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PBT BRANDS, INC.
APG SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated July 30, 1999 (herein called this
"Agreement"), is made by and among PBT BRANDS, INC., a Delaware corporation
(herein called the "Company") whose address is c/o The Jordan Company, 000 Xxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, APG Special Purpose Subsidiary,
Inc., a Delaware corporation ("APG Sub") and Automotive Performance Group, Inc.
a Delaware corporation ("APG Parent", and together with APG Sub, "APG").
1. Stock Subscriptions.
(a) APG Sub herewith subscribes for shares of the Company's
Common Stock, $0.01 par value (the "Common Stock,") as set forth on Schedule I
hereto, for a purchase price of $1.00 per share ("Original Common Cost") and
other good and valuable consideration, the sufficiency of which is hereby
acknowledged.
(b) APG Sub herewith subscribes for shares of the Company's
Series B Junior Redeemable Preferred Stock, $0.01 par value (the "Series B
Junior Preferred Stock") as set forth on Schedule I hereto, for a purchase price
of $1,000 per share ("Original Series B Preferred Cost") and other good and
valuable consideration, the sufficiency of which is hereby acknowledged.
(c) APG Sub herewith subscribes for shares of the Company's
Series D Junior Redeemable Preferred Stock, $0.01 par value (the "Series D
Preferred Stock and, together with the Common Stock and the Series B Junior
Preferred Stock, the "Stock") as set forth on Schedule I hereto, for a purchase
price of $1,000 per share ("Original Series D Preferred Cost and together with
the Original Series B Preferred Cost, the "Preferred Cost") and other good and
valuable consideration, the sufficiency of which is hereby acknowledged.
(d) APG acknowledges to the Company and the other stockholders
of the Company that APG understands and agrees, as follows:
THE STOCK HAS NOT BEEN REGISTERED UNDER FEDERAL OR STATE
SECURITIES LAWS. THE STOCK IS VERY SPECULATIVE AND RISKY. THERE IS NO PUBLIC OR
OTHER MARKET FOR THE STOCK NOR IS ANY LIKELY TO DEVELOP. THE COMPANY HAS A
LIMITED FINANCIAL HISTORY AND THE COMPANY HAS BORROWED SUBSTANTIALLY ALL OF THE
FUNDS AVAILABLE TO IT TO OPERATE ITS BUSINESS. APG ACKNOWLEDGES THAT APG MAY AND
CAN AFFORD TO LOSE
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ITS ENTIRE INVESTMENT AND THAT APG UNDERSTANDS THAT IT MAY HAVE TO HOLD THIS
INVESTMENT INDEFINITELY.
(e) The Company covenants that upon issuance the Common Stock
subscribed for by APG Sub shall aggregate $110,000 in aggregate subscription and
purchase price.
(f) The Company covenants that upon issuance, the Series B
Junior Preferred Stock subscribed for by APG Sub shall aggregate $3,250,000 in
aggregate subscription and purchase price.
(g) The Company covenants that upon issuance, the Series D
Junior Preferred Stock subscribed for by APG Sub shall aggregate $990,000 in
aggregate subscription and purchase price.
(h) Each certificate evidencing Stock being issued pursuant to
this Agreement shall bear legends reflecting (i) this Agreement's existence, and
(ii) the fact that said Stock has not been registered under Federal or state
securities laws and is subject to limitations on transfer set forth herein and
in the Stockholders Agreement (as defined in Section 2(b)). APG acknowledges
that the effect of these legends, among other things, is or may be to limit or
destroy the value of the certificate for purposes of sale or for use as loan
collateral. APG consents that "stop transfer" instructions may be noted against
the Stock sold hereunder. APG acknowledges that it is required to become a party
to the Stockholders Agreement as a condition to APG Sub purchasing the Stock
hereunder.
2. Proposed Transactions.
(a) This Agreement summarizes certain pertinent documents as
well as applicable laws and regulations. While the Company believes that these
summaries fairly reflect and summarize such matters, APG acknowledges that such
summaries are not complete and are qualified by reference to the complete texts
thereof of the documents, laws and regulations so summarized.
(b) APG acknowledges to the Company and the other stockholders
of the Company that it has received or has had ample opportunity to review and
understand the current form of each of the following documents:
A. The Amended and Restated Certificate of Incorporation of the
Company which describes the securities of the Company;
B. The Amended and Restated By-laws of the Company;
C. The Asset Purchase Agreement (the "Asset Purchase Agreement"),
dated as of the date hereof, by and between Permatex, Inc.
("Permatex") and Loctite Corp. ("Loctite"), including all
exhibits and schedules thereto;
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D. The Stock Purchase Agreement (the "Stock Purchase Agreement"),
dated as of the date hereof, by and between Permatex
Acquisition Corp. ("PAC") and Advanced Chemistry and
Technology, Inc. ("AC Tech"), including all exhibits and
schedules thereto;
E. The Revolving Credit and Term Loan Agreement, dated as of the
date hereof, between PAC, certain lenders and BankBoston N.A.
