EXHIBIT 99.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 14th day of June, 2002, by and between Catalina Lighting, Inc.,
a Florida corporation (the "Company"), and Sun Catalina Holdings, LLC, a
Delaware limited liability company (the "Purchaser").
WHEREAS, the Company desires to issue and sell, and the Purchaser
desires to purchase, shares of the Company's Common Stock, par value $.01 per
share, upon the terms and subject to the conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
SALE AND PURCHASE
SECTION 1.1. Sale and Issuance of Shares.
(a) At the Closing (as defined in Section 1.2(a)), and upon
the terms and subject to the conditions set forth in this Agreement, the Company
shall issue and sell to the Purchaser, and the Purchaser shall purchase and
accept from the Company, 924,572 shares of Common Stock, par value $.01, of the
Company (such shares, the "Shares"), for the aggregate purchase price of
$5,001,937 ("Purchase Price"), representing a price per share of $5.41, payable
as set forth in paragraph (b) below.
(b) The Purchase Price shall be payable in full by the
surrender by the Purchaser to the Company of the Secured Junior Subordinated
Note due 2006 of the Company in favor of the Purchaser, dated July 23, 2001 (the
"Note"), upon which the Company will be forever released from all obligations
and liabilities thereunder.
SECTION 1.2. Closing.
(a) The closing of the purchase and sale of the Shares (the
"Closing") shall take place at 4:00 p.m., local time, on the date hereof or at
such other time and date as the parties hereto shall agree in writing, at the
offices of Xxxxxx, Xxxxx & Xxxxxxx LLP, One Oxford Centre, Thirty-Second Floor,
Xxxxxxxxxx, Xxxxxxxxxxxx 00000 or at such other place as the parties hereto
shall agree in writing.
(b) At the Closing, (i) the Purchaser shall surrender to
the Company the Note, and (ii) the Company shall deliver to the Purchaser,
against payment of the Purchase Price therefor, a certificate or certificates
representing the Shares. The Shares shall be in definitive form and registered
in the name of the Purchaser or its nominee or designee and in a single
certificate or in such other denominations as the Purchaser shall request not
later than one business day prior to the date of the Closing.
(c) Upon the Closing:
(i) the Secured Obligations under and as defined in
the Security Agreement dated as of July 23, 2001 by and among the Company, the
subsidiaries of the Company party thereto and the Purchaser (the "Security
Agreement") shall be and have been fully and indefeasibly paid, the Security
Agreement shall terminate as set forth therein, and the Purchaser shall execute
and deliver to the Company all Uniform Commercial Code termination statements
and similar documents which the Company shall reasonably request to evidence
such termination;
(ii) the Secured Obligations under and as defined in
the Pledge Agreement and Irrevocable Proxy dated as of July 23, 2001 by and
between the Company and the Purchaser (the "Pledge Agreement") shall be and have
been fully and indefeasibly paid, the Pledge Agreement shall terminate as set
forth therein, and the Purchaser shall reassign and deliver to the Company such
of the Pledged Collateral (as defined in the Pledge Agreement) as shall be held
by it thereunder, together with appropriate instruments of reassignment and
release;
(iii) the Secured Obligations under and as defined in
the Intellectual Property Security Agreement dated as of July 23, 2001 by and
among the Company, the subsidiaries of the Company party thereto and the
Purchaser (the "IP Security Agreement") shall be and have been fully and
indefeasibly paid, the IP Security Agreement shall terminate as set forth
therein, and the Purchaser shall execute and deliver to the Company all
termination statements and similar documents which the Company shall reasonably
request to evidence such termination; and
(iv) the General and Continuing Guaranty dated as of
July 23, 2001 by the guarantors party thereto in favor of the Purchaser shall
terminate and thereafter be of no further force and effect.
(d) The obligation of the Purchaser to purchase the Shares
shall be contingent upon the amendment of the Registration Rights Agreement
dated as of July 23, 2001 by and among the Company, the Purchaser, SunTrust
Banks, Inc. and SunTrust Bank (the "Registration Rights Agreement"), to include
the Shares in the definition of "Registrable Securities" thereunder, which
amendment shall be in form and substance satisfactory to the Purchaser.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows:
SECTION 2.1. Authorization; Enforceability.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida and has the
requisite power and authority to own its properties and assets and to carry on
its business as it is now being conducted. The
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Company is duly qualified to do business as a foreign corporation in each
jurisdiction in which the character of the properties owned or leased by it or
the nature of its business makes such qualification necessary, except where the
failure to so qualify could not reasonably be expected to have a material
adverse effect on the Company.
