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REGISTRATION NO. 333-25325
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ACORN PRODUCTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 3423 22-3265462
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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GAVRIL MIHALY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
500 DUBLIN AVENUE 500 DUBLIN AVENUE
COLUMBUS, OHIO 43216-1930 COLUMBUS, OHIO 43216-1930
(614) 222-4400 (614) 222-4400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE (NAME, ADDRESS, INCLUDING ZIP CODE, AND
NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT
PRINCIPAL EXECUTIVE OFFICES) FOR SERVICE)
WITH COPIES TO:
CONOR D. REILLY, ESQ. CHRISTOPHER M. KELLY, ESQ.
GIBSON, DUNN & CRUTCHER LLP JONES, DAY, REAVIS & POGUE
200 PARK AVENUE 901 LAKESIDE AVENUE
NEW YORK, NEW YORK 10166-0193 CLEVELAND, OHIO 44114
(212) 351-4000 (216) 586-3939
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practical after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Registrant's expenses in connection with the Offering described in this
registration statement are set forth below. All amounts except the Securities
and Exchange Commission registration fee, the National Association of Securities
Dealers, Inc. (the "NASD") filing fee and the Nasdaq National Market listing fee
are estimated.
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Securities and Exchange Commission registration fee...................... $ 17,000
NASD filing fee.......................................................... 6,100
Printing and engraving expenses.......................................... 300,000
Accounting fees and expenses............................................. 200,000
Legal fees and expenses.................................................. 200,000
Nasdaq National Market listing fee....................................... 36,000
Fees and expenses (including legal fees) for qualifications under state
securities laws........................................................ 10,000
Transfer agent's fees and expenses....................................... 5,000
Miscellaneous............................................................ 225,900
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Total............................................................... $ 1,000,000
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* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") makes
provision for the indemnification of officers and directors of corporations in
terms sufficiently broad to indemnify the officers and directors of the
Registrant under certain circumstances from liabilities (including reimbursement
of expenses incurred) arising under the Securities Act of 1933, as amended (the
"Securities Act").
As permitted by the DGCL, the Registrant's Certificate of Incorporation
(the "Charter") provides that, to the fullest extent permitted by the DGCL, no
director shall be liable to the Registrant or to its stockholders for monetary
damages for breach of his fiduciary duty as a director. Delaware law does not
permit the elimination of liability (i) for any breach of the director's duty of
loyalty to the Registrant or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) in respect of certain unlawful dividend payments or stock redemptions
or repurchases or (iv) for any transaction from which the director derives an
improper personal benefit. The effect of this provision in the Charter is to
eliminate the rights of the Registrant and its stockholders (through
stockholders' derivative suits on behalf of the Registrant) to recover monetary
damages against a director for breach of fiduciary duty as a director thereof
(including breaches resulting from negligent or grossly negligent behavior)
except in the situations described in clauses (i)-(iv), inclusive, above. These
provisions will not alter the liability of directors under federal securities
laws.
The Registrant's Bylaws (the "Bylaws") provide that the Registrant may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Registrant) by reason of the fact that he is or was a director,
officer, employee or agent of the Registrant or is or was serving at the request
of the Registrant as a director, officer, employee or agent of another
corporation or enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Registrant, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful.
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The Bylaws also provide that the Registrant may indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the Registrant to procure a
judgment in its favor by reason of the fact that such person acted in any of the
capacities set forth above, against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted under similar
standards, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the Registrant unless and only to the extent that the Court of Chancery of the
State of Delaware or the court in which such action or suit was brought shall
determine upon application that despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
The Bylaws also provide that to the extent a director or officer of the
Registrant has been successful in the defense of any action, suit or proceeding
referred to in the previous paragraphs or in the defense of any claim, issue, or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith; that
indemnification provided for in the Bylaws shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that the
Registrant may purchase and maintain insurance on behalf of a director or
officer of the Registrant against any liability asserted against him or incurred
by him in any such capacity or arising out of his status as such whether or not
the Registrant would have the power to indemnify him against such liabilities
under such Bylaws.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Registrant has not issued or sold securities within the past three
years pursuant to offerings that were not registered under the Securities Act,
except as follows:
(a) In December 1993, Acorn issued a subordinated promissory note in
the aggregate principal amount of $25 million to several investment funds
and accounts (the "TCW Funds") managed by affiliates of the TCW Group, Inc.
This note was restated in May 1994.
(b) In May 1994, Acorn issued a subordinated promissory note in the
aggregate principal amount of approximately $6.4 million to the TCW Funds.
(c) Pursuant to the terms of an employment agreement dated as of
January 1994 between Acorn and Joseph I. Duffy, Acorn granted to Mr. Duffy
an option to purchase 63,624 shares of Common Stock. The vesting schedule
and exercise price per share were determined based on certain profitability
targets. Options to purchase 15,906 shares of Common Stock vested in fiscal
1995 and options to purchase 15,906 and 31,812 shares of Common Stock
expired in fiscal 1995 and fiscal 1996, respectively.
(d) Pursuant to the terms of an employment agreement dated as of
January 1994 between Acorn and Gabe Mihaly, Acorn granted to Mr. Mihaly an
option to purchase 47,718 shares of Common Stock. The vesting schedule and
exercise price per share were determined based on certain profitability
targets. Options to purchase 11,568 shares of Common Stock vested in fiscal
1995, options to purchase 5,784 shares and 17,352 shares of Common Stock
vested and expired, respectively, the nine months ended May 2, 1996 and
options to purchase 5,784 shares and 7,230 shares of Common Stock will vest
and expire, respectively, upon consummation of the Offering.
(e) In May 1994, Acorn sold 17,352 shares of Common Stock to Joseph I.
Duffy for an aggregate purchase price of $210,000.
(f) In May 1994, Acorn sold 20,244 shares of Common Stock to Gabe
Mihaly for an aggregate purchase price of $245,000.
(g) Pursuant to the terms of an employment agreement dated as of
August 1994 between Acorn and L. Edwin Donegan, Jr., Acorn granted to Mr.
Donegan an option to purchase 15,906 shares of Common Stock. All such
options expired.
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(h) Pursuant to the terms of an option agreement dated as of August 1,
1995, the Company granted John I. Leahy an option to purchase 14,460 shares
of Common Stock at an exercise price of $12.10 per share. Mr. Leahy
exercised the option with respect to 7,230 shares of Common Stock in each
of November 1995 and November 1996.
(i) In August 1996, Acorn issued 100 shares of Series A Preferred
Stock to the TCW Funds as payment in full of approximately $8.6 million in
accrued interest on the Subordinated Notes for fiscal 1995 and fiscal 1996.
(j) In December 1996, Acorn issued a subordinated promissory note in
the aggregate principal amount of $6 million to the TCW Funds.
The transactions set forth above were undertaken in reliance upon the
exemptions from the registration requirements of the Securities Act afforded by
(i) Section 4(2) thereof and/or Regulation D promulgated thereunder, as sales
not involving a public offering, and/or (ii) Rule 701 promulgated thereunder, as
sales by an issuer to employees, directors, officers, consultants or advisors
pursuant to written compensatory benefit plans or written contracts relating to
the compensation of such persons. The purchasers of the securities described
above acquired such securities for their own account not with a view to any
distribution thereof to the public.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) Exhibits
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EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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1.1 Form of Underwriting Agreement
2.1 Asset Purchase Agreement, dated as of February 19, 1997, between Greif Bros.
Corporation and UnionTools, Inc.**
3.1 Amended and Restated Certificate of Incorporation of Acorn Products, Inc.**
3.2 Amended and Restated Bylaws of Acorn Products, Inc.**
4.1 Specimen of Certificate for Common Stock**
5.1 Opinion of Gibson, Dunn & Crutcher LLP**
10.1 Employment Agreement dated May 29, 1997, between the Company, UnionTools and Gabe
Mihaly
10.2.1 Employee Severance Agreement, dated as of May 29, 1997, between the Company and
James B. Farland
10.2.2 Employee Severance Agreement, dated as of May 29, 1997, between the Company and
Thomas A. Hyrb
10.2.3 Employee Severance Agreement, dated as of May 29, 1997, between the Company and
Stephen M. Kasprisin
10.3 Acorn Products, Inc. Deferred Equity Compensation Plan for Directors
10.4 Acorn Products, Inc. 1997 Stock Incentive Plan
10.5 Standard Form of Acorn Products, Inc. Stock Option Agreement**
10.6 UnionTools, Inc. Retirement Plan for Salaried Employees**
10.7 Amendment No. 1 to UnionTools, Inc. Retirement Plan for Salaried Employees**
10.8 Acorn Products, Inc. Supplemental Pension Plan for Executive Employees**
10.9 Amended and Restated Credit Agreement between UnionTools and Heller Financial,
Inc. dated as of May 20, 1997**
10.10 License Agreement, dated as of August 1, 1992, between The Scott Company and
UnionTools**
10.11 Form of Registration Rights Agreement, dated as of May , 1997, between Acorn
Products, Inc. and various funds and accounts managed by TCW Special Credits**
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EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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10.12 Form of Registration Rights Agreement, dated as of May , 1997, between Acorn
Products, Inc. and OCM Principal Opportunities Fund, L.P.**
10.13 Letter dated May 30, 1997, between Acorn Products, Inc. and Kirkland Messina LLC**
11.1 Statement re computation of earnings per share (See Note 14 of the Notes to the
Consolidated Financial Statements)**
21.1 Subsidiaries of the Registrant**
23.1 Consent of Ernst & Young LLP**
23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included in signature page to registration statement)**
27.1 Financial Data Schedule**
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** Previously filed.
(B) Financial Statement Schedules
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SCHEDULE
NUMBER DESCRIPTION OF SCHEDULE
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I Condensed Financial Information of Registrant
II Valuation and Qualifying Accounts
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ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 3 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Columbus, State of Ohio, on June 18, 1997.
ACORN PRODUCTS, INC.
By: /s/ GAVRIL MIHALY
------------------------------------
Gavril Mihaly
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 3 to the Registration Statement has been signed by the
following persons in the capacity indicated on June 18, 1997.
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SIGNATURE TITLE
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/s/ GAVRIL MIHALY Chief Executive Officer and President
- --------------------------------------------- (Principal Executive Officer)
Gavril Mihaly
/s/ STEPHEN M. KASPRISIN Chief Financial Officer and Treasurer
- --------------------------------------------- (Principal Financial and Accounting Officer)
Stephen M. Kasprisin
/s/ CONOR D. REILLY Chairman of the Board
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Conor D. Reilly
Director
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William W. Abbott
* Director
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Matthew S. Barrett
* Director
- ---------------------------------------------
Stephen A. Kaplan
* Director
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John I. Leahy
*By: /s/ GAVRIL MIHALY
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Gavril Mihaly
Attorney-in-Fact
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EXHIBIT INDEX
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EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
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1.1 Form of Underwriting Agreement............................................
2.1 Asset Purchase Agreement, dated as of February 19, 1997, between Greif
Bros. Corporation and UnionTools, Inc.**..................................
3.1 Amended and Restated Certificate of Incorporation of Acorn Products,
Inc.**....................................................................
3.2 Amended and Restated Bylaws of Acorn Products, Inc.**.....................
4.1 Specimen of Certificate for Common Stock**................................
5.1 Opinion of Gibson, Dunn & Crutcher LLP**..................................
10.1 Employment Agreement dated May 29, 1997, between the Company, UnionTools
and Gabe Mihaly...........................................................
10.2.1 Employee Severance Agreement, dated as of May 29, 1997, between the
Company and James B. Farland..............................................
10.2.2 Employee Severance Agreement, dated as of May 29, 1997, between the
Company and Thomas A. Hyrb................................................
10.2.3 Employee Severance Agreement, dated as of May 29, 1997, between the
Company and Stephen M. Kasprisin..........................................
10.3 Acorn Products, Inc. Deferred Equity Compensation Plan for Directors......
10.4 Acorn Products, Inc. 1997 Stock Incentive Plan............................
10.5 Standard Form of Acorn Products, Inc. Stock Option Agreement**............
10.6 UnionTools, Inc. Retirement Plan for Salaried Employees**.................
10.7 Amendment No. 1 to UnionTools, Inc. Retirement Plan for Salaried
Employees**...............................................................
10.8 Acorn Products, Inc. Supplemental Pension Plan for Executive
Employees**...............................................................
10.9 Amended and Restated Credit Agreement between UnionTools and Heller
Financial, Inc. dated as of May 20, 1997**................................
10.10 License Agreement, dated as of August 1, 1992, between The Scott Company
and UnionTools**..........................................................
10.11 Form of Registration Rights Agreement, dated as of May , 1997, between
Acorn Products, Inc. and various funds and accounts managed by TCW Special
Credits**.................................................................
10.12 Form of Registration Rights Agreement, dated as of May , 1997, between
Acorn Products, Inc. and OCM Principal Opportunities Fund, L.P.**.........
10.13 Letter dated May 30, 1997, between Acorn Products, Inc. and Kirkland
Messina LLC**.............................................................
11.1 Statement re computation of earnings per share (See Note 14 of the Notes
to the Consolidated Financial Statements)**...............................
21.1 Subsidiaries of the Registrant**..........................................
23.1 Consent of Ernst & Young LLP**............................................
23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1)..........
24.1 Power of Attorney (included in signature page to registration
statement)**..............................................................
27.1 Financial Data Schedule**.................................................
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** Previously filed.
<PAGE> 1
3,250,000 SHARES
COMMON STOCK
($.001 PAR VALUE)
UNDERWRITING AGREEMENT
June __, 1997
A.G. EDWARDS & SONS, INC.
MORGAN KEEGAN & COMPANY, INC.
As Representative of the Several Underwriters
c/o A.G. Edwards & Sons, Inc.
One North Jefferson Avenue
St. Louis, Missouri 63103
The undersigned, Acorn Products, Inc., a Delaware corporation (the
"Company"), and UnionTools, Inc., a Delaware corporation (the "Subsidiary"),
hereby address you as the representatives (the "Representatives") of each of the
persons, firms and corporations listed on Schedule I hereto (collectively, the
"Underwriters") and hereby confirms its agreement with the several Underwriters
as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell to the
Underwriters 3,250,000 shares of Common Stock, par value $.001 per share of the
Company (the "Common Stock") (such 3,250,000 shares of Common Stock are herein
referred to as the "Firm Shares"). Solely for the purpose of covering
over-allotments in the sale of the Firm Shares, the Company further proposes to
grant to the Underwriters the right to purchase up to an additional 487,500
shares of Common Stock (the "Option Shares"), as provided in Section 3 of this
Agreement. The Firm Shares and the Option Shares are herein sometimes referred
to as the "Shares" and are more fully described in the Prospectus hereinafter
defined.
2. PURCHASE, SALE AND DELIVERY OF FIRM SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each such Underwriter agrees, severally and not jointly, (a)
to purchase from the Company at a purchase price of $___ per share, the number
of Firm Shares set forth opposite the name of such Underwriter in Schedule I
hereto and (b) to purchase from the Company any additional number of Option
Shares which such Underwriter may become obligated to purchase pursuant to
Section 3 hereof.
The Company will deliver definitive certificates for the Firm Shares at
the office of A.G. Edwards & Sons, Inc., 77 Water Street, New York, New York
("Edwards' Office"), or such other place as you and the Company may mutually
agree upon (the "Place of Closing"), for the accounts of the Underwriters
against payment by or on behalf of such Underwriter to the Company of the
purchase price for the Firm Shares sold by the Company to the several
Underwriters by wire transfer in same day funds payable to the order of the
Company at 8:00 a.m., St. Louis time, on _____________, 1997, or at such other
time and date not later
<PAGE> 2
than five full business days thereafter as you and the Company may agree, such
time and date of payment and delivery being herein called the "Closing Date."
The certificates for the Firm Shares so to be delivered will be made
available to you for inspection at Edwards' Office (or such other place as you
and the Company may mutually agree upon) at least one full business day prior to
the Closing Date and will be in such names and denominations as you may request
at least two full business days prior to the Closing Date.
It is understood that the Underwriters propose to offer the Shares to
the public upon the terms and conditions set forth in the Registration Statement
hereinafter defined.
3. PURCHASE, SALE AND DELIVERY OF THE OPTION SHARES. The Company hereby
grants options to the Underwriters to purchase from the Company 487,500 Option
Shares on the same terms and conditions as the Firm Shares; provided, however,
that such options may be exercised only for the purpose of covering any
over-allotments which may be made by the Underwriters in the sale of the Firm
Shares. No Option Shares shall be sold or delivered unless the Firm Shares
previously have been, or simultaneously are, sold and delivered.
The options are exercisable on behalf of the several Underwriters by
you, as Representatives, at any time, and from time to time, before the
expiration of 30 days from the date of this Agreement, for the purchase of all
or part of the Option Shares covered thereby, by notice given by you to the
Company in the manner provided in Section 12 hereof, setting forth the number of
Option Shares as to which the Underwriters are exercising the options, and the
date of delivery of said Option Shares, which date shall not be less than three
business days nor more than five business days after such notice unless
otherwise agreed to by the parties. You may terminate the options at any time,
as to any unexercised portion thereof, by giving written notice to the Company
to such effect.
You, as Representatives, shall make such allocation of the Option
Shares among the Underwriters as may be required to eliminate purchases of
fractional Shares.
Delivery of the Option Shares with respect to which the options shall
have been exercised shall be made to or upon your order at Edwards' Office (or
at such other place as you and the Company may mutually agree upon), against
payment by you of the per share purchase price to the Company by wire transfer
payable in same day funds. Such payment and delivery shall be made at 8:00 a.m.,
St. Louis time, on the date designated in the notice given by you as above
provided for, unless some other date and time are agreed upon, which date and
time of payment and delivery are called the "Option Closing Date." The
certificates for the Option Shares so to be delivered will be made available to
you for inspection at Edwards' Office at least one full business day prior to
the Option Closing Date and will be in such names and denominations as you may
request at least two full business days prior to the Option Closing Date. On the
Option Closing Date, the Company shall provide the Underwriters such
representations, warranties, opinions and covenants with respect to the Option
Shares as are required to be delivered on the Closing Date with respect to the
Firm Shares.
2
<PAGE> 3
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
(a) The Company and its Subsidiary, represent and warrant to and agree
with each Underwriter that:
(i) A registration statement (Registration No. 333-25325) on
Form S-1 with respect to the Shares, including a preliminary
prospectus, and such amendments to such registration statement as may
have been required to the date of this Agreement, has been prepared by
the Company pursuant to and in conformity with the requirements of the
Securities Act of 1933 (the "Act"), and the Rules and Regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder (except that the registration statement and
the preliminary prospectus as filed with the Commission on April 17,
1997 did not include an estimated range of the maximum offering price
and share and per share data) and has been filed with the Commission
under the Act. Copies of such registration statement, including any
amendments thereto, each related preliminary prospectus (meeting the
requirements of Rule 430 or 430A of the Rules and Regulations)
contained therein, the exhibits, financial statements and schedules
have heretofore been delivered by the Company to you. If such
registration statement has not become effective under the Act, a
further amendment to such registration statement, including a form of
final prospectus, necessary to permit such registration statement to
become effective will be filed promptly by the Company with the
Commission but no later than 9:00 a.m. on the first Business Day
following the date of this Agreement. If such registration statement
has become effective under the Act, a final prospectus containing
information permitted to be omitted at the time of effectiveness by
Rule 430A of the Rules and Regulations will be filed promptly by the
Company with the Commission in accordance with Rule 424(b) of the Rules
and Regulations. The term "Registration Statement" as used herein means
the registration statement as amended at the time it becomes or became
effective under the Act (the "Effective Date"), including financial
statements and schedules, all exhibits and any information contained in
any final prospectus filed with the Commission pursuant to Rule 424(b)
of the Rules and Regulations and, if applicable, the information deemed
to be included by Rule 430A of the Rules and Regulations. The term
"Prospectus" as used herein means (1) the prospectus as first filed
with the Commission pursuant to Rule 424(b) of the Rules and
Regulations or (2) if no such filing is required, the form of final
prospectus included in the Registration Statement at the Effective
Date. The term "Preliminary Prospectus" as used herein shall mean a
preliminary prospectus as contemplated by Rule 430 or 430A of the Rules
and Regulations included at any time in the Registration Statement.
