SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) September 9, 1997
(Items 1,5 and 7),
September 16, 1997 (Item 8)
Lund International Holdings, Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-16319 41-1568618
(State or Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
911 Lund Boulevard, Anoka, Minnesota 55303
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (612) 576-4200
-------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
On September 9, 1997, Mr. Allan W. Lund, the Lund Family Limited
Partnership, the Lois and Allan Lund Family Foundation and certain members of
Mr. Lund's family (collectively, the "Lund Interests") sold their collective 38%
interest in Lund International Holdings, Inc., a Delaware corporation (the
"Company"), to an investment vehicle affiliated with Harvest Partners, Inc., a
private investment firm. The Company does not, by responding to this Item 1,
make the determination that a change in control has occured. For a more complete
description of the transaction, see Item 5. Other Events.
ITEM 5. OTHER EVENTS.
On September 9, 1997, the Lund Interests sold an aggregate of 1,686,893
shares of the Company's common stock to LIH Holdings, LLC, a Delaware limited
liability company ("LIH"), a company affiliated with Harvest Partners, Inc., a
private investment firm ("Harvest Partners"), for a price of $11.50 per share
plus additional contingent payments on 1,426,501 of the shares. The shares sold
to LIH by the Lund Interests constituted approximately 38% of the Company's
outstanding common stock. The Stock Purchase Agreement contains customary
representations, warranties, covenants and conditions.
As more fully set forth below, the stock purchase transaction between
LIH and the Lund Interests, as well as the related agreements between the
Company and Harvest Partners, were considered and approved by a Special
Committee of disinterested directors of the Board of Directors of the Company
and by the Company's Board of Directors. In connection with the stock purchase
transaction, Mr. Lund retired and the Company entered into a Severance and
Noncompetition Agreement (the "Severance Agreement") with him. The Company also
entered into a three-year Governance Agreement (the "Governance Agreement") with
Harvest Partners. The Company and Harvest Partners have also entered into a
three-year Services Agreement (the "Services Agreement"), whereby Harvest
Partners will provide advisory services to the Company with respect to financial
and business matters, assist the Company in implementing a general strategy in
connection with the Company's business plan and anticipated growth and assist
the Company in structuring and negotiating acquisitions, among other things.
The purpose of the Governance Agreement entered into by the Company and
LIH, among other things, is to put in place certain arrangements relating to the
acquisition and disposition of the Company's securities by LIH and to establish
other provisions concerning LIH's relationship with the Company. The Governance
Agreement provides that LIH shall not, and that LIH will not permit any of its
Associates or Affiliates (as defined in the Governance Agreement) to,
beneficially own more than 1,933,346 shares of the Company's common stock;
provided, however, that this restriction shall not apply in the event of a
tender or exchange offer for more than 50% or more of the total outstanding
voting securities of the Company that is initiated by a party other than the
Company, LIH, any of LIH's Affiliates or Associates, or any person acting in
concert with LIH or any of its Affiliates or Associates. The Governance
Agreement also provides that the Company can issue shares of its common stock
directly to LIH or its Affiliates or Associates with the approval of a majority
of the Company's independent directors. In
<PAGE>
addition, the Governance Agreement provides that, prior to its termination, LIH,
and each Affiliate or Associate thereof which acquires shares of the Company's
common stock pursuant to the terms of the Governance Agreement, will not
transfer beneficial ownership of such shares to any other Affiliate or Associate
unless such third party becomes a signatory to the Governance Agreement.
The Governance Agreement further provides that the number of directors
comprising the Company's Board of Directors after the closing under the Stock
Purchase Agreement (the "Closing") shall be seven, including two individuals
nominated by LIH; the Company's Chief Executive Officer; two current independent
directors; an additional independent director nominated by a committee
consisting of the two directors nominated by LIH and one current independent
director and an additional independent director nominated by a committee
consisting of two current independent directors and one of the directors
nominated by LIH.
The Governance Agreement provides that the Company and LIH shall use
their best efforts to cause the composition of the Company's Board of Directors
to continue to reflect the same proportion of directors selected by LIH,
independent directors and management set forth above. The Governance Agreement
also provides that in the event that the number of shares of the Company's
common stock owned by LIH and any of its Affiliates or Associates falls below
50% of the number of shares of such stock acquired by LIH pursuant to the terms
of the Stock Purchase Agreement, LIH's right to nominate an individual to the
Company's Board of Directors will decrease by one designee. If LIH's holdings in
the Company fall below 5% of the number of shares of the Company's common stock
acquired by LIH pursuant to the terms of the Stock Purchase Agreement, LIH's
right to nominate individuals to the Company's Board of Directors is terminated.
Finally, the Governance Agreement provides that approval by the
Company's Board of Directors of certain corporate transactions requires the
affirmative vote of a majority of directors, which majority includes at least
one director nominated by LIH. Such matters include, but are not limited to, the
following: (i) any amendment to the Certificate of Incorporation or Bylaws of
the Company; (ii) any acquisition of another business; (iii) any extraordinary
sale, lease, transfer or other disposition of the Company's assets, the book
value of which exceeds 2% of the consolidated assets of the Company; (iv) any
reclassification, combination, split or similar event involving any debt or
equity securities of the Company; (v) any declaration or payment of any dividend
or distribution with respect to shares of the Company's capital stock; and (vi)
any incurrence of indebtedness not in the ordinary course of the Company's
business, if the aggregate amount of such indebtedness, on a consolidated basis,
exceeds $5,000,000.
The Services Agreement entered into by the Company and Harvest Partners
provides that Harvest Partners will provide the Company with services from time
to time as requested by the Company's Board of Directors. Such services shall
include, but not be limited to, (i) generally assisting the Company with respect
to financial and business matters as the Company's financial advisor; (ii)
recommending and assisting the Company in implementing a general strategy in
connection with the Company's accomplishing its business plan and anticipated
growth; (iii) assisting the Company in its efforts to structure and negotiate
acquisitions and dispositions
<PAGE>
of assets or business units; (iv) if necessary, locating equity partners and
structuring the terms of any such equity investment; (v) communicating with the
Company's lenders and stockholders, including assisting the Company in the
coordination of its investor relation services; (vi) structuring and negotiating
refinancings and other lending or borrowing transactions relating to the Company
and (vii) providing the Company with such other investment, advisory and related
financial services as Harvest Partners and the Company shall deem necessary and
appropriate. The term of the Service Agreement is three years, subject to
certain contingencies.
As full payment for all services provided by Harvest Partners to the
Company pursuant to the terms of the Services Agreement, the Company has agreed
to pay to Harvest Partners a quarterly fee based on achievement of cumulative
earnings before interest, taxes, depreciation and amortization ("EBITDA"), as
follows:
Annualized
Year Annual Payment EBITDA Target
---- -------------- -------------
1 $150,000 $4.0 million
2 $250,000 $5.5 million
3 $400,000 $7.0 million
The Severance Agreement was entered into by and between the Company and
Mr. Lund. The Severance Agreement provides that, for a period of 12 months, Mr.
Lund may not, directly or indirectly, compete with the Company, and may not
solicit or recruit any individual employed by the Company or influence or
attempt to influence customers, suppliers or vendors of the Company or parties
with which the Company does business, or divert their business away from the
Company. In connection with the execution of the Severance Agreement, the
Company paid Mr. Lund the following amounts: (i) $100,000 as and for severance;
(ii) $450,000 as and for Mr. Lund's agreement not to compete with the Company as
well as for his agreement to keep certain Company information confidential; and
(iii) $50,000 for Mr. Lund's release of claims that he either now has, or in the
future may have, against the Company. The Company also released Mr. Lund from
such claims.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(C) EXHIBITS
10.1 Stock Purchase Agreement, dated September 9, 1997, by and
among LIH Holdings, LLC, Allan W. Lund, the Lund Family
Limited Partnership, Lois and Allan Lund Family Foundation and
certain Lund Family Members.
10.2 Governance Agreement, dated September 9, 1997, between Lund
International Holdings, Inc. and LIH Holdings, LLC.
10.3 Services Agreement, dated September 9, 1997, by and between
Harvest Partners, Inc. and Lund International Holdings, Inc.
<PAGE>
10.4 Severance and Noncompetition Agreement, dated September 9,
1997, by and between Lund International Holdings, Inc. and
Allan W. Lund.
ITEM 8. CHANGE IN FISCAL YEAR.
On September 16, 1997, the Board of Directors of the Company approved a
change in the Company's fiscal year end from June 30 to December 31. The date of
the Company's new fiscal year end is December 31, 1997. The report covering the
transition period will be filed on Form 10-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LUND INTERNATIONAL HOLDINGS, INC.
Dated: September 17, 1997 By: /s/ William J. McMahon
-------------------------------
William J. McMahon
Its Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
10.1 Stock Purchase Agreement, dated September 9, 1997, by and
among LIH Holdings, LLC, Allan W. Lund, the Lund Family
Limited Partnership, Lois and Allan Lund Family Foundation and
certain Lund Family Members.
10.2 Governance Agreement, dated September 9, 1997, between Lund
International Holdings, Inc. and LIH Holdings, LLC.
10.3 Services Agreement, dated September 9, 1997, by and between
Harvest Partners, Inc. and Lund International Holdings, Inc.
10.4 Severance and Noncompetition Agreement, dated September 9,
1997, by and between Lund International Holdings, Inc. and
Allan W. Lund.
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
LIH HOLDINGS, LLC,
ALLAN W. LUND,
THE LUND FAMILY LIMITED PARTNERSHIP,
LOIS AND ALLAN LUND FAMILY FOUNDATION
AND
THE LUND FAMILY MEMBERS
LISTED ON SCHEDULE 1 HERETO
-------------------------------------
DATED AS OF SEPTEMBER 9, 1997
-------------------------------------
<PAGE>
AGREEMENT dated as of September 9, 1997, by and among LIH HOLDINGS,
LLC, a Delaware limited liability company ("Purchaser"), ALLAN W. LUND, an
individual residing at Rural Route 2, Box 2030, Hayward, WI 54843 ("Lund"), THE
LUND FAMILY LIMITED PARTNERSHIP, a Georgia limited partnership having a
principal mailing address at Rural Route 2, Box 2030, Hayward, WI 54843 (the
"Partnership"), LOIS AND ALLAN LUND FAMILY FOUNDATION, a non-profit corporation
organized under the laws of Minnesota, having its registered office at c/o Mark
J. Beltrand, Ltd., 9905 45th Avenue N., Suite 140, Plymouth, MN 55442 (the
"Foundation"; Lund, the Partnership and the Foundation are sometimes
hereinafter individually referred to as a "Seller" and collectively referred to
as the "Sellers"), and THOSE INDIVIDUALS LISTED ON SCHEDULE 1 HERETO
(individually, a "Lund Family Member," and, collectively, the "Lund Family
Members.")
W I T N E S S E T H :
WHEREAS, each Seller is the owner of the number of shares (the
"Shares") of common stock, $.10 par value per Share (the "Common Stock"), of
Lund International Holdings, Inc., a Delaware corporation (the "Company") set
forth opposite each such Seller's name on Schedule 2 hereto, which Shares
represent in the aggregate 1,426,501 shares of the Company's Common Stock;
WHEREAS, Sellers desire to sell and transfer to Purchaser, and
Purchaser desires to purchase and acquire from Sellers, all of Sellers' right,
title and interest in and to the Shares currently owned by Sellers, all subject
to the terms and conditions contained herein (the "Acquisition"); and
WHEREAS, the Lund Family Members desire to sell and transfer to
Purchaser, and Purchaser desires to purchase and acquire from the Lund Family
Members, all of their right, title and interest in and to an aggregate of
260,392 shares (the "Family Member Shares") of Common Stock, all subject to the
terms and conditions contained herein; and
WHEREAS, in furtherance of the consummation of the sale of the Shares
and the Family Member Shares, Purchaser, Sellers and the Lund Family Members
propose to enter into this Agreement (certain terms used herein have the
respective meanings set forth in Article IX hereof); and
WHEREAS, the Board of Directors of the Company has approved the
Acquisition and the other transactions contemplated by this Agreement
(collectively, the "Contemplated Transactions");
NOW, THEREFORE, in consideration of and in reliance upon the mutual
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby expressly acknowledged, the parties
hereto agree as follows:
<PAGE>
ARTICLE I
PURCHASE AND SALE
SECTION 1.1 AGREEMENT TO SELL AND PURCHASE THE SHARES; CONSIDERATION.
Subject to the terms and conditions of this Agreement, and in reliance upon the
representations, warranties, covenants and agreements contained herein, at the
Closing, Sellers shall sell, transfer and deliver to Purchaser, and Purchaser
shall purchase and accept from Sellers, free and clear of all Liens, all of
Sellers' right, title and interest in and to the Shares for a purchase price
(the "Purchase Price") consisting of (i) $11.50 per Share payable on the Closing
Date by Purchaser to Sellers by wire transfer to accounts designated by Sellers
for that purpose, and (ii) the additional consideration calculated and payable
in accordance with the provisions of Section 1.2 hereof (the "Additional
Consideration").
SECTION 1.2 CALCULATION AND PAYMENT OF ADDITIONAL CONSIDERATION.
(a) Definitions. For purposes of this Section 1.2, the following terms
shall have the following meanings:
"Closing Price" of the Company's Common Stock on a Trading Day shall
mean the last reported sale price for Common Stock regular way or, in case no
such reported sale takes place on such Trading Day, the average of the closing
bid and asked prices regular way for the Common Stock for such Trading Day, in
either case on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, or if the Common Stock is not listed or
admitted to trading on any national securities exchange, but is traded in the
over-the-counter market, the closing sale price of the Common Stock or, in case
no such sale is publicly reported, the average of the closing bid and asked
quotations for the Common Stock, as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or any comparable
system or, if the Common Stock is not listed or quoted on NASDAQ or a comparable
system, the closing sale price of the Common Stock or, in case no sale is
publicly reported, the average of the closing bid and asked prices, as furnished
by two members of the National Association of Securities Dealers, Inc. who make
a market in the Common Stock selected from time to time by the Company for that
purpose. If shares of the Company's Common Stock are not so listed for the 20
consecutive business days preceding any Anniversary Date (as defined below),
then the average Closing Price for shares of the Company's Common Stock for such
20 day period shall be determined by a nationally recognized investment banking
firm selected by Purchaser and reasonably acceptable to Sellers' Representative,
provided that such investment banking firm is not affiliated with, and does not
have a direct or indirect financial interest in, Purchaser or the Company (the
"Investment Banker"). The determination by the Investment Banker shall be final
and binding on Purchaser and Sellers. In addition, for purposes of this Section
1.2, a "Trading Day" shall mean, if the Common Stock is listed on any national
securities exchange, a business day during which such exchange was open for
trading and at least one trade of Common Stock was effected on such exchange on
such business day, or, if the Common Stock is not listed on any national
securities exchange but is traded in the over-the-counter market, a business day
during which the over-the-counter market was open for trading and at least one
"eligible dealer" quoted both a bid and asked price for the Common Stock. An
"eligible dealer" for any day shall include any broker-dealer who quoted both a
bid and asked price for such day, but shall not include any broker-dealer who
quoted only a bid or only an asked price for such day.
<PAGE>
"Triggering Event" shall mean (i) the sale of all or substantially all
of the assets or capital stock of the Company, (ii) the sale by Purchaser of 90%
or more of the aggregate of the Shares and the Family Member Shares
(collectively, the "Total Shares") (either in a single transaction or, if in
more than one transaction, the first such transaction that results in the sale
of more than 90% of the Total Shares), provided that such transaction(s) are on
an arm's-length basis with unaffiliated third persons or (iii) the merger,
consolidation or other business combination involving the Company, other than a
merger or consolidation of the Company in which all or substantially all of the
stockholders of the Company continue as stockholders of the entity surviving
such merger or consolidation.
(b) Additional Consideration Payable Upon a Triggering Event.
