SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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December 23, 1998 (Items 2 and 7)
Date of report (Date of earliest event reported) December 29, 1998 (Items 5 and 7)
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Lund International Holdings, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-16319 41-1568618
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
911 Lund Boulevard, Anoka, MN 55303
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code 612.576.4200
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(Former Name or Former Address, if Changed Since Last Report)
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THE FOLLOWING IS A SUMMARY OF THE DOCUMENTS DISCUSSED BELOW AND IS NOT INTENDED
TO BE A COMPLETE DESCRIPTION OF SUCH DOCUMENTS OR THE TRANSACTIONS WHICH ARE THE
SUBJECT OF SUCH DOCUMENTS. REFERENCE IS MADE TO ALL SUCH DOCUMENTS ATTACHED
HERETO AS EXHIBITS FOR A COMPLETE DESCRIPTION OF THE TERMS AND CONDITIONS
OF ALL SUCH DOCUMENTS.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 23, 1998, Lund International Holdings, Inc. (the "Company")
purchased all of the issued and outstanding capital stock (the "Shares") of
Ventshade Holdings, Inc. ("Ventshade"), the parent company of Auto Ventshade
Company ("AVS"), from the persons listed on Schedule A to the Stock Purchase
Agreement, dated as of December 11, 1998 (the "Stock Purchase Agreement"), among
Ventshade, the Persons listed on Schedule A to the Stock Purchase Agreement (the
"Sellers"), the Company and New Holdings, Inc. ("New Holdings"), a wholly-owned
subsidiary of the Company. The aggregate purchase price for the shares was
$66,875,000.
In part, the Company funded the acquisition of the Shares by entering
into an Investment Agreement, dated December 22, 1998 (the "Investment
Agreement"), with LIH Holdings III, LLC ("LIH III"), Massachusetts Mutual Life
Insurance Company ("MMLIC"), MassMutual Corporate Investors ("MMCI"), MassMutual
Participation Investors ("MMPI"), MassMutual Corporate Value Partners Limited
("MMCVPL"), Liberty Mutual Insurance Company ("Liberty") and BancBoston Capital
Inc. ("BancBoston") (collectively, the " Investors"). Pursuant to the terms of
the Investment Agreement, the Company sold to the Investors, via a private
placement, an aggregate of 1,047,412 shares of the Company's common stock and
252,401.8 shares of the Company's Series B Preferred Stock (collectively, the
"Purchased Shares"). The Series B Preferred Stock will be convertible into
common stock or non-voting common stock, at the option of the holder, upon
approval by the Company's stockholders of such conversion. The aggregate
purchase price for the Purchased Shares was $25,000,000.
The Company also funded part of the acquisition price of the Shares by
entering into Amendment No. 2 to Credit Agreement (the "Second Credit
Agreement"), dated December 23, 1998, with Heller Financial, Inc., as agent, and
as lender. Also parties to the Second Credit Agreement were the following
subsidiaries of the Company: Deflecta-Shield Corporation ("Deflecta"), Lund
Industries, Incorporated ("Lund"), Belmor Autotron Corp. ("Autotron"), DFM Corp.
("DFM"), Lund Acquisition Corp., BAC Acquisition Co., Trailmaster Products,
Inc., Delta III, Inc., AVS, New Holdings and Ventshade. The Second Credit
Agreement amends the Credit Agreement previously entered into by certain of the
parties listed above, dated February 27, 1998 and as amended through the date of
the Second Credit Agreement (the "Credit Agreement"). Pursuant to the terms of
the Second Credit Agreement, the Company expanded its lendings pursuant to the
terms of the Credit Agreement to provide financing of up to $96,200,000 to fund
the acquisition of the Shares and another contemplated acquisition that the
Company may make. The Second Credit Agreement also makes certain modifications
to covenants contained in the Credit Agreement.
The Company funded the balance of the acquisition price of the Shares
by entering into a Securities Purchase Agreement, dated December 23, 1998 (the
"Securities Purchase Agreement"), with Deflecta, Lund, Autotron, DFM and AVS.
Pursuant to the terms of the Securities Purchase Agreement, the Company, Lund,
Deflecta, Autotron, DFM and AVS (collectively, the "Companies") issued to the
Purchasers listed on Schedule 1 to the Securities Purchase Agreement
(collectively, the "Purchasers") 12.5% Senior Subordinated Notes
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(collectively, the "Notes"). Further, the Company issued to such Purchasers
warrants to purchase 52,075 shares of the Company's Series B Preferred Stock at
an exercise price of $.11 per share or, under certain circumstances (subject to
adjustment in certain events, including the issuance of shares at less than fair
market value, as defined), 520,749 shares of the Company's Common Stock (such
Warrants and the Notes being collectively referred to herein as the
"Securities"). The aggregate purchase price of the of the Securities sold
pursuant to the terms of the Securities Purchase Agreement was $20,000,000. The
Securities Purchase Agreement also provides for additional purchases of
Securities by the Purchasers to fund another contemplated acquisition by the
Company.
Pursuant to the terms of the Securities Purchase Agreement, the
Companies may, upon notice to the Purchasers, prepay all or any part of the
Notes upon the concurrent payment of certain premiums, ranging up to 3%, of the
principal amount so prepaid.
As part of the transactions contemplated by the Securities Purchase
Agreement and the Investment Agreement, the Company also entered into a Rights
Agreement, dated December 22, 1998 (the "Rights Agreement"), with LIH Holdings,
LLC, LIH Holdings II, LLC, LIH III (LIH Holdings, LLC, LIH Holdings II, LLC and
LIH III being collectively referred to herein as the "LIH Entities"),
BancBoston, Liberty, MMLIC, MMCVPL, MMCI, MMPI (MMLIC, MMCVPL, MMCI and MMPI
being collectively referred to herein as the " MassMutual Entities") and
National City Venture Corporation ("NCVC") (NCVC and the MassMutual Entities
being collectively referred to herein as the "Mezzanine Entities"). Pursuant to
the terms of the Rights Agreement, the Company provided each of the LIH
Entities, BancBoston, Liberty, and the Mezzanine Entities certain demand and
piggyback registration rights with respect to shares of the Company's common
stock either currently owned or to be acquired by them in connection with future
acquisitions made by the Company. The Rights Agreement further imposed certain
restrictions on, and conditions to, transfers of equity securities of the
Company owned by such investors.
Finally, in connection with the transactions outlined above, the
Company entered into a Second Amended and Restated Governance Agreement, dated
December 22, 1998 (the "Second Governance Agreement"), with the LIH Entities.
The Second Governance Agreement amends and restates the Governance Agreement
previously entered into by and between the Company and LIH Holdings, LLC, as
amended through the date of the Second Governance Agreement (the "Initial
Governance Agreement"), to add LIH III as a party.
The purpose of the Second Governance Agreement, among other things, is
to put in place certain arrangements relating to the acquisition and disposition
of the Company's securities by the
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LIH Entities and to establish other provisions concerning the relationship
between the Company and the LIH Entities. Subject to certain limitations
contained in the Second Governance Agreement, it provides that the LIH Entities
shall not, and that the LIH Entities will not permit any of their Associates or
Affiliates (as defined in the Second Governance Agreement) to, beneficially own
more than 3,306,792 shares of the Company's common stock (subject to
adjustment). In addition, the Second Governance Agreement provides that, prior
to its termination, the LIH Entities, and each Affiliate or Associate thereof
which acquires shares of the Company's common stock pursuant to the terms of the
Second Governance Agreement, will not transfer beneficial ownership of such
shares to any other Affiliate or Associate unless such third party becomes a
signatory to the Second Governance Agreement. The Second Governance Agreement
contains substantially similar terms as the Initial Governance Agreement
respecting the composition of the Company's Board of Directors and the voting
rights of the LIH Entities in the event of certain proposed corporate
transactions.
ITEM 5. OTHER EVENTS.
On December 29, 1998, Lund entered into an Escrow Agreement (the
"Escrow Agreement") with U.S. Bank Trust National Association ("U.S. Bank")
relating to the Industrial Development Revenue Bonds (Lund Industries
Incorporated Project) Series 1994, of the City of Anoka, Minnesota (the
"Bonds"). The City of Anoka, Minnesota ("Anoka") had previously issued
$5,450,000 aggregate principal amount of the Bonds pursuant to an Indenture of
Trust, dated September 1, 1994 (the "Indenture"), between Anoka and U.S. Bank
for the purpose of acquiring, constructing and equipping a manufacturing
facility owned by Lund. The purpose of the Escrow Agreement is to provide for
defeasance of the Bonds.
Pursuant to the terms of the Escrow Agreement, Lund directed U.S. Bank,
as Trustee under the Indenture, to transfer $729,486.53 on deposit in the funds
and accounts created under the Indenture to an Escrow Fund created by the Escrow
Agreement. Pursuant to the terms of the Escrow Agreement, Lund additionally
delivered $3,181,560.03 of other funds to U.S. Bank for deposit to such Escrow
Fund, all of which funds are to be invested in Treasury Securities (T-Notes)
issued by the Government of the United States (the "Escrowed Obligations"). The
Escrowed Obligations shall be used to pay in full debt service (including
interest and, at maturity, principal) on the Bonds on each September 1 and March
1, from March 1, 1999 to and including September 1, 2004, the stated maturity
date of the Bonds. Pursuant to the terms of the Escrow Agreement, the Guaranty
from Lund International Holdings, Inc. to U.S. Bank pursuant to the terms of the
Guaranty Agreement, dated September 1, 1994, shall remain in effect until
January 14, 2000, the date which is one year plus 15 days after the Bonds shall
have been paid or for which payment provisions have been made. In connection
with the Escrow Agreement, Lund also entered into a Cancellation and Discharge
of Indenture and Termination of Loan Agreement with U.S. Bank, pursuant to which
the Indenture and the Loan Agreement, dated September 1, 1994, between Lund and
Anoka, were terminated, including the elimination of certain covenants on the
part of Lund which were contained in those documents.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS.
10.1 Stock Purchase Agreement, dated December 11, 1998, by
and among Ventshade Holdings, Inc., the Persons listed
on Schedule A to the Agreement, Lund International
Holdings, Inc. and New Holdings, Inc.
10.2 Investment Agreement, dated December 22, 1998 (the
"Investment Agreement"), among LIH Holdings III, LLC,
Massachusetts Mutual Life Insurance Company, MassMutual
Corporate Investors, MassMutual Participation Investors,
MassMutual Corporate Value Partners Limited, Liberty
Mutual Insurance Company, BancBoston Capital Inc. and
Lund International Holdings, Inc.
10.3 Amendment No. 2 to Credit Agreement, dated December 23,
1998, among Lund International Holdings, Inc.,
Deflecta-Shield Corporation, Lund Industries,
Incorporated, Belmor Autotron Corp., DFM Corp., Lund
Acquisition Corp., BAC Acquisition Co., Trailmaster
Products, Inc., Delta III, Inc., Auto Ventshade Company,
New Holdings, Inc. Ventshade Holdings, Inc. and Heller
Financial, Inc.
10.4 Securities Purchase Agreement, dated December 23, 1998,
among Deflecta-Shield Corporation, Lund Industries,
Incorporated, Belmor Autotron Corp., DFM Corp. and Auto
Ventshade Company
10.5 Rights Agreement, dated December 22, 1998, with LIH
Holdings, LLC, LIH Holdings II, LLC, LIH Holdings III,
LLC, BancBoston Capital Inc., Liberty Mutual Insurance
Company, Massachusetts Mutual Life Insurance Company,
MassMutual Corporate Value Partners Limited, MassMutual
Corporate Investors, MassMutual Participation Investors
and National City Venture Corporation
10.6 Second Amended and Restated Governance Agreement, dated
December 22, 1998 among Lund International Holdings,
Inc., LIH Holdings, LLC, LIH Holdings II, LLC and LIH
Holdings III, LLC
10.7 Escrow Agreement, dated December 29, 1998, by and
between U.S. Bank Trust National Association and Lund
Industries, Incorporated
10.8 Cancellation and Discharge of Indenture and Termination
of Loan Agreement, dated December 29, 1998, executed and
issued by U.S. Bank Trust National Association
10.9 Form of Promissory Note issued pursuant to the
Securities Purchase Agreement
10.10 Form of Warrant issued pursuant to the Securities
Purchase Agreement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LUND INTERNATIONAL HOLDINGS, INC.
Date: January 6, 1999 By /s/ Ronald C. Fox
Ronald C. Fox
Its Chief Financial Officer
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EXHIBIT INDEX
10.1 Stock Purchase Agreement, dated December 11, 1998, by
and among Ventshade Holdings, Inc., the Persons listed
on Schedule A to the Agreement, Lund International
Holdings, Inc. and New Holdings, Inc.
10.2 Investment Agreement, dated December 22, 1998 (the
"Investment Agreement"), among LIH Holdings III, LLC,
Massachusetts Mutual Life Insurance Company, MassMutual
Corporate Investors, MassMutual Participation Investors,
MassMutual Corporate Value Partners Limited, Liberty
Mutual Insurance Company, BancBoston Capital Inc. and
Lund International Holdings, Inc.
10.3 Amendment No. 2 to Credit Agreement, dated December 23,
1998, among Lund International Holdings, Inc.,
Deflecta-Shield Corporation, Lund Industries,
Incorporated, Belmor Autotron Corp., DFM Corp., Lund
Acquisition Corp., BAC Acquisition Co., Trailmaster
Products, Inc., Delta III, Inc., Auto Ventshade Company,
New Holdings, Inc. Ventshade Holdings, Inc. and Heller
Financial, Inc.
10.4 Securities Purchase Agreement, dated December 23, 1998,
among Deflecta-Shield Corporation, Lund Industries,
Incorporated, Belmor Autotron Corp., DFM Corp. and Auto
Ventshade Company
10.5 Rights Agreement, dated December 22, 1998, with LIH
Holdings, LLC, LIH Holdings II, LLC, LIH Holdings III,
LLC, BancBoston Capital Inc., Liberty Mutual Insurance
Company, Massachusetts Mutual Life Insurance Company,
MassMutual Corporate Value Partners Limited, MassMutual
Corporate Investors, MassMutual Participation Investors
and National City Venture Corporation
10.6 Second Amended and Restated Governance Agreement, dated
December 22, 1998 among Lund International Holdings,
Inc., LIH Holdings, LLC, LIH Holdings II, LLC and LIH
Holdings III, LLC
10.7 Escrow Agreement, dated December 29, 1998, by and
between U.S. Bank Trust National Association and Lund
Industries, Incorporated
10.8 Cancellation and Discharge of Indenture and Termination
of Loan Agreement, dated December 29, 1998, executed and
issued by U.S. Bank Trust National Association
10.9 Form of Promissory Note issued pursuant to the
Securities Purchase Agreement
10.10 Form of Warrant issued pursuant to the Securities
Purchase Agreement
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
VENTSHADE HOLDINGS, INC.,
THE PERSONS LISTED ON SCHEDULE A HERETO,
LUND INTERNATIONAL HOLDINGS, INC., AND
NEW HOLDINGS, INC.
DATED AS OF DECEMBER 11, 1998
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TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE
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SECTION 1.1 Agreement to Sell and Purchase Capital Stock; Consideration............................... 1
SECTION 1.2 Redemption of Preferred Stock............................................................. 3
SECTION 1.3 Adjustments............................................................................... 3
SECTION 1.4 Closing................................................................................... 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS
SECTION 2.1 Title to Shares........................................................................... 5
SECTION 2.2 Due Authorization......................................................................... 6
SECTION 2.3 Consents and Approvals; Authority......................................................... 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1 Corporate Existence and Power; Capitalization; Subsidiaries............................... 6
SECTION 3.2 Due Authorization......................................................................... 7
SECTION 3.3 No Conflicts; Consents.................................................................... 8
SECTION 3.4 Charter Documents and Corporate Records................................................... 8
SECTION 3.5 Financial Information..................................................................... 8
SECTION 3.6 Liabilities............................................................................... 9
SECTION 3.7 Company Receivables....................................................................... 9
SECTION 3.8 Inventories............................................................................... 9
SECTION 3.9 Absence of Certain Changes................................................................ 9
SECTION 3.10 Properties; Title......................................................................... 11
SECTION 3.11 Contracts................................................................................. 12
SECTION 3.12 Intangible Property and Warranties........................................................ 12
SECTION 3.13 Claims and Proceedings.................................................................... 14
SECTION 3.14 Taxes..................................................................................... 14
SECTION 3.15 Employee Benefit Plans.................................................................... 18
SECTION 3.16 Employee-Related Matters.................................................................. 22
SECTION 3.17 Insurance................................................................................. 22
SECTION 3.18 Compliance with Laws...................................................................... 23
SECTION 3.19 Permits................................................................................... 23
SECTION 3.20 Environmental Matters..................................................................... 23
SECTION 3.21 Customers and Suppliers................................................................... 24
SECTION 3.22 Potential Conflicts of Interest........................................................... 25
SECTION 3.23 Finders' Fees............................................................................. 25
SECTION 3.24 Depositaries; Powers of Attorney, Etc..................................................... 25
SECTION 3.25 Y2K....................................................................................... 25
SECTION 3.26 Disclosure................................................................................ 25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT
AND PURCHASER
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SECTION 4.1 Authority Relative to This Agreement...................................................... 26
SECTION 4.2 No Conflicts; Consents.................................................................... 26
SECTION 4.3 Corporate Existence and Power............................................................. 27
SECTION 4.4 Finders' Fees............................................................................. 27
SECTION 4.5 Investment................................................................................ 27
SECTION 4.6 Equity Funding............................................................................ 27
SECTION 4.7 Tax Returns............................................................................... 27
SECTION 4.8 Disclaimer of Other Representations and Warranties;
Disclosure; Bring-Down.................................................................... 27
ARTICLE V COVENANTS AND AGREEMENTS PRIOR TO AND
SUBSEQUENT TO CLOSING
SECTION 5.1 Conduct of Business....................................................................... 28
SECTION 5.2 Corporate Examinations and Investigations................................................. 29
SECTION 5.3 Additional Financial Statements........................................................... 30
SECTION 5.4 Consents, Filings and Authorizations; Efforts to Consummate............................... 30
SECTION 5.5 Negotiations With Others.................................................................. 31
SECTION 5.6 Notices of Certain Events................................................................. 31
SECTION 5.7 Public Announcements...................................................................... 32
SECTION 5.8 Confidentiality........................................................................... 32
SECTION 5.9 Expenses.................................................................................. 34
SECTION 5.10 Supplements to Disclosure Schedules....................................................... 34
SECTION 5.11 HSR Act................................................................................... 34
SECTION 5.12 Further Assurances........................................................................ 34
SECTION 5.13 Tax Matters............................................................................... 35
ARTICLE VI CONDITIONS TO CLOSING
SECTION 6.1 Conditions to the Obligations of Sellers and Purchaser ................................... 35
SECTION 6.2 Conditions to the Obligations of Seller................................................... 35
SECTION 6.3 Conditions to the Obligations of Parent and Purchaser .................................... 36
ARTICLE VII TERMINATION
SECTION 7.1 Termination............................................................................... 39
SECTION 7.2 Effect of Termination; Right to Proceed................................................... 40
ARTICLE VIII INDEMNIFICATION
SECTION 8.1 Survival of Representations and Warranties ............................................... 41
SECTION 8.2 Obligation of Sellers to Indemnify........................................................ 41
SECTION 8.3 Obligation of Parent and Purchaser to Indemnify .......................................... 41
SECTION 8.4 Notice and Opportunity to Defend Third Party Claims ...................................... 41
SECTION 8.5 Limitation on Indemnification; Payment of Indemnification
Amounts................................................................................... 42
ARTICLE IX MISCELLANEOUS
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SECTION 9.1 Notices................................................................................... 44
SECTION 9.2 Entire Agreement.......................................................................... 45
SECTION 9.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies.................................................................. 45
SECTION 9.4 Governing Law............................................................................. 46
SECTION 9.5 Consent to Jurisdiction and Service of Process;
Waiver of Jury Trial...................................................................... 46
SECTION 9.6 Binding Effect; No Assignment............................................................. 47
SECTION 9.7 Exhibits.................................................................................. 47
SECTION 9.8 Severability.............................................................................. 47
SECTION 9.9 Counterparts.............................................................................. 47
ARTICLE X DEFINITIONS
SECTION 10.1 Definitions.............................................................................. 47
SECTION 10.2 Interpretation........................................................................... 54
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EXHIBITS
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Opinion of Counsel to Parent and Purchaser
Exhibit C - Nondisclosure and Nonsolicitation Agreement
Exhibit D - Form of Nonforeign Certificate
Exhibit E - Form of Release Agreement
Exhibit F - Form of Opinion of Counsel to Seller
Exhibit G - Form of Consent to Assignment and Estoppel Certificate
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STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of December 11, 1998, by and among VENTSHADE
HOLDINGS, INC., a Delaware corporation (the "Company"), THE PERSONS LISTED ON
SCHEDULE A HERETO (each, a "Seller", and collectively, "Sellers"), LUND
INTERNATIONAL HOLDINGS, INC., a Delaware corporation ("Parent"), and NEW
HOLDINGS, INC., a Delaware corporation ("Purchaser").
R E C I T A L S
1. The Company and its only subsidiary, Auto Ventshade Company, a
Delaware corporation (the "Subsidiary"), are in the business of manufacturing
and selling various consumer products in the automobile and light truck
accessory markets to automobile manufacturers and local, national and
international distributors and retailers (collectively, the "Business").
2. 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 100% of the issued and outstanding capital stock of the
Company (the "Acquisition").
3. In furtherance of the consummation of the Acquisition and the other
transactions contemplated hereby (the "Other Contemplated Transactions"), the
parties hereto desire to enter into this Agreement (certain capitalized terms
used herein have the respective meanings set forth in Article X).
NOW, THEREFORE, in consideration of the premises 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 CAPITAL STOCK;
CONSIDERATION. (a) Subject to the terms and conditions of this Agreement, at the
Closing each Seller shall sell, assign, convey, transfer and deliver to
Purchaser, and Purchaser shall purchase, acquire and take assignment and
delivery of, all of each such Seller's right, title and interest in and to those
shares set forth opposite the name of each such Seller on Schedule A
(collectively, the "Purchased Shares"). The parties hereto agree that the
aggregate purchase price to be paid at Closing by Purchaser in consideration of
the Purchased Shares will be equal to (i) $66,875,000 less (ii) the sum of the
amounts specified in paragraph (b) below (the "Purchase Price").
Purchaser shall pay the Purchase Price as follows:
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(i) at the Closing, $3,000,000 (the "Escrowed Funds") into an
escrow account (the "Escrow") for the purpose of securing Sellers'
indemnification obligations pursuant to Article VIII, with such $3,000,000 to be
paid in accordance with the terms of an escrow agreement (the "Escrow
Agreement") in substantially the form and to the effect of Exhibit A;
(ii) at the Closing, an amount equal to the difference between
(A) the Purchase Price and (B) the sum of the Escrow Funds and the $875,000
described in paragraph (iii) below (the "Net Purchase Price") by wire transfer
to the Representative; and
(iii) $875,000 by wire transfer to the Representative not
later than 90 days after the Closing Date; provided, however, that if, prior to
90 days after the Closing Date, the Company shall have received a federal income
tax refund primarily as a result of the payment of the Sale Bonus and the
Phillips 1994 Employment Agreement Termination Payment, then Purchaser shall pay
to the Representative the amount of such refund up to $875,000 within one (1)
business day after the receipt thereof. The parties hereto acknowledge and agree
that if such refund shall be less than $875,000, then such deficiency shall be
paid by Purchaser not later than 91 days after the Closing Date. The Company
shall specify in the IRS Form 4466 requesting such refund that such refund be
remitted to the Escrow Agent (as defined in the Escrow Agreement).
(b) In addition, at the Closing, Purchaser shall cause the Company to
pay, or shall pay on behalf of the Company, the following amounts:
(i) all principal of, interest on, premium, if any, expenses
and other amounts owing to the senior lenders under the Credit Agreement as such
amounts are set forth in the pay-off and discharge letter by such lenders and
delivered to the Company and Purchaser at the Closing (the "Senior Lender
Pay-Off Letter");
(ii) all principal of, interest on, premium, if any, expenses
and other amounts owing to JZ in respect of the JZ Purchase Agreement as such
amounts are set forth in the pay-off and discharge letter by JZ and delivered to
the Company and Purchaser at the Closing (the "JZ Pay-Off Letter");
(iii) all principal of, interest on, premium, if any, expenses
and other amounts owing with respect to interest-bearing indebtedness of the
Company and the Subsidiary (other than as set forth in items (i) and (ii) above)
as such amounts are set forth in pay-off and discharge letters delivered to the
Company and Purchaser at the Closing;
(iv) the redemption price, including all accrued and unpaid
dividends through the Closing Date, in respect of the Company's Preferred Stock
as such amounts are set forth in the pay-off and discharge letters by the
holders of the Company's Preferred Stock and delivered to the Company and
Purchaser at the Closing (the "Preferred Stock Pay-Off Letters");
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(v) (A) all accrued and unpaid management and consulting fees
and expenses under the TJC Consulting Agreement, and (B) all transaction fees
and expenses payable to The Jordan Company LLC in connection with investment
banking and financial advisory fees under the TJC Consulting Agreement with
respect to this Agreement, the Acquisition and the Other Contemplated
Transactions as such amounts are set forth in the payoff and discharge letter by
TJC Management Corporation and delivered to the Company and Purchaser at the
Closing (the "TJC Pay-Off Letter");
(vi) transaction fees and expenses incurred or payable by or
on behalf of the Company and the Subsidiary in connection with this Agreement,
the Acquisition and the Other Contemplated Transactions, including those of
Bowles Hollowell Conner & Co. set forth in a pay-off and discharge letter
delivered to the Company and Purchaser (the "BHC Pay-Off Letter") and of all
attorneys, accountants, actuaries, consultants, experts or other professionals,
if any, engaged by or on behalf of the Company and the Subsidiary in connection
with this Agreement and the Other Contemplated Transactions;
(vii) the Sale Bonus;
(viii) the Phillips 1994 Employment Agreement Termination
Payment; and
(ix) any Taxes (federal, state, local or foreign) required to
be withheld or paid by the Company with respect to any of the payments set forth
in Sections 1.1(b)(iv), (vii) and (viii).
(c) At the Closing, the Representative shall pay to each Seller such
Seller's Ownership Percentage of the Net Purchase Price. The Representative will
deliver to Sellers a certificate setting forth (i) the Net Purchase Price and
(ii) each of the amounts paid to Sellers pursuant to the preceding sentence.
SECTION 1.2 REDEMPTION OF PREFERRED STOCK. (a) At the Closing, the
Company will redeem in full the Nonvoting Preferred Stock and Special Voting
Preferred Stock, and each Seller who is a holder of such Preferred Stock shall,
in connection with its redemption in full, deliver to the Company the stock
certificates evidencing its Preferred Stock, and the Company shall cancel such
stock certificates upon such redemption in full. Each Seller who is a holder of
Nonvoting Preferred Stock or Special Voting Preferred Stock agrees that such
redemption, including the concurrent payment of all accrued and unpaid dividends
through the Closing Date, constitutes full performance of all obligations of the
Company in respect of the Nonvoting Preferred Stock and Special Voting Preferred
Stock.
(b) For purposes of this Agreement, the number of Purchased Shares held
by each Seller and the Ownership Percentage of each Seller shall assume the
consummation of the redemption of all Preferred Stock contemplated by this
Section 1.2.
SECTION 1.3 ADJUSTMENTS. (a) The Purchase Price will be subject to
adjustment as provided in this Section 1.3. The Company's Working Capital as of
the Closing Date will be
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calculated based on the Audited Balance Sheet as hereinafter defined. The
Purchase Price shall be decreased by the amount by which Working Capital as so
calculated is less than $11,167,231 (the "Working Capital Decrease Amount") or
increased by the amount by which Working Capital as so calculated is greater
than $12,167,231 (the "Working Capital Increase Amount"). For purposes hereof,
"Working Capital" means the amount equal to (i) the Company's current assets
(excluding cash and cash equivalents) less (ii) the Company's current
liabilities (excluding (x) all Company Debt, amounts due under the TJC
Consulting Agreement and all other amounts due under Section 1.1(b) to the
extent such amounts would be included in current liabilities, (y) accrued income
taxes and (z) liabilities arising as a result of the matters set forth in
Section 3.9(i) of the Company Letter and the third paragraph of Section 3.12(b)
of the Company Letter), with the foregoing items (i) and (ii) to be determined
in accordance with GAAP, consistently applied. Included in Section 1.3 of the
Company Letter is an example of the Working Capital calculation based upon the
Company's balance sheet as of November 30, 1998, which Working Capital was
$11,667,231. The Purchase Price also shall be increased by the amount of cash or
cash equivalents, if any, less the amount of overdrafts, if any, each as
included on the Audited Balance Sheet (the "Cash Increase Amount"); provided,
however, that if the amount of overdrafts, if any, exceeds the amount of cash
and cash equivalents, then Sellers shall pay the amount of such excess (the
"Cash Decrease Amount") to Purchaser.
(b) (i) As soon as practicable after the Closing Date, Purchaser will
cause PricewaterhouseCoopers LLP, independent accountants, to prepare an audited
balance sheet of the Company as of the Closing Date, prepared on a pro forma
basis after giving effect to the Acquisition and the Other Contemplated
Transactions (the "Audited Balance Sheet"). The Audited Balance Sheet will be
prepared in accordance with GAAP consistently applied and, among other things,
shall set forth (i) the Working Capital as of its date, and (ii) the Working
Capital Decrease Amount, Working Capital Increase Amount, Cash Decrease Amount
or Cash Increase Amount, if any. The costs and expenses incurred in connection
with preparation of the Audited Balance Sheet shall be borne by Purchaser.
Purchaser shall use commercially reasonable efforts to cause the completion of
the Audited Balance Sheet and to deliver the Audited Balance Sheet to the
Representative within sixty (60) days of the Closing Date.
(ii) Within thirty (30) days after receipt of the Audited
Balance Sheet, the Representative shall deliver a written notice (the "Objection
Notice") to Purchaser stating whether Sellers have any objections to the Audited
Balance Sheet, describing in detail any objections thereto. Sellers hereby agree
to work diligently with, and to cause the Representative to work diligently
with, Parent and Purchaser to resolve any such objections. The failure by the
Representative to give the Objection Notice (or written notification from
Representative that it has no objection to the Audited Balance Sheet) shall
constitute acceptance and approval of the Audited Balance Sheet and the proposed
adjustments to the Purchase Price set forth therein, if any, and shall be final
and binding upon the parties hereto.
(iii) The parties hereto shall promptly consult with each
other and their respective Agents with respect to any objections by
Representative pursuant to the Objection Notice and shall use reasonable efforts
to resolve all such objections within thirty
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(30) days after delivery by Representative of the Objection Notice. If any
objections remain unresolved after the end of such 30-day period, the parties
hereto promptly shall retain (or one of them if the others fail to jointly
retain after a written notice) Arthur Andersen LLP (the "Resolving Accounting
Firm") to resolve any remaining disputes concerning the Audited Balance Sheet.
The parties hereto, and their respective Agents, shall cooperate fully with the
Resolving Accounting Firm. The parties hereto shall give, and shall cause their
respective Agents to give, the Resolving Accounting Firm and its Agents such
reasonable assistance and access to the Assets and books and records of the
Company, and any applicable work papers, schedules and other documents, as the
Resolving Accounting Firm reasonably shall request. The Resolving Accounting
Firm shall be directed to resolve all disputes within thirty (30) calendar days
after being retained by the parties hereto, and a resolution of the Resolving
Accounting Firm shall be final and binding on the parties hereto. Fees and
expenses of the Resolving Accounting Firm shall be paid one-half by Purchaser
and one-half by Sellers and shall be payable upon completion of the Resolving
Accounting Firm's work. For purposes of this Section 1.3, the Audited Balance
Sheet shall be deemed to be the statement finally determined after all disputes
have been resolved as provided herein.
(iv) To the extent there is a Working Capital Decrease Amount,
a Working Capital Increase Amount, a Cash Decrease Amount or a Cash Increase
Amount in accordance with the provisions of Section 1.3(c)(iii), then such
adjustments shall be paid within three (3) days after resolution of all disputes
relating to the Audited Balance Sheet pursuant to Section 1.3(d), (i) in the
case of a Working Capital Increase Amount or a Cash Increase Amount, by Parent
by wire transfer to such account as the Representative may designate, (ii) in
the case of a Working Capital Decrease Amount, by Sellers by wire transfer from
the Escrowed Funds to such account as Parent or Purchaser may designate, and
(iii) in the case of a Cash Decrease Amount by Sellers by wire transfer to such
account as Parent or Purchaser may designate.
SECTION 1.4 CLOSING. The closing (the "Closing") of the Acquisition and
the Other Contemplated Transactions shall take place at the offices of Thelen
Reid & Priest LLP, New York, New York, 40 West 57th Street, New York, New York
10019, at 10:00AM, local time, on December 22, 1998, or at such other time or
place as the parties hereto shall agree, but no later than January 15, 1999. The
date of the Closing is hereinafter called the "Closing Date."
The parties hereto hereby agree to deliver at the Closing such documents,
certificates of officers and such other instruments as are specified in Article
VI hereof and as reasonably may be required to effect the transfer by Sellers of
the Purchased Shares pursuant to and as contemplated by this Agreement and to
consummate the Acquisition and the Other Contemplated Transactions. All events
which shall occur at the Closing shall be deemed to occur simultaneously.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller (severally and on behalf of himself, herself or itself
only) hereby represents and warrants to Parent and Purchaser, as of the date
hereof and as of the Closing Date (as if
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each such representation and warranty was remade on the Closing Date), that as
to such Seller, except as set forth in Section 2 of the Company Letter:
SECTION 2.1 TITLE TO SHARES. (a) The shares of Common Stock and
Preferred Stock, respectively, as set forth opposite each Person's name on
Schedule A and Schedule B are owned respectively by such Person, free and clear
of any and all Liens (other than restrictions on transfer arising under
applicable securities law) and, immediately prior to the Closing, will be owned
respectively by such Person, free and clear of any and all Liens (other than
restrictions on transfer arising under applicable securities law). In the
aggregate, the Persons listed on Schedule A and Schedule B are and, immediately
prior to the Closing, will be the holders of record of all of the outstanding
capital stock of the Company.
(b) There are no options, warrants, rights, convertible securities or
other agreements or commitments obligating such Seller, with respect to the
shares of capital stock of the Company owned by such Seller, to transfer or
sell, or cause the issuance, transfer or sale of, any shares of capital stock of
the Company.
SECTION 2.2 DUE AUTHORIZATION. Each Seller has duly and validly
executed and delivered this Agreement and has duly and validly executed and
delivered (or prior to or at the Closing will duly and validly execute and
deliver) the other Transaction Documents to which it is a party. This Agreement
constitutes the legal, valid and binding obligation of each Seller and the other
Transaction Documents of such Seller, upon execution and delivery by or on
behalf of such Seller (including by the Representative pursuant to the
Representative Agreement), will constitute legal, valid and binding obligations
of such Seller, in each case, enforceable against such Seller in accordance with
their respective terms, except as such obligations and their enforceability may
be limited by applicable bankruptcy and other similar Laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies is subject to the discretion of the court before which any
proceeding therefor may be brought (whether at law or in equity).
SECTION 2.3 CONSENTS AND APPROVALS; AUTHORITY. Except for filings under
the HSR Act, the execution, delivery and performance by such Seller of this
Agreement and the respective other Transaction Documents to which such Seller is
a party will not (a) violate or conflict with any Law or Order of any
Governmental Body against, or binding upon, such Seller, (b) require any filing
or registration by such Seller with, or consent or approval with respect to such
Seller of, any Governmental Body, or (c) violate or conflict with or result in a
breach or default under any Contract to which such Seller is a party or by which
any of such Seller's Assets or properties are bound.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and 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), that:
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SECTION 3.1 CORPORATE EXISTENCE AND POWER; CAPITALIZATION; SUBSIDIARIES.
(a) The Company and the Subsidiary each is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite power and all material Permits required to own, lease and operate
its respective properties and to conduct the Business as currently conducted.
Except in any such jurisdiction where failure to so qualify would not have a
Material Adverse Effect, the Company and the Subsidiary each is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary, which jurisdictions
are listed in Section 3.1 of the Company Letter.
(b) The entire authorized capital stock of the Company consists of (A)
400,000 shares of Common Stock, $1.00 par value per share (the "Common Stock"),
consisting of (i) 200,000 shares of Class A Common Stock ("Class A Common
Stock") and (ii) 200,000 shares of Class B Common Stock ("Class B Common
Stock"), and (B) 10,001 shares of Preferred Stock, par value $.01 per share,
consisting of (i) 10,000 shares of Nonvoting Preferred Stock ("Nonvoting
Preferred Stock") and (ii) one share of Special Voting Preferred Stock ("Special
Voting Preferred Stock"). Of such authorized shares, (A) (i) 54,000 shares of
Class A Common Stock are issued and outstanding and (ii) 45,000 shares of Class
B Common Stock are issued and outstanding, (B) (i) 2,150 shares of Nonvoting
Preferred Stock are issued and outstanding and (ii) one share of Special Voting
Preferred Stock is issued and outstanding. All of the outstanding shares of the
Company's capital stock are validly issued, fully paid and nonassessable, and no
shares were issued in violation of the preemptive rights of any stockholder. At
the Closing, the aggregate number of Purchased Shares shall represent all of the
outstanding shares of the Company's capital stock. The entire authorized capital
stock of the Subsidiary consists of 10,000 shares of Common Stock, $1.00 par
value per share, of which 1,000 shares are issued and outstanding. All
outstanding shares of the Subsidiary are owned by the Company, free and clear of
any and all Liens and are validly issued, fully paid and nonassessable.
(c) Except as set forth in Section 3.1 of the Company Letter, there are
no options, warrants, rights, convertible securities or other agreements or
commitments obligating any Seller, the Company or the Subsidiary to issue,
transfer or sell, or cause the issuance, transfer or sale of, any shares of
capital stock of the Company or the Subsidiary or to make any payments in
respect of the value of any shares of the Company or the Subsidiary.
(d) Except for the Subsidiary, the Company has not owned and does not
own any subsidiaries and does not directly or indirectly own any interest or
investment in any other Person.
SECTION 3.2 DUE AUTHORIZATION. The Company has full power, capacity and
authority to execute and deliver this Agreement and each other Transaction
Document to which it is a party and to consummate the Acquisition and the Other
Contemplated Transactions. No other proceedings on the part of the Company (or
any other Person) are necessary to authorize the execution and delivery by or on
behalf of the Company of this Agreement or the other
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Transaction Documents to which it is a party or the consummation of the
Acquisition and the Other Contemplated Transactions. This Agreement and each
other Transaction Document to which the Company is a party has been duly and
validly executed and delivered by the Company, and (assuming the valid execution
and delivery thereof by the other parties thereto) constitutes the legal, valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as such obligations and their enforceability
may be limited by applicable bankruptcy and other similar Laws (as defined
herein) affecting the enforcement of creditors' rights generally and except that
the availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought (whether at law or in
equity).
SECTION 3.3 NO CONFLICTS; CONSENTS. Except as set forth in Section 3.3
of the Company Letter (the "Company Required Consents") and, with respect to
(ii), (iii), (iv) and (v) below, as would not have a Material Adverse Effect,
neither the execution, delivery and performance by the Company of this Agreement
and each other Transaction Document to which it is a party, nor the consummation
of the Acquisition and the Other Contemplated Transactions, (i) violates any
provision of the Certificate of Incorporation or by-laws (or comparable
instruments) of the Company or the Subsidiary; (ii) requires the Company or the
Subsidiary to obtain any consent, approval, Permit or action of or waiver from,
or make any filing with, or give any notice to, any Governmental Body or any
other Person; (iii) violates, conflicts with or results in a breach or default
under (after the giving of notice or the passage of time or both), or permits
the termination of, any Contract, right, other obligation or restriction
relating to or which affects the Purchased Shares or the Company or the
Subsidiary to which the Company or the Subsidiary is a party or by which either
of them or its Assets or the Business may be bound or subject, or results in the
creation of any Lien upon the Purchased Shares or upon any of the Assets of the
Company or the Subsidiary pursuant to the terms of any such Contract; (iv)
violates or conflicts with any Law or Order of any Governmental Body against, or
binding upon, the Company or the Subsidiary or upon their respective Assets or
the Business or the Purchased Shares; or (v) violates or results in the
revocation or suspension of any Permit.
SECTION 3.4 CHARTER DOCUMENTS AND CORPORATE RECORDS. (a) The Company has
heretofore delivered to Purchaser true and complete copies of the Certificate of
Incorporation and by-laws (or comparable instruments) of the Company and the
Subsidiary, as in effect on the date hereof. The stock and transfer books (or
comparable documents) of the Company and the Subsidiary have been made available
to Purchaser for its inspection and are true and complete. The Company has
heretofore delivered to Purchaser true and complete copies of the minutes of
meetings (or written consents in lieu of meetings) of the board of directors
(and all committees thereof) and shareholders of the Company and the Subsidiary.
(b) All financial, business and accounting books, ledgers, accounts and
other official records relating to the Company, the Subsidiary and the Business
have been properly and accurately kept and completed in all material respects,
and there are no material inaccuracies or discrepancies contained or reflected
therein.
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SECTION 3.5 FINANCIAL INFORMATION. The Company has previously furnished
to Purchaser true and complete copies of (i) the Company's audited, consolidated
financial statements at and for the years ended December 31, 1997, 1996 and 1995
(the "Annual Statements"), (ii) the Company's unaudited financial statements for
the nine (9) months ended September 30, 1998 (the "Interim Statements"), and
(iii) all management letters, audit letters and attorney audit response letters
issued in connection with the Annual Statements. The Annual Statements have been
prepared in accordance with GAAP consistently applied as set forth in the notes
thereto and were audited by Ernst & Young LLP, the Company's independent
accountants. Each of the Annual and Interim Statements presents fairly, in all
material respects, the consolidated financial position of the Company and the
Subsidiary as of its date, and its earnings and cash flows for the periods then
ended, except that there is not any statement of cash flows for the Interim
Statements. Each balance sheet contained in the Annual Statements fully sets
forth on a consolidated basis all Assets and Liabilities of the Company and the
Subsidiary existing as of its date which, under GAAP, should be set forth
therein, and each statement of earnings contained therein sets forth the items
of income and expense of the Company and the Subsidiary which should appear
therein under GAAP. The Interim Statements have been prepared in accordance with
GAAP (except that notes have not been included) in a manner consistent with the
Company's past practices and present fairly, in all material respects, the
consolidated financial position of the Company and the Subsidiary as of its date
and results of operations for the period then ended, subject to normal year-end
adjustments and accruals.
SECTION 3.6 LIABILITIES. Except as described in Section 3.6 of the
Company Letter and as and to the extent reflected in the Interim Statements at
September 30, 1998 (the "Latest Balance Sheet Date"), the Company and the
Subsidiary did not have, as of the Latest Balance Sheet Date, any Liabilities
(other than obligations of continued performance under Contracts and other
commitments and arrangements entered into in the ordinary course of the
Business); and except as described in Section 3.6 of the Company Letter, the
Company and the Subsidiary have not incurred any Liabilities since the Latest
Balance Sheet Date, except (i) current Liabilities for trade or business
obligations incurred in the ordinary course of the Business and consistent with
past practice, (ii) Liabilities in respect of borrowings under the Company Debt,
(iii) Liabilities in respect of this Agreement, (iv) Liabilities that are
otherwise disclosed pursuant to any other representation herein and (v) any
other Liability which would not have a Material Adverse Effect. Section 3.6 of
the Company Letter contains a true and correct list of all Company Debt as of
the date hereof.
SECTION 3.7 COMPANY RECEIVABLES. Except to the extent of the amount of
the reserve for doubtful accounts reflected in the Interim Statements or as set
forth in Section 3.7 of the Company Letter, all the Receivables of the Company
and the Subsidiary reflected in the Interim Statements and all Receivables that
have arisen since the Last Balance Sheet Date (except Receivables that have been
collected since such date) are valid and enforceable claims, and constitute bona
fide Receivables resulting from the sale of goods and services in the ordinary
course of the Business. There are no notes receivable or sales representative
advances of either the Company or the Subsidiary except as have been issued or
incurred in the ordinary course of business consistent with past practice or for
less than $25,000 in the aggregate.
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SECTION 3.8 INVENTORIES. All Inventory is free and clear of all Liens,
except for the Liens described in Section 3.8 of the Company Letter.
SECTION 3.9 ABSENCE OF CERTAIN CHANGES. Since the Latest Balance Sheet
Date, except as set forth in this Agreement or disclosed in Section 3.9 of, or
elsewhere in, the Company Letter, the Company and the Subsidiary have conducted
the Business in the ordinary course consistent with past practices and there has
not been:
(a) Except for (i) material changes in general economic or industry
conditions, (ii) matters directly resulting from the conduct of Purchaser or
Parent in connection with this Agreement, or (iii) through direct competition of
Parent or Purchaser, any change in the Business, the Assets of the Company or
the Subsidiary, or the financial condition or the results of operations of the
Company or the Subsidiary (collectively, the "Condition of the Business") which
would have a Material Adverse Effect, or, to the knowledge of the Company, any
event, occurrence or circumstance that would have a Material Adverse Effect;
(b) Any transaction or Contract involving a total commitment by or to
the Company or the Subsidiary of at least $100,000 or, together with all other
such transactions or contracts, $500,000 in the aggregate with respect to the
purchase, acquisition, lease, disposition or transfer of any Assets or any
capital expenditure (in each case, other than in the ordinary course of the
Business) or creation of any Lien on any Asset;
(c) Any declaration, setting aside or payment of any dividend, other
than a regularly scheduled dividend payment on the Preferred Stock in accordance
with its terms, or other distribution with respect to any interest in the
Company;
(d) Any damage, destruction or other casualty loss (whether or not
covered by insurance), condemnation or other taking of the Assets of the Company
or the Subsidiary with a book value exceeding, in the aggregate, $100,000;
(e) Any change in any method of accounting or accounting practice by
the Company;
(f) Other than in the ordinary course of the Business with respect to
employees of the Company or the Subsidiary whose annual compensation is more
than $100,000, any increase in the compensation payable or to become payable to
any officer, shareholder, director, sales representative or employee of the
Company or the Subsidiary, or any material alteration in the benefits payable to
any thereof;
(g) Except for (i) material changes in general economic or industry
conditions, (ii) matters directly resulting from the conduct of Purchaser or
Parent in connection with this Agreement, or (iii) through direct competition of
Parent or Purchaser, since the Latest Balance Sheet Date, (A) no customer which
accounted for more than $1,125,000 in Company and Subsidiary consolidated net
sales included in the Interim Statements has threatened in writing or, to the
knowledge of the Company, orally to cancel or
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terminate its relationship with the Company or the Subsidiary or to decrease
such customer's annual purchases from the Company and the Subsidiary, on
consolidated basis, by an amount equal to the lesser of (i) $2,500,000 and (ii)
50% of the Company's and Subsidiary's consolidated net sales attributed to such
customer in the Interim Statements, and (B) no supplier from which the Company
and the Subsidiary, in the aggregate, purchased more than $399,000 in goods
included in costs of goods sold in the Interim Statements has threatened in
writing or, to the knowledge of the Company, orally to cancel or terminate its
relationship with the Company or the Subsidiary or to cause the decrease in such
annual purchases by an amount equal to 50% of purchases by the Company and the
Subsidiary from such supplier included in costs of goods sold in the Interim
Statements.
(h) Except for any changes made in the ordinary course of the Business,
any change in any of the Company's or the Subsidiary's business policies,
including advertising, marketing, pricing, purchasing, personnel, returns or
budget policies which would have a Material Adverse Effect;
(i) Any material modification, termination, amendment or other
alteration or change in the terms or provisions of any Contract.
SECTION 3.10 PROPERTIES; TITLE. (a) Neither the Company nor the Subsidiary
owns any real property. Section 3.10A of the Company Letter is a correct and
complete list of all leases under which the Company or the Subsidiary is a
lessee (the "Leased Property"), true and complete copies of which have been
delivered to the Purchaser. The Company and the Subsidiary enjoy peaceful and
undisturbed possession under all such leases, all of such leases are valid,
neither the Company nor the Subsidiary is in default under any such lease and
neither of them has received notice of any increase in rent or other charges or
any proposed material modification of any such lease. The Company or the
Subsidiary, as the case may be, has good, marketable and insurable leasehold
title to the Leased Property, free and clear of all Liens and other title
defects of any nature whatsoever, except real estate Taxes (general and
specific) not yet due and payable, restrictions imposed by zoning ordinances,
Liens with respect to Company Debt, or as disclosed in Section 3.10A of the
Company Letter. Section 3.10A of the Company Letter also sets forth with respect
to such Leased Property a list of all title insurance policies, deeds, appraisal
reports, surveys and environmental reports held or controlled by the Company,
true and complete copies of which have been provided to Purchaser.
(b) To the knowledge of the Company, all structures and
buildings of the Business are in good operating condition (subject to normal
wear and tear) with no structural or other defects that could interfere with the
operation of the Business, are located within applicable boundary lines and are
suitable for the purposes for which they are currently used. The Business is not
in violation of any building, zoning, anti-pollution, health, occupational
safety or other Law or any Order or Permit in respect of such Leased Property,
structures and buildings. Except as disclosed in Section 3.10B of the Company
Letter, no Person, other than the Company or the Subsidiary, has any right to
occupy or possess any of the Leased Property or any such structures or
buildings.
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(c) Except as disclosed in Schedule 3.10C of the Company Letter, or as
reflected on the Interim Statements, the Company or the Subsidiary has good,
valid, marketable, legal and beneficial title to (or valid leasehold interest
in) all of its Assets and is the lawful owner of its Assets, free and clear of
all Liens. The machinery, equipment and other tangible personal property
constituting part of the Company's and the Subsidiary's Assets (whether owned or
leased) have been maintained in a commercially reasonable manner, are in good
condition and repair (subject to normal wear and tear). There are no outstanding
options, warrants, commitments, agreements or any other rights of any character,
entitling any Person other than Purchaser to acquire any interest in all, or any
part of, the Assets, except for purchase orders outstanding on the Closing Date
entitling customers to purchase items of Inventory in accordance with the terms
of the respective Contracts. Section 3.10C of the Company Letter contains a list
and description of all (i) equipment, and (ii) other tangible personal property
of the Company or the Subsidiary with a book value (before depreciation) of
$100,000 or more, in each case, excluding Inventory.
SECTION 3.11 CONTRACTS. Section 3.11 of the Company Letter sets forth (i)
an accurate and complete list of all written Contracts and (ii) an accurate and
complete description of all oral Contracts relating to the Purchased Shares, the
Business, the Company or the Subsidiary, in each case involving $100,000 or more
in any year. All such Contracts are valid, in full force and effect and binding
upon the Company or the Subsidiary and, to the knowledge of the Company, the
other parties thereto in accordance with their terms. Neither the Company nor
the Subsidiary is in material default (or alleged default) under any such
Contract, nor, to the knowledge of the Company, is any other party thereto in
material default thereunder, nor does any condition exist that with notice or
the lapse of time or both would constitute a material default (or give rise to a
termination right) thereunder. Neither the Company nor the Subsidiary has
received notice with respect to the termination or alteration of the provisions
thereof by reason of the Acquisition and the Other Contemplated Transactions or
otherwise. Since the Latest Balance Sheet Date, except as set forth in Section
3.11 of the Company Letter, neither the Company nor the Subsidiary has waived
any material right under any such Contract, amended or extended any such
Contract or failed to renew (or received notice of termination or failure to
renew with respect to) any such Contract. Section 3.11 of the Company Letter
also lists all sales representatives of the Company and the Subsidiary. The
Company has heretofore delivered to Purchaser true, correct and complete copies
of all of the written Contracts, in each case involving payments in any year in
excess of $100,000.
SECTION 3.12 INTANGIBLE PROPERTY AND WARRANTIES. (a) Section 3.12 of the
Company Letter sets forth a true, correct and complete list of all registered
trademarks, registered copyrights, registered service marks or registered trade
names (and all applications for any of the foregoing), Permits, license
agreements, grants and licenses running to or from, or used by, the Company or
the Subsidiary in the conduct of the Business, and there are no other material
trademarks, material copyrights, material service marks, material trade names or
other material intangible assets, properties or rights that are used in the
Business (the "Intellectual Property Rights").
(b) Except as disclosed in Section 3.12 of, or elsewhere in, the
Company Letter or for amounts which do not exceed reserves in the unaudited
consolidated financial
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statements of the Company for the month ended November 30, 1998, which financial
statements have been provided to Parent and Purchaser prior to the date hereof:
(i) the Company owns the entire United States right, title and
interest in and to the Intellectual Property Rights;
(ii) the Company has no knowledge that the Intellectual
Property Rights are either invalid or unenforceable;
(iii) the Company has no knowledge that the Company's business
activities, presently and during the past six months, including its manufacture
and sales of its consumer products in the Business and/or its use of the
Intellectual Property Rights, has infringed or conflicts with, does infringe or
conflict with, or will infringe or conflict with patent or any other
intellectual property rights of any third party;
(iv) the Company has no knowledge that any design,
manufacturing process or product which has been manufactured and/or sold by the
Company or the Subsidiary, includes any defect, or could result in any product
liability claim, or, except for (x) material changes in general economic or
industry conditions, (y) matters directly resulting from the conduct of
Purchaser or Parent in connection with this Agreement or (z) through direct
competition of Purchaser or Parent, could result in any recall or required
repair or replacement, or any significant credit or refund related to such
defect or product liability claim, other than in the ordinary course of
business, consistent with past practice;
(v) the Company has no knowledge that there has been any
notice that any design, manufacturing process, or product which has been
manufactured and/or sold by the Company or the Subsidiary includes any defect,
or could result in any product liability claim, or, except for (x) material
changes in general economic or industry conditions, (y) matters directly
resulting from the conduct of Purchaser or Parent in connection with this
Agreement or (z) through direct competition of Purchaser or Parent, could result
in any recall or required repair or replacement, or any significant credit or
refund, from any supplier or other third party;
(vi) the Company has no knowledge that there has been any
product liability, product defect or other liability claims or suits associated
with any product manufactured or sold by the Company or the Subsidiary (other
than the Litigation);
(vii) except for (x) material changes in general economic or
industry conditions, (y) matters directly resulting from the conduct of
Purchaser or Parent in connection with this Agreement or (z) through direct
competition of Purchaser or Parent, the Company has no knowledge that there has
been any contemplation by the Company or the Subsidiary to accept for return or
replacement any products previously sold by the Company or the Subsidiary other
than returns or replacements in the ordinary course of business consistent with
past practice;
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(viii) except for (x) material changes in general economic or
industry conditions, (y) matters directly resulting from the conduct of
Purchaser or Parent in connection with this Agreement or (z) through direct
competition of Purchaser or Parent, the Company has no knowledge that any
products sold by the Company or the Subsidiary have been the subject of any
recall or request for recall by a third party in the past;
(ix) the Company has no knowledge that there has been any
claim by a third party that the Company or the Subsidiary has violated any
express or implied warranty with respect to any product manufactured or sold by
the Company or the Subsidiary;
(x) no license or royalty to which the Company or the
Subsidiary is a party is or has been in material breach or default by any party
thereto or has been or is the subject of any notice of termination given or
threatened;
(xi) neither the Company nor the Subsidiary has ever granted
any license or permission to any third party to utilize the Intellectual
Property Rights; and
(xii) the Acquisition and the Other Contemplated Transactions
will not adversely affect any right of Purchaser to enjoy as owner all of the
Intellectual Property Rights in the same manner thereof as if Purchaser were
Sellers.
SECTION 3.13 CLAIMS AND PROCEEDINGS. Except as set forth in Section 3.13 of
the Company Letter, there are no outstanding Orders of any Governmental Body
against or directly involving by name the Company or the Subsidiary, the Assets
of the Company or the Subsidiary, or the Business. Except as set forth in
Section 3.13 of the Company Letter, there are no actions, suits, asserted claims
or counterclaims or legal, administrative or arbitral proceedings or, to the
Company's knowledge, investigations (collectively, "Claims") (whether or not the
defense thereof or Liabilities in respect thereof are covered by insurance),
pending or, to the knowledge of the Company, threatened on the date hereof,
against or involving the Company, the Subsidiary, the Purchased Shares, the
Assets or the Business. Section 3.13 of the Company Letter also indicates those
Claims the defense thereof or Liabilities in respect thereof are covered by
insurance. Except as set forth on Section 3.13 of the Company Letter, on the
date hereof there are no Claims pending or, to the knowledge of the Company,
threatened, other than Claims that would not have a Material Adverse Effect. All
notices required to have been given to any insurance company listed as insuring
against any Claim set forth in Section 3.13 of the Company Letter have been
timely and duly given and, except as set forth in Section 3.13 of the Company
Letter, no insurance company has asserted that such Claim is not covered by the
applicable policy relating to such Claim. There are no Claims pending or, to the
knowledge of the Company, threatened that would give rise to any right of
indemnification on the part of any director or officer of the Company or the
heirs, executors or administrators of such director or officer, against the
Company.
SECTION 3.14 TAXES. (a) Except as set forth in Section 3.14 of the Company
Letter:
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(i) the Company and the Subsidiary have timely filed or, if
not yet due, will timely file, all federal or state Tax Returns required to be
filed by it for all taxable periods ending on or before the Closing Date and all
such Tax Returns are, or will be when filed, true, correct and complete in all
material respects. Copies of all such Tax Returns for periods ending on or after
December 31, 1994 have been given to Purchaser;
(ii) the Company and the Subsidiary has paid or, if payment is
not yet due, has established, in accordance with GAAP and consistent with past
practice, accruals that are reflected on the Interim Statement for the payment
of, all Taxes imposed on the Company or the Subsidiary or for which the Company
or the Subsidiary is liable, whether to taxing authorities or to other Persons
(pursuant to a tax sharing agreement or otherwise);
(iii) no extension of time has been requested or granted for
the Company or the Subsidiary to file any Tax Return that has not yet been filed
or to pay any Tax that has not yet been paid;
(iv) the Company or the Subsidiary has not received notice of
a determination by a Tax Authority that Taxes are owed by the Company or the
Subsidiary (such determination to be referred to as a "Tax Deficiency") and, to
the knowledge of the Company, no Tax Deficiency is proposed or threatened;
(v) all Tax Deficiencies have been paid or finally settled and
all amounts determined by settlement to be owed have been paid;
(vi) there are no Tax liens or other security interests on or,
to the knowledge of the Company, pending against the Company or the Subsidiary
or any of their respective properties that arose in connection with any failure
or alleged failure to pay any Tax;
(vii) there are no presently outstanding waivers or extensions
or requests for waiver or extension of the time within which a Tax Deficiency
may be asserted or assessed;
(viii) no Claim has ever been made by any Tax Authority in any
jurisdiction where the Company or the Subsidiary does not file Tax Returns
indicating that the Company or the Subsidiary is or may be subject to taxation
in such jurisdiction;
(ix) no issue has been raised in any examination,
investigation, audit, suit, action, claim or proceeding relating to Taxes (a
"Tax Audit") which, by application of similar principles to any past, present or
future period, would result in a Tax Deficiency for such period;
(x) there are no pending or, to the knowledge of the Company,
threatened, Tax Audits of the Company or the Subsidiary;
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(xi) none of the federal income Tax Returns with respect to
the Company have been examined;
(xii) there are no requests for rulings in respect of any Tax
pending between the Company or the Subsidiary and any Tax Authority;
(xiii) the Company and the Subsidiary have complied with all
applicable laws, rules and regulations relating to the withholding and payment
of Taxes and have timely withheld and paid to the proper governmental
authorities all amounts required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor, creditor or
shareholder;
(xiv) the Company and the Subsidiary have not made any
payments, are not obligated to make any payments nor are a party to any
agreement that under certain circumstance (as a consequence of the Acquisition
or the Other Contemplated Transactions or otherwise) could obligate it to make
any payments that will not be deductible under Code Section 280G or Code Section
162(m);
(xv) the Company and the Subsidiary have disclosed on its
federal income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code
Section 6662;
(xvi) after the date hereof, no election with respect to Taxes
will be made without the written consent of Purchaser (which consent shall not
be unreasonably withheld) other than those elections which would not have a
Material Adverse Effect and which are consistent with past practices of the
Company;
(xvii) none of the Assets of the Company or the Subsidiary is
property that it is required to treat as being owned by any other Person
pursuant to the "safe harbor lease" provisions of former Section 168(f)(8) of
the Code;
(xviii) none of the Assets of the Company or the Subsidiary
directly or indirectly secures any debt the interest on which is tax-exempt
under Section 103(a) of the Code;
(xix) none of the Assets of the Company or the Subsidiary is
"tax- exempt use property" within the meaning of Section 168(h) of the Code;
(xx) the Company and the Subsidiary have not agreed to make,
nor to the knowledge of Sellers or the Company is required to make, any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise;
(xxi) the Company and the Subsidiary have not participated in,
and will not participate between the date hereof through the Closing Date in, an
international boycott within the meaning of Section 999 of the Code;
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(xxii) the Company and the Subsidiary have not been a United
States real property holding corporation as defined in Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code;
(xxiii) the Company and the Subsidiary do not have, and have
not had, a permanent establishment in any foreign country, as defined in any
applicable tax treaty or convention between the United States and such foreign
country;
(xxiv) except as set forth in Section 3.14 of the Company
Letter, each of the Company and the Subsidiary is not a party to any Tax
allocation or Tax sharing agreement;
(xxv) each of the Company and the Subsidiary is not a Person
other than a United States Person within the meaning of the Code;
(xxvi) the Acquisition and the Other Contemplated Transactions
are not subject to tax withholding provisions of the Code; and
(xxvii) the Company and the Subsidiary have no liability for
Taxes of any other person under Treas. Reg. Section 1.1502-6 (or any similar
provision of state or local law) as a transferee or successor by contract or
otherwise.
(b) The Company represents that to its knowledge no previous ownership
change, as defined under Section 382 of the Internal Revenue Code of 1986, as
amended, has occurred, direct or indirectly, with respect to the Company or the
Subsidiary.
(c) Neither the Company nor the Subsidiary has been at any time a
member of (i) any combined, consolidated or affiliated group of corporations
(other than the group of which the Company is the common parent corporation), or
(ii) any partnership or joint venture or the holder of a beneficial interest in
any trust for any period for which the statute of limitations for any Tax has
not expired.
(d) Neither the Company nor the Subsidiary:
(i) has or is projected to have any amount includible in its
income for the current taxable year under Section 951 of the Code,
(ii) has been a passive foreign investment company within the
meaning of the Section 1296 of the Code,
(iii) has an unrecaptured overall foreign loss within the
meaning of Section 904(f) of the Code,
(iv) has been a personal holding company within the meaning of
Section 542 of the Code, or
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(v) has been a foreign personal holding company within the
meaning of Section 552 of the Code.
(e) Neither the Company nor the Subsidiary has any (i) income
reportable for a period ending after the Closing Date but attributable to a
transaction (e.g., installment sale) or a change in accounting method occurring
in or made for a period ending on or prior to the Closing Date which resulted in
a deferred reporting on income from such transaction or from such change in
accounting method (other than a deferred intercompany transaction), or (ii) a
deferred gain or loss arising out of any deferred intercompany transaction,
which income, gain or loss has been reflected on the Interim Statements in
accordance with GAAP, but for which no Tax liability accrual has been reflected
on the Interim Statement.
(f) Section 3.14 of the Company Letter contains (i) a schedule of the
filing dates of all Tax Returns required to be filed by the Company, (ii) a
description of all past Tax Audits involving the Company, (iii) a list of all
elections made by the Company relating to Taxes, including whether the Company
has made an election pursuant to Section 754 of the Code, and (iv) a list of the
states, territories and jurisdictions (whether foreign or domestic) to which any
Tax is properly payable by the Company. Except as set forth in Section 3.14 of
the Company Letter, the Company has retained all supporting and backup papers,
receipts, spreadsheets and other information necessary for (i) the preparation
of all Tax Returns that have not yet been filed, and (ii) the defense of all Tax
Audits involving taxable periods either ending on or during the four (4) years
prior to the Closing Date or from which there are unutilized net operating loss,
capital loss or investment tax credit carryovers.
(g) Except for sales, use and similar Taxes which do not exceed
$100,000, the Company or the Subsidiary has collected and remitted to the
appropriate Tax Authority all sales and use or similar Taxes required to have
been collected, including any interest and any penalty, addition to tax or
additional amount unpaid, and has been furnished properly completed exemption
certificates for all exempt transactions. To the knowledge of the Company, the
Company or the Subsidiary has collected and/or remitted to the appropriate Tax
Authority all withholding, payroll, employment, property, customs duty, fee,
assessment or charge of any kind whatsoever (including Taxes assessed to real
property and water and sewer rents relating thereto), including any interest and
any penalty, addition to tax or additional amount unpaid.
SECTION 3.15 EMPLOYEE BENEFIT PLANS. (a) Set forth in Section 3.15 of
the Company Letter is a list of each employee benefit plan (within the meaning
of Section 3(3) of ERISA), written or oral employment or consulting agreement,
severance pay plan or agreement, employee relations policy (or practice,
agreement or arrangement), agreements with respect to leased or temporary
employees, vacation plan or arrangement, sick pay plan, stock purchase plan,
stock option plan, fringe benefit plan, incentive plan, bonus plan, cafeteria or
flexible spending account plan and any deferred compensation agreement (or plan,
program, or arrangement) covering any present or former employee of the Company
or the Subsidiary and which is, or at any time during the last four (4) years
was, sponsored or maintained by (or to which contributions are required to be,
were during the last four (4) years or were required to have been during the
last four (4) years) made by the Company. Each and
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every such plan, program, policy, practice, arrangement and agreement included
on the list set forth in Section 3.15 of the Company Letter is hereinafter
referred to as an "Employee Benefit Plan".
(b) With respect to each Employee Benefit Plan, there has been
delivered to Purchaser (i) current, accurate and complete copies of each such
Employee Benefit Plan (including all trust agreements, insurance or annuity
contracts, summary plan descriptions, and any other material documents or
instruments relating thereto); (ii) the most recent audited financial statement
with respect to each such Employee Benefit Plan that is required to have an
audited financial statement; (iii) copies of the most recent determination
letters with respect to any such Employee Benefit Plan which is an employee
pension benefit plan (as such term is defined in Section 3(2) of ERISA) intended
to qualify under the Code; (iv) copies of the three most recent actuarial
reports with respect to each such Employee Benefit Plan that is required to have
an actuarial report; and (v) copies of the three most recent annual reports
(Forms 5500) with respect to each Employee Benefit Plan required to file an
annual report.
(c) With respect to each Employee Benefit Plan:
(i) each such Plan which is an employee pension benefit plan
(as such term is defined in ERISA Section 3(2)) intended to qualify under the
Code so qualifies and has received a favorable determination letter as to its
qualification under the Code, and, to the knowledge of the Company, no event has
occurred that will or could be expected to give rise to disqualification or loss
of tax-exempt status of any such plan or related trust;
(ii) the Company has complied in all material respects with
all provisions of ERISA, the Code and other applicable law, and, to the
knowledge of the Company, no act or omission by the Company, or any fiduciary of
any Employee Benefit Plan, has occurred that will or could be reasonably
expected to give rise to liability for a breach of fiduciary responsibilities
under ERISA or to any fines or penalties under ERISA Section 502(l);
(iii) Except as disclosed in Section 3.15 of the Company
Letter, no Employee Benefit Plan provides for any post-retirement life, medical,
dental or other welfare benefits (whether or not insured) for any current or
former employee except as required under Code Section 4980B, Part 6 of Title I
of ERISA or applicable state or local Law;
(iv) all contributions, insurance and annuity premiums and
salary deferrals elected by an employee or required to have been made by the
Company under law or under the terms of any contract, agreement or Employee
Benefit Plan for all complete and partial periods up to and including the date
hereof have been made or will be made to the appropriate plan on or before such
date;
(v) the Acquisition and the Other Contemplated Transactions
will not be the direct or indirect cause of any amount paid or payable from such
Employee Benefit Plan being classified as an excess parachute payment under Code
Section 280G;
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(vi) there are no matters pending before the IRS, the United
States Department of Labor or the Pension Benefit Guaranty Corporation ("PBGC");
(vii) there have been no claims or notice of claims filed
under any fiduciary liability insurance policy covering any Employee Benefit
Plan;
(viii) each and every such Employee Benefit Plan which is a
group health plan (as such term is defined under the Code or ERISA Section
607(1)) is in material compliance with the applicable requirements of Code
Section 4980B, Part 6 of Title I of ERISA, the applicable requirements of the
Health Insurance Portability and Accountability Act of 1996, and all other
federal, state or local Laws or ordinances requiring the provision or
continuance of health or medical benefits; and
(ix) neither the Company nor any other organization which has
a member of controlled group of organizations (within the meaning of Code
Section 414(b), (c), (m) or (o) (the "Controlled Group") maintains, sponsors or
has contributed to (or has at any time within the last four (4) years
maintained, sponsored or contributed to, or been obligated to maintain, sponsor
or contribute to): (1) any voluntary employees' beneficiary association within
the meaning of Section 501(c)(9) of the Code; (2) any welfare benefit fund
within the meaning of Section 419 of the Code; (3) any plan or arrangement which
is subject to (A) the minimum funding requirements of Code Section 412, (B)
Subtitle B, Part 3 of Title I of ERISA, or (C) Title IV of ERISA; or (4) any
multi-employer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
other than those set forth in Section 3.15 of the Company Letter.
(d) With respect to any employee benefit plan (within the meaning of
Section 3(3) of ERISA), stock purchase plan, stock option plan, fringe benefit
plan, bonus plan or any deferred compensation agreement, plan or program
(whether or not any such plan, program or agreement is currently in effect):
(i) there are no actions, suits or claims (other than routine
claims for benefits in the ordinary course) pending or, to the knowledge of the
Company, threatened, and the Company has no knowledge of any facts which could
reasonably give rise to any such actions, suits or claims (other than routine
claims for benefits in the ordinary course), which could subject the Company to
any liability;
(ii) None of the Company, any member of the Controlled Group
or any other Person has engaged in a prohibited transaction, as such term is
defined in Code Section 4975 or ERISA Section 406, which would subject the
Company to any taxes, penalties or other liabilities resulting from prohibited
transactions under Code Section 4975 or under ERISA Sections 409 or 502(i);
(iii) to the knowledge of the Company, no event has occurred
and no condition exists that could subject the Company to any tax or penalty
under Code Sections 511, 4971, 4972, 4976, 4977, 4978, 4979, 4979A, 4980B or
5000, or to a fine under ERISA Section 502(c);
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(iv) neither the Company nor any member of the Controlled
Group is subject to (1) any liability, lien or other encumbrance under any
agreement imposing secondary liability on either the Company or on any member of
the Controlled Group as a seller of the assets of a business in accordance with
Section 4204 of ERISA or under any other provision of Title IV of ERISA or Code
Section 412, (2) contingent liability under Title IV of ERISA to the PBGC or to
any plan, participant or other Person, or (3) a lien or other encumbrance under
Section 4068 of ERISA; and
(v) the Company is not subject to any liability pursuant to
Section 4069 of ERISA.
(e) (i) except as set forth in Section 3.15 of the Company Letter, the
Company is not subject to any legal, contractual, equitable or other obligation
to (1) establish as of any date any employee benefit plan of any nature,
including any pension, profit sharing, welfare, post-retirement welfare, stock
option, stock or cash award, non-qualified deferred compensation or executive
compensation plan, policy or practice, or (2) continue any employee benefit plan
of any nature, including any Employee Benefit Plan or any other pension, profit
sharing, welfare or post-retirement welfare plan, or any stock option, stock or
cash award, non-qualified deferred compensation or executive compensation plan,
policy or practice (or to continue their participation in any such benefit plan,
policy or practice) on or after the date hereof;
(ii) the Company may, in any manner, subject to the
limitations imposed by applicable law, and without the consent of any employee,
beneficiary or other Person, prospectively terminate, modify or amend any such
Employee Benefit Plan or any other plan, program or practice (or its
participation in such Employee Benefit Plan or any other plan, program or
practice) effective as of any date on or after the date hereof; and
(iii) to the knowledge of the Company, no representations or
communications (directly or indirectly, orally, in writing or otherwise) with
respect to participation, eligibility for benefits, vesting, benefit accrual
coverage or other material terms of any Employee Benefit Plan have been made to
any employee, beneficiary or other Person other than those which are in
accordance with the terms and provisions of each such Plan as in effect
immediately prior to the date hereof and the Closing Date.
(f) With respect to each multi-employer pension plan in which either
the Company or any member of the Controlled Group participates or has
participated in the last four (4) years: (i) no such company has withdrawn,
partially withdrawn or received any notice of any claim or demand for withdrawal
liability or partial withdrawal liability; (ii) no such company has received any
notice that any such plan is in reorganization, that increased contributions may
be required to avoid a reduction in plan benefits or the imposition of any
excise tax, or that any such plan is or may become insolvent; (iii) no such
company has failed to make any required contributions; (iv) no such
multi-employer plan is a party to any pending merger or asset or liability
transfer; (v) there are no proceedings of the PBGC against or affecting any such
multi-employer plan; (vi) no such company has (or will have as a result of the
Acquisition and the Other Contemplated Transactions) any withdrawal liability by
reason
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of a sale of assets pursuant to Section 4204 of ERISA; and (vii) Section
3.15 of the Company Letter includes for each such multi-employer plan, as of its
last valuation date, an estimate of the amount of potential withdrawal liability
of each such company, calculated according to the information made available
pursuant to ERISA Section 4221(e), and identifies the specific obligor, and
nothing has occurred or is expected to occur that would materially increase the
amount of the total potential withdrawal liability of a specified obligor for
any such plan over the amount shown in Section 3.15 of the Company Letter.
(g) With respect to each and every Employee Benefit Plan subject to
Title IV of ERISA: (i) no such Plan or related trust has been terminated or
partially terminated; (ii) no liability to the PBGC has been or is expected to
be incurred with respect to such a Plan; (iii) the PBGC has not instituted and
is not expected to institute any proceedings to terminate such a Plan; (iv)
there has been no reportable event (within the meaning of Section 4043 of
ERISA); (v) there exists no condition or set of circumstances that presents a
material risk of the termination of such a Plan by the PBGC; (vi) no accumulated
funding deficiency (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, exists with respect to such a Plan; and (vii) the
current value of all vested accrued benefits under each such Plan did not as of
the last day of the most recently ended fiscal year of such Plan, and will not
as of the Closing Date, exceed the current value of the assets of each such Plan
allocable to such vested accrued benefits.
SECTION 3.16 EMPLOYEE-RELATED MATTERS. (a) Section 3.16 of the Company
Letter contains a true and correct list of each director and employee of the
Company and the Subsidiary whose aggregate compensation exceeds $100,000 per
annum, including any agreement, whether oral or written, relating thereto, and a
general description of the rate and nature of all compensation and benefits
payable by the Company or the Subsidiary to each such Person. Section 3.16 of
the Company Letter also contains a general description of all existing
severance, accrued vacation obligations or retiree benefits of any current or
former director, officer or employee (to the extent not included in Section 3.15
of the Company Letter). Except as set forth in such Section 3.16 of the Company
Letter, the employment or contractual arrangement of all such Persons is
terminable at will without additional or further economic obligation on the part
of the Company or the Subsidiary.
(b) Except as set forth in Section 3.16 of the Company Letter,
(i) neither the Company nor the Subsidiary is a party to any Contract with any
labor organization or other representative of its employees; (ii) there is no
unfair labor practice charge or complaint pending or, to the knowledge of
Sellers or the Company, threatened against the Company or the Subsidiary, nor
has any been pending or threatened within the past three (3) years; (iii)
neither the Company nor the Subsidiary has experienced any labor strike,
picketing, hand billing, slowdown, work stoppage or similar labor controversy
within the past three (3) years; (iv) no representation question is pending or
has been raised respecting any of the employees of the Company or the Subsidiary
working within the past three (3) years, nor, to the knowledge of the Company,
are there any campaigns being conducted to solicit authorization from the
employees of the Company or the Subsidiary to be represented by any labor
organization; (v) no Claim before any Governmental Body brought by or on behalf
of or relating to any employee, prospective employee, former employee, retiree,
labor organization
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or other representative of the employees or the Company or the Subsidiary or
relating to its employment practices, is pending or, to the knowledge of the
Company, threatened against the Company or the Subsidiary; (vi) neither the
Company nor the Subsidiary is a party to, or otherwise bound by, any Order
relating to its employees or employment practices; and (vii) each of the Company
and the Subsidiary has paid in full to all of its employees all wages, salaries,
commissions, bonuses, benefits and other compensation due and payable to such
employees consistent with past practices (except for disputed amounts).
SECTION 3.17 INSURANCE. Section 3.17 of the Company Letter sets forth a
list of all insurance policies, fidelity and surety bonds and fiduciary
liability policies (the "Insurance Policies") covering the Assets, the Business,
operations, employees, officers and directors of the Company or the Subsidiary
and true and complete copies of all such Insurance Policies have been delivered
to Purchaser. Section 3.17 of the Company Letter also sets forth a true and
complete list of Claims made in respect of Insurance Policies during the three
(3) years prior to the date hereof (other than under health or other employee
benefit policies). There is no Claim exceeding $50,000 by the Company or the
Subsidiary pending under any of such Insurance Policies as to which coverage has
been questioned, denied or disputed by the underwriters of such Insurance
Policies or requirement by any insurer to perform work which has not been
satisfied. All premiums due under all Insurance Policies have been paid in
accordance with their terms and the Company or the Subsidiary is otherwise in
compliance with the terms and conditions of all such Insurance Policies. All
Insurance Policies are in full force and effect. To the knowledge of the
Company, there is not any threatened termination of, premium increase with
respect to, or uncompleted requirements under, any material Insurance Policy.
SECTION 3.18 COMPLIANCE WITH LAWS. To the knowledge of the Company,
neither the Company nor the Subsidiary is in violation of any order, judgment,
injunction, award, citation, decree, consent decree or writ (collectively,
"Orders"), or any law, statute, code, ordinance, rule, regulation or other
requirement (collectively, "Laws"), of any government or political subdivision
thereof, whether federal, state, local or foreign, or any agency or
instrumentality of any such government or political subdivision, or any court or
arbitrator (collectively, "Governmental Bodies") affecting its Assets of the
Company or the Subsidiary or the Business, except where any such violation would
not have a Material Adverse Effect.
SECTION 3.19 PERMITS. The Company or the Subsidiary has obtained all
licenses, permits (including environmental permits), certificates, certificates
of occupancy, orders, authorizations and approvals (collectively, "Permits"),
and has made all required registrations and filings with, any Governmental Body
that are required for the conduct of the Business. All Permits that are required
for the conduct of the Business are listed in Section 3.19 of the Company Letter
and are in full force and effect; no violations are or have been recorded in
respect of any Permit; and no proceeding is pending or threatened to revoke or
limit any Permit. Except as listed in Section 3.19 of the Company Letter, no
Permit will terminate by reason of the Acquisition and the Other Contemplated
Transactions. To the knowledge of the Company, this Agreement and the
Acquisition and the Other Contemplated Transactions will not invalidate, revoke
or otherwise adversely affect the validity of any such Permit.
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SECTION 3.20 ENVIRONMENTAL MATTERS. (a) Except as set forth in Section
3.20 of the Company Letter:
(i) To the knowledge of the Company, the Company and the
Subsidiary are in material compliance with all Environmental Laws;
(ii) To the knowledge of the Company, there have been no
Releases of Hazardous Substances by the Company or violations of Environmental
Laws by the Company or the Subsidiary;
(iii) To the knowledge of the Company, the Company or the
Subsidiary holds all Environmental Permits, licenses and other authorizations
necessary for lawful operation of the Business and all are in full force and are
disclosed in Section 3.20 of the Company Letter, and to the Company's and the
Subsidiary's knowledge, this Agreement and the Acquisition and the Other
Contemplated Transactions will not invalidate, revoke or otherwise adversely
affect the validity of any such Environmental Permit;
(iv) Neither the Company, the Subsidiary nor any Seller has
received oral or written notice of a violation or of a claim of potential or
actual liability by any Governmental Body or third-party against the Company or
the Subsidiary under Environmental Laws, nor are any such potential claims known
to the Company, the Subsidiary or any Seller;
(v) Except as set forth in Section 3.20 of the Company Letter,
none of the sites or facilities owned, leased or controlled by the Company or
the Subsidiary (both currently or, to the knowledge of the Company, ever in the
past) (a) are or have been used by the Company, the Subsidiary or any other
entity to generate, manufacture, process, refine, handle, use or dispose of any
Hazardous Substances, or (b) have or have had areas of contamination from
Releases of Hazardous Substances that have been remediated or that require
remediation under Environmental Laws; and
(vi) Except as set forth in Section 3.20 of the Company
Letter, no underground storage tanks, polychlorinated biphenyl-containing or
asbestos-containing structures or items are in place at any facility owned or
leased or controlled by the Company or the Subsidiary (both currently or, to the
knowledge of the Company, ever in the past) and any such previously located
tanks, items or structures have been removed (and area of location remediated)
in accordance with applicable Environmental Laws.
