Exhibit 10.3
STOCKHOLDER
AGREEMENT
THIS STOCKHOLDER
AGREEMENT (this “
Agreement ”), dated as of December 9, 2008, is
made by and among A. O. Smith Corporation, a Delaware corporation
(the “ Company ”), and each Person signatory
hereto or who becomes signatory hereto in accordance with the terms
of this Agreement (each, individually, a “ Stockholder
” and, collectively, the “ Stockholders
”). All terms used, but not otherwise defined herein, shall
have those meanings set forth in the Merger Agreement (defined
below).
RECITALS
WHEREAS, the Company, SICO
Acquisition, LLC, a Delaware limited liability company (“
MergerCo ”), Smith Investment Company, a Nevada
corporation (“ SICO ”), and Smith Investment
Company LLC, a Delaware limited liability company, are party to
that certain Agreement and Plan of Merger, dated as of the date
hereof (the “ Merger Agreement ”), pursuant to
which, among other things, SICO will be merged with and into
MergerCo (the “ Merger ”), and the outstanding
shares of common stock, par value $.10 per share, of SICO will be
converted in the Merger into the right to receive shares of common
stock, par value $1 per share, of the Company (the “
Common Stock ”) and shares of Class A common
stock, par value $5 per share, of the Company (the “ Class
A Common Stock ”; and, together with the Common Stock,
the “ Company Common Stock ”);
WHEREAS, each Stockholder is a
stockholder of SICO and will receive shares of Company Common Stock
issued as consideration in the Merger;
WHEREAS, in considering the Merger,
the Company has determined that it is advisable and in the best
interests of the Company and its stockholders to condition its
entry into the Merger on, among other things, the
Stockholders’ agreement to certain standstill and other
obligations set forth in this Agreement with respect to the affairs
of the Company and the Company Common Stock; and
WHEREAS, in order to induce the
Company to cause the Merger to be completed, the Stockholders have
agreed to the standstill and other obligations set forth in this
Agreement with respect to the affairs of the Company and the
Company Common Stock.
NOW, THEREFORE, in consideration of
the mutual covenants and agreements set forth in this Agreement,
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
AGREEMENT
1.01 Definitions . Except as
otherwise provided herein, the following terms have the following
meanings for all purposes of this Agreement:
(a) “ Acquisition
Transaction ” shall mean any transaction or series of
transactions, directly or indirectly, involving any merger,
consolidation, share exchange, business combination, issuance of
securities, acquisition of securities, recapitalization, tender
offer, exchange offer or other transaction (regardless of whether
the Company is the surviving entity after the consummation of such
transaction) in which a Person, directly or indirectly, acquires
all or more than 50% of the assets or beneficial ownership of all
or more than 50% of any class of stock of the Company; provided,
however, that the term “Acquisition Transaction” shall
not include (i) the Merger or any other transactions
contemplated by the Merger Agreement, (ii) entry into and
performance under the terms of the Voting Trust Agreement, or
(iii) any acquisition of shares of Company Common Stock by a
Stockholder (A) from any Existing Class A Holder or from
any Permitted Transferee (each as defined in the proposed Amended
and Restated Certificate of Incorporation of the Company, a form of
which is appended to the Merger Agreement as Exhibit J),
(B) in a “brokers transaction” (within the meaning
of Rule 144 under the Securities Act) or (C) in any privately
negotiated transaction that does not otherwise constitute a
“tender offer” (within the meaning of
Section 14(d) under the Exchange Act).
(b) “ beneficially owns
” (or comparable variations thereof) has the meaning set
forth in Rule 13d-3 promulgated under the Exchange Act.
(c) “ Bylaws ”
means the Amended and Restated Bylaws of the Company, as the same
may be amended and restated from time to time.
(d) “ Certificate of
Incorporation ” means the Amended and Restated
Certificate of Incorporation of the Company, as the same may be
amended and restated from time to time, and including the
amendments thereto contemplated by the Merger Agreement.
(e) “ Commission
” means the Securities and Exchange Commission.
(f) “ Controlled
Affiliate ” means a Person that, directly or indirectly,
through one or more intermediaries, is controlled by a Stockholder.
For purposes of this definition, “controlled by”, with
respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the
ownership of voting securities or by contract or
otherwise.
(g) “ Exchange Act
” means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
(h) “ Governmental
Authority ” shall mean any government, court, regulatory
or administrative agency, commission or authority, securities
exchange (including the NYSE) or other governmental
instrumentality, whether federal, state or local, domestic, foreign
or multinational.
(i) “ Person ”
means any individual, corporation, limited liability company,
partnership, trust, other entity or group (within the meaning of
Section 13(d)(3) of the Exchange Act).
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(j) “ Proxy Contest
” means any “solicitation” of
“proxies” (each within the meaning of
Section 14(a) of the Exchange Act) by a Person other than a
Stockholder, a Controlled Affiliate thereof, the Company or the
Board of Directors of the Company with respect to any matter
submitted for (i) consideration at any annual or special
meeting of the stockholders of the Company or (ii) stockholder
action by written consent.
(k) “ Securities Act
” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
(l) “ Standstill
Termination Date ” means the earliest of (i) three
years after the Effective Time, (ii) the date on which all of
the outstanding Class A Common Stock is automatically
converted into Common Stock in accordance with the Certificate of
Incorporation, (iii) the date on which the Company publicly
announces that it has entered into a definitive written agreement
with respect to an Acquisition Transaction, or (iv) ten
business days after a Person publicly announces an unsolicited
offer with respect to an Acquisition Transaction, if prior to such
tenth business day the Company has not issued a press release
expressly rejecting such Acquisition Transaction.
