UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
LUND INTERNATIONAL HOLDINGS, INC.
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(Name of Issuer)
COMMON STOCK, $.10 par value per share
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(Title of Class of Securities)
550 368 104
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(CUSIP Number)
Ira Kleinman
LIH Holdings, LLC
c/o Harvest Partners, Inc.
767 Third Avenue
New York, New York 10017
(212) 838-7776
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
With Copies To:
Leonard Gubar, Esq.
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
(212) 603-2000
September 9, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of
Rule 13d 1(b)(3) or (4), check the following box [ ].
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act.
Page 1 of __pages
Exhibit Index on page __
<PAGE>
SCHEDULE 13D
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CUSIP No. 550 368 104
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
LIH Holdings, LLC
EIN: 13-3961151
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(E) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
NUMBER OF 1,686,893
SHARES --------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 1,686,893
REPORTING --------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
1,686,893
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10 SHARED DISPOSITIVE POWER
1,686,893
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,686,893
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.4%
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14 TYPE OF REPORTING PERSON*
CO
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<PAGE>
SCHEDULE 13D
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CUSIP No. 550 368 104
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
LIH Investors, L.P.
EIN:
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(E) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
NUMBER OF 1,686,893
SHARES --------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 1,686,893
REPORTING --------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
1,686,893
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10 SHARED DISPOSITIVE POWER
1,686,893
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,686,893
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.4%
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14 TYPE OF REPORTING PERSON*
PN
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<PAGE>
SCHEDULE 13D
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CUSIP No. 550 368 104
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
LIH Management, L.P.
EIN:
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(E) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
NUMBER OF 1,686,893
SHARES --------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 1,686,893
REPORTING --------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
1,686,893
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,686,893
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,686,893
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.4%
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14 TYPE OF REPORTING PERSON*
PN
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<PAGE>
SCHEDULE 13D
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CUSIP No. 550 368 104
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
LIH, Incorporated
EIN:
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(E) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
NUMBER OF 1,686,893
SHARES --------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 1,686,893
REPORTING --------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
1,686,893
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,686,893
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,686,893
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.4%
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14 TYPE OF REPORTING PERSON*
CO
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<PAGE>
ITEM 1. SECURITY AND ISSUER
The title of the class of equity securities to which this
statement on Schedule 13D (the "Statement") relates is the common
stock, $.10 par value per share ("Common Stock"), of Lund
International Holdings, Inc., a Delaware corporation ("Company").
The principal executive offices of the Company are located at 911
Lund Boulevard, Anoka, Minnesota 55303.
ITEM 2. IDENTITY AND BACKGROUND
(a) This Statement is being filed by LIH Holdings, LLC, a
Delaware limited liability company ("LIH Holdings"). LIH
Holdings recently was organized for the purpose of acquiring
shares of Common Stock of the Company pursuant to the Stock
Purchase Agreement (as defined in Item 3) and has not engaged in
any business other than in connection with the acquisition of
shares of Common Stock. This Statement also is being filed by
LIH Investors, L.P., a Delaware limited partnership ("LIH
Investors"), LIH Management, L.P., a Delaware limited partnership
("LIH Management"), and LIH, Incorporated, a Delaware corporation
("LIH, Inc."). LIH Investors is an investment partnership that
owns a majority of the membership interests of LIH Holdings. LIH
Management serves as the general partner of LIH Investors and
LIH, Inc. serves as the general partner of LIH Management. As
such, LIH Investors, LIH Management and LIH, Inc. each may be
deemed to control, directly or indirectly, LIH Holdings and to
beneficially own the shares of Common Stock being reported on
this Statement by LIH Holdings.
(b) The address of the principal offices of each of LIH
Holdings, LIH Investors, LIH Management and LIH, Inc. is c/o
Harvest Partners, Inc. ("Harvest"), 767 Third Avenue, 7th Floor,
New York, New York 10017.
(c) Attached as Exhibit A are the names of the managers of
LIH Holdings, their business addresses and principal occupations.
Attached as Exhibit B are the names of the general partners of
LIH Investors, their business addresses and occupations (where
applicable).
Attached as Exhibit C are the names of the general partners of
LIH Management, their business addresses and occupations (where
applicable). Attached as Exhibit D are the names of the officers
and directors of LIH, Inc., their business addresses and
occupations (where applicable).