("BankBoston"), as Agent for itself and the other lenders
thereunder, including all exhibits and schedules thereto, as
amended or modified from time to time (the "Credit
Agreement");
F. The Stockholders Agreement, dated as of the date hereof, among
the Company and the stockholders named therein, including all
exhibits and schedules thereto (the "Stockholders Agreement");
G. The Purchase Agreement, dated as of the date hereof, between
the Company and JZ Equity Partners, PLC, including all
exhibits and schedules thereto (the "Securities Purchase
Agreement");
H. The Securities Purchase Agreement, dated as of the date
hereof, by and between PAC and BankBoston, including all
exhibits and schedules thereto (the "Mezzanine Purchase
Agreement");
I. The Jordan Investors Subscription Agreement, dated as of the
date hereof, among the Company and the investors named
therein, including all exhibit and schedules thereto (the
"Jordan Investors Subscription Agreement");
J. The Form of Management Subscription Agreement dated as of the
date hereof, by and among the Company and the stockholders
named therein, including all exhibits and schedules thereto
(the "Management Subscription Agreement");
K. The Subscription Agreement, dated as of the date hereof, by
and among the Company and FSC Corp. ("FSC"), including all
exhibits and schedules thereto (the "FSC Subscription
Agreement");
L. The Subscription Agreement, dated as of the date hereof, by
and between the Company and certain stockholders of AC Tech,
including all exhibits and schedules thereto (the "AC Tech
Investors Subscription Agreement");
M. The Agreement, dated as of the date hereof, by and among APG
Sub, APG Parent, the APG Investors and the Company, including
all exhibits and schedules hereto (the "APG Agreement");
N. The Management Consulting Agreement, dated as of the date
hereof, by and between the Company, Permatex Acquisition
Corp., Permatex, Inc. and TJC
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Management Corp., including all exhibits and schedules thereto
(the "TJC Management Consulting Agreement");
O. The Transaction Advisory Agreement, dated as of the date
hereof, by and between the Company, Permatex Acquisition
Corp., Permatex, Inc. and TJC Management Corp., including all
exhibits and schedules thereto (the "TJC Transaction Advisory
Agreement");
P. The Employment Agreement, dated as of the date hereof, by and
between the Company and Xxxx Xxxxxxx, including all exhibits
and certain schedules thereto (the "Employment Agreement");
and
Q. This Agreement and all exhibits and schedules hereto.
The documents referred to in A through Q are hereinafter collectively
referred to as the "Operative Documents" except that, for purposes of Section
8(f), this Agreement will not be considered an Operative Document.
The Company has afforded APG and its advisors, if any, the
opportunity to discuss an investment in the Stock and to ask questions of
representatives of the Company concerning the terms and conditions of the
offering of the Stock and the Operative Documents, and such representatives have
provided answers to all such questions concerning the offering of the Stock and
the Operative Documents. APG has consulted its own financial, tax, accounting
and legal advisors, if any, as to its investment in the Stock and the
consequences thereof and risks associated therewith and the Operative Documents.
Each of APG and its advisors, if any, have examined or have had the opportunity
to examine before the date hereof the Operative Documents and all information
that the advisor or APG deems to be material to an understanding of the Company,
the proposed business of the Company, and the offering of the Stock. APG also
acknowledges that there have been no general or public solicitations or
advertisements or other broadly disseminated disclosures (including, without
limitation, any advertisement, article, notice or other communication published
in any newspaper, magazine or similar media or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or advertising) by or on behalf of the Company regarding an
investment in the Stock.
3. Stockholder Representations and Warranties.
(a) APG represents to the Company and the other stockholders
of the Company that it is a sophisticated, experienced and professional
investor.
(b) APG represents that it has had an opportunity to select
and consult with such attorneys, business consultants and any other person(s)
APG wished to confer with since the time when the proposed transaction and APG
participation was first discussed with APG. APG acknowledges that the Company
has made available to APG prior to the signing of this
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Agreement and sale of any Stock hereunder, the opportunity to ask questions of
any person authorized to act on behalf of the Company concerning any aspect of
the investment and to obtain any additional information, to the extent the
Company possesses such information or can acquire it without unreasonable effort
or expense, necessary to verify the accuracy of the information.
(c) Except as permitted under the Stockholders Agreement, APG
agrees that it will not directly or indirectly in one or a series of related
transactions transfer any Stock.
(d) APG represents to the Company and the other stockholders
of the Company that it knows and understands and has given full consideration to
and has had the opportunity to ask questions of any person authorized to act on
behalf of the Company concerning any aspect of the transactions with affiliates
being consummated by the Company in connection with the TJC Management
Consulting Agreement, the TJC Transaction Advisory Agreement, the APG Agreement
(including the APG stock option and restricted stock arrangements described
therein), the Employment Agreement and the Management Subscription Agreement,
including all agreements, obligations, covenants and arrangements contained
therein or contemplated thereby, including all exhibits and schedules thereto
(collectively, the "Affiliate Transaction Agreements").
4. Risk Factors.
(a) APG acknowledges to the Company and the other stockholders
of the Company that APG knows and understands that the Subsidiaries are the
Company's only material assets and that the Company borrowed a substantial
portion of the funds used to effect the purchase of the Subsidiaries. It is
unlikely that dividends will be paid on the Stock. There is no legal requirement
or promise made by the Company to declare or pay such dividends and such
dividends may not in any event be paid if such payment would violate any term of
the Operative Documents. Certain of the Operative Documents severely restrict
the ability of the Company to make any dividend or redemption payments in any
case and such payment may be restricted by future agreements or instruments
binding on the Company. Such dividends and redemption payments may be made,
subject to the Company's loan agreements, only from funds available for such use
as provided by applicable law.
