EXHIBIT INDEX
Exhibit
No. Description
2.1 Agreement of Merger and Plan of Reorganization between
the Company and the Selling Shareholders.
3.1 Second Restated Articles of Incorporation of Ashland,
as amended to January 30, 1998 (incorporated by
reference to Exhibit 3 to Ashland's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1997 (File
No. 1-2918)).
3.2 By-laws of the Registrant, as amended (incorporated by
reference to Exhibit 3.2 to Ashland's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1996
(File No. 1-2918)).
4.1 Rights Agreement dated as of May 16, 1996, between the
Company and Harris Trust and Savings Bank (incorporated
by reference to Exhibit 4(a) of Ashland's Form 8-A
filed with the Commission on May 16, 1996).
4.2 Registration Rights Agreement between the Company and the
Selling Shareholders.
5 Opinion of Thomas L. Feazell, Esq.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Thomas L. Feazell, Esq. (included as part of
Exhibit 5).
23.3 Consent of Price Waterhouse LLP.
24 Power of Attorney, including resolutions of the
Board of Directors.
--------------------
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
among
Ashland Inc.,
through its division known as The Valvoline Company
and
Bernard A Li, individually and as trustee of The Li Family Trust
Charles W. Hill
and
Walter S. Arnold
and
EGL-1, Inc. (the "Company")
for the acquisition by merger of all the outstanding shares of
Common Stock of the Company
January 21, 1998
LIST OF EXHIBITS
Exhibit 1.4 Form of Registration Rights Agreement
Exhibit 5.1(G) Form of Affidavit re Non-Foreign Status
Exhibit 6.7 Forms of Releases
Exhibit 6.11(a) Form of Consulting Agreement for Bernard A. Li
Exhibit 6.11(b) Form of Employment Agreement for Walter S. Arnold
Exhibit 6.11(c) Form of Employment Agreement for Charles W. Hill
Exhibit 6.11(d) Offer of Employment for Elsie Jordan
Exhibit 9.1(a) Form of Shareholders' Closing Certificate
Exhibit 9.1(b) Form of Opinion of Counsel to Shareholders
Exhibit 9.2(e) Form of Opinion of Counsel to Purchaser
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
THIS AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
("Agreement"), made and entered into as of this 21st day of January, 1998,
among Bernard A. Li, an individual, individually and as trustee of The Li
Family Trust, Charles W. Hill, an individual, and Walter S. Arnold, an
individual (collectively hereinafter referred to as the "Shareholders"),
EGL-1, Inc., a California corporation (the "Company"), and Ashland Inc., a
Kentucky corporation, through its division known as The Valvoline Company,
with offices located at 3499 Blazer Parkway, Lexington, Kentucky 40509
(hereinafter referred to as the "Purchaser"). Immediately upon execution of
this Agreement, Purchaser shall form a California corporation which shall
be a wholly-owned subsidiary of Purchaser ("Valvoline Sub");
WITNESSETH:
WHEREAS, the Shareholders own of record and beneficially
all of the issued and outstanding shares of capital stock of the Company;
WHEREAS, the Shareholders desire to sell to Purchaser,
and Purchaser desires to buy from the Shareholders, all of the issued and
outstanding shares of common stock, no par value, of the Company (the
"Shares");
WHEREAS, the Shareholders and Purchaser intend that the
acquisition of the Shares qualify as a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code of
1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing
premises, the mutual representations, warranties, covenants and agreements
contained herein, and upon terms and subject to the conditions hereinafter
set forth, the parties do hereby agree as follows:
ARTICLE I.
TERMS OF MERGER
1.1 Merger. On the Closing Date, pursuant to the statutory
agreement of merger executed concurrently herewith, (i) Valvoline Sub shall
merge with and into the Company (the "Merger"), (ii) all the outstanding
capital stock of Valvoline Sub shall be converted into that number of
shares of common stock of the Company equal to the Purchase Price (as
adjusted pursuant to Section 1.3) divided by the amount of Ashland Stock
equivalent to the value of the Purchase Price (as so adjusted), as
determined under Section 1.4, and (iii) the Shares shall be converted into
the Purchase Price (as hereinafter defined). At the Closing, the
Shareholders shall deliver to Purchaser certificates, representing all of
the Shares, and Purchaser shall deliver to the Shareholders the Purchase
Price.
1.2 Purchase Price. The aggregate purchase price for the
Shares to be paid by Purchaser to the Shareholders hereunder shall be the
sum of Twenty Seven Million Dollars ($27,000,000.00), as may be adjusted
pursuant to the provisions of Section 1.3 hereof (the "Purchase Price").
1.3 Purchase Price Adjustment. Subject to compliance by
Purchaser with the provisions of this Section 1.3, the Purchase Price shall
be adjusted downward by the sum of (i) the Employee Bonus Amounts (as
hereinafter defined) and (ii) the Company Transaction Fees (as hereinafter
defined). Prior to the Closing, the Purchaser shall have contributed to the
capital of Valvoline Sub cash in the amount sufficient to pay the Employee
Bonus Amounts and the Company Transaction Fees and on the Closing Date the
Purchaser shall cause the Company, as successor to Valvoline Sub, to use
such cash to pay the Employee Bonus Amounts and the Company Transaction
Fees. "Company Transaction Fees" means the fees and charges incurred in
connection with the transactions contemplated by this Agreement to (i)
Donaldson, Lufkin & Jenrette, (ii) Sheppard, Mullin, Richter & Hampton LLP,
(iii) Good, Swartz & Berns, and (iv) Fulwider, Patton, Lee & Utecht, LLP.
At least five days before the Closing Date, the Shareholders shall cause
the Company to deliver to Purchaser a schedule showing the amounts of the
Company Transaction Fees. The parties agree that the Company shall have the
right to enter into agreements with its employees to provide for the
payment to such employees of the amounts set forth beside each employee's
name as set forth on Schedule 1.3 hereto ("Employee Bonus Amounts"). The
Company shall use its commercially reasonable efforts to obtain releases
from such employees and to provide copies thereof to the Purchaser on the
business day immediately preceding the Closing Date.
1.4 Form of Consideration. The Purchase Price shall be
paid by Purchaser at Closing to the Shareholders by issuance of shares of
common stock, par value $1.00 per share, of Ashland Inc., a Kentucky
corporation (the "Ashland Stock") in an amount equivalent to the value of
the Purchase Price. The number of shares of Ashland Stock that will be
deemed equivalent to the value of the Purchase Price shall be determined by
dividing the Purchase Price by the lesser of the closing price of Ashland
Stock as reported on the composite tape of the New York Stock Exchange for:
(1) the business day immediately preceding the Closing; or (2) the twenty
(20) business days immediately preceding Closing, represented as a simple
average. The Ashland Stock shall be paid to the Shareholders
proportionately according to the number and percentage of shares of the
Company held by each Shareholder at Closing. None of the Purchase Price may
be paid in cash or other property except for payment of any fractional
shares of the Purchaser. Following the Closing, the Purchaser shall file a
registration statement for the purpose of registering the resale of the
Ashland Stock under the Securities Act of 1933, as amended ("Securities
Act") subject to the terms and conditions of a Registration Rights
Agreement substantially in the form of Exhibit 1.4 hereto.
1.5 Binding Nature of Agreement. Until the Closing Date,
the Shareholders and their representatives shall be prohibited from
discussing, negotiating or entering into an agreement with any third party
for the purpose of or in any way related to the potential acquisition of
the Company, its stock or its assets. In addition, the parties shall
jointly prepare a public announcement outlining the proposed arrangement
between the parties to be released as soon as practicable following the
execution of this Agreement.
ARTICLE II.
CLOSING
2.1 The Closing; Closing Date. The Merger shall take place
at the offices of Sheppard, Mullin, Richter & Hampton LLP, 501 West
Broadway, 19th Floor, San Diego, California 92101 at 9:00 a.m. on February
2, 1998, or at such other place and/or other date as the parties may
mutually agree (the "Closing Date"). In no event shall the Closing Date be
later than February 15, 1998.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each of the Shareholders represents and warrants
severally, but not jointly, to Purchaser as set forth in this Article III.
The representations and warranties of the Shareholders set forth in
Sections 3.3, 3.5 and 3.6 shall be deemed to be given by a Shareholder
solely as to himself. For all other representations and warranties provided
by the Shareholders, each Shareholder's knowledge shall be imputed to the
other Shareholders regardless of a particular Shareholder's actual
knowledge. As used herein, "knowledge" of a Shareholder shall mean such
Shareholder's actual knowledge. Matters disclosed in a schedule in
reference to any specific section shall be deemed to be disclosed for all
purposes of this Article III.
3.1 Organization of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California and has full power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. The Company is duly qualified or otherwise authorized as a
foreign corporation to transact business and is in good standing in all
jurisdictions in which it is conducting its business (except where the
failure to so qualify would not have a material adverse effect on the
Company) and each jurisdiction wherein the Company is qualified or
authorized is set forth in Schedule 3.1.
3.2 Capitalization of the Company. As of the date hereof,
the authorized capitalization of the Company consists of 1,000,000 shares
of Common Stock, no par value, of which 100,000 shares are issued and
outstanding. All of the issued and outstanding shares of the Company are
held by the Shareholders, and are validly issued, fully paid and
non-assessable. There are no outstanding rights, subscriptions, warrants,
calls, options or other agreements of any kind to purchase or otherwise
receive from the Shareholders or the Company, and there are no securities
convertible into or exchangeable for, any shares of capital stock of the
Company.
3.3 Title to Shares. The Shareholders are the beneficial
and record owners of all the Shares, free and clear of any lien, pledge or
encumbrance ("Liens").
3.4 Articles of Incorporation and By-laws. The
Shareholders have heretofore delivered or made available to Purchaser
copies of the Company's Articles of Incorporation and By-laws, which have
not been amended since such delivery or being made available.
3.5 The Shareholders; Authority. The Shareholders have all
requisite power and authority to execute and deliver this Agreement and to
perform their obligations hereunder. This Agreement has been duly executed
and delivered by the Shareholders and constitutes the valid and binding
obligation of the Shareholders, enforceable against the Shareholders in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, and other laws
affecting the enforcement of creditors' rights generally and subject to
equitable principles.
3.6 Consents and Approvals. Except as set forth on
Schedule 3.6, there is no authorization, consent order or approval of, or
notice to or filing with, any governmental authority required to be
obtained or given or waiting period required to expire as a condition to
the lawful consummation by the Shareholders of the sale of the Shares
pursuant to this Agreement.
3.7 No Conflicts. Except as set forth on Schedule 3.7,
neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will:
a) violate or conflict with any provision of the
Articles of Incorporation or By-laws of the Company;
b) violate, conflict with or result in the
breach or termination of, or otherwise give any other contracting party the
right to terminate, or constitute a default under the terms of any
contract, mortgage, lease, bond, indenture, agreement, franchise or other
instrument or obligation of or with the Company, whether written or oral
(collectively, "Obligations"), except where any of the foregoing would not
have a material adverse effect on the Company;
c) result in the creation of any material Lien
upon any assets of the Company pursuant to the terms of any Obligation;
d) violate any judgment, order, writ, injunction
or decree of any court, arbitrator, administrative agency or government
authority (collectively, "Orders") to which the Company is a party; or
e) constitute a violation by the Shareholders or
the Company of any statute, law or regulation of any jurisdiction, except
for any violation which would not have a material adverse effect on the
Company.
3.8 Financial Statements. The Shareholders have delivered
to Purchaser (a) true copies, reviewed by Good, Swartz & Berns, the
Company's independent certified public accountants, of the Company's
Balance Sheet ("Balance Sheet" and the date thereof being the "Balance
Sheet Date") for the fiscal year ended December 31, 1996 (the "Reviewed
Financial Statements"); and (b) the balance sheet and income statement for
the eleven month period ended November 30, 1997 (the "Current Financial
Statements"), all of which Reviewed Financial Statements and Current
Financial Statements are set forth on Schedule 3.8 (collectively, "the
Financial Statements"). The Reviewed Financial Statements were reviewed and
prepared in conformity with generally accepted accounting principles
consistently applied so as to fairly present the financial condition and
results of operations of the Company for the period presented. The Current
Financial Statements have been prepared by management of the Company for
internal purposes on a basis consistent with past practice.
3.9 Liabilities. The Company does not have any debts,
obligations or liabilities of whatever kind or nature, either direct or
indirect, absolute or contingent, matured or unmatured, except for debts,
obligations or liabilities that (i) are set forth on Schedule 3.9, (ii) are
fully reflected in, or reserved against on, the Reviewed Financial
Statements or the Current Financial Statements, (iii) were not required to
be set forth in the Reviewed Financial Statements in accordance with
generally accepted accounting principles on a consistently applied basis,
(iv) were incurred in the ordinary course of business, (v) are created
under this Agreement or other contracts listed on Schedule 3.14 hereto or
as required or permitted thereby, or (vi) would not have a material adverse
effect on the Company.
3.10 Absence of Certain Changes or Events. Except as set
forth in Schedule 3.10 or except as otherwise contemplated by this
Agreement (including without limitation payment of the Employee Bonus
Amounts), since September 30, 1997, there has not been (a) any damage,
destruction or casualty loss to the physical properties of the Company
(whether covered by insurance or not) in excess of $25,000.00 in the
aggregate; (b) any material adverse change in the business, operations or
financial condition of the Company; (c) any entry into any transaction,
commitment or agreement (including without limitation any borrowing or
capital expenditure) to the Company except in the ordinary course of
business and in any event not greater than $25,000.00; (d) any redemption
or other acquisition by the Company of the Company's capital stock or any
declaration, setting aside or payment of any dividend or other distribution
in cash, stock or property with respect to the Company's capital stock; (e)
any increase in the rate or terms of compensation payable, or to become
payable, by the Company to its directors, officers or employees or any
increase in the rate or terms of any bonus, pension, insurance or other
employee benefit plan, payment or arrangement made to, for or with any such
directors, officers or key employees; or (f) any sale, transfer or other
disposition of any asset of the Company to any party, including the
Shareholders, except for (I) payment of third-party obligations incurred,
(II) transfers of assets identified as "Excluded Assets" on Schedule 3.10-A
hereto, which Excluded Assets may be transferred to the Shareholders or an
entity owned or controlled by them (which transfer will not cause the
Company, after the merger with Valvoline Sub, to fail to hold substantially
all of its properties other than the Ashland Stock within the meaning of
Code Section 368(a)(2)(E)(i)), and (III) transfers of assets in the
ordinary course of business or (g) any failure by the Company to pay its
accounts payable or other obligations in the ordinary course of business,
except for any failure which would not have a material adverse effect on
the Company.
3.11 Properties.
a) The Company does not own any real property
and there are no options held by the Company or contractual obligations to
purchase or acquire (including by way of lease) any interest in real
property.
b) Schedule 3.11(b) sets forth all leases,
subleases or other agreements under which the Company is lessee or lessor
of any real property. There is not under any of such instruments any
existing or claimed default, event of default or, to the Shareholders'
knowledge, event which, with notice or lapse of time or both, would
constitute an event of default by the Company.
3.12 Patents, Copyrights and Trademarks. Schedule 3.12 sets
forth a list of all patents, pending patent applications, copyrights,
trademarks and trade names ("Proprietary Rights") used by the Company for
which the Company has or is seeking registration protection, all of which
are either owned by or licensed to the Company. The Company possesses the
right to use and to prevent others from using such Proprietary Rights to
the extent allowable by applicable law and to the extent not limited by
existing agreements. Excepting the potential claims which may arise from
certain existing conflicts as set forth on Schedule 3.12, to the
Shareholders' knowledge, such Proprietary Rights do not infringe upon the
intellectual property rights currently asserted by others. Such Proprietary
Rights are sufficient and adequate to carry on the business of the Company
as heretofore conducted by the Company.
3.13 Insurance. Schedule 3.13 sets forth a list of current
primary policies or binders of fire, liability, product liability, workers'
compensation, vehicular, and other current primary insurance held by or in
force for the benefit of the Shareholders, including the Company. Such
policies and binders are in full force and effect. All premiums due on such
policies have been paid or accrued. The Company has not borrowed or
assigned any of the proceeds of any such policies to any other person or
entity, other than naming persons or entities as additional insureds or
loss payees. The Company is not in default with respect to any provision
contained in any such policy or binder, the effect of which default could
impair the ability of the Company to avail itself of the coverage provided
by such policy or binder, and the Company has not failed to give any notice
or present any claim under any such policy or binder when due and in a
timely fashion.
