EACH CASE IS OTHERWISE IN COMPLIANCE WITH
THE ACT AND SUCH LAWS."
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The above legend shall be removed, at the Parent's expense, from any shares of
Parent Capital Stock issued to and held by any Blue Coral Stockholder upon (i)
the expiration of the three year period (or if Rule 144 under the Act is
modified to decrease the holding period described in paragraph (k) of Rule 144,
such shorter period specified in paragraph (k) as so modified or contained in
any successor provision) beginning on the date hereof, except where such Blue
Coral Stockholder is an affiliate of the Parent, (ii) the sale of any such
shares pursuant to registration of such shares under the Securities Act or (iii)
the Parent's receipt of an opinion, in form and substance satisfactory to the
Parent, that registration under the Securities Act is not required with respect
to any future sale of such shares by such Blue Coral Stockholder.
14.5 BENEFIT AND ASSIGNMENT. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, successors and assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party to this
Agreement without the prior written consent of the other Parties hereto.
Notwithstanding the foregoing, the Parent and the Subsidiary may assign their
respective rights and obligations under this Agreement to any of their
respective Affiliates, PROVIDED that any such assignment shall not relieve the
Parent or the Subsidiary, as the case may be, from any of its obligations under
this Agreement.
14.6 NO THIRD-PARTY BENEFICIARIES. Except as provided in
Section 11.1 hereof with respect to indemni fication, nothing in this Agreement
shall confer any rights upon any Person other than the parties hereto and their
respective heirs, successors and permitted assigns.
14.7 ENTIRE AGREEMENT. This Agreement and the exhibits and
schedules hereto embody the entire agreement and understanding of the parties
hereto and supersede any and all prior agreements, arrangements and
understandings relating to the matters provided for herein. No amendment, waiver
of compliance with any provision or condition hereof or consent pursuant to this
Agreement shall be effective unless evidenced by an instrument in writing signed
by the party against whom enforcement of any amendment, waiver or consent is
sought.
14.8 HEADINGS. The headings set forth in this
Agreement are for convenience only and will not control or
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affect the meaning or construction of the provisions of this
Agreement.
14.9 CHOICE OF LAW. The construction and performance of this
Agreement shall be governed by the laws of the State of New York without regard
to its principles of conflict of laws, except insofar as the laws of the state
of Delaware are mandatorily applicable to the Merger, and the state and federal
courts of New York shall have exclusive jurisdiction over any controversy or
claim arising out of or relating to this Agreement.
14.10 NOTICES. All notices, requests, demands, letters,
waivers and other communications required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given if (a)
delivered personally, (b) mailed, certified or registered mail with postage
prepaid, (c) sent by next-day or overnight mail or delivery or (d) sent by fax,
as follows:
To Blue Coral or to the Blue Coral
Stockholders' Representative:
Blue Coral, Inc.
1215 Valley Belt Road
Cleveland, OH 44131-1415
Attention: Mr. Sheldon G. Adelman
Phone: 216-351-3000
Fax: 216-351-6989
With a copy to:
Baker & Hostetler
1900 East Ninth Street
3200 National City Center
Cleveland, OH 44114-3485
Attention: Robert G. Markey
Phone: 216-621-0200
Fax: 216-696-0740
To the Parent or the Subsidiary:
Quaker State Corporation
225 East John Carpenter Freeway
Irving, TX 75062
Attention: Secretary
Phone: 214-868-0400
Fax: 214-868-0440
85
<PAGE> 93
With a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Richard D. Bohm
Phone: 212-909-6226
Fax: 212-909-6836
or to such other Person or address as any party shall specify by notice in
writing to the party entitled to notice. All such notices, requests, demands,
letters, waivers and other communications shall be deemed to have been received
(w) if by personal delivery on the day after such delivery, (x) if by certified
or registered mail, on the fifth Business Day after the mailing thereof, (y) if
by next-day or overnight mail or delivery, on the day delivered or (z) if by
fax, on the next day following the day on which such fax was sent, provided that
a copy is also sent by certified or registered mail.
14.11 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
86
<PAGE> 94
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
QUAKER STATE CORPORATION
By: /s/ Herbert M. Baum
-----------------------------
Name: Herbert M. Baum
Title: Chairman of the Board
and Chief Executive Officer
QSBC ACQUISITION CORP.
By: /s/ Herbert M. Baum
-----------------------------
Name: Herbert M. Baum
Title:
BLUE CORAL, INC.
By: /s/ Sheldon Adelman
-----------------------------
Name:
Title:
/s/ Sheldon Adelman
-----------------------------
Sheldon Adelman
/s/ Carl Glickman
------------------------------
Carl Glickman
/s/ Michael Turk
------------------------------
Michael Turk
/s/ Nick Federico
------------------------------
Nick Federico
/s/ Lawrence Minich
------------------------------
Lawrence Minich
<PAGE> 95
GST-EXEMPT TRUST FBO
WENDY ADELMAN
By: /s/ Robert G. Markey
---------------------------
Co-Trustee
By: /s/ Michael G. Turk
---------------------------
Co-Trustee
/s/ Howard Adelman
------------------------------
Howard Adelman
/s/ Ronald Peterson
------------------------------
Ronald Peterson
/s/ Robert Markey
------------------------------
Robert Markey
/s/ Joel Adelman
------------------------------
Joel Adelman
/s/ Norton Rose
------------------------------
Norton Rose
<PAGE> 1
Exhibit #2
==========================================================================
ESCROW AGREEMENT
among
QUAKER STATE CORPORATION
and
THE BLUE CORAL STOCKHOLDERS
(as defined herein)
and
UNITED STATES TRUST COMPANY OF NEW YORK
as Escrow Agent
Dated as of June 28, 1996
==========================================================================
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION I
APPOINTMENT OF ESCROW AGENT; RESIGNATION AND
SUCCESSOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Appointment of Escrow Agent . . . . . . . . . . . . . . . . . . . . 1
1.2 Resignation of Escrow Agent; Appointment of Successor . . . . . . . 2
SECTION II
ESCROW ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Liability Secured by the Escrow Deposit . . . . . . . . . . . . . . 2
2.2 Delivery of the Escrowed Shares; etc. . . . . . . . . . . . . . . . 2
2.3 Investment of the Escrow Deposit . . . . . . . . . . . . . . . . . . 4
2.4 Right to Vote the Escrowed Shares . . . . . . . . . . . . . . . . . 4
SECTION III
RELEASE OF THE ESCROW DEPOSIT . . . . . . . . . . . . . . . . . . . . . 5
3.1 Distribution of Cash Dividends and Income . . . . . . . . . . . . . 5
3.2 Distributions for Indemnification . . . . . . . . . . . . . . . . . 5
3.3 Release upon the Escrow Date . . . . . . . . . . . . . . . . . . . . 7
SECTION IV
ESCROW AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 Responsibilities of Escrow Agent . . . . . . . . . . . . . . . . . . 9
SECTION V
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Blue Coral Stockholders' Representative11
5.2 Amendment and Termination . . . . . . . . . . . . . . . . . . . . . 12
5.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.5 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
i
<PAGE> 3
ESCROW AGREEMENT
AGREEMENT, dated as of June 28, 1996, among QUAKER STATE CORPORATION, a
Delaware corporation (the "Parent"), the individuals and the trust listed on the
signature pages hereto (collectively, the "Blue Coral Stockholders"), and UNITED
STATES TRUST COMPANY OF NEW YORK, as Escrow Agent (the "Escrow Agent").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Blue Coral Stockholders and the Parent, together with QSBC
Acquisition Corp. (the "Subsidiary") and Blue Coral, Inc. ("Blue Coral"), have
entered into an Agreement and Plan of Merger, dated as of June 7, 1996,
providing for the merger of the Subsidiary into Blue Coral (the "Merger
Agreement", which Merger Agreement contains certain definitions applicable to
capitalized terms used herein without definition);
WHEREAS, the Merger Agreement provides that the Parent Indemnitees shall
be indemnified by the Blue Coral Stockholders for certain possible Losses;
WHEREAS, to facilitate such indemnification, the Merger Agreement
provides for the deposit into escrow of a portion of the Merger Consideration
otherwise payable to the Blue Coral Stockholders; and
WHEREAS, the Parent and the Blue Coral Stockholders desire to secure the
services of the Escrow Agent, and the Escrow Agent is willing to provide such
services, pursuant to the terms and conditions of this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION I
APPOINTMENT OF ESCROW AGENT; RESIGNATION AND SUCCESSOR
1.1 APPOINTMENT OF ESCROW AGENT. The Escrow Agent is hereby appointed,
and accepts its appointment and designation as, Escrow Agent pursuant to the
terms and conditions of this Agreement.
<PAGE> 4
1.2 RESIGNATION OF ESCROW AGENT; APPOINTMENT OF SUCCESSOR. The Escrow
Agent acting at any time hereunder may resign at any time by giving at least 30
days' prior written notice of resignation to the Parent and the Blue Coral
Stockholders' Representative, such resignation to be effective on the date
specified in such notice. Upon receipt of such notice, the Parent and the Blue
Coral Stockholders' Representative shall, unless they otherwise agree, appoint a
bank or trust company with a combined capital and surplus of at least $100
million as successor Escrow Agent, by a written instrument delivered to such
Escrow Agent, the Parent and the Blue Coral Stockholders' Representative,
whereupon such successor Escrow Agent shall succeed to all the rights and
obligations of the retiring Escrow Agent as of the effective date of resignation
as if originally named herein. Upon such assignment of this Escrow Agreement,
the retiring Escrow Agent shall duly transfer and deliver the Escrow Deposit at
the time held by the retiring Escrow Agent, PROVIDED that, if no successor
Escrow Agent shall have been appointed on the effective date of resignation of
the resigning Escrow Agent hereunder, the resigning Escrow Agent may pay the
Escrow Deposit into a court of competent jurisdiction.
SECTION II
ESCROW ARRANGEMENTS
2.1 LIABILITY SECURED BY THE ESCROW DEPOSIT. This Escrow Agreement has
been executed and delivered, and the Escrow Account is hereby established, to
facilitate any indemnification which may be owed to the Parent Indemnitees
pursuant to the Merger Agreement.