(b)(i) If, at any time from and after the Closing Date and until the
tenth anniversary thereof, a Triggering Event is consummated, concurrently with
the consummation of such Triggering Event, Purchaser shall provide Sellers with
written notice thereof. Within 30 days following the consummation of such
Triggering Event, Purchaser shall pay to Sellers, subject to the limitations set
forth herein, as Additional Consideration an aggregate amount equal to 30% of
Purchaser's Actual Realized Gain, as hereinafter defined, with respect to the
Shares.
"Actual Realized Gain" shall mean the difference between Investors
Proceeds and the Minimum Return.
"Investors Proceeds" shall mean the sum of: (A) consideration received
by Purchaser with respect to the Shares in the Triggering Event; (B) without
duplication, consideration received by Purchaser with respect to any prior sale,
if any, of any of the Shares ("Prior Sale") (it being understood that the
Purchaser shall allocate proceeds received on any Prior Sales 84.6% to Shares
and 15.4% to Family Member Shares); and (C) any dividends or other distributions
theretofore received by Purchaser with respect to the Shares;
"Minimum Return" shall mean the sum of (A) the aggregate amount paid
for the Shares pursuant to Section 1.1, $16,404,761; and (B) all out-of-pocket
expenses incurred by Purchaser, which shall include, without limitation,
Purchaser's organizational expenses, legal and accounting fees and expenses and
any brokers' fees, discounts or commissions paid or payable in connection with
the consummation of the transactions contemplated by this Agreement provided
such costs shall not exceed $.40 per share, or $570,600 in the aggregate
(collectively, the "Expenses"); discounted for each component thereof from the
date of payment or incurrence to the date of the Triggering Event or date of
Option exercise pursuant to Section 1.2(c) hereto, as the case may be, at the
rate of 10% per annum, compounded annually.
(ii) If Purchaser has the right to elect to receive, in a Triggering
Event, in whole or in part, consideration other than cash for the Shares, the
decision regarding the type of consideration to be paid to Purchaser in
connection with such Triggering Event shall be made by Purchaser in its sole
discretion. Purchaser shall consult with Sellers' Representative with respect to
any elections which may be available to Purchaser and the preferences of the
Sellers' Representative with respect to whether to receive non-cash
consideration in whole or in part in fulfillment of Purchaser's obligations to
pay Additional Consideration. To the extent Purchaser receives non-cash
consideration for the Shares in a Triggering Event, then Purchaser, in
satisfaction of its obligation to Sellers pursuant to the Agreement, in its sole
discretion, may pay the Additional Consideration with
<PAGE>
non-cash consideration in the same form as received by Purchaser; provided that
the percentage of the Additional Consideration paid with such non-cash
consideration shall not exceed the percentage of all non-cash consideration
received by Purchaser for its Shares in the Triggering Event. The value of any
non-cash consideration received by Purchaser in a Triggering Event shall be the
value attributable to such non-cash consideration in the Triggering Event. (Any
dispute as to the value of any non-cash consideration shall be determined as
provided in subsection (b)(iii) of this Section 1.2.)
(iii) The calculation and amount of Actual Realized Gain shall be
certified to Sellers' Representative (as defined in Section 8.4 hereof) by the
Chief Executive Officer of Purchaser in writing concurrently with the payment by
Purchaser to Sellers of the Additional Consideration, together with any
schedules or exhibits reasonably necessary to support such calculations. Within
fifteen (15) business days after receipt of such certificate, Sellers'
Representative shall deliver a written notice to Purchaser stating whether it
has any objections thereto, provided, however, that if Sellers' Representative
requests additional documents, financial records, work papers or schedules
reasonably necessary to support such calculations, Sellers' Representative shall
have fifteen (15) business days after receipt of such additional materials to
deliver a written notice to Purchaser stating its objections to the calculations
prepared by Purchaser. Failure to give such timely objection notices (or written
notice that Sellers' Representative has no such objection) shall constitute
acceptance and approval of such calculation of Actual Realized Gain and shall be
final and binding upon the Purchaser and the Sellers and Sellers'
Representative.
The Purchaser and the Sellers' Representative shall promptly consult
with each other and their legal and accounting representatives with respect to
any objections by the Sellers' Representative pursuant to its objection notice
and shall use reasonable efforts to resolve all such objections within thirty
(30) days after delivery by Sellers' Representative of such objection notice. If
any objections remain unresolved after the end of such 30-day period, the
parties hereto shall promptly retain (or one party if the other party fails to
jointly retain after written notice) Ernst & Young (the "Resolving Firm") to
resolve remaining objections. The parties hereto, and their respective
representatives, shall cooperate fully with the Resolving Firm. If at the time
Purchaser and/or Sellers' Representative undertake to retain the Resolving Firm,
the Resolving Firm is engaged or during the previous two years has been engaged
in representing either the Purchaser or the Sellers in any material respect, the
Resolving Firm shall select (within thirty (30) days of receipt of any such
objections to the Resolving Firm) a firm comparable in professional standing and
expertise which is independent with respect to both Purchaser and Sellers and
which firm shall be the Resolving Firm for all purposes of this Agreement. The
parties hereto shall give, and shall cause their respective representatives to
give, the Resolving Firm and its representatives such reasonable access to
documents, financial records, work papers and schedules as the Resolving Firm
shall reasonably request. The Resolving Firm shall be directed to resolve all
objections within forty-five (45) days after being retained by the parties
hereto, and a resolution by the Resolving Firm shall be final and binding on the
parties hereto. Purchaser shall pay over any further Additional Consideration
determined to be due by the Resolving Firm within five (5) business days of
final resolution by the Resolving Firm. Fees and expenses of the Resolving Firm
shall be borne by the Sellers if the Resolving Firm determines that no
adjustment to the Purchaser's original calculation is required and shall be
borne by the Purchaser if any adjusted and additional payment due is determined
by the Resolving Firm, provided, however, based upon reasonable circumstances,
the Resolving Firm may allocate its fees between the Sellers and Purchaser in
such manner as it determines is equitable in the circumstances.
<PAGE>
(iv) To illustrate the application of the above provisions, an example
calculating Additional Consideration Payable Upon a Triggering Event (assuming
the Triggering Event occurs at an anniversary date of the Closing) is attached
hereto as Schedule 3.
(c) Additional Consideration Payable at Sellers' Election.
(c)(i) If a Triggering Event is not consummated by the fourth
anniversary of the Closing Date, then Sellers shall have the option (the
"Option"), on such date, and, thereafter on each anniversary of the Closing Date
until and including the tenth anniversary of the Closing Date (each such date,
"Anniversary Date"), exercisable for a period of 20 days commencing on any such
Anniversary Date, to require Purchaser to pay to Sellers, as Additional
Consideration, an aggregate amount equal to 30% of Purchaser's Hypothetical Gain
with respect to the Shares (unless, at any time before any such Anniversary
Date, a Triggering Event shall have been consummated).
"Hypothetical Gain" shall mean the difference between Investors
Hypothetical Proceeds and the Minimum Return.
"Investors Hypothetical Proceeds" shall mean the sum of: (A) the
product expressed in dollars of (x) the number of Shares owned by Purchaser at
the date of exercise of the Option (the "Option Exercise Date") and (y) the
average of the Closing Price for the 20 Trading Days immediately preceding the
Option Exercise Date (the "Average Share Price"); (B) without duplication,
consideration received by Purchaser with respect to any Prior Sale, if any; and
(C) any dividends or distributions theretofore received by Purchaser with
respect to the Shares.
(ii) The Option may be exercised, in whole and not in part, on one
occasion only, by Sellers. Sellers shall exercise the Option by providing
Purchaser with written notice thereof (the "Option Exercise") executed by the
Sellers' Representative. The exercise of the Option by the Sellers'
Representative shall bind all Sellers. The amount payable by Purchaser to
Sellers pursuant to this paragraph (c) of Section 1.2 shall at Purchaser's
option, exercisable in its sole discretion, be paid (i) in cash within 30 days
of the date of Purchaser's receipt of notice of exercise of the Option, or (ii)
in whole or in part, in cash or by delivery of shares of Common Stock of the
Company (the number of shares to be so delivered to be equal to the Additional
Consideration payable pursuant to this Section (c) divided by the Average Share
Price). Purchaser agrees, to the extent that it elects to deliver shares, to
effect such delivery in certificates registered in the Sellers' respective names
within five business days after receipt of the Option Exercise. Each Seller
hereby agrees not to effect any trades, directly or indirectly, in shares of the
Company's Common Stock during the 20 Trading Days immediately preceding the
exercise of the Option.
(iii) The calculation and amount of Hypothetical Gain shall be
certified (along with any documents, financial records, work papers and
schedules reasonably necessary to support such calculations) to Sellers'
Representative by the Chief Executive Officer of Purchaser in writing
concurrently with the payment by Purchaser to Sellers of the Additional
Consideration. Sellers' Representative shall have the right to object to such
calculations and the parties shall resolve any dispute regarding such
calculations in accordance with the procedures set forth in Section 1.2(b)(iii)
hereof.
(iv) Purchaser shall furnish Sellers' Representatives, at least ten
(10) business days prior to any Anniversary Date, information to document any
Prior Sales by Purchaser during
<PAGE>
the period prior to the date of information and Purchaser shall forthwith after
the applicable Anniversary Date update such information with respect to any
Prior Sales effected between the date of such information and the respective
Anniversary Date.
(v) To illustrate the application of the above provisions, an example
calculating Additional Consideration Payable at Sellers' Election is attached
hereto as Schedule 3.
(d) Limit on Additional Consideration In no event shall Purchaser be
required to pay to Sellers Additional Consideration in an aggregate amount
exceeding $6,268,005. The Additional Consideration shall be allocated among and
paid to Sellers in proportion to the amount that each Seller's Shares bears to
all Shares being sold to Purchaser pursuant to Section 1.1 hereof and, with
respect to Additional Consideration payable in cash, shall be paid by wire
transfer to accounts designated by Sellers for that purpose.
(e) Adjustments. If the Company shall in any manner subdivide (by stock
split, stock dividend or otherwise) or combine (by reverse stock split or
otherwise) the number of outstanding shares of its Common Stock, then, for
purposes hereof the number of Shares shall be appropriately adjusted to give
effect to such subdivision or combination.
(f) Right to Assign Additional Consideration. Each Seller's right to
receive the Additional Consideration shall be assignable by such Seller, in
whole or in part, to members of such Seller's family, family trusts or family
partnerships for estate planning purposes, and, with Purchaser's prior written
consent, to any other third party; provided, however, that no assignment
pursuant to this paragraph (f) of Section 1.2 shall be effective unless a copy
of a duly executed and notarized instrument of assignment among the Sellers and
their assignee(s) shall be delivered to Purchaser.
(g) No Effect on Purchaser's Ownership and Control of Shares. Anything
herein to the contrary notwithstanding, Sellers' right hereunder to receive
Additional Consideration shall not represent or be deemed to be (i) any right,
claim, lien, encumbrance, restriction or other interest in or with respect to
the Shares, or (ii) any restriction on the Purchaser (or any partner or
successor thereof) exercising any right with respect thereto, including without
limitation, the right to vote or direct the vote, dispose or direct the
disposition of, or enter into any agreement, arrangement or other understanding
with respect to the Shares; it being specifically agreed and acknowledged by the
Sellers that the sole right granted hereby to the Sellers, and the sole
obligation of Purchaser created hereby, is to receive and pay, respectively, the
Additional Consideration, in the circumstances and amounts and in accordance
with the procedures set forth herein. Notwithstanding the foregoing, Purchaser
agrees that until it delivers the Additional Consideration pursuant to this
Section 1.2 (i) it will not distribute all or substantially all of its assets
pro rata among its members without its members' pro rata first assuming
Purchaser's obligations under this Section 1.2, (ii) Purchaser agrees to
preserve and keep in full force and effect its existence as a limited liability
company provided it may incorporate as a corporation or become a partnership or
limited partnership as long as such successor assumes all Purchaser's
obligations under this Section 1.2, and (iii) Purchaser will not sell any of the
Shares or Family Member Shares to any affiliate of Purchaser except in exchange
for consideration which is at least equal to the fair value (as determined in
good faith by the Purchaser) of the Shares or Family Member Shares so sold.
<PAGE>
SECTION 1.3 PURCHASE OF LUND FAMILY MEMBER SHARES. (a) Purchaser hereby
agrees to purchase from each of the Lund Family Members the number of shares of
Common Stock of the Company owned by such Lund Family Member set forth opposite
such Lund Family Member's name on Schedule 1 hereto, for a purchase price of
$11.50 per share (the "Lund Family Purchase Price") payable on the Closing Date
by Purchaser to such Lund Family Member by wire transfer to an account
designated by such Lund Family Member for that purpose. No Lund Family Member
shall be entitled to any Additional Consideration in respect of the sale of
their Family Member Shares to Purchaser hereunder.
(b) Notwithstanding anything to the contrary set forth herein,
Purchaser's obligation to consummate the acquisition of shares of Common Stock
of the Company owned by Lund Family Members is expressly contingent upon
Purchaser's concurrent acquisition, pursuant to this Agreement, of the Shares,
but Purchaser's obligation to consummate the acquisition of the Shares from the
Sellers is not contingent upon Purchaser's concurrent acquisition pursuant to
this Agreement of the Family Member Shares owned by the Lund Family Members.
SECTION 1.4 CLOSING. The closing (the "Closing") of the Contemplated
Transactions shall take place at the offices of Lindquist & Vennum P.L.L.P, 4200
IDS Center, 80 South Eighth Street, Minneapolis, Minnesota 55402, on September
9, 1997, at 10:00 a.m., local time, or at such other date, time or place as the
parties hereto shall mutually agree. The date of the Closing is hereinafter
called the "Closing Date." At the Closing (a) Sellers and the Lund Family
Members shall deliver to Purchaser certificates representing the shares duly
endorsed in blank or accompanied by a stock power or other instrument of
transfer duly executed in blank, with signatures guaranteed by a bank or member
firm of the New York Stock Exchange and accompanied by all requisite stock
transfer tax stamps, and (b) Purchaser shall deliver to (i) Sellers that portion
of the Purchase Price payable at the Closing as provided in Section 1.1 hereof
and (ii) the Lund Family Members, the Lund Family Purchase Price as provided in
Section 1.3(a) hereof. The parties hereto hereby agree to deliver at the Closing
such other documents, certificates and instruments as are specified in Article
IV hereof and as reasonably may be required to effect the sale by Sellers and
Lund Family Members of the shares pursuant to, and as contemplated by, this
Agreement and to consummate the Contemplated Transactions. All events which
shall occur at the Closing shall be deemed to occur simultaneously.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS AND
LUND FAMILY MEMBERS
A. Sellers severally, and not jointly, represent and warrant to
Purchaser, as of the date of this Agreement and as of the Closing Date (as if
each such representation and warranty was remade on the Closing Date), as
follows:
SECTION 2.1 OWNERSHIP OF SHARES. (a) Each Seller is the beneficial
owner of the Shares set forth opposite such Seller's name on Schedule 2 hereto.
To the best knowledge of Sellers, as of the date hereof, the Shares constitute
approximately 32% of the outstanding shares of Common Stock of the Company,
without giving effect to currently outstanding stock options. The Shares are
lawfully owned by the Sellers free and clear of any Lien of any kind, and have
been owned by Sellers since February 1, 1997. There are no outstanding options,
warrants, commitments,
<PAGE>
agreements or any other rights of any character (except as created by this
Agreement) entitling any person other than Purchaser to acquire the Shares. The
Shares are fully paid and non-assessable, with no personal liability attaching
to the ownership thereof, and the Shares are transferable to Purchaser under the
terms of this Agreement. Sellers do not own any options or other rights to
purchase Common Stock or any other security or instrument convertible into or
exchangeable for Common Stock of the Company.
(b) Each Seller has the power to dispose of all of his, her or its
Shares, with no restrictions on such rights, subject to the terms of this
Agreement.