(ii) The Commission has not issued, and is not to the
knowledge of the Company threatening to issue, an order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus nor
instituted proceedings for that purpose. Each Preliminary Prospectus at
its date of issue, the Registration Statement and the Prospectus and
any amendments or supplements thereto contains or will contain, as the
case may be, all statements which are required to be stated therein by,
and in all material respects conform or will conform, as the case may
be, to the requirements of, the Act
3
<PAGE> 4
and the Rules and Regulations (except that the Preliminary Prospectus
dated April 17, 1997 did not include an estimated range of the maximum
offering price and share and per share data). Neither the Registration
Statement nor any amendment thereto, as of the applicable Effective
Date, and neither the Prospectus nor any supplement thereto contains or
will contain, as the case may be, as of its date, any untrue statement
of a material fact or omits or will omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that the Company makes no
representation or warranty as to information contained in or omitted
from the Registration Statement or the Prospectus, or any such
amendment or supplement, in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of the
Underwriters specifically for use in the preparation thereof.
(iii) The filing of the Registration Statement has been duly
authorized by the Board of Directors of the Company and the execution
and delivery of this Agreement has been duly authorized by the Board of
Directors of the Company and its Subsidiary; this Agreement has been
duly authorized, executed and delivered by the Company and the
Subsidiary and constitutes a valid and legally binding obligation of
the Company and the Subsidiary enforceable in accordance with its terms
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditors' rights
generally and by general principles of equity; the issue and sale of
the Shares by the Company and the consummation by the Company of the
transactions to be performed by the Company contemplated herein will
not (1) result in a violation of the Company's or the Subsidiary's
certificate of incorporation or bylaws or (2) result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any properties or assets of the Company or
its Subsidiary under, any indenture, mortgage, deed of trust, note,
loan agreement, sale and leaseback arrangement or other agreement or
instrument to which the Company or its Subsidiary is a party or any
existing statute, order, rule or regulation of any United States court
or governmental agency or body having jurisdiction over the Company or
its Subsidiary or their properties, except in the case of clause (2) to
such extent as does not materially adversely affect the business,
prospects, financial condition or results of operations of the Company
and its Subsidiary, taken as a whole; no consent, approval,
authorization, order, registration or qualification of or with any
United States court or governmental agency or body is required to be
obtained by the Company for the sale of the Shares to the Underwriters
or the consummation by the Company of the transaction to be performed
by the Company herein contemplated, except such as may be required by
the National Association of Securities Dealers, Inc. (the "NASD") or
any state or foreign securities laws under the Act or Rules and
Regulations.
(iv) Except as described in the Prospectus, neither the
Company nor its Subsidiary has sustained since the date of the latest
audited financial statements included in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree (other than
losses or interferences which
4
<PAGE> 5
do not materially adversely affect the business, prospects, financial
condition or results of operations of the Company and the Subsidiary
taken as a whole). Except as contemplated in the Prospectus, subsequent
to the respective dates as of which information is given in the
Registration Statement and the Prospectus, the Company and its
Subsidiary, taken as a whole have not incurred any liabilities or
obligations, direct or contingent, other than in the ordinary course of
business, or entered into any transactions not in the ordinary course
of business, and, except for the issuance of shares of Common Stock
upon the exercise of options outstanding on the date hereof, there has
not been any change in the capital stock or increase in the long-term
debt of the Company and its Subsidiary taken as a whole or any material
adverse change in the business, prospects, financial condition or
results of operations of the Company and its Subsidiary, taken as a
whole. The Company and its Subsidiary have filed all necessary federal,
state and foreign income and franchise tax returns and paid all taxes
shown as due thereon; all tax liabilities are adequately provided for
on the books of the Company and its Subsidiary except to such extent as
would not materially adversely affect the business, prospects,
financial condition or results of operations of the Company and its
Subsidiary, taken as a whole; and the Company and its Subsidiary have
no knowledge of any tax proceeding or action pending or threatened
against the Company or its Subsidiary which could reasonably be
expected, to materially adversely affect the business, prospects,
financial condition or results of operations of the Company and the
Subsidiary, taken as a whole.
(v) Except as described in the Prospectus, there are no legal,
governmental or regulatory proceedings pending or threatened to which
the Company or the Subsidiary are a party or of which any property of
the Company or the Subsidiary is the subject which could reasonably be
expected to have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and the
Subsidiary taken as a whole; and there are no contracts or documents of
the Company or its Subsidiary which would be required to be filed as
exhibits to the Registration Statement by the Act or by the Rules and
Regulations which have not been filed as exhibits to the Registration
Statement.
(vi) The outstanding shares of Common Stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable and were not issued in violation of any preemptive or
similar rights arising by or through the Company. The Shares have been
duly authorized and, when issued and delivered to and paid for by the
Underwriters in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable and are not the subject of any
preemptive or similar rights arising by or through the Company. The
Company has an authorized, issued and outstanding capitalization as set
forth in the Registration Statement and the Prospectus. The authorized
capital stock of the Company conforms to the description thereof
contained in the Registration Statement and the Prospectus in all
material respects. Except as set forth in the Registration Statement
and the Prospectus, the Company does not have outstanding any options
to purchase, or any rights or warrants to subscribe for, or any
securities or obligations convertible into or exchangeable for, or any
contracts or commitments to issue or sell, any shares of its capital
stock or any such warrants,
5
<PAGE> 6
convertible securities or obligations. No person has any right to have
any securities of the Company held by them registered under the Act in
connection with the Offering.
(vii) The Company and its Subsidiary have been duly
incorporated and are validly existing as corporations in good standing
under the laws of the State of Delaware, with corporate power and
authority to own, lease and operate their properties and conduct their
businesses as described in the Registration Statement; the Company and
its Subsidiary are duly qualified to do business as foreign
corporations in good standing in each state or other jurisdiction in
which their ownership or leasing of property or conduct of business
legally requires such qualification, except where the failure to be so
qualified, would not, individually or in the aggregate, materially
adversely affect the business, prospects, financial condition or
results of operations of the Company and the Subsidiary, taken as a
whole; and all of the outstanding shares of capital stock of the
Company's Subsidiary have been duly authorized and validly issued, are
fully paid and nonassessable and, except as described or referred to in
the Registration Statement and Prospectus, are owned by the Company
free and clear of any mortgage, pledge, lien, encumbrance, charge or
adverse claim; no options, warrants or other rights to purchase,
agreement or other obligations to issue or other rights to convert any
obligations into shares of capital stock or ownership interests in the
Subsidiary are outstanding.
(viii) Ernst & Young LLP, the accounting firm which has
certified the financial statements filed with the Commission as a part
of the Registration Statement, is an independent public accounting firm
within the meaning of the Act and the Rules and Regulations.
(ix) The consolidated financial statements and schedules of
the Company, including the notes thereto, filed with and as a part of
the Registration Statement and the Prospectus, present fairly the
consolidated financial position of the Company and its Subsidiary as of
the respective dates thereof and the consolidated results of operations
and statements of cash flow for the respective periods covered thereby,
all in conformity with generally accepted accounting principles applied
on a consistent basis throughout the periods involved except as
otherwise disclosed in the Registration Statement or the Prospectus.
The selected financial data included in the Registration Statement and
Prospectus present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statements in the Registration Statement and Prospectus.
(x) Each of the Company and its Subsidiary has all
governmental licenses, permits, consents, orders, approvals,
franchises, certificates and other authorizations (collectively,
"Licenses") necessary to carry on its business and own or lease its
properties as contemplated in the Registration Statement and
Prospectus, except such Licenses, the failure to so have would not have
an adverse effect on the business, prospects, financial condition or
results of operations of the Company and its Subsidiary, taken as a
whole. Each of the Company and its Subsidiary has complied in all
respects with all laws, regulations and orders applicable to it or its
business, assets and properties except for such non-compliance as could
not reasonably be expected to have a material
6
<PAGE> 7
adverse effect on the business, prospects, financial condition or
results of operations of the Company and the Subsidiary taken as a
whole. Each of the Company and its Subsidiary is not in breach or
default (nor has any event occurred which, with notice or lapse of time
or both, would constitute a default) in the due performance and
observation of any term, covenant or condition of any indenture,
mortgage, deed of trust, voting trust agreement, loan agreement, bond,
debenture, note agreement or other evidence of indebtedness, lease,
contract or other agreement or instrument (collectively, a "contract or
other agreement") to which it is a party, which default could
reasonably be expected, individually or in the aggregate, to have a
material adverse effect on the business, prospects, financial condition
or results of operations of the Company and its Subsidiary, taken as a
whole. Except as otherwise described in the Registration Statement and
Prospectus, there are no governmental proceedings or actions pending
or, to the Company's knowledge, threatened for the purpose of
suspending, modifying or revoking any License held by the Company or
its Subsidiary except such as could not reasonably be expected to have
a material adverse effect on the business, prospects, financial
condition or results of operations of the Company and the Subsidiary,
taken as a whole. The Company is not in violation of any provision of
its Certificate of Incorporation or Bylaws, as amended. The Subsidiary
is not in violation of its organizational documents, as amended.
Neither the Company nor the Subsidiary has, at any time during the past
five years, (1) made any unlawful contributions to any candidate for
any political office, or failed fully to disclose any contribution in
violation of law, or (2) made any payment to any state, federal or
foreign government official, or other person charged with similar
public or quasi-public duty (other than payment required or permitted
by applicable law).
(xi) Except as described in the Prospectus, the Company and
its Subsidiary own or possess, or can acquire on reasonable terms,
adequate patents, patent licenses, trademarks, service marks and trade
names necessary to conduct the business as currently operated by them,
and neither the Company nor any subsidiary has received any notice of
infringement of or conflict with asserted rights of others with respect
to any patents, patent licenses, trademarks, service marks or trade
names which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse
effect on the business, prospects, financial condition or results of
operations of the Company and its Subsidiary, taken as a whole.
(xii) The Company and its Subsidiary have good title to all
property owned by them, free and clear of all liens, encumbrances,
restrictions and defects except such as are described in the
Registration Statement or do not interfere with the use made and
proposed to be made of such property; and any property held under lease
or sublease by the Company or its Subsidiary is held under valid,
subsisting and enforceable leases or subleases with such exceptions as
are not material and do not interfere with the use made and proposed to
be made of such property by the Company and its Subsidiary, and neither
the Company nor any subsidiary has any notice or knowledge of any claim
of any sort which has been, or may be, asserted by anyone adverse to
the Company's or the Subsidiary's rights as lessee or sublessee under
any lease or sublease described above, or affecting or questioning the
Company's or any of its subsidiary's rights to the continued possession
of the leased or subleased premises under any such lease or sublease
7
<PAGE> 8
in conflict with the terms thereof except such as could not reasonably
be expected to materially adversely affect the business, prospects,
financial condition or results of operations of the Company and the
Subsidiary, taken as a whole.
(xiii) The business, operations and facilities of the Company
and its Subsidiary have been and are being conducted in compliance in
all material respects with all applicable laws, ordinances, rules,
regulations, Licenses, permits, approvals, plans, authorizations or
requirements relating to occupational safety and health, or pollution,
or protection of health or the environment (including, without
limitation, those relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants or hazardous or toxic
substances, materials or wastes into ambient air, surface water,
groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of chemical substances, pollutants, contaminants or hazardous or toxic
substances, materials or wastes, whether solid, gaseous or liquid in
nature) of any governmental department, commission, board, bureau,
agency or instrumentality of the United States or any state or
political subdivision thereof having jurisdiction over the Company or
its Subsidiary, and all applicable judicial or administrative agency or
regulatory decrees, awards, judgments and orders relating thereto,
except for such non-compliance as could not reasonably be expected to
have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company or its Subsidiary
taken as a whole; and none of the Company or its Subsidiary has
received any notice from any governmental instrumentality or any third
party alleging any violation thereof or liability thereunder
(including, without limitation, liability for costs of investigating or
remediating sites containing hazardous substances and/or damages to
natural resources), which violation could reasonably be expected to
have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company and its Subsidiary,
taken as a whole. The intended use and occupancy of each of the
facilities owned or operated by the Company or its Subsidiary complies
in all material respects with all applicable codes and zoning laws and
regulations except for such noncompliance as could not reasonably be
expected to have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and the
Subsidiary, taken as a whole, and there is no pending or, to the
knowledge of the Company, threatened condemnation, zoning change,
environmental or other proceeding or action that could reasonably be
expected to have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and the
Subsidiary, taken as a whole. Except as described in the Prospectus,
there is no factual basis for any action, suit or other proceeding
involving the Company or its Subsidiary or any of their material assets
for any failure of the Company or its Subsidiary, or any predecessor
thereof, to comply with any requirements of federal, state or local
regulation relating to air, water, solid waste management, hazardous or
toxic substances, or the protection of health or the environment except
such as could not reasonably be expected to have a material adverse
effect on the business, prospects, financial condition or results of
operations of the Company and the Subsidiary, taken as a whole.
8
<PAGE> 9
(xiv) Neither the Company nor its Subsidiary is involved in
any labor dispute with its employees which could reasonably be
expected, individually or in the aggregate, to have a material adverse
effect on the business, financial condition or results of operations of
the Company and its Subsidiary, taken as a whole, nor, to the Company's
knowledge, is any such dispute threatened or imminent.
(xv) Neither the Company nor any of its directors or officers
has taken nor will he, she or it take, directly or indirectly, any
action designed to or which might reasonably be expected to cause or
result in, under the Act or otherwise, or which has constituted,
stabilization or manipulation of the price of the Company's Common
Stock to facilitate sale or resale of the shares or otherwise and the
Company is not aware of any such action taken or to be taken by any
affiliates of the Company (within the meaning of the Rules and
Regulations).
(xvi) The Company is not an "investment company" or an entity
"controlled" by an "investment company" required to be registered under
the Investment Company Act of 1940, (the "Investment Company Act") (for
purposes of this Section 4(a)(xvi), "investment company" and
"controlled" shall have the meanings ascribed to such terms in the
Investment Company Act).
(b) Any certificate signed by any officer of the Company on behalf of
the Company and delivered to you or to counsel for the Underwriters shall be
deemed a representation and warranty by the Company to each Underwriter as to
the matters covered thereby.
5. ADDITIONAL COVENANTS. The Company covenants and agrees with the
several Underwriters that:
(a) If the Registration Statement is not effective under the Act, the
Company will use its reasonable best efforts to cause the Registration Statement
to become effective as promptly as possible, and it will notify you, promptly
after it shall receive notice thereof, of the time when the Registration
Statement has become effective. The Company (1) will prepare and timely file
with the Commission under Rule 424(b) of the Rules and Regulations, if required,
a Prospectus containing information previously omitted at the time of
effectiveness of the Registration Statement in reliance on Rule 430A of the
Rules and Regulations or otherwise; (2) will not file any amendment to the
Registration Statement or supplement to the Prospectus of which the Underwriters
shall not previously have been advised and furnished with a copy or to which the
Underwriters shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations; and (3) will promptly notify you
after it shall have received notice thereof of the time when any amendment to
the Registration Statement becomes effective or when any supplement to the
Prospectus has been filed.
(b) The Company will advise the Underwriters promptly, after it shall
receive notice or obtain knowledge thereof, of any request of the Commission for
amendment of the Registration Statement or for supplement to the Prospectus or
for any additional information, or of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the use of
the Prospectus or of the institution or threatening of any
9
<PAGE> 10
proceedings for that purpose, and the Company will use its reasonable best
efforts to prevent the issuance of any such stop order preventing or suspending
the use of the Prospectus and to obtain as soon as possible the lifting thereof,
if issued.
(c) The Company will cooperate with the Underwriters and their counsel
in endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as they may have designated and will make such applications, file
such documents, and furnish such information as may be necessary for that
purpose, provided the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction where it is not now so qualified or required to file such a consent
or to subject itself to taxation as doing business in any jurisdiction where it
is not now so taxed. The Company will, from time to time, file such statements,
reports, and other documents, as are or may be required to continue such
qualifications in effect for so long a period as is reasonably required for the
offering, sale and distribution of the Shares.
(d) The Company will deliver to, or upon the order of, the
Underwriters, without charge from time to time, as many copies of any
Preliminary Prospectus as they may reasonably request. The Company will deliver
to, or upon the order of, the Underwriters without charge as many copies of the
Prospectus, or as it thereafter may be amended or supplemented, as they may from
time to time reasonably request. The Company consents to the use of such
Prospectus by the Underwriters and by all dealers to whom the Shares may be
sold, both in connection with the offering or sale of the Shares and for such
period of time thereafter as the Prospectus is required by law to be delivered
in connection with the offering or sale of the Shares. The Company will deliver
to the Underwriters at or before the Closing Date two signed copies of the
Registration Statement and all amendments thereto including all exhibits filed
therewith, and will deliver to the Underwriters such number of copies of the
Registration Statement, without exhibits, and of all amendments thereto, as they
may reasonably request.
(e) If, during the period in which a prospectus is required by law to
be delivered by an Underwriter or dealer, any event shall occur as a result of
which, in the judgment of the Company or in your reasonable judgment or in the
reasonable opinion of counsel for the Underwriters, it becomes necessary to
amend or supplement the Prospectus in order to make the statements therein, in
light of the circumstances existing at the time the Prospectus is delivered to a
purchaser, not misleading, or, if it is necessary at any time to amend or
supplement the Prospectus to comply with any law, the Company promptly will
prepare and file with the Commission an appropriate amendment to the
Registration Statement or supplement to the Prospectus so that the Prospectus as
so amended or supplemented will not, in the light of the circumstances when it
is so delivered, be misleading, or so that the Prospectus will comply with law.
(f) The Company will make generally available to its shareholders
pursuant to the Securities and Exchange Act of 1934 (the "1934 Act"), as soon as
it is practicable to do so, but in any event not later than 18 months after the
effective date of the Registration Statement (as defined in Rule 158(c) under
the Act), a consolidated earnings statement of the Company and its Subsidiary
(which need not be audited) complying with Section 11(a) of the Act and the
Rules
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<PAGE> 11
and Regulations thereunder (including Rule 158) and will advise the Underwriters
in writing when such statement has been so made available.
(g) The Company will, for a period of two years from the Closing Date,
deliver to the Underwriters at their principal executive offices a reasonable
number of copies of annual reports, quarterly reports, current reports and
copies of all other documents, reports and information furnished by the Company
to its shareholders or filed with any securities exchange pursuant to the
requirements of such exchange or with the Commission pursuant to the Act or the
1934 Act. Any report, document or other information required to be furnished
under this paragraph (g) shall be furnished as soon as practicable after such
report, document or information becomes available.
(h) On the Closing Date, the Company will apply the net proceeds from
the sale of the Shares as set forth in the description under "Use of Proceeds"
in the Prospectus. The Company shall file such reports with the Commission with
respect to the sale of Shares and the application of the proceeds therefrom as
may be required in accordance with Rule 463 under the Act, including, without
limitation, Form SR.
(i) The Company will supply you with copies of all correspondence to
and from, and all documents issued to and by, the Commission in connection with
the registration of the Shares under the Act.
(j) Prior to the Closing Date (and, if applicable, the Option Closing
Date), the Company will furnish to you, as soon as they have been prepared,
copies of any unaudited interim consolidated financial statements of the Company
and its Subsidiary for any quarterly periods subsequent to the periods covered
by the financial statements appearing in the Registration Statement and the
Prospectus.
(k) The Company will use its reasonable best efforts to obtain approval
for, and maintain the quotation of the Shares on, the National Association of
Securities Dealers, Inc. Automated Quotation/National Market System (the
"NASDAQ/NMS").
