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
Date of report (Date of earliest event reported) January 28, 1999
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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
FOR A COMPLETE DESCRIPTION OF THE TERMS AND CONDITIONS OF ALL SUCH DOCUMENTS.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 28, 1999, Lund International Holdings, Inc. (the "Company")
purchased all of the issued and outstanding capital stock (the "Shares") of
Smittybilt, Inc. ("Smittybilt"). The aggregate purchase price for the Shares was
$18 million.
In part, the Company funded the acquisition of the Shares by entering
into an Investment Agreement, dated December 22, 1998), 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"). The Company also entered into a First Amendment
to the Investment Agreement, dated January 27, 1999, with the Investors (such
First Amendment and the Investment Agreement discussed above being collectively
referred to herein as the "Investment Agreement"). Pursuant to the terms of the
Investment Agreement, in connection with the acquisition of Smittybilt, the
Company sold to the Investors, via a private placement, an aggregate of 71,428.5
shares of the Company's Series B Preferred Stock (collectively, the "Purchased
Shares"). The shares of the Company's Series B Preferred Stock will be
convertible into shares of the Company's 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 $5,000,000.
The Company also funded part of the acquisition price of the Shares
with borrowings under Amendment No. 2 to Credit Agreement, dated December 23,
1998, with Heller Financial, Inc. ("Heller"), as agent, and as lender (the
"Credit Agreement"). Also parties to the 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., Auto Ventshade Company ("AVS"), New Holdings, Inc. and
Ventshade Holdings, Inc. The Second Credit Agreement was filed as Exhibit 10.3
to the Report on Form 8-K filed by the Company in connection with the
acquisition by the Company of Ventshade Holdings, Inc. (the "Ventshade
Acqusition"). The Company also entered into a Supplement to Credit Agreement,
dated January 28, 1999, with Smittybilt, Heller and certain of the parties set
forth above.
The Company funded the balance of the acquisition price of the Shares
by increasing the principal amount of promissory notes (the "Notes") issued
under the Securities Purchase Agreement, dated December 23, 1998 (the
"Securities Purchase Agreement"), with Deflecta, Lund, Autotron, DFM and AVS.
Pursuant to the Securities Purchase Agreement, the Company also issued to such
Purchasers additional warrants to purchase 18,409 shares of the Company's Series
B Preferred Stock at an exercise price of $.11 per share or, under certain
circumstances
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(subject to adjustment in certain events, including the issuance of shares at
less than fair market value, as defined), 184,090 shares of the Company's common
stock (such Warrants and the Notes being collectively referred to herein as the
"Securities"). The aggregate principal amount of the Notes issued pursuant to
the terms of the Securities Purchase Agreement in connection with the
acquisitions of Smittybilt and Ventshade Holdings, Inc. was $25,000,000 and the
Company issued in the aggregate warrants to purchase 704,839 shares of the
Company's common stock (or 70,483.9 shares of the Company's Series B Preferred
Stock, if approved by the Company's stockholders). 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. The Securities
Purchase Agreement was filed as Exhibit 10.4 to the Report on Form 8-K filed by
the Company in connection with the Ventshade Acquisition.
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, 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"). The Company also entered into a
First Amendment to Rights Agreement, dated January 27, 1999, with the parties
set forth above (such First Amendment and the Rights Agreement discussed above
being collectively referred to herein as the "Rights Agreement"). 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 owned by them. The Rights Agreement further imposed certain restrictions
on, and conditions to, transfers of equity securities of the Company owned by
such investors. The Rights Agreement was filed as Exhibit 10.5 to the Report on
Form 8-K filed by the Company in connection with the Ventshade Acquisition.
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, to add LIH III as a
party. The Second Governance Agreement was filed as Exhibit 10.6 to the Report
on Form 8-K filed by the Company in connection with the Ventshade Acquisition.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS.
10.1 Stock Purchase Agreement, dated January 7, 1999, among
Smittybilt, Inc., Tom G. Smith, Debbie Smith, Tom Smith and
Debbie Smith as Trustees of The Tom and Debbie Smith Family
Trust Dated February 7, 1991, Tom Smith and Debbie Smith as
Trustees of The Tom and Debbie Smith Charitable Remainder
Unitrust Dated July 8, 1998 and Lund International 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 First Amendment to Investment Agreement, dated January 27,
1999, 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.
10.4 First Amendment to Rights Agreement, dated January 27, 1999,
among 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,
National City Venture Corporation and Lund International
Holdings, Inc.
10.5 Supplement to Credit Agreement, dated January 28, 1999, by
Smittybilt, Inc. and Heller Financial, Inc. and Agent for the
benefit of all Lenders (as defined).
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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: February 11, 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 January 7, 1999, among
Smittybilt, Inc., Tom G. Smith, Debbie Smith, Tom Smith and
Debbie Smith as Trustees of The Tom and Debbie Smith Family
Trust Dated February 7, 1991, Tom Smith and Debbie Smith as
Trustees of The Tom and Debbie Smith Charitable Remainder
Unitrust Dated July 8, 1998 and Lund International 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 First Amendment to Investment Agreement, dated January 27,
1999, 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.
10.4 First Amendment to Rights Agreement, dated January 27, 1999,
among 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,
National City Venture Corporation and Lund International
Holdings, Inc.
10.5 Supplement to Credit Agreement, dated January 28, 1999, by
Smittybilt, Inc. and Heller Financial, Inc. and Agent for the
benefit of all Lenders (as defined).
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
AMONG
LUND INTERNATIONAL HOLDINGS, INC.,
SMITTYBILT, INC.,
TOM G. SMITH,
DEBBIE SMITH,
THE TOM AND DEBBIE SMITH FAMILY TRUST
DATED FEBRUARY 7, 1991,
AND
THE TOM AND DEBBIE SMITH CHARITABLE REMAINDER UNITRUST
DATED JULY 7, 1998
Dated as of January 7, 1999
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TABLE OF CONTENTS
ARTICLE I
SALE AND PURCHASE OF THE SHARES
Section 1.1 Sale and Purchase of the Shares................................. 2
ARTICLE II
TRANSFER OF ASSETS TO THE SHAREHOLDERS; DISCHARGE OF
LIABILITIES BY PURCHASER; ASSUMPTION OF LIABILITIES BY THE
SHAREHOLDERS
Section 2.1 Transfer of Assets to the Shareholders.......................... 2
Section 2.2 Discharge of Liabilities by Purchaser........................... 2
Section 2.3 Assumption of Liabilities by the Shareholders................... 2
Section 2.4 Discharge of Liabilities by Shareholders and Affiliates......... 3
ARTICLE III
PURCHASE PRICE; ADJUSTMENTS; PAYMENT; ESCROW
Section 3.1 Purchase Price.................................................. 3
Section 3.2 Payment to Shareholders......................................... 3
Section 3.3 Escrow of Funds................................................. 3
Section 3.4 Post-Closing Adjustments........................................ 4
ARTICLE IV
CLOSING
Section 4.1 Closing Date.................................................... 6
Section 4.2 Actions of the Shareholders at the Closing...................... 6
Section 4.3 Actions of Purchaser at the Closing............................. 7
Section 4.4 Post-Closing Cooperation........................................ 7
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS
Section 5.1 Organization, Good Standing and Corporate Power
and Authority of the Company.................................. 8
Section 5.2 Effective Agreement of the Company and the Shareholders......... 8
Section 5.3 Authority and Capacity of the Trust Shareholders................ 9
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Section 5.4 Capitalization of the Company; the Shares; Share Ownership;
Subsidiaries and Other Equity Interests....................... 9
Section 5.5 Financial Statements............................................ 10
Section 5.6 Undisclosed Liabilities......................................... 11
Section 5.7 Title to Acquired Assets........................................ 12
Section 5.8 Condition of Assets............................................. 12
Section 5.9 Inventory....................................................... 13
Section 5.10 Accounts Receivable............................................. 13
Section 5.11 Indebtedness to the Shareholders, Directors and Officers........ 13
Section 5.12 Leased Property................................................. 13
Section 5.13 Taxes........................................................... 16
Section 5.14 Contracts....................................................... 17
Section 5.15 Absence of Defaults: Compliance with Law........................ 18
Section 5.16 Litigation...................................................... 18
Section 5.17 Condemnation; Assessments; Defects.............................. 19
Section 5.18 Intangible Rights............................................... 19
Section 5.19 Insurance....................................................... 19
Section 5.20 Absence of Certain Changes...................................... 20
Section 5.21 Books and Records............................................... 20
Section 5.22 Employees; Employee Plans....................................... 20
Section 5.23 Product Warranties.............................................. 23
Section 5.24 Environmental Matters........................................... 23
Section 5.25 Change of Control Payments; Takeover Restrictions............... 24
Section 5.26 Customers and Suppliers......................................... 24
Section 5.27 Brokerage....................................................... 25
Section 5.28 Consultants, Agents, Dealers and Warehouses..................... 25
Section 5.29 Completeness of Representations................................. 25
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF
PURCHASER
Section 6.1 Organization, Good Standing and Corporate Power and
Authority of Purchaser........................................ 25
Section 6.2 Effective Agreement of Purchaser................................ 26
Section 6.3 Litigation...................................................... 26
Section 6.4 Brokerage....................................................... 26
ARTICLE VII
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
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Section 7.1 Access.......................................................... 27
Section 7.2 Interim Operations.............................................. 27
Section 7.3 Consents........................................................ 29
Section 7.4 Maintenance of Assets and Property.............................. 29
Section 7.5 Insurance....................................................... 30
Section 7.6 Risk of Loss.................................................... 30
Section 7.7 Lease........................................................... 30
Section 7.8 Sublease........................................................ 30
Section 7.9 Powder-Coat Agreement........................................... 30
Section 7.10 First Refusal Agreement......................................... 30
ARTICLE VIII
COVENANTS OF PURCHASER
Section 8.1 Collection of Accounts Receivable............................... 31
Section 8.2 Consents........................................................ 31
Section 8.3 Powder-Coat Agreement........................................... 31
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF PURCHASER
Section 9.1 Correctness of Representations and Warranties; Compliance
with Provisions............................................... 31
Section 9.2 Absence of Litigation........................................... 32
Section 9.3 No Loss or Damage............................................... 32
Section 9.4 Consents........................................................ 32
Section 9.5 Absence of Material Adverse Change.............................. 32
Section 9.6 Lease and Sublease Amendments................................... 32
Section 9.7 Powder-Coat Agreement........................................... 32
Section 9.8 Estoppel Certificates........................................... 32
Section 9.9 Discharge of the Bank Debt and Release of Liens................. 32
Section 9.10 Expiration of HSR Act Waiting Period............................ 32
Section 9.11 Noncompete Agreements........................................... 33
Section 9.12 First Refusal Agreement......................................... 33
Section 9.13 Legal Opinion of Counsel........................................ 33
Section 9.14 Releases from Guarantees........................................ 33
Section 9.15 Consulting Agreement............................................ 33
Section 9.16 Proceedings and Documentation................................... 33
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ARTICLE X
CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS
Section 10.1 Correctness of Representations and Warranties; Compliance
with Provisions.............................................. 34
Section 10.2 Absence of Litigation.......................................... 34
Section 10.3 Amendment of the Lease......................................... 34
Section 10.4 Powder-Coat Agreement.......................................... 34
Section 10.5 Discharge of Bank Debt......................................... 34
Section 10.6 Legal Opinion of Counsel....................................... 35
Section 10.7 Releases from Guarantees....................................... 35
Section 10.8 Lease Performance Letter of Credit............................. 35
Section 10.9 Lease Indemnification Agreement................................ 35
Section 10.10 Proceedings and Documentation.................................. 35
ARTICLE XI
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
Section 11.1 Survival of Representations and Warranties..................... 36
Section 11.2 Indemnification of Purchaser by the Company and the
Shareholders................................................. 36
Section 11.3 Indemnification of the Company and/or the Shareholders by
Purchaser.................................................... 37
Section 11.4 Procedure for Claims of Third Parties.......................... 37
Section 11.5 Claims Against the Escrow Funds................................ 38
Section 11.6 Further Assurances............................................. 38
Section 11.7 Certain Limitations............................................ 39
ARTICLE XII
TERMINATION
Section 12.1 Termination.................................................... 40
Section 12.2 Effect of Termination.......................................... 40
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ARTICLE XIII
MISCELLANEOUS
Section 13.1 Expenses....................................................... 41
Section 13.2 Confidentiality; Publicity..................................... 41
Section 13.3 Notices........................................................ 41
Section 13.4 Entire Agreement............................................... 42
Section 13.5 Amendment; Waiver.............................................. 42
Section 13.6 Parties in Interest............................................ 43
Section 13.7 Governing Law.................................................. 43
Section 13.8 Severability................................................... 43
Section 13.9 Captions....................................................... 43
Section 13.10 Counterparts................................................... 43
Section 13.11 Limitations on Rights of Third Parties......................... 43
Section 13.12 Joint Negotiation and Drafting................................. 43
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STOCK PURCHASE AGREEMENT, dated as of January 7, 1999 (this
"Agreement"), among SMITTYBILT, INC., a California corporation, having its
principal place of business at 395 Smitty Way, Corona, California 91719 (the
"Company"), TOM G. SMITH, an individual residing at 37375 Calle De Lobo,
Murrieta, California 92562 ("Tom Smith"), Debbie Smith, an individual residing
at 37375 Calle De Lobo, Murrieta, California 92562 ("Debbie Smith" and, together
with Tom Smith, the "Individual Shareholders"), Tom Smith and Debbie Smith as
trustees of The Tom and Debbie Smith Family Trust Dated February 7, 1991 (the
"1991 Trust") and Tom Smith and Debbie Smith as trustees of The Tom and Debbie
Smith Charitable Remainder Unitrust Dated July 8, 1998 (the "1998 Trust" and,
together with the 1991 Trust, the "Trust Shareholders" (the Individual
Shareholders and Trust Shareholders are collectively referred to herein as the
"Shareholders")) and Lund International Holdings, Inc., a Delaware corporation
(the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Trust Shareholders, are the owners of an aggregate of
6,000 shares (the "Shares"), par value $1.00 per share, of the Company, being
all of the issued and outstanding shares of capital stock of the Company; and
WHEREAS, the Trust Shareholders desire to sell the Shares to
Purchaser, and Purchaser desires to acquire the Shares from the Trust
Shareholders, and the Individual Shareholders are executing this Agreement to
further induce Purchaser to acquire the Shares, all upon the terms and
conditions hereinafter set forth; and
WHEREAS, each of the Shareholders has agreed to execute and deliver
at the Closing, and Purchaser has agreed to execute and deliver and pay the
Shareholders an aggregate of $1,000,000.00 for entering into, certain agreements
(the "Noncompete Agreements") which shall restrict the Shareholders from
engaging in business in competition with the Company from and after Purchaser's
acquisition of the Shares from the Shareholders; and
WHEREAS, the Trust Shareholders, as the sole shareholders of the
Company, and Purchaser respectively consider the acquisition of the Shares by
Purchaser to be in the best interests of the Shareholders and of Purchaser;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
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ARTICLE I
SALE AND PURCHASE OF THE SHARES
Section 1.1 Sale and Purchase of the Shares. Upon the terms and
subject to the conditions set forth in this Agreement, the Trust Shareholders
agree to sell, transfer, assign, convey and deliver to Purchaser, and Purchaser
agrees to purchase, acquire and accept from the Trust Shareholders, at the
Closing (as defined below in Section 4.1), the Shares in consideration for the
Purchase Price (as defined below in Section 3.1).
ARTICLE II
TRANSFER OF ASSETS TO THE SHAREHOLDERS; DISCHARGE OF
LIABILITIES BY PURCHASER; ASSUMPTION OF LIABILITIES BY THE
SHAREHOLDERS
Section 2.1 Transfer of Assets to the Shareholders. At or
immediately prior to the Closing, the Company will transfer to the Individual
Shareholders title to the following assets of the Company (collectively, the
"Shareholder Assets"):
(a) 1999 Chevy Suburban; Serial No. 3GNGK26J6xG126493
(b) 1996 B. M W 740 IL; Serial No. WBAGJ8322TDL35181
(c) 1997 Jeep; Serial No. 1JYFY19S3VP440316
(d) SMITTYBILT golf cart and wagon; and
(e) 1994 trailer.
In consideration for the transfer of the Shareholder Assets to the
Individual Shareholders, the Individual Shareholders will assume from the
Company, as of the date of such transfer, all liabilities and obligations
relating thereto, including, without limitation, all lease, loan, insurance and
maintenance obligations from and after such date with respect to the Shareholder
Assets, including without limitation those set forth in Schedule 2.1 hereto.
Section 2.2 Discharge of Liabilities by Purchaser. At the Closing,
Purchaser will discharge in full the outstanding indebtedness of the Company to
City National Bank ("CNB") under the Company's $1,500,000 revolving line of
credit and term loans each in the aggregate principal amount of $500,000 with
CNB (the "Bank Debt"), which indebtedness (including accrued interest and any
fees connected with such termination) as of the Closing shall not exceed
$1,512,000.
Section 2.3 Assumption of Liabilities by the Shareholders. At the
Closing, the Shareholders will assume from the Company all liabilities and
obligations of the Company with respect to all note(s) payable to, or loans or
advances to the Company from, Basil Smith, which are of a personal nature
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and which do not relate to Smittybilt business, including without limitation
those listed in Schedule 2.3 annexed hereto.
Section 2.4 Discharge of Liabilities by Shareholders and Affiliates.
At the Closing, the Shareholders shall, and shall cause each person that is
controlled by one or more of the Shareholders, including but not limited to the
Powder-Coat Company (as defined herein), to discharge any and all outstanding
indebtedness of Shareholders or affiliates of the Shareholders that is either
owed to the Company or guaranteed by the Company.