SECTION 2.2 POWER; BINDING AGREEMENTS. Lund has the legal capacity,
power and authority to enter into and perform all of his obligations under this
Agreement. Each of the Trust and the Foundation has the requisite power and
authority (in accordance with the terms of its organizational documents) to
enter into and perform all of its obligations under this Agreement. Upon
delivery of the Shares to Purchaser hereunder, Purchaser will acquire good title
thereto free and clear of all Liens and claims of others of every kind and
description, subject to applicable federal and state securities laws. The
execution, delivery and performance of this Agreement by each Seller will not
violate any agreement to which such Seller is a party or by which such Seller is
bound, including, without limitation, any trust agreement, voting agreement,
stockholders agreement, voting trust, partnership or other agreement. This
Agreement has been duly and validly executed and delivered by each Seller and
constitutes the legal, valid and binding agreement of such Seller, enforceable
against such Seller in accordance with its terms.
SECTION 2.3 NO CONFLICTS; CONSENTS. (a) Neither the execution, delivery
or performance by any Seller of this Agreement nor the consummation of the
Contemplated Transactions requires such Seller to the best of his, her or its
knowledge, to obtain any consent, approval or action of or waiver from, or make
any filing with, or give any notice to, any state or federal public body or
authority or any other person, and (b) neither the execution, delivery or
performance by any Seller of this Agreement nor the consummation of the
Contemplated Transactions nor compliance by any Seller with any of the
provisions hereof shall (i) conflict with or result in any breach of any
applicable trust, partnership agreement or other agreement applicable to such
Seller, (ii) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any third party
right of termination, cancellation, material modification or acceleration) under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation of any kind to which such Seller is a party or
by which such Seller or any of his or its properties or assets may be bound, or
(iii) violate any order, writ, injunction, decree, judgment, statute, rule or
regulation applicable to such Seller or any of such Seller's properties or
assets.
SECTION 2.4 CERTIFICATES REPRESENTING SHARES. The Shares and the
certificates representing such Shares are now, and at all times after the date
hereof and until the Closing Date will be, held by Sellers, or by a nominee or
custodian for the benefit of Sellers, free and clear of all Liens, proxies,
voting trusts or agreements, understandings or arrangements or any other
encumbrances whatsoever, except for any such encumbrances or proxies arising
hereunder.
<PAGE>
SECTION 2.5 BROKERS. Sellers have not taken any action in connection
with this Agreement or the transactions contemplated hereby so as to give rise
to any claim against Purchaser for any brokerage or finder's commissions, fees
or similar compensation.
SECTION 2.6 DISCLOSURE. (a) Neither this Agreement nor the Schedules
hereto includes or will include any untrue statement of a material fact or omits
or will omit to state a material fact necessary in order to make the statements
contained in this Agreement or the Schedules hereto not misleading.
(b) To the best knowledge of Sellers, all reports, registration
statements and other documents of the Company filed by the Company with the
Securities and Exchange Commission (the "Commission") during the three year
period immediately preceding the Closing Date (collectively, the "Company SEC
Documents") have been prepared in accordance with, and comply in all material
respects with, the applicable rules and regulations promulgated by the
Commission under the Securities Act of 1933, as amended (the "Securities Act")
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"). To the
best knowledge of Sellers, none of the Company SEC Documents at the time it was
filed or became effective, as the case may be, included, or as of the date
hereof includes (except to the extent superseded by any report, registration
statement or document subsequently filed with the Commission) any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not misleading. All representations and
warranties made by Sellers herein will be deemed to have been relied on by
Purchaser (notwithstanding any investigation by Purchaser).
B. Each Lund Family Member severally represents and warrants to
Purchaser, as of the date of this Agreement and as of the Closing Date (as if
each such representation and warranty was remade as of the Closing Date) as
follows:
SECTION 2.7 OWNERSHIP OF SHARES. (a) Each Lund Family Member is the
beneficial owner of the Family Member Shares set forth opposite such Lund Fund
Member's name on Schedule 1 hereto. The Family Member Shares are lawfully owned
by each Lund Family Member free and clear of any Lien of any kind, and have been
owned by such Lund Family Member since February 1, 1997. There are no
outstanding options, warrants, commitments, agreements or any other rights of
any character (except as created by this Agreement) entitling any person other
than Purchaser to acquire the Family Member Shares. The Family Member Shares are
fully paid and non-assessable, with no personal liability attaching to the
ownership thereof, and the Family Member Shares are transferable to Purchaser
under the terms of this Agreement. Lund Family Members do not own any options or
other rights to purchase Common Stock or any other security or instrument
convertible into or exchangeable for Common Stock of the Company.
<PAGE>
(b) Each Lund Family Member has the power to dispose of all of his or
her Shares, with no restrictions on such rights, subject to the terms of this
Agreement.
SECTION 2.8 POWER; BINDING AGREEMENTS. Each Lund Family Member has the
legal capacity, power and authority to enter into and perform all of his or her
obligations under this Agreement. Upon delivery of the Lund Family Member Shares
to Purchaser hereunder, Purchaser will acquire good title thereto free and clear
of all Liens and claims of others of every kind and description, subject to
applicable federal and state securities laws. The execution, delivery and
performance of this Agreement by such Lund Family Member will not violate any
agreement to which such Lund Family Member is a party or by which such Lund
Family Member is bound, including, without limitation, any trust agreement,
voting agreement, stockholders agreement, voting trust, partnership or other
agreement. This Agreement has been duly and validly executed and delivered by
such Lund Family Member and constitutes the legal, valid and binding agreement
of such Lund Family Member, enforceable against such Lund Family Member in
accordance with its terms.
SECTION 2.9 NO CONFLICTS; CONSENTS. (a) Neither the execution, delivery
or performance by such Lund Family Member of this Agreement nor the consummation
of the Contemplated Transactions requires, to the best of his, her or its
knowledge, such Lund Family Member to obtain any consent, approval or action of
or waiver from, or make any filing with, or give any notice to, any state or
federal public body or authority or any other person, and (b) neither the
execution, delivery or performance by such Lund Family Member of this Agreement
nor the consummation of the Contemplated Transactions nor compliance by such
Lund Family Member with any of the provisions hereof shall (i) conflict with or
result in any breach of any applicable trust, partnership agreement or other
agreement applicable to such Lund Family Member, (ii) result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which such Lund Family Member is a party or by which
such Lund Family Member or any of his or its properties or assets may be bound,
or (iii) violate any order, writ, injunction, decree, judgment, statute, rule or
regulation applicable to such Lund Family Member or any of such Lund Family
Member's properties or assets.
SECTION 2.10 CERTIFICATES REPRESENTING SHARES. The Lund Family Member
Shares and the certificates representing such Lund Family Member Shares are now,
and at all times after the date hereof and until the Closing Date will be, held
by such Lund Family Member, or by a nominee or custodian for the benefit of such
Lund Family Member, free and clear of all Liens, proxies, voting trusts or
agreements, understandings or arrangements or any other encumbrances whatsoever,
except for any such encumbrances or proxies arising hereunder.
SECTION 2.11 BROKERS. Such Lund Family Member has not taken any action
in connection with this Agreement or the transactions contemplated hereby so as
to give rise to any claim against Purchaser for any brokerage or finder's
commissions, fees or similar compensation.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers and each Lund Family
Member, as of the date of this Agreement and as of the Closing Date (as if each
such representation and warranty was remade on the Closing Date), as follows:
SECTION 3.1 EXISTENCE. Purchaser is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
SECTION 3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Purchaser has full
power and authority to execute and deliver this Agreement and to consummate the
Contemplated Transactions. The execution, delivery and performance by Purchaser
of this Agreement and the consummation by it of the Contemplated Transactions
have been duly and validly authorized and approved by Purchaser and no other
proceedings on the part of Purchaser are necessary to authorize the execution
and delivery by Purchaser of this Agreement or the consummation of the
Contemplated Transactions. This Agreement has been duly and validly executed and
delivered by Purchaser and constitutes the legal, valid and binding agreement of
Purchaser, enforceable against Purchaser in accordance with its terms.
SECTION 3.3 NO CONFLICTS; CONSENTS. Neither the execution, delivery or
performance by Purchaser of this Agreement nor the consummation of the
Contemplated Transactions (i) violates any provision of the Operating Agreement
of Purchaser; (ii) requires Purchaser to obtain any consent, approval or action
of or waiver from, or make any filing with, or give any notice to, any state or
federal public body or authority or any other person; or (iii) violates any
material mortgage, indenture, lease, agreement or other instrument, permit,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Purchaser or by which it (or any of its properties or
assets) is subject or bound. No filing is required with respect to the
transactions contemplated hereunder under the provisions of the
Hart-Scott-Rodino Anti-Trust Improvements Act of 1976.
SECTION 3.2 PURCHASE FOR INVESTMENT. Purchaser is acquiring the Shares
for its own account for investment, and not with a view to any distribution
thereof. Purchaser acknowledges that the certificates evidencing the Shares will
contain a legend restricting transfer thereof pursuant to the Securities Act and
that the Shares may not be sold, transferred or otherwise disposed of unless
pursuant to an effective registration statement under the Securities Act
covering the Shares or pursuant to an exemption therefrom.
SECTION 3.3 BROKERS. Purchaser has not taken any action in connection
with this Agreement or the transactions contemplated hereby so as to give rise
to any claim against any Seller for any brokerage or finder's commissions, fees
or similar compensation.
<PAGE>
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 CONDITIONS TO THE OBLIGATIONS OF SELLERS AND PURCHASER. The
obligations of Sellers and Purchaser hereunder to consummate each of the
Contemplated Transactions are subject to the fulfillment to their reasonable
satisfaction prior to or at the Closing of each of the following conditions, any
of which may be waived by the party for whose benefit such condition has been
imposed:
(a) Consummation of the Contemplated Transactions shall not have been
prohibited or restrained by any order, injunction, decree or judgment of any
court, governmental agency or other regulatory agency or commission and there
shall not have been promulgated, entered, issued or determined (by any court,
governmental agency or other regulatory agency or commission of competent
jurisdiction) to be applicable to this Agreement any law, regulation, order,
injunction, decree or judgment making the Contemplated Transactions illegal;
(b) All approvals or consents of, or waivers by, third parties which
are required in connection with the Contemplated Transactions shall have been
obtained, which approvals shall be without conditions or with conditions which
are reasonably acceptable to Purchaser and Sellers and such approvals shall be
effective and shall remain in force.
SECTION 4.2 ADDITIONAL CONDITIONS TO PURCHASER'S OBLIGATIONS.
Purchaser's obligations to consummate the Contemplated Transactions at the
Closing are subject to the fulfillment, to Purchaser's reasonable satisfaction,
prior to or at the Closing, of each of the following additional conditions, any
of which may be waived by Purchaser:
(a) Representations and Warranties. All representations and warranties
of each Seller contained herein shall be true and accurate at and as of the
Closing Date.
(b) Performance. Each Seller shall have performed and complied with all
agreements, covenants and conditions required by this Agreement to be performed
and complied with by him or it prior to or on the Closing Date.
(c) Certificates. Purchaser shall have received certificates, each
dated the Closing Date, signed by authorized representatives of each Seller to
the effect that the conditions set forth in Sections 4.2(a) and 4.2(b) hereof
have been satisfied.
(d) Allan Lund and Lois Lund Consents. Allan Lund and Lois Lund each
shall have executed and delivered to Purchaser a consent acknowledging and
authorizing Allan Lund's and Lois Lund's sale, as the case may be, of the Shares
to the extent the Shares constitute community property and otherwise precluding
Allan Lund and Lois Lund, as the case may be, from making future claims against
Purchaser with respect to the Shares or the proceeds thereof in the form of
Exhibit C hereto.
<PAGE>
(e) Agreement With the Company. Execution and delivery by the Company
simultaneously with the Closing of agreements relating to (i) matters of
governance of the Company (the "Governance Agreement") and (ii) financial
advisory services to be rendered to the Company (the "Services Agreement"), in
the forms attached hereto as Exhibits A and B, respectively.
(f) Additional Documents. Each Seller shall have delivered, or caused
to have been delivered, any and all other documents reasonably requested by
Purchaser to evidence each Seller's compliance with the conditions set forth in
this Article IV.
SECTION 4.3 ADDITIONAL CONDITIONS TO SELLERS' OBLIGATIONS. Sellers'
obligations to deliver (or cause to be delivered) the Shares to Purchaser at the
Closing are subject to the fulfillment, to Lund's reasonable satisfaction, prior
to or at the Closing, of each of the following additional conditions, any of
which may be waived by Lund:
(a) Representations and Warranties. All representations and warranties
of Purchaser contained herein shall be true and accurate at and as of the
Closing Date.
(b) Performance. Purchaser shall have performed and complied with all
agreements, covenants and conditions required by this Agreement to be performed
and complied with by it prior to or on the Closing Date.
(c) Certificate. Sellers shall have received a certificate, dated the
Closing Date, signed by a duly authorized officer of Purchaser to the effect
that the conditions set forth in Sections 4.3(a) and 4.3(b) hereof have been
satisfied.
(d) Additional Documents. Purchaser shall have delivered, or caused to
have been delivered, any and all other documents reasonably requested by Sellers
to evidence Purchaser's compliance with the conditions set forth in this Article
IV.
ARTICLE V
COVENANTS AND AGREEMENTS
The parties covenant and agree as follows:
SECTION 5.1 NO SOLICITATION. Beginning on the date hereof and ending on
the Closing Date, each Seller and Lund Family Member shall not, in his, her or
its capacity as such, directly or indirectly, initiate, solicit (including by
way of furnishing information), encourage or respond to or take any other action
knowingly to facilitate, any inquiries or the making of any proposal by any
person or entity (other than Purchaser or any Affiliate of Purchaser) with
respect to the Company that constitutes or reasonably may be expected to lead
to, an Acquisition Proposal, or enter into or maintain or continue discussions
or negotiate with any person or entity in furtherance of such inquiries or to
obtain any Acquisition Proposal, or agree to or endorse any Acquisition
Proposal, or authorize or permit any person or entity acting on behalf of such
Seller or Lund Family Member to do any of the foregoing. If any Seller or Lund
Family Member receives any inquiry or proposal regarding any Acquisition
Proposal, such Seller or Lund Family Member shall promptly inform Purchaser of
that inquiry or proposal and the details thereof. "Acquisition Proposal" means
discussions or negotiations with, or providing any information or assistance to,
or entering into any
<PAGE>
agreement with any person or group of persons (other than Purchaser) concerning
any acquisition of any equity interest in, or in a merger, consolidation,
liquidation, dissolution, disposition of all or substantially all of the assets
of, the Company or any disposition of any of the capital stock of the Company
(other than (a) pursuant to the transactions contemplated by this Agreement or
(b) dispositions pursuant to death, divorce or by operation of law).
SECTION 5.2 EXPENSES. The parties to this Agreement shall bear their
respective expenses incurred in connection with the preparation, execution and
performance of this Agreement and the transactions contemplated hereby,
including, without limitation, all fees and expenses of agents, representatives,
counsel and accountants.
SECTION 5.3 BEST EFFORTS; FURTHER ASSURANCES. The parties hereto shall
execute such other documents and papers and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and the
transactions contemplated hereby. Each such party shall use his or its best
efforts to fulfill, or obtain the fulfillment of, the conditions precedent to
effect the transactions contemplated in this Agreement as promptly as
practicable.
SECTION 5.4 MATTERS RELATING TO THE SHARES. Each Seller and Lund Family
Member hereby agrees that during the period commencing on the date hereof and
continuing until the Closing Date, at any meeting of the holders of Common Stock
of the Company, however called, or in connection with any written consent of the
holders of Common Stock of the Company, such Seller or Lund Family Member shall
vote (or cause to be voted) the Shares then owned by such Seller or Lund Family
Member (a) against any action or agreement that would result in a breach, in any
respect, of any covenant, representation or warranty or any other obligation or
agreement of such Seller or Lund Family Member under this Agreement; and (b)
except as otherwise agreed to in writing in advance by Purchaser, against the
following actions (other than the Contemplated Transactions): (i) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving the Company or its subsidiaries; (ii) a sale,
lease or transfer of a material amount of assets of the Company or its
subsidiaries, or a reorganization, recapitalization, dissolution or liquidation
of the Company or its subsidiaries; (iii) (1) any change in a majority of the
persons who constitute the board of directors of the Company; (2) any change in
the present capitalization of the Company or any amendment of Company's
Certificate of Incorporation or By-laws; (3) any other material change in the
Company's corporate structure or business; or (4) any other action involving the
Company or its subsidiaries which is intended, or could reasonably be expected,
to impede, interfere with, delay, postpone, or materially adversely affect the
Contemplated Transactions hereunder. No Seller or Lund Family Member shall enter
into any agreement or understanding with any person or entity the effect of
which would be to violate the provisions and agreements contained in this
Section 5.4.
