EXECUTION COPY

 

 

 

 

SECURITIES PURCHASE AGREEMENT

BY AND AMONG

TONTINE CAPITAL PARTNERS, L.P.,

TONTINE CAPITAL OVERSEAS MASTER FUND, L.P.

AND

PATRICK INDUSTRIES, INC.

 

 

MARCH 10, 2008

 

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TABLE OF CONTENTS

 

 

Page

ARTICLE 1 Definitions

1

ARTICLE 2 Purchase and Sale of Shares

3

 

2.1 Purchase of Shares

3

 

2.2 Purchase Price for Shares and Form of Payment; Delivery

4

 

2.3 Closing Date

4

ARTICLE 3 Buyers’ Representations and Warranties

4

 

3.1 Organization and Qualification

4

 

3.2 Authorization; Enforcement

4

 

3.3 Securities Matters

4

 

3.4 Information

5

 

3.5 Restrictions on Transfer

5

 

3.6 Stock Ownership

5

ARTICLE 4 Representations and Warranties of the Company

6

 

4.1 Organization and Qualification

6

 

4.2 Authorization; Enforcement

6

 

4.3 Capitalization; Valid Issuance of Shares

6

 

4.4 No Conflicts

7

 

4.5 SEC Documents; Financial Statements.

7

 

4.6 Absence of Certain Changes

8

 

4.7 Absence of Litigation

8

 

4.8 Intellectual Property

8

 

4.9 Tax Status

9

 

4.10 Permits; Compliance.

9

 

4.11 Environmental Matters

10

 

4.12 Title to Property

10

 

4.13 No Investment Company or Real Property Holding Company

10

 

4.14 No Brokers

11

 

4.15 Registration Rights

11

 

4.16 Exchange Act Registration

11

 

4.17 Labor Relations

11

 

4.18 Transactions with Affiliates and Employees

11

 

4.19 Insurance

11

 

4.20 Approved Acquisitions of Shares; No Anti-Takeover Provisions

11

 

4.21 ERISA

12

 

4.22 Disclosure

12

ARTICLE 5 Covenants

12

 

5.1 Form D; Blue Sky Laws

12

 

5.2 Use of Proceeds

12

 

5.3 Expenses

12

 

5.4 No Integration

12

 

5.5 Board Designee(s)

13

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5.6 Future Acquisitions

13

 

5.7 Announcement of Rights Offering

13

ARTICLE 6 Conditions To The Company’s Obligation

13

 

 

6.1 Delivery of Transaction Documents

13

 

6.2 Payment of Purchase Price

13

 

6.3 Representations and Warranties

13

 

6.4 Litigation

13

ARTICLE 7 Conditions to The Buyers’ Obligation

14

 

7.1 Delivery of Transaction Documents; Issuance of Shares

14

 

7.2 Representations and Warranties

14

 

7.3 Consents

14

 

7.4 Litigation

14

 

7.5 Opinion

14

 

7.6 No Material Adverse Change

14

 

7.7 Board Approval

14

 

7.8 Amendment of Rights Plan

14

 

7.9 Control Share Statute

14

 

7.10 Standby Purchase Agreement.

15

ARTICLE 8 Termination

15

 

8.1 Termination Provisions

15

 

8.2 Effect of Termination

15

ARTICLE 9 Indemnification

15

 

9.1 Indemnification by the Company

15

 

9.2 Notification

16

ARTICLE 10 Governing Law; Miscellaneous

16

 

10.1 Governing Law

16

 

10.2 Counterparts; Electronic Signatures

16

 

10.3 Headings

17

 

10.4 Severability

17

 

10.5 Entire Agreement; Amendments

17

 

10.6 Notices

17

 

10.7 Successors and Assigns

18

 

10.8 Third Party Beneficiaries

18

 

10.9 Publicity

18

 

10.10 Further Assurances

18

 

10.11 No Strict Construction

18

 

10.12 Rights Cumulative

18

 

10.13 Survival

18

 

10.14 Knowledge

19

 

 

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SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT, dated as of March 10, 2008, is entered into
by and among PATRICK INDUSTRIES, INC., an Indiana corporation (the “Company”),
and the investors identified on the signature page hereto (each a “Buyer” and
collectively, the “Buyers”).

RECITALS:

A.        The Buyers desire to provide financing to the Company, and the Company
desires to obtain financing from the Buyers, upon the terms and conditions set
forth in this Agreement, in connection with the Company’s prepayment of a
portion of the outstanding principal and accrued interest under the Senior
Subordinated Promissory Notes dated as of May 18, 2007, and issued by the
Company to the Buyers in connection with financing the Company’s acquisition of
Adorn Holdings, Inc. (individually, a “Note” and collectively, the “Notes”);

B.        The total financing being provided by the Buyers to the Company
hereunder shall consist of the purchase by the Buyers of 1,125,000 shares (the
“Shares”) of Common Stock, no par value, of the Company, which constitutes 18.7%
of the Common Stock currently outstanding, at $7.00 per share, for a total
purchase price of $7,875,000;

C.        Concurrently with the execution of this Agreement, the Buyers and the
Company are entering into a Standby Purchase Agreement (the “Standby Purchase
Agreement”), pursuant to which the Buyers are agreeing, subject to certain
conditions and limitations, to purchase from the Company in a proposed rights
offering to be initiated after the closing of the transactions contemplated
hereunder (i) their pro rata portion of the shares of Common Stock being
offered, and (ii) all of the shares of Common Stock not subscribed for by the
Company’s shareholders, in each case at a subscription price equal to $7.00 per
whole share;

D.        The Company and the Buyers entered into an Amended and Restated
Registration Rights Agreement, dated May 18, 2007 (the “Registration Rights
Agreement”) pursuant to which the Company has agreed under certain circumstances
to register the resale of shares of Common Stock held by the Buyers and whereby
the Shares purchased by the Buyers pursuant to this Agreement and the Standby
Purchase Agreement would also be eligible to be registered for resale; and

E.        The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemptions from securities registration afforded by Section
4(2) of the 1933 Act and Rule 506.

AGREEMENT

NOW THEREFORE, the Company and the Buyers hereby agree as follows:

ARTICLE 1

DEFINITIONS

“1933 Act” means the Securities Act of 1933, as amended.

“1934 Act” means the Securities Exchange Act of 1934, as amended.

