SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
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Date of Report
(Date of earliest
event reported): December 28, 2001
A. O. Smith Corporation
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(Exact name of registrant as specified in its charter)
Delaware 1-475 39-0619790
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
P.O. Box 245008, Milwaukee, Wisconsin 53224-9508
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(Address of principal executive offices, including zip code)
(414) 359-4000
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(Registrant's telephone number)
Item 2. Acquisition or Disposition of Assets.
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On December 28, 2001, A. O. Smith Corporation (the "Company") acquired
all of the issued and outstanding shares of common stock of State Industries,
Inc. ("State Industries") from Ocelot Oil Corp. ("Ocelot") pursuant to a Stock
Purchase and Sale Agreement, dated as of September 13, 2001 (the "Stock Purchase
Agreement"), by and among the shareholders of Ocelot, the beneficiaries of the
Herbert W. Lindahl, Jr. State Industries Trust and the John R. Lindahl State
Industries Trust, State Industries, Ocelot, John R. Lindahl, Herbert W. Lindahl,
Jr. and the Company.
In the transaction, the Company (i) paid approximately $57.8 million
in cash at the closing of the acquisition and (ii) assumed bank debt and related
liabilities of State Industries in the amount of approximately $56.3 million.
The purchase price that the Company paid for State Industries was determined on
the basis of arm's length negotiations between the parties, all of which were
unrelated. The Company funded the acquisition of State Industries through
available cash and borrowings under a credit facility with Bank of America, N.
A., Bank One, N.A., Firstar Bank, N.A., General Electric Capital Corporation,
The Bank of New York, Citibank, N. A., M & I Marshall & Ilsley Bank, U.S. Bank
National Association, Wachovia Bank, N. A. and Wells Fargo Bank Wisconsin, N. A.
The Stock Purchase Agreement is filed as an exhibit to this Current
Report on Form 8-K and is incorporated herein by reference. The brief summary of
the material provisions of the Stock Purchase Agreement set forth above is
qualified in its entirety by reference to the Stock Purchase Agreement filed as
an exhibit hereto.
State Industries used its assets in the business of designing,
manufacturing and distributing residential and commercial water heaters, pump
and expansion tanks and, through its subsidiary, APCOM, Inc., heating elements,
thermostats, controls and other water heater components. The Company intends to
continue to use such assets for that purpose.
Item 7. Financial Statements and Exhibits.
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(a) Financial Statements of Business Acquired.
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The required financial statements for State Industries are not filed
with this Current Report on Form 8-K, but will be filed by means of an amendment
to this report as soon as practicable and in no event later than March 15, 2002.
(b) Pro Forma Financial Information.
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The pro forma financial information required in connection with the
acquisition of State Industries is not filed with this Current Report on Form
8-K, but will be filed by means of an amendment to this report as soon as
practicable and in no event later than March 15, 2002.
(c) Exhibits.
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The exhibit listed in the accompanying Exhibit Index is filed as part
of this Current Report on Form 8-K.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
A. O. SMITH CORPORATION
Date: January 11, 2002 By:/s/ W. David Romoser
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W. David Romoser
Vice President, General Counsel and Secretary
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A. O. SMITH CORPORATION
Exhibit Index to Current Report on Form 8-K
Dated December 28, 2001
Exhibit
Number Description
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(2) Stock Purchase and Sale Agreement, dated as of September 13,
2001, by and among the shareholders of Ocelot Oil Corp., the
beneficiaries of the Herbert W. Lindahl, Jr. State Industries
Trust and the John R. Lindahl State Industries Trust, State
Industries, Inc., Ocelot Oil Corp., John R. Lindahl, Herbert W.
Lindahl, Jr. and A. O. Smith Corporation.*
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* The schedules and exhibits to this document are not being filed herewith.
The registrant agrees to furnish supplementally a copy of any such schedule
or exhibit to the Securities and Exchange Commission upon request.
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STOCK PURCHASE AND SALE AGREEMENT
by and among
THE SHAREHOLDERS OF OCELOT OIL CORP.,
THE BENEFICIARIES OF THE HERBERT W. LINDAHL, JR. STATE INDUSTRIES
TRUST AND THE JOHN R. LINDAHL STATE INDUSTRIES TRUST,
STATE INDUSTRIES, INC.,
OCELOT OIL CORP.,
JOHN R. LINDAHL,
HERBERT W. LINDAHL, JR.
and
A. O. SMITH CORPORATION
Dated as of September 13, 2001
TABLE OF CONTENTS
ARTICLE 1 PURCHASE AND SALE OF SHARES.........................................2
1.1 Purchase and Sale of Shares................................2
1.2 Purchase Price; Adjustment.................................2
1.3 Payment of Purchase Price..................................2
1.4 Definitions................................................2
ARTICLE 2 CLOSING.............................................................8
2.1 Closing....................................................8
2.2 Deliveries by Sellers at Closing...........................8
2.3 Deliveries by Purchaser at Closing.........................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF OCELOT AND SHAREHOLDERS...........9
3.1 Organization and Standing of Ocelot and State and its
Subsidiaries; Authorization and Enforceability.............9
3.2 Capitalization of the Corporations and Ocelot.............10
3.3 Ocelot Activities; Corporations' Subsidiaries.............10
3.4 Owned and Leased Personal Property........................11
3.5 Owned and Leased Real Property............................11
3.6 Inventory.................................................12
3.7 Contracts.................................................12
3.8 Condition of Assets.......................................12
3.9 No Consents...............................................13
3.10 Permits and Licenses......................................13
3.11 Insurance.................................................13
3.12 Financial Statements......................................14
3.13 Litigation................................................14
3.14 Brokers' Fees.............................................14
3.15 Employment Matters........................................14
3.16 Employee Benefit Plans....................................15
3.17 Taxes.....................................................17
3.18 Environmental Matters.....................................19
3.19 Conduct of Business.......................................21
3.20 Intellectual Property.....................................23
3.21 Bank Financing Through Bank of America....................24
3.22 Compliance with Law.......................................24
3.23 Powers of Attorney........................................24
3.24 Corporate Records.........................................24
3.25 Customers.................................................24
3.26 Product Warranty and Product Liability....................25
3.27 Affiliates Relationships to the Corporations.............26
3.28 Assets Necessary to Business..............................26
3.29 Accounts Receivable.......................................26
3.30 Sears Contract............................................26
3.30 Survival of Representations and Warranties................27
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER........................27
4.1 Organization and Standing of Purchaser....................27
4.2 Authorization and Enforceability..........................27
4.3 No Consents...............................................27
4.4 Litigation................................................27
4.5 Brokers' Fees.............................................28
4.6 Survival of Representations and Warranties................28
ARTICLE 5 OTHER COVENANTS AND AGREEMENTS.....................................28
5.1 No Obstruction of Purpose.................................28
5.2 Fulfillment of Conditions.................................28
5.3 Current Information.......................................28
5.4 Business Operations.......................................29
5.5 Financial Statements......................................30
5.6 Further Assurances........................................30
5.7 Requests for Approvals....................................30
5.8 HSR Act...................................................31
5.9 Consents..................................................31
5.10 Tax Responsibility........................................31
5.11 Supplements to Representations, Warranties and Schedules
of Sellers, Beneficiaries, JRL and HWL....................36
5.12 Supplements to Representations, Warranties and
Schedules of Purchaser....................................36
5.13 Release from Liability....................................36
5.14 Tax Matters...............................................37
5.15 Noncompetition and Confidentiality Agreements.............37
5.16 State France..............................................38
5.17 General Releases..........................................38
5.18 Access to Information and Records.........................39
5.19 Management Agreement......................................39
5.20 Insurance Matters.........................................40
5.21 Purchaser Payments........................................40
5.22 Releases of Purchaser, Ocelot and Corporations............40
5.23 No Obligation of Purchaser................................40
5.24 Losses in Excess of Proposed Settlement...................40
5.25 State Acceptance..........................................40
ARTICLE 6 CONDITIONS TO OBLIGATIONS OF SELLERS...............................41
6.1 Representations and Warranties............................41
6.2 Performance...............................................41
6.3 No Legal Bar..............................................41
6.4 Payment of Purchase Price.................................41
6.5 Documents Delivered by Purchaser..........................41
6.6 Hart-Scott-Rodino Waiting Period..........................42
ARTICLE 7 CONDITIONS TO OBLIGATIONS OF PURCHASER.............................42
7.1 Representations and Warranties............................42
7.2 Performance...............................................42
7.3 No Legal Bar..............................................43
7.4 Documents Delivered by Sellers............................43
7.5 Consents..................................................44
7.6 Material Adverse Change...................................44
7.7 Hart-Scott-Rodino Waiting Period..........................44
7.8 Absence of Litigation.....................................44
ARTICLE 8 TERMINATION........................................................44
8.1 Termination...............................................44
8.2 Effect of Termination.....................................45
8.3 Election Not to Terminate.................................46
ARTICLE 9 INDEMNIFICATION....................................................46
9.1 Indemnification by Purchaser..............................46
9.2 Indemnification by Sellers................................46
9.3 Limitation of Liability...................................47
9.4 Time Limitation...........................................47
9.5 Procedure For Filing of a Claim Under Sections 9.1
or 9.2....................................................47
9.6 Additional Procedure for Filing of a Claim Under
Section 9.2...............................................49
9.7 Other Limitations.........................................49
ARTICLE 10 SPECIAL PROVISIONS APPLICABLE TO BENEFICIARIES, JRL AND HWL.......50
10.1 Representations of Beneficiaries of the Herbert W.
Lindahl, Jr. State Industries Trust.......................50
10.2 Representations of Beneficiaries of the John R.
Lindahl State Industries Trust............................51
10.3 Agreement to be Bound by Certain Indemnification
Provisions................................................52
10.4 Agreement to be Bound by Noncompete; Release..............52
10.5 Agreement by JRL and HWL..................................52
ARTICLE 11 GENERAL...........................................................52
11.1 Binding Effect; Benefits; Assignment......................52
11.2 Governing Law; Dispute Resolution; Submission to
Jurisdiction; Waivers.....................................52
11.3 Public Announcements......................................54
11.4 Notices...................................................55
11.5 Counterparts..............................................57
11.6 Expenses..................................................57
11.7 Entire Agreement..........................................58
11.8 Amendment and Waiver......................................58
11.9 Severability..............................................58
11.10 Headings..................................................58
11.11 Confidential Information..................................58
11.12 Schedules.................................................59
11.13 Equitable Relief..........................................59
11.14 Representative for Parties Other Than Purchaser...........59
11.15 Waiver of Conflict........................................60
STOCK PURCHASE AND SALE AGREEMENT
THIS STOCK PURCHASE AND SALE AGREEMENT (the "Agreement") is made and
entered into this 13th day of September, 2001, by and among (i) the Persons
whose names appear on Schedule 1.1 attached hereto as shareholders of Ocelot and
incorporated herein by reference (individually, "Shareholder" and collectively,
"Shareholders"), (ii) the Persons whose names appear on Schedule 1.1 attached
hereto as beneficiaries of the Herbert W. Lindahl, Jr. State Industries Trust
and the John R. Lindahl State Industries Trust and incorporated herein by
reference (individually, "Beneficiary" and collectively, "Beneficiaries"), (iii)
STATE INDUSTRIES, INC., a Tennessee corporation ("State"), (iv) OCELOT OIL
CORP., a Colorado corporation ("Ocelot"), (v) JOHN R. LINDAHL ("JRL"), (vi)
HERBERT W. LINDAHL, JR. ("HWL"), and (vii) A. O. SMITH CORPORATION, a Delaware
corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, State is engaged in the business of designing, manufacturing and
distributing residential and commercial water heaters, pump and expansion tanks
and, through APCOM, Inc., a wholly-owned subsidiary, heating elements,
thermostats, controls and other water heater components; and
WHEREAS, Shareholders are the record and beneficial owners of all the
shares of capital stock of Ocelot (the "Ocelot Shares") in the amounts set forth
by each Shareholders' name on Schedule 1.1 attached hereto and will receive,
directly or indirectly, substantial consideration as a result of the
transactions contemplated by this Agreement; and
WHEREAS, Beneficiaries are the beneficiaries of the Herbert W. Lindahl, Jr.
State Industries Trust and the John R. Lindahl State Industries Trust
(collectively, the "Trusts") as set forth on Schedule 1.1 attached hereto and
will receive, directly or indirectly, substantial consideration as a result of
the transactions contemplated by this Agreement; and
WHEREAS, Ocelot is the record and beneficial owner of all the shares of
capital stock of State (the "State Shares"); and
WHEREAS, Ocelot desires to sell and Purchaser desires to purchase all of
the State Shares from Ocelot; and
WHEREAS, the parties desire to enter into this Agreement for the purpose of
effecting such purchase and sale.
NOW THEREFORE, in consideration of the mutual premises and covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
AGREEMENT
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Shares. Upon the terms and subject to the
conditions contained in this Agreement, at the Closing (as hereinafter defined),
Ocelot shall sell, transfer, assign, convey and deliver to Purchaser, and
Purchaser shall purchase and acquire from Ocelot, the State Shares, which
constitute all issued and outstanding shares of stock in State.
1.2 Purchase Price. As consideration for the sale, transfer, assignment,
conveyance and delivery by Ocelot to Purchaser of the State Shares, Purchaser
shall pay to Ocelot a total purchase price equal to the sum of the following
(the "Purchase Price"):
(a) Fifty Seven Million Eight Hundred Thousand and No/100 Dollars
($57,800,000), plus if applicable
(b) the State France Proceeds; minus
(c) the amount of the management fees paid pursuant to Section 5.19
hereof; and
(d) shall deliver to the appropriate parties as specified herein,
among other deliveries, the Releases and the Subordinated Debt Releases.
1.3 Payment of Purchase Price.
(a) At Closing, the Purchase Price shall be paid to Ocelot in
collected funds wired to Ocelot's bank accounts, a description of such bank
accounts to be provided by Ocelot to Purchaser at least three (3) days prior to
Closing.
(b) The amount of fees payable, or previously paid by the
Corporations, to Bank of America, N.A. pursuant to the Swap Agreements shall be
determined. If not previously paid by the Corporations, said amount shall be
paid by Purchaser to Bank of America, N.A. at Closing.
1.4 Definitions.
(a) "Affiliate" or "Affiliates" shall mean and include JRL, HWL, the
Beneficiaries and all directors and officers of the Corporations; the spouse of
any such person; any person who would be the heir or descendant of any such
person if he or she were not living; and any entity in which any of the
foregoing has a direct or indirect interest, except through ownership of less
than 5% of the outstanding equity interests of any entity.
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(b) "Agreement" shall have the meaning set forth in the introductory
paragraph hereof.
(c) "Ancillary Agreements" shall mean the agreements, documents and
instruments contemplated by this Agreement other than this Agreement.
(d) "Audited Financial Statement" shall have the meaning set forth in
Section 3.12(a) hereof.
(e) "Beneficiaries" shall have the meaning set forth in the
introductory paragraph hereof.
(f) "Canadian Group" shall mean those persons identified as such on
Schedule 1.1 hereto.
(g) "Claim" shall have the meaning set forth in Section 9.5 hereof.
(h) "Closing" shall have the meaning set forth in Section 2.1 hereof.
(i) "Code" shall have the meaning set forth in Section 3.16(c) hereof.
(j) "Consents" shall have the meaning set forth in Section 5.9 hereof.
(k) "Contracts" shall mean all contracts, leases and other
commitments, whether written or oral, to which State or its Subsidiaries is a
party or otherwise obligated which (i) provide for a term of more than six
months or the payment by or to any Corporation in excess of $10,000 and are not
terminable at will by the Corporation without cost or penalty, (ii) evidence
indebtedness of any Corporation or commitments for the borrowing or loaning of
any money or directly or indirectly guaranteeing liability of others or (iii)
require any Corporation to indemnify any other Person under which the
Corporation has any continuing obligations.
(l) "Corporations" shall have the meaning set forth in Section 3.1
hereof.
(m) "Credit Facility" shall mean the Revolving Credit Facility, Letter
of Credit Facility, Term Loan Facility and Capital Expenditure Loan Facility
existing pursuant to that certain Loan and Security Agreement dated as of August
28, 1997 between State Industries, Inc., APCOM, Inc., Ocelot Oil Corp. and
NationsBank, N.A. (now Bank of America, N.A.) and the financial institutions a
party thereto, as amended from time to time.
(n) "Current Financial Statement" shall have the meaning set forth in
Section 3.12(a) hereof.
(o) "Dispute" shall have the meaning set forth in Section 11.2(b)
hereof.
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(p) "Environmental Laws" shall have the meaning set forth in Section
3.18(a)(i) hereof.
(q) "Exempt Claims" shall have the meaning set forth in Section 9.6
hereof.
(r) "ERISA" shall have the meaning set forth in Section 3.16(c)
hereof.
(s) "Fain Litigation" shall mean Fain, et al v. State Industries, Inc.
in the 18th Judicial Court of Johnson County, Texas.
(t) "Financial Statements" shall have the meaning set forth in Section
3.12(a) hereof.
(u) "Governmental Authority" shall have the meaning set forth in
Section 3.9 hereof.
(v) "HSR Act" shall have the meaning set forth in Section 2.1 hereof.
(w) "HSR Forms" shall have the meaning set forth in Section 5.8
hereof.
(x) "Hazardous Materials" shall have the meaning set forth in Section
3.18(a)(ii) hereof.
(y) "HWL" shall mean Herbert W. Lindahl, Jr.
(z) "HWL Beneficiaries" shall have the meaning set forth in Section
10.1 hereof.
(aa) "Indemnified Party" shall have the meaning set forth in Section
9.5 hereof.
(bb) "Indemnifying Party" shall have the meaning set forth in Section
9.5 hereof.
(cc) "Intellectual Property" shall have the meaning set forth in
Section 3.20 hereof.
(dd) "JRL" shall mean John R. Lindahl.
(ee) "JRL Beneficiaries" shall have the meaning set forth in Section
10.2 hereof.
(ff) "July Balance Sheet" shall have the meaning set forth in Section
3.29 hereof.
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(gg) "Knowledge" shall mean, as applied to Sellers, the actual
conscious awareness of the following persons:
Jeff Atkinson Herbert W. Lindahl
Terry Bihun John R. Lindahl
Pat Bourke John R. Lindahl, Jr.
John Brenzie Kent Lindahl
Jim Flockencier Ken Naglewski
Eddie Goodwin Jimmy Raymer
Howard Heath Drew Smith
Lonnie Howard Evie Sommers
David Lasseter Larry T. Thrailkill
As applied to a Beneficiary, the term "Knowledge" shall mean the
actual conscious awareness of such Beneficiary.
(hh) "Leased Personalty" shall have the meaning set forth in Section
3.4 hereof.
(ii) "Lien" or "Liens" shall have the meaning set forth in Section
3.2(b) hereof.
(jj) "Losses" shall have the meaning set forth in Section 9.1 hereof.
(kk) "LTT" shall mean Larry T. Thrailkill.
(ll) "Management Agreement" shall have the meaning set forth in
Section 5.19 hereof.
(mm) "Material Adverse Change" shall mean, and shall be limited to (i)
loss of a material portion of the Corporations' manufacturing capacity which
cannot be restored or replaced within sixty (60) days; (ii) the incurrence of
any uninsured casualty loss or losses which aggregate more than $5,000,000;
(iii) the declaration of war by or against the United States of America; (iv)
any breaches of representations or warranties of the Sellers, the Beneficiaries,
JRL or HWL contained herein on the date hereof as of the date hereof, which,
individually or in the aggregate, either have resulted in, or are reasonably
likely to result in, the Corporations and/or Purchaser incurring or suffering
Losses in excess of $5,000,000; or (v) any breaches in any material respect of
representations or warranties of the Sellers contained in Section 3.2 hereof
whether on the date hereof as of the date hereof or at the Closing. Specifically
excluded from the definition of "Material Adverse Change" is any change in the
business or business prospects of the Corporations or any of them, including the
loss of customers, declining profitability or similar matters.
(nn) "New Sears Terms" shall have the meaning set forth in Section
3.30 hereof.
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(oo) "Ocelot" shall mean Ocelot Oil Corp., a Colorado corporation.
(pp) "Ocelot Shares" shall have the meaning set forth in the
introductory paragraphs of this Agreement.
(qq) "Owned Personalty" shall have the meaning set forth in Section
3.4 hereof.
(rr) "Owned Realty" shall have the meaning set forth in Section 3.5(a)
hereof.
(ss) "Permits" shall mean all permits, licenses, approvals,
certificates or authorizations of any federal, state or local governmental or
regulatory body held by State and the Subsidiaries.