SECTION 5.5 RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE.
Beginning on the date hereof and ending on the Closing Date, no Seller or Lund
Family Member shall (a) directly or indirectly, offer for sale, sell, transfer,
tender, pledge, encumber, assign or otherwise dispose of, or enter into any
contract, option or other arrangement or understanding with respect to, or
consent to the offer for sale, transfer, tender, pledge, encumbrance, assignment
or other disposition of, any or all of the Shares owned by such Seller or Lund
Family Member or any interest therein; (b) except as contemplated by this
Agreement, grant any proxies or powers of attorney, deposit any Shares into a
voting trust or enter into a voting agreement with respect to any Shares; or (c)
take any action that would make any representation or warranty of such Seller or
Lund Family
<PAGE>
Member contained herein untrue or incorrect or have the effect of preventing or
disabling such Seller or Lund Family Member from performing such Seller or Lund
Family Member's obligations under this Agreement.
SECTION 5.6 STOP TRANSFER; CHANGES IN SHARES. Each Seller and Lund
Family Member agrees with, and covenants to, Purchaser that such Seller shall
not request that the Company register the transfer (book-entry or otherwise) of
any certificate or uncertificated interest representing any of the Shares,
unless such transfer is made in compliance with this Agreement. In the event of
a stock dividend or distribution, or any change in the Common Stock of the
Company by reason of any stock dividend, split-up, recapitalization,
combination, exchange of shares or the like, the term "Shares" shall be deemed
to refer to and include the Shares as well as all such stock dividends and
distributions and any shares into which or for which any or all of the Shares
may be changed or exchanged and the Purchase Price shall be appropriately
adjusted. Each Seller and Lund Family Member shall be entitled to receive any
cash dividend paid by the Company during the term of this Agreement until the
Closing Date.
SECTION 5.7 GRANT OF IRREVOCABLE PROXY; APPOINTMENT OF PROXY. (a) Each
Seller and Lund Family Member hereby irrevocable grants to, and appoints Ira D.
Kleinman and Harvey Wertheim, in his capacity as a duly authorized officer of
Purchaser, such Seller's or Lund Family Member's proxy and attorney-in-fact
(with full power of substitution), for and in the name, place and stead of such
Seller or Lund Family Member's, to vote the Shares owned by such Seller or Lund
Family Member's, or grant a consent or approval in respect of such Shares,
against any Acquisition Proposal or other matter set forth in Section 5.1
hereof.
(b) Each Seller and Lund Family Member represents that any proxies
heretofore given in respect of the Shares owned by such Seller or Lund Family
Member's are not irrevocable, and that any such proxies are hereby revoked.
(c) Each Seller and Lund Family Member hereby affirms that the
irrevocable proxy set forth in this Section 5.7 is given in connection with the
execution of this Agreement, and that such irrevocable proxy is given to secure
the performance of the duties of such Seller or Lund Family Member's under this
Agreement. Each Seller and Lund Family Member hereby further affirms that the
irrevocable proxy is coupled with an interest and may under no circumstances be
revoked. Each Seller and Lund Family Member hereby ratifies and confirms all
that such irrevocable proxy may lawfully do or cause to be done by virtue
hereof. Such irrevocable proxy is executed and intended to be irrevocable in
accordance with the provisions of Section 212(e) of the General Corporation Law
of the State of Delaware.
SECTION 5.8 BINDING EFFECT. Each Seller and Lund Family Member agrees
that this Agreement and the obligations hereunder shall attach to the shares
owned by such Seller and Lund Family Member and shall be binding upon any person
or entity to which legal or beneficial ownership of such shares shall pass,
whether by operation of law or otherwise, including, without limitation, such
party's heirs, guardians, administrators or successors.
<PAGE>
ARTICLE VI
TERMINATION
SECTION 6.1 GROUNDS FOR TERMINATION. This Agreement may not be
terminated at any time prior to the Closing Date; except that (a) this Agreement
may be terminated by the mutual consent of Lund and Purchaser; (b) Lund or
Purchaser may terminate, by written notice to the other party, if (i) the
Closing shall not have occurred through no fault of Sellers or Purchaser prior
to October 31, 1997, or such later date as may be agreed by Purchaser and Lund,
or (ii) any court or other Federal or state agency of competent jurisdiction
shall have issued an order or decree restraining, enjoining or otherwise
prohibiting any of the parties from consummating any of the transactions
contemplated by this Agreement and either (A) such order or decree is not
dissolved or vacated prior to October 31, 1997, or such later date as may be
agreed by Purchaser and Lund; provided that, in the event such an order or
decree shall be issued, the parties hereto shall use their best efforts to have
the same dissolved or vacated prior to such date or (B) in the opinion of
counsel to the party giving notice of termination (which opinion is reasonable
as to its factual basis and legal conclusions in the opinion of counsel to the
party receiving such notice), such order or decree is not likely to be dissolved
or vacated within 30 days from the date such notice of termination is given; (c)
Purchaser may terminate, by written notice to Sellers, if a representation or
warranty of any Seller is incorrect or if any Seller breaches any of his or its
covenants or agreements contained in this Agreement; (d) Sellers may terminate,
such termination to be effective as to all of the Shares, by written notice to
Purchaser, if a representation or warranty of Purchaser is incorrect or if
Purchaser breaches any of its covenants or agreements contained in this
Agreement; and (e) Purchaser may terminate its obligation to purchase shares
from any Lund Family Member by written notice to such Lund Family Member if a
representation or warranty of such Lund Family Member is incorrect or if such
Lund Family Member breaches any of its covenants or agreements contained in this
Agreement.
SECTION 6.2 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 6.1, such termination shall be without liability of either
party, or any stockholder, director, trustee, officer, employee, partner, agent,
consultant or representative of such party, to the other party to this
Agreement; provided that, if such termination shall result from the
incorrectness of a representation or warranty of a party contained in this
Agreement or the breach by a party of the covenants or agreements of such party
contained in this Agreement, such party shall be fully liable for any and all
costs and expenses (including reasonable attorneys' fees and disbursements)
sustained or incurred by the other party.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or made pursuant hereto shall
survive the Closing and continue in full force and effect for a period of three
years thereafter.
<PAGE>
SECTION 7.2 INDEMNITY. Purchaser, each Seller and Lund Family Member
shall indemnify and hold the other harmless to the extent provided in this
Article VII from and against any and all losses, damages, liabilities, claims,
demands, judgments, settlements, costs and expenses of any nature whatsoever
(including reasonable attorneys' fees and disbursements) resulting from or
arising out of the breach of any then surviving representation or warranty or
the non-performance, partial or total, of any covenant or agreement of the
indemnifying party contained in this Agreement, in either case, to the extent
not waived by the indemnified party.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 NOTICES. (a) Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally by
hand or by recognized overnight courier, telecopied or mailed (by registered or
certified mail, postage prepaid) as follows:
(i) If to Purchaser, one copy to:
LIH HOLDINGS, LLC
c/o Harvest Partners, Inc.
767 Third Avenue
New York, New York 10017
Telecopier: (212) 593-0734
Attention: Ira D. Kleinman, Manager
with a simultaneous copy to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Telecopier: (212) 603-2001
Attention: Leonard Gubar, Esq.
(ii) If to Lund, one copy to:
Allan W. Lund
Rural Route 2, Box 2030
Hayward, WI 54843
with a simultaneous copy to:
Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
Telecopier: (612) 371-3207
Attention: Richard Ihrig, Esq.
<PAGE>
(iii) If to the Partnership, one copy to:
The Lund Family Limited Partnership
Rural Route 2, Box 2030
Hayward, WI 54843
with a simultaneous copy to:
Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
Telecopier: (612) 371-3207
Attention: Richard Ihrig, Esq.
(iv) If to the Foundation, one copy to:
Lois and Allan Lund Family Foundation
c/o Mark J. Beltrand, Ltd.
9905 45th Avenue N., Suite 140
Plymouth, MN 55442
with a simultaneous copy to:
Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
Telecopier: (612) 371-3207
Attention: Richard Ihrig, Esq.
; and
(v) Any Lund Family Member to the address set
forth next to his, her or its name on
Schedule 1
(b) Each such notice or other communication shall be effective (i) if
given by telecopier, when such telecopy is transmitted to the telecopier number
specified in Section 8.1(a) (with confirmation of transmission), or (ii) if
given by any other means, when delivered at the address specified in Section
8.1(a). Any party by notice given in accordance with this Section 8.1 to the
other parties may designate another address (or telecopier number) or person for
receipt of notices hereunder. Notices by a party may be given by counsel to such
party.
SECTION 8.2 ASSIGNMENT. Except as otherwise provided in Section 1.2
hereof, this Agreement may not be assigned by Sellers or any Lund Family Member,
except that all of the terms and provisions of this Agreement shall inure to the
benefit of and be binding upon the heirs, legal representatives, successors and
assigns of each Seller or Lund Family Member. Nothing in this
<PAGE>
Agreement, express or implied, is intended to or shall confer on any person
other than the parties hereto or their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
SECTION 8.3 MISCELLANEOUS. This Agreement and the Schedules and
Exhibits hereto embody the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof. This Agreement may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. No course of dealing and no delay on the part of any
party hereto in exercising any right, power or remedy under this Agreement shall
operate as a waiver thereof, or otherwise prejudice any party's rights, powers
and remedies. No right, power or remedy conferred by this Agreement upon any
party hereto shall be exclusive of any other right, power or remedy referred to
herein or now or hereafter available at law, in equity, by statute or otherwise.
This Agreement shall be construed in accordance with and governed by the laws of
the State of Delaware. If any term of this Agreement or application thereof
shall be invalid or unenforceable, the remainder of this Agreement shall remain
in full force and effect.
SECTION 8.4 APPOINTMENT OF SELLERS' REPRESENTATIVE. Each of the Sellers
hereby appoints Allan W. Lund (the "Sellers' Representative") with full power
and authority to act as the agent of such Seller in connection with the
provisions of this Agreement and to perform all acts required thereunder,
including, but not limited to, making all decisions relating to the exercise of
the Option pursuant to Section 1.2 hereof or the resolution and settlement of
any disputes under Section 1.2 hereof relating to the determination of
Additional Consideration thereunder, including, without limitation, receiving
and delivering all notices, giving all approvals and waivers, entering into all
amendments and exercising all rights of Sellers thereunder. If the Sellers'
Representative shall die, become totally incapacitated, shall otherwise be
unable to perform his or her duties or shall resign from such position, the
Sellers who represent a majority percentage of the Shares sold on the Closing
Date pursuant to Section 1.1 hereof shall appoint a new Sellers' Representative
to fill such vacancy and written notice of such action shall be given to the
Purchaser and all Sellers. All decisions and actions of the Sellers'
Representative shall be binding upon all of the Sellers and no Seller shall have
the right to object, dissent from, protest or otherwise contest the same. The
Purchaser shall be permitted to rely upon any written instrument or document
executed on behalf of the Sellers' Representative.
<PAGE>
SECTION 8.5 COUNTERPARTS. The Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
ARTICLE IX
DEFINITIONS
SECTION 9.1 DEFINITIONS. (a) The following terms, as used herein, have
the following meanings:
"Affiliate" of any person means any other person, directly or
indirectly through one or more intermediary persons, controlling, controlled by
or under common control with such person.
"Agreement" or "this Agreement" means, and the words "herein", "hereof"
and "hereunder" and words of similar import refers to, this agreement as it from
time to time may be amended.
"Lien" means, with respect to any asset, any mortgage, lien (including
mechanics, warehousemen, laborers and landlord's liens), claim, pledge, charge,
security interest, preemptive right, right of first refusal, option, judgment,
title defect or encumbrance of any kind in respect of or affecting such asset.
The term "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity,
including a government or political subdivision or an agency or instrumentality
thereof.
The term "voting power" when used with reference to the capital stock
of, or units of equity interests in, any person means the power under ordinary
circumstances (and not merely upon the happening of a contingency) to vote in
the election of directors of such person (if such person is a corporation) or to
participate in the management and control of such person (if such person is not
a corporation).
<PAGE>
(b) The following additional terms are defined in the following
sections of this Agreement:
TERM SECTION
Acquisition Recital
Acquisition Proposal 5.1
Additional Consideration 1.1
Closing 1.4
Closing Date 1.4
Commission 2.6(b)
Company Recital
Company SEC Documents 2.6(b)
Contemplated Transactions Recital
Exchange Act 2.6(b)
Family Member Shares Recital
Foundation Recital
Governance Agreement 4.2(e)
Lund Recital
Lund Family Members Recital
Purchase Price 1.1
Purchaser Recital
Resolving Firm 1.2(b)
Securities Act 2.6(b)
Sellers Recital
Sellers' Representative 8.4
Services Agreement 4.2(e)
Shares Recital
Trust Recital
SECTION 9.2 INTERPRETATION. Unless the context otherwise requires, the
terms defined in Section 9.1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms defined herein. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation."
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth above.
LIH HOLDINGS, LLC
By: /s/ Ira D. Kleinman
Name: Ira D. Kleinman
Title: Manager
/s/ Allan W. Lund
Allan W. Lund
THE LUND FAMILY LIMITED PARTNERSHIP
By: /s/ Allan W. Lund
Name: Allan W. Lund
Title: General Partner
/s/ Lois J. Lund
Lois J. Lund
LOIS AND ALLAN LUND FAMILY FOUNDATION
By: /s/ Allan W. Lund
Name: Allan W. Lund
Title: President
ALEXI LUND IRREVOCABLE MINORS TRUST
By: /s/ Nancy J. Pierro
Name: Nancy J. Pierro, Trustee
By: /s/ Mark J. Beltrand
Name: Mark J. Beltrand, Trustee
<PAGE>
KELLY PIERRO IRREVOCABLE MINORS TRUST
By: /s/ Nancy J. Pierro
Name: Nancy J. Pierro, Trustee
By: /s/ Mark J. Beltrand
Name: Mark J. Beltrand, Trustee
/s/ Daniel Lund
Daniel Lund
/s/ James R. Lund
James R. Lund
/s/ Kristen A. Lund
Kristen A. Lund
BRITTANY LUND IRREVOCABLE MINORS TRUST
By: /s/ Nancy J. Pierro
Name: Nancy J. Pierro, Trustee
By: /s/ Mark J. Beltrand
Name: Mark J. Beltrand, Trustee
NATALIE LUND IRREVOCABLE MINORS TRUST
By: /s/ Nancy J. Pierro
Name: Nancy J. Pierro, Trustee
By: /s/ Mark J. Beltrand
Name: Mark J. Beltrand, Trustee
<PAGE>
CHRISTOPHER PIERRO IRREVOCABLE
MINORS TRUST
By: /s/ Nancy J. Pierro
Name: Nancy J. Pierro, Trustee
By: /s/ Mark J. Beltrand
Name: Mark J. Beltrand, Trustee
MAGGIE MACFARLAND IRREVOCABLE
MINORS TRUST
By: /s/ Nancy J. Pierro
Name: Nancy J. Pierro, Trustee
By: /s/ Mark J. Beltrand
Name: Mark J. Beltrand, Trustee
/s/ Thomas A/ Lund
Thomas A. Lund
/s/ Nancy J. Pierro
Nancy J. Pierro
<PAGE>
LUND "FAMILY MEMBER SHARES"
SCHEDULE 1
SHARES NAME AND ADDRESS
------ ----------------
4,115 Nancy J. Pierro & Mark Beltrand, Trustees
Alexi Lund Irrevocable Minors Trust
c/o Mark J. Beltrand, Ltd.
9905 45th Avenue N.
Suite 140
Plymouth, MN 55442
4,115 Nancy J. Pierro & Mark Beltrand, Trustees
Kelly Pierro Irrevocable Minors Trust
c/o Mark J. Beltrand, Ltd.