3.14 Contracts and Other Agreements.
a) Schedule 3.14(a) sets forth a short
description of all of the following agreements to which the Company is a
party or which it or its assets or properties are bound or subject:
(i) agreements which obligate the Company
to purchase more than $25,000.00 worth of goods and/or services from any
one of the Shareholders or a group or entity related to or affiliated with
one of the Shareholders;
(ii) agreements for the sale of any of the
assets of the Company not in the ordinary course of business;
(iii) leases with a duration of more than
one (1) year which obligate the payment as rent or otherwise, in case of
each such lease, in excess of $25,000.00 per year;
(iv) employment contracts, consulting or
other contracts for personal services, executive compensation plans, bonus
plans, deferred compensation agreements, golden parachute agreements or
other plans, arrangements or contracts, whether written or oral, providing
for benefits or compensation for employees of the Company;
(v) agreements and/or commitments for
capital expenditures in excess of $25,000.00;
(vi) agreements which obligate the Company
to supply products, materials and/or services for a period of one (1) year
or more or which have a remaining amount to be paid to the Company in
excess of $25,000.00;
(vii) contracts, loan agreements,
repurchase agreements, mortgages, security agreements, trust indentures,
promissory notes or other documents relating to the borrowing of money or
for lines of credit;
(viii) contracts for the sale of securities
or for the grant of options or preferential rights to purchase any
securities;
(ix) partnerships or joint venture
agreements;
(x) contracts materially limiting or
restraining the Company from competing in its business;
(xi) agreements which obligate the Company
to assume, indemnify, or to otherwise become contingently liable or
responsible for the obligations of any other person or entity;
(xii) bids to perform services and/or to
provide products or materials in an amount in excess of $25,000;
(xiii) warranties or similar commitments or
agreements where the consideration paid or to be paid is more than $25,000;
(xiv) any other contract or agreement that
is material to the Company or its business.
b) Except as otherwise set forth in Schedule
3.14(b), neither the Company nor the Shareholders have received notice of
any (i) unresolved claim or threat that the Company has breached any term
or condition of any of the contracts, commitments, or agreements set forth
in Schedule 3.14(a), or (ii) notice of repudiation or denial of the
enforceability of any of the contracts, commitments or agreements set forth
in Schedule 3.14(a). All contracts, commitments and agreements set forth on
Schedule 3.14(a) are in full force and effect and there is no default, nor,
to the Shareholders' knowledge, any event which, with notice or lapse of
time, or both, will become a default.
3.15 Accounts Receivable. All of the accounts receivable
and notes receivable owing to the Company as of the Closing constitute
valid and enforceable claims arising from bona fide transactions in the
ordinary course of business, and as of the date hereof there are no claims,
refusals to pay or other rights of set-off against any thereof known to the
Shareholder. Except as set forth on Schedule 3.15, as of the date hereof
there is (a) no account debtor or note debtor delinquent in its payment by
more than sixty (60) days, (b) no account debtor or note debtor who has
refused or threatened to refuse to pay its obligations for any reason, (c)
to the Shareholders' knowledge, no such account debtor or note debtor who
is insolvent or bankrupt, and (d) no account receivable or note receivable
pledged to any third party.
3.16 Accounts Payable and Accrued Expenses. All accounts
payable, accruable expenses, and notes payable by the Company to third
parties as of the Closing arose in the ordinary course of business, and as
of the Closing there is no account payable, accrued expense, or note
payable past due or delinquent in its payment.
3.17 Inventories. Except as set forth on Schedule 3.17, the
inventories of the Company as of the Closing (a) include no items which are
slow moving, below standard quality, or of a quality or quantity not
useable or saleable in the ordinary course of business, the aggregate value
of which has not been written down on the Company's books of account to
realizable market value, and (b) are of a quality and quantity which is
reasonable in the circumstances of the Company's business.
3.18 Equipment and Machinery. Schedule 3.18 sets forth a
complete and correct list as of December 31, 1997 of each item of equipment
and machinery owned or leased by the Company. Except as set forth in
Schedule 3.18, the Company has good title, free and clear of all Liens to
the equipment and machinery owned by it. None of the title defects,
objections, security interests, or Liens materially adversely affects the
value of any of the items of equipment and machinery or interferes with its
use in the conduct of the business of the Company. Except as set forth in
Schedule 3.18, the Company holds good and transferable leaseholds in all of
the equipment and machinery leased by them, in each case under valid and
enforceable leases. The Company is not in default with respect to any item
of equipment and machinery leased by them, and, to the Shareholders'
knowledge, no event has occurred that constitutes or, with due notice or
lapse of time or both, may constitute a default under any lease thereof.
Except for repairs in the ordinary course of business, the equipment and
machinery listed in Schedule 3.18 is in good operating condition and
repair, normal wear and tear excepted.
3.19 Permits and Licenses. Schedule 3.19 sets forth all
governmental licenses, permits and approvals (collectively, the "Permits")
currently held by the Company and all such Permits are in full force and
effect. Schedule 3.19 also sets forth all applications for Permits
currently pending. Except as set forth in Schedule 3.19, the Company has
not received notice from any governmental entity to the effect that any
additional Permits are required. Except as set forth in Schedule 3.19, the
Permits are sufficient and adequate to permit the continued lawful conduct
of the business of the Company as heretofore conducted and none of the
operations of the Company are being conducted in a manner that violate any
of the terms or conditions under which any Permit was granted, which
violation would have a material adverse effect on the Company.
3.20 Compliance With Laws. Except as set forth in Sections
3.19 (Permits and Licenses), 3.21 (Environmental Liabilities), 3.22
(Actions and Proceedings), 3.24 (Certain Business Practices), 3.25
(Employees and Benefit Plans), and Article V (Taxes), or in the Schedules
thereto, the Company has complied with all laws, statutes, rules,
regulations and orders applicable to its business, except for such
non-compliance which would not have a material adverse effect on the
Company.
3.21 Environmental Liabilities.
a) Except as set forth on Schedule 3.21(a), the
Company has not used, stored, treated, transported, manufactured, refined,
handled, produced, or disposed of any Hazardous Materials or Petroleum
Products, as hereinafter defined, on, in, under, at, from, or above any of
their current or former properties or assets or property leased by them, or
otherwise, in any manner which at the time of the action in question
violated any Environmental Law, as hereinafter defined, governing the use,
storage, treatment, transportation, manufacture, refinement, handling,
production, or disposal of Hazardous Materials or Petroleum Products,
except for any violation which would not have a material adverse effect on
the Company.
b) Except as set forth on Schedule 3.21(b), the
Company has no material obligations or liabilities, matured or not matured,
absolute or contingent, assessed or unassessed, and no pending claims have
been made against them and no currently outstanding citations or notices
including, without limitation, notice letters, information requests or
notices of potential responsibility, have been issued against any of them,
which in the case of any of the foregoing have been or are imposed by any
provision of any Environmental Laws.
c) As used herein, "Environmental Laws" shall
mean any and all federal state, local, or municipal laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, or requirements of any
federal, state, municipal, or other governmental department, commission,
board, bureau or agency, regulating, relating to, or imposing liability or
standards of conduct concerning any Hazardous Materials or Petroleum
Products or environmental protection, as now in effect, including without
limitation, the Clean Water Act, also known as the Federal Water Pollution
Control Act, 33 U.S.C. Sec. 1251 et seq., the Clean Air Act, 42 U.S.C.
Secs. 7401 et seq., the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C. 300F et seq., the Surface Mining Control and Reclamation Act
30 U.S.C. Secs. 1201 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sec. 9601 et seq., the Superfund
Amendment and Reauthorization Act of 1986, Public Law 99-499, 100 Stat.
1613, the Emergency Planning and Community Right to Know Act, 42 U.S.C. Sec.
1101 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Sec.
6901 et seq., the Toxic Substances Control Act, 15 U.S.C. Sec. 2601 et seq.,
and any comparable state law, together, in each case, with any amendment
thereto, and the regulations adopted thereunder and all substitutions
thereof.
d) As used herein, "Hazardous Materials" shall
mean any hazardous materials, hazardous wastes, infectious medical wastes,
hazardous or toxic substances, asbestos, asbestos fibers, friable asbestos,
any PCB's, waste or used oil, or constituents of the foregoing, or other
waste or material defined or regulated as such in or under any
Environmental Law and shall include gasoline, diesel fuel, motor oil,
heating oil, kerosene, and any other petroleum products.
3.22 Actions and Proceedings. Except as set forth in
Schedule 3.22, there are no (a) suits, claims or legal, administrative or
arbitration proceedings or investigations (collectively, "Actions")
(whether or not the defense thereof or liabilities in respect thereof are
covered by policies of insurance) or (b) governmental or professional
inquiries (including, without limitation, any inquiry as to the
qualification of the Company to hold or receive any Permit), pending or, to
the Shareholders' knowledge, threatened, against, involving or affecting
the Company.
3.23 Certain Transactions. Except as set forth in Schedule
3.23, the Company is not, directly or indirectly, a party to or is bound by
a contractual obligation with, owes any money to, is purchasing or leasing
any property from, or obtaining services from, is transferring or leasing
any property to, or providing services to, or otherwise engaging in any
transaction with, any officer, director, shareholder or affiliate of the
Company.
3.24 Certain Business Practices. The Company has not, and
each shareholder, officer, employee, or agent of the Company (in each case,
acting on behalf of or at the request of the Company) has not, nor has any
other person acting on behalf of the Company, directly or indirectly, (i)
given or agreed to give any bribe, kickback, or other illegal payment to
any customer, supplier, governmental employee, or other person or entity
who is or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction); (ii) made or agreed to make any contribution, payment, or
gift of funds or property to any governmental official, employee, or agent
where either the contribution, payment, or gift or the purpose thereof was
illegal under the laws of any federal, state, local, or foreign
jurisdiction; or (iii) established or maintained any unrecorded fund or
asset for any purpose, or made any false entries on any books or records
for any reason.
3.25 Employees and Benefit Plans.
a) Employees. Schedule 3.25(a) sets forth a true
and complete list of every officer, director, employee and independent
contractor of the Company as of the date of this Agreement. Schedule
3.25(a) also sets forth any employee who is on a leave of absence under the
federal Family and Medical Leave Act or under any similar state law; who is
on sick leave or short-term or long-term disability, or who is on any other
kind of personal or medical leave. Schedule 3.25(a) includes:
(i) each such person's name, date of
hire, work location and job title;
(ii) if applicable, the name and address
of any labor organization which represents each such person and a
description of the bargaining unit in which each such person is a member;
(iii) each such person's current annual
base rate of compensation plus the amount of any increases thereto and any
and all bonuses, incentive pay or other additional compensation which the
Company is obligated to pay (other than pursuant to any employee benefit
plan as defined under section 3(3) of the Employees Retirement Income
Security Act of 1974, as amended ("ERISA"), and the reason for such
obligation; and
(iv) the corporate credit cards issued to
each such person. Other than that set forth on Schedule 3.25, there are no
currently existing agreements or arrangements which extend credit to
Company employees pursuant to which such employees may incur debt on behalf
of the Company.
To the reasonable knowledge of the Shareholders, all communications made to
any such officer, director, or employee by the Company prior to Closing
relating to any Benefit Plan, as defined in Section 3.25(b) below, were, at
the time made, substantially correct and not misleading.
b) Benefit Plans. Schedule 3.25(b) sets forth a
true and complete list and identification of all of the following described
arrangements which the Company maintains, contributes to, is a party to or
otherwise has any obligation with respect to any current or former officer,
director, employee and independent contractor as of the date hereof:
(i) all employee welfare benefit plans as
defined under section 3(1) of ERISA (hereinafter called "Welfare Plans");
(ii) all employee pension benefit plans as
defined under section 3(2) of ERISA (hereinafter called "Pension Plans" and
such Pension Plans and Welfare Plans shall hereinafter be collectively
referred to as "Plans" as defined under section 3(3) of ERISA);
(iii) all multiemployer plans as defined
under sections 3(37) and 4001(a)(3) of ERISA;
(iv) all multiple-employer plans as
described under section 413 of the Code;
(v) all written employment contracts;
(vi) all oral contracts or understandings
which alter the employee-at-will relationship or create express or implied
obligations;
(vii) all collective bargaining
agreements;
(viii) all stock option and stock
purchase programs, other than those listed under (i) or (ii) above:
(ix) all incentive, bonus, profit
sharing, deferred compensation or other similar arrangements, other than
those listed under (i) or (ii) above;
(x) all severance plans or policies,
whether or not written, other than those listed under (i) or (ii) above;
(xi) all unfunded excess benefit plans as
defined under section 3(36) of ERISA;
(xii) all insurance contracts or
policies, including both group and individual arrangements, and any and all
agreements or arrangements relating to benefit claims, administration,
investment or other services maintained in connection with any of the
foregoing; and
(xiii) any other compensation (other than
regular annual compensation), fringe benefit, employment policy, multiple
employer welfare arrangement (MEWA) as defined under section 3(40) of ERISA
or other employment benefit arrangement not already included under the
foregoing.
Except as set forth in Schedule 3.25(b), true, complete
and correct copies of all documents embodying the provisions of the
arrangements listed and identified under (i)-(xiii) above will be delivered
to Purchaser by the Shareholders prior to the execution of this Agreement.
Except as set forth in Schedule 3.25(b) , for the arrangements listed and
identified under (i)-(xiii) for which there are no writings, true, correct
and complete written descriptions of such arrangements, as they may have
been amended to the date of this Agreement, have been delivered to
Purchaser by the Shareholders. Except as set forth in Schedule 3.25(b),
since September 30, 1997, the Company has not adopted or amended any
arrangement of a nature referred to under (i)-(xiii) above, has not
authorized or promised any salary increase or bonus to any employee, and
has not authorized, promised or taken other actions which would require a
contribution to be made to the trustee of such Plan in excess of any
contributions already physically transferred to the trustee of such Plan.
c) ERISA and Code Filings. Except as set forth
in Schedule 3.25(c), with respect to each Plan and arrangement listed under
paragraph (b) above required to make the filings referred to in this
paragraph (c), there is no material violation of ERISA or the Code with
respect to the filing of applicable reports, documents and notices with the
Secretary of Labor, the Secretary of the Treasury, any participant or any
beneficiary. Except as set forth n Schedule 3.25(c), with respect to each
such Plan or arrangement (if applicable), complete and correct copies of
the following have been delivered to Purchaser by the Shareholders:
(i) the most recent annual actuarial
valuation reports;
(ii) the most recent forms in the 5500
series, including all applicable schedules and other attachments;
(iii) the most recent annual and periodic
accounting statements of plan assets;
(iv) the most recent summary plan
descriptions and summaries of material modifications;
(v) the most recent forms in the 990
series, including all applicable schedules and other attachments;
(vi) any form S310-A filings within the
last 12 months, including all applicable schedules and other attachments;
(vii) any form 5330 filings within the
last 12 months; and
(viii) any notice filing described in
Department of Labor regulations 2520.104-23 relating to Pension Plans for a
select group of management or highly compensated employees.
d) Compliance with Obligations. Except as set
forth in Schedule 3.25(d), with respect to each Plan and arrangement listed
in paragraph (b) above, to the Knowledge of the Shareholders, the Company
has performed in all material respects all of its obligations thereunder
and the terms and administration of each such Plan or arrangement, are and
have been in compliance in all material respects with all the requirements
prescribed by any and all applicable federal, state and local statutes or
ordinances, executive orders, regulatory law, common law, judicial
decisions and other governmental rules.
e) Medical Plans. Except as set forth in
Schedule 3.25(e), each Welfare Plan listed in paragraph (b) above that is a
group health plan as defined in section 5000(b)(1) of the Code and the
Company have, to the knowledge of the Shareholders, complied in all
material respects with all applicable requirements of the COBRA health
continuation of coverage provisions contained in section 49808(f) of the
Code and sections 601 through 609 of ERISA with respect to its employees,
former employees, qualified beneficiaries and alternate recipients. To the
Knowledge of the Shareholders, (i) the Company has not made any
contributions to a nonconforming large group health plan as defined under
section 5000 of the Code, and (ii) the Company has, with respect to the
coverage provided under such group health plan, complied in all material
respects with the current and former Medicare secondary payer provisions
contained in 42 USCS ss. 1395y.
f) Actions. Except as set forth in Schedule
3.25(f), there are no suits, actions, disputes, claims (other than routine
claims for benefits), arbitrations, legal, administrative or other
proceedings (including any pending IRS determination requests) or
governmental investigations pending or threatened with respect to any Plan
or arrangement listed in paragraph (b) above or with respect to the Company
as the sponsor or fiduciary thereof or with respect to any other fiduciary
thereof, and there are no facts which could give rise to any such suit,
action, dispute, claim (other than routine claims for benefits),
arbitration, legal, administrative or other proceeding or governmental
investigation with respect to any such Plan or arrangement or with respect
to the Company as the sponsor or fiduciary thereof or with respect to any
other fiduciary thereof.
g) IRS Matters. Except as set forth in Schedule
3.25(g), each Benefit Plan in paragraph (b) above intended to qualify under
section 401 of the Code or trust or other organization related thereto
intended to be exempt from taxation under section 501 of the Code, is the
subject of a favorable unrevoked determination or opinion letter issued by
the IRS as to its qualification and/or tax exempt status under the Code
which may still be relied upon as to such tax qualified and/or exempt
status. The Shareholders have delivered to Purchaser true and complete
copies of each such favorable unrevoked determination or opinion letter, if
any. Nothing has occurred which would cause the loss of such qualification
and/or tax exempt status, other than the enactment of any statute or the
promulgation of any regulation, ruling, notice or announcement with respect
to which there is in effect a delayed amendment date if each such Plan
which is subject thereto has been administered and maintained at all times
in compliance with such statute or regulation, ruling, notice or
announcement since the effective date thereof. No such Plan or any trust or
other organization related thereto is subject to any tax on unrelated
business income under section 511 of the Code or is subject to the
possibility of the imposition of such a tax and no such tax is currently
outstanding. Each such Plan has been operated in compliance with all
applicable provisions of ERISA, the Code and all regulations, rulings and
other authority issued thereunder, and all other applicable governmental
laws and regulations.
h) Prohibited Transactions and Other Matters.