ARTICLE III
PURCHASE PRICE; ADJUSTMENTS; PAYMENT; ESCROW
Section 3.1 Purchase Price. Purchaser shall pay to the Trust
Shareholders at Closing pursuant to this Agreement an amount equal to Eighteen
Million and 00/100 Dollars ($18,000,000.00) reduced by (i) the aggregate
principal amount of indebtedness and interest thereon discharged by Purchaser
and fees paid by Purchaser pursuant to Section 2.2 herein, (ii) the estimated
aggregate principal amount of and accrued interest on other interest-bearing
indebtedness outstanding on the Company's balance sheet on the Closing Date
other than any liabilities to be assumed by the Shareholders pursuant to Section
2.3 herein (the "Estimated Indebtedness") and (iii) the estimated aggregate
amount of capitalized leases recorded on the Company's balance sheet on the
Closing Date (the "Estimated Capitalized Leases") (the "Net Purchase Price"),
subject to being further reduced by the aggregate amount of the post-closing
adjustments provided for below in Section 3.4 (after such adjustments, if any,
the "Purchase Price"). One Million and 00/100 Dollars ($1,000,000.00) of the Net
Purchase Price shall be allocated to the Noncompete Agreements and the remainder
shall be allocated to Purchaser's purchase of the Shares. The Shareholders shall
make a bona fide determination of the Estimated Indebtedness and the Estimated
Capitalized Leases. The Shareholders shall deliver such determinations in
writing to Purchaser not less than two (2) days prior to the Closing Date.
Section 3.2 Payment to Shareholders. The Net Purchase Price shall be
paid at the Closing by the wire transfer to the Trust Shareholders (77.25% to
the 1991 Trust and 22.75% to the 1998 Trust), pursuant to the Shareholders'
instructions (delivered to Purchaser not later than two (2) business days prior
to the Closing Date), of immediately available funds in the amount equal to the
Net Purchase Price minus Seven Hundred, Fifty Thousand and 00/100 Dollars
($750,000.00).
Section 3.3 Escrow of Funds. Purchaser shall transfer to IBJ
Whitehall Bank & Trust Company, as escrow agent (the "Escrow Agent"), at the
Closing immediately available funds in the amount of Seven Hundred, Fifty
Thousand and 00/100 Dollars ($750,000.00) to be held by the Escrow Agent in an
escrow account in accordance with the terms of an escrow agreement substantially
in the form attached hereto as Exhibit A (the "Escrow Agreement"). To the extent
of any insurance recovery
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by the Company for any insured loss which has been deducted from funds deposited
pursuant to the Escrow Agreement (the "Escrow Funds") or paid to Purchaser, or
on Purchaser's behalf, by or on behalf of the Shareholders with respect to any
Environmental Liabilities against which Purchaser is indemnified pursuant to
this Agreement, Purchaser shall pay said insurance proceeds to the Trust
Shareholders within thirty (30) days of the Company's receipt of same.
Section 3.4 Post-Closing Adjustments.
(a) Promptly following the Closing, Purchaser shall retain
PriceWaterhouseCoopers LLP (the "Accountant"), to prepare and deliver to the
Shareholders within ninety (90) days after the Closing Date, at Purchaser's
expense, a balance sheet of the Company as of the Closing Date (the "Closing
Date Balance Sheet"). The Closing Date Balance Sheet shall be based in part
upon, and shall reflect the results of, a physical inventory taken by
representatives of Purchaser (in the presence of a representative of the
Shareholders, if the Shareholders shall so request) within ten (10) business
days following the Closing Date. In the event that (i) the value of the
Inventory (as defined below in Section 5.9) (as set forth in the Closing Date
Balance Sheet) shall reflect deficiencies as to (A) quantity shortages from the
quantities set forth in the list of the Inventory delivered at the Closing and
referred to below in Section 4.2(b) or (B) quality and/or saleability from that
represented below in Section 5.9, and/or (ii) the Book Value (as defined below
in this Section 3.4(a)) as reflected in the Closing Date Balance Sheet shall be
less than $5,075,848, then Purchaser shall be entitled to a reduction in the
Purchase Price equal to the aggregate amount of the deficiencies referred to in
the foregoing clauses (i) and (ii); provided, however, that any Inventory
deficiency referred to in such clause (A) shall not be counted again to the
extent that it accounts for a reduction in the Book Value referred to in such
clause (ii). The Purchase Price shall be reduced further by (i) the amount, if
any, that the actual aggregate principal amount of, and accrued interest on,
other interest-bearing indebtedness outstanding on the Closing Date Balance
Sheet is greater than the Estimated Indebtedness and (ii) the amount, if any,
that the actual aggregate amount of capitalized leases on the Closing Date
Balance Sheet is greater than the Estimated Capitalized Leases. Such reduction
in the Purchase Price with respect to deficiencies in Inventory and the
indebtedness of the Company shall be promptly refunded to Purchaser by the
Shareholders as soon as the Closing Date Balance Sheet and the reduction in the
Purchase Price determined therefrom (the "Purchase Price Reduction
Calculations") have become final and binding upon the parties to this Agreement,
as provided below in Section 3.4(b). The amount, if any, that the Book Value as
reflected on the Closing Date Balance Sheet exceeds $5,075,848 shall be credited
toward any deficiencies in Inventory in making the Purchase Price Reduction
Calculations.
For purposes of this Agreement, the term "Book Value" shall mean the
net amount of the Company's total assets after deducting the total amount of its
liabilities determined in accordance with generally accepted accounting
principles, it being understood that Book Value shall be calculated without
giving effect to transactions contemplated hereby or effected in connection
therewith, including, without limitation, the discharge of indebtedness to CNB
pursuant to Section 2.2 herein and any liabilities incurred or arranged or
capital contributions to, or purchases of capital
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stock of, the Company by Purchaser or any affiliate of Purchaser in order to
finance the transactions contemplated by this Agreement.
(a) The Closing Date Balance Sheet prepared by the Accountant and
the Purchase Price Reduction Calculation determined by the Accountant shall
become final and binding upon the parties hereto at the close of business on the
tenth (10th) day following the receipt thereof by the Shareholders unless the
Shareholders shall, prior thereto, have given written notice (a "Notice of
Disagreement") to Purchaser of their disagreement with the Closing Date Balance
Sheet or the Purchase Price Reduction Calculations. Any Notice of Disagreement
shall specify in reasonable detail the nature of any disagreement so asserted.
If a timely Notice of Disagreement is received by Purchaser with respect to the
Closing Date Balance Sheet or the Purchase Price Reduction Calculations, then
the Closing Date Balance Sheet and the Purchase Price Reduction Calculations (as
they may be revised in accordance with clause (i) or clause (ii) below) shall
become final and binding upon the parties hereto on the earlier of (i) the date
on which the parties hereto resolve in writing any differences they have with
respect to any matter specified in a Notice of Disagreement or (ii) the date on
which any matters in dispute are finally resolved in writing by the Deciding
Accountant (as hereinafter defined) and communicated to the parties hereto, with
the date on which the Closing Date Balance Sheet and the Purchase Price
Reduction Calculations so become final and binding being hereinafter referred to
as the "Final Determination Date".
During the twenty (20) days immediately following the delivery of
any Notice of Disagreement, the Shareholders, on the one hand, and Purchaser, on
the other hand, shall seek in good faith to resolve in writing any differences
which they may have with respect to any matter specified in such Notice of
Disagreement. During such 20-day period, the parties hereto shall have access to
each other's working papers, trial balances and similar materials relevant to
the preparation or analysis of the Closing Date Balance Sheet and the Purchase
Price Reduction Calculations. At the end of such 20-day period, the parties
hereto shall submit to Ernst & Young LLP (the "Deciding Accountant") for review
and resolution any and all matters which remain in dispute and which were
included in the Notice of Disagreement, and the Deciding Accountant shall reach
a final, binding resolution of all matters which remain in dispute within thirty
(30) days after the submission of any such dispute, which final resolution shall
be (A) in writing, (B) furnished to the parties hereto as soon as practicable
after the items in dispute have been referred to the Deciding Accountant, (C)
made in accordance with this Agreement and (D) conclusive and binding upon the
parties hereto.
Each party hereto shall pay its own costs and expenses incurred in
connection with such dispute resolution procedure, provided that the fees and
expenses of the Deciding Accountant shall be borne 50% by the Shareholders and
50% by Purchaser or the Company.
(a) In the event that, within 120 days after the Closing, Purchaser
or the Company has not collected in full the accounts receivable carried on the
Company's books as of the Closing and the aggregate amount of all such
uncollected accounts receivable shall exceed the bad debt
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allowance reflected on the Closing Date Balance Sheet together with any
receivables paid to the Company but not reflected in the Closing Date Balance
Sheet, Purchaser shall notify the Shareholders of such unpaid amount, whereupon
the Shareholders shall, within ten (10) days after receipt of such notice, pay
to Purchaser such unpaid amount. In the event that the Shareholders have paid
monies to Purchaser pursuant to this Section 3.4(c), Shareholder may elect
either (i) to continue to allow Purchaser to seek to collect such accounts
receivable for the account of the Shareholders, subject to the limitations set
forth in Section 8.1 herein, or (ii) to permit the Shareholders to seek to
collect such accounts receivable for the account of the Shareholders directly
provided that the Shareholders' collection methods and procedures shall not
adversely affect the Company's continuing business relations with the account
debtors and shall be otherwise reasonably acceptable to the Company. The
proceeds of any accounts receivable collected by Purchaser, the Company or the
Shareholders pursuant to this Section 3.4(c) shall be paid promptly to the
Shareholders (and customers shall be so directed) to the extent that the
Shareholders have made payments to Purchaser pursuant to this Section 3.4(c).
If, notwithstanding directions to customers to make payments to the
Shareholders, the Purchaser receives such payment, the amount thereof shall be
paid to the Shareholders.
ARTICLE IV
CLOSING
Section 4.1 Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Thelen Reid & Priest LLP, 333 South Grand Avenue, 34th Floor, Los Angeles,
California 90071, at 9:30 A.M. local time, on January 27, 1999 provided that any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, has terminated (such date, or the date to which the Closing
may be postponed as provided in this Agreement, being referred to herein as the
"Closing Date"). If the Closing is not held by the close of business on January
27, 1999, the Closing may be postponed, at the option of any party hereto, to a
date not later than February 28, 1999.
Section 4.2 Actions of the Shareholders at the Closing. At the
Closing, the Shareholders shall deliver to Purchaser each of the following
items: (a) stock certificates representing the Shares, which certificates shall
be duly endorsed for transfer to Purchaser or be accompanied by appropriate
stock transfer powers duly executed in favor of Purchaser; (b) lists of the
Accounts Receivable, Inventory and accounts payable of the Company as of a date
as close as possible to the Closing Date; (c) the Noncompete Agreements
substantially in the form attached hereto as Exhibit B; (d) the Escrow
Agreement, executed by the Shareholders, (e) the Lease Amendment (as defined
below in Section 7.7), executed by the Landlord (as defined below in Section
5.12); (f) the Sublease Amendment (as defined below in Section 7.8) executed by
the Powder-Coating Company; (g) the Powder-Coat Agreement (as defined below in
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Section 7.10), executed by the duly authorized officer of the Powder-Coating
Company; (h) the First Refusal Agreement (as defined below in Section 7.10)
executed by the Powder-Coating Company and each member thereof; (i) the
resignations, corporate minute books, stock books, stock transfer ledgers and
corporate seals of the Company described below in Section 9.16(c); (j) the
Estoppel Certificates (as defined below in Section 9.8); (k) the Consents (as
defined in Section 7.3 herein); (l) such certificates, instruments and documents
as are required to be delivered by the Shareholders or the Company pursuant to
the terms of this Agreement; (m) the legal opinion of Allan B. Weiss and
Associates described below in Section 9.13; (n) the releases required to be
delivered pursuant to Section 9.14; (o) the Consulting Agreement (as defined in
9.15) executed by Tom Smith; (p) such other instruments and documents as counsel
for Purchaser may reasonably require as necessary or desirable in connection
with the transactions contemplated by this Agreement; (q) all books and records
(including, without limitation, all original books of account, ledgers, tax
returns, customer and supplier lists and computer software and programs)
relating to the Company and its assets, property and business; and (r) physical
possession and control of the Company and its assets, property and business.
Section 4.3 Actions of Purchaser at the Closing. At the Closing,
Purchaser shall deliver (a) the Net Purchase Price to the Trust Shareholders and
the Escrow Agent as provided above in Section 3.2; (b) the Lease Amendment,
executed by the Company; (c) the Powder-Coat Agreement, executed by the Company;
(d) the Escrow Agreement, executed by Purchaser; (e) the Lease Indemnification
Agreement (as defined in Section 10.9 herein), executed by Purchaser; (f) the
legal opinion of Thelen Reid & Priest LLP described below in Section 10.6; (g)
written releases of any and all written guarantees by the Shareholders of
obligations of the Company, other than the Shareholders' guarantees of the
Company's obligations under the Primary Lease (as defined herein); (h) evidence
that Purchaser has obtained a letter of credit as more fully described below in
Section 10.8; and (i) such certificates, instruments and documents as are
required to be delivered by Purchaser pursuant to the terms of this Agreement.
Section 4.4 Post-Closing Cooperation. At any time and from time to
time from and after the Closing, each of the parties hereto will, at the request
of any other party hereto, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, such instruments and other documents, and
perform or cause to be performed such acts as may reasonably be required to
evidence or effectuate the sale, conveyance, transfer, assignment and delivery
to Purchaser of the Shares or for the performance by any of the parties hereto
of any of their respective obligations under this Agreement. In addition, the
parties hereto, upon the reasonable request of any other party hereto, shall
make available to any other party hereto, for inspection and/or copying, such
books and records as may reasonably be required by such other party in
connection with the filing of tax returns, compliance with other governmental
laws, rules or regulations or any other reasonable purpose.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders, jointly and severally prior to the
Closing, and the Shareholders, jointly and severally, but without the Company
from and after the Closing, hereby represent and warrant to Purchaser as
follows:
Section 5.1 Organization, Good Standing and Corporate Power and
Authority of the Company. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, is not
(by the nature of the business conducted by it or the ownership, leasing and
operation of its assets and properties) required to be qualified to transact
business as a foreign corporation in any other jurisdiction and has the
corporate power and authority to enter into this Agreement and to perform the
obligations required of it under this Agreement. The Company has all requisite
power and authority, and all licenses, franchises, permits and authorizations,
necessary to carry on its business as presently conducted and to own, lease and
operate the assets, property and business owned, leased and operated by it.
Section 5.2 Effective Agreement of the Company and the Shareholders.
(a) The execution and delivery by the Company and the Shareholders
of this Agreement and the consummation by the Company and the Shareholders of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action of the Company, and by all necessary legal action of the Trust
Shareholders, and this Agreement constitutes, and the Noncompete Agreements,
Escrow Agreement and any other agreements or instruments executed and delivered
by the Company and/or the Shareholders prior to or at the Closing, when executed
and delivered by the Company and/or the Shareholders, as the case may be, will
constitute legal, valid and binding obligations of the Company and/or the
Shareholders, as the case may be, enforceable against the Company and/or the
Shareholders, as the case may be, in accordance with their respective terms.
(b) Neither the execution and delivery of this Agreement, the
Noncompete Agreements, or the Escrow Agreement nor the consummation of the
transactions contemplated hereby or thereby will (i) violate any provision of
the articles of incorporation or by-laws of the Company, as amended to the date
hereof, or the declaration of trust of the 1991 Trust, as amended and restated,
or the declaration of trust of the 1998 Trust, (ii) with or without the giving
of notice and/or the passage of time, violate, conflict with, result in the
breach or termination of, constitute a default under, or result in the creation
of any material lien, charge or encumbrance upon any of the assets or property
of the Company or the Shareholders pursuant to any contract, agreement, lease or
commitment to which the Company or the Shareholders is a party or by which the
Company or the Shareholders or any of their respective assets or property may be
bound, or (iii) violate any
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judgment, decree, order, statute, rule or governmental regulation applicable to
the Company, the Shareholders or any of their respective assets, property or
business.
(c) Except as set forth in Schedule 5.2(c) annexed hereto, no
consent, approval, qualification, order or authorization of, or filing with, any
governmental authority, including any court, or other third party is required in
connection with the Company's or the Shareholders' valid execution, delivery or
performance of this Agreement, the Noncompete Agreements or the Escrow Agreement
or the consummation of any transaction contemplated hereby or thereby.
Section 5.3 Authority and Capacity of the Trust Shareholders.
Attached hereto as Schedule 5.3 are true and complete copies of the agreements,
instruments and other documents creating the 1991 Trust and the 1998 Trust. The
Trust Shareholders have all requisite power, authority and capacity to enter
into this Agreement, the Escrow Agreement and all other agreements or
instruments to be executed and delivered by the Trust Shareholders pursuant to
this Agreement and the Escrow Agreement and to perform their respective
obligations hereunder and thereunder.
Section 5.4 Capitalization of the Company; the Shares; Share
Ownership; Subsidiaries and Other Equity Interests.