9905 45th Avenue N.
Suite 140
Plymouth, MN 55442
64,415 Daniel Lund
7900 168th Lane
Ramsey, MN 55303
80,000 James R. Lund
11116 West River Road
Champlin, MN 55316
28,249 Kristen A. Lund
13954 Edelweiss St., N.W.
Andover, MN 55304
4,115 Nancy J. Pierro & Mark J. Beltrand, Trustees
Brittany Lund Irrevocable Minors Trust
c/o Mark J. Beltrand, Ltd.
9905 45th Avenue N.
Suite 140
Plymouth, MN 55442
<PAGE>
4,115 Nancy J. Pierro & Mark Beltrand, Trustees
Natalie Lund Irrevocable Minors Trust
c/o Mark J. Beltrand, Ltd.
9905 45th Avenue N.
Suite 140
Plymouth, MN 55442
4,115 Nancy J. Pierro & Mark J. Beltrand, Trustees
Christopher Pierro Irrevocable Minors Trust
c/o Mark J. Beltrand, Ltd.
9905 45th Avenue N.
Suite 140
Plymouth, MN 55442
4,115 Nancy J. Pierro & Mark Beltrand, Trustees
Maggie MacFarland Irrevocable Minors Trust
c/o Mark J. Beltrand, Ltd.
9905 45th Avenue N.
Suite 140
Plymouth, MN 55442
49,179 Thomas A. Lund
c/o James Automotive
1150 McKinley Street
Anoka, MN 55303
13,869 Nancy J. Pierro
4949 142nd Lane, N.W.
Ramsey, MN 55303
260,392
=======
<PAGE>
ALLAN LUND "SHARES"
SCHEDULE 2
<TABLE>
<CAPTION>
SHAREHOLDER SHARES CERTIFICATE NO. LOCATION
<S> <C> <C> <C>
Allan W. Lund 915,430 #6367 Mark L. Beltrand
Rural Route 2, Box 2030 68,000 #6469 Piper Jaffray
Hayward, WI 54843 43,171 Street name Piper Jaffray, Piper Jaffray
-------
1,026,601 no certificate number
Lois J. Lund 100,000 #5425 Mark J. Beltrand
Rural Route 2, Box 2030 100,000 #5426 Mark J. Beltrand
-------
Hayward, WI 54843 200,000
Lois and Allan Lund 67,900 Street name Piper Jaffray, Piper Jaffray
Family Foundation
The Lund Family 132,000 #6468 Piper Jaffray
Limited Partnership
</TABLE>
<PAGE>
SCHEDULE 3
<TABLE>
<CAPTION>
Lund Earnout Analysis
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assumptions
- -----------
Stock Purchase Price $ 11.50
Estimated Purchase Expenses $ 0.40
-------------------
Total Purchase Price $ 11.90
Return Hurdle Rate 10.0%
Harvest Share after Hurdle 70%
Al Share after Hurdle 30%
Payout Cap per share $ 4.39 per share
Payout Cap ($ in millions) $ 6.27
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Hurdle Price per share 13.09 14.40 15.84 17.42 19.17 21.08 23.19 25.51 28.06 30.87
Per Share Earnout Valuation
-------------------------------------------------------------------
Realized Proceeds ($ per share)
per share Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
--------- ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
21.00 2.37 1.98 1.55 1.07 0.55 0.00 0.00 0.00 0.00 0.00
23.50 3.12 2.73 2.30 1.82 1.30 0.73 0.09 0.00 0.00 0.00
26.00 3.87 3.48 3.05 2.57 2.05 1.48 0.84 0.15 0.00 0.00
28.50 4.39 4.23 3.80 3.32 2.80 2.23 1.59 0.90 0.13 0.00
31.00 4.39 4.39 4.39 4.07 3.55 2.96 2.34 1.65 0.88 0.04
33.50 4.39 4.39 4.39 4.39 4.30 3.73 3.09 2.40 1.63 0.79
Total Earnout Payment
-------------------------------------------------------------------
Realized Proceeds ($ in millions)
per share Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
--------- ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
21.00 3.39 2.82 2.21 1.53 0.79 0.00 0.00 0.00 0.00 0.00
23.50 4.45 3.89 3.28 2.60 1.86 1.03 0.13 0.00 0.00 0.00
26.00 5.52 4.96 4.35 3.67 2.93 2.10 1.20 0.21 0.00 0.00
28.50 6.27 6.03 5.42 4.74 3.99 3.17 2.27 1.28 0.19 0.00
31.00 6.27 6.27 6.27 5.81 5.06 4.24 3.34 2.35 1.26 0.06
33.50 6.27 6.27 6.27 6.27 6.13 5.31 4.41 3.42 2.33 1.13
</TABLE>
<PAGE>
EXHIBIT A
[GOVERNANCE AGREEMENT. INCLUDED AS EXHIBIT 10.2
TO THIS CURRENT REPORT ON FORM 8-K.]
<PAGE>
EXHIBIT B
[SERVICES AGREEMENT INCLUDED AS EXHIBIT 10.3
TO THIS CURRENT REPORT ON FORM 8-K.]
<PAGE>
EXHIBIT C
CONSENTS OF LOIS J. LUND AND ALLAN W. LUND
These Consents are given individually by Allan W. Lund and Lois J. Lund
in connection with the consummation of transactions under that certain Stock
Purchase Agreement dated as of September 9, 1997 by and among LIH Holdings, LLC,
a Delaware limited liability company ("Purchaser"), Allan W. Lund, Lois J. Lund,
the Lund Family Limited Partnership, the Lois and Allan Lund Family Foundation
and the Lund Family Members listed on Schedule 1 of said Stock Purchase
Agreement.
Lois J. Lund, the wife of Allan W. Lund, hereby consents to the sale by
Allan W. Lund of all of his shares personally owned in his individual name and
listed on Schedule 2 to said Stock Purchase Agreement to the extent said shares
constitute marital property under the laws of the State of Wisconsin and
otherwise acknowledges and agrees that she shall have no claim or recourse
whatsoever against the Purchaser or any of its affiliates with respect to the
shares acquired by Purchaser or proceeds thereof.
Allan W. Lund, the husband of Lois J. Lund, hereby consents to the sale
by Lois J. Lund of all of her shares personally owned in her individual name and
listed on Schedule 2 to said Stock Purchase Agreement to the extent said shares
constitute marital property under the laws of the State of Wisconsin and
otherwise acknowledges and agrees that he shall have no claim or recourse
whatsoever against the Purchaser or any of its affiliates with respect to the
shares acquired by Purchaser or proceeds thereof.
IN WITNESS WHEREOF, Allan W. Lund and Lois J. Lund each hereby gives
this Consent as of this 9th day of September, 1997.
_____________________________________ _____________________________________
Lois J. Lund Allan W. Lund
EXHIBIT 10.2
GOVERNANCE AGREEMENT
Agreement dated as of September 9, 1997 between Lund International
Holdings, Inc., a Delaware corporation (the "COMPANY"), and LIH Holdings, LLC, a
Delaware limited liability company (the "STOCKHOLDER").
WHEREAS, Allan W. Lund ("LUND") and the Stockholder propose to enter
into a stock purchase agreement (the "STOCK PURCHASE AGREEMENT") dated the date
hereof pursuant to which, among other things, subject to the terms and
conditions to be contained in the Stock Purchase Agreement, the Stockholder
would acquire from Lund, his family and certain entities related thereto, at the
closing of such purchase and sale (the "CLOSING"), Beneficial Ownership of
shares of common stock, par value $.10 per share, of the Company ("COMMON
STOCK"), aggregating 1,686,893 shares of Common Stock (the "SHARES"),
constituting approximately 38.4% of the Common Stock outstanding as of the date
hereof; and
WHEREAS, Lund and the Stockholder have sought Board approval of the
acquisition of Shares for purposes of Section 203 of the Delaware General
Corporation Law; and
WHEREAS, as a condition to such approval, a special committee formed by
the Board and the Board have required that certain arrangements be put in place
relating to the acquisition and disposition of securities of the Company by the
Stockholder and related provisions concerning the Stockholder's relationship
with the Company, have negotiated the terms of this Agreement and have concluded
that, subject to execution and delivery of this Agreement, giving its approval
under
<PAGE>
Section 203 of the Delaware General Corporation Law and implementing the
arrangements contemplated by this Agreement is in the best interests of the
Company and its stockholders; and
WHEREAS, in consideration of such approval, the Stockholder desires to
establish in this Agreement certain terms and conditions concerning the
acquisition and disposition of securities of the Company by the Stockholder and
its Affiliates and Associates, and related provisions concerning the
Stockholder's relationship with the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the Company and the Stockholder hereby agree as follows:
ARTICLE I
STANDSTILL AND VOTING
SECTION 1.01. Acquisition of Voting Securities.
(a) Until the Standstill Termination Date, the Stockholder covenants
and agrees that the Stockholder will not, and will not permit its Affiliates or
Associates to, Beneficially Own any Voting Securities in excess of the number of
Permitted Shares; provided that, (i) this Agreement shall not restrict any
acquisition of Voting Securities in a transaction directly with the Company and
approved in accordance with the provisions of Section 2.03(b) hereof (including,
without limitation, the acquisition of Voting Securities by any Stockholder
Director by reason of the grant of stock options by the Company to all
directors); and (ii) if a bona fide tender or exchange offer is made by any
Person (other than the Company, the Stockholder or an Affiliate or Associate of
the Stockholder, or any Person acting in concert with the Stockholder or any of
its Affiliates or
<PAGE>
Associates, and other than any acquisition or proposed acquisition of Voting
Securities that intentionally has been induced, in whole or in part and directly
or indirectly by the Stockholder in order to permit the acquisition by
Stockholder or its Affiliates and Associates of Voting Securities under this
paragraph (a)) to purchase outstanding shares of Voting Securities representing
50% or more of the Total Voting Power and such offer is not withdrawn or
terminated prior to the Stockholder commencing a tender offer or exchange offer,
then the Stockholder may commence a tender or exchange offer for all Voting
Securities not owned by the Stockholder or its Affiliates and Associates, and
this Agreement shall not prohibit the acquisition of Voting Securities pursuant
to such tender or exchange offer.
(b) Subject to the proviso in Section 1.01(a) hereof and any waiver or
approval in accordance with the provisions of Section 5.02(a) hereof, if at any
time the Stockholder or its Affiliates and Associates Beneficially Own more than
the Permitted Shares, inadvertently or otherwise, then the Stockholder shall
promptly take all action necessary to reduce the amount of Voting Securities
Beneficially Owned by such Persons to an amount not greater than the Permitted
Shares.
(c) The Stockholder shall not permit any Affiliate or Associate thereof
to Beneficially Own any Voting Securities unless such Person becomes a signatory
to this Agreement and a "STOCKHOLDER" hereunder.
SECTION 1.02. Limited Restrictions on Transfer. Prior to the Standstill
Termination Date, the Stockholder, and each Affiliate or Associate thereof which
acquires Voting Securities in accordance with the terms of this Agreement, will
not Transfer Beneficial Ownership of any Voting Securities to any of its
Affiliates or Associates unless each such Person becomes a signatory to this
<PAGE>
Agreement and a "STOCKHOLDER" hereunder. The Stockholder agrees to inclusion of
the following legend on certificates representing its Shares:
The shares represented by this certificate and any transfer thereof are
subject to a restriction on transfer to any Affiliate or Associate of the holder
hereof as set forth in a Governance Agreement between the holder and the Company
dated as of September 9, 1997, a copy of which is on file at the principal
executive office of the Company.
Such legend shall be placed on all certificates held by the Stockholder during
the continuance of this Agreement.
SECTION 1.03. Voting. Until the Standstill Termination Date, all Voting
Securities Beneficially Owned by the Stockholder or any Affiliate or Associate
thereof shall be voted in the election of directors, (a) in the case of election
of Independent Directors at the option of the Stockholder, either (1) for the
election of the Independent Directors proposed by the specified committees in
accordance with Article II, or (2) in the same proportion as the votes cast by
other holders of Voting Securities and (b) for the Stockholder Directors.
SECTION 1.04. Further Restrictions on Conduct.
(a) Unless waived or approved in advance in accordance with Section
5.02(b) hereof, the Stockholder covenants and agrees that until the Standstill
Termination Date, neither the Stockholder nor any Affiliate or Associate thereof
shall:
(i) initiate, propose, make, or in any way participate in,
directly or indirectly, any "solicitation" of "proxies" to vote, or
seek to influence any Person with respect to the voting of, any Voting
Securities, or become a "participant" in a "solicitation" or "election
<PAGE>
contest" (as such terms are defined or used in Regulation 14A under the
Exchange Act, as in effect on the date hereof), in any election contest
with respect to the election or removal of the Independent Directors
proposed by the specified committees in accordance with Article II;
(ii) other than as contemplated by Section 1.01(a) solicit,
offer, seek or propose to any other Person (including without
limitation the Company) any form of merger with, tender or exchange
offer for securities of, sale or liquidation of assets of, or similar
business combination transaction with or involving the Company or its
Affiliates or Associates; provided, however, the foregoing shall not
restrict any such action relating to a merger or similar business
combination with the purpose and effect of the Company or its
Affiliates and Associates acquiring the business, voting securities or
assets of another Person; or
(iii) take any other action inconsistent with the foregoing.
SECTION 1.05. Reports. Until the Standstill Termination Date, the
Stockholder shall deliver to the Company, promptly after any acquisition or
Transfer of Voting Securities, an accurate written report specifying the amount
and class of Voting Securities acquired or Transferred in such transaction and
the amount of each class of Voting Securities owned by the Stockholder or any
Affiliate or Associate thereof after giving effect to such transaction;
provided, however, that no such report need be delivered with respect to any
such acquisition or Transfer of Voting Securities by the Stockholder that is
reported in a statement on Schedule 13D filed with the Commission and delivered
to the Company by the Stockholder or any Affiliate or Associate thereof in
accordance with Section 13(d) of the Exchange Act and the rules thereunder. The
Company shall be entitled to rely on such reports and statements on Schedule 13D
for all purposes of this Agreement.
<PAGE>
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.01. Initial Composition of Board of Directors.
(a) The number of directors comprising the Board of Directors after the
Closing under the Stock Purchase Agreement shall be seven.
(b) Prior to the Closing, the Board of Directors shall take such action
as is required under applicable law to cause to be elected to the Board of
Directors, effective upon the Closing, the two Stockholder Directors set forth
on Exhibit 1 hereto.
(c) A third director, the Third Independent Director, shall be proposed
by Stockholder, not less than ten business days following the date hereof and
submitted for approval by the Independent Directors serving on the Company's
Board of Directors prior to Closing. The Stockholder shall provide the
Independent Directors with such information as the Independent Directors may
reasonably request regarding the proposed Third Independent Director. Such
Independent Directors shall notify Stockholder of such approval or disapproval
within ten business days following receipt of notice of the proposed Third
Independent Director. Failure to so notify Stockholder within such ten business
day period shall be deemed disapproval of such proposed Third Independent
Director. Upon any such disapproval, the Stockholder may submit for approval
another proposed Third Independent Director in the manner of the original
proposal. The Board of Directors shall take such action as is required under
applicable law to cause to be elected by the Board of Directors, effective upon
Closing, the Third Independent Director.
<PAGE>
(d) A fourth director, the Fourth Independent Director, shall be
proposed by the Independent Directors serving on the Company's Board of
Directors prior to Closing not less than ten business days following the date
hereof and submitted for approval by the Stockholder. The Independent Directors
shall provide the Stockholder with such information as the Stockholder may
reasonably request regarding the proposed Fourth Independent Director. The
Stockholder shall notify such Independent Directors of such approval or
disapproval within ten business days following receipt of notice of the proposed
Fourth Independent Director. Failure to so notify such Independent Directors
within such ten business day period shall be deemed disapproval of such proposed
Fourth Independent Director. Upon any such disapproval, such Independent
Directors may submit for approval another proposed Fourth Independent Director
in the manner of the original proposal. The Board of Directors shall take such
action as is required under applicable law to cause to be elected by the Board
of Directors, effective upon Closing, the Fourth Independent Director.