(l) For a period of 180 days from the Effective Date, the Company will
not directly or indirectly sell, contract to sell or otherwise dispose of any
shares of the Company's Common Stock, any securities exchangeable for Common
Stock or any other rights to acquire such shares without your prior written
consent, except for the Shares sold hereunder and except for sales of shares of
Common Stock to the Company's employees pursuant to the exercise of employee or
director stock options, stock purchase or other employee benefit plans.
(m) Prior to the Closing Date (and, if applicable, the Option Closing
Date), the Company will not issue any press releases or other communications
directly or indirectly and will hold no press conferences with respect to the
Company or its Subsidiary, the financial condition, results of operations,
business, properties, assets or liabilities of the Company or its Subsidiary, or
the offering of the Shares, without your prior written consent.
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<PAGE> 12
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters to purchase and pay for the Shares, as provided herein, shall
be subject to the accuracy in all material respects, as of the date hereof and
as of the Closing Date (and, if applicable, the Option Closing Date), of the
representations and warranties of the Company and its Subsidiary contained
herein, to the performance in all material respects by the Company of its
covenants and obligations hereunder, and to the following additional conditions:
(a) All filings required by Rule 424 and Rule 430A of the Rules and
Regulations shall have been made. No stop order suspending the effectiveness of
the Registration Statement, as amended from time to time, shall have been issued
and no proceeding for that purpose shall have been initiated or, to the best
knowledge of the Company or any Underwriter, threatened or contemplated by the
Commission, and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the reasonable satisfaction of the Underwriters.
(b) The Registration Statement and all amendments thereto, or
modifications thereof, if any, shall not contain an untrue statement of a
material fact required to be stated therein or necessary to make the statements
therein not misleading and the Prospectus and all amendments or supplements
thereto, or modifications thereof, if any, shall not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) On the Closing Date, the Company shall have consummated the
Exchange (as defined in the Prospectus) as described in the Prospectus under the
caption "Prospectus Summary - The Fund Transactions."
(d) On the Closing Date (and, if applicable, the Option Closing Date),
you shall have received the opinion of counsel for the Company, addressed to you
and dated the Closing Date (and, if applicable, the Option Closing Date), to the
effect that:
(i) The Company and its Subsidiary have been duly incorporated
and are validly existing as corporations in good standing under the
laws of the State of Delaware, with corporate power and authority to
own, lease and operate their properties and conduct their businesses as
described in the Registration Statement; the Company and its Subsidiary
are duly qualified to do business as foreign corporations in good
standing in each state or other jurisdiction in which their ownership
or leasing of property or conduct of business legally requires such
qualification, except where the failure to be so qualified would not
have a material adverse effect on the business, prospects, financial
condition or results of operations of the Company and the Subsidiary,
taken as a whole; and the outstanding shares of capital stock of the
Company's Subsidiary have been duly authorized and validly issued, are
fully paid and nonassessable and, to the knowledge of such counsel, and
except as otherwise described or referred to in the Registration
Statement and the Prospectus, are owned by the Company free and clear
of any mortgage, pledge, lien, encumbrance, charge or adverse claim; to
the knowledge of such counsel, no options, warrants or other rights to
purchase, agreement or other obligations
12
<PAGE> 13
to issue or other rights to convert any obligations into shares of
capital stock or ownership interests in the Subsidiary are outstanding
except as described in the Registration Statement and the Prospectus.
(ii) The Company has duly and validly authorized capital stock
as set forth under the heading "Capitalization" in the Prospectus; all
outstanding shares of Common Stock of the Company and the Shares
conform as to legal matters to the description of the Common Stock
contained in the Registration Statement and the Prospectus, and the
outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable; the Shares have
been duly authorized and, when issued and delivered to and paid for by
the Underwriters in accordance with this Agreement, will be validly
issued, fully paid and non-assessable, and to the knowledge of such
counsel, are not the subject of any preemptive rights or similar rights
arising by or through the Company.
(iii) The Registration Statement has become effective under
the Act and the Company has filed the Prospectus pursuant to Rule
424(b) under the Act and, to the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted or
are pending or contemplated by the Commission under the Act.
(iv) No authorization, approval, consent, order, registration
or qualification of or with any United States court or governmental
body, authority or agency is required to be obtained by the Company for
the sale of the Shares to the Underwriters or the consummation by the
Company of the transactions to be performed by the Company contemplated
by this Agreement, except such as may be required under the Act or the
Rules and Regulations or as may be required by the NASD or under state
or foreign securities laws in connection with the purchase and
distribution of the Shares by the Underwriters.
(v) This Agreement has been duly authorized, executed and
delivered by the Company and its Subsidiary. The execution, delivery
and compliance by the Company with the provisions of this Agreement and
the consummation by the Company of the transactions to be performed by
the Company herein contemplated do not and will not result in a
violation of the Company's certificate of incorporation or bylaws or
result in a breach or violation of any of the terms and provisions of,
or constitute a default under, or result in the creation or imposition
of any lien, charge or encumbrance upon any properties or assets of the
Company and its Subsidiary under any statute, or under any indenture,
mortgage, deed of trust, note, loan agreement, sale and leaseback
arrangement, or any other agreement or instrument filed as an exhibit
to the Registration Statement or any order, rule or regulation (other
than foreign and state securities laws, as to which such counsel need
not express an opinion, and other than federal securities laws, as to
which such counsel need not express an opinion pursuant to this
paragraph 6(d)(v)) known to such counsel of any court of the United
States or state thereof or governmental agency or body having
jurisdiction over the Company or its Subsidiary or their properties,
except, in the case of any such violation, breach, default, creation or
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<PAGE> 14
imposition, to such extent could not reasonably be expected to have a
material adverse effect on the business, prospects, financial condition
or results of operations of the Company and its Subsidiary, taken as a
whole.
(vi) To the knowledge of such counsel, (1) except as described
in the Prospectus, there are no legal, governmental or regulatory
proceedings pending or threatened to which the Company or the
Subsidiary are a party or of which any property of the Company or the
Subsidiary is the subject which could reasonably be expected to have a
material adverse effect on the business, prospects, financial condition
or results of operations of the Company or its Subsidiary taken as a
whole; and (2) there are no contracts or documents of a character
required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement
which are not described or filed as required.
(vii) The Company is not an "investment company" or a company
"controlled" by an "investment company" required to be registered under
the Investment Company Act. For purposes of this Section 6(c)(vii), the
terms "investment company" and "controlled" shall have the meanings
ascribed to such terms in the Investment Company Act.
In addition, such counsel shall state that such counsel has
participated in the preparation of the Registration Statement and the Prospectus
and in conferences with officers and other representatives of the Company,
counsel for the Company, representatives of the independent auditors of the
Company and your representatives at which the contents of the Registration
Statement and Prospectus and related matters were discussed. Such counsel also
shall state that because the purpose of their professional engagement was not to
establish or confirm factual matters and because the scope of their examination
of the affairs of the Company did not permit them to verify the accuracy,
completeness or fairness of the statements set forth in the Registration
statement or Prospectus, they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or Prospectus, except as to the extent
set forth in the last sentence of this paragraph. Such counsel shall also state
that on the basis of the foregoing, and except for the financial statements and
schedules and other financial data included therein, as to which such counsel
need express no opinion or believe, (a) such counsel is of the opinion that the
Registration Statement at the time it became effective, and the Prospectus as of
the date thereof and as of the date of such opinion, appeared on their face to
be appropriately responsive in all material respects to the relevant
requirements of the Securities Act and the General Rules and Regulations
promulgated thereunder and (b) no facts have come to such counsel's attention
that lead such counsel to believe that (i) the Registration Statement at the
time it became effective contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (ii) the Prospectus as of its
date and as of the date of such opinion, contained or contains an untrue
statement of a material fact or omitted or omits to state 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. Such
counsel also shall state that insofar as the statements contained in the
Registration Statement and the Prospectus under the caption "Description of
14
<PAGE> 15
Capital Stock" constitute a summary of the documents and legal matters referred
to therein, such counsel is of the opinion that such statements fairly present
the information called for with respect to such documents and legal matters by
the Securities Act and the applicable rules and regulations of the Commission
thereunder relating to registration statements on Form S-1 and prospectuses.
In rendering the foregoing opinion, such counsel may state
that they express no opinion as to the laws of any jurisdiction other than the
State of New York, the General Corporation Law of the State of Delaware and the
federal law of the United States.
(e) You shall have received on the Closing Date (and, if applicable,
the Option Closing Date), from Jones, Day, Reavis & Pogue, counsel to the
Underwriters, such opinion or opinions, dated the Closing Date (and, if
applicable, the Option Closing Date) with respect to the incorporation of the
Company, the validity of the Shares, the Registration Statement, the Prospectus
and other related matters as you may reasonably require; the Company shall have
furnished to such counsel such documents as they reasonably request for the
purpose of enabling them to pass on such matters.
(f) Immediately prior to the execution of this Agreement and on the
Closing Date (and, if applicable, the Option Closing Date), you shall have
received from Ernst & Young LLP, a letter or letters, dated the date of this
Agreement and the Closing Date (and, if applicable, the Option Closing Date),
respectively, in form and substance satisfactory to you, confirming that they
are independent public accountants with respect to the Company within the
meaning of the Act and the published Rules and Regulations, and the answer to
Item 509 of Regulation S-K set forth in the Registration Statement is correct
insofar as it relates to them, and stating to the effect set forth in Schedule
II hereto.
(g) Except as contemplated in the Prospectus, (1) neither the Company
nor its Subsidiary shall have sustained since the date of the latest audited
financial statements included in the Prospectus any loss or interference with
its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree other than such losses or interferences which do not materially
adversely affect the business, prospects, financial condition or results of
operations of the Company and the Subsidiary, taken as a whole; and (2)
subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, neither the Company nor its
Subsidiary shall have incurred any liability or obligation, direct or
contingent, or entered into transactions other than in the ordinary course of
business, and there shall not have been any change in the capital stock (other
than pursuant to the exercise of existing stock options) or increase in the
long-term debt of the Company and its Subsidiary or any change in the financial
condition, net worth, business, affairs, management, prospects or results of
operations of the Company and its Subsidiary taken as a whole, the effect of
which, in any such case described in clause (1) or (2), is in your judgment so
material or adverse as to make it impracticable or inadvisable to proceed with
the public offering or the delivery of the Shares being delivered on such
Closing Date (and, if applicable, the Option Closing Date) on the terms and in
the manner contemplated in the Prospectus.
15
<PAGE> 16
(h) There shall not have occurred any of the following: (1) a
suspension or material limitation in trading in securities generally on the New
York Stock Exchange or the NASDAQ/NMS or the establishing on such exchange or
system by the Commission or by such exchange or system of minimum or maximum
prices which are not in force and effect on the date hereof; (2) a general
moratorium on commercial banking activities declared by either federal or New
York State authorities; (3) the outbreak or escalation of hostilities involving
the United States or the declaration by the United States of a national
emergency or war, if the effect of any such event specified in this clause (3)
in your judgment makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares in the manner contemplated in the
Prospectus; (4) any national or international calamity or crisis, change in
national, international or world affairs, act of God, change in the
international or domestic markets, or change in the existing financial,
political or economic conditions in the United States or elsewhere, if the
effect of any such event specified in this clause which makes it impracticable
or inadvisable to proceed with the public offering or the delivery of the Shares
in the manner contemplated in the Prospectus; or (5) the enactment, publication,
decree, or other promulgation of any federal or state statute, regulation, rule,
or order of any court or other governmental authority, or the taking of any
action by any federal, state or local government or agency in respect of fiscal
or monetary affairs, if the effect of any such event specified in this clause
(5) in your judgment makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares in the manner contemplated in the
Prospectus.
(i) You shall have received certificates, dated the Closing Date (and,
if applicable, the Option Closing Date) and signed on behalf of the Company by
the President and the Chief Financial Officer of the Company stating that (1)
they have carefully examined the Registration Statement and the Prospectus as
amended or supplemented and nothing has come to their attention that would lead
them to believe that either the Registration Statement or the Prospectus, or any
amendment or supplement thereto as of their respective effective or issue dates,
contained, and the Prospectus as amended or supplemented at such Closing Date,
contains any untrue statement of a material fact, or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and, that (2) all representations and warranties made herein by the
Company are true and correct in all material respects at such Closing Date, with
the same effect as if made on and as of such Closing Date, and all agreements
herein to be performed by the Company on or prior to such Closing Date have been
duly performed in all material respects.
(j) The Company shall not have failed, refused, or been unable, at or
prior to the Closing Date (and, if applicable, the Option Closing Date) to have
performed in all material respects any agreement on their part to be performed
or any of the conditions herein contained and required to be performed or
satisfied by them at or prior to such Closing Date.
(k) The Company shall have furnished to you at the Closing Date (and,
if applicable, the Option Closing Date) such other certificates as you may have
reasonably requested as to the accuracy, on and as of such Closing Date, of the
representations and warranties of the Company herein and as to the performance
by the Company of their obligations hereunder.
16
<PAGE> 17
(l) The Shares shall have been approved for trading upon official
notice of issuance on the NASDAQ/NMS.
(m) A Lock-Up Agreement substantially in the form of Schedule III
hereto dated the date hereof or earlier shall have been executed and delivered
to the Representatives by each officer, director and beneficial owner of 5% or
more of the Common Stock of the Company and by the OCM Principal Opportunities
Fund, L.P.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to you and to Jones, Day, Reavis & Pogue, counsel for the several Underwriters.
The Company will furnish you with such conformed copies of such opinions,
certificates, letters and documents as you may reasonably request.
If any of the conditions specified above in this Section 6 shall not
have been satisfied at or prior to the Closing Date (and, if applicable, the
Option Closing Date) or waived by you in writing, this Agreement may be
terminated by you on notice to the Company.
7. INDEMNIFICATION. (a) The Company and its Subsidiary, jointly and
severally, will indemnify and hold harmless each Underwriter and each person, if
any, who controls any Underwriter within the meaning of the Act, against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter or such controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon 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; and will reimburse each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by such Underwriter
or such controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, or such
amendment or supplement, or any Blue Sky Application in reliance upon and in
conformity with written information furnished to the Company by you or by any
Underwriter through you, specifically for use in the preparation thereof; and
provided, further, that if any Preliminary Prospectus or the Prospectus
contained any alleged untrue statement or allegedly omitted to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading and such statement or omission shall have been corrected
in a revised Preliminary Prospectus or in the Prospectus or in an amended or
supplemented Prospectus, the Company shall not be liable to any Underwriter or
controlling person under this Subsection (a) with respect to such alleged untrue
statement or alleged omission to the extent that any such loss, claim, damage or
liability of such Underwriter or controlling person results from the fact that
such Underwriter sold Shares to a person to whom there was not sent or given, at
or prior to the written confirmation of such sale, such
17
<PAGE> 18
revised Preliminary Prospectus or Prospectus or amended or supplemented
Prospectus. This indemnity agreement shall be in addition to any liabilities
which the Company may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company, each
of its directors, each of its officers who have signed the Registration
Statement and, each person, if any, who controls the Company within the meaning
of the Act, against any losses, claims, damages or liabilities, joint or
several, to which the Company or any such director, officer or controlling
person may become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, any amendment or supplement thereto, or any Blue Sky Application or
arise out of or are based upon the omission or the 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, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in the Registration Statement, such Preliminary Prospectus or the
Prospectus, such amendment or supplement, or any Blue Sky Application in
reliance upon and in conformity with written information furnished to the
Company by any such Underwriter specifically for use in the preparation thereof;
and will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action.
This indemnity agreement shall be in addition to any liabilities which the
Underwriters may otherwise have.
(c) Any party which proposes to assert the right to be indemnified
under this Section 7 shall, within ten days after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim is to be made against an indemnifying party under this Section 7,
notify each such indemnifying party of the commencement of such action, suit or
proceeding, enclosing a copy of all papers served, but the omission so to notify
such indemnifying party of any such action, suit or proceeding shall not (1)
relieve such indemnifying party from any liability under paragraph (a) or (b)
above unless and to the extent it did not otherwise learn if such action and
such failure results in the forfeiture by the indemnifying party of substantive
rights and defenses or it has been materially prejudiced by such failure or (2)
relieve such indemnifying party from any liability which it may have to any
indemnified party otherwise than under this Section 7. In case any such action,
suit or proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in, and, to the extent that it shall
wish, jointly with any other indemnifying party, similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party shall not
be liable to such indemnified party for any legal or other expenses, other than
reasonable costs of investigation, subsequently incurred by such indemnified
party in connection with the defense thereof. The indemnified party shall have
the right to employ its own counsel in any such action, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (a) the
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<PAGE> 19
employment of counsel by such indemnified party at the expense of the
indemnifying party has been authorized in writing by the indemnifying party, (b)
the indemnified party shall have been advised by such counsel that there may be
a conflict of interest between the indemnifying party and the indemnified party
in the conduct of the defense, or certain aspects of the defense, of such action
(in which case the indemnifying party shall not have the right to direct the
defense of such action with respect to those matters or aspects of the defense
on which a conflict exists or may exist on behalf of the indemnified party) or
(3) the indemnifying party shall not in fact have employed counsel to assume the
defense of such action, in any of which events such fees and expenses to the
extent applicable shall be borne by the indemnifying party. An indemnifying
party will not, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened clam, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding. An indemnifying party shall not be liable for any settlement
of any action or claim effected without its consent. Each indemnified party, as
a condition of such indemnity, shall cooperate in good faith with the
indemnifying party in the defense of any such action or claim.
(d) If the indemnification provided for in this Section 7 is for any
reason, other than pursuant to the terms thereof, judicially determined (by the
entry of a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right to appeal) to be
unavailable to an indemnified party under Subsections (a), (b) or (c) above in
respect of any losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the Company and its Subsidiary, on
the one hand, and the Underwriters, on the other hand, from the offering of the
Shares. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault, as applicable, of the Company and its Subsidiary, on the one
hand, and the Underwriters, on the other hand, in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as other relevant equitable considerations.
The relative benefits received by, as applicable, the Company and the
Underwriters shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Subsection (d) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
19
<PAGE> 20
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
Subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this Subsection (d),
no Underwriter shall be required to contribute any amount in excess of the
underwriting discounts and commissions applicable to the Shares purchased by
such Underwriter. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The obligations
of the Company and its Subsidiary in this Subsection (d) to contribution are
joint and several. The Underwriters' obligations in this Subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties, and agreements of the Company contained in Sections
7 and 11 herein or in certificates delivered pursuant hereto, and the agreements
of the Underwriters contained in Section 7 hereof, shall remain operative and in
full force and effect regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any Underwriter or any
controlling person, the Company or any of its officers, directors or any
controlling persons, or the Selling Shareholders, and shall survive delivery of
the Shares to the Underwriters hereunder.
9. SUBSTITUTION OF UNDERWRITERS. (a) If any Underwriter shall default
in its obligation to purchase the Shares which it has agreed to purchase
hereunder, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange for
the purchase of such Shares, then the Company shall be entitled to a further
period of thirty-six hours within which to procure another party or parties
reasonably satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company
that you have so arranged for the purchase of such Shares, or the Company
notifies you that they have so arranged for the purchase of such Shares, you or
the Company shall have the right to postpone the Closing Date for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any persons substituted under this Section 9 with like effect as
if such person had originally been a party to this Agreement with respect to
such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters made by you or the Company as
provided in Subsection (a) above, the aggregate number of Shares which remains
unpurchased does not exceed one-tenth of the total Shares to be sold on the
Closing Date, then the Company shall have the right to require each
non-defaulting Underwriter to purchase the Shares which such Underwriter agreed
to purchase hereunder and, in addition, to require each non-defaulting
Underwriter to purchase
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<PAGE> 21
its pro rata share (based on the number of Shares which such Underwriter agreed
to purchase hereunder) of the Shares of such defaulting Underwriter or
Underwriters for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters made by you or the Company as
provided in Subsection (a) above, the number of Shares which remains unpurchased
exceeds one-tenth of the total Shares to be sold on the Closing Date, or if the
Company shall not exercise the right described in Subsection (b) above to
require the non-defaulting Underwriters to purchase Shares of the defaulting
Underwriter or Underwriters, then this Agreement shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the Company
except for the expenses to be borne by the Company and the Underwriters as
provided in Section 11 hereof and the indemnity and contribution agreements in
Section 7 hereof; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. EFFECTIVE DATE AND TERMINATION. This Agreement may be terminated
pursuant to Section 9(c) or as a result of the failure of a condition set forth
in Section 6(g) or Section 6(h) by you at any time at or prior to the Closing
Date by notice to the Company. Any such termination shall be without liability
of any party to any other party except as provided in Section 7 or Section 11
hereof. If you terminate this Agreement, you shall notify the Company by
telephone or telecopy, confirmed by letter.
