CONTINGENCY ESCROW AGREEMENT
AGREEMENT dated the 7th day of October, 1997 by and among the shareholders
of Lippert Components, Inc., a Pennsylvania corporation, set forth on Schedule
"1" hereto (individually, a "Shareholder" and collectively, the "Shareholders"),
Drew Industries Incorporated, a Delaware corporation ("Drew"), Lippert
Acquisition Corp., a Delaware corporation ("Subsidiary"), and The Chase
Manhattan Bank (the "Escrow Agent").
R E C I T A L S:
WHEREAS, Drew, Subsidiary, Lippert Components, Inc., ("Lippert") and the
Shareholders are parties to an Agreement and Plan of Merger (the "Agreement"),
effective the date hereof, relating to the merger of Lippert into Subsidiary
(the "Merger");
WHEREAS, Subsidiary is the surviving corporation in the Merger and will
change its name to Lippert Components, Inc.; and
WHEREAS, a portion of the consideration received by the Shareholders in
connection with the Merger is required to be deposited by the Shareholders with
the Escrow Agent to be held by and disbursed in accordance with the terms of
this Escrow Agreement,
NOW, THEREFORE, in consideration of these presents and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. The Shareholders have deposited with the Escrow Agent an aggregate of
Two Hundred Thirty Thousand Seven Hundred Sixty Nine (230,769) Drew Shares (as
defined in the Agreement) registered in the names of the Shareholders, together
with stock powers executed in blank, in the amounts set forth on Schedule "1"
annexed hereto (collectively, the "Escrow Fund"). The Escrow Fund shall at all
times remain under the dominion and control of the Escrow Agent, and only the
Escrow Agent shall have the right to disburse the Escrow Fund or any portion
thereof.
2. If Actual Operating Profit(as defined herein) of Subsidiary from the
manufacture of recreational vehicle chassis and related parts and the sale
thereof to Fleetwood Enterprises, Inc. or any successor thereto by virtue of
corporate reorganization (the "Fleetwood Chassis Business") during the period
from April 1, 1998 to March 31, 1999 is at least Seven Hundred Fifty Thousand
($750,000) Dollars (the "Minimum Operating Profit"), the Shareholders shall be
entitled to the entire Escrow Fund. If Subsidiary achieves less than the Minimum
Operating Profit, Drew shall be entitled to all or a portion of the Escrow Fund.
The Drew Shares shall be delivered by the Escrow Agent in the amounts and in the
manner provided in Section 2.2 hereof.
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2.1 For purposes of this Agreement, the term "Actual Operating
Profit" means income of Subsidiary from the Fleetwood Chassis Business before
(i) interest expense, (ii) interest or dividend income, (iii) amortization of
goodwill, (iv) amortization of any write-up of fixed assets or real estate
resulting from the Merger, (v) intercompany administrative fees charged to
Subsidiary by Drew, Kinro, Inc., or Shoals Supply, Inc. (subsidiaries of Drew),
(vi) taxes based upon income, (vii) extraordinary items determined in accordance
with generally accepted accounting principles, and (viii) fees or allocation of
expenses of Subsidiary's corporate office.
2.2 If Subsidiary achieves less than the Minimum Operating Profit,
the Shareholders shall be entitled to receive a number of Drew Shares equal to
230,769 multiplied by a fraction, the denominator of which is $750,000 and the
numerator of which is the Actual Operating Profit, and the remaining Drew Shares
shall be delivered to Drew. On or before May 15, 1999, Drew and Subsidiary shall
prepare and deliver to the Shareholders a statement reflecting the Actual
Operating Profit and the proposed distribution of the Drew Shares held in the
Escrow Fund (the "Statement"). Not later than ten (10) days from delivery of the
Statement, Drew and the Shareholders shall jointly direct the Escrow Agent to
deliver the Drew Shares in the Escrow Fund to the Shareholders or to Drew, as
the case may be, in the amounts set forth in the Statement.
