Exhibit 10.5
SUPPORT AGREEMENT
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Section 1.1 Defined Terms. .....................................2
Section 1.2 Interpretation Not Affected by Headings, Etc. ......2
Section 1.3 Number, Gender, Etc. ...............................2
Section 1.4 Date for Any Action. ...............................2
ARTICLE 2
COVENANTS OF PARENT CO AND THE COMPANY
Section 2.1 Covenants of ParentCo Regarding Exchangeable
Shares. ............................................2
Section 2.2 Issuance and Reservation of ParentCo Common
Shares. ............................................3
Section 2.3 Notification of Certain Events. ....................3
Section 2.4 Delivery of ParentCo Common Shares. ................4
Section 2.5 Qualification of ParentCo Common Shares. ...........4
Section 2.6 Equivalence. .......................................5
Section 2.7 Tender Offers, Etc. ................................5
Section 2.8 Delivery of Company Common Shares. .................5
Section 2.9 Qualification of Company Common Shares. ............6
ARTICLE 3
GENERAL
Section 3.1 Term. ..............................................6
Section 3.2 Changes in Capital of ParentCo and the Company. ....6
Section 3.3 Severability. ......................................7
Section 3.4 Amendments, Modifications, Etc. ....................7
Section 3.5 Ministerial Amendments. ............................7
Section 3.6 Meeting to Consider Amendments. ....................7
Section 3.7 Amendments Only in Writing. ........................8
Section 3.8 Enurement. .........................................8
Section 3.9 Notices to Parties. ................................8
Section 3.10 Counterparts. .....................................10
Section 3.11 Jurisdiction. .....................................10
Section 3.12 Attornment. .......................................10
(i)
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (the "Agreement") is made this 12th day of May, 1998 by
and among THE DERBY CYCLE CORPORATION (dba Raleigh USA Bicycle Company), a
corporation organized and existing under the laws of Delaware, having its
principal office at 00000 00xx Xxxxxx Xxxxx, Xxxx, Xxxxxxxxxx 00000 (the
"ParentCo"), DERBY INTERNATIONAL CORPORATION S.A., a corporation (societe
-------
anonyme) organized and existing under the laws of the Grand Duchy of
-------
Luxembourg, having its registered office at 0 Xxxxxxxxx xx xx Xxxxx, X-0000
Xxxxxxxxxx, Grand Duchy of Luxembourg ("Derby International"), DERBY FINANCE
S.a.r.l., a corporation (societe a responsibilite limitee) organized and
existing under the laws of the Grand Duchy of Luxembourg, having its registered
office at 00, xxx xx xx Xxxxxxxx, X-0000 Xxxxxxxxxx, Grand Duchy of Luxembourg
("DFS"), DC CYCLE, L.L.C., a limited liability company organized and existing
under the laws of Delaware, having its registered office at 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx ("LLC"), PERSEUS CYCLE, L.L.C., a limited liability company
organized and existing under the laws of Delaware, having its principal office
at Xxxxx 000, 0000 X Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000 ("Perseus") and
RALEIGH INDUSTRIES OF CANADA LIMITED, a corporation continued and existing under
the laws of Canada, having its registered office at 0000 Xxxxxx Xxxx, Xxxxxxxx,
Xxxxxxx, X0X0X0 Xxxxxx (the "Company").
RECITALS
WHEREAS, pursuant to a reorganization of the capital structure of the Company
(the "Reorganization"), the Company issued to Derby International certain
non-voting, cumulative, exchangeable and retractable preferred shares (the
"Exchangeable Shares" and the holder or holders of the issued and outstanding
Exchangeable Shares are referred to herein as the "Holder") having attached
thereto certain rights, privileges, restrictions and conditions contained in
the Articles of Continuance of the Company, as amended by Articles of Amendment
dated May 12, 1998 and as they may otherwise be amended from time to time
(collectively, the "Exchangeable Share Provisions");
WHEREAS, Derby International, LLC and Perseus hold or will hold all of the
issued and outstanding Class A Common Shares of ParentCo, and in their capacity
as shareholders of ParentCo, wish to agree to, and to agree to cause ParentCo to
perform, its obligations under this Agreement;
WHEREAS, the parties hereto desire to make appropriate provision and to
establish a procedure whereby ParentCo will take certain actions and make
certain payments and deliveries necessary to ensure that the Company will be
able to satisfy its obligations under the Exchangeable Share Provisions with
respect to the payment and satisfaction
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of dividends, Liquidation Amount and Retraction Price, all in accordance with
the Exchangeable Share Provisions;
WHEREAS, the parties desire that ParentCo and the Company shall execute and
deliver this Agreement,
NOW, THEREFORE, in consideration of the respective covenants and Agreements
provided in this Agreement and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties agree as
follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Section 1.1 Defined Terms.
Each term denoted herein by initial capital letters and not otherwise
defined herein shall have the meaning attributed thereto in the Exchangeable
Share Provisions, unless the context requires otherwise.
Section 1.2 Interpretation Not Affected by Headings, Etc.
The division of this Agreement into articles, Sections and paragraphs and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement.
Section 1.3 Number, Gender, Etc.
Words importing the singular number only shall include the plural and
vice versa. Words importing the use of any gender shall include all genders.
Section 1.4 Date for Any Action.
If any date on which any action is required to be taken under this
Agreement is not a Business Day, such action shall be required to be taken on
the next succeeding Business Day.
ARTICLE 2
CONVENANTS OF PARENT CO AND THE COMPANY
Section 2.1 Covenants of ParentCo Regarding Exchangeable Shares.
So long as any Exchangeable Shares are outstanding, ParentCo will
(1) take all such actions and do all such things as are necessary or desirable
to enable and permit the Company, in accordance with applicable law, to
pay and
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otherwise perform its obligations with respect to the satisfaction of the
Exchangeable Share Consideration representing the Liquidation Amount in
respect of each issued and outstanding Exchangeable Share upon the
liquidation, dissolution or winding-up of the Company or any other
distribution of the assets of the Company for the purpose of winding up
its affairs, including without limitation all such actions and all such
things as are necessary or desirable to enable and permit the Company to
cause to be delivered ParentCo CommonShares to the holders of Exchangeable
Shares in accordance with the provisions of Article 5 of the Exchangeable
Share Provisions;
(2) take all such actions and do all such things as are necessary or
desirable, including to purchase additional Common Shares of the Company
having an aggregate purchase price equal to amounts which the Company
requires to enable and permit the Company, in accordance with applicable
law, to pay and otherwise perform its obligations with respect to the
payment of dividends or the satisfaction of the Retraction Price to the
holders of the Exchangeable Shares in accordance with the Exchangeable
Share Provisions; and
(3) not prior to the fifth anniversary of the Effective Date exercise its vote
as a shareholder to initiate the voluntary liquidation, dissolution or
winding-up of the Company nor take any action or omit to take any action
that is designed to result in the liquidation, dissolution or winding-up
of the Company.
Section 2.2 Issuance and Reservation of ParentCo Common Shares.
ParentCo hereby represents, warrants and covenants that it has irrevocably
reserved for issuance and will at all times keep available, free from pre-
emptive and other rights, out of its authorized and unissued capital shares such
number of ParentCo Common Shares (or other shares or securities into which
ParentCo Common Shares may be reclassified or changed as contemplated by Section
2.6 hereof) as are now and may hereafter be required to enable and permit the
Company to meet its obligations under the Exchangeable Share Provisions.
Section 2.3 Notification of Certain Events.
In order to assist ParentCo to comply with its obligations hereunder, the
Company will give ParentCo and the Holder notice of each of the following events
at the time set forth below:
(1) in the event of any determination by the Board of Directors of the Company
in accordance with the constating documents of the Company to institute
voluntary liquidation, dissolution winding-up proceedings with respect to
the Company or to effect any other distribution of the assets of the
Company among its shareholders for the purpose of winding-up its affairs,
at least sixty (60) days
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prior to the proposed effective date of such liquidation, dissolution,
winding-up or other distribution;
(2) immediately, upon the earlier of (i) receipt by the Company of notice
of, and (ii) the Company otherwise becoming aware of, any threatened or
instituted claim, suit, petition or other proceedings with respect to
the involuntary liquidation, dissolution or winding-up of the Company
or to effect any other distribution of the assets of the Company among
its shareholders for the purpose of winding-up its affairs;
(3) prior to the setting of a payment date by the board of directors of the
Company for the payment of dividends on the Exchangeable Shares if the
company requires ParentCo to purchase Common Shares of the Company in
order to fund its obligations to pay such dividends; and
(4) immediately, upon receipt by the Company of a Retraction Notice (as
defined in the Exchangeable Share Provisions).
Section 2.4 Delivery of ParentCo Common Shares.
(1) ParentCo and the Company hereby agree that, upon a liquidation of the
Company (unless after receipt of the notice from Company described in
Section 2.3 hereof, ParentCo serves a ParentCo Notice (as defined in the
Put and Call Option Agreement of even date between the parties hereto),
the Company shall purchase and ParentCo shall issue the Equivalent
Number of ParentCo Common Shares (as defined in the Exchangeable Share
Provisions) at an issue price of United States Dollars ("USD") one
thousand (1,000.00) per ParentCo Common Share and ParentCo agrees that
the Company may setoff the subscription price payable by ParentCo to the
Company pursuant to Section 2.8 hereof against the subscription price
payable by the Company pursuant to this Section 2.4; and
(2) in furtherance of its obligations hereunder, upon receipt of notice of a
liquidation of the Company, ParentCo shall forthwith issue and deliver
the requisite ParentCo Common Shares to or to the order of the former
holder of the surrendered Exchangeable Shares, as the Company shall
direct. All such ParentCo Common Shares described herein shall be duly
issued as fully paid and non-assessable and shall be free and clear of
any lien, claim, encumbrance, security interest or adverse claim or
interest.
Section 2.5 Qualification of ParentCo Common Shares.
ParentCo covenants that if any ParentCo Common Shares to be issued and
delivered hereunder require registration or qualification with or approval of or
the filing of any document including any prospectus or similar document, the
taking of any proceeding with or the obtaining of any order, ruling or consent
from any governmental or regulatory authority under any Canadian or United
States federal,
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Provincial or state law or regulation or pursuant to the rules and regulations
of any regulatory authority, or the fulfilment of any other legal requirement
(collectively, the "Applicable Laws") before such shares may be issued and
delivered by ParentCo hereunder, ParentCo shall take all such actions and do all
such things in order to comply with all such Applicable Laws in regard thereto.
Section 2.6 Equivalence.
ParentCo hereby covenants and agrees to effect or as the case may be to
cause the Company to effect, all necessary amendments to ParentCo's constating
documents or, as the case may be, to the constating documents of the Company, to
ensure that the Equivalent Number of ParentCo Shares and the maximum number of
such shares referred to in Section 2.1 of the Exchangeable Share Provisions are
adjusted to fully reflect the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
ParentCo Common Shares) conversion, reorganization, recapitalization or other
like change with respect to the ParentCo Common Shares occurring after the
Effective Time.
Section 2.7 Tender Offers, Etc.
In the event that a tender offer, share exchange offer, issuer bid,
take-over bid or similar transaction with respect to ParentCo Common Shares
(an"Offer") is proposed by ParentCo or is proposed to ParentCo or its
shareholders and is recommended by the Board of Directors of ParentCo, or is
other effected or to be effected with the consent or approval of the Board of
Directors of ParentCo, ParentCo shall, in good faith, take all such actions and
do all such things as are necessary or desirable to enable and permit holders of
Exchangeable Shares to participate in such Offer to the same extent and on an
equivalent basis as the holders of ParentCo Common Shares, without
discrimination, including, without limiting the generality of the foregoing,
ParentCo will use its good faith efforts expeditiously to (and shall, in the
case of a transaction proposed by ParentCo or where ParentCo is a participant in
the negotiation thereof) ensure that holders of Exchangeable Shares may
participate in all such Offers without being required to retract Exchangeable
Shares as against the Company (or, if so required, to ensure that any such
retraction shall be effective only upon, and shall be conditional upon, the
closing of the Offer and only to the extent necessary to tender or deposit to
the Offer).
Section 2.8 Delivery of Company Common Shares.
(1) For purposes of funding the payment by the Company of dividends, the
Retraction Price and the subscription price for ParentCo Common Shares
under Section 2.4 ParentCo agrees that, upon receipt of a notice
pursuant to Section 2.3 hereof it shall (unless after receipt of such
notice it serves a ParentCo Notice) subscribe for, and the Company
hereby agrees that it shall issue to ParentCo, at the fair market value
thereof, on the dividend payment date, Liquidation Date or Retraction
Date, as the case may be, such number of Common Shares of the
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Company as is necessary in the aggregate to fund the dividend,
subscription price or the Retraction Price, as the case may be, payable by
the Company on such date; and
(2) in furtherance of its obligations hereunder, upon notice by the Company,
ParentCo shall forthwith pay the purchase price of the Common Shares of
the Company to or to the order of such holder or former holder of
Exchangeable Shares, all as the Company shall direct. Upon such payment,
all such Common Shares of the Company described herein shall be duly
issued as fully paid and non-assessable and shall be free and clear of any
lien, claim, encumbrance, security interest or adverse claim or interest.
Section 2.9 Qualification of Company Common Shares.
The Company covenants that if any Common Shares of the Company to be
issued and delivered hereunder require registration or qualification with or
approval of or the filing of any document including any prospectus or similar
document, the taking of any proceeding with or the obtaining of any order,
ruling or consent from any governmental or regulatory authority under any
Canadian or United States federal, provincial or state law or regulation or
pursuant to the rules and regulations of any regulatory authority, or the
fulfilment of any other legal requirement (collectively, the "Applicable Laws")
before such shares may be issued and delivered by the Company hereunder, the
Company shall take all such actions and do all such things in order to comply
with all such Applicable Laws in regard thereto.
ARTICLE 3
GENERAL
Section 3.1 Term.
This Agreement shall come into force and be effective as of the date
hereof and shall terminate and be of no further force and effect at such time as
no Exchangeable Shares (or securities or rights convertible into or exchangeable
for or carrying rights to acquire Exchangeable Shares) are held by any party
other than ParentCo or any of its Subsidiaries.
Section 3.2 Changes in Capital of ParentCo and the Company.
Notwithstanding the provisions of Section 3.4 hereof, at all times after
the occurrence of any event effected pursuant to Section 2.6 hereof, as a result
of which either ParentCo Common Shares or the Exchangeable Shares or both are in
any way changed, this Agreement shall forthwith be amended and modified as
necessary in order that it shall apply with full force and effect, mutatis
mutandis, to all new securities into which ParentCo Common Shares or the
Exchangeable shares or both are so changed, and the parties hereto shall execute
and deliver an agreement in writing giving effect to and evidencing such
necessary amendments and modifications.
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Section 3.3 Severability.
If any provision of this Agreement is held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remainder of this
Agreement shall not in any way be affected or impaired thereby and this
Agreement shall be carried out as nearly as possible in accordance with its
original terms and conditions.
Section 3.4 Amendments, Modifications, Etc.
This Agreement may not be amended or modified except by an agreement in
writing executed by the Company and ParentCo and approved by the holders of the
Exchangeable shares in accordance with Section 10.1 of the Exchangeable Share
Provisions.
Section 3.5 Ministerial Amendments.
Notwithstanding the provisions of Section 3.4 hereof, the parties to
this Agreement may in writing, at any time and from time to time, without the
approval of the holders of the Exchangeable Shares, amend or modify this
Agreement for the purposes of:
(1) adding to the covenants of either or both parties for the protection of
the holders of the Exchangeable Shares;
(2) making such amendments or modifications not inconsistent with this
Agreement as may be necessary or desirable with respect to matters or
questions which, in the opinion of the board of directors of each of the
Company and ParentCo, it may be expedient to make, provided that each
such board of directors shall be of the opinion that such amendments or
modifications will not be prejudicial to the interests of the holders of
the Exchangeable Shares; or
(3) making such changes or corrections which, on the advice of counsel to
the Company and ParentCo, are required for the purpose of curing or
correcting any ambiguity or defect or inconsistent provision or clerical
omission or mistake or manifest error; provided that the boards of
directors of each of the Company and ParentCo shall be of the opinion
that such changes or corrections will not be prejudicial to the
interests of the holders of the Exchangeable Shares.
Section 3.6 Meeting to Consider Amendments.
The Company, at the request of ParentCo, shall call a meeting or
meetings of the holders of the Exchangeable Shares for the purpose of
considering any proposed amendment or modification requiring approval of such
holders. Any such meeting or meetings shall be called and held in accordance
with the constating documents of the Company, the Exchangeable Share
Provisions and all applicable laws.
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Section 3.7 Amendments Only in Writing.
No amendment to or modification or waiver of any of the provisions of this
Agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by the parties hereto.
Section 3.8 Enurement.
This Agreement shall be binding upon and enure to the benefit of the
parties hereto and the holders, from time to time, of Exchangeable Shares and
each of their respective heirs, successors and assigns.
Section 3.9 Notices to Parties.
All notices and other communications between the parties shall be in
writing and shall be deemed to have been given if delivered personally or by
confirmed telecopy to the parties at the following addresses (or at such other
address for either such party as shall be specified in like notice):
(1) if to ParentCo to:
The Derby Cycle Corporation
00000 00xx Xxxxxx Xxxxx
Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Fax: 000-000-0000
Tel: 000-000-0000
with copies to:
(2) if to the Company to:
Raleigh Industries of Canada Limited
0000 Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxx, XXXXXX X0X 0X0
Attention: Xxxxxxx X. Xxxxxxxx
Fax: 000-000-0000
Tel: 000-000-0000
(3) if to LLC and Perseus at the address indicated at the head of this
Agreement with copy to:
Xxxxxxxx & Xxxxx
000 00xx Xxxxxx X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxx X. Xxxxx, Esquire
Facsimile: 000-000-0000
(4) if to Dervy International or DFS, to either or both at:
0 Xxxxxxxxx xx xx Xxxxx
X-0000 Xxxxxxxxxx
Grand Duchy of Luxembourg
Telefax: 352-451-23201
Attention: Chairman
with a copy to:
Xxxxxxxxx Xxxxx & Partners
0 Xxx Xxxxxx Xxxx
Xxxxxx XX0X 0XX
Telefax: 00-000-000-0000
Attention: Xxxxx X. Park
and a copy to:
Stikeman, Xxxxxxx
0000 Xxxx-Xxxxxxxx Xxxxxxxxx Xxxx
00xx Xxxxx
Xxxxxxxx, Xxxxxx X0X 0X0
Telefax: 000-000-0000
Attention: Xxxxxxx X. Xxxxxxxxxx
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of confirmed receipt thereof,
unless such day is not a Business Day, in which case it shall be deemed to have
been given and received upon the immediately following Business Day.
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Section 3.10 Counterparts.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which taken together shall constitute one and the
same instrument.
Section 3.11 Jurisdiction.
This Agreement shall be construed and enforced in accordance with the laws
of the Province of Ontario and the laws of Canada applicable therein.
Section 3.12 Attornment.
ParentCo agrees that any action or proceeding arising out of or relating to
this Agreement may be instituted in the courts of Ontario, waives any objection
which it may have now or hereafter to the venue of any such action or
proceeding, irrevocably submits to the jurisdiction of such courts in any such
action or proceeding, agrees to be bound by any judgement of such courts and not
to seek, and hereby waives, any review of the merits of any such judgement by
the courts of any other jurisdiction and hereby appoints the Company at its
registered office in the Province of Ontario as ParentCo's attorney for service
of process.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their respective officers thereunder duly authorized, all as of the date
first written above.
THE DERBY CYCLE CORPORATION DC CYCLE L.L.C.
By: /s/ Signature appears here By: /s/ Signature appears here
DERBY INTERNATIONAL CORPORATION S.A. PERSEUS CYCLE L.L.C.
By: /s/ Signature appears here By: /s/ Signature appears here
DERBY FINANCE S.a.r.l. RALEIGH INDUSTRIES OF CANADA
LIMITED
By: /s/ Signature appears here By: /s/ Signature appears here
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