(e) The remaining directors comprising the Board of Directors,
effective upon the Closing, shall consist of the Company Director and the two
Independent Directors proposed by the Independent Directors serving on the
Company's Board of Directors prior to Closing and set forth on Exhibit 2 hereto.
(f) Notwithstanding paragraphs (c) and (d) above, if at the time of
Closing, both the Third Independent Director and the Fourth Independent Director
have not been approved in the manner contemplated by paragraphs (c) and (d),
then, at the time of the Closing, the Board of Directors of the Company shall be
comprised of the directors contemplated by paragraphs (b) and (e) above and, in
addition, the two other Independent Directors currently serving on the Board of
<PAGE>
Directors and not named on Exhibit 2 hereto. Immediately following Closing, the
nominating committees of the Board of Directors set forth in Section 2.02 (a)
shall be formed and, consistent with Section 2.02(a), each of the Company and
Stockholder shall use its best efforts to cause the Third Independent Director
and Fourth Independent Director to be proposed by the Third Independent Director
Nominating Committee and the Fourth Independent Director Nominating Committee,
respectively, to the Board of Directors (i) for inclusion on the slate of
director nominees to be recommended to stockholders by the Board of Directors at
the 1997 Annual Meeting of Stockholders to serve upon the expiration of the term
of the two current Independent Directors not named on Exhibit 2 hereto, or (ii)
if earlier, to fill any vacancy resulting from the resignation of a current
Independent Director not named on Exhibit 2 hereto. The Company shall use its
best efforts to cause such resignations to occur as soon as practicable
following the proposal of director candidates by the Third Independent Director
and Fourth Independent Director Nominating Committees and concurrently with
election of the successor directors. In the event of any failure of either such
current Independent Director to resign concurrently with the proposed election
of the new Independent Director candidate to succeed such current Independent
Director, the Company and the Stockholder shall use their respective best
efforts, for the period until the 1997 Annual Meeting of Stockholders, to cause
the size of the Board of Directors to be increased to accommodate the proposed
election of such new Independent Director and to cause any such new Independent
Director candidate to be elected to the Board of Directors in the manner
contemplated in Section 2.02 hereof for the filling of vacancies.
<PAGE>
SECTION 2.02. Proportional Representation.
(a) Following the Closing and until the Standstill Termination Date,
except as indicated in paragraph (b) below, each of the Company and Stockholder
shall use its best efforts to cause the composition of the Board to continue to
reflect, or if paragraph (f) of Section 2.01 is operative to fully implement,
the proportionate representation of Stockholder Directors, Company Director and
Independent Directors set forth in paragraph (a) to (d) of Section 2.01. At each
annual meeting of stockholders following the Closing at which the term of any
Independent Director is to expire, unless such annual meeting shall be scheduled
to occur after the Standstill Termination Date, or at any time that a vacancy of
an Independent Director on the Board of Directors is to be filled, the identity
of such Independent Director to stand for election to the Board of Directors or
to fill the vacancy on the Board, as the case may be, shall be determined in the
following manner:
(i) If the term of any Third Independent Director, initially
proposed by the Stockholder and thereafter the Third Independent
Director Nominating Committee, expires or such position on the Board
becomes vacant, the Third Independent Director Nominating Committee
shall propose to the Board of Directors a person to serve as the Third
Independent Director on the slate to be recommended by the Board of
Directors or to fill such vacancy.
(ii) If the term of any Independent Director (excluding the
Fourth Independent Director) initially proposed by the Independent
Directors on the existing Board of Directors and thereafter by the
Independent Director Nominating Committee, expires or such position on
the Board becomes vacant, the Independent Director Nominating Committee
shall
<PAGE>
propose to the Board of Directors a person to serve as an Independent
Director on the slate to be recommended by the Board of Directors or to
fill such vacancy.
(iii) If the term of the Fourth Independent Director,
initially proposed by the Independent Directors on the existing Board
of Directors and thereafter by the Fourth Independent Director
Nominating Committee, expires or such position on the Board becomes
vacant, the Fourth Independent Director Nominating Committee shall
propose to the Board of Directors a person to serve as the Fourth
Independent Director on the slate to be recommended by the Board of
Directors or to fill such vacancy.
(iv) The Board of Directors shall recommend to stockholders
the Independent Directors proposed in accordance with the foregoing
provisions and include such Independent Directors on their slate of
directors or, in the case of any vacancy elect such Independent
Directors to the Board, unless the Board determines that to do so would
constitute a breach of its fiduciary obligations to the Company's
stockholders.
(b) The number of Stockholder Directors which the Stockholder shall be
entitled to designate shall be reduced to one if, at the date of determination,
the number of shares of Common Stock Beneficially Owned by Stockholder or any
Affiliate or Associate thereof which is a signatory to this Agreement is less
than 50% of the number of Shares acquired by the Stockholder at the Closing
pursuant to the Stock Purchase Agreement (as adjusted for stock dividends,
splits, recombinations and the like). In the event that the number of directors
which the Stockholder is entitled to designate is reduced, thereafter such
number of directors may not be increased. All rights of Stockholder and
obligations of the Company relative to Stockholder's designation of
representatives on the Board of Directors (including Stockholder, Company and
Independent
<PAGE>
Directors) shall terminate if at any time Stockholder Voting Power shall be 5%
or less of Total Voting Power. In such event, references in Section 2.02(i) and
(iii) to the Third Independent Director Nominating Committee and Fourth
Independent Director Nominating Committee shall be deemed references to the
Independent Director Nominating Committee.
(c) Other than as set forth in paragraph (b) above, the Company shall
cause each Stockholder Director designated by the Stockholder to be included in
the slate of nominees recommended by the Board of Directors to the Company's
stockholders for election as directors at each annual meeting of the
stockholders of the Company and shall use all reasonable efforts to cause the
election of each such Stockholder Director, including soliciting proxies in
favor of the election of such persons, or, in the case of any vacancy affecting
any Stockholder Director, elect to the Board a Stockholder Director designated
by the remaining Stockholder Director, or if none, the Stockholder, unless the
Board of Directors determines that to do so would constitute a breach of its
fiduciary obligations to the Company's stockholders.
SECTION 2.03. Voting.
(a) Until the first to occur of (i) the Standstill Termination Date,
(ii) the number of shares of Common Stock Beneficially Owned by Stockholder or
any Affiliate or Associate thereof which is a signatory to this Agreement
decreasing to less than 50% of the number of Permitted Shares, or (iii) the
Stockholder Voting Power decreasing to 5% or less of Total Voting Power, except
in the case of a Stockholder Interested Transaction (as defined below), the
Company shall not take any action described in Exhibit 3 hereto without the
affirmative vote of a majority of the entire Board of Directors, which majority
includes at least one Stockholder Director.
<PAGE>
(b) The Company shall not take any action relating to a Stockholder
Interested Transaction, unless such Stockholder Interested Transaction has been
approved by the affirmative vote of a majority of the Independent Directors.
Stockholder agrees that Stockholder shall not, and shall not take any action
which would cause the Company or its Board of Directors to, enter into or
participate in any Stockholder Interested Transaction which has not been
approved by the affirmative vote of a majority of the Independent Directors. If
requested by a majority of the Independent Directors, Stockholder shall cause
the Stockholder Directors to not vote upon or consent to any Stockholder
Interested Transaction, but such directors may be counted for purposes of any
quorum necessary to such action. "STOCKHOLDER INTERESTED TRANSACTION" shall mean
any transaction with or involving the Stockholder, its Affiliates or Associates
or relating to this Agreement, including, without limitation, any amendment,
modification or waiver hereof or thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Company. The
Company represents and warrants to the Stockholder that (a) the Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the state of Delaware and has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder, (b) the
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or any of the transactions contemplated hereby, and (c) this
<PAGE>
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, and, assuming this Agreement
constitutes a valid and binding obligation of the Stockholder, is enforceable
against the Company in accordance with its terms.
SECTION 3.02. Representations and Warranties of the Stockholder. The
Stockholder represents and warrants to the Company that (a) it is a limited
liability company duly organized, validly existing and in good standing under
the laws of the state of Delaware and has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder, (b) the
execution and delivery of this Agreement by the Stockholder and the consummation
by the Stockholder of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Stockholder and
no other corporate proceedings on the part of the Stockholder are necessary to
authorize this Agreement or any of the transactions contemplated hereby, and (c)
this Agreement has been duly executed and delivered by the Stockholder and
constitutes a valid and binding obligation of the Stockholder, and, assuming
this Agreement constitutes a valid and binding obligation of the Company, is
enforceable against the Stockholder in accordance with its terms.
ARTICLE IV
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
SECTION 4.01. "AFFILIATE" or "ASSOCIATE" shall mean an affiliate or
associate of a person, as such terms are defined in Section 203 of the Delaware
General Corporation Law.
<PAGE>
SECTION 4.02. "BENEFICIALLY OWN" or "BENEFICIAL OWNERSHIP" with respect
to any securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to Rule 13d-3 under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing.
SECTION 4.03. "CLOSING" shall have the meaning specified in the
recitals to this Agreement.
SECTION 4.04. "COMMISSION" shall mean the Securities and Exchange
Commission.
SECTION 4.05. "COMPANY DIRECTOR" shall mean the Company's Chief
Executive Officer.
SECTION 4.06. "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934.
SECTION 4.07. "FOURTH INDEPENDENT DIRECTOR" shall mean the Independent
Director nominated in accordance with the provisions of Section 2.01(d) and
Section 2.02(a)(iii).
SECTION 4.08. "FOURTH INDEPENDENT DIRECTOR NOMINATING COMMITTEE" shall
mean a committee of three directors, comprised of two Independent Directors
other than the Third Independent Director and one Stockholder Director. Any
action of the Fourth Independent Director Nominating Committee shall be
unanimous.
SECTION 4.09. "INDEPENDENT DIRECTOR" shall mean any person who is a
director of the Company and who is independent of and otherwise unaffiliated
with the Stockholder, the Company or their Affiliates or Associates (other than
as a director, or holder with Beneficial Ownership of less than 5% of the Voting
Securities, of the Company), and shall not be an officer or an employee, agent,
consultant or advisor (financial, legal or other) of the Stockholder, the
Company or their
<PAGE>
Affiliates or Associates, or any person who shall have served in any such
capacity within the three-year period immediately preceding the date such
determination is made.
SECTION 4.10. "INDEPENDENT DIRECTOR NOMINATING COMMITTEE" shall mean a
committee comprised of the Independent Directors, other than the Third
Independent Director.
SECTION 4.11. "PERMITTED SHARES" shall mean 1,933,346 shares of Common
Stock of the Company (as adjusted for stock dividends, splits, recombinations
and the like).
SECTION 4.12. "PERSON" shall mean any individual, partnership, joint
venture, corporation, trust, unincorporated organization, government or
department or agency of a government.
SECTION 4.13. "STANDSTILL TERMINATION DATE" shall mean the third
anniversary of the Closing.
SECTION 4.14. "STOCKHOLDER DIRECTOR" shall mean any person designated
by the Stockholder.
SECTION 4.15. "STOCKHOLDER INTERESTED TRANSACTION" shall have the
meaning set forth in Section 2.03(b).
SECTION 4.16. "STOCKHOLDER VOTING POWER" at any time shall mean the
aggregate voting power in the general election of directors of all Voting
Securities then Beneficially Owned by the Stockholder or its Affiliates and
Associates which are signatories to this Agreement.
SECTION 4.17. "SUBSIDIARY" shall mean, as to any Person, any
corporation at least a majority of the shares of stock of which having general
voting power under ordinary circumstances to elect a majority of the Board of
Directors of such corporation (irrespective of whether or not at the time stock
of any other class or classes shall have or might have voting power by reason of
the
<PAGE>
happening of any contingency) is, at the time as of which the determination is
being made, owned by such Person, or one or more of its Subsidiaries or by such
Person and one or more of its Subsidiaries.
SECTION 4.18. "THIRD INDEPENDENT DIRECTOR" shall mean the Independent
Director nominated in accordance with the provisions of Section 2.01(c) and
Section 2.02(a)(i).
SECTION 4.19. "THIRD INDEPENDENT DIRECTOR NOMINATING COMMITTEE" shall
mean a committee of three directors, comprised of two Stockholder Directors and
one Independent Director, other than the Third Independent Director. Any action
of the Third Independent Director Nominating Committee shall be unanimous.
SECTION 4.20. "TOTAL VOTING POWER" at any time shall mean the total
combined voting power in the general election of directors of all the Voting
Securities then outstanding.
SECTION 4.21. "TRANSFER" shall mean any sale, transfer, pledge,
encumbrance or other disposition, and to "TRANSFER" shall mean to sell,
transfer, pledge, encumber or otherwise dispose of.
SECTION 4.22. "VOTING SECURITIES" shall mean at any time shares of any
class of capital stock of the Company which are then entitled to vote generally
in the election of directors.
ARTICLE V
MISCELLANEOUS
SECTION 5.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including telecopy) and shall be
given,
<PAGE>
if to the Stockholder, to: LIH Holdings, LLC
c/o Harvest Partners, Inc.
767 Third Avenue
New York, NY 10017
Telecopier: 212-593-0734
Attention: Ira D. Kleinman, General Partner
with a copy to: Reid & Priest LLP
40 West 57th Street
New York, NY 10019
Telecopier: 212-603-2001
Attention: Leonard Gubar, Esq.
if to the Company, to: Lund International Holdings, Inc.
911 Lund Boulevard
Anoka, MN 55303
Attention: Chief Executive Officer
with a copy to: Leonard, Street and Deinard
150 South Fifth Street
Suite 2300
Minneapolis, MN 55402
Attention: Mark Weitz, Esq.
or such address or telecopy number as such party may hereafter specify for the
purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective when delivered personally, telegraphed or
telecopied, or, if mailed, five business days after the date of the mailing.
SECTION 5.02. Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Stockholder and the Company, or in the case of a waiver, by
the party against whom the waiver is to be effective. No amendment or waiver by
the Company shall be effective unless approved by a majority of the Independent
Directors.
<PAGE>
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 5.03. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that no party
may assign this Agreement without the other party's prior written consent.
SECTION 5.04. Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the state of Delaware.
SECTION 5.05. Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts thereof signed by the other party hereto.
SECTION 5.06. Specific Performance. The Company and the Stockholder
each acknowledges and agrees that the parties' respective remedies at law for a
breach or threatened breach of any of the provisions of this Agreement would be
inadequate and, in recognition of that fact, agrees that, in the event of a
breach or threatened breach by the Company or the Stockholder of the provisions
of this Agreement, in addition to any remedies at law, the Stockholder and the
Company, respectively, without posting any bond shall be entitled to obtain
equitable relief in the
<PAGE>
form of specific performance, a temporary restraining order, a temporary or
permanent injunction or any other equitable remedy which may then be available.
SECTION 5.07. Termination. This Agreement shall terminate on the
Standstill Termination Date.
SECTION 5.08. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, provided that
the parties hereto shall negotiate in good faith to attempt to place the parties
in the same position as they would have been in had such provision not been held
to be invalid, void or unenforceable.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first referred to above.
LUND INTERNATIONAL HOLDINGS, INC.