(a) The authorized capital stock of the Company consists of 200,000
shares of capital stock of one class, par value $ l.00 per share, of which the
Shares are the only issued and outstanding shares. The Shares are validly
issued, fully paid and non-assessable and owned of record and beneficially by
the Shareholders (as trustees of the 1991 Trust with respect to 4,635 shares and
as trustees of the 1998 Trust with respect to 1,365 shares). As of the Closing,
the Trust Shareholders will be the lawful and record owners of all the Shares,
free and clear of all liens, claims, charges and encumbrances, and the Trust
Shareholders will convey good and marketable title to the Shares to Purchaser
free and clear of all liens, claims, charges and encumbrances. As of the
Closing, the Shareholders will be the sole beneficial owners and/or
beneficiaries of all of the Shares, free and clear of all liens, claims, charges
and encumbrances. The Shares have not been issued in violation of, and are not
subject to, any preemptive or subscription right and are fully paid and
non-assessable. The Shares are not subject to any voting trust agreement or
other contract, agreement, arrangement, commitment or understanding restricting
or otherwise relating to the voting, dividend rights or disposition of the
Shares, other than as contemplated by this Agreement. There are 28,000 shares of
capital stock of the Company held in the Company's treasury. There are no
outstanding options, warrants or other rights of any kind to acquire any capital
stock of the Company or securities convertible into or exchangeable for, or
which otherwise confer on, the holder thereof any right to acquire any capital
stock of the Company, nor is the Company committed or obligated to issue any
such option, warrant, right or security or to authorize, issue, sell, redeem,
purchase or otherwise acquire any shares of capital stock or other securities of
the Company. No spouse or former spouse of the Individual Shareholders has, or
will have as of or at any time after the Closing, any right or claim to any of
the Shares, whether under any dower,
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community property or equitable distribution law of any jurisdiction or
otherwise. The Company does not, directly or indirectly, own any capital stock
of, or other equity interest in, any corporation, limited liability company,
partnership or other entity, nor do the Shareholders, directly or indirectly,
own any capital stock of, or other equity interest in, any corporation, limited
liability company, partnership or other entity which is engaged in a business
which is the same as, or similar to, the business engaged in by the Company,
save and except for the business of the Powder-Coating Company referred to
herein.
(b) For the purposes of this Agreement, the term "beneficial owner"
shall mean the person or persons with the direct or indirect power and authority
to exercise voting or dispositive control over securities.
Section 5.5 Financial Statements.
(a) Schedule 5.5(a) annexed hereto sets forth (i) the balance sheet
of the Company as at March 31, 1998 (the "March Balance Sheet"), (ii) the income
statement of the Company for the year then ended (on a comparative basis with
the income statement of the Company for the year ended March 31, 1997) and (iii)
the statements of retained earnings and cash flow of the Company for the year
ended March 31,1998 (such March Balance Sheet, income statement and statements
of retained earnings and cash flow, collectively, including the accompanying
notes to such financial statements and review report of Harmon & Wong, Certified
Public Accountants, being hereinafter collectively referred to as the "1998
Financial Statements").
(b) The Shareholders shall have also delivered to Purchaser copies
of (i) the Company's balance sheet at September 30, 1998, (the "September
Balance Sheet") and the related statements of income for the six months then
ended (on a comparative basis with the income statement of the Company for the
same six-month period in the prior year) and retained earnings and cash flow for
the six months then ended (collectively, the "September 1998 Financial
Statements"), (ii) the Company's balance sheet at December 31,1997 and the
related statements of income for the nine months then ended (on a comparative
basis with the income statement of the Company for the same nine-month period in
the prior year) and retained earnings and cash flow for the nine months then
ended (collectively, including the accompanying compilation report of Harmon &
Wong, Certified Public Accountants, being hereinafter collectively referred to
as the "December 1997 Financial Statements"), (iii) the Company's balance sheet
at March 31, 1997, and the related statements of income for the year then ended
(on a comparative basis with the income statement of the Company for the prior
year) and retained earnings and cash flow for the year then ended (collectively,
including the accompanying notes to financial statements and review report of
Harmon, Wong & Chan LLP, Certified Public Accountants, being hereinafter
collectively referred to as the "March 1997 Financial Statements"), and (iv) the
Company's balance sheet at March 31, 1996, and the related statements of income
for the year then ended (on a comparative basis with the income statement of the
Company for the prior year) and retained earnings and cash flow for the year
then ended (collectively, including the accompanying compilation report of
Harmon, Wong &
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Chan LLP, Certified Public Accountants, being hereinafter collectively referred
to as the "1996 Financial Statements").
(c) The 1998 Financial Statements, September 1998 Financial
Statements, the December 1997 Financial Statements, the March 1997 Financial
Statements and the 1996 Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently applied. The balance
sheets included in the 1998 Financial Statements, the September 1998 Financial
Statements, the December 1997 Financial Statements, the March 1997 Financial
Statements and the 1996 Financial Statements fairly present the financial
position of the Company as of the respective dates indicated and the statements
of income, retained earnings and cash flow included in the 1998 Financial
Statements, the September 1998 Financial Statements, the December 1997 Financial
Statements, the March 1997 Financial Statements and the 1996 Financial
Statements fairly present the results of operations, retained earnings and cash
flow of the Company for the respective periods indicated. The 1998 Financial
Statements, the September 1998 Financial Statements, the December 1997 Financial
Statements, the March 1997 Financial Statements and the 1996 Financial
Statements have been reviewed by the respective aforementioned certified public
accountants in accordance with the standards for accounting and compilation
services issued by the American Institute of Certified Public Accountants.
(d) Prior to the Closing, the Shareholders will deliver to Purchaser
the unaudited balance sheets of the Company at the end of each month after
September 1998 ended at least 30 days prior to the Closing Date and the income,
retained earnings and cash flow statements for each such month (with such income
statements being on a comparative basis with the respective income statements
for the same months in the prior year (such balance sheets and income, retained
earnings and cash flow statements being hereinafter collectively referred to as
the "1998 Monthly Financial Statements").
(e) The 1998 Monthly Financial Statements, when delivered to
Purchaser, will have been prepared on a basis consistent with the preparation of
the 1998 Financial Statements and in accordance with generally accepted
accounting principles consistently applied. The balance sheets included in the
1998 Monthly Financial Statements, when delivered to Purchaser, will fairly
present the financial position of the Company as of the respective dates
indicated and the income, retained earnings and cash flow statements included in
the 1998 Monthly Financial Statements, when delivered to Purchaser, will fairly
present the results of operations, retained earnings and cash flows of the
Company for the respective periods indicated.
Section 5.6 Undisclosed Liabilities. Except as set forth in the
March Balance Sheet or the Schedules to this Agreement, the Company has, and
will as of the Closing have, no liability or obligation (whether absolute,
accrued, contingent, contractual or otherwise due or to become due) other than
those incurred in the ordinary course of business since the close of business on
March 31, 1998. As of and from and after the Closing, neither the Company nor
Purchaser will be liable, obligated for or otherwise responsible for (a) any
liability or obligation, whether accrued,
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absolute, contingent, contractual or otherwise and except as incurred in the
ordinary course of the Company's business, which existed prior to the Closing
and under generally accepted accounting principles, should have been reflected
or reserved for in the March Balance Sheet but was not so reflected or reserved
for, (b) any liability or obligation, whether accrued, absolute, contingent,
contractual, statutory or otherwise arising out of or relating to any
Environmental Law (as defined in Section 5.24) or any release of a Hazardous
Substance (as defined in Section 5.24) whether or not such liability or
obligation is or is not reflected or reserved for in the March Balance Sheet;
(c) any liability or obligation whether accrued, absolute, contingent,
contractual, statutory or otherwise arising out of or relating to the conduct or
obligations of Powder-Coating Company under any Environmental Law; (d) any
expense, liability or obligation, including attorney's fees, relating to a claim
of a third party based upon an event which occurred prior to the Closing except
to the extent of any insurance recovery, (e) any expense, liability or
obligation owed by the Company to the Shareholders or any other director or
officer of the Company, or any of their affiliated entities or related persons,
or (f) any expense, liability or obligation to any employee or former employee
or independent contractor or former contractor of the Company arising with
respect to the period prior to the Closing unless reflected or reserved for in
the March Balance Sheet or incurred in the ordinary course of business between
the close of business on March 31, 1998, and up to the Closing. Notwithstanding
the foregoing, the Shareholders shall not be liable for any failures on the part
of the Company to receive insurance recoveries directly resulting from acts or
omissions of the Company that occur after the Closing Date. If the Company
cancels or allows to lapse any insurance in place at the Closing Date, the
Company shall obtain "prior acts" or similar coverage, or waive any right to
recover against the Shareholders for any claims or losses for which there
reasonably could have been insurance coverage, but for the cancellation or lapse
of coverage.
Section 5.7 Title to Acquired Assets. The Company has good, valid
and marketable title to all the assets, property and business reflected in the
1998 Financial Statements as being owned by the Company (except to the extent
disposed of in the ordinary course of business since March 31, 1998). Except as
disclosed in Schedule 5.7 annexed hereto, such assets, property and business
will, as of the Closing, be free and clear of all liens, claims, charges and
encumbrances. The assets, property and business owned by the Company as of the
Closing will constitute all the assets and property used in or necessary to the
operation of the Company's business, other than such other assets and property
as are leased under leases included in the Contracts. The Shareholders have,
directly or indirectly, no right, title or interest (other than through the
ownership of capital stock of the Company) in or to any assets or property used
in or necessary to the operation of the Company's business, and they have no
business independent of the Company's business, other than their interests in
(a) in the Landlord (as defined below in Section 5.12), (b) Adept Powder Coating
Company, L.L.C., a limited liability company organized and existing under the
laws of the State of California in which they have an interest (the
"Powder-Coating Company") in space subleased from the Company and (c) the T & D
Leasing Company, a sole proprietorship organized and existing under the laws of
the State of California.
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Section 5.8 Condition of Assets. The assets, property and business
of the Company as of the Closing (which will include, without limitation, the
leasehold improvements, machinery, fixtures, furniture and transportation
equipment described on Schedule 5.8 annexed hereto (the "Fixed Assets")) will be
in good working order and suitable for continued use in the same manner as
heretofore used.
Section 5.9 Inventory. Schedule 5.9 annexed hereto lists all of the
Company's raw materials, work-in-process, finished goods and supplies
(collectively, the "Inventory") as of March 31, 1998. The Inventory listed in
such Schedule 5.9 and all Inventory acquired between March 31, 1998, and the
Closing will have been purchased in the ordinary course of business at or about
market prices prevailing at the times of purchase. The Inventory as of the
Closing will be of a quality and in quantities readily saleable (at customary
markups) or usable (in the case of raw materials and supplies), as the case may
be, in the ordinary course of the Company's business. Since March 31, 1998,
Inventory has been sold by the Company only in the ordinary course of business
and not on terms or with markdowns which are inconsistent with sound business
practices or the Company's normal manner of doing business. The Inventory is
valued at the lower of cost or market price (first in, first out method, on a
consistent basis) in the 1998 Financial Statements, September 1998 Financials,
the December 1997 Financial Statements, the March 1997 Financial Statements and
the 1996 Financial Statements and will be so valued in the 1998 Monthly
Financial Statements. The list of Inventory to be delivered to Purchaser
pursuant to Section 4.2(b) above will be valued on a basis consistent with the
valuation of the Inventory in the September Balance Sheet (the "September
Inventory") and will reflect the September Inventory, as adjusted only by
additions to and dispositions from such Inventory arising in the ordinary course
of business subsequent to September 30, 1998. None of the Inventory is obsolete,
damaged or defective.
Section 5.10 Accounts Receivable. Schedule 5.10 annexed hereto lists
(by debtor, amount and age) all accounts receivable of the Company outstanding
as of September 30, 1998. All accounts receivable of the Company included in the
list of accounts receivable referred to above in Section 4.2(b) (the "Accounts
Receivable") will be valid, legal and subsisting accounts, enforceable in
accordance with their terms, arising from bona fide transactions in the ordinary
course of business.
Section 5.11 Indebtedness to the Shareholders, Directors and
Officers. Except as set forth in Schedule 5.11 annexed hereto, no cash dividend
or other distribution, or repayment of indebtedness, to the Shareholders or any
other insider or other related party has been declared, paid or made since March
31, 1998. As of the Closing, there will be no indebtedness of the Company to the
Shareholders or to its directors or officers, or of such persons to the Company.
Section 5.12 Leased Property. (a) The only real property that the
Company occupies on the date of this Agreement is that certain property located
at 395 Smitty Way, Corona, California (the "Primary Property") and that certain
property located at 2045 California Avenue (the "Secondary Property" and,
together with the Primary Property, the "Properties"). The Primary
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Property (including the land and the improvements constructed thereon) is
occupied by the Company pursuant to the lease dated March 31, 1997 (the "Primary
Lease") between Cusumano/Smitty Way LLC, as landlord (the "Landlord"), and the
Company, as tenant, and the Primary Property is owned by the Landlord, which has
the absolute right to lease such property to the Company. The Secondary Property
(including the land and improvements constructed thereon) is occupied by the
Company pursuant to the lease dated as of September 1, 1998 (the "Secondary
Lease" and, together with the Primary Lease, the "Leases") between Petar
Marovic, as landlord ("Marovic" and together with the Landlord, the
"Landlords"), and the Company, as tenant, and the Secondary Property is owned by
Marovic, which has the absolute right to lease such property to the Company.
True and complete copies of the Primary Lease and Secondary Lease, as the same
will be in full force and effect as of the Closing, have been delivered to
Purchaser by the Shareholders and are attached hereto as Exhibit C and Exhibit
D, respectively. The Leases are valid and binding obligations of the Landlords
and the Company and are in full force and effect without amendment or
modification. As of the Closing, no default will exist under the Leases on the
part of either the Landlords or the Company.
(a) The Company is the sole occupant of the building which is the
subject of the Primary Lease, other than the Powder-Coating Company and Ward
Business Applications, each of which subleases from the Company a part of the
premises covered by the Primary Lease. A true and complete copy of the
Powder-Coating Company's sublease with the Company, as the same will be in full
force and effect as of the Closing, is attached hereto as Exhibit E (the
"Sublease"). All equipment used directly in the business of the Powder-Coat
Company, other than the transfer conveyor running from the paint line to the
packaging department, is listed on Schedule 5.12(b) and is the property of the
Powder-Coating Company and shall not be transferred to the Company pursuant to
this Agreement. The Powder-Coating Company shall be permitted to remove said
equipment listed on Schedule 5.12(b) within 30 days after the termination of the
Sublease in a manner that does not unreasonably disrupt the normal operations of
the Company.
(b) There are no other agreements, oral or written, in the nature of
leases, licenses, permits, franchises, concessions, dedications or occupancy
agreements affecting either of the Properties or the use of either of the
Properties other than the Leases and the Sublease, and there are no
modifications, extensions, renewals or options with respect to each of the
Leases and the Sublease, whether oral or written, except as previously delivered
to Purchaser and annexed hereto.
(c) Schedule 5.12(d) annexed hereto contains a complete and correct
list of all written and oral management, service, equipment, supply, maintenance
or concession agreements with respect to or affecting the Properties
(hereinafter referred to as the "Service Contracts"). Except as specified in
Schedule 5.12(d), no agreement exists which is not cancelable upon thirty (30)
days' notice. Each of said agreements is in full force and effect and all
amounts due thereunder have been paid in full. The Company has not received any
notice from any party to said agreements claiming the existence of any default
or breach thereunder.
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(d) All improvements (including but not limited to all buildings,
roads, parking areas, curbs, sidewalks, utility lines and systems and sewers)
have been constructed in accordance with the plans and specifications approved
by the governmental authorities having jurisdiction and comply with all
building, zoning, environmental and other applicable laws. All site improvements
required by the applicable government authorities in connection with the
existing improvements have been completed and paid for in full.
(e) The improvements (including, but not limited to, their
structural parts, foundation, roofs and basements) and other improvements on
each of the Properties are in good condition and repair, and the mechanical,
heating, air conditioning, plumbing, electrical, water, sewer, ventilating
equipment, elevators and space and storm drainage systems at or servicing each
of the Properties and the improvements and all facilities and equipment relating
thereto are in good condition and working order, free from leaks, and of
sufficient capacity to adequately serve the tenants on each of the Properties.
(f) Permanent certificates of occupancy and all other licenses,
permits, authorizations and approvals required by all governmental authorities
having jurisdiction and the requisite certificates of the local board of fire
underwriters (or other body exercising similar functions) have been issued for
the improvements, have been paid for, and are in full force and effect, and the
use of each of the Properties and improvements complies in all respects with
such licenses, permits, authorizations, approvals and certificates.
(g) All curbcut and street opening permits or licenses required for
vehicular access to and from the Properties to any adjoining public street have
been obtained, have been paid for in full, and are in full force and effect, and
the owner of the Properties has full access thereto from any such adjoining
public street.
(h) All public utilities required for the operation of the
Properties enter the Properties through open public streets adjoining the
Properties.
(i) The zoning classification of all of the Primary Property is M-2
and all of the Secondary Property is M-4. The use of the Properties complies
with the zoning laws and ordinances pertaining thereto. Each of the Properties
is not deemed part of a larger parcel of land so as to require any form of
subdivision approval or zoning variance prior to the Closing.
(j) There are no existing violations of any federal, state, county
or other municipal laws, ordinances, orders, regulations or requirements
affecting either of the Properties including, without limitation, violations of
the building, safety, health, fire, environmental or zoning ordinances, or any
laws or ordinances regarding the use, storage and disposal of hazardous
materials, and no written notice of any such violation has been issued by any
governmental authority. There are no conditions existing at either of the
Properties which could result in the issuance or entering of any such violation.
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(k) No work has been performed or is in progress at, and no
materials have been furnished to, either of the Properties which, though not
presently the subject of, might give rise to mechanic's, materialmen's or other
liens against either of the Properties or any portion thereof, or if such work
has been done, the cost thereof has been paid in full.