2.2 DELIVERY OF THE ESCROWED SHARES; ETC. (a) On the Closing Date,
the Parent shall deliver to the Escrow Agent a certificate, bearing the legend
indicated in Section 14.4 of the Merger Agreement and registered in the name
"United States Trust Company of New York as Escrow Agent under Escrow Agreement,
dated June 28, 1996, by and among Quaker State Corporation and the Blue Coral
Stockholders (as defined therein)", for the applicable number of shares of
Parent Capital Stock determined in accordance with Section 3.1 of the Merger
Agreement (such shares, together with any additional shares of Parent Capital
Stock distributed pursuant to any stock split, stock dividend, reclassification
of shares or other transaction to which such shares may be subject, the
"Escrowed Shares"; the Escrowed Shares
2
<PAGE> 5
and any other securities, cash or other property distributed in respect of the
Escrowed Shares (whether by way of liquidation, merger, exchange, spin-off or
otherwise), any investments or securities permitted by this Agreement and any
interest received thereon shall constitute the "Escrow Deposit"). The parties
agree that all such distributions, including, without limitation, all such
interest and all other income earned on the Escrow Deposit shall be interest
and income of the Blue Coral Stockholders and shall be reported by the Blue
Coral Stockholders for federal, state and local tax purposes as for the
accounts of the Blue Coral Stockholders pro rata in accordance with the pro
rata ownership of the Blue Coral Stockholders reflected on the Ownership
Certificate (as hereinafter defined).
(b) At any time and from time to time during the term of this
Agreement, the Blue Coral Stockholders' Representative (as defined in Section
5.1 hereof), on behalf of any Blue Coral Stockholder, shall have the right to
substitute cash for any Escrowed Shares included in the Escrow Deposit by
depositing with the Escrow Agent an amount of cash equal to the product of (i)
the number of Escrowed Shares such Blue Coral Stockholder wishes to substitute
cash for (the "Substituted Shares"), TIMES (ii) the Adjusted Average Trading
Price (as defined in Section 3.2(e) below). Upon receipt of such amount of
cash in respect of such Substituted Shares, the Escrow Agent shall release such
Substituted Shares to the Blue Coral Stockholders' Representative on behalf of
such Blue Coral Stockholder.
(c) On the Closing Date, the Blue Coral Stockholders shall deliver to
the Escrow Agent a written certificate signed by each of the Blue Coral
Stockholders setting forth the respective ownership interests of each Blue Coral
Stockholder with respect to the Escrowed Shares (as the same may be amended from
time to time in accordance with the next sentence, the "Ownership Certificate").
The Ownership Certificate may be amended from time to time by written
certificate executed by the Blue Coral Stockholders' Representative and
delivered to the Escrow Agent.
(d) The Escrow Agent shall hold the Escrow Deposit in an Escrow Account
(the "Escrow Account") for the benefit of the Blue Coral Stockholders and the
Parent Indemnitees. The Escrow Deposit shall not be subject to any lien or
attachment of any creditor or any party thereto, and shall be used solely for
the purposes and subject to the conditions set forth in this Agreement and the
Merger Agreement.
3
<PAGE> 6
2.3 INVESTMENT OF THE ESCROW DEPOSIT. Except for the release of the
Escrow Deposit pursuant to Sections 2.2(b) and 3 hereof, the Escrow Agent shall
not sell or transfer any of the Escrowed Shares. Notwithstanding the foregoing,
the Escrow Agent is hereby authorized and directed to invest any cash contained
in the Escrow Deposit in the following obligations (collectively, the "Permitted
Investments"):
(a) obligations of, or fully guaranteed as to timely payment of
principal and interest by, the United States of America;
(b) such money market funds as are agreed to from time to time by the
Parent and the Blue Coral Stockholders' Representative; and
(c) certificates of deposit with any bank or trust company organized
under the laws of the United States of America or any agency or instrumentality
thereof or under the laws of any state thereof which has a combined capital and
surplus of at least $100,000,000.
Subject to the foregoing limitations, the Escrow Agent shall invest any
such cash in accordance with written instructions delivered to it by the Blue
Coral Stockholders' Representative from time to time. Except as provided above,
the Escrow Agent shall have no power or duty to invest the Escrow Deposit or to
make substitutions therefor or to sell, transfer or otherwise dispose of
investments acquired hereunder.
2.4 RIGHT TO VOTE THE ESCROWED SHARES. The Blue Coral Stockholders'
Representative, on behalf of the Blue Coral Stockholders, shall have the right
to direct the Escrow Agent in a writing signed by the Blue Coral Stockholders'
Representative to exercise the voting rights pertaining to all or a portion of
the Escrowed Shares that remain in the Escrow Account. The Escrow Agent shall
comply with any such directions. In the absence of such directions, the Escrow
Agent shall vote all of the Escrowed Shares in accordance with the
recommendations of management of Quaker State.
4
<PAGE> 7
SECTION III
RELEASE OF THE ESCROW DEPOSIT
3.1 DISTRIBUTION OF CASH DIVIDENDS AND INCOME. Any cash dividends
ordinarily declared and paid by the Parent on a quarterly basis with respect to
the Escrowed Shares and deposited pursuant hereto ("Cash Dividends") and all
interest earned on any portion of the Escrow Deposit shall be distributed by the
Escrow Agent to (or as directed by) the Blue Coral Stockholders' Representative,
on behalf of the Blue Coral Stockholders, promptly after receipt thereof by the
Escrow Agent.
3.2 DISTRIBUTIONS FOR INDEMNIFICATION. (a) At any time prior to the
second anniversary of the date hereof (the "Escrow Date"), the Parent may
deliver to the Escrow Agent a certificate (a "Notice of Claim") (i) stating that
a Parent Indemnitee is of the opinion that it may be entitled to indemnification
pursuant to Article XI of the Merger Agreement (an "Indemnified Obligation"),
(ii) stating the aggregate amount (the "Claim Amount") of such Indemnified
Obligation (or, in the case of an unliquidated Indemnification Obligation, a
good faith and reasonable estimate thereof), and (iii) specifying in reasonable
detail the nature of such Indemnified Obligation. Any Notice of Claim delivered
pursuant to this Section with respect to any unliquidated Indemnification
Obligation may be supplemented by a later Notice of Claim specifying in greater
detail the applicable Claim Amount or any other items set forth therein. Upon
delivery of any such Notice of Claim, the Escrow Agent shall, within five days
of receipt thereof, deliver a written notice together with a copy of such Notice
of Claim to the Blue Coral Stockholders' Representative.
(b) If the Blue Coral Stockholders' Representative shall object on
behalf of the Blue Coral Stockholders to the Indemnification Obligation or the
Claim Amount specified in such Notice of Claim, the Blue Coral Stockholders'
Representative shall, within ten business days after delivery of the written
notice containing a copy of any such Notice of Claim, deliver to the Escrow
Agent a certificate (a "Reply Certificate") (x) specifying each such objection,
and (y) specifying in reasonable detail the nature and basis for such objection.
Within five business days after delivery to the Escrow Agent of a Reply
Certificate, the Escrow Agent shall deliver a copy of such Reply Certificate to
the Parent. The Parent and the Blue Coral Stockholders' Representative shall
negotiate in good faith
5
<PAGE> 8
for a period of 20 days after delivery of such Reply Certificate to the Parent
to reach a written resolution of any objections raised in a Reply Certificate.
(c) If no Reply Certificate is delivered with respect to any Notice of
Claim, then the Blue Coral Stockholders' Representative shall be deemed to have
delivered a Payment Authorization (as defined below) acknowledging the Parent's
right to receive the Claim Amount specified in such Notice of Claim with respect
to the applicable Indemnification Obligation and the Escrow Agent shall transfer
to the Parent a portion of the Escrow Deposit in an amount equal to such Claim
Amount, all in accordance with the procedures set forth in Section 3.2(e).
(d) If the Escrow Agent receives a Reply Certificate in a timely manner
with respect to any Notice of Claim, the Claim Amount referred to in such Notice
of Claim shall be held by the Escrow Agent and shall not be released to the
Parent except upon the Parent's delivery to the Escrow Agent of either (i)
written instructions signed by each of an authorized officer of the Parent and
the Blue Coral Stockholders' Representative directing the Escrow Agent to
release the Claim Amount (or any other amount mutually agreed upon by such
parties) or (ii) both (A) a final, non-appealable order, judgment or decree of a
court or other body having jurisdiction over the matters relating to the
Indemnification Obligation referred to in such Notice of Claim demonstrating
that the Parent Indemnitee is entitled to indemnification for such Claim Amount
from the Blue Coral Stockholders pursuant to the Merger Agreement and (B) either
a certificate of the Parent, or a legal opinion from counsel reasonably
satisfactory to the Blue Coral Stockholders, certifying or opining, as the case
may be, that such order, judgment or decree is final and non-appealable (either
of (i) or (ii), a "Payment Authorization"), at which date the portion of the
amount due to such Parent Indemnitee determined pursuant to (i) or (ii) above
shall promptly be paid to the Parent in accordance with the procedures set forth
herein.
(e) As soon as practicable following receipt by the Escrow Agent of a
Payment Authorization, the Escrow Agent shall pay from the Escrow Deposit to the
Parent, on behalf of the Parent Indemnitee, the amount expressly set forth in
such Payment Authorization. In making such payment, the Escrow Agent shall
utilize the Escrow Deposit as directed in writing by the Blue Coral
Stockholders' Representative on or prior to the date that the Escrow Agent
6
<PAGE> 9
receives a Payment Authorization, or if not so directed on such date, then as
follows, in the following order of priority, to the extent required to make
such payment:
FIRST, the Escrow Agent shall utilize any cash then held
in the Escrow Deposit;
SECOND, to the extent of any insufficiency, the Escrow Agent
shall transfer, deliver and assign to the Parent, on behalf of the
Parent Indemnitee such number of Escrowed Shares (rounded up or down to
the nearest whole share) held in the Escrow Account as shall have a
value equal to the amount required to make or complete such payment, it
being understood and agreed that such Escrowed Shares shall be valued
for such purpose based upon the Average Trading Price, as adjusted for
any stock split, stock reclassification, recapitalization or other
similar transaction since the Closing under the Merger Agreement
(as so adjusted, the "Adjusted Average Trading Price"); and
THIRD, to the extent of any insufficiency, the Escrow Agent
shall sell securities or investments, other than the Escrowed Shares,
then held in the Escrow Deposit for cash and utilize such cash to make
up such insufficiency.