(b) Section 3.20 of the Company Letter also lists with particularity
all off-site locations where, to the knowledge of the Company, the Company and
the Subsidiary, directly or indirectly, has stored, discharged, transported,
deposited or otherwise used for, the disposal of Hazardous Substances.
SECTION 3.21 CUSTOMERS AND SUPPLIERS. Section 3.21 of the Company
Letter lists, by dollar amount and on a consolidated basis, for the nine (9)
months ended on the Latest Balance Sheet Date, the fifteen (15) largest
customers of the Company and the Subsidiary (collectively, the "Major
Customers") and the six (6) largest suppliers of the Company and the
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Subsidiary (collectively, the "Major Suppliers"). Except as set forth in Section
3.21 of the Company Letter or for (i) material changes in general economic or
industry conditions, (ii) matters directly resulting from the conduct of
Purchaser or Parent in connection with this Agreement, or (iii) through direct
competition of Parent or Purchaser, no customer which accounted for more than
$1,125,000 in the Company's and Subsidiary's consolidated net sales included in
the Interim Statements has threatened in writing or, to the knowledge of the
Company, orally to cancel or terminate its relationship with the Company or the
Subsidiary or to decrease such customer's annual purchases from the Company and
the Subsidiary, on a consolidated basis, by an amount equal to the lesser of (i)
$2,500,000 and (ii) 50% of the Company's and the Subsidiary's consolidated net
sales attributed to such customer in the Interim Statements, and no supplier
from which the Company and the Subsidiary, in the aggregate, purchased more than
$399,000 in goods included in costs of goods sold in the Interim Statements has
threatened in writing or, to the knowledge of the Company, orally to cancel or
terminate its relationship with the Company or the Subsidiary or to cause the
decrease in such annual purchases by an amount equal to 50% of purchases by the
Company and the Subsidiary from such supplier included in costs of goods sold in
the Interim Statements.
SECTION 3.22 POTENTIAL CONFLICTS OF INTEREST. (a) Except as set forth
in Section 3.22 of the Company Letter, no officer of the Company, no spouse of
any such officer, nor, to the knowledge of the Company, no entity controlled by
one or more of the foregoing: (i) owns, directly or indirectly, any interest in
(excepting less than 1% stock holdings for investment purposes in securities of
publicly held and traded companies), or is an officer, director or employee of,
any Person that carries on business in direct competition with the Company or
the Subsidiary; or (ii) has any material Claim whatsoever against, or owes any
amount to, the Company or the Subsidiary, except for claims in the ordinary
course of the Business such as for accrued vacation pay and accrued benefits
under employee benefit plans; or
(b) Except as set forth in Section 3.22 of the Company Letter, no
officer, director or Affiliate of the Company, no spouse of any such officer,
director or Affiliate, nor, to the knowledge of the Company, no entity
controlled by one or more of the foregoing, owns, directly or indirectly, in
whole or in part, any material Asset that the Company or the Subsidiary uses in
the conduct of its business.
SECTION 3.23 FINDERS' FEES. Except as set forth in Section 3.23 of the
Company Letter, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
Sellers, the Company or the Subsidiary who might be entitled to any fee or
commission from Parent, Purchaser, Sellers, the Company or the Subsidiary upon
consummation of the Acquisition and the Other Contemplated Transactions.
SECTION 3.24 DEPOSITARIES; POWERS OF ATTORNEY, ETC. Section 3.24 of the
Company Letter sets forth (i) the name of each bank or similar entity in which
the Company or the Subsidiary has an account, lock box or safe deposit box and
the names of all Persons authorized to draw thereon or to have access thereto,
and (ii) the name of each Person holding
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a general or special power of attorney from the Company or the Subsidiary and a
description of the terms thereof.
SECTION 3.25 Y2K. The Company and the Subsidiary have reviewed the
areas within the Business and operations of the Company and the Subsidiary which
could be adversely affected by, and have developed or are developing programs to
address on a timely basis, the "year 2000 problem" (i.e., the risk that computer
applications used by the Company and the Subsidiary may be unable to recognize
or perform properly date-sensitive functions involving certain dates prior to
and any date on or after December 31, 1999) (the "Year 2000 Problem"). Based on
such review and program with respect to the Company and the Subsidiary and any
inquiries of suppliers and vendors made to date, to the knowledge of the
Company, the Year 2000 Problem will not have a Material Adverse Effect.
SECTION 3.26 DISCLOSURE. Neither this Agreement, the Schedules hereto
or to the Company Letter, nor any audited or unaudited financial statements,
documents or certificates furnished or to be furnished to Purchaser or any of
its Agents or Affiliates by or on behalf of Sellers, the Company or the
Subsidiary pursuant to this Agreement or in connection with the Acquisition and
the Other Contemplated Transactions contain or will contain any untrue statement
of a material fact or omit or will omit a material fact necessary in order to
make the statements contained herein or therein not misleading. All
representations and warranties made by Sellers and the Company will be deemed to
have been relied on by Parent and Purchaser (notwithstanding any investigation
by Parent and Purchaser).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, represent and warrant to
Sellers and the Company, as of the date of this Agreement and as of the Closing
Date (as if each such representation and warranty was made on the Closing Date),
that:
SECTION 4.1 AUTHORITY RELATIVE TO THIS AGREEMENT. Parent and Purchaser
each has full corporate power and authority to execute and deliver this
Agreement and each other Transaction Document to which it is a party and to
consummate the Acquisition and the Other Contemplated Transactions. The
execution, delivery and performance by Parent and Purchaser of this Agreement
and the other Transaction Documents to which either of them is a party and the
consummation by it of the Acquisition and the Other Contemplated Transactions
have been duly and validly authorized and approved by Parent's and Purchaser's
board of directors, and no other corporate proceedings on the part of Parent and
Purchaser are necessary to authorize the execution and delivery by Parent or
Purchaser of this Agreement or the other Transaction Documents to which Parent
or Purchaser is a party or the consummation of the Acquisition and the Other
Contemplated Transactions to which Parent or Purchaser is a party. This
Agreement has been duly and validly executed and delivered by Parent and
Purchaser and (assuming the valid execution and delivery of this Agreement by
the other parties hereto) constitutes the legal, valid and binding agreement of
Parent and Purchaser, enforceable against Purchaser in accordance with its
terms, except as such obligations and their
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enforceability may be limited by applicable bankruptcy and other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought (whether at law or in
equity).
SECTION 4.2 NO CONFLICTS; CONSENTS. Except as set forth in Section 4.2
of the Company Letter, neither the execution, delivery and performance by Parent
or Purchaser of this Agreement and each other Transaction Document to which
either of them is a party nor the consummation of the Acquisition and the Other
Contemplated Transactions to which Parent or Purchaser is a party (i) violates
any provision of the Certificate of Incorporation or By-laws of Parent or
Purchaser; (ii) requires Parent or Purchaser to obtain any consent, approval or
action of or waiver from, or make any filing with, or give any notice to, any
Governmental Body or any other Person; (iii) violates, conflicts with or results
in the breach or default under (after the giving of notice or the passage of
time), or permits the termination of, any material Contract to which Parent or
Purchaser is a party or by which any of them or any of their respective assets
may be bound or subject; or (iv) violates any Law or Order of any Governmental
Body against, or binding upon, Parent or Purchaser or upon their assets or
businesses.
SECTION 4.3 CORPORATE EXISTENCE AND POWER. Parent and Purchaser are
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware and have all requisite powers and all material
Permits required to own, lease and operate its properties and to conduct its
business as currently conducted. Parent and Purchaser are duly qualified to do
business as a foreign corporations and are in good standing in each jurisdiction
where the character of the property owned or leased by Parent or Purchaser or
the nature of their activities, makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not have a
material adverse effect on the business, assets, financial condition or the
results of operations of Parent or Purchaser.
SECTION 4.4 FINDERS' FEES. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Parent or Purchaser who might be entitled to any fee or commission
from Sellers, the Company or the Subsidiary upon consummation of the Acquisition
and the Other Contemplated Transactions.
SECTION 4.5 INVESTMENT. Purchaser is not acquiring the Purchased Shares
with a view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act of 1933, as amended.
SECTION 4.6 EQUITY FUNDING. Parent shall provide equity financing to
Purchaser in an amount not less than $25,000,000 simultaneously with the
Closing.
SECTION 4.7 TAX RETURNS. Purchaser shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns for the Company and the
Subsidiary for all periods ending on or prior to the Closing Date which are
filed after the Closing Date.
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SECTION 4.8 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES;
DISCLOSURE; BRING-DOWN. (a) Neither Sellers, the Representative nor the Company
make, and they have not made, any representations or warranties relating to the
Company or the Subsidiary in connection with the Acquisition and the Other
Contemplated Transactions other than those contained in Article II and Article
III of this Agreement. It is also understood that any cost estimates,
projections or other productions, any data, any financial information or any
memoranda or presentations are not and shall not be deemed to be or to include
representations or warranties of Sellers and the Company, except to the extent
otherwise covered by the representations and warranties of Sellers and the
Company in Article II and Article III of this Agreement. No person has been
authorized by Sellers or the Company to make any representation or warranty
relating to the Company, the Subsidiary or the Business in connection with the
Acquisition and the Other Contemplated Transactions except as set forth in
Article II and Article III of this Agreement and, if made, such representation
or warranty must not be relied upon as having been authorized by the Company,
the Subsidiary or any Seller.
(b) Notwithstanding anything to the contrary contained in this
Agreement or in any of the Exhibits or Schedules hereto or to the Company
Letter, any information disclosed in one Exhibit or Schedule hereto or to the
Company Letter shall be deemed to be disclosed for any other representation or
warranty to which the disclosure relates on its face.
ARTICLE V
COVENANTS AND AGREEMENTS PRIOR TO
AND SUBSEQUENT TO CLOSING
SECTION 5.1 CONDUCT OF BUSINESS. (a) From the date hereof through the
Closing Date, the Company agrees, and the Company agrees to cause the
Subsidiary:
(i) To operate the Business according to the ordinary and
usual course of the Business consistent with past practice, to preserve intact
their present business organization and structure, to keep available the
services of their present officers, sales representatives and full-time
employees, to use commercially reasonable efforts to preserve and maintain their
Assets and the goodwill of the Business and to use commercially reasonable
efforts to preserve their relationships with customers, suppliers, independent
contractors, employees and other Persons having material business dealings with
them or material to the operation of the Business;
(ii) To maintain in the ordinary course of the Business,
consistent with past practice and in accordance with Contracts to which either
of them is a party, the Leased Property and all their material structures,
equipment and other tangible property in their present repair, order and
condition, subject to ordinary wear and tear;
(iii) To maintain the books and records relating to the
Business in the usual and ordinary manner and in a manner that fairly and
correctly reflects the income, expenses, Assets and Liabilities of the Company
and the Subsidiary consistent with GAAP, and to record and effect sales in the
usual and ordinary manner consistent with past practices;
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(iv) Except for short term indebtedness, not to incur any
Liability (other than Liabilities incurred in the ordinary course of the
Business, consistent with past practice);
(v) Not to undertake (nor permit to be undertaken) any of the
actions specified in Section 3.9;
(vi) Not to pay, discharge or satisfy any material Claim or
Liability, other than the payment, discharge or satisfaction in the ordinary
course of the Business of Claims or Liabilities incurred in the ordinary course
of the Business, consistent with past practice;
(vii) Not to sell, transfer, convey, assign or otherwise
dispose of any Assets, including Inventory, except in the ordinary course of the
Business consistent with past practice, or create, incur or assume any Lien on
any Assets of the Company or the Subsidiary;
(viii) Not to waive, release or cancel any material claims
against third parties or debts owing to the Company or the Subsidiary or any
material rights which have any value or make any Tax election or settle or
compromise any federal, state, local or foreign income Tax liability, or waive
or extend the statute of limitations in respect of any such Taxes;
(ix) Not to authorize for issuance, issue, sell, deliver or
agree or commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise) any shares of the
Company's or the Subsidiary's capital stock or any other securities, or amend
any of the terms of any such securities;
(x) Not to amend their respective Certificates of
Incorporation or by-laws;
(xi) Not to merge into or consolidate with any other entity or
permit any other entity to merge into or consolidate with it, or liquidate or
sell or dispose of any material assets other than in the ordinary course of
business; and
(xii) Not to enter into, adopt or amend or terminate any
Employee Benefit Plan.
(b) From the date hereof through the Closing Date, the Company agrees
and the Company agrees to cause the Subsidiary to consult with Parent and
Purchaser prior to any renewal, amendment, extension or termination of, waiver
of any material right under, or any failure to renew, any material Contract to
which the Company or Subsidiary is a party and not to take any such action if
Parent and Purchaser object thereto in writing; provided, however, that such
objection shall not be unreasonably withheld.
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(c) From the date hereof through the Closing Date, the Company agrees
and the Company agrees to cause the Subsidiary to continue to carry all
Insurance Policies and shall not allow any termination, cancellation or material
breach or default of such Insurance Policies to occur or exist.
SECTION 5.2 CORPORATE EXAMINATIONS AND INVESTIGATIONS. Prior to the
Closing Date, Sellers and the Company agree that Parent and Purchaser shall be
entitled, through their directors, officers, Affiliates, employees, attorneys,
accountants, representatives, lenders, consultants and other agents
(collectively, the "Agents") who are identified in Section 5.2 (the "Due
Diligence Agents") of the Company Letter, which may be amended from time to time
with the approval of the Company, which approval shall not be unreasonably
withheld, to make such investigation of the Business and the Assets and
operations of the Company and the Subsidiary, and such examination of the books,
records and financial condition of the Company and the Subsidiary, as Parent and
Purchaser shall deem necessary or appropriate. Any such investigation and
examination shall be conducted at reasonable times, under reasonable
circumstances and upon reasonable notice, and Sellers and the Company shall, and
the Company shall cause the Subsidiary to, cooperate fully therein. In that
connection, Sellers and the Company shall make available to the Due Diligence
Agents during such period, without however causing any unreasonable interruption
in the operations of the Business, all such information and copies of such
documents and records concerning the affairs of the Company and the Subsidiary
as the Due Diligence Agents may reasonably request, shall permit the Due
Diligence Agents access to the Assets of the Company and the Subsidiary and all
parts thereof and to the Company's and the Subsidiary's Agents, customers,
suppliers and others, and shall cause the Company's and the Subsidiary's Agents
to cooperate fully in connection with such review and examination; provided,
however, that access to the Company's and the Subsidiary's Agents, customers,
suppliers and others shall be coordinated by Asa R. Phillips, as Agent for
Sellers and the Company, and Dennis W. Vollmershausen, as Agent for Parent and
Purchaser, and provided, further, that the Subsidiary shall be entitled to have
one of its employees attend any in person or telephonic meetings between such
Agents, customers, suppliers or others, on the one hand, and the Due Diligence
Agents, on the other hand. No investigation by Parent or Purchaser shall
diminish or obviate any of the representations, warranties, covenants or
agreements of Sellers or the Company contained in this Agreement.
SECTION 5.3 ADDITIONAL FINANCIAL STATEMENTS. Prior to the Closing Date,
as soon as available and in any event within fifteen (15) calendar days after
the end of each month ending after the Latest Balance Sheet Date of the Interim
Statements, the Company shall furnish to Parent and Purchaser an unaudited
consolidated financial statement of the Company for such month in form and
substance comparable to the Interim Statements.
SECTION 5.4 CONSENTS, FILINGS AND AUTHORIZATIONS; EFFORTS TO
CONSUMMATE. (a) As promptly as practicable after the date hereof, Parent,
Purchaser and the Company shall, and the Company shall cause the Subsidiary to,
make all filings and submissions under such Laws as are applicable to them or to
their respective Affiliates, as may be required for them to consummate the
Acquisition and the Other Contemplated Transactions in accordance with the terms
of this Agreement and shall furnish copies thereof to each other party prior to
such filing and shall not make any such filing or submission to which the
Company or Purchaser, as the
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case may be, reasonably objects in writing. All such filings shall comply in
form and content in all material respects with applicable Law. Subject to the
terms and conditions herein, each party hereto, without payment or further
consideration, shall use its best efforts to take or cause to be taken all
action and to do or cause to be done all things necessary, proper or advisable
under applicable Laws, Permits and Orders, to consummate and make effective, as
soon as reasonably practicable, the Acquisition and the Other Contemplated
Transactions, including the obtaining of all Company Required Consents and
Permits or consents of any third party, whether private or governmental,
required in connection with such party's performance of such transactions and
each party hereto shall cooperate with the other in all of the foregoing.
(b) The Company, Sellers which have executed this Agreement as of the
date hereof who in the aggregate hold a majority of the issued and outstanding
shares of capital stock of the Company, and the Representative agree to use
their collective best efforts to cause each Seller which has not executed this
Agreement as of the date hereof to deliver a counterpart signature page to this
Agreement to the Company, Parent and Purchaser within ten (10) business days
hereof; provided, that if all such Sellers do not execute a counterpart
signature page to this Agreement within such time, the Company and Sellers
signatories hereto hereby agree, upon the request of Purchaser, to execute any
documents required or necessary in order to effect the sale of the Purchased
Shares pursuant to a merger whereby the Company would be merged with and into
Purchaser and to obtain all consents necessary in connection with such merger;
provided, further that the economic, financial and tax effects to Sellers,
Parent and Purchaser upon such merger are as favorable to the economic,
financial and tax effects to Sellers, Parent and Purchaser upon the sale of the
Purchased Shares as contemplated hereby and, as a condition to Parent's and
Purchaser's obligation to consummate the merger, there shall not have been
asserted any appraisal or dissenter's rights by any stockholder of the Company.
If the sale of the Purchased Shares is to be effected pursuant to a merger, the
Company and Sellers shall use their best efforts to cause each holder of
Purchased Shares not a signatory hereto to tender their Purchased Shares
pursuant to the terms of this Agreement for the consideration set forth herein,
together with a letter of transmittal in a form satisfactory to Purchaser
setting forth, among other things, the representations and warranties contained
in Article II.
SECTION 5.5 NEGOTIATIONS WITH OTHERS. From and after the date hereof
unless and until this Agreement shall have been terminated in accordance with
its terms, Sellers and the Company hereby agree that (i) Sellers, the Company
and their Agents shall immediately cease any existing discussions or
negotiations with any parties conducted heretofore with respect to any sale of
any of the Company, or any substantial portion of the Business or the Assets of
the Company or the Subsidiary or the Company's or Subsidiary's capital stock,
directly or by merger or consolidation, or the sale of Sellers' shares of the
Company capital stock; and (ii) Sellers, the Company their Agents will not
solicit, initiate, encourage, continue or enter into negotiations or discussions
of any type, directly or indirectly, with, or furnish any information or data
to, any Person relating to any such sale, including any Person with whom Sellers
or the Company are currently negotiating, other than Purchaser, with respect to
an offer for the sale of the Company, or any substantial portion of the
Business, the Company's or the Subsidiary's Assets, or the Company's or
Subsidiary's capital stock, directly or by merger or consolidation.
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SECTION 5.6 NOTICES OF CERTAIN EVENTS. Prior to the Closing Date,
Sellers, the Company, Parent and Purchaser shall promptly notify each other of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the Acquisition
and the Other Contemplated Transactions;
(b) any notice or other communication from any Governmental Body in
connection with the Acquisition and the Other Contemplated Transactions; and
(c) any event, condition or circumstance occurring from the date hereof
through the Closing Date that would constitute a violation or breach of any
representation or warranty, whether made as of the date hereof or as of the
Closing Date, or that would constitute a violation or breach of any covenant of
any party contained in this Agreement.
SECTION 5.7 PUBLIC ANNOUNCEMENTS. Sellers, the Company, Parent and
Purchaser will consult with each other before issuing any press release or
otherwise making any public statement with respect to the Acquisition and the
Other Contemplated Transactions, and will not issue any such press release or
make any such public statement without the prior approval of the Representative
or Purchaser, as the case may be, except as may be required by applicable Law in
which event the other party shall have the right to review and comment upon (but
not approve) any such press release or public statement prior to its issuance.
SECTION 5.8 CONFIDENTIALITY. (a) Each of Parent and Purchaser shall
hold in strict confidence, and shall use its best efforts to cause all the Due
Diligence Agents to hold in strict confidence, unless compelled to disclose by
judicial or administrative process, or by other requirements of Law, all
Confidential Information (defined below) concerning Sellers, the Company and the
Subsidiary which any of them has obtained from Sellers, the Company or the
Subsidiary or their Agents prior to, on or after the date hereof, in connection
with the Acquisition and the Other Contemplated Transactions, and Parent and
Purchaser shall not use or disclose to others, or permit the use of or
disclosure of, any such Confidential Information so obtained, and will not
release or disclose such information to any other Person, except the Due
Diligence Agents who need to know such information in connection with this
Agreement (and who shall be advised of the provisions of this Section 5.8). The
foregoing provisions shall not apply to any such information to the extent (i)
known by Parent or Purchaser prior to the date such information was provided to
Purchaser by or on behalf of Sellers, the Company or the Subsidiary in
connection with the Acquisition and the Other Contemplated Transactions, (ii)
made known to Parent or Purchaser from a third party, to the knowledge of Parent
and Purchaser, not in breach of any confidentiality requirement, or (iii) made
public through no fault of Parent, Purchaser or any of the Due Diligence Agents.
(b) If this Agreement is terminated as provided herein and the
Acquisition and the Other Contemplated Transactions are not consummated and if
requested by Sellers, Purchaser shall return to the Representative all tangible
evidence of such information regarding Sellers, the Company and the Subsidiary,
or provide, at Purchaser's option, a certificate to the Representative stating
that such information has been destroyed.
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(c) The term "Confidential Information" shall mean all written
information provided to Purchaser or Parent by, for or on behalf of the Sellers,
the Company or the Subsidiary or their Agents and will also include, without
limitation, the Confidential Due Diligence Information, as well as all notes,
compilations and analyses derived therefrom and all copies, summaries, notes and
other written materials so provided.
(d) In the event that Parent, Purchaser or any of the Due Diligence
Agents are requested in any legal or governmental proceeding to disclosure any
of the Confidential Information, Parent, Purchaser or such Representative, as
the case may be, shall give the Company prompt written notice of such request so
that the Company may seek an appropriate order or decree restricting such
disclosure. If, in the absence of such an order or decree, Parent, Purchaser
and/or any of the Due Diligence Agents are nonetheless compelled to disclose any
Confidential Information, Purchaser, Parent or the Due Diligence Agent, as the
case may be, may disclose such information in such proceeding without liability
hereunder provided that Parent, Purchaser or such Due Diligence Agent gives the
Company written notice of the Confidential Information to be disclosed as far in
advance of its disclosure as is practicable and, upon the Company's request and
at its expense, Parent, Purchaser or such Due Diligence Agent shall use its
reasonable commercial efforts to assist the Company to obtain assurances that
confidential treatment will be accorded to such information.
(e) The Confidential Information will be kept confidential by Parent
and Purchaser and will not be photocopied, distributed or disclosed to any
person other than the Due Diligence Agents for the sole purpose of the
Acquisition and the Other Contemplated Transactions. Notwithstanding the
foregoing, Parent, Purchaser and the Due Diligence Agents shall be permitted to
use the Confidential Information for the purpose of complying with the
disclosure requirements of any state or federal securities laws or the National
Association of Securities Dealers Automated Quotation System. No individual or
entity may be added to Section 5.2 of the Company Letter after the date hereof
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Each such Due Diligence Agent shall be advised of this
Agreement by Parent and Purchaser, shall agree to be bound by the terms of this
Agreement and shall not disclose such information to any other individual or
entity other than to another Due Diligence Agent or to Parent or Purchaser or as
permitted by Section 5.8(a). Parent and Purchaser agree to be responsible for
the breach of this Section 5.8 by the Due Diligence Agents.
(f) For a period of two years from the date hereof, without the prior
written consent of the Company, Parent and Purchaser will not, and will direct
the Due Diligence Agents not to hire or solicit the employment of any employees
of the Company listed in Section 5.8 of the Company Letter.
(g) Parent and Purchaser understand and acknowledge the economic and
competitive value and the confidential nature of the Confidential Information
and each further agrees that the breach of this Section 5.8 by it or the Due
Diligence Agents will result in irreparable harm to the Company and that
remedies at law, alone, will be inadequate to remedy any breach of this
Agreement and, therefore, each of Parent and Purchaser (i) consents
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to the issuance of injunctive or other equitable relief against it and/or the
Due Diligence Agents to prevent or end any violation of this Agreement in such
event and (ii) waives the requirement of the posting of any bond or other
security by the Company in connection therewith.
(h) The terms of this Section 5.8 are not to be construed to limit the
scope of relevant information or otherwise preclude Parent from obtaining
discovery relevant to the issues in the pending litigation between Lund
Industries, Incorporated and the Subsidiary (case no. 98-1441 JMR/FLN) (the
"Litigation"). Discovery in the Litigation, including any confidential
information that is produced during discovery, shall be handled under the terms
of the protective order that the court enters in the Litigation. The terms of
this Agreement shall not apply to the confidential information produced by the
parties during discovery in the Litigation, unless those terms are expressly
recited in the protective order entered by the court.
(i) In consideration for the Company's provision of the Confidential
Information, Parent and Purchaser agree to reduce any assessed damages, and to
toll prejudgment interest in connection with the Litigation as follows: (a) for
sales of the accused product from June 2, 1998 (the date the Complaint in the
Litigation was filed), to the date on which this Agreement is terminated in
accordance with Article VII, any assessed damage shall be reduced at a rate of
100%; and (b) for the period of time from June 2, 1998 to the date on which this
Agreement is terminated in accordance with the terms of Article VII, prejudgment
interest shall be tolled. The Litigation is also subject to dismissal pursuant
to Section 7.2(b).
(j) The parties agree that the terms of this Agreement supersede the
terms of the Confidentiality Agreement between Harvest Partners, Inc., Parent,
the Company and the Subsidiary dated August 13, 1998, as amended, and that such
Confidentiality Agreement is hereby terminated.
SECTION 5.9 EXPENSES. Except as otherwise specifically provided in this
Agreement, the parties hereto shall bear their respective expenses incurred in
connection with the preparation, execution and performance of this Agreement and
the Acquisition and the Other Contemplated Transactions, including all fees and
expenses of their respective Agents.
SECTION 5.10 SUPPLEMENTS TO DISCLOSURE SCHEDULES. It is understood and
agreed that, from time to time prior to the Closing, Sellers and the Company may
amend or supplement the Company Letter with respect to any matter that is
required to be set forth or described therein or that is necessary to complete
or correct any information in any representation or warranty of Sellers or the
Company contained in this Agreement; provided, however, that the disclosure
provided in any such amended, supplemented or revised Section of the Company
Letter shall in no way affect or be deemed to limit Parent's or Purchaser's
ability to terminate this Agreement and the Acquisition and the Other
Contemplated Transactions prior to the Closing.
SECTION 5.11 HSR ACT. Each party hereto shall have filed prior to the
date hereof, with respect to the Acquisition and the Other Contemplated
Transactions, and use good faith efforts to pursue a premerger notification form
under the Hart-Scott-Rodino Antitrust
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Improvements Act of 1976, as amended (the "HSR Act"). Purchaser shall bear the
$45,000 fee payable to the U.S. federal government in connection with each such
filing by Sellers and Purchaser.
SECTION 5.12 FURTHER ASSURANCES. Sellers hereby agree, without further
consideration, to execute and deliver, or to cause to be executed and delivered
on their behalf, following the Closing such other instruments of transfer and
take such other action as Purchaser may reasonably request in order to put
Purchaser in possession of, and to vest in Purchaser, good, valid, and
unencumbered title to the Purchased Shares in accordance with this Agreement and
to consummate the Acquisition and the Other Contemplated Transactions. Purchaser
hereby agrees, without further consideration, to take such other action
following the Closing and execute and deliver such other documents as Sellers
may reasonably request in order to consummate the Acquisition and the Other
Contemplated Transactions in accordance with this Agreement.
SECTION 5.13 TAX MATTERS. All sales Taxes (including any penalties and
interest) incurred in connection with the transfer of the Purchased Shares or
the consummation of the Acquisition and the Other Contemplated Transactions
shall be borne and paid by Sellers when due, and Sellers will, at their own
expense, file all necessary Tax Returns and other documentation with respect to
all such Taxes and fees.
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.1 CONDITIONS TO THE OBLIGATIONS OF SELLERS AND PURCHASER. The
obligations of Sellers, the Company, Parent and Purchaser to consummate the
Acquisition and the Other Contemplated Transactions are subject to the
satisfaction of the following conditions on or prior to the Closing Date:
(a) No Injunction. No provision of any applicable Law and no Order
shall prohibit the consummation of the Acquisition and the Other Contemplated
Transactions.
(b) No Proceeding or Litigation. No Claim instituted by any Person
shall have been commenced or pending against Sellers, the Company, the
Subsidiary, Parent or Purchaser or any of their respective Affiliates, officers
or directors which Claim seeks to restrain, prevent, change or delay in any
material respect the Acquisition and the Other Contemplated Transactions or
seeks to challenge any of the material terms or provisions of this Agreement or
seeks material damages in connection with any of such transactions, except as
would not have a Material Adverse Effect.
(c) HSR Act. The waiting period under the HSR Act shall have expired or
been terminated.
SECTION 6.2 CONDITIONS TO THE OBLIGATIONS OF SELLER. All obligations of
Sellers and the Company to consummate the Acquisition and the Other Contemplated
Transactions are
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subject to the fulfillment (or waiver by the Representative) on or prior to the
Closing Date of each of the following further conditions:
(a) Performance. Each of Parent and Purchaser shall have performed and
complied with all agreements, obligations and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
(b) Representations and Warranties. The representations and warranties
of Parent and Purchaser contained in this Agreement and in any certificate or
other writing delivered by Parent and Purchaser pursuant hereto shall be true in
all material respects at and as of the Closing Date as if made at and as of such
time.
(c) Purchase Price. The Purchase Price shall have been paid by
Purchaser in accordance with Section 1.1 on the Closing Date.
(d) Documentation. There shall have been delivered to the
Representative the following:
(i) A certificate, dated the Closing Date, of Parent and Purchaser
confirming the matters set forth in Section 6.2(a) and (b) hereof.
(ii) A certificate, dated the Closing Date, of each of the Secretary or
Assistant Secretary of Parent and Purchaser certifying that attached to such
certificate (A) is a true and correct copy of its Certificate of Incorporation
and all amendments, if any, thereto as of the date thereof; (B) is a true and
correct copy of its By-laws as of the date thereof; (C) is a true copy of all
corporate actions taken by it, including resolutions of its board of directors
authorizing the consummation of the Acquisition and the Other Contemplated
Transactions and the execution, delivery and performance of this Agreement and
each other Transaction Document to be delivered by Parent or Purchaser pursuant
hereto; and (D) are the names and signatures of its duly elected or appointed
officers who are authorized to execute and deliver this Agreement, the other
Transaction Documents to which Parent or Purchaser is a party and any
certificate, document or other instrument in connection herewith.
(iii) A signed opinion of Parent and Purchaser's counsel, dated the
Closing Date and addressed to Sellers, substantially in the form and to the
effect of the opinion annexed as Exhibit B hereto.
SECTION 6.3 CONDITIONS TO THE OBLIGATIONS OF PARENT AND PURCHASER. All
obligations of Parent and Purchaser to consummate the Acquisition and the Other
Contemplated Transactions hereunder are subject to the fulfillment (or waiver by
Parent and Purchaser) on or prior to the Closing of each of the following
further conditions:
(a) Performance. Except for (i) material changes in general economic or
industry conditions, (ii) matters directly resulting from the conduct of Parent
or Purchaser in connection with this Agreement or (iii) through direct
competition of Parent or Purchaser, Sellers and the Company shall have performed
and complied with all agreements, obligations
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and covenants required by this Agreement to be performed or complied with by
them on or prior to the Closing Date; provided, however, that this condition
shall be deemed to have not been fulfilled if the failure to perform and comply
with such agreements, obligations and covenants causes a Material Adverse
Effect.
(b) Representations and Warranties of Sellers. Except for such
inaccuracies which would not have a Material Adverse Effect, the representations
and warranties of Sellers contained in this Agreement and in any certificate or
other writing delivered by Sellers or the Representative pursuant hereto shall
be true at and as of the Closing Date as if made at and as of such time.
(c) Representations and Warranties of the Company. Except for (i)
material changes in general economic or industry conditions, (ii) matters
directly resulting from the conduct of Parent or Purchaser in connection with
this Agreement, or (iii) through direct competition of Parent or Purchaser, the
representations and warranties of the Company contained in this Agreement and in
any certificate or other writing delivered by the Company, the Subsidiary or the
Representative pursuant hereto shall be true at and as of the Closing Date as if
made at and as of such time, except for such inaccuracies that do not have a
Material Adverse Effect; provided, however, that those representations and
warranties which are qualified by references to "material", "Material Adverse
Effect" or "to the knowledge of the Company" shall be deemed not to include such
qualifications.
(d) No Adverse Change. Except for (i) material changes in general
economic or industry conditions, (ii) matters directly resulting from the
conduct of Parent or Purchaser in connection with this Agreement, or (iii)
through direct competition of Parent or Purchaser, during the period from the
Latest Balance Sheet Date to the Closing Date, there shall not have been (x) any
change in the Condition of the Business; (y) any damage, destruction, casualty,
determination or other event to or affecting the Assets of the Company or the
Subsidiary; or (z) any Claims or Liens filed or threatened against or affecting
the Company, the Subsidiary or their Assets which in the case of (x), (y) and
(z) above would have a Material Adverse Effect.
(e) Company Required Consents. All Company Required Consents shall have
been obtained.
(f) [Omitted.]
(g) [Omitted.]
(h) Termination of TJC Consulting Agreement. The TJC Consulting
Agreement shall have been terminated and discharged, and the Company and the
Subsidiary shall have been released from all obligations and liabilities under
the TJC Consulting Agreement pursuant to the TJC Pay-Off Letter.
(i) Repayment of Indebtedness. The indebtedness obligations and
liabilities under the Credit Agreement, the 1994 Purchase Agreement and other
Company Debt shall
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have been paid in full, and the Company and the Subsidiary shall have been
released from all obligations and liabilities in accordance with the Senior
Lender Pay-Off Letter and the JZ PayOff Letter.
(j) Redemption of Preferred Stock. The Company shall have redeemed all
outstanding shares of Preferred Stock and shall have paid all accrued dividends
thereon pursuant to the Certificate of Incorporation of the Company, as amended,
and in accordance with Section 1.2.
(k) Documentation. There shall have been delivered to Parent and
Purchaser the following:
(i) A certificate, dated the Closing Date, of the
Representative and the Company confirming the matters set forth in Sections
6.3(a), (b) and (c);
(ii) A certificate, dated the Closing Date, of the
Representative and the Company certifying that attached to such certificate (A)
is a true and correct copy of the Certificate of Incorporation and by-laws (or
comparable instruments) of Sellers and the Company, and all amendments, if any,
thereto as of the date thereof; (B) are the names of the directors and officers
of the Company; (C) is a true copy of all corporate actions taken by the board
of directors and the shareholders of the Company (which actions shall have been
taken prior to the date of entering into this Agreement) to authorize the
Acquisition and the Other Contemplated Transactions (including the approval of
the shareholders of the Company of the Sale Bonus); and (D) are the names and
signatures of the duly elected or appointed officers of the Company who are
authorized to execute and deliver this Agreement, the other Transaction
Documents to which the Company is a party and any certificate, document or other
instrument in connection herewith;
(iii) True, correct and complete copies of all the Company
Required Consents and Permits;
(iv) An executed Escrow Agreement;
(v) An executed Nondisclosure and Nonsolicitation Agreement;
(vi) The resignation of all officers and directors of the
Company and the Subsidiary, as may have been requested by Purchaser;
(vii) A Nonforeign Certificate executed by the Company and the
Representative in accordance with Section 1445(b) of the Code, substantially in
the form and to the effect of Exhibit D attached hereto;
(viii) A release, executed by the Representative and in favor
of Parent and Purchaser, substantially in the form and to the effect of Exhibit
E attached hereto;
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(ix) Good standing certificates for the Company and the
Subsidiary from the Secretary of State of the State of Delaware and each other
jurisdiction in which the Company is qualified to do business as a foreign
corporation;
(x) A signed opinion of Seller's counsel, dated the Closing
Date, addressed to Parent and Purchaser, substantially in the form and to the
effect of Exhibit F attached hereto;
(xi) the Senior Lender Pay-Off Letter;
(xii) the JZ Pay-Off Letter;
(xiii) the Preferred Stock Pay-Off Letters;
(xiv) the TJC Pay-Off Letter;
(xv) the BHC Pay-Off Letter;
(xvi) certificates evidencing all of the Purchased Shares,
which certificates shall be duly endorsed in blank or accompanied by duly
executed stock powers assigning them to Purchaser;
(xvii) releases from payees of the Sale Bonus and the Phillips
1994 Employment Agreement Termination Payment;
(xviii) releases of or amendments to the change in control
provisions, as requested by Purchaser, of the Employment Agreements;
(xix) evidence of the release by Jordan/Zalaznick Capital
Corporation of the security interest in the Purchased Shares owned by Marc
Iacovelli;
(xx) evidence of the termination of the Stockholders
Agreement, dated November 21, 1994, pertaining to the capital stock of the
Company; and
(xxi) a Landlord Consent and Estoppel Certificate in
substantially the form and to the effect of Exhibit G attached hereto.
(l) Confidential Due Diligence Information. One (1) business day after
the date hereof, there shall have been made available to Parent and Purchaser
the information described in Section 6.3 of the Company Letter (the
"Confidential Due Diligence Information").
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ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION. This Agreement may be terminated and the
Acquisition and the Other Contemplated Transactions may be abandoned at any time
prior to the Closing:
(a) By mutual written consent of the parties hereto, and after January
15, 1999, by any party hereto, if the Closing has not occurred by that date and
if failure to close is not the result of a breach of this Agreement or a willful
failure to complete closing conditions by the parties hereto.
(b) By the Representative, on behalf of each Seller and the Company, if
(i) there has been a misrepresentation or breach of warranty on the part of
Parent or Purchaser in the representations and warranties contained herein and
such misrepresentation or breach of warranty, if curable, is not cured within
thirty (30) days after written notice thereof from the Representative, but in
any event prior to January 15, 1999, (ii) either of Parent or Purchaser has
committed a breach of any covenant imposed upon it hereunder and fails to cure
such breach within thirty (30) days after written notice thereof from the
Representative, but in any event prior to January 15, 1999, or (iii) any
condition to Sellers' obligations hereunder becomes incapable of fulfillment
through no fault of Sellers and is not waived by the Representative.
(c) By Parent or Purchaser if (i) there has been a misrepresentation or
breach of warranty on the part of Sellers or the Company in the representations
and warranties contained herein and such misrepresentation or breach of
warranty, if curable, is not cured within thirty (30) days after written notice
thereof from Parent and Purchaser, but in any event prior to January 15, 1999,
(ii) any Seller or the Company has committed a breach of any covenant imposed
upon it hereunder and fails to cure such breach within thirty (30) days after
written notice thereof from Parent and Purchaser, but in any event prior to
January 15, 1999, or (iii) any condition to Parent's and Purchaser's obligations
hereunder becomes incapable of fulfillment through no fault of Parent or
Purchaser and is not waived by Purchaser.
(d) By Parent and Purchaser, on the one hand, or by Representative, on
behalf of each Seller and the Company, on the other hand, if there shall be any
Law that makes consummation of the Acquisition and the Other Contemplated
Transactions illegal or otherwise prohibited, or if any Order enjoining Parent
or Purchaser, on the one hand, or the Company and Sellers, on the other hand,
from consummating the Acquisition and the Other Contemplated Transactions is
entered and such Order shall have become final and nonappealable.
SECTION 7.2 EFFECT OF TERMINATION; RIGHT TO PROCEED. (a) In the event
of termination of this Agreement by either Sellers and the Company, on the one
hand, or Parent and Purchaser, on the other hand, as provided in Section 7.1,
this Agreement forthwith shall become null and void and there shall be no
liability on the part of Sellers, the Company, Purchaser or Parent, except that
upon termination of this Agreement pursuant to:
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(i) Section 7.1(b), Parent and Purchaser, jointly and
severally, shall (x) cause the withdrawal, with prejudice, of the Litigation and
(y) pay to the Representative $500,000 by wire transfer to an account designated
by the Representative not later than three (3) business days after the date of
such termination, and upon such withdrawal of the Litigation and payment of such
amount, Parent and Purchaser shall have no further obligation to Sellers or the
Company under this Agreement or otherwise, except with respect to the agreements
contained in Sections 5.7, 5.8, 5.9 and 5.11; and
(ii) Section 7.1(c), the Company will remain liable to Parent
and Purchaser for any misrepresentation or breach of warranty or nonfulfillment
of or failure to perform any covenant or agreement of any Seller or the Company
existing at the time of such termination, and in such event Parent and Purchaser
may seek such remedies, including Losses against the Company with respect to any
such breach as are provided in this Agreement or as are otherwise available at
Law or in equity and, without limiting the generality of the foregoing, the
Company shall reimburse Parent and Purchaser for all costs and expenses
resulting from any such breach.
(b) The agreements contained in Sections 5.7, 5.8, 5.9 and 5.11 shall
survive the termination of this Agreement.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. (a)
Notwithstanding any right of Parent or Purchaser fully to investigate the
affairs of the Company and any knowledge of facts determined or determinable by
Parent or Purchaser pursuant to such investigation or right of investigation,
each of Parent and Purchaser has the right to rely fully upon the
representations, warranties, covenants and agreements of Sellers and the Company
contained in this Agreement, or listed or disclosed on any Schedule attached
hereto or in the Company Letter or in any instrument delivered in connection
with or pursuant to any of the foregoing.
(b) All representations, warranties, covenants and agreements shall
survive the execution and delivery of this Agreement and the Closing hereunder
for a period of two (2) years following the Closing Date; provided, however,
notwithstanding such survival, Sellers shall not have any claim, direct or
indirect, including for contribution, against the Company or the Subsidiary,
pursuant to this Agreement or otherwise.
SECTION 8.2 OBLIGATION OF SELLERS TO INDEMNIFY. Subject to the
limitations set forth in Section 8.5, each Seller hereby agrees to indemnify,
defend and hold harmless Parent and Purchaser (and their directors, officers,
employees, Affiliates, successors, assigns and Agents) from and against all
Claims, losses, liabilities, damages, deficiencies, judgments, settlements,
costs of investigation or other expenses (including interest, penalties and
reasonable attorneys' fees and disbursements and expenses incurred in enforcing
this indemnification or in any litigation between the parties or with third
parties) (collectively, the "Losses") suffered or incurred by Purchaser or any
of the foregoing Persons arising out of (a)
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any breach of the representations, warranties, covenants and agreements of such
Seller or the Company contained in this Agreement or in the Company Letter or
any other Transaction Document, or (b) any Claim, including any Claim arising
out of or relating to Environmental Laws, whether made before or after the date
of this Agreement, or any litigation, proceeding or governmental investigation,
including any Claim arising out of or relating to Environmental Laws, whether
commenced before or after the date of this Agreement, arising out of the
Business, or otherwise relating to Sellers, the Company or the Subsidiary, prior
to the Closing, or otherwise arising out of any act or occurrence prior to, or
any state or facts existing as of, the Closing.
SECTION 8.3 OBLIGATION OF PARENT AND PURCHASER TO INDEMNIFY . Subject
to the limitations set forth in Section 8.5, Parent and Purchaser hereby agree,
jointly and severally, to indemnify, defend and hold harmless Sellers from and
against any Losses suffered by Sellers by reason of any breach of the
representations and warranties of Parent and Purchaser or of the covenants and
agreements of Parent or Purchaser contained in this Agreement or in the Company
Letter or any other Transaction Document.
SECTION 8.4 NOTICE AND OPPORTUNITY TO DEFEND THIRD PARTY CLAIMS.
(a) Promptly after receipt by any party hereto (the "Indemnitee") of notice of
any demand, claim, circumstance or Tax Audit which would or might give rise to a
claim or the commencement (or threatened commencement) of any action, proceeding
or investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give prompt notice thereof (the "Claims Notice") to the party
or parties obligated to provide indemnification pursuant to Section 8.2 or 8.3
(the "Indemnifying Party"). The Claims Notice shall describe the Asserted
Liability in reasonable detail and shall indicate the amount (estimated, if
necessary, and to the extent feasible) of the Loss that has been or may be
suffered by the Indemnitee.
(b) The Indemnifying Party may elect to defend, at its own expense and
with its own counsel satisfactory to Indemnitee, any Asserted Liability, unless
(i) the Asserted Liability seeks an Order, injunction or other equitable or
declaratory relief against the Indemnitee, or (ii) the Indemnitee shall have
reasonably concluded that (x) there is a conflict of interest between the
Indemnitee and the Indemnifying Party in the conduct of such defense, or (y) the
Indemnitee shall have one or more defenses not available to the Indemnifying
Party; provided, however, that the Indemnifying Party shall not be permitted to
make such election if the Indemnifying Party fails to provide Indemnitee with
evidence reasonably acceptable to Indemnitee that the Indemnifying Party will
have the financial resources to defend against the Asserted Liability and
fulfill its indemnification obligations hereunder. If the Indemnifying Party
elects to defend such Asserted Liability, it shall within thirty (30) calendar
days (or sooner, if the nature of the Asserted Liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee shall cooperate, at the
expense of the Indemnifying Party, in the defense of such Asserted Liability. If
the Indemnifying Party assumes the defense against any Asserted Liability it
will be conclusively established for purposes of this Agreement that such
Asserted Liability is within the scope of, and subject to, indemnification. If
the Indemnifying Party elects not to defend the Asserted Liability, is not
permitted to defend the Asserted Liability by reason of the first sentence of
this Section 8.4(b), fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement
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with respect to such Asserted Liability, the Indemnitee may pay, compromise or
defend such Asserted Liability at the sole cost and expense of the Indemnifying
Party. Notwithstanding the foregoing, neither the Indemnifying Party nor the
Indemnitee may settle or compromise any claim over the reasonable written
objection of the other, provided, however, that the Indemnitee may settle or
compromise any claim as to which the Indemnifying Party has failed to notify the
Indemnitee of its election as herein provided or is contesting its
indemnification obligations hereunder. In any event, the Indemnitee and the
Indemnifying Party may participate, at their own expense, in the defense of such
Asserted Liability. If the Indemnifying Party chooses to defend any Asserted
Liability, the Indemnitee shall make available to the Indemnifying Party any
books, records or other documents within its control that are necessary or
appropriate for such defense. Any expenses of any Indemnitee for which
indemnification is available hereunder shall be paid upon written demand
therefor.
SECTION 8.5 LIMITATION ON INDEMNIFICATION; PAYMENT OF INDEMNIFICATION
AMOUNTS. (a) Sellers' liability for indemnifiable damages pursuant to this
Article VIII shall accrue but shall not be payable until the amount of Losses
suffered or incurred by Parent and Purchaser (and their directors, officers,
employees, Affiliates, successors, assigns and other Agents) exceeds in the
aggregate $200,000 (the "Basket Amount"), and then Sellers shall be responsible
for the payment only of amounts in excess of such Basket Amount as may be
payable by Sellers pursuant to this Article VIII (subject to the limitation set
forth in paragraph (b) below); provided, however, that all Losses arising as a
result of an inaccuracy or breach of the representations and warranties
contained in Sections 2.1 (Title to Shares) and 3.14 (Taxes) shall become
immediately due and payable without giving effect to the Basket Amount (subject
to the limitation set forth in paragraph (b) below) (except that any Losses
arising as a result of an inaccuracy or breach of the representation and
warranty contained in Section 3.14(g) shall not be payable until the amount of
such Losses so incurred exceeds $100,000, at which time any and all such Losses
shall become immediately due and payable without giving effect to such amount in
accordance with this proviso).
(b) Any amounts payable by Sellers under this Article VIII shall be
payable only to the extent that Escrowed Funds are available, and when such
funds are fully released, Sellers shall be released from all Claims arising in
connection with the Acquisition and the Other Contemplated Transactions, except
with respect to (i) the Noncompetition and Nonsolicitation Agreement referred to
in Section 6.3(k)(v) and (ii) the Liabilities of each of Asa R. Phillips, Stan
Scarborough and Richard A. Tucker under their respective Employment Agreements.
(c) The parties hereto will act in good faith so that any amounts
payable by an Indemnifying Party to an Indemnitee pursuant to this Article VIII
shall be treated, for Tax purposes, as an adjustment to the Purchase Price,
unless a Final Determination with respect to an Indemnitee or any of its
Affiliates causes any such payment not to be treated as an adjustment to
Purchase Price for United States federal income tax purposes. If such payment
cannot be treated as an adjustment to the Purchase Price for Tax purposes, then
such indemnification payment shall be increased to take account of any net Tax
cost incurred by the Indemnitee as a result of the receipt or accrual of such
payments.
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(d) Parent and Purchaser will not be entitled to indemnification:
(i) with respect to punitive damages, except where such
damages are incurred by or awarded to a third party making a claim against such
an indemnitee;
(ii) with respect to any claim by or liability to any employee
employed by the Company or the Subsidiary arising as the result of the
termination of such employee's employment with the Company or the Subsidiary
subsequent to the Closing Date or any action by Purchaser subsequent to the
Closing Date (except with respect to any misrepresentation or breach of a
warranty or covenant by the Company);
(iii) to the extent of any reserves, accruals or amounts
recorded as of the Closing Date with respect to any obligation, liability or
matter for which reserves or accruals are reflected in the Interim Statements;
and
(iv) with respect to any obligation, liability or matter,
including environmental remediation and clean-up, arising under Laws that arise
or are promulgated or announced after the Closing Date.
(e) Any amounts payable under this Article VIII shall be calculated
after giving effect to any net proceeds actually received from insurance
policies covering the damage, loss, liability or expense that is the subject to
the claim for indemnity.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 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 Parent or Purchaser, one copy to:
Lund International Holdings, Inc.
911 Lund Boulevard
Anoka, Minnesota 55303
Telecopier: (612) 576-4297
Attention: President & Chief Executive Officer
with a simultaneous copy to:
Lund International Holdings, Inc.
c/o Harvest Partners, Inc.
280 Park Avenue, 33rd Floor
New York, New York 10017
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Telecopier: (212) 593-0734
Attention: Ira D. Kleinman
with a simultaneous copy to:
Thelen Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Telecopier: (212) 603-2001
Attention: Leonard Gubar, Esq.
(ii) If to Sellers or the Company, one copy to:
TJC Management Corporation,
as Representative
c/o The Jordan Company
767 Fifth Avenue
48th Floor
New York, New York 10019
Telecopier: (212) 572-0817
Attention: Jonathan F. Boucher
with a simultaneous copy to:
Bryan Cave LLP
3500 One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
Telecopier: (816) 374-3300
Attention: G. Robert Fisher, Esq.
(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 9.1(a) (with confirmation of transmission), or (ii) if
given by any other means, when received at the address specified in Section
9.1(a). Any party by notice given in accordance with this Section 8.1 to the
other party 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 9.2 ENTIRE AGREEMENT. This Agreement (including the Exhibits
and Schedules hereto and to the Company Letter) and the collateral agreements
executed in connection with the consummation of the Acquisition and the Other
Contemplated Transactions contain the entire agreement between the parties with
respect to the subject matter hereof and related transactions and supersede all
prior agreements, written or oral, with respect thereto.
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SECTION 9.3 WAIVERS AND AMENDMENTS; NON-CONTRACTUAL REMEDIES;
PRESERVATION OF REMEDIES. This Agreement may be amended, superseded, canceled,
renewed or extended only by a written instrument signed by the parties hereto.
The provisions hereof may be waived in writing by the parties hereto. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege. Except as otherwise
provided herein, the rights and remedies herein provided are cumulative and are
not exclusive of any rights or remedies that any party may otherwise have at law
or in equity.
SECTION 9.4 GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflict of laws rules thereof.
SECTION 9.5 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF
JURY TRIAL. IN THE EVENT ANY PARTY TO THIS AGREEMENT COMMENCES ANY LITIGATION,
PROCEEDING OR OTHER LEGAL ACTION IN CONNECTION WITH OR RELATING TO THIS
AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY MATTERS DESCRIBED OR
CONTEMPLATED HEREIN OR THEREIN, THE PARTIES TO THIS AGREEMENT HEREBY (A) AGREE
UNDER ALL CIRCUMSTANCES ABSOLUTELY AND IRREVOCABLY TO INSTITUTE ANY LITIGATION,
PROCEEDING OR OTHER LEGAL ACTION IN A COURT OF COMPETENT JURISDICTION LOCATED
WITHIN THE STATE OF NEW YORK AND THE COUNTY OF NEW YORK, WHETHER A STATE OR
FEDERAL COURT; (B) AGREE THAT IN THE EVENT OF ANY SUCH LITIGATION, PROCEEDING OR
ACTION, SUCH PARTIES WILL CONSENT AND SUBMIT TO PERSONAL JURISDICTION IN ANY
SUCH COURT DESCRIBED IN CLAUSE (A) OF THIS SECTION AND TO SERVICE OF PROCESS
UPON THEM IN ACCORDANCE WITH THE RULES AND STATUTES GOVERNING SERVICE OF PROCESS
(IT BEING UNDERSTOOD THAT NOTHING IN THIS SECTION SHALL BE DEEMED TO PREVENT ANY
PARTY FROM SEEKING TO REMOVE ANY ACTION TO A FEDERAL COURT IN NEW YORK); (C)
AGREE TO WAIVE TO THE FULL EXTENT PERMITTED BY LAW ANY OBJECTION THAT THEY MAY
NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH LITIGATION, PROCEEDING OR ACTION
IN ANY SUCH COURT OR THAT ANY SUCH LITIGATION, PROCEEDING OR ACTION WAS BROUGHT
IN AN INCONVENIENT FORUM; (D) DESIGNATE, APPOINT AND DIRECT CORPORATION SERVICE
COMPANY AS ITS AUTHORIZED AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ANY AND ALL
PROCESS AND DOCUMENTS IN ANY LEGAL PROCEEDING IN THE STATE OF NEW YORK; (E)
AGREE TO NOTIFY THE OTHER PARTIES TO THIS AGREEMENT IMMEDIATELY IF SUCH AGENT
SHALL REFUSE TO ACT, OR BE PREVENTED FROM ACTING, AS AGENT AND, IN SUCH EVENT,
PROMPTLY TO DESIGNATE ANOTHER AGENT IN THE STATE OF NEW YORK, SATISFACTORY TO
SELLERS AND PURCHASER, TO SERVE IN PLACE OF SUCH AGENT AND DELIVER TO THE OTHER
PARTY WRITTEN EVIDENCE OF SUCH SUBSTITUTE AGENT'S
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ACCEPTANCE OF SUCH DESIGNATION; (F) AGREE, AS AN ALTERNATIVE METHOD OF SERVICE
OF PROCESS IN ANY LEGAL PROCEEDING, TO MAILING OF COPIES OF SERVICE OF PROCESS
TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 9.1 FOR COMMUNICATIONS TO SUCH
PARTY; (G) AGREE THAT ANY SERVICE MADE AS PROVIDED HEREIN SHALL BE EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT; AND (H) AGREE THAT NOTHING HEREIN SHALL AFFECT
THE RIGHTS OF ANY PARTY TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY
DISPUTE IN CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY TRANSACTION
DOCUMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, AND AGREE
TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
SECTION 9.6 BINDING EFFECT; NO ASSIGNMENT. This Agreement and all of
its provisions, rights and obligations shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors, heirs and
legal representatives. This Agreement may not be assigned (including by
operation of Law) by a party without the express written consent of Parent and
Purchaser (in the case of assignment by Sellers or the Company) or the
Representative (in the case of assignment by Parent or Purchaser) and any
purported assignment, unless so consented to, shall be void and without effect.
Nothing herein express or implied is intended or shall be construed to confer
upon or to give anyone other than the parties hereto and their respective heirs,
legal representatives and successors any rights or benefits under or by reason
of this Agreement and no other party shall have any right to enforce any of the
provisions of this Agreement.
SECTION 9.7 EXHIBITS. All Exhibits, Schedules attached hereto and the
Company Letter are hereby incorporated by reference into, and made a part of,
this Agreement.
SECTION 9.8 SEVERABILITY. If any provision of this Agreement for any
reason shall be held to be illegal, invalid or unenforceable, such illegality
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such illegal, invalid or unenforceable provision had never
been included herein.
SECTION 9.9 COUNTERPARTS. This 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.
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ARTICLE X
DEFINITIONS
SECTION 10.1 DEFINITIONS. (a) The following terms, as used herein, have the
following meanings:
"Adjusted EBITDA" is defined, without duplication, as net income of the
Company and the Subsidiary, on a consolidated basis, before income taxes,
interest expense, The Jordan Company LLC and/or affiliates management fees,
depreciation and amortization, financing fees, gain or loss on revalued assets,
market development costs, general corporate overhead charges (which charges do
not reflect actual operating costs of the Company or Subsidiary), and management
bonus expenses in excess of 4% of adjusted operating income (as defined in the
executive employment agreements). Market development costs are defined as
discreet discounts and allowances or payments made to new or existing customers
for the purpose of obtaining new business or expanding existing business.
"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 refer to, this agreement as it from
time to time may be amended.
"Assets" means properties, rights, interests and assets of every kind,
real, personal or mixed, tangible and intangible, used or usable in the
Business.
The term "audit" or "audited" when used in regard to financial
statements means an examination of the financial statements by a firm of
independent certified public accountants in accordance with generally accepted
auditing standards for the purpose of expressing an opinion thereon.
"Certificate of Incorporation" means, in the case of any corporation,
the certificate of incorporation, articles of incorporation or charter of a
corporation, howsoever denominated under the laws of the jurisdiction of its
incorporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Debt" means (i) money borrowed by the Company or the
Subsidiary from any Person; (ii) any indebtedness of the Company or the
Subsidiary arising under leases required to be capitalized under GAAP or
evidenced by a note, bond, debenture or similar instrument; (iii) any
indebtedness of the Company or the Subsidiary arising under purchase money
obligations or representing the deferred purchase price of property and services
(other than current trade payables incurred in the ordinary course of the
Business); and (iv) any Liability of the Company or the Subsidiary under any
guaranty, letter of credit, performance credit or other agreement having the
effect of assuring a creditor against loss.
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"Company Letter" means that certain letter, dated as of the date
hereof, of the Company delivered to Parent and Purchaser.
"Contract" means any contract, agreement, indenture, note, bond, lease,
conditional sale contract, mortgage, license, franchise, instrument, commitment
or other binding arrangement, whether written or oral.
The term "control", with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other Persons by or through stock ownership, agency or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Credit Agreement" means the Revolving Credit and Term Loan Agreement,
dated November 21, 1994, as amended through the date hereof, among the Company,
the Subsidiary and BankBoston, N.A., formerly known as The First National Bank
of Boston, as agent for itself and other lending institutions.
"Employment Agreements" means the Employment and Noncompetition Agreements
by and between the Subsidiary and each of Asa R. Phillips, Stan Scarborough,
Richard A. Tucker and Todd A. Guthrie, each dated as of July 1, 1998.
"Environmental Laws" means any and all Laws (including common law),
Orders, Permits, agreements or any other requirement or restriction promulgated,
imposed, enacted or issued by any federal, state, local and/or foreign
Governmental Bodies relating to human health or the environment, including the
emission, discharge or Release of pollutants, contaminants, Hazardous Substances
or wastes into the environment (which includes ambient air, surface water,
ground water, or land), and the remediation thereof, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof, including the Clean Air
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Emergency Planning and Community Right To Know Act, the Federal Water
Pollution Control Act, the Oil Pollution Act of 1990, the Pollution Prevention
Act of 1990, the Resource Conservation and Recovery Act, the Safe Drinking Water
Act, the Endangered Species Act, the Toxic Substances Control Act, each as
amended, any state or local counterparts thereof and any state or local laws of
a similar nature for the protection of human health and welfare.
"Environmental Permits" with respect to the Company or the Subsidiary
means those Permits, authorizations, approvals and permission required to be
obtained by the Company or the Subsidiary under Environmental Laws in connection
with the Business or the use and operation of the Assets owned or leased by
them.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"Final Determination" means (i) with respect to United States federal
income Taxes, a "determination" as defined in Section 1313(a) of the Code or
execution of an Internal Revenue Service Form 870AD; (ii) with respect to Taxes
other than United States federal income Taxes and any final determination of
liability in respect of a Tax provided for under applicable Law, and shall
include the payment of Tax by Purchaser or the Company, whichever is responsible
for payment of such Tax under applicable law, with respect to any item
disallowed by a Tax Authority, provided that the other party is notified that
Purchaser or the Company, whichever is responsible, determines that no action
should be taken to recoup such disallowed item, and such other party agrees with
such determination; and (iii) any final determination of liability in respect of
a Loss provided for under applicable law.
"GAAP" means generally accepted accounting principles in effect on the
date hereof as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States.
"Hazardous Substances" means any dangerous, toxic, reactive, corrosive,
ignitable, radioactive, caustic or otherwise hazardous material, pollutant,
contaminant, chemical, waste or substance defined, listed or described as any of
such in or governed by any Environmental Law, including urea-formaldehyde,
solvents, acids, bases, heavy metals, polychlorinated biphenyls, asbestos or
asbestos-containing materials, radon, explosives, known carcinogens, petroleum
and its derivatives or petroleum products.
"Inventory" means, as of any date, collectively, all inventories of
merchandise and other products owned by the Company or the Subsidiary and held
for resale or for distribution, together with packaging and samples thereof
owned by the Company or the Subsidiary as of such date.
"IRS" means the Internal Revenue Service.
"JZ" means JZ Equity Partners PLC, a public investment trust
incorporated in England, formerly known as MCIT PLC and Mezzanine Capital &
Income Trust 2001 PLC.
"JZ Purchase Agreement" means the Purchase Agreement, dated as of
November 21, 1994, as amended through the date hereof, between the Company and
JZ.
"Knowledge of the Company" shall mean actual knowledge, after diligent
inquiry and after performance of the duties reasonably within the scope of each
such person's responsibility in the position held, of Asa R. Phillips, Stan
Scarborough, Richard A. Tucker and Todd A. Guthrie.
"Liability" means any direct or indirect indebtedness, liability,
assessment, claim, loss, damage, deficiency, obligation or responsibility, fixed
or unfixed, choate or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, actual or potential,
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contingent or otherwise (including any liability under any guaranties, letters
of credit, performance credits or with respect to insurance loss accruals).
"Lien" means, with respect to any Asset, any mortgage, lien (including
mechanics, warehousemen, laborers and landlords 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.
"Material Adverse Effect" shall mean an effect on the Condition of the
Business which is or would be materially adverse; provided, however, that with
respect to the matters and conditions set forth in Sections 6.1, 6.2, 6.3 and
Article VII, if all such effects, conditions or matters in the aggregate would
have (i) an adverse effect of more than $1,000,000 on Adjusted EBITDA, on a
consolidated basis, during any 12 month period, or (ii) an adverse effect of
more than $3,200,000 on the tangible net worth of the Company, on a consolidated
basis, it nonexclusively shall be deemed to constitute a Material Adverse
Effect.
"Ownership Percentage" means shall mean the percentage set forth
opposite each Seller's name on Schedule A.
"Pay-Off Letters" means the Senior Lender Pay-Off Letter, the JZ
Pay-Off Letter, the Preferred Stock Pay-Off Letters, and the TJC Pay-Off Letter
and the BHC Pay-Off Letter.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity, including a government or political subdivision or
an agency or instrumentality thereof.
"Phillips 1994 Employment Agreement Termination Payment" means the
$550,000 payment by the Subsidiary to Asa R. Phillips in connection with his
Employment and Noncompetition Agreement with the Subsidiary, dated as of
November 20, 1994.
"Preferred Stock" means the Nonvoting Preferred Stock and the Special
Voting Preferred Stock.
"Receivables" means as of any date any trade accounts receivable of the
Company or the Subsidiary arising in the ordinary course of the Business.
"Regulatory Actions" means any claim, demand, action, suit or
proceeding brought or instigated by any Governmental Body in connection with any
Environmental Law, including civil, criminal and/or administrative proceedings,
whether or not seeking costs, damages, penalties, expenses or injunctive relief.
"Release" means the intentional or unintentional, spilling, leaking,
disposing, discharging or disturbance of, or emitting, depositing, injecting,
leaching, escaping or any other release or threatened release, however defined,
of any Hazardous Substance.
"Representative" is defined in the Representative Agreement.
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"Representative Agreement" means the Representative Agreement, dated as
of the date hereof, by and among the parties hereto and TJC Management
Corporation.
"Sale Bonus" means the maximum amount of the special bonus (before any
deduction or other provision deferring payment of the Sale Bonus until release
of the Escrowed Funds), contingent upon consummation of this Agreement and the
Acquisition and the Other Contemplated Transactions, payable to Asa R. Phillips,
Stan Scarborough, Richard A. Tucker and Todd A. Guthrie referenced in Section
10.1 of the Company Letter.
"Tax" (including, with correlative meaning, the terms "Taxes" and
"Taxable") means (i) any net income, gross income, gross receipts, sales, use,
ad valorem, transfer, transfer gains, franchise, profits, license, withholding,
payroll, employment, social security (or similar), unemployment, disability,
excise, severance, stamp, rent, recording, registration, occupation, premium,
real or personal property, intangibles, environmental (including taxes under
Code ss. 59A) or windfall profits tax, alternative or add-on minimum tax,
capital stock, customs duty or other tax, fee, duty, levy, impost, assessment or
charge of any kind whatsoever (including taxes assessed to real property and
water and sewer rents relating thereto), together with any interest and any
fine, penalty, addition to tax or additional amount or deductions imposed by any
Governmental Body (domestic or foreign) (a "Tax Authority") responsible for the
imposition of any such tax, whether disputed or not, including any liability
arising under any tax sharing agreement, with respect to the Company or the
Subsidiary, the Business or the Assets (or the transfer thereof); (ii) any
liability for the payment of any amount of the type described in the immediately
preceding clause (i) as a result of the Company or the Subsidiary being a member
of an affiliated or combined group with, or as a successor to or transferee
from, any other corporation at any time on or prior to the Closing Date; and
(iii) any liability of the Company or the Subsidiary for the payment of any
amounts of the type described in the immediately preceding clause (i) as a
result of a contractual obligation to indemnify any other person.
"Tax Return" means any return or report (including elections,
declarations, disclosures, schedules, attachments, estimates and information
returns) relating to Taxes required to be supplied to any Tax Authority, and
including any amendment thereof.
"TJC Consulting Agreement" means the Management Consulting Agreement,
dated as of November 21, 1994, between TJC Management Corporation and the
Company, as amended.
"Transaction Documents" means, collectively, this Agreement and each of
the other agreements, instruments, certificates and other documents to be
executed and delivered by all or some of the parties hereto (including the
Representative) in connection with the consummation of the Acquisition and the
Other Contemplated Transactions.
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
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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 2
Agents 5.2
Annual Statements 3.5
Asserted Liability 8.4(a)
Audited Balance Sheet 1.3(c)(i)
Basket Amount 8.5(a)
BHC Pay-Off Letter 1.1(b)(vi)
Business Recital 1
Cash Decrease Amount 1.3(a)
Cash Increase Amount 1.3(a)
Claims 3.13
Claims Notice 8.4(a)
Class A Common Stock 3.1(b)
Class B Common Stock 3.1(b)
Closing 1.4
Closing Date 1.4
Common Stock 3.1(b)
Company Preamble
Company Required Consents 3.3
Condition of the Business 3.9(a)
Confidential Due Diligence Information 6.3(l)
Confidential Information 5.8(c)
Controlled Group 3.15(c)
Due Diligence Agents 5.2
Employee Benefit Plan 3.15(a)
Escrow 1.1(a)(i)
Escrow Agreement 1.1(a)(i)
Escrowed Funds 1.1(a)(i)
Governmental Bodies 3.18
HSR Act 5.11
Indemnifying Party 8.4(a)
Indemnitee 8.4(a)
Insurance Policies 3.17
Intellectual Property Rights 3.12
Interim Statements 3.5
JZ Pay-Off Letter 1.1(b)(ii)
Latest Balance Sheet Date 3.6
Laws 3.18
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Leased Property 3.10(b)
Litigation 5.8
Losses 8.2
Major Customers 3.21
Major Suppliers 3.21
Net Purchase Price 1.1(a)(ii)
Nonvoting Preferred Stock 3.1(b)
Objection Notice 1.3(c)(ii)
Orders 3.18
Other Contemplated Transactions Recital 3
Parent Preamble
PBGC 3.15(c)(vi)
Permits 3.19
Preferred Stock Pay-Off Letters 1.1(a)(iv)
Purchase Price 1.1(a)
Purchased Shares 1.1(a)
Purchaser Preamble
Resolving Accounting Firm 1.3(c)(iii)
Sellers Preamble
Senior Lender Pay-Off Letter 1.1(b)(i)
Special Voting Preferred Stock 3.1(b)
Subsidiary Recital 1
Tax Audit 3.14(a)(ix)
Tax Deficiency 3.14(a)(iv)
TJC Pay-Off Letter 1.1(b)(v)
Working Capital 1.3(a)
Working Capital Decrease Amount 1.3(a)
Working Capital Increase Amount 1.3(a)
Year 2000 Problem 3.25
SECTION 10.2 INTERPRETATION. Unless the context otherwise requires, the
terms defined in Section 10.1 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. All accounting terms defined in Section 10.1,
and those accounting terms used in this Agreement not defined in Section 10.1,
except as otherwise expressly provided herein, shall have the meanings
customarily given thereto in accordance with GAAP. When a reference is made in
this Agreement to Sections or Exhibits, such references shall be to a Section of
or Exhibit to 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".
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
VENTSHADE HOLDINGS, INC.
By: /s/ Jonathan F. Boucher
----------------------------------
Name: Jonathan F. Boucher
Title: President
LUND INTERNATIONAL HOLDINGS, INC.
By: /s/ Ira D. Kleinman
----------------------------------
Name: Ira D. Kleinman
Title: Chairman of the Board
NEW HOLDINGS, INC.
By: /s/ Ira D. Kleinman
----------------------------------
Name: Ira D. Kleinman
Title: Chairman of the Board
[Signatures of Sellers on following pages.]
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/s/ Jonathan F. Boucher
----------------------------------
JONATHAN F. BOUCHER
/s/ John M. Camp III
----------------------------------
JOHN M. CAMP III
/s/ A. Richard Caputo
----------------------------------
A. RICHARD CAPUTO
/s/ Marc Iacovelli
----------------------------------
MARC IACOVELLI
JAMES E. JORDAN JR.
PROFIT SHARING PLAN & TRUST
By: /s/ James E. Jordan Jr.
-----------------------------
Name: James E. Jordan Jr.
Title:
JOHN M. CAMP III
PROFIT SHARING PLAN & TRUST
By: /s/ John M. Camp III
-----------------------------
Name: John M. Camp III
Title: Trustee
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THE JORDAN TRUST
By: /s/ John W. Jordan II
------------------------------
Name: John W. Jordan II
Title: Trustee
JZ EQUITY PARTNERS PLC
By: /s/ James E. Jordan Jr.
-----------------------------
Name: James E. Jordan Jr.
Title: Partner
LEUCADIA INVESTORS, INC.
By: /s/ Joseph A. Orlando
-----------------------------
Name: Joseph A. Orlando
Title: Vice President
/s/ John R. Lowden
----------------------------------
JOHN R. LOWDEN
/s/ Adam E. Max
----------------------------------
ADAM E. MAX
/s/ Asa R. Phillips
------------------------------------
ASA R. PHILLIPS
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/s/ Paul Rodzevik
------------------------------------
PAUL RODZEVIK
/s/ Stan Scarborough
------------------------------------
STAN SCARBOROUGH
/s/ Richard A. Tucker
------------------------------------
RICHARD A. TUCKER
/s/ David W. Zalaznick
------------------------------------
DAVID W. ZALAZNICK
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Section 4.2
PARENT AND PURCHASER CONSENTS
Reference is made to the Credit Agreement, dated as of February 27,
1998 (the "Lund/Heller Credit Agreement"), by and among Parent, certain of its
affiliates, the lenders named therein and Heller Financial, Inc., as agent and
as lender. In order to consummate the Acquisition and the Other Contemplated
Transactions, Parent is required to obtain the consent of the lenders named in
the Lund/Heller Credit Agreement and, as of the date hereof, such consent has
not been obtained.
EXHIBIT 10.2
INVESTMENT AGREEMENT
dated as of December 22, 1998
among
LIH HOLDINGS III, LLC
BANCBOSTON CAPITAL INC.
LIBERTY MUTUAL INSURANCE COMPANY
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
MASSMUTUAL CORPORATE INVESTORS
MASSMUTUAL PARTICIPATION INVESTORS
MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED
and
LUND INTERNATIONAL HOLDINGS, INC.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 2
1.1 Definitions 2
1.2 Certain Conventions 7
ARTICLE II SALE OF SHARES; CLOSING 7
2.1 Purchase and Sale 7
2.2 Closing 7
2.3 Obligations of Purchasers Several and Not Joint 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 8
3.1 Organization of the Company 8
3.2 Power and Authority 8
3.3 Capital 9
3.4 Subsidiaries 10
3.5 No Conflicts 10
3.6 Governmental Approvals and Filings 11
3.7 SEC Documents; Financial Statements 11
3.8 Absence of Changes 12
3.9 Legal Proceedings 12
3.10 Other Negotiations; Brokers 12
3.11 Exemption from Registration; Restrictions on Offer and Sale
of Same or Similar Securities 12
3.12 Other Agreements 13
3.13 Holding Company Act and Investment Company Act Status 13
3.14 Stock Purchase Agreement 13
3.15 Disclosure 13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 14
4.1 Organization; Power and Authority 14
4.2 No Conflicts 14
4.3 Purchase for Investment 14
4.4 Brokers 15
ARTICLE V COVENANTS OF THE COMPANY 15
5.1 Regulatory and Other Approvals 15
5.2 Reservation of Shares 16
5.3 Use of Proceeds 16
5.4 Stockholders' Meeting 16
5.5 Nasdaq National Market 16
5.6 Notice and Cure 16
5.7 Fulfillment of Conditions 17
ARTICLE VI CONDITIONS TO OBLIGATIONS OF THE PURCHASERS 17
6.1 Representations and Warranties 17
6.2 Performance 17
6.3 Officers'Certificates 17
6.4 Orders and Laws 17
6.5 Regulatory Consents and Approvals 17
6.6 Third Party Consents 18
6.7 Opinion of Counsel 18
6.8 Certificate of Designation 18
6.9 Transaction Documents 18
6.10 Delivery of Certificates 18
6.11 Financing 18
6.12 Consummation of the Acquisition 19
6.13 Nasdaq National Market 19
6.14 Proceedings 19
ARTICLE VII CONDITIONS TO OBLIGATIONS OF THE COMPANY 19
7.1 Representations and Warranties 19
7.2 Performance 19
7.3 Certificate 19
7.4 Orders and Laws 20
7.5 Transaction Documents 20
7.6 Financing 20
ARTICLE VIII SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS 20
ARTICLE IX INDEMNIFICATION 21
9.1 Indemnification 21
9.2 Method of Asserting Claims 21
ARTICLE X TERMINATION 23
10.1 Termination 23
10.2 Effect of Termination 24
ARTICLE XI MISCELLANEOUS 24
11.1 Notices 24
11.2 Entire Agreement 25
11.3 Fees and Expenses 25
11.4 Public Announcements 25
11.5 Further Assurances 26
11.6 Waiver 26
11.7 Amendment 26
11.8 Third Party Beneficiaries 26
11.9 No Assignment; Binding Effect 26
11.10 Headings; Construction 27
11.11 Invalid Provisions 27
11.12 Governing Law 27
11.13 Counterparts 27
11.14 Limited Recourse 27
11.15 Consent to Jurisdiction and Service of Process 27
<PAGE>
EXHIBITS
Exhibit A -- Form of Second Amended and Restated Governance Agreement
Exhibit B -- Form of Rights Agreement
Exhibit C -- Form of Series B Certificate of Designation
Exhibit D-1 -- Form of Company Officer's Certificate
Exhibit D-2 -- Form of Company Secretary's Certificate
Exhibit E -- Form of Opinion of Leonard, Street and Deinard
Exhibit F -- Form of Closing Certificate for each Purchaser
SCHEDULES
Schedule I -- Purchased Securities; Purchase Price; Address for Notices
Schedule 3.3 -- Capital of Company
Schedule 3.5 -- No Conflicts
Schedule 3.8 -- Absence of Changes
Schedule 4.1 -- Purchaser's Entity and Jurisdiction
<PAGE>
INVESTMENT AGREEMENT dated as of December 22, 1998, among LIH HOLDINGS
III, LLC, a Delaware limited liability company ("LIH Holdings III"),
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, a Massachusetts corporation
("MassMutual"), MASSMUTUAL CORPORATE INVESTORS, a Massachusetts business trust
("MMCI"), MASSMUTUAL PARTICIPATION INVESTORS, a Massachusetts business trust
("MMPI") and MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED, a Cayman Islands
corporation ("MMCVP"; MassMutual, MMCI, MMPI and MMCVP being hereinafter
collectively referred to as the "MassMutual Entities"), Liberty Mutual Insurance
Company, a Massachusetts corporation ("Liberty Mutual"), and BancBoston Capital
Inc., a Massachusetts corporation ("BancBoston"; LIH Holdings III, the
MassMutual Entities, Liberty Mutual and BancBoston being hereinafter
collectively referred to as the "Purchasers"), and LUND INTERNATIONAL HOLDINGS,
INC., a Delaware corporation (the "Company").
WHEREAS, (a) LIH Holdings, LLC, a Delaware limited liability company
("LIH Holdings I"), is presently an Affiliate of LIH Holdings III and the owner
of 1,686,893 shares of the Common Stock, par value $0.10 per share (the "Common
Stock"), of the Company and (ii) LIH Holdings II, LLC, a Delaware limited
liability company ("LIH Holdings II"), is presently an Affiliate of LIH Holdings
III and the owner of 874,400 shares of Common Stock and 1,493,398 shares of the
Class B-1 Common Stock (the "Class B-1 Common Stock"), of the Company;
WHEREAS, pursuant to the Stock Purchase Agreement dated as of December
__, 1998 (as the same may be amended, supplemented or otherwise modified from
time to time in accordance with the provisions thereof, the "Stock Purchase
Agreement"), the Company agreed, subject to the conditions therein contained, to
acquire (the "Acquisition"), all the outstanding capital stock of Auto Ventshade
Company (the "Target") for a cash purchase price equal to $66 million;
WHEREAS, in order to provide a portion of the funds required for the
Acquisition, on the terms and subject to the conditions set forth herein, the
Company desires to sell to the Purchasers, and each of the Purchasers desires to
purchase from the Company, in the aggregate, 1,047,412 shares of Common Stock
and 252,401.8 shares of Series B Preferred Stock, par value $.01 per share (the
"Series B Preferred Stock"), of the Company, all for an aggregate purchase price
equal to $25,000,000 (the "Aggregate Purchase Price");
WHEREAS, in order to provide the balance of the funds required for the
Acquisition, the Company has entered into (i) the Heller Credit Agreement dated
as of December __, 1998 between the Company and Heller Financial, Inc. (as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with the provisions thereof, the "Heller Credit Agreement") and (ii)
each of the Securities Purchase Agreements dated as of December __, 1998 between
the Company, certain of its subsidiaries, each of the MassMutual Entities and
National City Venture Corporation, a Delaware corporation (as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
the provisions thereof, collectively, the "Securities Purchase Agreements"); and
WHEREAS, the amount of the aforementioned securities to be purchased by
each Purchaser pursuant hereto and the portion of the Aggregate Purchase Price
to be paid by such Purchaser therefor are as set forth opposite such Purchaser's
name in Schedule I.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
I. ARTICLE
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following
defined terms shall have the respective meanings indicated below:
"Acquisition" has the meaning ascribed to it in the recitals hereto.
"Actions or Proceeding" means any action, suit, proceeding, arbitration
or Governmental or Regulatory Authority investigation or audit.
"Aggregate Purchase Price" has the meaning ascribed to it in the
recitals hereto.
"Affiliate" means, as applied to any Person, (i) any other Person
directly or indirectly controlling, controlled by or under common control with
that Person, (ii) any other Person that owns or controls 5% or more of any class
of equity securities (including any equity securities issuable upon the exercise
of any Option) of that Person or any of its Affiliates, or (iii) any member,
director, partner, officer, agent, employee or relative of that Person. For the
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling", "controlled by", and "under common control with"), as
applied to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through ownership of voting securities or by Contract or
otherwise. For the purpose of this Agreement, (i) none of the Purchasers, LIH
Holdings I, LIH Holdings II or any of their respective Affiliates (other than
the Company and its Subsidiaries) shall be deemed to be "Affiliates" of the
Company or any Subsidiary and (ii) neither the Company nor any Subsidiary shall
be deemed to be an "Affiliate" of any Purchaser, LIH Holdings I, LIH Holdings II
or any of their respective Affiliates (other than the Company and its
Subsidiaries).
