EXHIBIT 10.1
BOARD OBSERVER AGREEMENT
THIS BOARD OBSERVER AGREEMENT (the "Agreement") dated as of
October 13, 2008 (the "Effective Date") is made by and between Xxxxx'x
Liquid Gold-Inc, a Colorado corporation (the "Company") and Value Fund
Advisors, LLC, an Oklahoma limited liability company ("VFA").
RECITALS
A. The Company has outstanding shares of Common Stock (as
defined below).
B. VFA is currently the Beneficial Owner of 1,578,530 shares
of the Common Stock. These shares are held by Advisory Clients (as
defined below) of VFA.
C. The Company is willing to have a representative of VFA be a
Board Observer as stated in this Agreement. The Company and VFA are
willing to enter into this Agreement, including the standstill provisions.
NOW, THEREFORE, in consideration of the premises, covenants and
agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, each party hereto ("Party"), intending to be legally
bound, hereby agrees as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.1 Certain Definitions. As used in this Agreement, the
following terms will have the meanings specified below:
"Advisory Clients" shall mean those investment clients of VFA on
whose behalf VFA Beneficially Owns or may acquire shares of Common Stock.
"Affiliate" shall mean, with respect to any Person, any other
Person controlling, controlled by or under direct or indirect common
control with such Person. For the purposes of this definition "control,"
when used with respect to any specified Person, shall mean the power to
direct the management and policies of such Person, directly or
indirectly, whether through ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" shall have
meanings correlative to the foregoing.
"Applicable Law" means all applicable provisions of all (a)
constitutions, treaties, statutes, laws (including common law), rules,
regulations, ordinances or codes of any Governmental Authority, and
(b) orders, decisions, injunctions, judgments, awards and decrees of
any Governmental Authority.
"Beneficially Own" with respect to any securities means having
beneficial ownership of such securities (as determined pursuant to
Rule 13d-3 under the Exchange Act, as in effect on the date hereof);
provided, however, that a Person will be deemed to beneficially own
(and have beneficial ownership of) all securities that such Person
has the right to acquire, whether such right is exercisable immediately
or with the passage of time or the satisfaction of conditions. The terms
"Beneficial Ownership" and "Beneficial Owner" have correlative meanings.
"Board of Directors" shall mean the board of directors of the
Company.
"Business Day" means a day other than a Saturday, a Sunday, or a
day on which banking institutions in the States of Colorado are
authorized or obligated by law or required by executive order to be
closed.
"Common Stock" means the common stock of the Company.
"Derivative Security" shall mean (i) any Voting Securities or any
other equity security of the Company, (ii) any securities convertible
into, or exchangeable or exercisable for, any Voting Securities or other
equity security of the Company or (iii) any obligations measured by the
price or value of any shares of capital stock of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Governmental Authority" means any federal, state, local or
political subdivision, governmental or administrative body,
instrumentality, department or agency or any court, administrative
hearing body, arbitration tribunal, commission or other similar dispute
resolution panel or body, and any other entity exercising executive,
legislative, judicial, regulatory or administrative functions of a
government.
"Person" means an individual, a partnership, an association, a
joint venture, a corporation, a limited liability company, a business,
a trust, any entity organized under Applicable Law, an unincorporated
organization or any Governmental Authority.
"Rights Plan" means the Shareholder Rights Agreement, dated as
of February 21, 2001 between the Company and Xxxxx Fargo Bank
Minnesota, N.A., as Rights Agent, as it may be amended from time to
time, and any extension of such Shareholder Rights Agreement or any
replacement shareholder rights agreement whether before or after the
expiration of such Shareholder Rights Agreement.
"SEC" means the Securities and Exchange Commission.
"Termination Date" shall have meaning ascribed to it in Section
5.1. "VFA Observer" shall have the meaning ascribed to it in Section 3.1.
"Vote" means, as to any entity, the ability to cast a vote at a
stockholders' or comparable meeting of such entity or by a consent with
respect to the election of directors or other members of such entity's
governing body under ordinary circumstances.
"Voting Power" means the aggregate number of Votes of the Company
outstanding as at such date.
"Voting Securities" means the Common Stock, any other securities
of the Company and its subsidiaries having the right to Vote and any
other securities which are convertible into, or exchangeable or
exercisable for, securities having the right to Vote.
Section 1.2 Interpretation and Construction of this Agreement.