 

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“Action” means any action, suit claim, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or investigation against
or affecting the Company, any of its Subsidiaries or any of their respective
properties before or by any court, arbitrator, governmental or administrative
agency, regulatory authority (federal, state, county, local or foreign), public
board, stock market, stock exchange or trading facility.

“Agreement” means this Securities Purchase Agreement.

“Buyer” and “Buyers” have the meaning set forth in the preamble.

“Claim” has the meaning set forth in Section 8.2.

“Closing” has the meaning set forth in Section 2.3.

“Closing Date” has the meaning set forth in Section 2.3.

“Code” has the meaning set forth in Section 4.13.

“Common Stock” means the Company’s common stock, no par value.

“Company” has the meaning set forth in the preamble.

“Environmental Laws” has the meaning set forth in Section 4.11.

“ERISA” has the meaning set forth in Section 4.21.

“Reimbursement Agreement” has the meaning set forth in Section 5.3.

“GAAP” has the meaning set forth in Section 4.5(b).

“Hazardous Materials” has the meaning set forth in Section 4.11.

“IBCL” has the meaning set forth in Section 4.20.

“Indemnified Party” has the meaning set forth in Section 8.2.

“Initial Securities Purchase Agreement” means that certain Securities Purchase
Agreement dated as of April 10, 2007 by and among the Company and the Buyers.

“Intellectual Property” has the meaning set forth in Section 4.8.

“Investment Company” has the meaning set forth in Section 4.13.

“Legal Requirement” means any federal, state, local, municipal, foreign,
international, multinational or other law, rule, regulation, order, judgment,
decree, ordinance, policy or directive, including those entered, issued, made,
rendered or required by any court, administrative or other governmental body,
agency or authority, or any arbitrator.

“Material Adverse Change” means a material adverse change on the business,
condition, financial or otherwise, assets, liabilities, or results of operations
of the Company and each of its Subsidiaries, taken as a whole; provided,
however, “Material Adverse Change” shall not include (a) changes in business or
economic conditions affecting the economy or the Company’s and each of its

 

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Subsidiaries’ industries generally, provided that the Company and each of its
Subsidiaries are not disproportionately affected thereby; (b) changes in stock
markets or credit markets; (c) any event as to which the Buyers have provided
written consent hereunder; or (d) except for purposes of Section 4.4, the
execution, delivery or performance of this Agreement (including any announcement
relating to this Agreement).

“Material Adverse Effect” means any material adverse effect on the business,
operations, assets, financial condition or prospects of the Company.

“Note” and “Notes” have the meaning set forth in the Recitals.

“Per Share Price” means $7.00 per Share.

“Permits” has the meaning set forth in Section 4.10.

“Purchase Price” has the meaning set forth in Section 2.2.

“Registration Rights Agreement” has the meaning set forth in the Recitals.

“Rights Agreement” has the meaning set forth in Section 4.20.

“Rule 506” means Rule 506 of Regulation D promulgated under the 1933 Act.

“SEC” means the United States Securities and Exchange Commission.

“SEC Documents” has the meaning set forth in Section 4.5.

“Shares” has the meaning set forth in the Recitals.

“Standby Purchase Agreement” has the meaning set forth in the Recitals.

“Subsidiaries” means with respect to the Company, Adorn Holdings, Inc., Adorn,
L.L.C., Machinery Inc. and Harlan Machinery Inc.

“TCP” means Tontine Capital Partners, L.P.

“TCOMF” means Tontine Capital Overseas Master Fund, L.P.

“Transaction Documents” means this Agreement and any other documents entered
into in connection with the sale of the Shares.

“Transfer Instructions” has the meaning set forth in Section 2.2.

ARTICLE 2

PURCHASE AND SALE OF SHARES

2.1       Purchase of Shares. Subject to the terms and conditions of this
Agreement, on the Closing Date, the Company shall issue and sell the Shares to
each Buyer and each Buyer shall purchase from the Company the number of Shares
as is set forth below such Buyer’s name on the signature page hereto.

 

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2.2       Purchase Price for Shares and Form of Payment; Delivery. On the
Closing Date each Buyer shall pay the Per Share Price for the Shares to be
issued and sold to it at the Closing, for a total price of $7,875,000 (the
“Purchase Price”). The Purchase Price shall be paid by wire transfer of
immediately available funds in accordance with the Company’s written
instructions. At the Closing, upon payment by the Buyers of the Purchase Price,
the Company shall deliver irrevocable written instructions (“Transfer
Instructions”) to the transfer agent for the Company’s Common Stock to issue
certificates representing the Shares registered in the name of each Buyer and to
deliver such certificates to or at the direction of each Buyer. The Company
shall not have the power to revoke or amend the Transfer Instructions without
the written consent of the Buyers.

2.3       Closing Date. Subject to the terms of this Agreement, the closing of
the transactions contemplated by this Agreement shall occur on or before the
date that is five (5) days after the date that the last of the conditions set
forth in Article 6 and Article 7 have been satisfied, or at such other time as
may be mutually agreed upon by the parties to this Agreement (the “Closing
Date”), at the offices of McDermott Will & Emery LLP, 227 West Monroe Street,
Chicago, Illinois 60606 or at such other location or by such other method
(including exchange of signed documents) as may be mutually agreed upon by the
parties to this Agreement (“Closing”).

ARTICLE 3

BUYERS' REPRESENTATIONS AND WARRANTIES

Each Buyer represents and warrants to the Company that:

3.1       Organization and Qualification. Each of the Buyers is an entity of the
type identified on the signature page hereto duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization,
with full power and authority to purchase the Shares and otherwise perform its
obligations under this Agreement and the other Transaction Documents.

3.2       Authorization; Enforcement. This Agreement and each of the other
Transaction Documents to be executed by the Buyers and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by, and duly executed and delivered on behalf of, such Buyer. This
Agreement and each of the other Transaction Documents to be executed by the
Buyers constitutes the valid and binding agreement of such Buyer enforceable in
accordance with its terms, except as such enforceability may be limited by: (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws in effect that limit creditors’ rights generally; (ii) equitable
limitations on the availability of specific remedies; and (iii) principles of
equity.