(tt) "Person" shall have the meaning set forth in Section 3.4 hereof.
(uu) "Personal Property" shall mean all material tangible personal
property (other than inventory) owned by the Corporations, or leased or used by
any of them in their operations.
(vv) "Personalty Leases" shall have the meaning set forth in Section
3.4(b) hereof.
(ww) "Plan" or "Plans" shall have the meaning set forth in Section
3.16(a) hereof.
(xx) "Post-Employment Benefits" shall have the meaning set forth in
Section 3.16(f) hereof.
(yy) "Pre-Closing Tax Period" shall have the meaning set forth in
Section 3.17(a) hereof.
(zz) "Products" shall have the meaning set forth in Section 3.26
hereof.
(aaa) "Purchase Price" shall have the meaning set forth in Section 1.2
hereof.
(bbb) "Purchaser" shall have the meaning set forth in the introductory
paragraph hereof.
(ccc) "Real Property" shall mean all real estate owned of record by
State and its Subsidiaries, or leased by any of them in their operations. Such
term does not include real estate owned by other Persons in which inventory is
located, as listed on Schedule 3.6(b) hereto.
(ddd) "Real Property Leases" shall have the meaning set forth in
Section 3.5(b) hereof.
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(eee) "Releases" shall have the meaning set forth in Section 5.13
hereof.
(fff) "Representative" or "Representatives" shall have the meaning set
forth in Section 11.14 hereof.
(ggg) "Sellers" shall have the meaning set forth in the introductory
paragraph of Article 3 hereof.
(hhh) "Settlement Offer" shall have the meaning set forth in Section
5.24 hereof.
(iii) "Shareholders" shall have the meaning set forth in the
introductory paragraph hereof.
(jjj) "State" shall mean State Industries, Inc., a Tennessee
corporation.
(kkk) "State Shares" shall have the meaning set forth in the
introductory paragraph hereof.
(lll) "State France" shall mean State France, S.A., a subsidiary of
State.
(mmm) "State France Proceeds" shall mean the amount equal to the
proceeds received by State from the closing of a sale of State France prior to
Closing less any Taxes paid or payable by the Corporations and all expenses,
costs and fees of the Corporations' legal, accounting, investment banking and
other professional counsel in connection with such a sale.
(nnn) "Stephens Group" shall mean those persons identified as such on
Schedule 1.1 hereto.
(ooo) "Subordinated Debt Releases" shall have the meaning set forth in
Section 5.13 hereof.
(ppp) "Subordinated Debtholders" shall have the meaning set forth in
Section 5.13 hereof.
(qqq) "Subordinated Indebtedness" shall have the meaning set forth in
Section 5.13 hereof.
(rrr) "Subsidiary" or "Subsidiaries" shall mean those corporations set
forth on Schedule 3.3 hereto.
(sss) "Swap Agreements" shall mean that certain ISDA Master Agreement
dated as of December 23, 1999, between Bank of America, N.A. and State,
including the Schedules thereto.
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(ttt) "Tax Returns" shall have the meaning set forth in Section
3.17(k)(ii) hereof.
(uuu) "Taxes" shall have the meaning set forth in Section 3.17(k)(i)
hereof.
(vvv) "THW" shall have the meaning set forth in Section 11.15 hereof.
(www) "Title Policies" shall have the meaning set forth in Section
3.5(a) hereof.
(xxx) "Trusts" shall have the meaning set forth in the introductory
paragraph of this Agreement.
(yyy) "Unaudited Financial Statement" shall have the meaning set forth
in Section 3.12(a) hereof.
ARTICLE 2
CLOSING
2.1 Closing. Subject to Section 8.1, the closing of the transaction
contemplated by this Agreement (the "Closing") shall take place within five (5)
business days following the expiration of all waiting periods pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"),
but, subject to Articles 6 and 7, in all events the Closing shall take place on
or before February 28, 2002. The Closing shall take place at the offices of
Boult, Cummings, Conners & Berry, PLC, 414 Union Street, Nashville, Tennessee or
at such other place as the parties may mutually agree.
2.2 Deliveries by Sellers at Closing Sellers shall deliver or cause to be
delivered to Purchaser at the Closing the documents and other items required by
Sections 7.4 and 7.5 hereof to be delivered by Sellers or the Persons specified
in such Sections as a condition to Purchaser's obligations hereunder.
2.3 Deliveries by Purchaser at Closing. Purchaser shall deliver or cause to
be delivered at Closing the following:
(a) to Ocelot, the Purchase Price;
(b) to Bank of America, N.A. the amounts due pursuant to the Swap
Agreements if the same have not been paid by State prior to Closing; and
(c) to all appropriate parties, the documents and other items required
by Section 6.5 hereof to be delivered by Purchaser as a condition to
Shareholders' obligations hereunder.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
OCELOT AND SHAREHOLDERS
Ocelot and Shareholders (the "Sellers") jointly and severally (except as
otherwise provided in this Agreement) represent and warrant to Purchaser as
follows (it being agreed that the following representations and warranties shall
be deemed to have been made on the date hereof and, subject to Section 5.11
hereof, on the date of the Closing):
3.1 Organization and Standing of Ocelot and State and its Subsidiaries;
Authorization and Enforceability. Ocelot is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado.
Each of State and its Subsidiaries (collectively, the "Corporations" or
individually a "Corporation") is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdictions listed on Schedule 3.1
hereto. Except as disclosed on Schedule 3.1 hereto, each of the Corporations is
duly licensed or qualified to do business as a foreign corporation, and is in
good standing, in each jurisdiction wherein the character of the properties
owned or leased by it, or the nature of its business, makes such licensing or
qualification necessary. Ocelot, the Corporations, the Shareholders and the
Beneficiaries have full capacity, power and authority to enter into this
Agreement and to carry out the transactions contemplated by this Agreement. This
Agreement and the Ancillary Agreements have been duly authorized by Ocelot and
the Corporations, and no other corporate acts or proceedings on the part of
Ocelot and the Corporations are necessary to authorize the execution, delivery
and performance by Ocelot and the Corporations of this Agreement or the
Ancillary Agreements. When executed and delivered by all parties hereto, this
Agreement and the Ancillary Agreements shall be binding upon the Shareholders,
the Beneficiaries, Ocelot and the Corporations and shall be enforceable against
them in accordance with their respective terms. True and complete copies, with
all amendments, of the Charters of the Corporations (certified as of a recent
date by the Secretary of State of the State of Incorporation) and the Bylaws of
the Corporations (certified as of the date hereof by the respective corporate
secretaries) have been delivered to Purchaser. Except as disclosed in Schedule
3.1(a), the execution and delivery of this Agreement and the Ancillary
Agreements, the consummation of the transactions contemplated hereby and
thereby, and the performance and fulfillment of their respective obligations and
undertakings hereunder and thereunder by the Shareholders, the Beneficiaries,
Ocelot and the Corporations will not, provided that the consents listed on
Schedule 3.9 hereto are obtained, (i) violate any provision of, or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or result in the breach of or accelerate or permit
the acceleration of any performance required by the terms of, or give rise to
any obligation to make a payment to any other Person under, the Charter or
Bylaws of Ocelot or the Corporations; any Contract to which Ocelot, any
Corporation or any of the Shareholders or the Beneficiaries is a party or by
which any of them may be bound; any judgment, decree, writ, injunction, order or
award of any Governmental Authority; or the governing trust instruments of the
Trusts; (ii) result in the creation of any Lien upon any of the properties or
assets (whether real or personal, tangible or intangible) of Ocelot or the
Corporations; or (iii) terminate or cancel, or result in the termination or
cancellation of, any Contract to which the Corporations are a party. Schedule
3.1 hereto contains a true and correct list of the directors and officers of the
Corporations.
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3.2 Capitalization of the Corporations and Ocelot.
(a) Schedule 3.2 hereto lists all authorized and issued shares of each
Corporation. All authorized shares have been authorized by all necessary
corporate action and all issued shares are validly issued and outstanding, fully
paid and non-assessable. Except as set forth on Schedule 3.2 hereto: (i) there
are no other authorized or outstanding equity securities of the Corporations of
any class, kind or character, and there are no outstanding rights, contracts,
rights to subscribe, conversion rights, exchange rights, warrants, options,
calls, puts or other agreements or commitments of any character relating to the
shares of the Corporations or any securities convertible or exchangeable or
exercisable for any shares of the Corporations; (ii) there are no agreements or
understandings among the shareholders of the Corporations with respect to the
voting, sale or transfer of the shares of the Corporations on any matter; (iii)
none of the shares are reserved for any purpose; (iv) there are no preemptive or
similar rights with respect to the issuance, sale or other transfer (whether
present, past or future) of the shares; (v) there are no agreements or other
obligations (contingent or otherwise) which may require the Corporations to
issue, repurchase or otherwise acquire any shares or any other securities; (vi)
there are no outstanding or authorized stock appreciation/phantom stock or
similar rights with respect to the Corporations; and (vii) there are no voting
trusts, proxies, or any other agreements or understandings with respect to the
shares.
(b) Ocelot has, and at the Closing Purchaser will receive, good, valid
and marketable title to the State Shares listed on Schedule 3.2 hereto, free and
clear of all liens, pledges, claims, encumbrances, security interests, orders,
writs and/or equities of any nature whatsoever (collectively "Liens"), and
Ocelot has full lawful capacity, right power and authority to transfer to the
Purchaser full unencumbered legal and equitable title to all of the State
Shares. State owns all of the shares of APCOM and State UK listed on Schedule
3.2 hereto, free and clear of all Liens.
(c) Schedule 1.1 sets forth the record and beneficial owners of all
Ocelot Shares and the beneficiaries of the Trusts.
3.3 Ocelot Activities; Corporations' Subsidiaries. Since January 1, 1994,
Ocelot has engaged in no activities other than (a) performing its duties under
the Management Agreement, (b) owning the stock of State Holding Company (which
was merged with State in 1997), and (c) collecting oil and gas royalties. Since
January 1, 1998, Ocelot has engaged in no activity other than (a) performing its
duties under the Management Agreement, and (b) owning the stock of State. Except
as set forth on Schedule 3.3 attached hereto, none of the Corporations has any
equity interest in any corporation, partnership, joint venture or other entity.
3.4 Owned and Leased Personal Property.
(a) Purchaser has been provided with a schedule of the Personal
Property owned by each Corporation (the "Owned Personalty"). Except as set forth
on Schedule 3.4(a) attached hereto, each Corporation has good and marketable
title to its Owned Personalty, free and clear of any and all Liens. The Owned
Personalty constitutes all Personal Property used by
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the Corporations in the operation of their business, except for such items
specified in Section 3.4(b) hereof.
(b) Schedule 3.4(b) attached hereto lists all Personal Property in the
possession of the Corporations which is owned by or in which an interest is, to
the Knowledge of Sellers, claimed by any other individual, firm, corporation,
partnership, or other person or entity ("Person") (whether a customer, supplier
or other entity) ("Leased Personalty"). Except as set forth on Schedule 3.4(b),
all leases or other contracts or licenses providing any Corporation with the
right to use the Leased Personalty (the "Personalty Leases") are in writing and
a copy of each such Personalty Lease has been delivered to Purchaser, and there
are no amendments to or modifications of any such Personalty Leases, except as
set forth on Schedule 3.4(b). Each Corporation has performed all obligations
required to be performed by it to date under the Personalty Leases, and to the
Knowledge of the Sellers no other party is in default (or would be in default on
the giving of notice or the lapse of time or both) under any Personalty Lease.
3.5 Owned and Leased Real Property.
(a) Schedule 3.5(a) attached hereto contains a true and complete list
of all Real Property owned by each Corporation (the "Owned Realty"). A true,
complete and accurate copy of the most recent title policies with respect to the
Owned Realty have been delivered to Purchaser (the "Title Policies"). The status
of the Owned Realty as set forth on such Title Policies is true and accurate in
all material respects, and no event has occurred since the date of any of the
Title Policies which would result in the Title Policies not being true and
accurate in all material respects.
(b) Schedule 3.5(b) attached hereto lists all contracts for the lease
by each Corporation, as lessee, of Real Property (the "Real Property Leases").
Except as set forth on Schedule 3.5(b), all Real Property Leases are in writing
and a copy of each such Real Property Lease has been delivered to Purchaser, and
there are no amendments to or modifications of any such Real Property Lease
except as set forth on Schedule 3.5(b). Each Corporation has performed all
obligations required to be performed by it to date under the Real Property
Leases, and to the Knowledge of the Sellers no other party is in default (or
would be in default on the giving of notice or the lapse of time or both) under
any Real Property Lease.
(c) None of the Real Property is in violation of applicable building
or zoning laws, rules or ordinances. There are now in full force and effect for
each location of Real Property duly issued certificates of occupancy permitting
such Real Property to be legally used and occupied as the same is now
constituted. No fact or condition exists that would prohibit or adversely affect
ordinary rights of access to and from such Real Property and from and to
existing public roadways. No special assessments currently affect the Real
Property, and to the Knowledge of Sellers, there are no planned or public
improvements that are reasonably likely to affect adversely the Real Property.
To the Knowledge of Sellers, neither the whole nor any part of the Real Property
is subject to any governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefor, nor has any such condemnation, expropriation or taking
been proposed.
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3.6 Inventory.
(a) Except as disclosed in Schedule 3.6(a) hereto, the inventory of
the Corporations as reflected in the Financial Statements consists of a quality
and quantity usable and salable in the ordinary course of the business of the
Corporations, consistent with past practices, except for items of obsolete
materials and materials of below standard quality, for which adequate reserves
have been provided in the Financial Statements. All inventory purchased since
the date of the Current Financial Statement consists of a quality and, together
with supplies already on hand, a quantity usable and salable in the ordinary
course of the business of the Corporations, consistent with past practices.
(b) Schedule 3.6(b) attached hereto contains a true and complete list
of all locations utilized by the Corporations for the storage, warehousing
and/or consignment of Inventories. Those locations for which the Corporations
have written agreements are specified on Schedule 3.6(b) hereto. A true and
correct copy of all such written agreements has been provided to the Purchaser.
3.7 Contracts. Schedule 3.7 attached hereto contains a true and complete
list of all Contracts, the Real Property Leases and the Personalty Leases
described above, true and correct copies of which have been provided to
Purchaser. Except as set forth on Schedule 3.7, each Contract listed on Schedule
3.7 is in writing and a copy of each such Contract has been delivered to
Purchaser, and there are no amendments to or modifications of such Contracts,
except as set forth on Schedule 3.7. Each Corporation has performed all
obligations required to be performed by it to date under the Contracts, and to
the Knowledge of the Sellers, no other party is in default (or would be in
default on the giving of notice or the lapse of time or both) under any
Contract. Except as disclosed on Schedule 3.7 hereto, none of the Corporations
are subject to any agreement, contract or commitment that contains any covenant
restricting the nature, type of or geographical area in which business can be
conducted by the Corporations.
3.8 Condition of Assets. Except as set forth in Schedule 3.8 hereto, the
Real Property and Personal Property, including, without limitation, plants,
buildings, structures, equipment, machinery, and vehicles, owned or leased by
the Corporations or used or employed by them in their businesses, are sufficient
and adequate to carry on their businesses as presently conducted, and free from
any defects, except for such defects as do not interfere with the use thereof in
the conduct of the normal operations of the Corporations.
3.9 No Consents. Except as set forth on Schedule 3.9 attached hereto, no
consent, declaration, filing or approval or authorization of, or registration
with, any agency, instrumentality, department, commission, court, tribunal, or
board of any government, whether foreign or domestic and whether national,
federal, state, provincial or local ("Governmental Authority") or any other
Person is required to be obtained by Sellers or the Corporations in connection
with the execution and delivery of this Agreement or the consummation of the
transaction contemplated hereby.
3.10 Permits and Licenses. Schedule 3.10 attached hereto, contains a
complete list of all Permits held by the Corporations. Except as indicated on
Schedule 3.10, (i) each Corporation
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is the legal and beneficial holder of all of its Permits listed on Schedule
3.10; (ii) such Permits listed on Schedule 3.10 are sufficient to permit each
Corporation to conduct its business in the manner in which it is now being
conducted, (iii) each of the Permits listed on Schedule 3.10 is in full force
and effect, valid and outstanding, and no event has occurred which, with the
giving of notice or the passage of time or otherwise, would permit revocation or
early termination of any of the foregoing or would adversely affect the rights
of the Corporations thereunder; and (iv) except as set forth on Schedule 3.17
hereto, neither the Corporations nor any Seller has received written notice from
any Governmental Authority or other Person questioning the validity of or
alleging failure to comply with the terms of such Permits listed on Schedule
3.10.
3.11 Insurance. Schedule 3.11 attached hereto contains a description of all
policies of fire, general liability, product liability, environmental impairment
liability, worker's compensation, health and other forms of insurance policies
or binders procured on or after November 1, 1996, and currently in force
insuring against risks of the Corporations and sets forth the primary named
insured for each such policy. Except as disclosed on Schedule 3.11, to the
Knowledge of the Sellers, there are no insurance policies under which the
Corporations have continuing obligation for retroactive premiums under insurance
policies, regardless of when procured. Except as disclosed on Schedule 3.11
hereto, the premiums for the policies are fully paid and no retroactive premiums
are due under the policies. Except as set forth on Schedule 3.11 hereto, all
such policies are valid, outstanding and enforceable policies. No notice of
cancellation or termination has been received with respect to any such policy.
No Corporation has received any written notice from or on behalf of any
insurance carrier issuing any such policy that insurance rates therefor will
hereafter be substantially increased (except to the extent that insurance rates
may be increased for all similarly situated risks) or that there will hereafter
be a cancellation of, an increase in a deductible (or an increase in premiums to
maintain an existing deductible) for or nonrenewal of any such policy. The
consummation of the transactions contemplated hereby will not alter or impair
the rights of the Corporations in respect of insurance coverage relating to
periods prior to and through the Closing.
3.12 Financial Statements.
(a) State has previously delivered to Purchaser and there are attached
hereto as Exhibit 3.12 (i) its audited consolidated balance sheet as of December
31, 1999, together with audited consolidated statement of income, retained
earnings; and cash flow for the year then ended (the "Audited Financial
Statement"); (ii) its unaudited consolidated balance sheet as of December 31,
2000 together with unaudited consolidated statement of income, retained earnings
and cash flow for the year then ended (the "Unaudited Financial Statement"); and
(iii) its unaudited consolidated balance sheet as of May 26, 2001 and the
related unaudited consolidated statement of income for the period then ended
(the "Current Financial Statement") (the Audited Financial Statement, Unaudited
Financial Statement and Current Financial Statement are referred to hereinafter
collectively as the "Financial Statements").
(b) The Audited Financial Statement has been examined and reported on
as described in Exhibit 3.12 hereto by Lattimore, Black, Morgan & Cain, P.C.,
Certified Public Accountants. The Financial Statements fairly, accurately and
correctly present, as of their
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respective dates, the financial condition and assets and liabilities as of the
date indicated therein and the results of operations for the period covered
thereby.
(c) The Unaudited Financial Statement and the Current Financial
Statement have been prepared in accordance with generally accepted accounting
principles, consistently applied, except as disclosed in the notes thereto or on
Schedule 3.12 hereto.
(d) Except as disclosed on the Financial Statements, elsewhere in this
Agreement, and in Schedule 3.12 hereto, there are no material contingent
liabilities of the Corporations.
3.13 Litigation. Except as set forth on Schedule 3.13 attached hereto, (i)
there is no material suit, action, proceeding, claim, investigation, or inquiry
pending, or to Sellers' Knowledge, threatened against any of the properties or
assets of the Corporations or to which any Corporation is or may become a party,
(ii) no Corporation is subject to any judgment, order, writ or injunction of or
agreement with any Governmental Authority, and (iii) to the best of Sellers'
Knowledge, there is no factual basis upon which any suit, action, proceeding,
claim, investigation or inquiry could be asserted or based, the effect of any of
such items in this clause (iii) which would adversely affect the transaction
contemplated by this Agreement.
3.14 Brokers' Fees. The Sellers have engaged Seale & Associates, LLC and
Stephens, Inc. to represent them with regard to this transaction. Except for
Sellers' liability to these two entities, neither the Corporations nor the
Sellers have incurred any liability for brokers' fees, finders' fees, agents'
commissions, financial advisory fees, or other similar forms of compensation in
connection with this Agreement or any transaction contemplated by this
Agreement.