"Agreement" means this Investment Agreement and the Schedules and
Exhibits hereto and the certificates delivered in connection herewith, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with the provisions hereof.
"Amended and Restated Governance Agreement" means the Second Amended
and Restated Governance Agreement, dated as of the date hereof, among the LIH
Entities and the Company, substantially in the form of Exhibit A, as the same
may be amended, supplemented or otherwise modified from time to time in
accordance with the provisions thereof.
"Assets and Properties" of any Person means all assets and properties
of every kind, nature, character and description (whether real, personal or
mixed, whether tangible or intangible, whether absolute, accrued, contingent,
fixed or otherwise and wherever situated), including the goodwill related
thereto, operated, owned or leased by such Person, including cash, cash
equivalents, accounts and notes receivable, chattel paper, documents,
instruments, general intangibles, real estate, equipment, inventory, goods and
intellectual property.
"BancBoston" has the meaning ascribed to it in the introductory
paragraph hereto.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of New York or the State of Minnesota are
authorized or obligated to close.
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"Business or Condition of the Company" means the business, condition
(financial or otherwise), results of operations, and Assets and Properties of
the Company and the Subsidiaries, taken as a whole.
"Charter" means the Certificate of Incorporation of the Company, as
amended, after giving effect to the filing of the Series B Certificate of
Designation with the Secretary of State of the State of Delaware.
"Claim Notice" has the meaning ascribed to it in Section 9.2(a).
"Class B Common Stock" has the meaning ascribed to it in Section 3.3.
"Class B-1 Common Stock" has the meaning ascribed to it in the recitals
hereto.
"Closing" means the closing of the transactions contemplated by Section
2.2.
"Closing Date" means the date on which the Closing actually occurs.
"Common Stock" has the meaning ascribed to it in the recitals hereto.
"Company" has the meaning ascribed to it in the introductory paragraph
hereto.
"Contract" means any agreement, lease, debenture, note, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract or
commitment (whether written or oral).
"Dispute Period" means the period ending 30 calendar days following
receipt by an Indemnifying Party of an Indemnity Notice.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Financial Statement Date" means June 30, 1998.
"Financing Agreements" means the Heller Credit Agreement and the
Securities Purchase Agreements.
"GAAP" means United States generally accepted accounting principles,
consistently applied throughout the specified period and all prior comparable
periods.
"Governmental or Regulatory Authority" means any court, tribunal,
authority, agency, commission, official or other instrumentality of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision, any arbitrator or panel of arbitrators, any stock
exchange or quotation service, and the National Association of Securities
Dealers.
"Heller Credit Agreement" has the meaning ascribed to it in the
recitals hereto.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" of any Person means all obligations of such Person (i)
for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases, (v) as an account party in respect of letters of
credit and similar instruments and (vi) in the nature of guarantees of the
obligations described in clauses (i) through (v) above of any other Person.
"Indemnified Party" has the meaning ascribed to it in Section 9.1.
"Indemnifying Party" has the meaning ascribed to it in Section 9.1.
"Indemnity Notice" has the meaning ascribed to it in Section 9.2(c).
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.
"Liberty Mutual" has the meaning ascribed to it in the introductory
paragraph hereto.
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention Contract or Contract committing
to grant any of the foregoing.
"LIH Entities" means LIH Holdings I, LIH Holdings II and LIH Holdings
III, collectively.
"LIH Holdings I" has the meaning ascribed to it in the recitals hereto.
"LIH Holdings II" has the meaning ascribed to it in the recitals
hereto.
"LIH Holdings III" has the meaning ascribed to it in the introductory
paragraph hereto.
"Loss" means any and all damages, fines, fees, penalties, deficiencies,
losses and expenses, including interest, reasonable expenses of investigation,
court costs, reasonable fees and expenses of attorneys, accountants and other
experts and other expenses associated with litigation or other proceedings or
with any claim, default or assessment (such fees and expenses to include all
fees and expenses, including the reasonable fees and expenses of attorneys,
incurred in connection with (i) the investigation or defense of any Third Party
Claims or (ii) asserting or disputing any rights under this Agreement or any
Transaction Document against the Company and any party hereto or otherwise). As
applied to any Purchaser, "Loss" shall also be deemed to include any
indemnifiable claim of any Purchaser hereunder and any diminution in the value
of the Purchased Securities being purchased by such Purchaser hereunder (or any
successor securities).
"MassMutual" has the meaning ascribed to it in the introductory
paragraph hereto.
"MassMutual Entities" has the meaning ascribed to it in the
introductory paragraph hereto.
"MMCI" has the meaning ascribed to it in the introductory paragraph
hereto.
"MMCVP" has the meaning ascribed to it in the introductory paragraph
hereto.
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"MMPI" has the meaning ascribed to it in the introductory paragraph
hereto.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person or (ii) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including any rights to
participate in the equity, income or election of directors, management committee
members or officers of such Person.
"Order" means any writ, judgment, decree, injunction or similar order
of any Governmental or Regulatory Authority (in each case whether preliminary or
final).
"Person" or "person" means any individual, corporation, joint stock
corporation, limited liability company or partnership, general partnership,
limited partnership, proprietorship, joint venture, other business organization,
trust, union, association, Governmental or Regulatory Authority or other entity
of any kind.
"Preferred Stock" has the meaning ascribed to it in Section 3.3.
"Purchase Price" means, with respect to each Purchaser, the dollar
amount (representing a portion of the Aggregate Purchase Price) set forth
opposite such Purchaser's name in Schedule I.
"Purchased Securities" means, with respect to each Purchaser, the
shares of Common Stock and Series B Preferred Stock to be purchased by such
Purchaser pursuant to Section 2.1.
"Purchasers" has the meaning ascribed to it in the introductory
paragraph hereto.
"Resolution Period" means the period ending 30 calendar days following
receipt by an Indemnified Party of a Dispute Notice.
"Rights Agreement" means the Rights Agreement to be entered into as of
the Closing Date by LIH Holdings I, LIH Holdings II, the Purchasers, the Company
and the other parties thereto substantially in the form of Exhibit B, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with the provisions thereof.
"SEC" means the Securities and Exchange Commission.
"SEC Document" has the meaning ascribed to it in Section 3.7.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"Securities Purchase Agreements" has the meaning ascribed to it in the
recitals hereto.
"Series B Preferred Stock" has the meaning ascribed to it in the
recitals hereto.
"Series B Certificate of Designation" means the Certificate of
Designation with respect to the Series B Preferred Stock, substantially in the
form of Exhibit C, to be filed with the Secretary of State of the State of
Delaware prior to the Closing.
"Stock Purchase Agreement" has the meaning ascribed to it in the
recitals hereto.
"Subsidiary" means any Person in which the Company, directly or
indirectly through one or more Subsidiaries or otherwise, beneficially owns more
than 50% of either the equity interests in, or the voting control of, such
Person.
"Target" has the meaning ascribed to it in the recitals hereto.
"Third Party Claim" has the meaning ascribed to it in Section 9.2(a).
"Transaction Documents" means the Amended and Restated Governance
Agreement, the Rights Agreement and any support or other agreement to be entered
into by two or more of the parties hereto in connection with the transactions
contemplated by this Agreement.
1.2 Certain Conventions. Unless the context of this Agreement
otherwise requires, (i) words of any gender include the other gender, (ii) words
(other than Purchaser) using the singular or plural number also include the
plural or singular number, respectively, (iii) the terms "hereof," "herein,"
"hereby" and derivative or similar words refer to this entire Agreement, (iv)
the terms "Article" and "Section" refer to the specified Article or Section of
this Agreement, (v) the words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation", and (vi) the phrases
"ordinary course of business" and "ordinary course of business consistent with
past practice" refer to the business and practice of the Company or a
Subsidiary. All accounting terms used herein and not expressly defined herein
shall have the respective meanings given to them under GAAP.
II. ARTICLE
SALE OF SHARES; CLOSING
2.1 Purchase and Sale. At the Closing, on the terms and
subject to the conditions of this Agreement, the Company shall issue and sell to
each Purchaser, and each Purchaser shall purchase from the Company, the shares
of Common Stock and Series B Preferred Stock set forth opposite such Purchaser's
name in Schedule I, free and clear of all Liens, for an aggregate purchase price
(payable in cash in the manner provided in Section 2.2) equal to the Purchase
Price with respect to such Purchaser.
2.2 Closing. The Closing will take place at such location as
LIH Holdings III and the Company mutually agree on the first Business Day as of
which each of the conditions precedent set forth in Article VI and Article VII
shall have been satisfied or waived as provided therein, or on such other date
as the Company and LIH Holdings III shall mutually agree. At the Closing, each
Purchaser shall pay the Purchase Price with respect to such Purchaser by wire
transfer of immediately available funds to the account specified by the Company
by written notice delivered to the Purchasers at least two Business Days before
the Closing Date. Simultaneously, the Company shall deliver to each Purchaser
certificates, registered in the name of such Purchaser, representing such
Purchaser's
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Purchased Securities. At the Closing, there shall also be delivered to the
Company and the Purchasers the opinions, certificates and other Contracts,
documents and instruments to be delivered under Articles VI and VII.
2.3 Obligations of Purchasers Several and Not Joint.
Notwithstanding anything herein to the contrary (other than the proviso
contained in this Section 2.3), the obligations of each Purchaser under this
Agreement are separate from the obligations of each other Purchaser under this
Agreement, and no Purchaser shall be liable or otherwise responsible in any
manner for any obligation of any other Purchaser under this Agreement; provided,
however, that each obligation of a MassMutual Entity hereunder shall be the
joint and several obligation of all of the MassMutual Entities.
III. ARTICLE
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Purchaser that the
statements contained in this Article III are true and correct as of the date of
this Agreement and will be true and correct as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article III). In the case of all representations and
warranties that expressly relate or are deemed to be made as of the Closing Date
pursuant to this Article III, the Acquisition is deemed to have occurred and the
Target is deemed to be a Subsidiary of the Company.
3.1 Organization of the Company. The Company is a corporation
duly organized, validly existing and in good standing under the Laws of the
State of Delaware, and is duly qualified, licensed or admitted to do business
and in good standing in those jurisdictions in which the ownership, use or
leasing of its Assets and Properties or the conduct or nature of its business
makes such qualification, licensing or admission necessary, except for such
failures to be so qualified, licensed, admitted or in good standing which will
not, individually or in the aggregate, have a material adverse effect on the
Business or Condition of the Company.
3.2 Power and Authority. The Company has the requisite power
and authority to execute and deliver this Agreement, the Transaction Documents
to which it is a party, the Stock Purchase Agreement and the Financing
Agreements, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by the Company of this Agreement, the Transaction Documents to which it
is a party, the Stock Purchase Agreement and the Financing Agreements, the
performance by the Company of its obligations hereunder and thereunder, and the
consummation of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary action on the part of the Board of
Directors of the Company, which action of the Board of Directors is the only
action necessary to authorize the execution, delivery and performance by the
Company of this Agreement, the Transaction Documents to which it is a party, the
Stock Purchase Agreement and the Financing Agreements. This Agreement has been
duly and validly executed and delivered by the Company and constitutes, and upon
the execution and delivery by the Company of each Transaction Document to which
it is a party, each such Transaction Document will constitute, a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity.
3.3 Capital. As of the date hereof and as of the Closing Date
immediately before giving effect to the Closing, the authorized capital stock of
the Company consists of 25,000,000 shares of Common Stock, 3,000,000 shares of
Class B Common Stock, par value $0.01 per share (the "Class B Common Stock"),
and 2,000,000 shares of preferred stock, par value $0.01 per share (the
"Preferred Stock"), of which (a) 5,263,370 shares of Common Stock are
outstanding, all of which are validly issued, fully paid and non-assessable, and
have been issued in compliance with all applicable federal and state securities
laws, (b) 1,493,398 shares of Class B Common Stock (designated as Class B-1
Common Stock) are outstanding, all of which are validly issued, fully paid and
non-assessable, and have been issued in compliance with all applicable federal
and state securities laws, and (c) no shares of Preferred Stock are outstanding.
On December 30, 1997, the Company validly issued 1,493,398 shares of Preferred
Stock (designated as Series A Preferred Stock) to LIH Holdings II in compliance
with all applicable federal and state securities laws, which shares were duly
converted into an equal number of shares of Class B-1 Common Stock on April 21,
1998. Immediately after giving effect to the Closing and the other transactions
contemplated by this Agreement, the Transaction Documents, the Stock Purchase
Agreement or the Financing Agreements to occur as of the Closing Date, (i) the
authorized capital stock of the Company will consist of 25,000,000 shares of
Common Stock, 3,000,000 shares of Class B Common Stock, of which 1,493,398
shares shall have been designated as Class B-1 Common Stock, 2,000,000 shares of
Preferred Stock, of which 1,493,398 shares have previously been designated as
Series A Preferred Stock and 292,225 shares shall have been designated as Series
B Preferred Stock, and (ii) the outstanding capital stock of the Company will
consist of 6,310,782 shares of Common Stock, 1,493,398 shares of Class B-1
Common Stock and 252,401.8 shares of Series B Preferred Stock. Except for the
Class B-1 Common Stock and the Series B Preferred Stock, or as set forth in
Schedule 3.3, there are no, and immediately after giving effect to the Closing
and the other transactions contemplated by this Agreement, the Transaction
Documents, the Stock Purchase Agreement or the Financing Agreements to occur on
the Closing Date, there will not be any, (x) outstanding Options with respect to
the Company, (y) agreements, arrangements or understandings to issue Options
with respect to the Company or (z) preemptive rights or agreements, arrangements
or understandings to issue preemptive rights with respect to the issuance or
sale of the Company's capital stock. Upon issuance at the Closing, the
certificates representing the Purchased Securities of each Purchaser will grant
to such Purchaser good and valid title to its Purchased Securities free and
clear of all Liens, and each Purchaser's Purchased Securities will have been
duly authorized, validly issued and fully paid and will be nonassessable.
The Company has taken all necessary corporate action to reserve the full number
of shares of Common Stock issuable upon the conversion of all the shares of
Series B Preferred Stock being purchased by the Purchasers hereunder. The shares
of Common Stock referred to above when issued upon conversion, will be duly
authorized, validly issued, fully paid and nonassessable.
Neither the execution, delivery or performance by the Company of this Agreement,
the Transaction Documents to which it is a party, the Stock Purchase Agreement
or the Financing Agreements, nor the issuance of the Purchased Securities of
each Purchaser as contemplated hereby, nor the issuance of shares of Common
Stock upon the conversion of any shares of Class B-1 Common Stock currently
outstanding, nor the issuance of shares of Common Stock upon the conversion of
any shares of Series B Preferred Stock being purchased by any Purchaser
hereunder, nor the consummation of the transactions contemplated by this
Agreement, the Transaction Documents, the Stock Purchase Agreement and the
Financing Agreements, will give rise to or result in (with or without notice,
lapse of time or both) any antidilution adjustment, acceleration of vesting or
other change under or to any Option, except as set forth in Schedule 3.3.
3.4 Subsidiaries. Each Subsidiary is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation and has full corporate power and authority to
conduct its business as and to the extent now conducted and to own, use and
lease its Assets and Properties. Each Subsidiary is duly qualified, licensed or
admitted to do business and in good standing in those jurisdictions in which the
ownership, use or leasing of such Subsidiary's Assets and Properties, or the
conduct or nature of its business, makes such qualification, licensing or
admission necessary, except for such failures to be so qualified, licensed,
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admitted or in good standing which will not, individually or in the aggregate,
have a material adverse effect on the Business or Condition of the Company. All
of the outstanding shares of capital stock of each Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable, and are owned,
beneficially and of record, by the Company or Subsidiaries wholly owned by the
Company, free and clear of all Liens. There are no outstanding Options with
respect to any Subsidiary and no agreements, arrangements or understandings to
issue Options with respect to any Subsidiary. Except for the capital stock of
the Subsidiaries, neither the Company nor any Subsidiary holds any equity,
partnership, limited liability company, joint venture or other interest in any
Person.
3.5 No Conflicts. The execution and delivery by the Company of
this Agreement, the Transaction Documents to which it is a party, the Stock
Purchase Agreement and the Financing Agreements, the performance by the Company
of its respective obligations hereunder and thereunder, and the consummation of
the transactions contemplated hereby and thereby (including, the filing of the
Series B Certificate of Designation, the issuance of the Purchased Securities of
each Purchaser, the issuance of Common Stock upon the conversion of the shares
of Class B-1 Common Stock currently outstanding, the issuance of Common Stock
upon the conversion of the shares of Series B Preferred Stock being purchased by
the Purchasers hereunder), does not and will not: (a) conflict with or result in
a violation or breach of any of the terms, conditions or provisions of the
Company's certificate of incorporation or by-laws; (b) conflict with or result
in a violation or breach of any term or provision of any Law or Order applicable
to the Company or any Subsidiary or any of their respective Assets and
Properties; or (c) except as set forth in Schedule 3.5 hereto, (i) conflict with
or result in a violation or breach of, (ii) constitute (with or without notice
or lapse of time or both) a default under, (iii) require the Company or any
Subsidiary to obtain any consent, approval or action of, make any filing with or
give any notice to any Person as a result or under the terms of, (iv) result in
any termination, cancellation, acceleration or modification of, or give to any
Person any right of termination, cancellation, acceleration or modification in
or with respect to, (v) give to any Person any additional rights or entitlement
to increased, additional, accelerated or guaranteed payments under, (vi) other
than liabilities under this Agreement, the Transaction Documents, the Stock
Purchase Agreement and the Financing Agreements, result in the creation of any
new, additional or increased liability of the Company or any Subsidiary under,
or (vii) result in the creation or imposition of any Lien upon the Company or
any Subsidiary or any of their respective Assets and Properties under, any
Contract to which the Company or any Subsidiary is a party or by which any of
their respective Assets and Properties is bound.
3.6 Governmental Approvals and Filings. No consent, approval
or action of, filing with or notice to any Governmental or Regulatory Authority
on the part of the Company (other than (a) as may be required under the Exchange
Act or, solely by reason of the Company's acquisition of Target, the HSR Act and
(b) the filing of the Series B Certificate of Designation with the Secretary of
State of the State of Delaware) is required in connection with the execution,
delivery and performance of this Agreement, the Transaction Documents, the Stock
Purchase Agreement or the Financing Documents or the consummation of the
transactions contemplated hereby or thereby.
3.7 SEC Documents; Financial Statements. Each report,
schedule, form, statement and other document required to be filed by the Company
with the SEC (each an "SEC Document", and collectively, the "SEC Documents") has
been so filed. As of its filing date, each SEC Document complied in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act. None of the SEC Documents, except to the extent that information contained
therein has been revised or superseded by an SEC Document subsequently filed
with the SEC, contains any untrue statement of a material fact or omits to state
a material fact (x) necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading or (y) required
to be stated therein or necessary to make the statements therein not misleading.
The financial statements of the Company and its Subsidiaries included in the SEC
Documents comply in all material respects with applicable requirements under the
Securities Act and the Exchange Act and any other published rules and
regulations of the SEC with respect to accounting requirements, have been
prepared in accordance with GAAP (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of the Company
and its consolidated Subsidiaries as of the respective dates thereof and the
consolidated results of their operations and cash flows for the respective
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments which will not have or reflect a material adverse
effect on the Business or Condition of the Company).
3.8 Absence of Changes. Since the Financial Statement Date,
except as set forth in Schedule 3.8 hereto or as disclosed in the SEC Documents
filed prior to the date hereof, there has not been any event or development
which, individually or together with other such events, did have or could
reasonably be expected to have a material adverse effect on the Business or
Condition of the Company. None of the other representations or warranties in
this Agreement shall be deemed to limit the foregoing.
3.9 Legal Proceedings. There are no Actions or Proceedings
pending or, to the knowledge of the Company, threatened overtly against,
relating to or affecting the Company or any Subsidiary or any of their
respective Assets and Properties, which (i) could reasonably be expected to
result in the issuance of an Order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement, the Transaction Documents, the Stock Purchase
Agreement or the Financing Agreements, or (ii) if determined adversely to the
Company or such Subsidiary, could reasonably be expected to, individually or in
the aggregate with other such Actions or Proceedings, have a material adverse
effect on the Business or Condition of the Company.
3.10 Other Negotiations; Brokers. None of the Company, any
Subsidiary or any of their respective Affiliates (nor any investment banker,
financial advisor, attorney, accountant or other Person retained by or acting
for or on behalf of the Company, any Subsidiary or any such Affiliate) (i) has
entered into any Contract that conflicts with any of the transactions
contemplated by this Agreement, the Transaction Documents, the Stock Purchase
Agreement or the Financing Agreements or (ii) has entered into any Contract or
had any discussions with any third party regarding any transaction involving the
Company or any Subsidiary which could result in any Purchaser, any of its
stockholders, members, general or limited partners, or any officer, director,
employee, agent or Affiliate of any Purchaser or any such stockholder, member or
partner being subject to any claim for liability to said third party in
connection with this Agreement, the Transaction Documents, the Stock Purchase
Agreement or the Financing Agreements or the consummation of any of the
transactions contemplated hereby or thereby. Other than Piper Jaffray Inc., the
fees and expenses of which will be paid by the Company, no agent, broker,
finder, investment banker, financial advisor or other similar Person will be
entitled to any fee, commission or other compensation in connection with any of
the transactions contemplated by this Agreement, the Transaction Documents, the
Stock Purchase Agreement or the Financing Agreements on the basis of any act or
statement made or alleged to have been made by the Company, any Subsidiary, any
of their respective Affiliates, or any investment banker, financial advisor,
attorney, accountant or other Person retained by or acting for or on behalf of
the Company, any Subsidiary or any such Affiliate.
3.11 Exemption from Registration; Restrictions on Offer and
Sale of Same or Similar Securities. Assuming the representations and warranties
of each Purchaser set forth in Section 4.3 are true and correct in all material
respects, the offer and sale of the Purchased Securities made to each Purchaser
pursuant to this Agreement is exempt from the registration requirements of the
Securities Act. Neither the Company nor any Person authorized to act on its
behalf has, in connection with the offering of the Purchased Securities of any
Purchaser, engaged in (i) any form of general solicitation or general
advertising (as those terms are used within the meaning of Rule 502(c) under the
Securities Act), (ii) any action involving a public offering within the meaning
of Section 4(2) of the Securities Act, or (iii) any action that would require
the registration under the Securities Act of the offering and sale of any
Purchased Securities pursuant to this Agreement or that would violate applicable
state securities or "blue
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sky" laws. Neither the Company nor any Person authorized to act on its behalf
has made, directly or indirectly, any offer or sale of any Purchased Securities
or of securities of the same or a similar class as any Purchased Securities that
could cause any offer or sale of any Purchased Securities contemplated hereby to
fail to be entitled to exemption from the registration requirements of the
Securities Act. As used herein, the terms "offer" and "sale" have the meanings
specified in Section 2(3) of the Securities Act.
3.12 Other Agreements. Each of the representations and
warranties of the Company contained in the Stock Purchase Agreement are or will
be true and correct in all material respects (if not qualified by materiality)
and in all respects (if qualified by materiality) on and as of each of the date
hereof, and the Closing Date, as though made on and as of such dates. Each of
the representations and warranties of the Company contained in any Financing
Agreement will be true and correct in all material respects (if not qualified by
materiality) or in all respects (if qualified by materiality) on and as of the
Closing Date as though made on and as of such date.
3.13 Holding Company Act and Investment Company Act Status.
Neither the Company nor any Subsidiary is a "holding company" or a "public
utility company", as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended. Neither the Company nor any Subsidiary is an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
3.14 Stock Purchase Agreement. The Company has delivered to
each Purchaser a true and complete copy of the Stock Purchase Agreement. The
Stock Purchase Agreement has not been terminated or amended, supplemented or
otherwise modified in any respect, and no party thereto has granted any waiver
of any of the terms or conditions thereof.
3.15 Disclosure. No representation or warranty on the part of
the Company contained in this Agreement, and no statement contained in any
schedule or in any certificate, list or other writing furnished to the
Purchasers pursuant to any provision of this Agreement, including pursuant to
Article VI, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein, in
the light of the circumstances under which they were made, not misleading.
IV. ARTICLE
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally and not jointly, hereby represents and
warrants to the Company, with respect to such Purchaser only, that the
statements contained in this Article IV are true and correct as of the date of
this Agreement and will be true and correct as of the Closing Date (as though
made then and as though the Closing Date was substituted for the date of this
Agreement throughout this Article IV).
4.1 Organization; Power and Authority. Such Purchaser is the
type of business entity set forth opposite its name in Schedule 4.1 hereto, and
has been duly organized and is validly existing and in good standing under the
Laws of the jurisdiction set forth opposite its name in Schedule 4.1 hereto.
Such Purchaser has the requisite power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery by such Purchaser
of this Agreement, the performance by such Purchaser of its obligations
hereunder and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all requisite action on the part of such
Purchaser. This Agreement has been duly and validly executed and delivered by
such Purchaser and constitutes the legal, valid and binding obligation of such
Purchaser enforceable against such Purchaser in accordance with its terms,
except as the enforceability hereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws relating
to the enforcement of creditors' rights generally and by general principles of
equity.
4.2 No Conflicts. The execution, delivery and performance by
such Purchaser of this Agreement, and the consummation by such Purchaser of the
transactions contemplated hereby, will not conflict with, or constitute a
default under, any agreement, indenture or instrument to which such Purchaser is
a party, or result in a violation of (a) such Purchaser's constitutive documents
or (b) any Order of any Governmental or Regulatory Authority having jurisdiction
over such Purchaser or any of its properties. Except for such filings as may be
required by the Exchange Act, no consent, approval or action of, or filing or
registration with, any Governmental or Regulatory Authority is required on the
part of such Purchaser for its execution, delivery and performance of this
Agreement.
4.3 Purchase for Investment. The Purchased Securities being
purchased by such Purchaser hereunder will be purchased by such Purchaser for
its own account for the purpose of investment and not with a view to the resale
or distribution of all or any part of such Purchased Securities in violation of
the Securities Act, it being understood that the right to dispose of such
Purchased Securities shall (subject to the Amended and Restated Governance
Agreement, in the case of LIH Holdings III) be entirely within the discretion of
such Purchaser. Such Purchaser is an "accredited investor" (as such term is
defined in Rule 501(a) of Regulation D under the Securities Act). Such Purchaser
has such knowledge and experience in financial and business matters as to be
able to evaluate the merits and risks of its investment in Purchased Securities
pursuant to this Agreement and is able to bear the economic risk of such
investment (including a complete loss of such investment). Such Purchaser
understands that the Purchased Securities being purchased by it hereunder have
not been registered under the Securities Act or any state securities laws in
reliance on exemptions from the registration requirements of the Securities Act
and such state securities laws, which depend upon, among other things, the
accuracy of the representations of such Purchaser set forth in this Section 4.3.
4.4 Brokers. Other than Piper Jaffray Inc., the fees and
expenses of which will be paid by the Company, no agent, broker, finder,
investment banker, financial advisor or other similar Person will be entitled to
any fee, commission or other compensation in connection with any of the
transactions contemplated by this Agreement on the basis of any act or statement
made by any Purchaser.
V. ARTICLE
COVENANTS OF THE COMPANY
The Company covenants and agrees with each Purchaser that, at all times
from and after the date hereof and until the Closing and, with respect to any
covenant or agreement by its terms to be performed in whole or in part after the
Closing, for the period specified herein or, if no period is specified herein,
indefinitely, the Company will comply with all the covenants and provisions
contained in this Article V, except to the extent that the Purchasers may
otherwise consent in writing.
5.1 Regulatory and Other Approvals. The Company shall and
shall cause each Subsidiary to (a) take all necessary or desirable steps and
proceed diligently and in good faith and use its best efforts, as promptly as
practicable, to obtain all consents, approvals or actions of, to make all
filings with and to give all notices to, Governmental or Regulatory Authorities
and other Persons required of the Company or any Subsidiary to consummate the
transactions contemplated by this Agreement, the Transaction Documents, the
Stock Purchase Agreement
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and the Financing Agreements, (b) provide such other information and
communications to such Governmental or Regulatory Authorities and other Persons
as any Purchaser or any such Governmental or Regulatory Authorities and other
Person may reasonably request and (c) cooperate with each Purchaser as promptly
as practicable in obtaining all consents, approvals or actions of, making all
filings with and giving all notices to, Governmental or Regulatory Authorities
and other Persons required of such Purchaser to consummate the transactions
contemplated by this Agreement and the Transaction Documents. The Company shall
provide prompt notification to each Purchaser when any such consent, approval,
action, filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise each Purchaser of any
communications (and, unless precluded by Law, provide each Purchaser with copies
of any such communications that are in writing) with any Governmental or
Regulatory Authority regarding any of the transactions contemplated by this
Agreement, the Transaction Documents, the Stock Purchase Agreement or the
Financing Agreements.
5.2 Reservation of Shares. The Company shall (a) at all times
that the shares of Series B Preferred Stock being purchased by the Purchasers
hereunder are outstanding, keep reserved the full number of shares of Common
Stock issuable upon conversion of such shares of Series B Preferred Stock and
(b) at all times that the currently outstanding shares of Class B-1 Common Stock
are outstanding, keep reserved the full number of shares of Common Stock
issuable upon conversion of such currently outstanding shares of Class B-1
Common Stock.
5.3 Use of Proceeds. The Company shall use the proceeds from
each purchase and sale of the Purchased Securities hereunder in order to
consummate the Acquisition.
5.4 Stockholders' Meeting. The Company shall on or before
April 30, 1999 (and, if necessary, from time to time as requested by any
Purchaser thereafter) call a stockholders meeting for the purpose of approving
the conversion of the Series B Preferred Stock into Common Stock pursuant to the
terms of the Series B Certificate of Designation. The Company shall promptly
(and, if necessary, from time to time as requested by LIH Holdings III) call a
stockholders meeting for the purpose of approving the terms of the Class B-1
Common Stock.
5.5 Nasdaq National Market. Prior to the Closing, the Company
shall cause the shares of Common Stock included in the Purchased Securities to
be approved for listing, subject to notice of issuance, by the Nasdaq National
Market. As soon as practicable after the conversion of the Series B Preferred
Stock, the Company shall cause the shares of Common Stock issuable upon
conversion of the Series B Preferred Stock to be approved for listing, subject
to notice of issuance, by the Nasdaq National Market. The Company shall cause
the shares of Common Stock issuable upon conversion of the currently outstanding
Class B-1 Common Stock to be approved for listing, subject to notice of
issuance, by the Nasdaq National Market.
5.6 Notice and Cure. The Company shall notify each Purchaser
promptly in writing of, and contemporaneously shall provide each Purchaser with
true and complete copies of any and all information or documents relating to,
and the Company shall use all commercially reasonable best efforts to cure
before the Closing, any event, transaction or circumstance that causes or will
cause any covenant or agreement of the Company under this Agreement to be
materially breached (if not qualified by materiality) or breached (if qualified
by materiality) or that renders or shall render materially untrue (if not
qualified by materiality) or untrue (if qualified by materiality) any
representation or warranty of the Company contained in this Agreement as if the
same were made on or as of the date of such event, transaction or circumstance.
The Company also shall notify each Purchaser promptly in writing of, and the
Company shall use all commercially reasonable best efforts to cure, before the
Closing, any material violation or material breach (in each case, if not
qualified by materiality) or any violation or breach (in each case, if qualified
by materiality) of any representation, warranty, covenant or agreement made by
the Company in this Agreement, whether occurring or arising before, on or after
the date of this Agreement. No notice given pursuant to this Section 5.6, and no
representation made by any Purchaser contained in Section 4.3, shall have any
effect on the representations, warranties, covenants and agreements contained in
this Agreement for purposes of determining satisfaction of any condition
contained herein or shall in any way limit any Purchaser's right to seek
indemnity under Article IX.
5.7 Fulfillment of Conditions. The Company shall take all
steps necessary or desirable and use all commercially reasonable efforts to
satisfy each condition to the obligations of the Purchasers contained in this
Agreement and shall not take or fail to take any action if such action or
failure to act could reasonably be expected to result in the nonfulfillment of
any such condition.
VI. ARTICLE
CONDITIONS TO OBLIGATIONS OF THE PURCHASERS
The obligations of each Purchaser hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part (as to such Purchaser) by such
Purchaser in its sole discretion):
6.1 Representations and Warranties. Each of the
representations and warranties made by the Company in this Agreement shall be
true and correct in all material respects (if not qualified by materiality) and
in all respects (if qualified by materiality) on and as of the Closing Date as
though such representation or warranty was made on and as of the Closing Date.
6.2 Performance. The Company shall have performed and complied
with each agreement, covenant and obligation required by this Agreement to be
performed or complied with by the Company at or before the Closing.
6.3 Officers' Certificates. The Company shall have delivered
to the Purchasers a certificate, dated the Closing Date and executed by the
President or any Vice President of the Company, substantially in the form and to
the effect of Exhibit D-1 hereto, and a certificate, dated the Closing Date and
executed by the Secretary or any Assistant Secretary of the Company,
substantially in the form and to the effect of Exhibit D-2 hereto.
6.4 Orders and Laws. There shall not be in effect on the
Closing Date any Order or Law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement, the Transaction Documents, the Stock Purchase Agreement or the
Financing Agreements.
6.5 Regulatory Consents and Approvals. All consents, approvals
and actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit each of the Purchasers and the Company to perform
their respective obligations under this Agreement and the Transaction Documents
and to consummate the transactions contemplated by this Agreement, the
Transaction Documents, the Stock Purchase Agreement and the Financing Agreements
(i) shall have been duly obtained, made or given, (ii) shall be in form and
substance reasonably satisfactory to each Purchaser, (iii) shall not be subject
to the satisfaction of any condition that has not been satisfied or waived and
(iv) shall be in full force and effect, and all terminations or expirations of
waiting periods imposed by any Governmental or Regulatory Authority necessary
for the consummation of the transactions contemplated by this Agreement, the
Transaction Documents, the Stock Purchase Agreement and the Financing Agreements
shall have occurred.
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6.6 Third Party Consents. All consents (or in lieu thereof
waivers) to the performance by the Purchasers and the Company of their
respective obligations under this Agreement and the Transaction Documents or to
the consummation of the transactions contemplated by this Agreement, the
Transaction Documents, the Stock Purchase Agreement or the Financing Agreements,
as are required under any Contract to which any Purchaser, the Company or any
Subsidiary is a party or by which any of their respective Assets and Properties
are bound and where the failure to obtain any such consent (or in lieu thereof
waiver) could reasonably be expected, individually or in the aggregate with
other such failures, to materially adversely affect any Purchaser or the
Business or Condition of the Company or otherwise result in a material
diminution of the benefits of the transactions contemplated by this Agreement,
the Transaction Documents, the Stock Purchase Agreement or the Financing
Agreements to any Purchaser in its sole discretion, (i) shall have been
obtained, (ii) shall be in form and substance reasonably satisfactory to each
Purchaser in its sole discretion, (iii) shall not be subject to the satisfaction
of any condition that has not been satisfied or waived and (iv) shall be in full
force and effect.
6.7 Opinion of Counsel. Each Purchaser shall have received the
opinion of Leonard, Street and Deinard, counsel to the Company, dated the
Closing Date, in substantially the form of Exhibit E hereto.
6.8 Certificate of Designation. LIH Holdings III shall have
received evidence satisfactory to it that the Series B Certificate of
Designation shall have been duly filed with the Office of the Secretary of State
of the State of Delaware and become effective in accordance with their
respective terms.
6.9 Transaction Documents. Each of the Transaction Documents
shall have been duly executed and delivered by the respective parties thereto
(other than the relevant Purchaser and, in the case of LIH Holdings III, the
other LIH Entities) and shall be in full force and effect.
6.10 Delivery of Certificates. Duly executed certificates
representing each Purchaser's Purchased Securities shall have been delivered to
such Purchaser.
6.11 Financing. The Company shall have entered into the
Financing Agreements with the other parties thereto, and the terms of each
Financing Agreement shall be reasonably satisfactory to each Purchaser.
Simultaneously with the Closing, the Company shall have received proceeds from
borrowings under the Financing Agreements and from the sale of Purchased
Securities pursuant hereto in an aggregate amount sufficient to pay the purchase
price under the Stock Purchase Agreement, together with all fees and expenses
required to be paid by the Company in connection with the closing of the
transactions contemplated hereby (including the Acquisition and the financing
thereof).
6.12 Consummation of the Acquisition. Simultaneously with the
Closing, all the conditions set forth in Section 6.3 of the Stock Purchase
Agreement shall have been satisfied and the Acquisition shall have been
consummated on the terms set forth in the Stock Purchase Agreement. None of the
terms or conditions of the Stock Purchase Agreement shall have been amended,
supplemented or otherwise modified, or waived or terminated, in any respect.
6.13 Nasdaq National Market. The Common Stock included in each
Purchaser's Purchased Securities shall have been approved for listing, subject
to notice of issuance, by the Nasdaq National Market.
6.14 Proceedings. All proceedings to be taken on the part of
the Company in connection with the transactions contemplated by this Agreement
and all documents incident thereto shall be reasonably satisfactory in form and
substance to each Purchaser, in its sole discretion, and its legal counsel, and
each Purchaser shall have received copies of all such documents and other
evidence as such Purchaser may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
VII. ARTICLE
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by the Company in its sole
discretion):
7.1 Representations and Warranties. Each of the
representations and warranties made by any Purchaser in this Agreement shall be
true and correct in all material respects on and as of the Closing Date as
though such representation or warranty was made on and as of the Closing Date.
7.2 Performance. Each Purchaser shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by such Purchaser
at or before the Closing.
7.3 Certificate. Each Purchaser shall have delivered to the
Company a certificate, dated the Closing Date and executed by a duly authorized
representative of such Purchaser, substantially in the form and to the effect of
Exhibit F attached hereto.
7.4 Orders and Laws. There shall not be in effect on the
Closing Date any Orders or Laws that became effective after the date of this
Agreement restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement, the
Transaction Documents, the Stock Purchase Agreement or the Financing Agreements.
7.5 Transaction Documents. The Transaction Documents shall
have been duly executed and delivered by the respective parties thereto other
than the Company, and shall be in full force and effect.
7.6 Financing. Simultaneously with the Closing, the Company
shall have received proceeds from borrowings under the Financing Agreements and
from the sale of Purchased Securities pursuant hereto in an aggregate amount
sufficient to pay the purchase price under the Stock Purchase Agreement,
together with all fees and expenses required to be paid by the Company in
connection with the closing of the transactions contemplated hereby (including
the Acquisition and the financing thereof).
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VIII. ARTICLE
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
Notwithstanding any right of any Purchaser (whether or not exercised)
to investigate the affairs of the Company or any right of any party (whether or
not exercised) to investigate the accuracy of the representations and warranties
of another party contained in this Agreement or the waiver of any condition to
Closing, each of the Company and the Purchasers has the right to rely fully upon
the representations, warranties, covenants and agreements of the others
contained in this Agreement. The representations, warranties, covenants and
agreements of the Company and each Purchaser contained in this Agreement will
survive the Closing (a) indefinitely with respect to the covenants and
agreements contained herein and the representations and warranties contained in
Sections 3.1, 3.2, 3.3, 3.4, 3.10, 4.1 and 4.4 and (b) until the third
anniversary of the Closing Date with respect to all other representations and
warranties, except that any representation or warranty that would otherwise
terminate in accordance with clause (b) above will continue to survive if a
Claim Notice or Indemnity Notice (as applicable) shall have been timely given
under Article IX on or prior to such termination date, until the related claim
for indemnification has been satisfied or otherwise resolved as provided in
Article IX, but only with respect to matters described in such Claim Notice or
Indemnity Notice.
IX. ARTICLE
INDEMNIFICATION
9.1 Indemnification. Whether or not the transactions
contemplated by this Agreement are consummated, the Company (the "Indemnifying
Party") shall indemnify each Purchaser and its Affiliates, and each of their
respective officers, directors, managers, partners, employees, agents, members,
authorized representatives and stockholders (collectively, the "Indemnified
Parties", and each, an "Indemnified Party"), in respect of, and hold each of
them harmless from and against, any and all Losses suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to (i) any misrepresentation or breach of
warranty, or any nonfulfillment of or failure to perform any covenant or
agreement, on the part of the Company contained in this Agreement, (ii) the
assertion by any Person not a party to this Agreement of any claim against an
Indemnified Party in connection with the matters or transactions that are the
subject of or contemplated by this Agreement, any of the Transaction Documents,
the Stock Purchase Agreement or any of the Financing Agreements (including any
claim asserted in any actual or threatened Action or Proceeding with respect to
(x) any use made or proposed to be made of the proceeds from the issuance or
sale of any Purchased Securities or (y) the purchase of any Purchased
Securities) and (iii) violations of applicable securities laws by the Company in
connection with the offering of any Purchased Securities; provided, however,
that the Indemnifying Party shall not have any obligations hereunder to an
Indemnified Party in respect of clause (ii) of this Section 9.1 to the extent
that a Loss claimed by such Indemnified Party thereunder is finally adjudicated
by a court of competent jurisdiction to have resulted primarily from the
negligence or wilful misconduct of such Indemnified Party. Except as otherwise
provided in Section 9.2(b), the Company shall reimburse each Indemnified Party
(whether or not such Indemnified Party is a party to this Agreement) for all
expenses (including counsel fees and disbursements) as they are incurred by such
Indemnified Party in connection with investigating and preparing or defending
any Action or Proceeding referred to above (whether or not such Indemnified
Party is a formal party to any such Action or Proceeding). If and to the extent
that the indemnification set forth herein is finally determined by a court of
competent jurisdiction to be unenforceable, the Company shall make the maximum
contribution to the payment and satisfaction of the indemnified Losses as shall
be permissible under applicable laws.
A. Method of Asserting Claims. All claims for indemnification
by any Indemnified Party under Section 9.1 will be asserted and resolved as
follows:
1. In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 9.1 in respect of, arising out of or
involving a claim or demand made by any Person not a party to this Agreement
against the Indemnified Party (a "Third Party Claim"), the Indemnified Party
must deliver a claim notice (a "Claim Notice") to the Indemnifying Party within
30 Business Days after receipt by such Indemnified Party of written notice of
the Third Party Claim; provided, however, that failure to give such Claim Notice
shall not affect the indemnification provided hereunder except to the extent
that the Indemnifying Party shall have been actually prejudiced as a result of
such failure.
1. If a Third Party Claim is made against an Indemnified
Party, the Indemnifying Party shall be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the Indemnifying Party, which counsel must be reasonably
satisfactory to the Indemnified Party. Subject to the next succeeding sentence,
should the Indemnifying Party so elect to assume the defense of a Third Party
Claim, the Indemnifying Party shall not be liable to the Indemnified Party for
legal expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof, but shall continue to pay for any expenses of investigation
or any Loss suffered; and if the Indemnifying Party assumes such defense, the
Indemnified Party shall have the right to participate in such defense and to
employ counsel, at its own expense, separate from the counsel employed by the
Indemnifying Party. If (i) the Indemnifying Party shall not assume the defense
of a Third Party Claim with counsel reasonably satisfactory to the Indemnified
Party within 20 Business Days after the delivery to the Indemnifying Party of
the related Claim Notice, or (ii) legal counsel for the Indemnified Party
notifies the Indemnifying Party in writing that there are or may be legal
defenses available to the Indemnified Party or to other Indemnified Parties
which are different from or additional to those available to the Indemnifying
Party, which, if the Indemnified Party and the Indemnifying Party were to be
represented by the same counsel, would constitute a conflict of interest for
such counsel or prejudice prosecution of the defenses available to such
Indemnified Party, or (iii) the Indemnifying Party shall assume the defense of a
Third Party Claim and fail to diligently prosecute such defense, then in each
such case the Indemnified Party, by notice to the Indemnifying Party, may employ
its own counsel and control the defense of the Third Party Claim and the
Indemnifying Party shall be liable for the reasonable fees, charges and
disbursements of counsel employed by the Indemnified Party; and the Indemnified
Party shall be promptly reimbursed for any such fees, charges and disbursements,
as and when incurred. Whether the Indemnifying Party or the Indemnified Party
controls the defense of any Third Party Claim, the parties hereto shall
cooperate in the defense thereof. Such cooperation shall include the retention
and provision to the counsel of the controlling party of records and information
which are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Indemnifying Party shall
have the right to settle, compromise or discharge a Third Party Claim (other
than any such Third Party Claim in which criminal conduct is alleged) without
the Indemnified Party's consent if such settlement, compromise or discharge (i)
constitutes a complete and unconditional discharge and release of the
Indemnified Party, and (ii) provides for no relief other than the payment of
monetary damages and such monetary damages are paid in full by the Indemnifying
Party. Any amounts reimbursed to any Indemnified Party hereunder with respect to
a particular Third Party Claim shall be repaid to the Indemnifying Party in the
event that it is finally adjudicated by a court of competent jurisdiction that
such Indemnified Party is not entitled to indemnification by the Indemnifying
Party with respect to such Third Party Claim.
1. In the event any Indemnified Party shall have a claim under
Section 9.1 against the Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver an indemnity
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notice (an "Indemnity Notice") with reasonable promptness to the Indemnifying
Party. The failure by any Indemnified Party to give the Indemnity Notice shall
not impair such party's rights hereunder except to the extent that the
Indemnifying Party demonstrates that it has been materially prejudiced thereby.
If the Indemnifying Party notifies the Indemnified Party that it does not
dispute the claim described in such Indemnity Notice or fails to notify the
Indemnified Party within the Dispute Period as to whether the Indemnifying Party
disputes the claim described in such Indemnity Notice, the Loss in the amount
specified in the Indemnity Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 9.1 and the Indemnifying Party shall pay the
amount of such Loss to the Indemnified Party on demand. If the Indemnifying
Party has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiations
within the Resolution Period, such dispute shall be resolved by litigation in a
court of competent jurisdiction.
1. The rights accorded to Indemnified Parties hereunder shall be in addition to
any rights that any Indemnified Party may have at law or in equity, under
federal and state securities laws, by separate agreement (including under the
Transaction Documents) or otherwise.
I. ARTICLE
TERMINATION
A. Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
1. at any time before the Closing, by written agreement of the
Company and the Purchasers;
1. at any time before the Closing, by the Company, on the one
hand, or any Purchaser, on the other hand, (i) in the event of a material breach
hereof by any non-terminating party if such non-terminating party fails to cure
such breach within five Business Days following notification thereof by the
terminating party or (ii) upon notification of the non-terminating parties by
the terminating party that the satisfaction of any condition to the terminating
party's obligations under this Agreement becomes impossible or impracticable
with the use of commercially reasonable efforts if the failure of such condition
to be satisfied is not caused by a breach hereof by the terminating party or any
of its Affiliates; and
1. at any time after June 30, 1999, by the Company, on the one
hand, or any Purchaser, on the other hand, upon notification of the
non-terminating parties by the terminating party if the Closing shall not have
occurred on or before such date and such failure to consummate is not caused by
a breach of this Agreement by the terminating party.
A. Effect of Termination. If this Agreement is validly
terminated pursuant to Section 10.1, this Agreement will forthwith become null
and void, and there will be no liability or obligation on the part of the
Company or any Purchaser, except as provided in the next two succeeding
sentences and except that the provisions with respect to expenses in Section
11.3 will continue to apply following any such termination. Notwithstanding any
other provision in this Agreement to the contrary, upon termination of this
Agreement pursuant to Section 10.1(b) or (c), (i) the Company will remain liable
to each of the Purchasers for any misrepresentation or breach of warranty, or
any nonfulfillment of or failure to perform any covenant or agreement, on the
part of the Company existing at the time of such termination, and (ii) each of
the Purchasers will remain liable to the other parties hereto for any
misrepresentation or breach of warranty, or any nonfulfillment of or failure to
perform any covenant or agreement, on the part of such Purchaser existing at the
time of such termination. Each of the Company and the Purchasers may seek such
remedies, including damages and reimbursement for fees and expenses of
attorneys, against the others with respect to any misrepresentation, breach,
nonfulfillment or failure referred to in clause (i) or (ii) above as are
provided under this Agreement, including its remedies (if any) under Article IX
with respect thereto, or as are otherwise available at Law or in equity.
I. ARTICLE
MISCELLANEOUS
A. Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission or
mailed by prepaid first class certified mail, return receipt requested, or
mailed by overnight courier prepaid, to the parties at the following addresses
or facsimile numbers:
(a) if to any Purchaser, to address for notices set forth
opposite its name in Schedule I; and
(b) if to the Company, to:
Lund International Holdings, Inc.
911 Lund Boulevard
Anoka, Minnesota 55303
Facsimile No: (612) 576-4297
Attn: Chief Executive Officer
with copies (which shall not constitute notice) to
the other Purchasers and to:
Leonard, Street and Deinard
150 South Fifth Avenue
Suite 2300
Minneapolis, Minnesota 55402
Facsimile No: (612) 335-1657
Attn: Mark Weitz, Esq.
All such notices, requests and other communications to any party hereto will (i)
if delivered personally to such party at its address as provided in this Section
11.1, be deemed given upon delivery, (ii) if delivered by facsimile transmission
to such party at its facsimile number as provided in this Section 11.1, be
deemed given upon receipt, (iii) if delivered by mail in the manner described
above to such party at its address as provided in this Section 11.1, be deemed
given on the earlier of the third Business Day following mailing or upon receipt
and (iv) if delivered by overnight courier to such party at its address as
provided in this Section 11.1, be deemed given on the earlier of the first
Business Day following the date sent by such overnight courier or upon receipt
(in each case regardless of whether such notice, request or other communication
is received by any other Person to whom a copy of such notice is to be delivered
pursuant to this Section 11.1). Any party from time to time may change its
address, facsimile number or other
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<PAGE>
information for the purpose of notices to that party by giving notice specifying
such change to the other parties hereto.
A. Entire Agreement. This Agreement and the Transaction
Documents supersede all prior discussions and agreements between the parties
hereto with respect to the subject matter hereof and thereof and contain the
sole and entire agreement between the parties hereto with respect to the subject
matter hereof and thereof.
A. Fees and Expenses. In the event that (i) the transactions
contemplated by this Agreement are consummated or (ii) this Agreement is
terminated other than pursuant to Section 10.1(b) by reason of a material breach
by any Purchaser, the Company shall reimburse each Purchaser for all the
reasonable fees and expenses (including the fees and expenses of counsel,
consultants and accountants), incurred by such Purchaser prior to the Closing in
connection with this Agreement, the Transaction Documents and the transactions
contemplated hereby or thereby.
A. Public Announcements. At all times at or before the
Closing, none of the Purchasers will issue or make any statements or releases to
the public with respect to this Agreement or the transactions contemplated
hereby without the consent of the Company, which consent shall not be
unreasonably withheld. If any Purchaser is unable to obtain the approval of its
public statement or release from the Company and such statement or release is,
in the opinion of legal counsel to such Purchaser, required by Law in order to
discharge such Purchaser's disclosure obligations, then such Purchaser may make
or issue the legally required statement or release and promptly furnish the
other parties hereto with a copy thereof. Each of the Purchasers will also
obtain the Company's prior approval of any press release to be issued by or on
behalf of such Purchaser following the Closing announcing the consummation of
the transactions contemplated by this Agreement.
A. Further Assurances. At any time and from time to time after
the Closing, the Company shall execute and deliver to each Purchaser such other
documents and instruments, provide such materials and information and take such
other actions as any Purchaser may reasonably request more effectively to vest
title in such Purchaser to the Purchased Securities being purchased by such
Purchaser hereunder and otherwise to cause the Company to fulfill its
obligations under this Agreement and the Transaction Documents.
A. Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition (and no
such waiver shall in any event be binding on any other party hereto that is
entitled to the benefits of such term or provision). No waiver by any party
hereto of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
A. Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
A. Third Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of the parties hereto and their
respective successors and permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Article IX.
A. No Assignment; Binding Effect. Neither this Agreement nor
any right, interest or obligation hereunder may be assigned (by operation of Law
or otherwise) by the Company without the prior written consent of the
Purchasers, and any attempt to do so will be void ab initio. Neither this
Agreement nor any right, interest or obligation hereunder may be assigned by any
Purchaser without the prior written consent of the other parties hereto, and any
attempt to do so will be void ab initio; provided, however, that (a) LIH
Holdings III may, to the extent applicable, assign any or all of such right,
interest or obligation in connection with a transfer of all or any part of its
interests in the Company permitted under the Amended and Restated Governance
Agreement and (b) each Purchaser may, to the extent applicable, assign any or
all of such right, interest or obligation in connection with a transfer by it of
shares of Common Stock pursuant to Section 10.2 of the Rights Agreement. Subject
to the immediately preceding sentence, this Agreement shall bind and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns, including any holder of Purchased Securities (or any
successor securities).
A. Headings; Construction. The headings used in this Agreement
have been inserted for convenience of reference only and do not define or limit
the provisions hereof. The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentum.
A. Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (i) such provision will be
fully severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
A. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
A. Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
A. Limited Recourse. Notwithstanding anything in this
Agreement (other than the proviso contained in this Section 11.14), any
Transaction Document or any other document, agreement or instrument contemplated
hereby to the contrary, the obligations of any Purchaser hereunder shall be
without recourse to any Affiliate of such Purchaser or any stockholder, partner,
member, officer, director, manager, employee or agent of such Purchaser or any
such Affiliate, and shall be limited to the assets of such Purchaser; provided,
however, that each obligation of a MassMutual Entity hereunder shall be the
joint and several obligation of all the MassMutual Entities.
A. Consent to Jurisdiction and Service of Process. EACH OF THE
COMPANY AND THE PURCHASERS CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF
-11-
<PAGE>
NEW YORK, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO
THIS AGREEMENT OR THE TRANSACTION DOCUMENTS MAY BE LITIGATED IN SUCH COURTS.
EACH OF THE COMPANY AND THE PURCHASERS ACCEPTS FOR ITSELF AND IN CONNECTION WITH
ITS RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTION DOCUMENTS. EACH OF THE
COMPANY AND THE PURCHASERS FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO IT AT THE ADDRESS SPECIFIED IN THIS AGREEMENT, SUCH SERVICE TO
BECOME EFFECTIVE 15 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL IN ANY WAY BE
DEEMED TO LIMIT THE ABILITY OF ANY PARTY HERETO TO SERVE ANY SUCH LEGAL PROCESS,
SUMMONS, NOTICES AND DOCUMENTS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW
OR TO OBTAIN JURISDICTION OVER OR TO BRING ACTIONS, SUITS OR PROCEEDINGS AGAINST
ANY OF THE OTHER PARTIES HERETO IN SUCH OTHER JURISDICTIONS, AND IN SUCH MANNER,
AS MAY BE PERMITTED BY ANY APPLICABLE LAW.
[SIGNATURE PAGE TO FOLLOW]
-12-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer or other representative of each party
hereto as of the date first above written.
LUND INTERNATIONAL HOLDINGS, INC.
By: /s/ Dennis Vollmershausen
-----------------------------------------
Name: Dennis Vollmershausen
Title: President
LIH HOLDINGS III, LLC
By: /s/ Ira D. Kleinman
-----------------------------------------
Name: Ira D. Kleinman
Title: Authorized Person
LIBERTY MUTUAL INSURANCE COMPANY
By: /s/ A. Alex Fontanes
-----------------------------------------
Name: A. Alex Fontanes
Title: Senior Vice President
BANCBOSTON CAPITAL INC.
By: /s/ Timothy H. Robinson
-----------------------------------------
Name: Timothy H. Robinson
Title: Vice President
[SIGNATURE PAGE TO INVESTMENT AGREEMENT]
-13-
<PAGE>
MASSACHUSETTS MUTUAL
LIFE INSURANCE COMPANY
By: /s/ Michael L. Klofas
-----------------------------------------
Name: Michael L. Klofas
Title: Managing Director
MASSMUTUAL CORPORATE INVESTORS
By: /s/ Michael L. Klofas
-----------------------------------------
Name: Michael L. Klofas
Title: Vice President
The foregoing is executed on behalf of MassMutual
Corporate Investors, organized under a Declaration of
Trust, dated September 13, 1985, as amended from time
to time. The obligations of such Trust are not
personally binding upon, nor shall resort be had to
the property of, any of the Trustees, shareholders,
officers, employees or agents of such Trust, but the
Trust's property only shall be bound.
MASSMUTUAL PARTICIPATION INVESTORS
By: /s/ Michael L. Klofas
-----------------------------------------
Name: Michael L. Klofas
Title: Vice President
The foregoing is executed on behalf of MassMutual
Participation Investors, organized under a
Declaration of Trust, dated April 7, 1988, as amended
from time to time. The obligations of such Trust are
not personally binding upon, nor shall resort be had
to the property of, any of the Trustees,
shareholders, officers, employees or agents of such
Trust, but the Trust's property only shall be bound.
[SIGNATURE PAGE TO INVESTMENT AGREEMENT]
<PAGE>
MASSMUTUAL CORPORATE VALUE
PARTNERS LIMITED
By Massachusetts Mutual Life Insurance
Company, as Investment Advisor
By: /s/ Michael L. Klofas
-----------------------------------------
Name: Michael L. Klofas
Title: Managing Director
[SIGNATURE PAGE TO INVESTMENT AGREEMENT]
EXHIBIT 10.3
AMENDMENT NO. 2
TO CREDIT AGREEMENT
THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT (this "Second Amendment") is
entered into as of the 23rd day of December, 1998 among:
LUND INTERNATIONAL HOLDINGS, INC., a Delaware corporation ("Holdings");
DEFLECTA-SHIELD CORPORATION, a Delaware corporation ("Deflecta"),
LUND INDUSTRIES, INCORPORATED, a Minnesota corporation ("LII"),
BELMOR AUTOTRON CORP., a Delaware corporation ("Autotron"),
DFM CORP., an Iowa corporation ("DFM"),
(each a "Borrower" and, collectively, "Borrowers");
LUND ACQUISITION CORP., a Minnesota corporation ("LAC"),
BAC ACQUISITION CO., a Delaware corporation ("BAC"),
TRAILMASTER PRODUCTS, INC., a Delaware corporation ("Trailmaster"),
DELTA III, INC., a Delaware corporation ("Delta"),
(each an "Active Subsidiary" and, collectively, "Active Subsidiaries");
AUTO VENTSHADE COMPANY, a Delaware corporation ("AVS");
NEW HOLDINGS, INC., a Delaware corporation ("NHI");
VENTSHADE HOLDINGS, INC., a Delaware corporation ("VHI");
The several financial institutions from time to time party to the Credit
Agreement (as defined herein) (each a "Lender" and, collectively, "Lenders");
and
HELLER FINANCIAL, INC., a Delaware corporation for itself as a Lender and as
Agent (in its capacity as Agent, the "Agent").
RECITALS
WHEREAS:
(A) Holdings, Borrowers, the Active Subsidiaries, Lenders and Agent
have entered into that certain Credit Agreement dated as of February 27, 1998
(as amended by Amendment No. 1 thereto, dated as of April 1, 1998 (the "First
Amendment"), the "Credit Agreement");
(B) NHI intends to acquire all of the outstanding shares of stock of
VHI for an aggregate purchase price of $66,875,000 (subject to post-closing
price adjustments) (the "AVS Acquisition") and Holdings intends to acquire all
of the outstanding shares of stock of SB for an aggregate purchase price of
$18,000,000 (subject to post-closing price adjustments) (the
1
<PAGE>
"SB Acquisition");
(C) Upon the consummation of the AVS Acquisition, AVS shall become a
Borrower and a Corporate Guarantor under the Credit Agreement, NHI shall be
merged with and into VHI with VHI being the surviving corporation and VHI shall
become a Corporate Guarantor under the Credit Agreement;
(D) Upon consummation of the SB Acquisition, SB shall become a Borrower
under the Credit Agreement;
(E) Holdings, Borrowers, the Active Subsidiaries, Lenders and Agent
desire to amend certain provisions of the Credit Agreement; and
(F) Holdings, Borrowers, the Active Subsidiaries, Lenders and Agent are
willing to so amend, all on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the agreements and provisions
contained herein, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement.
2. Certain Amendments to Credit Agreement. The Credit Agreement is
hereby amended as follows:
2.1 The Index of Defined Terms in the Credit Agreement is hereby
amended as follows:
(A) By deleting therefrom the references to "Acquisition Costs",
"Acquisition EBITDA", "Acquisition Loans", "Acquisition Loan
Commitment", "Acquisition Note", "Acquisition Pro Forma", "Acquisition
Total Indebtedness", "Cut-Off Date", "Permitted Acquisition Documents",
"Purchase Agreement", "Target" and "Test Date"; and
(B) By inserting in the proper alphabetical order each of the
following:
"AVS Preamble"
"AVS Draw ss.1.1(C)"
"NHI Preamble"
"SB Preamble"
"SB Draw ss.1.1(C)"
"Term Loan C ss.1.1(C)"
"Term Loan C Commitment ss.1.1(C)"
"Term C Note ss.10.1"
2
<PAGE>
"VHI Preamble";
2.2 Exhibit 1.5(B) is hereby deleted in its entirety and replaced with
the attached replacement Exhibit 1.5(B);
2.3 Exhibit 3.6(B)(12) is hereby deleted in its entirety;
2.4 Exhibit 4.7(D) is hereby deleted in its entirety and replaced with
the attached replacement Exhibit 4.7(D);
2.5 Exhibit 10.1(A) is hereby amended by deleting the Form of
Acquisition Note and inserting the attached Form of Term C Note;
2.6 The Schedules to the Credit Agreement are hereby replaced by the
Supplemental Schedules attached hereto;
2.7 The recital of the parties to the Credit Agreement is hereby
amended by inserting after the words "DFM CORP., an Iowa corporation
("DFM")," the following:
"AUTO VENTSHADE COMPANY, a Delaware corporation ("AVS"),
SMITTYBILT, INC., a California corporation ("SB"),";
2.8 The recital of the parties to the Credit Agreement is further
amended by inserting after the words "DELTA III, INC., a Delaware
corporation ("Delta")," the following:
"VENTSHADE HOLDINGS, INC., a Delaware corporation ("VHI")";
2.9 The Recitals to the Credit Agreement are hereby amended by (i)
deleting from the second line of the first paragraph thereof the words
", an acquisition facility" and (ii) deleting from clause (iii) of the
first paragraph thereof the words "Permitted Acquisitions (which shall
not include the Deflecta Acquisition) and";
2.10 Subsection 1.1(A) of the Credit Agreement is hereby amended by
deleting the words, "Collectively, Term Loan A and Term Loan B will be
referred to as the 'Term Loans'. Borrowers shall repay the Term Loans
through periodic payments on the dates and in the amounts indicated
below ('Scheduled Term Installments')" and replacing them with the
following:
"Collectively, Term Loan A, Term Loan B and Term Loan C will be
referred to as the 'Term Loans'. Borrowers shall repay the Term Loans
through periodic payments on the dates and in the amounts ('Scheduled
Term Installments') indicated below (in the
3
<PAGE>
case of Term Loan A and Term Loan B) and in subsection 1.1(C) (in the
case of Term Loan C)";
2.11 Subsection 1.1(C) of the Credit Agreement is hereby deleted in its
entirety and replaced with the following:
"(C) Term Loan C. Each Lender agrees severally and not jointly, to lend
to Borrowers its Pro Rata Share of "Term Loan C", up to an aggregate
maximum for all Lenders of $34,500,000 (the "Term Loan C Commitment"),
in two draws as follows:
(i) The first draw (the "AVS Draw") in an amount equal to
$25,000,000; and
(ii) The second draw (the "SB Draw") in an amount equal to
$9,500,000.
Upon the occurrence of each of the AVS Draw and SB Draw, the Term Loan
C Commitment shall be reduced by the amount of such AVS Draw or SB
Draw, as the case may be. The Term Loan C Commitment of the Lenders
shall expire on the earlier of (i) the date of the SB Draw or (ii) 90
days after the date of AVS Draw. Borrowers shall repay the Term Loan C
through the Scheduled Term Installments indicated below:
Term Loan C
Term Loan C Scheduled Installments
----------------------------------
(if both the AVS Draw
Date (if only the AVS Draw occurs) and the SB Draw occur)
---- ----------------------------- ----------------------
March 31, 1999 $ 200,000 $ 269,531.25
June 30, 1999 200,000 269,531.25
September 30, 1999 200,000 269,531.25
December 31, 1999 200,000 269,531.25
March 31, 2000 250,000 377,343.75
June 30, 2000 250,000 377,343.75
September 30, 2000 250,000 377,343.75
December 31, 2000 250,000 377,343.75
March 31, 2001 562,500 754,687.50
June 30, 2001 562,500 754,687.50
September 30, 2001 562,500 754,687.50
December 31, 2001 562,500 754,687.50
March 31, 2002 625,000 862,500.00
June 30, 2002 625,000 862,500.00
4
<PAGE>
September 30, 2002 625,000 862,500.00
December 31, 2002 625,000 862,500.00
March 31, 2003 687,500 970,312.50
June 30, 2003 687,500 970,312.50
September 30, 2003 687,500 970,312.50
December 31, 2003 687,500 970,312.50
March 31, 2004 787,500 1,078,125.00
June 30, 2004 787,500 1,078,125.00
September 30, 2004 787,500 1,078,125.00
December 31, 2004 787,500 1,078,125.00
March 31, 2005 3,137,500 4,312,500.00
June 30, 2005 3,137,500 4,312,500.00
September 30, 2005 3,137,500 4,312,500.00
December 31, 2005 3,137,500 4,312,500.00
; provided, however, that the final principal Scheduled Term
Installment for Term Loan C shall be an amount equal to the aggregate
principal amount of the Term Loan C outstanding on such date.";
2.12 Subsection 1.1(E) of the Credit Agreement is hereby amended by
deleting clause (iv) thereof in its entirety and replacing it with the
following:
"(iv) a Term C Note to evidence the Term Loan C; such Note to be in the
principal amount of such Lender's Pro Rata Share of such Term Loan C";
2.13 Subsection 1.1(F) of the Credit Agreement is hereby amended as
follows:
(A) By deleting from the first sentence thereof the words "or
Acquisition Loans";
(B) By deleting from the second sentence thereof the words "or
Acquisition Loans" and replacing them with the words "or Term Loan C";
and
(C) By deleting from the last sentence thereof the words "and each
Acquisition Loan" and replacing them with the words "and the Term Loan
C";
2.14 Subsection 1.2(A) of the Credit Agreement is hereby amended as
follows:
(A) By deleting from paragraph (1) thereof the words "and the
Acquisition Loans"; and
(B) By deleting paragraph (4) thereof in its entirety and replacing it
with the following:
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<PAGE>
"(4) Term Loan C: The Term Loan C shall bear interest as follows:
(a) If a Base Rate Loan, then at the sum of the Base Rate plus
the Base Rate Margin applicable to the Term Loan C.
(b) If a LIBOR Loan, then at the sum of the LIBOR plus the
LIBOR Margin applicable to the Term Loan C.";
2.15 The definition of "Base Rate Margin" in subsection 1.2(A) of the
Credit Agreement is hereby amended as follows:
(A) By deleting from subclause (y) of clause (i) thereof the words
"Acquisition Loans and";
(B) By inserting after the words "September 1, 1998" in clause (ii)
thereof, the following as a new subclause (y):
", (y) the date of the execution of the Second Amendment"; and
(C) By relettering existing subclause (y) of clause (ii) thereof as
subclause (z);
2.16 The definition of "LIBOR Margin" in subsection 1.2(A) of the
Credit Agreement is hereby amended as follows:
(A) By deleting from subclause (y) of clause (i) thereof the words
"Acquisition Loans and";
(B) By inserting after the words "September 1, 1998" in clause (ii)
thereof, the following as a new subclause (y):
", (y) the date of the execution of the Second Amendment"; and
(C) By relettering existing subclause (y) of clause (ii) thereof as
subclause (z);
2.17 The table entitled "Base Rate Margin Pricing Table" in subsection
1.2(A) of the Credit Agreement is hereby deleted in its entirety and
replaced with the following table:
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<PAGE>
BASE RATE MARGIN
PRICING TABLE
================================================================================
Total Indebtedness
to Pro Forma EBITDA is: Base Rate Margin
---------------------------------------------------
Revolving
Loans Term Loan A Term Loan B Term Loan C
- --------------------------------------------------------------------------------
greater than 5.00 to 1.00 2.00% 2.00% 2.50% 3.00%
- --------------------------------------------------------------------------------
equal to or less than 5.00 to 1.75% 1.75% 2.25% 2.75%
1.00 but equal to or greater
than 3.75 to 1.00
- --------------------------------------------------------------------------------
less than 3.75 to 1.00 1.50% 1.50% 2.00% 2.50%
- --------------------------------------------------------------------------------
2.18 The table entitled "LIBOR Margin Pricing Table" in subsection
1.2(A) of the Credit Agreement is hereby deleted in its entirety and
replaced with the following table:
LIBOR MARGIN
PRICING TABLE
================================================================================
Total Indebtedness
to Pro Forma EBITDA is: Base Rate Margin
---------------------------------------------------
Revolving
Loans Term Loan A Term Loan B Term Loan C
- --------------------------------------------------------------------------------
greater than 5.00 to 1.00 3.25% 3.25% 3.75% 4.25%
- --------------------------------------------------------------------------------
equal to or less than 5.00 to 3.00% 3.00% 3.50% 4.00%
1.00 but equal to or greater
than 3.75 to 1.00
- --------------------------------------------------------------------------------
less than 3.75 to 1.00 2.75% 2.75% 3.25% 3.75%
- --------------------------------------------------------------------------------
2.19 Subsection 1.2(A) of the Credit Agreement is hereby further
amended by deleting from the second to last paragraph thereof, clause
(f) in its entirety and replacing it with the following:
"(f) no Interest Period for any portion of the Term Loan C shall extend
beyond the date of the final Scheduled Term Installment thereof.";
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<PAGE>
2.20 Subsection 1.2(B) of the Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
"(B) Unused Fee. Borrowers shall pay Agent, for the benefit of all
Lenders committed to make Revolving Loans, subject to the immediately
following sentence, in each case based upon their respective Pro Rata
Shares, a fee ("Unused Fee") in an amount equal to (1)(a) the Revolving
Loan Commitment less (b) the sum of (i) the average daily balance of
the Revolving Loans plus (ii) the average daily aggregate amount of
outstanding Risk Participation Liability, in each case during the
preceding month, multiplied by (2) one-half of one percent (0.50%) per
annum. Any Unused Fee is to be paid quarterly in arrears on the first
day of each of January, April, July and October.";
2.21 Subsection 1.5(A) of the Credit Agreement is hereby amended as
follows:
(A) By deleting from the heading thereof the words "and Acquisition
Loans";
(B) By deleting from the second line thereof the words "and Acquisition
Loans"; and
(C) By deleting from the sixth and seventh lines thereof the words "or
the Acquisition Loans" and replacing them with the words "or the Term
Loan C";
2.22 Subsection 1.5(D) of the Credit Agreement is hereby amended by
deleting clause (4) from the parenthetical thereof in its entirety and
replacing it with the following: "(4) proceeds of the issuance of
equity securities by Holdings in connection with (i) the acquisition of
AVS in an amount not to exceed $25,000,000 and (ii) the acquisition of
SB in an aggregate amount not to exceed $5,000,000";
2.23 Subsection 1.5(E) of the Credit Agreement is hereby amended as
follows:
(A) By deleting from the third line thereof the words "and the
Acquisition Loans" and replacing them with the words "and the Term Loan
C";
(B) By deleting from the fourth and fifth lines thereof the words "and
the unpaid Scheduled Acquisition Installments of the Acquisition
Loans"; and
(C) By deleting from the fifth and sixth lines thereof the words "and
the Acquisition Loans";
2.24 Subsection 1.6 of the Credit Agreement is hereby amended by
deleting from the seventh line thereof the words "and the Acquisition
Loan Commitment have" and replacing them with the word "has";
8
<PAGE>
2.25 Subsection 3.1(E) of the Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
"[Omitted]";
2.26 Subsection 3.1(F) of the Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
"[Omitted]";
2.27 The following shall be inserted into the Credit Agreement as a new
subsection 3.1(G) after the end of subsection 3.1(F):
"(G) subordinated Indebtedness incurred by Holdings and Borrowers
pursuant to the Securities Purchase Agreements in connection with the
AVS Acquisition and the SB Acquisition in an aggregate principal amount
not to exceed $25,000,000.";
2.28 Subsection 3.2(B) of the Credit Agreement is hereby amended by
inserting after the words "Loan Documents" in the parenthetical thereof
the words "or the Securities Purchase Agreements";
2.29 Subsection 3.3(D) of the Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
"(D) the AVS Acquisition and the SB Acquisition shall be permitted
provided that (i) in connection with the AVS Acquisition, (a) at least
$25,000,000 shall have been invested in Holdings in exchange for equity
securities on terms and conditions acceptable to Agent, (b) Holdings
and Borrowers shall have issued $20,000,000 of subordinated debt
pursuant to the terms and conditions set forth in the Securities
Purchase Agreements, (c) the AVS Acquisition shall be on the terms and
conditions set forth in the AVS Acquisition Agreement, (d) upon
consummation of the AVS Acquisition, NHI shall be merged with and into
VHI with VHI as the surviving entity, (e) upon consummation of the AVS
Acquisition, AVS shall become a Borrower hereunder and VHI shall become
a Loan Party and a Corporate Guarantor hereunder and (f) immediately
after the consummation of the AVS Acquisition, the amount equal to the
Revolving Loan Commitment less the sum of (1) the amount of outstanding
Revolving Loans plus (2) the amount of outstanding Risk Participation
Liability, shall be at least $10,000,000, and (ii) in connection with
the SB Acquisition, (a) at least $5,000,000 shall have been invested in
Holdings in exchange for equity securities on terms and conditions
acceptable to Agent, (b) Holdings and Borrowers shall have issued
$5,000,000 of subordinated debt pursuant to the terms and conditions
set forth in the Securities Purchase Agreements, (c) the SB Acquisition
shall be on substantially the same terms and conditions set forth in
the SB Acquisition Agreement and otherwise reasonably acceptable to
Agent, (d) upon consummation of the SB Acquisition, SB shall become a
Borrower hereunder and (e) immediately after the consummation of the SB
Acquisition, the amount equal to the Revolving Loan Commitment less the
sum of
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<PAGE>
(1) the amount of outstanding Revolving Loans plus (2) the amount of
outstanding Risk Participation Liability, shall be at least
$10,000,000;";
2.30 Subsection 3.3 of the Credit Agreement is further amended as
follows:
(A) By inserting before the period at the end of clause (G) thereof the
following:
"; and (H) The Loan Parties may accept a promissory note in form and
substance reasonably satisfactory to Agent and in a principal amount
not to exceed $500,000, in connection with the sale of the assets of
the Fibernetics division permitted under subsection 3.7(e); provided,
that the sole originally executed counterpart of such note shall be
pledged and delivered to Agent, for the benefit of Agent and Lenders,
as security for the Obligations"; and
(B) By inserting in the definition of "Investment" therein after the
words "or ownership interest in" in the third line thereof the
following: ", or all or substantially all of the assets of";
2.31 Subsection 3.4 of the Credit Agreement is hereby amended as
follows:
(A) By inserting after the semicolon at the end of clause (H) thereof
the word "and";
(B) By deleting from the end of clause (I) thereof the word "and"; and
(C) By deleting clause (J) thereof in its entirety;
2.32 Subsection 3.5 of the Credit Agreement is hereby amended by
inserting at the end of the first paragraph thereof the following:
"Notwithstanding the foregoing, the Loan Parties may, pursuant to the
subordination terms set forth in the Senior Subordinated Notes, make
Restricted Junior Payments to the extent necessary to permit Holdings
and Borrowers to make interest payments with respect to the
Indebtedness permitted to be incurred under subsection 3.1(G)"
2.33 Subsections 3.6(B), (C) and (D) of the Credit Agreement are each
hereby deleted in their entirety;
2.34 Subsection 3.7 of the Credit Agreement is hereby amended by
inserting before the period at the end of clause (d) thereof the
following:
"; and (e) the sale or disposition of the assets of the Fibernetics
division of the Loan Parties";
10
<PAGE>
2.35 Subsection 3.8 of the Credit Agreement is hereby amended by
inserting in clause (d) thereof after the word "under" the words "the
second sentence of the first paragraph of subsection 3.5 or";
2.36 Subsection 3.10 of the Credit Agreement is hereby amended by
deleting from the third line thereof after the word "Indebtedness" the
words "of its" and replacing them with the words "which is";
2.37 Subsection 4.1 of the Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
"4.1 Capital Expenditure Limits. The aggregate amount of all Capital
Expenditures of Holdings and Borrowers and their respective
Subsidiaries will not exceed the following amounts ('Capex Limit')
during the following periods:
<TABLE>
<CAPTION>
Maximum Amount of Capital Expenditures
--------------------------------------
Period (if only the AVS (if both the AVS
------ Draw occurs) Draw and the SB
---------------- Draw occur)
----------------
<S> <C> <C>
From January 1, 1999 through December 31, 1999 $7,500,000 $8,000,000
From January 1, 2000 through December 31, 2000 $5,500,000 $6,000,000
Each Fiscal Year thereafter $5,500,000 $6,000,000
</TABLE>
Notwithstanding the foregoing, in the event the Loan Parties
and their respective Subsidiaries do not expend the entire Capex Limit
permitted in any Fiscal Year, the Loan Parties and their respective
Subsidiaries may carry forward to the immediately succeeding Fiscal
Year the unutilized portion of the Capex Limit, provided that the
amount so carried forward shall not exceed 50% of the Capex Limit for
such immediately succeeding Fiscal Year. All Capital Expenditures made
by Loan Parties and their respective Subsidiaries shall first be
applied to reduce the applicable Capex Limit for such Fiscal Year and
then to reduce the amount, if any, carried forward from the previous
Fiscal Year.
'Capital Expenditures' will be calculated as illustrated on
Exhibit 4.7(D)."
2.38 Subsection 4.2 of the Credit Agreement is hereby amended by
deleting the figure "$1,500,000" and replacing it with the following:
"$2,500,000 (if only the AVS Draw occurs) or $3,500,000 (if both the
AVS Draw and the SB Draw occur),"
2.39 Subsection 4.3 of the Credit Agreement is hereby amended by
deleting it in its
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<PAGE>
entirety and replacing it with the following:
"4.3 EBITDA. Holdings and Borrowers shall not permit EBITDA for the
four Fiscal Quarters (or such shorter period as indicated below) ending
on the last day of any Fiscal Quarter ending during the periods set
forth below to be less than the amount set forth below for such period.
<TABLE>
<CAPTION>
Minimum Amount of EBITDA
-----------------------------------
Period (if only the AVS (if both the AVS
------ Draw occurs) Draw and the SB
---------------- Draw occur)
----------------
<S> <C> <C>
Fiscal Quarter Ending March 31, 1999 $ 3,500,000 $ 4,000,000
For the Six Months Ending June 30, 1999 $10,000,000 $11,500,000
For the Nine Months Ending September 30, 1999 $17,300,000 $20,000,000
For the Twelve Months Ending December 31, 1999 $23,700,000 $27,300,000
For the Four Fiscal Quarters Ending:
March 31, 2000 $25,700,000 $29,500,000
June 30, 2000 $26,900,000 $31,000,000
September 30, 2000 $27,000,000 $31,000,000
December 31, 2000 $27,250,000 $31,000,000
March 31, 2001 $28,000,000 $32,000,000
June 30, 2001 $28,800,000 $32,000,000
September 30, 2001 $29,700,000 $34,000,000
December 31, 2001 $30,000,000 $34,000,000
March 31, 2002 and on the last day of each
Fiscal Quarter thereafter $30,000,000 $35,000,000
</TABLE>
'EBITDA' will be calculated as illustrated on Exhibit 4.7(D)."
2.40 Subsection 4.4 of the Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
"4.4 Fixed Charge Coverage. Holdings and Borrowers shall not permit
Fixed Charge Coverage for the four Fiscal Quarters (or such shorter
period as indicated
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<PAGE>
below) ending on the last day of any Fiscal Quarter ending during the
periods set forth below to be less than the ratio set forth below for
such period.
<TABLE>
<CAPTION>
Minimum Ratio
-----------------------------------
Period (if only the AVS (if both the AVS
------ Draw occurs) Draw and the SB
---------------- Draw occur)
----------------
<S> <C> <C>
For the Six Months Ending June 30, 1999 0.800 to 1.0 0.850 to 1.0
For the Nine Months Ending September 30, 1999 0.900 to 1.0 0.950 to 1.0
For the Twelve Months Ending December 31, 1999 1.000 to 1.0 1.000 to 1.0
For the Four Fiscal Quarters Ending:
March 31, 2000 1.000 to 1.0 1.050 to 1.0
June 30, 2000 1.050 to 1.0 1.050 to 1.0
September 30, 2000 1.050 to 1.0 1.100 to 1.0
December 31, 2000 and on the last day of
each Fiscal Quarter thereafter 1.100 to 1.0 1.100 to 1.0
</TABLE>
'Fixed Charge Coverage' will be calculated as illustrated on Exhibit
4.7(D)."
