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EXHIBIT 4
SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT dated as of December 20, 1996 among:
A. XXXXXX X. XXXXXXX, XXXXXX X. XXXXXXXX, XXXX X.
XXXXXX, XXXXXXX X. XXXXXXXXX and XXXXXX X. XXXXXX (each, an
"Existing Shareholder" and, collectively, the "Existing Shareholders");
B. AMERICAN INTERNATIONAL INSURANCE COMPANY, a
New York corporation (the "Investor"); and
C. ALCOHOL SENSORS INTERNATIONAL, LTD., a New York
corporation (the "Company").
RECITALS:
1. Pursuant to the Purchase Agreement (as defined below), the
Investor has agreed to purchase from the Company, and the Company has agreed to
issue and sell to the Investor, shares of the Company's Series A Cumulative
Non-redeemable Convertible Preferred Stock, par value $0.001 per share (the
"Series A Preferred Stock"), and certain warrants of the Company (the
"Warrants") exercisable into shares of the Company's Common Stock, par value
$0.001 per share (the "Common Stock"), all in accordance with the terms and
conditions of the Purchase Agreement.
2. As of the Effective Date (as defined below), each of the
Existing Shareholders owns the number of shares of Common Stock and the number
of options exercisable for Common Stock, respectively, specified with respect to
such individual on Schedule I attached hereto, and such shares, as of the
Effective Date, represent the percentage ownership of all of the Capital Stock
of the Company on a fully diluted basis (assuming, for this purpose only, that
all Capital Stock of the Company that is convertible or exercisable into or
exchangeable for Common Stock has been so converted, exercised or exchanged in
full) as specified with respect to such individual on Schedule I.
3. It is a condition precedent to the consummation of the
transactions under the Purchase Agreement that the parties hereto enter into
this Agreement.
4. The parties hereto desire to set forth their mutual
agreements and understandings with respect to, among other things, certain of
their respective rights, duties and obligations and certain transactions and
arrangements in respect of the Company, the Capital Stock of the Company and
related matters.
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NOW, THEREFORE, the parties hereto, intending legally to be
bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS AND INTERPRETATION. (a) As used in
this Agreement, the following terms shall have the following meanings:
"Affiliate": of any specified Person means any other
Person directly or indirectly Controlling or Controlled by or under direct or
indirect common Control with such specified Person.
"Agreement": this Shareholders Agreement, together
with all Schedules and Exhibits hereto, as the same may be amended, supplemented
or modified in accordance with the terms hereof from time to time.
"Capital Stock": any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person (other than
a corporation) and any and all rights, warrants or options to purchase any of
the foregoing.
"Confidential Material": confidential records and
information, including, but not limited to, development, marketing, purchasing,
organizational, strategic, financial, managerial, administrative, manufacturing,
production, distribution and sales information, data, specifications and
processes presently owned or at any time hereafter developed by the Company, any
of its Subsidiaries or their respective officers, employees, agents, consultants
or Affiliates or used presently or at any time hereafter in the course of the
business of the Company or any of its Subsidiaries, that are not otherwise part
of the public domain.
"Control": (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with"), as
used with respect to any Person, the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"Effective Date": the date of this Agreement.
"Exempt Transfer": with respect to each Existing
Shareholder, a direct or indirect Transfer of Common Stock to another Existing
Shareholder, provided that prior to each such Transfer the Company and each
Shareholder not a party to such proposed Transfer shall have
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received in writing the information required in a Transfer Notice with respect
to such Transfer from the proposed transferor.
"GAAP": generally accepted accounting principles in
the United States of America in effect from time to time.
"Governmental Authority": any nation or government,
any state or other political subdivision thereof or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government or any other regulatory authority.
"Investor Holder": the Investor and each Person that
has purchased or otherwise acquired shares of Series A Preferred Stock from the
Investor or another Investor Holder.
"Involuntary Transfer": a Transfer or proposed
Transfer by an Existing Shareholder by reason of (i) death, (ii) long-term
disability or (iii) termination of employment with the Company by the Company.
"Person": any individual, company, corporation,
partnership, limited liability company, trust, division, Governmental Authority
or other entity.
"Public Transfer": a public Transfer by an Existing
Shareholder of Capital Stock of the Company pursuant to Rule 144, as amended,
under the Securities Act or an effective registration statement relating to such
Capital Stock.
"Purchase Agreement": the Convertible Preferred
Stock and Warrant Purchase Agreement dated as of December 20, 1996 between the
Investor and the Company.
"Registration Rights Agreement": the Registration
Rights Agreement dated as of the date hereof between the Investor and the
Company.
"Related Documents": the Purchase Agreement and any
and all instruments, documents or agreements referred to therein or related
thereto, including, without limitation, the Warrant Certificate (as such term is
defined in the Purchase Agreement) and the Registration Rights Agreement.
"Related Transferee": as to any Existing
Shareholder, a Transferee that (i) has purchased or otherwise acquired shares of
Capital Stock of the Company from such Existing Shareholder and (ii) is a
spouse, parent, sibling, child, stepchild or grandchild of such Existing
Shareholder or a trust which is for the benefit of such a Person or Persons, or
is an Affiliate of such Existing Shareholder.
"Requirement of Law": as to any Person, the articles
or certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and
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any law, statute, treaty, rule or regulation, order or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property, or to which such Person
or any of its property is subject.
"Securities Act": the Securities Act of 1933, as
amended.
"Shareholder": each of the following Persons: each
of the Existing Shareholders, the Investor and each other Person that becomes a
party to this Agreement from time to time pursuant to Section 3.1(b) hereof.
"Stock Option Issuance": the issuance by the Company
to employees, directors or consultants pursuant to the Company's 1996 Stock
Option Plan or another similar plan hereafter approved by the Board of Directors
of the Company, of (A) options to acquire Common Stock not to exceed (x) 300,000
shares of Common Stock in the aggregate in any fiscal year of the Company and
(y) 600,000 shares of Common Stock in the aggregate and (B) Common Stock upon
the exercise of such options. The number of shares of Common Stock specified in
this definition shall be adjusted for stock splits, stock dividends, stock
combinations, recapitalizations and like occurrences.
"Subsidiary": as to any Person, any entity (whether
now existing or hereafter formed or acquired) of which shares of each class of
Capital Stock having ordinary voting power (other than Capital Stock having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such entity are at the time owned by
such Person or by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries of such Person. The Company's Subsidiaries shall
include, without limitation, Alcohol Sensors Europe, plc, a British Company.
"Transfer": with respect to any Capital Stock, (a)
any sale, assignment or transfer of such Capital Stock or any right or interest
therein; (b) any pledge or hypothecation of such Capital Stock or any interest
therein; (c) any grant, sale or other transfer of securities convertible or
exchangeable into or exercisable for or other options, warrants or rights to
acquire such Capital Stock or any interest therein; and (d) any other direct or
indirect transfer of such Capital Stock or any interest therein.