Except as set forth in Schedule 3.25(h), with respect to each Benefit Plan
listed in paragraph (b) above, to the Knowledge of the Shareholders (i) no
prohibited transaction, as such term is defined in section 4975 of the Code
and section 406 of ERISA, has occurred or been engaged in by any party in
interest, fiduciary or disqualified person and (ii) no actions have been
undertaken by any such Plan, party in interest, fiduciary or disqualified
person which could result in the imposition of the penalties specified
under sections 502(c), 502(i) and 502(i) of ERISA.
i) Contributions and Funding. Except as set
forth in Schedule 3.25(i), with respect to each Pension Plan listed in
paragraph (b) above which is subject to Part 3 of Subtitle B of Title 1 of
ERISA and/or section 412 of the Code, there has not been an accumulated
funding deficiency within the meaning of such statutory provisions, whether
or not waived, as of the last day of the most recent fiscal year of each
such Pension Plan which ended on or prior to the Closing Date and, with
respect to each Pension Plan which is subject to Title IV of ERISA (other
than a multiemployer plan as defined in section 3(37) of ERISA), the
actuarial present value of the accumulated benefit obligations (both vested
and non-vested) under each such Pension Plan as of its most recent plan
valuation date did not exceed the then current fair market value of the
assets of each such Pension Plan and, as of the Closing Date, the actuarial
present value of all such accumulated benefit obligations will not exceed
the then current fair market value of the assets of such Pension Plan. For
these purposes, the actuarial present value of accumulated benefit
obligations shall be determined using the actuarial assumptions used to
calculate contributions to each such Pension Plan.
j) Reportable Events. Except as set forth in
Schedule 3.25(j), with respect to each Pension Plan listed in paragraph (b)
above which is subject to Title IV of ERISA, there is no event or condition
which has occurred or is now existing which would be deemed a reportable
event (other than the transactions contemplated by this Agreement) within
the meaning of sections 4043(b) (11)-(8), 4062(e), 4063(a) or 4041(f) of
ERISA and no such reportable event is expected to occur during the current
fiscal year for any such Pension Plan.
k) PBGC Liability. Except as set forth in with
respect to each Pension Plan listed in paragraph (b) above which is subject
to Title IV of ERISA, there has not been and there is not expected to be
any liability to the Pension Benefit Guaranty Corporation ("PBGC"), except
for required premium payments, under sections 4062, 4063, 4064 or 4069 of
ERISA. All such premium payments to the PBGC have been paid when due and no
such premiums which should have been paid remain outstanding. Except as set
forth in Schedule 3.25(k), none of the Plans listed in paragraph (b) above
nor any other plan of the Company which is or was subject to Title IV of
ERISA has terminated since September 1, 1974.
l) Multiemployer Plans. Except as set forth in
Schedule 3.25(l), the Company does not and did not at any time on or after
the effective date of ERISA maintain, contribute to or otherwise have any
obligation with respect to any multiemployer plan (as defined in section
3(37) of ERISA) and the Company has not incurred any withdrawal liability
to any such multiemployer plan and has not received any notice pursuant to
section 4202 of ERISA with respect to any such multiemployer plan.
m) Retiree Liabilities. Except as set forth in
Schedule 3.25(m), the Company and/or any Plan or other arrangement listed
in paragraph (b) above has no obligation to provide any type of life,
medical, dental, disability, long-term care or other benefit to retirees,
former employees, former directors or former independent contractors of the
Company, other than coverage required under section 4980B(f) of the Code
and benefits payable under any Plan or other arrangement listed on which
provides for deferred compensation or severance benefits.
n) QDRO AND QMSCO Obligations. Schedule 3.25(n)
sets forth a true and complete list of every individual affected by or
potentially affected by any approved or any submitted domestic relations
order which has been submitted for the purpose of determining whether such
order is a Qualified Domestic Relations Order as defined under Code section
of 414(p) or a Qualified Medical Child Support Order as defined under
section 509 of ERISA.
o) ERISA Affiliates. The Company has never been
a member of a controlled group of entities, as determined under Code
Sections 414(b) and (c), where such membership would be material to
compliance of any Benefit Plan with the Code or ERISA.
3.26. Brokers or Finder's Fees. Except as set forth in
Schedule 3.26, neither the Shareholders nor the Company has paid or has or
will incur any liability for, any fees, compensation or other expenses to
any third party who acted on behalf of the Shareholders or the Company in
connection with this Agreement or the transactions contemplated hereby.
'Conditional End of Page' code here: keep together 4 lines.
3.27 Investment Representations.
(a) Each Shareholder represents that he is an "accredited
investor" within the meaning of Regulation D promulgated under the
Securities Act and has such knowledge and experience in financial and
business matters that he or it is capable of evaluating the merits and
risks of investment in Ashland Stock.
(b) Each Shareholder represents that he or it is acquiring the
Ashland Stock for his or her own account and acknowledges that the Ashland
Stock has not been registered under the Securities Act by reason of its
issuance in a transaction which is exempt from registration pursuant to
Section 4(2) of the Securities Act, and that the Ashland Stock must be held
indefinitely unless registered under the Securities Act or an exemption
from registration is available.
(c) The Shareholders agree that as evidence of the restrictions on
transfer, the following legend will be placed on the certificates
evidencing the Ashland Stock:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be sold, transferred, pledged or hypothecated unless
subsequently registered under said Act or an exemption from
registration is available."
(d) Each of the Shareholders hereby confirms that he or it was
furnished with, or had access to, during the course of this transaction and
prior to sale: (i) the information contained in the Purchaser.'s most
recent Form 10-K and annual report required to be filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
information contained in the Purchaser's most recent definitive proxy
statement required to be filed pursuant to Section 14 of the Exchange Act
and all periodic reports required to be filed since the filing of such
annual report (all such reports being referred to hereinafter as the
"Ashland SEC Documents"); (ii) a brief description of the securities being
offered and any material changes in the Purchaser's affairs which were not
disclosed in any documents furnished by the Purchaser; and (iii) any and
all such other information as was requested from the Purchaser (to the
extent the Purchaser possessed such information or could acquire it without
unreasonable effort or expense).
3.28 Ashland Stock. The Shareholders do not have any present plan
or intention to dispose of any of the Ashland Stock received in this
transaction if such disposition would reduce the fair market value of the
Ashland Stock (with such value measured as of the transaction date)
retained by the Shareholders to an amount less than forty percent (40%) of
the fair value of the Company stock held by the Shareholders immediately
before the transaction. Each Shareholder shall give to Purchaser written
notice (i) by November 30, 1998, of the number of shares of Ashland Stock,
if any, disposed of by such Shareholder prior to that time and (ii) by
April 15, 1999, of the number of shares of Ashland Stock, if any, disposed
of by such Shareholder after November 29, 1998 and before the first
anniversary of the Closing Date.
3.29 Product Formulations. The Company has disclosed to Purchaser
the percentages by weight of petroleum distillates, volatile organic
compounds, Hazardous Materials and certain other (but not all) components
for each current formula for the Company's chemical products, together with
the Material Data Safety Sheets and product labels for such chemical
products. To the Shareholders' knowledge, (i) the product labels for such
products comply with Consumer Product Safety Commission guidelines, and
(ii) the product formulations are accurately reflected in the disclosures
in the Material Safety Data Sheets for these products.
3.30 Full Disclosure. All documents, schedules and other materials
delivered or to be delivered by or on behalf of the Shareholders to
Purchaser in connection with this Agreement and the transactions
contemplated hereby are true and complete in all material respects. The
information furnished by or on behalf of the Shareholders to Purchaser in
this Article III does not contain any untrue statement of a material fact
or omit to state any material fact which may materially adversely affect
the results of operation or the financial position of the Company.
For purposes of the indemnification provisions contained in
Article XI, any Cost (as defined in Article XI) incurred by the Purchaser
as a result of a breach by a Shareholder (without regard to materiality) of
any representation and warranty contained in this Article III (which
representation and warranty is so qualified as to materiality) shall be
applied dollar for dollar against the Deductible and the Cap (each as
defined in Article XI).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the
Shareholders as follows:
4.1 Corporate Existence of Purchaser; Authority. Purchaser
is a corporation duly organized, validly existing and in good standing
under the laws of Kentucky. Purchaser has all requisite corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder, and the execution, delivery and performance of this
Agreement by Purchaser have been duly and validly authorized by the
Executive Committee of Purchaser (it being agreed by Purchaser that the
Executive Committee of Purchaser shall recommend the approval of this
Agreement and the transactions contemplated thereby to the Board of
Directors of the Purchaser). This Agreement has been duly executed and
delivered on behalf of Purchaser and, subject to the approval of the Board
of Directors of the Purchaser, constitutes the valid and binding obligation
of Purchaser, enforceable against Purchaser in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, and other laws affecting the enforcement of
creditors' rights generally and subject to equitable principles. The
issuance of the Ashland Stock has been duly authorized by all necessary
action on the part of the Purchaser and, when issued in accordance with the
terms of this Agreement, the Ashland Stock will be validly issued, fully
paid and non-assessable.
4.2 No Conflicts. Neither the execution, delivery and
performance of this Agreement by Purchaser nor the consummation by
Purchaser of the transactions contemplated by it hereby will:
a) violate any provision of the Certificate of
Incorporation or By-laws of Purchaser, (b) violate, conflict with or result
in the material breach or termination of, or otherwise give any other
contracting party the right to terminate, or constitute (or with notice or
lapse of time, or both, would constitute) a material default under the
terms of any Obligation, which, individually or in the aggregate, would
materially adversely affect the results of operations on a consolidated
basis or the consolidated financial position of Purchaser, (c) result in
the creation of any Lien upon the material assets of Purchaser pursuant to
the terms of any Obligation; (d) violate any Order to which Purchaser is a
party; (e) constitute a violation by Purchaser of any statute, law or
regulation of any jurisdiction which would materially adversely affect the
results of operations on a consolidated basis or the consolidated financial
position of Purchaser, or (f) violate any Permit, the violation of which
would materially adversely affect the results of operations on a
consolidated basis or the consolidated financial position of Purchaser.
4.3 Actions and Proceedings. There are no (a) Actions
(whether or not the defense thereof or liabilities in respect thereof are
covered by policies of insurance) or (b) governmental or professional
inquiries pending or, to the best knowledge of Purchaser, threatened,
against Purchaser which question or challenge the validity of this
Agreement or any action taken or to be taken by Purchaser in connection
with the transactions contemplated of Purchaser hereby.
4.4 Consents and Approvals. There is no authorization,
consent order or approval of, or notice to or filing with, any governmental
authority required to be obtained or given or waiting period to expire as a
condition to the lawful consummation by the Purchaser of the purchase of
the Shares pursuant to this Agreement.
4.5 Financial Statements. The Purchaser has delivered to
the Shareholders a balance sheet of Purchaser as of September 30, 1997 and
September 30, 1996 (the "Purchaser Latest Audited Financial Statements");
and the related statements of income, stockholders' equity and cash flows
for each of the years then ended, all certified by Ernst & Young,
independent certified public accountants, whose reports thereon are
included therein. The Purchaser's Latest Audited Financial Statements and
the notes thereto were audited and prepared in conformity with generally
accepted accounting principles consistently applied so as to fairly present
the financial condition and results of operations of the Purchaser.
4.6 Liabilities. The Purchaser does not have any debts,
obligations or liabilities of whatever kind or nature, either direct or
indirect, absolute or contingent, matured or unmatured, except for debts,
obligations and liabilities that (i) are set forth in Schedule 4.6 or in
the SEC Documents, (ii) are fully reflected in, or reserved against on, the
Purchaser Latest Audited Financial Statements, (iii) were not required to
be set forth in the Purchaser Latest Audited Financial Statements in
accordance with generally accepted accounting principles (iv) were incurred
in the ordinary course of business, (v) are created under this Agreement or
other contracts filed as exhibits to the SEC Documents, or (vi) would not
have a material adverse effect on the Purchaser.
4.7 Absence of Certain Changes or Events. Except as set
forth in the SEC Documents, or except as otherwise contemplated by this
Agreement, since the date of the Purchaser Latest Balance Sheet, there has
not been any material adverse change in the business, operations or
financial condition of the Purchaser.
4.8 Contracts and Commitments. Except as otherwise set
forth in the SEC Documents, the Purchaser has not received notice of any
(i) unresolved claim or threat that the Purchaser has breached any term or
condition of any contract or agreement which is material to its business or
operations ("Purchaser Material Contract"), or (ii) notice of repudiation
or denial of the enforceability of any Purchaser Material Contract, in the
case of clause (i) or (ii) which would have a material adverse effect on
the Purchaser, and all Purchaser Material Contracts are in full force and
effect and there is no default, nor any event which, with notice or lapse
of time, or both, will become a default.
4.9 Accuracy of Reports. The Purchaser's most recent Form
10-K filed with the SEC, and all reports on Form 8-K and 10-Q required to
be filed by the Purchaser thereafter to the date of this Agreement under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), have
been duly filed, were in substantial compliance with the requirements of
their respective report forms, were complete and correct in all material
respects as of the dates at which the information was furnished, and
contained (as of such dates) no untrue statement of a material fact nor
omitted to state a material fact necessary to make the statements made
therein, in light of the circumstances in which they were made, not
misleading.
4.10 Investment. Purchaser is acquiring the Shares for its
own account for investment purposes only and not with a view to
distribution or resale thereof to the public. Purchaser will not transfer
or otherwise dispose of the Shares except in accordance with applicable
federal and state securities laws or the rules and regulations promulgated
thereunder.
4.11 Tax-Free Reorganization. Purchaser intends that the
purchase of all of the issued and outstanding shares of the Company
pursuant to this Agreement shall constitute a tax-free reorganization
within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code
and corresponding provisions of state and local income tax law. Purchaser
has no plan or intention to reacquire any of the voting common stock of the
Purchaser issued to the Shareholders pursuant to this Agreement. Purchaser
has no present plan or intention (i) to liquidate the Company; (ii) to
merge the Company with or into another corporation other than a merger
permitted by Treasury Regulation Section 1.368-2(j)(4); (iii) to sell or
otherwise dispose of the shares of the Company's Common Stock acquired by
Purchaser pursuant to this Agreement, except for transfers of stock to
corporations controlled by Purchaser, or to cause the Company to issue
additional shares of its stock or to engage in any merger that would result
in Purchaser losing control of the Company after the purchase pursuant to
this Agreement; or (iv) to cause the Company to sell or otherwise dispose
of any of its assets, except for dispositions made in the ordinary course
of business or transfers of assets to a corporation controlled by the
Company. Following the purchase of shares of the Company's Common Stock
pursuant to this Agreement, Purchaser intends to cause the Company to
continue its historic business or use a significant portion of its historic
business assets in a business. Purchaser is not an investment company as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code. Purchaser is not
under the jurisdiction of a court in a Title 11 or similar case within the
meaning of Section 368(a)(3)(A) of the Code. The rights of shareholders of
Ashland Inc., under the Rights Agreement dated as of May 16, 1996, between
Ashland Inc. and Harris Trust and Savings Bank, an Illinois banking
corporation (the "Rights"), are not (and as of the Closing Date shall not
have become) separately tradable or represented by any certificate other
than the stock certificates for Ashland Inc. voting common stock itself. As
of the time Ashland Inc.'s board of directors adopted the plan for the
issuance of such Rights, the likelihood that such Rights would, at any
time, be exercised was both remote and speculative. The principal purpose
for the adoption of the Plan was to establish a mechanism by which Ashland
Inc. could, in the future, provide shareholders with rights to purchase
stock at substantially less than fair market value as a means of responding
to unsolicited offers to acquire Ashland Inc.