(d) During the last five years, neither LIH Holdings nor
any person listed on Exhibit A has been convicted in a criminal
proceeding. During the last five years neither LIH Investors nor
any person listed on Exhibit B been convicted in a criminal
proceeding. During the last five years, neither LIH Management
nor any person listed on Exhibit C has been convicted in a
criminal proceeding. During the last five years neither LIH,
Inc. nor any person listed on Exhibit D been convicted in a
criminal proceeding.
(e) During the last five years, neither LIH Holdings nor
any person listed on Exhibit A has been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to
such laws. During the last five years, neither LIH Investors nor
any person listed on Exhibit B has been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to
such laws. During the last five years, neither LIH Management
nor any person listed on Exhibit C has been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to
such laws. During the last five years, neither LIH, Inc. nor any
person listed on Exhibit D has been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of,
or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to
such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
LIH Holdings entered into a Stock Purchase Agreement dated
September 9, 1997 ("Stock Purchase Agreement") with Allan Lund
("Lund"), the Lund Family Limited Partnership (the "Lund Family
Partnership"), Lois and Allan Lund Family Foundation (the "Lund
Family Foundation" and together with Lund, the Lund Family
Partnership and the Lund Family Foundation the "Lund Sellers"),
and certain other sellers (the "Lund Family Members" and together
with the Lund Sellers, collectively the "Sellers"), pursuant to
which LIH Holdings purchased a total of 1,686,893 shares (the
"Shares") of the Company's Common Stock from the Sellers for a
purchase price of $11.50 per share, or an aggregate purchase
price of $19,399,270, payable in cash upon closing. The Stock
Purchase Agreement also provides that the Lund Sellers will
receive additional consideration based upon the occurrence of
certain events. A description of the Stock Purchase Agreement
(including a description of the circumstances under which the
additional consideration is payable) is set forth in Item 6 of
this Statement. LIH Holdings obtained the funds to pay the
portion of the purchase price of the Shares payable in cash upon
closing from its working capital.
ITEM 4. PURPOSE OF TRANSACTION
LIH Holdings acquired the shares of Common Stock in order to
obtain a substantial equity position in the Company. In
connection with its purchase of the Shares pursuant to the Stock
Purchase Agreement, LIH Holdings entered into the Governance
Agreement dated September 9, 1997 ("Governance Agreement") with
the Company that contains terms with respect to the acquisition
and voting of shares of Common Stock by LIH Holdings and the
right of LIH Holdings to nominate members of the Company's Board
of Directors. The Company entered into the Governance Agreement
as a condition to the approval by the Board of Directors of the
Company of the acquisition of the Shares by LIH Holdings for
purposes of Section 203 of the Delaware General Corporation Law.
Pursuant to the Governance Agreement, LIH Holdings agreed
that until the third anniversary of the Closing Date ("Standstill
Termination Date") it will not, and will not permit its
affiliates and associates (as such terms are defined under
Section 203 of the Delaware General Corporation Law) to,
beneficially own (as determined pursuant to Section 13d-3 of the
Securities Exchange Act of 1934, as amended) voting securities of
the Company in excess of 1,933,346 shares of Common Stock (as
adjusted for stock dividends, splits, recombinations and the
like) (the "Permitted Shares") except for (i) the acquisition of
voting securities from the Company which has been approved by the
vote of a majority of the Company's Independent Directors, as
defined; and (ii) the acquisition of voting securities pursuant
to a tender or exchange offer made by LIH Holdings for all voting
securities not owned by it after a third party (other than the
Company) has made a bona fide tender or exchange offer to
purchase 50% or more of the Company's voting securities. In
addition, until the Standstill Termination Date, LIH Holdings
will not (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 contest" (as such terms are defined
or used in Regulation 14A under the Exchange Act, as in effect on
the date of the Governance Agreement), in any election contest
with respect to the election or removal of the Independent
Directors proposed in accordance with the Governance Agreement;
or (ii) other than as contemplated by Section 1.01(a) of the
Governance Agreement, solicit, offer or propose to any person any
form of merger with the Company, any tender or exchange offer for
securities of the Company, or any sale or liquidation of the
Company's assets.