The definitions in this Agreement will apply equally to both the singular
and plural forms of the terms defined. Whenever the context may require,
any pronoun will include the corresponding masculine, feminine and
neuter forms. The words "include," "includes" and "including" will be
deemed to be followed by the phrase "without limitation." All
references herein to articles, Sections and Schedules will be deemed
to be references to articles and Sections of, and Schedules to, this
Agreement unless the context will otherwise require. The headings of the
articles and Sections are inserted for convenience of reference only
and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement. Unless the context will otherwise
require or provide, any reference to any agreement or other instrument
or statute or regulation is to such agreement, instrument, statute or
regulation as amended and supplemented from time to time (and, in the
case of a statute or regulation, to any successor provision).
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties by VFA. VFA hereby
represents and warrants to the Company at the date hereof as follows:
(a) VFA has all requisite power and authority to
execute, deliver and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all requisite action of VFA and its Advisory Clients.
(b) This Agreement has been duly executed and
delivered by VFA and constitutes a legal, valid and binding obligations
of VFA, enforceable in accordance with its terms, except to the extent
that enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting creditors rights generally or by general
principles of equity.
(c) No governmental consent, approval, authorization,
license or clearance, or filing or registration with any governmental or
regulatory authority, is required in order to permit VFA to perform its
obligations under this Agreement, except for such as have been obtained.
(d) The shares of Common Stock referenced in
Recital B represent all of the shares of Voting Securities of the
Company, if any, which are Beneficially Owned by VFA on the date hereof.
VFA does not have the right to Vote shares of Voting Securities of the
Company, other than those set forth in Recital B. Neither VFA nor its
Advisory Clients has granted any other Person the right to Vote such
shares set forth in Recital B.
Section 2.2 Representations and Warranties by the Company. The
Company represents and warrants to VFA at the date hereof as follows:
(a) The Company has all requisite corporate power
and authority to execute, deliver and perform its obligations under
this Agreement. The execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite corporate
action on the part of the Company.
(b) This Agreement has been duly executed and
delivered by the Company and constitutes a legal, value and binding
obligation of the Company, enforceable against the Company in accordance
with its terms, except to the extent that enforceability may be limited
by bankruptcy, insolvency or similar laws affecting creditors rights
generally or by general principles of equity.
(c) No governmental consent, approval,
authorization, license or clearance, or filing or registration with any
governmental or regulatory authority, is required in order to permit the
Company to perform its obligations under this Agreement, except for such
as have been obtained.
ARTICLE III
BOARD OBSERVER
Section 3.1 Observer. The Company grants to VFA the right to
designate a non-voting Observer to the Board of Directors ("VFA
Observer"), who is mutually acceptable to the Company and VFA. The VFA
Observer shall have the right to notice of and attendance at all
meetings of the Board of Directors. The VFA Observer shall be entitled
to receive and have full access to all information and materials provided
to any of the members of the Board of Directors, except where materials
are provided only to a committee that has been appointed by the Board of
Directors, at the same time as the Board of Directors receive such
materials subject to the following limitation: In the event that the
matter being considered by the Board of Directors directly concerns a
transaction or potential transaction with VFA or any Advisory Client or
Affiliate of VFA, the Board of Directors may exclude the VFA Observer
from such portion of the Board of Directors meeting and redact such
information in materials to the extent provided to VFA. VFA shall enter
into the Confidentiality Agreement attached hereto as Schedule 1 and
shall cause the VFA Observer to comply with VFA's obligations in the
Confidentiality Agreement in the same manner as VFA as if VFA Observer
were VFA. Neither VFA nor the VFA Observer will receive any compensation
from any Person in regard to the role of VFA Observer or any advice,
comments or ideas which may be provided by VFA Observer or VFA.
Section 3.2 Termination of Observer. This Article III and the
right of VFA to an observer at meetings of the Board of Directors shall
cease in their entirety (a) when and if VFA is no longer the Beneficial
Owner of at least 75% of the total shares of Common Stock listed in
Recital B as Beneficially Owned by VFA at the Effective Date and
(b) 30 days after advance written notice by either Party that the
Party in its sole discretion chooses to terminate this Article III and
such right.
ARTICLE IV
COVENANTS AND OTHER LIMITATIONS
Section 4.1 Covenants. Prior to the Termination Date and subject
to the further provisions hereof, without the prior written consent of
the majority of the entire Board of Directors (excluding any
representatives or designees of VFA or any Advisory Client of VFA):
(a) VFA will not, and will cause any Affiliate and
any Advisory Client of VFA not to, directly or indirectly, alone or in
concert with others, acquire any Voting Securities (except (i) by way of
stock dividends or other distributions or offerings made available to
holders of voting Securities generally, or (ii) shares referenced in
Section 2.1(d) and acquired from an Affiliate of VFA); provided,
however, that nothing in this Agreement shall be deemed to amend the
provisions of the Rights Plan.