"Transfer Notice": as defined in Section 3.2(a).
"Transferee": as defined in Section 3.1(b) hereof.
(b) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
Section, schedule and exhibit references are to this Agreement unless otherwise
specified.
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(c) The meanings given to terms defined herein shall be
equally applicable to the singular and plural forms of such terms.
ARTICLE II
VOTING AGREEMENT AND RELATED MATTERS
1 DESIGNEE TO THE BOARD OF DIRECTORS. (a) As specified in
the Company's Certificate of Incorporation, as amended from time to time (the
"Certificate of Incorporation"), a copy of which is attached hereto as Exhibit
A, so long as at least 250,000 shares of Series A Preferred Stock are
outstanding (as adjusted for stock splits, stock dividends, stock combinations,
recapitalizations and like occurrences), the holders of the Series A Preferred
Stock, voting separately as a class, shall have the special and exclusive right
to elect one director to the Board of Directors of the Company in accordance
with the terms and conditions set forth in the Certificate of Incorporation. The
Company agrees that it shall take all actions reasonably requested from time to
time by the holders of record of shares representing at least 51% of the voting
power of the Series A Preferred Stock then outstanding (the "Majority Holders")
in order to give full force and effect to and to carry out the full intent of
this paragraph (a) and Article Fourth, Section 7 of the Certificate of
Incorporation. The Shareholders agree to vote their shares of Capital Stock of
the Company in order to give full force and effect to and to carry out the full
intent of this paragraph (a) and Article Fourth, Section 7 of the Certificate of
Incorporation.
(b) If, at any time, less than 250,000 shares of Series A
Preferred Stock are outstanding (as adjusted for stock splits, stock dividends,
stock combinations, recapitalizations and like occurrences), but the Investor
then holds in excess of 166,666 shares of Common Stock (as adjusted for stock
splits, stock dividends, stock combinations, recapitalizations and like
occurrences), then the Investor shall have the special and exclusive right to
designate one director to the Board of Directors of the Company. The director to
be designated pursuant to this paragraph (b) may be removed with or without
cause by the Investor at any time. If the director designated by the Investor
pursuant to this paragraph (b) ceases to or is unable to continue in that
capacity, the Investor shall nominate a replacement director for election to the
Board of Directors of the Company. The Company agrees, for the purposes of this
paragraph (b), that it shall (w) nominate the Investor's designee to the Board
of Directors of the Company at each applicable meeting held to elect members to
the Board of Directors of the Company from time to time, (x) take all actions to
remove such director if requested by the Investor, (y) take all actions to cause
the Investor's nominee as a replacement director, if any, to be elected from
time to time and (z) take all other actions reasonably requested from time to
time by the Investor in order to give full
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force and effect to and to carry out the full intent of this paragraph (b). The
Shareholders agree, for the purposes of this paragraph (b), to vote their shares
of Capital Stock of the Company in order to (i) elect the Investor's designee to
the Board of Directors of the Company from time to time, (ii) oppose any and all
attempts to remove such director without the consent of the Investor, (iii)
remove such director if requested by the Investor and (iv) otherwise give full
force and effect to and to carry out the full intent of this paragraph (b).
2 REIMBURSEMENT OF EXPENSES. The Company shall promptly
reimburse the reasonable expenses (including, without limitation, reasonable
travel expenses) of any director elected to the Board of Directors of the
Company pursuant to Section 2.1 hereof related to (x) attending meetings of (i)
the Board of Directors of the Company or any of its Subsidiaries of which such
director is also a director and (ii) any committee of the Board of Directors of
the Company or any such Subsidiary of which such director is a member and (y)
the performance of his or her duties as a director of the Company or any such
Subsidiary or as a committee member of the Board of Directors of the Company or
any such Subsidiary, to the extent not accounted for in clause (x) above.
3 NUMBER OF DIRECTORS. Each of the parties hereto agrees
that it shall not permit any increase in the number of directors on the Board of
Directors of the Company beyond such number of directors at the Effective Date
(after accounting for the director to be designated by the holders of Series A
Preferred Stock on the Effective Date pursuant to Section 2.1 hereof and the
Certificate of Incorporation), unless the prior written consent of the Investor
is obtained prior thereto, which consent shall not be unreasonably withheld or
delayed.
ARTICLE III
AGREEMENTS RELATING TO THE CAPITAL STOCK
OF THE COMPANY AND OTHER MATTERS
1 TRANSFER OF CAPITAL STOCK. (a) For the period beginning on
the Effective Date and ending on the date that is two years thereafter (the
"Restricted Period"), the Existing Shareholders severally agree with the
Company, the Investor and with each other Shareholder that they will not,
directly or indirectly, Transfer any Capital Stock of the Company (or any
interest therein), now or hereafter at any time owned by them, except that each
Existing Shareholder may Transfer, upon written notice to the Company, the
Investor and each other Shareholder, in accordance with applicable law: (i) any
Common Stock of the Company pursuant to an Involuntary Transfer; (ii) any Common
Stock of the Company for estate planning purposes to such Existing Shareholder's
spouse, parents, siblings, children, stepchildren or grandchildren or to a trust
which is for the benefit of such Existing Shareholder or such Existing
Shareholder's spouse, parents, siblings, children, stepchildren or
grandchildren; (iii) during the period from (and including) the Effective Date
through (but excluding) the date that is one year thereafter (the "Initial
Period"), any Common Stock which does not exceed five percent (5%) of all of the
Common Stock held by such Existing Shareholder on the Effective Date; and (iv)
during the
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period from (and including) the last day of the Initial Period through (and
including) the last day of the Restricted Period, any Common Stock which does
not exceed fifteen percent (15%) of all of the Common Stock held by such
Existing Shareholder on the Effective Date; provided, however, that, in
connection with any Transfer permitted under this Section 3.1(a), prior to such
Transfer, such Existing Shareholder shall comply with Section 3.1(b) hereof.
(b) Any Transfer of Capital Stock of the Company by any
Existing Shareholder during the Restricted Period or at any time thereafter to a
Related Transferee shall not relieve the transferor of its obligations hereunder
and shall only be valid if the Person to whom such Capital Stock is Transferred
(a "Transferee"), prior to the Transfer, agrees in writing to be bound by the
terms of this Agreement as and to the same extent that the transferor
was bound by this Agreement immediately prior to such Transfer. Any such
Transferee that agrees to be bound by the terms of this Agreement as provided in
this paragraph (b) shall be deemed, upon execution and delivery of such
agreement, to be a Shareholder hereunder. Each such Transferee shall be entitled
to all of the rights under this Agreement to which the transferor was entitled
immediately prior to such Transfer. Any purported Transfer without obtaining
this agreement by the Transferee shall be deemed void and of no further effect
and shall be governed by the provisions of paragraph (c) below. The provisions
of this paragraph (b) shall not apply in connection with a Public Transfer by an
Existing Shareholder.