(b) APG acknowledges to the Company and the other stockholders
of the Company that it knows and understands that an investment in the Stock of
the Company is a speculative investment which involves a high risk of loss and
that on and after the date hereof, there will be no public market for the Stock
and the Company does not contemplate that a public market will develop.
(c) APG acknowledges to the Company and the other stockholders
of the Company that it knows and understands and has given full consideration to
and has had the opportunity to ask questions of any person authorized to act on
behalf of the Company
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concerning any aspect of the transactions with affiliates being consummated by
the Company in connection with the Affiliate Transaction Agreements.
(d) APG acknowledges to the Company and the other stockholders
of the Company that it knows and understands, and has given full consideration
to, the benefits and risks to APG of its investment in the Company, including,
without limitation, the payments , reimbursements, indemnities and releases in
the APG Agreement, and the repurchase provisions contained in Section 8 of this
Agreement.
5. Securities Law Matters.
(a) APG represents and warrants to the Company and the other
stockholders of the Company that APG used no "purchaser's representative" (as
that term is used in Regulation D as promulgated by the Securities and Exchange
Commission) in connection with this transaction. APG represents and warrants to
the Company and the other stockholders of the Company that neither The Jordan
Company nor any of its employees or affiliates has acted as a representative of
APG in the subject transaction. APG represents that it has substantial knowledge
and experience in financial, investment and business matters, and specifically
in the business of the Company, and has the requisite knowledge and experience
to evaluate the risks and merits of this investment. APG represents and warrants
that the decision of APG to purchase the Stock hereunder has been made by APG
independent of any other stockholder of the Company and independent of any
statements, disclosures or judgments as to the properties, business, prospects
or condition (financial or otherwise) of the Company which may have been made or
given by any Stockholder of the Company or other person. APG represents and
warrants to the Company and the other Stockholders of the Company that APG can
and will bear the economic risks of its investment in the Company and
acknowledges that it is able to hold the Company's unregistered Stock
indefinitely and is able to sustain a complete loss if the stock becomes
worthless.
(b) APG acknowledges to the Company and the other stockholders
of the Company that the Stock being purchased hereunder has not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), on the
ground that the sales of Common Stock pursuant to this Agreement are exempt
under Section 4(2) of the Securities Act as not constituting a distribution, and
that the Company's reliance on such exemption is predicated in part on APG's
representation which APG herewith makes that the Stock has been acquired solely
by and for the account of APG for investment purposes only, and is not being
purchased for subdivision, fractionalization, resale or distribution. APG has no
contract, undertaking, agreement or arrangement with any other stockholder to
sell, transfer or pledge to such other stockholder or anyone else the Stock (or
any part thereof) which APG has purchased hereunder. APG has no present plans or
intentions to enter into any such contract, undertaking, agreement or
arrangement. The Stock has not been registered or qualified for resale under
applicable securities laws, and may not be sold except pursuant to such
registration or qualification thereunder or an exemption therefrom. APG has
adequate means of providing for APG's current needs and possible contingencies
and has a net worth equal to at least three times its
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investment in the Stock. APG further acknowledges to the Company that the Stock
being sold to APG must be held indefinitely unless it is subsequently registered
under the Securities Act or a transfer is made pursuant to an exemption from
such registration, for example, pursuant to Rule 144. APG further represents and
warrants to the Company and the other stockholders of the Company that its
financial condition is such that APG is not under any present necessity or
constraint, and does not foresee in the future any necessity or constraint, to
dispose of these shares to satisfy any existing or contemplated debt or
undertaking.
(c) In the event that in the future the Company engages in any
negotiation or transaction (including a merger or consolidation or other
reorganization by or of the Company) in which Regulation D promulgated by the
SEC may or will be available to the Company, APG, in the event it is not then a
professional investor, agrees irrevocably (and with the knowledge and intention
that the other holders of the Company's stock of all classes will rely thereon
in making their respective present investment decisions) that APG will, within 5
business days of notice from the Company, which may be given in the sole
discretion of the Company, appoint a purchaser's representative or
representatives who shall be qualified and acceptable to the Company and any
other person(s) who is (are) involved in the proposed transaction so that the
maximum benefits of Regulation D shall be available to the Company and all of
its stockholders. APG acknowledges that any stockholder of the Company who does
not perform this covenant shall be liable to the Company and all of the
Company's other stockholders for any damage or loss that may or might be
incurred thereby.
6. Registration Rights.
The Stock has not been registered under Federal or state
securities laws and, in consequence thereof, all of the Stock must be held
indefinitely unless (a) subsequently registered under applicable Federal and
state securities laws, or (b) exemptions from such registration are available at
the time of a proposed sale or transfer thereof. The Company has no agreements
in respect of a registration statement under either Federal or state law and the
Company has no present intention to file a registration statement under either
Federal or state law.
7. Legend.
All certificates representing shares of the Stock shall be
endorsed as follows:
"THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE
ONLY UPON COMPLIANCE WITH, THE PROVISIONS OF A STOCKHOLDERS'
AGREEMENT, DATED JULY 30, 1999, AMONG THE COMPANY AND ITS
STOCKHOLDERS AND THE SUBSCRIPTION AGREEMENT(S), DATED JULY 30,
1999, AMONG THE COMPANY AND CERTAIN INVESTORS THEREIN.