2.41 Subsection 4.5 of the Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
"4.5 Total Interest Coverage. Holdings and Borrowers shall not permit
Total Interest Coverage for the four Fiscal Quarters (or such shorter
period as indicated below) ending on the last day of any Fiscal Quarter
ending during the periods set forth below to be less than the ratio set
forth below for such period.
<TABLE>
<CAPTION>
Minimum Ratio
-----------------------------------
Period (if only the AVS (if both the AVS
------ Draw occurs) Draw and the SB
---------------- Draw occur)
----------------
<S> <C> <C>
For the Six Months Ending June 30, 1999 1.300 to 1.0 1.300 to 1.0
For the Nine Months Ending September 30, 1999 1.550 to 1.0 1.600 to 1.0
For the Twelve Months Ending December 31, 1999 1.650 to 1.0 1.700 to 1.0
13
<PAGE>
For the Four Fiscal Quarters Ending:
March 31, 2000 1.800 to 1.0 1.800 to 1.0
June 30, 2000 2.000 to 1.0 2.000 to 1.0
September 30, 2000 2.000 to 1.0 2.000 to 1.0
December 31, 2000 2.000 to 1.0 2.000 to 1.0
March 31, 2001 2.250 to 1.0 2.250 to 1.0
June 30, 2001 2.500 to 1.0 2.500 to 1.0
September 30, 2001 2.750 to 1.0 2.750 to 1.0
December 31, 2001 2.750 to 1.0 2.750 to 1.0
March 31, 2002 and on the last day of each
Fiscal Quarter thereafter 3.000 to 1.0 3.000 to 1.0
</TABLE>
'Total Interest Coverage' will be calculated as illustrated on Exhibit
4.7(D).
2.42 Subsection 4.6 of the Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
"4.6 Total Indebtedness to EBITDA Ratio. Holdings and Borrowers shall
not permit the ratio of Total Indebtedness (calculated as of the last
day of any Fiscal Quarter ending during the periods set forth below) to
EBITDA for the four Fiscal Quarters ending on the last day of any
Fiscal Quarter ending during the periods set forth below (or for
periods shorter than four Fiscal Quarters, EBITDA for such shorter
period plus a certain multiple of $28,200,000 (the "EBITDA Index") as
set forth below) to be greater than the ratio set forth below for such
period.
Period Maximum Ratio
------ -----------------------------------
(whether or not the SB Draw occurs)
For the Six Months Ending on June 30, 1999 4.500 to 1.0
(0.56 times the EBITDA Index)
For the Nine Months Ending on September 30, 1999 4.350 to 1.0
(0.26 times the EBITDA Index)
For the Twelve Months Ending on December 31, 1999 4.200 to 1.0
For the Four Fiscal Quarters Ending:
March 31, 2000 4.000 to 1.0
June 30, 2000 3.750 to 1.0
14
<PAGE>
September 30, 2000 3.500 to 1.0
December 31, 2000 3.500 to 1.0
March 31, 2001 3.500 to 1.0
June 30, 2001 3.000 to 1.0
September 30, 2001 2.750 to 1.0
December 31, 2001 and on the last day
of each Fiscal Quarter thereafter 2.500 to 1.0
"Total Indebtedness" and "EBITDA" will be calculated as illustrated on Exhibit
4.7(D).
2.43 Subsection 5.25(B) of the Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
"(B) No portion of the proceeds of the Term Loan C shall be used by
Borrowers for any purpose other than in connection with the
consummation of the AVS Acquisition or the SB Acquisition.";
2.44 Subsection 5.25(C) of the Credit Agreement is hereby amended by
deleting the words "or the Term Loans" and replacing them with the
words ", the Term Loan A or the Term Loan B";
2.45 The following shall be inserted as a new subsection 5.28:
"5.28 Year 2000. Each Loan Party has made an assessment of the
microchip and computer-based systems and the software used in its
business and based upon such assessment believes that it will be "Year
2000 Compliant" by January 1, 2000. For purposes of this subsection,
"Year 2000 Compliant" means that all software, embedded microchips and
other processing capabilities utilized by, and material to the business
operations or financial condition of, each Loan Party are able to
interpret, store, transmit, receive and manipulate data on and
involving all calendar dates correctly and without causing any abnormal
ending scenarios in relation to dates in and after the Year 2000. From
time to time, at the request of Agent, each of the Loan Parties shall
provide to Lenders such updated information as is requested regarding
the status of its efforts to become Year 2000 Compliant.";
2.46 Subsection 6.3 of the Credit Agreement is hereby amended by
deleting the words ", the Acquisition Loans";
2.47 Subsection 7.2(A) of the Credit Agreement is hereby amended by
deleting the words "or an Acquisition Loan" and replacing them with the
words "or the Term Loan C";
2.48 Subsection 7.3 of the Credit Agreement is hereby amended by
deleting it in its
15
<PAGE>
entirety and replacing it with the following:
"7.3 Additional Conditions to AVS Draw. The obligations of Agent and
each Lender to fund the AVS Draw are subject to the condition that the
AVS Acquisition shall have occurred pursuant to the provisions set
forth in clause (i) of subsection 3.3(D), in addition to those
conditions set forth in subsections 7.1 and 7.2";
2.49 A new subsection 7.4 is hereby inserted into the Credit Agreement
following subsection 7.3:
"7.4 Additional Conditions to SB Draw. The obligations of Agent and
each Lender to fund the SB Draw are subject to the following
conditions: (i) the SB Acquisition shall have occurred pursuant to the
provisions set forth in clause (ii) of subsection 3.3(D), in addition
to those conditions set forth in subsections 7.1 and 7.2 and (ii) all
documents listed on Schedule B to the Second Amendment shall have been
delivered, all in form and substance satisfactory to Agent";
2.50 Subsection 8.1 of the Credit Agreement is hereby amended as
follows:
(A) By deleting the proviso which was inserted in the fifth line of the
first paragraph thereof pursuant to subsection 2.2 of the First
Amendment and replacing it with the following: "provided, however, no
such consent by Agent shall be required in the case of any assignment
to another Lender (including Heller) or an Affiliate or Related Fund of
a Lender (including Heller)";
(B) By deleting from the sixth and eighth lines of the first paragraph
thereof and the second line of the second paragraph thereof the words
"the Acquisition Loan Commitment (after the date specified in clause
(b)(v) of the term 'Expiry Date', the Acquisition Loans) and";
(C) By inserting after the words "the Term Loans" in the sixth and
eighth lines of the first paragraph thereof and the second line of the
second paragraph thereof the words "and, prior to the expiration of the
Term Loan C Commitment, the Term Loan C Commitment";
(D) By inserting after the word "The" and before the words
"administrative fee" in the tenth line of the first paragraph thereof
the following:
"requirement as to the minimum amount of an assignment referred to in
clause (b) of the preceding sentence and the";
(E) By inserting after the word "Affiliate" in the eleventh line of the
first paragraph thereof the words "or Related Fund";
16
<PAGE>
(F) By deleting the words "the Acquisition Loan Commitment" from the
fifteenth line of the first paragraph thereof and replacing them with
the words "the Term Loan C Commitment";
(G) By deleting the proviso which was inserted in the fourth line of
the second paragraph thereof pursuant to subsection 2.4 of the First
Amendment in its entirety;
(H) By inserting in the fifth line of the second paragraph thereof
after the figure "$4,000,000" the following: "provided, however, that
the conditions set forth in the preceding clauses (a) and (b) shall not
apply in the case of any sale of participations to another Lender
(including Heller) or an Affiliate or Related Fund of a Lender
(including Heller)"
(I) By deleting from the eleventh line of the second paragraph thereof
the words "or Scheduled Acquisition Installment";
2.51 Subsection 8.2(F) of the Credit Agreement is hereby amended by
deleting the words "Acquisition Loan Commitment" and replacing them
with the words "Term Loan C Commitment";
2.52 Subsection 8.2(H) of the Credit Agreement is hereby amended as
follows:
(A) By deleting from the first sentence of paragraph (1) thereof the
words "and the Acquisition Loan Commitment";
(B) By deleting from the second sentence of paragraph (1) thereof the
words "the Acquisition Loan Commitment (after the date specified in
clause (b)(v) of the term 'Expiry Date', the outstanding Acquisition
Loans) and"; and
(C) By inserting in the second sentence of paragraph (1) thereof after
the words "the outstanding Term Loans" the words "and, prior to the
expiration of the Term Loan C Commitment, the Term Loan C Commitment";
2.53 Subsection 8.3(C) of the Credit Agreement is hereby amended as
follows:
(A) By deleting from the second line thereof the words "clauses (a)
through (i)" and replacing them with the words "clauses (A) and (B)";
and
(B) By deleting from clause (B) thereof the words "Acquisition Loan
Commitment" and replacing them with the words "Term Loan C Commitment";
2.54 Subsection 8.6(B) of the Credit Agreement is hereby amended by
deleting from
17
<PAGE>
the heading and second line thereof the words "and Acquisition Loans";
2.55 Subsection 8.6(C) of the Credit Agreement is hereby amended by
deleting from paragraph (3) thereof the words "or Acquisition Loans"
and replacing them with the words "or the Term Loan C";
2.56 Subsection 9.1 of the Credit Agreement is hereby amended by
deleting from clause (b) thereof the words "Permitted Acquisition or";
2.57 Subsection 9.2 of the Credit Agreement is hereby amended as
follows:
(A) By deleting from clause (a) thereof the words "the Acquisition Loan
Commitment" and replacing them with the words "the Term Loan C
Commitment"; and
(B) By deleting from clause (c) thereof the words "or Scheduled
Acquisition Installment";
2.58 Subsection 10.1 of the Credit Agreement is hereby amended as
follows:
(A) By deleting the definitions of "Acquisition Costs", "Acquisition
Note" and "Target" in their entirety;
(B) By inserting in the proper alphabetical order the following
definition:
"'AVS Acquisition Agreement' means the Stock Purchase Agreement, dated
as of December 11, 1998, by and among VHI, the persons listed therein
as Sellers, Holdings and NHI.";
(C) By deleting from the definition of "Expiry Date" clauses (b)(iv)
and (b)(v) thereof in their entirety and replacing them with the
following:
"and (iv) December 31, 2005 for the Term Loan C";
(D) By deleting from the definition of "Expiry Date" in clause (c)
thereof the date "December 31, 2004" and replacing it with the date
"December 31, 2005";
(E) By inserting in the definition of "Harvest Partners" before the
period at the end thereof the words "and LIH Holdings III, LLC., a
Delaware limited liability company";
(F) By deleting from the definition of "Loan" the words ", the
Acquisition Loan Commitment";
18
<PAGE>
(G) By deleting from the definition of "Note" the words "Acquisition
Notes" and replacing them with the words "Term C Notes";
(H) By deleting from the definition of "Pro Rata Share" clause (c)
thereof in its entirety and replacing it with the following:
"(c) with respect to a Lender's obligation to lend a portion of the
Term Loan C and receive payments of interest and principal with respect
thereto, the percentage obtained by dividing (i) such Lender's
commitment to lend a portion of the Term Loan C, as set forth on the
signature page of the Second Amendment opposite such Lender's signature
or in the most recent Assignment and Acceptance Agreement, if any,
executed by such Lender, by (ii) all such commitments of all Lenders to
lend the Term Loan C,";
(I) By deleting from the definition of "Pro Rata Share" clause (d)
thereof in its entirety and replacing it with the following:
"(d) with respect to all other matters (including without limitation
the indemnification obligations arising under subsection 8.2(E)), the
percentage obtained by dividing (i) the sum of the then outstanding
portion of the Term Loans which were funded by such Lender, plus the
commitment of such Lender to make Revolving Loans, as set forth on the
signature page of this Agreement opposite such Lender's signature or in
the most recent Assignment and Acceptance Agreement, if any, executed
by such Lender, plus, prior to the expiration of the Term Loan C
Commitment, the commitment of such Lender to make the Term Loan C as
set forth on the signature page of the Second Amendment opposite such
Lender's signature or in the most recent Assignment and Acceptance
Agreement, if any, executed by such Lender by (ii) the sum of the then
outstanding Term Loans plus the aggregate Revolving Loan Commitment
plus, prior to the expiration of the Term Loan C Commitment, the
aggregate Term Loan C Commitment.";
(J) By inserting in the proper alphabetical order the following
definition:
"'Related Fund' means, with respect to any Lender which is a fund that
invests in loans, any other fund that invests in loans and is managed
by the same investment advisor as such Lender or by an Affiliate of
such Lender.";
(K) By deleting from the definition of "Requisite Lenders" from clause
(a) thereof the words "the Acquisition Loan Commitment (after the date
specified in clause (b)(v) of the term 'Expiry Date', the outstanding
principal balance of the Acquisition Loans) and";
(L) By inserting in the definition of "Requisite Lenders" after the
words "the Term
19
<PAGE>
Loans" in clause (a) thereof the words "and, prior to the expiration of
the Term Loan C Commitment, the Term Loan C Commitment";
(M) By inserting in the proper alphabetical order the following
definition:
"'SB Acquisition Agreement' means the draft of the Stock Purchase
Agreement, dated December 11, 1998, by and among Holdings, SB, Tom G.
Smith, Debbie Smith, The Tom and Debbie Smith Family Trust.";
(N) By inserting in the proper alphabetical order the following
definition:
"'Securities Purchase Agreements' means collectively those Securities
Purchase Agreements, dated the closing date of the AVS Acquisition, by
and among Holdings, Borrowers and each of Massachusetts Mutual Life
Insurance Company, MassMutual Corporate Investors, MassMutual
Participation Investors, MassMutual Corporate Value Partners Limited
and National City Venture Corporation, as amended, modified and
supplemented from time to time.";
(O) By inserting in the proper alphabetical order the following
definition:
"'Senior Subordinated Notes' means those 12.5% Senior Subordinated
Notes due December 31, 2006 issued pursuant to the Securities Purchase
Agreements."
(O) By inserting in the proper alphabetical order the following
definition:
"'Term C Note' means each note of Borrowers in substantially the form
of Exhibit 10.1(A), as applicable, issued pursuant to subsection
1.1(E)(iv)."
3. COMMITMENT ALLOCATIONS. Upon the execution and delivery of this
Second Amendment, each of the Lenders agrees to assign such portion, if any, of
its commitment to make Revolving Loans and its outstanding principal amount of
the Term Loan A and the Term Loan B to such of the other Lenders such that, as
for any Lender, its commitment to make Revolving Loans and its portion of the
outstanding balance of the Term Loan A and the Term Loan B shall be that amount
as set forth on the signature page of this Second Amendment opposite such
Lender's signature.
4. REPRESENTATIONS AND WARRANTIES. Each of the Loan Parties hereby
represents and warrants to the Lenders and the Agent that:
4.1 No Default. After giving effect to this Second Amendment,
no Default or Event of Default shall have occurred or be continuing.
4.2 Existing Representations and Warranties. As of the date
hereof and after
20
<PAGE>
giving effect to this Second Amendment, each and every one of the
representations and warranties of the Loan Parties set forth in the Loan
Documents are true, accurate and complete in all respects and with the same
effect as though made on the date hereof, and each is hereby incorporated herein
in full by reference as if restated herein in its entirety, except for (i)
changes in the ordinary course of business which are not prohibited by the
Credit Agreement (as amended hereby) and which do not, either singly or in the
aggregate, have a Material Adverse Effect and (ii) any representation or
warranty limited by its terms to a specific date that is prior to the date
hereof.
4.3 Authority; Enforceability. (i) The execution, delivery and
performance by each Loan Party of this Second Amendment are within its
organizational powers and have been duly authorized by all necessary action
(corporate or otherwise) on the part of each Loan Party, (ii) this Second
Amendment is the legal, valid and binding obligation of each Loan Party,
enforceable against each Loan Party in accordance with its terms, and (iii) this
Second Amendment and the execution, delivery and performance by each Loan Party
thereof does not: (A) contravene the terms of any Loan Party's corporate charter
or by-laws; (B) conflict with or result in any breach or contravention of, or
the creation of any Lien under, any document evidencing any contractual
obligation to which any Loan Party is a party or any order, injunction, writ or
decree to which any Loan Party or its property is subject; (C) violate any
requirement of law.
5. CONDITIONS PRECEDENT TO SECOND AMENDMENT
The effectiveness of this Second Amendment is subject to the
satisfaction, in form and substance satisfactory to Agent, of each of the
following conditions precedent:
5.1 Delivery of Documents. All documents listed on Schedule A
hereto shall have been delivered, all in form and substance satisfactory to
Agent.
5.2 Fees and Expenses. All accrued fees and expenses of Agent
and Lenders (including the fees and expenses of counsel for Agent and local
counsel for Agent) and all fees of Agent set forth in that certain letter, dated
the date hereof, from Agent to Holdings shall have been paid.
21
<PAGE>
6. REFERENCE TO AND EFFECT UPON THE CREDIT AGREEMENT.
6.1 AVS and VHI. By their execution of this Second Amendment,
AVS hereby agrees to be a Borrower and a Corporate Guarantor under the Credit
Agreement, VHI hereby agrees to be a Corporate Guarantor under the Credit
Agreement and each of AVS and VHI hereby agrees to be bound by the terms and
provisions of the Credit Agreement.
6.2 Effect. Except as specifically amended hereby, the Credit
Agreement and the other Loan Documents shall remain in full force and effect in
accordance with their terms and are hereby ratified and confirmed.
6.3 No Waiver; References. The execution, delivery and
effectiveness of this Second Amendment shall not operate as a waiver of any
right, power or remedy of the Agent or any Lender under the Credit Agreement,
nor constitute a waiver of any provision of the Credit Agreement, except as
specifically set forth herein. Upon the effectiveness of this Second Amendment,
each reference in:
(i) the Credit Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of similar import shall mean and be a
reference to the Credit Agreement as amended hereby;
(ii) the other Loan Documents to the "Credit
Agreement" shall mean and be a reference to the Credit Agreement as amended
hereby; and
(iii) the Loan Documents to the "Loan Documents"
shall be deemed to include this Second Amendment.
7. MISCELLANEOUS.
7.1 Expenses. The Loan Parties agree to pay the Agent upon
demand for all reasonable expenses, including reasonable attorneys' fees and
expenses of the Agent, incurred by the Agent in connection with the preparation,
negotiation and execution of this Second Amendment.
7.2 Headings. Section headings in this Second Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Second Amendment for any other purposes.
7.3 Law. THIS SECOND AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
7.4 Successors. This Second Amendment shall be binding upon
the Loan Parties, the Lenders and the Agent and their respective successors and
assigns (permitted
22
<PAGE>
assigns in the case of the Loan Parties), and shall inure to the benefit of the
Loan Parties, the Lenders and the Agent and the successors and assigns
(permitted assigns in the case of the Loan Parties) of the Loan Parties, Lenders
and the Agent.
7.5 Execution in Counterparts. This Second Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.
[Signature page follows]
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed and delivered by their respective officers thereunto
duly authorized as of the date first written above.
LUND INTERNATIONAL HOLDINGS, INC.
LUND INDUSTRIES, INCORPORATED
DEFLECTA-SHIELD CORPORATION
BELMOR AUTOTRON CORP.
DFM CORP.
LUND ACQUISITION CORP.
BAC ACQUISITION CO.
TRAILMASTER PRODUCTS, INC.
DELTA III, INC.
AUTO VENTSHADE COMPANY
NEW HOLDINGS, INC.
VENTSHADE HOLDINGS, INC.
For each of the foregoing corporations:
By: /s/ Ira D. Kleinman
Name: Ira D. Kleinman
Title: Chairman of the Board of Directors
<PAGE>
Commitment to make HELLER FINANCIAL, INC.,
Revolving Loans: in its capacity as Agent and a Lender
$0
Outstanding balance of By: /s/ Jennifer Cloud
Term Loan A: Name: Jennifer Cloud
$0 Title: Assistant Vice President
Outstanding balance of
Term Loan B:
$6,712,272.70
Commitment to make
Term Loan C:
$12,598,383.89
<PAGE>
Commitment to make DRESDNER BANK AG, NEW YORK AND
Revolving Loans: GRAND CAYMAN BRANCHES,
$3,876,923.08 as a Lender
Outstanding balance of
Term Loan A: By: /s/ Ben Marzouk
$2,487,692.30 Name: Ben Marzouk
Title: Vice President
Outstanding balance of
Term Loan B:
$1,596,363.64 By: /s/ Anthony J. Berti
Name: Anthony J. Berti
Commitment to make Title: Assistant Vice President
Term Loan C:
$4,177,894.15
<PAGE>
Commitment to make LASALLE NATIONAL BANK,
Revolving Loans: as a Lender
$3,876,923.08
Outstanding balance of By: /s/ Ken A. Hammerstrom
Term Loan A: Name: Ken A Hammerstrom
$2,487,692.30 Title: Senior Vice President
Outstanding balance of
Term Loan B:
$1,596,363.64
Commitment to make
Term Loan C:
$4,177,894.15
<PAGE>
Commitment to make THE PRUDENTIAL INSURANCE COMPANY OF
Revolving Loans: AMERICA,
$3,048,621.18 as a Lender
Outstanding balance of
Term Loan A:
$1,147,698.58 By: /s/ P. Scott von Fischer
Name: P. Scott von Fischer
Outstanding balance of Title: Vice President
Term Loan B:
$2,721,363.64
Commitment to make
Term Loan C:
$2,981,757.16
<PAGE>
Commitment to make IBJ SCHRODER BANK & TRUST COMPANY,
Revolving Loans: as a Lender
$3,876,923.08
Outstanding balance of By: /s/ Patricia G. McCormick
Term Loan A: Name: Patricia G. McCormick
$2,487,692.30 Title: Director
Outstanding balance of
Term Loan B:
$1,596,363.64
Commitment to make
Term Loan C:
$4,177,894.15
<PAGE>
Commitment to make KEY CORPORATE CAPITAL, INC.,
Revolving Loans: as a Lender
$7,383,163.99
Outstanding balance of By: /s/ Jay R. McKenney
Term Loan A: Name: Jay R. McKenney
$4,737,530.27 Title: Vice President
Outstanding balance of
Term Loan B:
$0
Commitment to make
Term Loan C:
$0
<PAGE>
Commitment to make FIRST UNION NATIONAL BANK, successor to
Revolving Loans: CORESTATES BANK, as a Lender
$5,168,214.82
Outstanding balance of By: /s/ Mark S. Supple
Term Loan A: Name: Mark S. Supple
$3,316,271.16 Title: Director
Outstanding balance of
Term Loan B:
$0
Commitment to make
Term Loan C:
$0
<PAGE>
Commitment to make FIRST SOURCE FINANCIAL LLP, as a Lender
Revolving Loans: By: First Source Financial, Inc.,
$2,769,230.77 its Agent/Manager
Outstanding balance of By: /s/ Kathi J. Inorio
Term Loan A: Name: Kathi J. Inorio
$2,585,423.09 Title: Vice President
Outstanding balance of
Term Loan B:
$0
Commitment to make
Term Loan C:
$1,879,136.84
<PAGE>
Commitment to make SENIOR DEBT PORTFOLIO, as a Lender
Revolving Loans: By: Boston Management and Research,
$0 as Investment Advisor
Outstanding balance of By: /s/ Scott H. Page
Term Loan A: Name: Scott H. Page
$0 Title: Vice President
Outstanding balance of
Term Loan B:
$4,486,363.64
Commitment to make
Term Loan C:
$2,854,223.79
<PAGE>
Commitment to make ARCHIMEDES FUNDING LLC, as a Lender
Revolving Loans: By: ING Capital Advisors, Inc,
$0 as Collateral Manager
Outstanding balance of By: /s/ Helen Y. Rhee
Term Loan A: Name: Helen Y. Rhee
$0 Title: Vice President and
Portfolio Manager
Outstanding balance of
Term Loan B:
$3,240,909.10
Commitment to make
Term Loan C:
$1,652,815.86
EXHIBIT 10.4
COMPOSITE
CONFORMED COPY
LUND INTERNATIONAL HOLDINGS, INC.
DEFLECTA-SHIELD CORPORATION
LUND INDUSTRIES, INCORPORATED
BELMOR AUTOTRON CORP.
DFM CORP.
AUTO VENTSHADE COMPANY
$25,000,000 12.5% Senior Subordinated Notes due December 31, 2006
Warrants to Purchase up to 704,839 shares of Common
Stock (or 70,483.9 shares of Series B Preferred Stock, as provided
in section 12 hereof)
(subject to adjustment) of Lund International Holdings, Inc.
------------------------------------
SECURITIES PURCHASE AGREEMENT
------------------------------------
December 23, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Authorization of Securities; Other Purchasers; etc. 1
2. Sale and Purchase of Securities 2
3. Closings 2
4. Conditions to Closings 3
4.1. Conditions to Auto Ventshade Closing 3
4.2. Conditions to Smittybilt Closing 6
4.3. Conditions to Each Closing 8
4.4. Joint and Several Obligations, etc. 9
5. Representations and Warranties 9
5.1. Organization, Standing, etc. of the Companies 9
5.2. Names; Jurisdiction of Incorporation, Subsidiaries, etc. 10
5.3. Qualification 10
5.4. Business, etc. 10
5.5. Capital Stock 10
5.6. Financial Statements 12
5.7. Changes; Solvency, etc. 12
5.8. Tax Returns and Payments 13
5.9. Funded Debt, Current Debt, Liens, Investments, Transactions with
Affiliates, Leases and Derivative Transactions 13
5.10. Title to Properties; Liens; Leases 14
5.11. Litigation, etc. 14
5.12. Valid and Binding Obligations; Compliance with Other Instruments;
Absence of Restrictions, etc. 14
5.13. ERISA 16
5.14. Consents, etc. 17
5.15. Proprietary Rights; Licenses 17
5.16. Offer of Securities; Investment Bankers 18
5.17. Government Regulation 18
5.18. Year 2000 Matters 18
5.19. Labor Relations; Suppliers, Distributors and Customers 18
5.20. Disclosure 19
6. Use of Proceeds; Regulation U, etc. 19
7. Financial Statements and Information 20
8. Inspection; Confidentiality 23
<PAGE>
9. Prepayment of Notes 24
9.1. [Intentionally Omitted.] 24
9.2 Optional Prepayment With Premium of Notes 24
9.3. Prepayment With Premium at the Option of Holders of Notes upon a
Change of Control 25
9.4. Allocation of Partial Prepayments of Notes 25
9.5. Notice of Optional Prepayments of Notes 25
9.6. Maturity; Accrued Interest; Surrender, etc. of Notes 26
9.7. Purchase of Notes 26
9.8. Payment on Non-Business Days 26
9.9. Application of Notes in Satisfaction of Exercise Price of Warrants 26
10. Subordination of Notes and Subsidiary Guarantees 26
11. Registration, etc. 26
12. Certain Provisions Concerning the Management Stock Option Plan and the
Warrants 27
12.1. Management Stock Option Plan; Excluded Outstanding Options 27
12.2. Warrants Exercisable for Series B Preferred Stock Under Certain
Circumstances 27
13. Board Visitation Rights 28
14. Covenants of the Companies 29
14.1. Books of Record and Account; Reserves 29
14.2. Payment of Taxes; Corporate Existence; Maintenance of Properties;
Compliance with Laws; Lines of Business; Proprietary Rights 29
14.3. Insurance 30
14.4. Limitation on Discount or Sale of Receivables 30
14.5. Limitation on Funded Debt and Current Debt 30
14.6. Limitation on Restricted Payments 32
14.7. Certain Financial Covenants 33
14.8. Limitation on Tax Consolidation 35
14.9. Limitation on Liens 35
14.10. Limitation on Transactions with Affiliates 37
14.11. Limitations on Investments and Derivative Transactions 37
14.12. Limitation on Issuance of Shares of Subsidiaries 37
14.13. Limitation on Subsidiary's Consolidation or Merger 37
<PAGE>
14.14. Limitation on the Holding Company's Consolidation, Merger and Sale 38
14.15. Limitation on Disposition of Property 39
14.16. [Intentionally Omitted.] 39
14.17. Modification of Certain Documents, Agreements and Instruments; Fiscal
Year. 39
14.18. Further Assurances 40
14.19. Additional Subsidiaries 40
15. Definitions 40
15.1. Definitions of Capitalized Terms 40
15.2. Other Definitions 58
15.3. Accounting Terms and Principles; Laws 59
16. Remedies 59
16.1. Events of Default Defined; Acceleration of Maturity 59
16.2. Suits for Enforcement, etc. 63
16.3. No Election of Remedies 64
16.4. Remedies Not Waived 64
16.5. Application of Payments 64
17. Registration, Transfer and Exchange of Securities 64
18. Replacement of Securities 65
19. Amendment and Waiver 65
20. Method of Payment of Securities 66
21. Expenses; Indemnity 66
22. Taxes 67
23. Communications 67
24. Survival of Agreements, Representations and Warranties, etc. 68
25. Successors and Assigns; Rights of Other Holders 68
26. Purchase for Investment; ERISA 68
27. Governing Law; Jurisdiction; Waiver of Jury Trial 70
28. Miscellaneous 70
<PAGE>
29. Certain Limitations 71
30. Rule 144A 71
31. Regulatory Compliance Cooperation 72
31.1. Exchange for Nonvoting Shares 72
31.2. Future Securities Issuances 72
31.3. Certain Definitions 72
</TABLE>
<TABLE>
<CAPTION>
Schedule I Schedule of Purchasers
<S> <C>
Exhibit 1(a) Form of Senior Subordinated Note
Exhibit 1(b) Form of Warrant
Exhibit 1(d) Form of Subsidiary Guarantee
Exhibit 3 Wire Instructions
Exhibit 4.1(c)(ii) Indebtedness to be Repaid at the Auto Ventshade Closing
Exhibit 4.1(c)(iv) Form of Rights Agreement
Exhibit 4.1(f) Opinion of Thelen Reid & Priest LLP
Exhibit 4.1(g) Opinion of Choate, Hall & Stewart
Exhibit 4.1(h) Additional Documents to be Delivered at or Prior to the Auto
Ventshade Closing
Exhibit 4.2(c)(ii) Indebtedness to be Repaid at the Smittybilt Closing
Exhibit 4.2(h) Additional Documents to be Delivered at or Prior to the Smittybilt
Closing
Exhibit 5.2 Names; Jurisdiction of Incorporation, Subsidiaries, etc.
Exhibit 5.5(a) Capital Stock
Exhibit 5.5(b) Rights, Options, Warrants, etc.
Exhibit 5.6(a) Financial Statements
Exhibit 5.6(b) Projected Financial Information
Exhibit 5.6(c) Pro Forma Unaudited Balance Sheet
Exhibit 5.7 Restricted Payments
Exhibit 5.8 Tax Returns and Payments
Exhibit 5.9 Funded Debt, Current Debt, Liens, Investments,
Transactions with Affiliates, Leases and Derivative Transactions
Exhibit 5.11 Litigation
Exhibit 5.14 Consents
Exhibit 6 Schedule of Sources and Uses
Exhibit 7(c)(iii)(A) Compliance Certificate
Exhibit 7(c)(v) Information as to New Subsidiaries
Exhibit 14.6 Transaction Fees to Harvest
</TABLE>
<PAGE>
LUND INTERNATIONAL HOLDINGS, INC.
DEFLECTA-SHIELD CORPORATION
LUND INDUSTRIES, INCORPORATED
BELMOR AUTOTRON CORP.
DFM CORP.
AUTO VENTSHADE COMPANY
911 Lund Boulevard
Anoka, Minnesota 55303
December 23, 1998
To each of the Purchasers named on Schedule I attached hereto.
Ladies and Gentlemen:
LUND INTERNATIONAL HOLDINGS, INC., a Delaware corporation (the "Holding
Company"), DEFLECTA-SHIELD CORPORATION, a Delaware corporation ("Deflecta"),
LUND INDUSTRIES, INCORPORATED, a Minnesota corporation ("LII"), BELMOR AUTOTRON
CORP., a Delaware corporation ("Autotron"), DFM CORP., an Iowa corporation
("DFM"), and AUTO VENTSHADE COMPANY, a Delaware corporation ("AVS"), jointly and
severally agree with you as follows. Certain capitalized terms used herein are
defined in section 15.
1. Authorization of Securities; Other Purchasers; etc.
(a) The Companies have authorized the issue and sale of their
12.5% Senior Subordinated Notes due December 31, 2006 (herein, together
with any notes issued in exchange therefor or replacement thereof,
called the "Notes") in the aggregate principal amount of $25,000,000.
The Notes are to be substantially in the form of Exhibit 1(a) attached
hereto.
(b) The Holding Company has authorized the issue and sale of
its warrants (herein, together with any warrants issued in exchange
therefor or replacement thereof, called the "Warrants") evidencing
rights to purchase in the aggregate 704,839 shares (subject to
adjustment) of the Holding Company Class A Common Stock (or, as further
provided in section 12, 70,483.9 shares of the Holding Company's Series
B Preferred Stock). The Warrants shall be exercisable for nominal
consideration, shall expire on December 31, 2006 and shall be
substantially in the form of Exhibit 1(b) attached hereto.
(c) Interest on the Notes is payable semi-annually on the last
day of each February and August, commencing February 28, 1999, and at
maturity. As further provided in section 29, in no event shall the
amount paid or agreed to be paid by the Obligors as interest and
premium on any
<PAGE>
Note exceed the highest lawful rate permissible under any law
applicable thereto.
(d) Each Subsidiary of the Holding Company (other than
Deflecta, LII, Autotron, DFM, AVS and, after the Smittybilt Closing
Date, Smittybilt) and each Person, if any, which hereafter becomes a
Subsidiary of the Holding Company shall unconditionally guarantee the
Notes and all other obligations of the Holding Company and its
Subsidiaries, if any, under the Operative Documents pursuant to
separate subordinated guarantees each substantially in the form of
Exhibit 1(d) attached hereto (as amended, modified and supplemented
from time to time, each a "Subsidiary Guarantee"; collectively, the
"Subsidiary Guarantees").
(e) The Securities are to be issued under this Agreement and
separate Securities Purchase Agreements (the "Other Securities Purchase
Agreements") identical herewith (except as to the name and address of
each of the other purchasers) being entered into concurrently by the
Companies with each of the other purchasers (the "Other Purchasers")
named in Schedule I attached hereto. The issue of Securities to you and
the issues of Securities to each of the Other Purchasers are separate
transactions and you shall not be liable or responsible for the acts or
defaults of the Other Purchasers.
2. Sale and Purchase of Securities. The Companies will issue and sell to
you and, subject to the terms and conditions hereof and in reliance upon the
representations and warranties of the Companies contained herein and in the
other Operative Documents, you will purchase from the Companies, at each
Closing, as specified in section 3, such Securities as are specified on that
portion of Schedule I attached hereto as is applicable to you. The aggregate
purchase price of the Notes and Warrants to be sold at the Auto Ventshade
Closing shall be $20,000,000, which shall be allocated (a) $2,600,000 to such
Warrants and (b) $17,400,000 to such Notes; the aggregate purchase price of the
Notes and Warrants to be sold at the Smittybilt Closing shall be $5,000,000,
which shall be allocated in a manner consistent with the foregoing allocation.
The Companies, you and each of the Other Purchasers agree that the values
ascribed to the Securities (which values shall be used by the Companies, you and
the Other Purchasers, as well as any subsequent holder of any of the Securities,
for all purposes, including the preparation of tax returns) shall be determined
in accordance with the foregoing.
-2-
<PAGE>
3. Closings. The sale and purchase of the Securities hereunder and under
the Other Securities Purchase Agreements shall occur at two closings (each, a
"Closing"), one of which (the "Auto Ventshade Closing") shall occur at the time
of the closing of the Auto Ventshade Acquisition and the other of which (the
"Smittybilt Closing") shall occur at the time of the closing of the Smittybilt
Acquisition. Each Closing shall take place at the office of Messrs. Choate, Hall
& Stewart, Exchange Place, 53 Stat Street, Boston, Massachusetts 02109. The Auto
Ventshade Closing shall occur on December 23, 1998 (or such other date (not
later than January 31, 1999)) as may be agreed to in writing by the Companies,
you and each of the Other Purchasers (the "Auto Ventshade Closing Date"). The
Smittybilt Closing shall occur on such date which is not later than 90 days
following the Auto Ventshade Closing Date and is specified by the Companies in
an Officers' Certificate delivered to you and the Other Purchasers not less than
7 nor more than 25 days prior to the date so specified (the "Smittybilt Closing
Date"). At each Closing, the Companies will deliver to you the Securities to be
issued to you at such Closing against payment of the purchase price thereof to
(or for the benefit of) the Companies in immediately available funds in
accordance with the wire instructions set forth on Exhibit 3 attached hereto.
Delivery of the Securities to be issued to you at each Closing shall be made in
the form of one or more Notes and Warrants, in such denominations and registered
in such names as are specified on Schedule I attached hereto and in each case
dated, and in the case of the Notes, bearing interest from the applicable
Closing Date. If at either Closing the Companies shall fail to tender the
Securities to be delivered to you thereat as provided herein, or if at either
Closing any of the conditions specified in section 4 shall not have been
fulfilled to your satisfaction, you shall, at your election, be relieved of all
further obligations under this Agreement with respect to such Closing, without
thereby waiving any other rights you may have by reason of such failure or such
non-fulfillment.
4. Conditions to Closings.
4.1. Conditions to Auto Ventshade Closing. Your obligation to purchase
and pay for the Securities to be issued to you hereunder at the Auto Ventshade
Closing is subject to the fulfillment to your satisfaction, prior to or at the
Auto Ventshade Closing, of the following conditions:
(a) Representations and Warranties Correct. The
representations and warranties made by the Companies herein and in the
other Operative Documents shall have been correct when made and shall
be correct in all material respects at and as of the time of the Auto
Ventshade Closing (after giving effect to the transactions consummated
at the Auto Ventshade Closing).
-3-
<PAGE>
(b) Performance; No Default. The Companies shall have
performed all agreements and complied in all material respects with all
conditions contained herein and in the other Operative Documents
required to be performed or complied with by them prior to or at the
Auto Ventshade Closing, including, without limitation, the conditions
set forth in section 4.1(c), and at the time of the Auto Ventshade
Closing, no Default or Event of Default shall exist and no condition
shall exist which has resulted in, or could reasonably be expected to
result in, a Material Adverse Change.
(c) Related Transactions.
(i) The Auto Ventshade Acquisition shall have been
consummated in accordance with the terms of the Auto Ventshade
Acquisition Documents. The aggregate purchase price paid by or
on behalf of the Holding Company in respect of the Auto
Ventshade Acquisition, excluding all related transaction fees
and expenses (which shall not exceed $4,500,000 in the
aggregate), shall not exceed $66,875,000, subject to
adjustment as provided in section 1.3 of the Auto Ventshade
Acquisition Agreement. No material condition for the benefit
of the Holding Company under any of the Auto Ventshade
Acquisition Documents shall have been waived. All filings and
consents necessary to effect the Auto Ventshade Acquisition
shall have been made and obtained. The terms of the Auto
Ventshade Acquisition Documents shall be satisfactory to you
in all material respects.
(ii) The debt and equity capitalization of the
Holding Company and its Subsidiaries shall be in all respects
reasonably satisfactory to you. Without limiting the
generality of the foregoing, the Persons indicated on Exhibit
5.5(a) attached hereto shall have purchased from the Holding
Company the Shares of the Holding Company specified on such
exhibit and shall have paid the consideration specified for
such Shares on such exhibit (which consideration shall include
new equity contributions in cash of not less than $25,000,000
in the aggregate, of which $1,666,667 shall have been
contributed by the MassMutual Group), in each case upon terms
reasonably satisfactory to you in all material respects. After
giving effect to the Auto Ventshade Closing, neither the
Holding Company nor any of its Subsidiaries shall have any
Funded Debt or Current Debt other than that evidenced by the
Notes issued and sold on or prior to such Closing and that
which is specified on Exhibit 5.9 attached hereto. The
Companies shall have repaid in full all of the Indebtedness
(and all interest accrued thereon) specified on Exhibit
4.1(c)(ii) attached hereto and all related Liens shall have
been terminated and you shall have
-4-
<PAGE>
received evidence of the foregoing (including, without
limitation, payoff letters, mortgage discharges and UCC
termination statements).
(iii) The Organizational Documents of the Holding
Company and each of its Subsidiaries shall be reasonably
satisfactory to you in all material respects.
(iv) You, each of the Other Purchasers, the Holding
Company, each of the Harvest Funds, BancBoston Capital Inc.
and Liberty Mutual Insurance Company shall have entered into a
Rights Agreement substantially in the form of Exhibit
4.1(c)(iv) attached hereto (the "Rights Agreement"), and such
agreement shall be in full force and effect.
(v) The Companies shall have entered into the
Executive Employment Agreements, each of which shall be
satisfactory to you in all material respects.
(vi) The Senior Loan Documents shall have been
executed and delivered and shall be in full force and effect.
The Companies shall have established pursuant thereto (A) a
$30,000,000 four-year senior secured revolving credit
facility, (B) a $19,250,000 four-year senior secured term loan
facility, (C) a $21,950,000 six-year senior secured term loan
facility and (D) a $34,500,000 seven-year senior secured term
loan facility. The aggregate amount of the Companies' unused -
- - - borrowing availability immediately following the Auto
Ventshade Closing under such revolving credit facility shall
be at least $10,000,000, and you shall have been furnished
with a borrowing base certificate satisfactory in form and
substance to you evidencing the same. The Senior Loan
Documents shall be satisfactory to you in all material
respects.
(vii) The Harvest Manager shall have agreed in
writing that payments under the Harvest Consulting Agreement
are subject to the provisions of section 14.6 hereof.
(viii) The terms and provisions of the Holding
Company's stock option plans (collectively, the "Management
Stock Option Plan") shall be reasonably satisfactory to you in
all material respects.
(d) Compliance Certificate. At the Auto Ventshade Closing, you
shall have received an Officers' Certificate, dated the Auto Ventshade
-5-
<PAGE>
Closing Date, certifying that the conditions specified in sections
4.1(a) and (b) have been fulfilled.
(e) Subsidiary Guarantees. Subsidiary Guarantees shall have
been duly authorized, executed and delivered by each Subsidiary of the
Holding Company (other than Deflecta, LII, Autotron, DFM and AVS) and
shall be in full force and effect.
(f) Opinion of Counsel for the Obligors. At the Auto Ventshade
Closing, you shall have received an opinion, dated the Auto Ventshade
Closing Date, from Thelen Reid & Priest LLP, counsel for the Obligors,
substantially in the form of Exhibit 4.1(f) attached hereto.
(g) Opinion of Your Special Counsel. At the Auto Ventshade
Closing, you shall have received an opinion dated the Auto Ventshade
Closing Date, from your special counsel, Choate, Hall & Stewart,
substantially in the form of Exhibit 4.1(g) attached hereto.
(h) Certain Additional Documents to be Delivered at or Prior
to the Auto Ventshade Closing. You shall have received the items
specified on Exhibit 4.1(h) attached hereto, each of which shall be in
form and substance reasonably acceptable to you.
(i) Sale of Securities to Other Purchasers. At the Auto
Ventshade Closing, the Companies shall issue to the Other Purchasers
the Securities to be issued at the Auto Ventshade Closing to the Other
Purchasers pursuant to the Other Securities Purchase Agreements and
shall receive payment in full of the purchase price thereof.
(j) Payment of Commitment Fee and Transaction Costs. The
Companies shall have paid, in immediately available funds, (a) a
nonrefundable commitment fee to you and the Other Purchasers in the
aggregate amount of $400,000, which fee (i) shall be allocated among
you and the Other Purchasers in proportion to the aggregate principal
amount of the Notes committed to be purchased by each at the Auto
Ventshade Closing and (ii) shall be paid by deducting such allocated
amounts from the payments made by you and the Other Purchasers at the
Auto Ventshade Closing for such Notes pursuant to section 2, and (b)
all fees, expenses and disbursements incurred by you and the Other
Purchasers at or prior to the time of the Auto Ventshade Closing in
connection with the transactions contemplated by the Operative
Documents, including, without limitation, the reasonable fees, expenses
and disbursements of your special counsel.
4.2. Conditions to Smittybilt Closing. Your obligation to purchase and
pay for the Securities to be issued to you hereunder at the Smittybilt Closing
is
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subject to the fulfillment to your satisfaction, prior to or at the Smittybilt
Closing, of the following conditions:
(a) Representations and Warranties Correct. The
representations and warranties made by the Companies herein and in the
other Operative Documents shall have been correct when made and shall
be correct in all material respects at and as of the time of the
Smittybilt Closing (after giving effect to the transactions consummated
at the Auto Ventshade Closing and the Smittybilt Closing), except (i)
as a result of changes in the ordinary course of business and (ii) for
any representation or warranty limited by its terms to a specific date
prior to the date of the Smittybilt Closing).
(b) Performance; No Default. The Companies shall have
performed all agreements and complied in all material respects with all
conditions contained herein and in the other Operative Documents
required to be performed or complied with by them prior to or at the
Smittybilt Closing, including, without limitation, the conditions set
forth in section 4.2(c), and at the time of the Smittybilt Closing, no
Default or Event of Default shall exist and no condition shall exist
which has resulted in, or could reasonably be expected to result in, a
Material Adverse Change.
(c) Related Transactions.
(i) The Smittybilt Acquisition shall have been
consummated in accordance with the terms of the Smittybilt
Acquisition Documents. The aggregate purchase price paid by or
on behalf of the Holding Company in respect of the Smittybilt
Acquisition, excluding all related transaction fees and
expenses (which shall not exceed $1,000,000 in the aggregate),
shall not exceed $18,000,000. No material condition for the
benefit of the Holding Company under any of the Smittybilt
Acquisition Documents shall have been waived. All filings and
consents necessary to effect the Smittybilt Acquisition shall
have been made and obtained (except for any such filing or
consent, as to which the failure to make or obtain will not,
and could not reasonably be expected to, result in a Material
Adverse Change). The terms of the Smittybilt Acquisition
Documents shall be satisfactory to you in all material
respects.
(ii) The debt and equity capitalization of the
Holding Company and its Subsidiaries shall be in all respects
reasonably satisfactory to you. Without limiting the
generality of the foregoing, the Persons (other than the
MassMutual Group) indicated on Exhibit 5.5(a) attached hereto
shall have purchased from the Holding Company the Shares of
the Holding Company specified on
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such exhibit and shall have paid the consideration specified
for such Shares on such exhibit (which consideration shall
include new equity contributions in cash of not less than
$5,000,000 in the aggregate, of which $333,333 shall have been
contributed by the MassMutual Group), in each case upon terms
satisfactory to you in all material respects. After giving
effect to the Smittybilt Closing, neither the Holding Company
nor any of its Subsidiaries shall have any Funded Debt or
Current Debt other than that evidenced by the Notes issued and
sold on or prior to such Closing and that which is specified
on Exhibit 5.9 attached hereto and/or permitted under section
14.5 hereof. The Companies shall have repaid in full all of
the Indebtedness (and all interest accrued thereon) specified
on Exhibit 4.2(c)(ii) attached hereto and all related Liens
shall have been terminated and you shall have received
evidence of the foregoing (including, without limitation,
payoff letters, mortgage discharges and UCC termination
statements).
(iii) The Organizational Documents of the Holding
Company and each of its Subsidiaries shall be satisfactory to
you in all material respects.
(iv) The Senior Loan Documents shall be in full force
and effect. The aggregate amount of the Companies' unused
borrowing availability immediately following the Smittybilt
Closing under such revolving credit facility shall be at least
$10,000,000, and you shall have been furnished with a
borrowing base certificate reasonably satisfactory in form and
substance to you evidencing the same. The Senior Loan
Documents shall be satisfactory to you in all material
respects.
(v) The Notes issued at the Auto Ventshade Closing
shall have been exchanged for new Notes identical to the Notes
issued at the Auto Ventshade Closing except that Smittybilt
shall be an additional issuer thereof, and Smittybilt shall
have executed a joinder to this Agreement by which it shall
acknowledge that it is a "Company" hereunder and, as such, is
bound by the terms hereof and of all other applicable
Operative Documents.
(vi) The Companies shall have furnished to you (A) a
revised Exhibit 5.9 disclosing the information required to be
set forth therein to make such exhibit accurate after giving
effect to the consummation of the transactions on the
Smittybilt Closing Date and (B) a schedule of sources and uses
setting forth the payments effected on such date in connection
with such transactions, all of which shall be satisfactory to
you in all material respects.
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(d) Compliance Certificate. At the Smittybilt Closing, you
shall have received an Officers' Certificate, dated the Smittybilt
Closing Date, certifying that the conditions specified in sections
4.2(a) and (b) have been fulfilled.
(e) Subsidiary Guarantees. Subsidiary Guarantees shall have
been duly authorized, executed and delivered by each Subsidiary of the
Holding Company (other than Deflecta, LII, Autotron, DFM , AVS and
Smittybilt) and shall be in full force and effect.
(f) Opinion of Counsel for the Obligors. At the Smittybilt
Closing, you shall have received an opinion, dated the Smittybilt
Closing Date, from Thelen Reid & Priest LLP, counsel for the Obligors,
substantially in the form of Exhibit 4.1(f) attached hereto and
addressing such other matters as you may reasonably request.
(g) Opinion of Your Special Counsel. At the Smittybilt
Closing, you shall have received an opinion dated the Smittybilt
Closing Date, from your special counsel, Choate, Hall & Stewart,
substantially in the form of Exhibit 4.1(g) attached hereto.
(h) Certain Additional Documents to be Delivered at or Prior
to the Smittybilt Closing. You shall have received the items specified
on Exhibit 4.2(h) attached hereto, each of which shall be in form and
substance reasonably acceptable to you.
(i) Sale of Securities to Other Purchasers. At the Smittybilt
Closing, the Companies shall issue to the Other Purchasers the
Securities to be issued at the Smittybilt Closing to the Other
Purchasers pursuant to the Other Securities Purchase Agreements and
shall receive payment in full of the purchase price thereof.
(j) Payment of Commitment Fee and Transaction Costs. The
Companies shall have paid, in immediately available funds, (a) a
nonrefundable commitment fee to you and the Other Purchasers in the
aggregate amount of $100,000, which fee (i) shall be allocated among
you and the Other Purchasers in proportion to the aggregate principal
amount of the Notes committed to be purchased by each at the Smittybilt
Closing and (ii) shall be paid by deducting such allocated amounts from
the payments made by you and the Other Purchasers at the Smittybilt
Closing for such Notes pursuant to section 2, and (b) all fees,
expenses and disbursements incurred by you and the Other Purchasers at
or prior to the time of the Smittybilt Closing in connection with the
transactions contemplated by the Operative Documents, including,
without limitation, the reasonable fees, expenses and disbursements of
your special counsel.
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4.3. Conditions to Each Closing. Your obligation to purchase and pay
for the Securities to be purchased by you hereunder at the Auto Ventshade
Closing and the Smittybilt Closing is subject to the fulfillment to your
satisfaction, at each such Closing, of the following conditions:
(a) Legal Investment; Certificate. At the time of such
Closing, your purchase of the Securities to be issued pursuant hereto
shall be permitted under the laws and regulations of any jurisdiction
to which you are subject (without resort to any provision of any such
law permitting limited investments by you without restriction as to the
character of the particular investment), and you shall, if requested by
you, have received an Officers' Certificate, dated the applicable
Closing Date, certifying as to such matters as you may request to
enable you to determine whether your purchase is so permitted.
(b) Sale and Purchase Not Forbidden by Law. The offer, issue,
sale and delivery by the Companies of the Securities to be issued
pursuant hereto and your purchase of such Securities at such Closing
shall not be prohibited by and shall not subject you to any tax,
penalty, liability or other onerous condition under or pursuant to any
law, statute, rule or regulation.
(c) Proceedings and Documents. All proceedings in connection
with the transactions contemplated by the Operative Documents and all
agreements, documents and instruments incident to such transactions
shall be reasonably satisfactory in substance and form to you and your
special counsel, and you and your special counsel shall have received
all such counterpart originals or copies thereof as you or they may
reasonably request.
4.4. Joint and Several Obligations, etc. All representations contained
herein shall be deemed to be separately made by each of the Obligors, and each
of the covenants, agreements and obligations set forth herein shall be deemed to
be the joint and several covenants, agreements and obligations of each of the
Obligors. Any notice, request, consent, report or other information or agreement
delivered by any of the Obligors shall be deemed to be ratified by, consented to
and also delivered by each of the other Obligors. Each of the Obligors
recognizes and agrees that each covenant and agreement of the "Obligors" under
this Agreement and the other Operative Documents shall create a joint and
several obligation of each of them, which may be enforced against any of them,
jointly, or against each of them separately, provided, however, that in no event
shall the liability of any Obligor under this Agreement and the other Operative
Documents exceed the maximum amount that, after giving effect to the incurring
of the obligations hereunder and under such other Operative Documents and to any
rights to contribution of such Obligor from Affiliates of such Obligor, would
not render the rights of the holders of the Notes to payment
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hereunder and under such other Operative Documents void, voidable or avoidable
under any applicable fraudulent transfer or conveyance law.
5. Representations and Warranties. The Companies jointly and severally
represent and warrant that, as of the date hereof and as of each Closing Date
(after giving effect to the other transactions consummated at each Closing):
5.1. Organization, Standing, etc. of the Companies. The Holding Company
and each of its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to own, lease and operate its
properties, to carry on its business as now conducted, and now proposed to be
conducted, to execute, deliver and perform each of the Operative Documents to
which it is (or is to be) a party and to consummate the transactions
contemplated by the Operative Documents and no approval of the stockholders of
the Holding Company or any class thereof is required in connection therewith
which has not been obtained (except that stockholder approval is required for
the conversion of the Series B Preferred Stock issuable upon exercise of the
Warrants at any time prior to the Trigger Date (as defined and further provided
in section 12) into Holding Company Common Stock.
5.2. Names; Jurisdiction of Incorporation, Subsidiaries, etc. Exhibit
5.2 attached hereto correctly specifies as to the Holding Company and each
Subsidiary (a) its legal name, (b) the jurisdiction of its incorporation and (c)
each jurisdiction (other than its jurisdiction of incorporation) in which it is
qualified to do business. The Holding Company does not have any Subsidiary that
is not named on Exhibit 5.2 attached hereto.
5.3. Qualification. Each of the Holding Company and its Subsidiaries is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the character of the properties owned or leased or the
nature of the activities conducted makes such qualification or licensing
necessary, except for those jurisdictions in which the failure to be so
qualified or licensed or to be in good standing has not resulted in, and could
not reasonably be expected to result in, a Material Adverse Change.
5.4. Business, etc. The Holding Company and its Subsidiaries are
engaged in the business (the "Business") of manufacturing, marketing,
distributing and selling external accessories for motor vehicles.
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5.5. Capital Stock.
(a) Exhibit 5.5(a) attached hereto correctly and fully
specifies as to the Holding Company and each of its Subsidiaries (after
giving effect to the transactions consummated at such Closing) (i) its
authorized and outstanding Shares and (ii) the name of each record and
beneficial owner of such Shares that, to the knowledge of the
Companies, based on filings pursuant to sections 13(d) and 16(a) of the
Exchange Act (and as to consideration, to the extent required to be
disclosed therein), beneficially owns 5% or more of the Shares of any
class of the Holding Company or any of its Subsidiaries, together with
the number (and class, if any) of such Shares held by each such Person
and the per share and aggregate consideration paid by such Person for
such Shares (which consideration, unless otherwise noted on such
exhibit, was paid in cash in full on or prior to the Auto Ventshade
Closing Date). All of the outstanding Shares of the Holding Company and
each of its Subsidiaries are, and all Warrant Shares issued upon
exercise of the Warrants in accordance with the terms thereof will be,
duly authorized, validly issued, fully paid and non-assessable. Except
as set forth on Exhibit 5.5(a) attached hereto, the outstanding Shares
of the Holding Company and each of its Subsidiaries are not, and all
Warrant Shares issued upon exercise of the Warrants will not be,
subject to any preemptive right, right of first refusal or similar
right on the part of any Company or (except for any such right granted
by any such Person) any other Person, and all of such Shares have been
(or will have been) offered, issued and sold in accordance with all
applicable laws. To the knowledge of the Companies, based on filings
pursuant to sections 13(d) and 16(a) of the Exchange Act (and as to
consideration, to the extent required to be disclosed therein), the
Harvest Funds own the Shares indicated on Exhibit 5.5(a) attached
hereto free of any Lien, proxy, voting agreement, voting trust,
stockholders agreement or similar agreement or restriction and, except
pursuant to the Harvest Governance Agreement, none of the Harvest Funds
is subject to any agreement or restriction that affects its right to
vote such Shares or to exercise any other incident of ownership of such
Shares.
(b) Except as provided in the Rights Agreement, except for the
Warrants and except as set forth on Exhibit 5.5(b) attached hereto,
after giving effect to the transactions consummated at such Closing,
(i) there are no outstanding rights, options, warrants or agreements
for the purchase from, or sale or issuance by, the Holding Company or
any of its Subsidiaries of any of their respective Shares or any
securities convertible into or exercisable or exchangeable for such
Shares; (ii) there are no agreements on the part of the Holding Company
or any of its Subsidiaries to issue, sell or distribute any of their
respective Shares, other securities or assets; (iii) neither the
Holding Company nor any of its
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Subsidiaries has any obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its Shares or any interest therein
or to pay any dividend or make any distribution in respect thereof; and
(iv) no Person is entitled to any rights with respect to the
registration of any Shares of the Holding Company or any of its
Subsidiaries under the Securities Act (or the securities laws of any
other jurisdiction).
(c) The aggregate number of shares of Holding Company Class A
Common Stock issuable upon exercise in full of the Warrants issued at
the Auto Ventshade Closing (or issuable upon conversion of the shares
of Series B Preferred Stock issuable upon exercise in full of such
Warrants) (in each case subject to section 12 and to the provisions of
the Certificate of Designation referred to therein) immediately after
the Auto Ventshade Closing is 520,749, which, if then issued, would
constitute not less than 4.8% of the Holding Company Common Stock (of
each class) (calculated on a fully-diluted basis assuming the
conversion, exercise and exchange of all outstanding securities
convertible into and exercisable or exchangeable for shares of Holding
Company Common Stock, including, without limitation, the Warrants
issued at or prior to such Closing, but excluding the Excluded
Outstanding Options. The aggregate number of shares of Holding Company
Class A Common Stock issuable upon exercise in full of the Warrants
issued at the Smittybilt Closing (or issuable upon conversion of the
shares of Series B Preferred Stock issuable upon exercise in full of
such Warrants) (in each case subject to section 12 and to the
provisions of the Certificate of Designation referred to therein)
immediately after the Smittybilt Closing will be 184,090, which, if
then issued, will constitute not less than 1.2% of the Holding Company
Common Stock (of each class) (calculated as aforesaid). The Holding
Company has reserved a sufficient number of its Shares of each
applicable class solely for issuance upon exercise of the Warrants.
(d) Except for the Harvest Governance Agreement, neither the
Organizational Documents nor any other agreement, document or
instrument binding on or applicable to the Holding Company contains any
provision requiring a higher voting requirement with respect to action
taken (and/or to be taken) by the board of directors or the holders of
Shares of the Holding Company than that which would apply in the
absence of such provision.
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5.6. Financial Statements. You have been furnished with:
(a) the financial statements referred to on Exhibit 5.6(a)
attached hereto, which financial statements are complete and correct in
all material respects (subject, in the case of any unaudited financial
statements, to normal year-end and audit adjustments), have been
prepared in accordance with GAAP (except (i) as may be indicated in the
notes thereto and (ii) in the case of any unaudited financial
statements, for the absence of footnotes) applied on a consistent basis
throughout the periods covered thereby and present fairly in all
material respects the financial position and the results of operations
and cash flows of the Person(s) purported to be covered thereby as at
the respective dates and for the respective periods indicated in
conformity with GAAP (subject, in the case of any unaudited financial
statements, to normal year-end and audit adjustments and the absence of
footnotes);
(b) the projections attached as Exhibit 5.6(b) hereto, which
projections were prepared in good faith, are based upon assumptions
that the Companies believe are reasonable and, to the best of the
Companies' knowledge, take into account all material information
regarding the matters set forth therein; and
(c) the pro forma unaudited balance sheet of the Holding
Company attached as Exhibit 5.6(c) hereto, which balance sheet fairly
presents in all material respects the consolidated financial position
of the Holding Company and its Subsidiaries as of December 31, 1998,
adjusted on a pro forma basis to give effect to the consummation of the
transactions contemplated by the Operative Documents (including the
Auto Ventshade Closing and the Smittybilt Closing), and reflects all
known liabilities of the Persons purported to be covered thereby,
contingent or other, as at the Auto Ventshade Closing Date, required by
GAAP to be reflected therein.
5.7. Changes; Solvency, etc. Since September 30, 1998 (in the case of
the Holding Company and its Subsidiaries), September 30, 1998 (in the case of
the Auto Ventshade Business) and September 30, 1998 (in the case of the
Smittybilt Business) (it being agreed that the representation made in this
section 5.7 with respect to the Smittybilt Business shall be deemed made only at
the time of the Smittybilt Closing): (a) there has been no change in the assets,
liabilities or financial condition of the Holding Company or any of its
Subsidiaries, the Auto Ventshade Business or the Smittybilt Business from that
set forth in the applicable balance sheets as at such dates referred to on
Exhibit 5.6(a) attached hereto, other than changes which have not been, either
in any case or in the aggregate, materially adverse; (b) no condition or event
has occurred which has resulted in, or could reasonably be expected to result
in, a
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Material Adverse Change; and (c) except as set forth on Exhibit 5.7 attached
hereto, no Restricted Payment or Restricted Investment has been, directly or
indirectly, declared, ordered, paid or made. Each of the Holding Company and its
Subsidiaries is Solvent.
5.8. Tax Returns and Payments. Each of the Holding Company and its
Subsidiaries has filed all material tax returns required by law to be filed and
has paid all taxes and assessments shown to be due and payable on such returns
and all other governmental charges levied upon any of its properties, assets,
income, franchises or sales other than those not yet delinquent or those being
contested in accordance with section 14.2(a). The income tax liability of each
of the Holding Company and its Subsidiaries has been finally determined by all
applicable foreign and domestic, federal, state and local governmental
authorities, including, without limitation, the Internal Revenue Service, and
satisfied, or the time for audit has expired, for all fiscal years through the
fiscal year specified as applicable for such Company on Exhibit 5.8 attached
hereto. Neither the Holding Company nor any of its Subsidiaries has executed any
waiver or waivers that would have the effect of extending the applicable statute
of limitations in respect of income tax liabilities. The charges, accruals and
reserves in the financial statements referred to on Exhibit 5.6(a) attached
hereto in respect of taxes for all fiscal periods are in accordance with GAAP,
and there are no known unpaid assessments for additional taxes for any fiscal
period or of any basis therefor.
5.9. Funded Debt, Current Debt, Liens, Investments, Transactions with
Affiliates, Leases and Derivative Transactions. Exhibit 5.9 attached hereto
correctly describes, as of the Auto Ventshade Closing Date, as to the Holding
Company and its Subsidiaries (after giving effect to the transactions
consummated at the Auto Ventshade Closing):
(a) all Funded Debt and Current Debt to be outstanding
immediately following the Auto Ventshade Closing (other than that
evidenced by the Notes and the Subsidiary Guarantees) and all
agreements pursuant to which the Holding Company and/or any of its
Subsidiaries has the right to incur the same, including a general
description of any collateral which secures (or will secure) the same;
(b) all Liens to which any of their respective properties and
assets will be subject immediately following the Auto Ventshade Closing
(other than those of the character described in section 14.9(b));
(c) all Investments to be owned or held immediately following
the Auto Ventshade Closing (other than Investments of the character
described in clauses (b) through (e), inclusive, of the definition of
Permitted Investments);
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(d) all of their respective Affiliates, all material
agreements with their respective Affiliates and all transactions
involving in excess of $60,000 with their respective Affiliates which
were consummated during the 12-month period ended on the Auto Ventshade
Closing Date or which the Holding Company or any of its Subsidiaries is
now obligated or now intends to consummate at any time in the future;
and
(e) each lease under which any of them is a lessee or
sublessee and the name of the lessor or sublessor, the lessee or
sublessee, the property leased, the annual Rental Obligations payable
thereunder and the term thereof.
Neither the Holding Company nor any of its Subsidiaries is liable
(contingently or otherwise) in respect of any Derivative Transactions other than
Permitted Derivative Transactions.
5.10. Title to Properties; Liens; Leases. The Holding Company and each
of its Subsidiaries has and, upon consummation of the transactions contemplated
by the Operative Documents, will have, good and marketable title to all of their
respective material properties and assets, including, without limitation, the
properties and assets acquired in the Acquisitions and those reflected in the
balance sheet, dated September 30, 1998, referred to on Exhibit 5.6(a) attached
hereto, except properties and assets disposed of since such date in the ordinary
course of business, free and clear of all Liens (other than Liens permitted
under section 14.9). The Holding Company and each of its Subsidiaries enjoys
peaceful and undisturbed possession under all leases under which it operates,
and all of such leases are valid, subsisting and in full force and effect and
are on "arm's length" terms.
5.11. Litigation, etc. There is no action, proceeding or investigation
pending or, to the best of the Companies' knowledge, threatened in writing,
including, without limitation, any of the same referred to on Exhibit 5.11
attached hereto, or any basis therefor known to the Companies, which (a)
questions the validity of any of the Operative Documents or any action taken or
to be taken pursuant thereto or (b) which has resulted in, or could reasonably
be expected to result in, a Material Adverse Change. There is no outstanding
judgment, decree or order which has resulted in, or could reasonably be expected
to result in, a Material Adverse Change. Exhibit 5.11 attached hereto sets forth
a complete list of all pending and, to the best of the Companies' knowledge,
threatened actions, proceedings and investigations, and all judgments, decrees
and orders, involving or affecting the Holding Company or any of its
Subsidiaries.
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5.12. Valid and Binding Obligations; Compliance with Other Instruments;
Absence of Restrictions, etc.
(a) This Agreement has been duly authorized, executed and
delivered by each of the Companies and constitutes the valid and
legally binding obligation of each of the Companies enforceable against
it in accordance with its terms. Each of the other Operative Documents
to which the Holding Company or any of its Subsidiaries is (or is to
be) a party has been duly authorized by the Holding Company or such
Subsidiary, as the case may be, and, when executed and delivered, will
constitute the valid and legally binding obligation of the Holding
Company or such Subsidiary, as the case may be, enforceable against it
in accordance with its terms.
(b) Neither the Holding Company nor any of its Subsidiaries
are in violation of or in default under any term of its Organizational
Documents or of any agreement, document, instrument, judgment, decree,
order, law, statute, rule or regulation applicable to it or any of its
properties and assets, in any way which has resulted in, or could
reasonably be expected to result in, a Material Adverse Change. Without
limiting the generality of the foregoing:
(i) the Holding Company and each of its Subsidiaries
is, and has been, in compliance with (and neither it nor any
of its predecessors in interest has received any notice to the
contrary) and there is no reasonable probability of any
liability of or any judgment, decree or order binding upon or
applicable to the Holding Company and/or any of its
Subsidiaries or any of their respective properties and assets
under or on account of any Environmental Laws, including,
without limitation, legal requirements relating to the use,
storage, handling, transport and disposal of Hazardous
Materials, except where the same has not resulted in, and
could not reasonably be expected to result in, a Material
Adverse Change;
(ii) neither the Holding Company nor any of its
Subsidiaries nor, to the best of the Holding Company's
knowledge, any other Person, has ever caused or permitted any
Hazardous Materials to be disposed of on or under any real
property owned or leased by the Holding Company or any of its
Subsidiaries in any manner not permitted by all applicable
laws, except for any disposals that have not resulted in, and
could not reasonably be expected to result in, a Material
Adverse Change; and
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(iii) except to the extent it has not resulted in,
and could not reasonably be expected to result in, a Material
Adverse Change, no real property ever owned or leased by the
Holding Company or any of its Subsidiaries has ever been used
by the Holding Company or any of its Subsidiaries or, to the
best of the Holding Company's knowledge, any third party as
(A) a disposal site or permanent storage site for any
Hazardous Materials or (B) a temporary storage site for any
Hazardous Materials, except in compliance with applicable
Environmental Laws. All Hazardous Materials used or generated
by the Holding Company or any of its Subsidiaries (including
any business merged into or otherwise acquired by the Holding
Company or any of its Subsidiaries) have been generated,
accumulated, stored, transported, treated, recycled and
disposed of in compliance with all applicable laws and
regulations, except for any non-compliance that has not
resulted in, and could not reasonably be expected to result
in, a Material Adverse Change. There are no underground
storage tanks or underground petroleum receptacles on any real
property owned or leased by the Holding Company or any of its
Subsidiaries. Neither this Agreement nor the transactions
contemplated hereby will result in any obligations for site
assessment or cleanup, or notification to or consent of any
governmental agency or third party under any
transaction-triggered Environmental Law.
(c) The execution, delivery and performance of and the
consummation of the transactions contemplated by the Operative
Documents will not violate or constitute a default under, or permit any
Person to accelerate or to require the prepayment of any Indebtedness
of the Holding Company or any of its Subsidiaries or to terminate any
material lease or agreement of the Holding Company or any of its
Subsidiaries pursuant to, or result in the creation of any Lien (other
than the Liens created by the Senior Loan Documents) upon any of the
properties or assets of the Holding Company or any of its Subsidiaries
pursuant to, any term of the Organizational Documents of the Holding
Company or any of its Subsidiaries or of any agreement, document,
instrument, judgment, decree, order, law, statute, rule or regulation
applicable to the Holding Company or any of its Subsidiaries or any of
their respective properties and assets.
(d) Neither the Holding Company nor any of its Subsidiaries is
a party to or bound by or subject to any Organizational Document, or
any agreement, document, instrument, judgment, decree, order, law,
statute, rule or regulation (other than (x) the Liens created by the
Senior Loan Documents, (y) the documents relating to the Industrial
Development Revenue Bonds (the "IDRB") referred to on Exhibit 5.9
attached hereto,
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all of which documents will be unconditionally and fully defeased in
accordance with its terms on December 29, 1998 and (z) laws, statutes,
rules and regulations generally applicable to businesses) (i) which
restricts its right or ability to incur Indebtedness (including by way
of guarantee), to issue securities or to consummate the transactions
contemplated hereby; (ii) under the terms of or pursuant to which its
obligation to pay all amounts due from it and/or to perform all
obligations imposed on it and/or to comply with the terms applicable to
it under any of the Operative Documents is in any way restricted or
(iii) which restricts its right or ability to pay dividends and/or to
make any other distributions in respect of its capital stock, to
mortgage or dispose of any of its properties, to consummate any merger,
consolidation or acquisition, to make Investments or capital
expenditures, to enter into and perform leases, to pay executive
compensation and/or to conduct its business as now conducted and now
proposed to be conducted.
5.13. ERISA.
(a) The Holding Company and each ERISA Affiliate has operated
and administered each Plan in compliance with all applicable laws
except for such instances of noncompliance which have not resulted in,
and could not reasonably be expected to result in, a Material Adverse
Change. Neither the Holding Company nor any ERISA Affiliate has
incurred any liability pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to employee
benefit plans (as defined in section 3 of ERISA), and no event,
transaction or condition has occurred or exists that could reasonably
be expected to result in the incurrence of any such liability by the
Holding Company or any ERISA Affiliate.
(b) The Holding Company and each ERISA Affiliate do not, and
have not within the preceding five years, maintained, sponsored or been
obligated to contribute to any employee benefit plan (as defined in
section 3 of ERISA), including a Multiemployer Plan, subject to
sections 401(a)(29) or 412 of the Code or Title IV of ERISA.
(c) The Holding Company and its Subsidiaries have no
postretirement benefit obligation (determined in accordance with
Financial Accounting Standards Board Statement No. 106, without regard
to liabilities attributable to continuation coverage mandated by
section 4980B of the Code).
(d) The consummation of the transactions contemplated by the
Operative Documents will not involve any non-exempt transaction that is
subject to the prohibitions of section 406 of ERISA or in connection
with which a tax could reasonably be expected to be imposed pursuant to
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section 4975(c)(1)(A)-(D) of the Code. The representation by the
Companies in the first sentence of this section 5.13(e) is made in
reliance upon and subject to the accuracy of your representation in
section 26(b) as to the sources of the funds used to pay the purchase
price of the Notes to be purchased by you.
5.14. Consents, etc. No consent, approval or authorization of, or
declaration or filing with, or other action by, any Person is required on the
part of the Holding Company or any of its Subsidiaries as a condition precedent
to the valid execution, delivery and performance of and the consummation of the
transactions contemplated by the Operative Documents and/or the exercise by any
holder of any Securities of any of its rights in respect thereof, other than
those specified on Exhibit 5.14 attached hereto, all of which (unless expressly
noted otherwise on Exhibit 5.14) have been obtained, are unconditional and are
in full force and effect. Without limiting the generality of the foregoing, all
filings in connection with the Acquisitions required under the Clayton Act or
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, each as amended, have
been made and the so-called "waiting period" under such Acts has expired or
terminated.
5.15. Proprietary Rights; Licenses. The Holding Company and each of its
Subsidiaries has all material Proprietary Rights and Licenses as are adequate
for the conduct of their respective businesses as now conducted and now proposed
to be conducted, without any known conflict with the rights of others. Each such
Proprietary Right and License is in full force and effect, all material
obligations with respect thereto have been fulfilled and performed and, to the
best of the Companies' knowledge, there is no infringement thereon by any other
Person. No default in the performance or observance by the Holding Company or
any of its Subsidiaries (or any of their predecessors in interest) of their
obligations thereunder has occurred which permits, or after notice of lapse of
time or both would permit, the revocation or termination of any Proprietary
Right or License or which has resulted in, or could reasonably be expected to
result in, a Material Adverse Change.
5.16. Offer of Securities; Investment Bankers. Neither the Holding
Company nor any Person acting on its behalf (a) has directly or indirectly
offered the Securities or any part thereof or any similar securities for issue
or sale to, or solicited any offer to buy any of the same from, anyone other
than you and the Other Purchasers and not more than 10 other institutional
investors, (b) has taken or will take any action which would bring the issuance,
exchange and sale of the Securities within the provisions of Section 5 of the
Securities Act or the registration or qualification provisions of any applicable
blue sky or other securities laws, (c) has dealt with any broker, finder,
commission agent or other similar Person in connection with the sale of the
Securities and the other transactions contemplated by the Operative Documents,
other than the Harvest Manager, or (d) is under any obligation to pay any
broker's fee, finder's fee or
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commission in connection with such transactions, other than fees owing in
connection with the Acquisitions to the Harvest Manager, which fees are the
obligation solely of the Holding Company.
5.17. Government Regulation. Neither the Holding Company nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act or the Investment Company Act of 1940, each
as amended.
5.18. Year 2000 Matters. The computer software operated by the Holding
Company and its Subsidiaries which is material to the conduct of the Business is
Year 2000 Compliant (as defined below), except where the failure to be Year 2000
Compliant has not resulted in, and could not reasonably be expected to result
in, a Material Adverse Change. As used herein, "Year 2000 Compliant" means that
neither the performance nor functionality of the operating systems for the
computers used by the Holding Company and its Subsidiaries for all software
applications that run on such computers is affected by dates prior to, during,
spanning or after January 1, 2000 and shall include, without limitation, (a)
accurately processing (including calculating, comparing and sequencing) date and
time data from, into and between the years 1999 and 2000, and leap year
calculations, (b) functioning without error, interruption or decreased
performance relating to such date and time data, (c) accurately processing such
date and time data when used in combination with other technology, if the other
technology properly exchanges date and time data, (d) accurate date and time
data century recognition, (e) calculations that accurately use the same century
and multi-century formulae and date and time values, (f) date and time interface
values which reflect the correct century and (g) processing, storing, receiving
and outputting all date and time data in a format that accurately indicates the
century of the date and time data.
5.19. Labor Relations; Suppliers, Distributors and Customers. No
dispute involving employees of the Holding Company or any of its Subsidiaries or
their respective relationships with their employees has resulted in, or could
reasonably be expected to result in, any Material Adverse Change. The
relationships with the suppliers to and distributors for and customers of the
Holding Company and its Subsidiaries are satisfactory commercial working
relationships and, during the 12-month period ended on such Closing Date, no
such supplier, distributor or customer has cancelled or otherwise terminated its
relationship with or decreased its services, supplies or materials to or its
usage or purchase of the services or products of the Holding Company or any of
its Subsidiaries in a manner which has resulted in, or could reasonably be
expected to result in, a Material Adverse Change. The Companies are not aware of
any intention of any such supplier, distributor or customer to take any such
action.
5.20. Disclosure. Neither this Agreement, the other Operative Documents
nor any of the other documents, certificates and written statements
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delivered in connection with the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein and therein not misleading in
the light of the circumstances under which such statements were made, it being
understood that, except as set forth in section 5.6(b), no representation or
warranty is made with respect to any projections or other prospective financial
information. There is no fact known to the Companies which has resulted in, or
could reasonably be expected to result in, a Material Adverse Change which has
not been set forth in this Agreement, the other Operative Documents and the
other documents, certificates and written statements referred to above in this
section 5.20.
6. Use of Proceeds; Regulation U, etc.
(a) The proceeds of the sale of the Securities received on the
Auto Ventshade Closing Date, together with other funds available to the
Companies under the Senior Loan Agreement or otherwise, will be used on
the Auto Ventshade Closing Date to finance the Auto Ventshade
Acquisition and in connection therewith to make the payments to the
Persons set forth in the schedule of sources and uses attached as
Exhibit 6 hereto. The proceeds of the sale of the Securities received
on the Smittybilt Closing Date, together with other funds available to
the Companies under the Senior Loan Agreement or otherwise, will be
used on the Smittybilt Closing Date to finance the Smittybilt
Acquisition and in connection therewith to make the payments to the
Persons set forth in the schedule of sources and uses delivered
pursuant to section 4.2(c). Any remaining balance of such proceeds will
be used for general corporate purposes of the Holding Company and its
Subsidiaries in accordance with the terms of the Operative Documents.
(b) Neither the Holding Company nor any of its Subsidiaries
owns, and the Holding Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, use any part of the proceeds
of the sale of the Securities for the purpose of purchasing or carrying
any "margin stock" within the meaning of Regulation U (12 CFR Part 221)
of the Board of Governors of the Federal Reserve System (herein called
a "margin security") or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might constitute the
transactions contemplated by the Operative Documents a "purpose credit"
within the meaning of said Regulation U or cause this Agreement or any
of the other Operative Documents to violate Regulation U or any other
regulation of the Board of Governors of the Federal Reserve System, or
the Exchange Act or any other applicable law, statute, regulation,
rule, order or restriction.
