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STOCK PURCHASE AGREEMENT
Series A Voting Convertible
Preferred Stock
Dated July 15, 1998
By and Among
SALTON/MAXIM HOUSEWARES, INC.
AND
CENTRE CAPITAL INVESTORS II, L.P.
CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P.
CENTRE CAPITAL OFFSHORE INVESTORS II, L.P.
THE STATE BOARD OF ADMINISTRATION OF FLORIDA
CENTRE PARALLEL MANAGEMENT PARTNERS, L.P.
CENTRE PARTNERS COINVESTMENT, L.P.
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STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
1. Authorization of Issuance of Shares............................... 1
2. Sale and Purchase of Shares....................................... 1
3. Closing Date; Termination......................................... 2
4. Representations and Warranties of the Company..................... 2
(a) Organization, Standing and Power of the
Company and its Subsidiaries; Holdings of the
Company..................................................... 2
(b) Authority; No Conflict...................................... 3
(c) Capitalization.............................................. 4
(d) Status of Shares............................................ 5
(e) Financial Statements; Corporate Records..................... 6
(f) Liabilities................................................. 7
(g) Actions Pending............................................. 7
(h) Compliance with Law......................................... 8
(i) No Consents................................................. 8
(j) SEC Filings................................................. 8
(k) Environmental Matters....................................... 9
(l) Disclosure of Facts......................................... 10
(m) No Violations; Restrictive Agreements....................... 10
(n) Offering of Securities...................................... 11
(o) Use of Proceeds............................................. 11
(p) Taxes....................................................... 11
(q) Registration under the Exchange Act......................... 12
(r) ERISA....................................................... 12
(s) Absence of Specified Changes................................ 14
(t) Intellectual Property....................................... 15
(u) Unlawful Payments and Contributions......................... 16
(v) Contracts and Commitments................................... 16
(w) Labor Matters............................................... 18
(x) Insurance................................................... 19
(y) Related Party Transactions.................................. 19
5. Representations and Warranties of the Purchasers.................. 19
(a) Organization of Purchasers.................................. 19
(b) Authority and Authorization of the Purchasers............... 20
(c) Non-Contravention........................................... 20
(d) No Consents................................................. 21
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(e) Experience of Purchasers; Acquisition for Investment........ 21
(f) Rule 144.................................................... 21
(g) HSR Act..................................................... 22
6. Covenants of the Company......................................... 22
(a) Reporting................................................... 22
(b) Inspection of Property; Access to Information............... 22
(c) Financial Records........................................... 23
(d) Election of Directors....................................... 23
(e) Transactions with Shareholders and Affiliates............... 24
(f) Exchange of Stock Certificates.............................. 25
(g) Lost Certificates Evidencing Shares......................... 25
(h) Pre-Emptive Rights of Purchasers............................ 25
7. Covenants of the Purchasers...................................... 27
(a) Prohibited Actions.......................................... 27
(b) Exempt Voting Securities.................................... 30
8. Conditions to the Obligations of the Parties..................... 30
(a) Obligations of the Purchasers............................... 30
(b) Obligations of the Company.................................. 32
(c) Obligations of Each of the Company and the Purchasers....... 32
9. Definitions...................................................... 33
10. Indemnification.................................................. 35
(a) Company Indemnification..................................... 35
(b) Purchaser Indemnification................................... 36
(c) Expenses, Reimbursement..................................... 36
(d) Contribution................................................ 37
(e) Indemnification Procedure................................... 38
(f) Survival.................................................... 39
(g) Indemnification Threshold................................... 39
11. Miscellaneous.................................................... 39
(a) Home Office Payment......................................... 39
(b) Expenses.................................................... 39