11. COSTS AND EXPENSES. The Company will bear and pay the costs and
expenses incident to the registration of the Shares and public offering thereof,
including, without limitation, (a) the fees and expenses of the Company's
accountants and the fees and expenses of counsel for the Company, (b) the
preparation, printing, filing, delivery and shipping of the Registration
Statement, each Preliminary Prospectus, the Prospectus and any amendments or
supplements thereto and the printing, delivery and shipping of this Agreement,
the Agreement Among Underwriters, the Selected Dealer Agreement, Underwriters'
Questionnaires and Powers of Attorney and Blue Sky Memoranda, (c) the furnishing
of copies of such documents to the Underwriters, (d) the registration or
qualification of the Shares for offering and sale under the securities laws of
the various states, including the reasonable fees and disbursements of
Underwriters' counsel relating to such registration or qualification, (e) the
fees payable to the NASD and the Commission in connection with their review of
the proposed offering of the Shares, (f) all printing and engraving costs
related to preparation of the certificates for the Shares, including transfer
agent and registrar fees, (g) all initial transfer taxes, if any, (h) all fees
and expenses relating to the authorization of the Shares for trading on
NASDAQ/NMS, (i) all travel expenses, including air fare and accommodation
expenses, of representatives of the Company in connection with the offering of
the Shares and (j) all of the other costs and expenses incident to the
performance by the Company of the registration and offering of the Shares;
provided, however, that the Underwriters will bear and pay the fees and expenses
of the Underwriters' counsel (other than fees and disbursements relating to the
registration or qualification of the Shares for offering and sale under the
securities laws of the various states), the Underwriters' out-of-pocket
expenses, stock transfer taxes or the resale of any Shares by
21
<PAGE> 22
them and any advertising costs and expenses incurred by the Underwriters
incident to the public offering of the Shares.
If this Agreement is terminated by you in accordance with the
provisions of Section 9(c), the Company shall not then be under any liability to
any Underwriter except as provided in Section 7 and Section 11, but, if for any
other reason, any Shares are not delivered by or on behalf of the Company as
provided herein, the Company shall reimburse the Underwriters for all of their
reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel to the Underwriters.
12. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the
Underwriters shall be mailed, delivered, sent by facsimile transmission, or
telegraphed and confirmed c/o A.G. Edwards & Sons, Inc. at One North Jefferson
Avenue, St. Louis, Missouri 63103, Attention: Syndicate, facsimile number (314)
289-7387, or if sent to the Company shall be mailed, delivered, sent by
facsimile transmission, or telegraphed and confirmed to the Company at 500
Dublin Avenue, Columbus, Ohio 43216-1930, facsimile number (614) 222-4437,
Attention: President. Notice to any Underwriter pursuant to Section 7 shall be
mailed, delivered, sent by facsimile transmission, or telegraphed and confirmed
to such Underwriter's address as it appears in the Underwriters' Questionnaire
furnished in connection with the offering of the Shares or as otherwise
furnished to the Company.
13. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the Underwriters and the Company and their respective successors
and assigns. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, corporation or other entity, other than
the parties hereto and their respective successors and assigns and the
controlling persons, officers and directors referred to in Section 7, any legal
or equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained; this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of the
parties hereto and their respective successors and assigns and said controlling
persons and said officers and directors, and for the benefit of no other person,
corporation or other entity. No purchaser of any of the Shares from any
Underwriter shall be construed a successor or assign by reason merely of such
purchase.
In all dealings with the Company under this Agreement you shall act on
behalf of each of the several Underwriters, the Company shall be entitled to act
and rely upon any statement, request, notice or agreement on behalf of the
Underwriters, made or given by you on behalf of the Underwriters, as if the same
shall have been made or given in writing by the Underwriters.
14. COUNTERPARTS. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one and
the same instrument.
15. PRONOUNS. Whenever a pronoun of any gender or number is used
herein, it shall, where appropriate, be deemed to include any other gender and
number.
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<PAGE> 23
16. APPLICABLE LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.
If the foregoing is in accordance with your understanding, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement between the Company and the Underwriters.
ACORN PRODUCTS, INC.
_____________________________________
By: Gabe Mihaly
Title: President and Chief Executive Officer
Accepted in St. Louis, UNIONTOOLS, INC.
Missouri as of the date
first above written, on
behalf of ourselves and each
of the several Underwriters _____________________________________
named in Schedule I hereto. By:
Title:
A.G. EDWARDS & SONS, INC.
______________________________
By:
Title:
MORGAN KEEGAN & COMPANY, INC.
______________________________
By:
Title:
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<PAGE> 24
SCHEDULE I
Name Number of Shares
- ---- ----------------
A.G. Edwards & Sons, Inc. -----
Morgan Keegan & Company, Inc. -----
- --------------------- -----
- --------------------- -----
- --------------------- -----
- --------------------- -----
- --------------------- -----
- --------------------- -----
- --------------------- -----
- --------------------- -----
- --------------------- -----
- --------------------- -----
- --------------------- -----
- --------------------- -----
- --------------------- -----
- --------------------- -----
- --------------------- -----
- --------------------- -----
Total -----
<PAGE> 25
SCHEDULE II
Pursuant to Section 6(g) of the Underwriting Agreement, Ernst & Young
LLP shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its Subsidiary within the meaning of the Act and the
applicable Rules and Regulations thereunder.
(ii) In their opinion, the financial statements and any
financial schedules audited by them and included in the Prospectus or the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations thereunder; and, if applicable, they have made a review in
accordance with standards established by the American Institute of Certified
Public Accountants of the unaudited consolidated interim financial statements.
(iii) On the basis of limited procedures, not constituting an
audit in accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information referred to
below, performing the procedures specified by the AICPA for a review of interim
financial information as discussed in SAS No. 71, Interim Financial Information,
on the interim financial statements of the Company and its Subsidiary included
in the Prospectus or the Registration Statement, inspection of the minute books
of the Company and its Subsidiary since the date of the latest audited financial
statements included in the Prospectus, inquiries of officials of the Company and
its Subsidiary responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, nothing came to
their attention that caused them to believe that:
(A) any material modifications should be made to the unaudited
consolidated statements of operations, consolidated balance
sheets and statements of consolidated stockholders' equity and
cash flows included in the Prospectus for them to be in
conformity with generally accepted accounting principles, or
the unaudited consolidated statements of operations,
consolidated balance sheets and statements of consolidated
stockholders' equity and cash flows included in the Prospectus
do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
published Rules and Regulations thereunder.
(B) any other unaudited statement of operations data and
balance sheet items included in the Prospectus do not agree
with the corresponding items in the unaudited consolidated
financial statements from which such data and items were
derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis
for the corresponding amounts in the audited consolidated
financial statements included in the Prospectus.
<PAGE> 26
(C) any unaudited pro forma financial information included in
the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or the
pro forma adjustments have not been properly applied to the
historical amounts in the compilation of the unaudited pro
forma financial information.
(D) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock or any increase in the consolidated
long-term debt of the Company and its Subsidiary, or any
decreases in consolidated working capital, net current assets
or net assets or other items specified by the Representatives,
or any changes in any items specified by the Representatives,
in each case as compared with amounts shown in the latest
balance sheet included in the Prospectus, except in each case
for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in
such letter.
(E) for the period from the date of the latest financial
statements included in the Prospectus to the specified date
referred to in Clause (D) there were any decreases in
consolidated net sales or the total or per share amounts of
consolidated net income or any other changes in any other
items specified by the Representatives, in each case as
compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Representatives, except in each case for changes, decreases or
increases which the Prospectus discloses have occurred or may
occur or which are described in such letter.
(iv) In addition to the audit referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraph (iii) above, they
have carried out certain specified procedures, not constituting an audit in
accordance with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the Representatives,
which are derived from the general accounting records of the Company and its
Subsidiary for the periods covered by their reports and any interim or other
periods since the latest period covered by their reports, which appear in the
Prospectus, or in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives, and have compared certain of such
amounts, percentages and financial information with the accounting records of
the Company and its Subsidiary and have found them to be in agreement.
II-2
<PAGE> 27
SCHEDULE III
Form of Lock-Up Agreement
A.G. EDWARDS & SONS, INC.
MORGAN KEEGAN & COMPANY, INC.
As Representatives of the
several Underwriters
c/o A.G. Edwards & Sons, Inc.
One North Jefferson Avenue
St. Louis, Missouri 63103
Ladies and Gentlemen:
The undersigned understands that Acorn Products, Inc. (the
"Company") has filed a Registration Statement (the "Registration Statement")
with the Securities and Exchange Commission (the "Commission") relating to the
proposed sale of the Company's common stock, par value $.001 per share (the
"Common Stock") by the Company in a public offering (the "Offering") to be
underwritten by A.G. Edwards & Sons, Inc. ("Edwards"), Morgan Keegan & Company,
Inc. (the "Representatives"), and other potential underwriters (the
"Underwriters"). Edwards has requested that each director and officer of the
Company and certain stockholders of the Company enter into this Agreement
because the prospect of public sales of Common Stock by the Company's
stockholders during the period after the offering would be detrimental to the
proposed underwriting effort. The undersigned recognizes that it is in the best
financial interests of the undersigned, as an officer, director or stockholder
of the Company, that the proposed public offering be completed.
In consideration of the foregoing and with the understanding
that the Underwriters will rely hereon in connection with their commitment to
underwrite the proposed public offering, the undersigned hereby agrees for the
benefit of the Company, the Representatives and the Underwriters not to, without
the prior written consent of Edwards, directly or indirectly, offer to sell,
sell, contract to sell, grant any option to purchase or otherwise dispose (or
announce any offer, sale, grant of any option to purchase or other disposition)
of any shares of Common Stock, or any securities convertible into or exercisable
or exchangeable for, shares of Common Stock for a period of 180 days after the
date of the Underwriting Agreement related to the Offering unless pursuant to
(a) a bona fide gift, (b) transfers made to family members, trusts or other
similar transfers, in each case for estate planning purposes, (c) transfers to
affiliated entities and (d) pledges in connection with loans; provided that any
person receiving or holding shares of Common Stock as a result of any of any
transaction pursuant to clauses (a), (b), (c) or (d) above agrees in writing
with you to be bound by the provisions of this agreement.
Dated: June , 1997
---------------------------------------
Name:
Title:
<PAGE> 1
Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement"), dated as of May 29, 1997, by and
among ACORN PRODUCTS, INC., a Delaware corporation ("Acorn"), and UNIONTOOLS,
INC., a Delaware corporation ("UnionTools" and, together, with Acorn, the
"Company"), and GABE MIHALY, an individual residing in the State of Ohio (the
"Executive").
W I T N E S S E T H
WHEREAS, the Executive wishes to continue to serve as President and
Chief Executive Officer of the Company and the Company wishes to secure the
services of the Executive under the terms described below.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained in this Agreement, the parties hereto agree as
follows:
1. Term of Employment. The Company hereby employs the Executive for a term
(the "Term") of five years commencing upon the date hereof, which Term shall
automatically be extended for, and include, successive one-year periods
thereafter unless written notice of non-renewal is provided at least 90 days, if
by the Executive, or one year, if by the Company, prior to the expiration of the
then current Term. In the event of non-renewal of the Term, the obligations and
covenants of the parties hereunder shall be of no further force and effect as of
the end of the Term, except those obligations which shall survive this Agreement
as set forth in Section 12, and except for vested fringe benefits and
compensation earned by the Executive pursuant to Section 3 up to the termination
date.
2. Duties of Executive. During the Term, the Executive shall perform the
duties of President of Acorn and President and Chief Executive Officer of Union
Tools. Subject to supervision by the Board of Directors of each such corporation
and by the Chief Executive Officer of Acorn, if other than the Executive, the
Executive shall have overall charge of the business affairs of the Company, with
the duties, responsibilities and authorities normally associated with such
position. The Executive also shall serve as a director of Acorn and UnionTools
and as an officer and/or director of one or more affiliates and subsidiaries of
Acorn and UnionTools (the "Subsidiaries") as Acorn's Board of Directors shall
request and shall be entitled to no additional remuneration for such service.
During the Term, the Executive shall devote substantially all of his
business time and efforts to the business and affairs of the Company and will
not engage in any activity which interferes with the performance of his duties
hereunder.
<PAGE> 2
3. Compensation.
3.1 Base Salary. In consideration of the Executive's service
hereunder, the Company shall pay to the Executive an annual base salary of
$296,000 (the "Base Salary"). The Base Salary shall be payable in accordance
with the standard policies of the Company in existence from time to time,
subject to any deductions required by law.
Beginning on January 1, 1998, the Base Salary shall be increased
annually on January 1 of each year during the Term of this Agreement by the
Percentage Increase (as defined below) of the Consumer Price Index for All Urban
Consumers for All Cities for all items as published by the Bureau of Labor
Statistics of the United States Department of Labor (the "Index") for the 12
months ending immediately prior to such January 1. For purposes hereof,
"Percentage Increase" shall mean such percentage equal to the fraction, the
numerator of which shall be the Index for the immediately preceding December
less the Index for the second preceding December, and the denominator of which
shall be the Index for the second preceding December.
3.2 Bonus. In addition to the Base Salary, the Executive shall be
entitled to a cash bonus (the "Annual Cash Bonus") within three months after the
end of each fiscal year of the Company, with the amount thereof to be determined
at the discretion of the Board of Directors and payable in accordance with the
standard policies of the Company in existence from time to time, subject to any
deductions required by law.
In addition to the Annual Cash Bonus, if (i) the Executive is
employed by the Company on January 5, 1998, (ii) the Executive has died prior to
January 5, 1998 or (iii) the Executive's employment has been terminated, other
than by the Executive (except pursuant to Section 4.1(b) hereof) or pursuant to
Section 4.4 hereof, the Company shall pay to the Executive (or his estate or
personal representative, if applicable) on January 12, 1998 a cash bonus of
$260,000 (the "One-Time Cash Bonus"). The Annual Cash Bonus and the One-Time
Cash Bonus collectively are referred to herein as the "Bonuses".
3.3 Additional Benefits. In addition to the compensation explicitly
provided for herein, the Executive shall be entitled to such fringe benefits as
are made available generally to the senior executives of the Company, including
participation in such pension, group life, disability, health and other similar
benefit or insurance programs as are now or hereafter made available generally
to such executives, including any "top hat" pension program which the Company
may adopt for some or all of its senior executives during the Term. Without
limiting the foregoing, the Executive shall be entitled to a car allowance in
the amount of $750 per month and the Executive shall be entitled to membership
in one country or other social club selected by him and approved by the Company.
All benefits payable pursuant to this Section 3.3 are herein referred to as the
"Additional Benefits".
3.4 Expenses. The Executive shall be reimbursed by the Company for
all reasonable, out-of-pocket ordinary and necessary business expenses incurred
by the Executive for the purpose of and in connection with the performance of
the Executive's services hereunder. Such reimbursement shall be made upon
presentation of vouchers or other
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<PAGE> 3
statements itemizing such expenses in reasonable detail consistent with the
Company's policies.
3.5. Vacation. The Executive shall be entitled to such
amount of paid vacation during each year as shall be afforded to the
other senior executives of the Company.
3.6. Life Insurance, Disability. The Company shall maintain for the
Executive during the Term a term life insurance policy of not less than $750,000
and disability insurance providing benefits upon disability at least equal to
70% of the Base Salary. The Executive shall be entitled to designate the
beneficiaries of such policies.
4. Termination of Employment.
4.1 Termination Without Cause; Resignation for Good Reason.
(a) Termination Without Cause. During the Term, the
Company may terminate this Agreement without Cause, effective upon
the occurrence of any of the following events:
(i) 30 days after written notice is delivered to the
Executive by the Company of the determination of the permanent
disability of the Executive, defined for purposes of this
subparagraph (a) as incapacity of the Executive to fulfill his
normal duties and responsibilities hereunder for a period of 120
work days out of 150 consecutive work days by reason of physical or
mental disability as determined by a medical doctor reasonably
acceptable to both the Board of Directors of Acorn and the Executive
or his personal representative and confirmed in writing by such
doctor, which confirmation shall be submitted to the Board of
Directors of Acorn and to the Executive or his personal
representative;
(ii) the death of the Executive; or
(iii) 60 days after written notice of termination is
delivered to the Executive by the Company for any reason other than
pursuant to subsections (a)(i) or (a)(ii) of this Section or Section
4.4 hereof.
(b) Resignation for Good Reason. During the Term, the
Executive may terminate this Agreement for Good Reason 30 days after
written notice is delivered to the Company by the Executive. "Good Reason"
shall mean (i) a material adverse change or diminution in the Executive's
duties or responsibilities, offices, facilities, staff assistance, fringe
benefits or other indicia of the Executive's position or (ii) any other
material breach by the Company of its obligations under this Agreement.
"Good Reason" shall not include relocation of the Executive's personal
residence or office pursuant to the relocation of the Company's executive
offices from Columbus, Ohio.
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<PAGE> 4
(c) Upon termination of this Agreement pursuant to this
Section 4.1, the obligations and covenants of the parties hereunder shall
be of no further force and effect, except those obligations which shall
survive this Agreement as set forth in Section 12 and except for the
payment obligations of the Company set forth in Section 4.2 below.
4.2 Payment Obligations of the Company upon Termination Without
Cause or Resignation for Good Reason. In the event of any termination of this
Agreement pursuant to Section 4.1 hereof, the Company shall be obligated to the
Executive as follows:
(a) In the event of termination pursuant to Section 4.1(a)(i)
or (ii), the Executive or his estate, as the case may be, shall be
entitled to receive (i) all compensation and other benefits, including,
without limitation, the Base Salary, any Bonuses and Additional Benefits
to which the Executive is entitled through the date of such termination
and (ii) the Additional Benefits for a period of one year after such
termination. If, for any reason, the Company cannot provide any such
Additional Benefits, it shall pay to the Executive the present value
thereof in cash at an assumed per annum interest rate of seven percent
(7%).
(b) In the event of termination pursuant to Section
4.1(a)(iii) or (b), the Executive or his estate shall be entitled to
receive (i) all compensation and other benefits, including, without
limitation, the Base Salary, any Bonuses and Additional Benefits to which
the Executive is entitled through the date of such termination, (ii) a
lump sum payment, to be paid on the fifth day following the date of
termination of the Executive's employment, in an amount equal to all Base
Salary due the Executive through the Term and (iii) the Additional
Benefits for a period of one year after such termination. If, for any
reason, the Company cannot provide any such Additional Benefits, it shall
pay to the Executive the present value thereof in cash at an assumed per
annum interest rate of seven percent (7%).
(c) In the event of termination pursuant to Section
4.1(a)(iii) or (b) within two years following a Change of Control, the
Executive or his estate also shall be entitled to receive a lump sum
payment, to be paid on the fifth day following the date of termination of
the Executive's employment, in an amount equal to the difference between
(i) three times the highest aggregate annual compensation (including
salary, bonuses and incentive payments) includible in gross income paid to
the Executive during any one of the three taxable years preceding the date
of the Executive's termination minus (ii) the compensation received by the
Executive pursuant to clause (ii) of Section 4.2(b).