(c) In the event a Transfer of any Capital Stock of the
Company has taken place or remains in place in violation of the provisions of
this Article III, such Transfer shall be void and of no effect, and no dividend
of any kind whatsoever nor any distribution pursuant to liquidation or otherwise
shall be paid by the Company or the related Shareholder to the Transferee in
respect of such Capital Stock (all such dividends and distributions being deemed
waived), and any voting rights of such Capital Stock on any matter whatsoever
shall remain vested in the transferor.
(d) The provisions of this Section 3.1 shall be in addition
to, and shall not in any way limit the application of, any other provision of
this Agreement.
2 TAG-ALONG RIGHTS. (a) If, at any time, any Existing
Shareholder and/or a Related Transferee or Related Transferees of such Existing
Shareholder (a "Section 3.2 Transferor") desires to Transfer any of its Common
Stock in an amount in excess of fifteen percent (15%) of all of the Common Stock
held by such Existing Shareholder on the Effective Date in one transaction or a
series of transactions to any Person or Persons (a "Section 3.2 Transferee"),
except pursuant to an Exempt Transfer or a Public Transfer, prior to any such
Transfer, such Section 3.2 Transferor shall promptly (and in any event at least
20 business days prior to the closing date thereof), provide each Investor
Holder (each, a "Prospective Participating Shareholder") with written notice of
the proposed Transfer (the "Transfer Notice") containing the following:
(i) the name and address of the proposed Section 3.2
Transferee;
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(ii) the number of shares of Common Stock to be
Transferred by such Section 3.2 Transferor; and
(iii) the purchase price and other terms and conditions of
payment and the closing date for the proposed Transfer (including, when
available, a copy of any purchase agreement related thereto).
(b) If any of such Prospective Participating Shareholders
(each, a "Participating Shareholder") wishes to participate in such Transfer,
each such Participating Shareholder may notify the Section 3.2 Transferor by
written notice (the "Tag-Along Notice") on or before the expiration of 15
business days following receipt of the Transfer Notice that such Participating
Shareholder desires to Transfer to the proposed Section 3.2 Transferee a part of
its shares of Capital Stock of the Company (as determined pursuant to the
following sentence) on the same terms and conditions set forth in the Transfer
Notice. The Tag-Along Notice shall specify the number of shares of such Capital
Stock such Participating Shareholder desires to Transfer (the "Tag-Along
Amount"); for purposes of making any determination or calculation pursuant to
this Section 3.2, but for such purposes only, as of any date of determination or
calculation, all of the Capital Stock of the Company held by an Investor Holder
shall be deemed to have been fully converted, exercised or exchanged, to the
extent applicable, as of such date of determination or calculation. The maximum
number of shares of such Capital Stock that each such Participating Shareholder
separately shall be entitled to Transfer hereunder shall be determined by
multiplying the number of shares of such Capital Stock held by such
Participating Shareholder at the time of the Transfer Notice by a fraction, the
numerator of which is the number of shares of Common Stock proposed to be
Transferred to the Section 3.2 Transferee by the Section 3.2 Transferor and the
denominator of which is the number of shares of Common Stock then owned by the
Section 3.2 Transferor. If no Prospective Participating Shareholder provides the
Section 3.2 Transferor with a Tag-Along Notice within the period specified
above, the Section 3.2 Transferor shall be free to sell all or a portion of such
Common Stock to the Section 3.2 Transferee in the amount and on the same terms
and conditions set forth in the Transfer Notice, subject to paragraph (h) below.
If there is any Participating Shareholder(s), the Section 3.2 Transferor may not
effect such Transfer unless the Section 3.2 Transferee shall have purchased the
Tag-Along Amount or the Reduced Tag-Along Amount (as defined below) from each
such Participating Shareholder on the same terms and conditions set forth in the
Transfer Notice.
(c) If the sum (the "Aggregate Shares Offered") of (i) the
number of shares of Common Stock proposed to be Transferred to the Section 3.2
Transferee by the Section 3.2 Transferor and (ii) the aggregate Tag-Along
Amounts for all Participating Shareholders exceeds the number of shares of
Common Stock that such Section 3.2 Transferee is willing to purchase, then each
such Participating Shareholder shall be obligated to Transfer a number of shares
of Common Stock or its equivalent (the "Reduced Tag-Along Amount") equal to the
product of the number of shares of Common Stock which the Section 3.2 Transferee
is willing to purchase and a fraction, the numerator of which is the Tag-Along
Amount with respect to such Person and the denominator of which is the Aggregate
Shares Offered, and the Section 3.2 Transferor shall be obligated to Transfer a
number of shares of Common Stock equal to the number of shares of
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Common Stock which the Section 3.2 Transferee is willing to purchase minus the
Reduced Tag-Along Amount or Reduced Tag-Along Amounts for all Participating
Shareholders.
(d) Any indemnity provided by a Participating Shareholder to
the Section 3.2 Transferee in a purchase agreement relating to such Transfer
will only relate to the shares of Capital Stock Transferred by it. Any indemnity
provided to the Section 3.2 Transferee by the Section 3.2 Transferor will only
relate to the shares of Common Stock Transferred by it.
(e) The Section 3.2 Transferor and the Participating
Shareholders whose shares of Capital Stock are Transferred pursuant to this
Section 3.2 shall be required to bear their pro rata share, based on the number
of shares of Capital Stock included in such Transfer, of the expenses of the
transaction including, without limitation, legal, accounting and investment
banking fees and expenses.
(f) The Company shall, upon request by any Participating
Shareholder, issue to such Participating Shareholder one or more stock
certificates registered in the names and in the denominations (aggregating in a
number equal to the original denomination) requested by such Participating
Shareholder, to facilitate any partial sale of shares of any Capital Stock
pursuant to this Section 3.2.
(g) To the extent that any prospective Section 3.2 Transferee
is unwilling or otherwise refuses to purchase Capital Stock from any
Participating Shareholder, the Section 3.2 Transferor shall not Transfer to such
prospective Section 3.2 Transferee any Common Stock, unless and until,
simultaneously with such Transfer, the Section 3.2 Transferor shall purchase
such Capital Stock from such Participating Shareholder on the same terms and
conditions specified in the Transfer Notice.
(h) Subject to the rights of each Prospective Participating
Shareholder, if it has so elected, to participate in the Transfer of Common
Stock as provided in this Section 3.2, the Section 3.2 Transferor may, not later
than sixty (60) days following delivery to the Prospective Participating
Shareholders of the Transfer Notice, conclude a Transfer of Common Stock covered
by the Transfer Notice on the terms and conditions described in the Transfer
Notice. Any proposed Transfer on terms and conditions more favorable to the
Section 3.2 Transferee than those described in the Transfer Notice, as well as
any proposed Transfer of any Common Stock by the Section 3.2 Transferor more
than sixty (60) days following delivery to the Prospective Participating
Shareholders of the Transfer Notice, shall again be subject to the tag-along
rights of the Prospective Participating Shareholders and shall require
compliance by the prospective Section 3.2 Transferor with the procedures
described in this Section 3.2.