(c) Survival of Representations and Warranties.................. 40
(d) Assignment and Binding Effect............................... 40
(e) Independent Investment Banking Firm......................... 40
(f) Headings.................................................... 41
(g) Notices..................................................... 41
(h) Governing Law............................................... 41
(i) Entire Agreement............................................ 42
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(j) Counterparts............................................... 42
(k) Severability............................................... 42
(l) Words in Singular and Plural Form.......................... 42
(m) Amendment and Modification................................. 42
(n) Waiver..................................................... 42
(o) Sections, Exhibits, Schedules.............................. 43
(p) Specific Enforcement....................................... 43
(q) Confidentiality............................................ 43
(r) Restrictive Legend......................................... 44
SCHEDULES AND EXHIBITS
Schedule I -- Purchasers
Schedule 4(a) -- Subsidiaries and Minority Investments
Schedule 4(b) -- No Conflicts
Schedule 4(c) -- Capitalization
Schedule 4(f) -- Liabilities
Schedule 4(g) -- Litigation
Schedule 4(h) -- Compliance with Law
Schedule 4(i) -- Consents
Schedule 4(k) -- Environmental Matters
Schedule 4(m) -- No Violations
Schedule 4(p) -- Taxes
Schedule 4(r) -- ERISA
Schedule 4(s) -- Absence of Specified Changes
Schedule 4(t) -- Intellectual Property
Schedule 4(v) -- Contracts
Schedule 4(w) -- Labor Matters
Schedule 4(y) -- Related Party Transactions
Schedule 11(a) -- Home Office Payment
Exhibit A -- Registration Rights Agreement
Exhibit B -- Certificate of Designation
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of July 15, 1998, among SALTON/MAXIM
HOUSEWARES, INC., a Delaware corporation (the "Company"), and each of the
parties listed on Schedule I annexed hereto (each, a "Purchaser," and
collectively, the "Purchasers").
W I T N E S S E T H
WHEREAS, the Company desires to raise capital by issuing and selling
shares of a new series of Preferred Stock (as hereinafter defined); and
WHEREAS, the Purchasers desire to purchase such shares of the Company's
Preferred Stock; and
WHEREAS, certain terms used in this Agreement are defined in Section 9
hereof.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. Authorization of Issuance of Shares. The Company has authorized the
issuance and sale of 40,000 shares of its Preferred Stock, such shares to be
constituted as a new series of Preferred Stock, and being designated as the
Series A Voting Convertible Preferred Stock (herein referred to as the
"Convertible Preferred Stock"). The relative powers, preferences and rights
and qualifications, limitations and restrictions of the Convertible Preferred
Stock shall be set forth in the Certificate of Designation.
2. Sale and Purchase of Shares. Subject to the terms and conditions
herein set forth, and in reliance on the representations, warranties and
agreements of the Company (in the case of the Purchasers) or the Purchasers (in
the case of the Company), on the Closing Date (as defined below), the Company
will issue and sell to the Purchasers and the Purchasers will purchase from the
Company the number of shares of Convertible Preferred Stock set forth opposite
each Purchaser's name on Schedule I hereto, in each case at a price of $1,000
per share. The shares of Convertible Preferred Stock being purchased pursuant
hereto are referred to herein as the "Shares".
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3. Closing Date; Termination. The closing (the "Closing") of the purchase
and sale of the Shares contemplated hereby shall take place on such date and at
such time as agreed to by the Company and the Purchasers but in no event later
than three business days following the date upon which all of the conditions
set forth in Section 8 are satisfied or waived (the date of the Closing is
hereinafter referred to as the "Closing Date"). The Closing shall be held at
the offices of Weil, Gotshal & Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx, or at such other place as agreed to by the Company and the Purchasers.
Delivery of the Shares to be purchased by the Purchasers pursuant to this
Agreement shall be made at the Closing by the Company delivering to each of the
Purchasers a separate single certificate in definitive form representing the
Shares being purchased by such Purchaser, registered in each such Purchaser's
name (or in the name of its respective nominee), against payment of the amount
set forth opposite such Purchaser's name on Schedule I hereto by wire transfer
of immediately available funds to the account of the Company specified in
writing to the Purchasers two business days prior to the Closing.
Prior to the Closing, the Second Amended and Restated Certificate of the
Company shall be amended and supplemented by the Certificate of Designation,
filed with the Secretary of State of the State of Delaware in accordance with
the General Corporation Law of such state.