In the event the Escrow Deposit shall be insufficient to pay the amount
expressly set forth in such Payment Authorization, the Escrow Agent shall pay
the entire amount of the Escrow Deposit to the Parent, on behalf of the Parent
Indemnitee, in accordance with this Section 3.2(e) and shall deliver to the
Parent and to the Blue Coral Stockholders' Representative a written
notification setting forth the amount by which such Payment Authorization
exceeds the amount of the Escrow Deposit so paid.
(f) To the extent that any payment pursuant to Section 3.2(e) hereof
shall be made in cash, the Escrow Agent shall pay all such amount to the Parent,
on behalf of the Parent Indemnitee, by wire transfer to the bank account or
accounts designated by the Parent to the Escrow Agent in writing not less than
one Business Day prior to the date of such payment.
3.3 RELEASE UPON THE ESCROW DATE. (a) On the Escrow Date, the Escrow
Agent shall distribute the Escrow Deposit to the Blue Coral Stockholders'
Representative and terminate the Escrow Account, unless the Escrow Agent shall
7
<PAGE> 10
have received a Notice of Claim from the Parent prior to the Escrow Date with
respect to an indemnification claim (an "Unresolved Claim") for which the
Escrow Agent has not received a subsequent Payment Authorization or written
notification, signed by the Parent and the Blue Coral Stockholder's
Representative, informing the Escrow Agent of the termination or other
resolution of such claim or claims (each, a "Claim Termination Notice"). If on
the Escrow Date there shall exist any Unresolved Claim, then (i) the Escrow
Agent shall retain the Escrow Deposit in the Escrow Account in an amount
sufficient for the payment of all Claim Amounts with respect to all such
Unresolved Claims, and (ii) theEscrow Agent shall release to the Blue Coral
Stockholder's Representative the portion of the Escrow Deposit in the Escrow
Account not otherwise retained in accordance with clause (i). For all purposes
of this Section 3.3(a), the Escrowed Shares shall be deemed to have a per share
value equal to the Adjusted Average Trading Price.
(b) Upon the resolution of any Unresolved Claim, the Escrow Agent shall
(A) release any portion of the Escrow Deposit retained in respect of such
Unresolved Claim (x) to the Parent in accordance with any Payment Authorization
received by the Escrow Agent in respect of such Unresolved Claim or (y) to the
Blue Coral Stockholder's Representative in accordance with any Claim Termination
Notice received by the Escrow Agent in respect of such Unresolved Claim and, if
no other Unresolved Claims remain outstanding, (B) release the remainder of the
Escrow Deposit to the Blue Coral Stockholders' Representative. For purposes of
this Section 3.3(b), the Escrowed Shares shall have a per share value equal to
the Adjusted Average Trading Price.
(c) Any distribution to the Blue Coral Stockholders' Representative
pursuant to this Section 3.3 shall be made by the Escrow Agent, in accordance
with the written instructions of the Blue Coral Stockholders' Representative
(including, without limitation, any instructions as to the liquidation of the
Escrow Account and/or the transfer of the Escrowed Shares to the transfer agent
of the Parent). The Escrow Agent shall sign such stock powers or other
documents of transfer as are necessary to transfer any remaining Escrowed Shares
included within the Escrow Deposit in accordance with such instructions (the
"Released Shares").
8
<PAGE> 11
SECTION IV
ESCROW AGENT
4.1 FEES. For its services hereunder, the Escrow Agent shall receive
$5,000 upon its receipt of the Escrow Deposit at the Closing and $5,000 for each
calendar year (or fraction thereof) until it has delivered all of the Escrow
Deposit pursuant to Section 3. One- half of the fees referred to in the
foregoing sentence shall be paid the Parent and one-half of such fees shall be
paid by the Blue Coral Stockholders' Representative, on behalf of the Blue Coral
Stockholders.
4.2 RESPONSIBILITIES OF ESCROW AGENT. The Escrow Agent's acceptance of
its duties under this Agreement is subject to the following terms and
conditions, which the parties hereto agree shall govern and control with respect
to its rights, duties, liabilities and immunities:
(a) Except as to its due execution and delivery of the Agreement, it
makes no representation and has no responsibility as to the validity of this
Agreement or of any other instrument referred to herein, or as to the
correctness of any statement contained herein, and it shall not be required
to inquire as to the performance of any obligation under the Merger
Agreement;
(b) The Escrow Agent shall be protected in acting upon any written
notice, request, waiver, consent, receipt or other paper or document, not
only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth of any information therein contained,
which it in good faith believes to be genuine and what it purports to be;
(c) The Escrow Agent shall not be liable for any error of judgment, or
for any act done or step taken or omitted by it in good faith, or for any
mistake of fact or law, or for anything which it may do or refrain from
doing in connection therewith, except its own gross negligence or
misconduct;
(d) The Escrow Agent may consult with competent and responsible legal
counsel selected by it, and it shall not be liable for any action taken or
omitted by it in good faith in accordance with the advice of such counsel;
9
<PAGE> 12
(e) The Parent and the Blue Coral Stockholders shall reimburse the
Escrow Agent for all expenses incurred by it in connection with its duties
hereunder (other than taxes imposed in respect of the receipt of fees by the
Escrow Agent pursuant to Section 4.1). The Parent and the Blue Coral
Stockholders agree to jointly and severally indemnify and hold the Escrow
Agent and its directors, employees, officers, agents, successors and assigns
(collectively, the "Indemnified Parties") harmless from and against any and
all losses, claims, damages, liabilities and expenses (collectively,
"Damages"), including, without limitation, reasonable costs of investigation
and counsel fees and expenses which may be imposed on the Escrow Agent or
incurred by it in connection with its acceptance of this appointment as the
Escrow Agent hereunder or the performance of its duties hereunder. Such
indemnity includes, without limitation, Damages incurred in connection with
any litigation (whether at the trial or appellate levels) arising from this
Escrow Agreement or involving the subject matter hereof. The
indemnification provisions contained in this paragraph are in addition to
any other rights any of the Indemnified Parties may have by law or otherwise
and shall survive the termination of this Agreement or the resignation or
removal of the Escrow Agent. Notwithstanding any provision to the contrary
in this Escrow Agreement, the Parent and the Blue Coral Stockholders shall
have no liability to the Indemnified Parties with respect to any Damages
that result, directly or indirectly, from the gross negligence or misconduct
of the Escrow Agent;
(f) The Escrow Agent shall have no duties or responsibilities except
those expressly set forth herein, and it shall not be bound by any
modification of this Agreement unless in writing and signed by all parties
hereto or their respective successors in interest;
(g) The Escrow Agent shall have no responsibility in respect of the
validity or sufficiency of this Escrow Agreement or of the terms hereof.
The recitals of facts in this Escrow Agreement shall be taken as the
statements of the Parent and the Blue Coral Stockholders, and the Escrow
Agent assumes no responsibility for the correctness of the same. The Escrow
Agent shall be under no obligation or duty to perform any act which would
involve it in an expense or liability or to institute or defend any suit in
respect of this Escrow Agreement or to
10
<PAGE> 13
advance any of its own monies unless properly indemnified;
(h) The Escrow Agent shall be protected in acting upon any notice,
resolution, request, consent, order, certificate, report, opinion, bond or
other paper or document reasonably believed by it to be genuine and to have
been signed and presented by the proper party or parties. Whenever the
Escrow Agent shall deem it necessary or desirable that a matter be proved or
established prior to taking or suffering any action under this Escrow
Agreement, such matter may be deemed inclusively proved and established by a
certificate signed by the Parent and the Blue Coral Stockholders'
Representative (on behalf of the Blue Coral Stockholders), and such
certificate shall be full warranty for any action taken or suffered in good
faith under the provisions of this Escrow Agreement; and
(i) The Escrowed Agent does not have any interest in the Escrow Deposit
but is serving as escrow agent only and having only possession thereof.
This Section 4.2(i) shall survive notwithstanding any termination of this
Agreement or the resignation of the Escrow Agent.
SECTION V
MISCELLANEOUS
5.1 BLUE CORAL STOCKHOLDERS' REPRESENTATIVE. (a) Each Blue Coral
Stockholder hereby irrevocably appoints to act on his behalf, in considering and
certifying the amount of any indemnification hereunder, in communicating with
the Blue Coral Stockholders, in appointing a successor Escrow Agent, in
considering and acting with respect to any amendment or termination of this
Agreement, and generally in performing all acts expressly required or permitted
to be performed by the Blue Coral Stockholders' Representative pursuant hereto,
Sheldon Adelman to serve as the Blue Coral Stockholders' Representative. If Mr.
Adelman should resign, die or otherwise become unable to serve as the Blue Coral
Stockholders' Representative, the Blue Coral Stockholders shall be obligated,
within 20 days following any such event, to elect, by plurality vote, another
Blue Coral Stockholders' Representative hereunder.
(b) Notwithstanding anything in this Agreement to the contrary, any
distribution from the Escrow Account shall, upon the express written instruction
from the Blue
11
<PAGE> 14
Coral Stockholders' Representative, be distributed by the Escrow Agent directly
to one or more of the Blue Coral Stockholders. The Parent and the Escrow Agent
shall have the right to deal exclusively with the Blue Coral Stockholders'
Representative with respect to all matters under this Agreement and neither the
Parent nor the Escrow Agent shall have any liability to any Blue Coral
Stockholder for any acts or omissions of the Blue Coral Stockholders'
Representative, or any acts or omissions taken or not taken by the Parent or
the Escrow Agent at the direction of the Blue Coral Stockholders'
Representative, including, but not limited to (i) any acts or omissions
relating to the voting of any Escrowed Shares or (ii) the transferring or the
failure to transfer any Released Shares, Cash Dividends, interest, or other
shares or amounts released from the Escrow Account. Upon any distribution from
the Escrow Account to the Blue Coral Stockholders' Representative (or to one or
more of the Coral Stockholders upon written instruction of the Blue Coral
Stockholders' Representative) in accordance with this Agreement, the Escrow
Agent and the Parent shall be deemed to have fully satisfied any and all
obligations to each Blue Coral Stockholder under this Agreement and the Merger
Agreement with respect to the amount of such distribution.