(i) The exercise or non-exercise of the rights of any
Prospective Participating Shareholder under this Section 3.2 to participate in
one or more Transfers of Common Stock shall not adversely affect its right to
participate in subsequent Transfers of Common Stock pursuant to this Section
3.2.
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(j) The provisions of this Section 3.2 shall be subject in all
respects to the provisions of Section 3.1 hereof (except as otherwise set forth
herein).
(k) This Section 3.2 shall remain in effect only so long as at
least 250,000 shares of Series A Preferred Stock are outstanding (as adjusted
for stock splits, stock dividends, stock combinations, recapitalizations and
like occurrences).
3 NO ISSUANCE OF CAPITAL STOCK. For the period beginning on
the Effective Date and ending nine (9) months thereafter, the Company shall not
issue or Transfer any of its Capital Stock without the Investor's prior written
consent, except for the issuance by the Company of shares of Common Stock (or,
in the case of clause (i) below, options to purchase Common Stock) in connection
with (i) the Stock Option Issuance (provided that during such nine (9)-month
period, such issuances shall not exceed options to purchase up to 225,000 shares
of Common Stock and the issuance of Common Stock upon the exercise of such
options and provided, further, that no such options or shares of Common Stock
may be issued by the Company prior to January 1, 1997), (ii) the conversion of
the Series A Preferred Stock or the exercise of the Warrants or (iii) the
exercise of warrants or options that are outstanding as of the Effective Date
and which are specified in Section 3.2 of the Purchase Agreement.
4 PARTICIPATION RIGHT ON NEW SECURITIES. During the
Restricted Period, the Company hereby grants to each of the Investor Holders
(collectively, the "Eligible Holders") the right of first refusal to purchase a
pro rata share of New Securities (as defined below) that the Company may, from
time to time, propose to sell and issue (the "Participation Right"). Each
Eligible Holder's pro rata share, for purposes of this Participation Right, is
the ratio of (X) the number of shares of Common Stock then owned by such
Eligible Holder to (Y) the total number of shares of Common Stock of the Company
outstanding immediately prior to the issuance of the New Securities, assuming,
in each case but for purposes of this Section 3.4 only, full conversion of all
shares of then outstanding Series A Preferred Stock and full exercise of all
then outstanding Warrants and other rights, options and warrants to purchase or
acquire Common Stock. This Participation Right shall be subject to the following
provisions:
(a) "New Securities" shall mean any offering by
the Company of any Capital Stock of the Company, whether now authorized or not;
provided, however, that "New Securities" does not include (i) Common Stock
issued pursuant to the Stock Option Issuance; (ii) Common Stock issuable upon
conversion of the Series A Preferred Stock or upon exercise of the Warrants;
(iii) Capital Stock issued pursuant to the acquisition of another corporation by
the Company by merger, purchase of substantially all of the assets or other
reorganization, whereby the Company owns more than 50% of the voting power of
such corporation; and (iv) Common Stock issuable upon the exercise of warrants
or options that are outstanding as of the Effective Date and which are specified
in Section 3.2 of the Purchase Agreement.
(b) In the event that the Company proposes to
undertake an issuance of New Securities, it shall give each Eligible Holder
written notice of its intention, describing the type of New Securities, the
price and the general terms and conditions upon which the Company
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proposes to issue the same. Each Eligible Holder shall have twenty (20) business
days from the date of receipt of any such notice to agree to purchase its pro
rata share of such New Securities for the price and upon the general terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased.
(c) In the event that the Eligible Holders fail
to exercise in full the Participation Right within said twenty (20) business day
period, the Company shall have sixty (60) days thereafter to sell the New
Securities respecting which the Eligible Holders' Participation Rights were not
exercised at a price and upon terms and conditions no more favorable to the
purchasers thereof than specified in the Company's notice. In the event the
Company has not sold the New Securities within said sixty (60) day period, the
Company shall not thereafter issue or sell any New Securities without first
offering such securities to the Eligible Holders in the manner provided above.
(d) This Section 3.4 shall not limit in any
respect the obligations of the Company under Section 3.3.
(e) This Section 3.4 shall remain in effect only
so long as at least 250,000 shares of Series A Preferred Stock are outstanding
(as adjusted for stock splits, stock dividends, stock combinations,
recapitalizations and like occurrences).
5 LEGENDS ON STOCK. Each Capital Stock certificate of the
Company held by an Existing Shareholder or any Transferee of an Existing
Shareholder shall bear the following legend on the face thereof:
"THIS CERTIFICATE IS ISSUED SUBJECT TO THE PROVISIONS OF A
SHAREHOLDERS AGREEMENT DATED AS OF DECEMBER 20, 1996, AND NEITHER THIS
CERTIFICATE NOR THE SHARES REPRESENTED BY IT ARE ASSIGNABLE OR
OTHERWISE TRANSFERABLE, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
SAID AGREEMENT, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY."
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAW OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the Capital Stock
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder of such Capital Stock (which counsel shall be reasonably
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satisfactory to the Company), the Capital Stock represented thereby is not, at
such time, required by law to bear such legend. The Company agrees that it will
not Transfer on its books any certificate for its Capital Stock in violation of
the provisions of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
1 REPRESENTATIONS AND WARRANTIES OF THE EXISTING
SHAREHOLDERS. Each of the Existing Shareholders severally represents and
warrants to the Investor, the other Shareholders and the Company that:
(a) Authority. Each Existing Shareholder has all
requisite power to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement and each of the Related Documents to which
it is a party have been duly executed and delivered by each Existing
Shareholder, have been effectively authorized by all necessary action
and constitute the legal, valid and binding obligation of each such Person,
enforceable against each such Person in accordance with its terms, except as
enforceability may be subject to the application of general equitable principles
and to bankruptcy, insolvency, moratorium or other similar laws affecting
creditors' rights generally.
(b) Agreements Not in Breach of Other Instruments.
The execution and delivery of this Agreement and the Related Documents to which
it is a party, the consummation of the transactions contemplated hereby and
thereby and the fulfillment of the terms hereof and thereof will not result in a
breach of any of the terms or provisions of, or constitute a default under, or
conflict with (x) any agreement, indenture or other instrument to which any
Existing Shareholder is a party or by which it is bound, (y) any judgment,
decree, order or award of any court, governmental body, Governmental Authority
or arbitrator by which any Existing Shareholder is bound or (z) any Requirement
of Law applicable to any Existing Shareholder.
(c) Regulatory Approvals. There are no consents,
approvals, authorizations or other requirements prescribed by any applicable
Requirement of Law that must be obtained or satisfied in connection with the
Existing Shareholder's execution, delivery and performance of this Agreement or
any of the Related Documents to which it is a party.
(d) No Legal Bar. Except as set forth on Schedule
4.1(d) hereto, there is no suit, action or proceeding pending or, to each
Existing Shareholder's knowledge, threatened against any Existing Shareholder
that questions the validity of this Agreement or any of the Related Documents,
any of the transactions contemplated hereby or thereby or any action which has
been taken by any of the parties in connection herewith or therewith or in
connection with any of the transactions contemplated hereby or thereby or that
seeks to enjoin the consummation thereof.
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(e) No Brokerage Fees. No broker or finder has
acted for any Existing Shareholder in connection with this Agreement or any of
the Related Documents or the transactions contemplated hereby or thereby, and no
broker or finder is entitled to any brokerage or finder's fees or other
commission in respect of such transactions based in any way on agreements,
arrangements or understandings made by or on behalf of any Existing Shareholder.
(f) Capitalization of the Company. As of the
Effective Date, each of the Existing Shareholders owns all right, title and
interest in and to the number of shares of Common Stock and the number of
options exercisable for Common Stock, respectively, specified with respect to
such individual on Schedule I attached hereto, free and clear of all liens,
claims, charges, security interests and other encumbrances, and such shares, as
of the Effective Date, represent the percentage ownership of all of the Capital
Stock of the Company on a fully diluted basis (assuming, for this purpose only,
that all Capital Stock of the Company that is convertible or exercisable into or
exchangeable for Common Stock has been so converted, exercised or exchanged in
full) as specified with respect to such individual on Schedule I. As of the
Effective Date, no shares of Capital Stock of the Company are owned by any
Existing Shareholder other than as specified on Schedule I with respect to such
Existing Shareholder.
2 REPRESENTATIONS AND WARRANTIES OF OTHER SHAREHOLDERS.
Each Shareholder (other than an Existing Shareholder and the Investor) hereby
makes the representations and warranties of the Existing Shareholders set forth
in Section 4.1(b), (c), (d) and (e) and the representation and warranty set
forth below, in each case with respect to itself only, to the Company and each
other Shareholder.
(a) Organization and Authority. To the extent the
Shareholder is a Person other than an individual, it is a company duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, has all requisite power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby, and
is duly qualified as a foreign company under the laws of each jurisdiction where
its conduct of business or the ownership of its assets requires such
qualification. To the extent the Shareholder is an individual, it has all
requisite power to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by such
Person, has been effectively authorized by all necessary action, and constitutes
the legal, valid and binding obligation of such Person, enforceable against such
Person in accordance with its terms, except as enforceability may be subject to
the application of general equitable principles and to bankruptcy, insolvency,
moratorium or other similar laws affecting creditors' rights generally.
3 CERTAIN ADDITIONAL REPRESENTATIONS OF THE SHAREHOLDERS.
Each Shareholder represents and warrants to the Company and to each other
Shareholder that (i) all Capital Stock of the Company purchased or otherwise
acquired by such Shareholder has been or is being acquired by it for its own
account for investment, without any intention of Transferring or further
distributing the same in violation of the securities laws and (ii) it is fully
aware that in agreeing to Transfer or issue such Capital Stock to it the Company
or a Shareholder, as applicable, is relying upon the truth and accuracy of this
representation and warranty.
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ARTICLE V
COVENANTS AND AGREEMENTS
1 COVENANTS AND AGREEMENTS OF THE COMPANY.
1 BOOKS AND ACCOUNTS. The Company shall, and
shall cause each of its Subsidiaries to: (a) make and keep books, records and
accounts, which, in reasonable detail, accurately and fairly reflect its
transactions and dispositions of its assets; and (b) devise (if not existing on
the Effective Date) and maintain a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and in accordance with the Company's past
practices or any other criteria applicable to such statements, and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
2 REPORTS; BUDGETS.
(a) The Company shall furnish to each
Shareholder, as soon as practicable and in any event within ninety (90) days
after the end of each fiscal year of the Company, a consolidated annual report
of the Company and its Subsidiaries, including a consolidated balance sheet as
at the end of such fiscal year and consolidated statements of income and
retained earnings and changes of cash flows for such fiscal year, together with
the related notes thereto, setting forth in each case in comparative form
corresponding figures for the preceding fiscal year, all of which shall be
correct and complete and shall present fairly the consolidated financial
position of the Company and its Subsidiaries and the consolidated results of
their operations and changes in their consolidated financial position as of the
time and for the period then ended. The consolidated portions of such financial
statements shall be accompanied by an unqualified report, in form and substance
reasonably satisfactory to the Investor, of independent public accountants of
recognized national standing reasonably satisfactory to the Investor, to the
effect that such financial statements have been prepared in accordance with GAAP
applied on a basis consistent with prior years (except as otherwise permitted
under GAAP), and present fairly the consolidated financial position of the
Company and its Subsidiaries and the consolidated results of their operations
and changes in their consolidated financial position as of the time and for the
period then ended. The Company shall, and shall cause each of its Subsidiaries
to, conduct its business so that such report of the independent public
accountants shall not contain any qualifications as to the scope of the audit or
with respect to the Company's or any of its Subsidiaries' compliance with GAAP
consistently applied, except for changes in methods of accounting in which such
accountants concur.
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15
(b) The Company shall furnish to each
Shareholder, as soon as practicable and in any event within forty-five (45) days
after the end of each of the first three fiscal quarters of each fiscal year of
the Company, a quarterly report of the Company and its Subsidiaries consisting
of an unaudited consolidated balance sheet as at the end of such quarter and an
unaudited consolidated statement of income and retained earnings for such
quarter and the portion of the fiscal year then ended, setting forth in each
case in comparative form corresponding figures for the same period in the prior
fiscal year and for the budget for the current fiscal year. All such reports
shall be certified by the chief financial officer of the Company to be correct
and complete, to present fairly the consolidated financial position of the
Company and its Subsidiaries and the consolidated results of their operations
and changes in their consolidated financial position as of the time and for the
period then ended and to have been prepared in accordance with GAAP consistently
applied.
(c) The Company shall furnish to each
Shareholder, as soon as practicable and in any event within thirty (30) days
after the end of each calendar month, commencing with the month of December
1996, a monthly report of the Company and its Subsidiaries in such form and
containing such information as the Company and the Investor shall mutually agree
promptly following the Effective Date.
(d) The Company shall furnish to each
Shareholder, as soon as practicable and in any event within fifteen (15) days
after delivery of such Shareholder's request, such additional reports as such
Shareholder may reasonably request with respect to such matters
and in such form and detail as is reasonably satisfactory to such Shareholder.
All such reports shall be certified by the chief financial officer of the
Company, which certification shall be in form and substance satisfactory to such
Shareholder.
(e) The Company shall furnish to each
Shareholder, as soon as practicable and in any event within ninety (90) days
after the end of each fiscal year of the Company, an annual operating budget for
the Company and each of its Subsidiaries for the succeeding fiscal year,
containing, among other things, budgeted statements of profit and loss for each
month of such fiscal year. Promptly upon preparation thereof, the Company shall
furnish to each Shareholder any other budgets that the Company may prepare and
any revisions of such previously furnished budgets. Each budget or material
revision thereof furnished to the Shareholders pursuant to this Section 5.1.2(e)
shall have been previously submitted to and approved by the Board of Directors
of the Company.
3 OTHER REPORTS AND INSPECTION. The Company
shall furnish to each Shareholder (a) as soon as practicable after issuance,
copies of any financial statements or reports prepared by the Company or its
Subsidiaries for, or otherwise furnished to, its shareholders or the Securities
and Exchange Commission and (b) promptly such other documents, reports and
financial data as such Shareholder may reasonably request. In addition, the
Company shall, upon reasonable prior notice, make available during regular
business hours to each Shareholder or its representatives or designees (x) all
assets, properties and business records of the Company and its Subsidiaries for
inspection and/or copying and (y) the directors, officers and employees of the
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Company and its Subsidiaries for interviews concerning the business, affairs and
finances of the Company and its Subsidiaries.
4 MATERIAL CHANGES. The Company shall
promptly notify each Shareholder of any material adverse change in the business,
properties, assets, prospects or condition, financial or otherwise, of the
Company or any of its Subsidiaries, or any other material adverse event or
circumstance affecting the Company or any of its Subsidiaries, and of any
material litigation or material governmental proceeding pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against the
Company or any of its Subsidiaries or against any director, officer, employee,
consultant or Affiliate of the Company or any of its Subsidiaries.
5 CORPORATE EXISTENCE, LICENSES AND PERMITS;
MAINTENANCE OF PROPERTIES. The Company shall, and shall cause each of its
Subsidiaries to, at all times conduct its business in the ordinary course and
cause to be done all things necessary to maintain, preserve and renew its
existence and shall preserve and keep in full force and effect, and shall cause
each of its Subsidiaries to preserve and keep in full force and effect, all
licenses, permits and authorizations necessary or advisable to the conduct of
its and their respective businesses. The Company shall maintain and keep, and
shall cause each of its Subsidiaries to maintain and keep, its and their
respective properties in good repair, working order and condition, and from time
to time, to make all needful and proper repairs, renewals and replacements, so
that the business carried on in connection therewith may be properly conducted
at all times.
6 COMPLIANCE WITH OBLIGATIONS AND LAWS. The
Company shall, and shall cause each of its Subsidiaries to, comply with (a) all
material obligations which it or its Subsidiaries are subject to, or become
subject to, pursuant to any contract or agreement, whether oral or written, as
such obligations are required to be observed or performed, unless and to the
extent that the same are being contested in good faith and by appropriate
proceedings diligently prosecuted and the Company and its Subsidiaries have set
aside on their books adequate reserves with respect thereto and (b) all
applicable laws, statutes, rules, regulations, orders, demands and requests of
all Governmental Authorities, including, without limitation, all Environmental
Laws (as defined in the Purchase Agreement).
7 AMENDMENTS TO ORGANIZATIONAL DOCUMENTS.
None of the Company and its Subsidiaries will amend its certificate of
incorporation or by-laws so as to adversely affect the rights of the Investor
under this Agreement, the Certificate of Incorporation, the by-laws of the
Company or the Related Documents.
8 TAXES AND LIENS. The Company shall, and
shall cause each of its Subsidiaries to, file all applicable tax returns in a
timely manner. The Company shall duly pay and discharge, and shall cause each of
its Subsidiaries to duly pay and discharge, when payable, all taxes, assessments
and governmental charges imposed upon or against the Company or its Subsidiaries
or their respective properties, or any part thereof or upon the income or
profits therefrom, in each case before the same become delinquent and before
penalties accrue thereon,
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as well as all claims for labor, materials or supplies which if unpaid might by
law or statute become a lien, claim, charge or encumbrance upon any of its
property or any property of any of its Subsidiaries, unless and to the extent
that the same are being contested in good faith and by appropriate proceedings
diligently prosecuted and the Company and its Subsidiaries have set aside on
their books adequate reserves with respect thereto.
9 RESTRICTIVE AGREEMENT. From and after the
Effective Date, neither the Company nor any of its Subsidiaries will be a party
to any agreement, instrument or understanding which by its terms would restrict
the Company's performance of its obligations pursuant to this Agreement, the
Certificate of Incorporation or any of the Related Documents.
10 SERIES A PREFERRED STOCK AND WARRANTS AND
RELATED MATTERS.
(a) The Company agrees that all shares of Common
Stock that may be issued upon conversion of the Series A Preferred Stock or upon
exercise of the Warrants will, upon issuance, be duly and validly authorized and
issued, fully paid and nonassessable, and free and clear from all rights, taxes,
liens, claims, charges and encumbrances.
(b) The Company shall pay when due and payable
any and all federal, state, local, transfer, documentary, stamp and other taxes
or charges, if any, attributable to the initial issuance or delivery of any
shares of Common Stock or certificates therefor issuable upon conversion of the
Series A Preferred Stock or upon exercise of the Warrants, other than any taxes
measured or based upon the net income of any Person other than the Company.
(c) The Company shall at all times have
authorized and reserved, free from preemptive or other rights or claims, a
sufficient number of shares of Common Stock to provide for the conversion of the
Series A Preferred Stock and the exercise of the Warrants. The Company further
agrees that if any shares of its Capital Stock to be reserved for the purpose of
the issuance of shares upon the conversion of the Series A Preferred Stock or
upon exercise of the Warrants require registration with or approval of any
Governmental Authority under any applicable law before such shares may be
validly issued or delivered upon conversion or exercise, then the Company shall
in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be.
(d) The Company shall comply in all respects
with its Certificate of Incorporation and by-laws, including, without
limitation, Article Fourth, Section 7(e) of the Certificate of Incorporation.
(e) So long as the Common Stock issuable upon
the conversion of the Series A Preferred Stock may be listed on any national
securities exchange or eligible for trading on NASDAQ (or any other quotation
system operated by a national securities association), the Company covenants and
agrees that it shall take all such action as may be necessary to cause all
shares reserved for such issuance to be listed as expeditiously as reasonably
possible on such exchange or to be made so eligible as expeditiously as possible
upon official notice of issuance upon such exercise.
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2 COVENANTS AND AGREEMENTS OF THE EXISTING
SHAREHOLDERS.
(a) For the period beginning on the Effective
Date and ending five (5) years thereafter (the "Term"), the Existing
Shareholders and their respective Affiliates shall not, directly or indirectly,
own, manage, operate, join or Control or participate (or serve as a consultant
or in a similar position) in the ownership, management, operation or Control of,
any business, entity, firm, partnership, corporation or other Person, whether
private, governmental or quasi-governmental, other than the Company or any of
its Subsidiaries, which is engaged, directly or indirectly, anywhere in North
America and/or Europe, in the business of developing, manufacturing, marketing,
selling and/or distributing breath alcohol ignition interlock devices and
related products.