This Agreement may be terminated and the transactions contemplated hereby
may be abandoned by action of the Purchasers, on the one hand, or the Company,
on the other, if the Closing shall not have occurred by August 31, 1998.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchasers as follows:
(a) Organization, Standing and Power of the Company and its Subsidiaries;
Holdings of the Company. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware;
and each of the subsidiaries of the Company is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. Each of the Company and each subsidiary of the Company has all
requisite corporate power and authority
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to own, lease and operate its properties and to carry on its business as now
being conducted. The Company and its subsidiaries are duly qualified to
transact business and are in good standing as foreign corporations in the States
of Illinois, California, New Jersey and New York which constitute each
jurisdiction where the character of their activities requires such
qualification, except where the failure of the Company or its subsidiaries to be
so qualified would not have a Material Adverse Effect.
The Company owns, directly or indirectly, all of the issued and
outstanding shares of capital stock of each of its subsidiaries free and clear
of any liens, encumbrances, equities and claims.
Except as set forth in Schedule 4(a), there are no options, warrants or
other rights outstanding for the purchase of, nor any securities convertible
into, capital stock of any class of any subsidiary, whether issued, unissued or
held in the treasury.
Except for the investments in the Persons set forth on Schedule 4(a) (the
"Minority Investments"), the Company and its subsidiaries do not own any
interest in any Person other than its subsidiaries. The class of security,
number of shares, percentage of such class and percentage of the Total Voting
Power of such Person owned by the Company and its subsidiaries with respect to
each Minority Investment is listed on Schedule 4(a) hereto.
(b) Authority; No Conflict. The Company has the requisite corporate power
and authority to enter into this Agreement and the Registration Rights
Agreement and to carry out its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and the Registration
Rights Agreement by the Company (including the issuance of the Shares and the
issuance of shares of Common Stock upon the conversion of the Shares) have been
duly and validly authorized by all requisite corporate proceedings on the part
of the Company and do not require the approval or consent of any stockholders
of the Company. Each of this Agreement and the Registration Rights Agreement
has been duly executed and delivered by the Company and is (assuming the due
authorization, execution and delivery by each of the Purchasers) a valid and
binding agreement of the Company, enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy and
insolvency laws and by other laws affecting
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the rights of creditors generally or by the availability of equitable remedies
and except as rights of indemnity or contribution may be limited by federal or
state securities or other laws or the public policy underlying such laws.
Except as set forth on Schedule 4(b), the execution and delivery of this
Agreement and the Registration Rights Agreement, and the consummation of the
transactions contemplated hereby and thereby (including the issuance of the
Shares and the issuance of shares of Common Stock upon the conversion of the
Shares and the compliance by the Company with the terms of such securities), do
not and will not result in or constitute: (i) a default under, or breach or
violation of, the Second Amended and Restated Certificate or the By-laws, (ii) a
default under, or breach or violation of, any material mortgage, deed of trust,
indenture, note, bond, license, lease or other material agreement, instrument or
obligation to which the Company or any subsidiary is a party or by which any of
their properties or assets are bound, (iii) an event which (with the giving of
notice or the lapse of time or both) would permit any Person to terminate,
accelerate the performance required by, or accelerate the maturity of any
indebtedness or obligation of the Company or any of its subsidiaries under, any
material agreement or commitment to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound or by
which any of their properties or assets are bound, (iv) the creation or
imposition of any lien, charge or encumbrance on any property of the Company or
any of its subsidiaries or on the Shares, under any agreement or commitment to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or by which any of their properties or
assets are bound, (v) a violation of any statute, rule, regulation, order,
judgment or decree of any court, public body or authority or any other
restriction of any kind or character by which the Company or any of its
subsidiaries or any of their properties or assets may be bound or (vi) an event
which would require any consent under any material agreement to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or by which any of their properties or assets are
bound.