4.12 No Broker or Finders Fee. Purchaser has not taken any
action which would cause the Shareholders or the Company to become liable
for any commission, fees, compensation or other expenses to any broker,
agent, finder or their intermediary in connection with the negotiation of
this Agreement or the consummation of the transactions contemplated hereby.
4.13 Full Disclosure. All documents, schedules and other
materials delivered or to be delivered by or on behalf of the Purchaser to
the Shareholders in connection with this Agreement and the transactions
contemplated hereby are true and complete in all material respects. The
information furnished by or on behalf of the Purchaser to the Shareholders
in connection with this Agreement and the transactions contemplated hereby
do not contain any untrue statement of a material fact or omit to state any
material fact which may materially adversely affect the results of
operation or the financial position of the Purchaser.
ARTICLE V
TAXES
5.1 Tax Representations and Warranties. The Shareholders
hereby represent and warrant to the Purchaser that, except as set forth on
Schedule 5.1, the statements contained in this Section 5.1 are correct and
complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date
were substituted for the date of this Agreement throughout this Article V).
(A) The Company has timely filed all returns,
declarations, reports, information returns, and statements ("Returns")
required to be filed under federal, state, local, or foreign law, and all
such Returns were correct and complete in all material respects, and all
taxes required to be paid by the Company have been paid or reflected as
liabilities or reserved for on the Reviewed Financial Statements as
adjusted for passage of time and events in the ordinary course of business
through the Closing Date in accordance with the past custom and practice of
the Company in preparing its returns and its reviewed financial statements.
The Company is not the beneficiary of any extension of time within which to
file any tax return. No claim has ever been made by an authority in a
jurisdiction where the Company does not file Returns that it is or may be
subject to taxation by that jurisdiction. There are no Security Interests
on any of the assets of the Company that arose in connection with any
failure (or alleged failure) to pay any tax. For purposes of this Section
5.1(a), the term "Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest other than liens for taxes
not yet due and payable or for taxes that the taxpayer is contesting in
good faith through appropriate proceedings.
(B) The Company has withheld and paid all taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or
other third party, and has paid over to the appropriate taxing authorities
all amounts required to be so withheld and paid over.
(C) No director or officer (or employee
responsible for tax matters) of the Company expects any authority to assess
any additional taxes for any period for which Returns have been filed.
There is no dispute or claim concerning any tax liability of the Company
either (i) claimed or raised by any authority in writing, or (ii) as to
which any of the Shareholders and the directors and officers (and employees
responsible for tax matters) of the Company has knowledge based upon
personal contact with any agent of such authority. Schedule 5.1 lists all
federal, state, local, and foreign income tax returns filed with respect to
the Company for taxable periods ended on or after January 31, 1995,
indicates those Returns that have been audited, and indicates those Returns
that currently are the subject of audit. The Company has delivered to the
Purchaser correct and complete copies of all federal income tax Returns
filed by the Company, examination reports received by the Company, and
statements of deficiencies assessed against or agreed to by the Company for
the periods ending on or after January 31, 1995.
(D) The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(E) The Company has not filed a consent under
Sec. 341(f) of the Code, concerning collapsible corporations. The Company
has not made any payments, is not obligated to make any payments, nor is a
party to any agreement that under certain circumstances could obligate it
to make any payments that will not be deductible under Code Sec. 280G by
reason of consummation of the transactions contemplated by this Agreement.
The Company has disclosed on its federal income tax returns all positions
taken therein that could give rise to a substantial understatement of
federal income tax within the meaning of Code Sec. 6662. The Company has no
subsidiaries and has not been a member of an Affiliated Group within the
meaning of Code Sec. 1502 filing a consolidated federal income tax Return,
and does not have any liability for the Taxes of any person under Treas.
Reg. Sec. 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract or otherwise.
(F) The unpaid Taxes of the Company did not, as
of the Balance Sheet Date, exceed the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing
differences between book and tax income) set forth on the face of the
Balance Sheet (rather than any notes thereto).
(G) The Shareholders are not foreign persons for
purposes of Code Sec. 1445 and each shall certify such at Closing in the
form of the affidavit substantially in the form of Exhibit 5.1(G).
(H) For purposes of this Agreement "Taxes" shall
mean all taxes, charges, fees, levies, or other assessments of whatever
kind or nature, including without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, estimated, severance,
stamp, occupancy, or property taxes, customs duties, fees, assessments, or
charges of any kind whatsoever (together with any interest and any
penalties, additions to tax or additional amounts) imposed by any taxing
authority upon or payable by the Company.
5.2 Tax Indemnity. Subject (except in the case of tax
fraud by the Company or the Shareholders) to the limitations set forth in
Article XI, the Shareholders hereby agree to pay, indemnify, defend and
hold the Purchaser harmless from and against any and all Taxes of the
Company with respect to any period (or any portion thereof) up to and
including the Closing Date, except for such Taxes shown as liabilities or
reserved for on the Balance Sheet ("Current Tax Liabilities"), together
with all reasonable legal fees, disbursements and expenses related to said
Taxes incurred by the Purchaser in connection therewith. Each Shareholder's
liability hereunder shall be several and limited to the percentage of the
total liability equal to such Shareholder's percentage of Shares on the
Closing Date. Tax returns, audits and claims for indemnity under this
section shall be handled as follows:
(A) The Shareholders shall prepare or cause to
be prepared and filed all income tax Returns of the Company with respect to
all taxable periods of the Company ending on or prior to the Closing Date
and to pay any and all income taxes shown as due with respect to such
income tax Returns and not previously paid or reserved for by the Company
in accordance with past custom and practice of the Company in preparing its
returns and its reviewed financial statements (other than the one and
one-half percent (1-1/2%) California franchise tax imposed on the Company
as an S corporation, which shall be paid by the Company). The Shareholders
shall provide the Purchaser with copies of each such Income tax Return at
least twenty (20) days prior to the due date for filing such returns and
the Purchaser shall have the right to review and approve such Returns for
fifteen (15) days following receipt thereof, provided, however, that the
Purchaser's approval shall only be required to the extent such Returns are
not prepared in a manner consistent with prior practice and shall not be
unreasonably withheld.
(B) Following the Closing, the Purchaser shall
be responsible for preparing or causing to be prepared all income tax
Returns of the Company with respect to all taxable periods of the Company
ending after the Closing Date and all other Returns required to be filed by
the Company after the Closing Date. To the extent any Taxes shown due on
such separate Returns may be indemnifiable by the Shareholders, (i) such
Returns shall be prepared in a manner consistent with prior practice unless
otherwise required by applicable Tax laws; (ii) the Purchaser shall provide
the Shareholders with copies of each such Return at least 20 days prior to
the due date for filing such return; and (iii) the Shareholders shall have
the right to review and approve (which approval shall not be unreasonably
withheld) such Returns for 15 days following receipt thereof. The
Shareholders and the Purchaser shall attempt in good faith mutually to
resolve any disagreements regarding such Returns prior to the due date for
filing thereof. The Purchaser shall file or cause to be filed all such
Returns and shall pay the Taxes shown due thereon; provided, however, that
nothing contained in the foregoing shall in any manner terminate, limit or
adversely affect any right of the Purchaser or the Shareholders to receive
indemnification pursuant to any provision in this Agreement.
(C) All audit inquiries and proposed adjustments
related thereto shall be handled as follows:
1. The Shareholders shall be responsible for all
audit inquiries and proceedings with respect to any Returns
relating to any period (or portion thereof) up to and including
the Closing Date. If any audit notice is sent to the Purchaser,
the Purchaser shall notify the Shareholders within ten (10) days
after receipt of such notice. Such notice shall be sent to the
Shareholders for purposes of this Article 5 at the address set
forth in Section 13.3 below. Upon notice to the Purchaser within
fifteen (15) days after receipt of the notice of such audit
inquiry or proceeding from the Purchaser, the Shareholders shall
assume (at the Shareholders' own cost and expense) control of such
audit inquiry or proceeding. If the Shareholders fail to notify
the Purchaser they are assuming control of such audit inquiry or
proceeding within the period set forth above, the Purchaser shall
assume control of such audit inquiry or proceeding at the
Shareholders' expense. If any audit notice is sent to the
Shareholders, the Shareholders shall notify the Purchaser within
fifteen (15) days after receipt of such audit notice. The
Shareholders shall keep the Purchaser advised regarding the status
and progress of any such audit.
2. If, in connection with the audit of any
Return, a proposed adjustment is asserted in writing to the
Purchaser with respect to any Taxes for which the Shareholders are
required to indemnify the Purchaser, the Purchaser shall notify
the Shareholders of such proposed adjustment within ten (10) days
of receipt of such proposed adjustment. Such notice shall be sent
to the Shareholders, as provided above. Upon notice to the
Purchaser within ten (10) days after receipt of the notice of such
proposed adjustment from the Purchaser, the Shareholders shall
assume (at the Shareholders' own cost and expense) control of the
contest of such proposed adjustment. If the Shareholders fail to
notify the Purchaser they are assuming control of such proposed
adjustment within the period set forth above, the Purchaser shall
assume control of such contest of such proposed adjustment at the
Shareholders' expense. The Shareholders shall keep the Purchaser
advised regarding the status and progress of any such contest.
(D) For federal and California income tax
purposes, the taxable year of the Company shall end as of the close of the
Closing Date and, with respect to all other Taxes, the Shareholders and the
Purchaser will, unless prohibited by applicable Law, close the taxable
period of the Company as of the close of the Closing Date. Neither the
Shareholders nor the Purchaser shall take any position inconsistent with
the preceding sentence on any Return. In any case where applicable law does
not permit the Company to close its taxable year on the Closing Date or in
any case in which a Tax is assessed with respect to a taxable period which
includes the Closing Date (but does not begin or end on that day), then
Taxes, if any, attributable to the taxable period of the Company beginning
before and ending after the Closing Date shall be allocated (i) to the
Shareholders for the period prior to and including the Closing Date, and
(ii) to the Purchaser for the period subsequent to the Closing Date. Any
allocation of income or deductions required to determine any Taxes
attributable to any period beginning before and ending after the Closing
Date shall be made by means of a closing of the books and records of the
Company as of the close of the Closing Date, provided that exemptions,
allowances or deductions that are calculated on an annual basis (including,
but not limited to, depreciation and amortization deductions) shall be
allocated between the period ending on the Closing Date and the period
after the Closing Date in proportion to the number of days in each such
period, the Purchaser shall provide the Shareholders with a schedule
showing the computation of the allocation at least twenty (20) days prior
to the due date for filing such a Return which includes the Closing Date.
The Shareholders shall have the right to review such schedule, and the
Purchaser and the Shareholders shall attempt in good faith mutually to
resolve any disagreements regarding the determination of such allocation.
(E) To the extent any determination of tax
liability of the Company, whether as the result of an audit or examination,
a claim for refund, the filing of an amended return or otherwise results in
any refund of Taxes paid attributable to (i) any period which ends on or
before the Closing Date or (ii) any period which includes the Closing Date
but does not begin or end on that day, any such refund shall belong to the
Shareholders provided that in the case of any Tax refund described in
clause (ii) of this Section 2.D, the portion of such Tax refund which shall
belong to the Shareholders shall be that portion that is attributable to
the portion of that period which ends on the Closing Date (determined on
the basis of an interim closing of the books as of the Closing Date), and
the Purchaser shall promptly pay any such refund, and the interest actually
received thereon, to the Shareholders upon receipt thereof by the
Purchaser. Any payments made under this Section 2.D shall be net of any
Taxes payable with respect to such refund, credit or interest thereon
(taking into account any actual reduction in Tax liability realized upon
the payment pursuant to this Section 2D).
(F) Certain Information. The Purchaser, the
Shareholders, and the Company agree to furnish or cause to be furnished to
each other (at reasonable times and at no charge) upon request as promptly
as practicable such information (including access to books and records)
pertinent to the Company and assistance relating to the Company as is
reasonably necessary for the preparation, review, audit and filing of any
Return, the preparation for any audit or the prosecution or defense of any
claim, suit or proceeding relating to any proposed adjustment or which may
result in the Shareholders being liable under the indemnification
provisions of this Article, provided that access shall be limited to items
pertaining solely to the Company. The Shareholders shall grant the
Purchaser access to all Returns filed with respect to the Company.
G. The indemnity provided for in this Section 5.2 shall
be independent of any other indemnity provision in this Agreement (but,
except in the case of tax fraud by the Company or the Shareholders, subject
to the limitations on indemnification obligations set forth in Article XI
hereof) and, anything in this Agreement to the contrary notwithstanding,
shall survive until the expiration of the applicable statutes of limitation
for the taxes referred to herein (as determined without regard to any
extension of such statutes of limitation, unless the Shareholders shall
have granted their prior written consent to such extension, which consent
shall not be unreasonably withheld).
5.3 Tax Distributions. The Company shall distribute to the
Shareholders an amount equal to fifty percent (50%) of the amount of the
taxable income of the Company for the portion of calendar year 1998 through
the date of Closing ("Tax Distributions"). For this purpose, "taxable
income" means the net amount of all items of income, gain, deduction, loss
and expense of the Company, whether or not separately stated (excluding
from such calculation any tax-exempt income or nondeductible expenditures).
Notwithstanding any other provision of this Agreement to the contrary and
without any effect on the Purchase Price, (i) the Shareholders shall be
permitted to cause the Company to make estimated Tax Distributions before
the date of Closing, and (ii) within ten (10) days after receipt from the
Shareholders of the proposed forms of federal and state income tax returns
of the Company for the portion of 1998 through Closing, respectively,
either (A) Purchaser shall cause the Company to make additional Tax
Distributions, if necessary, in the amount required such that the
Shareholders shall have received all Tax Distributions to which they are
entitled under the first sentence of this Section or (B) Shareholders shall
contribute to the capital of the Company any excess of Tax Distributions
received by them over the amount of all Tax Distributions to which they are
so entitled.
ARTICLE VI
COVENANTS OF THE SHAREHOLDERS
6.1 Access to Property, Information, Etc. Until Closing,
the Shareholders shall cause the Company to:
a) give to Purchaser and to its representatives
reasonable access to all of the properties, documents, personnel, books,
records and contracts pertaining to the Company;
b) furnish to Purchaser all data and information
with respect to the assets and the business of the Company as Purchaser may
from time to time reasonably request, except to the extent that the
Shareholders or the Company is prohibited therefrom by any agreement or
contract to which they are a party or of which they are a beneficiary,
provided that the Shareholders shall use their best efforts to promptly
obtain the waiver of such prohibition; and
c) authorize Purchaser and its representatives
to reasonably consult with the personnel of the Company and its
representatives concerning matters affecting the business and operations of
the Company.
6.2 Operations of Business. Until Closing, the
Shareholders shall cause the business and operations of the Company to be
conducted in its usual and customary manner. Notwithstanding the preceding
sentence, except as contemplated by this Agreement and the transactions
contemplated thereby, the Shareholders shall not permit the Company to take
any of the following actions without the prior written consent of
Purchaser.
a) issue any shares of stock of the Company or
any other securities convertible into or exchangeable for shares of stock
of the Company or grant any options, warrants or other rights for the
acquisition of or relating to the stock of the Company;
b) except for Tax Distributions, declare, set
aside or pay any dividend (whether in cash, shares or property) or stock
split or make any other payment or distribution to any of their
shareholders or purchase or otherwise acquire for value any of their stock
or other securities;
c) make any change in their certificates of
incorporation, by-laws or other governing instruments; or merge or
consolidate or obligate themselves to do so with or into any other entity;
d) borrow or agree to borrow any funds or incur,
or assume or become subject to, whether directly or by way of guaranty or
otherwise, any obligation or liability (absolute or contingent), except
obligations and liabilities incurred under existing lines of credit or
letters of credit and incurred in the ordinary course of business;
e) prepay any obligation having a fixed maturity
of more than ninety (90) days from the date such obligation was issued or
incurred; or
f) make any single capital expenditure or
commitment in excess of $25,000 for additions to property, plant or
equipment.