Pursuant to the Governance Agreement, the Company and
LIH Holdings have agreed that the Board of Directors will
consist of seven directors, including (i) two directors
designated by LIH Holdings, (ii) a third director to be proposed
by LIH Holdings who must be independent of and otherwise
unaffiliated with LIH Holdings and its affiliates and associates
(an "Independent Director") and approved by the Company's other
Independent Directors, (iii) two other Independent Directors who
will be initially proposed by Independent Directors serving on
the Board of Directors prior to the closing of the Stock Purchase
Agreement (and thereafter by a committee (the "Independent
Director Nominating Committee") comprised of Independent
Directors other than the Independent Director proposed by
LIH Holdings); (iv) an Independent Director to be initially
proposed by the Independent Directors on the existing Board of
Directors and thereafter by the Independent Director Nominating
Committee, subject to approval by LIH Holdings, and (v) the
Company's Chief Executive Officer. At any time when LIH Holdings
owns less than 50% of the shares of Common Stock it purchased on
the Closing Date, LIH Holdings will have the right to designate
only one director. The Governance Agreement provides that until
the Standstill Termination Date, LIH Holdings will vote its
securities of the Company for the election of Independent
Directors proposed by the Independent Director Nominating
Committee.
Until the first to occur of (i) the Standstill Termination
Date, (ii) the number of shares of Common Stock beneficially
owned by LIH Holdings or any of its affiliates or associates is
less than 50% of the Permitted Shares, or (iii) the voting power
in the general election of directors of all voting securities
then beneficially owned by LIH Holdings or its affiliates or
associates decreasing to less than 5% or less of the total
combined voting power in the general election of directors of all
voting securities then outstanding, the Company may not take
identified corporate actions without the affirmative vote of a
majority of the Company's Board of Directors, which majority
includes at least one director designated by LIH Holdings. These
actions are: (i) any amendment to the Certificate of
Incorporation or By-Laws of the Company; (ii) 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; (iii)
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; (iv) any merger, consolidation,
liquidation or dissolution of the Company or any subsidiary,
other than with or into the Company or another wholly-owned
subsidiary; (v) any acquisition of any other business; (vi) 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 (a) the Company or a subsidiary, (b)
short-term investments in the ordinary course of business, or (c)
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; (vii) any acquisition by the Company or any
subsidiary of assets, other than investment or loan assets, not
in the ordinary course of business; (viii) the issuance or sale
of any capital stock of the Company or any subsidiary, other than
(a) issuance of capital stock of the Company authorized for
issuance pursuant to stock plans or agreements in effect at the
date of the Governance Agreement, and (b) the 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;
(ix) any declaration or payment of any dividend or distribution
with respect to shares of the Company's capital stock; (x) 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 and (xi) establishment of, or continued
existence of, any committee of the Board of Directors with the
power to approve any of the foregoing.
The Governance Agreement also provides that the Company may
not take any action with respect to a Stockholder Interested
Transaction (as defined below) unless such transaction has been
approved by a majority of the Independent Directors. A
Stockholder Interested Transaction is defined to mean any
transaction with the Company and LIH Holdings, its affiliates or
associates, or relating to the Governance Agreement, including
without limitation, any amendment, modification or waiver of the
Governance Agreement.
In connection with the Stock Purchase Agreement and the
Governance Agreement, Harvest entered into the Services Agreement
dated September 9, 1997 (the "Services Agreement") with the
Company. Pursuant to the Services Agreement, Harvest will
provide the following services to the Company: (i) 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 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 equity investments, (v) communicating with Company
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) providing such
other investment, advisory and related financial services as
Harvest or the Company, from time to time, shall deem necessary
or appropriate. Under the Services Agreement, Harvest also will
provide to the Company the financial and/or management expertise
of the two directors ("Harvest Directors") that LIH Holdings
appoints to the Company's Board of Directors pursuant to the
Governance Agreement. The Harvest Directors will provide
guidance, counsel and managerial assistance to the Company.
The Services Agreement terminates upon the earlier of (i)
the date immediately preceding the third anniversary of the date
of the agreement, (ii) the date on which the agreement is
terminated for cause as provided in Section 7 of the Services
Agreement, or (iii) the date that the number of shares of Common
Stock owned by LIH Holdings, its affiliates and associates (as
such terms are defined under Section 203 of the Delaware
Corporation Law) decreases to less than 50% of the Permitted
Shares (as defined in the Governance Agreement).