(c) Capitalization. The authorized capital of the Company consists of (i)
20,000,000 shares of Common Stock, of which as of July 15, 1998, 13,474,644
shares (excluding shares held in treasury) were outstanding, and (ii) 2,000,000
shares of Preferred Stock, par value $.01 per
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share, of which as of the date hereof, no shares are outstanding. All of the
outstanding shares of Common Stock have been duly and validly issued, and are
fully paid and nonassessable and have not been issued in violation of or subject
to any preemptive rights provided for by law or by the Second Amended and
Restated Certificate or the By-laws. Except as set forth in Schedule 4(c),
there are no outstanding preemptive, conversion or other rights, options,
warrants or agreements granted or issued by or binding upon the Company for the
purchase or acquisition of any shares of its capital stock or any other
securities convertible into, exchangeable for or evidencing the right to
subscribe for any shares of capital stock. Since June 28, 1997, the Company has
not changed the amount of its authorized capital stock or purchased any shares
of its capital stock, or subdivided or otherwise changed any shares of any class
of its capital stock, whether by way of reclassification, recapitalization,
stock split or otherwise, or issued or reissued, or agreed to issue or reissue,
any of its capital stock, except as expressly provided in this Agreement, except
pursuant to the exercise of stock options and except as set forth on Schedule
4(c), and the Company has not since such date declared or paid any dividend in
cash or stock or made any other distribution of assets to its shareholders.
(d) Status of Shares. The Shares have been duly authorized by all
necessary corporate action on the part of the Company (no consent or approval
of stockholders being required by law, the Second Amended and Restated
Certificate or the By-laws, subject to the confirmation by the NASDAQ National
Market System that the issuance and sale of the Shares does not constitute a
"change of control" or otherwise require a shareholder vote under the rules of
the NASDAQ National Market System. The Shares, when delivered pursuant to this
Agreement, will be validly issued and outstanding, fully paid and nonassessable
and free and clear of any liens, and the issuance of such Shares is not and
will not be subject to preemptive or similar rights of any other stockholder of
the Company. The shares of Common Stock issuable upon conversion of the Shares
have been duly authorized by all necessary corporate action on the part of the
Company (no consent or approval of stockholders being required by law, the
Second Amended and Restated Certificate or the By-laws, subject to the
confirmation described hereinabove in this Section 4(d) in connection with the
rules of the NASDAQ National Market System), and such shares of Common Stock
have been validly reserved for issuance, and upon issuance upon such conversion
will be validly issued
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and outstanding, fully paid and nonassessable, and free and clear of any liens
and preemptive or similar rights.
(e) Financial Statements; Corporate Records. (i) The Company has
furnished to the Purchasers copies of the Financial Statements. The Financial
Statements, including in each case the related notes, fairly present the
financial position of the Company and its subsidiaries as of the respective
dates of said balance sheets and the results of the operations of the Company
and its subsidiaries for the respective periods covered by said statements of
income and cash flows and changes in financial position (subject, in the case
of unaudited Financial Statements, to normal year-end audit adjustments), and
have been prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited Financial Statements, for the absence of
footnotes) consistently applied by the Company throughout the periods involved,
except as may be indicated in any notes thereto.
(ii) The minute books of the Company previously made available to the
Purchasers contain complete and accurate records of all meetings and accurately
reflect all other corporate action of the stockholders and Board of Directors
(including committees thereof) of the Company. The share certificate books and
share transfer ledgers of the Company previously made available to the
Purchasers are true, correct and complete. All share transfer taxes levied or
payable with respect to all transfers of shares or share capital of the Company
prior to the date hereof have been paid and appropriate transfer tax stamps
affixed.
(iii) The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles. The books, records and accounts of the Company
accurately and fairly reflect in all material respects, in reasonable detail,
the transactions and the assets and liabilities of the Company with respect to
its business. The Company has not engaged in any material transaction with
respect to its business, maintained any bank account for its business or used
any material funds, except for transactions, bank accounts and material funds
which have been and are reflected in the normally maintained books, records and
accounts of the Company. The Company maintains a system of internal accounting
control sufficient in the reasonable judgment of the Company to provide
reasonable assurances that (i) transactions are executed in
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accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles, (iii)
access to assets, properties, books, records and accounts is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accounting for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(f) Liabilities. Except (i) as disclosed on Schedule 4(f) hereto, (ii) as
disclosed in the Financial Statements, (iii) for liabilities or obligations
that were incurred after June 28, 1997 in the ordinary course of business and
consistent with past practices (none of which is a liability for breach of
warranty, tort, infringement claim or lawsuit in excess of $250,000
individually or $1,000,000 in the aggregate for all such liabilities) and (iv)
liabilities the maximum amount of which do not exceed $250,000 individually or
$1,000,000 in the aggregate, the Company and its subsidiaries do not have any
liabilities or obligations (whether absolute, accrued, contingent or otherwise
and whether due or to become due and whether or not the amount thereof is
readily ascertainable) that were not either fully reflected or disclosed in the
June 28, 1997 Balance Sheet and, in the reasonable judgment of the Company, the
reserves referred to in the Financial Statements are appropriate and
reasonable.