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2.3 In the event of any disagreement between Drew and the
Shareholders regarding the Actual Operating Profit or the proposed distribution
of Drew Shares, within ten (10) days after the delivery of the Statement, Drew
and the Shareholders shall each designate a certified public accountant and the
accountants so designated shall, within five (5) days thereafter, select a third
independent certified public account (the "Designated Accountant"). The
Designated Accountant shall be empowered to resolve all disagreements between
Drew and the Shareholders relating to the Actual Operating Profit and
distribution of the Drew Shares. The Designated Accountant's decision shall be
made within thirty (30) days after his or her appointment, and shall be
conclusive and binding on Drew and the Shareholders. Drew and the Shareholders
shall cooperate with and assist the Designated Accountant in good faith, and
shall promptly respond to all reasonable requests for information and materials.
All fees and expenses incurred by and in connection with the Designated
Accountant shall be shared equally by Drew and the Shareholders.
2.3.1 As soon as practicable after receiving the Designated
Accountant's decision, the Escrow Agent shall deliver the Drew Shares in
accordance therewith. Any delivery of Drew Shares shall be made together with
stock powers executed in blank with respect to such Drew Shares.
3. (Intentionally omitted)
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4. Upon delivery of such Drew Shares, the recipient thereof may register
the Drew Shares in the recipient's name, and may thereafter, exercise all voting
and corporate rights with respect to such Drew Shares, and exercise any and all
rights of conversion, sale, transfer, exchange, subscription, cancellation or
any other rights, privileges or options pertaining to any or all of such Drew
Shares as if it were the absolute owner thereof, including, without limitation,
the right to exchange, at its discretion, any or all of the Drew Shares upon the
merger, consolidation, reorganization, recapitalization, or other readjustment
of Drew, or upon the exercise by the holder thereof of any right, privilege or
option pertaining to any or all of such Drew Shares, and in connection
therewith, to deposit and deliver any or all of such Drew Shares with any
committee, depository, transfer agent, registrar or other designated agency, or,
in the case of Drew, retire and cancel the Drew Shares, or retain the Drew
Shares as treasury shares subject to disposition at the discretion of Drew, all
upon such terms and conditions as the holder thereof may determine, subject to
applicable federal and state securities laws and agreements between Drew and the
Shareholders.
5. In addition to the foregoing, the recipient of said Drew Shares may, at
any time after delivery thereof without demand of performance or other demand,
advertisement, or notice of any kind to or upon the other party hereto or any
other person (all and each of which demands, advertisements and/or notices are,
to the extent
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permitted by law, hereby expressly waived), forthwith collect, receive,
appropriate and realize upon such Drew Shares, or any part thereof, and
forthwith sell, assign, give options to purchase, contract to sell, retire and
cancel, retain as treasury shares subject to disposition, or otherwise dispose
of and deliver such Drew Shares, or any part thereof, in one or more parcels at
public or private sale or sales on any exchange, broker's board or at any of the
recipient's offices or elsewhere at such prices and on such terms as it may deem
appropriate, subject to applicable federal and state securities laws and
agreements between Drew and the Shareholders.
6. Subject to the provisions of Section 11 hereof, at such time as the
Escrow Agent shall receive a notice signed by Drew and the Shareholders
regarding delivery of Drew Shares, the Escrow Agent is hereby irrevocably
authorized and directed by the Shareholders, Drew and Subsidiary to disburse the
Drew Shares in the amounts set forth in such notice in the manner and to the
party provided therein.
7. Drew, Subsidiary and the Shareholders hereby agree that the Drew Shares
shall, at the time of delivery thereof to the Escrow Agent, be registered in the
name of the Shareholders and shall continue to be so registered unless
registered in the name of Drew in accordance with the terms of this Escrow
Agreement. Unless and until the Drew Shares are so registered in the name of
Drew, the
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Shareholders shall be entitled to vote the Drew Shares with the same rights as
are afforded to the other holders of Drew Common Stock, and to receive and
retain any cash or, subject to Section 15.4 hereof, stock dividends paid in
respect thereof. The Escrow Agent shall have no responsibility to register the
Drew Shares in the names of Drew or the Shareholders.