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7. Financial Statements and Information. The Companies will furnish to you
in duplicate, so long as you shall be obligated to purchase Securities hereunder
or shall hold any of the Securities, and to each other institutional holder from
time to time of any of the Securities:
(a) as soon as available and in any event within (i) 30 days
after the end of each monthly accounting period and (ii) 45 days after
the end of each fiscal quarter, in each fiscal year of the Holding
Company, the consolidated and consolidating balance sheets of the
Holding Company and its Subsidiaries as at the end of such period and
the related consolidated and consolidating statements of income and
stockholders' equity and the related consolidated and (if provided to
the Senior Lenders) consolidating statements of cash flows, for such
period and for the portion of such fiscal year ended on the last day of
such period, in each case setting forth in comparative form the
corresponding figures for the same period and portion of the next
preceding fiscal year and the corresponding figures from the budgets
for the consolidated statements of income for the Holding Company for
such period and for the fiscal year which includes such period;
(b) as soon as available and in any event within 90 days after
the end of each fiscal year of the Holding Company, the consolidated
and consolidating balance sheets of the Holding Company and its
Subsidiaries as at the end of such year and the related consolidated
and consolidating statements of income, cash flows and stockholders'
equity for such year, in each case setting forth in comparative form
the corresponding audited figures for the next preceding fiscal year
and the corresponding unaudited figures from the budget for such fiscal
year, all in reasonable detail and accompanied by the standard
unqualified report on such audited consolidated financial statements of
the Holding Company and its Subsidiaries of PricewaterhouseCoopers LLP
or other accountants of recognized national standing selected by the
Holding Company, which report shall be prepared in accordance with
Statement of Auditing Standards No. 58 (entitled "Reports on Audited
Financial Statements") and such report shall be "Unqualified" (as
defined therein);
(c) together with each delivery of financial statements
pursuant to sections 7(a) and 7(b), an Officers' Certificate which
shall:
(i) certify that such financial statements have been
prepared in accordance with GAAP (subject, in the case of any
unaudited financial statements, to normal year-end and audit
adjustments and the omission of footnotes) applied on a
consistent basis throughout the periods covered thereby and
present fairly in all material respects the consolidated
financial position and the consolidated results of operations
and cash flows of the Holding
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Company and its Subsidiaries as at the end of and for the
periods covered thereby in conformity with GAAP;
(ii) state that, after due inquiry, the signers do
not have knowledge of the existence, during the fiscal period
covered by such financial statements or as at the date of such
Officers' Certificate, of (A) any "reportable condition" (as
defined in Statement on Auditing Standards No. 60 issued by
the Auditing Standards Board of the American Institute of
Certified Public Accountants) in the internal control
structure of the Holding Company or any of its Subsidiaries,
(B) any Change of Control or (C) any Default or Event of
Default, or, if such is not the case, specifying in reasonable
detail the nature and period of existence thereof and what
action the Holding Company or the applicable Subsidiary has
taken, is taking and proposes to take with respect thereto;
(iii) show in reasonable detail (A) all computations
required to demonstrate compliance, during and at the end of
the fiscal period covered by such financial statements, with
the provisions of sections 14.5, 14.6, 14.7 and 14.15 (such
computations to be set forth substantially in the manner of
Exhibit 7(c)(iii)(A) attached hereto) and (B) any adjustments
required under the terms of the Warrants to be made to the
Exercise Price or in the number or kind of Warrant Shares (as
defined in the Warrants) on account of any event or
transaction occurring during the fiscal period covered by such
financial statements;
(iv) include management's discussion and analysis of
the financial condition and the results of operations of the
Holding Company and its Subsidiaries as at the end of and for
the fiscal periods covered by such financial statements,
including a discussion of any significant variation from the
budgets for such periods delivered pursuant to section 7(h);
and
(v) if there shall exist any Subsidiary of the
Holding Company as of the date of such Officers' Certificate
which did not exist as of the date of the last Officers'
Certificate delivered pursuant to this section 7(c), specify
with respect to each such Subsidiary the information called
for by Exhibit 7(c)(v) and contain a brief description of the
nature of each such Subsidiary's business and certify that
each such new Subsidiary has executed and delivered the
Subsidiary Guarantee required pursuant to section 14.18;
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(d) as promptly as practicable (but in any event not later
than 10 days) after receipt thereof, copies of all reports or written
comments (including, without limitation, audit reports, so-called
management letters and any other reports or communications with respect
to the internal control structure of the Holding Company or any of its
Subsidiaries) submitted by independent accountants or other management
consultants;
(e) as promptly as practicable (but in any event not later
than 10 days) after the same are available, copies of (i) all material
press releases issued by the Holding Company or any Subsidiary of the
Holding Company, and all notices, proxy statements, financial
statements, reports and documents as the Holding Company shall send or
make available generally to its stockholders or as any Subsidiary of
the Holding Company shall send or make available generally to its
stockholders other than the Holding Company and (ii) all periodic and
special reports, documents and registration statements (other than on
Form S-8) which the Holding Company or any Subsidiary of the Holding
Company furnishes or files, or any officer, director or stockholder of
the Holding Company or any of its Subsidiaries furnishes or files with
respect to the Holding Company or any of its Subsidiaries, with the
Commission (or any analogous foreign governmental authority) or any
securities exchange;
(f) as promptly as practicable (but in any event not later
than 10 days) after any executive officer of the Holding Company or any
of its Subsidiaries becomes aware of the occurrence of any of the
following conditions or events, an Officers' Certificate specifying in
reasonable detail the nature and period of existence thereof, what
action the Holding Company or any of its Subsidiaries has taken, is
taking and proposes to take with respect thereto: (i) with respect to
any Plan, any reportable event, as defined in section 4043(b) of ERISA
and the regulations thereunder, for which notice thereof has not been
waived pursuant to such regulations as in effect on the date hereof;
(ii) the taking by the PBGC of steps to institute, or the threatening
by the PBGC of the institution of, proceedings under section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by any Company or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by the PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could result in the
incurrence of any liability by any Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties or assets of
any Company or any ERISA Affiliate pursuant to Title I or IV of ERISA
or such penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then existing,
has resulted in, or could reasonably be expected to result in, a
Material Adverse Change;
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(g) as promptly as practicable (but in any event not later
than five days) after the occurrence of any Default or Event of
Default, or of any condition or event which has resulted in, or could
reasonably be expected to result in, a Material Adverse Change, an
Officers' Certificate specifying in reasonable detail the nature and
period of existence thereof, what action the Holding Company or any of
its Subsidiaries has taken, is taking and proposes to take with respect
thereto and the date, if any, on which it is estimated the same will be
remedied;
(h) as promptly as practicable prior to the end of each fiscal
year of the Holding Company, an annual budget prepared on a monthly
basis for the Holding Company and its Subsidiaries for the succeeding
fiscal year (displaying anticipated balance sheets and statements of
income, cash flows and stockholders' equity) and, promptly upon
preparation thereof, any other significant budgets which the Holding
Company or any of its Subsidiaries prepares and any revisions of such
annual or other budgets;
(i) as promptly as practicable (but in any event not later
than 10 days) after delivery or receipt thereof, copies of all material
notices and communications given or received by the Holding Company or
any of its Subsidiaries under the Acquisition Documents (including,
without limitation, copies of (i) all documents related to adjustments
to the amounts paid under the Acquisition Documents and (ii) all
notices and communications relating to claims of breaches and defaults
and claims for indemnification given or received by the Holding Company
or any of its Subsidiaries), or any of the other agreements, documents
and instruments referred to in section 4.3;
(j) such other material information relating to the Holding
Company or any of its Subsidiaries as shall be furnished to any bank,
financial institution or other Person to which the Holding Company or
any of its Subsidiaries is indebted for borrowed money or for any
letters of credit (or similar instruments) (other than information
relating solely to collateral therefor); and
(k) such other information as from time to time may reasonably
be requested.
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8. Inspection; Confidentiality.
(a) The Companies will, and will cause their respective
Subsidiaries to, permit any Person designated by any institutional
holder of any of the Securities on reasonable notice and during normal
business hours and at such holder's expense (unless a Default or Event
of Default shall have occurred and be continuing, in which case, at the
Companies' expense), to visit and inspect any of the properties of the
Companies and their respective Subsidiaries, to examine their books and
records (and to make copies thereof and take extracts therefrom) and to
discuss their affairs, finances and accounts with and to be advised as
to the same by, their officers, consultants, counsel and accountants,
all at such reasonable times and intervals as such holder may desire,
provided that, in the absence of a Default or Event of Default, there
shall not be more than four such visits during any period of 12
consecutive months.
(b) Each holder of any Securities agrees by its acceptance
thereof to maintain, in accordance with such procedures as are adopted
by such holder in good faith to protect confidential information of
third parties delivered to such holder, the confidentiality of any
non-public information concerning the Companies and their respective
Subsidiaries which is furnished by the Companies to such holder
pursuant to this Agreement or any of the other Operative Documents and
which is designated in writing as confidential (collectively
"Confidential Information"); provided, however, no holder shall be
liable to the Holding Company or any other Person for any breach of
this section 8(b). The term "Confidential Information" shall not
include, however, any information which (x) was publicly known or
otherwise known to any holder at the time of disclosure by the
Companies to any holder; (y) subsequently becomes publicly known
through no act or omission of any holder or its agent or (z) becomes
known to any holder otherwise than through disclosure by the Companies.
Notwithstanding the foregoing, each holder of any Securities may
disclose Confidential Information: (i) with the consent of the
Companies (which shall not be unreasonably withheld or delayed); (ii)
when required by law or regulation; (iii) in any report, statement or
testimony submitted by such holder to any regulatory body having or
claiming to have jurisdiction over such holder; (iv) if required, to
the National Association of Insurance Commissioners or any similar
organization or to any rating agency; (v) to the officers, directors,
employees, agents, representatives and professional consultants of such
holder and of such holder's Affiliates; (vi) after the occurrence of an
Event of Default, in connection with the preservation, exercise and/or
enforcement of any of such holder's rights or remedies under this
Agreement and the other Operative Documents; (vii) in connection with
any contemplated transfer of any of the Securities held by such holder
to
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any institutional investor or financial institution, provided that any
such transferee agrees to be bound by the provisions of this section
8(b); (viii) in a response to any summons, subpoena or other legal
process or in connection with any judicial or administrative proceeding
or inquiry (and, in such event, such holder shall promptly notify the
Companies of the same); or (ix) to correct any false or misleading
information which may become public concerning the relationship of such
holder to the Companies or any of their respective Subsidiaries and/or
the transactions contemplated hereby.
9. Prepayment of Notes.
9.1. [Intentionally Omitted.]
9.2 Optional Prepayment With Premium of Notes. At any time or from time
to time, the Companies may, at their option, upon notice as set forth in section
9.5, prepay all or any part (in an integral multiple of $100,000 and a minimum
of $500,000 or such lesser principal amount thereof as shall then be
outstanding) of the Notes, upon the concurrent payment of a premium (a
percentage of the principal amount so prepaid pursuant to this section 9.2) (the
"Applicable Premium"), such percentage to be that set forth in the following
table opposite the period in which the date fixed for such prepayment occurs:
Applicable
Period Premium
Auto Ventshade Closing Date through
December 31, 2001 3.0%
January 1, 2002 through December 31, 2002 2.0%
January 1, 2003 through December 31, 2003 1.0%
January 1, 2004 and thereafter 0.0%
Any partial prepayment of Notes pursuant to this section 9.2 shall be applied to
the payment of installments of principal of the Notes in inverse order of
maturity.
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9.3. Prepayment With Premium at the Option of Holders of Notes upon a
Change of Control.
(a) If any Change of Control is to occur, then not less than
20 days nor more than 60 days prior to the occurrence of such Change of
Control, the Companies will notify each holder of any Notes of such
pending Change of Control and the date upon which it is scheduled to
occur. If any holder of Notes furnishes a written request for
prepayment to the Companies (in accordance with section 23) not more
than 10 Business Days after receipt by such holder of such notice of
such Change of Control from the Companies, the Companies will prepay
all of the Notes of such holder then outstanding, together with an
amount equal to the Applicable Premium, as liquidated damages and not
as a penalty, that would be due upon a prepayment of such Notes made
pursuant to section 9.2 on the date upon which such holder of Notes
furnishes such written request. Each such prepayment shall occur on the
date upon which the Change of Control occurs, unless the Holding
Company and each holder of Notes then to be prepaid agrees to a
different date, and no prepayment requested pursuant to this section
9.3 shall be due unless the Change of Control shall occur.
(b) Each notice from the Companies pursuant to this section
9.3 shall set forth in reasonable detail the material terms and
conditions of the event constituting the Change of Control, shall make
explicit reference to this section 9.3 and shall state that the right
of each holder of Notes to require prepayment thereof must be exercised
within 10 Business Days of the receipt of such notice.
9.4. Allocation of Partial Prepayments of Notes. In the case of each
partial prepayment of the Notes under section 9.2, the principal amount of the
Notes to be prepaid shall be allocated among all of the Notes at the time
outstanding (excluding any Notes at the time owned by any Company or any
Affiliate of any Company) in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof, with adjustments, to the extent
practicable, to compensate for any prior prepayments not made exactly in such
proportion.
9.5. Notice of Optional Prepayments of Notes. In the case of each
prepayment under this section 9, the Holding Company shall give written notice
thereof to each holder of Notes not less than 10 nor more than 30 days prior to
the date fixed for such prepayment. Each such notice shall set forth: (a) the
date fixed for prepayment; (b) the aggregate principal amount of Notes to be
prepaid on such date; and (c) the aggregate principal amount of Notes held by
such holder to be prepaid on such date and the amount of accrued interest and
premium, if any, to be paid to such holder on such date.
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9.6. Maturity; Accrued Interest; Surrender, etc. of Notes. In the case
of each prepayment of all or any part of any Note, the principal amount to be
prepaid shall mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount accrued to such date
and the premium, if any, due thereon. Any Note prepaid in full shall be
surrendered to the Companies at the Holding Company's principal place of
business promptly following prepayment and cancelled and shall not be reissued,
and no Note shall be issued in lieu of any prepaid principal amount of any Note.
9.7. Purchase of Notes. The Companies will not, and will not permit any
of their respective Affiliates to, directly or indirectly, purchase or otherwise
acquire, or offer to purchase or otherwise acquire, any Notes except by way of
payment or prepayment in accordance with the provisions of the Notes and this
Agreement.
9.8. Payment on Non-Business Days. If any amount hereunder or under the
Notes shall become due on a day which is not a Business Day, such payment shall
be due on the next succeeding Business Day without including the additional
day(s) elapsed in the computation of the interest payable on such next
succeeding Business Day.
9.9. Application of Notes in Satisfaction of Exercise Price of
Warrants. In the event that any holder of any Note shall apply all or any
portion of the principal amount of such Notes in satisfaction (in whole or in
part) of the payment of the Exercise Price (as defined in the Warrants), any
partial application of the principal amount of any such Note shall be applied to
the payment of installments of principal due thereunder in the inverse order of
maturity.
10. Subordination of Notes and Subsidiary Guarantees. The payment of the
Notes and Subsidiary Guarantees and the rights of the holders thereof are
subordinated to the payment of the Superior Indebtedness (as defined in the
Notes) and the rights of the holders thereof upon the terms of subordination set
forth in the Notes.
11. Registration, etc. Reference is hereby made to the Rights Agreement for
certain provisions relating to the right of the holders of the Registrable
Shares (as defined therein) to require the Holding Company to effect the
registration of such securities under the Securities Act.
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12. Certain Provisions Concerning the Management Stock Option Plan and the
Warrants.
12.1. Management Stock Option Plan; Excluded Outstanding Options. The
Holding Company will not (a) issue any securities convertible into or
exercisable or exchangeable for any shares of Holding Company Common Stock
pursuant to the Management Stock Option Plan or any similar plan or arrangement
unless the per share "strike price" of such securities shall not be less than
the Fair Value per share of the Holding Company Common Stock at the time such
securities are issued or (b) amend, supplement, modify or waive any term of the
Excluded Outstanding Options, except only to reduce the per share "strike price"
thereof to a price not less than $7.00 per share.
12.2. Warrants Exercisable for Series B Preferred Stock Under Certain
Circumstances.
(a) Notwithstanding anything to the contrary contained herein,
in the Warrants or in any of the other Operative Documents, the Holding
Company, you and, by its acceptance thereof, each other holder of any
of the Warrants hereby agree that (a) until the Trigger Date (as
defined in the Certificate of Designations, Preferences and Rights of
Series B Preferred Stock of the Holding Company dated December 22, 1998
(the "Certificate of Designation")), (i) the Warrants issued at the
Auto Ventshade Closing shall be initially and solely exercisable for an
aggregate of 52,074.9 shares of Series B Preferred Stock (as defined in
the Certificate of Designation) and (ii) the Warrants issued, if any,
at the Smittybilt Closing shall be initially exercisable for an
aggregate of 18,409 shares of Series B Preferred Stock and (b) on and
after the Trigger Date, all such Warrants shall be exercisable only for
Holding Company Class A Common Stock (or such other Warrant Shares as
are provided in the Warrants). Each Warrant issued at the Auto
Ventshade Closing or the Smittybilt Closing shall be initially
exercisable for the same portion of such applicable aggregate number of
shares of Series B Preferred Stock as the number of shares of Holding
Company Class A Common Stock issuable (on or after the Trigger Date)
upon the exercise of such Warrant bears to the total number of shares
of Holding Company Class A Common Stock issuable upon the exercise (on
or after the Trigger Date) of all Warrants issued at such Closing, as
set forth on Schedule I attached hereto.
(b) If at any time the Holding Company shall pay any dividend
or make any other distribution to the holders of Series B Preferred
Stock, then concurrently therewith, the Holding Company shall pay to
each holder of a Warrant an amount equal to the amount that such holder
would have received if, on the date such dividend or other distribution
is
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paid to the holders of Series B Preferred Stock (or the applicable
record date therefor), such holder held the maximum aggregate number of
shares of Series B Preferred Stock ever issuable upon exercise of such
Warrant.
(c) Until the Trigger Date, without the prior written consent
of the Required Holders of the Warrants, the Holding Company shall not
(i) declare any dividend on or make any distribution in respect of any
of its Shares which is payable in any of its Shares (or in any
securities convertible into or exercisable or exchangeable for any of
its Shares), (ii) subdivide or combine any of its outstanding Shares of
any class, (iii) issue or sell (or agree to issue or sell) any of its
Shares (or any securities convertible into or exercisable or
exchangeable for any of its Shares) for a consideration per Share less
than the Fair Value thereof, other than the issue of (A) the Warrants
to be issued at the Smittybilt Closing Date, (B) shares of Holding
Company Common Stock upon the exercise of any Excluded Outstanding
Options, (C) shares of Holding Company Common Stock pursuant to the
terms of those two certain Investment Agreements dated as of December
22, 1998 among the Holding Company and the institutional investors
named therein and (D) shares of Holding Company Common Stock upon the
conversion of any other securities convertible into shares of Holding
Company Common Stock which are outstanding on (and pursuant to the
terms in effect on) the Auto Ventshade Closing Date and are listed on
Exhibit 5.5(a) attached hereto, (iv) effect any reorganization,
reclassification or recapitalization of any of its Shares of any class,
(v) effect any other transaction as a result of which the holders of
the Holding Company Common Stock or Series B Preferred Stock become
entitled to receive any Shares or other securities and/or property with
respect to or in exchange for such Shares of Holding Company Common
Stock or Series B Preferred Stock, respectively, or (vi) effect any
other transaction or event involving its Shares that has, or could
reasonably be expected to have, an economically dilutive or otherwise
adverse effect upon the purchase rights or other rights of the holders
of the Warrants.
13. Board Visitation Rights. The Required Holders of the Notes shall have
the right to appoint one representative who shall: (a) receive notice of all
meetings (both regular and special) of the board of directors of each of the
Holding Company and its Subsidiaries and each committee of any such board (such
notice to be delivered or mailed as specified in section 23 at the same time as
notice is given to the members of any such board and/or committee but in no
event later than one day prior to the date of such meeting); (b) be entitled to
attend (or, at such representative's option, monitor by telephone) all such
meetings; (c) receive all notices, information and reports which are furnished
to the members of any such board and/or committee at the same time and in the
same manner as the same is furnished to such members; (d) be entitled to
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participate in all discussions conducted at such meetings and (e) receive as
soon as available (but in any event not later than 30 days after such meeting)
copies of the minutes of all such meetings. If any action is proposed to be
taken by any such board and/or committee by written consent in lieu of a
meeting, the Holding Company and each of its Subsidiaries will give written
notice thereof to such representative, which notice shall describe in reasonable
detail the nature and substance of such proposed action and shall be delivered
at the same time as notice is given to the members of any such board and/or
committee. The Holding Company and each of its Subsidiaries will furnish such
representative with a copy of each such written consent not later than five days
after it has been signed by its last signatory. Such representative shall not
constitute a member of any such board and/or committee and shall not be entitled
to vote on any matters presented at meetings of any such board and/or committee
or to consent to any matter as to which the consent of any such board and/or
committee shall have been requested. The Companies will pay the reasonable out-o
pocket expenses of such representative incurred in connection with attending
such meetings and/or exercising any rights hereunder.
14. Covenants of the Companies. From and after the date hereof and
thereafter so long as any of the Notes shall remain outstanding, the Holding
Company will, and will cause each of its Subsidiaries to, duly perform and
observe each and all of the covenants and agreements hereinafter set forth.
14.1. Books of Record and Account; Reserves. The Holding Company will,
and will cause each of its Subsidiaries to (a) at all times keep proper books of
record and account in which full, true and correct entries shall be made of its
transactions in accordance with GAAP and (b) set aside on its books from its
earnings for each fiscal year all such proper reserves as shall be required in
accordance with GAAP in connection with its business.
14.2. Payment of Taxes; Corporate Existence; Maintenance of Properties;
Compliance with Laws; Lines of Business; Proprietary Rights. The Holding Company
will, and will cause each of its Subsidiaries to:
(a) pay and discharge promptly as they become due and payable
all taxes, assessments and other governmental charges or levies imposed
upon it or its income or upon any of its property, as well as all
claims of any kind (including claims for labor, materials and supplies)
which, if unpaid, might by law become a Lien upon its property;
provided that no such Person shall be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or
validity thereof shall currently be contested in good faith by
appropriate proceedings promptly initiated and diligently conducted and
if it shall have set aside on its books such reserves, if any, with
respect thereto as are required by GAAP; provided, further, that the
Holding Company will, and will cause each of its Subsidiaries to, pay
any such tax, assessment, charge, levy or
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claim prior to the commencement of any proceeding to foreclose any Lien
securing the same;
(b) do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence and, except
to the extent the failure to do so will not, and could not reasonably
be expected to, result in a Material Adverse Change, all of its
Licenses, provided that nothing in this clause (b) shall prohibit the
consummation of any transaction consummated in accordance with section
14.13, 14.14 or 14.15;
(c) maintain and keep its material properties necessary for
the conduct of its business in good repair, working order and condition
(reasonable wear and tear excepted), so that the business carried on in
connection therewith may be properly and advantageously conducted at
all times;
(d) comply in all material respects with all applicable laws,
statutes, rules, regulations and orders of, and all applicable
restrictions imposed by, all governmental authorities in respect of the
conduct of its business and the ownership of its property (including,
without limitation, all Environmental Laws); provided that no such
Person shall be required by reason of this section 14.2(d) to comply
therewith at any time while it shall be contesting its obligation to do
so in good faith by appropriate proceedings promptly initiated and
diligently conducted, and if it shall have set aside on its books such
reserves, if any, with respect thereto as are required by GAAP;
(e) engage only in lines of business related to the Business
and conduct substantially all its business and keep substantially all
of its assets in the United States of America; and
(f) own or have a valid license for all material Proprietary
Rights used by it in the conduct of its business.
14.3. Insurance. The Holding Company will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurers,
insurance with respect to their properties and businesses against loss or damage
of the kinds customarily insured against by Persons of established reputation
engaged in the same or a similar business and similarly situated, in such
amounts and by such methods as shall be customary for such Persons and
reasonably deemed adequate by the Holding Company.
14.4. Limitation on Discount or Sale of Receivables. The Holding
Company will not, and will not permit any of its Subsidiaries to, directly or
indirectly, discount or sell any of their accounts receivable, except that any
such
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Person may settle doubtful accounts in the ordinary course of business,
provided that nothing in this section 14.4 shall prohibit the grant of any
security interest in accounts receivable or any action taken by the beneficiary
of such security interest in accordance with the security agreement creating the
same.
14.5. Limitation on Funded Debt and Current Debt. The Holding Company
will not, and will not permit any of its Subsidiaries to, be liable or create,
assume, incur, guarantee, or in any manner become liable, contingently or
otherwise, in respect of any Funded Debt or Current Debt other than:
(a) Funded Debt evidenced by the Notes (and Subsidiary
Guarantees);
(b) Funded Debt and/or Current Debt under the Senior Loan
Agreement, provided that the aggregate outstanding principal amount
thereof, including, without limitation, all amounts due (contingently
or otherwise), without duplication, in respect of reimbursement
obligations under letters of credit, interest rate protection or
similar agreements or similar instruments (and all related
reimbursement agreements), does not exceed $108,000,000 or, following
the Smittybilt Closing Date, $118,000,000, in each case minus the sum
(without duplication of amounts) of (i) the aggregate amount of all
scheduled principal payments made thereon from time to time (other than
any principal payment made under the revolving credit facility
established under the Senior Loan Agreement which may be reborrowed
under such facility) and (ii) the aggregate amount of any reductions in
the principal amount of the commitments under the credit facilities
established pursuant to the Senior Loan Agreement
(c) Funded Debt and/or Current Debt outstanding on the date
hereof and referred to on Exhibit 5.9 attached hereto (but, in each
case, no renewal, extension, refinancing or refunding of any thereof
except pursuant to section 14.5(e));
(d) Funded Debt and/or Current Debt under Capital Leases or
consisting of purchase money loans in addition to that permitted
pursuant to section 14.5(c), provided that (i) both at the time of and
immediately after giving effect to the incurrence thereof and the
retirement of any Indebtedness which is concurrently being retired, no
Default or Event of Default shall have occurred and be continuing, (ii)
the aggregate outstanding principal amount of such Funded Debt and
Current Debt incurred pursuant to this section 14.5(d) shall at no time
exceed $3,300,000 and (iii) any Liens securing such Funded Debt and/or
Current Debt are permitted under section 14.9(d);
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(e) Funded Debt and/or Current Debt incurred to extend,
refinance, refund or renew (the "Refinancing Debt") any other
outstanding Funded Debt and/or Current Debt permitted under this
section 14.5 (the "Refinanced Debt"), provided that:
(i) the aggregate outstanding principal amount of the
Refinancing Debt shall not at any time exceed (A) that of the
Refinanced Debt immediately prior to such refinancing or (B)
in the case of any extensions, refinancings, refundings or
renewals of the Funded Debt and Current Debt under the Senior
Loan Agreement or any Refinancing Debt thereof, the amount
permitted under section 14.5(b) at the time;
(ii) the scheduled final maturity date of the
Refinancing Debt is not earlier than that of the Refinanced
Debt;
(iii) the Weighted Average Life to Maturity of the
Refinancing Debt is not less than that of the Refinanced Debt;
(iv) the Refinancing Debt has a ranking which is not
senior (as a result of any contractual or structural
subordination, the grant of any collateral security therefor,
any change in the Persons obligated with respect thereto or
otherwise) to the ranking of the Refinanced Debt;
(v) the Refinancing Debt bears interest at market
rates prevailing at its date of issuance (taking into account
all pertinent information concerning the Holding Company and
its Subsidiaries); and
(vi) both at the time of and immediately after giving
effect to the incurrence of the Refinancing Debt and the
retirement of the Refinanced Debt, no Default or Event of
Default shall have occurred and be continuing;
(f) Funded Debt and/or Current Debt owing by (i) any
Wholly-Owned Subsidiary of the Holding Company to the Holding Company
or any other Wholly-Owned Subsidiary of the Holding Company or (ii) the
Holding Company to any of its Wholly-Owned Subsidiaries, provided that
the aggregate outstanding principal amount of Funded Debt and Current
Debt permitted under this clause (ii) shall not exceed $500,000 at any
time; and
(g) additional Funded Debt and/or Current Debt not otherwise
permitted under this section 14.5, provided that:
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(i) both at the time of and immediately after giving
effect to the incurrence of such Funded Debt and/or Current
Debt and the retirement of any Indebtedness which is
concurrently being retired, no Default or Event of Default
shall have occurred and be continuing; and
(ii) immediately after giving effect to the
incurrence of such Funded Debt and/or Current Debt and the
retirement of any Indebtedness which is concurrently being
retired, the Pro Forma Consolidated Leverage Ratio does not
exceed 4.50 to 1.00.
14.6. Limitation on Restricted Payments. The Holding Company will not,
and will not permit any of its Subsidiaries to, directly or indirectly, make or
commit to make any Restricted Payment other than the following Restricted
Payments:
(a) the Holding Company may purchase shares of Holding Company
Common Stock from management stockholders, provided that (i) both at
the time of and after giving effect thereto, no Default or Event of
Default shall have occurred and be continuing and (ii) the aggregate
amount of all such payments shall not exceed $250,000 during any period
of 12 consecutive months;
(b) the Holding Company may pay to Harvest Manager (x) the
management fees and other amounts required to be paid pursuant to the
Harvest Consulting Agreement (as in effect on the Auto Ventshade
Closing Date) and any extension or renewal thereof; provided that (i)
both at the time of and after giving effect thereto, no Default or
Event of Default shall have occurred and be continuing, (ii) the
aggregate amount of such fees shall not exceed $500,000 during any
period of 12 consecutive months and (iii) such fees are paid quarterly
in advance; (y) the transaction fees specified on Exhibit 14.6 attached
hereto and (z) such negotiated additional amounts referred to (and paid
in accordance with the provisions of) section 3(c) of the Harvest
Consulting Agreement (as in effect on the Auto Ventshade Closing Date)
so long as such amounts are reasonable and customary;
(c) the Holding Company may pay fees and out-of-pocket
expenses to members of the board of directors of the Holding Company
who are not otherwise employees or consultants to the Holding Company
or any of its Subsidiaries, any of the Harvest Funds or any of their
respective Affiliates, provided that the aggregate amount of all such
payments shall not exceed $100,000 during any period of 12 consecutive
months; and
(d) the Holding Company may pay to Old World the management
fees and other amounts required to be paid pursuant to the
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Old World Consulting Agreement (as in effect on the Auto Ventshade
Closing Date).
14.7. Certain Financial Covenants.
(a) Minimum Consolidated EBITDA. The Holding Company will not
permit Consolidated EBITDA for any period of four consecutive fiscal
quarters set forth below (or any shorter period as indicated below) to
be less than the amount set forth below for such period:
(i) until the Smittybilt Closing Date:
Period Minimum Amount
For the three months ending March 31, 1999 $ 3,150,000
For the six months ending June 30, 1999 9,000,000
For the nine months ending September 30, 1999 15,570,000
For the four consecutive fiscal quarters ending
December 31, 1999 21,330,000
March 31, 2000 23,130,000
June 30, 2000 24,210,000
September 30, 2000 24,300,000
December 31, 2000 24,525,000
March 31, 2001 25,200,000
June 30, 2001 25,920,000
September 30, 2001 26,730,000
December 31, 2001 27,000,000
March 31, 2002 and the last day
of each fiscal quarter thereafter 27,000,000
(ii) on and after the Smittybilt Closing Date:
Period Minimum Amount
For the three months ending March 31, 1999 $ 3,600,000
For the six months ending June 30, 1999 10,350,000
For the nine months ending September 30, 1999 18,000,000
For the four consecutive fiscal quarters ending
December 31, 1999 24,570,000
March 31, 2000 26,550,000
June 30, 2000 27,900,000
September 30, 2000 27,900,000
December 31, 2000 27,900,000
March 31, 2001 28,800,000
June 30, 2001 28,800,000
September 30, 2001 30,600,000
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December 31, 2001 30,600,000
March 31, 2002 and the last day
of each fiscal quarter thereafter 31,500,000
(b) Total Interest Coverage. The Holding Company shall not
permit Consolidated Total Interest Coverage for any period of four
consecutive fiscal quarters set forth below (or any shorter period as
indicated below) to be less than the ratio set forth below for such
period:
(i) until the Smittybilt Closing Date:
Period Minimum Ratio
For the six months ending June 30, 1999 1.15 to 1.00
For the nine months ending September 30, 1999 1.40 to 1.00
For the four consecutive fiscal quarters ending
December 31, 1999 1.45 to 1.00
March 31, 2000 1.60 to 1.00
June 30, 2000 1.80 to 1.00
September 30, 2000 1.80 to 1.00
December 31, 2000 1.80 to 1.00
March 31, 2001 2.00 to 1.00
June 30, 2001 2.25 to 1.00
September 30, 2001 2.45 to 1.00
December 31, 2001 2.45 to 1.00
March 31, 2002 and the last day to
of each fiscal quarter thereafter 2.70 to 1.00
(ii) on and after the Smittybilt Closing Date:
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Period Minimum Ratio
For the six months ending June 30, 1999 1.15 to 1.00
For the nine months ending September 30, 1999 1.45 to 1.00
For the four consecutive fiscal quarters ending
December 31, 1999 1.50 to 1.00
March 31, 2000 1.60 to 1.00
June 30, 2000 1.80 to 1.00
September 30, 2000 1.80 to 1.00
December 31, 2000 1.80 to 1.00
March 31, 2001 2.00 to 1.00
June 30, 2001 2.25 to 1.00
September 30, 2001 2.45 to 1.00
December 31, 2001 2.45 to 1.00
March 31, 2002 and the last day to
of each fiscal quarter thereafter 2.70 to 1.00
(c) Maximum Operating Lease Rentals. The Holding Company will
not, and will not permit any of its Subsidiaries to incur any Rental
Obligations (other than Rental Obligations under Capital Leases) if,
after giving effect thereto, the total amount of Rental Obligations
(other than Rental Obligations under Capital Leases) paid or payable by
the Holding Company and its Subsidiaries shall exceed (i) $2,750,000
during any period of four consecutive fiscal quarters ended on or
before the Smittybilt Closing Date or (ii) $3,850,000 during any period
of four consecutive fiscal quarters ended on or after the Smittybilt
Closing Date.
14.8. Limitation on Tax Consolidation. The Holding Company will not,
and will not permit any of its Subsidiaries to, become a party to a consolidated
or combined income tax return with any Person other than the Holding Company (or
the Successor Corporation, as provided in section 14.14) and its Subsidiaries.
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14.9. Limitation on Liens. The Holding Company will not, and will not
permit any of its Subsidiaries to, create or suffer to exist any Lien in respect
of any property of any character of the Holding Company or any of its
Subsidiaries (whether owned on the date hereof or hereafter acquired); provided
that there shall be excluded from the operation of this section 14.9:
(a) Liens securing Funded Debt and Current Debt under the
Senior Loan Agreement to the extent permitted under section 14.5(b);
(b) Liens (other than any Lien created by any Environmental
Law or by ERISA), charges and encumbrances which (i) are incurred in
the ordinary course of business and which are incidental to the conduct
of the business of the Holding Company and its Subsidiaries and the
ownership of its and their property, (ii) are not incurred in
connection with the borrowing of money or the obtaining of advances or
credit, (iii) do not in the aggregate materially detract from the value
of the property of the Holding Company or its Subsidiaries or
materially impair the use thereof in the operation of its or their
business and (iv) do not (and could not reasonably be expected to)
materially adversely affect the rights of the holders of the Notes,
including, without limitation, but subject in any event to the
foregoing provisions of this section 14.9(b):
(A) Liens for taxes, assessments or other
governmental charges (x) not yet due and payable or (y) due
and payable that are being contested in accordance with
section 14.2(a);
(B) statutory Liens of landlords, carriers,
warehousemen, mechanics, materialmen and other similar liens
imposed by law, which are incurred in the ordinary course of
business for sums not more than thirty (30) days delinquent or
which are being contested in accordance with section 14.2(a),
provided that the aggregate amount of liabilities secured by
such Liens does not exceed $275,000 at any time;
(C) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or
to secure the performance of tenders, statutory obligations,
surety, stay, customs and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return
of money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(D) deposits, in an aggregate amount not to exceed
$550,000 at any time, made in the ordinary course of business
to secure liability to insurance carriers;
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(E) any attachment or judgment Lien not constituting
an Event of Default under section 16.1(i); and
(F) easements, rights of way, restrictions, and other
similar charges or encumbrances not interfering in any
material respect with the ordinary conduct of the business of
the Holding Company or any of its Subsidiaries;
(c) any Lien existing on the date hereof and referred to on
Exhibit 5.9 attached hereto;
(d) any Lien securing Funded Debt and/or Current Debt under
Capital Leases or consisting of purchase money loans permitted under
section 14.5(d) and any Lien upon or in any property at the time such
property is acquired by the Holding Company or any of its Subsidiaries,
including property of any Person which is to be acquired by the Holding
Company or any of its Subsidiaries and thereafter becomes a Subsidiary
of the Holding Company (if such Lien was not incurred in contemplation
of the acquisition of such property), provided that, in any such case,
(i) such Lien does not and shall not extend to or cover any other
property of the Holding Company or any of its Subsidiaries and (ii) the
Funded Debt and Current Debt secured thereby is permitted under section
14.5(d) and does not exceed the lower of the cost and the fair market
value of such property;
(e) any Lien securing Funded Debt and Current Debt to the
extent permitted under section 14.5(g); and
(f) Liens securing any Refinancing Debt to the extent
permitted under section 14.5(e).
14.10. Limitation on Transactions with Affiliates. The Holding Company
will not, and will not permit any of its Subsidiaries to, engage in any
transaction (including, without limitation, the purchase, sale or exchange of
any properties and assets or the rendering of any services or the payment of
compensation) with an Affiliate of the Holding Company or of any of its
Subsidiaries (excluding any transaction exclusively between or among the Holding
Company and/or any one or more Wholly- Owned Subsidiaries of the Holding
Company) on terms less favorable to the Holding Company or any such Subsidiary
in any material respect than would be obtainable at the time in comparable
transactions with a Person not such an Affiliate; provided that nothing in this
section 14.10 shall prohibit the payment of any amount permitted to be paid
under section 14.6.
14.11. Limitations on Investments and Derivative Transactions. The
Holding Company will not, and will not permit any of its Subsidiaries to,
directly
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or indirectly, (a) make or commit to make any Investments other than Permitted
Investments or (b) be or become liable (contingently or otherwise) in respect of
any Derivative Transactions other than Permitted Derivative Transactions.
14.12. Limitation on Issuance of Shares of Subsidiaries. The Holding
Company will not permit any of its Subsidiaries to (a) issue, sell or otherwise
dispose of any Shares (or any securities convertible into or exercisable or
exchangeable for Shares) of such Subsidiary except to the Holding Company or to
a Wholly-Owned Subsidiary of the Holding Company or (b) sell, transfer or
otherwise dispose of any Shares (or any securities convertible into or
exercisable or exchangeable for Shares) of any other Subsidiary of the Holding
Company except to the Holding Company or to a Wholly-Owned Subsidiary of the
Holding Company. The Holding Company will not, in any event, permit any
Subsidiary of the Holding Company to have outstanding any Preferred Shares.
14.13. Limitation on Subsidiary's Consolidation or Merger. The Holding
Company will not permit any of its Subsidiaries to consummate any merger or
consolidation with any other Person, provided that, if, both at the time of and
immediately after giving effect thereto, no Default or Event of Default shall
have occurred and be continuing, then any Subsidiary of the Holding Company may
consummate any merger or consolidation with any Wholly-Owned Subsidiary of the
Holding Company so long as, if any Securities shall remain outstanding following
the consummation of such merger or consolidation, (x) the surviving or resulting
corporation shall be a Wholly-Owned Subsidiary of the Holding Company and shall
have delivered to each holder of any Notes to remain outstanding a legal, valid,
binding and enforceable Subsidiary Guarantee and (y) the holders of any
Securities to remain outstanding shall have received such additional agreements,
documents and instruments (including, without limitation, opinions of counsel)
as the Required Holders of any class of Securities to remain outstanding may
reasonably request in connection therewith. No consolidation or merger permitted
by this section 14.13 shall have the effect of releasing any Person from any
liability or obligation under this Agreement or any of the other Operative
Documents.
14.14. Limitation on the Holding Company's Consolidation, Merger and
Sale. The Holding Company will not consolidate with or merge into any other
Person or transfer all or substantially all of its property in a single
transaction or series of transactions to any Person, provided that the foregoing
restriction does not apply to the consolidation or merger of the Holding Company
with or into, or the transfer of all or substantially all of its property in a
single transaction or series of transactions to, any other Person so long as:
(a) the successor formed by such consolidation or the survivor
of such merger or the Person that acquires as a result of such transfer
all or substantially all of the property of the Holding Company, as the
case may be (the "Successor Corporation"), shall be a Solvent
corporation
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organized and existing under the laws of the United States of America,
any state thereof or the District of Columbia, shall conduct
substantially all of its business and shall keep substantially all of
its assets in the United States of America and whose lines of business
are related to or not materially different from the Business;
(b) if the Holding Company is not the Successor Corporation,
the Successor Corporation shall have executed and delivered to each
holder of Notes its assumption of the due and punctual performance and
observance of each covenant and condition of this Agreement and each of
the other Operative Documents (pursuant to such agreements and
instruments as shall be reasonably satisfactory to the Required Holders
of the Notes), and the Holding Company shall have caused to be
delivered to each holder of Notes an opinion of independent counsel
reasonably satisfactory to the Required Holders of the Notes, to the
effect that all agreements or instruments effecting such assumption are
legal, valid and binding obligations of such Successor Corporation
enforceable against it in accordance with their respective terms and
covering such other matters as the Required Holders of the Notes may
reasonably request; and
(c) immediately after giving effect to such transaction (i) no
Default or Event of Default shall have occurred and be continuing, (ii)
the Consolidated Net Worth of the Successor Corporation shall not be
less than the Consolidated Net Worth of the Holding Company immediately
prior to such transaction and (iii) the Holding Company or the
Successor Corporation, as the case may be, would be able to incur at
least $1 of additional Funded Debt and/or Current Debt under section
14.5(g).
No such consolidation, merger or transfer shall have the effect of releasing the
Holding Company or any Successor Corporation that shall theretofore have become
such in the manner prescribed in this section 14.14 from its liability under
this Agreement or any of the other Operative Documents.
14.15. Limitation on Disposition of Property. The Holding Company will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
sell, lease or otherwise dispose of any of their respective properties and
assets (or any right, title or interest therein), whether real, personal or
mixed, tangible or intangible, including, without limitation, shares of capital
stock, securities or Indebtedness of any Subsidiaries of the Holding Company,
except for (a) sales of inventory in the ordinary course of business consistent
with prudent business practice (b) the Proposed Deflecta-Shield Division Sale,
(c) a transaction effected in accordance with section 14.14 and (d) other sales
by the Holding Company and its Subsidiaries of their respective properties and
assets if, in the case of this clause (d), on the date of such sale and after
giving effect thereto:
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(i) no Default or Event of Default shall have
occurred and be continuing;
(ii) in the case of any sale for $500,000 or more,
the board of directors of the Holding Company shall have
reasonably determined in good faith, as evidenced by written
resolutions thereof promptly delivered to the holders of the
Notes, that (A) the sale of such properties and assets is in
the best interests of the Holding Company and its Subsidiaries
and is not disadvantageous in any material respect to the
holders of the Notes and (B) such properties and assets are
being disposed of for fair and adequate cash consideration on
fair and adequate terms; and
(iii) the aggregate depreciated book value of all
properties and assets sold pursuant to this clause (d) during
any period of 12 consecutive months is not more than 5% of
Consolidated Tangible Assets as at the end of the then most
recently completed fiscal year of the Holding Company for
which audited financial statements have been delivered
pursuant to section 7(b).
14.16. [Intentionally Omitted.]
14.17. Modification of Certain Documents, Agreements and Instruments;
Fiscal Year.
(a) The Holding Company will not, and will not permit any of
its Subsidiaries to amend, supplement, modify or waive:
(i) any term of the Senior Loan Agreement or any
related agreements, documents or instruments (or the
agreements, documents and instruments relating to any
Refinancing Debt thereof) if the effect thereof is (A) to
increase the aggregate outstanding principal amount of the
Indebtedness thereunder to an amount in excess of that
permitted under section 14.5(b), (B) to make the scheduled
final maturity date of the Indebtedness thereunder earlier
than that specified under the Senior Loan Agreement as in
effect on the Auto Ventshade Closing Date, (C) to make the
Weighted Average Life to Maturity of the Indebtedness
thereunder less than that of the Indebtedness under the Senior
Loan Agreement as in effect on the Auto Ventshade Closing Date
or (D) to make the ranking of the Indebtedness thereunder
senior (as a result of any contractual or structural
subordination, the grant of any collateral security therefor,
any change in the Persons obligated with respect thereto or
otherwise) to the ranking of the
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Indebtedness under the Senior Loan Agreement as in effect on
the Auto Ventshade Closing Date;
(ii) any term of any other agreement, document or
instrument referred to in section 4.3 or of its Organizational
Documents if the effect thereof is, or could reasonably be
expected to be, materially adverse to the interests of any
holder of any of the Securities; or
(iii) any term of (A) any of the Excluded Outstanding
Options, (B) the Harvest Consulting Agreement or (C) the
Governance Agreement.
(b) The Holding Company will not and will not permit any of
its Subsidiaries to have a fiscal year which ends on any date other
than December 31 in each year.
14.18. Further Assurances. From time to time hereafter, the Holding
Company will execute and deliver, or will cause to be executed and delivered,
such additional agreements, documents and instruments and will take all such
other actions as any holder or holders of the Notes may reasonably request for
the purpose of implementing or effectuating the provisions of the Operative
Documents. Without limiting the generality of the foregoing, in the event that
the Holding Company at any time or from time to time shall organize or acquire
any Subsidiary (subject to the limitations set forth in section 14.19), then and
in each such case, not less than 25 days prior to consummating such transaction,
the Holding Company will notify each holder of the Notes and, at the time of the
organization or acquisition of such Subsidiary the Holding Company will, and
will cause each such additional Subsidiary to, execute and deliver a Subsidiary
Guarantee to each holder of the Notes.
14.19. Additional Subsidiaries. Notwithstanding anything to the
contrary set forth herein, without the prior written consent of the Required
Holders of the Notes, the Holding Company shall not, and shall not permit any of
its Subsidiaries to, organize or acquire any Subsidiary if the effect thereof is
or could reasonably be expected to be materially adverse to the interests of any
holder of any of the Notes.
15. Definitions.
15.1. Definitions of Capitalized Terms. The terms defined in this
section 15.1, whenever used in this Agreement, shall, unless the context
otherwise requires, have the following respective meanings:
"Acquisition Documents" shall mean collectively the Auto Ventshade
Acquisition Documents and the Smittybilt Acquisition Documents.
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"Acquisitions" shall mean the Auto Ventshade Acquisition and the
Smittybilt Acquisition.
"Affiliate" of any Person shall mean any other Person which, directly
or indirectly, through one or more intermediaries, controls or is controlled by
or is under common control with such first-mentioned Person, or any individual,
in the case of a Person who is an individual, who has a relationship by blood,
marriage or adoption to such first-mentioned Person not more remote than first
cousin, and, without limiting the generality of the foregoing, shall include (a)
any Person beneficially owning or holding, directly or indirectly, 5% or more of
any class of Voting Stock or other equity securities of such first-mentioned
Person, (b) any Person of which such first-mentioned Person owns or holds,
directly or indirectly, 5% or more of any class of Voting Stock or other equity
securities or (c) any director, officer or senior management employee (or other
individual having or performing substantially similar responsibilities) of such
first-mentioned Person; provided that in no event shall you or any other
institutional holder of Securities be deemed to be an Affiliate of the Holding
Company. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of Voting Stock or
other equity securities or by contract or otherwise.
"Applicable Premium" shall have the meaning specified in section 9.2.
"Asset Disposition" shall mean the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of properties
and assets of the Holding Company or any of its Subsidiaries other than (a)
sales of inventory in the ordinary course of business and (b) the sale or
disposition of the real estate located at 1800 N. 9th Street, Indianola, Iowa.
"Auto Ventshade Acquisition" shall mean the purchase of the Auto
Ventshade Acquisition Shares, the Auto Ventshade Merger and the consummation at
the Closing of the other transactions contemplated by the Auto Ventshade
Acquisition Documents.
"Auto Ventshade Acquisition Agreement" shall mean the Stock Purchase
Agreement dated as of December 11, 1998 by and among the Holding Company,
Ventshade Holdings, Inc., the Persons listed on Schedule A thereto and New
Holdings, Inc.
"Auto Ventshade Acquisition Documents" shall mean the Auto Ventshade
Acquisition Agreement and the other agreements, documents and instruments
executed in connection therewith.
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"Auto Ventshade Acquisition Shares" shall mean all of the issued and
outstanding Shares of Ventshade Holdings, Inc., all of which are purchased by
New Holdings, Inc. pursuant to the Auto Ventshade Acquisition Agreement.
"Auto Ventshade Business" shall mean the businesses and operations
acquired in the Auto Ventshade Acquisition.
"Auto Ventshade Closing" and "Auto Ventshade Closing Date" shall have
the respective meanings specified in section 3.
"Auto Ventshade Merger" shall mean the merger on the Auto Ventshade
Closing Date of New Holdings, Inc. with and into Ventshade Holdings, Inc., with
Ventshade Holdings, Inc. as the surviving corporation.
"Autotron" shall mean Belmor Autotron Corp., a Delaware corporation,
and any successor thereto.
"AVS" shall mean Auto Ventshade Company, a Delaware corporation, and
any successor thereto.
"Business" shall have the meaning specified in section 5.4.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day which shall be in Boston, Massachusetts, Cleveland, Ohio, Minneapolis,
Minnesota, or New York, New York, a legal holiday or a day on which banking
institutions therein are authorized by law to close.
"Capital Expenditures" of any Person shall mean, for any period, the
amount capitalized as capital expenditures for such period as property, plant
and equipment, (a) plus all deposits made in such period in connection with
property, plant and equipment (less deposits of a prior period included in
capital expenditures of such period), (b) less net proceeds of Asset
Dispositions included in capital expenditures for such period which the Holding
Company or any of its Subsidiaries are permitted to reinvest under subsection
1.5(c) of the Senior Loan Agreement, in each case determined in accordance with
GAAP and (c) less the net proceeds of the sale or disposition of the real estate
located at 1800 N. 9th Street, Indianola, Iowa and the fixed assets of the
Fibernetics division (in the Proposed Deflecta-Shield Division Sale) which are
reinvested pursuant to the requirements of the Senior Loan Agreement.
"Capital Lease" shall mean any lease or similar arrangement which is of
such a nature that payment obligations of the lessee or obligor thereunder are
required to be capitalized and shown as liabilities upon a balance sheet of such
lessee or obligor prepared in accordance with GAAP or for which the amount of
the asset and liability thereunder as if so capitalized should be disclosed in a
note to such balance sheet.
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"Change of Control" shall mean an event or series of events by or after
which:
(a) any Person (other than the MassMutual Group), together
with "affiliates" and "associates" of such Person, within the meaning
of Rule 12b-2 of the Commission under the Exchange Act, shall
beneficially own and/or control Shares of the Holding Company (and/or
securities convertible into or exchangeable or exercisable for such
Shares) having, in the aggregate, greater voting power and/or greater
economic interest in the Holding Company than the Shares of the Holding
Company (and such other securities) beneficially owned and controlled
by the Harvest Funds, in each case calculated, without duplication, on
a fully-diluted basis;
(b) the Harvest Funds shall cease to beneficially own and
control 50% or more of the shares of Holding Company Common Stock
beneficially owned and controlled by the Harvest Funds as of the Auto
Ventshade Closing Date or, if greater, as of the Smittybilt Closing
Date (in each case, calculated, without duplication, on a fully-diluted
basis and adjusted appropriately for stock splits, stock dividends and
combinations and the like);
(c) the Holding Company shall cease to beneficially own and
control all of the outstanding Shares of each Issuer of the Notes
(other than the Holding Company) and of each Guarantor;
(d) the Holding Company shall cease to have the right and
ability by voting power, contract or otherwise to elect or designate
for election a majority of the members of the board of directors of
each Issuer of the Notes (other than the Holding Company) and of each
Guarantor (except for any such Issuer or Guarantor merged, consolidated
or dissolved in accordance with section 14.13); or
(e) the Holding Company shall cease to have the right and
ability by voting power, contract or otherwise to direct or cause the
direction of the management and policies of each Issuer of the Notes
(other than the Holding Company) and of each Guarantor.
"Closing" shall mean either the Auto Ventshade Closing or the
Smittybilt Closing, as applicable.
"Closing Date" shall mean either the Auto Ventshade Closing Date or the
Smittybilt Closing, as applicable.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
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"Commission" shall mean the Securities and Exchange Commission or any
other federal agency from time to time administering the Securities Act and/or
the Exchange Act.
"Companies" shall mean the Holding Company, Deflecta, LII, Autotron,
DFM, AVS and, on and after the Smittybilt Closing, Smittybilt, each of which is
sometimes herein referred to as a "Company".
"Confidential Information" shall have the meaning specified in section
8(b).
"Consolidated EBITDA", "Consolidated Net Income", "Consolidated Net
Worth", "Consolidated Operating Cash Flow", "Consolidated Tangible Assets",
"Consolidated Total Debt" and "Consolidated Total Interest Coverage" shall mean
the EBITDA, Net Income, Net Worth, Operating Cash Flow, Tangible Assets, Total
Debt and Total Interest Coverage, as the case may be, of the Holding Company and
its Subsidiaries (whether or not ordinarily consolidated in consolidated
financial statements of the Holding Company and Subsidiaries), all consolidated
in accordance with GAAP, and after giving appropriate effect to outside minority
interests, if any, in Subsidiaries, provided that in determining Consolidated
EBITDA, Consolidated Net Income and Consolidated Operating Cash Flow there shall
be excluded (a) the Net Income of any Person (other than a Wholly-Owned
Subsidiary of the Holding Company) in which the Holding Company or any
Subsidiary of the Holding Company has an ownership interest, except to the
extent that any such Net Income has been actually received in cash by the
Holding Company or such Subsidiary in the form of dividends or similar
distributions, (b) any undistributed Net Income of a Subsidiary of the Holding
Company which for any reason is unavailable for distribution to the Holding
Company or any other Subsidiary of the Holding Company, (c) the Net Income of
any Person accrued prior to the date it becomes a Subsidiary of the Holding
Company or is merged into or consolidated with the Holding Company or a
Subsidiary of the Holding Company, (d) in the case of a successor to the Holding
Company by consolidation, merger or transfer of assets, the Net Income of such
successor accrued prior to such consolidation, merger or transfer, (e) any
deferred or other credit representing the excess of the equity in any Subsidiary
of the Holding Company at the date of acquisition thereof over the cost of the
investment in such Subsidiary and (f) any restoration to income of any
contingency reserve, except to the extent that provision for such reserve was
made out of income accrued during the same period.
"Current Debt" of any Person shall mean, at any date, (a) all
Indebtedness for borrowed money or in respect of Capital Leases or the deferred
purchase price of property, whether or not interest bearing, of such Person at
such date which would, in accordance with GAAP, be classified as short-term
Indebtedness at such date, but specifically excluding the current
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maturities of such Person's Funded Debt and (b) all Guarantees by such Person at
such date of Current Debt of others.
"Default" shall mean any condition or event which constitutes or, after
notice or lapse of time or both, would constitute an Event of Default.
"Deflecta" shall mean Deflecta-Shield Corporation, a Delaware
corporation, and any successor thereto.
"Derivative Transaction" shall mean (a) any rate, basis, commodity,
currency, debt or equity swap, (b) any cap, collar or floor agreement, (c) any
rate, basis, commodity, currency, debt or equity exchange or forward agreement,
(d) any rate, basis, commodity, currency, debt or equity option, (e) any other
similar agreement, (f) any option to enter into any of the foregoing, (g) any
master agreement or other agreement providing for any of the foregoing and (h)
any combination of any of the foregoing.
"DFM" shall mean DFM Corp., an Iowa corporation, and any successor
thereto.
"EBITDA" of any Person shall mean, for any period, the Net Income of
such Person for such period:
(a) plus (i) any provision for (or less any benefit from)
income and franchise taxes included in the determination of Net Income,
(ii) interest expense deducted in the determination of Net Income,
(iii) amortization and depreciation deducted in the determination of
Net Income, (iv) losses (or less gains) from Asset Dispositions or
other non-cash items included in the determination of Net Income, (v)
extraordinary losses (or less extraordinary gains), net of related tax
effects, in each case determined in accordance with GAAP, (vi) expenses
of the Related Transactions included in the determination of Net
Income, provided that such expenses were included in the Pro Forma or
disclosed in the notes thereto, and (vii) for any period ending on or
before December 31, 1999, losses attributable to the Fibernetics
division (in the Proposed Deflecta-Shield Division Sale) during the
period from January 1, 1999 through January 30, 1999; and
(b) less expenditures pursuant to the last sentence of
subsection 4.8 of the Senior Loan Agreement applicable to, but not
included in, the Pro Forma, including expenditures during the period
made in connection with the Related Transactions and payment of
liabilities existing on the Auto Ventshade Closing Date.
"Environmental Laws" shall mean any law, statute, rule, regulation or
other governmental standard or requirement relating or pertaining to (a) the
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generation, manufacture, management, handling, use, sale, transportation,
treatment, storage, disposal, delivery, discharge, release or emission of any
waste, pollutant or toxic, hazardous or other substance, or (b) any other act,
omission or condition affecting or involving the environment or air or water
pollution or soil or groundwater contamination
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations and rulings thereunder.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) that, together with any of the Companies, would be treated as a
single employer under section 4001(b) of ERISA, or that is a member of a group
of which any of the Companies is a member and that is a controlled group within
the meaning of section 4971(e)(2)(B) of the Code.
"Event of Default" shall have the meaning specified in section 16.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
"Excluded Outstanding Options" shall mean the options outstanding on
the Auto Ventshade Closing Date exercisable for an aggregate of 677,000 shares
of Holding Company Common Stock and listed on Exhibit 5.5(a) attached hereto.
"Executive Employment Agreements" shall mean the employment agreements,
each as in effect on the Auto Ventshade Closing Date, between (a) the Holding
Company and each of Ronald C. Fox, Kenneth L. Holbrook, James Jurinac and Dennis
W. Vollmershausen and (b) AVS and each of Asa Phillips, Jr., Stan Scarborough
and Richard A. Tucker.
"Fair Value" shall mean the fair value of the appropriate security,
property, asset, business or entity as determined by the board of directors of
the Holding Company, provided that if, within 15 days following receipt of the
writing setting forth any such determination of Fair Value by the board of
directors of the Holding Company, the Required Holders of the Warrants shall
notify the Holding Company of their its disagreement with such determination,
then Fair Value shall be determined by an independent appraiser of recognized
national standing (selected by the Holding Company and reasonably satisfactory
to the Required Holders of the Warrants and/or Warrant Shares). Each
determination of Fair Value shall be made in accordance with generally accepted
financial practice (but without any adjustment on account of any lack of
liquidity, lack of control and/or restriction on transferability of any
securities) and shall be set forth in writing, and the Holding Company shall,
immediately following such
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determination, deliver a copy thereof to each holder of Securities then
outstanding. The determination of any such independent appraiser so made shall
be conclusive and binding on the Holding Company and on all holder or holders of
the applicable class of Securities. The Companies shall pay all of the expenses
incurred in connection with any such determination, including, without
limitation, the expenses of the independent appraiser engaged to make such
determination. If the Holding Company shall not have engaged such appraiser
within 10 days after the occurrence of the event giving rise to the need
therefor, then such appraiser may be engaged by the Required Holders of the
Warrants (for purposes of any determination of Fair Value pursuant to section 4
of the Warrants). Notwithstanding the foregoing, in the case of any security (a)
issued pursuant to a registered public offering, then the Fair Value of such
security shall be the offering price to the public in such offering (including,
with respect to any Convertible Security (as defined in the Warrants), the
conversion price thereof, and any Purchase Right (as defined in the Warrants),
the exercise price thereof), (b) issued in connection with a private placement
for which an independent investment bank of recognized national standing is the
agent, then the Fair Value of such security shall be the sale price (including,
with respect to any Convertible Security, the conversion price thereof, and any
Purchase Right, the exercise price thereof) in such private placement, (c)
issued at a price (including, with respect to any Convertible Security, the
conversion price, and any Purchase Right, the exercise price thereof) which an
independent investment bank of recognized national or regional standing shall
have determined, as set forth in a fairness opinion of such investment bank in
customary form, to be fair, then the Fair Value of such security shall be such
price or (d) issued pursuant to the Management Stock Option Plan, the Fair Value
thereof shall be the fair market value thereof.
"Funded Debt" of any Person shall mean, at any date, (a) all
Indebtedness for borrowed money or in respect of Capital Leases or the deferred
purchase price of property, whether or not interest-bearing, of such Person
which would, in accordance with GAAP, be classified as long-term Indebtedness at
such date, but in any event including all such Indebtedness, whether secured or
unsecured, of such Person which matures (or which, pursuant to the terms of a
revolving credit agreement or otherwise, is directly or indirectly renewable or
extendible at the option of such Person for a period ending) more than one year
after the date of the creation thereof, notwithstanding the fact that payments
in respect thereof (whether installment, serial maturity or sinking fund
payments or otherwise) are required to be made by such Person not more than one
year after the date as of which the amount of Funded Debt is being determined,
other than any amount thereof which is at the time included in Current Debt of
such Person and (b) all Guarantees by such Person at such date of Funded Debt of
others.
"GAAP" shall mean generally accepted accounting principles as in effect
in the United States from time to time, consistently applied.
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"Guarantee" of any Person shall mean, at any date, any obligation of
such Person at such date guaranteeing, directly or indirectly, any Indebtedness,
liability or other obligation of any other Person in any manner, but in any
event including all endorsements (other than for collection or deposit in the
ordinary course of business), all discounts with recourse and all obligations
incurred through an agreement, contingent or otherwise (a) to purchase the
obligations of any other Person or any security therefor or to advance or supply
funds for the payment or purchase of such obligations, or (b) to purchase, sell
or lease (as lessee or lessor) property, products, materials or supplies or to
purchase or sell transportation or services, primarily for the purpose of
enabling the obligor to make payment of such obligations or to assure the owner
of such obligations against loss, regardless of the delivery or non-delivery of
the property, products, materials or supplies or the furnishing or nonfurnishing
of the transportation or services, or (c) to provide funds for the payment of,
or obligating such Person to make, any loan, advance, capital contribution or
other investment in the obligor for the purpose of assuring a minimum equity,
asset base, working capital or other balance sheet condition for any date or to
provide funds for the payment of any obligation, dividend or stock liquidation
payment, or otherwise to supply funds to or in any manner invest in the obligor.
The amount of any Guarantee shall be equal to the amount of all Indebtedness,
liabilities and other obligations directly or indirectly guaranteed thereby.
"Guarantors" shall mean each of the Subsidiaries of the Holding Company
(other than Deflecta, LII, Autotron, DFM, AVS and, on and after the Smittybilt
Closing, Smittybilt) whether existing at the time of the Auto Ventshade Closing
or thereafter organized or acquired. At the time of the Auto Ventshade Closing,
the Guarantors are: (a) Lund Acquisition Corp., (b) BAC Acquisition Co., (c)
Trailmaster Products, Inc., (d) Delta III, Inc. and (e) Ventshade Holdings, Inc.
"Harvest Consulting Agreement" shall mean the Services Agreement dated
September 9, 1997 among the Holding Company and Harvest Manager.
"Harvest Funds" shall mean LIH, LIH II and LIH III.
"Harvest Governance Agreement" shall mean that certain Second Amended
and Restated Governance Agreement dated as of December 23, 1998 among the
Holding Company and the Harvest Funds.
"Harvest Manager" shall mean Harvest Partners, Inc., a New York
corporation.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or
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shall be restricted, prohibited or penalized by any Environmental Law or any
other applicable law (including, without limitation, asbestos, urea formaldehyde
foam insulation and polychlorinated biphenyls).
"Holding Company" shall mean Lund International Holdings, Inc., a
Delaware corporation, and any successor thereto.
"Holding Company Class A Common Stock" shall mean Common Stock, $.10
par value, of the Holding Company as constituted on the Auto Ventshade Closing
Date, and any Shares into which such Common Stock shall have been changed or any
Shares resulting from any reclassification of such Common Stock.
"Holding Company Class B Common Stock" shall mean Class B Common Stock,
$.01 par value, of the Holding Company as constituted on the Auto Ventshade
Closing Date and any Shares into which such Class B Common Stock shall have been
changed or any Shares resulting from any reclassification of such Class B Common
Stock.
"Holding Company Common Stock" shall mean the Holding Company Class A
Common Stock and the Holding Company Class B Common Stock.
"IDRB" shall have the meaning specified in section 5.12.
"Indebtedness" of any Person shall mean, at any date, all indebtedness,
liabilities and other obligations of such Person at such date (other than items
of shareholders' equity) which would, in accordance with GAAP, be classified as
liabilities of such Person, but in any event including (without duplication):
(a) all Guarantees of such Person;
(b) all indebtedness, liabilities and other obligations
secured by any mortgage, lien, pledge, charge, security interest or
other encumbrance in respect of property owned by such Person, whether
or not such Person has assumed or become liable for the payment of such
obligations;
(c) all indebtedness, liabilities and other obligations of
such Person arising under any conditional sale or other title retention
agreement, whether or not the rights and remedies of the seller or
lender under such agreement in the event of default are limited to
repossession or sale of such property;
(d) the amount of the obligation required to be recorded by
the lessee in respect of any Capital Lease under which such Person is
lessee; and
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(e) all indebtedness, liabilities and other obligations
arising in connection with letters of credit, bankers acceptances or
other credit enhancement facilities.
"Indemnified Costs" and "Indemnitee" shall have the respective meanings
specified in section 21.
"Interest Expense" of any Person shall mean, for any period, all
interest expense, net of interest income, included in the determination of Net
Income for such period, less (a) amortization of capitalized fees and expenses
incurred with respect to the Related Transactions included in interest expense,
(b) interest paid in kind and included in interest expense and (c) amortization
of original issue discount included in interest expense, in each case determined
in accordance with GAAP.
"Investment" shall mean, with respect to any Person, any investment
made in any other Person by stock purchase, capital contribution, loan, advance,
acquisition of Indebtedness, Guarantee or otherwise, but excluding any capital
expenditure made in the ordinary course of business.
"Issuer" shall mean, with respect to any Security, the issuer of such
Security.
"Licenses" shall mean certificates of public convenience and necessity,
franchises, licenses and other permits and authorizations from governmental
authorities.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, lien (statutory or otherwise), preference, priority,
security interest, chattel mortgage or other charge or encumbrance of any kind,
or any other type of preferential arrangement, including, without limitation,
the lien or retained security title of a conditional vendor and any easement,
right of way or other encumbrance on title to real property and any lease having
substantially the same effect as any of the foregoing.
"LIH" shall mean LIH Holdings LLC, a Delaware limited liability
company, the sole managing member of which is an Affiliate of the Harvest
Manager.
"LIH II" shall mean LIH Holdings II LLC, a Delaware limited liability
company, the sole managing member of which is an Affiliate of the Harvest
Manager.
"LIH III" shall mean LIH Holdings III LLC, a Delaware limited liability
company, the sole managing member of which is an Affiliate of the Harvest
Manager.
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"LII" shall mean Lund Industries, Incorporated, a Minnesota
corporation, and any successor thereto.
"Management Stock Option Plan" shall have the meaning specified in
section 4.1.
"MassMutual Group" shall mean Massachusetts Mutual Life Insurance
Company, MassMutual Corporate Investors, MassMutual Participation Investors and
MassMutual Corporate Value Partners Limited and their respective successors and
assigns.
"Material Adverse Change" shall mean a material adverse change in or
effect upon (a) the condition (financial or otherwise), business, performance,
operations, properties or prospects of the Holding Company and its Subsidiaries
taken as one enterprise, (b) the legality, validity or enforceability of this
Agreement, the Securities or any of the other Operative Documents; (c) the
rights and remedies of any holder of Securities with respect thereto or (d) the
ability of any of the Companies or of the Holding Company and its Subsidiaries
taken as one enterprise to perform their obligations under any of the Operative
Documents and/or to comply with any of the terms thereof. In determining whether
any individual event would result in a Material Adverse Change, notwithstanding
that such event does not of itself have such effect, a Material Adverse Change
shall be deemed to have occurred if the cumulative effect of such event and all
other then existing events would result in a Material Adverse Change
"Multiemployer Plan" shall mean any Plan that is a "multiemployer plan"
as defined in section 4001(a)(3) of ERISA.
"Net Income" of any Person shall mean, for any period, the net income
(or net loss), of such Person for such period, determined in accordance with
GAAP.
"Net Worth" of any Person shall mean, at any date, the sum of (a) the
capital stock (excluding treasury stock and capital stock subscribed and
unissued) and (b) surplus (including retained earnings, additional paid-in
capital and the balance of the current profit and loss account not transferred
to surplus) of such Person at such date, determined in accordance with GAAP.
"Notes" shall have the meaning specified in section 1.
"Obligors" shall mean the Companies and the Guarantors.
"Officers' Certificate" shall mean a certificate signed on behalf of
the Holding Company and its Subsidiaries by the Chairman, President or one of
the Vice Presidents of the Holding Company and by the Treasurer or one of the
Assistant Treasurers of the Holding Company.
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"Old World" shall mean Old World Industries, Inc.
"Old World Consulting Agreement" shall mean the Consulting Agreement
dated March 31, 1997 by and between Old World Industries, Inc. and LIH II, as
amended, modified and supplemented from time to time.
"Operating Cash Flow" of any Person shall mean, for any period, the
EBITDA of such Person for such period, minus (a) Unfinanced Capital Expenditures
during such period and (b) Other Capitalized Costs during such period, in each
case determined in accordance with GAAP.
"Operative Documents" shall mean this Agreement, the Other Securities
Purchase Agreements, the Securities, the Rights Agreement and each of the other
agreements, documents and instruments executed in connection herewith and
therewith, each as it may from time to time be amended, modified or
supplemented.
"Organizational Documents" of any Person shall mean such Person's
charter and by-laws, partnership agreement, operating agreement, members
agreement, trust agreement, as applicable, and/or any other similar agreement,
document or instrument.
"Other Capitalized Costs" of any Person shall mean, for any period, the
gross amount capitalized for such period as long term assets of such Person (net
of cash received in respect of long term assets), other than (a) Capital
Expenditures and (b) fees and expenses capitalized with respect to the Related
Transactions, determined in accordance with GAAP.
"Other Securities Purchase Agreements" and "Other Purchasers" shall
have the respective meanings specified in section 1.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA or any successor thereto.
"Permitted Derivative Transaction" shall mean any Derivative
Transaction consisting of an interest rate swap, cap and/or collar agreement on
usual and customary terms entered into to hedge against (as opposed to speculate
in) fluctuations in interest rates.
"Permitted Investment" shall mean any of the following Investments:
(a) Investments, if any, existing on the date hereof and
referred to in Exhibit 5.9 attached hereto;
(b) Investments by the Holding Company or by any Subsidiary of
the Holding Company in any Wholly-Owned Subsidiary (or in any
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Person which simultaneously therewith becomes a Wholly-Owned
Subsidiary) made by stock purchase, capital contribution, loan or
advance, provided that (i) both at the time of and immediately after
giving effect to any such Investment, no Default or Event of Default
shall have occurred and be continuing, (ii) all such Investments are
made only in Solvent entities which (A) are organized and existing
under the laws of the United States of America, any state thereof or
the District of Columbia, (B) conduct substantially all of their
business and keep substantially all of their assets in the United
States of America and (C) are engaged in lines of business related to
or not materially different from the Business;
(c) readily marketable obligations (having a maturity not in
excess of 12 months from the date of acquisition thereof) of, or fully
and unconditionally guaranteed (as to both principal and interest) by,
the United States of America or an agency thereof;
(d) negotiable certificates of deposit evidencing direct
obligations of any federally insured commercial bank or trust company
organized and operating in the United States of America having capital
and surplus and undivided profits of at least $100,000,000 and having
the highest or second highest rating available from Moody's Investors
Service, Inc. or Standard & Poor's Corporation;
(e) shares of so-called "money market funds" registered under
the Investment Company Act of 1940, as amended, organized and operating
in the United States of America, having total net assets of
$1,000,000,000 or more and investing primarily in securities of the
character described in the preceding clauses (c) and (d) of this
definition;
(f) accounts receivable arising from transactions in the
ordinary course of business; contingent liabilities represented by
endorsements of negotiable instruments for collection or deposit in the
ordinary course of business; advances (including advances to
employees), deposits, down payments and prepayments on account of firm
purchase orders, in each case made in the ordinary course of business;
(g) additional Investments not otherwise permitted under this
definition, provided that both at the time of and immediately after
giving effect to any Investment made pursuant to this clause (g), (i)
no Default or Event of Default shall exist and (ii) the aggregate value
of all Investments made pursuant to this clause (g) shall not at any
time exceed $1,000,000, provided, further, that the "value" of any
Investment, for purposes of this clause (g), shall be the greater of
(A) the amount at which such Investment is shown on the books of the
Holding Company or any of its Subsidiaries (or zero, if such Investment
is not shown on any such books) and (B) either (1) in the case of any
Guarantee of the obligation of any
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Person, the amount which the Holding Company or any of its Subsidiaries
has paid on account of such obligation, less any recoupment by the
Holding Company or any such Subsidiary of any such payments or (2) in
the case of any other Investment, the excess of (x) th greater of (i)
the amount originally entered on the books of the Holding Company or
any of its Subsidiaries with respect thereto and (ii) the cost thereof
to the Holding Company or its Subsidiary, over (y) any return of
capital (after income taxes applicable thereto) upon such Investment
through the sale or other liquidation thereof or part thereof or
otherwise;
(h) Investments made in connection with any Permitted
Derivative Transaction;
(i) the Investment consisting of a promissory note for
$500,000 to be received in connection with the Proposed Deflecta-Shield
Division Sale; and
(j) Investments to be made for the purpose of the defeasance
of the IDRB.
"Person" shall mean an individual, a corporation, an association, a
joint-stock company, a business trust or other similar organization, a
partnership, a joint venture, a trust, an unincorporated organization or a
government or any agency, instrumentality or political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Holding Company or any ERISA
Affiliate or with respect to which the Holding Company or any ERISA Affiliate
may have any liability.
"Preferred Shares", as applied to shares of any Person, shall mean
shares of such Person which shall be entitled to preference or priority over any
other shares of such Person in respect of either the payment of dividends or the
distribution of assets upon liquidation.
"Pro Forma" shall mean the pro forma unaudited consolidated and
consolidating balance sheets of the Holding Company and its Subsidiaries
attached hereto as Exhibit 5.6(c).
"Pro Forma Consolidated Leverage Ratio" shall mean, as of the date of
determination thereof, the ratio of (a) Consolidated Total Debt outstanding on
such date (including all Funded Debt and Current Debt the incurrence of which
gives rise to the need for such determination) to (b) Consolidated EBITDA for
the period of four consecutive fiscal quarters of the Holding Company ending on,
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or most recently ended prior to, such date of determination (or, for purposes of
any determination of the Pro Forma Consolidated Leverage Ratio before the
expiration of 365 days following the Auto Ventshade Closing Date (or, if the
Smittybilt Closing occurs, the Smittybilt Closing Date), Consolidated EBITDA for
the period commencing on the Auto Ventshade Closing Date (or, if the Smittybilt
Closing occurs, the Smittybilt Closing Date) and ending on the last day of the
then most recently completed fiscal quarter of the Holding Company multiplied by
a fraction the numerator of which is 365 and the denominator of which is the
number of days in such period), in each case determined on a pro forma basis to
give effect as of the first day of such period to the incurrence of all Funded
Debt and Current Debt giving rise to the need for such determination and the
retirement of any Indebtedness which is concurrently being retired. For purposes
hereof, Interest Expenses (in the calculation of Consolidated EBITDA) which are
payable at a floating or variable rate shall be determined on the basis of the
rate in effect on the date as of which the Pro Forma Consolidated Leverage Ratio
is to be determined.
"Proposed Deflecta-Shield Division Sale" shall mean the proposed sale
of the Fibernetics division of Deflecta to current management of such division
upon the terms and conditions disclosed to you prior to the date hereof.
"Proprietary Rights" shall mean any patents, registered and common law
trademarks, service marks, trade names, copyrights, licenses and other similar
rights (including, without limitation, know-how, trade secrets and other
confidential information) and applications for each of the foregoing, if any.
"Refinancing Debt" and "Refinanced Debt" shall have the respective
meanings specified in section 14.5.
"Related Transactions" shall mean the Acquisitions, the issue and sale
of the Securities pursuant to this Agreement and the Other Securities Purchase
Agreements and the consummation of the other transactions contemplated hereby,
including the payment of all fees, costs and expenses associated with all of the
foregoing.
"Rental Obligations" of any Person shall mean, for any period, all
rents and other amounts (including as such, all payments which such Person is
obligated to make to the lessor on termination of any lease and/or on surrender
of the leased property other than payments for which such Person is contingently
liable on account of early termination or breach of such lease) paid, payable or
guaranteed during such period by such Person, as lessee or sublessee under any
lease, including, without limitation, any amount required to be paid by such
Person (whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes, utilities and similar charges,
determined in accordance with GAAP. Whenever it is necessary to determine the
amount of Rental Obligations for any period, to the extent that
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such Rental Obligations are not definitely determinable by the terms of the
lease, the Rental Obligations not so definitely determinable shall be estimated
in good faith and in such reasonable manner as the board of directors of the
Holding Company may determine (as evidenced by a certified resolution of such
board of directors promptly delivered to the holder or holders of the Notes).
"Required Holders" as applied to describe the requisite holder or
holders of any class of the Securities, shall mean, at any date, the holder or
holders of 66-2/3% or more in interest of such class of Securities at the time
outstanding (excluding all Securities at the time owned by any Company or any
Affiliate of any Company).
"Restricted Investment" shall mean any Investment other than a
Permitted Investment.
"Restricted Payment" as applied to any Person shall mean:
(a) any dividend or other distribution, direct or indirect, on
account of any Shares of such Person now or hereafter outstanding
(including, without limitation, Preferred Shares) or any securities
convertible into or exercisable or exchangeable for such Shares, except
(i) any such dividend or distribution payable to the Holding Company
and/or any Wholly-Owned Subsidiary of the Holding Company (which has
executed and delivered a valid and enforceable Subsidiary Guarantee to
each holder of any Notes) and (ii) a dividend payable to all of the
holders of Holding Company Common Stock then outstanding solely in
shares of Holding Company Common Stock;
(b) any redemption, retirement, purchase or other acquisition,
direct or indirect, of any Shares of such Person now or hereafter
outstanding (including, without limitation, Preferred Shares) or any
securities convertible into or exercisable or exchangeable for such
Shares; and
(c) any payment of any management, transaction, investment
banking or consulting fee or similar amount to any Affiliate of the
Holding Company, including, without limitation, any of the Harvest
Funds, the Harvest Manager, Old World or any Affiliate of any such
Person;
provided that, notwithstanding the foregoing, the term "Restricted Payment"
shall not include any dividend or other distribution paid on, or any redemption,
retirement, purchase or other acquisition of, any Warrants and/or Warrant
Shares.
"Rights Agreement" shall have the meaning specified in section 4.3.
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"Securities" shall mean the Notes, the Warrants and, unless the context
clearly requires otherwise, the Warrant Shares, each of which is a "Security".
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"Senior Lender Agent" shall mean Heller Financial, Inc. as agent for
the Senior Lenders, or any successor agent appointed in accordance with the
Senior Loan Agreement.
"Senior Lenders" shall mean the lenders from time to time under the
Senior Loan Agreement.
"Senior Loan Agreement" shall mean the Credit Agreement dated as of
February 27, 1998, as amended by Amendment Nos. 1 and 2 thereto, dated April 1,
1998 and the date hereof, respectively, among the Holding Company and its
Subsidiaries, the Senior Lenders and the Senior Lender Agent, as further
amended, modified and supplemented from time to time.
"Senior Loan Documents" shall mean the Senior Loan Agreement and the
other agreements, documents and instruments executed in connection therewith, as
amended, modified and supplemented from time to time.
"Series B Preferred Stock" shall have the meaning specified in section
12.
"Shares" of any Person shall include any and all Shares of capital
stock, partnership interests, limited liability company interests, membership
interests, or other Shares, interests, participations or other equivalents
(however designated and of any class) in the capital of, or other ownership
interests in, such Person, and, as applied to the Holding Company, includes the
shares of Holding Company Common Stock.
"Smittybilt" shall mean Smittybilt, Inc., a California corporation.
"Smittybilt Acquisition" shall mean the purchase of the Smittybilt
Acquisition Shares and the consummation of the other transactions contemplated
by the Smittybilt Acquisition Documents.
"Smittybilt Acquisition Agreement" shall mean the purchase agreement
pursuant to which the Holding Company acquires the Smittybilt Acquisition
Shares.
"Smittybilt Acquisition Documents" shall mean the Smittybilt
Acquisition Agreement and the other agreements, documents and instruments
executed in connection therewith.
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"Smittybilt Acquisition Shares" shall mean all of the issued and
outstanding Shares of Smittybilt, all of which are to be purchased by the
Holding Company pursuant to the Smittybilt Acquisition Agreement.
"Smittybilt Business" shall mean the businesses and operations acquired
in the Smittybilt Acquisition.
"Smittybilt Closing" and "Smittybilt Closing Date" shall have the
respective meanings specified in section 3.
"Solvent" as applied to any Person at any date shall mean that on and
as of such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (b) the present fair salable value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's property would constitute an unreasonably small capital. The
amount of contingent liabilities on and as of any date shall be computed as the
amount that, in the light of all the facts and circumstances existing on and as
of such date, represents the amount that can reasonably be expected to become an
actual or matured liability. For purposes of this definition, "Person" shall
mean, where so required by the context in which the term "Solvent" appears, such
Person and its Subsidiaries taken as a whole.
"Source" shall have the meaning specified in section 26.
"Subsidiary" of any Person at any date shall mean (a) any other Person
a majority (by number of votes) of the Voting Stock of which is owned by such
first-mentioned Person and/or by one or more other Subsidiaries of such
first-mentioned Person and (b) any other Person with respect to which such
first-mentioned Person and/or any one or more other Subsidiaries of such
first-mentioned Person (i) is entitled to more than 50% of such Person's profits
or losses or more than 50% of such Person's assets on liquidation or (ii) holds
an equity interest in such Person of more than 50%. As used herein, unless the
context clearly required otherwise, the term "Subsidiary" refers to a Subsidiary
of the Holding Company.
"Subsidiary Guarantee" shall have the meaning specified in section 1.
"Tangible Assets" of any Person shall mean, at any date, the Total
Assets of such Person at such date, less any amount included therein in respect
of any item properly classified as an intangible asset in accordance with GAAP.
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"Total Assets" of any Person shall mean, at any date, the depreciated
book value of all properties and assets of such Person (whether real, personal
or mixed and tangible or intangible) at such date, determined in accordance with
GAAP.
"Total Debt" of any Person shall mean, at any date, all Funded Debt and
Current Debt of such Person at such date.
"Total Interest Coverage" of any Person shall mean, for any period, the
ratio of Operating Cash Flow of such Person for such period to Interest Expenses
of such Person for such period.
"Trigger Date" shall have the meaning specified in section 12.