(b) The execution, delivery and performance by the Company
of this Agreement and the consummation of the transactions contemplated hereby
do not and will not violate any provision of the governing documents of the
Company, or of any other material agreement or instrument to which the Company
is a party or by which it is bound, or to which any of its properties or assets
is subject, or of any applicable law. The Company has duly executed and
delivered this Agreement. This Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
SECTION 2.2. Governmental and Other Third Party Consents. Except as
required by applicable filing requirements of the Securities Exchange Act of
1934, as amended, or state securities laws and those consents that have already
been obtained or made or those for which the failure to obtain would not have a
material adverse effect on the Company, the Company is not required to obtain
any consent from, or to make any declaration or filing with, any governmental
authority or any other person in connection with the execution, delivery and
performance of this Agreement, including, without limitation, the issuance, sale
and delivery of the Shares as contemplated hereunder.
SECTION 2.3. Validity and Issuance of Shares. The Shares have been duly
authorized and when issued, delivered and paid for pursuant to the terms of this
Agreement, will be duly and validly issued, fully paid and non-assessable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as follows:
SECTION 3.1. Authorization; Enforceability; No Violations.
(a) The Purchaser is duly organized, validly existing and
in good standing as a limited liability company under the laws of the State of
Delaware and has the requisite power and authority to own its properties and
assets and to carry on its business as it is now being conducted. The Purchaser
is duly qualified to do business as a foreign limited liability company in each
jurisdiction in which the character of the properties owned or leased by it or
the nature of its business makes such qualification necessary, except where the
failure to so qualify could not reasonably be expected to have a material
adverse effect on the Purchaser.
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(b) The execution, delivery and performance by the
Purchaser of this Agreement and the consummation of the transactions
contemplated hereby do not and will not violate any provision of the governing
documents of the Purchaser, or of any other material agreement or instrument to
which the Purchaser is a party or by which it is bound, or to which any of its
properties or assets is subject, or of any applicable law. The Purchaser has
duly executed and delivered this Agreement. This Agreement constitutes the
legal, valid and binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
SECTION 3.2. Governmental and Other Third Party Consents. Except as
required by applicable filing requirements of the Securities Exchange Act of
1934, as amended, or state securities laws and those consents that have already
been obtained or made or those for which the failure to obtain would not have a
material adverse effect on the Purchaser, the Purchaser is not required to
obtain any consent from, or to make any declaration or filing with, any
governmental authority or any other person in connection with the execution,
delivery and performance of this Agreement, including, without limitation, the
purchase of the Shares as contemplated hereunder.
SECTION 3.3. Private Placement.
(a) The Purchaser understands that (i) the offering and
sale of the Shares by the Company to the Purchaser are intended to be exempt
from registration under the Securities Act of 1933, as amended (the "Securities
Act") pursuant to Section 4(2) thereof, and (ii) there is no existing public or
other market for the Shares.
(b) The Shares to be acquired by the Purchaser pursuant to
this Agreement are being acquired for its own account and without a view to
making a distribution thereof in violation of the Securities Act.
(c) The Purchaser has sufficient knowledge and experience
in financial and business matters so as to be capable of evaluating the merits
and risks of its investment in the Shares and the Purchaser is capable of
bearing the economic risks of such investment, including a complete loss of its
investment in the Shares.
(d) The Purchaser is an "accredited investor" as such term
is defined in Regulation D under the Securities Act.
(e) The Purchaser, either alone or together with the
Purchaser's advisors (if any), has read the Risk Factors previously provided by
the Company to the Purchaser and attached hereto as Exhibit A, and understands
the risks set forth therein as they relate to an investment in the Shares.
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SECTION 3.4. Legends. The Purchaser understands that each certificate
evidencing the Shares may bear any legend required by applicable state
securities laws, and the following legend, at the discretion of the Company:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
ARTICLE IV
MISCELLANEOUS
SECTION 4.1. Notices. All notices, demands, requests, consents,
approvals or other communications (collectively, "Notices") required or
permitted to be given hereunder or which are given with respect to this
Agreement shall be in writing and shall be personally served, delivered by
reputable overnight courier service with charges prepaid, or transmitted by hand
delivery or facsimile, addressed as set forth below, or to such other address as
such party shall have specified most recently by written notice. Notice shall be
deemed given on the date of service or transmission if personally served or
transmitted by facsimile. Notice otherwise sent as provided herein shall be
deemed given on the next business day following delivery of such notice to a
reputable overnight courier service.
To the Company:
Catalina Lighting, Inc.