REFERENCE ALSO IS MADE TO THE RESTRICTIVE PROVISIONS OF THE
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE COMPANY. COPIES
OF THE ABOVE REFERENCED AGREEMENTS ARE ON FILE AT THE OFFICE
OF THE
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COMPANY AT 000 XXXXX XXXXXX, 00XX XXXXX, XXX XXXX, XXX XXXX
00000.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY
NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT, OR AN EXEMPTION FROM REGISTRATION,
UNDER SAID ACT."
8. Repurchase Provisions
(a) Call Upon a Change of Control. Upon the occurrence of a
Change of Control (as defined in Section 11), the Company and/or the person
specified in Sections 8(c) and (d) (subject to Sections 8(a) and (b) may
repurchase (the "Change of Control Call Right") all or any portion of the shares
(the "Change of Control Repurchase Shares") of either or any of the:
(i) Common Stock purchased by APG pursuant to this
Agreement at a price per share equal to the Fair Market Value
of such shares; or
(ii) Preferred Stock purchased by APG pursuant to
this Agreement at a price per share equal to the Fair Market
Value of such shares.
The purchase price for any shares to be purchased pursuant to this
Section 8(a) is payable in cash.
(b) Call Upon a Material Breach. Upon the occurrence of a
Material Breach (as defined in Section 11), the Company and/or the person
specified in Sections 8(c) and (d) (subject Sections 8(a) and 8(b) may
repurchase (the "Material Breach Call Right") all or any portion of the shares
(the "Material Breach Repurchase Shares" and, together with the Change of
Control Repurchase Shares, the "Repurchase Shares") of either or any of the:
(i) Common Stock purchased by APG pursuant to this
Agreement at a price per share equal to the Original Common
Cost of such shares; provided, however, that in the event of
the occurrence of a Material Breach, the Material Breach Call
Right is exercisable only following the giving of written
notice (a "Material Breach Notice") by the Company of such
Material Breach and the subsequent failure of the breaching
party to cure such Material Breach within 30 days of delivery
of such notice (the "Material Breach Cure Period");or
(ii) Preferred Stock purchased by APG pursuant to
this Agreement at a price per share equal to the then
applicable Liquidation Value of such shares; provided,
however, that in the event of the occurrence of a Material
Breach, the Material Breach Call Right is exercisable only
following the giving of a Material
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Breach Notice by the Company and the subsequent failure of the
breaching party to cure such Material Breach within the
Material Breach Cure Period.
The purchase price for any shares to be purchased pursuant to this
Section 8(b) is payable in cash.
(c) Participation of Management Stockholders. In the event
that the Company has exercised a Change of Control Call Right or a Material
Breach Call Right, each of the Management Stockholders set forth on Schedule II
hereto (each, a "Participating Management Stockholder") shall have the option to
participate in such repurchase to the extent of such Participating Management
Stockholder's direct and indirect ownership (through his ownership of the
capital stock of APG Sub) of the capital stock of the Company, and shall be
entitled to purchase that number of Repurchase Shares equal to the sum of (x)
the product of (A) the aggregate number of Repurchase Shares, and (B) such
Participating Management Stockholder's percentage ownership of the Company's
capital stock (calculated on a fully diluted basis assuming the exercise of all
outstanding options and other convertible instruments) plus (y) the product of
(A) the aggregate number of Repurchase Shares, and (B) the product of (1) a
fraction, the numerator of which is the aggregate number of shares of APG Parent
owned by such Participating Management Stockholder (calculated on a
fully-diluted basis assuming the exercise of all outstanding options and other
convertible instruments) and the denominator of which is the aggregate number of
outstanding shares of Common Stock of APG Parent (calculated on a fully-diluted
basis assuming the exercise of all outstanding options and other convertible
instruments), and (2) a fraction, the numerator of which is the aggregate number
of shares of Common Stock of the Company owned by APG Sub (calculated on a
fully-diluted basis assuming the exercise of all outstanding options and other
convertible instruments) and the denominator of which is the aggregate number of
outstanding shares of Common Stock of the Company (calculated on a fully-diluted
basis assuming the exercise of all outstanding options and other convertible
instruments); provided, however, that any Participating Management Stockholder
whose actions or failure to act contributed to or resulted in a Change of
Control or Material Breach shall not be entitled to exercise the rights
contained in this Section 8(c).
(d) Participation of Other Stockholders.