5.2 AMENDMENT AND TERMINATION. This Agreement may be amended or
terminated by the written agreement of the parties hereto, or shall terminate
automatically at such time as all securities and funds from the Escrow Deposit
have been paid or distributed in accordance with the terms of this Agreement and
the Escrow Agent has received all fees as described in Section 5.1 hereto.
Notwithstanding the foregoing, all provisions concerning the indemnification of
the Escrow Agent shall survive any termination of this Agreement.
5.3 NOTICES. All notices, requests, demands, letters, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
sent by next-day or overnight mail or delivery or (d) sent by fax, as follows:
12
<PAGE> 15
To the Blue Coral Stockholder's Representative:
Blue Coral, Inc.
1215 Valley Belt Road
Cleveland, OH 44131-1415
Attention: Mr. Sheldon G. Adelman
Phone: 216-351-3000
Fax: 216-351-6989
With a copy to:
Baker & Hostetler
1900 East Ninth Street
3200 National City Center
Cleveland, OH 44114-3485
Attention: Robert G. Markey
Phone: 216-621-0200
Fax: 216-696-0740
To the Parent:
Quaker State Corporation
225 East John Carpenter Freeway
Irving, TX 75062
Attention: Secretary
Phone: 214-868-0400
Fax: 214-868-0440
With a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Richard D. Bohm
Phone: 212-909-6226
Fax: 212-909-6836
To the Escrow Agent:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust and Agency Division
Phone: 212-852-1674
Fax: 212-852-1626
or to such other Person or address as any party shall specify by notice in
writing to the party entitled to notice. All such notices, requests, demands,
letters, waivers and
13
<PAGE> 16
other communications shall be deemed to have been received (w) if by personal
delivery on the day after such delivery, (x) if by certified or registered
mail, on the fifth Business Day after the mailing thereof, (y) if by next-day
or overnight mail or delivery, on the day delivered or (z) if by fax, on the
next day following the day on which such fax was sent, provided that a copy is
also sent by certified or registered mail.
5.4 GOVERNING LAW. This Agreement shall be construed, performed and
enforced in accordance with the laws of the State of New York.
5.5 MISCELLANEOUS. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and assigns. The headings in
this Agreement are for convenience of reference only and shall not define or
limit the provisions hereof. This Agreement may be executed in several
counterparts, each of which is an original but all of which together shall
constitute one instrument.
14
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
QUAKER STATE CORPORATION
By: /s/ Paul E. Konney
___________________________
Name:
Title:
/s/ Sheldon Adelman
_____________________________
Sheldon Adelman
/s/ Carl Glickman
______________________________
Carl Glickman
GST-EXEMPT TRUST FBO
WENDY ADELMAN
By: /s/ Robert G. Markey
___________________________
Co-Trustee
By: /s/ Michael G. Turk
___________________________
Co-Trustee
/s/ Michael Turk
______________________________
Michael Turk
/s/ Nick Federico
______________________________
Nick Federico
/s/ Lawrence Minich
______________________________
Lawrence Minich
/s/ Howard Adelman
______________________________
Howard Adelman
<PAGE> 18
/s/ Ronald Peterson
______________________________
Ronald Peterson
/s/ Robert Markey
______________________________
Robert Markey
/s/ Joel Adelman
______________________________
Joel Adelman
/s/ Norton Rose
______________________________
Norton Rose
UNITED STATES TRUST COMPANY
OF NEW YORK, as Escrow Agent
By: /s/ Margaret Ciesmelewski
__________________________
Name: Margaret Ciesmelewski
Title: AVP
<PAGE> 1
Exhibit #3
STANDSTILL AGREEMENT
--------------------
THIS STANDSTILL AGREEMENT (the "Agreement"), dated as of June
28, 1996 by and between QUAKER STATE CORPORATION, a Delaware corporation (the
"Parent"), and Sheldon G. Adelman (the "Stockholder"). Capitalized terms used
herein without definition shall have the same meaning as such terms have under
the Merger Agreement (as defined below).
WHEREAS, the Parent and the Stockholder are parties to an
Agreement and Plan of Merger, dated as of June 7, 1996 (the "Merger Agreement")
among the Parent, the Stockholder, QSBC Acquisition Corp., Blue Coral, Inc. and
certain other parties named therein.
WHEREAS, the Stockholder is entitled to receive at the
Effective Time under the Merger Agreement 1,400,934 shares (the "Shares") of
capital stock of the Parent, par value $1.00 per share (the "Voting
Securities"), subject to the terms of an Escrow Agreement executed on the date
hereof; and
WHEREAS, the Parent is requiring, as a condition to the
Closing of the Merger Agreement, that the Stockholder enter into this Agreement
so as to avoid uncertainty between them with respect to the Shares.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements set forth herein and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree as
follows:
1. THE STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES. The
Stockholder represents and warrants to the Parent that: (A) the Stockholder is
duly authorized to execute, deliver and perform this Agreement; (B) this
Agreement has been duly executed by the Stockholder, is a valid and binding
agreement of the Stockholder, enforceable against the Stockholder in accordance
with its terms; (C) the execution, delivery and performance by the Stockholder
of this Agreement does not violate or conflict with or result in a breach of or
constitute (or with notice or lapse of time or both constitute) a default under
any agreement to which the Stockholder is a party; and (D) the Shares represent
all of the Voting Securities beneficially owned by the Stockholder on the date
hereof.
<PAGE> 2
2. PARENT'S REPRESENTATIONS AND WARRANTIES. The Parent
represents and warrants to the Stockholder that the Parent is duly authorized to
execute, deliver and perform this Agreement and that this Agreement has been
duly executed by the Parent, is a valid and binding agreement of the Parent,
enforceable against the Parent in accordance with its terms.
3. RESTRICTIONS ON TRANSFERS. The Stockholder agrees that,
during the term of this Agreement, the Stock holder will not, directly or
indirectly, sell, transfer or otherwise dispose of any interest in the Shares
without the consent of the Parent, PROVIDED, that the Stockholder may transfer
the Shares (A) to any Permitted Transferee (as defined below), (B) to any person
who the Stockholder believes, after due inquiry, would beneficially own
immediately after any such sale or transfer less than 5% of the outstanding
Voting Securities, (C) to any person who the Stockholder believes, after due
inquiry, would be entitled to report beneficial ownership of Voting Securities
on Schedule 13G under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (D) in any sale constituting a "brokers transaction" within the
meaning of Rule 144(a) under the Securities Act of 1933, as amended (or any
successor rule thereto) or (E) in a public offering effected pursuant to the
Registration Rights Agreement. For purposes of this Agreement, (X) the term
"Voting Securities" shall include any securities of the Parent with the power to
vote with respect to the election of directors generally or securities
convertible into or exercisable or exchangeable for such securities and (Y) the
term "Permitted Transferee" shall mean (I) any donee which is a spouse or an
immediate family member of the Stockholder or any other bona fide donee which is
a charitable, civic, educational or other similar not-for-profit organization,
or (II) any trust, corporation, limited liability company or partnership for the
benefit of, or controlled by, either directly or indirectly, the Stockholder
and/or the Stockholder and his or her spouse and immediate family members,
PROVIDED (A) in the case of clause (i) or (ii) above, such transferee has agreed
in an instrument of assumption reasonably satisfactory in form and substance to
the Parent to be bound by all of the terms and conditions of this Agreement and
(B) in the case of clause (ii) above, to the extent any such trust, corporation,
limited liability company or partnership shall cease to be so controlled, it
shall cease to be a Permitted Transferee for all purposes of this Agreement.
2
<PAGE> 3
4. VOTING. The Stockholder agrees that, prior to a Vacancy
Event, if any, the Stockholder will (A) be present, in person or represented by
proxy, at all stockholder meetings of the Parent so that all Voting Securities
beneficially owned by the Stockholder may be counted for the purpose of
determining the presence of a quorum at such meetings and (B) vote or consent,
or cause to be voted or a consent to be given, with respect to all Voting
Securities beneficially owned by the Stockholder on all matters submitted to
stockholders for a vote or consent in accordance with the recommendation made by
management on such matters; it being understood and agreed that the provisions
of this Section 4 shall not apply following any Vacancy Event. For purposes of
this Agreement, the term "Vacancy Event" shall mean any failure of the
Stockholder to be a member of the Board of Directors of the Parent due to (i)
his removal as a director in accordance with the by-laws of the Parent, (ii) the
Parent's failure to comply with its obligations under Section 7.3 of the Merger
Agreement, or (iii) the Parent's failure to nominate the Stockholder for
re-election to the Board of Directors of the Parent at any stockholders' meeting
at which the Stockholder's board seat is up for re-election.