For purposes of this Section 4.2, the following terms shall have the
following meanings:
"Affiliate" of any specified Person (as defined in Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) shall mean
(i) any other Person, directly or indirectly, controlling or controlled by or
under direct or indirect common control
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<PAGE> 5
with such specified Person or (ii) any Person who is a director or officer (a)
of such Person, (b) of any subsidiary of such Person or (c) of any Person
described in clause (i) above. For purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meaning correlative to the foregoing.
A "Change of Control" occurs upon any of the following events: (i)
the acquisition by any Person (as defined in Section 13(d) of the Exchange Act),
other than TCW or Oaktree, of beneficial ownership (as defined in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except such Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time) of securities of the Company (a) having 25% or more of the total voting
power of the then outstanding voting securities of the Company and (b) having
more voting power than the securities of the Company beneficially owned by
Oaktree; (ii) during any 12 month period, a change in the Board of Directors of
Acorn occurs such that Incumbent Members (as defined below) do not constitute a
majority of the Board of Directors of Acorn; (iii) a sale of all or
substantially all of the assets of Acorn or UnionTools; or (iv) the consummation
of a merger or consolidation of the Company with any other Person, provided,
however, that no Change of Control shall have occurred pursuant to this clause
(iv) if (A) after such merger or consolidation the voting securities of Acorn
prior to such merger or consolidation continue to represent more than 50% of the
combined voting power of such Person or (B) if such merger or consolidation does
not result in a material change in the beneficial ownership of Acorn's voting
securities.
"Incumbent Members" shall mean the members of the Board of Directors
of Acorn on the date immediately preceding the commencement of a twelve-month
period, provided that any person becoming a Director during such twelve-month
period whose election or nomination for election was approved by a majority of
the Directors who, on the date of such election or nomination for election,
comprised the Incumbent Members shall be considered one of the Incumbent Members
in respect of such twelve-month period.
"Oaktree" shall mean Oaktree Capital Management, LLC and its
Affiliates, including any partnerships, separate accounts or other entities
managed by Oaktree.
"TCW" shall mean: TCW Special Credits Plus Fund; TCW Special Credits
Fund III; TCW Special Credits Fund IIIb; TCW Special Credits Fund IV; TCW
Special Credits Trust; TCW Special Credits Trust IIIb; TCW Special Credits Trust
IV; TCW Special Credits Trust IVa; TCW Special Credits, as investment manager of
Delaware State Employees' Retirement Fund, Weyerhaeuser Company Pension Trust
and The Common Fund for Bond Investments; and any of their respective
Affiliates.
4.3 Payment Obligations of the Company Upon Non-Renewal of the
Agreement. If the Company provides the Executive with notice of non-renewal
pursuant to Section 1 hereof, the Executive shall be entitled to receive a lump
sum payment, to be paid on the fifth day following the expiration of the Term,
in an amount equal to the Executive's then-
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<PAGE> 6
current Base Salary; provided, however, that if this Agreement subsequently is
terminated pursuant to Section 4.1(a)(iii) or 4.1(b), the Company shall also be
obligated to make payments to the Executive pursuant to Section 4.2(b).
4.4 Termination for Cause. During the Term, this Agreement may be
terminated for Cause effective upon receipt by the Executive of the Company's
written notice specifying a valid basis for termination of the Executive for
Cause. "Cause" shall mean:
(a) the Executive's criminal conviction for fraud,
embezzlement, misappropriation of assets or any other felony
(excluding traffic violations); or
(b) the continuance of willful and repeated failures by the
Executive to perform his obligations under this Agreement which have not
been cured by the Executive within thirty (30) days following receipt of
written notice from the Board of Directors of Acorn specifying such
failure and the action required by the Executive to cure such breach of
his obligations hereunder.
Upon termination of this Agreement by the Company for Cause,
the obligations and covenants of the parties hereunder shall be of no
further force and effect, except those obligations which shall survive
this Agreement as set forth in Section 12, and except for vested fringe
benefits and compensation earned by the Executive pursuant to Section 3 up
to the termination date.
5. Pension Plans. The Executive shall participate in the pension plans of
the Company for purposes of receiving the pension benefits contemplated by
Section 3.5. For purposes of calculating years of service, vesting, benefit
accrual and other terms under such plans and any other plans in which the
Executive is eligible to participate pursuant to Section 3.5, the Executive
shall be deemed to have been employed by Union Tools since June 1, 1991 and, if
terminated pursuant to Sections 4.1(a) or 4.1(b), the Executive shall receive
credit for the period of time corresponding to the remainder of the Term, for
such purposes to be not less than three years from the date of such termination.
To the extent the Company is not able by the terms of such plans to extend
or continue participation by the Executive under such plans in accordance with
this Section 5, whether because of the sale of Union Tools, termination of the
employment of the Executive or otherwise, the Company shall provide on a
supplemental basis benefits equal to the additional amounts which the Executive
would have received under such plans if participation had been extended as
required.
6. Non-Competition; Confidentiality.
6.1 Non-Competition. At all times during the Term, and for a period
of (a) one year thereafter in the event of termination of this Agreement by the
Company pursuant to Section 4.4 hereof or termination of this Agreement by the
Executive before the end of the Term or (b) six months thereafter in the event
of non-renewal of the term of this Agreement at
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<PAGE> 7
the election of the Executive, the Executive shall not commit any Prohibited
Acts (as defined in Section 6.2 below).
For purposes of this Section 6.1, the following terms shall have the
following meanings:
"Direct Competitor" shall mean any company which is or becomes a
significant and direct competitor of Acorn, UnionTools or the Subsidiaries on or
after the date of this Agreement. A company will be considered a significant and
direct competitor of Acorn, UnionTools or the Subsidiaries if such company
acquires a 10% or greater market share in the United States of any product
category which accounts for 10% or more of the revenue of Acorn, UnionTools and
the Subsidiaries on a consolidated basis in any of the last three fiscal years.
"Prohibited Acts" shall mean owning, managing, operating,
controlling or participating in the ownership, management, operation or control
of, or being connected as an officer, employee, partner, director, agent or
consultant of, or having any financial interest in, any Direct Competitor.
6.2 De Minimis Stock Ownership. Notwithstanding any other provisions
of this Section 6, ownership of five percent (5%) or less of any class of voting
securities of a company listed on a nationally recognized stock exchange or for
which prices are quoted on the NASDAQ National Market shall not constitute a
violation hereof.
6.3 Confidentiality. The Executive agrees, at all times during and
after the Executive's employment hereunder, to hold in strictest confidence, and
not to disclose to any person, firm or corporation, without the express written
authorization of the Board of Directors of Acorn, any trade secrets, such as
inventions, processes, formulae, programs, data, any financial information or
any secret or confidential information relating to the research and development
program, products, vendor and marketing programs, customers, customers'
information, sales or business of the Company, except as such disclosure or use
may be required in connection with his work for the Company or is published or
otherwise readily available to the public or becomes known to the public other
than by breach by him of this Agreement.
The Executive further agrees, upon termination of this Agreement, to
promptly deliver to the Company all notes, books, engineering records,
correspondence, drawings, magnetic tape, punch cards, computer storage
information or media, and any and all other written and graphical records in his
possession or under his control relating to the past, present or future
business, products, or projects of the Company.
6.4 Remedies. It is recognized that damages in the event of breach
by the Executive of this Section 6 would be difficult, if not impossible, to
ascertain, and it is therefore agreed that the Company, in addition to and
without limiting any other remedy or right it may have, shall have the right to
an injunction or other equitable relief, in any court of competent jurisdiction,
enjoining any such breach, and the Executive hereby waives any and
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<PAGE> 8
all defenses he may have on the ground of lack of jurisdiction or competence of
the court to grant such an injunction or other equitable relief. The existence
of this right shall not preclude or impair any other rights and remedies at law
or in equity that the Company may have.
7. Indemnification. The Company will indemnify the Executive against all
costs, charges and expenses (including reasonable attorneys' fees) incurred or
sustained by him in connection with any claim, action, suit or proceeding to
which he may be made a party by reason of his being an officer, director or
employee of the Company or the Subsidiaries, provided the Executive acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was illegal. In
addition, the Company shall indemnify the Executive for all costs, including
reasonable attorneys' fees, incurred by the Executive in connection with any
successful action by the Executive to enforce or otherwise determine or insure
compliance by the Company with the terms of this Agreement.
8. Certain Additional Payments by the Employers. Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution by the Company to or for the benefit of the
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, or any
interest or penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, collectively, the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (the "Excise Tax
Payment") in an amount equal to the Excise Tax imposed upon the Payment and any
additional payments made pursuant to this Section 8.
9. Assignability; Binding Nature.
(a) This Agreement shall inure to the benefit of the Company
and the Executive and their respective successors, heirs (in the case of
the Executive) and assigns. For purposes of this Agreement, the term
"successor" of the Company shall include any person or entity, whether
direct or indirect, whether by purchase, merger, consolidation, operation
of law, assignment or otherwise who acquires or controls all or
substantially all of the assets of Acorn or UnionTools.
(b) The Company shall require any successor of the Company, by
an agreement in form and substance reasonably satisfactory to the
Executive, to expressly assume and agree to be bound by the terms of this
Agreement in the same manner and to the same extent that the Company would
be required to perform if no succession had occurred. The Company shall be
in material breach of this Agreement if any such successor fails to
expressly assume or otherwise agree to guaranty performance of this
Agreement to the extent the Company was obligated prior to any succession.
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(c) Except as expressly stated in Section 9(a) above, this
Agreement shall be non-assignable by either the Company or the Executive
without the prior written consent of all parties hereto.
10. Notices. Any notice hereunder shall be properly given if by
personal delivery or registered or certified mail, return receipt
requested, as follows:
If to Executive, at his address as it appears on the payroll records of
Union Tools.
If to the Company to:
Acorn Products, Inc.
500 Dublin Avenue
Columbus, Ohio 43216
Attention: President
with a copy to:
Conor D. Reilly, Esq.
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, N.Y. 10166-0193
or to such other addresses as the parties may designate in writing.
11. Integration; Modification. Except for the letter agreement, dated as
of the date hereof, among Acorn, UnionTools and the Executive, this Agreement
shall supersede all previous negotiations, commitments and writings with respect
to the employment of the Executive. This Agreement may not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing signed on behalf of each of the parties hereto. The
failure of any party hereto to enforce at any time any of the provisions of this
Agreement shall in no way be construed to be a waiver of any such provisions,
nor in any way to affect the validity of this Agreement or the right of any
party thereafter to enforce each and every such provisions. No waiver of any
breach of this Agreement shall be held to be a waiver of any other or subsequent
breach.
12. Survival of Certain Obligations. Except as otherwise specifically
provided for herein, the obligations of the parties pursuant to Sections 3.3,
3.4, 4.2, 6, 7, 8 and this Section 12 shall survive the termination of this
Agreement.
13. Severability. If any term or provisions of this Agreement is declared
invalid by a court of competent jurisdiction the remaining terms and provisions
of this Agreement shall remain unimpaired. If any term or provisions of Section
6 of this Agreement, or portion thereof, is so broad in scope or duration as to
be unenforceable, such provision or portion thereof shall be interpreted to be
only so broad as is enforceable.
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14. Captions. The captions appearing in this Agreement are
inserted only as a matter of convenience and as a reference and in no way
define, limit or describe the scope or intent of this Agreement or any of
the provisions hereof.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of the State of New York without
giving effect to any choice or conflict of laws provisions or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10
<PAGE> 11
IN WITNESS WHEREOF, each of the parties hereto has duly executed
this Agreement as of the date first above written.
ACORN PRODUCTS, INC.
By: /s/ Conor D. Reilly
---------------------------
Name: Conor D. Reilly
Title: Chairman of the Board
UNION TOOLS, INC.
By: /s/ Conor D. Reilly
----------------------------
Name: Conor D. Reilly
Title: Chairman of the Board
/s/ Gabe Mihaly
--------------------------------
Gabe Mihaly
11
<PAGE> 1
Exhibit 10.2.1
EMPLOYEE SEVERANCE AGREEMENT
THIS AGREEMENT is made and entered into as of May 29, 1997 among Acorn
Products, Inc., a Delaware corporation ("Acorn"), UnionTools, Inc., a Delaware
corporation ("UnionTools" and together with Acorn, the "Company")
and James B. Farland (the "Executive").
R E C I T A L S
As an inducement to the Executive to remain in the employ of the Company,
the Company has agreed to provide certain severance benefits and, under certain
circumstances, to make certain bonus payments to the Executive as specifically
set forth herein.
Notwithstanding anything in this Agreement to the contrary, the Executive
shall remain an employee-at-will hereafter. Accordingly, the Executive may be
discharged or may resign for any or no reason, and the rights of the Executive
and the Company upon any such termination of the Executive's employment shall be
as set forth herein.
NOW THEREFORE, the parties hereby agree as follows:
1. Severance.
(a) Severance Events. The Executive shall be entitled to the Severance
Payment set forth in Section 1(c) upon the termination of the Executive's
employment with the Company by either the Executive or the Company in the
following circumstances:
(i) resignation by the Executive for Good Reason; or
(ii) termination of the Executive's employment by the Company
other than for Cause.
The date of the termination of the Executive's employment in such instances
shall be fifteen (15) business days after the date written notice of resignation
is tendered by the Executive to the Company or written notice of termination is
tendered by the Company to the Executive, as applicable. Any such notice shall
specify with reasonable particularity the basis for resignation or termination
hereunder.
(b) Cause; Good Reason. As used in this agreement, the following
terms shall have the meanings set forth below:
(i) "Cause" shall mean (x) the Executive's criminal conviction for
fraud, embezzlement, misappropriation of assets or any other felony
(excluding traffic violations) or (y) the continuance of willful and
repeated failures by the Executive to perform the duties assigned to him
as an employee of the Company, which failures have not been cured by the
Executive within thirty (30) days following receipt of written notice from
the Board
<PAGE> 2
of Directors of Acorn or UnionTools, as applicable, specifying such
failure and the action required by the Executive to cure such breach of
his obligations.
(ii) "Good Reason" shall mean, without the written consent of the
Executive, (A) a material adverse change or diminution in the Executive's
duties or responsibilities, offices, reporting responsibilities,
facilities, staff assistance, fringe benefits or other indicia of the
Executive's position substantially as set forth on Annex A hereto (as the
same may from time to time be modified with the written consent of the
Company and the Executive) or (B) material breach by the Company of its
duties to the Executive, including timely payment of compensation,
provision of benefits and reimbursement of expenses, in keeping with past
practice. "Good Reason" shall not include relocation of the Executive's
personal residence or office pursuant to the relocation of the Company's
executive offices from Columbus, Ohio.
(c) Severance Payments. If the Executive is entitled to a payment pursuant
to this Section 1, then the Company shall pay to the Executive as a Severance
Payment in a lump sum, on the fifth day following the date of termination of the
Executive's employment, an amount equal to the highest aggregate annual
compensation (including salary, bonuses and incentive payments) includible in
gross income paid to the Executive during any one of the three taxable years
preceding the date of the Executive's termination, such amount to be subject to
adjustment pursuant to Section 3(c).
2. Change of Control.
(a) Change of Control Events. If the Executive's employment with the
Company is terminated by either the Executive or the Company in accordance with
Section 1(a) of this Agreement within two years after a Change of Control, in
addition to the severance payment provided in Section 1(c), the Executive also
shall be entitled to the Change of Control Payment provided in Section 2(c).
(b) Change of Control. A "Change of Control" occurs upon any of the
following events: (i) the acquisition by any Person (as defined in Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other
than TCW or Oaktree, of beneficial ownership (as defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act, except such Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time) of securities of Acorn (a) having 25% or more of the total voting power
of the then outstanding voting securities of Acorn and (b) having more voting
power than the securities of Acorn beneficially owned by Oaktree; (ii) during
any twelve month period, a change in the Board of Directors of Acorn occurs such
that Incumbent Members do not constitute a majority of the Board of Directors of
Acorn; (iii) a sale of all or substantially all of the assets of Acorn or
UnionTools; or (iv) the consummation of a merger or consolidation of Acorn with
any other Person, provided, however, that no Change of Control shall have
occurred pursuant to this clause (iv) if (A) after such merger or consolidation
the voting securities of Acorn prior to such merger or consolidation continue to
represent more than 50% of the combined voting power of such
2
<PAGE> 3
Person or (B) if such merger or consolidation does not result in a material
change in the beneficial ownership of Acorn's voting securities.
For purposes of this Section 2, the following terms shall have the
following meanings:
"Affiliate" of any specified Person (as defined in Section 13(d) of the
Exchange Act) shall mean (i) any other Person, directly or indirectly,
controlling or controlled by or under direct or indirect common control with
such specified Person or (ii) any Person who is a director or officer (a) of
such Person, (b) of any subsidiary of such Person or (c) of any Person described
in clause (i) above. For purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meaning correlative to the foregoing.
"Incumbent Members" shall mean the members of the Board of Directors of
Acorn on the date immediately preceding the commencement of a twelve-month
period, provided that any person becoming a Director during such twelve-month
period whose election or nomination for election was approved by a majority of
the Directors who, on the date of such election or nomination for election,
comprised the Incumbent Members shall be considered one of the Incumbent Members
in respect of such twelve-month period.
"Oaktree" shall mean Oaktree Capital Management, LLC and its Affiliates,
including any partnerships, separate accounts or other entities managed by
Oaktree.
"TCW" shall mean: TCW Special Credits Plus Fund; TCW Special Credits Fund
III; TCW Special Credits Fund IIIb; TCW Special Credits Fund IV; TCW Special
Credits Trust; TCW Special Credits Trust IIIb; TCW Special Credits Trust IV; TCW
Special Credits Trust IVa; TCW Special Credits, as investment manager of
Delaware State Employees' Retirement Fund, Weyerhaeuser Company Pension Trust
and The Common Fund for Bond Investments; and any of their respective
Affiliates.
(c) Change of Control Payment. If the Executive is entitled to a payment
pursuant to this Section 2, then the Company shall pay to the Executive as a
Change of Control Payment in a lump sum, on the fifth day following the date of
termination of the Executive's employment, an amount equal to two times the
highest aggregate annual compensation (including salary, bonuses and incentive
payments) includible in gross income paid to the Executive during any one of the
three taxable years preceding the date of the Executive's termination, such
amount to be subject to adjustment pursuant to Subsection 3(c).
3. Additional Payment Terms.
(a) No Reduction. The Executive shall not be required to mitigate damages
or the amount of any payment provided for under Section 1(c) or Section 2(c) by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under Section 1(c) or Section 2(c) be reduced by any compensation
earned by the Executive as the result of employment by another employer after
the date of termination or otherwise.
3
<PAGE> 4
(b) Indemnification. The Company shall indemnify the Executive for all
costs, including reasonable attorneys' fees, incurred by the Executive in
connection with any successful action by the Executive to enforce or otherwise
determine or ensure compliance by the Company with the terms of this Agreement.
(c) Certain Additional Payments by the Company.
(i) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended, or any interest or
penalties with respect to such excise tax (such excise tax, together with
any such interest and penalties, collectively, the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (the "Excise
Tax Payment") in an amount equal to the Excise Tax imposed upon the
Payment and any additional payments made pursuant to this Section 3(c).
(ii) If, within two years after the Executive resigns for Good
Reason or his employment is terminated by the Company other than for
Cause, the Executive obtains employment from any person or entity other
than the Company and as a result thereof is required to relocate to a city
outside of the greater metropolitan area in which the Executive's
principal residence was located at the time of such termination (and
remains so located at the time such employment is obtained), then the
Company shall be obligated to pay all reasonable relocation expenses (upon
presentation of proper receipts therefor) directly incurred by the
Executive in connection with such relocation in accordance with the
Company's policies currently then in effect (the "Relocation Payment").
The Executive shall be entitled to the Relocation Payment, if applicable,
only in connection with the first full-time employment obtained by the
Executive following the termination of his employment with the Company.
4. Miscellaneous.
(a) Assignability; Binding Nature.