(l) Neither the Company nor either of the Landlords has received any
written notice from any person or entity, including but not limited to the
holder(s) of any mortgages upon the Primary Property, any insurance company
which has issued a policy with respect to either of the Properties, or any board
of fire underwriters (or other body exercising similar functions) claiming any
defects or deficiencies or requesting, recommending or suggesting the
performance of any repairs, alterations or other work to either of the
Properties.
(m) No notice has been served upon the Company or either of the
Landlords for assessments for public improvements against either of the
Properties which remain unpaid, and no notice or order by any governmental or
other public authority has been served upon the Company or either of the
Landlords which (i) requires the performance of any work or the making of any
repairs or alterations in either of the Properties or in the streets abutting
either of the Properties, or (ii) orders the construction, repair or alteration
of any public improvements on or about either of the Properties or the streets
abutting either of the Properties.
(n) All oil and/or gas burners, incinerators, furnaces and other
fuel burning devices on each of the Properties comply with the requirements of
all applicable governmental or quasi-governmental departments, agencies and
other entities having jurisdiction thereover, including, without limitation, all
air pollution and environmental control laws, orders, rules and regulations, and
valid certificates of operation have been issued therefor and are in full force
and effect.
Section 5.13 Taxes. The Company has filed or caused to be filed in a
timely manner (within any applicable extension periods) all tax returns, reports
and forms required to be filed by any applicable federal, state, local or
foreign tax laws. The returns filed are complete and accurate in all respects.
All Taxes in respect of periods beginning before the Closing Date for which the
Company could be liable to a taxing authority or to other persons (pursuant to a
tax sharing agreement or otherwise) have been timely paid, remitted or accrued,
in full, on the 1998 Monthly Financial Statements, and no tax liens have been
filed, and no claims have been or are being asserted, by any taxing authority
with respect to any Taxes. The Company has not executed any waiver or extension
of the statute of limitations against assessment and collection of any Taxes.
The Company's federal income tax returns have been audited by the Internal
Revenue Service only for the fiscal years ended March 31, 1994 and 1995 (which
audit produced no additional Taxes other than as described in Schedule 5.13
annexed hereto), nor has the Company received any notice that any such audit
review is contemplated, none of its state tax returns has been audited. From and
after the Closing, the Company will not be liable, obligated for or otherwise
responsible, to any
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taxing or other government authority, for any expense, liability or obligation
of the Company (including with respect to any pension, retirement or other
employee benefit plan of the Company), whether arising from any audit or
otherwise, for Taxes attributable to the business of the Company or otherwise
conducted prior to the Closing.
Except as set forth in Schedule 5.13, the Company has never been a
member of an affiliated group of corporations, within the meaning of Section
1504 of the Code.
Except as set forth on Schedule 5.13, the Company has not been a
party to any Tax allocation or Tax sharing agreement.
Schedule 5.13 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, but not limited to, 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 Schedule 5.13, 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 six (6) years prior to the
Closing Date or from which there are unutilized net operating loss, capital loss
or investment tax credit carryovers.
For purposes of this Agreement "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 but not limited to 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, 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 being a member of an affiliated or combined group with any other
corporation at any time on or prior to the Closing Date; and (iii) any liability
of the Company 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.
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Section 5.14 Contracts. Except for this Agreement, the Leases, sales
orders and purchase orders entered into in the ordinary course of business which
do not, individually, involve more than $50,000 and the agreements, contracts,
leases, licenses and other commitments or instruments of the Company described
in Schedule 5.14 annexed hereto (collectively, the "Contracts"), the Company is
not a party to nor bound by any (a) employment agreement that is not terminable
at will by the Company without cost, (b) employee collective bargaining
agreement or other contract with any labor union, (c) covenant not to compete or
confidentiality agreement, (d) other agreement with any shareholder, officer,
director, employee or independent contractor of the Company, (e) lease or
similar agreement under which the Company is a lessor or sublessor of, or makes
available for use by any third party, any real property owned or leased by the
Company or any portion of premises otherwise occupied by the Company, (f) lease
or similar agreement under which the Company is lessee of, or holds or uses, any
machinery, equipment, vehicle or other tangible personal property owned by a
third party or is a lessor of, or makes available for use by any third party,
the tangible personal property owned by the Company, (g) contract for the future
purchase of materials, supplies or equipment, (h) management, service,
consulting or other similar type of contract which is not terminable by the
Company at will without cost or only nominal cost, (i) license or other
agreement relating in whole or in part to patents, trademarks, logos, trade
names, service marks, copyrights, inventions, discoveries, processes, formulae,
trade secrets, technology, ideas or other know-how, (j) agreement or contract
under which the Company has borrowed any money or issued any note, bond,
indenture or other evidence of indebtedness or directly or indirectly guaranteed
or secured indebtedness, liabilities or obligations of others, (k) mortgage,
pledge, security agreement, deed of trust or other document granting a lien,
including liens upon property acquired under conditional sales, capital leases
or other title retention or security devices, (l) employee handbook or other
written employment policies, including Employment Plans (as defined in Section
5.22(b) herein), or (m) other agreement, contract, lease, license, commitment or
instrument, including, without limitation, sales orders and purchase orders
entered into in the ordinary course of business, to which the Company is a party
or by which it or any of its assets, property or business is bound. Except as
indicated in such Schedule 5.14, each Contract is a valid and binding obligation
of the Company and, to the knowledge of the Company and the Shareholders, is in
full force and effect without amendment or modification. Except as indicated in
such Schedule 5.14, no default will exist under any Contract by virtue of the
acquisition of the Shares by Purchaser as contemplated by this Agreement.
Section 5.15 Absence of Defaults: Compliance with Law. The Company
is not in default under any of the Contracts and has received no notice alleging
any such default, and, to the best of the Company's and the Shareholders'
knowledge, no third party is in default under any of the Contracts. Except as
described in Schedule 5.15 annexed hereto, the Company is in compliance with all
applicable laws, rules, regulations and requirements of any governmental
authority, federal, state or local, relating to the Company's assets, property
and business, including, without limitation, the impact of its business upon the
environment, and the Company's assets, property and business may continue to be
operated by the Company from and after the Closing in the manner
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heretofore operated by the Company without violation of any applicable law,
rule, regulation or requirement of any governmental authority, federal, state or
local.
Section 5.16 Litigation. Except as set forth in Schedule 5.16
annexed hereto, there are no actions, suits, proceedings, arbitrations, demands
for arbitration, grievances, charges, or administrative complaints or
enforcement proceedings, judgments or decrees pending or, to the knowledge of
the Company or the Shareholders, threatened involving the Company, its business
or the Shareholders. There are no judgments, orders or decrees outstanding
against the Company or the Shareholders. Neither the Company nor the
Shareholders have any knowledge of any pending or threatened proceeding or
condition which would, in any manner, impair or curtail the ability of the
Company to operate its business after the Closing in the manner heretofore
operated.
Section 5.17 Condemnation; Assessments; Defects. Neither the Company
nor the Shareholders have received any notice of any condemnation action or
special assessment being contemplated with respect to the premises where the
Company's business is located or any notice from any governmental authority or
insurance company of any defect or inadequacy in any of the assets or property
constituting such business.
Section 5.18 Intangible Rights. Schedule 5.18 annexed hereto
contains an accurate and complete list of all patents, trademarks, logos, trade
names, service marks, copyrights, inventions, discoveries, processes, formulae,
trade secrets, technology, ideas and other know-how (collectively, "Intangible
Rights") used in the Company's business or in which the Company or the
Shareholders have any interest (other than Intangible Rights which are exclusive
to the business operated by the Powder-Coating Company and which are unnecessary
to the operation of the Company's business as presently conducted). Such
Intangible Rights are being lawfully used in the Company's business and may be
so used without payment to, or interference from, any third party, and there has
been no assignment, license or other authorization given to any third party to
use any of such Intangible Rights. None of such Intangible Rights is used in
connection with any business operated by the Shareholders other than the
business of the Company or the Powder- Coating Company. The Company has the
right to use, without payment to, or interference from, any third party, all
inventions, processes, technology, know-how and other proprietary rights, used
in its business. To the best of its knowledge, the Company has the right to sell
its products under the trade name "SMITTYBILT" without infringement on the
rights of any other person or entity. Any such Intangible Rights which are
jointly used by Company and the Powder-Coating Company shall remain the joint
property of the Company and the Powder-Coating Company. Notwithstanding the
foregoing, any restrictive covenants herein do not apply to Shareholders'
ownership and/or operation of the Powder-Coating Company.
The Company and the Shareholders warrant and represent that they
have no knowledge, information or belief: (a) that the Intangible Rights are
either invalid or unenforceable, or (b) that the Company's present business
activities, including, without limitation, its manufacture and sales
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of its current products, and/or its use of Intangible Rights, has infringed,
does infringe or will infringe patent or any other intellectual property rights
of any third party.
Section 5.19 Insurance. An accurate and complete list of all the
policies (the "Insurance Policies") of fire and casualty, product and other
liability and other forms of insurance in effect during the six-year period
preceding the Closing with respect to the Company's business is attached as
Schedule 5.19, including, but not limited to, fidelity, product and other public
liability, personal property, boiler and workers' compensation insurance. Such
list contains the name and address of each insurer and broker, the policy number
and a brief description of the coverage. Except as listed on Schedule 5.19
attached hereto, no claim has been filed under the Insurance Policies since
January 1, 1992. All such policies indicated as currently being in effect are in
full force and effect and neither the Company nor the Shareholders have
committed any default thereunder or received any correspondence from any of such
insurers expressly denying or reserving its rights as to coverage of any claim.
Section 5.20 Absence of Certain Changes. Except as contemplated by
this Agreement or as set forth in Schedule 5.20 annexed hereto, since March 31,
1998, the Company has not (a) canceled or compromised any deed or claim, or
released, transferred or granted any right to any third party; (b) suffered any
material adverse change in its financial condition, results of operations,
assets, property, liabilities or business (collectively, "Condition") or
obtained knowledge of any present or future business condition which is likely
to materially adversely affect its Condition or prevent it from carrying on its
business in substantially the same manner as that in which it is being
conducted; (c) increased the salary or wages or compensation of, or paid any
bonuses to, any Shareholder or employee or independent contractor or amended or
otherwise increased the benefits under any Employee Plan (as defined below in
Section 5.22;); (d) incurred any liability or obligation, whether absolute,
accrued, contingent, contractual or otherwise, other than ordinary operating
expenses; (e) sold or otherwise transferred any of its assets or property other
than in the ordinary course of business; (f) entered into any transaction, or
modified or terminated any existing transaction, with the Shareholders or any
other related or affiliated party; (g) pledged or subjected to mortgage, lien,
charge or encumbrance any of its assets or property; (h) suffered any
significant physical damage, destruction or loss, whether or not covered by
insurance, to any of its assets or property; (i) declared, set aside or paid any
dividend or other distribution (whether in cash, stock or property) with respect
to its capital stock or issued, sold or redeemed any of its capital stock; (j)
paid any salary or other compensation to the Shareholders or any affiliated
entity or related person; (k) suffered any labor dispute; (l) adopted any change
in its accounting principles or methods; (m) operated its business or otherwise
dealt with its assets and property other than in the ordinary course; or (n)
entered into any transaction which would result in any representation or
warranty of the Company or the Shareholders contained in this Agreement becoming
untrue immediately after the consummation of such transaction.
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Section 5.21 Books and Records. The books and records maintained by
the Company have been maintained in accordance with customary business practices
and fairly reflect all transactions to which the Company has been a party for at
least the past four (4) years.
Section 5.22 Employees; Employee Plans.
(a) Schedule 5.22(a) annexed hereto sets forth a list of all
employees of the Company, indicating each such employee's total current annual
compensation (including bonuses and commissions) and position. All salaries and
wages due employees have been paid.
(b) Schedule 5.22(b) annexed hereto identifies each written or oral
employment, "change in control" or severance contract between the Company and
any employee and each employee bonus, pension, profit-sharing, stock option,
stock purchase, incentive, deferred compensation, retirement, vacation,
hospitalization, medical, disability, insurance, severance or other form of
plan, policy or agreement providing employee benefits which is or at any time
was sponsored or maintained by (or to which contributions are, were, or at any
time were required to have been made by) the Company or any other organization
which is a member of a controlled group of organizations within the meaning of
Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended (the "Code"), of which the Company is a member (the "Controlled Group")
under which any present or former employee of the Company has accrued, and
remains entitled to, any rights or under which the Company has any obligation or
liability with respect to its employees (all such contracts, plans, policies and
agreements being hereinafter collectively referred to as the "Employee Plans").
The Employee Plans include plans, policies and programs providing employee
benefits that would be customary or appropriate for a business of the size and
type of the Company; all the Employee Plans have been maintained and
administered in compliance with their terms and with the requirements prescribed
by all applicable statutes, orders, rules and regulations. The transactions
contemplated by this Agreement will not be the direct or indirect cause of any
amount paid or payable from such Employee Plan being classified as a parachute
payment under Section 280G of the Code.
(c) No representation question under the National Labor Relations
Act, as amended, exists respecting any employees of the Company and no petition
concerning representation of any such employees is pending or threatened. There
is no unfair labor practice charge or complaint against the Company pending
before the National Labor Relations Board. There is no labor dispute, strike,
picketing, handbilling, work slowdown, or work stoppage pending or threatened
against or affecting the Company or its business, nor has the Company
experienced any such labor dispute, strike, picketing, handbilling, work
slowdown work stoppage, or other labor difficulty within six (6) years of the
date hereof. No contract restricts the relocation or closing of any plant,
office, facilities, or other operations of the Company. The Company has a
written hazard communication program and a written affirmative action program
which are in compliance with applicable federal, state, and local laws and
regulations. The Company has timely filed Form EEO-1 with the Equal Employment
Opportunity Commission each year since January 1,
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1995. The Company maintains a Form I-9 with copies of identification documents,
in compliance with applicable federal laws and regulations, for each employee
for whom such a Form I-9 must be maintained.
The Company is in compliance with all federal, state and local laws,
rules, regulations, decrees and orders governing employment, employment
practices and the terms and conditions of employment or otherwise applicable to
their relations with their respective employees. Neither the Company nor any
member of the Controlled Group is, or at any time during the sixty (60) month
period preceding the Closing Date was, obligated to contribute to a
multi-employer plan within the meaning of Section 3(37) or 4001(a)(3) of ERISA
or Section 414(f) of the Code.
(a) All employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) covering
former and current employees of the Company or under which the Company has any
obligation or liability with respect to its employees (the "Benefit Plans"),
including all employee pension benefit plans as defined in Section 3(2) of ERISA
which have been "qualified" under Section 401 (a) of the Code (as defined below
in Section 5.22(e), are identified in Schedule 5.22(b) annexed hereto.
(b) The Benefit Plans, in form and operation, are and have been
administered in all material respects in compliance with their terms and the
applicable requirements prescribed by ERISA, the applicable provisions of the
Code and any other applicable federal or state law and the rules and regulations
promulgated thereunder. Each Benefit Plan intended to qualify under Section
401(a) of the Code or for any other tax-exempt or tax-favored status under the
Code so qualifies and 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. The Company has not committed any violation of ERISA or any
agreement relating to the administration of such plans which, individually or in
the aggregate, could have a material adverse effect on the Condition of the
Company. All reports required under ERISA or any other applicable law or
regulation to be filed with a regulatory agency by the Company with respect to
the Benefit Plans have been duly filed, and all such reports are true and
correct in all material respects as of the respective dates thereof. None of the
Benefit Plans which are "employee welfare plans" as defined in Section 3(1)of
ERISA is funded through a trust.
(c) There is no pending or, to the best knowledge of the Company or
the Shareholders, threatened claim (other than claims for benefits in the normal
course) by or on behalf of the Employee Plans or by any employee or beneficiary
covered under the Employee Plans or otherwise involving the Employee Plans that
will or could be expected to give rise to liability for a breach of fiduciary
duty under ERISA or violation of other applicable federal or state law which
could result in any liability on the part of the Company or any Employee Plan
under Section 502(1) of ERISA or any other law, nor to the best knowledge of the
Company and the Shareholders, is there any basis for such a claim; there has
been no claim filed with respect to the Employee Plans since January 1, 1992.
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(d) With respect to each Employee Plan, (i) no Employee 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 Section 4980B of the Code, Part 6 of Title I of ERISA or applicable state
or local law; and (ii) all contributions required to have been made by law under
the terms of any contract, agreement or Employee Plan for all complete and
partial periods up to and including the Closing Date have been made or will be
made.
(e) With respect to each Employee Plan, none of the Company, the
Shareholders, any member of the Controlled Group or any other person has engaged
in a prohibited transaction, as such term as defined in Section 4975 of the Code
or Section 406 of ERISA, which would subject either the Company or any member of
the Controlled Group to any taxes, penalties or other liabilities resulting from
prohibited transactions under Section 4975 of the Code or Sections 409 or 502(i)
of ERISA.
(f) 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 Plan have been made prior to the Closing Date 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
Closing Date.
Section 5.23 Product Warranties. The Company and the Shareholders
warrant and represent that they have no knowledge, information or belief: (a)
that any design, manufacturing process, or product which has been manufactured
and/or sold by the Company includes any defect, or could result in any product
liability claim, or could result in any recall or required repair or
replacement, or any significant credit or refund, or (b) that there has been any
notice thereof from any supplier or other third party, or (c) that there have
been any product liability, product defect or other liability claims or suits
associated with any product manufactured or sold by the Company, or (d) that the
Company has contemplated or is contemplating any recall of any product sold by
it, or (e) that any products sold by the Company have been the subject of any
recall or request for recall by a third party in the past, or (f) that there has
been any claim by a third party that the Company has violated any express or
implied warranty with respect to any product manufactured or sold by the
Company.