The Services Agreement provides that the Company will pay
fees to Harvest as follows: (i) $150,000 for the first year of
the term of the Services Agreement; (ii) $250,000 for the second
year of the term of the Services Agreement; and (iii) $400,000
for the third year of the term of the Services Agreement;
provided that the Company's quarterly earnings before interest,
--------
taxes, depreciation and amortization ("EBITDA") are not less than
(x) $1,000,000 per fiscal quarter during the first year of the
term of the Services Agreement; (y) $1,375,000 per fiscal quarter
during the second year of the term of the Services Agreement;
and (z) $1,750,000 per fiscal quarter during the third year of
the term of the Services Agreement. Payment of the fee will be
suspended for any fiscal quarter that the relevant quarterly
EBITDA target (plus the cumulative amount, if any, of EBITDA
Excess, as defined, for the quarters preceding the quarter EBITDA
did not meet Target) is not met. All such suspended payments
will cumulate and be payable at such time as, for subsequent
quarters, the cumulative amount of the EBITDA Excess equals or
exceeds the cumulative amount of the EBITDA Deficiency, as
defined. Provided prior approval of a majority of the Independent
Directors of the Company is obtained, the Company may pay
Harvest negotiated amounts in excess of the fees described
above to the extent Harvest provides the Company with investment
banking, advisory or other services in connection with any
extraordinary transaction effected by the Company, including
any merger, business combination, recapitalization or significant
asset acquisition or disposition.
The foregoing descriptions of the Governance Agreement and
the Services Agreement are qualified in their entirety by
reference to such agreements, copies of which have been filed as
exhibits hereto.
Subject to the terms and provisions of the Governance
Agreement, LIH Holdings, LIH Investors, LIH Management and
LIH, Inc. reserve the right to acquire, as they deem appropriate,
additional shares of Common Stock through open market and
privately negotiated transactions, by tender offer or otherwise,
and to seek control of the Company. LIH Holdings also reserves
the right to dispose of some or all of its shares of Common Stock
in the open market or in privately negotiated transactions to
third paries or otherwise.
LIH Holdings anticipates that, from time to time, it,
directly, through directors that it designates for election to
the Board or through affiliates or associates, including Harvest,
may identify to the Company businesses to be considered for
acquisition by the Company that are related or complementary to
the Company's current lines of businesses. In that connection,
LIH Holdings also may propose, propose to arrange, or identify to
the Company sources of equity or debt financings.
Other than as set forth herein and in the Services Agreement
and Governance Agreement, neither LIH Holdings, LIH Investors,
LIH Management nor LIH Inc. has any current plans or proposals
which relate to or would result in any of the results specified
in paragraphs (a) through (j) of Item 4 of this Statement.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) LIH Holdings beneficially owns 1,686,893 shares of
Common Stock, representing approximately 38.4% of the issued and
outstanding shares of Common Stock. The percentage ownership of
LIH Holdings in the Company's Company Stock is based on 4,393,970
issued and outstanding shares of the Common Stock as reported by
the Company in its Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997 filed with the Securities and Exchange
Commission (the "Commission"). The executive officers and
managers of LIH Holdings do not beneficially own any shares of
Common Stock. Since LIH Investors, LIH Management and LIH, Inc.
may be deemed to control, directly or indirectly, LIH Holdings,
each of LIH Investors, LIH Management and LIH, Inc. may be deemed
to have the power to direct the vote or disposition of the
Shares, and accordingly, may be deemed, for purposes of
determining beneficial ownership pursuant to Rule 13d-3 under the
Securities Act of 1934, as amended (the "1934 Act"), to
beneficially own the Shares held by LIH Holdings.
(b) LIH Holdings has sole power to vote or direct the vote
and to dispose or direct the disposition of the Shares. Since
each of LIH Investors, LIH Management and LIH, Inc. may be deemed
to control, directly or indirectly, LIH Holdings, each of LIH
Investors, LIH Management and LIH, Inc. may be deemed to have
shared power to vote or direct the vote and dispose or direct the
disposition of the Shares.
(c) Except as set forth in Item 3 and pursuant to the Stock
Purchase Agreement, there have been no transactions in shares of
Common Stock during the past sixty days by LIH Holdings, LIH
Investors, LIH Management or LIH, Inc. or any person or entity
listed on Exhibits A, B, C and D to this Statement.
(d) No person is known to have the right to receive or the
power to direct the receipt of dividends from, or the proceeds
from the sale of, the shares, owned by LIH Holdings except LIH
Holdings.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER
The Stock Purchase Agreement provides for the purchase of
1,686,893 shares of Common Stock for $11.50 per share plus the
payment of Additional Consolidation (as defined in the Stock
Purchase Agreement) in certain events to the Lund Sellers. The
Additional Consideration is payable upon the happening of certain
events ("Triggering Events") occurring within ten years of the
closing date ("Closing Date") under the Stock Purchase Agreement.