(i) This Agreement shall inure to the benefit of the Company and the
Executive and their respective successors, heirs (in the case of the
Executive) and assigns. For purposes of this Agreement, the term
"successor" of the Company shall include any person or entity, whether
direct or indirect, whether by purchase, merger, consolidation, operation
of law, assignment or otherwise who acquires or controls all or
substantially all of the assets of Acorn or UnionTools.
(ii) The Company shall require any successor of the Company, by an
agreement in form and substance reasonably satisfactory to the Executive,
to expressly assume and agree to be bound by the terms of this Agreement
in the same manner and to the same extent that the Company would be
required to perform if no succession had occurred.
4
<PAGE> 5
The Company shall be in material breach of this Agreement if any such
successor fails to expressly assume or otherwise agree to guaranty
performance of this Agreement to the extent the Company was obligated
prior to any succession.
(iii) Except as expressly stated in Section 4(a) above, this
Agreement shall be non-assignable by either the Company or the Executive
without the prior written consent of all parties hereto.
(b) Notices. Any notice hereunder shall be properly given if by personal
delivery or registered or certified mail, return receipt requested, as follows:
If to the Executive, at his address as it appears on the payroll records
of the Company.
If to the Company, to:
Acorn Products, Inc.
500 Dublin Ave.
Columbus, Ohio 43216-1930
Attention: President
or to such other addresses as the parties may designate in writing.
(c) Integration; Modification. This Agreement shall supersede all previous
negotiations, commitments and writings with respect to the employment of the
Executive. This Agreement may not be released, discharged, abandoned, changed or
modified in any manner, except by an instrument in writing signed on behalf of
each of the parties hereto. The failure of either party hereto to enforce at any
time any of the provisions of this Agreement shall in no way be construed to be
a waiver of any such provisions, nor in any way to affect the validity of this
Agreement or the right of either party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to be a
waiver of any other or subsequent breach.
(d) Severability. If any term or provision of this Agreement is declared
invalid by a court of competent jurisdiction, the remaining terms and provisions
of this Agreement shall remain unimpaired.
(e) Captions. The captions appearing in this Agreement are inserted only
as a matter of convenience and as a reference and in no way define, limit or
describe the scope or intent of this Agreement or any of other provisions
hereof.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of the State of New York without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction.
5
<PAGE> 6
(g) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6
<PAGE> 7
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first above written.
EXECUTIVE
/s/ James B. Farland
----------------------------------------
Name: James B. Farland
ACORN PRODUCTS, INC.
By: /s/ Gavril Mihaly
----------------------------------------
Name: Gavril Mihaly
Title: President and CEO
UNIONTOOLS, INC.
By: /s/ Gavril Mihaly
----------------------------------------
Name: Gavril Mihaly
Title: President and CEO
7
<PAGE> 1
Exhibit 10.2.2
EMPLOYEE SEVERANCE AGREEMENT
THIS AGREEMENT is made and entered into as of May 29, 1997 among Acorn
Products, Inc., a Delaware corporation ("Acorn"), UnionTools, Inc., a Delaware
corporation ("UnionTools" and together with Acorn, the "Company")
and Thomas A. Hyrb (the "Executive").
R E C I T A L S
As an inducement to the Executive to remain in the employ of the Company,
the Company has agreed to provide certain severance benefits and, under certain
circumstances, to make certain bonus payments to the Executive as specifically
set forth herein.
Notwithstanding anything in this Agreement to the contrary, the Executive
shall remain an employee-at-will hereafter. Accordingly, the Executive may be
discharged or may resign for any or no reason, and the rights of the Executive
and the Company upon any such termination of the Executive's employment shall be
as set forth herein.
NOW THEREFORE, the parties hereby agree as follows:
1. Severance.
(a) Severance Events. The Executive shall be entitled to the Severance
Payment set forth in Section 1(c) upon the termination of the Executive's
employment with the Company by either the Executive or the Company in the
following circumstances:
(i) resignation by the Executive for Good Reason; or
(ii) termination of the Executive's employment by the Company
other than for Cause.
The date of the termination of the Executive's employment in such instances
shall be fifteen (15) business days after the date written notice of resignation
is tendered by the Executive to the Company or written notice of termination is
tendered by the Company to the Executive, as applicable. Any such notice shall
specify with reasonable particularity the basis for resignation or termination
hereunder.
(b) Cause; Good Reason. As used in this agreement, the following
terms shall have the meanings set forth below:
(i) "Cause" shall mean (x) the Executive's criminal conviction for
fraud, embezzlement, misappropriation of assets or any other felony
(excluding traffic violations) or (y) the continuance of willful and
repeated failures by the Executive to perform the duties assigned to him
as an employee of the Company, which failures have not been cured by the
Executive within thirty (30) days following receipt of written notice from
the Board
<PAGE> 2
of Directors of Acorn or UnionTools, as applicable, specifying such
failure and the action required by the Executive to cure such breach of
his obligations.
(ii) "Good Reason" shall mean, without the written consent of the
Executive, (A) a material adverse change or diminution in the Executive's
duties or responsibilities, offices, reporting responsibilities,
facilities, staff assistance, fringe benefits or other indicia of the
Executive's position substantially as set forth on Annex A hereto (as the
same may from time to time be modified with the written consent of the
Company and the Executive) or (B) material breach by the Company of its
duties to the Executive, including timely payment of compensation,
provision of benefits and reimbursement of expenses, in keeping with past
practice. "Good Reason" shall not include relocation of the Executive's
personal residence or office pursuant to the relocation of the Company's
executive offices from Columbus, Ohio.
(c) Severance Payments. If the Executive is entitled to a payment pursuant
to this Section 1, then the Company shall pay to the Executive as a Severance
Payment in a lump sum, on the fifth day following the date of termination of the
Executive's employment, an amount equal to the highest aggregate annual
compensation (including salary, bonuses and incentive payments) includible in
gross income paid to the Executive during any one of the three taxable years
preceding the date of the Executive's termination, such amount to be subject to
adjustment pursuant to Section 3(c).
2. Change of Control.
(a) Change of Control Events. If the Executive's employment with the
Company is terminated by either the Executive or the Company in accordance with
Section 1(a) of this Agreement within two years after a Change of Control, in
addition to the severance payment provided in Section 1(c), the Executive also
shall be entitled to the Change of Control Payment provided in Section 2(c).
(b) Change of Control. A "Change of Control" occurs upon any of the
following events: (i) the acquisition by any Person (as defined in Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other
than TCW or Oaktree, of beneficial ownership (as defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act, except such Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time) of securities of Acorn (a) having 25% or more of the total voting power
of the then outstanding voting securities of Acorn and (b) having more voting
power than the securities of Acorn beneficially owned by Oaktree; (ii) during
any twelve month period, a change in the Board of Directors of Acorn occurs such
that Incumbent Members do not constitute a majority of the Board of Directors of
Acorn; (iii) a sale of all or substantially all of the assets of Acorn or
UnionTools; or (iv) the consummation of a merger or consolidation of Acorn with
any other Person, provided, however, that no Change of Control shall have
occurred pursuant to this clause (iv) if (A) after such merger or consolidation
the voting securities of Acorn prior to such merger or consolidation continue to
represent more than 50% of the combined voting power of such
2
<PAGE> 3
Person or (B) if such merger or consolidation does not result in a material
change in the beneficial ownership of Acorn's voting securities.
For purposes of this Section 2, the following terms shall have the
following meanings:
"Affiliate" of any specified Person (as defined in Section 13(d) of the
Exchange Act) shall mean (i) any other Person, directly or indirectly,
controlling or controlled by or under direct or indirect common control with
such specified Person or (ii) any Person who is a director or officer (a) of
such Person, (b) of any subsidiary of such Person or (c) of any Person described
in clause (i) above. For purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meaning correlative to the foregoing.
"Incumbent Members" shall mean the members of the Board of Directors of
Acorn on the date immediately preceding the commencement of a twelve-month
period, provided that any person becoming a Director during such twelve-month
period whose election or nomination for election was approved by a majority of
the Directors who, on the date of such election or nomination for election,
comprised the Incumbent Members shall be considered one of the Incumbent Members
in respect of such twelve-month period.
"Oaktree" shall mean Oaktree Capital Management, LLC and its Affiliates,
including any partnerships, separate accounts or other entities managed by
Oaktree.
"TCW" shall mean: TCW Special Credits Plus Fund; TCW Special Credits Fund
III; TCW Special Credits Fund IIIb; TCW Special Credits Fund IV; TCW Special
Credits Trust; TCW Special Credits Trust IIIb; TCW Special Credits Trust IV; TCW
Special Credits Trust IVa; TCW Special Credits, as investment manager of
Delaware State Employees' Retirement Fund, Weyerhaeuser Company Pension Trust
and The Common Fund for Bond Investments; and any of their respective
Affiliates.
(c) Change of Control Payment. If the Executive is entitled to a payment
pursuant to this Section 2, then the Company shall pay to the Executive as a
Change of Control Payment in a lump sum, on the fifth day following the date of
termination of the Executive's employment, an amount equal to two times the
highest aggregate annual compensation (including salary, bonuses and incentive
payments) includible in gross income paid to the Executive during any one of the
three taxable years preceding the date of the Executive's termination, such
amount to be subject to adjustment pursuant to Subsection 3(c).
3. Additional Payment Terms.
(a) No Reduction. The Executive shall not be required to mitigate damages
or the amount of any payment provided for under Section 1(c) or Section 2(c) by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under Section 1(c) or Section 2(c) be reduced by any compensation
earned by the Executive as the result of employment by another employer after
the date of termination or otherwise.
3
<PAGE> 4
(b) Indemnification. The Company shall indemnify the Executive for all
costs, including reasonable attorneys' fees, incurred by the Executive in
connection with any successful action by the Executive to enforce or otherwise
determine or ensure compliance by the Company with the terms of this Agreement.
(c) Certain Additional Payments by the Company. Anything in this Agreement
to the contrary notwithstanding, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Executive,
whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement (a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended, or any interest
or penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties, collectively, the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (the "Excise Tax Payment") in
an amount equal to the Excise Tax imposed upon the Payment and any additional
payments made pursuant to this Section 3(c).
4. Miscellaneous.
(a) Assignability; Binding Nature.
(i) This Agreement shall inure to the benefit of the Company and the
Executive and their respective successors, heirs (in the case of the
Executive) and assigns. For purposes of this Agreement, the term
"successor" of the Company shall include any person or entity, whether
direct or indirect, whether by purchase, merger, consolidation, operation
of law, assignment or otherwise who acquires or controls all or
substantially all of the assets of Acorn or UnionTools.
(ii) The Company shall require any successor of the Company, by an
agreement in form and substance reasonably satisfactory to the Executive,
to expressly assume and agree to be bound by the terms of this Agreement
in the same manner and to the same extent that the Company would be
required to perform if no succession had occurred. The Company shall be in
material breach of this Agreement if any such successor fails to expressly
assume or otherwise agree to guaranty performance of this Agreement to the
extent the Company was obligated prior to any succession.
(iii) Except as expressly stated in Section 4(a) above, this
Agreement shall be non-assignable by either the Company or the Executive
without the prior written consent of all parties hereto.
(b) Notices. Any notice hereunder shall be properly given if by personal
delivery or registered or certified mail, return receipt requested, as follows:
If to the Executive, at his address as it appears on the payroll records
of the Company.
If to the Company, to:
Acorn Products, Inc.
4
<PAGE> 5
500 Dublin Ave.
Columbus, Ohio 43216-1930
Attention: President
or to such other addresses as the parties may designate in writing.
(c) Integration; Modification. This Agreement shall supersede all previous
negotiations, commitments and writings with respect to the employment of the
Executive. This Agreement may not be released, discharged, abandoned, changed or
modified in any manner, except by an instrument in writing signed on behalf of
each of the parties hereto. The failure of either party hereto to enforce at any
time any of the provisions of this Agreement shall in no way be construed to be
a waiver of any such provisions, nor in any way to affect the validity of this
Agreement or the right of either party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to be a
waiver of any other or subsequent breach.
(d) Severability. If any term or provision of this Agreement is declared
invalid by a court of competent jurisdiction, the remaining terms and provisions
of this Agreement shall remain unimpaired.
(e) Captions. The captions appearing in this Agreement are inserted only
as a matter of convenience and as a reference and in no way define, limit or
describe the scope or intent of this Agreement or any of other provisions
hereof.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of the State of New York without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction.
(g) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5
<PAGE> 6
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first above written.
EXECUTIVE
/s/ Thomas A. Hyrb
---------------------------------
Name: Thomas A. Hyrb
ACORN PRODUCTS, INC.
By: /s/ Gavril Mihaly
---------------------------------
Name: Gavril Mihaly
Title: President and CEO
UNIONTOOLS, INC.
By: /s/ Gavril Mihaly
---------------------------------
Name: Gavril Mihaly
Title: President and CEO
6
<PAGE> 1
Exhibit 10.2.3
EMPLOYEE SEVERANCE AGREEMENT
THIS AGREEMENT is made and entered into as of May 29, 1997 among Acorn
Products, Inc., a Delaware corporation ("Acorn"), UnionTools, Inc., a Delaware
corporation ("UnionTools" and together with Acorn, the "Company")
and Stephen M. Kasprisin (the "Executive").
R E C I T A L S
As an inducement to the Executive to remain in the employ of the Company,
the Company has agreed to provide certain severance benefits and, under certain
circumstances, to make certain bonus payments to the Executive as specifically
set forth herein.
Notwithstanding anything in this Agreement to the contrary, the Executive
shall remain an employee-at-will hereafter. Accordingly, the Executive may be
discharged or may resign for any or no reason, and the rights of the Executive
and the Company upon any such termination of the Executive's employment shall be
as set forth herein.
NOW THEREFORE, the parties hereby agree as follows:
1. Severance.
(a) Severance Events. The Executive shall be entitled to the Severance
Payment set forth in Section 1(c) upon the termination of the Executive's
employment with the Company by either the Executive or the Company in the
following circumstances:
(i) resignation by the Executive for Good Reason; or
(ii) termination of the Executive's employment by the Company
other than for Cause.
The date of the termination of the Executive's employment in such instances
shall be fifteen (15) business days after the date written notice of resignation
is tendered by the Executive to the Company or written notice of termination is
tendered by the Company to the Executive, as applicable. Any such notice shall
specify with reasonable particularity the basis for resignation or termination
hereunder.
(b) Cause; Good Reason. As used in this agreement, the following
terms shall have the meanings set forth below:
(i) "Cause" shall mean (x) the Executive's criminal conviction for
fraud, embezzlement, misappropriation of assets or any other felony
(excluding traffic violations) or (y) the continuance of willful and
repeated failures by the Executive to perform the duties assigned to him
as an employee of the Company, which failures have not been cured by the
Executive within thirty (30) days following receipt of written notice from
the Board
<PAGE> 2
of Directors of Acorn or UnionTools, as applicable, specifying such
failure and the action required by the Executive to cure such breach of
his obligations.
(ii) "Good Reason" shall mean, without the written consent of the
Executive, (A) a material adverse change or diminution in the Executive's
duties or responsibilities, offices, reporting responsibilities,
facilities, staff assistance, fringe benefits or other indicia of the
Executive's position substantially as set forth on Annex A hereto (as the
same may from time to time be modified with the written consent of the
Company and the Executive) or (B) material breach by the Company of its
duties to the Executive, including timely payment of compensation,
provision of benefits and reimbursement of expenses, in keeping with past
practice. "Good Reason" shall not include relocation of the Executive's
personal residence or office pursuant to the relocation of the Company's
executive offices from Columbus, Ohio.
(c) Severance Payments. If the Executive is entitled to a payment pursuant
to this Section 1, then the Company shall pay to the Executive as a Severance
Payment in a lump sum, on the fifth day following the date of termination of the
Executive's employment, an amount equal to the highest aggregate annual
compensation (including salary, bonuses and incentive payments) includible in
gross income paid to the Executive during any one of the three taxable years
preceding the date of the Executive's termination, such amount to be subject to
adjustment pursuant to Section 3(c).
2. Change of Control.
(a) Change of Control Events. If the Executive's employment with the
Company is terminated by either the Executive or the Company in accordance with
Section 1(a) of this Agreement within two years after a Change of Control, in
addition to the severance payment provided in Section 1(c), the Executive also
shall be entitled to the Change of Control Payment provided in Section 2(c).
(b) Change of Control. A "Change of Control" occurs upon any of the
following events: (i) the acquisition by any Person (as defined in Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other
than TCW or Oaktree, of beneficial ownership (as defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act, except such Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time) of securities of Acorn (a) having 25% or more of the total voting power
of the then outstanding voting securities of Acorn and (b) having more voting
power than the securities of Acorn beneficially owned by Oaktree; (ii) during
any twelve month period, a change in the Board of Directors of Acorn occurs such
that Incumbent Members do not constitute a majority of the Board of Directors of
Acorn; (iii) a sale of all or substantially all of the assets of Acorn or
UnionTools; or (iv) the consummation of a merger or consolidation of Acorn with
any other Person, provided, however, that no Change of Control shall have
occurred pursuant to this clause (iv) if (A) after such merger or consolidation
the voting securities of Acorn prior to such merger or consolidation continue to
represent more than 50% of the combined voting power of such
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<PAGE> 3
Person or (B) if such merger or consolidation does not result in a material
change in the beneficial ownership of Acorn's voting securities.
For purposes of this Section 2, the following terms shall have the
following meanings:
"Affiliate" of any specified Person (as defined in Section 13(d) of the
Exchange Act) shall mean (i) any other Person, directly or indirectly,
controlling or controlled by or under direct or indirect common control with
such specified Person or (ii) any Person who is a director or officer (a) of
such Person, (b) of any subsidiary of such Person or (c) of any Person described
in clause (i) above. For purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meaning correlative to the foregoing.
"Incumbent Members" shall mean the members of the Board of Directors of
Acorn on the date immediately preceding the commencement of a twelve-month
period, provided that any person becoming a Director during such twelve-month
period whose election or nomination for election was approved by a majority of
the Directors who, on the date of such election or nomination for election,
comprised the Incumbent Members shall be considered one of the Incumbent Members
in respect of such twelve-month period.
"Oaktree" shall mean Oaktree Capital Management, LLC and its Affiliates,
including any partnerships, separate accounts or other entities managed by
Oaktree.
"TCW" shall mean: TCW Special Credits Plus Fund; TCW Special Credits Fund
III; TCW Special Credits Fund IIIb; TCW Special Credits Fund IV; TCW Special
Credits Trust; TCW Special Credits Trust IIIb; TCW Special Credits Trust IV; TCW
Special Credits Trust IVa; TCW Special Credits, as investment manager of
Delaware State Employees' Retirement Fund, Weyerhaeuser Company Pension Trust
and The Common Fund for Bond Investments; and any of their respective
Affiliates.
(c) Change of Control Payment. If the Executive is entitled to a payment
pursuant to this Section 2, then the Company shall pay to the Executive as a
Change of Control Payment in a lump sum, on the fifth day following the date of
termination of the Executive's employment, an amount equal to two times the
highest aggregate annual compensation (including salary, bonuses and incentive
payments) includible in gross income paid to the Executive during any one of the
three taxable years preceding the date of the Executive's termination, such
amount to be subject to adjustment pursuant to Subsection 3(c).
3. Additional Payment Terms.
(a) No Reduction. The Executive shall not be required to mitigate damages
or the amount of any payment provided for under Section 1(c) or Section 2(c) by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under Section 1(c) or Section 2(c) be reduced by any compensation
earned by the Executive as the result of employment by another employer after
the date of termination or otherwise.
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<PAGE> 4
(b) Indemnification. The Company shall indemnify the Executive for all
costs, including reasonable attorneys' fees, incurred by the Executive in
connection with any successful action by the Executive to enforce or otherwise
determine or ensure compliance by the Company with the terms of this Agreement.