(i) In the event the Company does not or is unable to
exercise the rights contained in paragraphs (a) or (b) of this
Section 8, the Stockholders of the Company (other than the
Participating Management Stockholders) shall have the right to
purchase at the price set forth in paragraph (a) or (b) of
this Section 8, as the case may be, any portion of the
Repurchase Shares that otherwise would have been purchased by
the Company (the "Company Repurchase Shares") in the following
order of priority: first, the Jordan Investors shall have the
right to purchase the Company Repurchase Shares pro rata among
those of the Jordan Investors so electing, and thereafter, all
other Stockholders (other than the Participating Management
Stockholders) shall have the right to purchase the Company
Repurchase Shares pro rata among the Stockholders so electing
to
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purchase (or in such percentages as such other Stockholders
may agree); provided, however, that nothing contained in this
subparagraph (i) shall be deemed to prevent or otherwise
interfere with the exercise of the rights of the Participating
Management Stockholders to participate in a repurchase of the
Repurchase Shares as set forth in Section 8(c); or
(ii) In the event a Participating Management
Stockholder does not or is not entitled to exercise the rights
contained in this Section 8(d), the Company and the other
Stockholders of the Company (other than the Participating
Management Stockholders) shall have the right to purchase at
the price set forth paragraph (a) or (b) of this Section 8, as
the case may be, any portion of the Repurchase Shares that
such Participating Management Stockholder would otherwise have
been entitled to purchase (the "Management Repurchase Shares")
in the following order of priority: first, the Company shall
have the right to purchase the Management Repurchase Shares,
second, the Jordan Investors shall have the right to purchase
the Management Repurchase Shares pro rata among those of the
Jordan Investors so electing, and thereafter, all other
Stockholders (other than the Participating Management
Stockholders) shall have the right to purchase the Management
Repurchase Shares pro rata among the Stockholders so electing
to purchase (or in such percentages as such other Stockholders
may agree).
(e) Expiration and Closing of Call Rights. The Stockholder
and/or the Company, upon becoming aware of a Change of Control or Material
Breach, will promptly notify the company and the Jordan Investors thereof. If
the Company and/or the other persons entitled thereto has not delivered to the
Stockholder written notice (a "Call Notice") of its intention to exercise the
Change of Control Call Right or the Material Breach Call Right within six months
of (i) the occurrence of a Change of Control, or (ii) the expiration of the
Material Breach Cure Period, such call rights shall automatically expire. The
closing of any purchase pursuant to such call rights shall take place at the
time and place designated by the Company in the Call Notice, which date, subject
to the final sentence of this Section 8(e), shall not be more than twelve (12)
months after the delivery of the notice. This Section 8 shall terminate in its
entirety upon a Sale of the Company (as defined in Section 11).
(f) Restrictions on Payments by the Company. Notwithstanding
anything to the contrary contained in this Agreement, all repurchases pursuant
to this Section 8, shall be subject to (i) applicable restrictions contained in
any applicable law, (ii) restrictions contained in the Company's and its
subsidiaries' debt and equity financing agreements, including the Credit
Agreement, the Securities Purchase Agreement and the Mezzanine Purchase
Agreement, each as amended and in effect from time to time, and (iii) the
availability of cash to make any lump sum cash payments.
(g) Timing of Payments. In the event the Company elects or is
obligated to make payments in cash pursuant to the provisions of Section 8, such
payments will be made within twelve months of the date of the call.
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9. Non-Competition.
(a) As an inducement to the Company to enter into this
Agreement, APG, on behalf of itself, its management employees, its Subsidiaries
and its controlled entities (the "APG Control Parties") agrees that, for a
period of twelve years after the date hereof, no member of the APG Control
Parties will directly or indirectly, own, manage, operate, control, seek to
acquire, or participate in the ownership, management, operation or control of,
or be connected as an officer, employee, partner, director or otherwise with, or
have any financial interest in, or aid or assist anyone else in the conduct of,
any business, including any joint venture agreements or arrangements
("Competitive Business") that directly or indirectly competes with the Business
of the Company as at the date hereof or contemplated to be conducted by the
Company as of the date hereof, anywhere in the world; provided, however, that
each member of the APG Control Parties may continue operating its existing
businesses (the "APG Business") to the extent currently conducted as set forth
on the date hereof; provided, further, that the provisions of this Section 9(a)
shall terminate upon the second anniversary of the date upon which APG Sub
ceases to be a Stockholder of the Company.
(b) APG agrees that the violation or threatened violation of
any of the provisions of this Section 9 shall cause immediate and irreparable
harm to the Company and that the damage to the Company will be difficult or
impossible to calculate with precision. Therefore, in the event any of the APG
Control Parties violates this Section 9, an injunction restraining such APG
Control Party from such violation may be entered against such APG Control Party
in addition to any other relief available to the Company.
10. Confidentiality and Non-Solicitation. As an inducement to the
Company to enter into this Agreement, APG, on behalf of itself, its Affiliates
and the APG Parties (as defined in the APG Agreement)(the "APG Group") agrees
that, for a period of twelve years after the date hereof:
(a) No member of the APG Group will directly or indirectly in
one or a series of transactions, disclose to any person, or use or otherwise
exploit for their own benefit or for the benefit of anyone other than the
Company, Confidential Information (as defined in Section 11) and each member of
the APG Group shall use its best efforts to cause all persons or entities to
whom any Confidential Information has been disclosed to observe the terms and
conditions set forth herein as though each such person or entity was bound
hereby.
(b) Each member of the APG Group shall have no obligation
hereunder to keep confidential any Confidential Information if and to the extent
disclosure of any such Confidential Information is specifically required by law;
provided, however, that in the event disclosure is required by applicable law,
APG, on behalf of the APG Group, shall provide the Company with prompt notice of
such requirement, prior to making any disclosure, so that the Company may seek
an appropriate protective order.