The Triggering Events are: (i) the sale of all or substantially
all of the assets or capital stock of the Company; (ii) the sale
by LIH Holdings of 90% or more of the total number shares of
Common Stock purchased under the Stock Purchase Agreement (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 such shares); and (iii) a 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 continue as stockholders of the surviving
entity. Additional Consideration generally is limited to 30% of
LIH Holdings' Actual Realized Gain (as defined in the Stock
Purchase Agreement) upon its sale of Shares pursuant to the
Triggering Event. If a Triggering Event is not consummated by
the fourth anniversary of the Closing Date, then the Lund Sellers
have the option on such date and thereafter on each anniversary
of the Closing Date until the tenth anniversary of the Closing
Date, to require LIH Holdings to pay to the Lund Sellers as
Additional Consideration an amount equal to 30% of the
LIH Holdings' Hypothetical Gain (as defined in the Stock Purchase
Agreement) unless a Triggering Event has been consummated. In any
event, the Additional Consideration payable by LIH Holdings is
limited to $6,268,005. The Stock Purchase Agreement contains
representations and warranties of the Sellers, including with
respect to their ownership of the Shares and other matters. The
Stock Purchase Agreement also contains indemnification by each
Seller of the Purchaser.
The foregoing description of the Stock Purchase Agreement is
qualified in its entirety by reference to such agreement, a copy
of which has been filed an exhibit hereto.
In connection with the Stock Purchase Agreement, the Company
and LIH Holdings entered into the Governance Agreement and the
Company and Harvest entered into the Services Agreement. The
Governance Agreement and the Services Agreement are described in
Item 4 of this Statement.
Except as otherwise disclosed in this Statement, neither LIH
Holdings, LIH Investors, LIH Management nor LIH, Inc. nor, to the
best of their knowledge, any persons listed on Exhibits A, B, C
and D hereto has any contracts, arrangements, understandings or
relationships (legal or otherwise) with any person with respect
to the securities of the Company.
Other than the Stock Purchase Agreement, the Governance
Agreement and the Services Agreement, there are no contracts,
arrangements, understandings or relationships (legal or
otherwise) among the Reporting Persons and between such persons
and any other person with respect to any securities of the
Company, including, but not limited to, transfer or voting of any
of the securities, finder's fees, joint ventures, loan or option
arrangements, put or calls, guarantees of profits, division of
profits or losses, or the giving or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The following materials are filed as Exhibits to this
Statement.
A. Information with respect to officers and directors of
LIH Holdings, LLC.
B. Information with respect to Partners of LIH Investors,
L.P.
C. Information with respect to Partners of LIH Management,
L.P.
D. Information with respect to officers and directors of
LIH, Incorporated.
E. Stock Purchase Agreement dated September 9, 1997 by and
among LIH Holdings, LLC, Allan W. Lund, the Lund Family
Limited Partnership, the Lois and Allan Lund Family
Foundation and certain Lund Family Members.
F. Governance Agreement dated September 9, 1997 between
LIH Holdings, LLC and Lund International Holdings, Inc.
G. Services Agreement dated September 9, 1997 between
Harvest Partners, Inc. and Lund International Holdings,
Inc.
<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
Statement is true, complete and correct.
Date: September 9, 1997 LIH Holdings, LLC
By
---------------------------
Name:
Title:
Date: September 9, 1997 LIH Investors, L.P.
By: LIH Management, L.P., its
General Partner
By: LIH Incorporated, its
General Partner
By
-----------------------
Name:
Title:
Date: September 9, 1997 LIH Management, L.P.
By: LIH, Incorporated, its
General Partner
By
-----------------------
Name:
Title:
Date: September 9, 1997 LIH, Incorporated
By
---------------------------
Name:
Title:
<PAGE>
EXHIBIT INDEX
--------------
A. Information with respect to officers and directors of
LIH Holdings, LLC.
B. Information with respect to Partners of LIH Investors,
L.P.
C. Information with respect to Partners of LIH Management,
L.P.
D. Information with respect to officers and directors of
LIH, Incorporated.
E. Stock Purchase Agreement dated September 9, 1997 by and
among LIH Holdings, LLC, Allan W. Lund, the Lund Family
Limited Partnership, the Lois and Allan Lund Family
Foundation and certain Lund Family Members.
F. Governance Agreement dated September 9, 1997 between
LIH Holdings, LLC and Lund International Holdings, Inc.
G. Services Agreement dated September 9, 1997 between
Harvest Partners, Inc. and Lund International Holdings,
Inc.