8. On or about October 1, 1999, the Escrow Agent shall deliver the
remaining Escrow Fund to the Shareholders, in the same amounts or proportions as
delivered by the Shareholders to the Escrow Agent, less the number of Drew
Shares which may be, at such time, subject to a claim in accordance with this
Escrow Agreement.
9. This Escrow Agreement shall terminate at such time as the Escrow Fund
is fully disbursed in accordance with the terms contained herein, and thereupon
the Escrow Agent shall be released, discharged and acquitted of all obligations
and liabilities hereunder and any claims made by or on behalf of any party to
this Escrow Agreement.
10. If the Escrow Agent shall receive any notice not in the form provided
for in this Escrow Agreement, the Escrow Agent shall be entitled to refuse to
comply with any such notice without any liability for damages to any party
hereto; provided, however, that in the event a notice not in the form provided
for hereunder is delivered to the Escrow Agent, the Escrow Agent shall promptly
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notify the Shareholders, Drew and Subsidiary thereof specifying the defects in
the form of notice. Upon such notification of receipt of a defective notice, the
notifying party may submit a new notice.
11. If conflicting demands are made or conflicting notices are delivered
to the Escrow Agent with respect to this Escrow Agreement, the parties hereto
agree that the Escrow Agent shall be entitled to refuse to comply with any such
claim or demand and to withhold and stop all further proceedings in the
performance of this Escrow Agreement so long as such disagreement shall
continue. In so doing, the Escrow Agent shall not be nor become liable for
damages to the parties hereto or to any person for its failure to comply with
such conflicting or adverse demands. The Escrow Agent shall be entitled to
continue to so refrain and refuse to act until the rights of the adverse
claimants have been finally adjudicated in a court having jurisdiction of the
parties and/or all differences shall have been adjusted by mutual agreement, and
the Escrow Agent may, but shall not be obligated to, file a suit in interpleader
for declamatory judgment for the purpose of having the respective rights of the
claimants adjudicated, and deposit the Escrow Fund with the court. The
Shareholders, Drew and Subsidiary jointly and severally agree to pay all costs
and expenses including attorneys' fees, incurred by the Escrow Agent in
connection therewith, the amount thereof to be fixed and a judgment thereof to
be rendered by the court in such suit. In the event that the Escrow Agent makes
a deposit of the Escrow Fund hereunder into the court,
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then the Escrow Agent shall be fully released and discharged from any and all
duties or obligations that it may have under this Escrow Agreement.
12. The Escrow Agent shall act hereunder as a depository only and, except
for the Escrow Agent's willful misconduct or gross negligence, shall not be
responsible or liable in any manner whatsoever for the sufficiency, correctness,
genuineness or validity of any instrument or signature thereon deposited with or
delivered hereunder, or with respect to the form or execution of same, or the
identity, authority or rights of any person executing or depositing or
delivering the same. The Escrow Agent may act in reliance on any instrument
believed to be genuine and may assume that any person purporting to give any
written notice, advice or instruction in connection with the provisions hereof
has been duly authorized to do so. The Escrow Agent is neither a party to nor
bound by any agreement which may be deposited with, delivered to, evidenced by,
or arise out of this Escrow Agreement.
13. The Shareholders, on the one hand, and Drew and Subsidiary on the
other hand, jointly and severally, agree to indemnify and hold the Escrow Agent
harmless from all suits, claims, actions, judgments, losses, liability, fees,
costs, expenses, damages or other charges, including, without limitation,
reasonable attorneys' fees, which may be imposed upon, or incurred by, the
Escrow Agent, in connection with the performance of his duties hereunder, except
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with respect to any suits, claims, actions, judgments, losses, liability, fees,
costs or expenses incurred as a result of the Escrow Agent's willful misconduct
or gross negligence. The foregoing indemnification shall survive termination of
this Escrow Agreement.