(c) No member of the APG Group will without the express prior
written approval of the Board of Directors of the Company:
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(i) directly or indirectly recruit, solicit or otherwise
induce or influence any employee, sales agent, joint venturer, lessor,
supplier, agent, representative or any other person that has or had
during (A) the two year period initially preceding the date hereof and
(B) the one year period following the date hereof, a business
relationship with the Company, to discontinue, reduce or adversely
modify such employment, agency or business relationship with the
Company to the extent such employment, agency or business relationship
pertains to the Business; or
(ii) employ or seek to employ or cause any Competitive
Business to employ or seek to employ any person or agent who is
employed or retained by the Company. Notwithstanding the foregoing,
nothing herein shall prevent officers of any member of the APG Group
from providing a letter of recommendation to an employee with respect
to a future employment opportunity.
(d) No member of the APG Group will without the express prior
written approval of the Board of Directors of the Company, directly or
indirectly, recruit, solicit or otherwise induce or influence any customer or
supplier of the Company to discontinue, reduce or modify such business
relationship with the Company to the extent such business relationship pertains
to the Business.
(e) APG agrees that the violation or threatened violation of
any of the provisions of this Section 10 shall cause immediate and irreparable
harm to the Company and that the damage to the Company will be difficult or
impossible to calculate with precision. Therefore, in the event any member of
the APG Group violates this Section 10, an injunction restraining such member of
the APG Group from such violation may be entered against such member of the APG
Group in addition to any other relief available to the Company.
11. Definitions
(a) "AC Tech Business" shall mean the development, manufacture
and marketing of aircraft sealants, including but not limited to products based
upon Xxxxxx International, Inc. supplied polysulfide chemicals and additional
core technologies in epoxy, silicone and urethane based sealants, adhesives and
coatings marketed into markets, including but not limited to, aircraft, space
marine, automotive, electronics and telecommunications.
(b) "Affiliate" shall mean with respect to any Person, (a) any
Person which directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such Person, or
(b) any Person who is a director or executive officer (i) of such Person, (ii)
of any Subsidiary of such Person, or (iii) of any Person described in clause (a)
above; provided, that any Affiliate of a corporation shall be deemed an
Affiliate of such corporation's stockholders. For purposes of this definition,
"control" of a Person shall mean the power, direct or indirect, (i) to vote or
direct the voting of more than 5% of the outstanding shares of voting stock of
such Person, or (ii) to direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise.
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(c) "APG Investors" shall mean APG stockholders who are
parties to the APG Agreement.
(d) "APG Parent" shall mean Automotive Performance Group,
Inc., a Delaware corporation.
(e) "Business" shall mean the AC Tech Business and the
Permatex Business.
(f) "Change of Control" shall mean if (i) any person (other
than the APG Investors) acquires beneficially and of record, at least 51% of the
issued and outstanding capital stock of APG Parent (but not including for this
purpose, any warrants, options or convertible securities issued to the APG
Investors after the date hereof), (ii) any Person or group (within the meaning
of Section 13(d) or 14(d) of the Securities Exchange Act, as amended) shall
obtain the power (whether or not exercised) to elect a majority of APG Parent's
directors, or (iii) directors nominated by the APG Investors shall cease to
constitute a majority of the Board of Directors of APG Parent, or (iv) APG
Parent shall cease to own, beneficially and of record, 100% of the issued and
outstanding capital stock of APG.
(g) "Confidential Information" means any trade secret,
confidential study, data, calculations, software storage media or other
compilation of information, patent, patent application, copyright, trademark,
trade name, service xxxx, service name, "know-how", trade secrets, customer
lists, details of client or consultant contracts, pricing policies, sales
techniques, confidential information relating to suppliers, information relating
to the special and particular needs of the Business and its operational methods,
marketing plans or strategies, products and formulae, product development
techniques or plans, business acquisition plans or any portion or phase of any
scientific or technical information, ideas, discoveries, designs, computer
programs (including source of object codes), processes, procedures, research or
technical data, improvements or other proprietary or intellectual property of
the Business, whether or not in written or tangible form, and whether or not
registered, and including all files, records, manuals, books, catalogues,
memoranda, notes, summaries, plans, reports, records, documents and other
evidence thereof. The term "Confidential Information" does not include, and
there shall be no obligation hereunder with respect to, information that is or
becomes generally available to the public other than as a result of a disclosure
by Sellers.
(h) "Determination Period" shall mean the last four
consecutive completed fiscal quarters as set forth on the audited financial
statements of the Company immediately preceding the Change of Control Call Right
exercised pursuant to Section 8(a) for which Fair Market Value shall be used to
determine the Change of Control Call Right price.
(i) "EBITDA" shall mean shall mean for any period, the
consolidated net income (or loss) of the Company (after eliminating all
extraordinary or non-recurring items of income or loss), as reflected in the
Company's financial statements for such period, plus (i) interest and other
expense in respect of indebtedness for borrowed money and similar expense in
respect of capitalized leases, charged, accrued or otherwise allocated against
such net income (or loss), plus (ii) expenses for income taxes (whether paid,
accrued or deferred) charged or otherwise allocated against such net
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income, plus (iii) depreciation and amortization of any assets or other non-cash
charges (including, without limitation, any depreciation, amortization and other
non-cash charges relating to purchase accounting adjustments, and any
amortization or writeoff or intangible assets, transaction costs or goodwill)
charged, allocated or otherwise accrued against such net income (or loss), plus,
without duplication, (iv) non-cash expenses attributable to the issuance of
stock, options or warrants by the Company to any of its directors, officer,
employees, dealers or others or the exercise thereof, charged, accrued or
allocated against such net income (or loss), minus (v) interest income and other
income, in each case, excluding any such interest, depreciation, amortization
costs and expenses previously taken into account in determining EBITDA during
any period preceding such period, all as determined in accordance with generally
accepted accounting principles, consistently applied.