5. STANDSTILL PROVISIONS. The Stockholder
agrees that, during the term of this Agreement, without the
Parent's prior written consent, the Stockholder will not:
(a) acquire, announce an intention to acquire, offer or
propose to acquire, or agree to acquire, directly or indirectly, by
purchase or otherwise, record or beneficial ownership of any Voting
Securi ties, or direct or indirect rights to options to acquire
(through purchase, exchange, conversion or otherwise) any Voting
Securities, other than any such Voting Securities acquired by the
Stockholder pursuant to the exercise of warrants, options or other
rights to purchase Voting Securities granted to the Stockholder by the
Parent;
(b) make, or in any way participate, directly or indirectly,
in any "solicitation" of "proxies" (as such terms are defined in Rule
14a-1 under the Securities Exchange Act of 1934, as amended (the "1934
Act")) to vote any Voting Securities, seek to advise, encourage or
influence any person or entity with respect to the voting of any Voting
Securities, initiate or propose any shareholder proposal or induce
3
<PAGE> 4
or attempt to induce any other person to initiate any
shareholder proposal;
(c) make any statement or proposal, whether written or oral,
to the Board of Directors of the Parent, or to any director, officer or
agent of the Parent, or make any public announcement or proposal
whatsoever with respect to a merger or other business combination, sale
or transfer of assets, recapitalization, dividend, share repurchase,
liquidation or other extraordinary corporate transaction with the
Parent or any other transaction which could result in a change of
control, or solicit or encourage any other person to make any such
statement or proposal;
(d) except for an arrangement with one or more Family
Affiliates (as defined below) following a Vacancy Event, form, join or
in any way participate in a "group" (within the meaning of Section
13(d)(3) of the 1934 Act) with respect to any securities of the Parent;
it being understood and agreed that the term "Family Affiliate" means
the spouse or an immediate family member of the Stockholder or a trust,
corporation, limited liability company or partnership for the benefit
of or controlled by, either directly or indirectly, by the Stockholder
and/or the Stockholder and his or her spouse and immediate family
members PROVIDED that if any such trust, corporation, limited liability
company or partnership shall cease to be so controlled, it shall cease
to be a Family Affiliate for all purposes of this Agreement;
(e) except for an arrangement with one or more Family
Affiliates following a Vacancy Event, deposit any Voting Securities
into a voting trust or subject any Voting Securities to any arrangement
or agreement with respect to the voting of any Voting Securities other
than this Agreement;
(f) execute any written consent with respect to
the Parent, except in accordance with Section 4;
(g) otherwise act, alone or in concert with others, to seek to
exercise any control over the management, the board of directors of the
Parent or the policies of the Parent;
(h) make a public request to the Parent (or its
directors, officers, shareholders, employees or agents)
4
<PAGE> 5
to amend or waive any provisions of this Agreement, the certificate of
incorporation or by-laws of the Parent, including without limitation
any public request to permit the Parent or any other person to take any
action in respect of the matters referred to in this Section 5;
(i) take any action which might require the Parent to make a
public announcement regarding the possibility of any transaction
referred to in paragraph (c) above or similar transaction or, advise,
assist or encourage any other persons in connection with the foregoing;
or
(j) disclose any intention, plan or arrangement
inconsistent with the foregoing.
6. SPECIFIC PERFORMANCE. Each of the Stockholder and the
Parent acknowledges that the other party would not have an adequate remedy at
law for money damages if any of the covenants or agreements of the other party
in this Agreement were not performed in accordance with its terms and therefore
agrees that the other party shall be entitled to specific enforcement of such
covenants or agreements and to injunctive and other equitable relief in addition
to any other remedy to which it may be entitled, at law or in equity.
7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the execution of this Agreement and any investigation at
any time by the Stockholder, the Parent, or on behalf of either thereof.
8. ENTIRE AGREEMENT. This Agreement herewith, contains the
entire understandings of the parties with respect to the subject matter hereof
and may not be amended except by a writing signed by the parties. This Agreement
shall be binding upon the parties hereto and their respective heirs, legal
representatives, successors and assigns, PROVIDED that this Agreement shall not
be assignable by either of the parties except as provided herein.
9. SEVERABILITY. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in
5
<PAGE> 6
full force and effect, unless such action would substantially impair the
benefits to either party of the remaining provisions of this Agreement.
10. NOTICES. All notices, requests, demands, letters, waivers
and other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (A) delivered
personally, (B) mailed, certified or registered mail with postage prepaid, (C)
sent by next-day or overnight mail or delivery or (D) sent by fax, as follows:
To the Stockholder:
Blue Coral, Inc.
1215 Valley Belt Road
Cleveland, OH 44131-1415
Attention: Mr. Sheldon G. Adelman
Phone: 216-351-3000
Fax: 216-351-6989
With a copy to:
Baker & Hostetler
1900 East Ninth Street
3200 National City Center
Cleveland, OH 44114-3485
Attention: Robert G. Markey
Phone: 216-621-0200
Fax: 216-696-0740
To the Parent:
Quaker State Corporation
225 East John Carpenter Freeway
Irving, TX 75062
Attention: Secretary
Phone: 214-868-0400
Fax: 214-868-0440
6
<PAGE> 7
With a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Richard D. Bohm
Phone: 212-909-6226
Fax: 212-909-6836
or to such other Person or address as any party shall specify by notice in
writing to the party entitled to notice. All such notices, requests, demands,
letters, waivers and other communications shall be deemed to have been received
(W) if by personal delivery on the day after such delivery, (X) if by certified
or registered mail, on the fifth Business Day after the mailing thereof, (Y) if
by next-day or overnight mail or delivery, on the day delivered or (Z) if by
fax, on the next day following the day on which such fax was sent, provided that
a copy is also sent by certified or registered mail.
11. COOPERATION. Subject to the terms and conditions of this
Agreement, each of the parties hereby agrees to use all reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws, rules and
regulations to consummate and make effective the transactions contemplated by
this Agreement. In case at any time after the execution of this Agreement,
further action is necessary or desirable to carry out the purposes of this
Agreement, each party shall take, or cause to be taken, all such necessary or
desirable action.
12. TERM. This Agreement shall expire on the
fourth anniversary of the date hereof.
13. GOVERNING LAW, ETC. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware. This Agreement may be executed in one or
more counterparts, which together will constitute a single
agreement.
14. COUNTERPARTS. This Agreement may be executed
in one or more counterparts, each of which will be deemed an
original and all of which together will constitute one and the same instrument.
7
<PAGE> 8
IN WITNESS WHEREOF, the Parent and the Stockholder have caused
this Agreement to be executed in their names effective as of the date first
written above.
QUAKER STATE CORPORATION
By: /s/ Paul E. Konney
-------------------------
Name:
Title:
/s/ Sheldon G. Adelman
-------------------------
Sheldon G. Adelman
<PAGE> 1
Exhibit #4
===============================================================================
REGISTRATION RIGHTS AGREEMENT
among
QUAKER STATE CORPORATION
and
THE BLUE CORAL STOCKHOLDERS
(as defined herein)
Dated as of June 28, 1996
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Registrations Upon Demand............................................................................1
1.1 Demands.....................................................................................1
1.2 Registration Statement Form.................................................................2
1.3 Expenses....................................................................................2
2. Opinion of Counsel in Lieu of Registration...........................................................3
3. Incidental Registrations.............................................................................3
3.1 Procedures......................................................................................4
4. Registration Procedures..............................................................................6
5. Holdback Agreements.................................................................................11
6. Preparation; Reasonable Investigation...............................................................11
7. Representation by the Parent........................................................................11
8. Indemnification.....................................................................................12
8.1 Indemnification by the Parent..............................................................12
8.2 Indemnification by the Sellers.............................................................13
8.3 Notices of Claims, etc.....................................................................13
8.4 Other Indemnification......................................................................14
8.5 Limitation on Indemnification by the Sellers
..........................................................................................14
8.6 Other Remedies.............................................................................15
9. Definitions.........................................................................................16
10. Miscellaneous......................................................................................18
10.1 Successors, Assigns and Transferees.......................................................18
10.2 Amendment and Modification................................................................19
10.3 GOVERNING LAW.............................................................................19
10.4 Invalidity of Provision...................................................................19
10.5 Notices...................................................................................19
10.6 Headings; Execution in Counterparts.......................................................20
10.7 Entire Agreement..........................................................................20
10.8 Term......................................................................................20
</TABLE>
i
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of June 28, 1996,
among QUAKER STATE CORPORATION, a Delaware corporation (the "Parent") and the
individuals and trusts listed on the signature pages hereto (such individuals
and trusts, collectively, the "Blue Coral Stockholders"). Capitalized terms used
herein without definitions shall have the respective meanings assigned thereto
in Article 10 hereof.
1. Registrations Upon Demand.
-------------------------
1.1 Demands. At any time after the Closing Date, the Blue
Coral Stockholders shall have the right to make up to two separate demands that
the Parent effect registration under the Securities Act of all or a portion of
the Registrable Securities owned by such Blue Coral Stockholders (the Blue Coral
Stockholder or Blue Coral Stockholders exercising such registration rights
hereunder are referred to herein as the "Demand Registrants"), PROVIDED that the
Parent shall not be required to effect any registration demanded pursuant to
this Section 1.1 if: (a) another registration of equity securities of the Parent
under the Securities Act is then pending or has been duly and validly demanded
by any Person pursuant to any contractual arrangement existing on the date
hereof between such Person and the Parent and such contractual arrangement
prohibits the Parent from effecting such registration at such time pursuant to
this Agreement, (b) a period of less than three months shall have elapsed from
the effective date of the most recent registration previously effected by the
Parent, or (c) the number of Registrable Securities for which such registration
is demanded is less than 20% of the total number of Merger Shares. Upon any such
qualifying demand, the Parent will promptly, but in any event within 15 days,
give written notice of such demand to all holders of Registrable Securities and
thereupon the Parent will use its best efforts to effect the prompt registration
under the Securities Act of (I) the Registrable Securities which the Parent has
been so demanded to register by the Demand Registrants, and (II) all other
Registrable Securities which the Parent has been requested to register by the
holders thereof by written request given to the Parent within 20 days after the
giving of such written notice by the Parent, all to the extent required to
permit the disposition of the Registrable Securities so to be registered on any
securities exchange on which equity securities of the Parent are then
<PAGE> 4
listed, in "brokers' transactions" within the meaning of section 4(4) of the
Securities Act, in transactions directly with a "market maker," as that term is
defined in section 3(a)(38) of the Exchange Act or in privately negotiated
transactions.
Notwithstanding the foregoing, if the Parent shall at any time
furnish to each seller of the Registrable Securities to be registered a
certificate of the Parent stating that counsel to the Parent, which counsel
shall be reasonably satisfactory to the Demand Registrants, or the Board of
Directors of the Parent has determined that the Parent has pending or in process
a material transaction or other development, the disclosure of which would, in
the good faith judgment of the Parent, materially and adversely affect the
Parent, then, in either case, the Parent may defer the filing (but not the
preparation) of a registration statement, and may withhold efforts to cause the
registration statement to become effective if the registration has been filed,
for up to 120 days, but the Parent shall use all reasonable efforts to resolve
the transaction and, in accordance with Section 4, to file the registration
statement and cause it to become effective as soon as possible. If the Parent
shall so defer the filing of any such registration statement, or so withhold
efforts to cause the registration statement to become effective, the holders of
Registrable Securities to be registered shall have the right to withdraw the
demand for registration by giving written notice to the Parent from the Majority
Holders within 20 days after receipt of the applicable notice of deferment (and,
in the event of such withdrawal, such demand shall not be counted for purposes
of determining the number of demands for registration to which the holders of
Registrable Securities are entitled pursuant to Section 1.1). Notwithstanding
anything else to the contrary in this Section 1.1 or in Section 5, the aggregate
number of days during which otherwise qualifying holders of Registrable
Securities shall be prohibited from registering and selling Registrable
Securities under this Section 1.1 shall not exceed 180 days during any
consecutive 12-month period.