(b) If any of VFA, its Affiliates or its Advisory
Clients is a record holder of Voting Securities or has Voting Power with
respect to such Voting Securities, VFA shall, and will cause any such
Affiliate and Advisory Clients to, be present, in person or by proxy, at
all meetings of shareholders of the Company so that all Voting Securities
Beneficially Owned by VFA and any such Affiliate and Advisory Clients
may be counted for the purpose of determining the presence of a quorum
at such meetings. VFA shall not, and shall cause its Affiliates and
Advisory Clients not to, deposit any Voting Securities in a voting trust
or subject any Voting Securities to any arrangement or agreement with
respect to the voting of such Voting Securities, except those where VFA
has or shares Voting Power pursuant to arrangements that exist on the
date of this Agreement and that have been publicly reflected in a filing
made pursuant to Section 13 of the Exchange Act and, for the avoidance
of doubt, excluding the grant of any revocable proxies or consents to
the Board of Directors.
(c) In addition to the foregoing, VFA will not,
and will cause each of its Affiliates and Advisory Clients not to,
directly or indirectly, alone or in concert with others, take any of the
following actions:
(i) acquire, by purchase or otherwise any
assets of the Company or any of its subsidiaries;
(ii) make, effect or commence any tender or
exchange offer, merger or other business combination involving the
Company or any of its subsidiaries;
(iii) consummate any recapitalization,
restructuring, liquidation, dissolution or other extraordinary
transaction with respect to the Company or any of its affiliates;
(iv) make, or in any way participate in, any
"solicitation" of "proxies" (as such terms are used in the proxy rules
of the SEC) to Vote, or seek to advise or influence any Person with
respect to the voting of, any Voting Securities;
(v) except for any group of VFA with its
Affiliates and Advisory Clients existing on the date of this Agreement
and publicly disclosed in a filing made pursuant to Section 13 of the
Exchange Act or with any future controlled Affiliates or Advisory
Clients, form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act and Rule 13d-5(b)
thereunder) with respect to any Voting Securities; or
(vi) disclose any intention, plan or
arrangement inconsistent with the foregoing or take any action which
might require the Company to make a public announcement regarding the
possibility of an acquisition of securities, a business combination or
a merger.
The foregoing shall not limit the ability of VFA and any of its
Affiliates and Advisory Clients to Vote or grant proxies to the Board of
Directors with respect to their Voting Securities pursuant to revocable
proxies or consents.
ARTICLE V
TERM AND TERMINATION
Section 5.1 Termination. The respective covenants and agreements
of VFA and the Company contained in this Agreement will continue in full
force and effect until the earlier of (a) one year after a right of VFA
to a VFA Observer is terminated or relinquished or (b) the tenth
anniversary of the Effective Date (the "Termination Date"). Any
termination of this Agreement as provided herein will be without
prejudice to the rights of any Party arising out of the breach by any
other Party of any provision of this Agreement prior to the date of such
termination.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Remedies. VFA acknowledges and agrees that
irreparable damage would occur in the event any of the provisions of
this Agreement were not performed in accordance with its specific terms
or were otherwise breached. It is accordingly agreed that the Company
shall be entitled to an injunction or injunctions to prevent breaches
of the provisions of this Agreement and to enforce specifically the
terms and provisions hereby in any court of the United States or any
state thereof having jurisdiction, in addition to any other remedy to
which the Company may be entitled at law or equity. In the event an
action seeking injunctive relief hereunder, the Company shall not be
required to post a bond.
Section 6.2 Notices. All notices, requests and other
communications to any Party hereunder will be in writing (including
prepaid overnight courier, facsimile transmission or similar writing)
and will be given to such Party at its address or facsimile number set
forth in this Section 6.2 or at such other address or facsimile number
as such Party may hereafter specify in writing. Each such notice,
request or other communication will be effective (a) if given by
facsimile, when transmitted to the facsimile number specified in this
Section 6.2 and confirmation of receipt is received by the sender,
(b) if given by mail, upon the earlier of actual receipt of three (3)
Business Days after deposit in the United States Mail, registered or
certified mail, return receipt requested, properly addressed and with
proper postage prepaid, (c) one (1) Business Day after deposit with an
internationally reputable overnight courier properly addressed and with
all charges prepaid or (d) when received, if by any other means:
The Company: Xxxxx'x Liquid Gold-Inc.