(b) During the Term, the Existing Shareholders
and their respective Affiliates shall refrain from, directly, indirectly or as
an agent on behalf of or in conjunction with any Person, soliciting (i) or
encouraging any employee of the Company or any of its Subsidiaries who is
employed in an executive, managerial, administrative, technical or professional
capacity or who possesses Confidential Material to leave the employment of the
Company or such Subsidiary or (ii) any customer of the Company or any of its
Subsidiaries on behalf of any Person other than the Company or any such
Subsidiary.
(c) Each of the Existing Shareholders has had,
and may be expected in the future to have, access to Confidential Material. All
such Confidential Material is considered secret and has been and/or will be
disclosed to each such Existing Shareholder in confidence, and each Existing
Shareholder acknowledges that, as a consequence of his employment and position
with the Company, he has had access to and became acquainted with Confidential
Material. Except in the performance of his duties as a director, officer or
consultant of the Company, each Existing Shareholder shall not, during the Term
and at all times thereafter, directly or indirectly for any reason whatsoever,
disclose or use any such Confidential Material. All records, files, drawings,
documents, equipment and other tangible items, wherever located, relating in any
way to or containing Confidential Material, which any such Existing Shareholder
has prepared, used or encountered or shall in the future prepare, use or
encounter, shall be and remain the Company's sole and exclusive property and
shall be included in the Confidential Material. Whenever requested by the
Company, each Existing Shareholder shall promptly deliver to the Company any and
all of the Confidential Material and copies thereof, not previously delivered to
the Company, that may be in the possession or under the control of such Existing
Shareholder. The foregoing restrictions shall not apply to the use, divulgence,
disclosure or grant of access to Confidential Material to the extent, but only
to the extent, (i) such Confidential Material has been publicly disclosed (not
due to a breach by such Existing Shareholder of his obligations hereunder or by
breach of any other Person of a fiduciary or confidential obligation to the
Company) or (ii) such Existing Shareholder is required to disclose Confidential
Material by or to any court of competent jurisdiction or any governmental or
quasi-governmental agency, authority or instrumentality of competent
jurisdiction, provided that such Existing Shareholder shall, prior to any such
disclosure, immediately notify the Company of such requirement and provided,
further, that the Company shall have the right, at its expense, to object to
such disclosures and to seek
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confidential treatment of any Confidential Material to be so disclosed on such
terms as it shall determine.
(d) In the case of each registration of any
underwritten primary offering initiated by the Company (other than any
registration by the Company on Form S-4 or Form S-8 (or any successor or
substantially similar form), or the registration of (A) an employee stock
option, stock purchase or compensation plan or of securities issued or issuable
pursuant to any such plan or (B) a dividend reinvestment plan) or any
underwritten secondary offering initiated at the request of any other Person
(including, without limitation, any demand registration initiated by the
Investor or an Other Approved Holder (as defined in the Registration Rights
Agreement) under the Registration Rights Agreement or otherwise, whether or not
shares of Capital Stock of the Company will be included by the Company in any
such offering), each Existing Shareholder severally agrees, if and to the extent
requested in writing by the managing underwriter or underwriters administering
such offering as promptly as reasonably practicable prior to the commencement of
the ten (10)-day period referred to below, not to effect any public Transfer of
any Capital Stock of the Company except as part of such underwritten
registration, during the period beginning ten (10) days prior to the effective
date of the applicable registration statement relating to such underwritten
offering and ending on the earlier of (i) ninety (90) days after such effective
date and (ii) the date such Transfer is permitted by such managing underwriter
or underwriters. The provisions of this paragraph (b) shall (x) be in addition
to, and shall not in any way limit the application of, any other provision of
this Agreement and (y) remain in full force and effect for so long as the
Registration Rights Agreement is in effect, notwithstanding the earlier
termination or expiration of this Agreement.
3 TERMINATION OF CURRENT SHAREHOLDERS' AGREEMENTS.
Each of the Existing Shareholders and the Company agree that all existing
shareholders' agreements among or between such parties or any of them in
relation to the Company and/or its Capital Stock are hereby terminated and
superseded and replaced by this Agreement.
4 WAIVERS BY THE INVESTOR. The parties hereto agree
that the Investor may from time to time in its sole discretion waive any or all
of its rights, privileges or remedies hereunder with respect to any Person or
Persons, subject to Section 7.2 hereof.
ARTICLE VI
EFFECTIVE DATE; TERM; TERMINATION
1 EFFECTIVE DATE. This Agreement shall become
effective on the Effective Date.
2 TERM. The obligations of each party hereunder shall
remain binding upon such party until such time as:
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(a) this Agreement has terminated pursuant to Section 6.3
hereof; or
(b) such party has Transferred all of its Capital Stock in the
Company in accordance with the terms of this Agreement and the by-laws
of the Company and is in compliance with its obligations under this
Agreement.
3 TERMINATION. Except as otherwise expressly provided
herein, this Agreement shall terminate and all rights and obligations hereunder
shall cease, upon the first to occur of any of the following events:
(i) the date that is ten (10) years after the
Effective Date; or
(ii) the voluntary dissolution of the Company; or
(iii) the written agreement of each of the parties
hereto to such termination; or
(iv) (x) there ceases to be at least 250,000 shares
of Series A Preferred Stock outstanding (as adjusted for stock splits,
stock dividends, stock combinations, recapitalizations and like
occurrences) and (y) the Investor ceases to own at least 166,666 shares
of Common Stock (assuming, for this purpose only, that all Capital
Stock of the Company owned by the Investor that is convertible or
exercisable into or exchangeable for Common Stock has been so
converted, exercised or exchanged by the Investor in full and as
adjusted for stock splits, stock dividends, stock combinations,
recapitalizations and like occurrences).
ARTICLE VII
MISCELLANEOUS
1 ENTIRE AGREEMENT. This Agreement, together with the other
agreements, instruments and documents expressly referred to herein, constitute
the entire agreement of the parties with respect to the transactions
contemplated hereby and supersede all prior agreements and understandings with
respect thereto, whether written or oral.
2 NO WAIVER; MODIFICATIONS IN WRITING. No failure or delay
by a party in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to any
party at law or in equity or otherwise. No waiver of or consent to any departure
by a party from any provision of this
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Agreement shall be effective unless signed in writing by the parties entitled to
the benefit thereof. No amendment, modification or termination of any provision
of this Agreement shall be effective unless signed in writing by all parties.
Any amendment, supplement or modification of or to any provision of this
Agreement, any waiver of any provision of this Agreement, and any consent to any
departure from the terms of any provision of this Agreement, shall be effective
only in the specific instance and for the specific purpose for which made or
given.
3 NOTICES. All notices, demands and other communications
provided for hereunder shall be in writing, shall be given by registered or
certified mail, return receipt requested, telegram, telecopy, courier service or
personal delivery, addressed
(i) to the Company or any Existing Shareholder as
follows:
Alcohol Sensors International, Ltd.