14. It is understood and agreed that the Escrow Agent's only duties and
obligations hereunder are as expressly set forth in this Escrow Agreement. The
Escrow Agent shall not be subject to, nor obligated to recognize, any other
agreements to which the Shareholders, Drew, and/or Subsidiary are parties.
Reference in this Escrow Agreement to the "Agreement" is for identification
purposes only and its terms and conditions are not thereby incorporated herein.
The Escrow Agent shall not be liable for any action taken or omitted hereunder
except in the case of the Escrow Agent's willful misconduct or gross negligence.
15. The Shareholders hereby jointly and severally warrant and represent to
Drew and Subsidiary and agree with Drew and Subsidiary as follows:
15.1 The Drew Shares are owned by the Shareholders free and clear of
all liens and encumbrances of any kind, nature or description, created or
permitted by the Shareholders or asserted against the Shareholders as of the
date hereof, and there are no restrictions upon the transfer of any of the Drew
Shares (except
10
pursuant to applicable securities laws and agreements with Drew) which have not
been consented to in writing, and the Shareholders have the right to transfer
the Drew Shares free and clear of any such liens or encumbrances.
15.2 This Agreement constitutes the legal, valid and binding
obligation of Drew, Subsidiary, and the Shareholders in accordance with its
terms.
15.3 The Shareholders agree that they will not cause or permit any
transfer, pledge or encumbrance of the Drew Shares comprising the Escrow Fund
for the term of this Agreement.
15.4 So long as any Drew Shares are held by the Escrow Agent
pursuant to the terms hereof, the Shareholders shall deposit with the Escrow
Agent (to be held pursuant to the terms hereof) any additional shares which they
shall be entitled to receive in respect of the Drew Shares held by the Escrow
Agent by way of conversion, stock dividend, stock split, reclassification,
recapitalization or corporate reorganization; provided, however, that the Escrow
Agent shall not be charged with knowledge of such conversion, stock dividend,
stock split, reclassification, recapitalization or corporate reorganization. The
term "Drew Shares", as used herein, shall include any such additional shares to
be delivered to the Escrow Agent.
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15.5 The parties hereto agree that at any time and from
time-to-time, upon written request, they will execute and deliver such further
documents and do such further acts and things as may be reasonably requested in
order to effect the purposes of this Agreement.
15.6 All notices and other communications hereunder shall be in
writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person, telegram, telex, facsimile or other standard
form of telecommunication, or by registered or certified post-paid mail, return
receipt requested, and addressed as follows, or to such other address as any
party may notify the other in accordance with the provisions hereof:
If to the Escrow Agent:
The Chase Manhattan Bank
1 Chase Square Tower
10th Floor
Rochester, New York 14643
Attention: Mary Pat Feeney
Telephone: (716) 258-6658
Telecopy: (716) 258-6560
If to Drew or Subsidiary:
Drew Industries Incorporated
200 Mamaroneck Avenue
White Plains, NY 10601
Attention: President
Telephone: (914) 428-9098
Telecopy: (914) 428-4581
with a copy to:
Harvey F. Milman, Esq.
Gilbert, Segall and Young LLP
430 Park Avenue
New York, New York 10022
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Telephone: (212) 644-4012
Telecopy: (212) 644-4051
If to the Shareholders:
c/o L. Douglas Lippert
115 Golfside Drive
Alma, MI 48801
Telephone:
Telecopy:
with a copy to:
Couzens, Lansky, Fealk, Ellis, Roeder
& Lazar, P.C.
33533 West Twelve Mile Road, Suite 150
P.O. Box 9057
Farmington Hills, MI 48333-9057
Attention: Jeffrey Levine, Esq.
Telephone: (248) 489-8600
Telecopy: (248) 489-4156
16. The Escrow Agent may consult with, and obtain advice from, legal
counsel of its own selection in the event of any dispute or question as to the
construction of any of the provisions hereof or its duties hereunder, and the
Escrow Agent shall not incur any liability whatsoever if the Escrow Agent acts
or omits to act hereunder in good faith in accordance with the opinion and
instructions of such counsel.