1.2 REGISTRATION STATEMENT FORM. Each registra tion demanded
pursuant to Section 1.1 shall be effected by the filing of a registration
statement on a Form S-3, unless the Parent is not qualified to use such Form, in
which case such registration shall be effected on any Form selected by the
Parent for which the Parent then qualifies.
2
<PAGE> 5
1.3 EXPENSES. (a) The Parent will pay all Registration
Expenses in connection with any registration demanded under Section 1.1;
provided that any seller thereunder shall pay all Registration Expenses to the
extent required to be paid by such seller under applicable law, including any
applicable blue sky laws.
(b) In connection with a registration of Registerable
Securities under Section 1.1 or Section 3, the sellers of such Registerable
Securities shall have the right upon written request to require the Parent to
pay all fees and disbursements of the counsel to such sellers in such
registration that total up to $20,000.00, provided that the Parent shall only be
obligated to pay such fees and disbursements in connection with any two
registrations during the term of this Agreement. Except as provided in the
preceding sentence, the sellers of Registerable Securities will be exclusively
responsible for paying any fees and disbursements of any counsel retained by the
sellers of such Registrable Securities in connection with any registration of
such Registrable Securities under Section 1.1 or Section 3.
2. OPINION OF COUNSEL IN LIEU OF REGISTRATION. Notwithstanding
anything in this Agreement to the contrary, if in the opinion of counsel for the
Parent, which opinion shall be in form and substance reasonably satisfactory to
such Blue Coral Stockholder and its counsel, no registration under the
Securities Act is required in connection with any Blue Coral Stockholder's
disposition of any of the Merger Shares covered by a demand for registration
made by such Blue Coral Stockholder under Section 1.1 in the manner in which
such Blue Coral Stockholder proposes to dispose of such Merger Shares included
in such demand, such Merger Shares (x) shall not be eligible for registration
under this Agreement, (y) shall not be included in any determination of whether
or not the test set out in clause (c) of Section 1.1 has been satisfied and (z)
shall no longer constitute Registrable Securities under this Agreement;
provided, however, that if prior to such disposition, such counsel withdraws,
rescinds or otherwise nullifies such opinion, or if the opinion of counsel for
the Majority Holders, which opinion shall be in form and substance reasonably
satisfactory to the Parent and its counsel, the facts or law supporting such
opinion have substantively changed, then this Section 2 shall be inoperative
with respect to the sale of such Merger Shares in such registration.
3. INCIDENTAL REGISTRATIONS.
3
<PAGE> 6
3.1 PROCEDURES. If the Parent at any time proposes to register
any of its equity securities under the Securities Act (other than pursuant to
Section 1 or a registration on Form S-4 or S-8 or any successor form), whether
for its own account or for the account of others, and the registration form to
be used may be used for the registration of Registrable Securities, it will give
prompt written notice to all holders of Registrable Securities of its intention
to do so. Upon the written request of any such holder (each, a "Requesting
Holder") made within 15 days after the receipt of any such notice (which request
shall specify the number of Registrable Securities intended to be disposed of by
such holder), the Parent will use its best efforts to effect the registration
under the Securities Act of all such Registrable Securities, PROVIDED that:
(a) in the case of any Specialty Demand Registration,
registration under this Section 3 shall only be effected to the extent
permitted under Section 2.1(b) of the Specialty Oil Registration Rights
Agreement;
(b) if, at any time after giving written notice of its
intention to register any equity securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Parent shall determine for any reason not to
register such equity securities, the Parent may, at its election, give
written notice of such determination to each holder of Registrable
Securities and, thereupon, shall not be obligated to register any
Registrable Securities in connection with such registration (but shall
nevertheless pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights of the Blue Coral
Stockholders to request that a registration be effected under, and in
accordance with the terms and limitations of, Section 1; and
(c) if a registration pursuant to this Section 3 involves an
underwritten offering, and the managing underwriter (or, in the case of
an offering that is not underwritten, a nationally recognized
investment banking firm) shall advise the Parent by letter of its
opinion that the number or type of equity securities requested to be
included in such registration would, in its opinion, materially
adversely affect such offering, including the price at which such
securities can be sold, and the Parent has so advised each Requesting
Holder in writing, then the Parent will include in such
4
<PAGE> 7
registration, to the extent of the number and type of securities which
the Parent is so advised can be sold in (or during the time of) such
offering, FIRST, all securities, if any, proposed by the Parent to be
sold for its own account, SECOND, to the extent that the number of
securities which the Parent proposes to sell for its own account
pursuant to such offering is less than the number of securities which
the Parent has been advised can be sold in such offering without having
the adverse effect referred to above, any securities initially proposed
to be registered by the Parent for the accounts of other Persons
pursuant to the exercise of demand registration rights if such
securities must be included to prevent a breach of any applicable
registration rights agreement between the Parent and such other Person,
but only in such amount and to the extent required by such agreement,
THIRD, to the extent that the number of securities which the Parent
proposes to sell for its own account pursuant to this Section 3,
together with those securities included in such offering pursuant to
clause second is less than the number of shares which the Parent has
been advised can be sold in such offering without having the adverse
effect referred to above, such securities requested to be included by
any Person pursuant to rights granted to such Person in Section 2.2(b)
of the Specialty Oil Registration Rights Agreement, and FOURTH, such
Registrable Securities requested to be included in such registration
pursuant to this Agreement and such other securities proposed to be
registered by the Company for the accounts of each other Person (not
included in those securities to be registered pursuant to clause SECOND
and clause THIRD) and which by the terms of any applicable registration
rights agreement between the Parent and such other Person must be
included in the same proportion as the Registrable Securities of any
Requesting Holder under this Agreement, pro rata among such Requesting
Holders and such other Persons on the basis of the estimated proceeds
from the sale thereof. Additionally, any Blue Coral Stockholders who
are then executive officers or directors of Blue Coral or the Parent
will not be entitled to participate in any such registration to the
extent that the managing underwriter (or, in the case of an offering
that is not underwritten, an investment banker) shall determine in good
faith that the participation of such executive officers or directors of
Blue Coral or the Parent would adversely affect the marketability of
the other securi ties being sold in such registration. Any Requesting
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<PAGE> 8
Holder may elect in writing, prior to the effective date of the
registration statement filed in connection with such registration, to
withdraw such request and not to have such securities registered in
connection with such registration. No registration effected under this
Section 3.1 shall relieve the Parent from its obligation to effect
registrations under Section 1.
3.2 EXPENSES. Each Requesting Holder shall pay its pro rata
share of all Registration Expenses incurred in connection with a
registration under Section 3.1, such pro rata share to be calculated based
on the relative number of shares that such Requesting Holder included in
such registration as compared to the total number of shares of Parent
Capital Stock being sold by all Persons in such registration. Subject to
Section 1.3(b), each Requesting Holder will be exclusively responsible for
paying any fees and disbursements of any counsel retained by such
Requesting Holder in connection with any registration under Section 3.1.
4. REGISTRATION PROCEDURES. If and whenever the Parent is
required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Section 1,
the Parent will, subject to Section 1.1, promptly:
(a) prepare, and as soon as practicable, but in any event
within 60 days thereafter file with the Commission, a registration
statement with respect to such Registrable Securities, make all
required filings with the NASD and use its best efforts to cause such
registration statement to become effective;
(b) prepare and file with the Commission such amendments and
post-effective amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for so long as
is required to comply with the provisions of the Securities Act and to
complete the disposition of all securities covered by such
registration statement as provided in Section 1.1, but in no event for
a period of longer than four months after such registration statement
becomes effective;
(c) furnish to counsel selected by the holders of at least
51% of the Registrable Securities
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<PAGE> 9
proposed to be sold in connection with such registration (such
holders, the "Majority Holders") copies of all documents proposed to be
filed with, or submitted to the staff of, the Commission in connection
with such registration, which documents will be subject to the review
of such counsel, and the Parent shall not file any amendment or
post-effective amendment or supplement to such registration statement
or the prospectus included therein to which the Majority Holders or
their counsel shall have reasonably objected in writing on the grounds
that such amendment or supplement does not comply (explaining why) in
all material respects with the requirements of the Securities Act or of
the rules or regulations thereunder, unless the Parent determines that
the filing of such amendment or supplement is required by law or
necessary to avoid liability under the Securities Act;
(d) furnish to each seller of Registrable Securities, without
charge, such number of conformed copies of such registration statement
and of each such amendment and supplement thereto (in each case
including at least one copy of all exhibits and documents filed
therewith) and such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the
Securities Act, and such other documents, as such seller may reasonably
request in order to facilitate the disposition of the Registrable
Securities owned by such seller as provided in Section 1.1;
(e) use reasonable efforts to register or qualify such
Registrable Securities covered by such registration statement under the
securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things which may
be necessary or advisable to enable such seller to consummate the
disposition of such Registrable Securities in such jurisdictions in the
manner provided in Section 1.1, PROVIDED that the Parent shall not for
any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified,
subject itself to taxation in any jurisdiction wherein it is not so
subject, or
7
<PAGE> 10
take any action which would subject it to general service of process
in any jurisdiction wherein it is not so subject;
(f) use reasonable efforts to cause all Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies, authorities or
self-regulatory bodies as may be necessary by virtue of the business
and operations of the Parent to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities as provided
in Section 1.1;
(g) notify each seller of any Registrable Securities covered
by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the
happening of any event or existence of any fact as a result of which
the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing, and, as promptly as is practicable,
prepare and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(h) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement of the Parent (in form complying with the provisions of
Section 11(a) of the Securities Act) and the rules and regulations
promulgated thereunder covering the period of at least 12 months, but
not more than 18 months, beginning with the first month after the
effective date of the registration statement;
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<PAGE> 11
(i) notify each seller of any Registrable Securities covered
by such registration statement (I) when the prospectus or any
prospectus supplement or post-effective amendment has been filed, and,
with respect to such registration statement or any post-effective
amendment, when the same has become effective, (II) of any request by
the Commission for amendments or supplements to such registration
statement or to amend or to supplement such prospectus or for
additional information, (III) of the issuance by the Commission of any
stop order suspending the effectiveness of such registration statement
or the initiation of any proceedings for that purpose and (IV) of the
suspension of the qualification of such securities for offering or sale
in any jurisdiction, or of the institution of any proceedings for any
of such purposes;
(j) use every reasonable effort to obtain the lifting of any
stop order that might be issued suspending the effectiveness of such
registration statement at the earliest possible moment;
(k) use its best efforts (I) to list such Registrable
Securities on any securities exchange on which the equity securities of
the Parent are then listed or, if no such equity securities are then
listed, and (II) to provide a transfer agent and registrar for such
Registrable Securities not later than the effective date of such
registration statement PROVIDED, that if the Parent is unable to so
list such Registrable Securities, the demand to register such
Registrable Securities shall be deemed withdrawn under Section 1.1 (and
such demand shall not be counted for determining the number of demands
for registration to which the holders of Registrable Securities are
entitled pursuant to Section 1.1);
(l) comply with the requirements of Section 153 of the
Securities Act regarding delivery of prospectuses; and
(m) cooperate with the holders of Registrable Securities
covered by such registration statement to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive
legends) representing the securities to be sold under such registration
statement, and enable such securities
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<PAGE> 12
to be in such denominations and registered in such names as such
holders may request.