3.3       Securities Matters. In connection with the Company’s compliance with
applicable securities laws:

a.         Such Buyer understands that the Shares are being offered and sold to
it in reliance upon specific exemptions from the registration requirements of
United States and state securities laws and that the Company is relying upon the
truth and accuracy of, and such Buyer’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Buyer set
forth herein in order to determine the availability of such exemption and the
eligibility of such Buyer to acquire the Shares.

b.         Such Buyer is purchasing the Shares for its own account, not as a
nominee or agent, for investment purposes and not with a present view towards
resale, except pursuant to

 

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sales exempted from registration under the 1933 Act, or registered under the
1933 Act as contemplated by the Registration Rights Agreement.

c.         Such Buyer is an “accredited investor” as that term is defined in
Rule 501(a) of Regulation D under the 1933 Act, and has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of an investment in the Shares. Such Buyer understands that its
investment in the Shares involves a significant degree of risk. Such Buyer
understands that no United States federal or state agency or any other
government or governmental agency has passed upon or made any recommendation or
endorsement of the Shares.

3.4       Information. Such Buyer has conducted its own due diligence
examination of the Company’s business, financial condition, results of
operations, and prospects. In connection with such investigation, such Buyer and
its representatives (i) have reviewed the Company’s Form 10-K for the fiscal
years ended December 31, 2005 and December 31, 2006, the Company’s quarterly
reports on Form 10-Q for the three most recently concluded interim periods and
the Company’s Current Reports on Form 8-K or Form 8-K/A filed in 2006, 2007, and
2008 and (ii) have been given an opportunity to ask questions, to the extent
such Buyer considered necessary, and have received answers from, officers of the
Company concerning the business, finances and operations of the Company and
information relating to the offer and sale of the Shares, and (iii) have
received or had an opportunity to obtain such additional information as it
deemed necessary to make an informed investment decision with respect to the
purchase of the Shares.

3.5       Restrictions on Transfer. Such Buyer understands that except as
provided in the Registration Rights Agreement, the issuance of the Shares has
not been and is not being registered under the 1933 Act or any applicable state
securities laws. Such Buyer may be required to hold the Shares indefinitely and
the Shares may not be transferred unless (i) the Shares are sold pursuant to an
effective registration statement under the 1933 Act, or (ii) the Shares to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration. Such Buyer understands that until such time as the resale of
the Shares has been registered under the 1933 Act as contemplated by the
Registration Rights Agreement or otherwise may be sold pursuant to an exemption
from registration, certificates evidencing the Shares may bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of the certificates evidencing such Shares):

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE “ACT”). THE SHARES MAY NOT BE OFFERED FOR SALE,
SOLD, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE
CORPORATION.”

3.6       Stock Ownership. The Buyers, in the aggregate, beneficially owned as
of the date of this Agreement, 2,343,089 shares of the Company’s Common Stock.
Except for (i) such shares and the Shares to be issued pursuant to this
Agreement, and (ii) the rights of the Buyers set forth in the Standby Purchase
Agreement, neither the Buyers nor any of their respective affiliates, has or has
a right to acquire any beneficial ownership interest in any capital stock or any
other securities of the Company, and no such person has a right to vote any
Common Stock of the Company.

 

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ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the Company’s Disclosure Schedule attached hereto, the
Company represents and warrants to Buyers that:

4.1       Organization and Qualification. The Company has no subsidiaries other
than the Subsidiaries. The Company and each of its Subsidiaries is a
corporation, duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated, with corporate power and
authority to own, lease, use and operate its properties and to carry on its
business as now operated and conducted. The Company and each of its Subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction in which its ownership or use of property or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified or in good standing would not have a
Material Adverse Effect. Neither the Company nor any Subsidiary is in violation
of any provision of its respective certificate or articles of incorporation,
partnership agreement, bylaws or other organizational or charter documents, as
the same may have been amended.

4.2       Authorization; Enforcement. The Company has all requisite corporate
power and authority to enter into and perform this Agreement and each of the
other Transaction Documents and to consummate the transactions contemplated
hereby and thereby and to issue the Shares, in accordance with the terms hereof
and thereof. The execution and delivery of this Agreement and each of the other
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation, the
issuance of the Shares) have been duly authorized by the Company’s Board of
Directors and no further consent or authorization of the Company, its Board of
Directors, or its shareholders is required. This Agreement and each of the other
Transaction Documents have been duly executed and delivered by the Company. This
Agreement and each of the other Transaction Documents will constitute upon
execution and delivery by the Company, a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by: (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws in effect that limit creditors’
rights generally; (ii) equitable limitations on the availability of specific
remedies; (iii) principles of equity (regardless of whether such enforcement is
considered in a proceeding in law or in equity); and (iv) to the extent rights
to indemnification and contribution may be limited by federal securities laws or
the public policy underlying such laws.

4.3       Capitalization; Valid Issuance of Shares. As of the date hereof, the
authorized capital stock of the Company consists of 20,000,000 shares of Common
Stock, of which 6,008,033 shares are issued and outstanding, and no shares are
held by the Company as treasury shares, and 1,000,000 shares of preferred stock,
of which no shares are issued and outstanding. All of such outstanding shares of
Common Stock are duly authorized, validly issued, fully paid and nonassessable.
The Shares have been duly authorized and when issued pursuant to the terms
hereof will be validly issued, fully paid and nonassessable and will not be
subject to any encumbrances, preemptive rights or any other similar contractual
rights of the shareholders of the Company or any other person. No shares of
capital stock of the Company are subject to preemptive rights or any other
similar rights of the shareholders of the Company or any liens or encumbrances
imposed through the actions or failure to act of the Company. As of the date of
this Agreement, except as set forth on Schedule 4.3 or disclosed in the
Company’s Proxy Statement filed on October 9, 2007, (i) there are no outstanding
options, warrants, scrip, rights to subscribe for, puts, calls, rights of first
refusal, agreements, understandings, claims or other commitments or rights of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable for any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is
or may become bound to issue additional shares of capital stock, (ii)

 

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there are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of its or their securities
under the 1933 Act (except the Registration Rights Agreement) and (iii) there
are no anti-dilution or price adjustment provisions contained in any security
issued by the Company (or in any agreement providing rights to security holders)
that will be triggered by the issuance of the Shares. Except as may be described
in any documents which have been publicly filed by any of the Company's
shareholders, to the Company’s knowledge, there are no agreements between the
Company’s shareholders with respect to the voting or transfer of the Company’s
capital stock or with respect to any other aspect of the Company’s affairs.