6.3 Maintenance and Operation of Properties. Until
Closing, the Shareholders shall cause the Company to use their best efforts
to maintain the properties and assets of the Company in good operating
condition, with the exception of ordinary wear and tear and damage by fire
or other casualty to the extent insured, and will operate such properties
and assets in the ordinary course of business and consistent with past
business practices.
6.4 Sales or Encumbrances of Assets. Except to the extent
any such actions are undertaken in the ordinary course of business or
pursuant to the terms of this Agreement, until Closing, the Shareholders
shall prohibit the Company from selling, mortgaging, leasing, buying,
exchanging, or otherwise acquiring, transferring or disposing of any amount
of machinery or equipment and shall prohibit the Company from selling,
transferring, mortgaging, pledging, exchanging, or voluntarily subjecting
to any Lien the other assets of the Company and Subsidiaries
6.5 Maintenance of Books. The Shareholders will cause the
books and records of the Company to be maintained in the usual, regular and
ordinary course consistent with past business practices.
6.6 Other Expenditures. Except pursuant to binding
agreements in effect as of the date of this Agreement, and except for
normal payments or increases in accordance with current salary programs in
effect as of the date of this Agreement, the Shareholders shall cause the
Company not to make or agree to make any increase in the rate of wages,
salaries, bonuses, fringe benefits or other remuneration of any officer,
employee or consultant, or pay any bonus or similar fee to any director,
officer or employee or become a party to any employment contract,
consulting agreement or other arrangement with any of its directors,
officers or employees other than contracts which are terminable at will.
6.7 Directors, Officers and Employees. The Shareholders
shall, upon written request by Purchaser made prior to the Closing, procure
the resignations of the officers and directors of the Company elected or
appointed prior to the Closing Date, which resignations shall be effective
only upon the occurrence of the Closing. The Shareholders agree that all
employment agreements between the Company and each Shareholder in effect
immediately prior to the Closing shall be deemed terminated effective on
the Closing. The Shareholders shall cause the Company to obtain the
termination of the existing employment agreement between the Company and
Elizabeth Li, and releases in the form of Exhibit 6.7 from the Shareholders
and Elizabeth Li, which termination shall be effective only upon the
occurrence of the Closing.
6.8 Confidentiality. The Shareholders and its officers,
employees, agents and representatives will hold in strict confidence, and
not use in any way except in connection with the transactions contemplated
by the Agreement, information obtained from Purchaser or any affiliate of
the Purchaser, or any officer, employee, affiliate, agent or representative
of Purchaser except to the extent such information:
a) was in the public domain prior to being
furnished to the Shareholders or the Company;
b) was known, as shown in the written records of
the Shareholders of the Company prior to disclosure by Purchaser;
c) is required to be disclosed by the
Shareholders or the Company, or any of their officers, agents,
representatives or employees, in connection with any court action or any
proceeding before a governmental or regulatory or administrative body
(provided that prompt notice of such requirement is given to Purchaser to
allow Purchaser to seek an appropriate protective order) or in connection
with securing any consent or approval required hereunder upon the prior
written notice to and approval by Purchaser;
d) is disclosed to the Shareholders or The
Company by a third party who does not have an obligation of confidentiality
to Purchaser; or
e) after being furnished to the Shareholders or
The Company, entered the public domain through no fault or failure to act
on their part or on the part of their officers, agents, representatives, or
employees.
In addition, the Shareholders shall hold in strict
confidence and shall not use in any manner detrimental to the Company any
confidential and proprietary information of or relating to the Company.
6.9 Consents and Approvals. The Shareholders shall do the
following:
a) use all reasonable efforts to obtain all
consents from all parties required to be obtained by the Shareholders and
the Company to carry out the transactions contemplated by this Agreement;
b) in a timely, accurate and complete manner,
make or cause to be made, such required filings and prepare such required
applications to any governmental agency with which such filings or
applications are required to be made or whose approval or consent is
required for the consummation by the Shareholders of the transactions
contemplated by this Agreement;
c) provide to Purchaser such information
concerning the Shareholders and the Company as Purchaser may require to
make the filings and prepare the applications as specified in Section 7.2
(b); and
d) cooperate in good faith with any governmental
investigation and of witnesses, if requested.
6.10 Representations, Warranties and Schedules. The Shareholders
shall disclose to Purchaser any material changes to representations and
warranties of the Shareholders in Article III occurring on or before the
Closing Date, and such representations, warranties, and schedules shall be
deemed amended by such disclosures.
6.11 Other Agreements. At the Closing, Bernard A. Li shall execute
and deliver to Purchaser a Consulting Agreement substantially in the form
of Exhibit 6.11(a) hereto (the "Consulting Agreement"). Also at the
Closing, Walter S. Arnold and Charles W. Hill shall execute and deliver to
Purchaser Employment Agreements substantially in the forms of Exhibit
6.11(b) (the "Arnold Employment Agreement") and Exhibit 6.11(c) (the "Hill
Employment Agreement"), respectively, hereto. The parties acknowledge that
prior to the execution of this Agreement, Elsie Jordan has executed the
agreement attached hereto as Exhibit 6.11(d).
6.12 Shareholder Waivers. Each Shareholder waives any rights such
Shareholder may have pursuant to the Executive Shareholders Agreement dated
November 1, 1995 among the Company and the Shareholders (and all other
agreements among the Shareholders regarding the sale or transfer of shares
of the Company), and agrees that such agreement shall be deemed terminated
and revoked immediately prior to the Closing; provided, that if the Closing
does not occur pursuant to this Agreement then such agreement shall
continue in full force and effect.
6.13 Matters Relating To Ashland Stock. Each Shareholder agrees
not to sell to a third party the Ashland Stock issued to him or it pursuant
to this Agreement prior to the earliest date necessary for the transactions
contemplated hereby to be treated as a "pooling" under applicable
accounting rules; provided, however, that such restrictions shall not apply
in the event the transaction is otherwise not eligible for such accounting
treatment at the time of such sale. Each Shareholder agrees to indemnify
and hold the Purchaser harmless from any Costs (as hereinafter defined)
suffered by the Purchaser in the event the transaction contemplated hereby
is not treated as a "pooling" as a result of the breach by that Shareholder
of this Section 6.13; provided, that (i) such indemnity shall not be
subject to the limitations of any other provision hereof, and (ii) the
maximum liability for a Shareholder for a breach of this Section 6.13 shall
be limited to the pro-rata portion of the Purchase Price received by such
Shareholder hereunder.
6.14 Matters Relating to Vincent Motorcycles Black Eagle
Trademarks. The Shareholders agree that prior to the earlier of the one
year anniversary of the Closing Date or the date that public statements are
made in connection with the use of the "Vincent Motorcycles Black Eagle"
trademarks, Serial Nos. 75-045,352 and 75-210,945 (the "Trademarks"), the
Shareholders will cause the Trademarks to be revised so that the eagle head
portion of the Trademarks is materially different than the Trademarks in
their current configurations when one is overlayed upon the other. The
Purchaser shall have the right to approve any such revisions to the
Trademarks, which approval shall not be unreasonably withheld, conditioned
or delayed.
ARTICLE VII
COVENANTS OF PURCHASER
7.1 Duty of Confidentiality. Purchaser and its officers,
employees, agents and representatives will comply with the terms and
conditions set forth in the letter of agreement dated October 20, 1997 from
Donaldson, Lufkin & Jenrette Securities Corporation through Jeffrey Raich
as agent for the Company to the Purchaser through Rick Organ. 'Conditional
End of Page' code here: keep together 5 lines.
7.2 Consents and Approvals. Purchaser shall do the
following:
a) use all reasonable efforts to obtain all
consents from all parties required to be obtained by Purchaser to carry out
the transaction contemplated by this Agreement.
b) in a timely, accurate and complete manner,
make or cause to be made such required filings and prepare such required
applications to any governmental agency with which such filings or
applications are required to be made or whose approval or consent is
required for the consummation by Purchaser of the transactions contemplated
by this Agreement;
c) provide to the Shareholders such information
concerning Purchaser as the Shareholders may require to make the filings
and prepare the applications as specified in Section 6.9(b); and
d) cooperate in good faith with the governmental
investigation and of witnesses, if requested.
7.3 Tax-Free Reorganization. Purchaser covenants that it shall not
take any actions or position between the execution of this Agreement and
the closing of the purchase of the Company as well as anytime thereafter
which is inconsistent with the treatment and characterization of such
purchase as a tax-free reorganization under Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code (unless actions of the Shareholders subsequent to
the Closing Date shall have caused the transaction to have failed to
qualify as a tax-free reorganization). Purchaser shall cause the Company
to, file all its Returns due with respect to or after the purchase
consistent with treatment of the purchase as a tax-free reorganization
under Sections 368(a)(1)(A) and 368(a)(2)(E) (unless actions of the
Shareholders subsequent to the Closing Date shall have caused the
transaction to have failed to qualify as a tax-free reorganization).
Following the purchase, Purchaser shall cause the Company to continue its
historic business or use a significant portion of its historic business
assets in a business.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS TO CLOSE
8.1 Conditions Precedent for the Shareholders to Close.
The obligations of the Shareholders to consummate the transactions
contemplated by this Agreement are contingent and specifically conditioned
upon the satisfaction at or before Closing of the following conditions:
a) Representations and Warranties at Closing.
Except as contemplated by this Agreement, the representations and
warranties of Purchaser contained in this Agreement shall continue to be
true and accurate in all material respects as of the Closing Date.
b) Compliance With Conditions. Purchaser shall
have performed and complied in all material respects with all agreements,
covenants and conditions required by this Agreement prior to or at the
Closing.
c) Corporate Authority. The execution and
delivery of this Agreement by Purchaser and the performance of its
covenants and obligations under this Agreement shall have been duly
authorized by all necessary corporate actions (including without limitation
the approval of the Board of Directors of the Purchaser).
d) Absence of Litigation. At the Closing Date,
no Actions shall have been instituted or shall be threatened in which it is
sought to restrain or prohibit the consummation of this Agreement or the
transactions contemplated herein or the transfer of title or use of any of
the properties or assets of Company or in which it is sought to obtain
substantial damages against the Shareholders in connection with this
Agreement or the consummation of the transactions contemplated herein.
e) [Intentionally Omitted].
f) Closing Documents, Actions, Etc. All
certificates, instruments and documents required to be delivered by or on
behalf of Purchaser at Closing, and all actions to be taken by Purchaser at
Closing, all as set forth in Section 9.2, shall have been delivered or
taken.
g) Assignments and Consents. All necessary
agreements, assignments and consents to the consummation by Purchaser of
the transaction contemplated by this Agreement, or otherwise pertaining to
matters covered by it shall have been obtained by Purchaser and delivered
to the Shareholders on or prior to the Closing Date.
8.2 Conditions Precedent for Purchaser to Close. The
obligation of Purchaser to consummate the transactions contemplated by this
Agreement is contingent and specifically conditioned upon the satisfaction
at or before Closing of the following conditions:
a) Representations and Warranties at Closing.
Except as contemplated by this Agreement, the representations and
warranties of the Shareholders contained in this Agreement shall continue
to be true and accurate in all material respects as of the Closing Date
except that if there occurs a breach (i) with respect to representations
and warranties (other than those set forth in Sections 3.3 (Title to
Shares) and 3.5 (Authority)) of the Shareholders, this condition shall be
deemed satisfied unless such breach results in a Termination Event (as
defined below) on the Company, and (ii) with respect to the representations
and warranties of the Shareholders set forth in the first and last
sentences of Section 3.2, Sections 3.3 and 3.5, this condition shall not be
deemed satisfied for any breach thereof. For purposes of this Article, a
"Termination Event" shall mean any changes or discoveries in the
representations, warranties and schedules as disclosed by the Shareholders
pursuant to Section 6.10 that in the reasonable judgment of the Purchaser
have resulted or are reasonably likely to result in increased expenses,
losses or liabilities of the Company which will total in the aggregate One
Million Three Hundred Seventy Five Thousand Dollars ($1,375,000) or more.
b) Compliance With Conditions. The Shareholders
shall have performed and complied in all material respects with all
agreements, covenants and conditions required by this Agreement prior to
the Closing.
c) Corporate Authority. The execution and
delivery of this Agreement by the Shareholders and the performance of its
covenants and obligations under this Agreement, shall have been duly
authorized by all necessary actions.
d) Absence of Litigation. At the Closing Date,
no Actions shall have been instituted in which it is sought to restrain or
prohibit the consummation of this Agreement or the transactions
contemplated herein or in which it is sought to obtain damages in excess of
$250,000 against Purchaser in connection with this Agreement or the
consummation of the transactions contemplated hereby.
e) Termination Event. At the Closing Date there
shall have been no Termination Event with respect to the Company.
f) Lease Amendment. The Company shall have
entered into a lease amendment with Inter-Market Investment Group (the
"Partnership") for the lease of the Company's premises (the "Lease")
pursuant to which (i) the term of the Lease shall be for six (6) months
following the date of Closing, (ii) following such six-month term, the
Lease shall be on a month-to-month basis and during such period may be
terminated by either party with thirty (30) days written notice, (iii) in
the event the current sublessee of the Company's premises (the "Sublessee")
renews the sublease (the "Sublease") upon the expiration thereof, the
Company shall pay monthly rent to the Partnership equal to the amount of
the monthly rental payment due under the Lease less the amount of the
monthly rent, if any, paid under the Sublease (the "Sublease Rent") (it
being understood that the Company shall include in such payment the amount
of Sublease Rent, if any, received by the Company under the Sublease), and
(iv) all other terms and conditions of the Lease (including the amount of
monthly rent) shall remain in full force and effect.
g) Closing Documents, Actions, Etc. All
certificates, instruments and documents required to be delivered by or on
behalf of the Shareholders at Closing, and all actions to be taken by the
Shareholders at Closing, all as set forth in Section 9.1, shall have been
delivered or taken.
h) Assignments and Consents. All necessary
agreements, assignments and consents to the consummation by the
Shareholders of the transactions contemplated by this Agreement, or
otherwise pertaining to matters covered by it, shall have been obtained by
the Shareholders and delivered to Purchaser on or prior to the Closing
Date.
i) Resignation of Officers and Directors. To the
extent requested in writing by Purchaser prior to Closing Date, each
officer and director of the Company shall have submitted his or her
resignation effective as of the Closing Date.
j) Termination of Employment Agreements. Each
existing employment agreement with the Shareholders and Elizabeth Li to
which the Company is a party shall have been terminated effective as of the
Closing Date.
k) Life Insurance Policies. The Company's
obligations to pay premiums for life insurance policies for the
Shareholders shall have been terminated.
ARTICLE IX
ACTIONS TO BE TAKEN AT CLOSING
9.1 Actions of the Shareholders. At Closing, the
Shareholders shall deliver the following certificates, instruments and
documents and take the following actions:
a) deliver to Purchaser a certificate executed
by each of the Shareholders, dated as of the Closing Date, certifying to
the fulfillment of the conditions specified in Sections 8.2(a) and 8.2(b)
substantially in the form of Exhibit 9.1(a) to this Agreement;
b) deliver to Purchaser an opinion of the
counsel for the Shareholders, dated the Closing Date, substantially in the
form of Exhibit 9.1(b), with such modifications as shall be reasonably
acceptable to legal counsel from Purchaser;
(c) deliver to Purchaser: true copies, reviewed
by Good, Swartz & Berns, the Company's independent certified public
accountants, of the Company's financial statements for the fiscal year
ended December 31, 1997, which financial statements shall have been
reviewed and prepared in conformity with generally accepted accounting
principles consistently applied so as to fairly present the financial
condition and results of operations of the Company for such period;
(d) to the extent the Shareholders have received
a written request for the resignations of directors of the Company, deliver
to Purchaser the resignations of such directors;
(e) deliver to Purchaser stock certificates
representing all the Shares, endorsed in blank or accompanied by stock
powers duly executed in blank in proper form for transfer; and
(f) deliver to Purchaser the Consulting
Agreement executed by Bernard A. Li and the Arnold Employment Agreement and
the Hill Employment Agreement executed by Walter S. Arnold and Charles W.