"Unfinanced Capital Expenditures" shall mean Capital Expenditures, less
the portion thereof financed under Capital Leases or other Indebtedness (other
than Indebtedness incurred under the revolving credit facility established
pursuant to the Senior Loan Agreement or any Refinancing Debt incurred in
respect thereof), determined in accordance with GAAP.
"Voting Stock", when used with reference to any Person, shall mean
Shares (however designated) of such Person having ordinary voting power for the
election of a majority of the members of the board of directors (or other
governing body) of such Person, other than Shares having such power only by
reason of the happening of a contingency.
"Warrant Shares" shall have the meaning specified in the Warrants.
"Warrants" shall have the meaning specified in section 1.
"Weighted Average Life to Maturity" of any Indebtedness or obligation
shall mean, at any date, the number of years obtained by dividing the then
Remaining Dollar-years of such Indebtedness or obligation by the then
outstanding principal amount of such Indebtedness or obligation. For purposes of
this definition, the "Remaining Dollar-years" of any Indebtedness or obligation
shall mean, at any date, the total of the products obtained by multiplying (a)
the amount of each then remaining installment, sinking fund, serial maturity or
other required payment, including payment at final maturity, in respect thereof,
by (b) the number of years (calculated to the nearest one-twelfth) which will
elapse between such date and the making of such payment.
"Wholly-Owned Subsidiary" shall mean any Subsidiary all of the
outstanding Shares of which, other than directors' qualifying Shares, shall at
the time be owned by the Holding Company and/or by one or more other
Wholly-Owned Subsidiaries and the accounts of which are consolidated with those
of the Holding Company in accordance with GAAP.
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"Withdrawal Liability" shall have the meaning given such term under
Part 1 of Subtitle E of Title IV of ERISA.
15.2. Other Definitions. The terms defined in this section 15.2,
whenever used in this Agreement, shall, unless the context otherwise requires,
have the respective meanings hereinafter specified.
"this Agreement" (and similar references to any of the other Operative
Documents) shall mean, and the words "herein" (and "therein"), "hereof" (and
"thereof"), "hereunder" (and "thereunder") and words of similar import shall
refer to, such instruments as they may from time to time be amended, modified or
supplemented.
"beneficial" ownership of any Shares or other securities by any Person
shall be determined in the manner set forth in Rule 13d-3 of the Commission
under the Exchange Act.
a "class" of Securities shall refer to the Notes, the Warrants and the
Warrant Shares, as the case may be, each of which is a separate class.
"corporation" shall include an association, joint stock company,
business trust or other similar organization.
"premium" when used in conjunction with references to principal of and
interest on the Notes, shall mean any amount due upon any payment or prepayment
of any of the Notes, other than principal and interest, and shall include the
Applicable Premium.
15.3. Accounting Terms and Principles; Laws.
(a) All accounting terms used herein which are not expressly
defined in this Agreement shall have the respective meanings given to
them in accordance with GAAP; all computations made pursuant to this
Agreement shall be made in accordance with GAAP and all financial
statements shall be prepared in accordance with GAAP.
(b) All references herein to laws, statutes, rules,
regulations and/or to other governmental restrictions, standards and/or
requirements shall, unless the context clearly requires otherwise, be
deemed to refer to those promulgated, issued and/or enforced by any
domestic or foreign federal, state or local government, governmental
agency, authority, court, instrumentality or regulatory body,
including, without limitation, those of the United States of America or
any state thereof or the District of Columbia.
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16. Remedies.
16.1. Events of Default Defined; Acceleration of Maturity. If any one
or more of the following events ("Events of Default") shall occur (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body), that is to say:
(a) if default shall be made in the due and punctual payment
of all or any part of the principal of, or premium (if any) on, any
Note when and as the same shall become due and payable, whether at the
stated maturity thereof, by notice of or demand for prepayment, or
otherwise;
(b) if default shall be made in the due and punctual payment
of any interest on any Note or any fee when and as the same shall
become due and payable and such default shall have continued for a
period of five Business Days;
(c) if default shall be made in the performance or observance
of any covenant, agreement or condition contained in sections 7(g),
8(a), 9.7, 14.2(b), 14.5 to 14.19, inclusive;
(d) if default shall be made in the performance or observance
of any other of the covenants, agreements or conditions contained in
this Agreement or any of the other Operative Documents and such default
shall have continued for a period of 30 days after the earlier to occur
of (i) the Holding Company's obtaining actual knowledge of such default
or (ii) the Holding Company's receipt of written notice of such
default;
(e) if the Holding Company or any Subsidiary of the Holding
Company shall make a general assignment for the benefit of creditors,
or shall generally not pay its debts as they become due, or shall admit
in writing its inability to pay its debts as they become due, or shall
file a voluntary petition in bankruptcy, or shall be adjudicated
bankrupt or insolvent, or shall file any petition or answer seeking for
itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future
statute, law or regulation, or shall file any answer admitting or not
contesting the material allegations of a petition filed against it in
any such proceeding, or shall seek or consent to or acquiesce in the
appointment of any trustee, custodian, receiver, liquidator or fiscal
agent for it or for all or any substantial part of its properties, or
shall (or its directors or stockholders shall) take any action looking
to its dissolution or liquidation;
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(f) if, within 45 days after the commencement of an action
against the Holding Company or any Subsidiary of the Holding Company
seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future
statute, law or regulation, such action shall not have been dismissed
or all orders or proceedings thereunder affecting the operations or the
business of the Holding Company or any Subsidiary of the Holding
Company stayed, or if the stay of any such order or proceeding shall
thereafter be set aside, or if, within 45 days after the appointment
without the consent or acquiescence of the Holding Company or any
Subsidiary of the Holding Company of any trustee, custodian, receiver,
liquidator or fiscal agent for the Holding Company or any Subsidiary of
the Holding Company or for all or any substantial part of their
respective properties, such appointment shall not have been vacated;
(g) if, under the provisions of any law for the relief or aid
of debtors, any court or governmental agency of competent jurisdiction
shall assume custody or control of the Holding Company or of any
Subsidiary of the Holding Company or of all or any substantial part of
their respective properties and such custody or control shall not be
terminated by the Holding Company or any of its Subsidiaries or stayed
within 45 days from the date of assumption of such custody or control;
(h) if the Holding Company or any Subsidiary of the Holding
Company shall fail to (i) make any payment due on any Indebtedness
(other than the Notes) or other obligation (including any in respect of
any performance bond, bid bond or lease or any Shares upon the exercise
by any Person of any put or call option or other similar right of
redemption or repurchase with regard to such Shares), if the aggregate
outstanding amount thereof (and of any other Indebtedness or other
obligation as to which the Holding Company or any Subsidiary of the
Holding Company is in default) exceeds $1,000,000 (or the equivalent
thereof, as of any date of determination, in any other currency), or
(ii) perform, observe or discharge any covenant, condition or
obligation in any agreement, document or instrument evidencing,
securing or relating to such Indebtedness or other obligation, if the
effect of any such failure of the character described in this clause
(ii) is to cause, or any other Person shall cause, any payment in
respect thereof in an aggregate amount of $1,000,000 (or the equivalent
thereof, as of any date of determination, in any other currency) or
more to become due and payable;
(i) if a final judgment or judgments for the payment of money
which, together with all other outstanding final judgments for the
payment of money against the Holding Company and/or any Subsidiary of
the Holding Company (excluding any judgment or judgments as to which a
financially sound and reputable insurance company (having the highest
or
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second highest rating available from A.M. Best Company or an equivalent
Person) has accepted full liability in writing), exceeds an aggregate
of $1,000,000 (or the equivalent thereof, as of any date of
determination, in any other currency) shall be rendered against the
Holding Company or any Subsidiary of the Holding Company which
judgments are not, within 30 days after entry thereof, discharged or
stayed pending appeal, or are not discharged within 30 days after the
expiration of such stay;
(j) if any representation or warranty made by or on behalf of
the Holding Company or any Subsidiary of the Holding Company in this
Agreement or in any of the other Operative Documents or in any
agreement, document or instrument delivered under or pursuant to any
provision hereof or thereof shall prove to have been false or incorrect
in any material respect on the date as of which made;
(k) if, at any time, this Agreement or any of the other
Operative Documents shall for any reason (other than the scheduled
termination thereof in accordance with its terms) expire, fail to be in
full force and effect or be disaffirmed, repudiated, cancelled,
terminated by the Holding Company or any of its Subsidiaries or
declared to be unenforceable, null and void; or
(l) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under section 412 of the Code, (ii) a notice of
intent to terminate any Plan shall have been or is reasonably expected
to be filed with the PBGC or the PBGC shall have instituted proceedings
under section 4042 of ERISA to terminate or appoint a trustee to
administer any Plan or the PBGC shall have notified the Holding Company
or any ERISA Affiliate that a Plan may become a subject of any such
proceedings, (iii) the aggregate "amount of unfunded benefit
liabilities" (within the meaning of section 4001(a)(18) of ERISA) under
all Plans, determined in accordance with Title IV of ERISA, shall
exceed $250,000 (or the equivalent thereof, as of any date of
determination, in any other currency), (iv) the Holding Company or any
ERISA Affiliate shall have incurred or is reasonably expected to incur
any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans,
(v) the Holding Company or any ERISA Affiliate withdraws from any
Multiemployer Plan, or (vi) the Holding Company or any Subsidiary of
the Holding Company establishes or amends any employee welfare benefit
plan that provides post-employment welfare benefits in a manner that
would increase the liability of the Holding Company or any Subsidiary
of the Holding Company thereunder; and any such event or events
described in clauses (i) through (vi) above, either individually or
together with any other such event or
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events, has resulted in, or could reasonably be expected to result in,
a liability in excess of $1,000,000;
then, upon the occurrence and during the continuance of any Event of Default
(other than one of the character described in clauses (e), (f) or (g) of this
section 16.1) and at the option of the Required Holders of the Notes, exercised
by written notice to the Companies (or to any of them), the principal of all
Notes shall forthwith become due and payable, together with interest accrued
thereon, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived, and the Companies shall forthwith upon any
such acceleration pay to the holder or holders of all the Notes then outstanding
(i) the entire principal of and interest accrued on the Notes and (ii) in
addition, to the extent permitted by applicable law, an amount equal to the
Applicable Premium, as liquidated damages and not as a penalty, that would be
due upon a prepayment of the Notes pursuant to section 9.2 on the date upon
which the Notes shall have been so accelerated; provided that, in the case of an
Event of Default of the character described in clauses (a) or (b) of this
section 16.1 and irrespective of whether all of the Notes have been declared due
and payable by the Required Holders of the Notes, any holder of Notes who or
which has not consented to any waiver with respect to such Event of Default may,
at the option of such holder, by written notice to the Companies (or to any of
them), declare all Notes then held by such holder to be, and such Notes shall
thereupon become, forthwith due and payable, together with interest accrued
thereon, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived, and the Companies shall forthwith upon any
such acceleration pay to such holder (i) the entire principal of and interest
accrued on such Notes, and (ii) in addition, to the extent permitted by
applicable law, an amount equal to the Applicable Premium, as liquidated damages
and not as a penalty, that would be due upon a prepayment of such Notes pursuant
to section 9.2 on the date upon which such Notes shall have been so accelerated;
provided, further, that, in the case of an Event of Default of the character
described in clauses (e), (f) or (g) of this section 16.1, the principal of all
Notes shall forthwith become due and payable, together with interest accrued
thereon (including any interest accruing after the commencement of any action or
proceeding under the federal bankruptcy laws, as now or hereafter constituted,
or any other applicable domestic or foreign federal or state bankruptcy,
insolvency or other similar law, and any other interest that would have accrued
but for the commencement of such proceeding, whether or not any such interest is
allowed as an enforceable claim in such proceeding), without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived, and the Companies shall forthwith upon any such acceleration pay to the
holder or holders of all the Notes then outstanding (i) the entire principal of
and interest accrued on the Notes, and (ii) in addition, to the extent permitted
by applicable law, an amount equal to the Applicable Premium, as liquidated
damages and not as a penalty, that would be due upon a prepayment of the Notes
pursuant to section 9.2 on the date upon which the Notes shall have been so
accelerated.
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Notwithstanding the foregoing provisions, at any time after the
occurrence of any Event of Default and of notice thereof, if any, by any holder
or holders of Notes and before any judgment, decree or order for payment of the
money due has been obtained by or on behalf of any holder or holders of the
Notes, the Required Holders of the Notes by written notice to the Companies (or
to any of them), may rescind and annul such Event of Default and/or notice of
such Event of Default and the consequences thereof with respect to all of the
Notes (including any Notes which were accelerated pursuant to the first proviso
in the preceding paragraph by any holder or holders on account of an Event of
Default of the character described in clause (a) or (b) of this section 16.1)
if:
(1) the Companies have paid a sum sufficient to pay
(A) all overdue interest on the Notes at the rate
specified in the Notes;
(B) the principal of (and premium, if any, on) any
Notes which have become due otherwise than by such Event of
Default or notice thereof and interest thereon at the rate
specified in the Notes; and
(C) interest on such overdue principal (and premium,
if any) and, to the extent that payment of such interest is
lawful, interest upon overdue interest, all at the rate for
overdue amounts specified in such Notes; and
(2) all Defaults and Events of Default, other than the
non-payment of amounts which have become due solely by such
acceleration, have been cured or waived as provided in section 19.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
16.2. Suits for Enforcement, etc. In case any one or more of the Events
of Default specified in section 16.1 shall have occurred and be continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under section 16.1, the holder of any Security may proceed to
protect and enforce its rights either by suit in equity or by action at law, or
both. Each Obligor stipulates that the remedies at law of the holder or holders
of the Securities in the event of any default by any Obligor in the performance
of or compliance with any covenant or agreement in this Agreement or any of the
other Operative Documents are not and will not be adequate and that, to the
fullest extent permitted by law, such terms may be specifically enforced by a
decree for the specific performance thereof, whether by an injunction against a
violation thereof or otherwise. Without limiting the generality
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of the foregoing (and without derogating from any provision contained in this
Agreement or any of the other Operative Documents), upon the occurrence and
during the continuance of an Event of Default, the Required Holders of the Notes
at the time outstanding shall, as a group, have the right to apply for and have
a receiver appointed for the Holding Company and its Subsidiaries, or any one or
more of them, by a court of competent jurisdiction in any action taken by any
such holders to enforce their respective rights and remedies hereunder and under
the other Operative Documents in order to manage, protect and preserve the
assets of the Holding Company and its Subsidiaries and continue the operation of
the business of the Holding Company and its Subsidiaries, or to sell or dispose
of the assets of the Holding Company and its Subsidiaries, and to collect all
revenues and profits thereof and apply the same to the payment of all expenses
and other charges of such receivership, including the compensation of the
receiver, and each Obligor hereby consents to such appointment without regard to
the presence or absence of any misfeasance or malfeasance or any other fact or
circumstance which otherwise would provide a defense to such appointment.
16.3. No Election of Remedies. No remedy conferred in this Agreement or
in any of the other Operative Documents upon the holder of any Security is
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or thereunder or now or hereafter existing at law or in equity or by
statute or otherwise.
16.4. Remedies Not Waived. No course of dealing between any Obligor, on
the one hand, and any holder of any Security, on the other hand, and no delay by
any such holder in exercising any rights hereunder or under any of the other
Operative Documents shall operate as a waiver of any rights of any such holder.
16.5. Application of Payments. In case any one or more of the Events of
Default specified in section 16.1 shall have occurred, all amounts to be applied
to the prepayment or payment of any Notes, shall be applied, after the payment
of all related costs and expenses incurred by the holders of the Notes
(including, without limitation, compensation to any and all trustees,
liquidators, receivers or similar officials and reasonable fees, expenses and
disbursements of counsel) in such order of priority as is determined by the
Required Holders of the Notes.
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17. Registration, Transfer and Exchange of Securities.
(a) Securities issued hereunder shall be issued in registered
form. The Holding Company shall keep at its principal executive office
(which at Closing shall be located at the address set forth at the
beginning of this Agreement) registers in which the Issuer(s) of the
Securities shall provide for the registration and transfer of the
Securities. The name and address of each holder of the Securities shall
be registered in such registers. The Issuer(s) shall give to any
institutional holder of any Security promptly (but in any event within
10 days) following request therefor, a complete and correct copy of the
names and addresses of all registered holders of the Securities and the
amount and kind of Securities held by each. Whenever any Security or
Securities shall be surrendered for transfer or exchange, the Issuer(s)
of the Securities at its (or their) expense will execute and deliver in
exchange therefor a new Security or Securities (in such denominations
and registered in such name or names as may be requested by the holder
of the surrendered Security or Securities), in the same aggregate
unpaid principal amount (in the case of the Notes) or the same
aggregate number of shares (in the case of the Warrant Shares), as
applicable, as that of the Security or Securities so surrendered and,
in the case of the Notes, dated so as not to result in any loss of
interest. The Issuer(s) may treat the Person in whose name any Security
is registered as the owner of such Security for all purposes.
(b) Each holder of any Securities agrees by its acceptance
thereof not to transfer any Securities if, after giving effect to such
transfer, there are more than five unaffiliated holders of the
Securities.
18. Replacement of Securities. Upon receipt by the Issuer(s) of such
Security of reasonably satisfactory evidence of the loss, theft, destruction or
mutilation of any Security and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnity, and (in the case of mutilation) upon
surrender of such Security, the Issuer(s) of such Security, at its (or their)
expense will execute and deliver in lieu of such Security a new Security of like
tenor and, in the case of any new Note, dated so as not to result in any loss of
interest. Your unsecured agreement to indemnify and/or affidavit and that of any
other institutional holder shall constitute satisfactory indemnity and/or
satisfactory evidence of loss, theft or destruction for the purpose of this
section 18.
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19. Amendment and Waiver.
(a) Any term of this Agreement and, unless explicitly provided
otherwise therein, of any of the other Operative Documents may, with
the consent of the Companies, be amended, or compliance therewith may
be waived, in writing only, by the Required Holders of each class of
Securities entitled to the benefits of such term, provided that (i)
without the consent of the holders of all of the Notes at the time
outstanding, no such amendment or waiver shall (A) change the amount of
the principal of or any rate of interest on or premium payable with
respect to any of the Notes or change the payment terms of any of the
Notes, or, except as provided in the Notes, subordinate the obligation
of the Obligors to pay any amount due on the Notes to any other
obligation, or (B) change the percentage of holders of Notes required
to approve any such amendment, effectuate any such waiver or accelerate
payment of the Notes; (ii) without the consent of the holders of all of
the Warrants and Warrant Shares at the time outstanding, no such
amendment or waiver shall change the percentage of holders of the
Warrants and Warrant Shares required to approve any such amendment or
effect any such waiver; and (iii) no such amendment or waiver shall
extend to or affect any obligation not expressly amended or waived or
impair any right consequent thereon. Executed or true and correct
copies of any amendment, waiver or consent effected pursuant to this
section 19 shall be delivered by the Companies to each holder of
Securities forthwith (but in any event not later than five days)
following the effective date thereof.
(b) The Companies will not, directly or indirectly, request or
negotiate for, or offer or pay any remuneration or grant any security
as an inducement for, any proposed amendment or waiver of any of the
provisions of this Agreement or any of the other Operative Documents
unless each holder of the Securities (irrespective of the kind and
amount of Securities then owned by it) shall be informed thereof by the
Companies and, if such holder is entitled to the benefit of any such
provision proposed to be amended or waived, shall be afforded the
opportunity of considering the same, shall be supplied by the Companies
with sufficient information to enable it to make an informed decision
with respect thereto and shall be offered and paid such remuneration
and granted such security on the same terms.
(c) In determining whether the requisite holders of Securities
have given any authorization, consent or waiver under this section 19,
any Securities owned by the Companies or any of their Affiliates shall
be disregarded and deemed not to be outstanding.
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20. Method of Payment of Securities. Irrespective of any provision hereof
or of the other Operative Documents to the contrary, so long as you (or your
nominee) or any other institutional holder shall hold any Security, the
Companies will make all payments thereon to you or such other institutional
holder by the method and at the address for such purpose specified in Schedule I
attached hereto or by such other method or at such other address as you or such
institutional holder may designate in writing, without requiring any
presentation or surrender of such Security, except that if any Security shall be
paid, prepaid and/or repurchased in full, such Security shall be surrendered to
the Issuer(s) thereof promptly following such payment, prepayment or repurchase
and cancelled.
21. Expenses; Indemnity. Whether or not the transactions contemplated by
any of the Operative Documents shall be consummated, the Companies will pay or
cause to be paid (or reimbursed, as the case may be) and will defend, indemnify
and hold you (and each other holder of any of the Securities) and each of your
(and such other holder's) directors, officers, employees, agents, advisors and
Affiliates (each, an "Indemnitee") harmless in respect of all costs, losses,
expenses (including, without limitation, the reasonable fees, costs, expenses
and disbursements of counsel) and damages (collectively, "Indemnified Costs")
incurred by or asserted against any Indemnitee in connection with the
negotiation, execution, delivery, performance and/or enforcement of this
Agreement or any of the other Operative Documents (including, without
limitation, so-called work-outs and/or restructurings and all amendments,
waivers and consents hereunder and thereunder, whether or not effected) and/or
the consummation of the transactions contemplated hereby and thereby or which
may otherwise be related in any way to this Agreement or any other Operative
Documents or such transactions or such Indemnitee's relationship to the
Companies or any of their Affiliates or any of their respective properties and
assets, including, without limitation, any and all Indemnified Costs related in
any way to the requirements of any Environmental Laws (as the same may be
amended, modified or supplemented from time to time) or to any environmental
investigation, assessment, site monitoring, containment, clean up, remediation,
removal, restoration, reporting and sampling, whether or not consented to, or
requested or approved by, any Indemnitee, and whether or not such Indemnified
Cost is attributable to an event or condition originating from any properties or
assets of the Companies or any of their respective Subsidiaries or any other
properties now, previously or hereafter owned, leased, occupied or operated by
the Companies or any of their respective Subsidiaries. Notwithstanding the
foregoing, the Companies shall not have any obligation to an Indemnitee under
this section 21 with respect to any Indemnified Cost which is finally determined
by a court of competent jurisdiction to have arisen solely and directly as a
result of the willful misconduct or bad faith of such Indemnitee.
22. Taxes. The Companies will pay all taxes and fees (including interest
and penalties), including, without limitation, all recording and filing fees,
issuance
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and documentary stamp and similar taxes, which may be payable in respect of the
execution and delivery of this Agreement and each of the other Operative
Documents.
23. Communications. All communications provided for herein and, unless
explicitly provided otherwise therein, in any of the other Operative Documents
shall be in writing and sent (a) by telecopy if the sender on the same day sends
a confirming copy of such communication by a recognized overnight delivery
service (charges prepaid), (b) by a recognized overnight delivery service
(charges prepaid), or (c) by messenger. Any such communication must be sent (i)
if to the Companies or any of their respective Subsidiaries (or any of them), to
such Person at:
c/o Harvest Partners, Inc.
280 Park Avenue, 33rd floor
New York, New York 10017
Attention: Ira D. Kleinman
Telecopy: (212) 812-0100
with a copy (which shall not constitute notice) to:
Thelen Reid & Priest LLP
40 West 57th Street
New York, New York 10019-4097
Attention: Steven L. Wasserman, Esq.
Telecopy No.: (212) 603-2001
or at such other address (or telecopy number) as may be furnished in writing by
the Companies to each holder of any Security and (ii) if to you, at your address
for such purpose set forth in Schedule I attached hereto, with a copy (which
shall not constitute notice) to:
Choate, Hall & Stewart
Exchange Place
53 State Street,
Boston, Massachusetts 02109
Attention: Frank B. Porter, Jr., Esq.
Telecopy No.: (617) 248-4000
and if to any other holder of any Security, at the address of such holder as it
appears on the applicable register maintained pursuant to section 17, or at such
other address as may be furnished in writing by you or by any other holder to
the Companies. Communications under this section 23 shall be deemed given only
when actually received.
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24. Survival of Agreements, Representations and Warranties, etc. All
agreements, representations and warranties contained herein and in the other
Operative Documents shall be deemed to have been relied upon by you and shall
survive the execution and delivery of this Agreement and each of the other
Operative Documents, the issue, sale and delivery of the Securities and payment
therefor and any disposition of the Securities by you, whether or not any
investigation at any time is made by you or on your behalf. All indemnification
provisions, including, without limitation, those contained in sections 21 and
22, shall survive the date upon which none of the Securities shall be
outstanding and the termination of this Agreement and each of the other
Operative Documents.
25. Successors and Assigns; Rights of Other Holders. This Agreement and,
unless explicitly provided otherwise therein, each of the other Operative
Documents shall bind and inure to the benefit of and be enforceable by the
Companies and you, successors to the Companies and your successors and assigns,
and, in addition, shall inure to the benefit of and be enforceable by each
holder from time to time of any Securities who, upon acceptance thereof, shall,
without further action, be entitled to enforce the applicable provisions and
enjoy the applicable benefits hereof and thereof. No Company may assign any of
its rights or obligations under any of the Operative Documents to which it is a
party without the written consent of all of the holders of the Securities then
outstanding.
26. Purchase for Investment; ERISA.
(a) You represent and warrant (i) that you have been furnished
with all information that you have requested for the purpose of
evaluating your proposed acquisition of the Securities to be issued to
you pursuant hereto, (ii) that you will acquire such Securities for
your own account for investment and not for distribution in any manner
that would violate applicable securities laws, but without prejudice to
your rights to dispose of such Securities or a portion thereof to a
transferee or transferees, in accordance with such laws and the Rights
Agreement, if applicable, if at some future time you deem it advisable
to do so and (iii) that you are an "accredited investor", as defined in
Regulation D of the Commission under the Securities Act. The
acquisition of such Securities by you at a Closing shall constitute
your confirmation of the foregoing representations and warranties with
respect to the Securities acquired by you at such Closing. You
understand that such Securities are being sold to you in a transaction
which is exempt from the registration requirements of the Securities
Act, and that, in making the representations and warranties contained
in section 5.16, the Companies are relying, to the extent applicable,
upon your representations and warranties contained herein.
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(b) You represent that at least one of the following
statements is an accurate representation as to each source of funds (a
"Source") to be used by you to pay the purchase price of the Securities
to be purchased by you hereunder:
(i) the Source is an "insurance company general
account" as defined in Section V(e) of Prohibited Transaction
Exemption ("PTE") 95-60 (issued July 12, 1995) and, except as
you have disclosed to the Companies in writing pursuant to
this section (i), the amount of reserves and liabilities for
the general account contract(s) held by or on behalf of any
employee benefit plan or group of plans maintained by the same
employer or employee organization do not exceed 10% of the
total reserves and liabilities of the general account
(exclusive of separate account liabilities) plus surplus as
set forth in the NAIC Annual Statement filed with the state of
domicile of the insurer; or
(ii) the Source is a separate account of an insurance
company maintained by you in which an employee benefit plan
(or its related trust) has an interest, which separate account
is maintained solely in connection with your fixed contractual
obligations under which the amounts payable, or credited, to
such plan and to any participant or beneficiary of such plan
(including any annuitant) are not affected in any manner by
the investment performance of the separate account; or
(iii) the Source is either (A) an insurance company
pooled separate account, within the meaning of PTE 90-1
(issued January 29, 1990), or (B) a bank collective investment
fund, within the meaning of the PTE 91-38 (issued July 12,
1991) and, except as you have disclosed to the Companies in
writing pursuant to this section (iii), no employee benefit
plan or group of plans maintained by the same employer or
employee organization beneficially owns more than 10% of all
assets allocated to such pooled separate account or collective
investment fund; or
(iv) the Source constitutes assets of an "investment
fund" (within the meaning of Part V of the QPAM Exemption)
managed by a "qualified professional asset manager" or "QPAM"
(within the meaning of Part V of the QPAM Exemption), no
employee benefit plan's assets that are included in such
investment fund, when combined with the assets of all other
employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section
V(c)(1) of the QPAM Exemption) of such employer or by the same
employee organization and managed by such QPAM, exceed 20% of
the total client assets managed by such QPAM, the conditions
of Part I(c) and (g) of the
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QPAM Exemption are satisfied, neither the QPAM nor a person
controlling or controlled by the QPAM (applying the definition
of "control" in Section V(e) of the QPAM Exemption) owns a 5%
or more interest in the Companies and (A) the identity of such
QPAM and (B) the names of all employee benefit plans whose
assets are included in such investment fund have been
disclosed to the Companies in writing pursuant to this section
(iv); or
(v) the Source is a governmental plan; or
(vi) the Source is one or more employee benefit
plans, or a separate account or trust fund comprised of one or
more employee benefit plans, each of which has been identified
to the Companies in writing pursuant to this section (vi); or
(vii) the Source does not include assets of any
employee benefit plan, other than a plan exempt from the
coverage of ERISA.
As used in this section 26(b), the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall
have the respective meanings assigned to such terms in Section 3 of
ERISA, and the term "QPAM Exemption" means PTE 84-14 (issued March 13,
1984).
27. Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement and,
unless explicitly provided otherwise therein, each of the other Operative
Documents, including the validity hereof and thereof and the rights and
obligations of the parties hereunder and thereunder, and all amendments and
supplements hereof and thereof and all waivers and consents hereunder and
thereunder, shall be construed in accordance with and governed by the domestic
substantive laws of the State of New York without giving effect to any choice of
law or conflicts of law provision or rule that would cause the application of
the domestic substantive laws of any other jurisdiction. Each of the Companies,
to the extent that it may lawfully do so, hereby consents to service of process,
and to be sued, in the State of New York and consents to the jurisdiction of the
courts of the State of New York and the United States District Court for the
Southern District of New York, as well as to the jurisdiction of all courts to
which an appeal may be taken from such courts, for the purpose of any suit,
action or other proceeding arising out of any of its obligations hereunder or
thereunder or with respect to the transactions contemplated hereby or thereby,
and expressly waives any and all objections it may have as to venue in any such
courts. Each of the Companies further agrees that a summons and complaint
commencing an action or proceeding in any of such courts shall be properly
served and shall confer personal jurisdiction if served personally or by
certified mail to it at its address referred to in section 23 or as otherwise
provided under the laws of the State of New York. Notwithstanding the foregoing,
each of the Companies
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agrees that nothing contained in this section 27 shall preclude the institution
of any such suit, action or other proceeding in any jurisdiction other than the
State of New York. EACH OF THE COMPANIES IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL
BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING INSTITUTED BY OR AGAINST IT IN
RESPECT OF ITS OBLIGATIONS HEREUNDER OR THEREUNDER OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
28. Miscellaneous. The headings in this Agreement and in each of the other
Operative Documents are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof or thereof. This Agreement (together with
the other Operative Documents) embodies the entire agreement and understanding
among you and the Companies and supersedes all prior agreements and
understandings relating to the subject matter hereof. Each covenant contained
herein and in each of the other Operative Documents shall be construed (absent
an express provision to the contrary) as being independent of each other
covenant contained herein and therein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. If any provision in this Agreement or in any
of the other Operative Documents refers to any action taken or to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable, whether such action is taken directly or indirectly by such
Person. In case any provision in this Agreement or any of the other Operative
Documents shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. This Agreement and, unless explicitly provided otherwise
therein, each of the other Operative Documents, may be executed in any number of
counterparts and by the parties hereto or thereto, as the case may be, on
separate counterparts but all such counterparts shall together constitute but
one and the same instrument.
29. Certain Limitations. Notwithstanding anything to the contrary contained
in this Agreement or in any of the other Operative Documents, none of the
Obligors will be required to pay, and none of the holders of any of the Notes
shall be permitted to collect, any amount of interest on any of the Notes in
excess of the maximum amount of interest permitted by applicable law ("Excess
Interest"). If any Excess Interest is provided for or determined by a court of
competent jurisdiction to have been provided for in this Agreement or in any of
the other Operative Documents, then in such event (a) the provisions of this
section 29 shall govern and control, (b) no Person shall be obligated to pay any
Excess Interest, (c) any Excess Interest that any holder of any Note may have
received shall be, at the option of such holder, (i) applied as a credit against
the outstanding principal amount of such Note or accrued and unpaid interest
(not to exceed the maximum amount permitted by law), (ii) refunded to the payor
thereof or (iii) any combination of the foregoing, (d) the interest rate(s)
provided for in this Agreement and in the other Operative Documents shall be
automatically
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reduced to the maximum lawful rate allowed from time to time under applicable
law (the "Maximum Rate"), and this Agreement and/or each of the other Operative
Documents, as applicable, shall be deemed to have been and shall be, reformed
and modified to reflect such reduction, and (e) none of the Obligors shall have
any action against any holder of any of the Notes arising out of the payment or
collection of any Excess Interest. Notwithstanding the foregoing, if, for any
time period, interest on any of the Notes (or any other obligation under this
Agreement or any of the other Operative Documents) is calculated at the Maximum
Rate rather than the applicable rate under this Agreement or any of the other
Operative Documents, and thereafter such applicable rate becomes less than the
Maximum Rate, the rate of interest payable on such obligations shall remain at
the Maximum Rate until each payee shall have received the amount of interest
which such payee would have received during such period on such obligations had
the rate of interest not been limited to the Maximum Rate during such period.
30. Rule 144A. The Companies will take, or will cause to be taken, such
action as any holder of Securities may reasonably request from time to time to
facilitate any sale or disposition by any such holder of any Securities without
registration under the Securities Act and/or any applicable securities laws
within the limitation of the exemptions provided by any rule or regulation
thereunder, including, without limitation, Rule 144A under the Securities Act.
31. Regulatory Compliance Cooperation.
31.1. Exchange for Nonvoting Shares. In the event that any Regulated
Investor determines that it has a Regulatory Problem, the Companies shall use
reasonable efforts to take such actions as are reasonably requested by such
Regulated Investor in order (a) to effectuate and facilitate any transfer by
such Regulated Investor of any Securities then held by such Regulated Investor
to any Person designated by such Regulated Investor, and (b) to permit such
Regulated Investor (or any Affiliate of such Regulated Investor) to exchange all
or any portion of any voting Shares of the Holding Company then held by such
Person on a share-for-share basis for non-voting Shares of the Holding Company,
which shall be identical in all respects to such voting Shares, except that such
new Shares shall be nonvoting and shall be convertible into voting Shares on
such terms as are reasonably requested by such Regulated Investor in light of
regulatory considerations then prevailing. Such actions may include, but shall
not necessarily be limited to:
(i) entering into such additional agreements as are requested
by such Regulated Investor to permit any Person designated by such
Regulated Investor to exercise any voting power which is relinquished
by such Regulated Investor upon any exchange of voting Shares for
nonvoting Shares of the Holding Company; and
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<PAGE>
(ii) entering into such additional agreements, adopting such
amendments to the Organizational Documents of the Holding Company and
taking such additional actions as are reasonably requested by such
Regulated Investor in order to effectuate the intent of the foregoing.
31.2. Future Securities Issuances. In the event that at any time a
Regulated Investor has the right to acquire any securities of the Holding
Company (as the result of a preemptive offer, pro rata offer or otherwise), at
such Regulated Investor's request the Holding Company will offer to sell to such
Regulated Investor non-voting securities on the same terms as would have existed
had such Regulated Investor acquired the securities so offered and immediately
requested their exchange for non-voting securities pursuant to section 31.1. The
Holding Company shall grant to any subsequent holder of Securities originally
acquired from any Regulated Investor, upon such Person's request, the same
rights granted to the Regulated Investors pursuant to this section 31.
31.3. Certain Definitions. As used in this section 31, the following
terms have the following respective meanings:
"Regulated Investor" means National City Venture Corporation and any
other holder of Securities subject to regulation by a Regulatory Agency.
"Regulatory Agency" means the U.S. Small Business Administration (or
any successor body or agency), the board of Governors of the Federal Reserve
System (or any successor body or agency) or any other governmental body or
agency charged with the administration of the Small Business Investment Act of
1958, the Bank Holding Company Act of 1956 or any similar, related or successor
laws regulating banks, bank holding companies, insurance companies, insurance
holding companies, SBICs and their respective subsidiaries.
"Regulatory Problem" means the assertion by any Regulatory Agency (or
the reasonable belief by a Regulated Investor that a substantial risk of such
assertion exists) that a Regulated Investor is not entitled to hold, or exercise
any significant right with respect to, any of the Securities.
[The remainder of this page is intentionally left blank.]
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<PAGE>
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterparts of this Agreement, whereupon it shall
become a binding agreement under seal among you and the Companies. Please then
return one of such counterparts to the Companies.
Very truly yours,
LUND INTERNATIONAL HOLDINGS, INC.
By /s/ Ira D. Kleinman
Chairman of the Board
DEFLECTA-SHIELD CORPORATION
By /s/ Ira D. Kleinman
Chairman of the Board
LUND INDUSTRIES, INCORPORATED
By /s/ Ira D. Kleinman
Chairman of the Board
BELMOR AUTOTRON CORP.
By /s/ Ira D. Kleinman
Chairman of the Board
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<PAGE>
DFM CORP.
By /s/ Ira D. Kleinman
Chairman of the Board
AUTO VENTSHADE COMPANY
By /s/ Ira D. Kleinman
Chairman of the Board
The foregoing Agreement is hereby
agreed to as of the date thereof.
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By /s/ Michael L. Klofas
Managing Director
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<PAGE>
DFM CORP.
By /s/ Ira D. Kleinman
Chairman of the Board
AUTO VENTSHADE COMPANY
By /s/ Ira D. Kleinman
Chairman of the Board
The foregoing Agreement is hereby
agreed to as of the date thereof.
MASSMUTUAL CORPORATE INVESTORS
By /s/ Michael L. Klofas
Vice President
The foregoing is executed on behalf of MassMutual
Corporate Investors, organized under a Declaration of
Trust, dated September 13, 1985, as amended from
<PAGE>
time to time. The obligations of such Trust are
not personally binding upon, nor shall resort
be had to the property of, any of the Trustees,
shareholders, officers, employees or agents of
such Trust, but the Trust's property only shall
be bound.
<PAGE>
DFM CORP.
By /s/ Ira D. Kleinman
Chairman of the Board
AUTO VENTSHADE COMPANY
By /s/ Ira D. Kleinman
Chairman of the Board
The foregoing Agreement is hereby
agreed to as of the date thereof.
MASSMUTUAL PARTICIPATION INVESTORS
By /s/ Michael L. Klofas
Vice President
The foregoing is executed on behalf of MassMutual
Participation Investors, organized under a Declaration
of Trust, dated April 7, 1988, as amended from time
to time. The obligations of such Trust are not
personally binding upon, nor shall resort be
had to the property of, any of the Trustees,
shareholders, officers, employees or agents of
such Trust, but the Trust's property only shall
be bound.
<PAGE>
DFM CORP.
By /s/ Ira D. Kleinman
Chairman of the Board
AUTO VENTSHADE COMPANY
By /s/ Ira D. Kleinman
Chairman of the Board
The foregoing Agreement is hereby
agreed to as of the date thereof.
MASSMUTUAL CORPORATE VALUE
PARTNERS LIMITED
By Massachusetts Mutual Life Insurance
Company, as Investment Advisor
By /s/ Michael L. Klofas
Managing Director
<PAGE>
DFM CORP.
By /s/ Ira D. Kleinman
Chairman of the Board
AUTO VENTSHADE COMPANY
By /s/ Ira D. Kleinman
Chairman of the Board
The foregoing Agreement is hereby
agreed to as of the date thereof.
NATIONAL CITY VENTURE CORPORATION
By /s/ Christopher P. Dowd
Vice President
EXHIBIT 10.5
RIGHTS AGREEMENT
between
LUND INTERNATIONAL HOLDINGS, INC.
and
THE PARTICIPATING STOCKHOLDERS PARTY HERETO
December 22, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEMAND REGISTRATIONS 2
1.1 Requests for Registration. 2
1.2 Long-Form Registrations. 3
1.3 Short-Form Registrations. 4
1.4 Effective Registration Statement. 4
1.5 Priority on Demand Registrations. 5
1.6 Selection of Underwriters. 6
1.7 Other Registration Rights. 6
1.8 Black-Out Rights and Postponement. 6
ARTICLE II PIGGYBACK REGISTRATIONS 7
2.1 Right to Piggyback. 7
2.2 Piggyback Expenses. 7
2.3 Priority on Primary Registrations. 7
2.4 Priority on Secondary Registrations. 8
ARTICLE III HOLDBACK AGREEMENTS 8
3.1 Holder's Holdback Obligations. 8
3.2 Company's Holdback Obligations. 8
ARTICLE IV REGISTRATION PROCEDURES 9
ARTICLE V REGISTRATION EXPENSES 13
5.1 Fees and Expenses Generally. 13
5.2 Counsel Fees. 14
ARTICLE VI UNDERWRITTEN OFFERINGS 14
6.1 Demand Underwritten Offerings. 14
6.2 Incidental Underwritten Offerings. 14
ARTICLE VII INDEMNIFICATION 15
7.1 Indemnification by the Company. 15
7.2 Indemnification by a Selling Shareholder. 16
7.3 Indemnification Procedure. 17
7.4 Underwriting Agreement. 18
7.5 Contribution. 18
7.6 Periodic Payments. 19
ARTICLE VIII RULE 144 20
<PAGE>
ARTICLE IX PARTICIPATION IN UNDERWRITTEN REGISTRATIONS 20
ARTICLE X TRANSFER RESTRICTIONS; RIGHTS OF INCLUSION; DUTY OF
FIRST OFFER 21
10.1 Transfer Restrictions 21
10.2 Rights of Inclusion. 22
ARTICLE XI DEFINITIONS 25
11.1 Terms. 25
11.2 Other Defined Terms. 30
11.3 0Defined Terms in Corresponding Sections. 30
ARTICLE XII MISCELLANEOUS 31
12.1 No Inconsistent Agreements. 31
12.2 Specific Performance. 31
12.3 Amendments and Waivers. 31
12.4 Successors and Assigns. 32
12.5 Notices. 32
12.6 Headings, Certain Conventions. 33
12.7 Gender. 33
12.8 Invalid Provisions. 34
12.9 Governing Law. 34
12.10 Consent to Jurisdiction and Service of Process 34
12.11 Waiver of Jury Trial 34
12.12 Counterparts. 35
SCHEDULE I Addresses for Notices to Participating Stockholders
EXHIBIT A-1 Form of Joinder Agreement For Permitted Transferees
EXHIBIT A-2 Form of Joinder Agreement For Additional Stockholders
<PAGE>
RIGHTS AGREEMENT dated as of December 22, 1998, by and among Lund
International Holdings, Inc., a Delaware corporation (the "Company"), LIH
Holdings, LLC, a Delaware limited liability company ("LIH Holdings I"), LIH
Holdings II, LLC, a Delaware limited liability company ("LIH Holdings II"), LIH
Holdings III, LLC, a Delaware limited liability company ("LIH Holdings III"; LIH
Holdings I, LIH Holdings II and LIH Holdings III being hereinafter collectively
referred to as the "LIH Entities"), BancBoston Capital Inc., a Massachusetts
corporation ("BancBoston"), Liberty Mutual Insurance Company, a Massachusetts
corporation ("Liberty Mutual"), Massachusetts Mutual Life Insurance Company, a
Massachusetts corporation ("MMLIC"), MassMutual Corporate Value Partners
Limited, a company organized under the laws of the Cayman Islands ("MMCVP"),
MassMutual Corporate Investors, a Massachusetts business trust ("MMCI"),
MassMutual Participation Investors, a Massachusetts business trust ("MMPI";
MMLIC, MMCVP, MMCI and MMPI being hereinafter collectively referred to as the
"MassMutual Entities"), and National City Venture Corporation, a Delaware
corporation ("NCVC"; NCVC and the MassMutual Entities being hereinafter
collectively referred to as the "Mezzanine Entities"). Capitalized terms are
used as defined in Article XI hereto.
RECITALS
WHEREAS, on the date hereof, LIH Holdings I is the owner of 1,686,893
shares of Common Stock, and LIH Holdings II is the owner of 874,400 shares of
Common Stock and 1,493,398 shares of the Class B-1 Common Stock, par value $0.01
per share (the "Class B-1 Common Stock"), of the Company;
WHEREAS, in connection with the Company's acquisition on the date
hereof of all the outstanding capital stock of Auto Ventshade Corporation, the
Company, LIH Holdings III, BancBoston, Liberty Mutual and the MassMutual
Entities have entered into that certain Investment Agreement (as the same may be
amended, supplemented or otherwise modified from time to time, the "AVS
Investment Agreement") dated as of December 22, 1998, whereby the Company
desires to sell and LIH Holdings III, BancBoston, Liberty Mutual and the
MassMutual Entities desire to purchase, in the aggregate, 1,047,412 shares of
Common Stock and 252,401.8 shares of the Series B Preferred Stock, par value
$.01 per share (the "Series B Preferred Stock"), of the Company, all for an
aggregate purchase price equal to $25,000,000;
WHEREAS, in connection with the proposed acquisition by the Company of
all the outstanding capital stock of Smitty Bilt, Inc., the Company, LIH
Holdings III, BancBoston, Liberty Mutual and the MassMutual Entities have
entered into that certain Investment Agreement (as the same may be amended,
supplemented or otherwise modified from time to time, the "SB Investment
Agreement"; the AVS Investment Agreement and the SB Investment Agreement being
hereinafter collectively referred to as the " Investment Agreements") dated as
of December 22, 1998, whereby the Company
<PAGE>
desires to sell and LIH Holdings III, BancBoston, Liberty Mutual and the
MassMutual Entities desire to purchase, in the aggregate, 316,056 shares of
Common Stock and 39,822.9 shares of Series B Preferred Stock, all for an
aggregate purchase price equal to $5,000,000;
WHEREAS, the Company, certain of its subsidiaries and each of the
Mezzanine Entities, in connection with the issuance to the Mezzanine Entities of
subordinated notes in an aggregate principal amount equal to $25,000,000, are
entering into those certain Securities Purchase Agreements (as each may be
amended, supplemented or otherwise modified from time to time, collectively, the
"Securities Purchase Agreements") dated December 23, 1998, whereby, among other
things, the Company desires to sell and the Mezzanine Entities desire to
purchase, in the aggregate, Warrants (including any securities (other than any
shares of Common Stock or Series B Preferred Stock) issued in exchange therefor
or replacement thereof, in each case as the same may be amended, supplemented or
otherwise modified from time to time, the "Warrants") to purchase up to either
70,484 shares of Series B Preferred Stock or 704,839 shares of Common Stock;
WHEREAS, each of the LIH Entities, BancBoston, Liberty Mutual, the
Mezzanine Entities and the Company desires to enter into this Agreement to
provide for, among other things, registration rights with respect to the Common
Stock and to impose restrictions on, and conditions to, certain transfers of
equity securities of the Company;
WHEREAS, each Investment Agreement, among other things, provides that
the execution and delivery of an agreement in substantially the form hereof is a
condition to the consummation of the other transactions contemplated by such
Investment Agreement; and
WHEREAS, each Securities Purchase Agreement, among other things,
provides that the execution and delivery of an agreement in substantially the
form hereof is a condition to the consummation of the other transactions
contemplated by such Securities Purchase Agreement.
NOW THEREFORE, in connection with the Investment Agreements and the
Securities Purchase Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
I. ARTICLE
DEMAND REGISTRATIONS
A. REQUESTS FOR REGISTRATION. (a) Subject to Sections 1.2, 1.3 and 1.8, at any
time after September 9, 2000, any or all of the Required LIH
<PAGE>
Stockholders, the Required BancBoston Stockholders, the Required Liberty Mutual
Stockholders and the Required Mezzanine Stockholders may request in writing
registration under the Securities Act of all or part of their Registrable
Securities (i) on Form S-1 or Form S-2 or any similar or successor long-form
registration statement (any such registration, a "Long-Form Registration") or
(ii) on Form S-3 or any similar or successor short-form registration statement
(any such registration, a "Short-Form Registration") if the Company qualifies to
use such short form. Within 10 days after its receipt of any such request, the
Company will give written notice of such request to all other Participating
Stockholders. Thereafter, the Company will use all reasonable efforts to effect
the registration under the Securities Act on the form requested by the
Requesting Investors, and to include in such registration, (i) all Registrable
Securities which the Requesting Investors have so requested to be included
therein, and (ii) all other Registrable Securities with respect to which the
Company has received written requests for inclusion therein by the Participating
Stockholders within 30 days after their receipt of the Company's notice, subject
in each case to the provisions of Section 1.5. Each Long-Form Registration or
Short-Form Registration requested in accordance with this Section 1.1 is
referred to herein as a "Demand Registration."
(b) The Requesting Investors which request a Demand Registration
pursuant to this Section 1.1 may, at any time prior to the effective date of the
registration statement relating to such Demand Registration, revoke such request
by providing written notice to the Company; provided, however, that
notwithstanding such revocation, such Demand Registration shall be deemed a
request for purposes of Section 1.2 unless, after consultation with the Company
and any proposed underwriter, the Requesting Investors in good faith determine
that more than 25% of the amount of Registrable Securities which they have
requested to be registered (before giving effect to any cutback pursuant to
Section 1.5) would not be sold pursuant to such Demand Registration within a
reasonable amount of time or at a price reasonably acceptable to such Requesting
Investors.
(c) Any request for a Demand Registration pursuant to Section 1.1 shall
specify the number of Registrable Securities proposed to be sold by the
Requesting Investors and the intended method of disposition thereof.
A. LONG-FORM REGISTRATIONS. (a) The Required LIH Stockholders will be entitled
to request pursuant to Section 1.1 one Long-Form Registration, (b) the Required
BancBoston Stockholders will be entitled to request pursuant to Section 1.1 one
Long-Form Registration, (c) the Required Liberty Mutual Stockholders will be
entitled to request pursuant to Section 1.1 one Long-Form Registration, and (d)
the Required Mezzanine Stockholders will be entitled to request pursuant to
Section 1.1 up to two Long-Form Registrations; provided, however, that no such
request for a Long-Form Registration shall be made unless such request is for
the registration of at least 450,000 shares of Common Stock (which number of
shares shall be appropriately adjusted for any stock dividend, stock split,
combination of shares or other similar event that occurs after the date hereof).
The Company will pay all Registration
<PAGE>
Expenses in connection with any such Long-Form Registration; provided, however,
that in the case of any Long-Form Registration as to which LIH Stockholders
comprise the Requesting Investors, such LIH Stockholders will pay for any
special audits required to be undertaken by the Company in connection therewith.
All Long-Form Registrations (unless otherwise requested by the Requisite
Registration Participants) shall be underwritten registrations.
A. SHORT-FORM REGISTRATIONS. In addition to the Long-Form Registrations
contemplated by Section 1.2, the Required LIH Stockholders, the Required
BancBoston Stockholders, the Required Liberty Mutual Stockholders, and the
Required Mezzanine Stockholders will each be entitled to request an unlimited
number of Short-Form Registrations in which the Company will pay all
Registration Expenses; provided, however, that (a) in the case of any Short-Form
Registration as to which LIH Stockholders comprise the Requesting Investors,
such LIH Stockholders will pay for any special audits required to be undertaken
by the Company in connection therewith, (b) no such request for a Short-Form
Registration shall be made unless such request is for the registration of at
least 200,000 shares of Common Stock (which number of shares shall be
appropriately adjusted for any stock dividend, stock split, combination of
shares or other similar event that occurs after the date hereof) and (c) in any
12 month period, the Company shall not be obligated to effect more than two
Short-Form Registrations pursuant to this Agreement.
A. EFFECTIVE REGISTRATION STATEMENT. No Demand Registration shall be deemed to
have been requested or effected for purposes of Section 1.1(a) or 1.2:
a) unless a registration statement with respect thereto has been
declared effective by the Commission (other than in connection with a
revocation notice delivered pursuant to Section 1.1(b)) and the Company
has complied in all material respects with all obligations required to
be performed by it on or prior to the date of such declaration in
connection with such Demand Registration;
a) if after such registration statement has become effective, any stop
order, injunction or other order or requirement of the Commission or
any other Governmental or Regulatory Authority affecting any of the
Registrable Securities covered by such registration statement, is for
any reason threatened in writing or issued by the Commission or such
other Governmental or Regulatory Authority and, as a result thereof,
none of the Registrable Securities covered thereby have been sold;
a) if the conditions to closing specified in the purchase agreement or
underwriting agreement entered into in connection with such
<PAGE>
Demand Registration are not satisfied by reason of a failure by or
inability of the Company to satisfy any of such conditions to closing;
a) if the Company declines to effect such Demand Registration pursuant
to Section 1.8(a) or delivers a Black-Out Notice with respect to such
Demand Registration;
a) if the Requesting Investors have made the determination contemplated
by the proviso to Section 1.1(b) with respect to such Demand
Registration and have notified the Company of such determination in
accordance with Section 1.1(b);
a) if the Requesting Investors are not able to register and sell at
least 75% of the amount of Registrable Securities which they requested
(before giving effect to any cutback effected pursuant to Section 1.5)
to be included in such registration; or
a) if the registration statement with respect to such Demand
Registration does not remain effective for a period of at least 180
days beyond the effective date thereof or, in the case of any Demand
Registration that constitutes an underwritten offering of Registrable
Securities, until 45 days after the commencement of the distribution by
the holders of the Registrable Securities included in such Demand
Registration, in each case unless all of the Registrable Securities
included in such Demand Registration have been sold to the public prior
thereto in accordance with the plan of distribution specified in such
registration statement.
If a Demand Registration requested pursuant to this Article I is deemed
not to have been requested or effected as provided in this Section 1.4, then the
Company shall continue to be obligated to effect the number of Demand
Registrations set forth in Section 1.2 without giving effect to such requested
Demand Registration and will pay all Registration Expenses in connection with
such Demand Registration.
A. PRIORITY ON DEMAND REGISTRATIONS. The Company will not include in any Demand
Registration any securities which are not Registrable Securities of the
Participating Stockholders without the written consent of the Requisite
Registration Participants. If the Requesting Investors and other holders of
Registrable Securities request Registrable Securities to be included in a Demand
Registration which is an underwritten offering and the managing underwriter
advises the Company in writing that in its opinion the number of Registrable
Securities requested to be included exceeds the number of Registrable Securities
which can be sold in such offering within a price range acceptable to the
Requisite Requesting Investors, the Company will include any securities to be
sold in such Demand Registration in the following order: (i) (x) first, the
<PAGE>
Registrable Securities requested to be included in such registration by the
Requesting Investors or by other Participating Stockholders in accordance with
Section 1.1(a), provided that if the managing underwriter determines in good
faith that a lower number of Registrable Securities should be included, then
only that lower number of Registrable Securities requested to be included by the
Requesting Investors and such other Participating Stockholders shall be included
in such registration, and the Requesting Investors and such other Participating
Stockholders shall participate in such registration on a pro rata basis in
accordance with the number of Registrable Securities requested to be included in
such registration by each of them; (y) second, the securities which the Company
proposes to sell; and (z) third, any securities other than Registrable
Securities to be sold by persons other than the Company included in such
registration in compliance with Section 1.7.
A. SELECTION OF UNDERWRITERS. The Requisite Registration Participants with
respect to any Demand Registration will have the right to select the
underwriters and the managing underwriter to administer such Demand Registration
(which underwriters and managing underwriters shall be reasonably acceptable to
the Company).
A. OTHER REGISTRATION RIGHTS. Except as provided in this Agreement, without the
written consent of the Participating Stockholders which then hold Registrable
Securities representing at least a majority (by number of shares) of the
Registrable Securities (on a Fully-Diluted Basis) then held by all Participating
Stockholders, the Company will not grant to any Person the right to request the
Company to register any equity securities of the Company, or any securities
convertible, exchangeable or exercisable for or into such securities, other than
piggyback registration rights entitling the holder thereof to participate in
Company-initiated registrations, subject to the prior rights of Participating
Stockholders to include their Registrable Securities in Company-initiated
registrations in accordance with Section 2.3.
A. BLACK-OUT RIGHTS AND POSTPONEMENT. (a) The Company shall not be required to
effect a Demand Registration if the Company, within the 120-day period preceding
the date of a request for a Demand Registration, has effected a registration of
securities in which the Participating Stockholders were able to register and
sell at least 75% of the amount of Registrable Securities which they requested
(before giving effect to any cutback effected pursuant to Section 1.5, 2.3 or
2.4) to be included in such registration pursuant to Demand Registration rights
under Article I or Piggyback Registration rights under Article II.
(b) The Company may, upon written notice (a "Black-Out Notice") to the
Requesting Investors requesting a Demand Registration, require such Requesting
Investors to withdraw such Demand Registration upon the good faith determination
by the
<PAGE>
Company that such postponement is necessary (i) to avoid disclosure of material
non-public information or (ii) as a result of a pending material financing or
acquisition transaction, and in each case, each of the LIH Stockholders, the
BancBoston Stockholders, the Liberty Mutual Stockholders and the Mezzanine
Stockholders may not request another Demand Registration for a period of up to
120 days, as specified by the Company in such Black-Out Notice. The Company may
only give a Black-Out Notice where the giving of such notice has been
specifically approved by the Board of Directors of the Company. Upon receipt of
a Black-Out Notice, the related Demand Registration shall be deemed to be
rescinded and retracted and shall not be counted as a Demand Registration for
any purpose hereunder. The Company may not deliver more than three Black-Out
Notices in any 12-month period; provided, however, that the aggregate number of
days covered by Black-Out Notices in any 12-month period shall not under any
circumstances exceed 180.
I. ARTICLE
PIGGYBACK REGISTRATIONS
A. RIGHT TO PIGGYBACK. Whenever the Company proposes to register any of its
equity securities under the Securities Act (other than pursuant to a Demand
Registration and other than on Forms S-4 or S-8 or any successor forms), whether
for the Company's own account or for the account of any other Person, and the
registration form to be used may be used for the registration of Registrable
Securities (a "Piggyback Registration"), the Company will give prompt written
notice (in any event within 10 days after its receipt of notice of any exercise
of other demand registration rights) to all Participating Stockholders of its
intention to effect such a registration. Such notice shall offer each
Participating Stockholder the opportunity to register, on the same terms and
conditions, such number of such Participating Stockholder's Registrable
Securities as such Participating Stockholder may request. The Company will
include in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein by Participating
Stockholders within 30 days after their receipt of the Company's notice, subject
to the provisions of Sections 2.3 and 2.4. Such requests for inclusion shall
specify the number of Registrable Securities intended to be disposed of and the
intended method of distribution thereof.
A. PIGGYBACK EXPENSES. The Registration Expenses of the Participating
Stockholders will be paid by the Company in all Piggyback Registrations.
A. PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company, and the managing
underwriter advises the Company in writing that in its opinion the number of
securities requested to be included in such registration is such that the
success of the
<PAGE>
Company's offering will be materially and adversely affected, then the Company
will include any securities to be sold in such Piggyback Registration in the
following order: (i) first, the securities the Company proposes to sell; (ii)
second, the Registrable Securities requested to be included in such registration
by the Participating Stockholders in accordance with Section 2.1, provided that
if the managing underwriter in good faith determines that a lower number of
Registrable Securities of the Participating Stockholders should be included,
then the Company shall be required to include in such registration only that
lower number of Registrable Securities, and the Participating Stockholders shall
participate in such registration on a pro rata basis in accordance with the
number of Registrable Securities requested to be included in such registration
by each Participating Stockholder; and (iii) third, if all Registrable
Securities requested to be included in such registration by the Participating
Stockholders in accordance with Section 2.1 are included in such registration,
any other securities requested to be included in such registration in compliance
with Section 1.7.
A. PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is an
underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriter advises the Company in writing that in
its opinion the number of securities requested to be included in such
registration is such that the success of such holders' offering would be
materially and adversely affected, then the Company will include any securities
to be sold in such Piggyback Registration in the following order: (i) first, the
securities which such holders propose to sell in compliance with Section 1.7;
(ii) second, the Registrable Securities requested to be included in such
registration by the Participating Stockholders in accordance with Section 2.1,
provided that if the managing underwriter determines in good faith that a lower
number of Registrable Securities of the Participating Stockholders should be
included, then the Company shall be required to include in such registration
only that lower number of Registrable Securities, and the Participating
Stockholders shall participate in such registration on a pro rata basis in
accordance with the number of Registrable Securities requested to be included in
such registration by each; and (iii) third, any other securities proposed to be
included in such registration in compliance with Section 1.7.
I. ARTICLE
HOLDBACK AGREEMENTS
A. HOLDER'S HOLDBACK OBLIGATIONS. Each Participating Stockholder agrees not to
effect any public sale or distribution of Registrable Securities, or any
securities convertible, exchangeable or exercisable for or into Registrable
Securities during the seven days prior to, and the 180-day period beginning on,
the effective date of any underwritten Demand Registration or any underwritten
Piggyback Registration in which such Participating Stockholder had an
opportunity to participate without cutback
<PAGE>
under Article II hereof (in each case except as part of such underwritten
registration), unless the managing underwriter of such underwritten registration
otherwise agrees.
A. COMPANY'S HOLDBACK OBLIGATIONS. Unless the managing underwriter of the
relevant underwritten Demand Registration or an underwritten Piggyback
Registration otherwise agrees, the Company agrees (i) not to effect any public
sale or distribution of its equity securities, or any securities convertible,
exchangeable or exercisable for or into such securities, during the 14 days
prior to, and during the 90-day period beginning on, the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration in
which holders of Registrable Securities are selling stockholders (except as part
of such underwritten registration or pursuant to registrations on Form S-4 or
S-8 or any successor forms), and (ii) to use all reasonable efforts to cause
each holder of at least 5% (on a Fully-Diluted Basis) of its equity securities
to agree not to effect any public sale or distribution of any such equity
securities or any securities convertible, exchangeable or exercisable for into
such equity securities during the 180-day period beginning on the effective date
of any underwritten Demand Registration or any underwritten Piggyback
Registration in which holders of Registrable Securities are selling stockholders
(except as part of such underwritten registration, if otherwise permitted).
I. ARTICLE
REGISTRATION PROCEDURES
Whenever Participating Stockholders have requested that any Registrable
Securities be registered in accordance with Article I or II, the Company will
use all reasonable efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof, and pursuant thereto the Company will as reasonably expeditiously as
possible (or, in the case of clause (p) below, will not):
1. promptly prepare and file with the Commission a registration statement with
respect to such Registrable Securities (such registration statement to include
all information which the Participating Stockholders holding the Registrable
Securities to be registered thereby shall reasonably request) and use all
reasonable efforts to cause such registration statement to become effective,
provided, that as promptly as practicable before filing a registration statement
or prospectus or any amendments or supplements thereto, the Company will (i)
furnish to one counsel selected by the Requisite Registration Participants
copies of all such documents proposed to be filed, and the Company shall not
file any such document to which such counsel shall have reasonably objected on
the grounds that such document does not comply in all material respects with the
requirements of the Securities Act, and (ii) notify each Participating
Stockholder holding Registrable Securities covered by such registration
statement of (x) any request by the Commission to amend such registration
statement or amend or
<PAGE>
supplement any prospectus, or (y) any stop order issued or threatened by the
Commission, and take all reasonable actions required to prevent the entry of
such stop order or to promptly remove it if entered;
1. (i) prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective at all times
during the period commencing on the effective date of such registration
statement and ending on the first date as of which all Registrable Securities of
the Participating Stockholders covered by such registration statement are sold
in accordance with the intended plan of distribution set forth in such
registration statement and (ii) comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;
1. furnish to each Participating Stockholder holding Registrable Securities
covered by such registration statement, without charge, such number of conformed
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus and, in each case, including all exhibits thereto and
documents incorporated by reference therein) and such other documents as such
Participating Stockholder may reasonably request in order to facilitate the
disposition of the Registrable Securities covered thereby that are held by such
Participating Stockholder;
1. use its best efforts to register or qualify the Registrable Securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions in the United States as any Participating Stockholder
holding any such Registrable Securities shall reasonably request, to keep such
registration or qualification in effect for so long as such registration
statement remains in effect and to do any and all other acts and things which
may be reasonably necessary or advisable to enable such Participating
Stockholder to consummate the disposition in such jurisdictions of any such
Registrable Securities held by such Participating Stockholder; provided,
however, that the Company will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this clause (d), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
1. furnish to each Participating Stockholder holding Registrable Securities
covered by such registration statement a signed copy, addressed to such
Participating Stockholder (and the underwriters, if any) of an opinion of
counsel for the Company or special counsel to such Participating Stockholder
dated the effective date of such registration statement (and, if such
registration statement includes an underwritten public offering, dated the date
of the closing under the underwriting agreement), reasonably satisfactory in
form and substance to the Requisite Registration Participants, covering
substantially the same matters with respect to such registration statement (and
<PAGE>
the prospectus included therein) as are customarily covered in opinions of
issuer's counsel delivered to the underwriters in underwritten public offerings,
and such other legal matters as the Requisite Registration Participants (or the
underwriters, if any) may reasonably request;
1. notify each Participating Stockholder holding Registrable Securities covered
by such registration statement, at a time when a prospectus relating to such
Registrable Securities is required to be delivered under the Securities Act, of
the occurrence of any event known to the Company as a result of which the
prospectus included in such registration statement, as then in effect, contains
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made, and, at the
request of any such Participating Stockholder, (i) the Company will prepare and
furnish such Participating Stockholder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made and (ii) the Company shall extend the period during which such
registration statement shall be maintained effective by the number of days
during the period from and including the date of the giving of such notice to
such Participating Stockholder to the date when the Company made available to
such Participating Stockholder an appropriately amended or supplemented
prospectus;
1. cause all Registrable Securities of the Participating Stockholders covered by
such registration statement to be listed on each securities exchange and
quotation system on which similar securities issued by the Company are then
listed and to enter into such customary agreements as may be required in
furtherance thereof, including listing applications and indemnification
agreements in customary form;
1. provide a transfer agent and registrar for the Registrable Securities of the
Participating Stockholders covered by such registration statement not later than
the effective date of such registration statement;
1. enter into such customary arrangements and take all such other actions as the
Requisite Registration Participants or the underwriters, if any, for the
offering of the Registered Securities covered by such registration statement
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including using its best efforts to effect a stock split
or combination of shares) and, in connection with an underwritten offering,
participate, to the extent reasonably requested by the managing underwriter for
the offering, in customary efforts to sell the securities in the offering,
including participating in "road shows";
<PAGE>
1. make available for inspection by any Participating Stockholder holding
Registrable Securities covered by such registration statement, any underwriter
participating in any disposition of securities pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
Participating Stockholder or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company and all
correspondence between the Commission and the Company or its counsel or auditors
and all memoranda relating to discussions with the Commission or its staff in
connection with such registration statement, and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such Participating Stockholder, underwriter,
attorney, accountant or agent in connection with such registration statement;
1. subject to other provisions hereof, use all reasonable efforts to cause the
Registrable Securities of the Participating Stockholders covered by such
registration statement to be registered with or approved by such Governmental or
Regulatory Authorities or self-regulatory organizations as may be necessary to
enable such Participating Stockholders thereof to consummate the disposition of
such Registrable Securities;
1. use all reasonable efforts to obtain a "cold comfort" letter, dated the
effective date of such registration statement (and, if such registration
includes an underwritten offering, dated the date of the closing under the
underwriting agreement), signed by the independent public accountants who have
certified the Company's financial statements included in such registration
statement, addressed to the Company, to each Participating Stockholder holding
Registrable Securities covered by such registration statement, and to the
underwriters, if any, covering substantially the same matters with respect to
such registration statement (and the prospectus included therein) and with
respect to events subsequent to the date of such financial statements, as are
customarily covered in accountants' letters delivered to the underwriters in
underwritten public offerings of securities and such other financial matters as
the Requisite Registration Participants (or the underwriters, if any) may
reasonably request;
1. otherwise use all reasonable efforts to comply with all applicable rules and
regulations of the Commission and make available to its security holders, in
each case as soon as practicable, an earnings statement covering a period of at
least 12 months, beginning with the first month after the effective date of such
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act;
1. permit any Participating Stockholder holding Registrable Securities covered
by such registration statement, which Participating Stockholder, in its sole
judgment exercised in good faith, might be deemed to be a controlling person of
the Company (within the meaning of the Securities Act or the Exchange Act) to
participate in the preparation of such registration statement and to include
therein material, furnished to
<PAGE>
the Company in writing, which in the reasonable judgment of such Participating
Stockholder should be included and which is reasonably acceptable to the
Company;
1. promptly notify the Participating Stockholders holding the Registrable
Securities covered by such registration statement of the issuance by any state
securities commission or other Governmental or Regulatory Authority of any order
suspending the qualification or exemption from qualification of any such
Registrable Securities under any state securities or "blue sky" law, and use
every reasonable effort to obtain the lifting at the earliest possible time of
any stop order (whether issued by the Commission or otherwise) suspending the
effectiveness of such registration statement or of any order preventing or
suspending the use of any preliminary prospectus included therein;
1. at any time file or make any amendment to such registration statement, or any
amendment of or supplement to the prospectus included therein (including
amendments of the documents incorporated by reference into the prospectus), (i)
of which each Participating Stockholder holding Registrable Securities covered
by such registration statement or the managing underwriter, if any, shall not
have previously been advised and furnished a copy or (ii) to which the Requisite
Registration Participants, the managing underwriter (if any) or counsel for the
Requisite Registration Participants or any such managing underwriter shall
reasonably object;
1. make such representations and warranties (subject to appropriate disclosure
schedule exceptions) to the Participating Stockholders holding Registrable
Securities covered by such registration statement and the underwriters, if any,
in form, substance and scope as are customarily made by issuers to underwriters
and selling holders, as the case may be, in underwritten public offerings of
substantially the same type;
1. during the period when the prospectus included in such registration statement
is required to be delivered under the Securities Act, promptly file all
documents required to be filed with the Commission pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act; and
1. if such registration statement refers to any Participating Stockholder
holding Registrable Securities covered thereby by name or otherwise as the
holder of any securities of the Company, then (whether or not, in the sole
judgment, exercised in good faith, of such Participating Stockholder, such
Participating Stockholder is or might be deemed to be a controlling person of
the Company), (i) at the request of such Participating Stockholder, insert
therein language, in form and substance reasonably satisfactory to such
Participating Stockholder, the Company and the managing underwriter (if any), to
the effect that the holding by such Participating Stockholder of such securities
is not to be construed as a recommendation by such Participating Stockholder of
the investment quality of the Company's Registrable Securities or the Company's
other securities covered thereby and that such holding does not imply that such
Participating
<PAGE>
Stockholder will assist in meeting any future financial requirements of the
Company, or (ii) in the event that such reference to such Participating
Stockholder by name or otherwise is not required by the Securities Act, any
similar Federal or state statute, or any rule or regulation of any Governmental
or Regulatory Authority having jurisdiction over the offering, then in force,
the Company shall be required at the request of such Participating Stockholder
to delete the reference to such Participating Stockholder.
I. ARTICLE
REGISTRATION EXPENSES
A. FEES AND EXPENSES GENERALLY. Subject to the next succeeding sentence, all
expenses incident to the Company's performance of or compliance with this
Agreement, including internal expenses (including all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual or special audit or quarterly review, the expense of any liability
insurance, the expenses and fees for listing securities on one or more
securities exchanges or quotation systems pursuant to clause (g) of Article IV,
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registrable
Securities), printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all independent certified public
accountants, underwriters (excluding underwriting fees, discounts and
commissions) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses"), will be borne by the Company.
Notwithstanding anything in this Agreement to the contrary, (a) each
Participating Stockholder shall pay any underwriting fees, discounts or
commissions attributable to the sale of its Registrable Securities and (b) in
the case of any Demand Registration as to which LIH Stockholders comprise the
Requesting Investors, such LIH Stockholders shall pay for any special audits
required to be undertaken by the Company in connection therewith.
A. COUNSEL FEES. In connection with each Demand Registration, the Company will
reimburse the Participating Stockholders for the reasonable fees and
disbursements of one counsel selected by the Requisite Registration
Participants.
I. ARTICLE
UNDERWRITTEN OFFERINGS
A. DEMAND UNDERWRITTEN OFFERINGS. If requested by the underwriters for any
underwritten offering of Registrable Securities pursuant to a Demand
Registration, the Company will enter into an underwriting agreement with such
<PAGE>
underwriters for such offering, such agreement to be consistent with the terms
hereof, to contain such representations and warranties by the Company and such
other terms as are generally included in agreements of this type, including
indemnities customarily included in such agreements, and to be otherwise
reasonably satisfactory in form and substance to the Requisite Registration
Participants, the Company and the underwriters. The Participating Stockholders
holding the Registrable Securities to be distributed by such underwriters will
cooperate in good faith with the Company in the negotiation of the underwriting
agreement. The Participating Stockholders holding the Registrable Securities to
be distributed by such underwriters shall be parties to such underwriting
agreement and may, at the option of the Requisite Registration Participants,
require that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such Participating
Stockholders and that any or all of the conditions precedent to the obligations
of such underwriters under such underwriting agreement also be conditions
precedent to the obligations of such Participating Stockholders. The Company
shall cooperate as reasonably requested by any such Participating Stockholder in
order to limit (a) any representations or warranties to, or agreements with, the
Company or the underwriters to be made by such Participating Stockholder only to
representations, warranties or agreements regarding such Participating
Stockholder, such Participating Stockholder's Registrable Securities and such
Participating Stockholder's intended method of distribution and any other
representation required by applicable law and (b) such Participating
Stockholder's maximum liability in respect of its indemnification and
contribution obligations under such underwriting agreement to an amount equal to
the net proceeds actually received by such Participating Stockholder (after
deducting any underwriting fees, discounts and expenses) from the sale of
Registrable Securities pursuant to such Demand Registration.
A. INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any time proposes to
register any of its equity securities under the Securities Act as contemplated
by Article II and such equity securities are to be distributed by or through one
or more underwriters, the Company will, if requested by any Participating
Stockholder as provided in Article II, arrange for such underwriters to include
all the Registrable Securities to be offered and sold by such Participating
Stockholder, subject to the limitations set forth in Article II, among the
securities to be distributed by such underwriters. The Participating
Stockholders holding Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the Company
and such underwriters (provided that such underwriting agreement is consistent
with the terms hereof), and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such Participating Stockholders and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement also be conditions precedent to the obligations of such
Participating Stockholders. The Company shall cooperate as reasonably requested
by any such Participating Stockholder in order to limit
<PAGE>
(a) any representations or warranties to, or agreements with, the Company or the
underwriters to be made by such Participating Stockholder only to
representations, warranties or agreements regarding such Participating
Stockholder, such Participating Stockholder's Registrable Securities and such
Participating Stockholder's intended method of distribution and any other
representation required by applicable law and (b) such Participating
Stockholder's maximum liability in respect of its indemnification and
contribution obligations under such underwriting agreement to an amount equal to
the net proceeds actually received by such Participating Stockholder (after
deducting any underwriting fees, discounts and expenses) from the sale of
Registrable Securities pursuant to the applicable Piggyback Registration.
I. ARTICLE
INDEMNIFICATION
A. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold
harmless, to the fullest extent permitted by law, each of the Participating
Stockholders holding any Registrable Securities covered by a registration
statement that has been filed with the Commission pursuant to this Agreement,
each underwriter for such Participating Stockholder in connection therewith,
each other Person, if any, who controls such Participating Stockholder or any
such underwriter within the meaning of the Securities Act or the Exchange Act,
and each of their respective managers, partners, officers, directors, employees
and general partners, as follows:
a) against any and all loss, liability, claim, damage or expense (other
than amounts paid in settlement) incurred by such Person arising out of
or based upon an untrue statement or alleged untrue statement of a
material fact contained in such registration statement (or any
amendment or supplement thereto), including all documents incorporated
therein by reference, or in any preliminary prospectus or prospectus
included therein (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading;
a) against any and all loss, liability, claim, damage and expense
incurred by such Person to the extent of the aggregate amount paid in
settlement of any litigation, investigation or proceeding by any
Governmental or Regulatory Authority, in each case whether commenced or
threatened, or of any claim whatsoever, that is based upon any such
untrue statement or omission or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
the Company (which consent shall not be unreasonably withheld or
delayed); and
<PAGE>
a) against any and all expense incurred by such Person in connection
with investigating, preparing or defending against any litigation or
any investigation or proceeding by any Governmental or Regulatory
Authority, in each case whether commenced or threatened in writing, or
against any claim whatsoever, that is based upon any such untrue
statement or omission or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under clause (i) or
(ii) above;
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of or based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Participating Stockholder expressly for use in
the preparation of such registration statement (or any amendment or supplement
thereto), including all documents incorporated therein by reference, or in any
preliminary prospectus or prospectus included therein (or any amendment or
supplement thereto); and provided further, however, that the Company will not be
liable to any Participating Stockholder (or any other indemnified Person) under
the indemnity agreement in this Section 7.1, with respect to any preliminary
prospectus or the final prospectus or the final prospectus as amended or
supplemented, as the case may be, to the extent that any such loss, liability,
claim, damage or expense of such Participating Stockholder (or other indemnified
Person) results from the fact that such Participating Stockholder sold
Registrable Securities to a Person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the final prospectus
or of the final prospectus as then amended or supplemented, whichever is most
recent, if the Company has previously and timely furnished copies thereof to
such Participating Stockholder. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such any
Participating Stockholder or any other Person eligible for indemnification under
this Section 7.1, and shall survive the transfer of the relevant Registrable
Securities by the Participating Stockholder who theretofore held them.
A. INDEMNIFICATION BY A SELLING SHAREHOLDER. In connection with any registration
statement which covers Registrable Securities of a Participating Stockholder
pursuant to this Agreement, each such Participating Stockholder agrees to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 7.1 of this Agreement), to the extent permitted by law, the
Company and each underwriter for the Company or any such Participating
Stockholder in connection therewith, each other Person who controls the Company
or any such underwriter within the meaning of the Securities Act or the Exchange
Act, and each of their respective managers, officers, directors and general
partners, with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary, final or
summary prospectus contained therein, or any amendment or
<PAGE>
supplement thereto or to any such prospectus, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information that relates only to such Participating
Stockholder and its affiliates or the plan of distribution and that is furnished
to the Company by or on behalf of such Participating Stockholder expressly for
use in the preparation of such registration statement, preliminary, final or
summary prospectus or amendment or supplement. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Company or any other Person eligible under this Section 7.2, and shall
survive the transfer of Registrable Securities by such Participating
Stockholder. The obligations of each Participating Stockholder pursuant to this
Section 7.2 are to be several and not joint. Additionally, with respect to each
claim pursuant to this Section 7.2 and each corresponding claim for contribution
under Section 7.5, each such Participating Stockholder's maximum aggregate
liability under this Section 7.2 and Section 7.5 shall be limited to an amount
equal to the net proceeds actually received by such Participating Stockholder
(after deducting any underwriting fees, discounts and expenses) from the sale of
Registrable Securities being sold pursuant to such registration statement or
prospectus by such Participating Stockholder.
A. INDEMNIFICATION PROCEDURE. Within 10 days after receipt by an indemnified
party hereunder of written notice of the commencement of any action or
proceeding involving a claim referred to in Section 7.1 or 7.2, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided, however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under Section 7.1 or 7.2, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such action or
proceeding is brought against an indemnified party, the indemnifying party will
be entitled to participate in and to assume the defense thereof, jointly with
any other indemnifying party similarly notified, it may, with counsel reasonably
satisfactory to such indemnified party; and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party for
any legal fees and expenses subsequently incurred by the latter in connection
with the defense thereof, unless in such indemnified party's reasonable judgment
an actual or potential conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, in which case the
indemnifying party shall not assume the defense of such claim but also shall not
be liable for the fees and expenses of (i) in the case of a claim referred to in
Section 7.1, more than one counsel (in addition to any local counsel) for all
indemnified parties selected by the holders of a majority (by number of shares)
of the Registrable Securities held by such indemnified parties, or (ii) in the
case of a claim referred to in Section 7.2, more than one counsel (in addition
to any local counsel) for the Company, in each case in connection with any one
action or separate but similar or related actions or proceedings. An
indemnifying party who is not entitled to (pursuant to the immediately preceding
sentence), or elects not to, assume the defense of a claim will not be obligated
to pay the fees and expenses of more
<PAGE>
than one counsel (in addition to any local counsel) for all parties indemnified
by such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party an actual or potential conflict of interest
may exist between such indemnified party and any other of such indemnified
parties with respect to such claim, in which event the indemnifying party shall
be obligated to pay the fees and expenses of such additional counsel or counsels
as may be reasonable in light of such conflict. The indemnifying party will not,
without the prior written consent of each indemnified party, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit, investigation or proceeding in respect of which
indemnification may be sought hereunder (whether or not such indemnified party
or any Person who controls such indemnified party is a party to such claim,
action, suit, investigation or proceeding), unless such settlement, compromise
or consent includes an unconditional release of such indemnified party from all
liability arising out of such claim, action, suit, investigation or proceeding.
An indemnified party will not settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit, investigation or
proceeding in respect of which it is then seeking (or thereafter seeks)
indemnification hereunder, in each case without the prior written consent of the
indemnifying party (which consent shall not be unreasonably withheld or
delayed). Notwithstanding anything to the contrary set forth herein, and without
limiting any of the rights set forth above, an indemnified party hereunder will
have the right to retain, at its own expense, counsel with respect to the
defense of a claim.