(j) "Fair Market Value" shall mean, for any Determination
Period, the Quotient obtained by dividing (i) an amount equal to (A) 5.75
multiplied by EBITDA for the Determination Period less (B) the aggregate amount
of indebtedness for borrowed money and capitalized leases of the Company as of
the end of the Determination Period (including, without limitation, interest
accrued but unpaid as of the end of the Determination Period) less (C) the
aggregate liquidation value of shares of preferred stock of the Company
outstanding at the end of the Determination Period (including, without
limitation, dividends secured but unpaid in respect of such stock as of the end
of the Determination Period), less (D) the aggregate amount that would be
payable by the Company in respect of any equity appreciation or similar rights
outstanding as of the end of the Determination Period assuming the exercise in
full of any and all such rights (whether vested or not) as of such date, by (ii)
the aggregate number of shares of Common Stock issued and outstanding on a fully
diluted basis as of the date of the Change of Control giving rise to the
calculation of Fair Market Value; provided, however that in no event shall the
Fair Market Value be less than the Original Common Cost or the Original
Preferred Cost, as the case may be.
(k) "Jordan Investors" shall mean the Stockholders who are
parties to the Jordan Investors Subscription Agreement and JZEP.
(l) "JZEP" shall mean JZ Equity Partners PLC.
(m) "Liquidation Value" shall mean the per share Liquidation
Value of the Series B Redeemable Preferred Stock, and/or the per share
Liquidation Value of the Series D Redeemable Preferred Stock, each as defined in
the Company's Amended and Restated Certificate of Incorporation.
(n) "Material Breach" shall mean the breach in any material
respect of any of the representations, warranties, covenants, obligations and
agreements of APG, any of its Affiliates or any of the APG Parties (as defined
in the APG Agreement) under this Agreement, the Stockholders Agreement, the APG
Agreement or any other agreement to which APG or APG Parent is a party executed
in connection with the transactions contemplated under this Agreement, the
Stockholders Agreement or the APG Agreement.
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(o) "Permatex Business" shall mean the development,
manufacture and distribution of functional chemical products to the automotive
maintenance and repair and consumer markets, including but not limited to
anaerobic threadlockers and liquid gaskets, silicone gasketing materials,
aerosol parts cleaners, waterless handcleaners, adhesives and a variety of
"Do-It-Yourself" fix and repair chemical products.
(p) "Person" shall mean an individual or a corporation,
association, partnership, joint venture, organization, business, trust, or any
other entity or organization, including a government or any subdivision or
agency thereof.
(q) "Sale of the Company" means the sale of the Company to an
independent third party or group of third parties pursuant to which such party
or parties acquire (i) capital stock of the Company possessing the voting power
under normal circumstances to elect a majority of the Company's Board of
Directors (whether by merger, consolidation or sale or transfer of the Company's
capital stock) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis.
(r) "Three Year Junior Notes" shall mean a subordinated
promissory note of the Company in the form attached hereto as Exhibit A.
12 Miscellaneous Provisions and Definitions.
(a) Subject to the conditions of transfer of Stock contained
herein and in the Stockholders Agreement, this Agreement, including, without
limitation, the provisions of Section 8 of this Agreement, shall be binding upon
and shall inure to the benefit of APG and its respective successors and assigns,
by way of merger consideration or operation of law or otherwise and to the
Company and its respective successors and assigns, by way of merger,
consolidation or operation of law or otherwise. Once APG is no longer a
stockholder of the Company, all rights and benefits previously enjoyed by such
party pursuant to the terms of this Agreement shall automatically terminate with
respect to APG.
(b) Prior to consummation of any transfer of shares of Stock
held by APG permitted under the Stockholders Agreement, except for transfers
pursuant to Rule 144 or a public offering, such party shall cause the transferee
to execute an agreement in which the transferee agrees to be bound by the terms
of this Agreement.
(c) The language used in this Agreement will be deemed to be
the language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction will be applied against any person.
(d) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT THAT
NO DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN THAT OF
NEW YORK, AND NO DEFENSE,
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COUNTERCLAIM OR RIGHT OF SET-OFF GIVEN OR ALLOWED BY THE LAWS OF ANY OTHER STATE
OR JURISDICTION, OR ARISING OUT OF THE ENACTMENT, MODIFICATION OR REPEAL OF ANY
LAW, REGULATION, ORDINANCE OR DECREE OF ANY FOREIGN JURISDICTION, BE INTERPOSED
IN ANY ACTION HEREON. SUBJECT TO PARAGRAPH 12(e), EACH OF APG AND THE COMPANY
AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS AGREEMENT
OR ANY AGREEMENT RELATING TO OR CONTEMPLATED BY THIS AGREEMENT OR ANY OF THE
OPERATIVE DOCUMENTS MAY BE COMMENCED IN THE COURTS OF THE STATE OF NEW YORK OR
THE UNITED STATES DISTRICT COURTS IN NEW YORK, NEW YORK. EACH OF APG AND THE
COMPANY CONSENT TO SUCH JURISDICTION, AGREE THAT VENUE WILL BE PROPER IN SUCH
COURTS AND WAIVE ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS. THE CHOICE OF
FORUM SET FORTH IN THIS PARAGRAPH 12(d) SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION
UNDER THIS OR ANY AGREEMENT RELATING TO OR CONTEMPLATED BY THIS AGREEMENT OR ANY
OF THE OPERATIVE DOCUMENTS AGREEMENT TO ENFORCE SAME IN ANY OTHER JURISDICTION.