Hill, respectively.
9.2 Actions of Purchaser. At Closing, Purchaser shall
deliver the following certificates, instruments and documents and take the
following actions:
a) deliver to the Shareholders a certificate
executed by the President of Purchaser or other executive officer of the
Purchaser, dated as of the Closing Date, certifying to the fulfillment of
the conditions specified in Sections 8.1(a) and 8.1(b);
b) deliver to the Shareholders duly adopted
resolutions of the Board of Directors of Purchaser, certified by the
Secretary or an Assistant Secretary of Purchaser, as of the Closing Date:
(i) authorizing and approving the
execution and delivery of this Agreement and the purchase of the Shares by
Purchaser and the consummation of the other transactions contemplated
herein in accordance with the terms of this Agreement; and
(ii) authorizing and approving all other
necessary and proper corporate actions to enable Purchaser to comply with
the terms hereof;
c) deliver to the Shareholders a certificate of
incumbency, dated as of the Closing Date, as to the officers of Purchaser
executing this Agreement and any certificate, instrument or document to be
delivered at Closing, executed by the President and attested by the
Secretary or an Assistant Secretary of Purchaser;
d) deliver to the Shareholders a certificate
from the Secretary of State of the state of incorporation of Purchaser
dated not more than seven (7) days prior to the Closing Date, as to the
legal existence and good standing of Purchaser under the laws of such
state;
e) deliver to the Shareholders an opinion of
counsel, dated the Closing Date, substantially in the form of Exhibit
9.2(e), with such modifications as shall be reasonably acceptable to legal
counsel for the Shareholders; and
f) deliver to the Shareholders stock
certificates representing the Ashland Stock equivalent to the value of the
Purchase Price.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties pursuant to this
Agreement shall expire one (1) year after the Closing Date and shall
thereafter be of no force and effect.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification of Purchaser and the Company. Subject
to the limitations set forth herein, the Shareholders shall indemnify and
hold Purchaser, Company, and each of their shareholders, subsidiaries,
affiliates, officers and directors harmless from, against, for and in
respect of any and all damages, losses, settlement payments, obligations,
liabilities, claims, costs and expenses ("Costs") incurred or paid by an
indemnified party arising out of the breach of any representation, warranty
or covenant of the Shareholders in this Agreement.
Notwithstanding the foregoing:
a) no indemnification shall be made with respect
to any matter to the extent that insurance proceeds have been collected by
the party to be indemnified with respect to such matter;
b) no payment under indemnification shall be
provided, unless and until the aggregate amount of all such matters exceed
Two Hundred and Fifty Thousand Dollars $250,000.00 (the "Deductible");
c) the aggregate amount of actual amounts paid
by the Shareholders for breach of any representation, warranty or covenant
of the Shareholders in this Agreement shall not exceed Two Million Dollars
($2,000,000.00) (the "Cap"); and
(d) each Shareholder's liability hereunder shall
be several and limited to the percentage of the total liability equal to
such Shareholder's percentage of Shares on the Closing Date.
11.2 Indemnification of the Shareholders. Subject to the
limitations hereinafter set forth, Purchaser shall indemnify and hold the
Shareholders and each of its subsidiaries, affiliates, officers and
directors harmless from, against, for and in respect of any and all
damages, losses, settlement payments, obligations, liabilities, claims,
costs and expenses paid by any such indemnified party (i) by reason of the
breach of any representation or warranty of Purchaser contained or made in
connection with Sections 4.1 through 4.6 or (ii) as a result of third party
claims against such party arising out of the operations of the Company
after the Closing Date.
11.3 Rules Regarding Indemnification.
a) The obligations and liabilities of each
Indemnifying party hereunder shall be subject to the following terms and
conditions:
(i) The Indemnified party shall give
prompt written notice to the indemnifying party of any claim which might
give rise to a claim by the indemnified party against the indemnifying
party based on the Indemnity agreements contained in Sections 11.1 and 11.2
hereof, stating the nature and basis of said claims and the amounts
thereof, to the extent known.
(ii) In the event any action, suit or
proceeding is brought against the indemnified party, with respect to which
the Indemnifying party may have liability under the indemnity agreements
contained in Sections 11.1 and 11.2 hereof, the action, suit or proceeding
shall, upon the written acknowledgment by the indemnifying party that it is
obligated to indemnify under such indemnity agreement, be defended
(including all proceedings on appeal or for review) by the indemnifying
party. The indemnified party shall have the right to employ its own counsel
in any such case, but the fees and expenses of such counsel shall be at the
indemnified party's own expense. In such cases, the indemnified party shall
make available to the indemnified party and its attorneys and accountants
all books and records of the indemnifying party relating to such
proceedings or litigation and the parties hereto agree to render to each
other such assistance as they may reasonably require of each other in order
to ensure the proper and adequate defense of any such action, suit or
proceeding.
(iii) With respect to any indemnification
based upon Taxes pursuant to Article V by the Shareholders for a period
before Closing, no Shareholder shall be liable as to any such
indemnification matter for which the Purchaser does not give a written
notification to the Shareholders within 30 days after the earlier of (A)
receipt by the Purchaser from the relevant taxing authority of a notice of
deficiency with respect to such Taxes or (B) expiration of three (3) years
following the due date (including extensions) for filing the Return for
such Taxes (or, if earlier, the expiration of three (3) years following the
date of actual filing of such Return).
b) Neither the indemnified party nor the
indemnifying party shall make any settlement of any claims without the
written consent of the other party, which consent shall not be unreasonably
withheld or delayed. In addition, if, within ten (10) days of receipt of
notice of a proposed settlement amount, the indemnified party notifies the
indemnifying party that the terms of such proposed settlement are
unacceptable to the indemnified party then the indemnified party shall
undertake the defense of the litigation and the liability of the
indemnifying party shall be limited to the amount of the proposed
settlement. Further, if for any reason the indemnified party determines
that it is in its best interests to handle the defense of a claim for which
It is entitled to indemnification from the indemnifying party, the
indemnified party and indemnifying party shall endeavor in good faith to
reach an agreement by which the indemnified party shall release the
indemnifying party in consideration for the payment by the Indemnifying
party to the Indemnified party of the estimated value of the claim.
c) The Purchaser's sole and exclusive remedy
against any Shareholder for any breach of a representation, warranty,
covenant or other obligation made in or imposed by this Agreement with
respect to such Shareholder shall be a claim for indemnification subject to
the limitations set forth in this Article XI. Notwithstanding anything
herein to the contrary, the Cap shall not apply (i) to the breach by a
Shareholder of the representations and warranties contained in the first
and last sentences of Section 3.2 (Capitalization of the Company) and in
Sections 3.3 (Title to Shares) and 3.5 (Authority), or (ii) in the event
the Company has borrowed or agreed to borrow any funds under a new bank
line of credit or similar arrangement (that is, other than under lines of
credit or other agreements for indebtedness in effect as of the date of the
Current Financial Statements), and paid or distributed the proceeds to or
for the benefit of the Shareholders in violation of this Agreement;
provided, however, that in the event of any such breach or event described
in clauses (i) and (ii) of this subsection (c), the Purchaser's claim for
indemnification shall be limited to the amount of proceeds received by such
Shareholder for the purchase of such Shareholder's Shares.
d) With respect to any matter for which
indemnification has been provided hereunder the indemnified party hereby
covenants and agrees to cooperate with the indemnifying party to assign any
of its rights under any Insurance policy in the indemnified party's name
against a loss covered by such policy.
(e) Liability for indemnification obligations
hereunder shall be subject to reduction for any tax benefit as and when
realized in connection with the loss or damage suffered by such person
which forms the basis of the indemnifying person's liability hereunder.
(f) Notwithstanding anything in this Agreement
(including without limitation the indemnity set forth in Schedule 3.9), (i)
in no event shall the liability of a Shareholder for breach of any or all
of the warranties, representations and/or covenants of such Shareholder in
this Agreement (including without limitation such indemnity and the
indemnities in Article V and this Article XI) exceed the Purchase Price
received by such Shareholder, except in the case of actual fraud by such
Shareholder, and (ii) with respect to any obligation of the Shareholders
for the breach of a representation, warranty or covenant in this Agreement
(including without limitation any agreement to indemnify and Schedule 3.9)
as to which the Cap is not applicable, (I) the liability of each
Shareholder shall be several, (II) where and to the extent the breach
arises from an action of one or more of the Shareholders, each Shareholder
shall be liable only for his breach, and (III) in the case of a breach not
described in the preceding clause (II), any amount recoverable by Purchaser
shall only be recoverable from the Shareholders pro-rata in proportion to
their holdings of Company stock.
11.4 Tax Benefits. In determining the amount of any claims of
Purchaser ("Purchaser Claims"), such amount shall be reduced by the amount
of any tax benefit effects (collectively, the "Tax Effects") accruing to
Purchaser related to the Purchaser's Claims or to the payments made
pursuant to such Claims. Tax Effects shall include without limitation any
tax refunds not shown as an asset on the reviewed balance sheet of the
Company prepared as of December 31, 1997 which are obtained for any tax
periods ending on or prior to the Closing Date, whether or not directly
related to any Purchaser Claims or to any payment made pursuant to such
Claims, other than a tax refund to the extent attributable solely to a
carryback to a period ending on or before the Closing Date of a tax item
from a taxable period beginning on or after the Closing Date. The Tax
Effects shall be determined by taking into account all facts and
circumstances existing at the Closing Date through the future date(s) to
which such benefits run (to the extent of the present value thereof,
discounted at the applicable short term applicable federal rate, as of the
date of such indemnification). For purposes of determining the time or
times at which Tax Effects shall be taken into account to reduce any
indemnification claims hereunder, the parties agree that Tax Effects shall
reduce the amount of any indemnification claims under this Article XI only
if, as and when actually realized by Purchaser. In the event a Shareholder
has paid Purchaser for an indemnification claim which is later subject to
reduction due to a Tax Effect, Purchaser shall promptly pay such amount to
the Shareholder at the time Purchaser if, as and when such Tax Effect is
actually realized by the Purchaser.
ARTICLE XII
TERMINATION OF AGREEMENT
12.1 Termination. This Agreement may be terminated prior
to the Closing as follows:
a) At the election of the Shareholders or the
Purchaser, if for any reason the Closing has not occurred on or before
February 15, 1998, (time being of the essence in respect of the
transactions contemplated by this Agreement);
b) At the election of the Purchaser or the
Shareholders, if any legal proceeding is threatened or commenced by any
governmental or regulatory body or person (other than the Shareholders or
the Purchaser or any affiliate of the Shareholders or the Purchaser) to
restrain, modify or prevent the carrying out of the transactions
contemplated under this Agreement and either Purchaser or the Shareholders,
as the case may be, reasonably and in good faith deems it impractical or
inadvisable to proceed in view of such legal proceeding or threat thereof;
c) At any time on or prior to the Closing Date,
by written consent of the Purchaser and the Shareholders;
d) By the Shareholders, if there has been: (i) a
material misrepresentation on the part of Purchaser of Purchaser's
representations and warranties contained in this Agreement ; or (ii) a
material breach by Purchaser of any covenant or agreement of Purchaser
contained in this Agreement; or
e) By Purchaser, if there has been: (i) a
material misrepresentation on the part of the Shareholders of the
representations and warranties of the Shareholders contained in this
Agreement where such misrepresentation constitutes a Termination Event (as
defined in Section 8.2(a)); or (ii) a material breach by the Shareholders
of any covenant or agreement of the Shareholders contained in this
Agreement.
12.2 Survival. In the event this Agreement is terminated
pursuant to Section 12.1 and the transactions contemplated hereby are not
consummated as described above, this Agreement shall be of no further force
and effect, except for the provisions of Sections 6.8, 7.1 and 13.4, which
shall survive in accordance with their own respective terms.
12.3 Termination Upon Default or Abandonment If this
Agreement terminates as a result of a breach by a party, then in addition
to any other remedy which may be afforded to the non-breaching party, such
non-breaching party shall be entitled to receive from the breaching party
reimbursement for all reasonable costs and expenses (including attorney's
fees) incurred by such non-breaching party incident to this Agreement and
the transactions contemplated herein.
12.4 Termination Fee. In recognition of the considerable
time and expense that the Shareholders have expended and will expend in
entering into this Agreement and the other transactions contemplated
hereby, and in order to induce the Shareholders to enter into such
transactions, in the event the Merger is not consummated due to the failure
by the Purchaser to meet the conditions set forth in Article VIII above or
the failure by the Purchaser to use its commercially reasonable efforts to
meet such conditions, the Purchaser shall promptly pay to the Shareholders
(pro-rata) in cash the sum of One Million Dollars ($1,000,000) (the
"Termination Fee"), which fee shall be full and complete compensation to
the Shareholders as a result of such failure and, upon the making of such
payment (provided such payment is timely made in accordance with the terms
of this Agreement), there shall be no further obligation to the
Shareholders by the Purchaser pursuant to this Agreement; provided,
however, the Termination Fee shall not be paid in the event the Merger is
not consummated as a result of: (i) a Termination Event (as defined in
Section 8.2(a), or (ii) the discovery by Purchaser of facts not known to
Purchaser as of the effective date of this Agreement that indicate that the
Shareholders or the Company have violated existing law with respect to the
conduct of the Company's business which violation (a) results in or could
reasonably be expected to result in increased expenses or liabilities of
the Company which total in the aggregate $1,375,000 or more, or (b) if such
violation is not quantifiable as to dollar amount, results in or could
reasonably be expected to result in a substantial detrimental effect on the
business of the Company. In the event Purchaser determines that the
Termination Fee is not payable pursuant to clause (i) or (ii) above, it
shall provide written notice of such determination to the Shareholders
within five (5) business days following demand therefor by the
Shareholders, which notice shall set forth with specificity the basis upon
which Purchaser has made such termination (including all facts available to
Purchaser with respect thereto). The parties hereto acknowledge and agree
that, other than as provided in this Section 12.4, the Purchaser's
obligation to pay the Termination Fee shall not be subject to other
conditions precedent to Purchaser's obligations under this Agreement.
ARTICLE XIII
MISCELLANEOUS
13.1 Further Assurances. Each of the parties shall execute
such documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and the
transactions contemplated hereby, including but not limited to, such
further instruments of assignment, transfer, conveyance, endorsement,
direction or authorization and other documents as Purchaser or its counsel
may request. In order to perfect title of Purchaser and its successors and
assigns to the Shares or as the Shareholders, or its counsel may reasonably
request in order to effectuate the purposes of this Agreement.
13.2 No Other Beneficiaries. This Agreement is being made
and entered into solely for the benefit of Purchaser and the Shareholders
and neither Purchaser nor the Shareholders intends hereby to create any
rights in favor of any other person, as a third party beneficiary of this
Agreement or otherwise.
13.3 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered by personal
delivery, mail, overnight courier or telecopier. Such communications shall
be deemed given, if by personal delivery, when received if by mail, when
mailed by certified or registered mail (postage prepaid and return receipt
requested); or if by overnight courier or telecopier, when delivered to
such courier or sent by telecopier (provided that the party giving the
notice has confirmation of such delivery or sending), and in each case,
addressed to the party to whom notice is to be given as set forth below:
To the Shareholders: Bernard A. Li
P.O. Box 8705
Rancho Santa Fe, California 92067
Charles W. Hill
1555 Pearl Heights Road
Vista, California 92083
Walter S. Arnold
25595 Madero Way
Temecula, California 92590
To the Company: Eagle One Industries
5927 Landau Court
Carlsbad, California 92008
To Purchaser: The Valvoline Company,
a division of Ashland Inc.
3499 Blazer Parkway
Lexington, Kentucky 40509
Attn: President
Any party may, by notice given in accordance with this Section to the other
parties, designate another address or person for receipt of notices
hereunder.
13.4 Costs and Expenses. Except as otherwise provided in
this Agreement, the Shareholders and Purchaser shall each pay their own
expenses incident to this Agreement and the transactions contemplated
herein, including, without limitation, fees of attorneys and accountants,
irrespective of whether such transactions shall be consummated.
13.5 Access After Closing. After the Closing, Purchaser
shall give the Shareholders reasonable access to the personnel and the
books and records of the Company, and cooperate and assist the
Shareholders, to enable the Shareholders to perform the functions described
in Section 1.2 or to respond to any governmental audit or investigation,
any litigation or claim, or any tax-related matters which relate to
activities of the Company prior to Closing.