By /s/ W. J. McMahon
----------------------------------
Its Chief Executive Officer
-------------------------------
LIH HOLDINGS, LLC
By /s/ Ira D. Kleinman
----------------------------------
Its Manager
-------------------------------
<PAGE>
EXHIBIT 1
STOCKHOLDER DIRECTORS
Ira Kleinman
Harvey Wertheim
<PAGE>
EXHIBIT 2
INDEPENDENT DIRECTORS
Robert Schoeberl
David Dovenberg
<PAGE>
EXHIBIT 3
1. Any amendment to the Certificate of Incorporation or By-Laws of the
Company;
2. any reclassification, combination, split, subdivision, redemption,
purchase or other acquisition, directly or indirectly, of any debt or
equity security of the Company or any Subsidiary;
3. any sale, lease, transfer or other disposition (other than in the
ordinary course of business and other than to the Company or another
wholly owned Subsidiary), in one or more related transactions, of the
assets of the Company or any Subsidiary the book value of which assets
exceeds 2% of consolidated assets of the Company and its Subsidiaries;
4. any merger, consolidation, liquidation or dissolution of the Company or
any Subsidiary, other than with or into the Company or another wholly
owned Subsidiary;
5. any acquisition of any other business;
6. any investment by the Company or any Subsidiary in or loans, advances
or extensions of credit by the Company or any Subsidiary to, any Person
(other than (i) the Company or a Subsidiary, (ii) short term
investments in the ordinary course of business, or (iii) loans, or
advances to customers, officers, employees and suppliers in the
ordinary course of business (collectively the "EXCEPTED INVESTMENTS AND
LOANS")), which together with all such other investments, loans and
advances at the time owned by the Company and its Subsidiaries
(exclusive of the Excepted Investments and Loans) would exceed an
amount equal to 2% of consolidated assets;
7. any acquisition by the Company or any Subsidiary of assets, other than
investment or loan assets, not in the ordinary course of business;
8. issue or sell any capital stock of the Company or any Subsidiary, other
than (i) issuance of capital stock of the Company authorized for
issuance pursuant to stock plans or agreements in effect at the date
hereof; and (ii) issuance of shares of capital stock of the Company or
any Subsidiary, in one or more related transactions, the amount of
which does not exceed at the date of issuance or sale of such shares
(or the date of issuance or grant of any related right to acquire such
shares) in excess of 2% of the outstanding shares of capital stock of
such class;
9. any declaration or payment of any dividend or distribution with respect
to shares of the Company's capital stock; and
10. any incurrence, assumption or issuance by the Company or its
Subsidiaries of any indebtedness for money borrowed, not in the
ordinary course of business, if, immediately after giving effect
thereto and the application of proceeds therefrom, the aggregate amount
of such indebtedness of the Company and its Subsidiaries would exceed
$5,000,000.
<PAGE>
11. Establishment of, or continued existence of, any committee of the Board
of Directors with the power to approve any of the foregoing.
EXHIBIT 10.3
SERVICES AGREEMENT
SERVICES AGREEMENT, dated as of September 9, 1997, by and between
Harvest Partners, Inc., a New York corporation ("Harvest"), and Lund
International Holdings, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H :
WHEREAS, the Company and an affiliate of Harvest ("Purchaser") have
entered into that certain Governance Agreement of even date herewith (the
"Governance Agreement") relating to matters associated with the proposed
acquisition by Purchaser of outstanding shares of Common Stock of the Company
pursuant to that certain Stock Purchase Agreement of even date herewith among
Purchaser and Allan W. Lund and related parties (the "Stock Purchase
Agreement"); and
WHEREAS, the Company is in the business of designing, manufacturing and
marketing a broad line of exterior accessories for new and used light trucks,
sport utility vehicles and vans (the "Business"); and
WHEREAS, the Company desires that Harvest provide the Company with
financial advisory and strategic planning services relating to the Company's
business and affairs (collectively, the "Harvest Services"); and
WHEREAS, Harvest has designated two representatives with financial
and/or management expertise to serve on the Board of Directors of the Company,
such representatives
<PAGE>
to render counsel, guidance and managerial assistance to the Company while
serving on the Company's Board of Directors (collectively, the "Director
Services").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. Effective Date. This Agreement shall be effective as of the closing
date under the Stock Purchase Agreement (the "Effective Date").
2. SERVICES. (a) Harvest will provide the Harvest Services to the
Company from time to time as requested by the Board of Directors of the Company.
The Harvest Services shall include, without limitation, (i) assisting the
Company, generally, with respect to financial and business matters, as the
Company's financial advisor, (ii) recommending and assisting the Company in
implementing a general strategy in connection with the Company's accomplishing
its business plan and anticipated growth; (iii) assisting the Company to
structure and negotiate acquisitions and dispositions of assets and/or business
units; (iv) if necessary, locating equity partners and structuring the terms of
any such equity investment, (v) communicating with lenders and stockholders,
including, assisting in the coordination of investor relation services, (vi)
structuring and negotiating refinancings and other lending or borrowing
transactions relating to the Company and (vii) such other investment, advisory
and related financial services as Harvest or the Company shall, from time to
time, deem necessary or appropriate. The Harvest Services may be rendered both
through the Harvest Directors (as defined below) and directly by Harvest and its
affiliates, provided, however, that the Harvest Services are understood by the
parties to be in addition to the Director Services. The Harvest Services shall
be strictly advisory in nature and
<PAGE>
the Company shall be free to accept or reject any such advise in its sole
discretion. Harvest shall have no authority to bind or obligate the Company in
any way. Nothing contained in this Agreement shall require the Company to
exclusively use the services of Harvest in connection with the matters referred
to herein as Harvest Services.
(b) Harvest hereby agrees to provide the Company with the Director
Services, if requested by the Board of Directors of the Company or if Harvest
unilaterally elects in accordance with the Governance Agreement. In that event,
Harvest hereby agrees to cause two of its principals, directors or designees
with financial and/or management expertise to serve on the Company's Board of
Directors (the "Harvest Directors"). The Harvest Directors shall provide
guidance, counsel and managerial assistance to the Company in providing such
Director Services and shall devote such time and attention as is reasonably
necessary to provide the Director Services.
3. COMPENSATION. (a) Subject to Section 4 below, as full payment for
the Harvest Services and the Director Services to be rendered to the Company
hereunder (specifically excluding, however, all amounts payable directly by the
Company to its directors, including the Harvest Directors, for directors'
services), the Company shall pay to Harvest a fee (the "Harvest Fee") equal to
$150,000 with respect to the first year (which for purposes of this paragraph 3
shall mean the four consecutive fiscal quarters ending September 30, 1998) of
the term hereof, $250,000 with respect to the second year (which for purposes of
this paragraph 3 shall mean the four consecutive fiscal quarters ending
September 30, 1999) of the term hereof and $400,000 with respect to the third
year (which for purposes of this paragraph 3 shall mean the four consecutive
fiscal quarters ending September 30, 2000) of the term hereof, payable in
<PAGE>
equal quarterly installments in advance simultaneously with the Company's public
release of the Company's earnings following the end of each fiscal quarter of
the Company; provided, however, that the first payment, relating to the quarter
ending December 31, 1997, shall be made on the date hereof; provided, further,
however, that such quarterly installment payments shall only be required if the
Company's quarterly earnings before interest, taxes, depreciation and
amortization ("EBITDA"), as calculated in accordance with generally accepted
accounting principles in the United States of America as in effect from time to
time, applied on a basis consistent with those used in the preparation of the
Company's financial statements ("GAAP"), is not less than (i) $1,000,000 per
fiscal quarter during the first year of the term hereof, (ii) $1,375,000 per
fiscal quarter during the second year of the term hereof and (iii) $1,750,000
per fiscal quarter during the third year of the term hereof (each such amount
being herein called the "Target"). For purposes of this Section 3(a), the
quarterly EBITDA of the Company shall be determined by the Chief Financial
Officer of the Company, whose determination, in the absence of manifest error,
shall be binding and conclusive on Harvest and the Company. Notification of the
amount of the Company's quarterly EBITDA, together with a copy of the Chief
Financial Officer's certification to the Company of such amount, shall be
delivered to Harvest in writing by the Company simultaneously with the public
release of the Company's earnings following the end of each fiscal quarter of
the Company.
(b) Notwithstanding the provisions of Section 3(a) above, payment of
the Harvest Fee shall be suspended for each fiscal quarter immediately following
a fiscal quarter in which the Company's quarterly EBITDA (plus the cumulative
amount, if any, of the EBITDA Excess, as
<PAGE>
hereinafter defined, for the fiscal quarters preceding the fiscal quarter in
which EBITDA did not meet Target) did not meet the Target. To the extent the
Company's actual quarterly EBITDA for any quarter exceeds the Target, such
excess is hereinafter referred to as the "EBITDA Excess." To the extent the
Company's actual quarterly EBITDA for any quarter is less than the Target, such
deficiency is hereinafter referred to as the "EBITDA Deficiency". All suspended
payments of the Harvest Fee shall accumulate and shall be payable at such time
as, with respect to each full fiscal quarter ending prior to termination of this
Agreement, the cumulative amount of the EBITDA Excess, on a dollar-for-dollar
basis, equals or exceeds the then cumulative amount of the EBITDA Deficiency.
(c) The Company, provided prior approval of a majority of the
Independent Directors (as defined in the Governance Agreement) is obtained, may
pay Harvest negotiated amounts in excess of the Harvest Fee to the extent
Harvest provides the Company with investment banking, advisory or other similar
Harvest Services in connection with any extraordinary transaction effected by
the Company, including any merger, business combination, recapitalization or
significant asset acquisition or disposition.
(d) Harvest shall not be entitled to reimbursement of out-of-pocket
expenses for performing Harvest Services hereunder. Notwithstanding the
foregoing, the Harvest Directors shall be entitled to expense reimbursement
available to the Company's directors generally.
4. TERM. This Agreement shall commence on the date hereof and shall
terminate upon the earlier of (a) the date immediately preceding the third
anniversary of the date of this Agreement, (b) the date on which this Agreement
is terminated for cause as provided in
<PAGE>
Section 7 below, or (c) the date the number of shares of Common Stock
Beneficially Owned (as defined in the Stock Purchase Agreement) by Purchaser or
any Affiliate or Associate (as defined in the Stock Purchase Agreement) thereof
which is a signatory to the Stock Purchase Agreement decreases to less than 50%
of the number of Permitted Shares (as defined in the Stock Purchase Agreement).
5. RIGHT TO ENGAGE IN OTHER ACTIVITIES. The Harvest Services and the
Director Services provided herein are not to be deemed exclusive. Nothing
contained herein shall restrict Harvest or any of its shareholders, directors,
officers, employees or agents from engaging in any other business or devoting
time and attention to the management, investment, involvement or other aspects
of any other business, including becoming an officer or director thereof, or
rendering services of any kind to any other corporation, firm, individual or
association. The Company further acknowledges that Harvest, from time to time,
may provide investment, management and advisory services to other companies and
entities. In addition, the Company acknowledges that Harvest has, and will
continue, to render investment and advisory advice and services to certain of
the Company's stockholders, including LIH Holdings, LLC, a Delaware limited
liability corporation ("LIH"), and LIH's members and their affiliates.
6. CONFIDENTIALITY. Harvest acknowledges that in connection with the
performance of the Harvest Services hereunder, it and its employees may have
access to the Company's confidential information (as hereinafter defined).
Harvest agrees that neither it nor its employees will use or disclose outside
the scope of its engagement hereunder any confidential information of the
Company and will take normal and reasonable steps to protect the
<PAGE>
confidentiality of any such confidential information. Confidential Information
shall encompass information about the Company's products, business, finances and
marketing plans, but shall not include information which (i) becomes generally
available to the public other than as a result of a disclosure by Harvest or its
employees, (ii) was available to Harvest on a non-confidential basis prior to
its disclosure to Harvest by the Company, its representatives or agents or (iii)
becomes available to Harvest on a non-confidential basis from a source other
than the Company, its representatives or agents, provided that such source is
not bound by a confidentiality agreement with the Company, its representatives
or its agents or otherwise is prohibited from transmitting the information to
Harvest or its employees by a confidential, legal or fiduciary obligation.
7. TERMINATION FOR CAUSE. This Agreement may be terminated for cause by
the party whose conduct is not the cause for such termination if (a) either
party commits an act of criminal misconduct or gross negligence or neglect in
any material respect of its obligations as set forth herein, or (b) either party
files a voluntary petition in bankruptcy or is adjudicated as bankrupt or
insolvent, or such party files a petition under any chapter of the United States
Bankruptcy Code or any other present or future applicable Federal, state or
other statute or law regarding bankruptcy, insolvency or other relief for
debtors, or any party seeks, or consents to, or acquiesces in the appointment
of, any trustee, receiver, conservator or liquidator of itself or of all or any
substantial portion of its property, and such petition in bankruptcy, or
adjudication as a bankrupt or insolvent entity, is not waived, dismissed or
overturned within 60 days from the date of the filing or adjudication in
question.
<PAGE>
8. ASSIGNMENT. Neither Harvest nor the Company may assign this
Agreement or any of their respective rights or obligations hereunder, except
that either of them may assign or transfer this Agreement to any other person
who or which acquires all or substantially all of their respective property,
business and assets, provided that, in the case of Harvest, the successor to its
business employs substantially the same personnel to provide the Harvest
Services and the Director Services hereunder.
9. SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not in any manner or way affect any other provision hereof,
and this Agreement shall be construed, if possible, as if amended to conform to
legal requirements, failing which it shall be construed as if any such offending
provision were omitted.
10. INDEPENDENT CONTRACTOR RELATIONSHIP. Harvest shall serve as an
independent contractor to the Company pursuant to the terms and conditions of
this Agreement and this Agreement does not create and shall not be construed to
create a relationship of principal and agent, joint venturers, co-partners,
employer and employee, or any similar relationship between the Company and
Harvest, and the parties hereto expressly deny the existence of any such
relationship.
11. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York, without
giving effect to the conflicts of law principles thereof.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof.
<PAGE>
13. BINDING NATURE. Subject to the restrictions on assignability
contained herein, each and all of the covenants, terms, conditions, provisions
and agreements herein contained shall be binding upon, and inure to the benefit
of, the parties hereto and their respective successors, heirs and permitted
assigns.
14. AMENDMENT, ETC. The provisions of this Agreement may not be
amended, waived, modified or changed except by an instrument in writing signed
by all of the parties hereto. No waiver of any breach or condition of this
Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their representatives thereunto duly authorized on the date first
above written.
<PAGE>
HARVEST PARTNERS, INC.
By: /s/ Ira D. Kleinman
---------------------------------
Name: Ira D. Kleinman
Title: Partner
LUND INTERNATIONAL HOLDINGS, INC.
By: /s/ William J. McMahon
---------------------------------
Name: William J. McMahon
Title: Chief Executive Officer
EXHIBIT 10.4
SEVERANCE AND NONCOMPETITION
AGREEMENT
THIS AGREEMENT, by and between Lund International Holdings, Inc., a
Minnesota corporation with its principal offices at Anoka, Minnesota ("Lund")
and Allan W. Lund of Hayward, Wisconsin (the "Executive"), is made and entered
into on of this 9th day of September, 1997.
WHEREAS, Executive has made a significant contribution to the
profitability, growth, and financial strength of Lund; and
WHEREAS, Executive has intimate knowledge of the business and affairs
of Lund, its policies, methods and personnel; and
WHEREAS, Lund recognizes the value of Executive's services to other
similar businesses engaged in the aftermarket for light truck and sport utility
vehicle exterior appearance accessories, to the detriment of Lund and its
shareholders; and
WHEREAS, it is in the best interests of Lund and its stockholders to
provide for the payment described in this Agreement in order to restrict the
employment of Executive in the aftermarket for light truck and sport utility
vehicle exterior appearance accessories; and
WHEREAS, Executive desires to enter into this Agreement to so restrict
his employment, in consideration for the payment and other benefits to be
provided herein.
THEREFORE, in consideration of the foregoing and other respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. Lump Sum Payment. As and for severance and in consideration for the
noncompetition and nondisclosure provisions of Sections 3 and 4 herein,
Executive shall be entitled to and Lund shall pay to Executive on the date of
the execution of this Agreement a lump sum payment in cash or other immediately
available funds as follows:(a) One Hundred Thousand and no/100 Dollars
($100,000), as and for severance; (b) Four Hundred Fifty Thousand and no/100
Dollars ($450,000), as and for the restrictions under Section 3 and 4 herein;
and (c) Fifty Thousand and no/100 Dollars ($50,000), as and for the mutual
release described in Section 10.
Before the execution of this Agreement, counsel to Lund shall provide
Executive with its opinion that no portion of the above payments constitute an
"excess parachute payment" within the meaning of Section 280G of the Internal
Revenue Code of 1986.