(g) Actions Pending. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened, against the
Company or any of its subsidiaries or any of their respective properties or
assets by or before any court, arbitrator or governmental body department,
commission, board, bureau, agency or instrumentality, that questions the
validity or enforceability of this Agreement, the Registration Rights
Agreement, the Certificate of Designation or the Shares or any action taken or
to be taken pursuant hereto or thereto. Except as disclosed in Schedule 4(g),
there is no material litigation or governmental proceeding or investigation
pending or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries. Neither the Company nor any of its subsidiaries is in
default in any material respect with respect to any material judgment, order,
writ, injunction, decree or award.
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(h) Compliance with Law. Except as disclosed in Schedule 4(h), the
business of the Company and each of its subsidiaries has been and is presently
being conducted in all material respects in compliance with applicable U.S. and
foreign federal, state, and local governmental laws, rules, regulations and
ordinances. Except as disclosed in Schedule 4(h), the Company and each of its
subsidiaries has all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it that are material to the
business of the Company and its subsidiaries, taken as a whole, and each of the
Company and its subsidiaries is in compliance with all material terms thereof.
(i) No Consents. Except as set forth in Schedule 4(i), no consent,
authorization or approval of or filing with any person or any U.S. or foreign
federal, state or local governmental department, commission, board, agency or
instrumentality is required to be obtained or made by the Company for the valid
execution and performance by the Company of this Agreement or the Registration
Rights Agreement or the valid authorization, issuance and sale of the Shares or
the valid authorization, issuance and delivery of the shares of Common Stock
issuable upon conversion of the Shares, except as described in Section 4(d)
with respect to the NASDAQ National Market System and, in the case of any
registration pursuant to the Registration Rights Agreement, for (i) those
required by federal and state securities laws, and (ii) those required by the
NASDAQ National Market.
(j) SEC Filings. The Company has furnished to the Purchasers its (i)
Annual Report on Form 10-K for the fiscal year ended June 28, 1997 and
Quarterly Report on Form 10-Q for the fiscal quarter ended Xxxxx 00, 0000, (xx)
Proxy Statement for the Company's Annual Meeting of Shareholders held on
December 16, 1997, and (iii) all other reports or registration statements filed
by the Company or any of its subsidiaries with the Securities and Exchange
Commission (the "SEC") since January 1, 1995, each as filed with the SEC
(collectively, the "SEC Reports"). As of their respective dates, such reports
and statements complied in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act")
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations thereunder, and did not contain any untrue statement
of a material fact or omit to state a material fact required to
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be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(k) Environmental Matters. (i) Except as set forth in Schedule 4(k), (x)
each of the Company and its subsidiaries is in compliance in all material
respects with all Environmental Laws and all permits required thereunder for
the operation of the Company and its subsidiaries; (y) to the knowledge of the
Company, neither the Company nor any of its subsidiaries has received any
communication (written or oral) from a governmental authority with respect to
such compliance or the failure thereof and (z) the Company and its subsidiaries
are in full compliance in all material respects with the New Jersey
Environmental/Cleanup Responsibility Act, as amended by the Industrial Site
Recovery Act, and any orders or decrees issued thereunder.