13.6 Employee Plans.
a) Qualified Plan Termination. The Shareholders
hereby jointly and severally agree to take all necessary, proper,
convenient and legally permissible actions to cause the Company to freeze
benefit accruals under any other plan qualified under section 401(a) of the
Code (collectively referred to as "Qualified Plans") that it maintains
within a reasonable time prior to the Closing Date and commence procedures
designed to terminate the Qualified Plans as soon as reasonably possible
thereafter. Such actions to freeze benefit accruals and terminate the
Qualified Plans shall include, but not be limited to, the adoption of plan
amendments and/or Board of Directors resolutions the making of required
notifications under the terms of the Qualified Plans and under law and the
filing for a favorable determination letter with the IRS upon the Qualified
Plans' termination. The Shareholders shall be jointly and severally liable
for completing all actions required to terminate the Qualified Plans,
including any such actions and related activities which occur after the
Closing Date. Purchaser hereby agrees to reasonably cooperate with the
Shareholders to provide access to it of any information and other materials
it may reasonably require to accomplish the termination of the Qualified
Plans. In connection with the termination of the qualified Plans, all
participants thereunder who are affected by the termination shall become
completely vested in their accrued benefits thereunder, to the extent
funded.
(b) To the extent allowed by law and by the
terms of the benefit plans themselves, the benefits made available by the
Company to its employees as of the Closing Date shall continue to be made
available to the Company's employees on the same terms and conditions for
the term of their continued employment by the Company or, alternatively
with respect to life, long-term disability and medical benefits, Purchaser
may cause the Company to make available instead the corresponding life,
long-term disability and medical benefit plans afforded generally to
employees of Ashland Inc.
13.7 Notices Regarding Insured Claims. Purchaser shall
provide the Shareholders with timely written notice of any claim for which
insurance coverage is provided under the policies listed on Schedule for
occurrences prior to the Closing Date that might reasonably exceed the
applicable primary policy limit. Upon receipt of such notice, the
Shareholders shall timely notify the appropriate insurance carrier of such
claim and the parties agree to cooperate with each other with respect to
the filing of any such claim.
13.8 Entire Agreement. This Agreement, including the
Exhibits and Schedules and such other related agreements, contains the
entire agreement among the parties with respect to the purchase of the
Shares and related transactions, and supersedes all prior agreements,
written or oral, with respect thereto (including without limitation
representations, warranties and covenants contained in materials previously
delivered by the Shareholders to the Purchaser).
13.9 Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be
waived only by a written instrument signed by the parties hereto or, in the
case of a waiver, by the party waiving compliance. No delay on the part of
any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver of any partial exercise
of any such right, power or privilege, preclude any further exercise
thereof or the exercise of any other such right, power or privilege. From
time to time prior to the Closing Date, the Shareholders shall promptly
supplement or amend any schedules hereto which would have been required to
be set forth or described in such a schedule which is necessary to correct
any information in a schedule which has become inaccurate.
13.10 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of California
without regard to the conflict of laws provisions of such jurisdiction.
13.11 Jurisdiction. Jurisdiction and venue in an action
against a Shareholder (other than a counterclaim or cross-claim in a
proceeding filed by a Shareholder in another jurisdiction or venue) in any
matter arising out of or connected with the transactions contemplated by
this Agreement or documents or instruments executed or delivered in
connection therewith shall be proper only where such Shareholder (i)
resides, (ii) is domiciled, or (iii) carries on an active trade or business
directly, through an agent, or through an entity in which such Shareholder
holds more than ten percent (10%) of the voting power (provided, however,
that any activity by a Shareholder on behalf of the Company or Purchaser
shall not be considered to be so carrying on such a trade or business).
Circumstances where a Shareholder shall be considered to be carrying on a
trade or business shall include, but shall not be limited to, rendering
material personal services as an employee or independent contractor only
where such Shareholder is physically present when performing such services.
Jurisdiction and venue shall be proper in all cases in San Francisco, Los
Angeles, Orange and San Diego Counties, California.
13.12 Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their legal
successors and representatives. This Agreement shall not be assignable
except by operation of law by the Purchaser or the Shareholders without the
prior written consent of the other party hereto.
13.13 Waiver of Conflict. The Purchaser acknowledges that
the Company and the Shareholders have been represented by Sheppard, Mullin,
Richter & Hampton LLP in connection with this transaction and in other
matters, and the Purchaser hereby agrees to waive on behalf of itself and
the Company any and all conflicts of interest and privileges that may apply
to any future representation by such firm of the Company, the Shareholders
or their respective affiliates in connection with disputes arising from the
transactions contemplated hereby or in connection with any other matters.
13.14 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed
by all of the parties hereto. Delivery of an executed counterpart of the
signature page to this Agreement by facsimile shall be as effective as
delivery of a manually executed counterpart of this Agreement; provided,
that any party so delivering an executed counterpart by facsimile shall
thereafter promptly deliver a manually executed counterpart of this
Agreement to the other party, but failure to deliver such manually executed
counterpart shall not affect the validity, enforceability and binding
effect of this Agreement.
13.15 Exhibits and Schedules. The Exhibits and Schedules
are a part of this Agreement as if fully set forth herein. All references
herein to sections, subsections, clauses, exhibits and schedules shall be
deemed references to such parts of this Agreement, unless the context shall
otherwise require.
13.16 Headings. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
13.17 Notices Regarding Representations, Warranties and
Covenants.
a) The Shareholders shall notify Purchaser
promptly of any event or occurrence prior to Closing that would cause any
representation or warranty set forth in Article III or V of this Agreement
or any covenant of the Shareholders set forth in Article V or VI of this
Agreement to be untrue and incorrect.
b) Purchaser will notify the Shareholders
promptly of any event or occurrence prior to Closing that would cause any
representation of warranty set forth in Article IV of this Agreement or any
covenant of Purchaser set forth in Article VII of this Agreement to be
untrue or incorrect.
IN WITNESS WHEREOF, the Shareholders, the Purchaser and
the Company have or have caused their respective authorized representatives
to execute this Agreement effective as of the date first above written.
ASHLAND INC., through its division
known as THE VALVOLINE COMPANY
By: /s/ James J. O'Brien
-------------------------------------
Title: Senior Vice President
-------------------------------------
THE LI FAMILY TRUST
/s/ Bernard A. Li
-------------------------------------------
By: Bernard A. Li, Trustee
/s/ Bernard A. Li
-------------------------------------------
BERNARD A. LI
/s/ Charles W. Hill
-------------------------------------------
CHARLES W. HILL
/s/ Walter S. Arnold
-------------------------------------------
WALTER S. ARNOLD
EGL-1, INC., a California corporation
By: /s/ Bernard A. Li
-------------------------------------
Title: President
-------------------------------------
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
February 2, 1998 by and between ASHLAND INC., a Kentucky corporation (the
"Company"), and each of the persons whose names appear on the signature
page attached hereto (each, a "Holder" and collectively, the "Holders").
WHEREAS, pursuant to an Agreement of Merger and Plan of Reorganization
dated as of January 21, 1998 (the "Merger Agreement"), by and among the
Company, the Holders, and EGL-1, Inc., a California corporation, the
Holders have acquired shares of common stock, $1.00 par value (the "Common
Stock"), of the Company (collectively, and together with any shares of
Common Stock of the Company issued to a Holder as (or issuable upon the
conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange
for or in replacement of, any shares of Common Stock held by the Holders,
the "Registrable Securities");
WHEREAS, in order to induce the Holders to acquire the Registrable
Securities, the Company and the Holders have agreed to enter into this
Agreement; and
WHEREAS, it is intended by the Company and the Holders that this
Agreement shall become effective immediately upon the acquisition by the
Holders of the Registrable Securities;
NOW, THEREFORE, in consideration of the premises, promises and the
mutual covenants contained herein and in the Merger Agreement, the Company
hereby agrees as follows:
1. Registration Rights.
(a) Grant of Required Registration Right. The
Company agrees (i) to prepare and file a registration statement
(the "Registration Statement") on Form S-3 (or other applicable
form) with the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "Securities
Act"), no later than sixty (60) days following the Closing (as
defined in the Merger Agreement) covering the registration for
resale of the Registrable Securities, and (ii) use its best
efforts to cause the Registration Statement to become effective
under the Securities Act no later than May 1, 1998 (the
"Registration Date"). The Company shall use its best efforts to
cause the Registration Statement to be effective continuously for
a period of sixty (60) days beginning with the Registration Date
(the "Registration Period"); provided, however, that in the event
the Registration Statement does not become effective on such date,
the Registration Period shall commence on such later date as the
Registration Statement becomes effective (and provided further,
that such deferral of the Registration Period shall not excuse any
breach by the Company of its obligations hereunder).
(b) Exception as to Timing. Notwithstanding any
other provision of this Agreement, the Company may postpone or
suspend the filing or effectiveness of the Registration Statement
if the Company shall furnish to the Holders a certificate signed
by the Chief Financial Officer of the Company (the "Certificate")
stating that, in the good faith judgment of the Chief Financial
Officer of the Company, it would be detrimental to the Company and
its shareholders for the Registration Statement to be filed or the
effectiveness thereof continued and it is therefore necessary to
defer or suspend, as applicable, the filing or effectiveness of
the Registration Statement. Upon receipt of the Certificate, each
Holder shall cease sales of the Registrable Securities until
notified by the Company that the Registration Statement is or has
remained effective. The Company shall have the right to defer or
suspend such filing or effectiveness for a maximum of two periods
as follows: (i) a period of not more than seven (7) consecutive
days and a period of not more than thirty (30) consecutive days;
provided, however, that, with respect to the thirty-day period
described above, the Company shall use its commercially reasonable
efforts to terminate as soon as practicable the deferral or
suspension of the effectiveness of the Registration Statement
prior to the expiration of such period; and provided, further,
that notwithstanding anything to the contrary set forth herein,
the Company shall not exercise any right of deferral or suspension
of the effectiveness of the Registration Statement for the ten
consecutive trading days commencing on the Registration Date (or,
if later, the date the Registration Period actually commenced).
The length of the Registration Period (as defined above) shall be
increased by the length of any deferral or postponement taken by
the Company hereunder.
2. Registration Procedures. Pursuant to its obligations hereunder,
the Company shall:
(a) prepare and file with the SEC the
Registration Statement and use its best efforts to cause the
Registration Statement to become effective and remain effective as
provided above;
(b) prepare and file with the SEC such
amendments and supplements to the Registration Statement and the
prospectus used in connection therewith as may be necessary to
keep the Registration Statement effective as provided above and to
comply with the provisions of the Securities Act with respect to
the sale or other disposition of all securities covered by the
Registration Statement (including prospectus supplements with
respect to the sales of securities from time to time in connection
with a registration statement pursuant to Rule 415 of the
Commission);
(c) supply copies of the Registration Statement
and any amendments thereto (it being understood that for purposes
of this Agreement, reports filed under the Exchange Act shall not
constitute part of, or an amendment to, the Registration
Statement) to each Holder prior to filing such document with the
SEC, and reasonably consult with such persons and their counsel
with respect to the form and content of such filing. The Company
will immediately amend such Registration Statement to include such
reasonable changes as the Holders reasonably agree should be
included therein;
(d) furnish to the Holders such numbers of
copies of a summary prospectus or other prospectus, including a
preliminary prospectus or any amendment or supplement to any
prospectus, in conformity with the requirements of the Securities
Act, and such other documents as the Holders may reasonably
request in order to facilitate the public sale or other
disposition of the securities owned by the Holders;
(e) use its best efforts to register and qualify
the securities covered by the Registration Statement under such
other securities or blue sky laws of such jurisdictions as the
Holders shall reasonably request, and do any and all other acts
and things which may be necessary or advisable to enable such
Holders to consummate the public sale or other disposition in such
jurisdictions of the securities owned by such Holders, except that
the Company shall not for any such purpose be required to qualify
to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, to file therein any general
consent to service of process or to be subject to any escrow or
other similar conditions;
(f) use its best efforts to list the Registrable
Securities on any securities exchange on which any securities of
the Company are then listed, if the listing of such securities is
then permitted under the rules of such exchange;
(g) enter into and perform its obligations under
an underwriting agreement, if the offering is an underwritten
offering, in usual and customary form, with the managing
underwriter or underwriters of such underwritten offering;
(h) notify the Holders at any time when a
prospectus relating thereto covered by the Registration Statement
is required to be delivered under the Securities Act, of the
happening of any event of which it has knowledge as a result of
which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances then existing;
(i) immediately notify each Holder (a) of the
issuance by the SEC of any stop order or order suspending the
effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose, or (b) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any
jurisdiction, or the initiation of any proceedings for such
purpose. The Company, with the reasonable cooperation of the
Holders, shall make every reasonable effort to contest any such
proceedings and to obtain the withdrawal of any such order at the
earliest possible time;
(j) make earning statements satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158
thereunder generally available to its security holders as soon as
reasonably practicable, but in no event later than 45 days after
the end of any 12-month period commencing at the end of any fiscal
quarter in which Registrable Securities are sold;
(k) take such other actions as shall be
reasonably requested by any Holders to facilitate the registration
and sale of the Registrable Securities.
3. Exclusion of Certain Securities in Registration Statement; No
Other Registration Statements. The Company hereby represents, warrants and
agrees that other than the Registrable Securities it shall not allow or
permit any other securities of the Company to be included in the
Registration Statement; provided, however, that other securities may be
included in the Registration Statement at the request of the Company and
with the prior written consent of all the Holders, which consent shall not
be unreasonably withheld.
4. Expenses. All expenses incurred in any registration of the
Holder's Registrable Securities under this Agreement shall be paid by the
Company, including, without limitation, printing expenses, fees and
disbursements of counsel for the Company, the reasonable fees and
disbursements of one counsel for the Holders (which counsel the Company may
request be the Company's counsel if such counsel is reasonably acceptable
to the Holders and, if not, such counsel shall be selected by the Holders;
provided, however, that in the event the Holders retain separate counsel,
the reasonable fees and expenses to be reimbursed shall not exceed $1,000,
expenses of any audits to which the Company shall agree or which shall be
necessary to comply with governmental requirements in connection with any
such registration and expenses of complying with the securities or blue sky
laws of any jurisdictions pursuant to Section 2(d); provided, however, the
Company shall not be liable for any discounts or commissions to any
broker-dealer or underwriter selected by any Holder. At such time as the
Holders are permitted to resell the Registrable Securities pursuant to Rule
144 under the Securities Act, the Company shall bear the expense relating
to any legal opinion requested by the transfer agent of the Company in
order to effect such resale.
5. Indemnification,
(a) Company Indemnity. The Company shall
indemnify and hold harmless each Holder, the affiliates, officers,
directors and partners of each Holder, and each person, if any,
who controls such Holder (within the meaning of the Securities Act
or the Securities Exchange Act of 1934 (the "Exchange Act")),
against any losses, claims, damages or liabilities (joint or
several) to which they may become subject under the Securities
Act, the Exchange Act or other federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation") :
(i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement including any
preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading, (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, or any state
securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities law, and
in each case, the Company shall reimburse the Holder, affiliate,
officer or director or partner or controlling person for any legal
or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability
or action; provided, however, that the Company shall not be liable
to any Holder in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in
connection with such registration by the Holder or any other
officer, director or controlling person thereof. The Company will
also indemnify selling brokers, dealer managers and similar
securities industry professionals participating in the
distribution, their officers and directors and each Person who
controls such Persons (within the meaning of the Securities Act or
the Exchange Act) to the same extent as provided above with
respect to the indemnification of the Holders of Registrable
Securities.
(b) Holder Indemnity. The Holder shall indemnify
and hold harmless the Company, its affiliates, its counsel,
officers, directors, shareholders and representatives, any
underwriter (as defined in the Securities Act) and each person, if
any, who controls the Company or the underwriter (within the
meaning of the Securities Act or the Exchange Act) , against any
losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the
Exchange Act or any state securities law, and in each case the
Holder shall reimburse the Company, affiliate, officer or director
or shareholder, underwriter or controlling person for any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability
or action; insofar as such losses, claims, damages or liabilities
(or actions and respect thereof) arise out of or are based upon a
violation which occurs in reliance upon and in conformity with
written information furnished expressly by such Holder or any
other officer, director or controlling person thereof to the
Company in connection with the registration of Registrable
Securities. Notwithstanding the above, the Holder's
indemnification shall be limited to the dollar value of the
securities being registered for the account of the Holder.