A. UNDERWRITING AGREEMENT. The Company and each Participating Stockholder
requesting registration of all or any part of its Registrable Securities
pursuant to Article I or II, shall provide for the foregoing indemnity (with
appropriate modifications) in any underwriting agreement entered into in
connection with a Demand Registration or a Piggyback Registration with respect
to any required registration or other qualification of Registrable Securities
under any Federal or state law or regulation of any Governmental or Regulatory
Authority.
A. CONTRIBUTION. If the indemnification provided for in Sections 7.1 and 7.2 of
this Agreement is unavailable to hold harmless an indemnified party under such
Section, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages,
liabilities and expenses referred to in Section 7.1 or 7.2, as the case may be,
in such proportion as is appropriate to reflect the relative fault of such
indemnifying party, on the one hand, and such indemnified party, on the other
hand, in connection with statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations, including the relative benefits received by each party
from the offering of the securities covered by the relevant registration
statement, the parties' relative knowledge and access to information concerning
the matter with respect to which the relevant claim was asserted and the
parties' relative opportunities to correct and prevent any relevant statement or
omission. Without limiting the generality of the
<PAGE>
foregoing, the parties' relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to relevant information and
opportunity to correct or prevent such alleged untrue or untrue statement or
omission. The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 7.5 were to be determined by pro rata or
per capita allocation (even if the underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the first and second sentences of
this Section 7.5. The amount paid by an indemnified party as a result of the
losses, claims, damages, liabilities or expenses referred to in the first
sentence of this Section 7.5 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending the relevant action or proceeding and shall be
limited as provided in Section 7.3 if the indemnifying party has assumed the
defense of the relevant action or proceeding in accordance with the provisions
of Section 7.3. Promptly after receipt by an indemnified party under this
Section 7.5 of notice of the commencement of any action or proceeding against
such party in respect of which a claim for contribution may be made against an
indemnifying party under this Section 7.5, such indemnified party shall notify
the indemnifying party in writing of the commencement thereof if the notice
specified in Section 7.3 has not been given with respect to such action or
proceeding; provided, howeve , that the omission to so notify the indemnifying
party shall not relieve the indemnifying party from any liability which it may
otherwise have to any indemnified party under this Section 7.5, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. The Company and the Participating Stockholders agree with each
other, and will agree with and the underwriters of Registrable Securities
registered pursuant to Article I or II, if requested by such underwriters, that
(i) the underwriters' portion of the contribution paid to the Participating
Stockholders pursuant to this Section 7.5 shall not exceed the total
underwriting fees, discounts and commissions in connection with the relevant
offering of Registrable Securities and (ii) the total amount of such
Participating Stockholder's contributions under this Section 7.5 and any amounts
paid by such Participating Stockholder in respect of corresponding claims for
indemnification under Section 7.2 shall not exceed an amount equal to the net
proceeds actually received by such Participating Stockholder from the sale of
Registrable Securities in the offering to which the losses, liabilities, claims,
damages or expenses of the indemnified parties relate. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
A. PERIODIC PAYMENTS. The indemnification required by this Article VII shall be
made by periodic payments of the amount thereof during the course of the
relevant investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred; provided, however, that if it is finally
determined by a court
<PAGE>
of competent jurisdiction that the relevant indemnified party was not entitled
to indemnification hereunder in respect of such investigation or defense, such
indemnified party shall repay to the indemnifying party, on demand, all amounts
received by it in respect of such investigation or defense pursuant to this
Section 7.6, together with interest thereon at a rate per annum equal to the
"prime rate" (as published from time to time in the Wall Street Journal) for the
period from and including the date on which the indemnified party received the
relevant amount to but excluding the date on which it repaid such amount to the
indemnifying party.
I. ARTICLE
RULE 144
If the Company shall have filed a registration statement pursuant to
the requirements of Section 12 of the Exchange Act or pursuant to the
requirements of the Securities Act, the Company covenants that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the Commission thereunder (or, if the
Company is not required to file such reports, it will, upon the request of any
Participating Stockholder, make publicly available other information), and it
will take such further action as any Participating Stockholder may reasonably
request, all to the extent required from time to time to enable such
Participating Stockholder to sell shares of Registrable Securities without
registration under the Securities Act in compliance with (i) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any Participating Stockholder, the Company will deliver to such Participating
Stockholder a written statement as to whether it has complied with such
requirements.
<PAGE>
I. ARTICLE
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Participating Stockholder may participate in any underwritten
registration hereunder unless such Participating Stockholder (i) agrees to sell
its Registrable Securities on the basis provided in any underwriting
arrangements approved by the Person or Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements, escrow agreements and other
documents reasonably required under the terms of such underwriting arrangements
and consistent with the provisions of this Agreement. If the Requesting
Investors with respect to any Long-Form Demand Registration are subsequently not
entitled to participate in such Demand Registration solely by reason of their
failure to comply with any material requirement of this Article IX then,
notwithstanding anything in Section 1.1(b) or 1.4 to the contrary, the request
by such Requesting Investors for such Long-Form Registration shall continue to
be counted for purposes of Section 1.2.
<PAGE>
I. ARTICLE
TRANSFER RESTRICTIONS; RIGHTS OF
INCLUSION; DUTY OF FIRST OFFER
10.1 TRANSFER RESTRICTIONS. (a) Each of the LIH Stockholders, the
BancBoston Stockholders, the Liberty Mutual Stockholders and the Mezzanine
Stockholders, severally and not jointly, agrees that it will not, for a period
of 180 days after the Closing Date (as defined in the SB Investment Agreement
or, if the closing under the SB Investment Agreement does not occur, as defined
in the AVS Investment Agreement), Transfer any Restricted Securities other than
(i) to a Permitted Transferee, who shall have executed a Joinder Agreement in
substantially the form of Exhibit A-1, and thereby become a party to this
Agreement, (ii) in the case of the BancBoston Stockholders, the Liberty Mutual
Stockholders and the Mezzanine Stockholders, to any LIH Stockholder (unless such
Transfer would result in a breach of the Amended and Restated Governance
Agreement), (iii) pursuant to Section 10.2 or (iv) pursuant to a transaction
that constitutes a Sale of the Company.
(b) Until the first date as of which (i) the market value of publicly
held shares of Common Stock calculated in accordance with Rules 4310 and 4450
under the Manual of the National Association of Securities Dealers, Inc. (the
"Manual"), as in effect from time to time (or any successor listing requirements
for NASDAQ)) has exceeded the minimum market value then required therefor by
Rule 4450(b)(3) under the Manual (or any successor listing requirement for
NASDAQ) by at least $15 million for a period of 90 consecutive trading days,
(ii) the number of shares of Common Stock that are publicly held (as so
calculated) exceeds the minimum number of shares required to be publicly held by
Rule 4450(b)(2) under the Manual (or any successor listing requirement for
NASDAQ) and (iii) the Company has issued the officer's certificate described in
the next succeeding sentence, each of the BancBoston Stockholders, the Liberty
Mutual Stockholders and the Mezzanine Stockholders agrees, severally and not
jointly, that it shall not, without the prior written consent of the independent
directors of the Company, (x) Transfer any Common Stock or Equity Equivalents to
any person or "group" (as defined for purposes of Rule 13d under the Exchange
Act) if, after giving effect to such Transfer, any of the shares of Common Stock
directly or indirectly beneficially owned by such person or any member of such
group would not be deemed to be publicly held for purposes of Rule 4450(b)(2) or
4450(b)(3) under the Manual (or any successor listing requirement for NASDAQ) or
(y) be a Transferee (or permit any person included in any group in which such
BancBoston Stockholder, Liberty Mutual Stockholder or Mezzanine Stockholder is
included to be a Transferee) of any Common Stock or Equity Equivalents if, after
giving effect to such Transfer, any of the shares of Common Stock directly or
indirectly beneficially owned by such Transferee (or by any member of any such
group) would not be deemed to be publicly held for purposes of Rule 4450(b)(2)
or 4450(b)(3) under the Manual (or any successor listing requirement for
NASDAQ); provided, however, that this Section 10.1(b) shall not apply to any
Transfer of Common Stock or Equity Equivalents (A) pursuant to Section 10.2, (B)
to any LIH Stockholder (unless such Transfer would
<PAGE>
result in a breach of the Amended and Restated Governance Agreement), or (C)
pursuant to a transaction that constitutes a Sale of the Company. Within 10
Business Days following the first date as of which the requirements set forth in
clauses (i) and (ii) above have been satisfied, the Company shall provide each
of the BancBoston Stockholders, the Liberty Mutual Stockholders and the
Mezzanine Stockholders with an officer's certificate certifying as to, and
setting forth calculations demonstrating in reasonable detail, the satisfaction
of such requirements.
(c) Each of the Participating Stockholders that is then a Bank Entity
agrees, severally and not jointly, that it will not effect any Transfer of
Restricted Securities to any other Person, unless such Participating Stockholder
determines in good faith that such Transfer would not cause such Participating
Stockholder or any of its Affiliates to be in violation of the Bank Holding
Company Act.
10.2 RIGHTS OF INCLUSION. (a) Except for (i) any Transfer of Restricted
Securities to a Permitted Transferee, (ii) any Transfer of Restricted Securities
pursuant to a Demand Registration, a Piggyback Registration or a Rule 144
Transaction, and (iii) other Transfers of Restricted Securities (other than
Transfers in respect of which an Inclusion Notice is delivered pursuant to this
Section 10.2(a)) which, in the aggregate, comprise less than 20% of the LIH
Stockholders' Original Ownership Level, and subject to paragraph (f) below, if
any or all of the LIH Stockholders (the "Transferors") propose to Transfer any
Restricted Securities (the "Transferor Shares") to one or more persons (the
"Buyer"), then as a condition of such Transfer, the Transferors shall cause the
Buyer to include a written offer (the "Section 10.2 Offer") to each of the
BancBoston Stockholders, Liberty Mutual Stockholders and Mezzanine Stockholders
(collectively, the "Offerees"), to sell to the Buyer, at the option of each
Offeree, that number of shares of Restricted Securities determined in accordance
with Section 10.2(b), on the same terms and conditions as are applicable to the
Transferor Shares, all of which terms shall be specified in the Section 10.2
Offer. The terms of the Section 10.2 Offer shall not require any Offeree (i) to
provide any representation, warranty or covenant other than representations,
warranties and covenants which relate specifically to such Offeree or its
Restricted Securities, such as representations regarding such Offeree's power
and authority to effect a sale of its Restricted Securities pursuant to the
Section 10.2 Offer and such Offeree's title to and ownership of its Restricted
Securities, (ii) other than in connection with the representations, warranties
and covenants which such Offeree may be required to provide under clause (i)
above, to join in any indemnification obligations that are not allocated
severally (as opposed to jointly and severally) among the Transferors and the
Offerees on a pro rata basis (based on the Transferors' and each Offeree's
respective amounts of the aggregate consideration paid to them in connection
with the Transfer contemplated by the Section 10.2 Offer) or (iii) to indemnify
the Buyer with respect to an amount in excess of the net cash proceeds paid to
such Offeree in connection with such Transfer. The Transferors shall provide a
written notice (the "Inclusion Notice") of the Section 10.2 Offer to each
Offeree, which may accept the Section 10.2 Offer by providing
<PAGE>
a written notice of acceptance of the Section 10.2 Offer to the Transferors
within 10 Business Days of delivery of the Inclusion Notice.
(b) Each Offeree shall have the right (an "Inclusion Right") to sell
pursuant to the Section 10.2 Offer the same percentage of its Restricted
Securities (calculated on a Fully-Diluted Basis) as the percentage of the
Transferors' Restricted Securities to be sold by the Transferors to the Buyer.
Any Offeree which owns Equity Equivalents may sell pursuant to the Section 10.2
Offer, in lieu of shares of Restricted Securities, Equity Equivalents
representing that number of shares of Restricted Securities which it could sell
pursuant to its Inclusion Right, and the purchase price therefor shall equal the
aggregate price that would be paid for the shares of Restricted Securities
issuable upon the exercise, exchange or conversion thereof minus the aggregate
exercise, exchange or conversion price under such Equity Equivalents for such
shares of Restricted Securities. If any Offeree exercises its Inclusion Right on
a timely basis pursuant to Section 10.2(a) with respect to any Inclusion Notice,
then prior to the expiration of the applicable 120-day period referred to in
Section 10.2(c), none of the Transferors shall consummate any sale to the Buyer
of any of the Transferor Shares covered by such Inclusion Notice unless such
Offeree is permitted to participate in such Transfer as provided in this Section
10.2 (it being understood that any Transfer of any such Transferor Shares after
the expiration of such 120-day period must comply with this Section 10.2).
(c) With reasonable promptness following its exercise of an Inclusion
Right, each Offeree shall deliver to the Transferors a certificate or
certificates representing the Restricted Securities to be Transferred pursuant
to the Section 10.2 Offer by such Offeree, free and clear of all Liens (other
than Liens which the Buyer permits to exist with respect to the Transferor
Shares at the time of its acquisition thereof), and a limited power-of-attorney
authorizing the Transferors to sell or otherwise dispose of such Restricted
Securities pursuant to the terms of the Section 10.2 Offer. The Transferors
shall have 120 days, commencing on the expiration of the 10-Business Day period
referred to in Section 10.2(a), in which to Transfer to the Buyer, on behalf of
itself and the Offerees, up to the number of Restricted Securities equal to the
sum of (i) the number of Restricted Securities covered by the Section 10.2 Offer
as to which Offerees shall have exercised their Inclusion Rights on a timely
basis pursuant to Section 10.2(a) plus (ii) the number of Transferor Shares. If
all such Restricted Securities and Transferor Shares are not sold to the Buyer,
the Transferors, at their option, may elect to sell, on behalf of themselves and
the Offerees that have exercised their Inclusion Rights on a timely basis
pursuant to Section 10.2(a), such number thereof as the Buyer will purchase,
allocated Pro Rata (as nearly as practicable) among the Transferors and such
Offerees. The material terms of any Transfer referred to in the two immediately
preceding sentences, including price and form of consideration, shall be as set
forth in the Inclusion Notice. If at the end of such 120-day period the
Transferors have not completed the Transfer of all the Transferor Shares and all
such Offerees' Restricted Securities (if any) proposed to be sold, the
Transferors shall return to each of the Offerees its respective certificates, if
any, representing Restricted Securities which the Offerees delivered for
Transfer pursuant to
<PAGE>
this Section 10.2 and which were not sold pursuant to the Section 10.2 Offer,
and the provisions of this Section 10.2 shall continue to be in effect.
(d) Promptly after the Transfer of the Transferor Shares and Restricted
Securities (if any) of the Offerees to the Buyer pursuant to the Section 10.2
Offer, the Transferors shall notify the Offerees thereof. To the extent within
their control and at the expense of the requesting Offeree, the Transferors
shall furnish such evidence of the completion of such Transfer and the terms
thereof as may be reasonably requested by any Offerees that participated in such
Transfer.
(e) Notwithstanding anything to the contrary contained in this Section
10.2, (i) except for the Transferors' obligation to return to each Offeree any
certificates representing the Offerees' Restricted Securities there shall be no
liability on the part of any Transferor to any Participating Stockholder in the
event that any proposed Transfer pursuant to this Section 10.2 is not
consummated for any reason, and (ii) whether or not any sale of Restricted
Securities is effected pursuant to this Section 10.2 shall be in the sole and
absolute discretion of the Transferors.
(f) The provisions of paragraphs (a) through (e) above shall not apply
to any Transfer of Restricted Securities by any LIH Stockholder which occurs
following the first date as of which the LIH Stockholders, taken together, cease
to beneficially own Restricted Securities which comprise at least 20% of the LIH
Stockholders' Original Ownership Level.
<PAGE>
I. ARTICLE
DEFINITIONS
A. Terms. As used in this Agreement, the following defined terms shall have the
meanings set forth below:
"Additional Stockholder" means any person to whom the Company has
granted registration rights in compliance with Section 1.7 and who has executed
a Joinder Agreement in substantially the form of Exhibit A-2, and its direct and
indirect Permitted Transferees, so long as any such Person shall hold
Registrable Securities.
"BancBoston Stockholders" means BancBoston, and its direct and indirect
Permitted Transferees, in each case so long as any such Person shall hold
Registrable Securities or Restricted Securities.
"Bank Entity" means, at any time of determination, any Person that is
then subject to regulation under Section 4 of the Bank Holding Company Act.
"Bank Holding Company Act" means the Bank Holding Company Act of 1956,
as amended, and the rules and regulations thereunder.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of New York or the State of Minnesota are
authorized or obligated to close.
"Commission" means the U.S. Securities and Exchange Commission.
"Common Stock" means the Common Stock, par value $.10 per share, of the
Company, any securities into which such Common Stock shall have been changed and
any securities resulting from any reclassification or recapitalization of such
Common Stock, and all other securities of any class or classes (however
designated) of the Company the holders of which have the right, without
limitation as to amount, after payment on any securities entitled to a
preference on dividends or other distributions upon any dissolution, liquidation
or winding up, either to all or to a share of the balance of payments upon such
dissolution, liquidation or winding up.
"Equity Equivalents" means (a) the Warrants, (b) any other securities
(other than employee options) which, by their terms, are or may be exercisable,
convertible or exchangeable for or into Common Stock at the election of the
holder thereof, (c) the shares of Class B-1 Common Stock and (d) the shares of
Series B Preferred Stock.
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar Federal statute then in effect, and any reference to a particular
section thereof shall include a reference to a comparable section, if any, of
any such similar Federal statute, and the rules and regulations thereunder.
"Fully-Diluted Basis" means with respect to the calculation of the
number of shares of Common Stock, (i) all shares of Common Stock outstanding at
the time of determination, (ii) all shares of Common Stock issuable upon the
exercise, conversion or exchange of any Equity Equivalents outstanding at the
time of determination and (iii) all shares of Common Stock issuable upon the
exercise, conversion or exchange of any securities that are issuable upon the
exercise, conversion or exchange of any Equity Equivalents outstanding at the
time of determination.
"Joinder Agreement" means a Joinder Agreement substantially in the form
attached hereto as Exhibit A-1 or A-2.
"Liberty Mutual Stockholders" means Liberty Mutual, and its direct and
indirect Permitted Transferees, in each case so long as any such Person shall
hold Registrable Securities or Restricted Securities.
"LIH Stockholders" means the LIH Entities, and their respective direct
and indirect Permitted Transferees, in each case so long as any such Person
shall hold Registrable Securities or Restricted Securities.
"Mezzanine Stockholders" means the Mezzanine Entities, and their
respective direct and indirect Permitted Transferees, in each case so long as
any such Person shall hold Registrable Securities or Restricted Securities.
"Original Ownership Level" means, with respect to the BancBoston
Stockholders, the LIH Stockholders, the Liberty Mutual Stockholders or the
Mezzanine Stockholders (as applicable), the number of shares of Common Stock, on
a Fully Diluted Basis, as adjusted for any stock splits, stock dividends or
reclassifications or other similar events, held by them in the aggregate on the
Closing Date immediately after the Closing (as such terms are defined in the SB
Investment Agreement or, if the Closing thereunder does not occur, as such terms
are defined in the AVS Investment Agreement).
"Participating Stockholders" means the LIH Stockholders, the BancBoston
Stockholders, the Liberty Mutual Stockholders, the Mezzanine Stockholders and
any Additional Stockholders or transferee of any of the foregoing persons who
has acquired Registrable Securities and who has executed a Joinder Agreement.
"Permitted Transferee" means:
(i) with respect to any Participating Stockholder who is a
natural person, the spouse or any lineal descendant (including by
adoption
<PAGE>
and stepchildren) of such Participating Stockholder or any trust of
which such Participating Stockholder is the trustee and which is
established solely for the benefit of any of the foregoing individuals
and whose terms are not inconsistent with the terms of Article X; and
(ii) with respect to any Participating Stockholder who is not
a natural person, (A) any Affiliate of such Participating Stockholder
and any officer or director of such Participating Stockholder or any
such Affiliate, (B) any spouse or lineal descendant (including by
adoption and stepchildren) of the officers and directors referred to in
clause (A) above, and any trust in which all the beneficiaries thereof
are one or more of the persons described in this clause (B) and the
officers and directors described in clause (A) above and whose terms
are not inconsistent with the terms of Article X; and
(iii) as to any LIH Stockholder, (w) any other LIH
Stockholder, (x) any member or manager of such LIH Stockholder, (y) any
partner, officer or employee of any such manager or member, (z) any
Affiliate of such LIH Stockholder or of any such member, manager,
partner, officer or employee, and (xx) any liquidating trust or similar
entity established by such LIH Stockholder or any of the foregoing
entities for the benefit of its members, partners or other interest
holders and their Permitted Transferees for the purpose of holding
Registrable Securities;
(iv) as to any Mezzanine Stockholder, (w) any other Mezzanine
Stockholder, (x) any liquidating trust or similar entity established by
any Mezzanine Stockholder for the benefit of its Permitted Transferees
for the purpose of holding Registrable Securities, (y) with respect to
the MassMutual Entities only, any person (excluding individuals) that
is an investment fund for whom a MassMutual Entity (or any Affiliate
thereof) is the sole investment manager or investment advisor, and (z)
with respect to NCVC only, Great Lakes Capital Investments I, LLC, or
any other entity that is formed and controlled by and for the benefit
of the executive officers of NCVC; and
(v) as to any Liberty Mutual Stockholder, Liberty Mutual Fire
Insurance Company, Liberty Life Assurance Company of Boston and Liberty
Insurance Corporation, in each case so long as such Person is an
Affiliate of such Liberty Mutual Stockholder at the time of the
relevant Transfer;
provided, however, that notwithstanding anything in paragraphs
(i) through (v) above to the contrary, for the purposes of Article X
only, (w) the "Permitted Transferees" of the LIH Stockholders at any
time of determination shall not include any Person who is then a
BancBoston
<PAGE>
Stockholder, a Liberty Mutual Stockholder, a Mezzanine Stockholder or a
Permitted Transferee of a BancBoston Stockholder, Liberty Mutual
Stockholder or Mezzanine Stockholder, (x) the "Permitted Transferees"
of the BancBoston Stockholders at any time of determination shall not
include any Person who is then an LIH Stockholder, a Liberty Mutual
Stockholder, a Mezzanine Stockholder or a Permitted Transferee of an
LIH Stockholder, Liberty Mutual Stockholder or Mezzanine Stockholder,
(y) the "Permitted Transferees" of the Liberty Mutual Stockholders at
any time of determination shall not include any Person who is then a
BancBoston Stockholder, an LIH Stockholder, a Mezzanine Stockholder or
a Permitted Transferee of a BancBoston Stockholder, LIH Stockholder or
Mezzanine Stockholder and (z) the "Permitted Transferees" of the
Mezzanine Stockholders at any time of determination shall not include
any Person who is then a Liberty Mutual Stockholder, a BancBoston
Stockholder, an LIH Stockholder or a Permitted Transferee of a Liberty
Mutual Stockholder, BancBoston Stockholder or LIH Stockholder.
"Pro Rata" means, with respect to one or more Stockholders, in
proportion to the number of shares of Common Stock on a Fully-Diluted Basis
owned by such Stockholder or Stockholders or which may be acquired by any such
Stockholder or Stockholders upon exercising any rights under any Equity
Equivalent owned by such Stockholder or Stockholders.
"Registrable Securities" means, at any time of determination, (i) the
shares of Common Stock then issued and outstanding or which are issuable upon
the conversion, exercise or exchange of Equity Equivalents, (ii) any then
outstanding securities into which shares of Common Stock shall have been changed
and (iii) any then outstanding securities resulting from any reclassification or
recapitalization of Common Stock; provided, however, that "Registrable
Securities" shall not include any shares of Common Stock or other securities
obtained or transferred pursuant to an effective registration statement under
the Securities Act or in a Rule 144 Transaction; and provided further, however,
that "Registrable Securities" shall not include any shares of Common Stock or
other securities which are held by a Person who is not a Participating
Stockholder.
"Requesting Investors" means, with respect to any Demand Registration,
the Required LIH Stockholders, the Required BancBoston Stockholders, the
Required Liberty Mutual Stockholders or the Required Mezzanine Stockholders (as
the case may be) that have requested such Demand Registration in accordance with
Section 1.1.
"Required BancBoston Stockholders" means, as of the date of any
determination thereof, BancBoston Stockholders which then hold Registrable
Securities representing at least a majority (by number of shares) of the
Registrable Securities (or, for purposes of any amendment, modification or
waiver of any provision of Article X, the
<PAGE>
Restricted Securities), on a Fully-Diluted Basis, then held by all BancBoston
Stockholders.
"Required Liberty Mutual Stockholders" means, as of the date of any
determination thereof, Liberty Mutual Stockholders which then hold Registrable
Securities representing at least a majority (by number of shares) of the
Registrable Securities (or, for purposes of any amendment, modification or
waiver of any provision of Article X, the Restricted Securities),
<PAGE>
on a Fully-Diluted Basis, then held by all Liberty Mutual Stockholders.
"Required LIH Stockholders" means, as of the date of any determination
thereof, LIH Stockholders which then hold Registrable Securities representing at
least a majority (by number of shares) of the Registrable Securities (or, for
purposes of any amendment, modification or waiver of any provision of Article X,
the Restricted Securities), on a Fully-Diluted Basis, then held by all LIH
Stockholders.
"Required Mezzanine Stockholders" means, as of the date of any
determination thereof, Mezzanine Stockholders which then hold Registrable
Securities representing at least a majority (by number of shares) of the
Registrable Securities (or, for purposes of any amendment, modification or
waiver of any provision of Article X, the Restricted Securities), on a
Fully-Diluted Basis, then held by all Mezzanine Stockholders.
"Requisite Registration Participants" means, with respect to any Demand
Registration or Piggyback Registration, Participating Stockholders which then
hold Registrable Securities representing at least a majority (by number of
shares) of the Registrable Securities requested to be included in such Demand
Registration (whether as Requesting Investors or otherwise) or Piggyback
Registration pursuant to Section 1.1 or 2.1, as applicable.
"Requisite Requesting Investors" means, as of the date of any
determination thereof with respect to any Demand Registration, Requesting
Investors which then hold a majority (by number of shares) of the Registrable
Securities, on a Fully-Diluted Basis, then held by all Requesting Investors of
such Demand Registration.
"Restricted Securities" means the Series B Preferred Stock, the Common
Stock, any Equity Equivalents and any securities issued with respect to any of
the foregoing as a result of any stock dividend, stock split, reclassification,
recapitalization, reorganization, merger, consolidation or similar event or upon
the conversion, exchange or exercise thereof.
"Rule 144 Transaction" means a transfer of Common Stock (a) complying
with Rule 144 under the Securities Act (or any successor statute or rule) as
such Rule (or such successor statute or rule, as the case may be) is in effect
on the date of such transfer (but not including a sale other than pursuant to a
"brokers transaction" as defined in clauses (1) and (2) of paragraph (g) of such
Rule as in effect on the date hereof) and (b) occurring at a time when shares of
Common Stock are registered pursuant to Section 12 of the Exchange Act (or any
successor to such Section).
"Sale of the Company" means the sale of the Company (whether by merger,
consolidation, recapitalization, reorganization, sale of securities of the
Company or sale of all or substantially all the assets of the Company) to one or
more Persons (other than the LIH Stockholders and their respective Affiliates)
who acquire securities
<PAGE>
representing 50% or more of the total voting power of and equity interest in the
Company, in each case on a Fully-Diluted Basis.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute then in effect, and any reference to a particular
section thereof shall include a reference to a comparable section, if any, of
any such similar Federal statute, and the rules and regulations thereunder.
"Transfer" means any direct or indirect sale, transfer, assignment,
grant of a participation in, gift, hypothecation, pledge or other disposition of
any Restricted Security or any interest therein or, as the context may require,
to sell, transfer, assign, grant a participation in, give as a gift,
hypothecate, pledge or otherwise dispose of, directly or indirectly, any
Restricted Security or any interest therein; provided, however, that the
exercise of any purchase, conversion or exchangeability right provided for in
the terms of the Series B Preferred Stock or any Equity Equivalent shall not be
deemed a "Transfer."
A. OTHER DEFINED TERMS. Unless otherwise defined herein, capitalized terms used
in this Agreement shall have the respective meanings assigned to them in the AVS
Investment Agreement.
A. DEFINED TERMS IN CORRESPONDING SECTIONS. The following defined terms, when
used in this Agreement, shall have the meaning ascribed to them in the
corresponding Sections of this Agreement listed below:
"AVS Investment Agreement" -- Recitals
"BancBoston -- Preamble
"Black-Out Notice" -- Section 1.8(b)
"Buyer" -- Section 10.2(a)
"Class B-1 Common Stock" -- Recitals
"Company" -- Preamble
"Demand Registration" -- Section 1.1
"Inclusion Notice" -- Section 10.2(a)
"Inclusion Right" -- Section 10.2(b)
"Investment Agreements" -- Recitals
"Liberty Mutual" -- Preamble
"LIH Holdings I" -- Preamble
"LIH Holdings II" -- Preamble
"LIH Holdings III" -- Preamble
"LIH Entities -- Preamble
"Long-Form Registration" -- Section 1.1(a)
"MassMutual Entities" -- Preamble
"Mezzanine Entities" -- Preamble
<PAGE>
"MMCI" -- Preamble
"MMCVP" -- Preamble
"MMLIC" -- Preamble
"MMPI" -- Preamble
"NCVC" -- Preamble
"Offerees" -- Section 10.2(a)
"Piggyback Registration" -- Section 2.1
"Registration Expenses" -- Section 5.1
"SB Investment Agreement -- Recitals
"Section 10.2 Offer" -- Section 10.2(a)
"Securities Purchase Agreements" -- Recitals
"Series B Preferred Stock" -- Recitals
"Short-Form Registration" -- Section 1.1(a)
"Transferors" -- Section 10.2(a)
"Transferor Shares" -- Section 10.2(a)
"Warrants" -- Recitals
I. ARTICLE
MISCELLANEOUS
A. NO INCONSISTENT AGREEMENTS. The Company represents and warrants that it does
not currently have, and covenants that it will not hereafter enter into any
Contract which is inconsistent with, or would otherwise restrict the performance
by the Company of, its obligations hereunder.
A. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would
occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof and that the parties hereto shall be entitled
to specific performance of the terms hereof, in addition to any other remedy
that may be available to any of them at law or equity; provided, however, that
each of the parties hereto agrees to provide the other parties hereto with
written notice at least two Business Days prior to filing any motion or other
pleading seeking a temporary restraining order, a temporary or permanent
injunction, specific performance, or any other equitable remedy and to give the
other parties hereto and their counsel a reasonable opportunity to attend and
participate in any judicial or administrative hearing or other proceeding held
to adjudicate or rule upon any such motion or pleading.
A. AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no modification,
amendment or waiver of any provision of this Agreement will be effective against
the Company or any holder of Registrable Securities or Restricted Securities,
unless such modification, amendment or waiver is approved in
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writing by the Company, the Required LIH Stockholders, the Required BancBoston
Stockholders, the Required Liberty Mutual Stockholders and the Required
Mezzanine Stockholders. Each of the Participating Stockholders and the Company
shall be bound by each modification, amendment or waiver authorized in
accordance with this Section 12.3, regardless of whether the certificates
evidencing the Registrable Securities or the Restricted Securities shall have
been marked to indicate such modification, amendment or waiver. The failure of
any party hereto to enforce any of the provisions of this Agreement will in no
way be construed as a waiver of such provisions and will not affect the right of
such party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
A. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns. Each of the Participating Stockholders hereby
agrees that it shall not Transfer any Restricted Securities to any of its
Permitted Transferees, unless such Permitted Transferee shall have executed a
Joinder Agreement, substantially in the form of Exhibit A-1, and thereby become
a party to this Agreement. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities, except to the
extent reserved to or by the Transferor in connection with any such Transfer;
provided, however, that the benefits of this Agreement shall inure to and be
enforceable by any Transferee of Registrable Securities only if such Transferee
acquired such Registrable Securities in accordance with the terms of Article X
and shall have executed a Joinder Agreement. Notwithstanding the immediately
preceding sentence, (a) nothing contained herein shall be construed as granting
any Participating Stockholder the right to Transfer any of its Restricted
Securities except in accordance with this Agreement and (b) unless otherwise
expressly contemplated by this Agreement, none of the provisions of Article X
shall apply to any Transfer of Restricted Securities (or to the Transferee
thereof) subsequent to a Transfer of those securities pursuant to Section 10.2.
A. NOTICES. All notices, requests and other communications hereunder must be in
writing and will be deemed to have been duly given only if delivered personally
against written receipt or by facsimile transmission or mailed by prepaid first
class certified mail, return receipt requested or mailed by reputable overnight
courier, fee prepaid, to the parties at the following addresses or facsimile
numbers:
(a) if to the Company, to:
Lund International Holdings, Inc.
911 Lund Boulevard
Anoka, Minnesota 55303
Facsimile No: (612) 576-4297
Attn: Chief Executive Officer
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with copies (which shall not constitute notice) to the other
holders of Registrable Securities or Restricted Securities and
to:
Leonard, Street and Deinard
150 South Fifth Avenue
Suite 2300
Minneapolis, Minnesota 55402
Facsimile No: (612) 335-1657
Attn: Mark Weitz, Esq.; and
(b) if to any Participating Stockholder, to the address for notices set
forth opposite its name in Schedule I.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 12.5, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section 12.5, be deemed given upon receipt, (iii) if delivered
by mail in the manner described above to the address as provided in this Section
12.5, be deemed given on the earlier of the third full Business Day following
the day of mailing or upon receipt, and (iv) if delivered by overnight courier
to the address provided in this Section 12.5, be deemed given on the earlier of
the first Business Day following the date sent by such overnight courier or upon
receipt (in each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of such notice is
to be delivered pursuant to this Section 12.5). Any party from time to time may
change its address, facsimile number or other information for the purpose of
notices to that party by giving notice specifying such change to the other
parties hereto.
A. HEADINGS, CERTAIN CONVENTIONS. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit any terms
or provisions hereof. Unless the context otherwise expressly requires, all
references herein to Articles, Sections and Exhibits are to Articles and
Sections of, and Exhibits to, this Agreement. The words "herein," "hereunder"
and "hereof" and words of similar import refer to this Agreement as a whole and
not to any particular Section or provision. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation."
A. GENDER. Whenever the pronouns "he" or "his" are used herein they shall also
be deemed to mean "she" or "hers" or "it" or "its" whenever applicable. Words in
the singular shall be read and construed as though in the plural and words in
the plural shall be construed as though in the singular in all cases where they
would so apply.
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A. INVALID PROVISIONS. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future law, and if the rights or
obligations of any party hereto under this Agreement will not be materially and
adversely affected thereby, (i) such provision will be fully severable, (ii)
this Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (iii) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and (iv) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
A. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
A. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH OF THE PARTIES HERETO
CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE
COUNTY OF NEW YORK, STATE OF NEW YORK AND IRREVOCABLY AGREES THAT ALL ACTIONS OR
PROCEEDINGS RELATING TO THIS AGREEMENT MAY BE LITIGATED IN SUCH COURTS. EACH OF
THE PARTIES HERETO ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT.
EACH OF THE PARTIES HERETO FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE PARTY AT THE ADDRESS SPECIFIED IN THIS AGREEMENT, SUCH SERVICE
TO BECOME EFFECTIVE 15 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL IN ANY WAY
BE DEEMED TO LIMIT THE ABILITY OF ANY PARTY HERETO TO SERVE ANY SUCH LEGAL
PROCESS, SUMMONS, NOTICES AND DOCUMENTS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER OR TO BRING ACTIONS, SUITS OR
PROCEEDINGS AGAINST ANY OF THE OTHER PARTIES
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HERETO IN SUCH OTHER JURISDICTIONS, AND IN SUCH MANNER, AS MAY BE PERMITTED BY
ANY APPLICABLE LAW.
A. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT. EACH OF THE PARTIES HERETO ALSO WAIVES ANY BOND OR SURETY OR
SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF SUCH
PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
EACH OF THE PARTIES HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED
THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES
ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
A. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
LUND INTERNATIONAL HOLDINGS, INC.
By: /s/ Dennis Vollmershausen
---------------------------------------
Name: Dennis Vollmershausen
Title: President
LIH HOLDINGS, LLC
By: /s/ Ira D. Kleinman
---------------------------------------
Name: Ira D. Kleinman
Title: Authorized Person
LIH HOLDINGS II, LLC
By: /s/ Ira D. Kleinman
---------------------------------------
Name: Ira D. Kleinman
Title: Authorized Person
LIH HOLDINGS III, LLC
By: /s/ Ira D. Kleinman
---------------------------------------
Name: Ira D. Kleinman
Title: Authorized Person
LIBERTY MUTUAL INSURANCE COMPANY
By: /s/ A. Alexander Fontanes
---------------------------------------
Name: A. Alexander Fontanes
Title: Senior Vice President and
Chief Investment Officer
[Signature Page to Rights Agreement]
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BANCBOSTON CAPITAL INC.
By: /s/ Timothy H. Robinson
---------------------------------------
Name: Timothy H. Robinson
Title: Vice President
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Michael L. Klofas
---------------------------------------
Name: Michael L. Klofas
Title: Managing Director
MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED
By: Massachusetts Mutual Life Insurance
Company, as Investment Advisor
By: /s/ Michael L. Klofas
---------------------------------------
Name: Michael L. Klofas
Title: Managing Director
MASSMUTUAL CORPORATE INVESTORS
By: /s/ Michael L. Klofas
---------------------------------------
Name: Michael L. Klofas
Title: Vice President
The foregoing is executed on behalf of
MassMutual Corporate Investors, organized
under a Declaration of Trust, dated
September 13, 1985, as amended from time to
time. The obligations of such Trust are not
personally binding upon, nor shall resort be
had to the property of, any of the Trustees,
shareholders,
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officers, employees or agents of such Trust,
but the Trust's property only shall be
bound.
[Signature Page to Rights Agreement]
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MASSMUTUAL PARTICIPATION INVESTORS
By: /s/ Michael L. Klofas
---------------------------------------
Name: Michael L. Klofas
Title: Vice President
The foregoing is executed on behalf of
MassMutual Participation Investors,
organized under a Declaration of Trust,
dated April 7, 1988, as amended from time to
time. The obligations of such Trust are not
personally binding upon, nor shall resort be
had to the property of, any of the Trustees,
shareholders, officers, employees or agents
of such Trust, but the Trust's property only
shall be bound.
NATIONAL CITY VENTURE CORPORATION
By: /s/ Christopher P. Dowd
---------------------------------------
Name: Christopher P. Dowd
Title: Vice President
[Signature Page to Rights Agreement]
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Exhibit A-1
Form of Joinder Agreement
For Permitted Transferees
LUND INTERNATIONAL HOLDINGS, INC.
911 Lund Boulevard
Anoka, Minnesota 55303
Attention: Chief Executive Officer
Ladies & Gentlemen:
In consideration of the transfer to the undersigned of [DESCRIBE
SECURITY BEING TRANSFERRED] of LUND INTERNATIONAL HOLDINGS, INC., a Delaware
corporation (the "Company"), the undersigned represents that it is a Permitted
Transferee of [INSERT NAME OF TRANSFEROR] and agrees that, as of the date
written below, [HE][SHE][IT] shall become a party to, and a Permitted Transferee
as defined in, that certain Rights Agreement dated as of December 22, 1998, as
such agreement may have been amended from time to time (the "Agreement"), among
the Company and the persons named therein, and as a Permitted Transferee shall
be fully bound by, and subject to, all of the covenants, terms and conditions of
the Agreement that were applicable to the undersigned's transferor, as though an
original party thereto, and shall be deemed a [LIH STOCKHOLDER] [BANCBOSTON
STOCKHOLDER] [LIBERTY MUTUAL STOCKHOLDER] [MEZZANINE STOCKHOLDER] [ADDITIONAL
STOCKHOLDER] for all purposes thereof.
Executed as of the day of , .
SIGNATORY:
Address:
ACKNOWLEDGED AND ACCEPTED:
LUND INTERNATIONAL HOLDINGS, INC.
By:___________________________________
Name:
Title:
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Exhibit A-2
Form of Joinder Agreement
For Additional Stockholders
LUND INTERNATIONAL HOLDINGS, INC.
911 Lund Boulevard
Anoka, Minnesota 55303
Attention: Chief Executive Officer
Ladies & Gentlemen:
In consideration of the issuance to the undersigned of [DESCRIBE
SECURITY BEING ISSUED] of LUND INTERNATIONAL HOLDINGS, INC., a Delaware
corporation (the "Company"), the undersigned agrees that, as of the date written
below, [HE][SHE][IT] shall become a party to and an Additional Stockholder under
that certain Rights Agreement dated as of December 22, 1998, as such agreement
may have been amended from time to time (the "Agreement"), among the Company and
the persons named therein, and shall be fully bound by, and subject to, the
covenants, terms and conditions of the Agreement as provided under Section 12.4
of the Agreement as though an original party thereto.
Executed as of the day of , .
SIGNATORY:
Address:
ACKNOWLEDGED AND ACCEPTED:
LUND INTERNATIONAL HOLDINGS, INC.
By:___________________________________
Name:
Title:
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Schedule I
Names and Addresses
LIH Holdings III, LLC
c/o Harvest Partners, Inc.
280 Park Avenue
33rd Floor
New York, NY 10017
Attn: Ira D. Kleinman
Facsimile No.: (212) 812-0100
Liberty Mutual Insurance Company
175 Berkeley Street
Boston, MA 02117
Attn: Jeffrey Moy
Facsimile No.: (617) 574-6971
BancBoston Capital Inc.
17 Federal Street
Mail Stop 75-10-01
Boston, MA 02110
Attn: Timothy Robinson
Facsimile No.: (617) 434-1153
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Michael L. Klofas
Facsimile No.: (413) 846-5035
MassMutual Corporate Value Partners Limited
c/o Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Michael L. Klofas
Facsimile No.: (413) 846-5035
MassMutual Corporate Investors
c/o Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Michael L. Klofas
Facsimile No.: (413) 846-5035
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Schedule I cont'd
Names and Addresses
MassMutual Participation Investors
c/o Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attn: Michael L. Klofas
Facsimile No.: (413) 846-5035
National City Venture Corporation
1965 East Sixth Street, Suite 1010
Cleveland, OH 44114
Attn: Christopher P. Dowd
Facsimile No.: (216) 575-9965
EXHIBIT 10.6
SECOND AMENDED AND RESTATED GOVERNANCE AGREEMENT
This Second Amended and Restated Governance Agreement, dated as of
December 22, 1998, among Lund International Holdings, Inc., a Delaware
corporation (the "Company"), LIH Holdings, LLC, a Delaware limited liability
company ("LIH"), LIH Holdings II, LLC, a Delaware limited liability company
("LIH II"), and LIH Holdings III, LLC, a Delaware limited liability company
("LIH III"; LIH, LIH II and LIH III are referred to collectively herein as the
"LIH Entities");
WITNESSETH:
WHEREAS, Allen W. Lund ("Lund") and LIH entered into a stock purchase
agreement (the "Stock Purchase Agreement"), dated September 9, 1997, pursuant to
which, among other things, subject to the terms and conditions contained in the
Stock Purchase Agreement, LIH acquired 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 thereof; and
WHEREAS, Lund and LIH received 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 required that certain arrangements be put in place
relating to the acquisition and disposition of securities of the Company by LIH
and its Affiliates and related provisions concerning LIH's relationship with the
Company, negotiated the terms of that certain Governance
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Agreement, dated September 9, 1997 (the "Initial Governance Agreement") and,
subject to execution and delivery of the Initial Governance Agreement, gave its
approval under Section 203 of the Delaware General Corporation Law and
implemented the arrangements contemplated by the Initial Governance Agreement;
and
WHEREAS, the Company and LIH entered, executed and delivered the
Initial Governance Agreement and the Initial Governance Agreement has been in
effect since September 9, 1997 as amended, supplemented and modified to the date
hereof; and
WHEREAS, pursuant to the provisions of Section 1.01(a)(i) of the
Initial Governance Agreement, LIH or its Affiliates or Associates may acquire
securities from the Company, provided that such acquisition is approved by the
affirmative vote of a majority of the Independent Directors; and
WHEREAS, LIH II and the Company entered into an Investment Agreement,
dated November 25, l997 (the "LIH II Investment Agreement"), providing for the
purchase from the Company by LIH II of 874,400 shares of Common Stock and
1,493,398 shares of the Company's Series A Preferred Stock, par value $.01 per
share (the "Preferred Shares"), which Preferred Shares were subsequently
converted into shares of the Company's Class B-1 Common Stock (the "Class
B-1 Common Stock"; and such shares of Class B-1 Common Stock together with
874,400 shares of Common Stock are collectively referred to as the "LIH II
Shares"); and
WHEREAS, as a condition to approval of the LIH II Investment Agreement
by the Independent Directors, the Independent Directors approved the Amended and
Restated Governance Agreement, dated November 25, l997 (the "First Amendment"),
which was executed by the Company, LIH and LIH II; and
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WHEREAS, (x) LIH III desires to purchase additional shares of capital
stock from the Company (the "LIH III Shares") as more fully set forth in (i)
that certain Investment Agreement, dated as of December __, 1998, relating to
the acquisition of the Ventshade Holdings, Inc. (the "Auto Ventshade Investment
Agreement") and (ii) that certain Investment Agreement dated as of December
_____, 1998 relating to the acquisition of the Smittybilt, Inc. (the "Smittybilt
Investment Agreement;" and together with the Auto Ventshade Investment
Agreement, the "1998 Investment Agreements") and the Company desires to sell
such shares of capital stock to LIH III and, as a condition thereto, the
Company, LIH, LIH II and LIH III desire to enter into this Second Amended and
Restated Governance Agreement which amends and restates the First Amendment;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein and intending to be legally bound
hereby, the Company, LIH, LIH II and LIH III hereby agree as follows:
ARTICLE I
STANDSTILL AND VOTING
Section 1.01. Acquisition of Voting Securities.
(a) Until the Standstill Termination Date, each of the LIH Entities
severally covenants and agrees that it will not take any action or omit to take
any action to allow the aggregate number of Voting Securities Beneficially Owned
by the LIH Entities and their respective Affiliates and Associates to exceed 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
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limitation, the acquisition of Voting Securities by any LIH Director or any LIH
II 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, any of the LIH Entities or an Affiliate or
Associate of any of the LIH Entities, or any Person acting in concert with any
of the LIH Entities or any of their respective 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 any LIH Entity in order to permit the acquisition by an LIH Entity 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 any
LIH Entity commencing a tender offer or exchange offer, then any LIH Entity may
commence a tender or exchange offer for all Voting Securities not owned by the
LIH Entities and their 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 LIH Entities and their Affiliates and Associates Beneficially Own more
than the Permitted Shares, inadvertently or otherwise, then each LIH Entity
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) No LIH Entity shall permit any of its Affiliates or Associates to
Beneficially Own any Voting Securities unless such Person becomes a signatory to
this Agreement and a party hereunder.
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Section 1.02. Limited Restrictions on Transfer. Prior to the Standstill
Termination Date, no LIH Entity, nor any Affiliate or Associate thereof which
acquires Voting Securities in accordance with the terms of this Agreement, will
Transfer Beneficial Ownership of any Voting Securities to any of their
respective Affiliates or Associates unless each such Person becomes a signatory
to this Agreement and a party hereunder. Each LIH Entity agrees to inclusion of
the following legend on certificates representing the Shares, the LIH II Shares
and the LIH III 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 Second Amended and
Restated Governance Agreement between the holder and the Company dated
as of December __, 1998, 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 LIH
Entities during the continuance of this Agreement.
Section 1.03. Voting. Until the Standstill Termination Date, all Voting
Securities Beneficially Owned by the LIH Entities 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 any LIH Entity, 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, (b) in the case of LIH, for the LIH
Director, and (c) in the case of LIH II, for the LIH II Director.
Section 1.04. Further Restrictions on Conduct.
(a) Unless waived or approved in advance in accordance with Section
5.02(b) hereof, each of the LIH Entities severally covenants and agrees that
until the Standstill Termination Date, neither it nor any of its Affiliates or
Associates shall:
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(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, each of
the LIH Entities 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 it or any of its
Affiliates or Associates 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
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Securities by the LIH Entities that is reported in a statement on Schedule 13D
filed with the Commission and delivered to the Company by the LIH Entities or
any of their respective Affiliates or Associates 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 shall be
seven.
(b) As of the date hereof, the Board of Directors shall consist of the
LIH Director set forth on Exhibit 1 hereto, the LIH II Director set forth on
Exhibit I hereto and the Company Director, two Independent Directors, the Third
Independent Director and the Fourth Independent Director, all as set forth on
Exhibit 2 hereto.
Section 2.02 Proportional Representation.
(a) Until the Standstill Termination Date, except as indicated in
paragraph (b) below, the Company and each LIH Entity shall use their respective
best efforts to cause the composition of the Board to continue to reflect, or to
fully implement, the proportionate representation of the LIH Director, the LIH
II Director, Company Director and Independent Directors set forth in 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
prior to the Standstill Termination Date that a vacancy of an Independent
Director on the Board of Directors is to be filled, the identity of such
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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 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) 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 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) All rights of LIH and obligations of the Company relative to LIH's
designation of representatives on the Board of Directors (including the LIH, LIH
II, Company and Independent
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Directors) shall terminate if, at the date of determination, the aggregate
number of shares of Common Stock Beneficially Owned by the LIH Entities and any
Affiliate or Associate thereof which is a signatory to this Agreement is less
than 50% of the number of Shares acquired by LIH at the Closing pursuant to the
Stock Purchase Agreement (as adjusted for stock dividends, splits,
recombinations and the like). All rights of the LIH Entities and obligations of
the Company relative to the designation of representatives on the Board of
Directors (including LIH, LIH II, 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 of the LIH Director and the LIH II Director designated by LIH and LIH
II, respectively, 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 LIH Director and LIH II
Director, including soliciting proxies in favor of the election of such persons,
or, in the case of any vacancy affecting any LIH Director or LIH II Director,
elect to the Board an LIH Director designated by LIH or an LIH II Director
designated by LIH II, 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
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(a) Until the first to occur of (i) the Standstill Termination Date,
(ii) the aggregate number of shares of Common Stock Beneficially Owned by the
LIH Entities and 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 the LIH II 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.
Each of LIH, LIH II and LIH III severally agrees that it 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, each of LIH,
LIH II and LIH III severally agrees to cause the LIH Director or the LIH II
Director, as the case may be, not to 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 an LIH Entity, its respective Affiliates or
Associates or relating to this Agreement, including, without limitation, any
amendment, modification or waiver hereof or thereof.
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Section 2.04 Assignment of Certain Rights. LIH II hereby assigns to
Harvest Partners III, L.P., a Delaware limited partnership ("HP III"), all of
its rights under this Agreement relative to (i) LIH II's designation of an LIH
II representative on the Board of Directors, and (ii) any management rights to
which it may be entitled pursuant to Section 2.05 below. The Company hereby
expressly consents to such assignment and agrees that all of its obligations
with respect to such designation and management rights shall be enforceable
against the Company by HP III. HP III hereby expressly agrees to be bound by the
provisions of this Agreement and that this Agreement is enforceable against it.
Section 2.05 Venture Capital Operating Company Status. In the event
that (i) at any time LIH II is not entitled to designate at least one member for
election to the Board of Directors, or (ii) the United States Department of
Labor through formal or informal rules, regulations or interpretations provides,
or it is otherwise established through governmental or court action, that such
representation does not constitute the exercise of management rights of the kind
necessary to enable HP III to continue to qualify as a "venture capital
operating company" within the meaning of Section 2510.3-101 of the plan asset
regulations promulgated by the United States Department of Labor (a "VCOC"),
then the Company shall, acting through its Board of Directors in a manner
consistent with its fiduciary obligations and consistent with the terms hereof,
grant to LIH II such management rights as the Company shall determine, the
exercise of which would (after taking into account the assignment pursuant to
Section 2.04 above), in the opinion of counsel to the HP III, enable HP III to
continue to qualify as a VCOC.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Company. The Company
represents and warrants to each LIH Entity 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 each LIH Entity, is enforceable against the Company in
accordance with its terms.
Section 3.02. Representations and Warranties of the LIH Entities. Each
of LIH, LIH II and LIH III severally 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 such
LIH Entity and the consummation by such LIH Entity of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of such LIH Entity and no other corporate proceedings on the part of
such LIH Entity are necessary to authorize this Agreement
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or any of the transactions contemplated hereby, and (c) this Agreement has been
duly executed and delivered by such LIH Entity and constitutes a valid and
binding obligation of such LIH Entity, and, assuming this Agreement constitutes
a valid and binding obligation of the Company, is enforceable against such LIH
Entity 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; provided, however, that an LIH Entity shall not be
deemed an "Affiliate" of any other LIH Entity for the purposes of LIH, LIH II,
or LIH III, as the case may be, causing any of the "Affiliates" of the other LIH
Entities from taking, or refraining from taking, any action under this
Agreement.
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 2.02(a)(iii).
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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 the LIH II 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 any of the LIH Entities, the Company or their respective 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 any of the LIH Entities, the Company or their respective 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 composed of the Independent Directors, other than the Third
Independent Director.
Section 4.11. "PERMITTED SHARES" shall mean 3,306,792 shares of Common
Stock, which number shall increase to include the number of shares of Common
Stock into which the Class B-1 Common Stock and the Series B Preferred Stock is
convertible, once the Class B-1 Common Stock and the Series B Preferred Stock is
converted (as adjusted for stock dividends, splits, recombinations and the
like); provided, however, until the Company consummates or if the Company does
not consummate the transactions contemplated by the Smittybilt Investment
Agreement, 3,306,792 shall be replaced by 3,149,080 in this Section 4.11.
14
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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 September 9,
2000.
Section 4.14. "LIH DIRECTOR" shall mean any person designated by LIH.
Section 4.15. "LIH II DIRECTOR" shall mean any person designated by LIH
II.
Section 4.16. "STOCKHOLDER INTERESTED TRANSACTION" shall have the
meaning set forth in Section 2.03(b).
Section 4.17. "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 LIH Entities and their respective
Affiliates and Associates which are signatories to this Agreement.
Section 4.18. "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 4.19. "THIRD INDEPENDENT DIRECTOR" shall mean the Independent
Director nominated in accordance with the provisions of Section 2.02(a)(i).
Section 4.20. "THIRD INDEPENDENT DIRECTOR NOMINATING COMMITTEE" shall
mean a committee of three directors, comprised of the LIH Director, the LIH II
Director, and one
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Independent Director, other than the Third Independent Director. Any action of
the Third Independent Director Nominating Committee shall be unanimous.
Section 4.21. "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 4.22. "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 4.23. "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 LIH to: LIH Holdings, LLC
c/o Harvest Partners, Inc.
280 Park Avenue
New York, NY 10017
Telecopier: 212-812-0100
Attention: Ira D. Kleinman
with a copy to: Thelen Reid & Priest LLP
40 West 57th Street
New York, NY 10019
Telecopier: 212-603-2001
Attention: Leonard Gubar, Esq.
if to LIH II or LIH III to: LIH Holdings II, LLC
c/o Harvest Partners, Inc.
280 Park Avenue
New York, NY 10017
Telecopier: 212-812-0100
Attention: Ira D. Kleinman
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with a copy to: Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Telecopier: 212-309-6273
Attention: James A. Mercadante, Esq.
if to the Company, to: Lund International Holdings, Inc.
911 Lund Boulevard
Anoka, MN 55303
Telecopier: 612-576-4299
Attention: Dennis Vollmershausen,
Chief Executive Officer
with a copy to: Leonard, Street and Deinard
150 South Fifth Street
Suite 2300
Minneapolis, MN 55402
Telecopier: 612-335-1657
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 LIH Entities 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
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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 of the
parties hereto.
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, LIH, LIH II and LIH
III each acknowledge and agree 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 an LIH Entity of the provisions of
this Agreement, in addition to any remedies at law, each LIH Entity 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.
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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.
19
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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/ Dennis Vollmershausen
------------------------------------
Its President
------------------------------------
LIH HOLDINGS, LLC
By /s/ Ira Kleinman
------------------------------------
Its Manager
------------------------------------
LIH HOLDINGS II, LLC
By /s/ Ira Kleinman
------------------------------------
Its Manager
------------------------------------
LIH HOLDINGS III, LLC
By /s/ Ira Kleinman
------------------------------------
Its Manager
------------------------------------
ACCEPTED AND AGREED
(as to Sections 2.04 and 2.05)
HARVEST PARTNERS III, L.P.
By Harvest Associates III, LLC
By /s/ Ira Kleinman
----------------------
Name: Ira Kleinman
Authorized Person
<PAGE>
Exhibit 1
LIH DIRECTOR
Ira Kleinman
LIH II DIRECTOR
Harvey Wertheim
<PAGE>
Exhibit 2
INDEPENDENT DIRECTORS
Robert Schoeberl
David Dovenberg
THIRD INDEPENDENT DIRECTOR
Vacant
FOURTH INDEPENDENT DIRECTOR
Lawrence Day
<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
<PAGE>
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.
EXHIBIT 10.7
ESCROW AGREEMENT
RELATING TO:
INDUSTRIAL DEVELOPMENT REVENUE BONDS
(LUND INDUSTRIES INCORPORATED PROJECT) SERIES 1994
OF THE CITY OF ANOKA, MINNESOTA
THIS AGREEMENT is made the 29th day of December, 1998, by and between
U.S. Bank Trust National Association, in Saint Paul, Minnesota (the "Escrow
Agent") and Lund Industries Incorporated (the "Company"):
WITNESSETH THAT:
WHEREAS, the City of Anoka, Minnesota (the "Issuer") has heretofore
issued $5,450,000 aggregate principal amount of its Industrial Development
Revenue Bonds (Lund Industries Incorporated Project), Series 1994 (the "Bonds")
pursuant to an Indenture of Trust dated as of September 1, 1994 (the
"Indenture") by and between the Issuer and U.S. Bank Trust National Association,
formerly known as First Trust National Association, as trustee (the "Trustee"),
for the purpose of acquiring, constructing and equipping a manufacturing
facility owned by the Company and located within the corporate boundaries of the
Issuer (the "Project"); and
WHEREAS, to provide for the defeasance of the Bonds, all in accordance
with Section 6-2 of the Indenture, the Company has directed the Trustee to
transfer $729,486.53 on deposit in the funds and accounts created under the
Indenture to an Escrow Fund created herein, and has additionally delivered
$3,181,560.03 of other funds to the Trustee for deposit to the Escrow Fund
identified below (the "Escrow Fund"), which shall be held, invested and used in
accordance with the terms and conditions of this Escrow Agreement; and
WHEREAS, the foregoing sums shall simultaneously be invested in
securities (the "Escrowed Obligations") as described in Exhibit A attached
hereto, which Escrowed Obligations shall be used to pay debt service on the
Bonds on each September 1 and March 1, from March 1, 1999 to and including
September 1, 2004, the Stated Maturity of the Bonds, all as further described on
Exhibit B hereto (the Escrowed Obligations (or evidence of the investment
therein and constructive receipt of) are herein called the "Escrow Deposit");
NOW, THEREFORE, in consideration of the premises and of the respective
agreements on the part of the Escrow Agent and the Company herein contained, the
parties hereto hereby agree as follows:
<PAGE>
1. Deposit. The Company hereby irrevocably directs that $729,486.53 be
transferred by the Trustee to the Escrow Fund from the funds and accounts
created under the Indenture, and herewith irrevocably delivers the sum of
$3,181,560.03 for deposit to the Escrow Fund, and hereby directs and authorizes
the Trustee to acquire the Escrowed Obligations described on Exhibit A attached
hereto.
2. Acknowledgment of Deposit and Transfer of Funds. Receipt of the
Escrow Deposit shall be acknowledged on behalf of the Escrow Agent on the date
hereof by execution of an Acknowledgment in the form attached hereto as Exhibit
C by a duly authorized officer of the Escrow Agent. The Escrow Deposit shall be
invested in the Escrowed Obligations specified in Exhibit A and the Escrow Agent
is hereby authorized and directed to make such investments as instructed by the
Company.
3. Notice of Defeasance. Upon receipt of the Escrow Deposit, the Escrow
Agent shall, in its capacity as the Trustee, mail a notice of defeasance to the
owners of the Bonds.
4. Compensation; Waiver of Lien. The fees and expenses of the Escrow
Agent relative to its duties under this Agreement in the amount of $12,850.19
have been paid by the Company on the date hereof. Such amount is payment in full
to the Escrow Agent relative to its duties hereunder. The Escrow Agent expressly
waives any lien upon or claim against the moneys and investments in the Escrow
Fund.
5. Collection and Remittance; Payment of Principal of Bonds. The Escrow
Agent will collect all remittances of interest on the Escrowed Obligations in
the Escrow Fund as and when such interest becomes due and payable and will cause
such Escrowed Obligations to be presented for payment and converted into cash on
their respective maturity or due dates in accordance with the schedule of cash
payments included in the Escrow Verification Report, prepared by McGladrey and
Pullen (the "Escrow Report"). The Escrow Agent will remit from the Escrow Fund
to the paying agent for the Bonds (which paying agent is currently the Trustee)
the funds required for the payment of the Bonds as set forth on Exhibit B
hereto.
6. Sufficiency of Escrow Deposit. In reliance upon the Escrow Report,
the Company represents, and the Escrow Agent acknowledges, that the amount of
the Escrow Deposit deposited in the Escrow Fund, if the principal of and
interest on the Escrowed Obligations are paid in accordance with their terms, is
sufficient to produce cash in such amounts to enable the Escrow Agent to make
full and timely payments of debt service on the Bonds as provided in paragraph 5
above.
7. Release of Guaranty. In accordance with Section 2.02 of that certain
Guaranty Agreement dated as of September 1, 1994, from Lund International
Holdings, Inc. (the "Guarantor") in favor of the Trustee, the Guaranty shall
remain in effect until the date which is one year plus 15 days after all Bonds
shall have been paid or provided for (i.e. January 14, 2000). On such date the
Trustee shall execute and deliver to the Company and the Guarantor a release of
the Guaranty in the form of Exhibit D attached hereto.
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<PAGE>
8. Trust; Remission of Remaining Moneys. It is recognized that the
Escrowed Obligations and money held in the Escrow Fund from time to time shall
be subject to the charge and lien thereon of this Escrow Agreement and the use
thereof required to be made by the provisions of this Escrow Agreement. The
Escrow Agent shall hold all such money and obligations in a special trust fund
and account (herein the "Escrow Fund") separate and wholly segregated from all
other funds and securities of the Company or the Escrow Agent or deposited with
the Escrow Agent, and shall never commingle such money or securities with other
money or securities, provided that nothing contained herein shall be construed
as requiring the Escrow Agent to keep the identical moneys, or any part thereof,
received for the Escrow Fund on hand, but moneys of an equal amount, except to
the extent such are investments permitted under this Escrow Agreement, shall
always be maintained on hand as funds held by the Escrow Agent as trustee,
belonging to the Company, and a special account thereof evidencing such fact
shall at all times be maintained on the books of the Escrow Agent, together with
such investments.
In the event of the Escrow Agent's failure to account for any money or
obligations held by it in the Escrow Fund, such money and obligations shall be
and remain the property of the Company, and if for any reason such money or
obligations cannot be identified, all other assets of the Escrow Agent shall be
impressed with a trust for the amount thereof and the Company shall be entitled
to a preferred claim upon such assets. All moneys remaining in the Escrow Fund
after payment therefrom of all sums required to be paid under this Escrow
Agreement shall be promptly remitted to the Company.
9. Sale and/or Reinvestment. (a) The Escrow Agent may sell or reinvest,
or both, all or a part of the Escrowed Obligations, or the proceeds thereof, in
securities set forth in Minnesota Statutes, Section 475.67, Subdivision 8, if
and only if (i) such sales or reinvestment, or both, are approved by a duly
authorized representative of the Company and otherwise permitted by the laws of
Minnesota, (ii) an opinion of a certified public accountant or a financial
advisor is first obtained to the effect that such sale or reinvestments, or
both, will not prevent the Escrow Agent from making all of the payments to the
paying agent of the Bonds as required in paragraph 5 above, and (iii) an opinion
of nationally recognized bond counsel or tax counsel recognized as having an
expertise in the area of tax-exempt financing is first obtained to the effect
that such sales or reinvestment, or both, (A) will not cause the Bonds to become
arbitrage bonds or prohibited advance refunding bonds under Sections 148 or
149(d) of the federal Internal Revenue Code of 1986, as amended, and the
applicable regulations and administrative interpretations thereunder, (B) will
not otherwise cause the interest on the Bonds to become includable in the gross
income of the owners thereof for federal income tax purposes, and (C) will not
materially adversely affect the legal rights of the holders of the Bonds.
(b) The Escrow Agent shall notify the Company within two Business Days
of monies becoming available. Monies credited to the Escrow Fund hereunder which
are uninvested pending disbursement or receipt of proper investment directions
or as directed herein, may be deposited to and held in a non-interest bearing
demand deposit account established with the Commercial Banking Department of the
Escrow Agent or with any bank affiliated with the Escrow Agent, without the
pledge of securities to or other collateralization of such deposit accounts.
3
<PAGE>
10. Final Statement. No later than January 15 of each year the Escrow
Agent shall render a statement to the Company, which statement shall set forth
for the preceding twelve month period the cash on hand and Escrowed Obligations
which have matured and the amounts received by the Escrow Agent by reason of
such maturity, the interest earned on any of the Escrowed Obligations, a list of
any investments or reinvestments made by the Escrow Agent in other Escrowed
Obligations and the interest and/or principal derived therefrom, the amounts of
cash paid for the principal and interest on the Bonds, as said payments became
due and payable, and any other transactions of the Escrow Agent pertaining to
its duties and obligations as set forth herein.
11. Trust; Safekeeping. All Escrowed Obligations, moneys and investment
income deposited with or received by the Escrow Agent pursuant to this Escrow
Agreement shall be subject to the trust created by this Escrow Agreement, and
the Escrow Agent shall be liable for the preservation and safekeeping thereof;
provided, however, that it shall not be responsible for any depreciation in
value of any of the Escrowed Obligations or for the reinvestment of the same
except as herein provided.
12. Duties; Obligations and Liabilities. The duties and obligations of
the Escrow Agent shall be as prescribed by the provisions of this Escrow
Agreement, and the Escrow Agent shall not be liable hereunder except for failure
to perform its duties and obligations as specifically set forth herein or to act
in good faith in the performance thereof, and no implied duties or obligations
shall be incurred by the Escrow Agent other than those specified herein. The
Escrow Agent may consult with counsel of its choice and the opinion of such
counsel shall be full and complete authorization and protection with respect to
any action taken or not taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel.
13. Resignation; Successor. The Escrow Agent may at any time resign and
be discharged of its obligations hereunder by giving to the Chief Financial
Officer of the Company written notice of such resignation and by refunding to
the Company a pro rata amount of the escrow fee described in paragraph 4 hereof
based on the remainder of the term of this Escrow Agreement compared to its
complete term, not less than 60 days before the date when the same is to take
effect, and by publication of a copy of such notice in any available daily or
weekly newspaper or periodical which circulates throughout the State of
Minnesota and furnishes financial news as part of its service, not less than 30
days prior to such date. Such resignation shall take effect upon the appointment
and qualification of a successor escrow agent. In the event of receipt of notice
of such resignation, a successor shall be promptly appointed by the Company, and
the Company shall immediately give written notice thereof to the predecessor
agent and publish the same in a Minnesota newspaper as described above. If in a
proper case no appointment of a successor agent is made within 45 days after the
receipt by the Company of notice of such resignation, the Escrow Agent or the
holder of any Bond may apply to any court of competent jurisdiction to appoint a
successor Escrow Agent, which appointment may be made by the court after such
notice, if any, as the court may prescribe.
Any successor agent appointed hereunder shall execute, acknowledge and
deliver to its predecessor agent and to the Company a written acceptance of such
appointment, and shall thereupon without any further act, deed or conveyance
become fully vested with all moneys,
4
<PAGE>
properties, duties and obligations of its predecessor, but the predecessor shall
nevertheless pay over, transfer, assign and deliver all moneys, securities or
other property held by it to the successor agent, shall execute, acknowledge and
deliver such instruments of conveyance and do such other things as may
reasonably be required to vest and confirm more fully and certainly in the
successor agent all right, title and interest in and to the property held by it
hereunder. Any bank into which the Escrow Agent may be merged or with which it
may be consolidated or any bank resulting from any merger or consolidation to
which it shall be a party or any bank to which it may sell or transfer all or
substantially all of its corporate trust business shall, if the Company
approves, be the successor agent without the execution of any document or the
performance of any further act.
14. Successors and Assigns; Beneficiaries. This Escrow Agreement shall
be irrevocable and binding upon and shall inure to the benefit of the Company
and the Escrow Agent and their respective successors and assigns. In addition,
this Escrow Agreement shall constitute a third party beneficiary contract for
the benefit of the Issuer and the holders at any time of the Bonds. Said third
party beneficiaries shall be entitled to enforce performance and observance by
the Company and Escrow Agent of the respective agreements and covenants herein
contained as fully and completely as if said third party beneficiaries were
parties hereto.
15. Supplemental Agreements. For any one or more of the following
purposes, the Company and Escrow Agent may enter into any supplemental
agreements to this Escrow Agreement as shall not adversely affect the rights of
the holder or holders of the Bonds and as shall not be inconsistent with the
terms and provisions of this Escrow Agreement, without the consent of or notice
to the holder or holders of the Bonds:
(a) To cure any ambiguity or formal defect or omission in this
Escrow Agreement;
(b) To grant to, or confer upon, the Escrow Agent for the
benefit of the holder or holders of the Bonds any additional rights,
remedies, powers or authority that may lawfully be granted to, or
conferred upon, such holder or holders; and
(c) To provide additional funds, securities or properties
under this Escrow Agreement.
16. Consent Otherwise to Amendments. Except as expressly provided in
paragraph 15 above, this Escrow Agreement may not be repealed, revoked, altered
or amended without the unanimous written consent of the Company and the holder
or holders of the Bonds, and the written consent of the Escrow Agent.
17. Headings. Headings in this Escrow Agreement are for convenience of
reference only and are not a part hereof, and shall not limit or define the
meaning of any provision hereof.
5
<PAGE>
U.S. BANK TRUST NATIONAL ASSOCIATION
By /s/ David H. Bluhm
---------------------------------
Its Vice President
---------------------------------
Escrow Agreement by and between U.S. Bank Trust National Association and Lund
Industries Incorporated
6
<PAGE>
LUND INDUSTRIES INCORPORATED
By /s/ Ronald C. Fox
-------------------------
Its Chief Financial Officer
Escrow Agreement by and between U.S. Bank Trust National Association and Lund
Industries Incorporated.
7
<PAGE>
EXHIBIT A
ESCROWED OBLIGATIONS
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Maturity Type Coupon Yield $Price Par Principal Cost +Accrued =Total Cost
Amount Interest
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
08/31/1999 T-NOTE 5.875% 4.581% 100.8351790% 520,000 524,342.93 10,127.07 534.470.00
08/31/2000 T-NOTE 6.250% 4.510% 102.7593140% 544,000 559,010.67 11,270.72 570,281.39
08/31/2001 T-NOTE 6.500% 4.535% 104.8792230% 579,000 607,250.70 12,475.69 619,726.39
08/31/2002 T-NOTE 6.250% 4.553% 105.6665840% 620,000 655,132.82 12,845.30 667,978.12
08/15/2003 T-NOTE 5.750% 4.494% 105.1930670% 659,000 693,222.31 14,003.75 707,226.06
08/15/2004 T-NOTE 7.250% 4.561% 113.2109530% 700,000 792,476.67 18,755.43 811,232.10
- ---------------------------------------------------------------------------------------------------------------------
3,622,000 3,831,436.10 79,477.96 3,910,914.06
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
COMPOSITION OF ESCROWED OBLIGATIONS
Cash Deposit.........................................$ 132.50
Cost of Investments Purchased with Escrow Deposi.....$3,910,914.06
Total Cost of Investments............................$3,911,046.56
A - 1
<PAGE>
EXHIBIT B
DEBT SERVICE SCHEDULE FOR BONDS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
CITY OF ANOKA, MINNESOTA
INDUSTRIAL DEVELOPMENT REVENUE BONDS
(LUND INDUSTRIES INCORPORATED PROJECT)
SERIES 1994
DEBT SERVICE SCHEDULE
- -----------------------------------------------------------------------------------------------
DATE PRINCIPAL COUPON INTEREST TOTAL P+1 FISCAL TOTAL
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
09/01/1998 -- -- -- -- --
03/01/1999 -- -- 114,742.50 114,742.50 --
09/01/1999 520,000.00 6.100% 114,742.50 634,742.50 749,485.00
03/01/2000 -- -- 98,882.50 98,882.50 --
09/01/2000 545,000.00 6.200% 98,882.50 643,882.50 742,765.00
03/01/2001 -- -- 81,987.50 81,987.50 --
09/01/2001 580,000.00 6.300% 81,987.50 661,987.50 743,975.00
03/01/2002 -- -- 63,717.50 63,717.50 --
09/01/2002 620,000.00 6.350% 63,717.50 683,717.50 747,435.00
03/01/2003 -- -- 44,032.50 44,032.50 --
09/01/2003 660,000.00 6.400% 44,032.50 704,032.50 748,065.00
03/01/2004 -- -- 22,912.50 22,912.50 --
09/01/2004 705,000.00 6.500% 22,912.50 727,912.50 750,825.00
- -----------------------------------------------------------------------------------------------
Total 3,630,000.00 -- 852,550.00 4,482,550.00 --
- -----------------------------------------------------------------------------------------------
</TABLE>
B - 1
<PAGE>
EXHIBIT C
ACKNOWLEDGMENT
I, being duly authorized to execute this acknowledgment on behalf of
U.S. Bank Trust National Association, as Escrow Agent, do hereby acknowledge
that there has on this date been irrevocably deposited with the Escrow Agent in
trust for the security of the holders and owners of the City of Anoka,
Minnesota's Industrial Development Revenue Bonds (Lund Industries Incorporated
Project) each dated September 1, 1994, as the date of original issue,
$3,911,046.56 as that certain Escrow Deposit required to be deposited with the
Escrow Agent on December 29 1998 in accordance with the Escrow Agreement dated
as of December 29, 1998, by and between the Escrow Agent and Lund Industries
Incorporated.
Dated this 29 day of December, 1998.
U.S. BANK TRUST NATIONAL ASSOCIATION
By
----------------------------------
Its Vice President
C - 1
<PAGE>
EXHIBIT D
RELEASE OF GUARANTY
In accordance with Paragraph 7 of that certain Escrow Agreement (the
"Escrow Agreement") dated December 29, 1998, between the undersigned and Lund
Industries Incorporated (the "Company"), one year and fifteen (15) days has
elapsed since the Company provided for payment of the City of Anoka, Minnesota
Industrial Development Revenue Bonds (Lund Industries Incorporated Project)
Series 1994 (the "Bonds") pursuant to the Escrow Agreement, and in consideration
thereof, that certain Guaranty Agreement, dated as of September 1, 1994 (the
"Guaranty"), between the undersigned and Lund International Holdings, Inc. (the
"Guarantor") is hereby released and terminated.
Dated: January 14, 2000 U.S. BANK TRUST NATIONAL ASSOCIATION
By
----------------------------------
Title
-------------------------
D - 1
EXHIBIT 10.8
CANCELLATION AND DISCHARGE OF INDENTURE
AND TERMINATION OF LOAN AGREEMENT
THIS CANCELLATION AND DISCHARGE OF INDENTURE is dated as of December
29, 1998, executed and issued by U.S. Bank Trust National Association, formerly
known as First Trust National Association (the "Trustee");
W I T N E S S E T H:
WHEREAS, the City of Anoka, Minnesota (the "Issuer") and the Trustee
did as of September 1, 1994, enter into an Indenture of Trust (the "Indenture"),
pursuant to which the Issuer did pledge and assign to the Trustee all payments
and revenues derived by Issuer under a Loan Agreement (the "Agreement") dated as
of September 1, 1994, between the Issuer and Lund Industries Incorporated (the
"Company") for the purpose of securing $5,450,000 original principal amount of
Industrial Development Revenue Bonds (Lund Industries Incorporated Project) (the
"Bonds") of the Issuer;
WHEREAS, in accordance with Section 6-2 of the Indenture, the Issuer
has provided for the cancellation and discharge of the lien of the Indenture by
causing an irrevocable deposit of escrow securities which meet the requirements
of the Indenture, in an amount, without reinvestment, to be sufficient to pay
principal of and interest on the Bonds as it shall become due through the Stated
Maturity thereof;
WHEREAS, the Trustee is satisfied that all conditions precedent to the
cancellation and discharge of the lien of the Indenture have been satisfied;
NOW, THEREFORE, the Trustee does hereby acknowledge and agree that the
lien of the Indenture has been fully cancelled and discharged, and does hereby
release, convey and quitclaim unto the Issuer and the Company and their
successors and assigns all of Trustee's right, title, interest, claim or demand
whatsoever which it may have acquired in the payments and revenues derived under
the Agreement or otherwise in any other real or personal property through the
Indenture or through the operation of law.
In accordance with Section 6-2 of the Indenture, all liability of the
Issuer and the Company to the Holders of the Bonds for the payment of principal,
interest and redemption premiums thereon ceases, terminates and is hereby
completely discharged and such Holders shall have a claim therefor solely upon
the cash and/or securities so deposited, and shall not be entitled to any other
benefit of or security under the Indenture, except that the obligations of the
Company under Sections 7.04 and 8.04 of the Loan Agreement shall survive.
In accordance with the Indenture, the Bonds are no longer deemed
Outstanding within the meaning of the Indenture, and in accordance with Section
10.01 of the Loan Agreement, the Loan Agreement is hereby released and
terminated.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this instrument to be
executed in its corporate name and delivered on its behalf by its duly
authorized officers, all as of the day first written above.
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
By /s/ David H. Bluhm
------------------------------------
Its Vice President
--------------------------------
STATE OF MINNESOTA )
)SS.
COUNTY OF WASHINGTON )
The foregoing instrument was acknowledge before me this 29th day of
December, 1998 by David H. Bluhm, the Vice President, of U.S. Bank Trust
National Association, a national banking association.
/s/ Anita Malmgren
----------------------------------------
Notary Public
(SEAL)
THIS INSTRUMENT WAS
DRAFTED BY:
Leonard, Street and Deinard
150 South Fifth Street
Suite 2300
Minneapolis, Minnesota 55402
2
EXHIBIT 10.9
THE PAYMENT OF THIS NOTE AND THE RIGHTS OF THE HOLDER OF THIS NOTE ARE
SUBORDINATED TO THE PAYMENT OF SUPERIOR INDEBTEDNESS AND THE RIGHTS OF THE
HOLDERS OF SUPERIOR INDEBTEDNESS UPON THE TERMS OF SUBORDINATION SET FORTH
HEREIN.
LUND INTERNATIONAL HOLDINGS, INC.
DEFLECTA-SHIELD CORPORATION
LUND INDUSTRIES, INCORPORATED
BELMOR AUTOTRON CORP.
DFM CORP.
AUTO VENTSHADE COMPANY
12.5% Senior Subordinated Note due December 31, 2006
No. R-
$_________________________, _____
LUND INTERNATIONAL HOLDINGS, INC., a Delaware corporation, DEFLECTA-SHIELD
CORPORATION, a Delaware corporation, LUND INDUSTRIES, INCORPORATED, a Minnesota
corporation, BELMOR AUTOTRON CORP., a Delaware corporation, DFM CORP., an Iowa
corporation, and AUTO VENTSHADE COMPANY, a Delaware corporation (each, a
"Company"; collectively, the "Companies"), for value received, hereby jointly
and severally promise to pay to ____________________, or registered assigns, the
principal amount of __________________ DOLLARS ($________) on December 31, 2006,
with interest (computed on the basis of a 360-day year of twelve 30-day months)
on the unpaid balance of such principal amount at the rate of 12.5% per annum,
from the date hereof, payable semi-annually on the last day of each February and
August after the date hereof, commencing on [February 28, 1999/the first such
date next succeeding the date hereof], and at maturity, until the principal
hereof shall have become due and payable (whether at maturity or at a date fixed
for prepayment or by declaration or otherwise), and with interest on any overdue
principal (including any overdue prepayment of principal) and (to the extent
permitted by applicable law) premium, if any, and (to the extent permitted by
applicable law) on any overdue installment of interest, at the rate of 14.5% per
annum until paid, payable semi-annually as aforesaid or, at the option of the
holder hereof, on demand and, upon acceleration of this Note, together with the
Applicable Premium specified in the Securities Purchase
<PAGE>
Agreements hereinafter referred to, as liquidated damages and not as a penalty;
provided that in no event shall the amount payable by the Companies as interest
on this Note exceed the highest lawful rate permissible under any law applicable
hereto. Payments of principal, premium, if any, and interest hereon shall be
made in lawful money of the United States of America by the method and at the
address for such purpose specified in the Securities Purchase Agreements
hereinafter referred to, and such payments shall be overdue for purposes hereof
if not made on the originally scheduled date of payment therefor, without giving
effect to any applicable grace period and notwithstanding that such payment may
be prohibited under the terms of subordination applicable hereto.