3.15 Employment Matters. Purchaser has been provided a true and complete
list of all officers and employees of each Corporation, years of service, and
their annual salary or hourly wages. Except as set forth on Schedule 3.15
attached hereto:
(a) No present or past employee of either Corporation has any written
or oral, express or implied, contract, agreement, arrangement or understanding
of any nature whatsoever, including without limitation, any plans or contracts
providing for bonuses, severance payments, pensions, profit sharing, stock
options, stock purchase rights, deferred compensation, insurance, or retirement
benefits of any nature;
(b) There is no pending or threatened labor dispute, strike, work
stoppage, grievance, claim of unfair labor practice, wrongful discharge,
employment discrimination, or sexual harassment, or any other employment dispute
of any form or nature affecting either Corporation;
(c) Each Corporation has withheld all amounts required by law or
agreement to be withheld from the wages or salaries or any other form of
compensation of its employees and has no unaccrued liability for any wages or
vacation pay, sick pay, bonuses or other incentives or for any taxes or
penalties for failure to pay any of the foregoing;
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(d) No union or other collective bargaining unit has been certified or
recognized by any Corporation as representing any employee nor, to the Knowledge
of Sellers, is a union or other collective bargaining unit seeking certification
or recognition for such purpose.
(e) None of the Corporations have any written or oral policy,
agreement or understanding regarding vacation and/or severance pay requirements.
Except as disclosed on Schedule 3.15(e), the consummation of the transaction
contemplated by this Agreement will not entitle any employee of the Corporations
to severance pay.
(f) Each of the Corporations has obtained and maintained Employment
Eligibility Verifications on Forms I-9 as required by the Immigration Reform and
Control Act of 1986; and
(g) Each Corporation has complied with applicable laws relating to
collective bargaining, wages, hours, and age, race, disability, and sex
discrimination.
3.16 Employee Benefit Plans.
(a) Schedule 3.16 attached hereto lists all plans, programs,
agreements, commitments or arrangements maintained by or on behalf of the
Corporations that provide benefits or compensation to, or for the benefit of,
any current or former employees (a "Plan" or "Plans"). Except as set forth on
Schedule 3.16, only current and former employees of the Corporations (and
eligible dependents and beneficiaries of such current and former employees)
participate in the Plans. True and correct copies of all Plans, and other
related documents reasonably requested by Purchaser, have been delivered to
Purchaser.
(b) With respect to each Plan, except as set forth on Schedule 3.16
(i) no litigation or administrative or other proceeding is pending or, to
Sellers' Knowledge, threatened involving such Plan, (ii) such Plan has been
administered and operated, in all material respects, in the ordinary and usual
course in accordance with applicable law and in accordance with its terms and
(iii) all required returns, filings, reports and disclosures with respect to
such Plan have been timely and accurately made.
(c) Schedule 3.16 includes each Plan which is an "employee benefit
plan" as defined in Section 3(3) of the Employee Retirement and Income Security
Act of 1974, as amended ("ERISA") and the Internal Revenue Code of 1986, as
amended (the "Code"). No such Plan has incurred an "accumulated funding
deficiency" as such term is defined in Section 4971 of the Code. Each Plan that
is intended to be qualified under Sections 401(a) and 501(a) of the Code,
including the Pension Plan for Employees of State Industries, Inc., the State
Industries, Inc. 401(k) Savings Plan, the APCOM, Inc. Pension Plan and Trust and
the APCOM, Inc. 401(k) Plan, has at all times satisfied the requirements for
qualification and exemption under the Code.
(d) Except as set forth on Schedule 3.16 attached hereto and made a
part hereof, none of the Corporations are or have been required to contribute to
a defined benefit
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pension plan that is or was subject to Title IV of ERISA or to any
multi-employer benefit plan as defined in Section 3(37) of ERISA.
(e) With respect to each Plan, except as set forth on Schedule 3.16(e)
attached hereto and made a part hereof, neither such Plan, nor any trustee,
administrator, fiduciary, agent or employee thereof has at any time been
involved in a transaction which would constitute a "prohibited transaction"
within the meaning of Section 406 of ERISA or Section 4975 of the Code, nor has
any such person been involved in or caused such ERISA Plan to be involved in a
breach of fiduciary duty under Section 404 of ERISA.
(f) Except as set forth on Schedule 3.16(f) hereto, none of the
Corporations and none of the Plans, have any obligation to provide, or liability
for, health care, life insurance or other benefits after termination of
employment ("Post-employment Benefits"), except for retirement benefits under
the Plans or except as required by ERISA Section 601 and Section 4980B of the
Code. Except as set forth on Schedule 3.16(f) hereto, with respect to (i) all
persons terminated or retired on or before the Closing, and (ii) active
employees and other participants and beneficiaries, to the extent
Post-employment Benefits (other than qualified retirement plan benefits under
the Plans) have been, or are reasonably expected to be, earned by service to the
Closing, the Financial Statements contain adequate reserves in an amount not
less than the present value of all such benefits, determined as though all
Post-employment Benefits were fully vested and nonforfeitable and assuming the
continuation of all such Plans, using actuarial methods and assumptions which
are reasonable individually and in the aggregate. As of the Closing, notice of
the availability of continuation coverage (as defined in Section 602 of ERISA
and Section 4980B of the Code) will have been provided to all persons entitled
thereto and all persons electing such coverage are being (or have been, if
applicable) provided such coverage. Set forth on Schedule 3.16(f) hereto is a
listing of all terminated employees currently receiving Post-employment Benefits
pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985.
(g) Except as set forth on Schedule 3.16 attached hereto and made a
part hereof, none of the Corporations has any liability, whether actual or
contingent, under Title IV of ERISA or any other potential liability
attributable to an employee benefit plan, program, commitment or arrangement
that is or was maintained by an entity other than the Corporations.
3.17 Taxes. Except as set forth in Schedule 3.17 attached hereto:
(a) The provision made for Taxes on the Financial Statements is
sufficient for the payment of all Taxes at the date of such Financial Statements
and for all years and periods prior thereto. Since the date of the Audited
Financial Statements, the Corporations have not incurred any Taxes other than
Taxes incurred in the ordinary course of business consistent in type and amount
with past practices of the Corporations. The charges, accruals, and reserves for
Taxes with respect to the Corporations for any tax period (or portion thereof)
ending on or before Closing (a "Pre-Closing Tax Period") (including any
Pre-Closing Tax Period for which no Tax Return has yet been filed) reflected on
the books of the Corporations (excluding any provision for deferred income
taxes) are adequate to cover such Taxes;
- 16 -
(b) All income Tax Returns (as hereinafter defined) and all other
material Tax Returns required to be filed by the Corporations for all taxable
periods or portions thereof ending on or before the date of Closing have been or
will be timely filed. All such Tax Returns which have been filed are correct and
complete in all material respects and Tax Returns filed hereafter will be
correct and complete in all material respects. The Corporations have paid all
Taxes that are owed on such Tax Returns. No claim has ever been made by an
authority in a jurisdiction where the Corporations do not file Tax Returns that
any of such Corporations is or may be subject to Tax by that jurisdiction or
authority;
(c) The Corporations have duly withheld and paid all Taxes that each
is required to withhold and pay in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party of
such Corporation;
(d) There are no outstanding agreements which extend the statutory
period of limitations applicable to any claim for the collection or assessment
of Taxes (as hereinafter defined) due from the Corporations for any taxable
period;
(e) No audit or other proceeding by any Governmental Authority is
pending or to the Knowledge of Sellers threatened with respect to any Taxes due
from or with respect to the Corporations;
(f) None of the Corporations have requested any extension of time
within which to file any Tax Return;
(g) None of the Corporations (i) has been a member of an affiliated
group filing a consolidated federal income Tax Return (other than a group the
common parent of which was Ocelot), and (ii) has any liability for the Taxes of
any person or entity under Treas. Reg. ss. 1.1502-6 (or any corresponding or
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise. Schedule 3.17 sets forth any Persons other
than Ocelot and the Corporations that have been a member of the Ocelot
affiliated group for each federal income Tax Return of Ocelot for which the
statute of limitations does not bar a federal Tax assessment;
(h) None of the Corporations (i) have consented or agreed at any time
under Section 341 of the Code; (ii) has agreed, or is required, to make any
adjustment under Section 263A, Section 481 or 482 of the Code (or any
corresponding or similar provision of state, local, or foreign law) by reason of
a change in accounting method or otherwise which will continue to have effect
for taxable period after Closing; (iii) has made an election, or is required, to
treat any of its existing assets as tax-exempt bond financed property or
tax-exempt use property within the meaning of Section 168 of the Code; (iv) has
safe-harbor or any other tax-advantaged leases with respect to any taxable year
for which the period for assessment for Taxes has not expired, taking into
account any extensions or waivers thereof; (v) is and has been an includible
corporation in any other affiliated group of corporations within the meaning of
Section 1504(a) of the Code; (vi) has entered into tax-sharing or allocation
agreements or similar arrangements which are applicable for any period for which
the period for assessment for Taxes has not expired, taking into account any
extensions or waivers thereof; (vii) is a member of a
- 17 -
limited liability company, partner in a partnership or a member of a joint
venture or any other arrangement or contract which is treated as a partnership
for federal income tax purposes; (viii) has made or is obligated to make, or
will, as a result of any event connected with the transactions contemplated by
or referred to in this Agreement, make or become obligated to make any "excess
parachute payment" as defined in Section 280G of the Code; (ix) has an excess
loss account, as defined in Section 1.1502-32(e)(1) of the Regulations; (x) has
applied for any Tax ruling; or (xi) entered into a closing agreement as
described in Code Section 7121 or otherwise (or any corresponding or similar
provision of state, local or foreign Tax law) with any Tax authority (A) since
January 1, 1991 or (B) that would materially affect Tax Returns of the
Corporations, the liability of the Corporations for Taxes or the calculation of
such Taxes on an ongoing basis. No property of any of the Corporations secures
any debt the interest on which is exempt from Tax under Section 103 of the Code.
None of the Corporations has in effect any election for federal income tax
purposes under Sections 108, 168, 338, 341, 441, 471, 1017, 1033, 1502, or 4977
of the Code. None of the Corporations has a permanent establishment in any
foreign country, as defined in any applicable Tax treaty or convention between
the United States of America and such foreign country. None of the Corporations
will be required to include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or portion thereof)
ending after the Closing as a result of any (A) deferred intercompany gain or
any excess loss account described in Treasury Regulations under Code Section
1502 (or any corresponding or similar provision of state, local or foreign
income Tax law); (B) installment sale or open transaction disposition made on or
prior to the Closing; or (C) prepaid amount received on or prior to the Closing;
(i) None of the Sellers is a "foreign person" as defined in Section
1445(f)(3) of the Code;
(j) Schedule 3.17 sets forth the following information for federal and
state Tax purposes with respect to the Corporations as of the most recent
practicable date and on an estimated pro forma basis as of the Closing giving
effect to the consummation of the transactions contemplated thereby: (i) the
amount of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution of the
Corporations and (ii) the amount of Tax refunds (by year and type of Tax) for
which each of the Corporations has filed for or expects to file;
(k) For purposes of this Agreement:
(i) The term "Taxes" means all federal, state, local,
territorial, provincial or foreign income, net income, gross receipts, single
business, license, payroll, employment, value-added, privilege, profits,
franchise, withholding, sales, use, occupation, property, excise, severance,
stamp, environmental, custom duties, capital stock and all other taxes, fees and
governmental charges of any form or nature whatsoever (including interest and
penalties, if any), and
(ii) The term "Tax Returns" means all returns, declarations,
estimates, claims for refund and reports of any form or nature whatsoever
(including, without limitation, information returns and any statement) in
respect of, relating to, or required to be filed in
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connection with, any Taxes, including any schedule, form, or attachment thereto
and any amendment thereof.
3.18 Environmental Matters.
(a) For the purpose of this Section 3.18:
(i) "Environmental Laws" shall be defined as any and all federal,
state or local laws or common law relating to the regulation and protection of
human health, safety and welfare, the environment or natural resources,
including without limitation the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Solid Waste Disposal
Act, as amended by the Resource Conservation and Recovery Act of 1976 and the
Hazardous and Solid Waste Amendments of 1984, the Clean Air Act, the Federal
Water Pollution Control Act, the Emergency Planning and Community Right to Know
Act, the Toxic Substances Control Act, the Federal Insecticide, Fungicide, and
Rodenticide Act and the Hazardous Materials Transportation Act.
(ii) "Hazardous Materials" shall be defined as all chemicals,
materials, substances, or wastes (including, without limitation, asbestos,
polychlorinated biphenyls and petroleum) (A) now or hereafter designated or
defined or included in any definition under any Environmental Law as
"hazardous," "toxic," "dangerous," "pollutant," or "contaminant," and (B) the
handling, use of, disposal of or exposure to which is prohibited, limited or
regulated by any Environmental Law.
(b) Sellers have provided Purchaser with Phase I and/or Phase II
Environmental Surveys that have been prepared for any real property presently or
formerly owned, leased or operated by the Corporations.
(c) Except as set forth on Schedule 3.18, the Corporations are in
compliance with, and have complied with, the provisions of all Environmental
Laws, including, without limitation, all laws with respect to reporting releases
of Hazardous Materials and the registration, testing and maintenance of
underground storage tanks, except for instances of noncompliance where neither
the costs and penalties associated with noncompliance nor the costs associated
with rectifying the noncompliance, individually or in the aggregate with those
associated with other instances of noncompliance subject to this or similar
exceptions under this Section 3.18, would be material relative to the
Corporations.
(d) Schedule 3.18 includes a true, accurate and complete list of all
Permits possessed by any Corporation relating to the use, generation, storage,
transportation or disposal of Hazardous Materials. The Corporations have been
and are in compliance with the requirements of all such Permits, except for
instances of noncompliance where neither the costs and penalties associated with
noncompliance nor the costs associated with rectifying the noncompliance,
individually or in the aggregate with those associated with other instances of
noncompliance subject to this or similar exceptions under this Section 3.18,
would be material relative to the Corporations.
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(e) Except as set forth on Schedule 3.18, there are no facts,
circumstances, acts or omissions related to any real property presently or
formerly owned, leased or operated by the Corporations that could impose
liability on any of the Corporations under any Environmental Law.
(f) Except as set forth on Schedule 3.18, there has been no order,
directive, citation or notice by any Governmental Authority with respect to the
use, generation, storage, transportation or disposal of Hazardous Materials
affecting any Corporation, any of the Real Property (or, to the Knowledge of
Sellers, with respect to any real property formerly owned, leased or operated by
the Corporations), any improvements located thereon or the business conducted
thereon which is presently pending or unresolved.
(g) Except as set forth on Schedule 3.18, all of the Real Property is
free of all (i) Hazardous Materials, except those used, stored, transported and
disposed in compliance with all Environmental Laws; (ii) underground storage
tanks; (iii) underground pipelines; and (iv) solid waste management units (as
such term is used in 42 U.S.C. s.6924 and its implementing regulations). Except
as set forth on Schedule 3.18, none of the Corporations has stored, treated or
disposed of any Hazardous Materials on, in or under any real property presently
or formerly owned, leased or operated by the Corporations, or any part thereof,
or has permitted any real property presently or formerly owned, leased or
operated by the Corporations, or any part thereof, to be used for the storage,
treatment or disposal of Hazardous Materials in violation of Environmental Laws,
which has not been remediated.
(h) No real property presently or, to the Knowledge of Sellers,
formerly owned, leased or operated by the Corporations is listed on the National
Priority List established by the United States Environmental Protection Agency
(the "EPA");
(i) Except as set forth on Schedule 3.18 attached hereto and made part
hereof, no claim, demand, or request has been received by the Corporations from
the Occupational Safety and Health Administration, the EPA, or any other
federal, state or local governmental entity with respect to Environmental Laws,
the handling or disposal of Hazardous Materials, Permits or worker health and
safety matters, regarding current or past operations at any real property
presently or formerly owned, leased, or operated by the Corporations that
remains pending or unresolved.
(j) Except as set forth on Schedule 3.18 hereto, none of the
Corporations have received notice of any unauthorized release or discharge of
any Hazardous Materials in, on, or under any real property presently or formerly
owned, leased, or operated by the Corporations, which has not been fully
remedied.
(k) Except as set forth on Schedule 3.18 hereto, the disposal or
removal of all wastes (including chemical wastes), by-products,
off-specification materials, and unusable products by or on behalf of the
Corporations from any real property presently or formerly owned, leased, or
operated by the Corporations has been conducted in compliance with all
applicable laws and regulations, including Environmental laws, except for
instances of noncompliance where neither the costs and penalties associated with
noncompliance nor the costs associated
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with rectifying the noncompliance, individually or in the aggregate with those
associated with other instances of noncompliance subject to this or similar
exceptions under this Section 3.18, would be material relative to the
Corporations.
(l) Each of the Corporations has made available to the Purchaser all
Material Safety Data Sheets, Tier 1, Tier II and Form R reports for all
products, intermediates, and raw materials purchased, manufactured, used or sold
by the Corporations, each of which is complete, correct and current.
(m) To the Knowledge of Sellers, except as set forth on Schedule 3.18
attached hereto and made part hereof, none of the off-site locations where
Hazardous Substances generated or transported from, by or on behalf of the
Corporations have come to be located (whether through disposal, storage or use)
has been nominated or identified as a facility that is subject to an existing or
potential claim under Environmental Laws for which the Corporations could be
liable.
3.19 Conduct of Business. Except as specifically set forth on Schedule 3.19
attached hereto or disclosed in this Agreement and the Schedules hereto, since
December 31, 2000, the Corporations have operated in the ordinary course of
business and the Corporations have not:
(a) entered into or amended any Contract or incurred or committed to
incur any liability or other obligation (fixed or contingent) other than in the
ordinary course of business and consistent with past practice;
(b) discharged or satisfied any Lien or paid any obligation or
liability, other than in the ordinary course of business consistent with past
practice;
(c) mortgaged, pledged or subjected to any Lien any of its assets or
properties, other than in the ordinary course of business consistent with past
practice;
(d) transferred, leased or otherwise disposed of any of its assets or
properties or acquired any assets or properties, other than in any case in the
ordinary course of business and consistent with past practice;
(e) canceled or compromised any debt or claim, other than in the
ordinary course of business and consistent with past practice;
(f) waived or released, under any Contract, rights of the Corporations
having value to the Corporations, other than in any case in the ordinary course
of business and consistent with past practice;
(g) terminated or received notice of the termination of or a default
or violation under any Contract or Permit;
(h) other than in the ordinary course of business and consistent with
past practice, made or granted any wage or salary increase applicable to any
group or classification of
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employees generally, paid any bonuses, entered into any employment Contract with
any officer or employee or made any loan to, or entered into any transaction of
any other nature with, any officer or employee of the Corporations;
(i) adopted, or increased the payments to or benefits under, any Plan
for or with employees of Corporations.
(j) entered into any transaction, Contract or commitment, except those
listed, or which pursuant to the terms hereof are not required to be listed, on
the schedules hereto, this Agreement and the transactions contemplated hereby,
and those entered into in the ordinary course of business and consistent with
past practice;
(k) made any change in the Corporations' authorized or issued capital
stock; granted any stock option or right to purchase shares of capital stock of
either Corporation; issued any security convertible to such capital stock;
granted any registration rights; purchased, redeemed, retired or otherwise
acquired any shares of capital stock; or declared or paid any dividend or other
distribution or payment in respect of shares of capital stock of the
Corporations;
(l) amended the charter or bylaws of the Corporations;
(m) suffered any casualty loss or damage (whether or not such loss or
damage shall have been covered by insurance) which affects the Corporations'
ability to conduct its business;
(n) except as reflected in the Current Financial Statements, suffered
any event or other occurrence which, singly or in the aggregate, would
materially adversely affect the business of the Corporations or its properties
or assets;
(o) changed any of the accounting methods used by the Corporations; or
(p) agreed, orally or in writing, to do any of the foregoing.