(c) Certain Additional Payments by the Company. Anything in this Agreement
to the contrary notwithstanding, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Executive,
whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement (a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended, or any interest
or penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties, collectively, the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (the "Excise Tax Payment") in
an amount equal to the Excise Tax imposed upon the Payment and any additional
payments made pursuant to this Section 3(c).
4. Miscellaneous.
(a) Assignability; Binding Nature.
(i) This Agreement shall inure to the benefit of the Company and the
Executive and their respective successors, heirs (in the case of the
Executive) and assigns. For purposes of this Agreement, the term
"successor" of the Company shall include any person or entity, whether
direct or indirect, whether by purchase, merger, consolidation, operation
of law, assignment or otherwise who acquires or controls all or
substantially all of the assets of Acorn or UnionTools.
(ii) The Company shall require any successor of the Company, by an
agreement in form and substance reasonably satisfactory to the Executive,
to expressly assume and agree to be bound by the terms of this Agreement
in the same manner and to the same extent that the Company would be
required to perform if no succession had occurred. The Company shall be in
material breach of this Agreement if any such successor fails to expressly
assume or otherwise agree to guaranty performance of this Agreement to the
extent the Company was obligated prior to any succession.
(iii) Except as expressly stated in Section 4(a) above, this
Agreement shall be non-assignable by either the Company or the Executive
without the prior written consent of all parties hereto.
(b) Notices. Any notice hereunder shall be properly given if by personal
delivery or registered or certified mail, return receipt requested, as follows:
If to the Executive, at his address as it appears on the payroll records
of the Company.
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If to the Company, to:
Acorn Products, Inc.
500 Dublin Ave.
Columbus, Ohio 43216-1930
Attention: President
or to such other addresses as the parties may designate in writing.
(c) Integration; Modification. This Agreement shall supersede all previous
negotiations, commitments and writings with respect to the employment of the
Executive. This Agreement may not be released, discharged, abandoned, changed or
modified in any manner, except by an instrument in writing signed on behalf of
each of the parties hereto. The failure of either party hereto to enforce at any
time any of the provisions of this Agreement shall in no way be construed to be
a waiver of any such provisions, nor in any way to affect the validity of this
Agreement or the right of either party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to be a
waiver of any other or subsequent breach.
(d) Severability. If any term or provision of this Agreement is declared
invalid by a court of competent jurisdiction, the remaining terms and provisions
of this Agreement shall remain unimpaired.
(e) Captions. The captions appearing in this Agreement are inserted only
as a matter of convenience and as a reference and in no way define, limit or
describe the scope or intent of this Agreement or any of other provisions
hereof.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of the State of New York without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction.
(g) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first above written.
EXECUTIVE
/s/ Stephen M. Kasprisin
--------------------------------------
Name: Stephen M. Kasprisin
ACORN PRODUCTS, INC.
By: /s/ Gavril Mihaly
--------------------------------------
Name: Gavril Mihaly
Title: President and CEO
UNIONTOOLS, INC.
By: /s/ Gavril Mihaly
--------------------------------------
Name: Gavril Mihaly
Title: President and CEO
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<PAGE> 1
EXHIBIT 10.3
ACORN PRODUCTS, INC.
DEFERRED EQUITY COMPENSATION PLAN FOR DIRECTORS
SECTION 1. INTRODUCTION
1.1 ESTABLISHMENT OF PLAN. Acorn Products, Inc., a Delaware corporation
(the "Company"), hereby establishes the Acorn Products, Inc. Deferred Equity
Compensation Plan for Directors (the "Plan") for those directors of the Company
who are not employees of the Company. The Plan provides the opportunity for
Directors to defer receipt of all or one-half of their cash compensation on a
pretax basis and to invest those deferrals in the Company's Stock.
1.2 PURPOSES. The purposes of the Plan are to align the interests of
Directors more closely with the interests of other shareholders of the Company,
to encourage the highest level of Director performance by providing the
Directors with a direct interest in the Company's attainment of its financial
goals and to help attract and retain qualified Directors.
1.3 EFFECTIVE DATE. The Plan shall be effective (the "Effective Date")
on April 3, 1997. To the extent an investment or distribution of Stock may be
made under the Plan, the Plan is intended to qualify for the exemption provided
by Rule 16b-3 under the Exchange Act, as now in effect or hereafter amended,
from short swing profit liability under Section 16(b) of the Exchange Act.
SECTION 2. DEFINITIONS
2.1 DEFINITIONS. The following terms shall have the meanings set forth
below:
(a) "Administrative Committee" means the committee designated
in Section 3 to administer the Plan.
(b) "Affiliate" of any specified Person means (i) any other
Person, directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person or (ii) any Person who is a
director or officer (a) of such Person, (b) of any subsidiary of such Person or
(c) of any Person described in clause (i) above. For purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meaning correlative to the
foregoing.
(c) "Board", as used in connection with the defined terms
"Change of Control" and "Incumbent Members" means the Board of Directors of the
Company. As used elsewhere in the Plan, the Board shall mean not only the Board
of Directors of the Company but, with respect to actions taken or to be taken in
connection with the Plan, any committee thereof authorized by the Board to take
action with respect to the Plan.
<PAGE> 2
EXHIBIT 10.3
(d) "Change of Control" occurs upon any of the following
events: (i) the acquisition by any Person (as defined in Section 13(d) of the
Exchange Act) other than TCW or Oaktree of beneficial ownership (as defined in
Rule 13d-3 and Rule 13d-5 under the Exchange Act, except such Person shall be
deemed to have "beneficial ownership" of all securities that such Person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time) of securities of the Company (a) having 25% or more of the
total voting power of the then outstanding voting securities of the Company and
(b) having more voting power than the securities of the Company beneficially
owned by Oaktree; (ii) during any twelve month period, a change in the Board
occurs such that Incumbent Members do not constitute a majority of the Board;
(iii) a sale of all or substantially all of the assets of the Company or
UnionTools, Inc.; or (iv) the consummation of a merger or consolidation of the
Company with any other Person, provided, however, that no Change of Control
shall have occurred pursuant to this clause (iv) if (A) after such merger or
consolidation the voting securities of the Company prior to such merger or
consolidation continue to represent more than 50% of the combined voting power
of such Person or (B) if such merger or consolidation does not result in a
material change in the beneficial ownership of the Company's voting securities.
(e) "Common Stock Equivalent" means a hypothetical share of
Stock which shall have a value on any date equal to the Fair Market Value of one
share of Stock on that date.
(f) "Deferred Stock Equivalent Account" means the bookkeeping
account established by the Company in respect to each Director pursuant to
Section 5.3 hereof and to which shall be credited the fees deferred by the
Director as provided in the Plan and the Common Stock Equivalents into which
such deferred fees are deemed invested pursuant to the Plan.
(g) "Director" means a member of the Board who is not an
employee of the Company or a subsidiary of the Company. For purposes of the
Plan, an employee is an individual whose wages are subject to the withholding of
federal income tax under Section 3401 of the Internal Revenue Code.
(h) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
(i) "Fair Market Value" of a share of Stock means as of any
applicable date the average of the high and low sale prices of such Stock on the
date such determination is required herein, or if there were no sales on such
date, the average of the closing bid and asked prices, as reported on the
principal United States securities exchange on which the Stock is listed or, in
the absence of any such listing, on the Nasdaq National Market or, if the Stock
is not at the time listed on a national securities exchange or traded on the
Nasdaq National Market, the value of such Stock on such date as determined in
good faith by the Board.
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EXHIBIT 10.3
(j) "Incumbent Members" means the members of the Board on the
date immediately preceding the commencement of a twelve-month period, provided
that any person becoming a Director during such twelve-month period whose
election or nomination for election was approved by a majority of the Directors
who, on the date of such election or nomination for election, comprised the
Incumbent Members shall be considered one of the Incumbent Members in respect of
such twelve-month period.
(k) "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time.
(l) "Oaktree" means Oaktree Capital Management, LLC and its
Affiliates, including any partnerships, separate accounts or other entities
managed by Oaktree.
(m) "Payment Date" means each of the dates each year on which
the Company pays fees to Directors.
(n) "Stock" means the $0.001 par value common stock of the
Company.
(o) "TCW" means: TCW Special Credits Plus Fund; TCW Special
Credits Fund III; TCW Special Credits Fund IIIb; TCW Special Credits Fund IV;
TCW Special Credits Trust; TCW Special Credits Trust IIIb; TCW Special Credits
Trust IV; TCW Special Credits Trust IVa; TCW Special Credits, as investment
manager of Delaware State Employees' Retirement Fund, Weyerhaeuser Company
Pension Trust and The Common Fund for Bond Investments; and any of their
respective Affiliates.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the context,
the masculine gender shall also include the feminine gender, and the definitions
of any term herein in the singular shall also include the plural.
SECTION 3. PLAN ADMINISTRATION
The Plan shall be administered by the Administrative Committee,
comprised of the Chief Financial Officer and the Secretary of the Company or
such other officers of the Company as the Board may designate. Subject to the
limitations of the Plan, the Administrative Committee shall have the sole and
complete authority: (i) to impose such limitations, restrictions and conditions
as it shall deem appropriate; (ii) to interpret the Plan and to adopt, amend and
rescind administrative guidelines and other rules and regulations relating to
the Plan; and (iii) to make all other determinations and to take all other
actions necessary or advisable for the implementation and administration of the
Plan. Notwithstanding the foregoing, the Administrative Committee shall have no
authority, discretion or power to alter any terms or conditions specified in the
Plan. The Administrative Committee's determinations on matters within its
authority shall be conclusive and binding upon the Company, the Directors and
all other persons.
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EXHIBIT 10.3
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. There shall be authorized for issuance under the
Plan, in accordance with the provisions of the Plan, 73,000 shares of Stock.
This authorization may be increased from time to time by approval of the Board
and by the shareholders of the Company if the Board determines that such
shareholder approval is required. The Company shall at all times during the term
of the Plan retain as authorized and unissued Stock at least the number of
shares from time to time required under the provisions of the Plan, or otherwise
assure itself of its ability to perform its obligations hereunder. The shares of
Stock issuable hereunder shall be authorized and unissued shares or previously
issued and outstanding shares of Stock reacquired by the Company.
4.2 ADJUSTMENTS UPON CHANGES IN STOCK. If there shall be any change in
the Stock, through merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, spin-off, split up, dividend in kind or other
change in the corporate structure or distribution to the shareholders,
appropriate adjustments shall be made by the Administrative Committee (or if the
Company is not the surviving corporation in any such transaction, the board of
directors of the surviving corporation) in the aggregate number and kind of
shares subject to the Plan and the number and kind of shares which may be issued
under the Plan. Appropriate adjustments may also be made by the Administrative
Committee in the terms of Common Stock Equivalents under the Plan to reflect
such changes and to modify any other terms on an equitable basis as the
Administrative Committee in its discretion determines.
SECTION 5. DEFERRALS AND DISTRIBUTIONS
5.1 DEFERRAL ELECTIONS. A Director may elect to defer receipt of all or
one-half of the annual fees payable to the Director for serving on the Board. A
Director may make the elections permitted hereunder by giving written notice to
the Company in a form approved by the Administrative Committee. The notice shall
state: (i) whether all or one-half of such fees shall be deferred; (ii) the date
as of which deferral is to commence; and (iii) subject to the limitations of
this Section 5, the year in which distribution is to commence and the form
(i.e., lump sum or installments over a stated number of years) of distribution.
5.2 TIME FOR ELECTING DEFERRAL AND CHANGE IN ELECTION. The election to
defer fees shall be made in the first instance prior to the first meeting of the
Board following the Effective Date of the Plan and, thereafter, prior to the
latest to occur of the following: (i) the beginning of the calendar year for
which the fees are to be earned; (ii) such Director's first day of Board service
in that year; or (iii) the thirty-first day following the date the Director
first becomes eligible to participate in the Plan; provided that, an election
made on or after the first day of a calendar year shall only apply to fees
earned after the date of the election. An election to defer, once made, is
irrevocable for the first calendar year with respect to which the election is
made, except as provided in Section
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<PAGE> 5
EXHIBIT 10.3
5.11 hereof. An election to defer, once made, shall continue to be effective for
succeeding calendar years until revoked or modified by the Director by written
request to the Administrative Committee prior to the beginning of a calendar
year for which fees would otherwise be deferred.
5.3 DEFERRED STOCK EQUIVALENT ACCOUNTS. A Deferred Stock Equivalent
Account shall be established for each Director. Deferred fees shall be credited
to such Account as of the date such amounts would have otherwise been paid in
cash to the Director, and shall be converted into Common Stock Equivalents based
on the Fair Market Value as of the date such amounts would have otherwise been
paid in cash to the Director. Deferred fees shall be converted into Common Stock
Equivalents by dividing (i) an amount equal to the dollar amount of the fees
deferred by (ii) the Fair Market Value. A Director's Deferred Stock Equivalent
Account also shall be credited with dividend equivalents and other distributions
pursuant to Section 5.4.
5.4 DIVIDEND EQUIVALENTS. Dividends and other distributions with
respect to Common Stock Equivalents shall be deemed to have been paid as if such
Common Stock Equivalents were actual shares of Stock issued and outstanding on
the respective record or distribution dates. Common Stock Equivalents shall be
credited to a Director's Deferred Stock Equivalent Account in respect of cash
dividends and any other securities or property distributed with respect to the
Stock in connection with reclassifications, spin-offs and the like on the basis
of the value of the dividend or other asset distributed and the Fair Market
Value of the Common Stock Equivalents on the date of the announcement of the
dividend or asset distribution, all at the same time and in the same amount as
dividends or other distributions are paid or distributed with respect to the
Stock. Fractional shares shall be credited to a Director's Deferred Stock
Equivalent Account cumulatively, but the balance of shares of Common Stock
Equivalents in a Director's Deferred Stock Equivalent Account shall be rounded
to the next highest whole share for any distribution to such Director pursuant
to this Section 5.
5.5 STATEMENT OF ACCOUNTS. A statement as to the balance of his or her
Deferred Stock Equivalent Account will be sent to each Director at least once
each calendar year.
5.6 PAYMENT OF ACCOUNTS. As soon as practicable following termination
of service as a Director, a Director shall receive a distribution of his or her
Deferred Stock Equivalent Account as directed by the Director in his or her most
recent notice of distribution instructions, provided, however, that any such
notice, other than the initial such notice, shall not be effective to direct the
time and manner of distribution of the Director's Deferred Stock Equivalent
Account unless such notice is received by the Administrative Committee at least
two years prior to the effective date of the Director's termination of service.
Either a lump sum or the first of a stated number of equal annual installments
shall be paid in the year of such termination. Succeeding installments (if any)
shall be paid on January 31 of each calendar year following the calendar year in
which the first payment was made. Such distribution(s) shall be made in shares
of Stock on the basis of one share of Stock for each Common Stock Equivalent
credited to such Director's
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EXHIBIT 10.3
Deferred Stock Equivalent Account as of the Payment Date immediately preceding
the date of distribution.
5.7 PAYMENTS FOLLOWING THE DEATH OF A DIRECTOR. In the event of a
Director's death before the balance of his or her Deferred Stock Equivalent
Account is fully paid, payment of the balance of the Director's Deferred Stock
Equivalent Account shall then be made to the beneficiary or beneficiaries, at
such time or times and in such manner as shall be designated by the Director
pursuant to Section 5.8 or, in the absence of a designation as to the time and
manner of payment, in the time and manner selected by the Administrative
Committee. The Administrative Committee may, in its discretion, take into
account the application of any designated beneficiary and direct that the
balance of the Director's Deferred Stock Equivalent Account be paid to such
beneficiary in the manner requested by such application.
5.8 DESIGNATION OF BENEFICIARY. A Director shall file with the
Administrative Committee a written designation of one or more persons as the
beneficiary who shall be entitled to receive the amount, if any, payable
hereunder after the Director's death. Such designation also shall specify the
manner and the time or times at which such amount shall be paid. A Director may,
from time to time, revoke or change his beneficiary designation without the
consent of any prior beneficiary by filing a new designation with the
Administrative Committee. The last such designation received by the
Administrative Committee shall be controlling; provided, however, that no
designation or change or revocation thereof shall be effective unless received
by the Administrative Committee prior to the Director's death and in no event
shall it be effective as of a date prior to its receipt. If no such beneficiary
designation is in effect at the time of the Director's death, or if no
designated beneficiary survives the Director, the Director's estate shall be
deemed to have been designated his or her beneficiary and the executor or
administrator thereof shall receive the amount, if any, payable hereunder after
the Director's death. If the Administrative Committee is in doubt as to the
right of any person to receive all or part of such amount, the Company may
retain such amount until the rights thereto are determined, or the Company may
pay such amount into any court of appropriate jurisdiction and such payment
shall be a complete discharge of the liability of the Company therefor.
5.9 CHANGE OF CONTROL. Notwithstanding any provision of this Plan to
the contrary, in the event of a Change of Control, each Director shall receive,
within ten (10) days of the date of such Change of Control a lump sum
distribution of the number of shares of Stock equal to the number of Common
Stock Equivalents credited to such Director's Deferred Stock Equivalent Account
as of the date of the Change of Control.
5.10 EMERGENCY PAYMENTS. In the event of an "unforeseeable emergency"
as defined herein, the Administrative Committee may determine the amounts
payable under Section 5 hereof and pay all or a part of such amounts in shares
of Stock without regard to the payment dates otherwise determined pursuant to
Sections 5.6, 5.7 and 5.8, to the extent the Administrative Committee determines
that such action is necessary in light of immediate and substantial needs of the
Director (or his beneficiary) occasioned by severe
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<PAGE> 7
EXHIBIT 10.3
financial hardship. For the purposes of this Section, an "unforeseeable
emergency" is a severe financial hardship to the Director resulting from a
sudden and unexpected illness or accident of the Director or beneficiary, or of
a dependent (as defined in Section 152(a) of the Internal Revenue Code) of the
Director or beneficiary, loss of the Director's or beneficiary's property due to
casualty, or other similar extraordinary and unforeseeable circumstances arising
as a result of events beyond the control of the Director or beneficiary.
Payments shall not be made pursuant to this Section to the extent that such
hardship is or may be relieved: (a) through reimbursement or compensation by
insurance or otherwise; (b) by liquidation of the Director's or beneficiary's
assets, to the extent the liquidation of such assets would not itself cause
severe financial hardship; or (c) by cessation of the Director's deferrals under
the Plan. Such action shall be taken only if a Director (or a Director's legal
representatives or successors) signs an application describing fully the
circumstances which are deemed to justify the payment, together with an estimate
of the amounts necessary to prevent such hardship, which application shall be
approved by the Administrative Committee after making such inquiries as the
Administrative Committee deems necessary or appropriate.
5.11 PAYMENT OF TAXABLE AMOUNT. Notwithstanding any other provision of
this Section 5 or any payment schedule directed by a Director pursuant to
Sections 5.6, 5.7 or 5.8 and regardless of whether payments have commenced under
this Section 5, in the event that the Internal Revenue Service should finally
determine that part or all of the value of a Director's Deferred Stock
Equivalent Account which has not actually been distributed to the Director is
nevertheless required to be included in the Director's or beneficiary's gross
income for federal income tax purposes, then the balance of the Deferred Stock
Equivalent Account or the part thereof that was determined to be includable in
gross income shall be distributed in shares of Stock to the Director or
beneficiary, as the case may be, in a lump sum as soon as practicable after such
determination, without any action or approval by the Administrative Committee. A
"final determination" of the Internal Revenue Service for purposes of this
Section is a determination in writing by said Service ordering the payment of
additional tax, reporting of additional gross income or otherwise requiring Plan
amounts to be included in gross income, which is not appealable or which the
Director or beneficiary does not appeal within the time prescribed for appeals.