2. Payment in Addition to Other Benefits. Executive shall be entitled
to receive all benefits payable to Executive under any and all compensation,
bonus, stock option, welfare, pension, fringe benefit plan, program or practice
sponsored, maintained, or contributed to by Lund to the extent to which
Executive is entitled as of the date of this Agreement in accordance
<PAGE>
with their respective terms, which shall be in addition to, and not reduced by,
any amounts payable to Executive under Section 1. Except with respect to
benefits as provided in the preceding sentence and for continuation and
conversion rights to certain benefits pursuant to Section 4980B of the Code
(COBRA) and applicable state law, Executive's participation in any such plan,
program or practice shall cease as of the date of this Agreement.
3. Nondisclosure. Executive acknowledges that during his employment
with Lund and/or its subsidiaries, he has occupied a position of trust and
confidence. Executive shall not, except as may be required by applicable law,
until such information shall have become public other than by Executive's
unauthorized disclosure, disclose to others or use, whether directly or
indirectly, any Confidential Information regarding Lund, its subsidiaries and
affiliates. "Confidential Information" shall mean information about Lund, its
subsidiaries and affiliates, and their respective suppliers and customers that
is generally understood by persons involved in the automotive aftermarket to be
confidential, trade secret and/or proprietary information of Lund and that was
learned by Executive in the course of his employment by Lund, its subsidiaries
and affiliates, including (without limitation) such information pertaining to
sales and marketing activities, customers, suppliers and vendors of unique
products or products the supply of which is so limited that diversion of such
products to others would materially constrain their supply to Lund, product
design and specifications, development of new products and inventions, pricing,
manufacturing processes unique to Lund, financial information (other than that
publicly disclosed by Lund), and management, financial conditions or business
plans. Executive acknowledges that such Confidential Information is specialized,
unique in nature and of great value to Lund, its subsidiaries and affiliates,
and that such information gives Lund, its subsidiaries and affiliates a
competitive advantage. Executive agrees to deliver or return to Lund, at Lund's
request at any time as soon thereafter as possible, all documents, computer
tapes and disks, records, lists, data, drawings, prints, notes and written
information (and all copies thereof) furnished by Lund, its subsidiaries or
affiliates or prepared by Executive during the term of his employment by Lund,
its subsidiaries and affiliates.
4. Noncompetition. For a period of twelve (12) months following the
effective date of this Agreement, Executive agrees that he shall not at any
time, directly or indirectly, within the United States:
a. be employed by or provide advice or consulting services to, or
participate in (as owner, partner, stockholder, member,
venturer, director, governor, or the like) any business
engaged in the invention, design, development, marketing,
selling, distributing and/or manufacturing of products that
compete with products which are, on the date of this
Agreement, (i) listed in Lund's current published catalogues,
(ii) under development by Lund or any of its subsidiaries or
affiliates, or (iii) under active negotiation by Lund or any
of its subsidiaries or affiliates to purchase the
manufacturing rights for from another company.
b. solicit or recruit any individual employed by Lund, its
subsidiaries or affiliates for the purpose of being employed
by him or by any entity on whose behalf he is acting as an
agent, representative or employee; or
<PAGE>
c. influence or attempt to influence customers, suppliers, or
vendors of Lund or any of its subsidiaries or affiliates or
parties with which Lund or any of its subsidiaries or
affiliates do business, to divert their business away from
Lund, its subsidiaries or affiliates.
Notwithstanding anything in Sections 3 and 4 to the contrary, (1)
Executive's ownership, for strictly investment purposes, of less than five
percent (5%) of the capital stock of a publicly owned company shall not
constitute a violation of this Section 4; (2) nothing in this Agreement shall
limit Executive's right to be employed by, provide advice or consulting services
to, invest in, or otherwise participate in James Automotive, Inc., provided
that, during the period covered by this Section, James Automotive, Inc. does not
manufacture, market or distribute any products that duplicate any products which
are, on the date of this Agreement, described in paragraph (a)(i), (ii) or (iii)
of this Section 4 above.
5. Violation of Noncompete and Nondisclosure; Injunctive Relief. In the
event that Executive is determined, by a court of competent jurisdiction, to
have engaged in the conduct proscribed by either Sections 3 or 4 of this
Agreement, Executive agrees to repay the amount received pursuant to Section
1(b) of this Agreement. It is further expressly agreed that Lund will or would
suffer irreparable injury if Executive violated either Section 3 or 4 of this
Agreement and that Lund would by reason of such violation be entitled to
preliminary or injunctive relief in a court of competent jurisdiction, and
Executive further consents and stipulates to the entry of such preliminary or
injunctive relief in such a court upon an appropriate finding by such court that
Executive has violated either Sections 3 or 4.
6. Litigation Support. Executive agrees to cooperate fully, without
compensation, in all reasonable respects with Lund and its attorneys in
connection with Lund's prosecution, defense or response to matters or actions in
which (a) Lund, its subsidiaries, affiliates, officers, directors or employees
are named in a Complaint, Cross-Complaint or counter claim as a defendant, (b)
allegations, claims or charges have been made or threatened against Executive
and/or Lund (or any of its subsidiaries) which relate to or involve Executive's
former duties as an employee or officer of Lund, or (c) Executive is or may be
either (i) entitled to indemnification from Lund pursuant to the Articles of
Incorporation or Bylaws of Lund or the Delaware General Corporation Law or (ii)
entitled to coverage under one or more directors' and officers' or other
insurance policies maintained at any time by Lund. Such cooperation shall
include, for example, Executive making himself available to Lund's
representatives and to Lund's attorneys for purposes of conferences, meetings,
compilation and communication of records and facts, and appearing as a witness
or prospective witness in connection with deposition or other testimony that may
be required in connection with such defense, provided, however, that Executive's
interest is not adverse to the interest of Lund, and provided further, that
Executive's availability be at such times and places that are mutually
convenient to Executive, Lund, Lund's attorneys and plaintiff's attorneys. Lund
will reimburse Executive for all travel and other reasonable out-of-pocket
expenses relating to his attendance at conferences, meetings, depositions and
the like relating to the Litigation. In connection with his involvement in the
defense of the Litigation, Executive also understands and agrees that the
matters that Executive discusses with Lund and its attorneys are likely to be of
a confidential and privileged nature and Executive agrees to comply
<PAGE>
with all instructions and advice provided to Executive by Lund and its attorneys
with respect to the confidential and privileged nature of such communications.
7. Indemnification. Lund will defend, indemnify and hold Executive (and
his legal representative or other successors) harmless from and against any
damages, claims, liabilities, losses and expenses (including without limitation
the payment of reasonable attorney's fees and expenses in advance of final
disposition of the proceedings) of any kind or nature whatsoever which may be
sustained or suffered by Executive in connection with or arising out of any
action, suit or proceeding to which he (or his legal representative or other
successors) may be made a party by reason of his being or having been a
director, officer or employee of Lund or any of its subsidiaries, his serving or
having served any other enterprise as a director, officer or employee at the
request of Lund, the disposition of Executive's shares in Lund, or the making of
this Agreement, to the fullest extent permitted by Delaware General Corporation
Law as in effect at the time of the subject act or omission, the Articles of
Incorporation and By-Laws of Lund as in effect at such time or on the date of
this Agreement, or any insurance policies Lund may elect to maintain generally
for the benefit of its directors and officers, whichever affords or afforded
greater protection to Executive; and Lund shall cause to be maintained in effect
for not less than six years from the date of this Agreement (to the extent
available) policies of directors' and officers' liability insurance covering
Executive of at least the same coverage as those maintained by Lund on the date
of this Agreement and containing terms and conditions which are no less
advantageous than such policies. The identification accorded Executive by this
Section 7 shall apply regardless of whether the claim giving rise to
indemnification is made against Executive in his capacity as a director, officer
or employee of Lund, or otherwise; provided, that the nature of the claim is
such that it could have been brought against Executive in his capacity as a
director, officer or employee of Lund. If any claim is made against Executive
for investment banking fees arising out of the disposition of Executive's shares
in Lund, Lund will defend, indemnify and hold Executive (and his legal
representatives or other successors) harmless from and against fifty percent
(50%) of any damages, claims, liabilities, losses and expenses (including,
without limitation, the payment of reasonable attorneys' fees and expenses in
advance of final disposition of the proceedings) which may be sustained or
suffered by Executive in connection with such claim. The preceding sentence is
not intended to acknowledge that Executive is obligated for any such investment
banking fees, and Lund and Executive affirm their belief that Executive has no
such obligation.
8. Confidentiality of Agreement. Executive and Lund agree to keep this
Agreement, including the contents thereof, in confidence and not to disclose the
terms of this Agreement to any third party without the written consent of the
other. However, nothing contained herein shall prevent (a) either party from
disclosing this Agreement or the terms thereof to their respective accountants
and attorneys and, in the case of Lund, to its employees and directors who have
a need to know of the existence and contents hereof; (b) Executive from
disclosing the terms of this Agreement to his spouse, to banks or other
financial institutions in connection with his obtaining loans or credit from
such entities, or to prospective employers who have made bonafide employment
offers to Executive, provided, however, that Executive shall first advise such
banks, financial institutions or prospective employers of the confidential
nature of this Agreement; or (c) Lund from disclosing the terms and conditions
of this Agreement or from
<PAGE>
filing copies of this Agreement with any state or federal regulatory agencies,
including the Securities and Exchange Commission, if such disclosure or filing
of copies is considered by Lund as necessary or appropriate to comply with
federal or state securities laws or regulations or other legal or regulatory
requirements.
9. Resignations. Executive hereby resigns, effective as of the date of
this Agreement, as an officer and director of Lund and any and all of its
subsidiaries and affiliates.
10. Mutual Release. In consideration for the amount set forth in
Section 1(c) above and the other consideration contained therein, Executive and
Lund agree to execute a mutual release in the form attached hereto as Exhibit 1.
11. Press Release. Lund and Executive have agreed on the wording of a
press release regarding Executive's resignation, which is attached hereto as
Exhibit 2.
12. Future Statements. Executive and Lund and its subsidiaries and
affiliates agree that they will not engage in speech or actions which are
detrimental to the name and/or reputation of each other, nor make any
disparaging comments concerning each other, including the officers, directors,
agents, employees, and shareholders of Lund, its subsidiaries and affiliates,
except that this provision shall have no effect in the event a party hereto is
made the subject of any action commenced by the other party, its officers,
directors, agents, employees or shareholders in the future.
13. Successors. Lund will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Lund to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
Lund would be required to perform it if no such succession had taken place.
14. Binding Agreement. This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives, successors,
heirs, and designated beneficiaries. If Executive should die before the amount
would be payable to Executive hereunder if Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to Executive's designated beneficiaries, or, if
there is no such designated beneficiary, to Executive's estate.
15. No Mitigation. Executive shall not be required to mitigate the
amount of the payment provided for in Section 1 by seeking other employment or
otherwise, nor shall the amount of the payment provided for in Section 1 be
reduced by any compensation earned by Executive as the result of employment by
another employer or by retirement benefits after the date of payment, or
otherwise.
16. No Modification. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the parties. No waiver by either party hereto at any
time of any breach by the other party to this Agreement of, or compliance with,
any condition or provision of this Agreement to be performed
<PAGE>
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or similar time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement.
17. Attorneys' Fees. Lund shall also pay all legal fees and expenses
incurred by Executive in connection with the negotiation, drafting and execution
of this Agreement and the sale of Executive's Shares in Lund contemporaneous
hereto. Provided, however, Lund's obligation under this Section shall not exceed
$30,000 in addition to amounts paid by Lund for such fees and expenses before
July 21, 1997.
18. Validity. It is the desire and the intent of the parties that the
provisions of Section 4 shall be enforceable to the fullest extent permissible
under applicable law and public policy. Accordingly, if Section 4 or any portion
thereof shall be adjudicated to be invalid or unenforceable whether because of
the duration and scope of the covenants set forth herein or otherwise, the
length and scope of the restrictions set forth in Section 4 shall be reduced to
the extent necessary so that this covenant may be enforced to the fullest extent
possible under applicable law.
The invalidity or unenforceability or any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
19. Withholding. Lund shall withhold from any amounts due and payable
to Executive by Lund under Section 1(a) and (c) the amount of any and all
withholding required under federal, state or local tax laws or regulations.
Executive shall be responsible for any state and federal taxes applicable to the
amounts due and payable to Executive under Section 1(b).
20. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Minnesota.
IN WITNESS WHEREOF, the undersigned officer, on behalf of Lund
International Holdings, Inc., and Allan W. Lund have hereunto set their hands as
of the date first above written.
<PAGE>
LUND INTERNATIONAL HOLDINGS, INC.
By: /s/ William J. McMahon
--------------------------------
Its Chief Executive Officer
EXECUTIVE:
/s/ Allan W. Lund
-----------------------------------
Allan W. Lund
<PAGE>
EXHIBIT 1
MUTUAL RELEASE
As a material inducement to Lund to enter into this Release, Executive
hereby irrevocably and unconditionally releases, acquits and forever discharges
Lund, its officers, directors, agents, employees, shareholders, partners,
successors and assigns, individually and in their representative capacity, and
any entity affiliated with any of the foregoing, from any and all claims,
demands, obligations, damages, expenses, compensation and causes of action, of
any nature and from whatsoever source, whether known and unknown, whether based
in tort, contract or other theory of recovery, and whether for compensatory or
punitive damages, which Executive may have against any and all of them. Through
this Release, Executive extinguishes all causes of action against such persons,
including but not limited to any contract, wage or benefit claims; shareholder
claims; impairment of economic opportunity claims; intentional infliction of
emotional distress, defamation or any other tort claims; and all claims arising
from any federal, state or municipal law or ordinance. This Release extinguishes
any potential claims of employment discrimination arising from Executive's
employment with and separation from Lund, including specifically any claims
under the Minnesota Human Rights Act, the Americans With Disabilities Act, Title
VII of the Civil Rights Act of 1964, and the Age Discrimination in Employment
Act. Executive understands that this Release releases all known and unknown
claims against the Company and the other releases; provided, however, that
claims which arise out of a breach of this Agreement or claims which arise out
of any employee benefit plan under which Executive is entitled to benefits (as
set forth in the Severance and Noncompetition Agreement between Lund and
Executive dated September 9, 1997) are not released hereunder.
Under the Age Discrimination in Employment Act, Executive has 21 days
to review and consider this Release. If Executive executes this Release before
21 days elapsed from the date on which Executive first receives it (September 9,
1997) then Executive shall voluntarily waive his right to the full 21 day review
period. Executive has the right to rescind this Release within fifteen (15)
calendar days of the date upon which Executive signs it. If Executive desires to
rescind this Release, Executive must do so in writing and deliver it to Mark S.
Weitz, Leonard, Street and Deinard, 150 South Fifth Street, Minneapolis,
Minnesota 55402, by hand or by mail within the 15-day period. If such rescission
is by mail, it must be postmarked within 15 calendar days of the date on which
Executive executes this Release and sent by certified mail, return receipt
requested.
As a material inducement to Executive to enter into this Release, Lund
and its subsidiaries and affiliates hereby irrevocably and unconditionally
release, acquit and forever discharge Executive from any and all claims,
demands, obligations, actions, damages, expenses, and compensation of any nature
and from whatever source, whether known or unknown, suspected or unsuspected,
whether based in tort, contract or other theory of recovery, and whether for
compensatory or punitive damages, on account of or in any way growing out of the
employment relationship between the parties, Executive's relationship as a
shareholder or director of Lund and its subsidiaries and affiliates, the making
of the Agreement of which this Release is a part or the sale of Executive's
shares in Lund. This Release releases all such claims
<PAGE>
against Executive. Claims which arise out of a breach of the Agreement of which
this Release is a part are not released hereunder.
In the event this Release is rescinded pursuant to Minnesota Statutes,
Section 363.031, subd. 2, as provided in the accompanying notice, Executive
shall promptly repay to Lund an amount of Fifty Thousand Dollars and no/100
dollars ($50,000) and the mutual release provided herein shall be null and void
and of no further force or effect
LUND INTERNATIONAL HOLDINGS, INC.
("LUND")
By: /s/ William J. McMahon
---------------------------------------
Its Chief Executive Officer
ALLAN W. LUND ("EXECUTIVE")
/s/ Allan W. Lund
------------------------------------------
Allan W. Lund