3.20 Intellectual Property. Schedule 3.20 attached hereto contains an
accurate and complete list of all domestic and foreign patents, design
registrations, patent and design registration applications, intellectual
property licenses and agreements (including, but not limited to, patent,
software and know-how licenses and agreements), trade names, trademarks,
registered copyrights, service marks, trademark registrations and applications,
service mark registrations and applications, copyright registrations and
applications and domain names owned or used by State or any of the Subsidiaries
in the operation of their businesses as presently conducted or as presently
proposed to be conducted (collectively, along with trade secrets, the
"Intellectual Property"). Except as set forth in Schedule 3.20 hereto, State or
one of the Subsidiaries, as applicable, owns, free and clear from all Liens, the
entire right, title and interest in and to the Intellectual Property (including,
without limitation, the exclusive right to use and license the same). State or
one of the Subsidiaries, as applicable, is the owner of record of all patents,
copyright registrations and trademark registrations, and applications therefor,
in the applicable
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governmental offices. Except as set forth in Schedule 3.20 hereto, there are no
pending or, to the Knowledge of the Sellers, threatened actions affecting the
Intellectual Property. Except as set forth in Schedule 3.20 hereto, to the
Knowledge of the Sellers, no third party is currently infringing or otherwise
violating any of the Intellectual Property. Schedule 3.20 hereto lists all
notices or claims currently pending or received by State or any of the
Subsidiaries which claim infringement by State or any of the Subsidiaries of any
third party intellectual property rights, including, but not limited to,
domestic or foreign patents, patent applications, patent licenses and know-how
licenses, trade names, trademark registrations and applications, service marks,
copyrights, copyright registrations or applications, trade secrets, domain names
or other confidential proprietary information. Except as set forth in Schedule
3.20 hereto, there is no reasonable basis upon which any claim may be asserted
against State or any of the Subsidiaries for infringement or misappropriation of
any third party intellectual property rights, including, but not limited to,
domestic or foreign patents, patent applications, patent licenses and know-how
licenses, trade names, trademark registrations and applications, trademarks,
service marks, copyrights, copyright registrations or applications, trade
secrets, domain names or other confidential proprietary information. All
patents, registrations and certificates issued by any governmental authority
relating to any of the Intellectual Property, and all applications therefor, and
all licenses and other agreements pursuant to which State or any of the
Subsidiaries use any of the Intellectual Property, are valid and subsisting and
have been properly maintained, and none of State, the Subsidiaries or, to the
Knowledge of the Sellers, any other Person is in material default or violation
thereunder.
3.21 Bank Financing Through Bank of America. The Corporations have
delivered a copy to Purchaser of all documents reflecting the financing provided
to the Corporations through Bank of America, N.A., as Agent, and have informed
Purchaser that the transactions contemplated hereby will constitute a default
thereunder. Schedule 3.21 sets forth the amount of indebtedness of the
Corporations under the Credit Facility as of the dates set forth on such
Schedule. Except as set forth on Schedule 3.21, the Corporations have no
indebtedness to any Person for money borrowed other than under the Credit
Facility. The Corporations currently have no eurodollar rate loans outstanding
under the Credit Facility. Further, Purchaser has been informed by the
Corporations that the Corporations are subject to the Swap Agreements in
connection with such financing, and all documentation reflecting such Swap
Agreements has been provided to Purchaser.
3.22 Compliance with Law. Other than as disclosed elsewhere in this
Agreement and the schedules hereto, the business of the Corporations has been
conducted in accordance and in compliance with, and none of the Corporations are
in violation of, any law, statute, ordinance rule or regulation, order,
judgment, writ, injunction or decree, in each case, or any federal, state or
local government or instrumentality or agency thereof or any court or other
similar body, including without limitation all laws, rules regulations and other
requirements relating to antitrust, consumer protection, employment, employment
practices, employment benefits, environmental, equal opportunity, health,
occupational safety, pension, securities, and written affirmative action plans,
except for instances of noncompliance where neither the costs and penalties
associated with noncompliance nor the costs associated with rectifying the
noncompliance, individually or in the aggregate with those associated with other
instances of
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noncompliance subject to this exception, have or will have a material adverse
effect on the operation or business of the Corporations.
3.23 Powers of Attorney. Except as set forth on Schedule 3.23 attached
hereto and made a part hereof, no person holds any tax or other power of
attorney from any of the Corporations with respect to any matter.
3.24 Corporate Records. Except as disclosed in Section 3.12 hereof and
Schedule 3.12 hereto, the books of account and other financial records of each
of the Corporations are each true, correct and complete, and accurately reflect
the operations of the business and financial condition of each of the
Corporations and the net worth and book value of their properties. All other
corporate records of each of the Corporations furnished to the Purchaser
pursuant to this Agreement, are true, correct and complete in all material
respects.
3.25 Customers. Except as disclosed on Schedule 3.25 attached hereto and
made a part hereof, to the Knowledge of the Sellers, since January 1, 2001 no
customer or distributor to whom the Corporations had in excess of $5,000,000 of
gross sales during 2000 has provided any written or other notice to any of the
Corporations that such customer or distributor (a) has materially reduced, or
will materially reduce, purchases of products from any of the Corporations, (b)
has ceased, or will cease, to purchase products from any of the Corporations or
(c) has sought, or is seeking, to materially reduce the price it will pay for
products of any of the Corporations by an amount which would adversely affect
annual gross margin on sales to such customer in the amount of $1,000,000 or
more. To the Knowledge of the Sellers, since January 1, 2001 no customer or
distributor to whom the Corporation had in excess of $5,000,000 of gross sales
during 2000 has provided any written or other notice to any of the Corporations
that such customer or distributor will not continue to purchase products from
any of the Corporations after the Closing on terms and conditions substantially
the same as those prevailing during the last twelve months. Without limiting the
foregoing, since January 1, 2001 there has been no material change to the terms
and conditions of sales of the Corporations' products to the four wholesale
customers of the Corporations to which the Corporations sold the greatest dollar
volume of sales in 2000.
3.26 Product Warranty and Product Liability. Schedule 3.26 contains a true,
correct and complete copy of the Corporations' standard warranty or warranties
for sales of the Products being manufactured or sold as of the date of this
Agreement, and except as expressly identified on Schedule 3.26 hereto, there are
no warranties, deviations from standard warranties, commitments or obligations
with respect to the return, repair or replacement of the Products that may
result in warranty expense materially different from what the Corporations have
experienced to date. Schedule 3.26 sets forth the estimated aggregate annual
cost to the Corporations of performing warranty obligations for customers for
each of the three (3) preceding fiscal years and the current fiscal year to the
date of June 30, 2001. Since January 1, 1999, there has been no change in
Product materials, design or manufacturing technique that may result in warranty
expense materially different from what the Corporations have experienced to
date. Except as set forth on Schedule 3.26, since January 1, 1999, the
Corporations have not made voluntary concessions or payments not charged to
warranty expense as an accommodation to customers that have claimed a Product is
defective exceeding $25,000 in each case. Except as
- 24 -
set forth on Schedule 3.26, there are no defects in design, construction or
manufacture of the Products that are likely to result in product liability
and/or product warranty expense materially different from what the Corporations
have experienced to date or create an unusual risk of injury to persons or
property. Except as set forth on Schedule 3.26, none of the Products
manufactured and sold since January 1, 1995, has been the subject of any
replacement, field fix, retrofit, modification or recall campaign, and to the
Knowledge of the Sellers, no facts or conditions exist that could reasonably be
expected to result in such a recall campaign. The Products have been designed
and manufactured so as to meet and comply with all governmental standards and
specifications in effect at the time of the sale of such Products. The Products
have received all governmental approvals necessary to allow their sale and use
which were in effect at the time of such sale. To the extent required by law or
a customer, all Products currently offered by the Corporations have been
certified or approved by Underwriters Laboratories, the American Water Works
Association, ANSI or other requisite independent party or the analogous foreign
body, as the case may be. The term "Products" means any and all products
currently or at any time previously designed, manufactured, distributed or sold
by the Corporations, or by any predecessor of any of the Corporations (including
through the acquisition of assets) since January 1, 1991.
3.27 Affiliates Relationships to the Corporations.
(a) Contracts and Transactions With Affiliates. All leases, contracts,
agreements or other arrangements currently in effect and, since January 1, 1999,
transactions between the Corporations and any Affiliate or Stephens, Inc. other
than those involving employee compensation, benefits, and expense reimbursements
incurred or paid in the ordinary course of business, are described on Schedule
3.27(a).
(b) No Adverse Interests. Other than the ownership in less than 5% of
the stock of a publicly traded company, no Affiliate has any direct or indirect
interest in (i) any entity which does business with the Corporations or is
competitive with the Corporations' businesses, or (ii) any property, asset or
right which is used by the Corporations in the conduct of their businesses.
(c) Obligations. Except for employee compensation, benefits and
expense reimbursements incurred or paid in the ordinary course of business, all
obligations of any Affiliate or Stephens, Inc. to the Corporations, and all
obligations of the Corporations to any Affiliate and Stephens, Inc., are listed
on Schedule 3.27(c).
3.28 Assets Necessary to Business. The property, assets and rights the
Corporations will have immediately after the Closing comprise all property,
assets and rights, tangible and intangible material to the conduct of the
business of the Corporations as presently conducted and are adequate to conduct
the business of the Corporations on a basis consistent with past practice.
3.29 Accounts Receivable. Except as set forth in Items 3 and 4 of Schedule
3.29, all accounts receivable of the Corporations (a) reflected on the Current
Financial Statement, (b) reflected on the unaudited consolidated balance sheet
of the Corporations as of July 28, 2001 attached as Schedule 3.29 hereto (the
"July Balance Sheet"), and (c) as incurred in the normal
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course of business since the date thereof, represent arm's length sales actually
made in the ordinary course of business; are collectible (net of the reserve for
doubtful accounts shown (i) in the case of clause (a) above, on the Current
Financial Statement, (ii) in the case of clause (b) above, on the July Balance
Sheet, (iii) in the case of clause (c) above as to receivables in existence on
the date of this Agreement, on the July Balance Sheet, and (iv) in the case of
clause (c) above as to receivables not in existence on the date of this
Agreement, on each recent interim financial statement delivered to Purchaser) in
the ordinary course of business without the necessity of commencing legal
proceedings; are subject to no counterclaim or setoff; and are not in dispute.
Schedule 3.29 contains an aged schedule of accounts receivable as of June 30,
2001.
3.30 Sears Contract. Schedule 3.30 hereto sets forth an outline of the
principal commercial terms of State's new agreement with Sears to retain Sears'
business through December 31, 2004 (the "New Sears Terms") as renegotiated
through the date of this Agreement, a comparison of such terms with those of the
current agreement and a summary of the annual impact of the New Sears Terms on
margins of the Corporations, which outline is true and correct.
3.31 Survival of Representations and Warranties. The representations and
warranties of Sellers made herein are subject to the provisions of Section 5.11
hereof and shall survive the Closing for a period of one (1) year, except that
the representations contained in Sections 3.17 and 3.18 hereof shall survive
until the expiration of the applicable statute of limitations with respect to
Claims made thereunder and the representations contained in Section 3.2 hereof
shall not expire.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers as follows (it being agreed
that the following representations and warranties shall be deemed to have been
made on the date hereof and, subject to Section 5.12 hereof, the date of
Closing):
4.1 Organization and Standing of Purchaser. Purchaser is a corporation,
validly existing and in good standing under the laws of the State of Delaware.
Purchaser is duly qualified to do business as a corporation in all states in
which, because of Purchaser's activities conducted in such states, qualification
is required.
4.2 Authorization and Enforceability. Purchaser has full capacity, power
and authority to enter into this Agreement and the Ancillary Agreements and to
carry out the transactions contemplated by this Agreement and the Ancillary
Agreements. This Agreement and the Ancillary Agreements have been duly
authorized by Purchaser and no other corporate acts or proceedings on the part
of Purchaser are necessary to authorize the execution, delivery and performance
by Purchaser of this Agreement and the Ancillary Agreements. When executed and
delivered by all parties hereto, this Agreement and the Ancillary Agreements
shall be binding upon Purchaser and enforceable against Purchaser in accordance
with their respective terms.
- 26 -
4.3 No Consents. Except as set forth on Schedule 4.3 attached hereto, no
consent, declaration, filing or approval or authorization of, or registration
with, any Governmental Authority or any other Person is required to be obtained
by Purchaser in connection with the execution and delivery of this Agreement and
the Ancillary Agreements by Purchaser, or the consummation by Purchaser of the
transaction contemplated hereby or thereby.
4.4 Litigation. There is no suit, action, proceeding, claim, investigation,
or inquiry pending, or to Purchaser's knowledge, threatened against any of the
properties or assets of Purchaser or to which Purchaser is or may become a
party, and Purchaser is not subject to any judgment, order, writ or injunction
of any Governmental Authority and, to the best of Purchaser's knowledge, there
is no factual basis upon which any such suit, action, proceeding, claim,
investigation or inquiry could be asserted or based, the effect of any of which
would adversely affect the consummation of the transaction contemplated hereby.
4.5 Brokers' Fees. Except as disclosed on Schedule 4.5 hereto, Purchaser
has not incurred any liability for brokers' fees, finders' fees, agents'
commissions, financial advisory fees, or other similar forms of compensation in
connection with this Agreement or any transaction contemplated by this
Agreement. Purchaser shall have liability to the Persons listed on Schedule 4.5
for brokers' fees, finders' fees, agents' commissions, financial advisory fees,
or other similar forms of compensation in connection with this Agreement or any
transaction contemplated by this Agreement.
4.6 Survival of Representations and Warranties. The representations and
warranties of Purchaser made herein and in any instrument delivered by or on
behalf of Purchaser herewith shall be true and correct as of the Closing and
shall survive the Closing for a period of one (1) year.
ARTICLE 5
OTHER COVENANTS AND AGREEMENTS
5.1 No Obstruction of Purpose. No party shall take any action which would
cause or tend to cause the conditions upon the obligations of the parties hereto
to effect the transaction contemplated hereby not to be fulfilled, including,
without limitation, taking any action, condition or thing which would cause the
representations and warranties made by such party herein not to be true, correct
and accurate in all material respects as of the date of Closing.
5.2 Fulfillment of Conditions. Each party shall take all commercially
reasonable steps which are within its power to cause to be fulfilled those of
the conditions precedent to the obligations of the other parties to consummate
the transaction contemplated hereby which are dependent upon the actions of it.
Each party shall cooperate with the efforts of the other parties to obtain such
consents, declarations, filings, approvals, authorizations, registrations and
waivers as contemplated or required by this Agreement.
5.3 Current Information. Prior to the Closing, each party shall advise the
other parties in writing as soon as practicable after it becomes known to such
party:
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(a) of the occurrence of any event that renders any of the
representations or warranties of such party set forth herein inaccurate in any
material respect;
(b) that any representation or warranty of such party set forth herein
was not accurate in all material respects when made; and
(c) of the failure of such party to comply with or accomplish any of
the covenants or agreements set forth herein in any material respect.
5.4 Business Operations. The Corporations will operate their respective
businesses prior to Closing, in all material respects, in accordance with their
respective current methods of transacting business and shall use their
commercially reasonable efforts to preserve the rights and franchises of the
Corporations and the goodwill of employees, suppliers, customers and others
having significant business dealings with them. The Corporations will maintain
all of the insurance in effect as of the date hereof through their respective
expiration dates and will use their reasonable best efforts to replace or
continue such insurance on such commercially reasonable terms as may then be
available. The Sellers and the Corporations make no representations as to the
availability or cost of such replacement or continuation insurance. The
Corporations will use, operate, maintain and repair all property of the
Corporations in a normal business manner.
The Corporations will not, except as described in Section 5.16 hereof,
between the date of this Agreement and the Closing:
(a) Issue any stock, bonds, debentures, warrants, options or other
securities or become subject to any obligation to issue any such securities;
(b) Declare, set aside or make any dividend payment or any other
payment or distribution to the Sellers or the Beneficiaries;
(c) Sell, assign, transfer or otherwise dispose of, mortgage, pledge,
or subject to lien or any other encumbrance any of their respective assets
except inventory items and other items of personal property in the ordinary
course of business;
(d) Incur any additional indebtedness outside of the ordinary course
of business, make any loans, advances or guaranties to any Person outside of the
ordinary course of business or incur any eurodollar rate loans outstanding under
the Credit Facility;
(e) Amend their respective Charters or Bylaws;
(f) Change their accounting methods;
(g) Increase the annual compensation or other benefits or pay a bonus
outside of the ordinary course of business to, or enter into any employment
agreements with, any employees of the Corporations;
- 28 -
(h) Adopt any new employee benefit plan or materially change any
existing Plan;
(i) Enter into or modify or amend any Contract with any Affiliate;
(j) Except with the prior consent of the Purchaser, which consent will
not be unreasonably withheld (except that no specific pricing information will
be revealed to Purchaser), terminate or modify in any material respect the
Corporations' relationships with their customers or distributors or enter into,
terminate or amend in any material respect any Contract with customers or
distributors except in the ordinary course of business and consistent with past
practice. For purposes of this subsection (j), the term "Contract" shall have
the meaning set forth in Section 1.4 hereof, except that $100,000 shall be
substituted in lieu of $10,000;
(k) Except with the prior consent of the Purchaser, which consent will
not be unreasonably withheld, enter into, terminate or amend in any material
respect any Contract except in the ordinary course of business and consistent
with past practice and except for such new Contracts or amendments to Contracts
the effect of which could reasonably be expected to be advantageous to the
margins and profitability of the Corporations. For purposes of this subsection
(k), the term "Contract" shall have the meaning as set forth in Section 1.4(k)
hereof, except that $100,000 shall be substituted in lieu of $10,000 and the
term shall not include the relationships described in Section 5.4(j) hereof;
(l) Except with the prior consent of the Purchaser, which consent will
not be unreasonably withheld, enter into any settlement agreements regarding any
pending or threatened litigation which settlement requires a payment in excess
of the amount of $100,000; or
(m) State shall not make payments to the claimants that filed claims
pursuant to the proposed settlement in the Fain Litigation without the consent
of Purchaser, which consent will not be unreasonably withheld.
5.5 Financial Statements. The Corporations will provide Purchaser, as soon
as practicable, copies of all of their interim monthly financial statements that
are prepared by them in the ordinary course of their business prior to the
Closing.
5.6 Further Assurances. From time to time after the Closing, each party
shall execute and deliver such documents, instruments and certificates as the
other parties hereto may reasonably request to more effectively vest, confirm
and evidence in Purchaser title to or rights in and to any of the Shares and to
otherwise carry out the purpose and intent of this Agreement.
5.7 Requests for Approvals. Each party shall (a) promptly file or submit
and diligently prosecute any and all applications or notices with any and all
Governmental Authorities and all other requests for consents, declarations,
filings, approvals, authorizations, or registrations from any Governmental
Authority or any other Person, the filing or granting of which is necessary for
the consummation of the transaction contemplated hereby, and (b) provide such
other information and communications to such parties as they may reasonably
request in connection therewith. Each party will provide prompt notification to
the other parties when any
- 29 -
such consent, approval, action, filing or notice referred to in clause (a) above
is obtained, taken, made or given, as applicable, and will advise the other
parties of any communications (and, unless precluded by law, provide copies of
any such communications that are in writing) with any of such parties regarding
the transaction contemplated by this Agreement.
5.8 HSR Act. Each party shall submit all applications, forms or notices
("HSR Forms"), if any, necessary to be submitted by such party to the
appropriate Governmental Authorities on or before the tenth (10th) day following
the execution of this Agreement. Each party shall comply at the earliest
practicable date with any request for additional information received from the
other parties or from the Federal Trade Commission or the Antitrust Division of
the Department of Justice pursuant to the HSR Act and shall cooperate with the
other parties in connection with the filing by or on behalf of such other
parties of the HSR Forms required to be filed by such other parties with respect
to the transaction contemplated by this Agreement and in connection with
resolving any investigation or other inquiry concerning the transaction
contemplated by this Agreement commenced by either the Federal Trade Commission
or the Antitrust Division of the Department of Justice or state attorneys
general. The parties agree that they will use their respective reasonable best
efforts to obtain the approval of the transaction contemplated hereby from the
Federal Trade Commission and the Antitrust Division of the Department of
Justice. Such reasonable best efforts shall include, but not be limited to,
responding to a "Second Request for Information" and pursuing HSR approval
through the injunction stage; provided, however, that nothing in this Section
5.8 shall require that Purchaser divest, sell or hold separate any of its or the
Corporations' assets, businesses or properties or enter into a consent decree or
assume any other obligations with respect to the ongoing operations of Purchaser
and/or the Corporations. To the extent the provisions of Sections 5.7 or 5.9 are
inconsistent with this Section 5.8, this Section 5.8 shall govern with respect
to matters discussed in this Section 5.8.
5.9 Consents. Sellers shall use their reasonable business efforts to take,
and cause to be taken, all actions and to do, and cause to be done, all things
necessary, proper or advisable under applicable laws, to obtain prior to Closing
all authorizations, consents and waivers (the "Consents") required to be
obtained by Sellers or the Corporations pursuant to Section 3.9 hereof. Failure
of Sellers to obtain any such Consents shall not be a default by Sellers.