(ii) Except as set forth in Schedule 4(k), (x) there is no civil, criminal
or administrative action, claim, demand, investigation or notice relating to a
violation of an Environmental Law (an "Environmental Claim") pending or, to the
knowledge of the Company, threatened and (y) there are no past or present
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the release or threatened release, emission, discharge or
disposal of any chemical, pollutant, contaminant, waste, toxic substance,
asbestos or asbestos containing material, petroleum or petroleum product, that
could reasonably be expected to form the basis of any material Environmental
Claim, in either case (1) against the Company or any of its subsidiaries, (2)
against any Person whose liability for any Environmental Claim the Company or
any of its subsidiaries has or may have retained or assumed either
contractually or by operation of law, or (3) involving any real or personal
property which the Company or any of its subsidiaries owns, leases, operates or
manages, or formerly owned, leased, operated or managed.
"Environmental Laws" shall mean any applicable foreign, federal, state,
provincial or local law, rule, regulation, directive, decree, order or
agreement concerning releases of chemicals, substances, materials, wastes,
contaminants or pollutants into any part of the natural environment, or
protection of natural resources, the environment and public and employee health
and safety including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, as
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amended by the Superfund Amendment, and Reauthorization Act, (42 U.S.C. Section
9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section
1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section
6901 et seq.), the Clean Water Act (33 U.S.C. Section 1251 et seg.), the Clean
Air Act (33 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. Section 7401 et seq.), the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. Section 136 et seq.), and the Occupational Health and
Safety Act 29 U.S.C. Section 651 et seq., as such laws have been and may be
amended or supplemented through the Closing Date, and the regulations
promulgated pursuant thereto.
(l) Disclosure of Facts. No representation, warranty or statement made by
the Company in (i) this Agreement (including, without limitation, the
representations and warranties made by the Company herein and in the schedules
and exhibits hereto which are incorporated by reference herein and which
constitute an integral part of this Agreement) or (ii) any other written
materials furnished on or prior to the Closing Date, by the Company to the
Purchasers or any of their representatives, attorneys and accountants pursuant
to this Agreement, contains any untrue statement of a material fact, or omits
to state a material fact required to be stated herein or therein or necessary
to make the statements contained herein or therein, in light of the
circumstances under which they were or will be made, not misleading; provided,
however, that no representation or warranty is made in this Section 6(l) with
respect to any financial projections furnished to the Purchasers by the
Company.
(m) No Violations; Restrictive Agreements. Except as disclosed in
Schedule 4(m), neither the Company nor any of its subsidiaries is in violation
of or default under any term of the Second Amended and Restated Certificate or
the By-laws. Except as set forth in Schedule 4(m), neither the Company nor any
of its subsidiaries (i) is a party to any contract or agreement that limits in
any material respect the amount of, or otherwise imposes material restrictions
on the incurring of indebtedness or the paying of dividends by the Company,
(ii) is a party to any contract or agreement, or subject to any charter or
other corporate restriction, that has a Material Adverse Effect or (iii) has
any net worth maintenance, "keep-well", capital contribution or other similar
financial obligations or commitments with respect to any of its subsidiaries or
any other Person in which it holds an interest.
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(n) Offering of Securities. Neither the Company nor any agent acting on
its behalf has offered or will offer the Shares or any part thereof or any
similar securities for issue or sale to, or has solicited or will solicit any
offer to acquire any of the same from, anyone other than the Purchasers so as
to require the registration of the Shares in connection with the issuance
thereof pursuant to this Agreement under the provisions of Section 5 of the
Securities Act.
(o) Use of Proceeds. The proceeds from the sale of the Shares will be
used by the Company to (i) redeem the shares of Common Stock held by
Windmere-Durable Holdings, Inc. (the "Windmere Shares") or (ii) for general
corporate purposes.
(p) Taxes. (i) Except as set forth in Schedule 4(p), the Company and its
subsidiaries have timely filed or caused to be filed all material Tax Returns
that are required to be filed by or with respect to them, their operations and
assets, and all such Tax Returns were complete and correct in all material
respects. The Company and its subsidiaries have paid or caused to be paid all
Taxes as shown on said returns and on all assessments received by them to the
extent that such Taxes have become due, except Taxes disclosed on Schedule 4(p)
that are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been set aside.
(ii) The Company and its subsidiaries have paid or caused to be paid, or
have established reserves which, in the reasonable judgment of the Company,
are adequate, in all material respects, for all Tax liabilities applicable to
the Company and its subsidiaries for all fiscal years which have not been
examined and reported on by the taxing authorities (or closed by applicable
statutes).