4.4       No Conflicts. The execution, delivery and performance of this
Agreement and each of the other Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of Shares) will not (i) conflict
with or result in a violation of any provision of the Articles of Incorporation,
as amended, of the Company or the Bylaws, as amended, of the Company, (ii)
violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture,
patent, patent license or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any Legal Requirement
(including federal and state securities laws and regulations and regulations of
any self-regulatory organizations to which the Company or its securities are
subject) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries
is in violation of its Certificate or Articles of Incorporation, bylaws or other
organizational documents and neither the Company nor any of its Subsidiaries is
in default (and no event has occurred which with notice or lapse of time would
result in a default) under, and neither the Company nor any of its Subsidiaries
has taken any action or failed to take any action that would give to others any
rights of termination, amendment, acceleration or cancellation of, any agreement
or instrument to which the Company or any of its Subsidiaries is a party or by
which any property or assets of the Company or any of its Subsidiaries is bound
or affected, except for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. Except with respect to any filings or
notices related to the issuance of the Shares to be filed with Nasdaq, if any,
and as required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency, regulatory
agency, self regulatory organization or stock market or any third party in order
for it to execute, deliver or perform any of its obligations under the
Transaction Documents. All consents, authorizations, orders, filings and
registrations that the Company is required to effect or obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the date
hereof.

 

 

4.5

SEC Documents; Financial Statements.

a.       Since December 31, 2005, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the 1933 Act and the 1934 Act
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits to such documents) incorporated by reference therein, being hereinafter
referred to herein as the “SEC Documents”), or has timely filed for a valid
extension of such time of filing and has filed any such SEC Documents prior to
the expiration of any such extension. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1933
Act and the 1934 Act and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC, contained any untrue statement of a

 

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material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

b.   As of their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles (“GAAP”),
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes, year end adjustments or may be condensed or summary statements) and
fairly present in all material respects the consolidated financial position of
the Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the financial statements of the Company
included in the SEC Documents, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to December 31, 2006, and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in such financial
statements, which, individually or taken in the aggregate would not reasonably
be expected to have a Material Adverse Effect.

c.   Except as set forth on Schedule 4.5, the Company has established and
maintains disclosure controls and procedures (as such term is defined in Rule
13a-15(e) under the 1934 Act).

4.6       Absence of Certain Changes. Except as set forth on Schedule 4.6, since
December 31, 2006, other than circumstances affecting the recreational vehicle
and manufactured housing industries generally, there has not occurred any event
or circumstance that has had, resulted in, or would reasonably be expected to
have, a Material Adverse Change. Except with respect to the transactions
contemplated hereby and by each of the other Transaction Documents and except as
set forth on Schedule 4.6, since December 31, 2006, the Company has not incurred
any liabilities (contingent or otherwise) other than (A) trade payables, accrued
expenses and other liabilities incurred in the ordinary course of business
consistent with past practice, (B) liabilities not required to be reflected on
the Company’s financial statements pursuant to GAAP, and (C) liabilities
disclosed in filings made with the SEC.

4.7       Absence of Litigation. There is no Action pending or, to the knowledge
of the Company or any of its Subsidiaries, threatened against or affecting the
Company or any of its Subsidiaries that (i) adversely affects or challenges the
legality, validity or enforceability of this Agreement, or (ii) would, if there
were an unfavorable decision, have or reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries, nor any
director or officer thereof (in his or her capacity as such), is or has been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty. There
has not been, and to the knowledge of the Company, there is not pending any
investigation by the SEC involving the Company or any current or former director
or officer of the Company (in his or her capacity as such). The SEC has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company under the 1934 Act or the 1933 Act.

4.8       Intellectual Property. The Company and each of its Subsidiaries owns
or possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, copyrights,
trademarks, trademark applications, service marks, service names, trade names
and copyrights (“Intellectual Property”) necessary to enable it to conduct its
business as now operated (and, to the Company’s knowledge, as presently
contemplated to be operated in the future); except as set forth on Schedule 4.8,
there is no claim or Action by any person pertaining to, or proceeding pending,
or

 

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to the Company’s knowledge threatened, which challenges the right of the Company
or of a Subsidiary with respect to any Intellectual Property necessary to enable
it to conduct its business as now operated and to the Company’s knowledge, the
Company’s or its Subsidiaries’ current products and processes do not infringe on
any Intellectual Property or other rights held by any person, except where any
such infringement would not reasonably be expected to have a Material Adverse
Effect.

4.9       Tax Status. The Company and each of its Subsidiaries has made or filed
all federal, state and foreign income and all other material tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim. The Company
has not executed a waiver with respect to the statute of limitations relating to
the assessment or collection of any foreign, federal, state or local tax.

 

 

4.10

Permits; Compliance.

a.       The Company and each of its Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted (collectively, “Permits”), and there is no Action pending or, to the
knowledge of the Company, threatened regarding suspension or cancellation of any
of the Permits. Neither the Company nor any of its Subsidiaries is in conflict
with, or in default or violation of, any of the Permits, except for any such
conflicts, defaults or violations which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect.

b.       Except as set forth on Schedule 4.10(b), since December 31, 2006, no
event has occurred or, to the knowledge of the Company, circumstance exists that
(with or without notice or lapse of time): (a) would reasonably be expected to
constitute or result in a violation by the Company or any of its Subsidiaries,
or a failure on the part of the Company or its Subsidiaries to comply with, any
Legal Requirement; or (b) would reasonably be expected to give rise to any
obligation on the part of the Company or any of its Subsidiaries to undertake,
or to bear all or any portion of the cost of, any remedial action of any nature
in connection with a failure to comply with any Legal Requirement, except in
either case that would not reasonably be expected to have a Material Adverse
Effect. Except as set forth on Schedule 4.10(b), neither the Company nor any of
its Subsidiaries has received any notice or other communication from any
regulatory authority or any other person, nor does the Company have any
knowledge regarding: (x) any actual, alleged, possible or potential violation
of, or failure to comply with, any Legal Requirement, or (y) any actual,
alleged, possible or potential obligation on the part of the Company or any of
its Subsidiaries to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature in connection with a failure to comply with any
Legal Requirement, except in either case that would not reasonably be expected
to have a Material Adverse Effect.

c.       The Company is in compliance in all material respects with the
provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated thereunder that are applicable to it and has taken reasonable steps
such that the Company expects to be in a position to comply with the
requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and
regulations promulgated thereunder at such time as Section 404 becomes
applicable to the Company.

