Escrow Agreement

EXHIBIT 10.7


ESCROW AGREEMENT


RELATING TO:


INDUSTRIAL DEVELOPMENT REVENUE BONDS


(LUND INDUSTRIES INCORPORATED PROJECT) SERIES 1994


OF THE CITY OF ANOKA, MINNESOTA


THIS AGREEMENT is made the 29th day of December, 1998, by and between U.S. Bank Trust National Association, in Saint Paul, Minnesota (the "Escrow Agent") and Lund Industries Incorporated (the "Company"):


WITNESSETH THAT:


WHEREAS, the City of Anoka, Minnesota (the "Issuer") has heretofore issued $5,450,000 aggregate principal amount of its Industrial Development Revenue Bonds (Lund Industries Incorporated Project), Series 1994 (the "Bonds") pursuant to an Indenture of Trust dated as of September 1, 1994 (the "Indenture") by and between the Issuer and U.S. Bank Trust National Association, formerly known as First Trust National Association, as trustee (the "Trustee"), for the purpose of acquiring, constructing and equipping a manufacturing facility owned by the Company and located within the corporate boundaries of the Issuer (the "Project"); and


WHEREAS, to provide for the defeasance of the Bonds, all in accordance with Section 6-2 of the Indenture, the Company has directed the Trustee to transfer $729,486.53 on deposit in the funds and accounts created under the Indenture to an Escrow Fund created herein, and has additionally delivered $3,181,560.03 of other funds to the Trustee for deposit to the Escrow Fund identified below (the "Escrow Fund"), which shall be held, invested and used in accordance with the terms and conditions of this Escrow Agreement; and


WHEREAS, the foregoing sums shall simultaneously be invested in securities (the "Escrowed Obligations") as described in Exhibit A attached hereto, which Escrowed Obligations shall be used to pay debt service on the Bonds on each September 1 and March 1, from March 1, 1999 to and including September 1, 2004, the Stated Maturity of the Bonds, all as further described on Exhibit B hereto (the Escrowed Obligations (or evidence of the investment therein and constructive receipt of) are herein called the "Escrow Deposit");


NOW, THEREFORE, in consideration of the premises and of the respective agreements on the part of the Escrow Agent and the Company herein contained, the parties hereto hereby agree as follows:


1. Deposit. The Company hereby irrevocably directs that $729,486.53 be transferred by the Trustee to the Escrow Fund from the funds and accounts created under the Indenture, and herewith irrevocably delivers the sum of $3,181,560.03 for deposit to the Escrow Fund, and hereby directs and authorizes the Trustee to acquire the Escrowed Obligations described on Exhibit A attached hereto.


2. Acknowledgment of Deposit and Transfer of Funds. Receipt of the Escrow Deposit shall be acknowledged on behalf of the Escrow Agent on the date hereof by execution of an Acknowledgment in the form attached hereto as Exhibit C by a duly authorized officer of the Escrow Agent. The Escrow Deposit shall be invested in the Escrowed Obligations specified in Exhibit A and the Escrow Agent is hereby authorized and directed to make such investments as instructed by the Company.


3. Notice of Defeasance. Upon receipt of the Escrow Deposit, the Escrow Agent shall, in its capacity as the Trustee, mail a notice of defeasance to the owners of the Bonds.


4. Compensation; Waiver of Lien. The fees and expenses of the Escrow Agent relative to its duties under this Agreement in the amount of $12,850.19 have been paid by the Company on the date hereof. Such amount is payment in full to the Escrow Agent relative to its duties hereunder. The Escrow Agent expressly waives any lien upon or claim against the moneys and investments in the Escrow Fund.


5. Collection and Remittance; Payment of Principal of Bonds. The Escrow Agent will collect all remittances of interest on the Escrowed Obligations in the Escrow Fund as and when such interest becomes due and payable and will cause such Escrowed Obligations to be presented for payment and converted into cash on their respective maturity or due dates in accordance with the schedule of cash payments included in the Escrow Verification Report, prepared by McGladrey and Pullen (the "Escrow Report"). The Escrow Agent will remit from the Escrow Fund to the paying agent for the Bonds (which paying agent is currently the Trustee) the funds required for the payment of the Bonds as set forth on Exhibit B hereto.


6. Sufficiency of Escrow Deposit. In reliance upon the Escrow Report, the Company represents, and the Escrow Agent acknowledges, that the amount of the Escrow Deposit deposited in the Escrow Fund, if the principal of and interest on the Escrowed Obligations are paid in accordance with their terms, is sufficient to produce cash in such amounts to enable the Escrow Agent to make full and timely payments of debt service on the Bonds as provided in paragraph 5 above.


7. Release of Guaranty. In accordance with Section 2.02 of that certain Guaranty Agreement dated as of September 1, 1994, from Lund International Holdings, Inc. (the "Guarantor") in favor of the Trustee, the Guaranty shall remain in effect until the date which is one year plus 15 days after all Bonds shall have been paid or provided for (i.e. January 14, 2000). On such date the Trustee shall execute and deliver to the Company and the Guarantor a release of the Guaranty in the form of Exhibit D attached hereto.


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8. Trust; Remission of Remaining Moneys. It is recognized that the Escrowed Obligations and money held in the Escrow Fund from time to time shall be subject to the charge and lien thereon of this Escrow Agreement and the use thereof required to be made by the provisions of this Escrow Agreement. The Escrow Agent shall hold all such money and obligations in a special trust fund and account (herein the "Escrow Fund") separate and wholly segregated from all other funds and securities of the Company or the Escrow Agent or deposited with the Escrow Agent, and shall never commingle such money or securities with other money or securities, provided that nothing contained herein shall be construed as requiring the Escrow Agent to keep the identical moneys, or any part thereof, received for the Escrow Fund on hand, but moneys of an equal amount, except to the extent such are investments permitted under this Escrow Agreement, shall always be maintained on hand as funds held by the Escrow Agent as trustee, belonging to the Company, and a special account thereof evidencing such fact shall at all times be maintained on the books of the Escrow Agent, together with such investments.


In the event of the Escrow Agent's failure to account for any money or obligations held by it in the Escrow Fund, such money and obligations shall be and remain the property of the Company, and if for any reason such money or obligations cannot be identified, all other assets of the Escrow Agent shall be impressed with a trust for the amount thereof and the Company shall be entitled to a preferred claim upon such assets. All moneys remaining in the Escrow Fund after payment therefrom of all sums required to be paid under this Escrow Agreement shall be promptly remitted to the Company.


9. Sale and/or Reinvestment. (a) The Escrow Agent may sell or reinvest, or both, all or a part of the Escrowed Obligations, or the proceeds thereof, in securities set forth in Minnesota Statutes, Section 475.67, Subdivision 8, if and only if (i) such sales or reinvestment, or both, are approved by a duly authorized representative of the Company and otherwise permitted by the laws of Minnesota, (ii) an opinion of a certified public accountant or a financial advisor is first obtained to the effect that such sale or reinvestments, or both, will not prevent the Escrow Agent from making all ...