(e) EACH OF APG AND THE COMPANY AGREE THAT ANY DISPUTE BETWEEN
OR AMONG THE PARTIES TO THIS AGREEMENT OR RELATING TO OR IN RESPECT OF THIS
AGREEMENT, OR ANY AGREEMENT RELATING TO OR CONTEMPLATED BY THIS AGREEMENT OR ANY
OF THE OPERATIVE DOCUMENTS THEIR NEGOTIATION, EXECUTION, PERFORMANCE, SUBJECT
MATTER, OR ANY COURSE OF CONDUCT OR DEALING OR ACTIONS UNDER OR IN RESPECT OF
THIS AGREEMENT, OR ANY AGREEMENT RELATING TO OR CONTEMPLATED BY THIS AGREEMENT
OR ANY OF THE OPERATIVE DOCUMENTS SHALL BE SUBMITTED TO, AND RESOLVED
EXCLUSIVELY PURSUANT TO ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. SUCH ARBITRATION
SHALL TAKE PLACE IN NEW YORK, NEW YORK AND SHALL BE SUBJECT TO THE SUBSTANTIVE
LAW OF THE STATE OF NEW YORK. DECISIONS PURSUANT TO SUCH ARBITRATION SHALL BE
FINAL, CONCLUSIVE AND BINDING ON THE PARTIES SUBJECT TO CONFIRMATION,
MODIFICATION OR CHALLENGE PURSUANT TO 9 U.S.C. Section 1 ET SEQ. UPON THE
CONCLUSION OF ARBITRATION, APG OR THE COMPANY MAY APPLY TO ANY COURT OF THE TYPE
DESCRIBED IN PARAGRAPH 12(d) TO ENFORCE THE DECISION PURSUANT TO SUCH
ARBITRATION. IN CONNECTION WITH THE FOREGOING, THE PARTIES HEREBY WAIVE ANY
RIGHTS TO A JURY TRIAL TO RESOLVE ANY DISPUTES OR CLAIMS RELATING TO THIS
AGREEMENT OR ANY AGREEMENT RELATING TO OR CONTEMPLATED BY THIS AGREEMENT OR ANY
OF THE OPERATIVE DOCUMENTS.
(f) APG agrees and acknowledges that the Operative Documents
and any other agreement or instrument that may restrict the ability of the
Company to make any dividend or redemption payments may be created, amended,
modified or supplemented, from time to time, and
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may be refinanced, extended or substituted, from time to time, without notice
to, or the consent or approval of, APG.
(g) All personal pronouns used in this Agreement, whether
masculine, feminine or neuter gender, shall include all other genders if the
context so requires; the singular shall include the plural, and vice versa.
(h) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(i) In case any one or more of the provisions or parts of a
provision contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or part of a provision of this Agreement or any other jurisdiction, but this
Agreement shall be reformed and construed in any such jurisdiction as if such
invalid or illegal or unenforceable provision or part of a provision had never
been contained herein and such provision or part shall be reformed so that it
would be valid, legal and enforceable to the maximum extent permitted in such
jurisdiction.
(j) This Agreement constitutes the entire agreement by and
among the parties with respect to the subject matter hereof and may not be
modified orally, but only by a writing subscribed by the party charged
therewith.
(k) Each of the parties hereto agrees to execute all such
further instruments and documents and to take all such further action necessary
to effectuate the terms and purposes of this Agreement.
(l) Whenever notice is required to be given by any party
hereunder, such notice shall be deemed sufficient when delivered to the Company
at its address above which is also the address of The Jordan Company LLC and to
APG to such address as APG shall have furnished.
(m) Each party shall be entitled to rely conclusively upon any
notice received, or the failure to receive any notice, from any other party with
respect to rights and obligations under this Agreement.
(n) Each person who is entitled to participate in the
repurchase rights set forth in Section 8 are intended third party beneficiaries
thereof.
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IN WITNESS WHEREOF, each of the undersigned has signed this Agreement
as of the date first above written:
PBT BRANDS, INC.
By: /s/ Xxxxxxx Xxxx
Name: Xxxxxxx Xxxx
Title: Vice President
19
APG SPECIAL PURPOSE SUBSIDIARY, INC.
By: /s/ Xxxx X. Xxxxxxx
Name:
Title:
20
AUTOMOTIVE PERFORMANCE GROUP, INC.
By: /s/ Xxxx X. Xxxxxxx
Name:
Title:
21
SCHEDULE I
Stockholder Schedule
Consideration Series B Junior Series D
Class A Paid for Common Preferred Junior Consideration Paid
Common Stock Stock Preferred for Preferred Stock
Stockholder Stock Stock
APG Special Purpose 110,000 $110,000 3,250 990 $4,240,000
Subsidiary, Inc.
22
SCHEDULE II
Participating Management Stockholders