EXHIBIT A
---------
INFORMATION WITH RESPECT TO
EXECUTIVE OFFICERS AND MANAGERS OF
LIH HOLDINGS, LLC
----------------------------------
POSITION WITH PRINCIPAL
NAME<FN1> LIH HOLDINGS, LLC OCCUPATION
---- ----------------- -----------
Harvey P. Manager and President Managing General
Wertheim Partner of Harvest
Partners, Inc., a
private equity
investment firm
("Harvest")
Ira Kleinman Manager and Secretary General Partner of
Harvest
William Kane Manager and Treasurer General Partner of
Harvest
[FN]-----------------
1. All named individually are United States citizens and the
business address of each of the named individuals is c/o
Harvest Partners, Inc., 767 Third Avenue, 7th Floor, New
York, New York 10017.
EXHIBIT B
---------
INFORMATION WITH RESPECT TO
GENERAL PARTNER OF LIH INVESTORS, L.P.
--------------------------------------
POSITION WITH
NAME AND ADDRESS LIH INVESTORS, L.P. PRINCIPAL OCCUPATION
---------------- ------------------- --------------------
The General Partner of LIH Investors, L.P. is LIH
Management, L.P., a Delaware limited partnership.
EXHIBIT C
---------
INFORMATION WITH RESPECT TO
GENERAL PARTNER OF LIH MANAGEMENT, L.P.
---------------------------------------
POSITION WITH
NAME AND ADDRESS LIH MANAGEMENT, L.P. PRINCIPAL OCCUPATION
---------------- -------------------- --------------------
The General Partner of LIH Management, L.P. is LIH,
Incorporated, a Delaware corporation.
EXHIBIT D
---------
INFORMATION WITH RESPECT TO DIRECTORS
AND EXECUTIVE OFFICERS OF LIH, INCORPORATED
-------------------------------------------
NAME AND POSITIONS WITH
ADDRESS<FN1> LIH, INCORPORATED PRINCIPAL OCCUPATION
------- ----------------- --------------------
Harvey J. Director and Managing General
Wertheim President Partner of Harvest
Partners, Inc., a
private equity
investment firm
("Harvest")
Ira D. Kleinman Director and General Partner of
Secretary Harvest
William Kane Director and General Partner of
Treasurer Harvest
[FN]------------------
1. Unless otherwise noted above, all named individually are
United States citizens and the business address of each of
the named individuals is c/o Harvest Partners, Inc., 767
Third Avenue, 7th Floor, New York, New York 10017.
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., 9965
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:
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.
"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 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.
(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 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 and (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.
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, 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.
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.
(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.
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 3.4 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 3.5 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.
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, 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.
---------
(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 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 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.
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.
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.
(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 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.
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).
(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."
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/ The Lund Family Limited Partnership
------------------------------------------
Name:
Title:
/s/ Lois J. Lund
---------------------------------------------
Lois J. Lund
LOIS AND ALLAN LUND FAMILY FOUNDATION
By: /s/ Lois and Allan Lund Family Foundation
------------------------------------------
Name:
Title:
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
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
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
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
SHAREHOLDER SHARES CERTIFICATE NO. LOCATION
----------- ------ --------------- --------
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
---------
1,026,601 Piper Jaffray,
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 Piper Jaffray
Jaffray,
Family Foundation
The Lund Family 132,000 #6468 Piper Jaffray
Limited Partnership
<PAGE>
SCHEDULE 3
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
<TABLE>
<CAPTION>
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hurdle Price per 13.09 14.40 15.84 17.42 19.17 21.08 23.19 25.51 26.06 30.87
share
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 1.88 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 2.98 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 0.00
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
<PAGE>
EXHIBIT B
<PAGE>
EXHIBIT C
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 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. Acqusition 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
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 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 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.
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.
(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 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.
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 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
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.
(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 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.
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 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 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,
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.
(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 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.
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/ Lund International Holdings, Inc.
. . . . . . . . . . . . . . . . . . . . . .
Its . . . . . . . . . . . . . . . . . . .
LIH HOLDINGS, LLC
By /s/ LIH Holdings, LLC
. . . . . . . . . . . . . . . . . . . . . .
Its . . . . . . . . . . . . . . . . . . .
<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.
11. Establishment of, or continued existence of, any committee
of the Board of Directors with the power to approve any of
the foregoing.
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 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 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 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 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 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 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 peti-
tion 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.
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.
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
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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.
HARVEST PARTNERS, INC.
By: /s/ Harvest Partners, Inc.
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Name:
Title:
LUND INTERNATIONAL HOLDINGS, INC.
By: /s/ Lund International Holdings, Inc.
--------------------------------------
Name:
Title:
