Exhibit 99.1
EXCHANGE AGREEMENT
This Exchange Agreement ("Agreement") is dated as of September 28, 2005
and is made by and between Salton, Inc., a Delaware corporation (the "Company"),
and the person listed on the signature page attached hereto (the "Holder").
Certain capitalized terms used herein and not otherwise defined have the
meanings set forth in Article VIII hereof.
WHEREAS, the Holder is the beneficial owner of the aggregate principal
amount of 10-3/4% Senior Subordinated Notes due 2005 (the "2005 Notes") issued
pursuant to the Indenture, dated as of December 16, 1998, among the Company, the
Guarantors (as defined therein) and SunTrust Bank (as successor to Xxxxx Fargo
Bank Minnesota, N.A.), as trustee (the "2005 Indenture") as set forth under the
Holder's name on the signature page hereto; and
WHEREAS, the Holder has agreed with the Company to exchange all of the
Notes beneficially owned by the Holder, including all accrued but unpaid or
deferred interest, as the case may be, thereon, for Second Lien Notes (as
defined in Section 8.1 below), upon the terms and subject to the conditions set
forth below; and
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained and
intending to be legally bound hereby, the Company and the Holder hereby agree as
follows:
ARTICLE I
EXCHANGE OF NOTES AND RELATED MATTERS
Section 1.1 (a) Exchange of 2005 Notes. At the Closing, the Holder
shall be deemed to have transferred and delivered, and shall promptly thereafter
cause to be transferred and delivered, to the Company or its duly authorized
agent (the "Exchange Agent"), the aggregate principal amount of the 2005 Notes
including all interest accrued and unpaid or deferred thereon, as set forth
under the Holder's name on the signature page hereto (the "2005 Exchanged
Notes"). In consideration of such deemed and actual transfer and delivery, at
the Closing, the Company shall, or shall cause the Exchange Agent to, issue and
deliver to and in the name of the registered holder of the 2005 Exchanged Notes:
$4,078,385.79 of aggregate principal amount of Second Lien Notes. Effective
immediately as of the Closing, the 2005 Exchanged Notes shall no longer
represent evidence of indebtedness under the 2005 Indenture or otherwise but
shall instead represent only the right to receive the aggregate principal amount
of Second Lien Notes pursuant to this Section 1.1 (the "New Securities").
(b) Closing. The closing of the exchange described in Section 1.1 shall
take place at the offices of Xxxxxxxxxxxx Xxxx & Xxxxxxxxx LLP, 0000 Xxxxx
Xxxxx, Xxxxxxx, XX 00000 at 10:00 a.m., Chicago time, as soon as reasonably
practicable after satisfaction or waiver of the conditions set forth in Articles
IV or V hereof, but in no event not later than two business days after
satisfaction of such conditions or at such other time and place as the Company
and the Holder mutually agree upon orally or in writing (which time and place
are designated as the "Closing").
Section 1.2 Liens; Transfer. Prior to the Closing, the Holder shall not
(a) encumber the 2005 Exchanged Notes with any Lien, (b) permit such 2005
Exchanged Notes to be
encumbered with any Lien or (c) sell, transfer or otherwise dispose of any of
such 2005 Exchanged Notes.
Section 1.3 Waivers; Release. Effective immediately prior to the
Closing, the Holder hereby waives and releases, and at the request of the
Company shall cause its nominee to waive and release all rights, claims and
causes of action against the Company, its Subsidiaries or its Agents based upon
Losses sustained from the purchase or ownership of the 2005 Exchanged Notes.
Section 1.4 Indemnification by the Holder. The Holder shall indemnify
the Company and its Agents against, and hold them harmless from, all Losses
incurred by them arising out of the failure of such Holder to deliver its 2005
Exchanged Notes in accordance with this Agreement or arising out of the loss,
theft or destruction of the certificate(s) representing the Holder's 2005
Exchanged Notes.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Holder as follows:
Section 2.1 Organization and Standing of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation and has all requisite corporate power and
authority (i) to own, lease and operate its properties, to carry on its business
as now being conducted and (ii) to execute, deliver and perform its obligations
under this Agreement, and the other agreements to be executed by the Company in
connection herewith and to consummate the transactions contemplated hereby and
thereby. The Company and its Subsidiaries are duly qualified to do business and
are in good standing in all jurisdictions wherein such qualification is
necessary, and where failure so to qualify would have a material adverse effect
on their business, properties, operations, condition (financial or other),
results of operations or prospects of the Company and its Subsidiaries, taken as
a whole.
Section 2.2 Exchange Agreement. This Agreement has been duly and
validly authorized by the Company, this Agreement has been duly executed and
delivered by the Company and this Agreement is a valid and binding obligation of
the Company enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
Section 2.3 Absence of Brokers, Finders, Solicitation Compensation,
Etc. No broker, finder or similar person is entitled to any commission, fee or
other compensation in respect of the transactions contemplated by this Agreement
by reason of any action or conduct of the Company or any person acting on its
behalf, and the Company shall pay, and indemnify and hold harmless the Holder
from, any claim made against the Holder by any person for any such commission,
fee or other compensation. The Company has not and will not pay any commission
or other remuneration to any person for solicitation of exchanges of 2005
Exchanged Notes for New Securities pursuant to this Agreement.
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Section 2.4 Certain Securities Law Matters. The New Securities may be
issued to the Holder pursuant to this Agreement without registration under the
Securities Act by reason of Section 3(a)(9) and 4(2) thereof and similar
provisions under applicable state securities laws. The Company understands and
believes that under Section 3(a)(9) the New Securities will assume the character
of the 2005 Exchanged Notes (i.e., restricted or non-restricted) for purposes of
their ability to be resold by the Holder and that, with respect to 2005
Exchanged Notes that are "restricted securities," the Holder will be entitled to
tack the holding period of its Exchanged Note to the holding period of the New
Notes issued to such Holder in exchange for such Exchanged Notes for purposes of
Rule 144 promulgated under the Securities Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE HOLDER
The Holder represents and warrants to the Company as follows:
Section 3.1 Organization and Standing of the Holder. The Holder is duly
organized, validly existing and in good standing under the laws of its state of
incorporation or formation and has all requisite power and authority to own and
operate its properties, to carry on its business as now conducted and to enter
into and, as applicable, perform its obligations hereunder.
Section 3.2 Exchange Agreement. This Agreement has been duly and
validly authorized on behalf of the Holder. This Agreement has been duly
executed and delivered by the Holder and this Agreement is a valid and binding
obligation of the Holder enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
Section 3.3 Non-Contravention. The execution and delivery by the Holder
of this Agreement does not and will not, with or without the giving of notice or
the lapse of time, or both (i) result in any violation of any terms of the
charter documents of the Holder; (ii) conflict with or result in a breach by the
Holder or any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Holder is a party or by which the Holder or any of its properties or assets is
bound or affected or (iii) violate or contravene any applicable law, rule or
regulation or any applicable decree, judgment or order of any Governmental Body
having jurisdiction over the Holder or any of its properties or assets.
Section 3.4 Ownership. The Holder is the beneficial owner of the
aggregate principal amount of the 2005 Notes as set forth under the Holder's
name on the signature page hereto. There are no outstanding agreements,
arrangements or understandings under which such Holder or its nominee may be
obligated to sell, transfer or otherwise dispose of any of the 2005 Notes, other
than this Agreement. The amount of 2005 Notes set forth under the Holder's name
represents all 2005 Notes beneficially owned by the Holder.
Section 3.5 Liens. The 2005 Notes held by such Holder are not subject
to any Lien. The execution and delivery of, and the performance by the Holder of
its obligations under, this Agreement, will not result in the creation of any
Lien upon the 2005 Notes held by such Holder.
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Section 3.6 Investor Representations. The Holder is a "qualified
institutional buyer" as defined in Rule 144A promulgated under the Securities
Act and an "accredited investor" as defined in Rule 501 promulgated under the
Securities Act. The Holder is acquiring the New Securities for its own account
for investment only and not with a view towards the public sale or distribution
thereof. The Holder understands that the New Securities are being issued to it
in reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Holder's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Holder set forth herein in order to determine the availability of such
exemptions and the eligibility of the Holder to acquire the New Securities.
Section 3.7 Restrictions on Transfer. The Holder acknowledges that the
New Securities have not been registered under the Securities Act or applicable
state securities laws and may not be offered, sold, pledged or otherwise
transferred unless registered under the Securities Act and applicable state
securities laws or an exemption from such registration is available. The Holder
agrees the New Securities will bear a legend to the effect of the foregoing
sentence.
Section 3.8 Information Provided. The Holder is an informed
sophisticated purchaser, and has engaged, or has had the opportunity to engage,
expert advisor(s) experienced in the evaluation of transactions contemplated
hereunder. The Holder and its advisors, if any, have received and have had an
opportunity to review the Disclosure Statement and have been furnished with all
other materials relating to the business, finances and operations of the Company
and materials relating to the issuance of the New Securities which have been
requested by the Holder; the Holder and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and have received satisfactory
answers to any such inquiries; and the Holder understands that its investment in
the New Securities involves a high degree of risk and that no Governmental Body
has passed on or made any recommendation or endorsement of the New Securities.
The Holder agrees to accept the New Securities at the Closing based upon its own
inspection, examination and determination with respect thereto as to all
matters, and without reliance upon any express or implied representations or
warranties of any nature made by or on behalf of or imputed to the Company,
except as expressly set forth in this Agreement.
Section 3.9 Terms of Exchange. The Holder acknowledges that (i) the
Company's offer to exchange the 2005 Exchanged Notes for the New Securities was
not subject to or conditioned upon a stated minimum or maximum number of 2005
Notes required to be exchanged by the Company and (ii) such holder was not given
a fixed time limitation upon which to negotiate an agreement with the Company
relating to the exchange of its 2005 Notes. The terms of this Agreement were the
result of negotiations between the Holder, the Company, and representatives of
the Company and the Holder was given the opportunity to review and comment upon
the proposed terms of this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT TO HOLDER'S OBLIGATION
The obligation of the Holder to exchange the Notes for the New
Securities is subject to the following conditions (any or all of which may be
waived by the Holder in its sole discretion):
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Section 4.1 Representations and Warranties. Each of the representations
and warranties of the Company set forth in this Agreement shall be true and
correct in all material respects on the Closing Date.
Section 4.2 Performance; No Default. The Company shall have performed
and complied in all material respects with all covenants and agreements
contained in this Agreement required to be performed or complied with by the
Company prior to or at the Closing.
Section 4.3 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
reasonably satisfactory to the Holder, and the Holder shall have received all
such counterpart originals or certified or other copies of such documents as it
may reasonably request.
ARTICLE V
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION
The obligation of the Company to exchange the 2005 Exchanged Notes for
the New Securities is subject to the following conditions (any or all of which
may be waived by the Company in its sole discretion):
Section 5.1 Representations and Warranties. Each of the representations
and warranties of the Holder set forth in this Agreement shall be true and
correct in all material respects on the Closing Date.
Section 5.2 Performance; No Default. The Holder shall have performed
and complied in all material respects with all agreements and conditions
contained in this Agreement required to be performed or complied with by the
Holder prior to or at the Closing.
Section 5.3 Documentation at Closing. The Company shall have received,
on or prior to the date of the Closing, each of the following in form and
substance satisfactory to the Company:
(1) a Joinder and Acceptance Agreement in the form attached
hereto as Exhibit 1 executed by the Holder; and
(2) an Administrative Details Form in the form attached hereto
as Exhibit 2 executed by the Holder.
Section 5.4 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
reasonably satisfactory to the Company, and the Company shall have received all
such counterpart originals or certified or other copies of such documents as it
may reasonably request.
Section 5.5 No Actions. No Action shall have been instituted (and be
pending) by or before any Governmental Body to restrain or prohibit this
Agreement or the consummation of the transactions contemplated by this
Agreement. No preliminary or permanent injunction or
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other order issued by any federal or state court of competent jurisdiction
preventing consummation of this Agreement shall be in effect.
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS OF THE PARTIES
Section 6.1 Further Action by Holder. The Holder shall, at the written
request of the Company, at any time and from time to time following the Closing
execute and deliver to the Company all such further instruments and take all
such further action as may be reasonably necessary or appropriate in order to
confirm or carry out its obligations under this Agreement.
Section 6.2 Further Action by The Company. The Company shall, at the
written request of the Holder, at any time and from time to time following the
Closing execute and deliver to the Holder all such further instruments and take
all such further action as may be reasonably necessary or appropriate in order
to confirm or carry out its obligations under this Agreement.
Section 6.3 Best Efforts. Each of the Company and the Holder shall use
its best efforts (subject to standards of commercial reasonableness) to
consummate the transactions contemplated to be performed by it under this
Agreement.
Section 6.4 Publicity. Neither the Company nor the Holder shall, nor
shall they permit their respective Agents to, issue or cause the publication of
any press release or make any other public statement, filing or announcement
with respect to this Agreement and the transactions contemplated hereby without
the prior approval of the other party; provided, however, that the Company shall
be entitled, without the prior approval of the Holder, to make any press release
or other public disclosure with respect to such transactions as is required by
applicable law or the New York Stock Exchange. The Company and the Holder shall
cooperate in issuing press releases or otherwise making public statements with
respect to this Agreement and the transactions contemplated hereby, which
cooperation shall include first consulting the other party hereto concerning the
requirement for, and timing and content of, such public announcement.
ARTICLE VII
TERMINATION
Section 7.1 Termination. Notwithstanding anything in this Agreement to
the contrary, this Agreement may be terminated and the transactions contemplated
by this Agreement abandoned at any time prior to the Closing by any party if the
transactions contemplated by this Agreement are not consummated in accordance
with their terms within 30 days after the date hereof; provided, however, that a
party hereto shall not have the right to terminate this Agreement if the failure
to consummate the transactions contemplated by this Agreement shall be primarily
attributable to such party's failure to satisfy its obligations hereunder;
provided further that the provisions of Section 9.1, 9.2 and 9.8 shall survive
any such termination of this Agreement.
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ARTICLE VIII
DEFINITIONS
Section 8.1 Definitions. As used in this Agreement, in addition to the
terms defined elsewhere, the following terms shall have the meanings set forth
below, unless the context otherwise requires:
"Action" shall mean any action, suit or legal, administrative or
arbitral proceeding or investigation before any Governmental Body.
"Agent" shall mean, with respect to any Person, any officer, director,
employee, stockholder, controlling person (within the meaning of the Securities
Act), affiliate or authorized agent of such Person.
"Disclosure Statement" means the Confidential Disclosure Statement,
dated as of July 5, 2005, as supplemented on August 2, 2005, of the Company.
"Governmental Body" shall mean any government or political subdivision
thereof, whether federal, state, local or foreign, or any agency or
instrumentality of any such government or political subdivision thereof, or any
federal or state court or arbitrator.
"Holder" shall have the definition set forth in the first paragraph of
this Agreement and all of its successors and assigns.
"Lien" shall mean any lien, pledge, mortgage, security interest,
charge, option or other encumbrance or adverse claim of any kind.
"Losses" shall mean, with respect to any Person, all losses, claims,
damages, liabilities (including attorneys' fees) and out-of-pocket expenses of
such Person.
"Person" means any individual, corporation, partnership, joint venture,
trust, estate, limited liability company, unincorporated organization or
governmental agency.
"SEC" means the Securities and Exchange Commission.
"Second Lien Notes" means the Senior Secured Second Lien Notes due
March 31, 2008 to be issued by the Company pursuant to the Second Lien Credit
Agreement.
"Second Lien Credit Agreement" means the Credit Agreement dated as of
August 26, 2005 among the financial institutions named therein, as the lenders,
The Bank of New York, as the agent, Salton, Inc. and each of its subsidiaries
that are signatories thereto, as the borrowers, and each of its other
subsidiaries that are signatories thereto, as guarantors.
"Securities Act" means the Securities Act of 1933, as amended.
"Series C Preferred Stock" means the Series C Preferred Stock, par
value $0.01 per share, of the Company.
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"Subsidiary" means any Person, a majority of the capital stock of which
is owned by the Company or another Subsidiary of the Company.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Costs and Expenses. Each party shall bear its own costs and
expenses in connection with the preparation, execution and delivery of this
Agreement and the issuance of the New Securities.
Section 9.2 Survival of Representations. The representations,
warranties, covenants and agreements of the Holder and the Company contained in
this Agreement or in any certificate furnished hereunder shall survive the
Closing.
Section 9.3 Prior Agreements. This Agreement constitutes the entire
agreement between the parties concerning the subject matter hereof and
supersedes any prior representations, understandings or agreements. There are no
representations, warranties, agreements, conditions or covenants, of any nature
whatsoever (whether express or implied, written or oral) between the parties
hereto with respect to such subject matter except as expressly set forth herein.
Section 9.4 Severability. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision or the validity and enforceability of this Agreement in any
other jurisdiction.
Section 9.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO ITS CHOICE OF LAW RULES.
Section 9.6 Headings. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of, or
affect the interpretation of, this Agreement.
Section 9.7 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart. A facsimile transmission of this Agreement bearing
a signature on behalf of a party hereto shall be legal and binding on such
party.
Section 9.8 Assignment; Binding Effect. The Holder shall not convey,
assign or otherwise transfer any of its rights or obligations under this
Agreement without the express written consent of the Company, and the Company
shall not convey, assign or otherwise transfer any of its rights and obligations
under this Agreement without the express written consent of the Holder. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
Section 9.9 Waiver; Remedies. No delay on the part of any Holder or The
Company in exercising any right, power or privilege under this Agreement shall
operate as a wavier
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thereof, nor shall any waiver on the part of any Holder or the Company of any
right, power or privilege under this Agreement operate as a waiver of any other
right, power or privilege of such party under this Agreement, nor shall any
single or partial exercise of any right, power or privilege under this Agreement
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege under this Agreement.
Section 9.10 Amendment. This Agreement may be modified or amended only
by written agreement of the parties to this Agreement.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused this Agreement to be executed by their respective duly authorized
officers, as of the date first above written.
NAME OF HOLDER:
FMA CBO FUNDING III, LTD.
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(Print Name)
By:
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Name:
---------------------------------
Title:
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AGGREGATE PRINCIPAL AMOUNT HELD:
$4.0 million of principal amount of
10-3/4% Senior Subordinated Notes due
2005
The above signed is the (xxxx all
applicable):
X beneficial owner and/or
----
record holder
----
of the above referenced securities.
If holder is beneficial holder but not
record holder, identity of record
holder:
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SALTON, INC.
By:
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Name:
---------------------------------
Title:
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