Exhibit 10.5
SUBSCRIPTION AND STOCK PURCHASE AGREEMENT
This Subscription and Stock Purchase Agreement (the "Agreement") is
entered into as of the 27th day of September, 1999, by and between HF Holdings,
Inc., a Delaware corporation (the "Company"), and HF Investment Holdings, LLC, a
Delaware limited liability company ("HF LLC").
WHEREAS, the Company and ICON Health & Fitness, Inc. ("Health & Fitness")
have made an exchange offer, pursuant to the Exchange Offer and Consent
Solicitation, dated July 30, 1999, as supplemented (the "Exchange Offer"), for
all outstanding 13% Senior Subordinated Notes due 2002 of Health & Fitness ("13%
Notes"), 15% Senior Secured Discount Notes due 2004 of IHF Holdings, Inc. ("15%
Notes"), and 14% Senior Discount Notes due 2006 of ICON Fitness Corporation
("14% Notes");
WHEREAS, HF LLC, as the "Non-CSFB Investors LLC" under the term sheet,
dated July 8, 1999, as amended and attached to the Exchange Offer as Annex H
(the "Term Sheet"), wishes to purchase from the Company, and the Company wishes
to sell and issue to HF LLC, shares of the Company's common stock, par value
$.001 per share ("Common Stock"), upon the terms and conditions herein set
forth;
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties to this Agreement, intending to be legally bound,
mutually agree as follows:
ARTICLE I
Purchase and Sale of Shares
1.1 Sale and Issuance of Shares. Subject to the terms and conditions of
this Agreement, HF LLC does hereby subscribe for and agrees to purchase at the
Closing (as defined below), and the Company does hereby agree to sell to HF LLC
at the Closing, five million one hundred sixty thousand thirty-five (5,160,035)
shares (the "Shares") of Common Stock.
1.2 Purchase Price. In consideration for the sale of the Shares by the
Company to HF LLC hereunder, HF LLC shall pay to the Company an amount (the
"Purchase Price") equal to thirty million dollars ($30,000,000).
1.3 Closing. The purchase, sale and issuance of the Shares hereunder shall
occur at a closing (the "Closing") to be held immediately prior to, and
conditioned upon, the closing of
the transactions contemplated by the Term Sheet (the "ICON Restructuring"). At
the Closing, and upon payment of the Purchase Price, the Company shall issue and
deliver to HF LLC, or its nominee, a certificate representing the Shares.
Payment of the Purchase Price shall be made at the Closing by delivery of a wire
transfer of same day funds denominated in U.S. dollars, unless otherwise
mutually agreed in writing with the Company.
ARTICLE II
Representations and Warranties of the Company
2.1 Organization and Standing. The Company represents and warrants that it
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted.
2.2 Authorization. The Company represents and warrants that all corporate
action on the part of the Company necessary for the authorization, execution,
delivery and performance of this Agreement by the Company, and for the
authorization, issuance and delivery of the Shares being sold under this
Agreement, has been taken. This Agreement, when executed and delivered by all
parties hereto, shall constitute the valid and legally binding obligation of the
Company, except to the extent the enforceability thereof may be limited by
bankruptcy laws, insolvency laws, reorganization laws, moratorium laws or other
laws affecting creditors' rights generally or by general equitable principles.
2.3 Validity of Shares. The Company represents and warrants that the
Shares, when sold, issued and delivered in accordance with the terms of this
Agreement, shall be duly and validly issued, fully paid and nonassessable, and
free and clear of all liens, encumbrances and restrictions of any kind, except
as contemplated hereunder and under the Stockholders Agreement (the
"Stockholders Agreement"), attached as Annex C to the Exchange Offer.
ARTICLE III
Representations, Warranties and Agreements of HF LLC
3.1 Organization and Standing. HF LLC represents and warrants that it is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite power and
authority to carry on its business as now conducted and as proposed to be
conducted.
3.2 Authorization. HF LLC represents and warrants that all action on the
part of HF LLC necessary for the authorization, execution, delivery and
performance of this Agreement by HF LLC has been taken, and that this Agreement,
when executed and delivered by all parties hereto, shall constitute the valid
and legally binding obligation of HF LLC,
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except to the extent the enforceability thereof may be limited by bankruptcy
laws, insolvency laws, reorganization laws, moratorium laws or other laws
affecting creditors' rights generally or by general equitable principles.