Section 5.24 Environmental Matters. For the purposes of this Section
5.24, "Hazardous Substances" shall mean and include any chemicals, materials,
wastes, substances, pollutants, contaminants or other matter which are
referenced or regulated by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Hazardous
Materials Act, as amended, the Resource Conservation and Recovery Act, as
amended ("RCRA"), the Occupational Safety and Health Act, as amended ("OSHA"),
the Toxic Substances Control Act, as amended, the Clean Water Act, as amended,
the Clean Air Act, as amended, and any similar federal, state or local law such
as, without limitation, the California Clean Air Act, the Porter Cologne Water
Quality Act, the California Hazardous Substances Account Act, the Safe
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Drinking Water and Toxic Enforcement Act of 1986, and the California
Hazardous Waste Control Law (all such laws, and the rules and regulations
promulgated thereunder, being referred to herein collectively as "Environmental
Law(s)"). Except as described in Schedule 5.24 annexed hereto, as of the Closing
Date, neither the Company nor the Shareholders (a) is aware of any violations of
any Environmental Laws or similar federal, state or local law, ordinance, rule
or regulation relating to air or water pollution, toxic waste, asbestos or other
environmental protection matters, or relating, without limitation, to
occupational health or safety or Hazardous Substances, (b) is aware of any
failure by the Company to enforce or comply, to the extent required by any
Environmental Laws, with all provisions in all leases, licenses and occupancy
agreements affecting such facilities, plants or assets relating to the handling
or storage of Hazardous Substances on, about or in connection with the operation
of such facilities, plants or assets, (c) has any knowledge concerning disposal
of any Hazardous Substances on such real property or the Leased Property
identified in Section 5.12 by the Company or third parties, and (d) is aware of
any reasonable basis for the assertion of any claim by any private party or
governmental agency against the Company relating to environmental matters or
arising under any Environmental Laws. Except as described in Schedule 5.24
annexed hereto, to the best knowledge of the Company and the Shareholders, the
Company is not a party to any litigation involving any environmental matter or
arising under any Environmental Laws or in which any claim as to any
environmental matter has been raised. Except as permitted by Environmental Laws
or as set forth in Schedule 5.24 annexed hereto, as far as Company and
Shareholders are aware, as of the Closing Date, there has been no release of
Hazardous Substances generated at facilities, plants or assets of the Company or
stored, transported across or used at or in any such facilities, plants or
assets and neither the Company nor the Shareholders have knowledge of any
information that would require it under any Environmental Laws to stop producing
or marketing any of the Company's products or change the Company's business in a
manner that would have an adverse effect upon the Company's business. As of the
Closing Date, there are no permits or registrations required for the operation
of its business by Environmental Laws which have not been obtained, and, except
as described in Schedule 5.24 annexed hereto, as of the Closing Date the Company
has not received any notice from any governmental agency stating that such
governmental agency (i) plans to take any action with respect to any such permit
or registration or (ii) has identified the Company as a potentially responsible
party or a responsible party in connection with the release of any Hazardous
Substance to the ground or groundwater of any state. There have been no
environmental surveys conducted within the past two (2) years with respect to
any of the Company facilities or any written communication during the past
eighteen (18) months between the Company and any environmental agency or other
governmental authority having jurisdiction under any Environmental Laws.
Notwithstanding the foregoing, the Company and Shareholders have disclosed the
contamination issues associated with the South El Monte properties.
Section 5.25 Change of Control Payments; Takeover Restrictions.
(a) Except as disclosed in Schedule 5.25(a) annexed hereto or as
required by law, the Company has no plans or agreements to which it is a party,
or by which the Company or its
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properties are bound, pursuant to which payments, including with respect to the
acceleration of benefits, will be required upon or as a result of a "change of
control" of the Company.
(b) To the best knowledge of the Shareholders, no state takeover
statute or similar statute or regulation of any state or other jurisdiction
applies to this Agreement or any of the transactions contemplated hereby. No
provision of the Articles of Incorporation or By-laws of the Company, directly
or indirectly, restrict or impair the ability of Purchaser or its affiliates to
vote, or otherwise to exercise the rights of a stockholder with respect to,
securities of the Company that may be acquired or controlled by the Purchaser or
its affiliates pursuant to this Agreement or permit any stockholder to acquire
securities of the Company on a basis not available to Purchaser in the event
that Purchaser were to acquire securities of the Company.
Section 5.26 Customers and Suppliers.
(a) Schedule 5.26 annexed hereto sets forth: (i) a list of the 10
largest customers of the Company in terms of revenue during each of the fiscal
years ended March 31, 1997, and 1998, and the six-month period ended September
30, 1998 (collectively, the "Major Customers"), showing the approximate total
revenue received in each such period from each such customer; and (ii) a list of
the 10 largest suppliers of the Company in terms of purchases during each of the
fiscal years ended March 31, 1997, and 1998, and the six-month period ended
September 30, 1998 (collectively, the "Major Suppliers"), showing the
approximate total purchases in each such period from each such supplier.
(b) Since March 31, 1998, except as set forth in Schedule 5.26
annexed hereto, no Major Customer or Major Supplier has (i) canceled in writing
its relationship with the Company or (ii) as of March 31, 1998, to the Company's
knowledge, indicated in writing its intention to so cancel its relationship,
including as a result of any transaction that would result in a "change of
control" of the Company, or to decrease the dollar amount of its purchases from
the Company during the fiscal year ending March 31, 1999, or 2000, by more than
50% from the dollar amount so purchased or sold during the year ended March 31,
1998.
Section 5.27 Brokerage. Neither the Company nor the Shareholders
have incurred any obligation or liability, contingent or otherwise, for any
brokerage or finder's fee, agent's commission or other similar payment in
connection with this Agreement or the transactions contemplated by this
Agreement, except for the obligations of the Shareholders to Capstone Financial
Group, which obligations will be fully discharged by the Shareholders without
any liability with respect thereto on the part of the Company or Purchaser.
Section 5.28 Consultants, Agents, Dealers and Warehouses. Schedule
5.28 annexed hereto identifies all consultants, sales representatives,
distributors, agents, dealers and off-premises warehouses used in connection
with the Company's business.
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Section 5.29 Completeness of Representations. The Company and the
Shareholders have disclosed to Purchaser all facts known to them which are
material to the Company's Condition. No representation or warranty of the
Company or the Shareholders made in this Agreement or in any document or
certificate furnished by either of them to Purchaser pursuant to this Agreement
or in connection with the transactions contemplated hereby contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make any statement or fact contained herein or
therein not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF
PURCHASER
Purchaser hereby represents and warrants to the Shareholders as
follows:
Section 6.1 Organization, Good Standing and Corporate Power and
Authority of Purchaser. Purchaser is a 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 perform the obligations
required of it under this Agreement. Purchaser has and will have all requisite
power and authority to own the Shares.
Section 6.2 Effective Agreement of Purchaser.
(a) The execution and delivery by Purchaser of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action of Purchaser, and this Agreement
constitutes, and any other agreements or instruments executed and delivered by
Purchaser at the Closing, including the Escrow Agreements, when executed and
delivered by it, will constitute, legal, valid and binding obligations of
Purchaser enforceable against Purchaser in accordance with their respective
terms.
(b) Except as set forth in Schedule 6.2(b) attached hereto, neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby or thereby, will (i) violate any provision of
the certificate of incorporation or by-laws of Purchaser, as amended to date,
(ii) with or without the giving of notice and/or the passage of time, violate,
conflict with, result in the breach or termination of, constitute a default
under or result in the creation of any material lien, charge or encumbrance upon
any of the assets or property of Purchaser pursuant to, any contract, agreement,
lease or commitment to which Purchaser is a party or by which Purchaser or any
of Purchaser's assets or property may be bound or (iii) violate any judgment,
decree, order, statute, rule or governmental regulation applicable to Purchaser
or any of Purchaser's respective assets, property or business.
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(c) Except as set forth in Schedule 6.2(c), no consent, approval,
qualification, order or authorization of, or filing with, any governmental
authority, including any court, or other third party is required in connection
with Purchaser's valid execution, delivery or performance of this Agreement or
the Escrow Agreements or the consummation of any transaction contemplated hereby
or thereby, other than as may be required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the Securities and
Exchange Act of 1934, as amended.
Section 6.3 Litigation. There are no actions, suits, proceedings,
judgments or decrees pending or, to the knowledge of Purchaser threatened
against or affecting Purchaser which could prevent or interfere with the
consummation of the transactions contemplated hereby.
Section 6.4 Brokerage. Purchaser has not incurred any obligation or
liability, contingent or otherwise, for any brokerage or finder's fee, agent's
commission or other similar payment in connection with this Agreement or the
transactions contemplated by this Agreement.
ARTICLE VII
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders, jointly and severally prior to the
Closing, and the Shareholders, jointly and severally but without the Company
from and after the Closing, hereby covenant and agree with Purchaser as follows:
Section 7.1 Access. From and after the date hereof until the Closing
the Company and the Shareholders will afford to the officers, employees,
counsel, accountants and other authorized representatives of Purchaser and its
institutional lender (collectively, the "Representatives") full access during
normal business hours to all of the Company's properties, books, contracts,
commitments and records as may be reasonably requested and, during such period,
the Company and the Shareholders will furnish promptly to the Representatives
all information concerning the Company's business as the Representatives may
reasonably request.
Section 7.2 Interim Operations. From and after the date hereof until
the Closing (unless Purchaser shall otherwise agree in writing):
(a) the business of the Company shall be conducted only in the
ordinary and usual course and, to the extent consistent therewith, the
Shareholders shall cause the Company to use its best efforts to preserve the
business organization of the Company and the Company's assets and property
intact and maintain the existing relations of the Company with its customers,
suppliers and employees;
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(b) the Shareholders shall not (directly or indirectly through
advisors, agents or other intermediaries), (i) solicit or initiate inquiries,
proposals or offers from any person (other than Purchaser or any of its
affiliates) relating to any proposal to acquire the Shares or all or
substantially all of the assets of the Company (a "Takeover Proposal") or (ii)
in connection with any of the foregoing, enter into or participate in any
discussions (knowingly) or negotiations or furnish to any other person any
information with respect to the business, properties or assets of the Company;
(c) the Company shall not (directly or indirectly through advisors,
agents or other intermediaries), (i) solicit or initiate inquiries, proposals or
offers from any person (other than Purchaser or any of its affiliates) relating
to any Takeover Proposal or (ii) in connection with any of the foregoing, enter
into or participate in any discussions (knowingly) or negotiations or furnish to
any other person any information with respect to the business, properties or
assets of the Company;
(d) the Company will not (i) amend its articles of incorporation or
by-laws, (ii) declare, set aside or pay any dividend or distribution payable in
cash, stock or property with respect to its capital stock, (iii) issue, sell,
pledge, dispose of or encumber any additional shares of, or securities
convertible or exchangeable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any shares of its capital stock, (iv) transfer,
lease, license, sell, mortgage, pledge, dispose of or encumber any assets other
than in the ordinary and usual course of business, incur or modify any
indebtedness or other liability other than in the ordinary and usual course of
business or incur any additional indebtedness for borrowed money, (v) sell
inventory with markdowns or on terms which are inconsistent with sound business
practices or the Company's normal manner of doing business, or (vi) redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock.
(e) the Company will not (i) grant any bonus or increase in the
compensation payable or to become payable to any of its shareholders, directors,
executive officers or key employees or adopt any new, or amend or otherwise
increase the amounts payable or to become payable under any existing, Employee
Plan or Benefit Plan, (ii) make any payment on account of the liabilities
referred to above in Section 2.3 or (iii) enter into any employment agreement
with or, except in accordance with the existing written policies of the Company,
grant any severance or termination pay to, any officer, director or employee of
the Company;
(f) the Company will not enter into any agreement, contract, lease,
license or other commitment or instrument which, if entered into prior to the
date hereof, would be required to be disclosed in Schedule 5.14 annexed hereto;
(g) the Company will not modify, amend or terminate any of the
Contracts or waive, release or assign any rights or claims;
(h) the Company will not enter into an agreement to do any of the
foregoing;
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(i) the Company shall not (i) incur or assume any long-term debt, or
any short-term indebtedness except in the ordinary course of business under
lines of credit in existence on the date hereof in amounts not consistent with
past practice; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person; (iii) make any loan, advances or capital contributions to, or
investments in, any other person; or (iv) make any commitments for, make or
authorize any capital expenditures other than in amounts less than $50,000.00
individually, and $500,000.00 in the aggregate; and
(j) the Company shall not (i) change any of the accounting methods
used by it unless required by generally accepted accounting principles or (ii)
make any Tax election or change any Tax election already made, adopt any Tax
accounting method, change any Tax accounting method unless required by
applicable law, enter into any closing agreement, settle any Tax claim or
assessment or consent to any Tax claim or assessment or any waiver of the
statute of limitations for any such claim or assessment.
Section 7.3 Consents. Between the date hereof and the Closing, the
Company and the Shareholders will use their best efforts to obtain the consents
of third parties (if any) indicated in Schedule 5.2(c) annexed hereto as being
essential to permit the consummation of the transactions contemplated hereby and
waivers by third parties of any violations, breaches or defaults that may be
caused by the consummation of the transactions contemplated by this Agreement,
including, but limited to the consents of both the Company and Basil Smith under
that certain shareholders agreement, dated September 6, 1977, among the Company
and certain shareholders of the Company, the consent of Petar Marovic under the
Secondary Lease and the consent of Cusumano/Smitty Way LLC under the Primary
Lease (collectively, the "Consents"). Nothing contained in this Agreement shall
be construed as an attempt to assign any contract, agreement, lease, purchase
order, sales order or other commitment of the Company which is, as a matter of
law, non-assignable without the consent of the other party or parties thereto
unless such consent shall have been obtained. From and after the Closing, the
Shareholders will cooperate with the Company in obtaining all such required
consents which have not been obtained prior to the Closing. In the event that
the Shareholders and the Company shall be unable, after the Closing, to obtain
any of such required consents, the Shareholders, Purchaser and the Company will
cooperate in any reasonable arrangement (whether by way of lease, sublease,
management agreement, operating agreement or otherwise) designed to provide the
Company and Purchaser with the benefits under any such contract, agreement,
lease, purchase order, sales order or other commitment from and after the
Closing.
Section 7.4 Maintenance of Assets and Property. From and after the
date hereof until the Closing, the Company's assets and property will be kept
and maintained in good operating condition and repair, normal wear and tear
expected.
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Section 7.5 Insurance. From and after the date hereof until the
Closing, the Company will continue to maintain in full force and effect all
insurance coverage relating to assets, property and business currently in effect
or renewals thereof or substitutes therefor, and will not default with respect
to any provision of, and give notices and present all claims under, such
insurance policies in due and timely fashion.
Section 7.6 Risk of Loss. From and after the date hereof until the
Closing Date, the Company shall bear the risk of any physical loss, damage or
destruction to its assets, property and business. If there shall occur any such
physical loss, damage or destruction, then Purchaser, at its sole option, may
accept assignment of all insurance proceeds resulting therefrom, provided,
however, that if such loss, damage or destruction shall have reduced the value
of the assets, property and business of the Company by more than $500,000 (as
determined by an appraiser agreed upon by the parties hereto if the parties
hereto cannot agree on the amount of such reduction in value), then Purchaser
may instead, at its sole option, terminate this Agreement by giving written
notice of termination to the other parties hereto within ten (10) days after
having been notified of such loss, damage or destruction, whereupon this
Agreement shall terminate and be of no further force or effect, without any
liability on the part of any party hereto to any other party hereto. In no event
shall Shareholder be liable for any cost or expense arising from such loss.
Section 7.7 Lease. At the Closing, the Shareholders will cause the
Landlord to enter into an amendment of the Lease in the form of Exhibit F
annexed hereto (the "Lease Amendment"), to be effective from and after the
Closing.
Section 7.8 Sublease. At the Closing, the Shareholders will cause
the Powder-Coating Company to enter into an amendment to the Sublease
substantially in the form of Exhibit G annexed hereto (the "Sublease Amendment")
to be effective from and after the Closing.
Section 7.9 Powder-Coat Agreement. At the Closing, the Shareholders
will cause the Powder-Coating Company to enter into a supply agreement
substantially in the form of Exhibit H annexed hereto (the "Powder-Coat
Agreement"), to be effective from and after the Closing.
Section 7.10 First Refusal Agreement. At the Closing the
Shareholders will cause the Powder-Coating Company and each of the members of
the Powder-Coating Company to enter into a first refusal agreement substantially
in the form of Exhibit I annexed hereto (the "First Refusal Agreement").
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ARTICLE VIII
COVENANTS OF PURCHASER
Purchaser hereby covenants and agrees with the Company (prior to the
Closing) and the Shareholders as follows:
Section 8.1 Collection of Accounts Receivable. For a period of 180
days after the Closing, Purchaser shall, at the request of and on behalf of the
Shareholders, cause the Company to use its commercially reasonable efforts to
collect previously uncollected Accounts Receivable to the extent of any monies
that have been paid to Purchaser by the Shareholders pursuant to Section 3.4(c)
herein. Any such collections received by the Company will be promptly remitted
to the Shareholders. Neither the Company nor Purchaser shall be under any
obligation to institute legal or other proceedings, or otherwise incur any
out-of-pocket expense payable to third parties, in order to collect any such
Account Receivable. If after the above referenced 180-day period has terminated
and both the Company and Purchaser have ceased to attempt to collect one or more
accounts receivable for which the Shareholders have paid amounts to Purchaser
pursuant to Section 3.4(c) herein, then Purchaser shall cause the Company to
assign any such accounts receivable to the Shareholders and waive any claim
thereto.