(iii) The term "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income,
gross receipts, premium, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, estimated
severance, stamp, occupation, property or other taxes, fees, custom duties,
assessments or charges of any kind whatsoever, including any joint,
consolidated, combined, uniform or transferee liability in respect of taxes
or any
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liability for taxes imposed by any tax shoring, tax indemnity or similar
agreement, in each case together with any interest and any penalties
(including penalties for failure to file in accordance with applicable
information reporting requirements), and additions to tax by any authority
(domestic or foreign). The term "Tax Return" shall mean any report,
return, form, declaration or other document or information required to be
supplied to any authority in connection with the reporting or collection of
Taxes.
(q) Registration under the Exchange Act. The Company has not registered
the Convertible Preferred Stock as a class pursuant to Section 12 of the
Exchange Act. When issued, the Convertible Preferred Stock will not be
registered as such a class and as of the date of such issuance such
registration will not be required.
(r) ERISA.
(i) Schedule 4(r) sets forth a complete and correct list of (i) all
"employee benefit plans", as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and any other pension plans
or employee benefit arrangements, programs or payroll practices (including,
without limitation, severance pay, vacation pay, company awards, salary
continuation for disability, sick leave, retirement, deferred compensation,
bonus or other incentive compensation, stock purchase arrangements or policies,
hospitalization, medical insurance, life insurance and scholarship programs)
maintained by the Company or any of its subsidiaries or to which the Company or
any of its subsidiaries contributes or is obligated to contribute thereunder
with respect to employees of the Company ("Employee Benefit Plans"). None of
the Employee Benefit Plans are "pension plans" within the meaning of Section
3(2) of ERISA. Neither the Company or any of its subsidiaries nor any trade or
business (whether or not incorporated) which is under common control, or which
is treated as a single employer, with Company under Section 414(b), (c), (m) or
(o) of the Code ("ERISA Affiliate") maintains, contributes or is obligated to
contribute to any "employee pension plans", as defined in Section 3(2) of
ERISA, which are subject to Title IV of ERISA or Section 412 of the Code
("Pension Plans"), "Multiemployer Plans" within the meaning of Section 3(37) of
ERISA ("Multiemployer Plan") or "welfare benefit plans", within the meaning of
Section 3(1) of ERISA providing continuing benefits after the
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termination of employment (other than as required by Section 4980B of the Code
or Part 6 of Title I of ERISA and at the former employee's or his beneficiary's
sole expense).
(ii) All contributions and premiums required by law or by the terms of
any Employee Benefit Plan have been timely made.
(iii) There has been no material violation of ERISA with respect to the
filing of applicable returns, reports, documents and notices regarding any of
the Employee Benefit Plans with the Secretary of Labor or the Secretary of the
Treasury or the furnishing of such notices or documents to the participants or
beneficiaries of the Employee Benefit Plans.
(iv) True, correct and complete copies of the following documents, with
respect to each of the Employee Benefit Plans, have been delivered or made
available to the Purchasers (A) any plans and related trust documents, and all
amendments thereto, (B) the most recent Forms 5500 for the past three years and
schedules thereto, (C) the most recent financial statements for the past three
years, (D) the most recent summary plan descriptions (including letters or
other documents updating such descriptions) and (E) written descriptions of all
non-written agreements relating to the Employee Benefit Plans.
(v) There are no pending judicial or administrative proceedings which
have been asserted or instituted against any of the Employee Benefit Plans, the
assets of any such plans or the Company, or the plan administrator or any
fiduciary of the Employee Benefit Plans with respect to the operation of such
plans (other than routine, uncontested benefit claims), and, to the knowledge
of the Company, there are no facts or circumstances which could form the basis
for any such proceeding.
(vi) Each of the Employee Benefit Plans has been maintained, in all
material respects, in accordance with its terms and all provisions of
applicable law. All amendments and actions required to bring each of the
Employee Benefit Plans into conformity in all material respects with all of the
applicable provisions of ERISA and other applicable Laws have been made or
taken except to the extent that such amendments or actions are not required by
law to be made or taken until a date after the Closing Date and are disclosed
on Schedule 4(s).