(c) Notice; Right to Defend. Promptly after
receipt by an indemnified party under this Section 5 of notice of
the commencement of any action (including any governmental action)
, such indemnified party shall, if a claim in respect thereof is
to be made against any indemnifying party under this Section 5,
deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the
right to participate in and if the indemnifying party agrees in
writing that it will be responsible for any costs, expenses,
judgments, damages and losses incurred by the indemnified party
with respect to such claim, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own
counsel in combination with other parties who have entered into
substantially identical agreements, with the fees and expenses to
be paid by the indemnifying party, if the indemnified party based
upon advice of counsel reasonably believes that representation of
such indemnified party by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall
relieve such indemnifying party of any liability to the
indemnified party under this Agreement only if and to the extent
that such failure is prejudicial to its ability to defend such
action, and the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this
Agreement. There can be no settlement without the indemnifying
party's prior consent.
(d) Contribution. If the indemnification
provided for in this Agreement is held by a court of competent
jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred
to therein, then the indemnifying party, in lieu of indemnifying
such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such
loss, liability, claim, damage or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other
hand in connection with the statements or omissions which resulted
in such loss, liability, claim, damage or expense as well as any
other relevant equitable considerations. The relevant fault of the
indemnifying party and the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying
party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. Notwithstanding the
foregoing, the amount the Holder shall be obligated to contribute
pursuant to the Agreement shall be limited to an amount equal to
the proceeds to the Holder of the Registrable Securities sold
pursuant to the Registration Statement which gives rise to such
obligation to contribute (less the aggregate amount of any damages
which the Holder has otherwise been required to pay in respect of
such loss, claim, damage, liability or action, or any
substantially similar loss, claim, damage, liability or action
arising from the sale of such Registrable Securities).
(e) Survival of Indemnity. The indemnification
provided by this Agreement shall be a continuing right to
indemnification and shall survive the registration and sale of any
Registrable Securities by any person entitled to indemnification
hereunder and the expiration or termination of this Agreement.
6. Reports Under Exchange Act. With a view to making available to
the Holders the benefits of Rule 144 promulgated under the Securities Act
and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration
generally or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep adequate public information
available, as those terms are understood and defined in SEC Rule
144, at all times;
(b) use all reasonable commercial efforts to
qualify, and maintain qualification, for registration on Form S-3;
(c) file with the SEC in a timely manner all
reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(d) furnish to any Holder, so long as the Holder
owns any Registrable Securities, promptly upon request (i) a
written statement by the Company as to whether or not it has
complied with the reporting requirements of SEC Rule 144, the
Securities Act and the Exchange Act, or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3,
(ii) a copy of the most recent annual and/or quarterly report of
the Company and such other reports and documents so filed by the
Company as may be reasonably requested, and (iii) such other
information as may be reasonably requested in availing any Holder
of any rule or regulation of the SEC which permits the selling of
any such securities without registration or pursuant to such form.
7. Remedies.
(a) Time is of the Essence. The parties agree
that time is of the essence of each of the covenants contained
herein and that, in the event of a dispute hereunder, this
Agreement is to be interpreted and construed in a manner that will
enable the Holders to sell their Registrable Securities as quickly
as possible. Any delay on the part of any party not expressly
permitted under this Agreement shall be deemed a material breach
of this Agreement.
(b) Remedies Upon Default or Delay. The Company
acknowledges the breach of any part of this Agreement may cause
irreparable harm to the Holder and that monetary damages alone may
be inadequate. The Company therefore agrees that the Holder shall
be entitled to injunctive relief or such other applicable remedy
as a court of competent jurisdiction may provide. Nothing
contained herein will be construed to limit a Holder's right to
any remedies at law, including recovery of damages for breach of
any part of this Agreement.
8. No Inconsistent Agreements. The Company will not, on or after
the date of this Agreement, enter into any agreement with respect to its
securities that materially adversely affects the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions
hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the
holders of the Company's securities under any agreement in effect on the
date hereof.
9. Notices. Any notice, request, instruction or other document to
be given hereunder by any party hereto to another party hereto shall be in
writing, shall be deemed to have been duly given or delivered when
delivered personally or telecopied (receipt confirmed, with a copy sent by
reputable overnight courier), or one business day after delivery to a
reputable overnight courier, postage prepaid, to the address of the party
set forth below such person's signature on this Agreement or to such
address as the party to whom notice is to be given may provide in a written
notice to each of the other parties to this Agreement, a copy of which
written notice shall be on file with the Secretary of the Company.
10. Successors and Assigns. Except as otherwise expressly provided
herein, this Agreement shall inure to the benefit of and be binding upon
the successors and permitted assigns of the Company and the Holder.
11. Amendment; Waiver and Termination. This Agreement may be
amended, and the observance of any term of this Agreement may be waived,
but only with the written consent of the company and the Holder. No delay
on the part of any party in the exercise of any right, power or remedy
shall operate as a waiver thereof, nor shall any single or partial exercise
by any party of any right, power or remedy preclude any other or further
exercise thereof , or the exercise of any other right, power or remedy.
12. Counterparts; Facsimile Delivery. One or more counterparts of
this Agreement may be signed by the Parties, each of which shall be an
original but all of which together shall constitute one and the same
instrument. Delivery of an executed counterpart of the signature page to
this Agreement by facsimile shall be effective as delivery of a manually
executed counterpart of this Agreement; provided, that any party so
delivering an executed counterpart by facsimile shall thereafter promptly
deliver a manually executed counterpart of this Agreement to the other
party, but failure to deliver such manually executed counterpart shall not
affect the validity, enforceability and binding effect of this Agreement.
13. Governing Law. This Agreement shall be construed in accordance
with and governed by the internal laws of the State of California, without
giving effect to conflicts of law principles.
14. Invalidity or Provisions. If any provision of this Agreement
is or becomes invalid, illegal or unenforceable. in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected thereby.
15. Headings. The headings in this Agreement are for convenience
of reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first set forth above.
ASHLAND INC. THE LI FAMILY TRUST
By: /s/ James J. O'Brien /s/ Bernard A. Li
-------------------------- ----------------------------------
Name: James J. O'Brien Bernard A. Li, Trustee
Position: Senior Vice President Address: P.O. Box 8705
Address: 3499 Blazer Parkway Rancho Santa Fe, CA 92067
Lexington, Kentucky 40509
/s/ Charles W. Hill
----------------------------------
Charles W. Hill
Address: 1555 Pearl Heights Road
Vista, CA 92083
/s/ Walter S. Arnold
----------------------------------
Walter S. Arnold
Address: 25595 Madero Way
Temecula, CA 92590
Exhibit 5
March 19, 1998
Ashland Inc.
1000 Ashland Drive
Russell, KY 41169
Dear Sirs:
As Senior Vice President, General Counsel and Secretary of Ashland
Inc., I have examined and am familiar with the Second Restated Articles of
Incorporation and the By-laws of Ashland, both as amended. I am also
familiar with the corporate proceedings taken by the Board of Directors of
Ashland on January 28, 1998 to authorize the filing with the Securities and
Exchange Commission of a Form S-3 Registration Statement covering up to
482,575 shares of Ashland Common Stock, $1.00 par value (the "Common
Stock"), together with the Rights attached thereto ("Rights") evidenced by
the Common Stock to the extent provided in Ashland's Shareholder Rights
Agreement dated May 15, 1996, as amended. I have also examined originals or
copies certified or otherwise identified to my satisfaction of such
corporate records and other documents as I have deemed necessary or
appropriate for purposes of this opinion.
Based on the foregoing, I am of the opinion that:
1. Ashland is a duly organized and validly existing corporation
under the laws of the Commonwealth of Kentucky.
2. All necessary corporate action on the part of Ashland has been
taken to authorize the registration of the Common Stock and the Rights.
Such shares of Common Stock are validly issued, fully paid and
nonassessable; and the Rights, if issued, will be validly issued.
I know that I am referred to under the heading "Legal Matters" in
the Registration Statement on Form S-3 and related Prospectus of Ashland
with respect to the Common Stock, filed with the Securities and Exchange
Commission, and consent thereto and to the filing of this opinion as an
Exhibit to such Registration Statement.
Very truly yours,
/s/ Thomas L. Feazell
Thomas L. Feazell
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3) and related Prospectus of Ashland
Inc. for the registration of 482,575 shares of its common stock and to the
incorporation by reference therein of our report dated November 5, 1997,
with respect to the consolidated financial statements and financial
statement schedule of Ashland Inc. and subsidiaries, included in its Annual
Report (Form 10-K) for the year ended September 30, 1997, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Ernst & Young LLP
March 17, 1998
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of Ashland
Inc. of our report dated March 12, 1998 relating to the financial
statements of Marathon Oil Company Downstream Businesses (a division of
Marathon Oil Company), which appears in the Current Report on Form 8-K/A of
Ashland Inc. dated March 17, 1998.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Pittsburgh, PA
March 19, 1998
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned Directors and
Officers of ASHLAND INC., a Kentucky corporation, which is about to file a
Registration Statement on Form S-3 for the registration of up to 482,575
shares of Common Stock, par value $1.00 per share of Ashland Inc. with the
Securities and Exchange Commission under the provisions of the Securities
Act of 1933, as amended, hereby constitutes and appoints PAUL W. CHELLGREN,
THOMAS L. FEAZELL and DAVID L. HAUSRATH, and each of them, his true and
lawful attorneys-in-fact and agents, with full power to act without the
others to sign and file such Registration Statement and the exhibits
thereto and any and all other documents in connection therewith with the
Securities and Exchange Commission, and to do and perform any and all acts
and things requisite and necessary to be done in connection with the
foregoing as fully as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any
of them, may lawfully do or cause to be done by virtue hereof.
Dated: January 28, 1998
/s/ Paul W. Chellgren /s/ James B. Farley
- --------------------------------- ------------------------------
Paul W. Chellgren, Chairman of the Board James B. Farley, Director
and Chief Executive Officer
/s/ J. Marvin Quin
- --------------------------------- ------------------------------
J. Marvin Quin, Senior Vice President Ralph E. Gomory, Director
and Chief Financial Officer
/s/ Kenneth L. Aulen /s/ Mannie L. Jackson
- --------------------------------- ------------------------------
Kenneth L. Aulen, Administrative Mannie L. Jackson, Director
Vice President, Controller and
Principal Accounting Officer
/s/ Jack S. Blanton /s/ Patrick F. Noonan
- --------------------------------- ------------------------------
Jack S. Blanton, Director Patrick F. Noonan, Director
/s/ Jane C. Pfeiffer
- --------------------------------- ------------------------------
Thomas E. Bolger, Director Jane C. Pfeiffer, Director
/s/ Samuel C. Butler /s/ Michael D. Rose
- --------------------------------- ------------------------------
Samuel C. Butler, Director Michael D. Rose, Director
/s/ Frank C. Carlucci /s/ William L. Rouse, Jr.
- --------------------------------- ------------------------------
Frank C. Carlucci, Director William L. Rouse, Jr., Director
/s/ Robert B. Stobaugh
- --------------------------------- ------------------------------
Robert B. Stobaugh, Director
CERTIFICATION
The undersigned certifies that he is an Assistant Secretary of ASHLAND INC.
("ASHLAND"), a Kentucky corporation, and that, as such, he is authorized to
execute this Certificate on behalf of ASHLAND and further certifies that
attached are true and correct copies of excerpts from the minutes of a
meeting of the Board of Directors of ASHLAND duly called, convened, and
held on January 28, 1998, at which a quorum was present and acting
throughout.
IN WITNESS WHEREOF, I have signed and sealed this Certification this 13th
day of March, 1998.
/s/ T. Cody Wales
-------------------------------
T. Cody Wales
Assistant Secretary
EXCERPT FROM
MINUTES OF DIRECTORS' MEETING
ASHLAND INC.
January 28, 1998
ACQUISITION OF EGL-1
RESOLVED, that the acquisition by the Corporation, through its
division known as The Valvoline Company ("Valvoline"), of all of
the outstanding shares of common stock of EGL-1, Inc. ("EGL-1"),
for the consideration set forth herein (the "Purchase") is hereby
in all respects authorized, ratified and approved;
FURTHER RESOLVED, that the total consideration to be paid by the
Corporation for the Purchase (the "Purchase Price") shall not
exceed $27,000,000 and shall be paid in cash, Common Stock of the
Corporation ("Common Stock"), or a combination of cash and Common
Stock;
FURTHER RESOLVED, that the number of shares of Common Stock to be
issued shall be determined by dividing the Purchase Price by the
lesser of the closing price of the Common Stock as reported on the
composite tape of the New York Stock Exchange for (1) the business
day immediately preceding the closing of the EGL-1 transaction; or
(2) the average of the twenty (20) business days immediately
preceding such closing;
FURTHER RESOLVED, that this Board of Directors hereby deems that
the value of the shares of EGL-1 being acquired is at least
equivalent to the Purchase Price;
FURTHER RESOLVED, that the Chairman of the Board, the Executive
Vice President, or any Senior or Administrative Vice President of
the Corporation, or the President or any Vice President of
Valvoline (the "Authorized Officers") be, and each of them hereby
is, authorized to negotiate and enter into a definitive agreement
to consummate the purchase (the "Agreement"), and to take any and
all actions and execute and deliver any and all documents,
certificates, instruments or agreements related to the foregoing
which any of them deem necessary or appropriate, and that any and
all actions and execution of any and all documents, certificates,
instruments or agreements related to the foregoing occurring
heretofore including, without limitation, execution of an
Agreement of Merger and Plan of Reorganization, is or are hereby
in all respects authorized, ratified and approved;
FURTHER RESOLVED, that any of the Authorized Officers, the
Secretary or any Assistant Secretary of the Corporation be, and
each of them hereby is, authorized, acting singly, to execute and
file with the Securities and Exchange Commission: (1) a
Registration Statement on Form S-3 or any other appropriate form
with respect to the Common Stock to be issued pursuant to the
foregoing resolutions; (2) an application to register the Common
Stock under the Securities Exchange Act of 1934, as amended; and
(3) such further amendments thereto as are necessary or desirable;
FURTHER RESOLVED, that for the purpose of any original issue of
the aggregate number of shares of Common Stock authorized by the
preceding resolution, any transfer agent for Common Stock be, and
hereby is, authorized to countersign as Transfer Agent, when
presented to it duly executed by or on behalf of the Corporation,
certificates for shares of the Common Stock, and to cause such
certificates to be registered by any Registrar for Common Stock
and when so countersigned and registered, to deliver such
certificates to or upon the written order of the Authorized
Officers; and further, that said Registrar be, and hereby is,
authorized and directed to register certificates for the aggregate
number of shares of Common Stock authorized by the preceding
resolutions when presented to it, duly executed on behalf of the
Corporation and countersigned by said Transfer Agent, and
thereupon to deliver such certificates, when so registered, to or
upon the order of said Transfer Agent and further, that the
authority of said Transfer Agent and Registrar, respectively, be,
and it hereby is, extended to apply to the transfer and
registration from time to time of said shares of Common Stock
after the original issue thereof;
FURTHER RESOLVED, that the Authorized Officers be, and each of
them hereby is, authorized to cause the Corporation to make
application to the New York Stock Exchange and the Chicago Stock
Exchange for the listing on such Exchanges, upon official notice
of issuance of the Common Stock to be issued pursuant to the
foregoing resolutions; and that the aforesaid Authorized Officers
of the Corporation be, and each of them hereby is, authorized in
connection with such listing applications to execute in the name
or on behalf of the Corporation and under its corporate seal or
otherwise, and to file or deliver all such applications,
statements, certificates, agreements, and other documents as in
their judgment shall be necessary, proper or advisable to
accomplish such listings;
FURTHER RESOLVED, that in connection with the transaction
contemplated under the Agreement, there may be credited to the
Corporation's capital account the sum of $1.00 for each share of
the Common Stock issued by the Corporation in the transaction and
the transaction shall otherwise be handled on the books of the
Corporation in accordance with the laws of the Commonwealth of
Kentucky and generally accepted accounting principles;
FURTHER RESOLVED, that the Authorized Officers and counsel for the
Corporation and Valvoline be, and they hereby are, authorized to
take all such further action and to execute all such further
instruments and documents, in the name and on behalf of the
Corporation and Valvoline, and under their corporate seals or
otherwise, and to pay all such expenses as in their judgment shall
be necessary, proper or advisable in order to fully carry out the
intent and to accomplish the purposes of the foregoing resolutions
and each of them.
*****