Section 8.2 Consents. Between the date hereof and the Closing,
Purchaser will cooperate with the Company and the Shareholders in seeking to
obtain the Consents.
Section 8.3 Powder-Coat Agreement. At the Closing, Purchaser will
cause the Company to enter into the Powder-Coat Agreement, to be effective from
and after the Closing.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to consummate the transactions to be
consummated by Purchaser at the Closing are subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may be
waived by Purchaser or nominee in its sole discretion):
Section 9.1 Correctness of Representations and Warranties;
Compliance with Provisions. All of the representations and warranties of the
Company and the Shareholders contained in this Agreement or otherwise made in
writing pursuant to this Agreement shall have been true and correct in all
material respects when made and shall be true and correct at the Closing in all
material respects as though restated and made at such time; all of the terms,
covenants and conditions of this Agreement required to be complied with and
performed by either of them at or prior to the Closing Date shall have been duly
complied with and performed; and they shall have
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delivered to Purchaser a certificate, signed by the Shareholders and the
President of the Company, dated the Closing Date, to the foregoing effect.
Section 9.2 Absence of Litigation. No litigation, proceeding,
investigation or inquiry shall be pending or threatened at the Closing Date in
which it is sought or threatened to restrain, enjoin, restrict, limit or
prohibit (or to obtain substantial damages as a result of) the consummation of
the transactions contemplated by this Agreement, and the Shareholders and the
Company shall have delivered to Purchaser a certificate, signed by the
Shareholders and the President of the Company, dated the Closing Date,
confirming such fact to the best of their knowledge.
Section 9.3 No Loss or Damage. There shall have been no loss, damage
or destruction to the Company's assets, property or business entitling Purchaser
to terminate this Agreement as provided above in Section 7.6.
Section 9.4 Consents. The Shareholders shall have obtained the
Consents, in form and substance reasonably satisfactory to Purchaser and shall
have furnished copies thereof to Purchaser.
Section 9.5 Absence of Material Adverse Change. There shall not have
occurred any material adverse change in the Condition of the Company since March
31, 1998, and Purchaser shall have received a certificate, signed by the
President and the chief financial and accounting officer of the Company and by
the Shareholders, dated the Closing Date, to the foregoing effect.
Section 9.6 Lease and Sublease Amendments. The Landlord shall have
entered into the Lease Amendment and the Powder-Coating Company shall have
executed and delivered the Sublease Amendment.
Section 9.7 Powder-Coat Agreement. The Company and the
Powder-Coating Company shall have entered into the Powder-Coat Agreement.
Section 9.8 Estoppel Certificates. Purchaser shall have received
estoppel letters or certificates (the "Estoppel Certificates") from the lessors
and lenders referred to in Schedule 9.8 annexed hereto, including the Landlords
and the Powder-Coating Company, with respect to their respective leases and
loans to the Company, which Estoppel Certificates shall contain information that
is not inconsistent with the information set forth in Schedule 5.14 annexed
hereto, the 1998 Financial Statements and the 1998 Monthly Financial Statements.
Section 9.9 Discharge of the Bank Debt and Release of Liens. Upon
the repayment in full of the Bank Debt pursuant to Section 2.2 herein and the
repayment in full of any outstanding indebtedness guaranteed by the Company
pursuant to Section 2.4 herein, all liens, claims, charges and encumbrances
against assets of the Shareholders and the Company (other than assets leased by
the Company from third party lessors) shall have been released, with Purchaser
having received
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termination statements with respect to all financing statements on Form UCC-1
filed against the Company with respect to such liens, claims, charges and
encumbrances.
Section 9.10 Expiration of HSR Act Waiting Period. The applicable
waiting period under the HSR Act shall have expired or been earlier terminated
without action by the Justice Department or the Federal Trade Commission to
prevent the consummation of the transactions contemplated by this Agreement.
Section 9.11 Noncompete Agreements. Each of the Shareholders shall
have executed and delivered to Purchaser the Noncompete Agreements.
Section 9.12 First Refusal Agreement. The Powder-Coating Company and
each of the members of the Powder-Coating Company shall have executed and
delivered the First Refusal Agreement.
Section 9.13 Legal Opinion of Counsel. Purchaser shall have received
the legal opinion of Allan B. Weiss and Associates, counsel to the Company and
the Shareholders, substantially in the form of Exhibit J annexed hereto.
Section 9.14 Releases from Guarantees. Purchaser shall have received
evidence reasonably satisfactory to Purchaser that the Company has been, or
immediately upon Closing will be, released from any and all liability under any
guaranty by the Company of the debts or other obligations of any of the
Shareholders or any affiliate of the Shareholders, including, but not limited
to, releases from those parties listed on Schedule 9.14 attached hereto.
Section 9.15 Consulting Agreement. Tom Smith shall have executed and
delivered to Purchaser a consulting agreement substantially in the form of
Exhibit K annexed hereto (the "Consulting Agreement").
Section 9.16 Proceedings and Documentation. All corporate and other
proceedings required to carry out the transactions contemplated by this
Agreement and all instruments and other documents relating to such transactions
shall be satisfactory in form and substance to Thelen Reid & Priest LLP, counsel
to Purchaser, and Purchaser shall have been furnished with (a) copies of
resolutions adopted by the Board of Directors and shareholders of the Company,
authorizing the execution and delivery by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby and thereby,
certified by the Secretary or an Assistant Secretary of the Company, (b)
certificates of the Secretary or an Assistant Secretary of the Company with
respect to the incumbency of the officers of the Company executing instruments
and other documents in connection with the transactions contemplated by this
Agreement, (c) the written resignations of all the directors and officers of the
Company incumbent at the Closing Date and the corporate minute books, stock
books, stock transfer ledgers and corporate seals of the
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Company and (d) such other instruments and documents as such counsel shall have
reasonably requested.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS
The obligations of the Company and the Shareholders to consummate
the transactions to be consummated by them at the Closing are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Shareholders in their sole discretion):
Section 10.1 Correctness of Representations and Warranties;
Compliance with Provisions. All of the representations and warranties of
Purchaser contained in this Agreement or otherwise made in writing pursuant to
this Agreement shall have been true and correct in all material respects when
made and shall be true and correct at the Closing in all material respects as
though restated and made at such time; all of the terms, covenants and
conditions of this Agreement required to be complied with and performed by
Purchaser at or prior to the Closing Date shall have been duly complied with and
performed, and Purchaser shall each have delivered to the Shareholders and the
Company a certificate signed by its President or Vice President, as the case may
be, dated the Closing Date, to the foregoing effect.
Section 10.2 Absence of Litigation. No litigation, proceeding,
investigation or inquiry shall be pending or threatened at the Closing Date in
which it is sought or threatened to restrain, enjoin, restrict, limit or
prohibit (or to obtain substantial damages as a result of) the consummation of
the transactions contemplated by this Agreement, and Purchaser shall have
delivered to the Shareholders and the Company a certificate signed by its
President or Vice President, dated the Closing Date, confirming such fact to the
best of its knowledge.
Section 10.3 Amendment of the Lease. Purchaser shall have caused the
Company to enter into the Lease Amendment.
Section 10.4 Powder-Coat Agreement. The Company and the
Powder-Coating Company shall have entered into the Powder-Coat Agreement.
Section 10.5 Discharge of Bank Debt. The Bank Debt shall have been
paid in full, and Shareholders released in writing therefrom.
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Section 10.6 Legal Opinion of Counsel. The Shareholders shall have
received the legal opinion of Thelen Reid & Priest LLP, counsel to Purchaser,
substantially in the form of Exhibit L annexed hereto.
Section 10.7 Releases from Guarantees. The Shareholders shall have
received evidence reasonably satisfactory to the Shareholders that each of Tom
Smith and Debbie Smith has been, or immediately upon Closing will be, released
from any guaranty of the obligations under the Secondary Lease.
Section 10.8 Lease Performance Letter of Credit. The Shareholders
shall have received evidence that Purchaser or Company has obtained a letter of
credit in the aggregate principal amount of not less than $1,750,000 in form and
substance reasonably acceptable to Tom Smith, which letter of credit shall (i)
guaranty the performance by the Company of its obligations under the Primary
Lease, (ii) name Tom Smith, Debbie Smith and their assigns and successors as the
primary beneficiaries of such letter of credit, (iii) be issued by a financial
institution with net assets exceeding $50,000,000 and (iv) be in the usual and
customary form for standby letters of credit (the "Letter of Credit"). In the
event that Tom Smith does not find the Letter of Credit to be reasonably
acceptable in form and substance, Purchaser and Tom Smith shall appoint a
mutually acceptable arbitrator to determine whether Tom Smith's reasons for so
rejecting the Letter of Credit are reasonable. In the event that Purchaser and
Tom Smith cannot agree upon an arbitrator, then the matter shall be submitted to
the American Arbitration Association in Los Angeles, and the American
Arbitration Association shall appoint an arbitrator. The arbitrator selected by
either means shall determine the reasonableness of Tom Smith's rejection, and
shall deliver a written decision to the Purchaser and Tom Smith within ten (10)
days of being so appointed, which written decision shall be final and binding
upon the parties. The Letter of Credit shall be an irrevocable letter of credit
until December 31, 2000. Purchaser shall keep the Letter of Credit and any
subsequent Letter of Credit open until the earlier to occur of (i) the
termination of the Primary Lease or (ii) any fiscal year after the end of
Purchaser's fiscal year ended December 31, 2000 or thereafter if Purchaser's
Available Cash Flow (as defined in and determined pursuant to this Section 10.8)
exceeds $12,000,000. If at the end of any fiscal year of Purchaser prior to the
termination of the Primary Lease Purchaser's Available Cash Flow is less than
$12,000,000, then Purchaser shall obtain another Letter of Credit. For the
purposes of this Section 10.8, "Available Cash Flow" shall be determined in
accordance with United States generally accepted accounting principles by
reference to the audited financial statements of Purchaser for the fiscal year
then ended and shall equal Purchaser's net income after taxes plus depreciation,
amortization and other non-cash charges minus scheduled payments of any term
loans then outstanding for the fiscal year then ended.
Section 10.9 Lease Indemnification Agreement. Purchaser shall have
executed and delivered to Tom Smith and Debbie Smith an indemnification
agreement substantially in the form of Exhibit M annexed hereto (the "Lease
Indemnification Agreement").
Section 10.10 Proceedings and Documentation. All corporate and other
proceedings required to carry out the transactions contemplated by this
Agreement and all instruments and other
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documents relating to such transactions shall be satisfactory in form and
substance to Allan B. Weiss, Esq., counsel to the Company and the Shareholders,
and the Company and the Shareholders shall have been furnished with (a)
documentation evidencing the authority of the officers of Purchaser with respect
to the execution and delivery by Purchaser of this Agreement and all other
agreements or other instruments executed and delivered by Purchaser pursuant to
this Agreement and the consummation by Purchaser of the transactions
contemplated hereby and thereby certified by the Secretary or an Assistant
Secretary of Purchaser; (b) certificates of the Secretary of Purchaser or an
Assistant Secretary of Purchaser with respect to the incumbency of its officers
executing instruments and other documents in connection with the transactions
contemplated by this Agreement; and (c) such other instruments and documents as
such counsel shall have reasonably requested.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
Section 11.1 Survival of Representations and Warranties. The
representations and warranties made by the Shareholders or Purchaser in this
Agreement or in any instrument delivered pursuant to this Agreement shall not
survive the Closing except for the representations and warranties contained in
Sections 5.4, 5.7 and 5.13 herein shall survive the Closing for the period of
any applicable statute of limitations and the representations and warranties
contained in Section 5.24 herein shall survive the Closing in perpetuity. Any
claim by the Company, the Shareholders or Purchaser based upon a breach of a
representation or warranty shall be in writing and be asserted prior to the
expiration of the survival period for the applicable representation or warranty.
Nothing contained in this Section 11.1 with respect to the survival of
representations and warranties shall affect in any way the obligations of the
parties hereto that are to be performed, in whole or in part, after the Closing.
In determining the dollar amount of any claim as to which a party hereto shall
be entitled to indemnification under this Article XI, the gross amount of such
claim shall be reduced by an amount equal to the insurance proceeds which the
indemnified party shall have received, net of expenses incurred, with respect to
the subject matter of such claim.
Section 11.2 Indemnification of Purchaser by the Shareholders.
Subject to the limitations contained above in Section 11.1, the Shareholders,
jointly and severally with each other shall, on demand, or as soon thereafter as
is reasonably practicable, indemnify and hold harmless Purchaser (and/or the
Company as well, from and after the Closing) from, and reimburse Purchaser
(and/or the Company as well, from and after the Closing) for, any losses,
claims, demands, damages, liabilities, deficiencies, costs and expenses
(including, without limitation, attorneys' fees) incurred by Purchaser (and/or
the Company as well, from and after the Closing) by reason or arising out of any
breach of this Agreement or any of the following ("Purchaser Claims"):
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(a) any material misrepresentation, omission of fact or breach of
any representation or warranty by the Shareholders contained in this Agreement
or in any instrument or other document executed by the Shareholders and
delivered to Purchaser hereunder;
(b) any material failure by the Shareholders to perform any
obligation or duty required to be performed by the Shareholders under any
provision of this Agreement; or
(c) the Company's operations on or occupancy of premises at
2112-2124 Lee Avenue, South El Monte, California, or any liability or obligation
relating to any Environmental Law or any obligation or liability relating to the
San Gabriel Valley Superfund Site (it being understood that, notwithstanding any
provision contained in this Agreement to the contrary, the indemnification
obligations of the Shareholders with respect to this clause (c) shall in no way
be limited by the time limitations imposed in Section 11.1 above, the amount of
the Escrow Funds or the termination of this Agreement).
Section 11.3 Indemnification of the Company and/or the Shareholders
by Purchaser. Purchaser shall, on demand, as soon thereafter as is reasonably
practicable, indemnify and hold harmless the Company (if the Closing shall not
have occurred) and/or the Shareholders from, and reimburse the Company (if the
Closing shall not have occurred) and/or the Shareholders for, any claims,
demands, losses, damages, liabilities, deficiencies, costs and expenses
(including, without limitation, attorneys' fees) incurred by the Company (if the
Closing shall not have occurred) and/or the Shareholders after the Closing by
reason or arising out of any failure by Purchaser to perform any obligation or
duty required to be performed by Purchaser under any provision of this Agreement
("Shareholder Claims").
Section 11.4 Procedure for Claims of Third Parties. In the event
that any claim, demand, action, lawsuit or other proceeding is asserted in
writing by a third party which may entitle any party hereto to indemnification
under this Agreement (an "Indemnified Claim"), the party or parties hereto
against whom such Indemnified Claim is asserted (the "Indemnified Party") shall
give prompt notice thereof to the other party or parties hereto obligated to
provide indemnification (the "Indemnifying Party"), which notice shall be
accompanied by a copy or statement of the Indemnified Claim; if the failure to
give such notice materially jeopardizes the Indemnifying Party's ability to
assume control of the defense of such Indemnified Claim, such notice shall be a
condition precedent to any liability of the Indemnifying Party under this
Article XI with respect to such Indemnified Claim. If the Indemnifying Party
shall receive actual notice of any such Indemnified Claim under circumstances in
which it is reasonable to believe that the Indemnified Party has not yet
received such Indemnified Claim, the Indemnifying Party shall give prompt notice
thereof to the Indemnified Party. Following receipt of notice of such
Indemnified Claim, the Indemnifying Party shall have the right (to be exercised,
within fifteen (15) days after such receipt, by written notice to the
Indemnified Party), but not the obligation, to participate in and control, at
its sole expense: (1) the defense, compromise or settlement (including, without
limitation, the negotiation and execution of a reasonable consent decree) of any
such Indemnified
37
<PAGE>
Claim with counsel of its choice, and (2) the filing, pursuit and settlement of
any claim under any Company insurance policy in existence as of the Closing Date
that may cover any liability pursuant to such Indemnified Claim; provided,
however, that no such compromise or settlement pursuant to (1) or (2) above
shall, without the prior written consent of the Indemnified Party, impose any
liability, obligation or restriction of any kind upon the Indemnified Party or
terminate or impair in any way any of the Indemnified Party's rights or
privileges under any policy of insurance. If the Indemnifying Party shall fail
timely to defend, contest or otherwise protect against, and participate in and
control the defense, compromise or settlement of, any suit, action or other
proceeding arising from such Indemnified Claim, the Indemnified Party shall have
the right, but not the obligation, to defend, contest or otherwise protect
itself against same and, upon not less than fifteen (15) days' written notice to
the Indemnifying Party, to make any compromise or settlement thereof; provided,
however, that the Indemnified Party shall not make any such compromise or
settlement if the Indemnifying Party shall object thereto within such
fifteen-day period and shall thereupon assume the control of the defense and
deposit moneys equal to the amount of any such claim into a mutually agreed
escrow or post a bond in the amount of any such claim to protect the Indemnified
Party from any liability arising from such suit, action or other proceeding.
Section 11.5 Claims Against the Escrow Funds. After the Closing,
Purchaser shall have the right to recoup any amounts owing to it by the
Shareholders as a result of a breach by any of the Shareholders of any of the
representations and warranties contained in Section 5.24 herein or the
obligations contained in Section 11.2(c) herein by asserting a written claim
therefor against the Escrow Funds pursuant to the provisions (including the
dispute resolution provisions) of this Agreement or the Escrow Agreement.
Shareholders shall be given 15 days prior written notice of the assertion of any
such claim.