Purchaser shall use its reasonable business efforts to take, and cause to be
taken, all actions and to do, and cause to be done, all things necessary, proper
or advisable under applicable laws, to obtain prior to Closing all Consents
required to be obtained by Purchaser pursuant to Sections 4.3 hereof. Failure by
Purchaser to obtain any such Consents shall not be a default by Purchaser
hereunder. Each party shall use its reasonable business efforts to assist and
cooperate with the other parties in their efforts to obtain such Consents. Each
party agrees to keep the other parties fully informed with respect to such
efforts.
5.10 Tax Responsibility. The following provisions shall govern the
allocation of responsibility as between Purchaser and Sellers for certain tax
matters:
(a) Tax Periods Ending on or Before the Closing. Between the date of
this Agreement and the Closing, Ocelot shall prepare and file, or cause the
Corporations to prepare and file, on a timely basis all Tax Returns that are
required to be filed by the Corporations prior
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to the Closing (taking into account any extensions of time to file). Purchaser
shall prepare or cause to be prepared and file or cause to be filed all Tax
Returns for the Corporations for all periods ending on or prior to the Closing
that are filed after the Closing (other than income (or franchise) Tax Returns
with respect to periods for which a consolidated, unitary or combined income (or
franchise) Tax Return of Ocelot will include the operations of the
Corporations).
(b) Tax Periods Beginning Before and Ending After the Closing.
Purchaser shall prepare or cause to be prepared and file or cause to be filed
any Tax Returns of the Corporations for Tax periods that begin before the
Closing and end after the Closing. Purchaser and the Corporations will take no
position on such returns that would adversely affect Ocelot or the Shareholders
after Closing.
(c) Consolidated Returns for Periods Through the Closing.
(i) Within ten (10) days after the date hereof, Ocelot shall
appoint State as agent for those Tax years the Corporations were members of the
Ocelot consolidated or combined groups pursuant to and in accordance with Treas.
Reg. ss. 1.1502-77 (and pursuant to any similar state law or administrative
rule) (the "Tax Agent"). Ocelot shall use its best efforts to obtain approval of
the Tax Agent by the IRS (and any applicable state Tax authority) prior to the
Closing. Ocelot shall allow Purchaser and its counsel to review and comment on
the application for such appointment in advance of filing with the IRS (and any
applicable state Tax authority) and to participate in any discussions with the
IRS (and any applicable state Tax authority) related thereto.
(ii) If the IRS (or any applicable state Tax authority) does not
approve the Tax Agent prior to or at the Closing, then Ocelot shall not
terminate its existence within the meaning of Treas. Reg. ss. 1.1502-77 (or any
similar state law or administrative rule) until the earlier of such time as (A)
the IRS (and any applicable state Tax authority) has approved the Tax Agent or
(B) Ocelot has received and paid to Purchaser in accordance with Section 5.10(g)
all Tax refunds listed on Schedule 3.17 and any Tax refunds and reductions in
Tax liability arising from the 2001 (and 2002 if the Closing occurs in 2002)
Ocelot federal (and state) consolidated (or combined) income (or franchise) Tax
Returns in which Ocelot will include the operations of the Corporations
("Consolidated Returns") or, in the event Ocelot has not received any such Tax
refund or reduction in Tax liability, all administrative and judicial
proceedings with respect to all such Tax refunds or reductions in Tax liability
have been finally settled by an administrative or judicial decision from which
no appeal can be taken or the time for taking any such appeal has expired.
(iii) To the extent the IRS or any applicable state Tax authority
has approved the Tax Agent, the provisions of this Section 5.10(c)(iii) shall
govern matters relating to the applicable Consolidated Returns. The Tax Agent
will cause the Corporations to prepare and file on a timely basis the
Consolidated Returns that are required to be filed by Ocelot had Ocelot not
appointed the Tax Agent (taking into account any extensions of time to file).
The Tax Agent shall also cause such returns to be reviewed by Lattimore, Black,
Morgan & Cain, P.C., of Brentwood, Tennessee, or such other accounting firm as
Purchaser and Ocelot mutually agree, at Ocelot's expense. Ocelot or its
successors shall pay to the Tax Agent upon the filing of such
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Consolidated Return any of Ocelot's Taxes (as hereinafter defined) as shown on
the applicable Consolidated Returns and any reduction in Ocelot's Taxes from the
utilization of any of the Corporations' Tax attributes. "Ocelot's Taxes" shall
be determined by taking into account (A) any deferred income recognized as the
result of the disposition of the Corporations under Treas. Reg. ss. 1.1502-13
and Treas. Reg. ss. 1.1502-14, (B) any excess loss accounts recognized under
Treas. Reg. ss. 1.1502-19, (C) any other taxable income recognized by Ocelot on
the sale of the Corporations, and (D) any other taxable income of Ocelot and any
other corporation in the affiliated group other than the Corporations. The Tax
Agent will include the income of the Corporations (including any deferred income
triggered into income by Treas. Reg. ss. 1.1502-13 and Treas. Reg. ss. 1.1502-14
and any excess loss accounts taken into income under Treas. Reg. ss. 1.1502-19)
on the applicable Consolidated Returns for all periods through and including the
Closing. Ocelot will furnish all Tax information requested by the Tax Agent for
inclusion in the applicable Consolidated Returns. The Tax Agent will allow
Ocelot an opportunity to review and comment upon the applicable Consolidated
Returns (including any amended returns) to the extent that they relate to
Ocelot. The Tax Agent will take no position on such returns that relate to
Ocelot that would adversely affect Ocelot or the Shareholders after the Closing.
The income of the Corporations will be apportioned to the period up to and
including the Closing and the period after the Closing by closing the books of
the Corporations as of the end of the Closing.
(iv) To the extent the IRS or any applicable state Tax authority
has not approved the Tax Agent, then the provisions of this Section 5.10(c)(iv)
shall govern matters relating to the applicable Consolidated Returns. The
Corporations will prepare and Ocelot will file on a timely basis the applicable
Consolidated Returns that are required to be filed by Ocelot (taking into
account any extensions of time to file). Ocelot shall cause such returns to be
reviewed by Lattimore, Black, Morgan & Cain, P.C., or such other accounting firm
as Purchaser and Ocelot mutually agree, at Ocelot's expense. The Corporations
shall pay to Ocelot upon the filing of such Consolidated Return the
Corporations' Taxes as shown on the applicable Consolidated Returns, reduced by
any reduction in Ocelot's Taxes by the utilization of any of the attributes of
the Corporations upon the filing of such applicable Consolidated Return. The
"Corporations' Taxes" as shown on a Consolidated Return shall be determined as
if the Corporations filed a separate consolidated (or combined) income (or
franchise) Tax return with State as the parent corporation instead of filing as
part of the applicable Ocelot Consolidated Return. Ocelot or its successors will
pay to Purchaser upon the filing of such applicable Consolidated Return any
reduction in Ocelot's Taxes as shown on the applicable Consolidated Returns
resulting from the utilization of any Tax attribute of any of the Corporations
to the extent not used to reduce payment to Ocelot for the Corporations' Taxes.
Ocelot will include the income of the Corporations (including any deferred
income triggered into income by Treas. Reg. ss. 1.1502-13 and Treas. Reg. ss.
1.1502-14 and any excess loss accounts taken into income under Treas. Reg. ss.
1.1502-19) on the applicable Consolidated Returns for all periods through and
including the Closing. Ocelot will allow Purchaser an opportunity to review and
comment upon the applicable Consolidated Returns (including any amended returns)
to the extent that they relate to the Corporations. Ocelot will take no position
on such returns that relate to the Corporations that would adversely affect the
Corporations after the Closing. The income of the Corporations will be
apportioned to the period up to and including the Closing and the period after
the Closing by closing the books of the Corporations as of the end of the
Closing.
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(v) After the date hereof, Ocelot shall not enter into any
transaction (whether by acquisition of equity interests, merger or otherwise)
with any Person that would result in such Person becoming a member of the Ocelot
affiliated group. Without limiting the provisions of Section 5.10(c)(ii), Ocelot
shall not liquidate, dissolve, merge or enter into a transaction that otherwise
terminates its existence within the meaning of Treas. Reg. ss. 1.1502-77 (or any
similar state law or administrative rule) until the day after the Closing.
Except as otherwise provided for in this Section 5.10(c), Ocelot shall prepare,
or cause to be prepared, and file on a timely basis all Tax Returns that are
required to be filed by Ocelot, including, without limitation, Form 966 (if
Ocelot is liquidated for tax purposes), Form 1099s and separate federal and
state income (and franchise) Tax Returns.
(d) Cooperation on Tax Matters.
(i) Purchaser, the Corporations and Sellers shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this Section and any
audit, appeal, hearing, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information that are reasonably relevant
to any such filing, audit, appeal, hearing, litigation or other proceeding and
making employees, officers, accountants, auditors, representatives, and agents
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Corporations and Sellers
agree (A) to retain all books and records with respect to Tax matters pertinent
to the Corporations relating to any taxable period beginning before the Closing
until the expiration of the statute of limitations (and, to the extent notified
by Purchaser or Sellers, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with any
taxing authority, in the case of Purchaser and the Corporations, of which
Purchaser has knowledge, and (B) to give the other party reasonable written
notice prior to transferring, destroying or discarding any such books and
records and, if the other party so requests, the Corporations or Sellers, as the
case may be, shall allow the other party to take possession of such books and
records.
(ii) To the extent the IRS or any applicable state Tax authority
has approved the Tax Agent, the Tax Agent shall allow Ocelot or its successor
and its counsel to participate at its own expense in any audits of the
applicable Ocelot consolidated or combined income (and franchise) Tax Returns to
the extent that such returns relate to Ocelot. The Tax Agent will not settle any
such audit in a manner that would adversely affect Ocelot or its successor after
the Closing without the prior written consent of Ocelot or its successor, which
will not be unreasonably withheld.
(iii) To the extent the IRS or any applicable state Tax authority
has not approved the Tax Agent, Ocelot shall allow the Corporations and their
counsel to participate at their own expense in any audits of the applicable
Ocelot consolidated or combined income (and franchise) Tax Returns to the extent
that such returns relate to the Corporations. Ocelot will not settle any such
audit in a manner that would adversely affect the Corporations after the Closing
without the prior written consent of Purchaser, which will not be unreasonably
withheld.
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(iv) Purchaser and Sellers shall, upon request, use their best
efforts to obtain any certificate or other document from any governmental
authority or any other person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
(e) Tax Sharing Agreements. All Tax sharing agreements or similar
agreements with respect to or involving the Corporations shall terminate
automatically as of the Closing and, after the Closing, the Corporations shall
not be bound thereby or have any liability thereunder, and such agreements shall
have no further effect for any tax year (whether the current year, a future
year, or a past year).
(f) Payment of Taxes. If, after Closing, Ocelot shall become liable
for Taxes as a result of an audit by any governmental authority of the
Corporations or the affiliated group of which they were a member prior to
Closing (other than any Taxes attributable to any Person other than any of the
Corporations), such Taxes shall be paid by the Purchaser. Notwithstanding the
provisions of Section 9.5, the provisions of this Section 5.10 shall determine
the party entitled to contest and defend all such audits or legal proceedings
related to the foregoing Tax matters.
(g) Tax Refunds. To the extent the IRS has not approved the Tax Agent,
(i) on or before September 30, 2001, Ocelot shall file IRS Form 1139,
Corporation Application for Tentative Refund, to carry-back the approximately
$8.4 million year 2000 product liability losses to the tax year ended January 2,
1994 and, if necessary, to any subsequent tax year; (ii) on or before the
extended due date for filing the year 2001 Ocelot consolidated federal income
Tax Return, the Corporations will prepare and Ocelot shall file IRS Form 1139,
Corporation Application for Tentative Refund, to carry-back any Tax attribute of
the Corporations to the earliest tax year possible; (iii) Ocelot shall allow
Purchaser and its counsel to review such Form 1139 prepared by Ocelot in advance
of filing with the IRS and shall not file such Form 1139s without the prior
written consent of Purchaser, which will not be unreasonably withheld; (iv)
Ocelot shall respond to any IRS inquiries relating to such Form 1139s, amended
Tax Returns and refund claims on a timely basis so as not to delay receipt of
any Tax refunds and allow Purchaser and its counsel to participate in any
discussions with the IRS related thereto; and (v) Ocelot shall provide Purchaser
at the Closing with a properly prepared and signed IRS Form 2848, Power of
Attorney and Declaration of Representative, granting Purchaser's representatives
authority to represent Ocelot, at Purchaser's expense, in Tax matters relating
to such Form 1139s, amended Tax Returns and Tax refund claims resulting from
carryback of any Tax attribute of the Corporations, which Power of Attorney and
Declaration of Representative shall not be revoked by Ocelot or Shareholders.
After Closing, any expenses attributable to preparing such Form 1139s and
amended Tax Returns or attaining such Tax refunds shall be borne by the
Corporations and the Purchaser. Prior to the Closing, Ocelot and the
Corporations will use any Tax refund or reduction in Tax liability from the
utilization of any Tax attribute of any of the Corporations, other than a
reduction in Tax liability of any of the Corporations, to pay off outstanding
balances under the Credit Facility when such refund is received or such
reduction in Tax liability is realized by the Ocelot affiliated group. After the
Closing, Ocelot or its successors will immediately pay to Purchaser any Tax
refund received which results from a utilization of any Tax attribute of any of
the Corporations by carryback or
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inclusion in the applicable Ocelot consolidated (or combined) Tax Return,
whether prepared and filed by the Tax Agent or Ocelot, when such refund is
received. Upon request by Purchaser from time to time, Ocelot or its successors
shall provide Purchaser or its representatives access to all Tax returns and
related books and records of Ocelot to enable Purchaser to confirm compliance
with respect to the foregoing Tax matters.
(h) Retention of Carryovers. Ocelot will not elect to retain any net
operating loss carryovers, capital loss carryovers or tax credit carryovers of
the Corporations under Treas. Reg.ss.1.1502-20(g).
5.11 Supplements to Representations, Warranties and Schedules of Sellers,
Beneficiaries, JRL and HWL. Sellers, Beneficiaries, JRL and HWL shall, from time
to time after the date hereof and prior to the Closing, supplement or amend
their representations and warranties contained in Article 3 (other than Section
3.2) and Article 10 hereof and the schedules attached to this Agreement other
than Schedules 1.1, 5.13, 9.6 and 11.4; provided, however, that such supplements
or amendments will not cure a breach which existed on the date this Agreement
was executed.
5.12 Supplements to Representations, Warranties and Schedules of Purchaser.
Purchaser shall, from time to time after the date hereof and prior to the
Closing, supplement or amend the representations and warranties of Purchaser
contained in Article 4 and the schedules referred to in Article 4 with respect
to any change in facts or circumstances arising after the date hereof which, if
existing or occurring at the date hereof, would have been required to be
disclosed in such representations, warranties or schedules. If information
disclosed in a supplement or amendment to such representations, warranties or
schedules materially and adversely varies from those set forth herein on the
date of execution of this Agreement as a result of a change in facts or
circumstances arising after the date hereof and materially affects the ability
of Purchaser to consummate the transactions contemplated hereby, Purchaser shall
not be deemed to be in default under this Agreement, but Sellers shall have the
right to terminate this Agreement. In the event Sellers desire not to terminate
this Agreement, this Agreement shall remain in full force and effect, such
representations, warranties and schedules shall be deemed to be supplemented or
amended by the information so disclosed, and Sellers shall be deemed to have
accepted the representations, warranties and schedules, as supplemented or
amended, at Closing.
5.13 Payment of Credit Facility; Release from Liability. At Closing,
Purchaser shall pay in full the Credit Facility and, if not previously paid by
State , the amount due under the Swap Agreements.
Purchaser shall use its best efforts to obtain at Closing the release
of Sellers from all liabilities for obligations of the Corporations for
indebtedness of the Corporations to Bank of America, N.A., as Agent, under the
Credit Facility. Sellers shall use their best efforts to assist Purchaser in
obtaining the release of Sellers from all such liabilities. At Closing,
Purchaser shall use its best efforts to deliver to Sellers releases,
certificates, instruments or other documents as Sellers may reasonably deem
necessary or advisable in order to cause Sellers to be released from all such
liabilities (the "Releases").
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Further, Ocelot is indebted to certain persons and entities (the
"Subordinated Debtholders") enumerated on Schedule 5.13 hereto. The indebtedness
to such Subordinated Debtholders is referred to as the "Subordinated
Indebtedness." Ocelot, the Corporations, and the Subordinated Debtholders have
entered into the agreements with Bank of America, N.A., as Agent prohibiting the
payment of the Subordinated Indebtedness as set forth on Schedule 5.13 hereto.
Purchaser shall use its best efforts to obtain at Closing the consent of Bank of
America, N.A., as Agent, to the immediate payment by Ocelot to the Subordinated
Debtholders of all amounts due and owing under the Subordinated Indebtedness.
Sellers shall use their best efforts to assist Purchaser in obtaining such
consent. At Closing, Purchaser shall use its best efforts to deliver to Ocelot
and the Subordinated Debtholders such consents, terminations, certificates,
instruments, releases or other documents as Ocelot and the Subordinated
Debtholders may reasonably deem necessary or advisable in order to allow Ocelot
to pay such Subordinated Indebtedness without violating the terms of the
agreements with Bank of America, N.A., as Agent as set forth on Schedule 5.13
hereto (the "Subordinated Debt Releases").
5.14 Tax Matters. Purchaser shall not make an election under Section
338(h)(10) of the Code with respect to the purchase of State Shares.
5.15 Noncompetition and Confidentiality Agreements. Sellers, Beneficiaries,
JRL and HWL severally agree that for a period of three (3) years from the date
of Closing, they and each of them will not, directly or indirectly: (a) within
the United States, become affiliated directly or indirectly as an officer,
director, seller, owner, partner, consultant, or otherwise, with any individual,
company or other business entity, in competition with the business of the
Corporations as they exist on the date of Closing; (b) offer employment to an
employee of the Corporations without the written consent of Purchaser, but the
foregoing shall not prohibit solicitations to the public in general so long as
employees of the Corporations are not offered employment; or (c) solicit the
business of any customer of the Corporations that was a customer at any time
during the two years prior to the Closing; provided, however, that this shall
not prohibit any Seller from owning directly or indirectly shares not in excess
of five percent (5%) of the outstanding voting shares of any publicly traded
company. No Person bound by this Section 5.15 shall at any time subsequent to
the Closing, except as explicitly requested by Purchaser, (i) use for any
purpose, (ii) disclose to any person, or (iii) keep or make copies of documents,
tapes, discs or programs containing, any confidential information concerning the
Corporations. For purposes hereof, "confidential information" shall mean and
include, without limitation, all Intellectual Property in which the Corporations
have an interest, all customer lists and customer information, and all other
information concerning the Corporations' processes, apparatus, equipment,
packaging, products, marketing and distribution methods, not previously
disclosed to the public directly by the Corporations. Each Person bound by this
Section 5.15 agrees that even though no separate consideration is set forth for
their covenant not to compete contained herein, this Agreement as a whole shall
constitute good and sufficient consideration, and each such Person acknowledges
that Purchaser would not enter into this Agreement absent the provisions hereof.
In the event of litigation involving the provisions of this Section 5.15, then,
without limiting other rights of Purchaser and the Corporations, Purchaser and
Corporations shall have the right to specific performance and other equitable
relief. Monetary liability arising by virtue of a breach of this Section 5.15
shall be the personal and individual
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responsibility of the Person who has breached the provisions of this Section
5.15. If a court of competent jurisdiction ever determines that the covenant not
to compete set forth herein is overly broad as to time or geographical scope,
then such determination shall not invalidate this provision, but the parties
agree that such court is to construe this Agreement as broadly as possible in
favor of the Corporations and Purchaser with respect to the geographical scope
and time limitation.
5.16 State France. Purchaser recognizes that State is the majority owner of
the stock of State France. State is attempting to dispose of State France (and
its subsidiary) to a third party prior to Closing. If State disposes of State
France prior to Closing, then the proceeds from the sale of State France shall
enter into computation of the Purchase Price as set forth in Section 1.2(a)(i)
hereof. If State fails to dispose of State France prior to Closing, then (a)
prior to Closing State shall transfer all stock of State France to Ocelot or any
other Person in order to remove State France from the ownership of State, and
(b) the Purchase Price as computed pursuant to Section 1.2(a)(i) hereof shall
not change, but the Purchase Price described in Section 1.2(a)(ii) shall not be
applicable. Notwithstanding the foregoing, the terms and conditions of any such
disposition to a third party or transfer to Ocelot of State France shall provide
that State shall not have any obligations, including, without limitation,
indemnity obligations, or be required to take any actions, with respect to State
France as a result of or after such disposition or transfer, and in no event
shall such disposition or transfer be effected in a manner that would adversely
affect the business of State as it is presently conducted.