17. If any term or provision of this Escrow Agreement or the application
thereof to any person or circumstances shall be invalid or unenforceable, the
remainder of this Escrow Agreement, or the application of such term or provision
to persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Escrow Agreement shall be valid and be enforced to the fullest
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extent permitted by law.
18. This Escrow Agreement contains the entire agreement between the
parties hereto and shall be binding upon and inure to the benefit of their
respective legal representatives, successors and assigns. Any agreement
hereafter made shall be ineffective to change, modify, waive, release,
discharge, terminate or effect an abandonment of this Escrow Agreement, in whole
or in part, unless such agreement is in writing and signed by the party against
whom enforcement of the change, modification, waiver, release, discharge,
termination or the effecting of the abandonment is sought.
19. This Escrow Agreement may be executed in separate counterparts each of
which shall be an original of this Escrow Agreement and which, when taken
together, shall constitute the entire Escrow Agreement between the parties
hereto.
20. This Agreement shall be governed by the laws of the State of Delaware,
without giving effect to the principles of conflicts of laws, including, but not
limited to, matters of construction, validity and performance. Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the United States
District Court for the District of Delaware and any court of competent
jurisdiction of the State of Delaware located in the city of Wilmington over any
suit, action or proceeding arising out of or
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relating to this Agreement. Each party hereby irrevocably waives to the fullest
extent permitted by law, (i) any objection that they may now or hereafter have
to the venue of any such suit, action or proceeding brought in any such court,
(ii) any claim that any such suit, action or proceeding has been brought in an
inconvenient forum, and (iii) all right to trial by jury in any proceeding
enforcing or defending any rights under this Agreement or relating hereto. Final
judgment in any such suit, action or proceeding brought in any such court shall
be conclusive and binding upon each party duly served with process therein and
may be enforced in the courts of the jurisdiction of which either party or any
of its property is subject, by a suit upon such judgment.
21. In connection with any legal proceeding arising hereunder between Drew
and the Subsidiary on the one hand, and the Shareholders on the other hand, the
prevailing party, by motion, on the merits, or otherwise, shall be reimbursed by
the other party for all costs and expenses, including reasonable attorneys'
fees, paid or incurred by the prevailing party in prosecuting or defending such
proceeding.
22. If the Escrow Agent is an attorney or law firm representing one of the
parties or any other individual or entity involved in the aforesaid transaction,
then the parties hereby consent to the continuance of said representation and
agree that it shall not constitute a conflict of interest.
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23. Drew agrees to pay the Escrow Agent a fee of $1,500 per year for its
services hereunder, together with reasonable counsel fees (including the
allocated cost of in-house counsel) and other out-of-pocket expenses incurred by
the Escrow Agent in the performance of its duties. The Escrow Agent reserves the
right to increase, decrease or modify its annual fee upon 60 days' written
notice to Drew. The compensation, counsel fees, if any, and expenses so payable
shall be paid by Drew to the Escrow Agent, from time to time, upon the written
request of the Escrow Agent.
24. The Escrow Agent, or any successor to it hereafter appointed, may at
any time resign and be discharged of the duties and obligations created by this
Escrow Agreement by giving at least 30 days' prior written notice to the parties
hereto. The Escrow Agent may be removed at any time upon 60 days' notice by an
instrument signed by authorized representatives of the Shareholders, Drew and
Subsidiary. Any successor escrow agent shall be approved by Drew and the
Shareholders. Any such successor escrow agent shall deliver to the parties
hereto a written instrument accepting such appointment hereunder and shall take
delivery of the Escrow Fund to hold and distribute in accordance with the terms
hereof. If no successor escrow agent shall have been appointed within 30 days
after the parties hereto are notified of the Escrow Agent's resignation or
within 60 days after the Escrow Agent is notified of its removal, the Escrow
Agent shall
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deliver the Escrow Fund to an attorney designated by Drew and the Shareholders.