The Parent may require each seller of any Registrable
Securities as to which any registration is being effected to furnish to the
Parent such information regarding such seller, its ownership of Registrable
Securities and the intended method of disposition of such Registrable
Securities as the Parent may from time to time reasonably request in
writing and as shall be required by law in connection therewith. Each such
holder agrees to furnish promptly to the Parent all information required to
be disclosed in order to make the information previously furnished to the
Parent by such holder not materially misleading.
The Parent agrees not to file or make any amendment to any
registration statement with respect to any Registrable Securities, or any
amendment of or supplement to the prospectus used in connection therewith,
which refers to any seller of any Registrable Securities covered thereby by
name, or otherwise identifies such seller as the holder of any Registrable
Securities, without the consent of such seller, such consent not to be
unreasonably withheld or delayed, unless such disclosure is required by law
or is necessary to avoid liability under the securities laws.
By acquisition of Registrable Securities, each holder of such
Registrable Securities shall be deemed to have agreed that upon receipt of
any notice from the Parent of the happening of any event of the kind des
cribed in Section 4(g), such holder will promptly discon tinue such
holder's disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such holder's receipt
of the copies of the supplemented or amended prospectus contem plated by
Section 4(g). If so directed by the Parent, each holder of Registrable
Securities will deliver to the Parent all copies, other than permanent file
copies, in such holder's possession of the prospectus covering such
Registrable Securities at the time of receipt of such notice. In the event
that the Parent shall give any such notice, the period mentioned in Section
4(b) shall be extended by the number of days during the period from and
including the date of the giving of such notice to and including the date
when each seller of any Registrable Securities covered by such registration
statement shall
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<PAGE> 13
have received the copies of the supplemented or amended prospectus
contemplated by Section 4(g).
5. HOLDBACK AGREEMENTS. If and whenever the Parent proposes to
register any of its equity securities under the Securities Act for its own
account or otherwise (other than on Form S-4 or S-8 or any successor form),
each holder of Registrable Securities agrees by acquisition of such
Registrable Securities not to effect any public sale or distribution,
including any sale pursuant to Rule 144 under the Securities Act, of any
Registrable Securities within seven days prior to and 90 days (unless
advised in writing by the managing underwriter that a longer period, not to
exceed 180 days, is required, or such shorter period as the managing
underwriter for any underwritten offering may agree) after the effective
date of the registration statement relating to such registration, except
as part of such registration.
6. PREPARATION; REASONABLE INVESTIGATION. In connection with
the preparation and filing of each registration statement registering
Registrable Securities under the Securities Act, the Parent will give any
holder of Registrable Securities so to be registered which owns at least
10% of the Registrable Securities and its counsel and accountants the
opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission,
and each amendment thereof or supplement thereto, and will give each such
holder such access to the financial and other records, pertinent corporate
documents and properties of the Parent and its subsidiaries and such
opportunities to discuss the business of the Parent with its officers and
the independent public accountants who have issued audit reports on its
financial statements as shall be reasonably requested by such holders in
connection with such registration statement.
7. REPRESENTATION BY THE PARENT. The Parent represents to the
Blue Coral Stockholders that, as of the date hereof, the Parent is not
contractually obligated to effect the registration of any shares of Parent
Capital Stock under the Securities Act except pursuant to the Specialty Oil
Registration Rights Agreement, the Slick 50 Registration Rights Agreement
and this Agreement. True and complete copies of the Specialty Oil
Registration Rights Agreement and the Slick 50 Registration Rights
Agreement have been previously provided to the Blue Coral Stockholders'
Representative. As of the date hereof, the
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<PAGE> 14
parties to the Specialty Oil Registration Rights Agreement have not
exercised any of their rights under Section 2.1(a) of the Speciality Oil
Registration Rights Agreement to demand that the Parent effect any
registration of Parent Capital Stock under the Securities Act. As of the
date hereof, the parties to the Slick 50 Registration Rights Agreement have
not exercised any of their rights under Section 1.1 of the Slick 50
Registration Rights Agreement to demand that the Parent effect any
registration of Parent Capital Stock under the Securities Act.
8. INDEMNIFICATION.
8.1 INDEMNIFICATION BY THE PARENT. In the event of any
registration of any Registrable Securities pursuant to this Agreement, the
Parent will indemnify and hold harmless (a) the seller of such Registrable
Securities, (b) the directors, officers, partners, employees, agents and
Affiliates of such seller and (c) each person, if any, who controls (with
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) any of the foregoing against any and all losses, claims,
damages or liabilities (or actions or proceedings in respect thereof),
joint or several, directly or indirectly based upon or arising out of (i)
any untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which such Registrable
Securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein or
used in connection with the offering of securities covered thereby, or any
amendment or supplement thereto, or (ii) any omission or alleged omission
to state a fact required to be stated therein or necessary to make the
statements therein not misleading; except insofar as any such loss, claim,
damage, liability, action, proceeding or expense arises out of or is based
upon an untrue statement or omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to the Parent by such seller for use in the
preparation thereof. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of any such seller of
Registrable Securities or any such director, officer or controlling Person
and shall survive the transfer of such Registrable Securities by such
seller. The indemnity agreement contained in this Section 8.1 shall not
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<PAGE> 15
apply to amounts paid in settlement of any such loss, claim, damage,
liability, action or proceeding if such settlement is effected without the
consent of the Parent (which consent shall not be unreasonably withheld).
8.2 INDEMNIFICATION BY THE SELLERS. The Parent may require, as
a condition to including any Registrable Securities in any registration
statement filed pursuant to Section 1 that the Parent shall have received
an undertaking satisfactory to it from each of the prospective sellers of
such Registrable Securities to indemnify and hold harmless, severally and
not jointly, in the same manner and to the same extent as set forth in
Section 8.1, the Parent, its directors and officers and each Person, if
any, who controls (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) the Parent with respect to any statement
or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement
thereto, if such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with written
information furnished to the Parent by such seller for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such indemnity
shall remain in full force and effect, regardless of any investigation made
by or on behalf of the Parent or any such director, officer or controlling
Person and shall survive the transfer of such Registrable Securities by
such seller. The indemnity agreement contained in this Section 8.2 shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability, action or proceeding if such settlement is effected without the
consent of such seller (which consent shall not be unreasonably withheld).
8.3 NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding paragraphs of
this Section 8, such indemnified party will, if a claim in respect thereof
is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action or proceeding, PROVIDED that the
failure of any indemnified party to give notice as provided herein shall
not relieve the indemnifying party of its obligations under the preceding
paragraphs of this
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<PAGE> 16
Section 8, except to the extent that the indemnifying party is materially
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, the indemnifying party will be
entitled to participate therein and to assume the defense thereof, jointly
with any other indemnifying party similarly notified, to the extent that it
may wish, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with the defense
thereof. Notwithstanding the foregoing, if such indemnified party
reasonably determines, based upon advice of its independent counsel, that
a conflict of interest may exist between the indemnified party and the
indemnifying party with respect to such action and that it is advisable for
such indemnified party to be represented by separate counsel, such
indemnified party may retain other counsel, reasonably satisfactory to the
indemnifying party, to represent such indemnified party, and the
indemnifying party shall pay all reasonable fees and expenses of such
counsel. No indemnifying party, in the defense of any such claim or
litigation, shall, except with the consent of such indemnified party, which
consent shall not be unreasonably withheld, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim
or litigation.
8.4 OTHER INDEMNIFICATION. Indemnification similar to that
specified in the preceding paragraphs of this Section 8 (with appropriate
modifications) shall be given by the Parent and each seller of Registrable
Securities with respect to any required registration (other than under the
Securities Act) or other qualification of such Registrable Securities
under any federal or state law or regulation of any governmental authority.
8.5 LIMITATION ON INDEMNIFICATION BY THE SELLERS.
Notwithstanding anything in this Agreement to the contrary, the
indemnification and contribution obligations of the sellers of any
Registrable Securities under Sections 8.2, 8.4 and 8.6 shall not exceed the
respective amount of proceeds received by any such seller in connection
with such registration and sale of any such
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<PAGE> 17
Registrable Securities pursuant to this Agreement, after deduction of all
costs and expenses required to be paid by such seller under this Agreement.