Prior to Closing, the Corporations shall not (a) transfer any of their
respective assets to State France or its subsidiary, other than transfers for
adequate consideration and in the ordinary course of business, or (b) assume any
liabilities of State France or its subsidiary.
5.17 General Releases. At the Closing, each Seller, each Beneficiary, JRL
and HWL shall deliver general releases to Purchaser, in form and substance
reasonably satisfactory to Purchaser and its counsel, releasing the Corporations
and the directors, officers, agents and employees of the Corporations from all
Claims to the Closing, except (a) as may be described in written contracts
disclosed in any schedule to this Agreement and expressly described and excepted
from such releases, and (b) in the case of persons who are employees of the
Corporations, compensation for current periods expressly described and excepted
from such releases. Such releases shall also contain waivers of any right of
contribution or other recourse against the Corporations with respect to
representations, warranties or covenants made herein by the Corporations. At
Closing, the Corporations shall deliver to each Seller, each Beneficiary, JRL
and HWL general releases in form and substance reasonably satisfactory to each
Seller, Beneficiary, JRL and HWL releasing them from all Claims prior to
Closing, except for Claims arising pursuant to this Agreement. At Closing,
Sellers shall cause LTT to deliver a release to Purchaser in form and substance
reasonably satisfactory to Purchaser and its counsel, releasing the Corporations
from any liability under that certain engagement letter executed February 12,
2001, pursuant to which LTT became Chairman of the Board of Directors of State.
Similarly, Ocelot and the Corporations shall deliver to LTT a release in form
and substance reasonably satisfactory to LTT releasing LTT from any claims
arising prior to the Closing resulting from or related to his service as a
director of Ocelot and State pursuant to the above described engagement letter.
Notwithstanding the above, the releases specified in this Section 5.17 shall in
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no way alter or modify the indemnification obligations of Ocelot or the
Corporations to any Seller, Beneficiary, JRL, HWL or LTT for indemnification
under state law, the charter or bylaws of the respective Corporations, or any
policy of insurance maintained by the Corporations, to the extent such Seller or
Beneficiary has served as an officer or director of Ocelot or any Corporation.
5.18 Access to Information and Records. During the period prior to the
Closing, the Sellers shall cause the Corporations to give Purchaser, its
counsel, accountants and other representatives (i) access during normal business
hours to all of the properties, books, records, contracts and documents of the
Corporations for the purpose of such inspection, investigation and testing as
Purchaser deems appropriate (and the Corporations shall furnish or cause to be
furnished to Purchaser and its representatives all information with respect to
the business and affairs of the Corporations as Purchaser may request); (ii)
access to employees, agents and representatives for the purposes of such
meetings and communications as Purchaser reasonably desires; and (iii) with the
prior consent of the Corporations in each instance (which consent shall not be
unreasonably withheld), access to vendors, customers, dealers, manufacturers of
its machinery and equipment, and others having business dealings with the
Corporations. Without limiting the foregoing, the Corporations shall give
Purchaser access to all Owned Realty for the purposes of obtaining, at
Purchaser's expense, title insurance commitments for, and surveys of, the Owned
Realty, and for the purpose of performing a Phase II environmental
investigation; provided, however, that no such access shall be permitted without
the prior consent of the affected Corporation (which consent shall not be
unreasonably withheld) and such access shall be conducted in such a manner as to
avoid disruption of the ordinary business operation of the Corporations. Ocelot
shall provide the title insurance company for such title insurance commitments
with such nonimputation indemnities as the title insurance company may request
for purposes of Purchaser obtaining a nonimputation endorsement. If Purchaser or
the Corporations reasonably determine, with the advice of legal counsel, that
the provision of any information under this Section 5.18 is reasonably likely to
result in a violation of any law, rule or regulation applicable to the
Corporations or Purchaser, then Purchaser shall be entitled to have a mutually
agreeable third party (which agreement shall not be unreasonably withheld)
review such information in accordance with procedures to which the parties
mutually agree, which agreement shall not be unreasonably withheld.
5.19 Management Agreement. State has accrued the management fees under the
Amended and Restated Management Agreement dated October 9, 1991, as amended on
September 14, 1994, between State and Ocelot (the "Management Agreement"), on a
basis consistent with past practice through May 26, 2001. State will not accrue
management fees thereafter. Ocelot shall not forgive State's obligations for
such management fees through May 26, 2001. Purchaser, Ocelot and State agree
that all such management fees owed by State to Ocelot through May 26, 2001 will
be paid at Closing. Ocelot and State agree that such Management Agreement shall
automatically terminate at the Closing.
5.20 Insurance Matters. Prior to the Closing, Ocelot shall (a) request, and
shall use its best efforts to cause, the insurer for each insurance policy under
which the Corporations have coverage and under which Ocelot is currently the
first named insured to assign such first named
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insurance status to State as of the Closing and (b) provide a copy of each such
policy and the records relating thereto in its possession to Purchaser.
5.21 Releases of Stephens and Seale. At Closing, Purchaser will execute a
general release in favor of Stephens, Inc. and Seale & Associates, LLC,
releasing such entities and their owners, directors, officers, agents and
attorneys for liability associated with investment banking services rendered by
such firms in connection with this transaction, such agreements to be in form
and substance reasonably acceptable to Stephens, Inc. and Seale & Associates,
LLC.
5.22 Releases of Purchaser, Ocelot and Corporations. At Closing, Stephens,
Inc. and Seale & Associates, LLC will execute a general release in favor of
Purchaser, Ocelot and the Corporations, releasing such entities and their
owners, directors, officers, agents and attorneys for liability associated with
the transaction contemplated by this Agreement, such agreements to be in form
and substance reasonably acceptable to Purchaser, Ocelot and the Corporations.
5.23 No Obligation of Purchaser. Nothing in this Agreement shall be
construed as creating an obligation of Purchaser to provide equity, credit,
credit support, or credit enhancement to the Corporations or Ocelot prior to the
Closing.
5.24 Losses in Excess of Proposed Settlement. If, prior to Closing, (a)
Corporations receive or wish to make a bona fide offer to settle any pending or
threatened litigation ("Settlement Offer"), (b) Purchaser is given reasonable
oral or written notice of the Settlement Offer considering the circumstances,
(c) Purchaser does not consent to the Settlement Offer (in which case Ocelot
shall keep the Purchaser reasonably informed as to material developments with
respect to such litigation and Purchaser shall have the right, at its expense,
to participate in, but not control the defense of, such litigation), (d)
Corporations' ultimate liability for all Losses connected with such pending or
threatened litigation exceeds the amount for which Corporations requested such
settlement consent, and (e) this Agreement is terminated other than pursuant to
Section 8.1(c) or Section 8.1(f) hereof (if such termination pursuant to Section
8.1(f) is due to breaches of representations or warranties of Sellers, the
Beneficiaries, JRL or HWL made on the date hereof), on the date hereof, then
Purchaser shall pay to Corporations and Ocelot within two (2) business days an
amount equal to such Losses less the requested settlement amount.
5.25 State Acceptance. State will continue to administer the activities of
State Acceptance Corporation, a separate entity owned by JRL and HWL, in the
manner it has done so previously; provided, however, that State Acceptance
Corporation (a) will not enter into any further leases of equipment, (b) will
pay State fees equal to State's cost for performing such administration (limited
to State's reasonable allocation for any employee cost or other overhead
expenses plus actual out-of-pocket expenses) so long as State is administering
such activities and (c) shall enter into an agreement, reasonably satisfactory
to Purchaser, at Closing pursuant to which State Acceptance Corporation shall
agree to be bound by the provisions of this Section 5.25. All income generated
by State Acceptance Corporation will be the property of State Acceptance
Corporation. Purchaser shall not be liable to State Acceptance Corporation for
any losses or damages of any type that may be suffered by State Acceptance
Corporation as a result (either directly or indirectly) of the services provided
by Purchaser under such agreement or any failure by State Acceptance Corporation
to provide those services, unless any such losses or
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failure are due to the gross negligence or willful misconduct of Purchaser.
PURCHASER DOES NOT MAKE ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR
IMPLIED, AS TO THE UTILITY OF THOSE SERVICES OR WHETHER ANY OF THOSE SERVICES
WILL IN FACT BE SUFFICIENT TO MEET ANY BUSINESS NEEDS OF State ACCEPTANCE
CORPORATION. WITHOUT LIMITATION, PURCHASER DOES NOT MAKE ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE WITH RESPECT TO THOSE
SERVICES.
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of Sellers under this Agreement are subject to the
satisfaction at or prior to the Closing (or the waiver thereof by Ocelot and the
Representatives of the Shareholders) of each of the following conditions:
6.1 Representations and Warranties. The representations and warranties of
Purchaser contained in this Agreement shall be true and correct in all material
respects as of the date hereof and as updated pursuant to Section 5.12 hereof,
on and as of the Closing.
6.2 Performance. Purchaser shall have performed and complied, in all
material respects, with all the covenants and agreements required by this
Agreement to be performed or complied with by Purchaser at or prior to the
Closing.
6.3 No Legal Bar. There shall not be in effect on the date of Closing any
laws prohibiting or making illegal the consummation of the transaction
contemplated by this Agreement.
6.4 Payment of Purchase Price. Purchaser shall have delivered to Ocelot the
Purchase Price, and to Bank of America, as Agent, the amount specified in
Section 5.13 hereof.
6.5 Documents Delivered by Purchaser. Purchaser shall have delivered or
caused to be delivered to Sellers:
(a) Third Party Consents. All third party consents, declarations,
filings, approvals, authorizations or registrations required to be obtained by
Purchaser as contemplated by Sections 4.3, 5.7 and 5.9 hereof;
(b) Authorizing Resolutions. Certified copies of resolutions of the
appropriate governing authority of Purchaser, authorizing the consummation of
the transactions contemplated by this Agreement;
(c) Good Standing Certificate. A Certificate of good standing of
Purchaser, recently certified by the appropriate Governmental Authority;
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(d) Releases. The Releases and the Subordinated Debt Releases as
contemplated by Section 5.13 hereof and the general releases contemplated by
Section 5.21 hereof;
(e) Opinions of Counsel. The opinions of outside counsel to Purchaser
and Purchaser's general counsel in substantially the forms set forth in Exhibit
6.5(e); and
(f) Compliance Certificate. A certificate signed by Purchaser that the
representations and warranties of Purchaser contained in this Agreement, as
updated pursuant to the provisions of Section 5.12 hereof, are true and correct
in all material respects on and as of the Closing, and that Purchaser has
performed and complied, in all material respects, with all the covenants and
agreements required by this Agreement to be performed or complied with by
Purchaser at or prior to the Closing.
6.6 Hart-Scott-Rodino Waiting Period. All applicable waiting periods
relating to the HSR Act shall have expired.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser under this Agreement to close the transaction
is subject to the satisfaction at or prior to the Closing (or the waiver thereof
by Purchaser) of each of the following conditions:
7.1 Representations and Warranties. The representations and warranties of
Sellers and Beneficiaries contained in this Agreement as supplemented or updated
pursuant to Section 5.11 hereof shall be true and correct in all material
respects.
7.2 Performance. Sellers, Beneficiaries, JRL and HWL shall have performed
and complied with in all material respects all the covenants and agreements
required by this Agreement to be performed or complied with by them at or prior
to the Closing.
7.3 No Legal Bar. There shall not be in effect on the date of Closing any
laws prohibiting or making illegal the consummation of the transaction
contemplated by this Agreement.
7.4 Documents Delivered by Sellers. Sellers, Beneficiaries, JRL and HWL
shall have delivered or caused to be delivered to Purchaser:
(a) Authorizing Resolutions. Certified copies of resolutions of the
board of directors and shareholders of Ocelot authorizing the consummation of
the transaction contemplated by this Agreement;
(b) Good Standing Certificate. A certificate of existence of each
Corporation, certified by the appropriate Governmental Authority;
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(c) Opinions of Counsel. The opinions of counsel to Ocelot, the
Corporations, JRL, HWL and the Trusts in substantially the forms set forth in
Exhibit 7.4(c) hereto.
(d) Stock Certificates. Certificates representing the State Shares,
accompanied by (i) irrevocable stock powers or other instruments of transfer,
duly executed in blank, (ii) all necessary stock transfer and documentary stamps
attached, and (iii) such other documents as may be reasonably requested by
Purchaser in order to effect the transfer of the State Shares to Purchaser; and
(e) Resignations. The resignations of the officers and directors of
the Corporations as Purchaser shall request.
(f) Compliance Certificate. A certificate signed by each Seller that
the representations and warranties of Sellers contained in this Agreement, as
updated pursuant to the provisions of Section 5.11 hereof, are true and correct
in all material respects on and as of the Closing, and that Sellers have
performed and complied with in all material respects all the covenants and
agreements required by this Agreement to be performed or complied with by them
at or prior to the Closing, and a certificate signed by Beneficiaries and each
of JRL and HWL, respectively, that the representations and warranties of
Beneficiaries, JRL and HWL contained in this Agreement, as updated pursuant to
the provisions of Section 5.11 hereof, are true and correct in all material
respects on and as of the Closing, and that Beneficiaries, JRL and HWL have
performed and complied with in all material respects all the covenants and
agreements required by this Agreement to be performed or complied with by them
respectively at or prior to the Closing.
(g) General Releases. The general releases referred to in Sections
5.17 and 5.22 hereof, duly executed by the persons referred to in such Sections.
7.5 Consents. Sellers shall have obtained all third party consents,
declarations, filings, approvals, authorizations or registrations required to be
obtained by Sellers as contemplated by Sections 5.7 and 5.9 hereof.
7.6 Material Adverse Change. There shall not occur, beginning on the date
of this Agreement and continuing through the Closing, any Material Adverse
Change.
7.7 Hart-Scott-Rodino Waiting Period. All applicable waiting periods
relating to the HSR Act shall have expired.
7.8 Absence of Litigation. No action, proceeding or litigation shall be
pending seeking to enjoin, restrain or prohibit the transactions contemplated
hereby, including, without limitation, under antitrust laws.
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ARTICLE 8
TERMINATION
8.1 Termination. This Agreement may be terminated and the transaction
contemplated hereby may be abandoned at any time prior to the Closing:
(a) By mutual written consent of Purchaser, Ocelot and the
Representatives of the Shareholders;
(b) By Ocelot and the Representatives of the Shareholders if (i)
Purchaser defaults in the performance of its obligations under this Agreement,
or (ii) the conditions specified in Sections 6.1, 6.2, 6.4, 6.5(b), 6.5(c) or
6.5(d) hereof (with respect, in Section 6.5(d), only to the general releases
specified in Section 5.21 hereof) cannot be satisfied;
(c) By Purchaser if (i) Sellers, Beneficiaries, JRL or HWL default in
the performance of their obligations under this Agreement, or (ii) the
conditions specified in Sections 7.1, 7.2 or 7.4 hereof cannot be satisfied;
(d) By Ocelot and the Representatives of the Shareholders, if the
conditions specified in Sections 6.3, 6.5(a), 6.5(d) (with respect, in Section
6.5(d), only to the Releases and the Subordinated Debt Releases specified in
Section 5.13 hereof) or 6.6 hereof cannot be satisfied;
(e) By Purchaser, if the conditions specified in Sections 7.3, 7.5,
7.6, 7.7 or 7.8 hereof cannot be satisfied;
(f) By Ocelot and the Representatives of the Shareholders or Purchaser
if a Material Adverse Change occurs; provided, however, Ocelot and the
Representatives of the Shareholders may not terminate this Agreement pursuant to
this Section 8.1(f) on the basis of clause (iv) of the definition of Material
Adverse Change; or
(g) Automatically, if the Closing, through no fault of any party
hereto, has not occurred as of February 28, 2002.
8.2 Effect of Termination.
(a) In the event this Agreement is terminated by Ocelot or the
Representatives of the Shareholders pursuant to Section 8.1(b) hereof, Sellers
shall be entitled to pursue all rights and remedies available to Sellers (with
no minimum or maximum limitation) under applicable law to recover their actual
losses.
(b) In the event this Agreement is terminated by Purchaser pursuant to
Section 8.1(c) hereof, Purchaser shall be entitled to pursue all rights and
remedies available to Purchaser (with no minimum or maximum limitation) under
applicable law to recover its actual Losses; provided, however, that such rights
and remedies may be pursued only against Ocelot and the Corporations, regardless
of whether this Agreement is breached by Sellers, Beneficiaries,
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JRL and/or HWL, and none of the Shareholders, Beneficiaries, JRL or HWL shall
have any liability therefor.
(c) If this Agreement is terminated by Purchaser pursuant to Section
8.1(f) hereof on the basis of clause (iv) of the definition of Material Adverse
Change (i) due to willful breaches of representations and warranties of Sellers
or Beneficiaries made on the date hereof, (ii) due to breaches of
representations and warranties of Sellers set forth in Sections 3.2(a) and
3.2(b) or (iii) for any reason whatsoever if Sellers, Beneficiaries, JRL and/or
HWL commence an action against Purchaser alleging a breach of Purchaser's
obligations under this Agreement, then Purchaser shall be entitled to pursue all
other rights and remedies available to Purchaser under applicable law to recover
its actual Losses subject to the following: (A) such rights and remedies may be
pursued only against Ocelot and the Corporations, regardless of whether this
Agreement is breached by Sellers, Beneficiaries, JRL and/or HWL, and none of the
Shareholders or Beneficiaries shall have any liability therefor; (B) for this
purpose, Purchaser's Losses shall be limited to Purchaser's expenses, costs and
fees incurred in connection with the negotiation, preparation, execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement, including without limitation, the HSR Act fee, fees and
expenses of Purchaser's legal advisors, accountants and consultants and
Purchaser's reasonable allocation for employee costs and other overhead
expenses; and (C) Purchaser shall not be entitled to recover its Losses to the
extent Sellers, Beneficiaries, JRL and/or HWL are successful on the merits in
such an action against Purchaser, as evidenced by a final, non-appealable order
or judgment issued by a court of competent jurisdiction.
(d) In the event this Agreement is terminated pursuant to Sections
8.1(a), (d), (e), (f) (except as set forth in Section 8.2(c)) or (g) hereof, the
parties shall have no further rights against one another.
8.3 Election Not to Terminate.
(a) By Sellers. Upon the occurrence of an event described in Sections
8.1(b), (d), or (f) hereof, if Ocelot and the Representatives waive the right to
terminate this Agreement and proceed with the Closing, Purchaser shall not be
deemed to be in default under this Agreement.
(b) By Purchaser. Upon the occurrence of an event described in
Sections 8.1(c), (e), or (f) hereof, if Purchaser waives its right to terminate
this Agreement and proceeds with the Closing, Sellers shall not be deemed to be
in default under this Agreement.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by Purchaser. Indemnification pursuant to this Section
9.1 shall only apply if Closing occurs. If Closing does not occur, Article 8
hereof provides the exclusive remedy of the parties. Subject to the limitations
set forth in this Article 9, Purchaser shall indemnify, defend, and hold
harmless Sellers against and in respect of any and all (a) claims,
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demands, suits, actions, proceedings and assessments, whether or not ultimately
determined to be valid; (b) all losses, obligations, liabilities, damages,
recoveries, judgments, awards, settlements, rulings, Taxes and deficiencies; and
(c) all costs and expenses, including interest, penalties, court costs,
reasonable attorneys', consultants' and expert witnesses' fees, disbursements
and expenses and other investigative costs, of investigating, defending or
asserting any of the foregoing or of enforcing this Agreement (all such matters
described in subsections (a), (b) and (c) above defined as "Losses"), that they
incur or suffer which arise, result from, relate to or are based upon (i) any
breach of representations and warranties (as supplemented or updated pursuant to
Section 5.12 hereof) made by Purchaser in this Agreement or in any schedule,
certificate, exhibit or any instrument to be furnished by Purchaser under this
Agreement (ignoring, for purposes of determining the existence of any such
breach or the amount of Losses with respect thereto, any "materiality" or
similar qualifiers set forth in such representations and warranties); and (ii)
failure by Purchaser to perform any of its covenants or agreements in this
Agreement or in any schedule, certificate, exhibit or any instrument to be
furnished by Purchaser under this Agreement (regardless of whether such failure
is deemed "material").