Section 11.6 Further Assurances. In connection with any Indemnified
Claim, the parties hereto shall cooperate fully with each other and make
available all pertinent technical reports, studies, data, drawings, maps, plans
or other technical information that the parties have in their possession,
custody or control that relates to or concerns the subject matter of such
Indemnified Claim and that is necessary or advisable for the defense, compromise
or settlement of such Indemnified Claim. Each party agrees that, if it is an
Indemnified Party, it will not unreasonably withhold its consent to waive any
conflicts that might otherwise prevent counsel chosen by the Indemnifying Party
pursuant to Section 11.4 of this Agreement from representing the Indemnified
Party where such waiver can lawfully be given. The Purchaser agrees to
cooperate, to the extent practicable, with the Shareholders in any reasonable
investigation by the Shareholders of any evidence discovered that indicates that
the Company is a contributor to groundwater contamination in the San Gabriel
Valley Superfund Site. The Purchaser further agrees, if requested in writing by
the Shareholders, to cause the Company to remain, or become, a member of a
committee of potentially responsible parties organized to investigate or
remediate groundwater under and emanating from the South El Monte Operable Unit,
provided, however, that all costs, fees and charges associated therewith shall
be paid by the Shareholders. The Purchaser further agrees, if requested in
writing by the Shareholders, to participate in any allocation process between
38
<PAGE>
potentially responsible parties associated with the South El Monte Operable
Unit, provided, however, that the Shareholders shall pay all fees, costs and
charges associated therewith, including, without limitation, the fees and costs
of legal representatives and technical consultants, subject to the limitations
set forth in Section 11.7(c) herein.
The parties will act in good faith so that any amounts payable by an
indemnifying party to an indemnitee pursuant to this Article XI 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.
Section 11.7 Certain Limitations. Notwithstanding the foregoing, the
indemnity provided pursuant to this Article XI is subject to the following
limitations:
(a) The indemnity provided pursuant to this Article XI will not
apply to (i) Purchaser losses relating to false or incomplete responses to
requests for information issued by any public agency and directed to the Company
after the Closing or (ii) Shareholder losses relating to false or incomplete
responses to requests for information issued by any public agency and directed
to the Company prior to the Closing;
(b) The indemnity provided pursuant to this Article XI will not
apply to (i) Purchaser losses relating to any alleged criminal acts or conducts
by the Company or its employees or agents after the Closing or (ii) Shareholder
losses relating to any alleged criminal acts or conduct of the Company or its
employees or agents prior to the Closing;
(c) If the Indemnifying Party exercise its right to participate in
and control the defense, compromise or settlement of any Indemnified Claim with
counsel of its choice, pursuant to Section 11.4 of this Agreement, it shall have
no obligation to reimburse the Indemnified Party for any costs that the
Indemnified Party may incur through additional counsel that it may retain itself
for any purpose relating to such Indemnified Claim, including, but not limited
to, overseeing or otherwise assisting counsel selected by the Indemnifying
Party; provided, however, that in the event that the Indemnified Party gives
notice of an Indemnified Claim pursuant to Section 11.4 of this Agreement and
the Indemnifying Party shall fail to expressly accept in writing the obligation
of full indemnity under this Agreement with respect thereto, without reservation
of rights or qualification of the duty to indemnify, then the Indemnified Party
shall be entitled to retain counsel of its own choosing to ensure the protection
of its rights with respect to such Indemnified Claim by, among other things and
without limitation, overseeing or otherwise assisting counsel selected by the
Indemnifying Party, and the Indemnifying Party shall be obligated to promptly
reimburse the Indemnified Party for the costs and fees associated therewith.
39
<PAGE>
ARTICLE XII
TERMINATION
Section 12.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time before the
Closing:
(a) By the mutual written consent of Purchaser and the Shareholders;
(b) By either Purchaser or the Shareholders if any federal or state
governmental authority shall have issued an order, decree or ruling (which
order, decree or ruling the parties hereto shall use their best efforts to
vacate), in each case permanently restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated by this Agreement;
(c) By Purchaser, without any material breach by Purchaser of any
representations, warranties or obligations under this Agreement, if the Closing
has not occurred by February 28, 1999;
(d) By the Shareholders, without any material breach by the
Shareholders of any representations, warranties or obligations under this
Agreement, if the Closing has not occurred by February 28, 1999;
(e) By Purchaser if the Company or any Shareholder has materially
breached any covenant or representation of the Company or Shareholder, as the
case may be, contained in this Agreement; or
(f) By the Shareholders if Purchaser has materially breached any
covenant or representation of Purchaser contained in this Agreement.
Section 12.2 Effect of Termination. In the event that any party to
this Agreement has terminated this Agreement pursuant to Section 12.1 hereof,
written notice thereof shall be given to the other party or parties specifying
the provision hereof pursuant to which such termination is made. In the event of
termination pursuant to Section 12.1 hereof, this Agreement shall become null
and void, except that nothing herein shall relieve the Company, any of the
Shareholders or Purchaser of liability for a willful and material breach of this
Agreement. Each party, if so requested by any of the other parties to this
Agreement, shall return promptly every document furnished to it by or on behalf
of the other party in connection with the transactions contemplated by this
Agreement, whether obtained before or after the execution of this Agreement, and
any copies thereof which may have been made. This Section 12.2 and Section 13.2
herein shall survive any termination of this Agreement.
40
<PAGE>
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Expenses. Whether or not the transactions contemplated
by this Agreement shall be consummated and except as otherwise expressly
provided in this Agreement, each of the parties hereto shall pay the fees and
expenses of its counsel, accountants and other experts and all other expenses
incurred by it in connection with the preparation for, entering into and
consummation of the transactions contemplated by this Agreement and all other
matters incident thereto, it being understood that the Shareholders (as
distinguished from the Company) shall pay (and/or reimburse Purchaser at the
Closing for) all such reasonable fees and expenses which shall be incurred by
the Company prior to the Closing (it being understood, however, that the
salaries of the Company's internal staff members involved in such transactions
prior to the Closing shall not be reimbursable to Purchaser).
Section 13.2 Confidentiality; Publicity. Until the Closing Purchaser
will, and from and after the date hereof the Company and the Shareholders will,
and will cause their respective directors, officers and representatives to,
maintain the confidentiality of all proprietary information obtained in
connection with the negotiation and consummation of the transactions
contemplated by this Agreement. In the event that such transactions shall not be
consummated, each party hereto will, at the request of any other party hereto,
return all such proprietary information.
All notices to third parties and all other publicity concerning the
transactions contemplated by this Agreement at any time prior to the Closing
shall be jointly planned and coordinated by the Shareholders and Purchaser and
no party hereto shall act in this regard without the prior approval of the other
parties hereto, except as may be required by law by reason of Purchaser being a
publicly traded company, which approval will not be unreasonably withheld or
delayed.
Section 13.3 Notices. All notices, requests, demands and other
communications which are required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given on the date of
delivery if delivered by hand or by facsimile transmission, on the date after
mailing if sent by a recognized overnight express delivery service or the
express mail service of the United States Postal Service or three (3) days after
mailing if sent by registered or certified mail, return receipt requested,
postage prepaid, as follows:
(a) if to the Company (prior to the Closing) or the Shareholders,
to:
Mr. Tom G. Smith 37375 Calle De Lobo,
Murrieta, California 92562
with a copy to:
41
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Allan B. Weiss, Esq. 5000 E. Spring Street, Suite 430,
Long Beach, CA 90815
(FAX: 562/421-6903)
(b) if to Purchaser, to:
Lund International Holdings, Inc.
911 Lund Boulevard,
Anoka, Minnesota 55303
Attention: Ronald C. Fox
(FAX: 612/576-4297)
with a copy to:
Thelen Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: Leonard Gubar, Esq.
(FAX: 212/603-2001)
or to such other person or address as any party hereto shall have specified by
notice in writing to the other party hereto.
Section 13.4 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the
transactions contemplated hereby and supersedes any and all prior agreements and
understandings relating to the subject matter hereof. No representation, promise
or statement of intention has been made by any party hereto which is not
embodied in this Agreement or the written statements, certificates, exhibits or
other documents delivered pursuant hereto or in connection with the transactions
contemplated hereby, and no party hereto shall be bound by or liable for any
alleged representation, promise or statement of intention not set forth herein
or therein.
Section 13.5 Amendment; Waiver. Except as otherwise expressly
provided herein, this Agreement may be amended, modified, superseded or
canceled, and any of the terms, representations, warranties, covenants or
conditions hereto may be waived, only by a written instrument executed by the
parties hereto or, in the case of a waiver, by the party hereto waiving
compliance.
42
<PAGE>
Section 13.6 Parties in Interest. All the terms, representations,
warranties, covenants and conditions contained in this Agreement shall be
binding upon, and shall inure to the benefit of and be enforceable by, the
parties hereto and their respective successors and assigns.
Section 13.7 Governing Law. This Agreement, and all amendments
hereof, shall be governed by and construed in accordance with the internal laws
of the State of California applicable to contracts made and to be performed
therein. The parties agree that any original action commenced by the parties
containing a claim for recovery under, or enforcement, interpretation or
modification of, this Agreement must be commenced in the United States District
Court for the Central District of California or the California Superior Court,
Los Angeles County.
Section 13.8 Severability. If any provision of this Agreement or the
application of any such provision to any person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
Section 13.9 Captions. The article and section headings contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning of interpretation of this Agreement.
Section 13.10 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original
instrument and all of which together shall constitute a single agreement.
Section 13.11 Limitations on Rights of Third Parties. Nothing
expressed or implied in this Agreement is intended or shall be construed to
confer upon or give any person, firm or corporation other than the parties
hereto any rights or remedies under or by reason of this Agreement or any
transaction contemplated hereby.
Section 13.12 Joint Negotiation and Drafting. Shareholders and
Company have prepared the initial draft of this Agreement to be used as the
basis for a final agreement. Upon execution by the parties, this Agreement shall
be deemed to have been jointly drafted. As such, no ambiguities herein shall be
construed against either party.
43
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
COMPANY:
SMITTYBILT, INC.
By: /s/ Tom G. Smith
------------------------------------
Tom G. Smith President
By: /s/ Janice Spencer
------------------------------------
Janice Spencer Secretary
SHAREHOLDERS:
/s/ Tom G. Smith
----------------------------------------
TOM G. SMITH
/s/ Debbie Smith
----------------------------------------
DEBBIE SMITH
/s/ Tom G. Smith
----------------------------------------
TOM G. SMITH, AS TRUSTEE OF THE
TOM AND DEBBIE SMITH FAMILY TRUST
DATED FEBRUARY 7, 1991
44
<PAGE>
SHAREHOLDERS (CONT'D)
/s/ Tom G. Smith
----------------------------------------
TOM G. SMITH, AS TRUSTEE OF THE
TOM AND DEBBIE SMITH
CHARITABLE REMAINDER
UNITRUST DATED JULY 8, 1998
/s/ Debbie A. Smith
----------------------------------------
DEBBIE A. SMITH, AS TRUSTEE OF THE
TOM AND DEBBIE SMITH FAMILY TRUST
DATED FEBRUARY 7, 1991
/s/ Debbie A. Smith
----------------------------------------
DEBBIE A. SMITH, AS TRUSTEE OF THE
TOM AND DEBBIE SMITH
CHARITABLE REMAINDER
UNITRUST DATED JULY 8, 1998
PURCHASER:
LUND INTERNATIONAL HOLDINGS, INC.
By: /s/ Dennis Vollmershausen
------------------------------------
By: /s/ Kathy Smith
--------------------------------
Kathy Smith, Secretary
45
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............................................................8
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.......................................9
3.2 Power and Authority................................................9
3.3 Capital............................................................9
3.4 Subsidiaries......................................................11
3.5 No Conflicts......................................................11
3.6 Governmental Approvals and Filings................................12
3.7 SEC Documents; Financial Statements...............................12
3.8 Absence of Changes................................................12
3.9 Legal Proceedings.................................................12
3.10 Other Negotiations; Brokers.......................................13
3.11 Exemption from Registration; Restrictions on Offer and Sale
of Same or Similar Securities.....................................13
3.12 Other Agreements..................................................14
3.13 Holding Company Act and Investment Company Act Status.............14
3.14 Stock Purchase Agreement..........................................14
3.15 Disclosure........................................................14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...................14
4.1 Organization; Power and Authority.................................15
4.2 No Conflicts......................................................15
4.3 Purchase for Investment...........................................15
4.4 Brokers...........................................................16
ARTICLE V COVENANTS OF THE COMPANY............................................16
5.1 Regulatory and Other Approvals....................................16
5.2 Reservation of Shares.............................................16
5.3 Use of Proceeds...................................................17
5.4 Stockholders' Meeting.............................................17
<PAGE>
Page
5.5 Nasdaq National Market............................................17
5.6 Notice and Cure...................................................17
5.7 Fulfillment of Conditions.........................................18
ARTICLE VI CONDITIONS TO OBLIGATIONS OF THE PURCHASERS........................18
6.1 Representations and Warranties....................................18
6.2 Performance.......................................................18
6.3 Officers' Certificates............................................18
6.4 Orders and Laws...................................................18
6.5 Regulatory Consents and Approvals.................................18
6.6 Third Party Consents..............................................19
6.7 Opinion of Counsel................................................19
6.8 Certificate of Designation........................................19
6.9 Transaction Documents.............................................19
6.10 Delivery of Certificates..........................................19
6.11 Financing.........................................................19
6.12 Consummation of the Acquisition...................................20
6.13 Nasdaq National Market............................................20
6.14 Consummation of the "closing" under the AVS Investment Agreement..20
6.15 Proceedings.......................................................20
ARTICLE VII CONDITIONS TO OBLIGATIONS OF THE COMPANY.........................20
7.1 Representations and Warranties....................................20
7.2 Performance.......................................................21
7.3 Certificate.......................................................21
7.4 Orders and Laws...................................................21
7.5 Transaction Documents.............................................21
7.6 Financing.........................................................21
ii
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Page
ARTICLE VIII SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS.......................................................21
ARTICLE IX INDEMNIFICATION....................................................22
9.1 Indemnification...................................................22
9.2 Method of Asserting Claims........................................22
ARTICLE X TERMINATION.........................................................24
10.1 Termination.......................................................24
10.2 Effect of Termination.............................................25
ARTICLE XI MISCELLANEOUS......................................................25
11.1 Notices...........................................................25
11.2 Entire Agreement..................................................26
11.3 Fees and Expenses.................................................26
11.4 Public Announcements..............................................27
11.5 Further Assurances................................................27
11.6 Waiver............................................................27
11.7 Amendment.........................................................27
11.8 Third Party Beneficiaries.........................................27
11.9 No Assignment; Binding Effect.....................................27
11.10 Headings; Construction............................................28
11.11 Invalid Provisions................................................28
11.12 Governing Law.....................................................28
11.13 Counterparts......................................................28
11.14 Limited Recourse..................................................29
11.15 Consent to Jurisdiction and Service of Process....................29
iii
<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
iv
<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, the Company anticipates entering into a Stock Purchase
Agreement (as the same may be amended, supplemented or otherwise modified from
time to time in accordance with the provisions thereof, the "Stock Purchase
Agreement"), whereby the Company agrees, subject to the conditions therein
contained, to acquire (the "Acquisition"), all the outstanding capital stock of
SmittyBilt, Inc. (the "Target") for a cash purchase price equal to $18 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, 316,056 shares of Common Stock and
39,822.9 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 $5,000,000 (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
<PAGE>
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:
ARTICLE I
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.
-2-
<PAGE>
"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.
"AVS Investment Agreement" means the Investment Agreement, dated as
of December 22, 1998, among the Company and the Purchasers, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
the provisions thereof.
"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.
"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.
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"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.
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"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.
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"MMCVP" has the meaning ascribed to it in the introductory paragraph
hereto.
"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.
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"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.
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ARTICLE II
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 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.
ARTICLE III
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
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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 and the "closing" as defined in
the AVS Investment Agreement, 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) 5,263,270 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
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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, and
assuming that the "closing" as defined in the AVS Investment Agreement shall
have occurred in accordance with the provisions thereof and after giving effect
to the other transactions contemplated thereby, 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 6,626,838 shares of Common Stock, 1,493,398
shares of Class B-1 Common Stock and 292,224.7 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.
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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, 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
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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
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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 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
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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 on which
the Stock Purchase Agreement is entered into, 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. On the Closing Date, the Company will
have delivered to each Purchaser a true and complete copy of the Stock Purchase
Agreement. As of the Closing Date, the Stock Purchase Agreement will not have
been terminated or amended, supplemented or otherwise modified in any respect,
and no party thereto will have 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.
ARTICLE IV
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).
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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.
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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.
ARTICLE V
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 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
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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.
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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.
ARTICLE VI
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
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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.
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
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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 Article IX 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. The Stock
Purchase Agreement shall be in form and substance reasonably satisfactory to
each of the Purchasers.
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 Consummation of the "closing" under the AVS Investment
Agreement. Prior to the Closing, the "closing" as defined in the AVS Investment
Agreement shall have occurred.
6.15 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.
ARTICLE VII
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.
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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).
ARTICLE VIII
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)
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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.
ARTICLE IX
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.
9.2 Method of Asserting Claims. All claims for indemnification by
any Indemnified Party under Section 9.1 will be asserted and resolved as
follows:
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(a) 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.
(b) 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
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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.
(c) 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 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.
(d) 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.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by written agreement of the
Company and the Purchasers;
(b) 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
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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
(c) 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.
10.2 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.
ARTICLE XI
MISCELLANEOUS
11.1 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:
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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 information for the purpose of notices to
that party by giving notice specifying such change to the other parties hereto.
11.2 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.
11.3 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.
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11.4 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.
11.5 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.
11.6 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.
11.7 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
11.8 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.
11.9 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
-27-
<PAGE>
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).
11.10 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.