8.6 OTHER REMEDIES. If for any reason the foregoing indemnity
is unavailable, or is insufficient to hold harmless an indemnified party,
other than, in each case, by reason of the exceptions provided therein,
then the indemnifying party shall contribute to the amount paid or payable
by the indemnified party as a result of such losses, claims, damages,
liabilities, actions, proceedings or expenses: in such proportion as is
appropriate to reflect the relative fault of the indemnifying party, on
the one hand, and of the indemnified party, on the other hand, in
connection with the statements or omissions that resulted in such loss,
claim, damage, liability, action, proceeding or expense, as well as any
other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statements or omissions. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. No party shall be
liable for contribution under this Section 7.6 except to the extent and
under such circumstances as such party would have been liable to indemnify
under this Sec tion 7 if such indemnification were enforceable under
applicable law.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8.6 were determined by
PRO RATA allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 8.6, no
holder of Registrable Securities shall be required to contribute any amount
in excess of the amount by which the total price at which the Registrable
Securities of such holder were offered to the public (net of all
underwriting discounts and commissions) exceeds the amount of any damages
which such
15
<PAGE> 18
holder has otherwise been required to pay by reason of such untrue
statement or omission.
9. DEFINITIONS. For purposes of this Agree ment, the following terms
shall have the following
respective meanings:
"AFFILIATE": A Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, the Person specified.
"BLUE CORAL" means Blue Coral, Inc.
"BLUE CORAL STOCKHOLDER" has the meaning set forth in the Preamble to
this Agreement.
"CLOSING DATE": The date on which the closing of the Merger actually
occurs.
"COMMISSION": The Securities and Exchange Commission.
"DEMAND REGISTRANT": As defined in Sec tion 1.1.
"EXCHANGE ACT": The Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations thereunder
which shall be in effect at the time.
"MAJORITY HOLDERS": As defined in Section 4(c).
"MERGER": The acquisition of Blue Coral, Inc. by a wholly owned
subsidiary of the Parent pursuant to the Agreement and Plan of Merger,
dated as of June 7, 1996, among the Parent, QSBC Acquisition Corp., Blue
Coral and the Blue Coral Stockholders.
"MERGER SHARES": The shares of Parent Capital Stock issued to the Blue
Coral Stockholders in the Merger.
"NASD": National Association of Securities Dealers, Inc.
"NASDAQ": The Nasdaq National Market.
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<PAGE> 19
"PARENT" shall have the meaning set forth in the Preamble to this
Agreement.
"PARENT CAPITAL STOCK" means shares of capital stock of the Parent,
par value $1.00 per share.
"PERMITTED TRANSFEREE" means (i) any donee which is a spouse or an
immediate family member of any Blue Coral Stockholder or any other bona
fide donee which is a charitable, civic, educational or other similar
not-for-profit organization, or (ii) any trust, corporation, limited
liability company or partnership for the benefit of, or controlled by,
either directly or indirectly, any holder of Registrable Securities and/or
such holder and his or her spouse and immediate family members; provided
(A) in the case of clause (i) or (ii) above, such transferee has agreed in
an instrument of assumption reasonably satisfactory in form and substance
to the Parent to be bound by all of the terms and conditions of this
Agreement and (B) in the case of clause (ii) above, to the extent any such
trust, corporation, limited liability company or partnership shall cease to
be so controlled, it shall cease to be a Permitted Transferee for all
purposes of this Agreement.
"PERSON": An individual, corporation, partnership, joint venture,
association, trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"REGISTRABLE SECURITIES": The Merger Shares that are beneficially
owned (within the meaning of Section 13d-3 of the Exchange Act) by any of
the Blue Coral Stockholders or Permitted Transferees, together with any
securities issued or distributed in respect of any Merger Shares by way of
stock dividend or stock split or in connection with a combination of
shares, recapitalization, reorganization, merger, consolidation or
otherwise; PROVIDED that such securities shall cease to be Registrable
Securities (I) when a registration statement with respect to the sale of
such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such
registration statement, (II) when they shall have been otherwise
transferred or disposed of by the Blue Coral Stockholder to whom they were
issued, other than to a Permitted Transferee, (III) when they shall have
ceased to be outstanding or (IV) for so long as they are the subject of an
opinion satisfying the standards set forth
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in Section 2, which opinion has not been withdrawn, rescinded or otherwise
nullified in the manner referred to in the proviso to Section 2.
"REGISTRATION EXPENSES": All expenses incident to the Parent's
performance of or compliance with any registration pursuant to this
Agreement, including, without limitation, (i) registration, filing and NASD
fees, (ii) fees and expenses of complying with securities or blue sky laws,
(iii) fees and expenses associated with listing securities on an exchange
or NASDAQ, (iv) word processing, duplicating and printing expenses, (v)
messenger and delivery expenses, (vi) transfer agents', trustees',
depositories', registrars' and fiscal agents' fees, and (vii) fees and
disbursements of counsel for the Parent and of its independent public
accountants; provided, that except as provided in Section 1.3(b)
Registration Expenses shall not include any fees and disbursements of any
counsel retained by the sellers of Registrable Securities.
"REQUESTING HOLDER": As defined in Section 3.
"SECURITIES ACT": The Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations thereunder which
shall be in effect at the time.
"SLICK 50 REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of July 11, 1995, among the Parent and the Slick 50
Stockholders (as defined therein).
"SPECIALTY OIL REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights and Transfer Agreement, dated as of September 30, 1994, between the
Parent and certain shareholders of the Parent.
"SPECIALTY DEMAND REGISTRATION" means any registration under the
Securities Act of Shares of Parent Capital Stock that is requested pursuant
to Section 2.1 of the Specialty Oil Registration Rights Agreement.
10. MISCELLANEOUS.
10.1 SUCCESSORS, ASSIGNS AND TRANSFEREES. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this
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<PAGE> 21
Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the Blue Coral Stockholders, except to another Blue
Coral Stockholder or a Permitted Transferee, without the prior written
consent of the Parent.
10.2 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented by the Parent with the written consent of the
holder or holders of a majority of the Registrable Securities.
10.3 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER AND THE PERSONS SUBJECT HERETO SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF.
10.4 INVALIDITY OF PROVISION. The invalidity or unenforceability of
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including
that provision, in any other jurisdiction.
10.5 NOTICES. All notices, requests, demands, letters, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (a)
delivered personally, (b) mailed, certified or registered mail with postage
prepaid, (c) sent by next-day or overnight mail or delivery or (d) sent by
telecopy or telegram, as follows:
(i) If to the Parent, to it at:
Quaker State Corporation
225 East John Carpenter Freeway
Irving, TX 75062
Attention: Secretary
Phone: 214-868-0400
Fax: 214-868-0440
or to such other person or address as the
Parent shall specify by notice in writing to
each of the Blue Coral Stockholders;
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(ii) If to any holder of Registrable Securities, to the
address of such holder as set forth on the signature
pages hereto or to such other person or address as
any Blue Coral Stockholder shall specify by notice in
writing to the Parent.
All such notices, requests, demands, letters, waivers and other
communications shall be deemed to have been received (W) if by personal
delivery on the day after such delivery, (X) if by certified or registered
mail, on the fifth business day after the mailing thereof, (Y) if by
next-day or overnight mail or delivery, on the day delivered or (Z) if by
telecopy or telegram, on the next day following the day on which such
telecopy or telegram was sent, provided that a copy is also sent by
certified or registered mail.
10.6 HEADINGS; EXECUTION IN COUNTERPARTS. The headings and
captions contained herein are for convenience and shall not control or
affect the meaning or construction of any provision hereof. This Agreement
may be executed in any number of counterparts, each of which shall be
deemed to be an original and which together shall constitute one and the
same instrument.
10.7 ENTIRE AGREEMENT. This Agreement is intended by the
parties hereto as a final expression of their agreement and intended to be
a complete and exclusive statement of their agreement and understanding in
respect of the subject matter contained herein. This Agreement supersedes
all prior agreements and understandings between the parties with respect
to such subject matter.
10.8 TERM. This Agreement shall be effective as of the date
hereof and shall continue in effect thereafter until the earliest of (a)
its termination by the consent of the parties hereto or their respective
successors in interest, (b) the date on which the Parent has effected two
registrations for the Blue Coral Stockholders pursuant to Section 1.1
hereof and (c) the date on which none of the Merger Shares are Registrable
Securities under this Agreement, except for the provisions of Section 8
which shall survive the termination of this Agreement.
20
<PAGE> 23
IN WITNESS WHEREOF, this Agreement has been signed by each of
the parties hereto, effective as of the date first written above.
QUAKER STATE CORPORATION
By: /s/ Paul E. Konney
-------------------------------
Name: Paul E. Konney
/s/ Sheldon G. Adelman
-----------------------------
Sheldon G. Adelman
95 Ridgecreek Trail
Moreland, Hills, Ohio 44022
/s/ Carl D. Glickman
------------------------------
Carl D. Glickman
2678 Eaton Road
Shaker Heights, Ohio 44114
GST-EXEMPT TRUST FBO
WENDY ADELMAN
1215 Valley Belt Road
Cleveland, Ohio 44131-1451
By: /s/ Robert G. Markey
---------------------------
Co-Trustee
By: /s/ Michael G. Turk
---------------------------
Co-Trustee
/s/ Michael G. Turk
------------------------------
Michael G. Turk
17775 Saratoga Trail
Strongsville, Ohio 44136
/s/ Nicolas Federico
------------------------------
Nicolas Federico
8970 Galloway Trail
Novelty, Ohio 44072
/s/ Lawrence J. Minich
------------------------------
Lawrence J. Minich
1151 Sommerhill
Akron, Ohio 44313
/S/ Howard Adelman
------------------------------
Howard Adelman
24639 Twickenham Drive
Beachwood, Ohio 44122
/s/ Ronald Peterson
------------------------------
Ronald Peterson
4801 N LaLomita Road
Tucson, Arizona 85718
/s/s Robert G. Markey
------------------------------
Robert G. Markey
27925 Belgrave Road
Pepper Pike, Ohio 44124
/s/ Joel E. Adelman
------------------------------
Joel E. Adelman
180 Honeybelle Oval
Orange Village, Ohio 44022
/s/ Norton Rose
------------------------------
Norton Rose
19301 Shaker Boulevard
Shaker Heights, Ohio 44122