 

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d.       The Company is, and has reason to believe that for the foreseeable
future it will continue to be, in compliance with all applicable rules of the
Nasdaq Global Market. The Company has not received notice from Nasdaq that the
Company is not in compliance with the rules or requirements thereof. The
issuance and sale of the Shares under this Agreement does not contravene the
rules and regulations of the Nasdaq Global Market, and no approval of the
shareholders of the Company is required for the Company to issue the Shares as
contemplated by this Agreement.

4.11     Environmental Matters. “Environmental Laws” shall mean, collectively,
all Legal Requirements, including any federal, state, local or foreign statute,
laws, rule, regulation, ordinance, code, policy or rule of common law or any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment issued against the Company or
its Subsidiaries, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or threatened release
of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, “Hazardous
Materials”) or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials. Except for such
matters as could not, singly or in the aggregate, reasonably be expected to
result in a Material Adverse Effect: (i) the Company and its Subsidiaries have
complied and are in compliance with all applicable Environmental Laws; (ii)
without limiting the generality of the foregoing, the Company and its
Subsidiaries have obtained, have complied, and are in compliance with all
Permits that are required pursuant to Environmental Laws for the occupation of
their respective facilities and the operation of their respective businesses;
(iii) none of the Company or its Subsidiaries has received any written notice,
report or other information regarding any actual or alleged violation of
Environmental Laws, or any liabilities or potential liabilities (including
fines, penalties, costs and expenses), including any investigatory, remedial or
corrective obligations, relating to any of them or their respective facilities
arising under Environmental Laws, nor, to the knowledge of the Company is there
any factual basis therefore; (iv) there are no underground storage tanks,
polychlorinated biphenyls, urea formaldehyde or other hazardous substances
(other than small quantities of hazardous substances for use in the ordinary
course of the operation of the Company’s and its Subsidiaries’ respective
businesses, which are stored and maintained in accordance and in compliance with
all applicable Environmental Laws), in, on, over, under or at any real property
owned or operated by the Company and/or its Subsidiaries; (v) there are no
conditions existing at any real property or with respect to the Company or any
of its Subsidiaries that require remedial or corrective action, removal,
monitoring or closure pursuant to the Environmental Laws and (vi) to the
knowledge of the Company, neither the Company nor any of its Subsidiaries has
contractually, by operation of law, or otherwise amended or succeeded to any
liabilities arising under any Environmental Laws of any predecessors or any
other Person.

4.12     Title to Property. Except for any lien for current taxes not yet
delinquent or which are being contested in good faith and by appropriate
proceedings and except as set forth on Schedule 4.12, the Company and its
Subsidiaries have good and marketable title to all real property and all
personal property owned by them which is material to the business of the Company
and its Subsidiaries. Any leases of real property and facilities of the Company
and its Subsidiaries are valid and effective in accordance with their respective
terms, except as would not have a Material Adverse Effect.

4.13     No Investment Company or Real Property Holding Company. The Company is
not, and upon the issuance and sale of the Shares as contemplated by this
Agreement will not be, an “investment company” as defined under the Investment
Company Act of 1940 (“Investment Company”). The Company is not controlled by an
Investment Company. The Company is not a United States real property holding
company, as defined under the Internal Revenue Code of 1986, as amended (the
“Code”).

 

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4.14     No Brokers. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, transaction fees or similar
payments relating to this Agreement or the transactions contemplated hereby.

4.15     Registration Rights. Except pursuant to the Registration Rights
Agreement, the Standby Purchase Agreement and this Agreement, neither the
Company nor any Subsidiary is currently subject to any agreement providing any
person or entity any rights (including piggyback registration rights) to have
any securities of the Company or any Subsidiary registered with the SEC or
registered or qualified with any other governmental authority.

4.16     Exchange Act Registration. The Common Stock is registered pursuant to
the 1934 Act, and the Company has taken no action designed to, or which, to the
knowledge of the Company, is likely to have the effect of, terminating the
registration of the Common Stock.

4.17     Labor Relations. No labor or employment dispute exists or, to the
knowledge of the Company, is imminent or threatened, with respect to any of the
employees of the Company that has, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

4.18     Transactions with Affiliates and Employees. Except as set forth in the
SEC Documents, none of the officers or directors of the Company, and to the
knowledge of the Company, none of the employees of the Company, is presently a
party to any transaction or agreement with the Company (other than for services
as employees, officers and directors) exceeding $100,000, including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.

4.19     Insurance. The Company and its Subsidiaries have insurance policies in
full force and effect of a type, covering such risks and in such amounts, and
having such deductibles and exclusions as are customary for conducting
businesses and owning assets similar in nature and scope to those of the Company
and its Subsidiaries. The amounts of all such insurance policies and the risks
covered thereby are in accordance in all material respects with all material
contracts and agreements to which the Company and/or its Subsidiaries is a party
and with all applicable Legal Requirements. With respect to each such insurance
policy: (i) the policy is valid, outstanding and enforceable in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws in
effect that limit creditors’ rights generally, equitable limitations on the
availability of specific remedies and principles of equity (regardless of
whether such enforcement is considered in a proceeding in law or in equity);
(ii) neither the Company nor any of its Subsidiaries is in breach or default
with respect to its obligations thereunder in any material respect; and (iii) no
party to the policy has repudiated, or given notice of an intent to repudiate,
any provision thereof.

4.20     Approved Acquisitions of Shares; No Anti-Takeover Provisions. Prior to
Closing, the Company will have taken all necessary action, if any, required
under the laws of the State of Indiana or otherwise to allow the Buyers to
acquire the Shares pursuant to this Agreement, including the adoption of
irrevocable resolutions approving and exempting from the restrictions in Section
18 and Section 19 of Chapter 43 of the ICBL the transactions contemplated by
this Agreement. Without limitation of the foregoing, the Company will not have
amended its Bylaws to opt in to the provisions of the Indiana Business
Corporation Law (“IBCL”) pertaining to the acquisition of a controlling interest
(IBCL 23-1-42-1 through 23-1-42-11) with respect to the acquisition by the
Buyers of the Shares. Except for the Rights Agreement, the Company has no
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s

 

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Articles of Incorporation or Bylaws, each as amended (or similar charter
documents), that is or could become applicable to the Buyers as a result of the
Buyers and the Company fulfilling their obligations or exercising their rights
under this Agreement, including without limitation the Company’s issuance of the
Shares and the Buyers’ ownership of the Shares. Prior to Closing, the Company
will have amended the Rights Agreement, dated March 21, 2006, as amended, by and
between the Company and National City Bank, as Rights Agent (the “Rights
Agreement”), to accommodate the issuance and sale of the Shares to the Buyers,
in a form reasonably acceptable to the Buyers.