00000 XX 00xx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxx & Bockius LLP
Xxx Xxxxxx Xxxxxx, Xxxxxx-Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
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To the Purchaser:
Sun Catalina Holdings, LLC
c/o Sun Capital Partners, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxx and Xxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
with a copy to:
Sun Capital Partners, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attention: C. Xxxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
SECTION 4.2. Governing Law. This Agreement shall be governed by,
interpreted under, and construed in accordance with the internal laws of the
State of New York applicable to agreements made and to be performed within the
State of New York, without giving effect to any choice-of-law provisions thereof
that would compel the application of the substantive laws of any other
jurisdiction. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the United States District Court sitting in the Southern
District of New York, and of the Supreme Court of the State of New York sitting
in New York County and any appellate court from any thereof, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper.
SECTION 4.3. Entire Agreement. This Agreement and the Registration
Rights Agreement, as amended in the manner contemplated by Section 1.2(d) hereof
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede all prior and contemporaneous agreements,
representations, understandings, negotiations and discussions between the
parties, whether oral or written.
SECTION 4.4. Modifications and Amendments. No amendment, modification or
termination of this Agreement shall be binding upon any other party unless
executed in writing by the parties hereto intending to be bound thereby.
SECTION 4.5. Waivers and Extensions. Any party to this Agreement may
waive any right, breach or default which such party has the right to waive,
provided that such waiver will
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not be effective against the waiving party unless it is in writing, is signed by
such party, and specifically refers to this Agreement. Waivers may be made in
advance or after the right waived has arisen or the breach or default waived has
occurred. Any waiver may be conditional. No waiver of any breach of any
agreement or provision herein contained shall be deemed a waiver of any
preceding or succeeding breach thereof nor of any other agreement or provision
herein contained. No waiver or extension of time for performance of any
obligations or acts shall be deemed a waiver or extension of the time for
performance of any other obligations or acts.
SECTION 4.6. Titles and Headings. Titles and headings of sections of this
Agreement are for convenience only and shall not affect the construction of any
provision of this Agreement.
SECTION 4.7. Assignment. This Agreement is not transferable or assignable
by the Company or by the Purchaser.
SECTION 4.8. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
SECTION 4.9. Further Assurances. Each party hereto, upon the request of any
other party hereto, shall do all such further acts and execute, acknowledge and
deliver all such further instruments and documents as may be necessary or
desirable to carry out the transactions contemplated by this Agreement,
including, in the case of the Company, such acts, instruments and documents as
may be necessary or desirable to convey and transfer to the Purchaser the Shares
to be purchased by it hereunder.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have caused this Stock Purchase Agreement
to be executed and delivered by their duly authorized representatives as of the
date first written above.
CATALINA LIGHTING, INC.,
a Florida corporation
By: /s/ Xxxx Xxxxxxx
----------------------------------
Name: Xxxx Xxxxxxx
Title: Chief Financial Officer
SUN CATALINA HOLDINGS, LLC,
a Delaware limited liability company
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Co-CEO
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EXHIBIT A
CATALINA LIGHTING, INC. RISK FACTORS
You should carefully consider the risks and uncertainties described below
before deciding to purchase shares of our common stock. The risks and
uncertainties described below are not the only ones we face. Additional risks
and uncertainties not known to us or that we deem immaterial could also impair
our business. If any of the following risks actually occurs, our business,
financial condition or operating results could be negatively affected. If this
happens, you could lose part or all of your investment.
RISKS RELATED TO OUR BUSINESS AND OUR INDUSTRY
Our business could suffer if we are unable to develop and introduce new
products.
Despite our significant investments in product development, we may not be
successful in adding new products to our current product lines or in developing
new products. In addition, we seek to expand our product lines in market
segments in which we currently do not compete. The marketing efforts and
strategies for product extensions and new products may be substantially
different from those associated with our historical operations. If we are not
successful in adding new products to our current product lines or in developing
new products and effective marketing strategies, our operating results could be
adversely affected.
In the highly competitive market in which we operate, we may not be able to
compete effectively, especially against established competitors with
significantly greater financial resources.
The lighting industry in which we operate is highly competitive. We compete
primarily on the basis of product quality, design, customer service,
distribution strength, brand awareness and price. Competitors range from large
global diversified companies to foreign manufacturers. A number of our
competitors are divisions or subsidiaries of larger companies which have
substantially greater resources than we have. Competition could prevent the
institution of price increases or could require price reductions or increased
spending on product development and marketing and sales which could adversely
affect our results of operations.
We rely on third-party manufacturers to supply components used in our products.
A majority of the components utilized in our products are supplied by
third-party manufacturers. In the future, our suppliers may not be able to meet
our demand for components in a timely and cost-effective manner, and our
business, operating results, financial condition or customer relationships could
be adversely affected by either an increase in prices for, or an interruption or
reduction in supply of, key components.