This Note is one of the Companies' 12.5% Senior Subordinated Notes due
December 31, 2006, limited to $25,000,000 aggregate principal amount, issued
pursuant to those certain Securities Purchase Agreements dated December 23, 1998
(such agreements, as amended, modified and supplemented from time to time, the
"Securities Purchase Agreements") among the Companies and the institutional
investors named therein, and the holder hereof is entitled to the benefits of
the Securities Purchase Agreements and the other Operative Documents referred to
in the Securities Purchase Agreements, including, without limitation, the Note
Guarantees, and may enforce the agreements contained therein and exercise the
remedies provided for thereby or otherwise available in respect thereof, all in
accordance with the terms thereof.
This Note is subject to prepayment only as specified in the Securities
Purchase Agreements.
Capitalized terms used herein without definition have the meanings
ascribed to them in the Securities Purchase Agreements.
1. Subordination of Subordinated Indebtedness. The payment of the Subordinated
Indebtedness and the rights of the holders thereof are subordinated to the
payment of the Superior Indebtedness and the rights of the holders thereof to
the extent specified in this section 1.
1.1. Certain Definitions. As used in this section 1, the following
terms have the following respective meanings:
"Bankruptcy Code" shall mean 11 U.S.C. ss. 101 et seq., as
from time to time hereafter amended, and any successor or similar
statute.
"Blockage Period" shall have the meaning specified in section
1.4.
"Cash Equivalents" shall mean:
(a) readily marketable obligations (having a maturity
not in
<PAGE>
excess of 12 months from the date of acquisition thereof) of,
or fully and unconditionally guaranteed (as to both principal
and interest) by, the United States of America or an agency
thereof; and
(b) negotiable certificates of deposit evidencing
direct obligations of any federally insured commercial bank or
trust company organized and operating in the United States of
America having capital and surplus and undivided profits of at
least $100,000,000 and having the highest or second highest
rating available from Moody's Investors Service, Inc. or
Standard & Poor's Corporation.
"Companies" shall mean Lund International Holdings, Inc., a
Delaware corporation, Deflecta-Shield Corporation, a Delaware
corporation, Lund Industries, Incorporated, a Minnesota corporation,
Belmor Autotron Corp., a Delaware corporation, DFM Corp., an Iowa
corporation, and Auto Ventshade Company, a Delaware corporation, each
of which is a "Company".
"Covenant Default" shall have the meaning specified in section
1.4.
"Liquidation Payment" shall have the meaning specified in
section 1.3.
"Payment Default" shall have the meaning specified in section
1.4.
"Permissible Securities" shall mean (a) any debt securities
the payment of which is subordinated, at least to the extent provided
in this section 1 with respect to the Subordinated Indebtedness, to the
payment of all Superior Indebtedness at the time outstanding and all
securities issued in exchange therefor and (b) any shares of common
stock of any Company.
"Person" shall mean an individual, a corporation, a limited
liability company, an association, a joint-stock company, a business
trust or other similar organization, a partnership, a joint venture, a
trust, an unincorporated organization or a government or any agency,
instrumentality or political subdivision thereof.
"Securities Purchase Agreements" shall mean those certain
Securities Purchase Agreements dated December 23, 1998 by and between
the Companies and each of the institutional investors named therein,
pursuant to which the Subordinated Notes are issued, as amended,
modified and supplemented from time to time.
<PAGE>
"Senior Lenders" shall mean the lenders from time to time
under the Senior Loan Agreement.
"Senior Lender Agent" shall mean Heller Financial, Inc. as
agent for the Senior Lenders.
"Senior Loan Agreement" shall mean the Credit Agreement dated
as of February 27, 1998, as amended by Amendment Nos. 1 and 2 thereto,
dated April 1, 1998 and December 23, 1998, respectively, among the
Companies, certain of the Subsidiaries of Lund International Holdings,
Inc., the Senior Lenders and the Senior Lender Agent, as further
amended, modified and supplemented from time to time.
"Subordinated Indebtedness" shall mean the principal amount of
the Indebtedness evidenced by the Subordinated Notes, together with any
interest (including any interest accruing after the commencement of any
action or proceeding under any bankruptcy, insolvency or other similar
law, and any interest that would have accrued but for the commencement
of any such proceeding, whether or not any such interest is allowed as
an enforceable claim in such proceeding), and premium and any other
amount (including any fee or expense) due thereon or payable, if any,
with respect thereto, including any such amounts payable by any
guarantor thereof.
"Subordinated Lenders" shall mean the holder or holders of the
Subordinated Notes.
"Subordinated Notes" shall mean the Companies' 12.5% Senior
Subordinated Notes due December 31, 2006, together with any notes
issued in exchange therefor or replacement thereof, of which this Note
is one.
"Subordination Notice" shall have the meaning specified in
section 1.4.
"Superior Indebtedness" shall mean the principal amount of any
indebtedness of the Companies now outstanding or hereafter amended,
created, incurred, assumed or guaranteed (or any refinancing thereof),
together with any interest (including any interest accruing after the
commencement of any action or proceeding under any bankruptcy,
insolvency or other similar law, and any interest that would have
accrued but for the commencement of any such proceeding, whether or not
any such interest is allowed as an enforceable claim in such
proceeding) and premium or other amount (including any fee or expense)
due thereon or payable with respect thereto, including any such amounts
payable by any guarantor thereof, provided that (a) Superior
Indebtedness must arise under
<PAGE>
the Senior Loan Agreement (or under any agreement executed in
connection with any extension, refinancing, refunding or renewal
thereof effected in compliance with the Securities Purchase
Agreements), (b) the aggregate outstanding principal amount of Superior
Indebtedness, including, without limitation, all amounts due
(contingently or otherwise) in respect of reimbursement obligations
under letters of credit, interest rate protection agreements or similar
instruments (and all related reimbursement agreements), must not exceed
at any time $108,000,000 or, following the Smittybilt Closing Date,
$118,000,000, in each case minus the sum (without duplication of
amounts) of (i) the aggregate amount of all scheduled principal
payments made thereon from time to time (other than any principal
payment made under the revolving credit facility established under the
Senior Loan Agreement which may be reborrowed under such facility) and
(ii) the aggregate amount of any reductions in the principal amount of
the commitments under the credit facilities established pursuant to the
Senior Loan Agreement and (c) Superior Indebtedness shall not include
any amount in respect of (i) any indebtedness given to or taken by the
seller of assets or stock for all or a portion of the purchase price
thereof, (ii) any indebtedness which is expressly made equal or
subordinate in right of payment to the Subordinated Notes or (iii) any
indebtedness for goods, materials or services purchased in the ordinary
course of business.
1.2. Subordinated Indebtedness Subordinated to Superior Indebtedness;
No Amendments.
(a) Each Company, for itself and its successors and assigns,
covenants and agrees, and each holder of any Subordinated Indebtedness,
by its acceptance thereof, shall be deemed to have agreed,
notwithstanding anything to the contrary in any of the Subordinated
Notes or any other agreement, document or instrument related thereto,
that the payment of the Subordinated Indebtedness shall be subordinated
to the extent and in the manner set forth in this section 1, to the
prior payment in full in cash or Cash Equivalents of all Superior
Indebtedness, and that each holder of Superior Indebtedness, whether
now outstanding or hereafter created, incurred, assumed or guaranteed,
shall be deemed to have acquired Superior Indebtedness in reliance upon
the provisions contained in this section 1. No present or future holder
of Superior Indebtedness shall be prejudiced in the right to enforce
the subordination of the Subordinated Indebtedness effected pursuant to
this section 1 by any act or failure to act on the part of any Company.
(b) Without the written consent of the holder or holders of at
least 66-2/3% in aggregate principal amount of the Superior
Indebtedness at the time outstanding, neither this section 1 nor any of
the terms of the Subordinated Indebtedness shall be amended if the
effect thereof is to
<PAGE>
(i) increase the interest rate on such Subordinated Indebtedness, (ii)
change the dates upon which payments of principal or interest are due
on such Subordinated Indebtedness, (iii) change any event of default or
add or make more restrictive any covenant with respect to such
Subordinated Indebtedness, (iv) change the prepayment provisions of
such Subordinated Indebtedness or (v) change or amend any other term if
such change or amendment would materially increase the obligations of
the Companies or confer additional material rights on the holder of the
Subordinated Indebtedness in a manner adverse to the holders of the
Superior Indebtedness.
(c) Unless and until the Superior Indebtedness has been paid
in full in cash or Cash Equivalents, the Companies shall not grant to
the holders of the Subordinated Indebtedness any lien or security
interest in or on any of the assets of any Company to secure the
Subordinated Indebtedness without the written consent of the holder or
holders of not less than 100% in aggregate principal amount of the
Superior Indebtedness at the time outstanding.
1.3. Dissolution, Liquidation, Reorganization, etc. Upon any payment or
distribution of the assets of any Company of any kind or character, whether in
cash, property or securities, to creditors upon any dissolution, winding-up,
total or partial liquidation, reorganization, composition, arrangement,
adjustment or readjustment of any Company or its securities, whether voluntary
or involuntary, or in bankruptcy, insolvency, reorganization, liquidation or
receivership proceedings, or upon a general assignment for the benefit of
creditors, or any other marshalling of the assets and liabilities of any
Company, or otherwise (hereinafter a "Liquidation Payment"), then and in any
such event:
(a) the holders of the Superior Indebtedness shall be entitled
to receive payment in full in cash or Cash Equivalents (or to have such
payment duly provided for in cash or Cash Equivalents in a manner
reasonably satisfactory to the holders of Superior Indebtedness) of all
amounts due or to become due on or in respect of all Superior
Indebtedness, before any Liquidation Payment, whether in cash, property
or securities (other than Permissible Securities), is made on account
of or applied to any of the Subordinated Indebtedness;
(b) the Subordinated Indebtedness shall forthwith become due
and payable, and any Liquidation Payment, whether in cash, property or
securities (other than Permissible Securities), to which any holder of
the Subordinated Indebtedness would be entitled except for the
provisions of this section 1, shall be paid or delivered by any debtor,
custodian, liquidating trustee, agent or other Person making such
Liquidation Payment, directly to the holders of the Superior
Indebtedness, or their representative or
<PAGE>
representatives, ratably according to the aggregate amounts remaining
unpaid on account of the Superior Indebtedness, for application to the
payment thereof, to the extent necessary to pay the Superior
Indebtedness in full in cash or Cash Equivalents after giving effect to
any concurrent payment or distribution, or provision therefor, to the
holders of such Superior Indebtedness;
(c) each holder of the Subordinated Indebtedness at the time
outstanding hereby irrevocably authorizes and empowers the holders of
the Superior Indebtedness or such holders' representative to collect
and receive such holder's ratable share of any Liquidation Payment and
to receipt therefor, and, if any holder of Subordinated Indebtedness
fails to file a claim therefor at least ten (10) calendar days prior to
the date established by rule of law or order of court for such filing,
to file and prove (but not to vote) such claim therefor, provided that
the holders of Superior Indebtedness shall concurrently send written
notice thereof to each holder of Subordinated Indebtedness together
with a copy of the proof of claim so filed; and
(d) each holder of the Subordinated Indebtedness shall execute
and deliver to the holders of the Superior Indebtedness or their
representative or representatives all such further instruments
confirming the above authorization and all such powers of attorney,
proofs of claim, assignments of claim and other instruments, and shall
take all such other action, as may be reasonably requested by the
holders of the Superior Indebtedness or such representative or
representatives, to enforce such claims and to carry out the purposes
of this section 1.
Upon any payment or distribution of assets referred to in this section
1, the holders of the Subordinated Indebtedness shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction in which such
bankruptcy, insolvency, reorganization, liquidation, receivership or other
proceeding is pending, or a certificate of the debtor, custodian, liquidating
trustee, agent or other Person making any such payment or distribution to such
holders, for the purpose of ascertaining the Persons entitled to participate
therein, the holders of the Superior Indebtedness, the then outstanding
principal amount of the Superior Indebtedness and any and all amounts payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this section 1.
<PAGE>
1.4. No Payments With Respect to Subordinated Indebtedness in Certain
Circumstances.
(a) The Companies will not, directly or indirectly, make or
agree to make, and neither the holder nor any assignee or successor
holder of any Subordinated Indebtedness will accept or receive any
payment or distribution (in cash, property or securities (other than
Permissible Securities) by set-off or otherwise), direct or indirect,
of or on account of the Subordinated Indebtedness if, at the time of
such payment or distribution or immediately after giving effect
thereto:
(i) a default in the payment when due of all or any
portion of the principal of or premium, if any, or interest
on, or any loan fee or indemnification payment due in respect
of any Superior Indebtedness shall have occurred (a "Payment
Default"); or
(ii) all of the following four conditions shall
exist:
(A) a condition or event (other than a
Payment Default) shall have occurred or would occur
as a result of such payment or distribution with
respect to any Superior Indebtedness which permits
the holder or holders thereof to accelerate
immediately the maturity thereof (a "Covenant
Default"); and
(B) the Companies and the holder or holders
of Subordinated Indebtedness shall have received
written notice (each a "Subordination Notice") of
such Covenant Default from the requisite holder or
holders of the Superior Indebtedness, or their
representative or representatives (which notice shall
state that it is a "Subordination Notice" and shall
make reference to the provisions of this section
1.4(a)(ii)); and
(C) such Covenant Default shall not have
been cured by the Companies or waived in writing by
the requisite holder or holders of the Superior
Indebtedness with respect to which such Covenant
Default shall have occurred; and
(D) less than 180 days, shall have elapsed
after the date of receipt by the Companies and the
holders of the Subordinated Indebtedness of such
Subordination Notice (any period during which the
restrictions imposed by this section 1.4(a)(ii) are
in effect being hereinafter referred to as a
"Blockage Period");
<PAGE>
provided, however, that, for the purpose of this
section 1.4(a)(ii), (1) Blockage Periods shall not be
in effect for more than an aggregate of 180 days
during any period of 360 consecutive days and (2) no
facts or circumstances known to the holders of
Superior Indebtedness giving any Subordination Notice
on the date any Subordination Notice is given may,
unless the same shall have ceased to exist for a
period of at least 30 consecutive days, be used or
shall be effective as a basis for any subsequent
Subordination Notice.
(b) The restrictions imposed by section 1.4(a) shall cease to
apply and the Companies may resume payments in respect of the
Subordinated Indebtedness (including any payments which shall not have
been made on account of the provisions of this section 1, but excluding
any payments which may have become due upon any acceleration of the
maturity of the Subordinated Indebtedness) or any judgment with respect
thereto upon the earliest to occur of (i) the cure of the Payment
Default or Covenant Default by the Companies, (ii) the written waiver
thereof by the requisite holder or holders of the Superior Indebtedness
with respect to which such Payment Default or Covenant Default shall
have occurred or (iii) in the case of a Covenant Default, (A) the
expiration of the applicable Blockage Period or (B) the termination of
such Blockage Period by such requisite holder or holders of such
Superior Indebtedness.
(c) In the event of the failure of the Companies to pay the
principal of and interest and premium, if any, on and any loan fee or
indemnification payment due in respect of any Superior Indebtedness
upon the maturity thereof or upon any an acceleration of the maturity
of the principal of any Superior Indebtedness in accordance with the
terms thereof (which acceleration has not been rescinded or annulled),
such Superior Indebtedness shall first be paid in full in cash or Cash
Equivalents (or provision for such payment in cash or Cash Equivalents
shall be made in a manner reasonably satisfactory to the holder or
holders of such Superior Indebtedness) before any payment or
distribution (in cash, properties or securities (other than Permissible
Securities), by set-off or otherwise) is made on account of or applied
to the Subordinated Indebtedness.
1.5. Payments and Distributions Received. If any payment or
distribution of any kind or character, whether in cash, property or securities
(other than Permissible Securities), shall be received by any holder of any of
the Subordinated Indebtedness in contravention of this section 1, such payment
or distribution shall be held in trust for the benefit of, and shall be paid
over or delivered and transferred to, the holders of the Superior Indebtedness,
or their representative or representatives, ratably according to the aggregate
amount
<PAGE>
remaining unpaid on account of such Superior Indebtedness, for application to
the payment of the Superior Indebtedness, to the extent necessary to pay all
such Superior Indebtedness in full in cash or Cash Equivalents, after giving
effect to any concurrent payment or distribution, or provision therefor, to the
holders of such Superior Indebtedness. In the event of the failure of any holder
of any of the Subordinated Indebtedness to endorse or assign any such payment or
distribution, the holders of the Superior Indebtedness (or such holders'
representative) are (is) hereby irrevocably authorized to endorse or assign the
same.
1.6. Subrogation. Subject to the payment in full of all Superior
Indebtedness in cash or Cash Equivalents, in case cash, property or securities
otherwise payable or deliverable to the holders of the Subordinated Indebtedness
shall have been applied pursuant to this section 1 to the payment of Superior
Indebtedness, then and in each such case, the holders of the Subordinated
Indebtedness shall be subrogated to the rights of each holder of Superior
Indebtedness to receive any further payment or distribution in respect of or
applicable to the Superior Indebtedness; and, for the purposes of such
subrogation, no payment or distribution to the holders of Superior Indebtedness
of any cash, property or securities to which any holder of Subordinated
Indebtedness would be entitled except for the provisions of this section 1
shall, and no payment over pursuant to the provisions of this section 1 to the
holders of Superior Indebtedness by the holders of the Subordinated Indebtedness
shall as between any Company, its creditors other than the holders of Superior
Indebtedness and the holders of Subordinated Indebtedness, be deemed to be a
payment by any Company to or on account of Superior Indebtedness.
1.7. Certain Notices. In the event that (a) any Superior Indebtedness
or Subordinated Indebtedness shall be transferred and/or shall become due and
payable before the expressed maturity thereof as the result of the occurrence of
a default or any event of default or (b) any term or provision of any agreement,
document or instrument related to the Superior Indebtedness or Subordinated
Indebtedness shall be amended, modified or supplemented, or compliance therewith
waived, the Companies will give immediate written notice in writing of such
event to each holder of Subordinated Indebtedness and Superior Indebtedness
(together with copies of all related agreements, documents and instruments).
Each notice of any transfer of any Superior Indebtedness or Subordinated
Indebtedness shall include the name and address of the applicable transferee for
purposes of this section 1. The holder or holders of Superior Indebtedness shall
be obligated to give a Subordination Notice (as defined in section 1.4) to a
holder of Subordinated Indebtedness other than the initial holders thereof only
if the holder or holders of Superior Indebtedness shall have been furnished
written notice of such other holder's address for purposes of this section 1. No
holder of Subordinated Indebtedness shall be obligated to give any notice under
section 1.11 to any holder of Superior Indebtedness unless such
<PAGE>
holder of Subordinated Indebtedness shall have been furnished written notice of
the address of such holder of Superior Indebtedness for purposes of this section
1.
Each holder of any Subordinated Indebtedness will furnish to the
holders of Superior Indebtedness (or their agent or representative) copies of
any notice furnished by such holder to the Companies of the occurrence of an
event of default thereunder and of the acceleration of any Subordinated
Indebtedness, provided that the failure to furnish such copies of any such
notice to the holder or holders of the Superior Indebtedness shall not have any
effect upon any of the rights and obligations of the parties hereto or any of
the rights of any holder of Subordinated Indebtedness on account of any event of
default or otherwise.
1.8. Subordination Not Affected, etc. The terms of this section 1, the
subordination effected hereby and the rights created hereby of the holders of
the Superior Indebtedness shall not be affected by (a) any amendment or
modification of or supplement to any Superior Indebtedness (or any renewal,
extension, refinancing or refunding thereof) or any agreement, document or
instrument relating thereto to the extent permitted by the Securities Purchase
Agreements, (b) any exercise or non-exercise of any right, power or remedy under
or in respect of any Superior Indebtedness (or any security or collateral
therefor) or pursuant to any agreement, document or instrument relating thereto
or (c) any waiver, consent, release, indulgence, delay or other action, inaction
or omission, in respect of any Superior Indebtedness (or any security or
collateral therefor) or pursuant to any agreement, document or instrument
relating thereto, whether or not any holder of any Subordinated Indebtedness
shall have had notice or knowledge of any of the foregoing.
1.9. Obligations Unimpaired. The provisions of this section 1 are
solely for the purpose of defining the relative rights of the holders of
Superior Indebtedness on the one hand and the holders of Subordinated
Indebtedness on the other hand, and (a) subject to the rights, if any, under
this section 1 of the holders of Superior Indebtedness, nothing in this section
1 shall (i) impair as between the Companies and any holder of any Subordinated
Indebtedness, the obligation of the Companies, which is unconditional and
absolute, to pay to the holder thereof all amounts due thereon in accordance
with the terms thereof or (ii) except as otherwise provided in section 1.11,
prevent the holder of any Subordinated Indebtedness from exercising all remedies
available to such holder, whether arising under any agreement, document or
instrument related thereto, applicable law or otherwise, and (b) no Person is
entitled to any third party beneficiary rights or other similar rights on
account of or under this section 1 other than the holders of the Superior
Indebtedness. The failure to make any payment due in respect of any of the
Subordinated Indebtedness or to comply with any of the terms and conditions of
any of the agreements, documents and instruments related to any of the
Subordinated Indebtedness by reason of any
<PAGE>
provision of this section 1 shall not be construed as preventing the occurrence
of any default or event of default with respect to the Subordinated
Indebtedness.
1.10. Holders of Subordinated Indebtedness Entitled to Assume Payments
Not Prohibited in Absence of Notice. No holder of Subordinated Indebtedness
shall at any time be charged with knowledge of the existence of any facts which
would prohibit the making of any payment to it, unless and until such holder
shall have received written notice thereof from the Companies or from any holder
of Superior Indebtedness or any agent or representative thereof. Prior to the
receipt of any such notice, each holder of Subordinated Indebtedness shall be
entitled to assume conclusively that no such facts exist, without, however,
limiting any right of any holder of Superior Indebtedness under this section 1
to recover from any holder of the Subordinated Indebtedness any payment made in
contravention of this section 1. Each payment on the Subordinated Indebtedness
by the Companies shall be deemed to constitute a representation of the Companies
that such payment is permitted to be paid by the Companies under this section 1.
Each holder of Subordinated Indebtedness shall be entitled to rely on
the delivery to it of a written notice by a Person representing himself to be a
holder of Superior Indebtedness or to be the agent or representative of any
holder of Superior Indebtedness to establish that such notice has been given by
any such Person. In the event that such holder of Subordinated Indebtedness
determines in good faith that further evidence is required with respect to the
right of any such Person to participate in any payment or distribution pursuant
to this section 1, such holder of Subordinated Indebtedness may request such
Person to furnish evidence to the reasonable satisfaction of such holder of
Subordinated Indebtedness as to any fact pertinent to the rights of such Person
under this section 1, and if such evidence is not furnished, such holder of
Subordinated Indebtedness may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
1.11. Limitation on Right of Action. Notwithstanding anything to the
contrary contained in any of the Subordinated Notes or any other agreement,
document or instrument related thereto, each of the holders of the Subordinated
Indebtedness agrees that, if any Superior Indebtedness is outstanding, such
holder of the Subordinated Indebtedness will not accelerate any of the
Subordinated Indebtedness or take any other enforcement action with respect to
the Subordinated Indebtedness, unless:
(a) the holder or holders of any Superior Indebtedness shall
have accelerated the Superior Indebtedness or shall have foreclosed
upon any collateral securing the same;
<PAGE>
(b) a proceeding under the Bankruptcy Code or any similar
state statute or law (including any law providing for the appointment
of a receiver or other similar official) shall have been commenced by
or against any Company by Persons other than the holders of the
Subordinated Indebtedness; or
(c) both (i) an Event of Default under (and as defined in) the
Securities Purchase Agreements shall have occurred and shall have
continued uncured and unwaived for a period of 180 days and (ii) not
less than 60 days prior to accelerating any of the Subordinated
Indebtedness or taking any other enforcement action with respect to the
Subordinated Indebtedness, such holder of Subordinated Indebtedness
shall have given each holder of Superior Indebtedness written notice of
the same (which notice may be given prior to the expiration of such
180-day period), which notice shall specify in reasonable detail the
default on the basis of which such holder of the Subordinated
Indebtedness shall take any enforcement action and the enforcement
action that such holder of Subordinated Indebtedness then intends to
take.
1.12. Legends, etc. The Companies covenant to cause each Subordinated
Note (or other instrument evidencing any of the Subordinated Indebtedness) now
or hereafter issued to contain a provision or legend in substantially the
following form:
THE PAYMENT OF THIS NOTE AND THE RIGHTS OF THE
HOLDER OF THIS NOTE ARE SUBORDINATED TO THE PAYMENT
OF SUPERIOR INDEBTEDNESS AND THE RIGHTS OF THE
HOLDERS OF SUPERIOR INDEBTEDNESS UPON THE TERMS OF
SUBORDINATION SET FORTH HEREIN.
2. General.
2.1. Registered Notes, etc. This Note is in registered form and is
transferable only by surrender hereof at the principal executive office of the
Holding Company as provided in the Securities Purchase Agreements. The Companies
may treat the person in whose name this Note is registered on the Note register
maintained at such office pursuant to the Securities Purchase Agreements as the
owner hereof for all purposes, and the Companies shall not be affected by any
notice to the contrary.
2.2. Events of Default, etc. In case an Event of Default, as defined in
the Securities Purchase Agreements, shall occur and be continuing, the unpaid
balance of the principal of this Note may be declared and become due and
<PAGE>
payable in the manner and with the effect provided in the Securities Purchase
Agreements.
2.3. Certain Waivers, etc. The parties hereto, including the makers and
all guarantors and endorsers of this Note, hereby waive presentment, demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance or enforcement of this Note.
2.4. Governing Law. This Note shall be construed in accordance with and
governed by the domestic substantive laws of the State of New York without
giving effect to any choice of law or conflicts of law provision or rule that
would cause the application of domestic substantive laws of any other
jurisdiction.
[The remainder of this page is intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the Companies have executed this Note as an
instrument under seal as of the date first above written.
LUND INTERNATIONAL HOLDINGS, INC.
By
(Title)
DEFLECTA-SHIELD CORPORATION
By
(Title)
LUND INDUSTRIES, INCORPORATED
By
(Title)
<PAGE>
BELMOR AUTOTRON CORP.
By
(Title)
DFM CORP.
By
(Title)
AUTO VENTSHADE COMPANY
By
(Title)
<PAGE>
FORM OF ASSIGNMENT
[To be signed only upon transfer of Note]
For value received, the undersigned hereby sells, assigns and
transfers unto the within Note, and appoints Attorney to transfer such Note on
the books of LUND INTERNATIONAL HOLDINGS, INC., DEFLECTA-SHIELD CORPORATION,
LUND INDUSTRIES, INCORPORATED, BELMOR AUTOTRON CORP., DFM CORP. and AUTO
VENTSHADE COMPANY with full power of substitution in the premises.
Date: _____________, _____.
____________________________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Note)
Signed in the presence of
_______________________________
EXHIBIT 10.10
- --------------------------------------------------------------------------------
WARRANT
To Purchase ______ Shares of Common Stock
(or, as provided in section 12 of the Securities Purchase Agreements
hereinafter referred to, ________ Shares of Series B Preferred Stock)
of
LUND INTERNATIONAL HOLDINGS, INC.
________________________, ____
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions 2
1.1. Definitions of Terms 2
1.2. Other Definitions 3
2. Exercise of Warrant 3
2.1. Right to Exercise; Notice 3
2.2. Manner of Exercise; Issuance of Shares of Holding Company
Common Stock 4
2.3. Effectiveness of Exercise 5
2.4. Continued Validity 5
2.5. Automatic Exercise on Last Day of Exercise Period 5
3. Registration, Transfer, Exchange and Replacement of Securities; Legends 6
3.1. Registration, Transfer, Exchange and Replacement of Securities 6
3.2. Transfers and Legends 6
4. Anti-Dilution Provisions 7
4.1. Adjustment of Number of Shares of Holding Company Class A
Common Stock Purchasable 7
4.2. Adjustment of Exercise Price 8
4.3. Rights Offering 16
4.4. Certificates and Notices 17
4.5. Adjustments for Changes in Certain Data 18
5. Put Rights; Registration, etc. 18
6. Reservation of Holding Company Common Stock (and/or Other Securities),
etc. 19
7. Various Covenants of the Holding Company 19
<PAGE>
7.1. No Impairment or Amendment; No Further Issuances or Sales;
Continued Validity 19
7.2. Listing on Securities Exchanges, etc. 19
7.3. Anti-Dilution Provisions 20
7.4. Indemnification 20
7.5. Certain Expenses 20
8. Miscellaneous 20
8.1. Nonwaiver 20
8.2. Amendment 20
8.3. Communications 21
8.4. Like Tenor 21
8.5. Remedies 21
8.6. Successors and Assigns 21
8.7. Governing Law 21
8.8. Headings; Entire Agreement; Partial Invalidity, etc. 21
Exhibit 2.2(a) Form of Notice of Exercise
Exhibit 3.1 Form of Assignment
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY OTHER APPLICABLE SECURITIES LAW, AND MAY NOT BE TRANSFERRED IN
THE ABSENCE OF REGISTRATION THEREUNDER OR AN EXEMPTION THEREFROM.
THIS WARRANT IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THE
RIGHTS AGREEMENT DATED DECEMBER 23, 1998, AS AMENDED, MODIFIED AND SUPPLEMENTED
FROM TIME TO TIME.
WARRANT
To Purchase ______ Shares of Common Stock
(or, as provided in section 12 of the Securities Purchase Agreements
hereinafter referred to, ________ Shares of Series B Preferred Stock)
of
LUND INTERNATIONAL HOLDINGS, INC.
No. RW-_________________, ____
THIS IS TO CERTIFY that, for value received, ______________________, or
registered assigns, is entitled upon the due exercise hereof at any time during
the Exercise Period (as hereinafter defined) to purchase in the aggregate
__________ shares of Common Stock, $.10 par value (or, as provided in section 12
of the Securities Purchase Agreements hereinafter referred to, ________ Shares
of Series B Preferred Stock), of LUND INTERNATIONAL HOLDINGS, INC., a Delaware
corporation (the "Holding Company"), at an Exercise Price of $.11 per share
(such Exercise Price and the number of Shares purchasable hereunder being
subject to adjustment as provided herein), and to exercise the other rights,
powers and privileges hereinafter provided, all on the terms and subject to the
conditions hereinafter set forth.
This Warrant is one of the Holding Company's Warrants to Purchase
Shares of Common Stock (or Series B Preferred Stock, as the case may be)
(herein, together with any warrants issued in exchange therefor or replacement
thereof, all as amended or supplemented from time to time, called the
"Warrants") initially exercisable in the aggregate for (a) [Insert "520,749"
(for Warrants issued at the Auto Ventshade Closing); "184,090" (for Warrants
issued at the Smittybilt Closing)] (subject to adjustment) shares of Common
Stock of the Holding Company and issued pursuant to those certain Securities
Purchase Agreements, dated December 23, 1998, by and among the Holding Company,
certain of its Subsidiaries and the institutional investors named therein (as
amended,
<PAGE>
modified and supplemented from time to time, the "Securities Purchase
Agreements") or (b) as provided in section 12 of the Securities Purchase
Agreements, ________ [Insert "52,075" (for Warrants issued at the Auto Ventshade
Closing); "18,409" (for Warrants issued at the Smittybilt Closing)] (subject to
adjustment) shares of Series B Preferred Stock of the Holding Company. Reference
is hereby made to the Securities Purchase Agreements and to the Rights Agreement
(as defined therein) for a description of, among other things, certain terms
relating to the Warrants and the Warrant Shares and certain rights of the
holders hereof and thereof, including, without limitation, the rights of the
holders to require the registration of the Warrant Shares. Holders of Warrants
and/or Warrant Shares are entitled to the applicable benefits of the Securities
Purchase Agreements and the other Operative Documents and may enforce the
applicable agreements contained therein, all in accordance with the terms
thereof, notwithstanding any payment or prepayment or redemption or acquisition
of any of the other Securities issued pursuant to the Securities Purchase
Agreements.
1. Definitions.
1.1. Definitions of Terms. Terms used herein without definition which
are defined in the Securities Purchase Agreements have the meanings ascribed to
them therein, unless the context clearly requires otherwise, including, without
limitation, the following terms: "Business Day", "Companies", "corporation",
"Excluded Outstanding Options", "Fair Value", "Holding Company Class A Common
Stock", "Holding Company Class B Common Stock", "Holding Company Common Stock",
"Management Option Plan", "Notes", "Officers' Certificate", "Operative
Documents", "Organizational Documents", "Person", "Preferred Shares",
"Refinancing Debt", "Required Holders", "Rights Agreement", "Securities",
"Securities Act", "Senior Loan Documents", "Series B Preferred Stock", "Shares"
and "Subsidiary". In addition, the terms defined in this section 1, whenever
used and capitalized in this Warrant, shall, unless the context otherwise
requires, have the following respective meanings:
"Assignment" shall mean the form of Assignment appearing at the end of
this Warrant.
"Convertible Securities" shall mean evidences of indebtedness, Shares
(including, without limitation, any Preferred Shares) or other securities which
are convertible into or exchangeable or exercisable for, with or without payment
of additional consideration, Holding Company Common
<PAGE>
Stock, either immediately or upon the arrival of a specified date or the
happening of a specified event.
"Exercise Period" shall mean, subject to the provisions of section 2.5,
the period commencing on the date on which this Warrant is issued and
terminating at 5:00 p.m., Boston time, on December 31, 2006.
"Exercise Price" shall mean the price per share of Holding Company
Common Stock set forth in the preamble to this Warrant, as such price may be
adjusted pursuant to section 4.
"Holding Company" shall mean Lund International Holdings, Inc., a
Delaware corporation, and any successor thereto.
"Notice of Exercise" shall mean the form of Notice of Exercise
appearing at the end of this Warrant.
"Other Securities" shall mean with reference to the exercise privilege
of the holders of the Warrants, any Shares (other than shares of Holding Company
Common Stock) of the Holding Company and any other securities of the Holding
Company (including, without limitation, Preferred Shares) or of any other Person
which the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise or partial exercise of the Warrants, in
lieu of or in addition to shares of Holding Company Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or in
replacement of shares of Holding Company Common Stock (or Other Securities)
pursuant to the terms of the Warrants or otherwise.
"Purchase Rights" shall mean any warrants, options or other rights to
subscribe for, purchase or otherwise acquire any shares of Holding Company
Common Stock or any Convertible Securities, either immediately or upon the
arrival of a specified date or the happening of a specified event.
"Securities Purchase Agreements" shall have the meaning specified in
the preamble to this Warrant.
"Warrant Shares" shall mean, subject to the provisions of section 12 of
the Securities Purchase Agreements, the shares of Holding Company Common Stock
(and/or Other Securities) issued or issuable, as the case may be, from time to
time upon exercise of the Warrants, including, without
<PAGE>
limitation, any shares of Holding Company Common Stock (and/or Other Securities)
issued or issuable with respect thereto by way of dividend or distribution or in
connection with a combination of shares of Holding Company Common Stock,
recapitalization, merger, consolidation, other reorganization or otherwise.
"Warrants" shall have the meaning specified in the preamble to this
Warrant.
1.2. Other Definitions. The terms defined in this section 1.2, whenever
used in this Warrant, shall, unless the context otherwise requires, have the
following respective meanings:
"this Warrant" (and similar references to any of the other Operative
Documents) shall mean, and the words "herein" (and "therein"), "hereof" (and
"thereof"), "hereunder" (and "thereunder") and words of similar import shall,
unless the context clearly requires otherwise, refer to, such instruments as
they may from time to time be amended, modified or supplemented.
2. Exercise of Warrant.
2.1. Right to Exercise; Notice. On the terms and subject to the
conditions of this section 2, the holder hereof shall have the right, at its
option, to exercise this Warrant in whole or in part at any time or from time to
time during the Exercise Period, all as more fully specified below.
2.2. Manner of Exercise; Issuance of Shares of Holding Company Common
Stock. To exercise this Warrant, the holder hereof shall deliver to the Holding
Company (a) a Notice of Exercise (substantially in the form of Exhibit 2.2(a)
attached hereto) duly executed by a duly authorized officer of the holder hereof
(or its attorney) specifying the Warrant Shares to be purchased, (b) an amount
equal to the aggregate Exercise Price for all Warrant Shares as to which this
Warrant is then being exercised and (c) this Warrant. At the option of the
holder hereof, payment of the Exercise Price shall be made (w) by wire transfer
of funds to an account in a bank located in the United States designated by the
Holding Company for such purpose, (x) by check payable to the order of the
Holding Company, (y) by application of any Warrant Shares and/or any Notes, as
provided below, or (z) by any combination of such methods.
<PAGE>
Upon the exercise of this Warrant in whole or in part, the holder
hereof may, at its option, submit to the Holding Company written instructions
from such holder to apply any specified portion of the Warrant Shares issuable
upon such exercise in payment of the Exercise Price required upon such exercise,
in which case the Holding Company will accept such specified portion of the
Warrant Shares (at a value per share equal to the then Fair Value thereof less,
in each case, the Exercise Price then in effect), in lieu of a like amount of
such cash payment.
Upon the exercise of this Warrant in whole or in part by the holder of
any Notes, such holder may, at its option, surrender such Notes to the Holding
Company together with written instructions from such holder to apply all or any
specified principal amount of such Notes against the payment of some or all of
the Exercise Price required upon such exercise, in which case the Holding
Company will accept such specified principal amount in lieu of a like amount of
such cash payment. In lieu of or in addition to the aforesaid application, such
holder may, without surrendering such Notes, furnish the Holding Company with
written instructions to apply all or any specified amount of accrued interest on
such Notes against the payment of some or all of the Exercise Price required
upon such exercise, in which case the Holding Company will accept such specified
accrued interest in lieu of a like amount of cash. Upon any such partial
application of the principal of any such Note, the Holding Company at its
expense will, and will cause each of the other Companies to, promptly issue and
deliver to or upon the order of the holder thereof a new Note or Notes equal in
aggregate principal amount to the unpaid principal amount of such surrendered
Note not so applied and dated so as to result in no loss of interest. At the
time of surrender of any such Note pursuant to this section 2.2, the Holding
Company will, and will cause each of the other Companies to, pay to the holder
surrendering such Note all interest on the principal amount thereof so applied
accrued to and including the date of such surrender.
Upon receipt of the items referred to in section 2.3, the Holding
Company shall, as promptly as practicable, and in any event within five days
thereafter, cause to be issued and delivered to the holder hereof (or its
nominee) or the transferee designated in the Notice of Exercise, a certificate
or certificates representing the Warrant Shares specified in the Notice of
Exercise (but not exceeding the maximum number thereof issuable upon exercise of
this Warrant) minus the Warrant Shares, if any, applied in payment of the
Exercise Price. Such certificates shall be
<PAGE>
registered in the name of the holder hereof (or its nominee) or in the name of
such transferee, as the case may be.
If this Warrant is exercised in part, the Holding Company shall, at the
time of delivery of such certificate or certificates, issue and deliver to the
holder hereof or the transferee so designated in the Notice of Exercise, a new
Warrant evidencing the right of the holder hereof or such transferee to purchase
at the Exercise Price then in effect the Warrant Shares for which this Warrant
shall not have been exercised and this Warrant shall be cancelled.
2.3. Effectiveness of Exercise. Unless otherwise requested by the
holder hereof, this Warrant shall be deemed to have been exercised and such
certificate or certificates representing Warrant Shares shall be deemed to have
been issued, and the holder or transferee so designated in the Notice of
Exercise (subject to the provisions of section 3.2) shall be deemed to have
become the holder of record of such Warrant Shares for all purposes, as of the
close of business on the date on which the Notice of Exercise, the Exercise
Price and this Warrant shall have been received by the Holding Company.
2.4. Continued Validity. A holder of Warrant Shares issued upon the
exercise of this Warrant, in whole or in part, shall continue to be entitled to
all rights to which a holder of this Warrant is entitled pursuant to the
provisions of this Warrant, except such rights as by their terms apply solely
(a) to the holder of a Warrant or (b) to the period prior to the exercise of
this Warrant in whole or in part, notwithstanding that this Warrant is cancelled
following such exercise. The Holding Company will, at the time of any exercise
of this Warrant, upon the request of the holder of the Warrant Shares issued
upon the exercise hereof, acknowledge in writing, in form reasonably
satisfactory to such holder, its continuing obligation to afford to such holder
all rights to which such holder shall continue to be entitled after such
exercise in accordance with the provisions of this Warrant, including, without
limitation, those set forth in sections 7.1, 7.2, 7.4 and 7.5 of this Warrant;
provided that if such holder shall fail to make any such request, such failure
shall not affect the continuing obligation of the Holding Company to afford to
such holder all such rights.
<PAGE>
2.5. Deemed Exercise on Merger or Sale; Automatic Exercise on Last Day
of Exercise Period.
(a) If the Holding Company merges or consolidates with, or
sells all or substantially all of its properties and assets to any
other unaffiliated Person and
(i) consideration is payable to the holders of
Holding Company Common Stock (or Other Securities) in exchange
for their shares of Holding Company Common Stock (or Other
Securities) in connection with such merger, consolidation or
sale which consists solely of cash or other property (other
than securities, as to which the following clause (ii) shall
apply), then (A) the holder of this Warrant shall be entitled
to receive distributions (the "Distributions") at the same
time as and on an equal basis with the holders of Holding
Company Common Stock (or Other Securities) as if this Warrant
had been exercised immediately prior to such event, less the
Exercise Price, or (B) at the option of the holder of this
Warrant, such holder may require that this Warrant be
purchased by the Holding Company or by the successor thereto
in such merger, consolidation or sale upon the consummation of
such merger, consolidation or sale at a price (for each share
of Holding Company Common Stock (or Other Security) issuable
upon exercise of this Warrant) equal to the Distributions per
share payable to the holders of the Holding Company Common
Stock (or Other Securities), less the Exercise Price. Upon
receipt by the holder of this Warrant of payment pursuant to
clauses (A) or (B) in this clause (i), this Warrant and the
rights of the holder hereof shall terminate; or
(ii) in connection therewith, securities are issuable
to the holders of Holding Company Common Stock (or Other
Securities), if this Warrant has not been exercised on or
before the consummation of such transaction, then the holder
of this Warrant shall be entitled to receive the same
securities at the same time as and on an equal basis with the
holders of Holding Company Common Stock (or Other Securities)
as if this Warrant had been exercised in full immediately
prior to such event and upon receipt of such securities this
Warrant and the rights of the holder hereof shall terminate.
Payment of the Exercise Price in
<PAGE>
connection therewith shall be made by application of that
portion of the securities issuable to the holder of this
Warrant (at a value per share equal to the then Fair Value
thereof) equal to the aggregate exercise price which would
then be due upon an exercise of this Warrant.
(b) If this Warrant shall not have been exercised in full on
or before the last day of the Exercise Period, then this Warrant shall
be automatically exercised, without further action on the part of the
holder hereof, in full (and the holder hereof shall be deemed to be a
holder of the Warrant Shares issued upon such automatic exercise) on
and as of the last day of the Exercise Period, unless at any time on or
before such last day of the Exercise Period the holder of this Warrant
shall notify the Holding Company in writing that no such automatic
exercise is to occur. Payment of the Exercise Price due in connection
with any such automatic exercise pursuant to this section 2.5 shall be
made by application of that portion of the Warrant Shares issuable upon
such exercise (at a value per share equal to the then Fair Value
thereof) equal to the aggregate Exercise Price which is due upon such
exercise, unless at any time on or before such last day of the Exercise
Period the holder of this Warrant shall notify the Holding Company that
such holder elects one of the other payment options set forth in
section 2.2. As promptly as practicable following any such automatic
exercise, and in any event within ten Business Days after the day that
the holder of this Warrant surrenders this Warrant to the Holding
Company for cancellation, the Holding Company shall cause to be issued
and delivered to the holder hereof a certificate registered in the name
of the holder hereof (unless the holder shall specifically instruct the
Holding Company otherwise) representing the Warrant Shares issued in
connection with such automatic exercise of this Warrant minus the
number of Warrant Shares, if any, applied in payment of the Exercise
Price.
<PAGE>
3. Registration, Transfer, Exchange and Replacement of Securities; Legends.
3.1. Registration, Transfer, Exchange and Replacement of Securities.
Reference is hereby made to sections 17 and 18 of the Securities Purchase
Agreements for certain provisions relating to the registration, transfer,
exchange and replacement of the Warrants and Warrant Shares. To transfer this
Warrant, the holder shall deliver to the Holding Company a Notice of Assignment
(substantially in the form of Exhibit 3.1 attached hereto) duly executed by the
holder hereof (or its attorney) specifying that this Warrant (or any portion
hereof) is to be transferred to the Person(s) named therein.
3.2. Transfers and Legends. Neither this Warrant nor any Warrant Shares
may be transferred or assigned (a) unless registered under the Securities Act or
unless an exemption from such registration is available and (b) except in
accordance with the restrictions on transfer set forth in the Rights Agreement,
and any transfer or assignment not made in accordance with the foregoing shall
be void. Until the date on which the Warrants are transferred pursuant to a
registration statement effective under the Securities Act or an exemption from
the registration requirements of the Securities Act each Warrant shall bear a
legend in substantially the following form:
"THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER
APPLICABLE SECURITIES LAW, AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF REGISTRATION
THEREUNDER OR AN EXEMPTION THEREFROM."
So long as this Warrant is subject to the restrictions on transfer set forth in
the Rights Agreement, this Warrant shall bear a legend in substantially the
following form:
"THIS WARRANT IS SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFER SET FORTH IN THE RIGHTS AGREEMENT DATED
DECEMBER 23, 1998, AS AMENDED, MODIFIED AND
SUPPLEMENTED FROM TIME TO TIME."
Until the date on which the Warrant Shares are transferred pursuant to a
registration statement or an exemption from the registration requirements of
<PAGE>
the Securities Act becomes effective under the Securities Act, each certificate
evidencing Warrant Shares shall bear a legend in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY OTHER APPLICABLE SECURITIES
LAW, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF
REGISTRATION THEREUNDER OR AN EXEMPTION THEREFROM."
So long as the Warrant Shares are subject to the restrictions on transfer set
forth in the Rights Agreement, each certificate evidencing Warrant Shares shall
bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET
FORTH IN THE RIGHTS AGREEMENT DATED DECEMBER 23,
1998, AS AMENDED, MODIFIED AND SUPPLEMENTED FROM
TIME TO TIME."
4. Anti-Dilution Provisions.
4.1. Adjustment of Number of Shares of Holding Company Class A Common
Stock Purchasable. Upon any adjustment of the Exercise Price as provided in
section 4.2, the holder hereof shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of Holding
Company Class A Common Stock (calculated to the nearest 1/100th of a share)
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Holding Company Class A Common Stock
purchasable hereunder immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment.
4.2. Adjustment of Exercise Price. In addition to any adjustment
required under the provisions of section 4.5 below, and except as otherwise
provided in section 4.2(n) below, the Exercise Price shall be subject to
adjustment from time to time as set forth in this section 4.2, provided that no
such adjustment shall cause the Exercise Price to be less than the par value of
any Warrant Share issuable upon exercise.
<PAGE>
(a) Dividends, Distributions, Subdivisions and Combinations.
If and whenever the Holding Company subsequent to the date hereof:
(i) declares a dividend upon, or makes any
distribution in respect of, any shares of Holding Company
Common Stock (or any other Shares of the Holding Company),
payable in shares of Holding Company Common Stock, Convertible
Securities or Purchase Rights, or
(ii) subdivides its outstanding shares of Holding
Company Common Stock into a larger number of shares of Holding
Company Common Stock, or
(iii) combines its outstanding shares of Holding
Company Common Stock into a smaller number of shares of
Holding Company Common Stock,
then the Exercise Price shall be adjusted to that price determined by
multiplying the Exercise Price in effect immediately prior to such
event by a fraction (A) the numerator of which shall be the total
number of outstanding shares of Holding Company Common Stock
immediately prior to such event, and (B) the denominator of which shall
be the total number of outstanding shares of Holding Company Common
Stock immediately after such event, treating as outstanding all shares
of Holding Company Common Stock issuable upon conversions or exchanges
of any such Convertible Securities issued in such dividend or
distribution and exercises of any such Purchase Rights issued in such
dividend or distribution.
(b) Issuance of Additional Shares of Holding Company Common
Stock. If and whenever the Holding Company subsequent to the date
hereof shall issue or sell shares of Holding Company Common Stock
(except as otherwise provided in the last paragraph of this section
4.2(b)), for a consideration per share of Holding Company Common Stock
less than the Fair Value per share of Holding Company Common Stock
(determined, in each case, as of the date specified in the next
succeeding paragraph), the Exercise Price upon each such issuance or
sale shall be adjusted as of the date specified in the next succeeding
paragraph to the price determined by multiplying the Exercise Price in
effect as of the date specified in the next succeeding paragraph by a
fraction (x) the numerator of which is (A) the sum of (1) the number of
shares of
<PAGE>
Holding Company Common Stock outstanding immediately prior to such
issue or sale multiplied by the Fair Value per share of Holding Company
Common Stock immediately prior to such issue or sale plus (2) the
aggregate consideration, if any, received by the Holding Company upon
such issue or sale, divided by (B) the total number of shares of
Holding Company Common Stock outstanding immediately after such issue
or sale, and (y) the denominator of which is the Fair Value per share
of Holding Company Common Stock immediately prior to such issue or
sale.
For the purposes of this section 4.2(b), the date as of which
the Exercise Price shall be adjusted and the date as of which the Fair
Value shall be determined shall be the earlier of (A) the date on which
the Holding Company shall enter into a firm contract for the issuance
of such shares of Holding Company Common Stock and (B) immediately
prior to the date of actual issuance of such shares of Holding Company
Common Stock, provided that if such issuance is of the kind referred to
in the last sentence of the definition of Fair Value appearing in the
Securities Purchase Agreements, such date shall be the date on which
such issuance occurs.
No adjustment of the Exercise Price shall be made under this
section 4.2(b) upon the issuance of any shares of Holding Company
Common Stock which are (i) distributed to holders of shares of Holding
Company Common Stock pursuant to a dividend, distribution or
subdivision for which an adjustment shall previously have been made
under section 4.2(a) or (ii) issued pursuant to the exercise of any
Purchase Rights or pursuant to the conversion or exchange of any
Convertible Securities to the extent that an adjustment shall
previously have been made upon the issuance of such Purchase Rights or
Convertible Securities pursuant to sections 4.2(a), (c) or (d).
(c) Issuance of Purchase Rights. If and whenever the Holding
Company subsequent to the date hereof shall issue or sell any Purchase
Rights (except as otherwise provided in the last paragraph of this
section 4.2(c)) and the consideration per share of Holding Company
Common Stock for which shares of Holding Company Common Stock may at
any time thereafter be issuable upon exercise thereof (or, in the case
of Purchase Rights exercisable for the purchase of Convertible
Securities, upon the subsequent conversion or exchange of such
Convertible Securities) shall be less than the Fair Value per share of
Holding Company Common Stock (determined, in
<PAGE>
each case, as of the date specified in the next succeeding paragraph),
the Exercise Price upon each such issuance or sale shall be adjusted as
provided in section 4.2(b) as of the date specified in the next
succeeding paragraph on the basis that the maximum number of shares of
Holding Company Common Stock ever issuable upon exercise of such
Purchase Rights (or upon conversion or exchange of such Convertible
Securities following such exercise) shall be deemed to have been issued
as of the date of the determination of the Fair Value specified in the
next succeeding paragraph.
For the purposes of this section 4.2(c), the date as of which
the Exercise Price shall be adjusted and the date as of which the Fair
Value shall be determined shall be the earlier of (A) the date on which
the Holding Company shall enter into a firm contract for the issuance
of such Purchase Rights and (B) immediately prior to the date of actual
issuance of such Purchase Rights, provided that if such issuance is of
the kind referred to in the last sentence of the definition of Fair
Value appearing in the Securities Purchase Agreements, such date shall
be the date on which such issuance occurs.
No adjustment of the Exercise Price shall be made under this
section 4.2(c) upon the issuance of any Purchase Rights to the extent
that an adjustment shall previously have been made upon the issuance of
such Purchase Rights pursuant to section 4.2(a).
(d) Issuance of Convertible Securities. If and whenever the
Holding Company subsequent to the date hereof shall issue or sell any
Convertible Securities (except as otherwise provided in the last
paragraph of this section 4.2(d)) and the consideration per share of
Holding Company Common Stock for which shares of Holding Company Common
Stock may at any time thereafter be issuable pursuant to the terms of
such Convertible Securities shall be less than the Fair Value per share
of Holding Company Common Stock (determined, in each case, as of the
date specified in the next succeeding paragraph), the Exercise Price
upon each such issuance or sale shall be adjusted as provided in
section 4.2(b) as of the date specified in the next succeeding
paragraph on the basis that the maximum number of shares of Holding
Company Common Stock ever necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have
been issued as of the date of the determination of the Fair Value
specified in the next succeeding paragraph.
<PAGE>
For the purposes of this section 4.2(d), the date as of which
the Exercise Price shall be adjusted and the date as of which the Fair
Value shall be determined shall be the earlier of (A) the date on which
the Holding Company shall enter into a firm contract for the issuance
of such Convertible Securities and (B) immediately prior to the date of
actual issuance of such Convertible Securities, provided that if such
issuance is of the kind referred to in the last sentence of the
definition of Fair Value appearing in the Securities Purchase
Agreements, such date shall be the date on which such issuance occurs.
No adjustment of the Exercise Price shall be made under this
section 4.2(d) upon the issuance of any Convertible Securities which
are (i) distributed to holders of shares of Holding Company Common
Stock pursuant to a dividend or distribution to the extent that an
adjustment shall previously have been made pursuant to section 4.2(a)
or (ii) issued pursuant to the exercise of any Purchase Rights to the
extent that an adjustment shall previously have been made upon the
issuance of such Purchase Rights pursuant to section 4.2(a) or (c).
(e) Minimum Adjustment. If any adjustment of the Exercise
Price pursuant to this section 4.2 shall result in an adjustment of
less than $.0001, no such adjustment shall be made, but any such lesser
adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to $.0001; provided that
upon any adjustment of the Exercise Price resulting from (i) the
declaration of a dividend upon, or the making of any distribution in
respect of, any shares of Holding Company Common Stock (or any other
Shares of the Holding Company) payable in shares of Holding Company
Common Stock, Purchase Rights or Convertible Securities or (ii) the
reclassification by subdivision, combination or otherwise, of the
Holding Company Common Stock into a greater or smaller number of shares
of Holding Company Common Stock, the foregoing figure of $.0001 (or
such figure as last adjusted) shall be proportionately adjusted, and
provided, further, that upon the exercise of this Warrant, the Holding
Company shall make all necessary adjustments (to the nearest .0001 of a
cent) not theretofore made to the Exercise Price up to and including
the date upon which this Warrant is exercised.
<PAGE>
(f) Readjustment of Exercise Price. Upon each change in (i)
the consideration, if any, payable for any Purchase Rights or
Convertible Securities referred to in section 4.2(a), (c) or (d), (ii)
the consideration, if any, payable upon exercise of such Purchase
Rights or upon the conversion or exchange of such Convertible
Securities or (iii) the number of shares of Holding Company Common
Stock issuable upon the exercise of such Purchase Rights or the rate at
which such Convertible Securities are convertible into or exchangeable
for shares of Holding Company Common Stock, the Exercise Price in
effect at the time of such event shall forthwith be readjusted to the
Exercise Price which would have been in effect at such time had such
Purchase Rights or Convertible Securities provided for such changed
consideration, number of shares of Holding Company Common Stock so
issuable or conversion rate, as the case may be, at the time initially
granted, issued or sold. On the expiration of any Purchase Rights not
exercised or of any right to convert or exchange under any Convertible
Securities not exercised, the Exercise Price then in effect shall
forthwith be increased to the Exercise Price which would have been in
effect at the time of such expiration had such Purchase Rights or
Convertible Securities never been issued. No readjustment of the
Exercise Price pursuant to this section 4.2(f) shall (i) increase the
Exercise Price by an amount in excess of the adjustment originally made
to the Exercise Price in respect of the issue, sale or grant of the
applicable Purchase Rights or Convertible Securities or (ii) require
any adjustment to the amount paid or number of Warrant Shares received
by any Person upon any exercise of this Warrant prior to the date upon
which such readjustment to the Exercise Price shall occur.
(g) Reorganization, Reclassification or Recapitalization of
the Holding Company. If and whenever subsequent to the date hereof the
Holding Company shall effect (i) any reorganization, reclassification
or recapitalization of the Holding Company Common Stock (or any other
Shares of the Holding Company) (other than in the cases referred to in
section 4.2(a)), (ii) any consolidation or merger of the Holding
Company with or into another Person (other than in the cases referred
to in section 2.5), (iii) the sale, transfer or other disposition of
the property, assets or business of the Holding Company as an entirety
or substantially as an entirety or (iv) any other transaction (or any
other event shall occur) as a result of which holders of shares of
Holding Company Common Stock become entitled to receive any Shares or
other securities and/or property
<PAGE>
(including, without limitation, cash) with respect to or in exchange
for shares of Holding Company Common Stock, there shall thereafter be
deliverable upon the exercise of this Warrant or any portion thereof
(in lieu of or in addition to the Warrant Shares theretofore
deliverable, as appropriate) the highest number of Shares or other
securities and/or the greatest amount of property (including, without
limitation, cash) to which the holder of the number of Warrant Shares
which would otherwise have been deliverable upon the exercise of this
Warrant or any portion thereof at the time would have been entitled
upon such reorganization, reclassification, recapitalization,
consolidation, merger, sale, transfer, disposition or other transaction
or upon the occurrence of such other event, and at the same aggregate
Exercise Price.
Prior to and as a condition of the consummation of any
transaction or event described in the preceding sentence, the Holding
Company shall make equitable, written adjustments in the application of
the provisions set forth herein and in the other Operative Documents
for the benefit of the holders of the Warrants and/or Warrant Shares,
in a manner reasonably satisfactory to the Required Holders of the
Warrants and/or Warrant Shares, as applicable, so that all such
provisions shall thereafter be applicable, as nearly as possible, in
relation to any Shares or other securities or other property thereafter
deliverable upon exercise of the Warrants and so that the holders of
the Warrants will (prior to exercise) enjoy all of the rights and
benefits enjoyed by any Person who shall have acquired any such Shares
or other securities and/or property in connection with any such
transaction or event, including, without limitation, any subsequent
tender offer or redemption of any such Shares or other securities. Any
such adjustment shall be made by and set forth in a supplemental
agreement of the Holding Company and/or the successor entity, as
applicable, for the benefit of the holders of the Warrants and/or
Warrant Shares and in form and substance acceptable to the Required
Holders of the Warrants and Warrant Shares, which agreement shall bind
the Holding Company and/or the successor entity, as applicable, and all
holders of Warrants and Warrant Shares then outstanding and, upon
request by the Required Holders of the Warrants and Warrant Shares,
shall be accompanied by a favorable opinion of the regular outside
counsel to the Holding Company or the successor entity, as applicable
(or such other firm as is reasonably acceptable to the Required Holders
of the Warrants), as to the enforceability of such agreement and as
<PAGE>
to such other matters as the Required Holders of the Warrants may
reasonably request.
(h) Other Dilutive Events. If any other transaction or event
shall occur (excluding any transaction or event explicitly referred to
in this section 4.2, but including, without limitation, any issuance,
repurchase, redemption, or other distribution in respect of any Shares
or other securities of the Holding Company or of any other Person,
including any Person referred to in section 4.2(g)), as to which the
other provisions of this section 4 are not strictly applicable but the
failure to make any adjustment to the Exercise Price or to any of the
other terms of this Warrant would not fairly protect the purchase
rights and other rights represented by this Warrant in accordance with
the essential intent and principles hereof, then, and as a condition to
the consummation of any such transaction or event, and in each such
case, the Holding Company shall appoint a firm of independent certified
public accountants of recognized national standing (which may be the
regular auditors of the Holding Company), which shall give its opinion
as to the adjustment, if any, on a basis consistent with the essential
intent and principles established in this section 4, necessary to
preserve, without dilution, the rights represented by this Warrant. The
certificate of any such firm of accountants shall be conclusive
evidence of the correctness of any computation made under this section
4. The Holding Company shall pay the fees and expenses of such firm of
accountants in connection with any such opinion. Upon receipt of such
opinion, the Holding Company will promptly deliver a copy thereof to
the holder of this Warrant and shall make the adjustments described
therein.
(i) Determination of Consideration. For the purposes of this
section 4, the consideration received or receivable by the Holding
Company for the issuance, sale or grant of shares of Holding Company
Common Stock, Purchase Rights or Convertible Securities, irrespective
of the accounting treatment of such consideration, shall be valued and
determined as follows:
(i) Cash Payment. In the case of cash, the gross
amount paid by the purchasers without deduction of any accrued
interest or dividends, any reasonable expenses paid or
incurred and any underwriting or placement commissions or
concessions paid or allowed by the Holding Company to
unaffiliated third parties in connection with such issue or
sale.
<PAGE>
(ii) Non-Cash Payment. In the case of consideration
other than cash, the Fair Value thereof (in any case as of the
date immediately preceding the issuance, sale or grant in
question).
(iii) Certain Allocations. If shares of Holding
Company Common Stock, Purchase Rights and/or Convertible
Securities are issued or sold together with other securities
or other assets of the Holding Company for a consideration
which covers more than one of the foregoing categories of
securities and assets, the consideration received or
receivable (computed as provided in clauses (i) and (ii) of
this section 4.2(i)) shall be allocable to such shares of
Holding Company Common Stock, Purchase Rights and/or
Convertible Securities as reasonably determined in good faith
by the board of directors of the Holding Company (provided
such allocation is set forth in a written resolution and a
certified copy thereof is furnished to the holder of this
Warrant promptly (but in any event within 10 days) following
its adoption).
(iv) Dividends in Securities. If the Holding Company
shall declare a dividend or make any other distribution upon
any shares of Holding Company Common Stock payable in shares
of Holding Company Common Stock, Convertible Securities or
Purchase Rights, such shares of Holding Company Common Stock,
Convertible Securities or Purchase Rights, as the case may be,
issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(v) Purchase Rights and Convertible Securities. The
consideration for which each share of Holding Company Common
Stock shall be deemed to be issued upon the issuance or sale
of any Purchase Rights or Convertible Securities shall be
determined by dividing (A) the total consideration, if any,
received by the Holding Company as consideration for the
Purchase Rights or the Convertible Securities, as the case may
be, plus the minimum aggregate amount of additional
consideration, if any, ever payable to the Holding Company
upon the exercise of such Purchase Rights and/or upon the
conversion or exchange of such Convertible Securities, as the
<PAGE>
case may be, but without deduction of any accrued interest or
dividends, any reasonable expenses paid or incurred and any
underwriting placement commissions or concessions paid or
allowed by the Holding Company to unaffiliated third parties
in connection with such issue or sale; by (B) the maximum
number of shares of Holding Company Common Stock ever issuable
upon the exercise of such Purchase Rights or upon the
conversion or exchange of such Convertible Securities.
(vi) Merger, Consolidation or Sale of Assets. If any
shares of Holding Company Common Stock, Convertible Securities
or Purchase Rights are issued in connection with any merger or
consolidation of which the Holding Company is the surviving
corporation, the amount of consideration therefor shall be
deemed to be the Fair Value of such portion of the assets and
business of the non-surviving corporation as shall be
attributable to such shares of Holding Company Common Stock,
Convertible Securities or Purchase Rights, as the case may be.
In the event of (A) any merger or consolidation of which the
Holding Company is not the surviving corporation or (B) the
sale, transfer or other disposition of the property, assets or
business of the Holding Company as an entirety or
substantially as an entirety for shares or other securities of
any other Person, the Holding Company shall be deemed to have
issued the number of shares of Holding Company Common Stock
for Shares or other securities of the surviving corporation or
such other Person computed on the basis of the actual exchange
ratio on which the transaction was predicated and for a
consideration equal to the Fair Value on the date of such
transaction of such Shares or other securities of the
surviving corporation or such other Person, and if any such
calculation results in adjustment of the Exercise Price, the
determination of the number of Warrant Shares issuable upon
exercise of this Warrant immediately prior to such merger,
consolidation or sale, for the purposes of section 4.2(g),
shall be made after giving effect to such adjustment of the
Exercise Price.
(j) Record Date. If the Holding Company shall take a record of
the holders of the Holding Company Common Stock for the purpose of
entitling them (i) to receive a dividend or other distribution payable
in shares of Holding Company Common Stock, Convertible Securities or
Purchase Rights or (ii) to subscribe for or purchase shares
<PAGE>
of Holding Company Common Stock, Convertible Securities or Purchase
Rights, then all references in this section 4 to the date of the issue
or sale of shares of Holding Company Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of
such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be, shall be deemed to be
references to such record date.
(k) Shares Outstanding. The number of shares of Holding
Company Common Stock deemed to be outstanding at any given time shall
not include shares of Holding Company Common Stock held by the Holding
Company or any Subsidiary of the Holding Company.
(l) Maximum Exercise Price. At no time shall the Exercise
Price exceed the amount set forth in the first paragraph of the
Preamble of this Warrant except as a result of an adjustment thereto
pursuant to section 4.2(a)(iii) or 4.2(g).
(m) Application. All subdivisions of this section 4.2 are
intended to operate independently of one another. If a transaction or
an event occurs that requires the application of more than one
subdivision, all applicable subdivisions shall be given independent
effect (but without duplication of adjustment).
(n) No Adjustments Under Certain Circumstances. Anything
herein to the contrary notwithstanding, no adjustment to the Exercise
Price shall be made in the case of:
(i) any issuance of shares of Holding Company Common
Stock (or Other Securities) upon the exercise in whole or in
part of any of the Warrants; or
(ii) the issuance or sale of shares of Holding
Company Common Stock, Purchase Rights or Convertible
Securities for a consideration per share of Holding Company
Common Stock at or above the Fair Value per share of Holding
Company Common Stock, all determined as provided herein; or
(iii) the issuance of any shares of Holding Company
Class A Common Stock for an equal number of shares of Holding
Company Class B Common Stock (subject to
<PAGE>
appropriate adjustment for any stock dividend, subdivision or
combination) upon conversion thereof pursuant to the terms of
the Holding Company's Certificate of Designation, Preferences
and Rights of Class B-1 Common Stock (as in effect on the Auto
Ventshade Closing Date); or
(iv) the issuance of shares of Holding Company Class
A Common Stock upon conversion of the Series B Preferred Stock
outstanding on the Auto Ventshade Closing Date pursuant to the
terms of the Holding Company's Certificate of Designation,
Preferences and Rights of the Series B Preferred Stock (as in
effect on the Auto Ventshade Closing Date); or
(v) the issuance of shares of Holding Company Common
Stock upon the exercise of the options therefor outstanding
(and as in effect) on the Auto Ventshade Closing Date and
specified on Exhibit 5.5(b) attached to the Securities
Purchase Agreements, provided that the aggregate number of
shares of Holding Company Common Stock so issued shall not
exceed 677,000 (subject to appropriate adjustment for any
stock dividend, subdivision or combination) at any time.
4.3. Rights Offering. If the Holding Company shall effect an offering
of its Shares pro rata among its stockholders, the holder hereof shall be
entitled, at its option, to elect to participate in each and every such offering
as if this Warrant had been exercised and such holder were, at the time of any
such rights offering, then a holder of that number of Warrant Shares to which
such holder is then entitled on the exercise hereof.
<PAGE>
4.4. Certificates and Notices.
(a) Adjustments to Exercise Price. As promptly as practicable
(but in any event not later than 10 Business Days) after the occurrence
of any event requiring any adjustment under this section 4 to the
Exercise Price (or to the number or kind of securities or other
property deliverable upon the exercise of this Warrant), the Holding
Company shall, at its expense, deliver to the holder of this Warrant
either (i) an Officers' Certificate or (ii) a certificate signed by a
firm of independent certified public accountants of recognized national
standing (which may be the regular auditors of the Holding Company),
setting forth in reasonable detail the events requiring the adjustment
and the method by which such adjustment was calculated and specifying
the adjusted Exercise Price and the number of shares of Holding Company
Common Stock (or Other Securities) purchasable upon exercise of this
Warrant after giving effect to such adjustment. The certificate of any
such firm of accountants shall be conclusive evidence of the
correctness of any computation made under this section 4.
(b) Extraordinary Events. If and whenever the Holding Company
subsequent to the date hereof shall propose to (i) pay any dividend to
the holders of shares of Holding Company Common Stock or to make any
other distribution to the holders of shares of Holding Company Common
Stock (including, without limitation, any cash distribution), (ii)
offer to the holders of shares of Holding Company Common Stock rights
to subscribe for or purchase any additional shares of Holding Company
Common Stock (or any other Shares) or any other rights or options,
(iii) effect any reclassification of the Shares of the Holding Company
(other than a reclassification involving merely the subdivision or
combination of outstanding shares of Holding Company Common Stock
referred to in section 4.2(a)), (iv) engage in any reorganization or
recapitalization or any consolidation or merger, (v) consummate any
sale, transfer or other disposition of its property, assets and
business as an entirety or substantially as an entirety, (vi) effect
any other transaction which might require an adjustment to the Exercise
Price (or to the number or kind of shares of Holding Company Common
Stock, securities or other property deliverable upon the exercise of
this Warrant), including, without limitation, any transaction of the
kind described in section 4.2(g) or (vii) commence or effect the
liquidation, dissolution or winding up of
<PAGE>
the Holding Company, then, in each such case, the Holding Company shall
deliver to the holder of this Warrant an Officers' Certificate giving
notice of such proposed action, specifying (A) the date on which the
books of the Holding Company shall close, or a record shall be taken,
for determining the holders of shares of Holding Company Common Stock
entitled to receive such dividend or other distribution or such rights
or options, or the date on which such reclassification, reorganization,
recapitalization, consolidation, merger, sale, transfer, other
disposition, transaction, liquidation, dissolution or winding up shall
take place or commence, as the case may be, and (B) the date as of
which it is expected that holders of shares of Holding Company Common
Stock shall be entitled to receive shares of Holding Company Common
Stock, securities or other property deliverable upon such action, if
any such date is to be fixed. Such Officers' Certificate shall be
delivered in the case of any action covered by clause (i) or (ii)
above, at least 30 days prior to the record date for determining
holders of shares of Holding Company Common Stock for purposes of
receiving such payment or offer, and, in any other case, at least 30
days prior to the date upon which such action takes place and 20 days
prior to any record date to determine holders of shares of Holding
Company Common Stock entitled to receive such securities or other
property.
(c) Effect of Failure. Failure to give any certificate or
notice, or any defect in any certificate or notice required under this
section 4.4 shall not affect the legality or validity of the adjustment
of the Exercise Price or the number of Warrant Shares purchasable upon
exercise of this Warrant.
4.5. Adjustments for Changes in Certain Data. The Holding Company
hereby agrees that the initial aggregate number of shares of Holding Company
Class A Common Stock issuable upon exercise in full of the Warrants issued on
the [Auto Ventshade/ Smittybilt] Closing Date (or upon conversion of the Series
B Preferred Stock issuable upon such exercise, subject to the provisions of
section 12 of the Securities Purchase Agreements) to the initial holders thereof
was _______ [Insert "520,749" (for Warrants issued at the Auto Ventshade
Closing); "184,090" (for Warrants issued at the Smittybilt Closing)], which was
intended to constitute not less than ______ [Insert "4.8%" (for Warrants issued
at the Auto Ventshade Closing); "1.2%" (for Warrants issued at the Smittybilt
Closing)] of the shares of Holding Company Common Stock (of both classes)
outstanding immediately following the [Auto Ventshade/Smittybilt] Closing
(calculated
<PAGE>
on a fully-diluted basis assuming the conversion, exercise and exchange of all
outstanding securities convertible into or exercisable or exchangeable for
Shares of the Holding Company, including, without limitation, the Warrants, but
excluding the Excluded Outstanding Options. If for any reason the shares of
Holding Company Class A Common Stock purchasable upon the exercise of the
Warrants issued on the [Auto Ventshade/Smittybilt] Closing Date constituted less
than [4.8%/1.2%] of the shares of Holding Company Common Stock outstanding as of
such time (and as so calculated), the Holding Company shall forthwith reissue
each Warrant then outstanding with appropriate adjustments in the Exercise Price
and in the number of shares of Holding Company Class A Common Stock (and as
provided in section 12 of the Securities Purchase Agreements, shares of Series B
Preferred Stock) issuable upon exercise thereof (together with an Officers'
Certificate setting forth in reasonable detail the computation of such
adjustments), and all such adjustments shall be reasonably satisfactory to the
holders thereof.
5. Registration, etc. Reference is hereby made to the Securities Purchase
Agreements and to the Rights Agreement for certain provisions relating to the
rights of the holders of the Warrants and Warrant Shares to require the Holding
Company to register the Warrant Shares under the Securities Act.
6. Reservation of Holding Company Common Stock (and/or Other Securities), etc.
The Holding Company has reserved and after the date hereof will at all times
reserve and keep available, solely for issuance, sale and delivery upon the
exercise of this Warrant, such number of shares of Holding Company Class A
Common Stock purchasable upon the exercise of this Warrant. All such shares of
Holding Company Common Stock (and/or Other Securities) shall be duly authorized
and, when issued upon exercise of this Warrant in accordance with the terms
hereof, will be validly issued, fully paid and nonassessable and not subject to
preemptive rights on the part of any other Person or to any Lien, charge or
other security interest, but, in each case, subject to the applicable terms of
the Rights Agreement.
<PAGE>
7. Various Covenants of the Holding Company.
7.1. No Impairment or Amendment; No Further Issuances or Sales;
Continued Validity. The Holding Company shall not by any action, including,
without limitation, amending its Organizational Documents, any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of Shares or other securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate to
protect the rights of the holder hereof against impairment. Without limiting the
generality of the foregoing, the Holding Company (a) will take all such action
as may be necessary or appropriate in order that the Holding Company may validly
issue fully paid and nonassessable Warrant Shares, (b) will obtain and maintain
all such authorizations, exemptions or consents from any public regulatory body
having jurisdiction as may be necessary to enable the Holding Company to perform
its obligations under this Warrant, (c) will not be or become bound by any
agreement, document or instrument (other than the Senior Loan Documents (or the
documents related to any Refinancing Debt thereof)), the terms of which restrict
the Holding Company from performing its obligations under, and/or complying with
the terms of, this Warrant and/or any of the other Operative Documents, (d) will
not amend or modify any term, condition or provision of (i) its Organizational
Documents or (ii) the Management Option Plan, or any related agreement, document
or instrument, in a manner which is, or could reasonably be expected to be,
adverse in any material respect to the interests of any holder of Warrants
and/or Warrant Shares and (e) will not permit the par value of any Warrant
Shares issuable upon exercise of this Warrant to be greater than the amount
payable therefor upon such exercise.
So long as any Warrants or Warrant Shares are outstanding, the Holding
Company will acknowledge in writing, in form satisfactory to any holder of any
such security, the continued validity of the Holding Company's obligations
hereunder.
7.2. Listing on Securities Exchanges, etc. At all times following the
exercise of this Warrant, the Holding Company will use commercially reasonable
efforts to maintain the listing of all issued and outstanding Warrant Shares on
each securities exchange or market or trading system on which such securities
are then or at any time thereafter listed or traded.
<PAGE>
7.3. Anti-Dilution Provisions. If the Holding Company issues any
Purchase Rights or Convertible Securities or other securities containing
provisions protecting the holder or holders thereof against dilution in any
manner more favorable to such holder or holders thereof than those set forth in
this Warrant, such provisions (or any more favorable portion thereof) shall be
deemed to be incorporated herein as if fully set forth in this Warrant and, to
the extent inconsistent with any provision of this Warrant, shall be deemed to
be substituted therefor.
7.4. Indemnification. Without limiting the generality of any provision
of the Securities Purchase Agreements or any of the other Operative Documents,
the Holding Company shall indemnify, save and hold harmless the holder of this
Warrant and the holder of any Warrant Shares from and against any and all
liability, loss, cost, damage, reasonable attorneys' and accountants' fees and
expenses, court costs and all other out-of-pocket expenses reasonably incurred
by such holder in connection with enforcing any of the terms hereof.
7.5. Certain Expenses. The Holding Company shall pay all taxes (other
than transfer taxes) and other governmental charges that may be imposed in
respect of, the issue, sale and delivery of this Warrant and any Warrant Shares.
8. Miscellaneous.
8.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right, power or remedy hereunder on the part of the holder of this
Warrant or of any Warrant Shares shall operate as a waiver of or otherwise
prejudice such holder's rights, powers or remedies.
8.2. Amendment. Any term, covenant, agreement or condition of the
Warrants may, with the consent of the Holding Company, be amended, or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), by one or more substantially concurrent written
instruments signed by the Required Holders of the Warrants and the Holding
Company, provided that (a) no such amendment or waiver shall change the number
of Warrant Shares issuable upon the exercise of any Warrant or the manner of
exercise or the amount of any payment due upon exercise or the duration of the
Exercise Period, in each case without the prior written consent of the holder of
such Warrant and (b) no such amendment or waiver shall extend to or affect any
<PAGE>
obligation not expressly amended or waived or impair any right consequent
thereon.
8.3. Communications. All communications provided for herein shall be
delivered, mailed or sent by facsimile transmission addressed in the manner and
shall be effective as of the time specified in the Securities Purchase
Agreements.
8.4. Like Tenor. All Warrants shall at all times be identical, except
as to the preamble to each Warrant.
8.5. Remedies. No remedy conferred in this Warrant on the holder of any
Warrant or Warrant Shares is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or under any other agreement, document or
instrument or now or hereafter existing at law or in equity or by statute or
otherwise.
8.6. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
permitted assigns of the Holding Company, the holder or holders of this Warrant
and, as applicable, of any Warrant Shares, to the extent provided herein, and
shall be enforceable by such holder or holders.
8.7. Governing Law. This Warrant, including the validity hereof and the
rights and obligations of the Holding Company and of the holder hereof and all
amendments and supplements hereof and all waivers and consents hereunder, shall
be construed in accordance with and governed by the domestic substantive laws of
the State of New York without giving effect to any choice of law or conflicts of
law provision or rule that would cause the application of the domestic
substantive laws of any other jurisdiction.
<PAGE>
8.8. Headings; Entire Agreement; Partial Invalidity, etc. The table of
contents to and headings in this Warrant are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof. This Warrant, together
with the other Operative Documents, embodies the entire agreement and
understanding between the holder hereof and the Holding Company and supersedes
all prior agreements and understandings relating to the subject matter hereof.
In case any provision in this Warrant or any of the other Operative Documents
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
[The remainder of this page is left blank intentionally.]
<PAGE>
IN WITNESS WHEREOF, the Holding Company has caused this Warrant to
be executed as an instrument under seal by its duly authorized officer as of the
date first above written.
LUND INTERNATIONAL HOLDINGS, INC.
By: _______________________________
(Title)
<PAGE>
Exhibit 2.2(a)
FORM OF NOTICE OF EXERCISE
(To be executed only upon partial or full exercise
of the within Warrant)
The undersigned registered holder of the within Warrant irrevocably
exercises the within Warrant for and purchases ______ shares of Common Stock of
LUND INTERNATIONAL HOLDINGS, INC. and herewith makes payment therefor in the
amount of $_________, all at the price, in the manner and on the terms and
conditions specified in the within Warrant, and requests that a certificate (or
_______ certificates in denominations of _____________ Shares of Common Stock)
for such Common Stock hereby purchased be issued in the name of and delivered to
[choose one] (a) the undersigned or (b) _________________, whose address is
________________________ and, if such shares of Common Stock shall not include
all the Warrant Shares issuable as provided in the within Warrant, that a new
Warrant of like tenor for the Warrant Shares not being purchased hereunder be
issued in the name of and delivered to [choose one] (a) the undersigned or (b)
__________________, whose address is _________________________ .
Dated: ___________________, _____.
[ ]
By ___________________________
(Signature of Registered Holder)
NOTICE: The signature on this Notice of Exercise must correspond with the name
as written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.
<PAGE>
Exhibit 3
FORM OF ASSIGNMENT
(To be executed only upon the assignment of the within
Warrant)
FOR VALUE RECEIVED, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto ______________________________,
whose address is ____________________________, all of the rights of the
undersigned under the within Warrant, with respect to shares of Common Stock of
LUND INTERNATIONAL HOLDINGS, INC. and, if such shares of Common Stock shall not
include all the Warrant Shares issuable as provided in the within Warrant, that
a new Warrant of like tenor for the Warrant Shares not being transferred
hereunder be issued in the name of and delivered to [choose one] (a) the
undersigned or (b) ____________, whose address is ________________, and does
hereby irrevocably constitute and appoint ______________________ Attorney to
register such transfer on the books of LUND INTERNATIONAL HOLDINGS, INC.
maintained for the purpose, with full power of substitution in the premises.
Dated: ___________________, _____.
[ ]
By ___________________________
(Signature of Registered Holder)
NOTICE: The signature on this Assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.