4.21     ERISA. Based upon the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”), and the regulations and published interpretations
thereunder: (i) neither the Company nor any of its Subsidiaries has engaged in
any Prohibited Transactions (as defined in Section 406 of ERISA and Section 4975
of the Code); (ii) the Company and each of its Subsidiaries has met all
applicable minimum funding requirements under Section 302 of ERISA in respect to
its plans; (iii) neither the Company nor any of its Subsidiaries has any
knowledge of any event or occurrence which would cause the Pension Benefit
Guaranty Corporation to institute proceedings under Title IV of ERISA to
terminate any employee benefit plan(s); neither the Company nor any of its
Subsidiaries has any fiduciary responsibility for investments with respect to
any plan existing for the benefit of persons other than its or such Subsidiary’s
employees; and (v) neither the Company nor any of its Subsidiaries has
withdrawn, completely or partially, from any multi-employer pension plan so as
to incur liability under the Multiemployer Pension Plan Amendments Act of 1980.

4.22     Disclosure. The Company understands and confirms that the Buyers will
rely on the representations and covenants contained herein in effecting the
transactions contemplated by this Agreement and the other Transaction Documents.
All representations and warranties provided to the Buyers including the
disclosures in the Company’s disclosure schedules attached hereto furnished by
or on behalf of the Company, taken as a whole are true and correct and do not
contain any untrue statement of material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or
its Subsidiaries or its or their businesses, properties, prospects, operations
or financial conditions, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been
so publicly announced or disclosed.

ARTICLE 5

COVENANTS

5.1       Form D; Blue Sky Laws. Upon completion of the Closing, the Company
shall file with the SEC a Form D with respect to the Shares as required under
Regulation D and each applicable state securities commission and will provide a
copy thereof to the Buyers promptly after such filing.

5.2       Use of Proceeds. The Company shall use the proceeds from the sale of
the Shares to prepay principal and pay related accrued interest due under the
Notes.

5.3       Expenses. The Company shall pay the fees and expenses incurred by the
Buyers in connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the other Transaction Documents and the
transactions hereunder and thereunder, including, without limitation, reasonable
attorneys’ fees and expenses.

5.4       No Integration. The Company shall not make any offers or sales of any
security (other than the Shares) under circumstances that would require
registration of the Shares being offered or sold

 

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hereunder under the 1933 Act or cause the offering of the Shares to be
integrated with any other offering of securities by the Company in such a manner
as would require the Company to seek the approval of its shareholders for the
issuance of the Shares under any shareholder approval provision applicable to
the Company or its securities.

5.5       Board Designee(s). The parties hereto acknowledge and affirm that the
Buyers shall continue to have the rights and the Company shall continue to have
the obligations as set forth in Section 5.5 of the Initial Securities Purchase
Agreement with respect to the Company’s Board of Directors.

5.6       Future Acquisitions. The Company shall not revoke its approval of the
acquisition of the Shares by the Buyers. The Company shall use its best efforts
to ensure that the acquisition of the Shares by the Buyers shall not be made
subject to the provisions of any anti-takeover laws and regulations of any
governmental authority, including without limitation, the applicable provisions
of the ICBL, and any provisions of an anti-takeover nature adopted by the
Company or any of its Subsidiaries, including the Rights Agreement, or contained
in the Company’s Articles of Incorporation, Bylaws, or the organizational
documents of any of its Subsidiaries, each as amended.

5.7       Announcement of Rights Offering. The Company shall publicly announce,
concurrent with the announcement of the execution of this Agreement, that the
Company has entered into the Standby Purchase Agreement and intends to conduct a
registered rights offering to its shareholders at the Per Share Price.

ARTICLE 6

CONDITIONS TO THE COMPANY'S OBLIGATION

The obligation of the Company hereunder to issue and sell the Shares to the
Buyers at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions thereto, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion:

6.1       Delivery of Transaction Documents. The Buyers shall have executed and
delivered the Transaction Documents to which it is a party to the Company.

6.2       Payment of Purchase Price. The Buyers shall have delivered the
Purchase Price in accordance with Section 2.2 above.

6.3       Representations and Warranties. The representations and warranties of
the Buyers shall be true and correct in all material respects (provided,
however, that such qualification shall only apply to representations or
warranties not otherwise qualified by materiality) as of the date when made and
as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and the applicable Buyer shall
have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the applicable Buyer at or prior to the Closing
Date.

6.4       Litigation. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.

 

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ARTICLE 7

CONDITIONS TO THE BUYERS' OBLIGATION

The obligation of the Buyers hereunder to purchase the Shares at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Buyers’ sole
benefit and may be waived by the Buyers at any time in their sole discretion:

7.1       Delivery of Transaction Documents; Issuance of Shares. The Company
shall have executed and delivered the Transaction Documents to the Buyers, and
shall deliver the Transfer Instructions to the transfer agent for the Company’s
Common Stock to issue certificates in the name of each Buyer representing the
Shares being purchased by such Buyer. The Company shall deliver a copy of the
Transfer Instructions to the Buyers at the Closing.

7.2       Representations and Warranties. The representations and warranties of
the Company shall be true and correct in all material respects (provided,
however, that such qualification shall only apply to representations or
warranties not otherwise qualified by materiality) as of the date when made and
as of the Closing Date as though made at such time (except for representations
and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date.

7.3       Consents. Any consents or approvals required to be secured by the
Company for the consummation of the transactions contemplated by the Transaction
Documents shall have been obtained and shall be reasonably satisfactory to the
Buyers.

7.4       Litigation. No Action shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.

7.5       Opinion. The Buyers shall have received an opinion of the Company’s
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyers with respect to the matters set forth in Exhibit A
attached hereto.

7.6       No Material Adverse Change. There shall not have been a Material
Adverse Change or any event or occurrence (including the failure of the
representations and warranties of the Company, in the aggregate, to be true and
correct as of the Closing Date) which would reasonably be likely to have a
Material Adverse Change.

7.7       Board Approval. The board of directors of the Company shall have
adopted irrevocable resolutions approving and exempting from the restrictions in
Section 18 and Section 19 of Chapter 43 of the ICBL the transactions
contemplated by this Agreement.

7.8       Amendment of Rights Plan. As of the Closing Date, the amendment to the
Rights Agreement referenced in Section 4.20 shall continue to be in full force
and effect to accommodate the issuance and sale of the Shares to the Buyers.