9.2 Indemnification by Sellers. Indemnification pursuant to this Section
9.2 shall only apply if Closing occurs. If Closing does not occur, Article 8
hereof provides the exclusive remedy of the parties. Subject to the limitations
set forth in this Article 9, Sellers shall, jointly and severally, indemnify,
defend, and hold harmless Purchaser and its directors, officers, employees and
controlled and controlling persons and the Corporations against and in respect
of any and all Losses that Purchaser and its directors, officers, employees and
controlled and controlling persons and the Corporations shall incur or suffer,
which arise, result from, relate to or are based upon (a) any breach of the
representations and warranties made by Sellers or the Corporations solely in
Section 3.2 of this Agreement, whether on the date hereof as of the date hereof
or at the Closing (ignoring, for purposes of determining the existence of any
such breach or the amount of Losses with respect thereto, any "materiality" or
similar qualifiers set forth in such representations and warranties); (b)
failure by Sellers or, prior to the Closing, the Corporations to perform any of
their covenants or agreements in Sections 5.6, 5.10(c), (d), (g) and (h), 5.15,
5.19, 10.3, 11.2, 11.4, 11.6 and 11.14 and Article 9 of this Agreement
(regardless of whether such failure is deemed "material"); (c) any Taxes of any
Person other than any of the Corporations (i) under Treas. Reg. ss. 1.1502-6 (or
any similar provision of state, local or foreign law), (ii) as a transferee or
successor, (iii) by contract, or (iv) otherwise; and (d) the disposition to a
third party, or the transfer to Ocelot, of State France or otherwise relating to
the business or liabilities of State France. Subject to the limitations set
forth in this Article 9, Beneficiaries agree to jointly and severally indemnify,
defend, and hold harmless Purchaser and its directors, officers, employees and
controlled and controlling persons and the Corporations against and in respect
of any and all Losses that Purchaser and its directors, officers, employees and
controlled and controlling persons and the Corporations shall incur or suffer,
which arise, result from, relate to or are based upon a breach of the
representations and warranties contained in Section 10.1 hereof (as to Evalyn L.
Sommers and Eric V. Lindahl), and Section 10.2 hereof (as to John R. Lindahl,
Jr., Kent Lindahl, Sherry Lindahl and Jennifer Lindahl) and a breach of the
covenants to which the Beneficiaries are bound under Section 10.4.
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9.3 Limitation of Liability. As specified in Section 5.15 hereof, any
breach by any Seller or Beneficiary of the provisions of Section 5.15 hereof
shall be recoverable only from the breaching Seller or Beneficiary.
9.4 Time Limitation. The liability of Purchaser pursuant to Section 9.1
hereof and the liability of Sellers pursuant to Section 9.2 hereof for
indemnification obligations shall be limited to a period of one (1) year
following the Closing, except (a) Claims for indemnification pursuant to Section
9.2(a) or the last sentence of Section 9.2 in each case for breach of
representations contained in Section 3.2, 10.1 and 10.2, and Claims for
indemnification pursuant to Section 9.2(b) for breaches of the covenants
contained in Sections 5.10(c), (g) and (h), Sections 5.19, 5.24 and 10.3 and
Article 9 and indemnification pursuant to the provisions of Section 9.2(c)
hereof shall have no limitation; and (b) Claims for indemnification pursuant to
Section 9.2(b) for breaches of the covenants contained in Sections 5.10(d),
5.10(f), 5.15, 11.2, 11.4, 11.6 and 11.14 hereof and indemnification pursuant to
the provisions of Sections 9.2(d) hereof may be made at any time within the
statute of limitations for such underlying Claims.
In no event shall a party be liable for indemnification to the other
unless a valid claim for indemnification, setting forth with specificity the set
of facts and circumstances giving rise to the alleged liability, shall have been
set forth in writing and delivered to the other party or parties on or before
the expiration of the applicable time periods set forth above.
9.5 Procedure For Filing of a Claim Under Sections 9.1 or 9.2. Following
notice by one or more parties to be indemnified (the "Indemnified Party") to the
party from whom indemnification is sought (the "Indemnifying Party," which term
shall include a Beneficiary if such Person has an indemnification obligation to
pay Purchaser for a Claim pursuant to Section 9.6) that the Indemnified Party
believes it is entitled to indemnification pursuant to the provisions of
Sections 9.1 and 9.2 hereunder, as the case may be, for a claim, demand or
proceeding made by any Person other than the parties hereto (referred to herein
as a "Claim"), the Indemnifying Party shall be entitled, at its cost and
expense, to contest and defend by all appropriate legal proceedings such Claim;
provided, however, that notice of the intention to so contest shall be delivered
by the Indemnifying Party to the Indemnified Party within thirty (30) days from
the receipt by the Indemnifying Party of notice from the Indemnified Party of
the assertion of such Claim in which notice of intention to defend the
Indemnifying Party shall admit it has an indemnification obligation hereunder
with respect to such claim, which will constitute the Indemnifying Party's
obligation to pay directly all Losses incurred therewith. Any such contest of a
claim may be conducted in the name and on behalf of the Indemnifying Party or
the Indemnified Party, as may be appropriate. Such contest shall be conducted
diligently by reputable attorneys employed by the Indemnifying Party reasonably
acceptable to the Indemnified Party, and the Indemnifying Party shall keep the
Indemnified Party fully informed with respect to such Claim and the contest
thereof.
Whether or not the Indemnified Party joins in any such contest, with
or without separate counsel (such counsel to be at its own expense), the
Indemnifying Party shall have full authority, in consultation with the
Indemnified Party and its counsel, if any, to determine all action to be taken
with respect thereto, provided, however, that the Indemnifying Party shall not,
- 46 -
without the prior written consent of the Indemnified Party, settle, compromise,
or offer to settle or compromise any such Claim or demand on a basis which (a)
would or could result in the imposition of a consent order, injunction or decree
which would or could restrict the future activity or conduct of the Indemnified
Party or (b) does not include as an unconditional term thereof the giving by the
claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect to such Claim. Notwithstanding anything in this Section 9.5
to the contrary, (i) if there is a reasonable probability that such Claim may
materially and adversely affect the Indemnified Party other than as a result of
money damages or other money payments, or (ii) if the party asserting such Claim
is a customer, distributor or sales representative of the Corporations, then the
Indemnifying Party shall not have the right to contest, defend or settle such
Claim; provided, however, that the Indemnified Party must contest, defend,
and/or settle such Claim in a reasonable manner. If any Claim is asserted and
the Indemnifying Party fails to contest and defend such Claim within a
reasonable period of time after notice of any such Claim or has undertaken but
abandoned such defense, the Indemnified Party (upon prior written notice to the
Indemnifying Party) may take such action in connection therewith as the
Indemnified Party deems necessary or desirable, including the contest, defense
or settlement of such Claim or consent to the entry of a judgment with respect
to such Claim, on behalf of and for the account and risk of the Indemnifying
Party, and retention of attorneys, and the Indemnified Party shall be entitled
to indemnification for reasonable attorneys' fees in connection with such
events.
If a Claim is made against any party, as the Indemnifying Party, the
party making such Claim, as the Indemnified Party, agrees to cooperate with the
Indemnifying Party and its counsel, including, at the Indemnifying Party's
expense (limited, however, to the Indemnified Party's reasonable out-of-pocket
expenditures), permitting reasonable access to books, records and employees in
contesting any such claim which the Indemnifying Party elects to contest, or, if
appropriate, in making any counterclaim against any Person asserting a Claim, or
any cross-complaint against any Person concerning the Claim.
The Indemnified Party agrees to use all reasonable efforts to afford
the Indemnifying Party and its counsel the opportunity to be present at, and to
participate in, conferences with all Persons, including Governmental
Authorities, asserting any Claim against the Indemnified Party or conferences
with representatives of or counsel for such Persons.
9.6 Additional Procedure for Filing of a Claim Under Section 9.2. Claims
for indemnification under Section 9.2 hereof that are not barred pursuant to
Section 9.4 hereof and as to which recovery is not limited in amount by Section
9.3(c) hereof may be made against the Sellers and Beneficiaries, and Sellers and
Beneficiaries shall have an indemnification obligation to pay to Purchaser the
amount of such Claims, subject to the limitations of Section 9.7 hereof.
9.7 Other Limitations. Indemnification pursuant to Section 9.2 hereof shall
be subject to the following further limitations:
(a) Maximum Amount. In no event shall indemnification obligations of a
Seller exceed the amount of the proceeds of the sale of State received by each
Seller directly or indirectly from Ocelot with respect to such Seller's
ownership of Ocelot Shares. Purchaser recognizes that, subject to Sections
5.10(c)(iii) and 5.10(c)(v), Ocelot will commence liquidation
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proceedings immediately after Closing and will distribute proceeds of the sale
of State by Ocelot to the Shareholders. After such distribution, Purchaser may
seek indemnification for Claims for indemnification under Section 9.2 hereof
that are not barred pursuant to Section 9.4 hereof only from (i) the recipients
of such proceeds from Ocelot and only to the extent of such proceeds received
and/or (ii) Ocelot or its successor entity. With regard to the Herbert W.
Lindahl, Jr. State Industries Trust, indemnification shall be the responsibility
of such trust until such proceeds are distributed to the HWL Beneficiaries,
after which indemnification shall be the responsibility of the HWL Beneficiaries
to the extent each receives such proceeds. Prior to any such distribution, the
HWL Beneficiaries shall have no indemnification obligations whatsoever under
this Agreement. Furthermore, the indemnification obligations of such trust shall
be reduced by the extent of such distributions. Before it distributes any of
such proceeds to the HWL Beneficiaries or any other Person, the Herbert W.
Lindahl, Jr. State Industries Trust shall provide to Purchaser (A) the name and
current address of each Person to whom such trust will distribute such proceeds,
the amount of such proceeds to be distributed to each such Person and the
date(s) of the distribution(s) and (B) an agreement, in form reasonably
satisfactory to Purchaser, executed by each Person to whom such trust will
distribute such proceeds that is not an HWL Beneficiary that shall provide that
such Person will be bound by the obligations of this Agreement as if such Person
were an HWL Beneficiary for purposes of this Agreement. With regard to the John
R. Lindahl State Industries Trust, to the extent that such trust distributes
such proceeds to the JRL Beneficiaries, indemnification shall not be the
responsibility of such trust but shall be that of the JRL Beneficiaries to the
extent each receives such proceeds from such trust. At the Closing, the John R.
Lindahl State Industries Trust shall provide to Purchaser the name of each
Person to whom such trust will distribute such proceeds, the amount of such
proceeds to be distributed to each such Person and the date(s) of the
distribution(s). Distributions of principal and income of the Trusts to the
Beneficiaries shall be considered distribution of the proceeds of the sale of
State for purposes of this Section 9.7(a). The limitations of this Section
9.7(a) shall not apply to indemnification obligations for a breach of Section
5.15 or for a breach of Sections 11.2, 11.4 or 11.14 by a Person other than
Ocelot.
(b) Joint and Several Limitation. Notwithstanding any other provision
hereof, there shall be no joint and several indemnification obligation (only a
several obligation) for a breach of a representation or warranty as to the
ownership of Ocelot Shares (i) by the Sellers pursuant to Section 3.2(c) hereof,
(ii) by the HWL Beneficiaries under the first sentence that is a representation
in Section 10.1 hereof, and (iii) by the JRL Beneficiaries under the first
sentence that is a representation in Section 10.2 hereof.
(c) Payment of Subordinated Indebtedness. Notwithstanding any other
provision or term of this Agreement, Purchaser shall make no claim and have no
right, directly or indirectly, with respect to the payment of the Subordinated
Indebtedness to the Subordinated Debtholders by Ocelot from the proceeds of the
sale of State Shares. Such payments shall not be available to Purchaser to
satisfy any claim for indemnification under this Agreement.
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ARTICLE 10
SPECIAL PROVISIONS APPLICABLE TO BENEFICIARIES,
JRL AND HWL
The Beneficiaries, JRL and HWL execute this Agreement for the sole purpose
of being bound to the following provisions:
10.1 Representations of Beneficiaries of the Herbert W. Lindahl, Jr. State
Industries Trust. Evalyn L. Sommers and Eric V. Lindahl (the "HWL
Beneficiaries") represent and warrant to Purchaser as follows (it being agreed
that the following representations and warranties shall be deemed to have been
made on the date hereof and, subject to Section 5.11 hereof, on the date of
Closing): The Herbert W. Lindahl, Jr. State Industries Trust owns, free and
clear of all Liens, the shares of stock of Ocelot as specified on Schedule 3.2
hereto. Except as set forth on Schedule 3.2 hereto: (i) to the Knowledge of the
HWL Beneficiaries, there are no other authorized or outstanding equity
securities of Ocelot of any class, kind or character and there are no
outstanding rights, contracts, rights to subscribe, conversion rights, exchange
rights, warrants, options, calls, puts or other agreements or commitments of any
character relating to the shares of Ocelot or any securities convertible or
exchangeable or exercisable for any shares of the Ocelot Stock; (ii) there are
no agreements or understandings among the shareholders of Ocelot with respect to
the voting, sale or transfer of the shares of Ocelot on any matter; and (iii)
there are no voting trusts, proxies, or any other agreements or understandings
with respect to such shares. Each of the HWL Beneficiaries has full capacity,
power and authority to enter into this Agreement and to carry out the
transactions contemplated by this Agreement. This Agreement and the Ancillary
Agreements have been duly authorized by each of the HWL Beneficiaries. When
executed and delivered by all parties hereto, this Agreement and the Ancillary
Agreements shall be binding upon each of the HWL Beneficiaries and shall be
enforceable against them in accordance with their respective terms. Except as
disclosed in Schedule 3.1(a) hereto, the execution and delivery of this
Agreement and Ancillary Agreements, the consummation of the transactions
contemplated hereby and thereby, and the performance and fulfillment of their
respective obligations and undertakings hereunder and thereunder by each of the
HWL Beneficiaries will not, provided that the consents listed on Schedule 3.9
hereto are obtained, violate any provision of, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or result in the breach of or accelerate or permit the acceleration of
any performance required by the terms of, or give rise to any obligation to make
a payment to any other Person under, any Contract to which any either of them is
a party or by which either of them may be bound; any judgment, decree, writ,
injunction, order or award of any Governmental Authority binding on either of
them; or the governing trust instrument of the Herbert W. Lindahl, Jr. State
Industries Trust. The only Beneficiaries of the Herbert W. Lindahl, Jr. State
Industries Trust entitled or eligible to receive current distributions of income
or principal of such Trust are set forth on Schedule 1.1 hereto.
10.2 Representations of Beneficiaries of the John R. Lindahl State
Industries Trust. John R. Lindahl, Jr., Kent Lindahl, Sherry Lindahl Lewis and
Jennifer Lindahl (the "JRL Beneficiaries") represent and warrant to Purchaser as
follows (it being agreed that the following representations and warranties shall
be deemed to have been made on the date hereof and, subject to Section 5.11
hereof, on the date of Closing): The John R. Lindahl State Industries
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Trust owns, free and clear of all Liens, the shares of stock of Ocelot as
specified on Schedule 3.2 hereto. Except as set forth on Schedule 3.2 hereto:
(i) to the Knowledge of the JRL Beneficiaries, there are no other authorized or
outstanding equity securities of Ocelot of any class, kind or character and
there are no outstanding rights, contracts, rights to subscribe, conversion
rights, exchange rights, warrants, options, calls, puts or other agreements or
commitments of any character relating to the shares of Ocelot or any securities
convertible or exchangeable or exercisable for any shares of the Ocelot Stock;
(ii) there are no agreements or understandings among the shareholders of Ocelot
with respect to the voting, sale or transfer of the shares of Ocelot on any
matter; and (iii) there are no voting trusts, proxies, or any other agreements
or understandings with respect to such shares. Each of the JRL Beneficiaries has
full capacity, power and authority to enter into this Agreement and to carry out
the transactions contemplated by this Agreement. This Agreement and the
Ancillary Agreements have been duly authorized by each of the JRL Beneficiaries.
When executed and delivered by all parties hereto, this Agreement and the
Ancillary Agreements shall be binding upon each of the JRL Beneficiaries and
shall be enforceable against them in accordance with their respective terms.
Except as disclosed in Schedule 3.1(a) hereto, the execution and delivery of
this Agreement and Ancillary Agreements, the consummation of the transactions
contemplated hereby and thereby, and the performance and fulfillment of their
respective obligations and undertakings hereunder and thereunder by each of the
JRL Beneficiaries will not, provided that the consents listed on Schedule 3.9
hereto are obtained, violate any provision of, or constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, or result in the breach of or accelerate or permit the acceleration of
any performance required by the terms of, or give rise to any obligation to make
a payment to any other Person under, any Contract to which any of them is a
party or by which any of them may be bound; any judgment, decree, writ,
injunction, order or award of any Governmental Authority binding on any of them;
or the governing trust instrument of the John R. Lindahl State Industries Trust.
The only Beneficiaries of the John R. Lindahl State Industries Trust entitled or
eligible to receive current distributions of income or principal of such Trust
are set forth on Schedule 1.1 hereto.
10.3 Agreement to be Bound by Certain Indemnification Provisions. Each
Beneficiary agrees (a) to jointly and severally indemnify Purchaser for a breach
of the representations and warranties contained in Sections 3.2, 10.1 and 10.2
hereof without regard to the limitations contained in Sections 9.3 and 9.4, and
(b) to be bound by the terms of Sections 9.2 and 9.6 hereof, to the extent that
such sections apply to each such Beneficiary.
10.4 Agreement to be Bound by Noncompete; Release. Each Beneficiary agrees
that he or she:
(a) is bound by the provisions of Section 5.15 hereof, and is bound by
the remedies against each such Beneficiary for a breach of Section 5.15 hereof
as such remedies are specified in Sections 5.15 and 9.3 hereof;
(b) will deliver the general release described in Section 5.17 hereof;
and
(c) is bound by the provisions of Article 11 hereof.
- 50 -
10.5 Agreement by JRL and HWL. JRL and HWL each agree to be bound by the
terms of Sections 9.6, 5.15, and 5.17 and Article 11 hereof to the extent such
section applies to each of them.
ARTICLE 11
GENERAL
11.1 Binding Effect; Benefits; Assignment. No party may assign its rights
or obligations hereunder without the express written consent of the other
parties, which consent may be granted or withheld in such other parties' sole
discretion. All of the terms of this Agreement shall be binding upon, inure to
the benefit of, and be enforceable by and against the parties hereto and their
respective successors and authorized assigns. Nothing in this Agreement, express
or implied, is intended to confer upon any other Person any rights or remedies
under or by reason of this Agreement, except as expressly indicated in this
Agreement.
11.2 Governing Law; Dispute Resolution; Submission to Jurisdiction;
Waivers.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Tennessee, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof or
otherwise.
(b) In the event of any dispute or disagreement between Sellers,
Beneficiaries, JRL and/or HWL, on the one hand, and Purchaser on the other hand
as to the interpretation of any provision of, or the performance of obligations
under, this Agreement (a "Dispute"), the Dispute, upon written request of either
party, shall be referred to representatives of the parties for decision, with
Purchaser being represented by a senior executive officer who has no direct
operational responsibility for the matters contemplated by this Agreement and
Sellers and/or Beneficiaries being represented by the appropriate Representative
or Representatives. The Representatives and the representative of Purchaser
specified on Schedule 11.2 hereto shall meet promptly, and in any event within
twenty-five (25) days after reference of the Dispute to the Representatives and
the representative of Purchaser specified on Schedule 11.2 hereto, in a good
faith effort to resolve the Dispute. If the Representatives and the
representative of Purchaser specified on Schedule 11.2 hereto do not agree upon
a decision within thirty (30) days after reference of the Dispute to them, then
the parties shall be free to exercise the remedies available to them under
Section 11.2(c) hereof.
(c) If the parties have attempted negotiation in accordance with
Section 11.2(b) hereof and thirty (30) days have elapsed after reference of the
Dispute to the Representatives, then any party may initiate mediation of the
Dispute in accordance with this Section 11.2(c) by providing written notice to
the other party or parties of the Dispute and requesting the use of a neutral
mediator to mediate efforts to arrive at a resolution of the Dispute. Each of
the parties shall promptly propose to the other parties by written notice one or
more individuals to be mediator from a list of mediators provided by the Center
for Public Resources and shall promptly disclose to the other party any
circumstances known to it that would cause reasonable doubt regarding the
impartiality of an individual under consideration as a mediator. The parties
shall promptly act in good faith to select the mediator from such individuals by
- 51 -
mutual agreement, and if the parties do not reach agreement within five (5) days
after all parties have proposed mediators, the Center for Public Resources shall
select the mediator from those under consideration who are impartial. The
mediator's compensation will be determined at or before his or her appointment
and shall be shared equally by the parties. The mediator shall conduct the
mediation according to procedures that the mediator determines. The parties'
efforts to reach a resolution of the Dispute through the mediation shall
continue until such a resolution is reached or sixty (60) days elapse after a
party initiates mediation of the Dispute, unless the parties agree in writing to
extend the mediation beyond such sixty-day period. If the parties do not reach a
resolution of the Dispute within such period, then the parties shall be free to
exercise the remedies available to them under Section 11.2(d) hereof.