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Inflation and economic conditions could have an adverse impact on our net sales
and income.
We periodically experience price increases in the costs of raw materials,
which could reduce our profitability due to an inability to immediately pass on
such price increases to our customers. Significant increases in the price of raw
materials could have an adverse impact on our net sales and income from
continuing operations.
Given our business's dependence on China, any restrictions placed on trade with
China in the future could adversely impact our operations and financial
position.
We obtain a very high percentage of the lighting products we sell from
factories located in China. Our ability to import products from China at current
tariff levels could be materially and adversely affected if trade relations with
China should change. At present, the U.S. government has granted "normal trade
relations" (formerly "most favored nation") status to China for trade and tariff
purposes. As a result of this status, China receives the same favorable tariff
treatment that the United States extends to its other "normal" trading partners.
Additionally, China was recently admitted to the World Trade Organization.
However, we cannot provide any assurance that China's World Trade Organization
membership or normal trade relations status will not change. In addition,
unforeseen events and circumstances could result in restrictions being placed on
trade with China in the future, which could adversely impact our business and
financial position.
Our failure to make or integrate acquisitions effectively could impair our
business.
As part of our business strategy, we intend to pursue strategic
acquisitions. We cannot assure you that we will succeed in consummating any such
acquisitions. If any such acquisitions are consummated, we cannot assure you
that such acquisitions will be successfully integrated or operated profitably.
Acquisitions can present significant challenges to management due to the
increased time and resources required to properly integrate management,
employees, accounting controls, personnel and administrative functions. We
cannot assure you that we will not encounter such difficulties or that we will
be able to realize the benefits that we hope to achieve from any future
acquisitions.
We may not be able to successfully maintain necessary financing arrangements and
to comply with the terms of our $75 million credit facility.
Our satisfaction of the terms of our $75 million credit facility in future
quarters depends on business and economic conditions, including demand for our
products. Our ability to make scheduled payments of the principal of, to pay
interest on, or to refinance, our indebtedness and to make scheduled payments
under our other obligations depends on our future performance, which is subject
to economic, financial, competitive and other factors beyond our control. Our
business may not continue to generate sufficient cash flow from operations in
the future to service our debt and make necessary capital expenditures after
satisfying liabilities arising in the ordinary course of business. If we are
unable to do so, we may be required to refinance all or a
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portion of our debt, sell assets or obtain additional financing, and we cannot
be assured of being able to complete such actions.
Product liability claims related to our products may exceed available insurance
coverage, and we may not be able to maintain our current levels of product
liability insurance.
We are engaged in a business which could expose us to possible claims for
injury resulting from the failure of our products to function as designed and
other product defects. We maintain primary product liability insurance coverage
of $1 million per occurrence and $5 million in the aggregate, as well as
umbrella insurance policies providing an aggregate of $75 million in excess
umbrella insurance coverage. The primary insurance coverage requires us to
self-insure for a maximum amount of $10,000 per incident. No assurance can be
given that any claims will not exceed available insurance coverage or that we
will be able to maintain this same level of insurance.
The world-wide terrorist attacks and the war on terrorism may result in any
number of adverse consequences to the economy, our industry in general and our
business in particular.
We are unable to predict, or even speculate as to, the adverse effects that
the worldwide terrorist attacks, the U.S.-led war on terrorism and any other
related or consequent military, political, social or economic affairs may have
on the world economy and our industry. Additionally, with operations and sales
both in the United States and abroad (including, to a significant extent, the
United Kingdom and China), we are susceptible to the effects faced by both U.S.-
and non-U.S.-based businesses.
RISKS RELATED TO OUR COMMON STOCK
Because our common stock is not listed on a national securities exchange, there
can be no assurance that an active trading market for the shares of common stock
will develop or, if developed, will be sustained.
On August 9, 1999, the New York Stock Exchange (the "NYSE") notified us
that it had changed its rules regarding continued listing for companies which
have shares traded on the NYSE. Through March 31, 2001, we did not meet the new
rules, which required a total market capitalization of $50 million and the
maintenance of minimum total shareholders' equity of $50 million. On April 5,
2001, the NYSE announced that it had determined that our common stock should be
removed from the list of companies trading on the NYSE. We decided not to appeal
the NYSE's decision. Since May 21, 2001, our common stock has been quoted on the
NASD Over-the-Counter Bulletin Board under the symbol "CALI.OB". We have applied
for listing on the Nasdaq SmallCap Market, but no assurance can be given that
our shares of common stock will be approved for listing or that, if approved, we
will meet the requirements for continued listing.
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