1.02 Standstill Agreement .
From and after the Effective Time until the Standstill Termination
Date, each Stockholder will not, and will cause its Controlled
Affiliates not to, directly or indirectly, without the prior
written approval of the Company’s Board of Directors or any
duly constituted committee thereof:
(a) Except in response to a Proxy
Contest, engage in or knowingly participate in, directly or
indirectly, or publicly announce an intention to engage in or
participate in, any “solicitation” of
“proxies” (each within the meaning of
Section 14(a) of the Exchange Act) from any Person other than
a Stockholder with respect to any matter submitted for
consideration (including the election of directors by holders of
the Common Stock, voting as a separate class, in accordance with
the Certificate of Incorporation) at any annual or special meeting
of the stockholders of the Company; provided however , that
nothing herein shall restrict or limit the ability of (i) the
holders of Class A Common Stock to solicit proxies or consents
solely regarding matters affecting the rights, preferences or
privileges of the Class A Common Stock that are exclusive to
the Class A Common Stock and not shared with the holders of
Company Common Stock, (ii) the holders of the Class A
Common Stock, voting as a separate class or voting with the holders
of Common Stock, to elect directors in accordance with the
Certificate of Incorporation, or (iii) the Stockholders to
vote their respective shares;
(b) Except in response to a Proxy
Contest or otherwise if initiated or not opposed by the Company,
initiate, knowingly participate in, or consent to the taking of any
stockholder action by consent without a meeting pursuant to
Section 228 of the DGCL; provided however, that nothing herein
shall restrict or limit the ability of (i) the holders of
Class A Common Stock to solicit consents, or to take action by
written consent, solely regarding matters affecting the rights,
preferences or privileges of the Class A Common Stock that are
exclusive to the Class A Common Stock and not shared with the
holders of Company Common Stock, or (ii) the holders of the
Class A Common Stock, voting or acting as a separate class or
voting or acting with the holders of Common Stock, to elect
directors in accordance with the Certificate of
Incorporation;
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(c) Submit, otherwise solicit
stockholder approval for, or take any action that would result in a
public announcement related to, any proposal for consideration at
any annual or special meeting of the stockholders of the Company
(including pursuant to Rule 14a-8 under the Exchange
Act);
(d) Make, effect or commence an
Acquisition Transaction, or take any action that would reasonably
be expected to result in a public announcement of an Acquisition
Transaction;
(e) Enter into any agreements,
arrangements or understandings with any other Person with respect
to any matter described in this Section 1.02, including
forming, joining or knowingly participating in a
“group” (within the meaning of Section 13(d)(3) of
the Exchange Act) with respect to the Company or the Company Common
Stock; provided, however, that nothing herein shall limit any
Stockholder from forming, joining or participating in a
“group” (i) comprised solely of the Stockholders
and their respective Controlled Affiliates, (ii) created by
entry into and the conduct of the Voting Trust Agreement,
(iii) created as a result of any transaction undertaken for
bona fide estate planning purposes, and/or (iv) created as a
result of a transaction expressly permitted by this Agreement;
or
(f) Except as provided in the Voting
Trust Agreement, directly or indirectly sell, assign, gift,
bequeath, appoint or otherwise dispose of any shares of
Class A Common Stock to a Permitted Transferee unless the
transferee is a Stockholder or becomes a party to this Agreement by
executing a counterpart signature page to this
Agreement.
The provisions of this
Section 1.02 shall not impair or affect in any way the
exercise by any Stockholder or any of its Controlled Affiliates of
his or her fiduciary or other duties as a director, officer or
employee of the Company in his or her capacity as such, nor shall
any action in such capacity constitute a breach of this
Agreement.
1.03 Stockholder
Representations . Each Stockholder, severally and not jointly,
hereby represents and warrants to the Company as
follows:
(a) This Agreement has been duly and
validly executed and delivered by such Stockholder and constitutes
a legally valid and binding obligation of such Stockholder
enforceable against such Stockholder in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors’ rights generally and by general
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(b) The execution and delivery by
such Stockholder of this Agreement do not, and the performance by
such Stockholder of such Stockholder’s obligations under this
Agreement will not: (i) conflict with or result in a violation
or breach of any term or provision of any law, statute, rule or
regulation or any order, judgment or decree of any Governmental
Authority applicable to such Stockholder; or (ii) conflict
with or result in a violation or breach of, constitute (with or
without notice or lapse of time or both) a default under, or
require such Stockholder to obtain any consent, approval or action
of, make any filing with or give any notice to any Person as a
result or under the terms of, any contract, permit, license,
agreement or arrangement to which such Stockholder is a party or by
which such Stockholder may be bound.
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(c) No consent, approval or action
of, filing with or notice to any Governmental Authority on the part
of such Stockholder is required in connection with the execution
and delivery of this Agreement, other than any filing with the
Commission required in connection with the execution and delivery
of this Agreement.
1.04 Company Representations
. The Company hereby represents and warrants to each Stockholder as
follows:
(a) The Company is a corporation
duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. The Company has the requisite
corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby.
(b) The execution and delivery by
the Company of this Agreement, and the performance by the Company
of its obligations hereunder, have been duly and validly authorized
by the Board of Directors of the Company, no other corporate action
on the part of the Company or its stockholders being necessary.
This Agreement has been duly and validly executed and delivered by
the Company a