(d) If and only if the parties have attempted mediation in accordance
with Section 11.2(c) hereof and sixty (60) days have elapsed after a party
initiates mediation, then each of the parties may commence litigation with
respect to the Dispute in accordance with this Section 11.2(d); notwithstanding
the foregoing, a party may commence (but not prosecute) litigation prior to such
time if doing so is necessary to toll a relevant statute of limitations. Each
party hereto irrevocably and unconditionally submits to the exclusive
jurisdiction of the U.S. District Court for the Western District of Tennessee
sitting in the City of Memphis, Tennessee, over any suit, action or proceeding
arising out of or relating to this Agreement. Without limitation of other means
of service, each party hereto agrees that service of any process, summons,
notice or document with respect to any action, suit or proceeding may be served
on it in accordance with the notice provisions set forth herein. Each party
hereto irrevocably and unconditionally waives any objection to the laying of
venue of any such suit, action or proceeding brought in such court and any claim
that such suit, action or proceeding brought in such court has been brought in
an inconvenient forum. Each party hereto agrees that a final judgment in any
suit, action or proceeding brought in such court shall be conclusive and binding
upon such party and may be enforced in any other courts to whose jurisdiction
such party is or may be subject, by suit upon such judgment. Each party hereto
hereby waives its rights to a trial by jury of any claim or cause of action that
relates to the termination of this Agreement or the obligations of the parties
to consummate the transactions contemplated hereby at the Closing. Such waiver
shall apply to any action, proceeding or other litigation of any type brought by
any party against any other party, regardless of the basis of the claim or cause
of action, dealing with the matters enumerated above, but shall not apply to any
action, proceeding or other litigation not described above.
(e) During negotiations or mediations pursuant to Section 11.2 hereof,
the parties shall continue performance of this Agreement unless doing so would
unnecessarily increase damages.
(f) The requirements of negotiation and mediation under this Section
11.2 shall not prohibit a party from seeking injunctive relief from a court of
competent jurisdiction in accordance with Section 11.2(d) hereof immediately
following or in anticipation of an alleged breach of this Agreement by the other
party.
11.3 Public Announcements. At all times at or before the Closing, no party
shall issue or make any reports, statements or releases to the public with
respect to this Agreement or the
- 52 -
transaction contemplated hereby without the prior written consent of the other
parties, which consent shall not be unreasonably withheld, except that each
party may issue a press release, acceptable to Ocelot, in the case of
Purchaser's press release, and acceptable to Purchaser, in the case of Sellers'
press release, concerning the transactions contemplated by this Agreement upon
the execution of this Agreement. If any party is unable to obtain the approval
of its public report, statement or release from the other parties and such
report, statement or release is, in the opinion of legal counsel to such party,
required by law, regulation or stock exchange rules in order to discharge such
party's disclosure obligations, then such party may make or issue the legally
required report, statement or release and promptly furnish the other parties
with a copy thereof. Notwithstanding the foregoing, the Sellers shall cause the
Corporations to provide Purchaser access to, and facilitate meetings with, the
employees of the Corporations for the purpose of making announcements
concerning, and preparing for the consummation of, the transactions contemplated
hereby. Each party shall also obtain the prior approval of the other parties
with respect to any press release to be issued immediately following the Closing
announcing the consummation of the transaction contemplated by this Agreement.
11.4 Notices. All notices, requests, demands, and other communications to
be given pursuant to the terms of this Agreement shall be in writing and shall
be deemed to have been duly given as follows: (a) if personally delivered, when
delivered; (b) if mailed by certified or registered mail (postage prepaid and
return receipt requested), upon the date of receipt; (c) if shipped and
receipted by express courier service (charges prepaid), upon receipt; or (d) if
transmitted by telecopier or similar facsimile transmitter, the first business
day on which the transmission is received (and sender shall bear the burden of
proof of delivery):
If to Ocelot and, prior to the Closing, the Corporations:
AT THE ADDRESSES SHOWN ON SCHEDULE 11.4
If to Shareholders or Beneficiaries:
TO THE REPRESENTATIVES OF THE SAME IF SECTION 11.14 PROVIDES FOR THE
UTILIZATION OF THE REPRESENTATIVES, OTHERWISE TO THE SHAREHOLDERS AND
BENEFICIARIES AT THE ADDRESSES SHOWN ON SCHEDULE 11.4
With a copy to:
Larry T. Thrailkill, Esq.
Thrailkill, Harris, Wood & Boswell, PLC
5141 Virginia Way, Suite 240
Brentwood, TN 37027
Telephone: 615-376-3555
Facsimile: 615-376-3016
and
- 53 -
With a copy to:
M. David Cox, Esq.
Harwell, Howard, Hyne, Manner & Gabbert
315 Deaderick Street, Suite 1800
Nashville, TN 37238
Telephone: 615-256-0500
Facsimile: 615-251-1057
If to JRL:
Mr. John R. Lindahl
2901 Hwy. 12 No.
PO Box 40
Chapmansboro, TN 37035
Telephone: 615-792-5077
Facsimile: 615-792-1693
With a copy to:
Larry T. Thrailkill, Esq.
Thrailkill, Harris, Wood & Boswell, PLC
5141 Virginia Way, Suite 240
Brentwood, TN 37027
Telephone: 615-376-3555
Facsimile: 615-376-3016
If to HWL:
Mr. Herbert W. Lindahl
118 Postwood Place
Nashville, TN 37205
Telephone: 615-352-8284
Facsimile: 615-792-1521
With a copy to:
Larry T. Thrailkill, Esq.
Thrailkill, Harris, Wood & Boswell, PLC
5141 Virginia Way, Suite 240
Brentwood, TN 37027
Telephone: 615-376-3555
Facsimile: 615-376-3016
- 54 -
If to Purchaser and, after the Closing, the Corporations:
Steve W. Rettler
A. O. Smith Corporation
11270 West Park Place
P. O. Box 245008
Milwaukee, WI 53224-9508
Telephone: 414-359-4048
Facsimile: 414-359-4198
With a copy to:
W. David Romoser, Esq.
A. O. Smith Corporation
11270 West Park Place
P. O. Box 245009
Milwaukee, WI 53224-9509
Telephone: 414-359-4137
Facsimile: 414-359-4143
And to:
Patrick G. Quick, Esq.
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202-5367
Telephone: 414-297-5678
Facsimile: 414-297-4900
Any party may change its address by prior written notice to the other parties.
11.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
all of which shall together constitute one and the same instrument. This
Agreement may also be executed by signatures to facsimile transmittal documents
in lieu of original or machine generated or copied documents.
11.6 Expenses.
(a) The Sellers, jointly and severally, shall pay, and shall
indemnify, defend and hold Purchaser and the Corporations harmless from and
against all expenses, costs and fees of their and the Corporations' legal,
accounting, and other professional counsel incurred after July 31, 2001,
including, without limitation, Thrailkill, Harris, Wood & Boswell, PLC; and
Boult, Cummings, Conners & Berry, PLC in connection with the transactions
contemplated hereby. The Sellers, jointly and severally, shall pay, and shall
indemnify, defend and hold the Purchaser and the Corporations harmless from and
against all expenses, costs and fees of their and the Corporations' investment
banking firms incurred after May 26, 2001, including, without
- 55 -
limitation, Seale & Associates, LLC and Stephens, Inc., in connection with the
transaction contemplated hereby, other than out-of-pocket reimbursements paid
thereafter as reflected on Schedule 11.6(a) hereto. For these purposes, any fees
the payment of which is contingent upon the consummation of the transaction
contemplated hereby shall be deemed incurred at the Closing.
(b) The Sellers, jointly and severally, and Purchaser shall each pay
50% of the HSR Act fee.
(c) Except as otherwise provided herein, each party shall pay its own
respective expenses, costs, and fees incurred in connection with the
negotiation, preparation, execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement.
11.7 Entire Agreement. This Agreement, and the schedules to this Agreement
and the agreements referred to in this Agreement set forth the entire agreement
and understanding of the parties hereto in respect of the transactions
contemplated by this Agreement and supersede all prior agreements, arrangements,
and understandings relating to the subject matter of this Agreement.
11.8 Amendment and Waiver. This Agreement may be amended, modified,
superseded, or canceled and any of the terms, covenants, representations,
warranties or conditions of this Agreement may be waived only by a written
instrument executed by Purchaser, Ocelot and the Representatives of the
Shareholders; provided, however, that any amendment that would modify the
Purchase Price or increase indemnification obligations must be executed by
Purchaser, Ocelot, the Shareholders and the Beneficiaries and any amendment that
would modify Article 10 or any provision to which Article 10 refers in a manner
adverse to a Beneficiary or JRL or HWL must be executed by the Person adversely
affected, or, in the case of a waiver, by or on behalf of the party waiving
compliance. The failure of any party at any time to require performance of any
provision of this Agreement shall not affect the right of that party at a later
time to enforce the same. No waiver by any party of any condition or breach of
any term, covenant, representation, or warranty contained in this Agreement, in
any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of the condition or of any breach of the term, covenant,
representative or warranty or any other term, covenant, representation, or
warranty set forth in this Agreement.
11.9 Severability. Any provision, or clause thereof, of this Agreement that
shall be found to be contrary to applicable law or otherwise unenforceable shall
not affect the remaining terms of this Agreement, which shall be construed as if
the unenforceable provision, or clause thereof, were absent from this Agreement.
11.10 Headings. The headings of the sections and subsections of this
Agreement have been inserted for convenience of reference only and shall not
restrict or otherwise modify any of the terms or provisions of this Agreement.
- 56 -
11.11 Confidential Information. This Agreement, the terms of the
transaction contemplated hereby (including without limitation the Purchase
Price), and any information heretofore or hereafter disclosed or obtained in
connection with this Agreement concerning the business, operations, affairs or
financial condition of any party hereto, shall be kept confidential, except as
otherwise required by law or legal process (including without limitations
filings and submissions required under the HSR Act) or stock exchange rules and
except to the extent it (a) is or has been disclosed to any lender to the
Corporations or Purchaser or the respective attorneys, accountants and financial
advisors of any party hereto, (b) is or hereafter becomes lawfully obtainable
from other sources or to the extent that such duty as to confidentiality is
waived in writing by the party to whom the confidential information relates, or
(c) to the extent that Purchaser deems it necessary or appropriate to include
information with respect to the Corporations or the transactions contemplated in
this Agreement in a filing to be made with the Securities and Exchange
Commission. Such obligations as to confidentiality shall survive termination or
abandonment of this Agreement.
11.12 Schedules. Provided the Sellers have used their reasonable best
efforts to assure that information set forth in the schedules specifically
refers to the Article and Section of this Agreement to which such information is
responsive, any fact or item disclosed by Sellers on the face of any schedule to
this Agreement shall be deemed disclosed on all other schedules to this
Agreement to which such fact or item may reasonably apply so long as the
applicability of the information to other schedules or sections of this
Agreement is reasonably apparent from the information set forth on the face of
the schedule. However, information set forth in any schedule to this Agreement
shall not be deemed to have been disclosed with respect to any statement in any
Article and Section of this Agreement that is not qualified by reference to a
schedule to this Agreement.
11.13 Equitable Relief. Each party agrees that any breach of the other
party's obligations to consummate the sale and purchase of the State Shares at
the Closing will result in irreparable injury to the non-breaching party for
which a remedy of law would be inadequate and that, in addition to any relief at
law that may be available to the non-breaching party for such breach and
regardless of any other provision contained in this Agreement, the non-breaching
party shall be entitled to injunctive and other equitable relief as a court may
grant. This Section 11.13 shall not be construed to limit the non-breaching
party's right to obtain equitable relief for other breaches of this Agreement
under general equitable standards.
11.14 Representative for Parties Other Than Purchaser. With respect to any
Claim or Dispute arising under this Agreement after Closing, and the other
matters set forth in this Section 11.14, the following persons shall have the
authority to represent, act on behalf of, and bind the Sellers, Beneficiaries,
JRL and HWL depending upon the type of Claim or Dispute or other matter:
(a) As to a Claim or Dispute involving equitable relief and any Claim
or Dispute arising under the non-compete and confidentiality obligations
described in Section 5.15 hereof, no person shall represent any offending party,
and Purchaser must deal directly with such offending party.
- 57 -
(b) As to a Claim or Dispute for which the Purchaser will proceed
against a Seller, then Douglas A. Martin shall represent the Stephens Group and
Brooke Wade shall represent the Canadian Group. No one shall represent any other
party against whom Purchaser seeks recovery or with whom Purchaser has a
controversy, and Purchaser must deal directly with such party.
(c) As to other matters involving this Agreement, including, without
limitation, amending this Agreement in accordance with Section 11.8 hereof or
terminating this Agreement in accordance with Section 8.1 hereof; waiving
compliance with conditions precedent to the Sellers' obligations set forth in
Article 6 hereof; consenting to the assignment of rights under this Agreement in
accordance with Section 11.1 hereof; giving and receiving notices on behalf of
all Shareholders and Beneficiaries; and in general executing and delivering all
agreements, certificates, receipts, instructions and other instruments
contemplated by or deemed advisable in connection with this Agreement, then
Douglas A. Martin shall represent the Stephens Group, Brook Wade shall represent
the Canadian Group, John R. Lindahl, Jr. shall represent the John R. Lindahl
State Industries Trust and all Beneficiaries thereof, Evalyn L. Sommers shall
represent the Herbert W. Lindahl, Jr. State Industries Trust and all
Beneficiaries thereof, JRL shall represent himself and HWL shall represent
himself.
The term "Representative" or "Representatives" shall refer to all persons
against whom Purchaser must proceed or deal with under each circumstance
described in subsections (a) through (c) above. Each Shareholder and
Beneficiary, by his, her or its execution of this Agreement, hereby constitutes
and appoints his, her or its respective Representative as his, her or its true
and lawful attorney in fact, with full power in his, her or its name and on his,
her or its behalf, for the foregoing purposes. This power of attorney, and all
authority hereby conferred, is granted in consideration of the mutual covenants
and agreements made herein, and shall be irrevocable and shall not be terminated
by an act of any Shareholder or Beneficiary or by operation of law, whether by
the death or incapacity of any Shareholder or Beneficiary or by the occurrence
of any other event.
11.15 Waiver of Conflict. Purchaser acknowledges that LTT serves as
Chairman of the Board of Directors of State and Ocelot and the law firm with
which he is affiliated, Thrailkill, Harris, Wood & Boswell, PLC ("THW"), has
served as counsel to State, Ocelot, their subsidiaries, JRL and HWL. Purchaser,
State and its subsidiaries hereby agree that LTT's service as a director or the
fact that his Knowledge is the basis of any Claim under this Agreement shall not
be asserted as a basis for establishing a conflict of interest that would
disqualify LTT or THW (or its successor) from representing Ocelot, JRL or HWL in
any matter, including matters adverse to State and its subsidiaries.
- 58 -
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
OCELOT:
OCELOT OIL CORP.
By: /s/ Herbert W. Lindahl, Jr.
-----------------------------------
Title:
---------------------------------
STATE:
STATE INDUSTRIES, INC.
By: /s/ Herbert W. Lindahl, Jr.
-----------------------------------
Title:
---------------------------------
JRL:
/s/ John R. Lindahl
---------------------------------------
John R. Lindahl, Individually
HWL:
/s/ Herbert W. Lindahl, Jr.
---------------------------------------
Herbert W. Lindahl, Jr., Individually
SHAREHOLDERS:
HERBERT W. LINDAHL, JR. STATE
INDUSTRIES TRUST
By: /s/ Evie L. Sommers
-----------------------------------
Evie L. Sommers, Trustee
JOHN R. LINDAHL STATE INDUSTRIES
TRUST
By: /s/ John R. Lindahl, Jr.
------------------------------------
John R. Lindahl, Jr., Trustee
By: /s/ George L. Fehrmann
------------------------------------
George L. Fehrmann, Trustee
STEPHENS GROUP, INC.
By: /s/ Jackson Farrow, Jr.
-----------------------------------
Title: Vice-President
--------------------------------
GOLAN INVESTMENTS, LTD.
By: /s/
-----------------------------------
Title: President
--------------------------------
/s/ Andrea Hannon Beaton
---------------------------------------
Andrea Beaton
/s/ Connor Hannon
---------------------------------------
Connor Hannon
/s/ Murph Hannon
---------------------------------------
Murph Hannon
This Agreement is executed on behalf of the following Shareholders by Stephens
Group, Inc. as attorney-in-fact pursuant to a Limited Power of Attorney dated
August 14, 2001:
Coral Partners
Gordon Smale IRA
W. Miles Amerine Stephens Trust UID 9/10/86
Jon E.M. Jacoby
Warren A. Stephens
Douglas H. Martin
Gordon Smale
Warren & Harriet Stephens Children's Trust
UID 9/30/87
C. Ray Gash
Robert Schulte
K. Rick Turner
Harriet C. Stephens Trust UID 3/22/84
Elizabeth Ann Stephens Campbell Revocable
Trust UID 8/25/92
Pamela Diane Stephens Trust UID 4/10/92
Wilton R. Stephens, Jr. Trust UID 1/1/72
Jacoby Enterprises, Inc.
BY: STEPHENS GROUP, INC.,
Attorney-in-Fact
By: /s/ Jackson Farrow, Jr.
-----------------------------------
Title: Vice-President
--------------------------------
BENEFICIARIES:
BENEFICIARIES OF THE HERBERT W.
LINDAHL, JR. STATE INDUSTRIES TRUST
/s/ Evie L. Sommers
----------------------------------------
Evie L. Sommers, Beneficiary
/s/ Eric V. Lindahl
----------------------------------------
Eric V. Lindahl, Beneficiary
BENEFICIARIES OF THE JOHN R. LINDAHL
STATE INDUSTRIES TRUST
/s/ John R. Lindahl, Jr.
----------------------------------------
John R. Lindahl, Jr., Beneficiary
/s/ Kent Lindahl
----------------------------------------
Kent Lindahl, Beneficiary
/s/ Sherry Lindahl Lewis
----------------------------------------
Sherry Lindahl Lewis, Beneficiary
/s/ Jennifer Lindahl
----------------------------------------
Jennifer Lindahl, Beneficiary
PURCHASER:
A. O. SMITH CORPORATION
By: /s/ Steve W. Rettler
------------------------------------
Title: Vice President Business Development
------------------------------------
EXHIBITS
3.12 Audited Financial Statements
6.5(e) Opinion of Counsel to Purchaser
7.4(c) Opinion of Counsel to Ocelot
SCHEDULES
Schedule Description
1.1 Shareholders of Ocelot Oil Corp.
3.1 Jurisdictions in which State and its Subsidiaries are organized
and in good standing; list of officers and directors of the
Corporations
3.1(a) Contracts which would be in default or accelerated as a result of
the transaction
3.2 Ownership of all authorized and issued shares of State and its
Subsidiaries
3.3 Subsidiaries, and all entities in which the Corporations have an
interest
3.4(a) Owned Personalty
3.4(b) Leased Personalty
3.5(a) Owned Realty
3.5(b) Real Property Leases
3.6(a) Inventory which is not of a quality and quantity usable and
saleable in the ordinary course of business of the Corporations
3.6(b) Locations utilized by the Corporations for the storage,
warehousing and/or consignment of inventories
3.7 Contracts, Real Property Leases and Personalty Leases
3.8 Condition of Assets
3.9 Consents and Authorizations
3.10 Permits and Licenses
3.11 Description of all insurance policies
3.12 Financial Statements
3.13 Litigation
3.15 Employment Matters
3.15(e) Employees entitled to Severance Pay
3.16 Employee Benefit Plans
3.16(e) Prohibited transactions within the meaning of ss. 406 of ERISA or
ss. 4975 of the Code 3.16(f) Terminated Employees currently
receiving Post-employment Benefits pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985
3.17 Taxes
3.18 Environmental Matters
3.19 Conduct of Business
3.20 Intellectual Property
3.21 Indebtedness
3.22 Compliance with Laws
3.23 Powers of Attorney
3.25 Disclosures by Customers
3.26 Product Warranty and Liability
3.27(a) Contracts with Affiliates
3.27(c) Obligations of Affiliates
3.29 Aged Accounts Receivable Schedule
3.30 Sears Contract
Schedule Description
4.3 Purchaser's Consent
4.5 Purchaser's Brokers
5.13 Subordinated Debtholders
11.2 Purchaser's Representative
11.4 Addresses for Notices