Upon the delivery of the Escrow Fund in accordance with this Section 23, the
Escrow agent shall be discharged from any further duties hereunder.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
ATTEST: DREW INDUSTRIES INCORPORATED
/s/ Fredric M. Zinn By: /s/ Leigh J. Abrams
- ------------------------------- -----------------------------------
President and Chief Executive
Officer
ATTEST: LIPPERT ACQUISITION CORP.
/s/ Fredric M. Zinn By: /s/ Leigh J. Abrams
- ------------------------------- -----------------------------------
President
WITNESS: THE SHAREHOLDERS:
L. Douglas Lippert Living Trust, dated
June 6, 1989
/s/ Gary McPhail By: /s/ L. Douglas Lippert
- ------------------------------- -----------------------------------
L. Douglas Lippert, Trustee
/s/ Gary McPhail /s/ Jason D. Lippert
- ------------------------------- --------------------------------------
Jason D. Lippert
Lippert Family Irrevocable Trust f/b/o
Jason D. Lippert, dated December 20,
1986
Lippert Family Irrevocable Trust f/b/o
Joshua E. Lippert, dated December 20,
1986
Lippert Family Irrevocable Trust f/b/o
Steven Shawn Lippert, dated December
20, 1986
Lippert Family Irrevocable Trust f/b/o
Jarod B. Lippert, dated December 20,
1986
Lippert Family Irrevocable Trust f/b/o
Jaime R. Lippert, dated December 20,
1986
Lippert Family Irrevocable Trust f/b/o
Jayde S. Lippert, dated December 20,
1986
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By: Lippert Family Irrevocable
Trust, dated December 20,
1986
/s/ Gary McPhail By: /s/ Larry Douglas Lippert
- ------------------------------- ------------------------------
Larry Douglas Lippert,
Co-Trustee
By: Steven Lyn Lippert
- ------------------------------- Co-Trustee
/s/ Gary McPhail By: /s/ L. Douglas Lippert
- ------------------------------- ------------------------------
L. Douglas Lippert,
Attorney-in-Fact
ESCROW AGENT:
The Chase Manhattan Bank
By:
-----------------------------------
Name: Mary Pat Feeney
Title: Second Vice President
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By: Lippert Family Irrevocable
Trust, dated December 20,
1986
/s/ Gary McPhail By: /s/ Larry Douglas Lippert
- ------------------------------- ------------------------------
Larry Douglas Lippert,
Co-Trustee
By: Steven Lyn Lippert
- ------------------------------- Co-Trustee
/s/ Gary McPhail By: /s/ L. Douglas Lippert
- ------------------------------- ------------------------------
L. Douglas Lippert,
Attorney-in-Fact
ESCROW AGENT:
The Chase Manhattan Bank
By: /s/ Mary Pat Feeney
-----------------------------------
Name: Mary Pat Feeney
Title: Second Vice President
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SCHEDULE 1
NAME OF SHAREHOLDER NUMBER OF DREW SHARES
- ------------------- ---------------------
L. Douglas Lippert Living Trust, 142,843
dated June 6, 1989
Lippert Family Irrevocable Trust 4,924
f/b/o Jason D. Lippert, dated
December 20, 1986
Lawrence C. Lippert 11,769
Dorothy F. Lippert 31,846
Jason D. Lippert 2,462
Lippert Family Irrevocable Trust 7,385
f/b/o Joshua E. Lippert, dated
December 20, 1986
Lippert Family Irrevocable Trust 7,385
f/b/o Steven Shawn Lippert, dated
December 20, 1986
Lippert Family Irrevocable Trust 7,385
f/b/o Jarod B. Lippert, dated
December 20, 1986
Lippert Family Irrevocable Trust 7,385
f/b/o Jaime R. Lippert, dated
December 20, 1986
Lippert Family Irrevocable Trust 7,385
f/b/c Jayde S. Lippert, dated
December 20, 1986
Totals: 230,769