SECTION 6. GENERAL CREDITOR STATUS
Each participating Director and beneficiary designated by a Director
shall be and remain an unsecured general creditor of the Company with respect to
any payments due and owing to such Director or beneficiary hereunder. All
payments to persons entitled to benefits hereunder shall be made out of the
general assets and shall be solely the obligation of the Company. The Plan is a
promise by the Company to pay benefits in the future and it is the intention of
the Company and participating Directors that the Plan be "unfunded" for tax
purposes (and for the purposes of Title I of the Employee Retirement Income
Security Act of 1974).
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EXHIBIT 10.3
SECTION 7. CLAIMS PROCEDURES
If a claim for benefits made by any person (the "Applicant") is denied,
the Administrative Committee shall furnish to the Applicant, within 90 days
after its receipt of such claim (or within 180 days after such receipt if
special circumstances require an extension of time), a written notice which: (i)
specifies the reasons for the denial; (ii) refers to the pertinent provisions of
the Plan on which the denial is based; (iii) describes any additional material
or information necessary for the perfection of the claim and explains why such
material or information is necessary; and (iv) explains the claim review
procedures. Upon the written request of the Applicant submitted within 60 days
after receipt of such written notice, the Administrative Committee shall afford
the Applicant a full and fair review of the decision denying the claim and, if
so requested: (i) permit the Applicant to review any documents which are
pertinent to the claim; (ii) permit the Applicant to submit to the
Administrative Committee issues and comments in writing; and (iii) afford the
Applicant an opportunity to meet with the Administrative Committee as a part of
the review procedure. Within 60 days after its receipt of a request for review
(or within 120 days after such receipt if special circumstances, such as the
need to hold a hearing, require an extension of time) the Administrative
Committee shall notify the Applicant in writing of its decision and the reasons
for its decision and shall refer the Applicant to the provisions of the Plan
which form the basis for its decision.
SECTION 8. ASSIGNABILITY
The right of a Director and his beneficiary to receive payments or
distributions hereunder shall not be subject in any manner to anticipation,
alienation, sale, transfer (other than by will or the laws of descent and
distribution), assignment, pledge, encumbrance, attachment, or garnishment by
creditors of a participating Director or his beneficiary.
SECTION 9. PLAN TERMINATION, AMENDMENT AND MODIFICATION
The Plan shall automatically terminate at the close of business on the
fifteenth anniversary of the effective date unless sooner terminated by the
Board. The Board may at any time terminate, and from time to time may amend or
modify the Plan, provided, however, that no amendment or modification may become
effective without approval of the amendment or modification by the shareholders
if shareholder approval is required to enable the Plan to satisfy any applicable
federal or state statutory or regulatory requirements, and, provided further
that no termination, amendment or modification shall reduce the then existing
balance of any Director's Deferred Stock Equivalent Account or otherwise
adversely change the terms and conditions thereof without the Director's
consent.
SECTION 10. GOVERNING LAW/PLAN CONSTRUCTION
The Plan and all agreements hereunder shall be construed in accordance
with and
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EXHIBIT 10.3
governed by the laws of the State of New York. Nothing in this document shall be
construed as an employment agreement or in any way impairing the right of the
Company, the Board or its committees or the Company's shareholders, to remove a
Director from service as a director, to refuse to renominate or reelect such
person as a director, or to enforce the duly adopted retirement policies of the
Board.
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<PAGE> 1
EXHIBIT 10.4
ACORN PRODUCTS, INC.
1997 STOCK INCENTIVE PLAN
1. Establishment and Purpose of the Plan. This 1997 Stock Incentive
Plan (the "Plan") is established by Acorn Products, Inc., a Delaware corporation
(the "Company"), as of April 3, 1997. The Plan is designed to enable the Company
to attract, retain and motivate members of the senior management and certain
other officers and key employees of the Company, UnionTools, Inc., a Delaware
corporation ("UnionTools"), and the Company's other direct and indirect
subsidiaries by providing for or increasing their proprietary interest in the
Company. The Plan provides for the grant of options ("Options") that qualify as
incentive stock options ("Incentive Stock Options") under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), as well as Options that
do not so qualify ("Non-Qualified Options"), for the grant of stock appreciation
rights ("Stock Appreciation Rights") and for the sale or grant of restricted
stock ("Restricted Stock").
2. Stock Subject to the Plan. The maximum number of shares of stock
that may be subject to Options or Stock Appreciation Rights granted hereunder
and the number of shares of stock that may be sold as Restricted Stock
hereunder, shall not in the aggregate exceed 730,000 shares of common stock,
$0.001 par value (the "Shares", and individually, a "Share"), of the Company,
subject to adjustment under Section 12 hereof. Anything contained herein to the
contrary notwithstanding, the aggregate number of Shares with respect to which
options or stock appreciation rights may be granted during any calendar year to
any individual shall be limited to 73,000. The Shares that may be subject to
Options granted under the Plan, and Restricted Stock sold or granted under the
Plan, may be authorized and unissued Shares or Shares reacquired by the Company
and held as treasury stock.
Shares that are subject to the unexercised portions of any Options that
expire, terminate or are canceled, and Shares that are not required to satisfy
the exercise of any Stock Appreciation Rights that expire, terminate or are
canceled, and Shares of Restricted Stock that are reacquired by the Company
pursuant to the restrictions thereon, may again become available for the grant
of Options or Stock Appreciation Rights and the sale or grant of Restricted
Stock under the Plan. If a Stock Appreciation Right is exercised, any Option or
portion thereof that is surrendered in connection with such exercise shall
terminate and the Shares theretofore subject to the Option or portion thereof
shall not be available for further use under the Plan.
3. Administration of the Plan. The Plan shall be administered by the
Management Development and Compensation Committee (the "Committee") consisting
of not less than two members appointed by the Board of Directors (the "Board")
of the Company. If no persons are designated by the Board to serve on the
Committee, the Plan shall be administered by the Board and all references
herein to the Committee shall refer to the Board. From time to time, the Board
shall have the discretion to add, remove or replace members of the Committee
and shall have the sole authority to fill vacancies on the Committee. All
actions of the Committee shall comply with the provisions of Rule 16b-3 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and Section
162(m) of the Code.
<PAGE> 2
EXHIBIT 10.4
All actions of the Committee shall be authorized by a majority vote
thereof at a duly called meeting. The Committee shall have the sole authority,
in its absolute discretion, to adopt, amend, and rescind such rules and
regulations as, in its opinion, may be advisable in the administration of the
Plan, to construe and interpret the Plan, the rules and regulations, and the
agreements and other instruments evidencing Options and Stock Appreciation
Rights granted and Restricted Stock sold or granted under the Plan and to make
all other determinations deemed necessary or advisable for the administration of
the Plan. All decisions, determinations, and interpretations of the Committee
shall be final and conclusive upon the Eligible Employees, as hereinafter
defined. Notwithstanding the foregoing, any dispute arising under any Agreement
(as defined below) shall be resolved pursuant to the dispute resolution
mechanism (if any) set forth in such Agreement.
Subject to the express provisions of the Plan, the Committee shall
determine the number of Shares subject to grants or sales and the terms thereof,
including the provisions relating to the exercisability of Options and Stock
Appreciation Rights, lapse and non-lapse restrictions upon the Shares obtained
or obtainable under the Plan and the termination and/or forfeiture of Options
and Stock Appreciation Rights and Restricted Stock under the Plan. The terms
upon which Options and Stock Appreciation Rights are granted and Restricted
Stock is sold or granted shall be evidenced by a written agreement executed by
the Company and the Participant (as defined below) to whom such Options, Stock
Acquisition Rights and Restricted Stock are sold or granted (the "Agreement").
4. Eligibility. Persons who shall be eligible for grants of Options or
Stock Appreciation Rights or sales or grants of Restricted Stock hereunder
("Eligible Employees") shall be employee directors of the Company or UnionTools
or the Company's other direct and indirect subsidiaries and those employees of
the Company, UnionTools or the Company's other direct and indirect subsidiaries
who are members of a select group of management or other key employees that the
Committee may from time to time designate to participate under the Plan
("Participants") through grants of Non-Qualified Options, Incentive Stock
Options and, if applicable, Stock Appreciation Rights, and/or through sales or
grants of Restricted Stock.
5. Terms and Conditions of Options. No Incentive Stock Option shall be
granted for a term of more than ten years and no Non-Qualified Option shall be
granted for a term of more than ten years and thirty days. Options may, in the
discretion of the Committee, be granted with associated Stock Appreciation
Rights or be amended so as to provide for associated Stock Appreciation Rights.
The Agreement may contain such other terms, provisions and conditions as may be
determined by the Committee as long as such terms, conditions and provisions are
not inconsistent with the Plan. The Committee shall designate as such those
Options intended to be eligible to qualify and be treated as Incentive Stock
Options and, correspondingly, those Options not intended to be eligible to
qualify and be treated as Incentive Stock Options.
6. Exercise Price of Options. The exercise price per share for each
Non-Qualified Option granted hereunder shall be set forth in the Agreement. The
exercise price per share of any Option intended to be eligible to qualify and be
treated as an Incentive Stock Option shall not be less than the Fair Market
Value of a Share on the date such Incentive Stock Option is granted, except that
if such Incentive Stock Option is granted to a Participant who on the date of
grant is treated under Section 424(d) of the Code as owning stock (not including
stock purchasable under outstanding options) possessing more than ten percent of
the total combined voting power of all classes of the Company's stock, the
exercise price per share shall not be less than one hundred ten
2
<PAGE> 3
EXHIBIT 10.4
percent (110%) of the Fair Market Value of a Share on the date such Incentive
Stock Option is granted, and the option shall not be exercisable more than four
years from the date of grant.
Payment for Shares purchased upon exercise of any Option granted
hereunder shall be in cash at the time of exercise, except that, if either the
Agreement so provides or the Committee so permits, and if the Company is not
then prohibited from purchasing or acquiring Shares, such payment may be made in
whole or in part with Shares. The Committee also may on an individual basis
permit payment or agree to permit payment by such other alternative means as may
be lawful, including by delivery of an executed exercise notice together with
irrevocable instructions to a broker promptly to deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price.
7. Determination of Fair Market Value. The Fair Market Value of a Share
for the purposes of the Plan shall mean the average of the high and low sale
prices of a Share on the date such determination is required herein, or if there
were no sales on such date, the average of the closing bid and asked prices, as
reported on the principal United States securities exchange on which the Shares
are listed or, in the absence of such listing, on the Nasdaq National Market or,
if Shares are not at the time listed on a national securities exchange or traded
on the Nasdaq National Market, the value of a Share on such date as determined
in good faith by the Committee.
8. Non-Transferability. Except to the extent provided otherwise in the
Agreement, any Option granted under the Plan shall by its terms be
nontransferable by the Participant other than by will or the laws of descent and
distribution (in which case such descendant or beneficiary shall be subject to
all terms of the Plan applicable to Participants) and is exercisable during the
Participant's lifetime only by the Participant or by the Participant's guardian
or legal representative.
9. Incentive Stock Options. The provisions of the Plan are intended to
satisfy the requirements set forth in Section 422 of the Code and the
regulations promulgated thereunder (including the aggregate fair market value
limits set forth in Section 422(d) of the Code) with respect to Incentive Stock
Options granted under the Plan. For the purpose of this Section 9, the Fair
Market Value of a Share shall be determined at the time the Incentive Stock
Option is granted.
10. Stock Appreciation Rights. The Committee may, under such terms and
conditions as it deems appropriate, grant to any Eligible Employee selected by
the Committee, Stock Appreciation Rights, which may or may not be associated
with Options. Upon exercise of a Stock Appreciation Right, the Participant shall
be entitled to receive payment of an amount equal to the excess of the Fair
Market Value of the underlying Shares on the date of exercise over the exercise
price of the Stock Appreciation Rights. Such payment may be made in additional
Shares valued at their Fair Market Value on the date of exercise or in cash, or
partly in Shares and partly in cash, as the Committee may designate. The
Committee may require that any Stock Appreciation Right shall be subject to the
condition that the Committee may at any time, in its absolute discretion, not
allow the exercise of such Stock Appreciation Right. The Committee may further
impose such conditions on the exercise of Stock Appreciation Rights as may be
necessary or desirable to comply with Rule 16b-3 under the Exchange Act.
11. Restricted Stock. The Committee may sell or grant Restricted Stock
under the Plan (either independently or in connection with the exercise of
options or Stock Appreciation Rights under the Plan) to Eligible Employees
selected by the Committee. The Committee shall in each case
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<PAGE> 4
EXHIBIT 10.4
determine the number of Shares of Restricted Stock to be sold or granted, the
price at which such Shares are to be sold, if applicable, and the terms or
duration of the restrictions to be imposed upon those Shares.
12. Adjustments. If at any time the class of Shares subject to the Plan
is changed into or exchanged for a different number or kind of shares or
securities, as the result of any one or more reorganizations, recapitalizations,
stock splits, reverse stock splits, stock dividends or similar events, or in the
event of a rights offering to purchase Shares at a price substantially below
Fair Market Value, an appropriate adjustment consistent with such change,
exchange or offering shall be made in the number, exercise or sale price and/or
type of shares or securities for which Options or Stock Appreciation Rights may
thereafter be granted and Restricted Stock may thereafter be sold or granted
under the Plan in such manner as the Committee may deem equitable to prevent
substantial dilution or enlargement of the rights granted to, or available for,
participants in the Plan. Any such adjustment in outstanding Options or in
outstanding rights to purchase Restricted Stock shall be made without changing
the aggregate exercise price applicable to the unexercised portions of such
Options or the aggregate purchase price of such Restricted Stock, as the case
may be.
13. Change of Control. Notwithstanding any provision of this Plan to
the contrary, in the event of a Change of Control (as defined below), all
Options and Stock Appreciation Rights that have been granted by the Board as of
the date thereof shall vest and become exercisable, as the case may be,
immediately prior to the effective time of any Change of Control and all
conditions to exercise thereof shall be deemed to have been met.
For purposes of this Section 13, the following terms shall have the
following meanings:
"Affiliate" of any specified Person (as defined in Section 13(d) of the
Exchange Act) shall mean (i) any other Person, directly or indirectly,
controlling or controlled by or under direct or indirect common control with
such specified Person or (ii) any Person who is a director or officer (a) of
such Person, (b) of any subsidiary of such Person or (c) of any Person described
in clause (i) above. For purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meaning correlative to the foregoing.
"Change of Control" shall mean: (i) the acquisition by any Person (as
defined in Section 13(d) of the Exchange Act) other than TCW or Oaktree, of
beneficial ownership (as defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except such Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time) of securities of the
Company (a) having 25% or more of the total voting power of the then outstanding
voting securities of the Company and (b) having more voting power than the
securities of the Company beneficially owned by Oaktree; (ii) during any twelve
month period, a change in the Board occurs such that Incumbent Members do not
constitute a majority of the Board; (iii) a sale of all or substantially all of
the assets of the Company or UnionTools; or (iv) the consummation of a merger or
consolidation of the Company with any other Person, provided, however, that no
Change of Control shall have occurred pursuant to this clause (iv) if (A) after
such merger or consolidation the voting securities of the Company prior to such
merger or consolidation continue to represent more than 50% of the combined
voting power of
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EXHIBIT 10.4
such Person or (B) if such merger or consolidation does not result in a material
change in the beneficial ownership of the Company's voting securities.
"Incumbent Members" shall mean the members of the Board on the date
immediately preceding the commencement of a twelve-month period, provided that
any person becoming a Director during such twelve-month period whose election or
nomination for election was approved by a majority of the Directors who, on the
date of such election or nomination for election, comprised the Incumbent
Members shall be considered one of the Incumbent Members in respect of such
twelve-month period.
"Oaktree" shall mean Oaktree Capital Management, LLC and its
Affiliates, including any partnerships, separate accounts or other entities
managed by Oaktree.
"TCW" shall mean: TCW Special Credits Plus Fund; TCW Special Credits
Fund III; TCW Special Credits Fund IIIb; TCW Special Credits Fund IV; TCW
Special Credits Trust; TCW Special Credits Trust IIIb; TCW Special Credits Trust
IV; TCW Special Credits Trust IVa; TCW Special Credits, as investment manager of
Delaware State Employees' Retirement Fund, Weyerhaeuser Company Pension Trust
and The Common Fund for Bond Investments; and any of their respective
Affiliates.
14. Investment Representation. Each Agreement may provide that, upon
demand by the Committee for such a representation, the Optionee shall deliver to
the Committee at the time of any exercise of an Option a written representation
that the Shares to be acquired upon such exercise are to be acquired for
investment and not for resale or with a view to the distribution thereof. Upon
such demand, delivery of such representation prior to the delivery of any Shares
issued upon exercise of an Option shall be a condition precedent to the right of
the Optionee or such other person to purchase any Shares.
15. Duration of the Plan. Options and Stock Appreciation Rights may not
be granted and Restricted Stock may not be sold or granted under the Plan after
April 3, 2007.
16. Amendment and Termination of the Plan. The Board may at any time
alter, amend, suspend or terminate the Plan. The Committee may amend the Plan or
any Agreement issued hereunder to the extent necessary for any Option or Stock
Appreciation Right granted or Restricted Stock sold or granted under the Plan to
comply with applicable tax or securities laws.
No Option or Stock Appreciation Right may be granted or Restricted
Stock sold or granted during any suspension or after the termination of the
Plan. No amendment, suspension or termination of the Plan or of any Agreement
issued hereunder shall, without the consent of the affected holder of such
Option or Stock Appreciation Right or Restricted Stock, alter or impair any
rights or obligations in any Option or Stock Appreciation Right or Restricted
Stock theretofore granted or sold to such holder under the Plan.
17. Nature of the Plan. The Plan is intended to qualify as a
compensatory benefit plan within the meaning of Rule 701 under the Securities
Act of 1933. The grant, exercise or sale of securities under the Plan is
intended to qualify for the exemption from short swing profits liability under
Section 16(b) of the Exchange Act, provided by Rule 16b-3 promulgated
thereunder, as such Rule is now in effect or hereafter amended.
5
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EXHIBIT 10.4
18. Cancellation of Options. Any Option granted under the Plan may be
canceled at any time with the consent of the holder and a new Option may be
granted to such holder in lieu thereof.
19. Withholding Taxes. Whenever Shares are to be issued with respect to
the exercise of Options or amounts are to be paid or income earned with respect
to Stock Appreciation Rights or Restricted Stock under the Plan, the Committee
in its discretion may require the Participant to remit to the Company, prior to
the delivery of any certificate or certificates for such Shares or the payment
of any such amounts, all or any part of the amount determined in the Committee's
discretion to be sufficient to satisfy federal, state and local withholding tax
obligations (the "Withholding Obligation") that the Company or its counsel
determines may arise with respect to such exercise, issuance or payment.
Pursuant to a procedure established by the Committee, the Participant may (i)
request the Company to withhold delivery of a sufficient number of Shares or a
sufficient amount of the Participant's compensation or (ii) deliver a sufficient
number of previously-issued Shares, to satisfy the Withholding Obligation.
20. No Rights as Stockholder or to Continuance of Employment. No
Participant shall have any rights as a Stockholder with respect to any Shares
subject to his or her Option or Stock Appreciation Right prior to the date of
issuance to him or her of a certificate or certificate for such Shares. The Plan
and any Option or Stock Appreciation Rights granted and any Restricted Stock
sold or granted under the Plan shall not confer upon any Participant any right
with respect to any continuance of employment by the Company, nor shall they
interfere in any way with the right of the Company to terminate his or her
employment at any time.
21. Compliance with Government Law and Regulations. The Plan, the grant
and exercise of Options and Stock Appreciation Rights, and the grant and sale of
Restricted Stock thereunder, and the obligation of the Company to sell and
deliver Shares under such Options and Stock Appreciation Rights, shall be
subject to all applicable laws, rules and regulations and to such approvals by
any government or regulatory agency that may be required. The Company shall not
be required to issue or deliver any certificates for Shares prior to (i) the
listing of such Shares on any stock exchange on which Shares may then be listed
and (ii) the completion of any registration or qualification of such Shares
under any state or federal law, or any ruling or regulation of any governmental
body which the Company shall, in its sole discretion, determine to be necessary
or advisable.
6