7.9       Control Share Statute. As of the Closing Date, the Company shall not
have amended its Bylaws to opt back in to the provisions of the IBCL pertaining
to the acquisition of a controlling interest (IBCL 23-1-42-1 through
23-1-42-11); provided, however, that the Company can so amend its Bylaws to

 

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opt into the provisions of Chapter 42 of the IBCL once the purchase and issuance
of the Shares hereunder is complete.

7.10     Standby Purchase Agreement. The Buyers and the Company shall have
entered into the Standby Purchase Agreement and the Company shall be taking
reasonable action to effectuate the transactions contemplated thereunder.

ARTICLE 8

TERMINATION

8.1       Termination Provisions. This Agreement may be terminated at any time
before the Closing Date:

 

a.

By mutual consent of the Company and the Buyers;

b.       By either the Company or the Buyers as applicable, in the event that
any of the conditions precedent to their respective obligations to consummate
the transactions contemplated hereby as set forth in Article 6 or Article 7,
through no fault of the terminating party, have not been met and satisfied and
have become impossible of fulfillment;

c.       By either the Company or the Buyers if the Closing Date does not occur
before April 30, 2008, or such later date as the parties may mutually agree upon
(provided that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein);

d.       By the Buyers if there has been any material breach of any
representation, warranty, agreement or covenant in this Agreement by the
Company, which breach cannot be or has not been cured within thirty (30) days
after giving written notice thereof to the Company; and

e.       By the Company if there has been any material breach of any
representation, warranty, agreement or covenant in this Agreement by the Buyers,
which breach cannot be or has not been cured within thirty (30) days after
giving written notice thereof to the Buyers.

8.2       Effect of Termination. Upon the termination of this Agreement pursuant
to the terms hereof, this Agreement will be void and neither party will have any
further liability obligations with respect hereof, except as otherwise provided
in this Agreement, including Section 10.13, or except and to the extent
termination results from the intentional breach by a party of any of its
representations, warranties or covenants hereunder.

ARTICLE 9

INDEMNIFICATION

9.1       Indemnification by the Company. The Company agrees to indemnify the
Buyers and their affiliates and hold the Buyers and their affiliates harmless
from and against any and all liabilities, losses, damages, costs and expenses of
any kind (including, without limitation, the reasonable fees and disbursements
of the Buyers’ counsel in connection with any investigative, administrative or
judicial proceeding), which may be incurred by the Buyers or their affiliates as
a result of any claims made against the Buyers or their affiliates by any person
that relate to or arise out of (i) any breach by the Company of any of its
representations, warranties or covenants contained in this Agreement or in the
Transaction Documents (other than the Registration Rights Agreement, which
contains separate

 

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indemnification provisions), or (ii) any litigation, investigation or proceeding
instituted by any person with respect to this Agreement or the performance of
the transactions contemplated hereby or the Shares (excluding, however, any such
litigation, investigation or proceeding which arises solely from the acts or
omissions of the Buyers or their affiliates).

9.2       Notification. Any person entitled to indemnification hereunder
(“Indemnified Party”) will (i) give prompt notice to the Company, of any third
party claim, action or suit with respect to which it seeks indemnification (the
“Claim”) (but omission of such notice shall not relieve the Company from
liability hereunder except to the extent it is actually prejudiced by such
failure to give notice), specifying in reasonable detail the factual basis for
the Claim, the amount thereof, estimated in good faith, and the method of
computation of the Claim, all with reasonable particularity and containing a
reference to the provisions of this Agreement in respect of which such
indemnification is sought with respect to the Claim, and (ii) unless in such
Indemnified Party’s reasonable judgment a conflict of interest may exist between
such Indemnified Party and the Company with respect to such claim, permit the
Company to assume the defense of the Claim with counsel reasonably satisfactory
to the Indemnified Party. The Indemnified Party shall cooperate fully with the
Company with respect to the defense of the Claim and, if the Company elects to
assume control of the defense of the Claim, the Indemnified Party shall have the
right to participate in the defense of the Claim at its own expense. If the
Company does not elect to assume control or otherwise participate in the defense
of the Claim, then the Indemnified Party may defend through counsel of its own
choosing. If such defense is not assumed by the Company, the Company will not be
subject to any liability under this Agreement or otherwise for any settlement
made without its consent (but such consent will not be unreasonably withheld or
delayed). If the Company elects not to or is not entitled to assume the defense
of a Claim, it will not be obligated to pay the fees and expenses of more than
one counsel for all Indemnified Parties with respect to the Claim, unless an
actual conflict of interest exists between such Indemnified Party and any other
of such Indemnified Parties with respect to the Claim, in which event the
Company will be obligated to pay the fees and expenses of such additional
counsel or counsels.

ARTICLE 10

GOVERNING LAW; MISCELLANEOUS

10.1     Governing Law. This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of Indiana applicable to
agreements made and to be performed entirely within such state, without regard
to the principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States Federal Courts located in the State
of Indiana with respect to any dispute arising under this Agreement, the
agreements entered into in connection herewith or the transactions contemplated
hereby or thereby. All parties irrevocably waive the defense of an inconvenient
forum to the maintenance of such suit or proceeding. All parties further agree
that service of process upon a party mailed by first class mail shall be deemed
in every respect effective service of process upon the party in any such suit or
proceeding. Nothing herein shall affect any party’s right to serve process in
any other manner permitted by law. All parties agree that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.
The party which does not prevail in any dispute arising under this Agreement
shall be responsible for all reasonable fees and expenses, including reasonable
attorneys’ fees, incurred by the prevailing party in connection with such
dispute.

10.2     Counterparts; Electronic Signatures. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other
party. This Agreement, once executed by a party, may be delivered to the other
party hereto by

 

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electronic transmission of a copy of this Agreement bearing the signature of the
party so delivering this Agreement.

10.3     Headings. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.

10.4     Severability. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform to such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.

10.5     Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and supersede all previous
understandings or agreements between the parties with respect to such matters
(other than the Reimbursement Agreement). No provision of this Agreement may be
waived other than by an instrument in writing signed by the party to be charged
with enforcement. The provisions of this Agreement may be amended only by a
written instrument signed by the Company and the Buyers.