3.3 Investment Representations and Undertakings.
(a) HF LLC hereby represents that (i) the Shares will be acquired by
it for investment for its own account, not as a nominee or agent, and not
with a view to the sale or distribution of any part thereof in violation
of applicable federal and state securities laws, and (ii) it has no
current intention of selling or otherwise distributing the same in
violation of applicable federal and state securities laws. By executing
this Agreement, HF LLC further represents that it does not have any
contract, undertaking, agreement or arrangement with any person to sell or
otherwise transfer to such person, or to any other person, any of the
Shares in violation of applicable federal and state securities laws;
(b) HF LLC understands that the Shares have not been registered
under the Securities Act of 1933, as amended (the "1933 Act") on the basis
that the sale provided for in this Agreement and the issuance of
securities hereunder is exempt from registration under the 1933 Act
pursuant to Section 4(2) thereof and regulations issued thereunder, and
that the Company's reliance on such exemption is in part predicated on
representations of HF LLC set forth in this Agreement;
(c) HF LLC represents that it has such knowledge in financial and
business matters as to be capable of evaluating the merits and risks of
its investment and that it is an "accredited investor" as such term is
defined in Regulation D promulgated pursuant to Section 4(2) of the 1933
Act. HF LLC further represents that it has had access, during the course
of the transactions contemplated hereby and prior to its purchase of
Shares, to the same kind of information that is specified in Part I of a
registration statement under the 1933 Act and that it has had, during the
course of the transactions contemplated hereby and prior to its purchase
of the Shares, the opportunity to ask questions of, and receive answers
from, the Company (and Health & Fitness) concerning the terms and
conditions of the Exchange Offer and to obtain additional information (to
the extent the Company (and Health & Fitness) possessed such information
or could acquire it without unreasonable effort or expense) necessary to
verify the accuracy of any information furnished to it or to which it had
access. HF LLC understands that no federal or state agency has passed upon
this investment or upon the Company, nor has any such agency made any
finding or determination as to the fairness of this investment;
(d) HF LLC understands that the Shares may not be sold, transferred
or otherwise disposed of without registration under the 1933 Act or an
exemption therefrom and, in the absence of an effective registration
statement covering the Shares
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or an available exemption from registration under the 1933 Act, that the
Shares may have to be held indefinitely and, as a consequence, that HF LLC
must be prepared to bear the economic risk of this investment for an
indefinite period of time. In that regard, HF LLC understands and
acknowledges that, except as may be provided in the Stockholders
Agreement, the Company is under no duty or obligation, contractual or
otherwise, to register the Shares under the 1933 Act or to comply with the
terms of any exemption thereunder. In particular, HF LLC acknowledges that
it is aware that the Shares may not be sold pursuant to Rule 144
promulgated under the 1933 Act unless all of the conditions of that Rule
are met. Among the current conditions for use of Rule 144 by certain
holders is the availability to the public of current information about the
Company. Such information is not now available, and the Company has no
current plans to make such information available. HF LLC represents that,
in the absence of an effective registration statement covering the Shares,
it will sell, transfer or otherwise dispose of the Shares only in a manner
consistent with its representations set forth herein and then only in
accordance with the Stockholders Agreement; and
(e) HF LLC also understands and acknowledges that the Stockholders
Agreement imposes certain obligations with respect to and additional
restrictions on transferability of the Shares and, that as a party to the
Stockholders Agreement, that the certificates issued to it evidencing the
Shares will bear certain legends, restricting transferability of the
Shares, all as required by the Stockholders Agreement.
ARTICLE IV
Conditions to Obligations of HF LLC at Closing
The obligations of HF LLC under Article I of this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions:
4.1 Representations and Warranties. The representations and warranties of
the Company contained in Article II hereof shall be true and correct on and as
of the Closing with the same force and effect as if they had been made at the
Closing.
4.2 Performance. The Company shall have performed and complied with all
agreements and conditions contained in this Agreement required to be performed
or complied with by it on or before the Closing.