11.11 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.
11.12 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.
11.13 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.
-28-
<PAGE>
11.14 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.
11.15 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 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]
-29-
<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. Alexander Fontanes
------------------------------------
Name: A. Alexander Fontanes
Title: Senior Vice President and
Chief Investment Officer
BANCBOSTON CAPITAL INC.
By: /s/ Timothy H. Robinson
------------------------------------
Name: Timothy H. Robinson
Title: Vice President
<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
EXHIBIT 10.3
FIRST AMENDMENT
TO
INVESTMENT AGREEMENT
THIS FIRST AMENDMENT TO INVESTMENT AGREEMENT (this "First Amendment"),
dated as of January 27, 1999, is 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"), 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, the Purchasers and the Company originally entered into the
Investment Agreement, dated as of December 22, 1998 (the "Investment
Agreement"), whereby the Company agreed to sell, and the Purchasers agreed to
purchase, in the aggregate, 316,056 shares of the Common Stock, par value $0.10
per share (the "Common Stock"), of the Company and 39,822.9 shares of the Series
B Preferred Stock, par value $.01 per share (the "Series B Preferred Stock"), of
the Company for an aggregate purchase price equal to $5,000,000 (the "Aggregate
Purchase Price") in order to provide a portion of the funds for the acquisition
of all of the outstanding capital stock of Smitty Bilt, Inc. (the "Target");
WHEREAS, the Company and the stockholders of the Target have entered
into a definitive Stock Purchase Agreement, dated as of January 7, 1999 (as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with the provisions thereof, the "Stock Purchase Agreement");
WHEREAS, in lieu of the purchase and sale of the 316,056 shares of
Common Stock contemplated by the Investment Agreement, the Company now desires
to sell to each of the Purchasers, and each of the Purchasers desires to
purchase from the Company, in the aggregate, an additional 31,605.6 shares of
Series B Preferred Stock (in addition to the aforementioned 39,822.9 shares of
Series B Preferred Stock), all without any change in the Aggregate Purchase
Price and otherwise on the terms and subject to the conditions set forth in the
Investment Agreement as amended by this First Amendment; and
WHEREAS, the Purchasers and the Company desire to amend the Investment
Agreement to provide for the changes described above.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this First Amendment, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree to amend the Investment Agreement as follows:
ARTICLE I
AMENDMENTS TO INVESTMENT AGREEMENT
Effective as of the date hereof:
1.1 Series B Certificate of Designation. The definition of "Series B
Certificate of Designation" is hereby amended to read in its entirety as
follows:
""Series B Certificate of Designation" means, collectively, (i) the
Certificate of Designation with respect to the Series B Preferred
Stock filed with the Secretary of State of the State of Delaware of
December 22, 1998, and (ii) an amendment to such Certificate of
Designation, to be filed with the Secretary of State of the State of
Delaware prior to the Closing, which has the sole effect of increasing
the number of shares of Series B Preferred Stock authorized by such
Certificate of Designation to 394,315."
1.2 Section 2.1. Section 2.1 of the Investment Agreement is hereby
amended by deleting "Common Stock and" in the third line of the first sentence
thereof.
1.3 Section 3.3. (a) Section 3.3 of the Investment Agreement is hereby
amended by replacing "292,225" with "394,315" in clause (i) thereof.
(b) Section 3.3 of the Investment Agreement is hereby amended by
replacing: "6,626,838" with "6,310,782", and "292,224.7" with "323,830.3", in
clause (ii) thereof.
1.4 Section 5.5. Section 5.5 of the Investment Agreement is hereby
amended to read in its entirety as follows:
"5.5 Nasdaq National Market. As soon as practicable after any
conversion of the Series B Preferred Stock, the Company shall cause
the shares of Common Stock issuable upon such conversion of the Series
B Preferred Stock to be approved for listing, subject to notice of
issuance, by the Nasdaq National Market."
1.5 Section 6.13. Section 6.13 of the Investment Agreement is hereby
deleted from the Investment Agreement in its entirety.
2
<PAGE>
1.6 Schedule I. Schedule I to the Investment Agreement is hereby
amended by deleting in its entirety Schedule I thereto and substituting therefor
Schedule I attached hereto. Accordingly, all references to Schedule I in the
Investment Agreement shall hereafter refer to Schedule I attached hereto.
ARTICLE II
MISCELLANEOUS
2.1 Agreement. Except as expressly amended hereby, the Investment
Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof, and this First Amendment shall not be
deemed to waive or amend any provision of the Investment Agreement except as
expressly set forth herein.
2.2 Headings; Construction. The headings used in this First Amendment
have been inserted for convenience of reference only and do not define or limit
the provisions hereof. The parties hereto agree that this First Amendment 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 First Amendment, 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.
2.3 Governing Law. This First Amendment 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.
2.4 Counterparts; Effectiveness. This First Amendment 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. This First
Amendment shall become effective as of the date hereof.
2.5 Definitions. Unless otherwise specifically defined herein, each
term used herein which is defined in the Investment Agreement shall have the
meaning assigned to such term in the Investment Agreement. Unless the context
otherwise specifically requires, each reference to "hereof", "hereunder",
"herein" and "hereby" and each other similar reference and each reference to
"this Agreement" and each other similar reference contained in the Investment
Agreement shall from and after the date hereof refer to the Investment Agreement
as amended hereby.
3
<PAGE>
IN WITNESS WHEREOF, this First Amendment 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/ Ronald C. Fox
------------------------------------
Name: Ronald C. Fox
Title: Treasurer
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
BANCBOSTON CAPITAL INC.
By: /s/ Timothy H. Robinson
------------------------------------
Name: Timothy H. Robinson
Title: Vice President
[SIGNATURE PAGE TO FIRST AMENDMENT TO INVESTMENT AGREEMENT]
<PAGE>
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Michael P. Hermsen
------------------------------------
Name: Michael P. Hermsen
Title: Managing Director
MASSMUTUAL CORPORATE INVESTORS
By: /s/ Michael P. Hermsen
------------------------------------
Name: Michael P. Hermsen
Title: Managing Director
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 P. Hermsen
------------------------------------
Name: Michael P. Hermsen
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.
<PAGE>
MASSMUTUAL CORPORATE VALUE
PARTNERS LIMITED
By Massachusetts Mutual Life Insurance
Company, as Investment Advisor
By: /s/ Michael P. Hermsen
------------------------------------
Name: Michael P. Hermsen
Title: Managing Director
[SIGNATURE PAGE TO FIRST AMENDMENT TO INVESTMENT AGREEMENT]
EXHIBIT 10.4
FIRST AMENDMENT
TO
RIGHTS AGREEMENT
THIS FIRST AMENDMENT (this "First Amendment"), dated as of January 27,
1999, is 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"), 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"),
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"), BANCBOSTON CAPITAL INC., a
Massachusetts corporation ("BancBoston"), and NATIONAL CITY VENTURE CORPORATION,
a Delaware corporation ("NCVC"; NCVC and the MassMutual Entities being
hereinafter collectively referred to as the "Mezzanine Entities").
WHEREAS, the parties hereto originally entered into the Rights
Agreement, dated as of December 22, 1998 (the "Rights Agreement"), whereby each
of the parties thereto desired to provide for, among other things, registration
rights with respect to the Common Stock (as defined below) and to impose
restrictions on, and conditions to, certain transfers of equity securities of
the Company;
WHEREAS, the Purchasers (as defined in the Investment Agreement) and
the Company originally entered into the Investment Agreement, dated as of
December 22, 1998 (the "Investment Agreement"), whereby the Company agreed to
sell, and the Purchasers agreed to purchase, in the aggregate, 316,056 shares of
the Common Stock, par value $0.10 per share (the "Common Stock"), of the Company
and 39,822.9 shares of the Series B Preferred Stock, par value $.01 per share
(the "Series B Preferred Stock"), of the Company for an aggregate purchase price
equal to $5,000,000 (the "Aggregate Purchase Price") in order to provide a
portion of the funds for the acquisition of all of the outstanding capital stock
of Smitty Bilt, Inc. (the "Target");
WHEREAS, the Company and the stockholders of the Target have entered
into a definitive Stock Purchase Agreement, dated as of January 7, 1999 (as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with the provisions thereof, the "Stock Purchase Agreement");
WHEREAS, in lieu of the purchase and sale of the 316,056 shares of
Common Stock contemplated by the Investment Agreement, the Company now desires
to sell to each of the Purchasers, and each of the
<PAGE>
Purchasers desires to purchase from the Company, in the aggregate, an additional
31,605.6 shares of Series B Preferred Stock (in addition to the aforementioned
39,822.9 shares of Series B Preferred Stock), all without any change in the
Aggregate Purchase Price and otherwise on the terms and subject to the
conditions set forth in the Investment Agreement which is being amended to
reflect the same by a First Amendment to the Investment Agreement, dated as of
the date hereof, among the Purchasers and the Company (the "First Amendment to
the Investment Agreement"); and
WHEREAS, each of the LIH Entities, the Mezzanine Entities, Liberty
Mutual, BancBoston and the Company desire to amend the Rights Agreement to
provide for changes to the recitals to the Rights Agreement in order to
accurately describe the securities to be sold to the Purchasers pursuant to the
Investment Agreement as amended by the First Amendment to the Investment
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this First Amendment, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree to amend the Rights Agreement as follows:
ARTICLE I
AMENDMENT TO RIGHTS AGREEMENT
Effective as of the date hereof:
1.1 RECITALS. The third whereas clause of the Rights Agreement is
hereby amended by deleting "316,056 Shares of Common Stock and 39,822.9" in the
penultimate line thereof and replacing it with "71,428.5".
ARTICLE II
MISCELLANEOUS
2.1 AGREEMENT. Except as expressly amended hereby, the Rights
Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof, and this First Amendment shall not be
deemed to waive or amend any provision of the Rights Agreement except as
expressly set forth herein.
2.2 HEADINGS, CERTAIN CONVENTIONS. The headings used in this First
Amendment 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 First Amendment. The words
"herein," "hereunder" and "hereof" and words of similar import refer to this
First Amendment as a whole and not to any particular Section or provision. The
words
2
<PAGE>
"include," "includes" and "including" shall be deemed to be followed by
the phrase "without limitation."
2.3 GOVERNING LAW. This First Amendment 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.
2.4 COUNTERPARTS; EFFECTIVENESS. This First Amendment 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. This First
Amendment shall become effective as of the date hereof.
2.5 DEFINITIONS. Unless otherwise specifically used herein, each term
used herein which is defined in the Rights Agreement shall have the meaning
assigned to such term in the Rights Agreement. Unless the context otherwise
specifically requires, each reference to "hereof", "hereunder", "herein" and
"hereby" and each other similar reference and each reference to "this Agreement"
and each other similar reference contained in the Rights Agreement shall from
and after the date hereof refer to the Rights Agreement as amended hereby.
[SIGNATURE PAGE TO FOLLOW]
3
<PAGE>
IN WITNESS WHEREOF, this Amendment 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/ Ronald C. Fox
------------------------------------
Name: Ronald C. Fox
Title: Treasurer
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
4
<PAGE>
BANCBOSTON CAPITAL INC.
By: /s/ Timothy H. Robinson
------------------------------------
Name: Timothy H. Robinson
Title: Vice President
[SIGNATURE PAGE TO FIRST AMENDMENT TO RIGHTS AGREEMENT]
5
<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: Managing Director
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 FIRST AMENDMENT TO RIGHTS 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: Vice President
NATIONAL CITY VENTURE CORPORATION
By: /s/ Christopher P. Dowd
------------------------------------
Name: Christopher P. Dowd
Title: Vice President
[SIGNATURE PAGE TO FIRST AMENDMENT TO INVESTMENT AGREEMENT]
EXHIBIT 10.5
SUPPLEMENT TO CREDIT AGREEMENT
THIS SUPPLEMENT TO CREDIT AGREEMENT (this "Supplement") is made this
28th day of January 1999 by
SMITTYBILT, INC., a Delaware corporation ("Smittybilt")
and HELLER FINANCIAL, INC., as Agent ("Agent") for the benefit of all Lenders
(as such term is defined below).
WHEREAS:
(A) LUND INTERNATIONAL HOLDINGS, INC., a Delaware corporation ("Lund"
or "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"), AUTO VENTSHADE COMPANY, a Delaware corporation ("AVS")
(each of Deflecta, LII, Autotron, DFM and AVS, 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"), VENTSHADE HOLDINGS, INC., a Delaware corporation ("VHI") (each of
LAC, BAC, Trailmaster, Delta and VHI an "Active Subsidiary" and, collectively,
"Active Subsidiaries"), the financial institutions listed on the signature pages
thereof and their respective successors and assigns (each a "Lender" and,
collectively, "Lenders"); and Agent have entered into that certain Credit
Agreement, dated as of February 27, 1998 (as amended to the date hereof and as
it may further be amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement"; capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to such terms in the Credit
Agreement);
(B) Borrowers, Active Subsidiaries, Lenders and Agent have entered
into that certain Second Amendment to the Credit Agreement, dated as of December
23, 1998 (the "Second Amendment"), pursuant to which Lenders and Agent consented
to the SB Acquisition; provided, that, Smittybilt, Inc., a California
corporation ("Smittybilt-California"), agree to become a Borrower under the
Credit Agreement; and
(C) Smittybilt is the successor to Smittybilt-California by way of the
merger of Smittybilt-California with and into SB Holdings, Inc., a Delaware
corporation;
NOW, THEREFORE, in consideration of the agreements and provisions
contained herein, the parties hereto hereby agree as follows:
<PAGE>
1. Joinder. Smittybilt hereby agrees to become a Borrower and a
Corporate Guarantor under the Credit Agreement and all other Loan Documents. On
and after the date hereof, each reference in the Credit Agreement or any other
Loan Document to "Borrower" or "Corporate Guarantor" shall also mean and be a
reference to Smittybilt. Smittybilt hereby agrees to be bound as a Borrower and
a Corporate Guarantor by all of the terms and provisions of the Credit Agreement
and each other Loan Document to the same extent as each other Borrower or
Corporate Guarantor, as the case may be.
2. Notes. Smittybilt and the other Borrowers shall jointly and
severally execute and deliver to each Lender, as applicable, the following
notes: (i) a Replacement Term A Note to evidence the Term Loan A, such Note to
be in the principal amount of such Lender's Pro Rata Share of such Term Loan A
and in substantially the form of Exhibit A hereto; (ii) a Replacement Term B
Note to evidence the Term Loan B, such Note to be in the principal amount of
such Lender's Pro Rata Share of such Term Loan B and in substantially the form
of Exhibit B hereto; (iii) a Replacement 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 and in substantially the form of Exhibit C hereto and (iv) a
Replacement Revolving Note to evidence the Revolving Loans, such Note to be in
the principal amount of such Lender's Pro Rata Share of the Revolving Loan
Commitment and in substantially the form of Exhibit D hereto.
3. Schedules. The Schedules to the Credit Agreement are hereby
supplemented by and to the extent of the Supplements to Credit Agreement
Schedules (the "Schedule Supplements") attached hereto. Smittybilt hereby
certifies that such Schedule Supplements are true, accurate and complete as of
the date hereof.
4. Representations and Warranties. Smittybilt hereby represents and
warrants to the Lenders and the Agent that:
4.1 No Default. After giving effect to this Supplement, 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 giving effect to this Supplement, each and every one of the
representations and warranties of the Loan Parties set forth in the Credit
Agreement and the other 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 and the other Loan Documents 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.
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<PAGE>
4.3 Authority; Enforceability. (i) The execution, delivery and
performance by Smittybilt of this Supplement are within its organizational
powers and have been duly authorized by all necessary action (corporate or
otherwise) on the part of Smittybilt, (ii) this Supplement is the legal, valid
and binding obligation of Smittybilt, enforceable against Smittybilt in
accordance with its terms, and (iii) this Supplement and the execution, delivery
and performance by Smittybilt thereof does not: (A) contravene the terms of its
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 (other than
the Loan Documents) evidencing any contractual obligation to which it is a party
or any order, injunction, writ or decree to which it or its property is subject;
or (C) violate any requirement of law.
5. Reference to and Effect Upon the Credit Agreement. The execution,
delivery and effectiveness of this Supplement 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. Upon the
effectiveness of this Supplement, each reference in:
(i) the Credit Agreement to "this Credit Agreement", "hereunder",
"hereof", "herein" or words of similar import shall mean and be a reference to
the Credit Agreement as supplemented hereby;
(ii) the other Loan Documents to the "Credit Agreement" shall mean
and be a reference to the Credit Agreement as supplemented hereby; and
(iii) the Loan Documents to the "Loan Documents" shall be deemed
to include this Supplement.
6. Miscellaneous.
6.1 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 Supplement.
6.2. Headings. Section headings in this Supplement are included
herein for convenience of reference only and shall not constitute a part of this
Supplement for any other purposes.
6.3 Law. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
6.4 Successors. This Supplement shall be binding upon the Loan
Parties, the Lenders and the Agent and their respective successors and assigns
(permitted assigns in the
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<PAGE>
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.
6.5 Execution in Counterparts. This Supplement 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]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to
be executed and delivered by their respective officers thereunto duly authorized
as of the date first written above.
SMITTYBILT, INC.
By: /s/ Ira Kleinman
-----------------------------------
Name: Ira Kleinman
Title: Chairman of the Board
ACKNOWLEDGED AND ACCEPTED BY:
HELLER FINANCIAL, INC.,
AS AGENT
By: /s/ Jennifer Kloud
----------------------------------
Name: Jennifer Kloud
Title: Assistant Vice President
[SIGNATURE PAGE TO SUPPLEMENT TO CREDIT AGREEMENT]