10.6     Notices. Any notices required or permitted to be given under the terms
of this Agreement shall be delivered personally or by courier (including a
recognized, receipted overnight delivery service) or by facsimile (with a copy
delivered by receipted overnight delivery service) and shall be effective upon
receipt, if delivered personally or by courier (including a recognized,
receipted overnight delivery service) or by facsimile, in each case addressed to
a party. The addresses for such communications shall be:

If to the Company:

Patrick Industries, Inc.

107 West Franklin Street

Elkhart, Indiana 46516

Telephone: (574) 294-7511

Facsimile: (574) 522-5213

 

Attention: Andy Nemeth

With copy to:

McDermott Will and Emery LLP

227 West Monroe

Chicago, Illinois 60606-5096

Telephone: (312) 984-7582

Facsimile: (312) 984-7700

 

Attention: Robert A. Schreck, Jr., Esq.

If to the Buyers:

Tontine Capital Partners, L.P.

55 Railroad Avenue, 1st Floor

Greenwich, Connecticut 06830

Attention: Mr. Jeffrey L. Gendell

Telephone: (203) 769-2000

Facsimile: (203) 769-2010

 

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With copy to:

Barack Ferrazzano Kirschbaum & Nagelberg LLP

200 W. Madison Street, Suite 3900

Chicago, Illinois 60606

Attention: Sarah M. Bernstein, Esq.

Telephone: (312) 984-3100

 

Facsimile:

(312) 984-3150

 

Each party shall provide notice to the other party of any change in address.

10.7     Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their successors and assigns. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Buyers.

10.8     Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.

10.9     Publicity. The Company and the Buyers shall have the right to review a
reasonable period of time before issuing any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of the
Buyers, to make any press release with respect to such transactions as is
required by applicable law and regulations (although the Buyers shall be
consulted by the Company in connection with any such press release prior to its
release and shall be provided with a copy thereof and be given an opportunity to
comment thereon). Notwithstanding the foregoing, the Company shall file with the
SEC a Form 8-K disclosing the transactions herein within four (4) business days
of the Closing Date and attach the relevant agreements and instruments thereto,
and the Buyers may make such filings as may be required under Section 13 and
Section 16 of the 1934 Act.

10.10   Further Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

10.11   No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

10.12   Rights Cumulative. Each and all of the various rights, powers and
remedies of the parties shall be considered cumulative with and in addition to
any other rights, powers and remedies which such parties may have at law or in
equity in the event of the breach of any of the terms of this Agreement or the
Transaction Documents. The exercise or partial exercise of any right, power or
remedy shall neither constitute the exclusive election thereof nor the waiver of
any other right, power or remedy available to such party.

10.13   Survival. Any covenant or agreement in this Agreement required to be
performed following the Closing Date, shall survive the Closing Date. Without
limitation of the foregoing, the

 

18

 

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respective representations and warranties given by the parties hereto shall
survive the Closing Date and the consummation of the transactions contemplated
herein, but only for a period of the earlier of (i) three (3) years following
the Closing Date and (ii) the applicable statute of limitations with respect to
each representation and warranty, and thereafter shall expire and have no
further force and effect. Notwithstanding anything to the contrary in this
Agreement, Article 9 and Article 10 shall survive the termination of this
Agreement.

10.14   Knowledge. The term "knowledge of the Company" or any similar
formulation of knowledge shall mean, the actual knowledge after due inquiry of
the named executive officers of the Company as set forth in its 2007 Proxy
Statement.

 

[Remainder of this page intentionally left blank]

19

 

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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed as of the date first above written.

COMPANY:

 

PATRICK INDUSTRIES, INC.

 

By: ________________________________________

 

Name:

Paul E. Hassler

 

Title:

President

 

 

BUYER:

 

TONTINE CAPITAL PARTNERS, L.P.

 

 

By:

Tontine Capital Management, L.L.C, its general partner

 

 

By:

____________________________________

 

Jeffrey L. Gendell, as managing member

 

 

Total Number of Shares: 900,000

Total Purchase Price for the Shares: $6,300,000.00

Form of Entity and Jurisdiction of Organization:

Delaware Limited Partnership

 

TONTINE CAPITAL OVERSEAS MASTER FUND, L.P.

 

 

By:

Tontine Capital Overseas GP, L.L.C., its general partner

 

 

By:

____________________________________

 

Jeffrey L. Gendell, as managing member

 

Total Number of Shares: 225,000

Total Purchase Price for the Shares: $1,575,000.00

Form of Entity and Jurisdiction of Organization:

Cayman Islands Limited Partnership

 

S-1

[Signature page to Securities Purchase Agreement]

 

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EXHIBIT A

FORM OF LEGAL OPINION

1. The Company is a corporation, validly existing and in good standing under the
laws of the state of the jurisdiction in which it is incorporated.

2. The Company has all necessary corporate power and authority to execute,
deliver and perform its obligations under each of the Transaction Documents. The
execution, delivery and performance of each of the Transaction Documents have
been duly authorized by all necessary corporate action on the part of the
Company.

3. Each of the Transaction Documents has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.

4. The issuance, sale and delivery of the Shares and the execution, delivery and
performance by the Company of the Transaction Documents and the consummation by
the Company of the transactions contemplated thereby do not violate or result in
a breach of or default under the Articles of Incorporation, as amended, Bylaws,
as amended, or any applicable requirement of law.

5. To our knowledge, there are no actions, suits, proceedings, claims or
disputes pending or threatened against, or affecting, the Company, at law, in
equity, in arbitration or before any governmental authority that contest the
execution, validity or performance of the Transaction Documents.

6. Except for filings, authorizations or approvals contemplated by the
Agreement, to our knowledge no authorizations or approvals of, and no filings
with, any governmental authority are necessary or required for the execution,
delivery or performance by, or enforcement against, the Company of any of the
Transaction Documents.

7. The Shares are duly authorized and, when issued and sold to the Buyers after
payment therefor in accordance with the terms of the Transaction Documents, will
be validly issued, fully paid and non-assessable.

8. There are no statutory, or to our knowledge, contractual preemptive, rights
of first refusal or similar rights with respect to the issuance and sale of the
Shares.

9. Assuming that the representations made by the Buyers in the Agreement are
true and correct and that any required filings are made pursuant to Rule 503 of
Regulation D as promulgated under the Securities Act of 1933, the offering, sale
and issuance of the Shares pursuant to the Agreement do not require registration
under the Securities Act of 1933, as amended and the rules promulgated
thereunder as they currently exist or registration or qualification under any
state securities laws.

 

A-1