00 Xxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, President
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx
Telecopy: (000) 000-0000
(ii) to the Investor as follows:
American International Insurance Company
000 Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Telecopy: (000) 000-0000
with copies to:
American International Group, Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxx
Telecopy: (000) 000-0000
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Kramer, Levin, Naftalis & Xxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
(iii) to any other Shareholder as specified by such Person
in writing to each party hereto,
or to such other address as any party shall designate in writing, and shall be
deemed given when received.
4 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Agreement.
5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of
the parties under this Agreement may not be assigned or otherwise transferred to
any other Person, except (i) with the prior written consent of the other parties
hereto and (ii) in connection with a Transfer of Capital Stock of the Company by
a Shareholder made in compliance with all of the provisions of this Agreement.
Except as expressly provided in this Agreement, this Agreement shall not be
construed so as to confer any right or benefit upon any Person other than the
parties to this Agreement and their respective successors, permitted assigns,
heirs and personal representatives. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, permitted assigns, heirs and personal representatives.
6 GOVERNING LAW. This Agreement shall be deemed to be a
contract made under and shall be governed by and construed in accordance with
the internal laws of the State of New York without reference to the principles
of conflict of laws.
7 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Any suit,
action or proceeding arising out of or relating to this Agreement, the Related
Documents or the transactions contemplated hereby or thereby may be instituted
in any Federal court situated in the State of New York or any state court of the
State of New York in each case, in the Borough of Manhattan, City of New York,
and each party agrees not to assert, by way of motion, as a defense or
otherwise, in any such suit, action or proceeding, any claim that it is not
subject personally to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Agreement, the Related Documents
or the subject matter hereof or thereof may not be enforced in or by such court.
Each party further irrevocably submits to the jurisdiction of such court in any
such suit, action or proceeding. Any and all service of process and any other
notice in any such suit, action or proceeding shall be effective against any
party if given personally or by registered or certified mail, return receipt
requested, or by any other means of mail that requires a signed receipt, postage
fully prepaid,
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mailed to such party as herein provided. Nothing herein contained shall be
deemed to affect the right of any party to serve process in any manner permitted
by law or to commence legal proceedings or otherwise proceed against any other
party in any other jurisdiction.
8 FURTHER ASSURANCES. Each of the parties hereto shall
execute and deliver such documents, instruments and agreements and take such
further actions as may be reasonably required or desirable to carry out the
provisions of this Agreement, the Related Documents and the transactions
contemplated hereby and thereby, and each of the parties hereto shall cooperate
with each other in connection with the foregoing.
9 SPECIFIC PERFORMANCE. The parties acknowledge that
irreparable damage would occur to the Investor in the event that any of the
provisions of this Agreement or any of the Related Documents were not performed
by the other parties hereto in accordance with their specific terms or were
otherwise breached by such other parties and that money damages would not
provide an adequate remedy to the Investor. It is accordingly agreed that the
Investor shall be entitled to an injunction and other equitable remedies to
prevent breaches by the other parties hereto of this Agreement and the Related
Documents, and to enforce specifically the terms and provisions hereof or
thereof in any court of the United States or any state thereof having
jurisdiction, this being in addition to any other remedy to which the Investor
may be entitled at law or in equity.
10 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. If any provision in Section 5.2 hereof is held to be invalid or
unenforceable because of the scope or duration of or the area covered by such
provision, the parties hereto agree that the court making such determination
shall reduce the scope, duration and/or area of such provision (and shall
substitute appropriate provisions for any such invalid or unenforceable
provisions) in order to make such provision enforceable to the fullest extent
permitted by law and/or shall delete specific words and phrases, and such
modified provision shall then be enforceable and shall be enforced. The parties
hereto recognize that if, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants contained in Section 5.2 hereof, then that
invalid or unenforceable covenant contained in Section 5.2 hereof shall be
deemed eliminated from this Agreement to the extent necessary to permit the
remaining separate covenants hereof to be enforced. In the event that any court
determines that the time period or the area, or both, are unreasonable and that
any of the covenants in Section 5.2 hereof is to that extent invalid or
unenforceable, the parties hereto agree that such covenants will remain in full
force and effect, first, for the greatest time period, and second, in the
greatest geographical area that would not render them enforceable.
11 HEADINGS. The Article and Section headings used or
contained in this Agreement are for convenience of reference only and shall not
affect the construction of this Agreement.
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24
12 COSTS AND EXPENSES. The respective parties hereto shall
pay all costs and expenses that each respectively incurs with respect to the
negotiation, execution and delivery of this Agreement and the Related Documents.
13 WAIVER OF JURY TRIAL. The parties hereto hereby
irrevocably waive all right to a trial by jury in any action, proceeding or
counterclaim arising out of or relating to this Agreement, the Related Documents
or the transactions contemplated hereby or thereby.
14 PUBLICITY. The parties agree that no public release or
announcement concerning this Agreement or any of the Related Documents or the
transactions contemplated hereby or thereby shall be made without advance review
and approval by the Company and the Investor, except as otherwise required by
applicable law.
15 NATURE OF AGREEMENTS. The covenants and agreements of the
parties in this Agreement are several and not joint covenants and agreements,
unless otherwise expressly specified herein.
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25
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement or caused this Agreement to be duly executed by their respective
officers or representatives thereunto duly authorized as of the day and year
first written above.
/s/ Xxxxxx X. Xxxxxxx
-----------------------------------------
XXXXXX X. XXXXXXX
/s/ Xxxxxx X. Xxxxxxxx
-----------------------------------------
XXXXXX X. XXXXXXXX
/s/ Xxxx X. Xxxxxx
-----------------------------------------
XXXX X. XXXXXX
/s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------------
XXXXXXX X. XXXXXXXXX
/s/ Xxxxxx X. Xxxxxx
-----------------------------------------
XXXXXX X. XXXXXX
AMERICAN INTERNATIONAL INSURANCE
COMPANY
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Senior Vice President & Director
ALCOHOL SENSORS INTERNATIONAL, LTD.
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President & CEO
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26
SCHEDULE I
SHAREHOLDERS' OWNERSHIP
OF CAPITAL STOCK
Percentage
No. of Shares of Ownership of All
Options of the Company's
No. of Shares Exercisable for Capital Stock
of Common Common Stock (on a Fully
Name of Shareholder Stock Owned Owned Diluted Basis)
------------------- ----------- ----- --------------
Xxxxxx X. Xxxxxxx 646,082 5.31%
Xxxxxx X. Xxxxxxxx 150,000 1.23%
Xxxx X. Xxxxxx 646,082 5.31%
Xxxxxxx X. Xxxxxxxxx 646,082 5.31%
Xxxxxx X. Xxxxxx 0 140,000 1.15%
Ariel Enterprises 180,000 100,000 2.30%
27
Exhibit A: Certificate of Incorporation of the Company
Schedule 4.1(d): Certain Legal Matters