4.3 Restructuring Conditions. All conditions to the obligation of HF LLC
to consummate the ICON Restructuring under the Term Sheet shall have been
satisfied or waived.
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ARTICLE V
Conditions to the Obligations of the Company at Closing
The obligations of the Company under Article I of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions:
5.1 Representations and Warranties. The representations and warranties of
HF LLC contained in Article III hereof shall be true and correct on and as of
the Closing Date with the same force and effect as if they had been made at the
Closing.
5.2 Performance. HF LLC shall have performed and complied with all
agreements and conditions contained in this Agreement required to be performed
or complied with by it on or before the Closing.
5.3 Restructuring Conditions. HF LLC shall have executed and delivered a
counterpart copy of the Stockholders Agreement, and all other conditions to the
obligation of the Company to consummate the ICON Restructuring under the Term
Sheet shall have been satisfied or waived.
ARTICLE VI
Mutual Conditions Precedent
The obligations of the Company and HF LLC under Article I of this
Agreement are subject to the fulfillment on or before the Closing of each of the
following conditions:
6.1 Qualifications. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Shares pursuant to this Agreement shall have been duly obtained and shall be
effective.
ARTICLE VII
Miscellaneous
7.1 No Waiver; Modifications in Writing. This Agreement sets forth the
entire understanding of the parties, and supersedes all prior agreements,
arrangements and communications, whether oral or written, with respect to the
subject matter hereof. No waiver of or consent to any departure from any
provision of this Agreement shall be effective unless signed in writing by the
party entitled to the benefit thereof. Except as otherwise provided herein, no
amendment, modification or termination of any provision of this Agreement shall
be effective unless signed in writing by or on behalf of the Company and HF LLC.
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7.2 Taxes. The Company shall pay any and all stamp, transfer and other
similar taxes payable or determined to be payable in connection with the
execution and delivery of this Agreement and the original issuance of the
Shares, but excluding all federal, state and local income or similar taxes, and
shall save and hold HF LLC harmless from and against any and all liabilities
with respect to or resulting from any delay in paying, or omission to pay, such
taxes.
7.3 Counterparts. This Agreement may be executed in multiple counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
but all of which taken together shall constitute one and the same Agreement.
7.4 Binding Effect; Assignment. The rights and obligations of HF LLC under
this Agreement may not be assigned to any other person. Except as expressly
provided in this Agreement, this Agreement shall not be construed so as to
confer any right or benefit upon any person other than the parties to this
Agreement, and their respective successors and permitted assigns. This Agreement
shall be binding upon the Company and HF LLC, and their respective successors
and permitted assigns.
7.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of the State of Delaware as to all
matters, including but not limited to matters of validity, construction, effect,
performance and remedies, but without giving effect to any choice or conflict of
laws provision or rule that would cause the application of the domestic
substantive laws of any other jurisdiction.
7.6 Severability of Provisions. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
7.7 Headings. The Article and Section headings used or contained in this
Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
7.8 Injunctive Relief. Each of the parties to this Agreement hereby
acknowledges that in the event of a breach by any of them of any material
provision of this Agreement, the aggrieved party may be without an adequate
remedy at law. Each of the parties therefore agrees that, in the event of a
breach of any material provision of this Agreement, the aggrieved party may
elect to institute and prosecute proceedings to enforce specific performance or
to enjoin the continuing breach of such provision, as well as to obtain damages
for breach of this Agreement. By seeking or obtaining any such relief, the
aggrieved party will not be precluded from seeking or obtaining any other relief
to which it may be entitled.
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7.9 Survival of Agreements, Representations and Warranties. All
agreements, representations and warranties contained herein or made in writing
by or on behalf of the Company or HF LLC, as the case may be, in connection with
the transactions contemplated by this Agreement shall survive the execution and
delivery of this Agreement and the sale and purchase of the Shares and payment
therefor.
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WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as an instrument under seal, as of the date first above written.
HF HOLDINGS, INC.
By: /s/ S. Fred Beck
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Name: S. Fred Beck
Title: Chief Financial Officer, Vice
President & Treasurer
HF INVESTMENT HOLDINGS, LLC
By: /s/ Gary E. Stevenson
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Name: Gary E. Stevenson
Title: Administrative Member
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