0000 Xxxxxx Xxxxxx
Xxxxxx XX 00000-0000
Attn: President and Chief Executive
Officer
Fax: (000) 000-0000
with a copy to: Holland & Xxxx LLP
000 00xx Xxxxxx, Xxxxx 0000 Xxxxxx,
XX 00000
Attn: Xxxx X. Xxxx
Fax: (000) 000-0000
VFA: Value Fund Advisors, LLC
000 X. Xxxxxx, 0xx Xxxxx Xxxxx,
XX 00000
Attn: Manager
Fax:_________________
The Parties will promptly notify each other in the manner provided
in this Section 6.2 of any change of any change in their respective
addresses. A notice of change of address will not be deemed to have been
given until received by the addressee. Communications by facsimile also
will be sent concurrently by mail, but will in any event be effective as
stated above.
Section 6.3 Expenses. The Company and each Stockholder will each
pay its own expenses with respect to this Agreement.
Section 6.4 Assignment. No Party will assign this Agreement or
any rights, interests or obligations hereunder, or delegate performance
of any of its obligations hereunder, without the prior written consent of
each of the other parties.
Section 6.5 Entire Agreement. This Agreement embodies the
entire agreement and understanding of the Parties in respect of the
subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the Parties with respect to such
subject matter.
Section 6.6 Waiver, Amendment, etc. This Agreement may not be
amended or supplemented, and no waivers of or consents to departures from
the right under this Agreement will operate as a waiver thereof, nor will
any single or partial exercise of any right or power, or any abandonment
or discontinuance of steps to enforce such right or power, preclude any
other or further exercise thereof or the exercise of any other right
or power.
Section 6.7 Binding Agreement; No Third Party Beneficiaries.
This Agreement will be binding upon and inure to the benefit of the
Parties and their successors and permitted assigns. Nothing expressed or
implied herein is intended or will be construed to confer upon or to
give to any third party any rights or remedies by virtue hereof.
Section 6.8 Governing Law; Exclusive Jurisdiction; Service of
Process. This Agreement will be governed by and construed in accordance
with the internal laws of the State of Colorado, without regard to
conflicts of laws principles.
Section 6.9 Severability. The invalidity or unenforceability
of any provision hereof in any jurisdiction will not affect the validity
or enforceability of the remainder hereof in that jurisdiction or the
validity or enforceability of this Agreement, including that provision,
in any other jurisdiction. To the extent permitted by Applicable Law,
each Party waives any provision of Applicable Law that renders any
provision hereof prohibited or unenforceable in any respect. If any
provision of this Agreement is held to be unenforceable for any reason,
it will be adjusted rather than voided, if possible, in order to
achieve the intent of the Parties to the extent possible.
Section 6.10 Public Statements or Releases. Neither the Company
nor VFA shall make any public announcement with respect to the existence
or terms of this Agreement without the prior approval of the other Party,
which shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, nothing in this Section 6.10 shall prevent either Party from
making any public announcement it considers necessary in order to
satisfy its obligations under the law or under the rules of any national
securities exchange or market, provided such Party, to the extent
practicable, provides the other Party with an opportunity to review and
comment on any proposed public announcement before it is made.
Section 6.11 Venue. Any cause of action for a breach or
enforcement of, or a declaratory judgment respecting, this Agreement
may be commenced and maintained in the United States District Court for
the Northern District of Oklahoma or for the District of Colorado, the
applicable Oklahoma state trial court sitting in Tulsa, Oklahoma and
having subject matter jurisdiction or the applicable Colorado State trial
court sitting in Denver, Colorado and having subject matter jurisdiction.
Each of the Parties consents to the jurisdictions of such courts (and of
the appropriate appellate courts) in any action or proceeding concerning
this Agreement and waives any objections to such venues. Process in any
action or proceeding referred to in this paragraph may be served on any
Party anywhere in the world.
Section 6.12 Counterparts. This Agreement may be executed in
one or more counterparts each of which when so executed and delivered
will be deemed an original but all of which will constitute one and the
same Agreement.
The Company and VFA have caused their respective duly authorized
officers or manager to execute this Agreement as of the day and year
first above written.
XXXXX'X LIQUID GOLD-INC.
By: /s/ Xxxx X. Xxxxxxxxx
Xxxx X. Xxxxxxxxx
President and Chief Executive Officer
VALUE FUND ADVISORS, LLC
By: /s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
Manager
SCHEDULE 1
CONFIDENTIALITY AGREEMENT