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(vii) The Company and any ERISA Affiliate which maintains a "group health
plan" within the meaning of Section 5000(b)(1) of the Code, have complied in
all material respects with the notice and continuation requirements of Section
4980B of the Code or Part 6 of Title I of ERISA and the applicable regulations
thereunder.
(viii) Neither the Company or any of its subsidiaries nor a "party in
interest" or "disqualified person" with respect to the Employee Benefit Plans
has engaged in a non-exempt "prohibited transaction" within the meaning of
Section 4975 of the Code or Section 406 of ERISA.
(ix) No stock or other security issued by Company or any of its
subsidiaries forms or has formed a material part of the assets of any Employee
Benefit Plan.
(s) Absence of Specified Changes. Except as disclosed in the SEC Reports,
and except as disclosed in Schedule 4(s) or contemplated by this Agreement,
since June 28, 1997, there has not been with respect to the Company or its
subsidiaries, taken as a whole, any:
(1) material adverse change in its business, financial condition or results
of operations;
(2) material contract, agreement, license, commitment or other transaction
entered into or assumed by or on behalf of the Company or any of its
subsidiaries except in the ordinary course of business;
(3) material change in accounting principles, methods or practices;
(4) any purchase, sale, transfer, assignment, conveyance or pledge of any
material assets or properties of the Company or any of its subsidiaries,
except in the ordinary course of business consistent with past practice;
(5) any waiver or modification by the Company or any of its subsidiaries of
any right or rights of substantial value, or of any payment, direct or
indirect, in satisfaction of any liability, in each case, having a Material
Adverse Effect;
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(6) any loan or advance by the Company or any of its subsidiaries, except
for loans or advances made in the ordinary course of business;
(7) declaration, setting aside, or payment of a dividend or other
distribution in respect of its capital stock, or any direct or indirect
redemption, purchase or other acquisition of any shares of its capital stock;
(8) amendment to its Second Amended and Restated Certificate or By-laws;
(9) issuance of capital stock or change in the authorized capitalization of
the Company (except pursuant to the exercise of stock options and except as
contemplated by this Agreement), or any event which would have required an
adjustment to the Conversion Price (as defined in the Certificate of
Designation) or the number of shares of Common Stock issuable upon conversion
of a Share if the Shares had been issued and the Certificate of Designation
had been in effect as of June 28, 1997; or
(10) agreement or understanding to take any of the actions described above
in this paragraph 4(t).
(t) Intellectual Property. Schedule 4(t) sets forth (A) a true and
complete list and summary description of all material patents, registered or
common law trademarks, trade names, service marks, licenses and copyrights and
applications for any of the foregoing (collectively, "Intellectual Property")
owned by to the Company or its subsidiaries and (B) each agreement, whether
oral or in writing, pursuant to which the Company is obligated to pay any
Person, in consideration of a license of or other agreement with respect to
Intellectual Property or in consideration of any other rights with respect to
the development or marketing of any product or products, an amount which is in
excess for fiscal year 1998, or can reasonably be expected to be in excess, for
fiscal year 1999, of $500,000 per annum. The Purchasers have been supplied
with true and correct copies of each such written agreement (and a written
description of any oral agreement) as in effect on the date hereof. The
Intellectual Property identified on Schedule 4(t) constitutes all the material
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Intellectual Property necessary for use in the United States and in such other
jurisdictions as is necessary for the conduct of the business of the Company and
its subsidiaries as presently conducted. Except as set forth in Schedule 4(t),
the Company has no notice or knowledge of any objection or claim being asserted
by any person with respect to the ownership, validity, enforceability or use of
any Intellectual Property listed on Schedule 4(t) or challenging or questioning
the validity or effectiveness of any such license, and has not received any such
notice within the last five years.
(u) Unlawful Payments and Contributions. Neither the Company nor its
subsidiaries or any of their respective directors, officers or, to the
Company's knowledge, any of their other employees or agents has (a) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment
or other unlawful expense relating to political activity; (b) made any direct
or indirect unlawful payment to any government official or employee from
Company funds; (c) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended in connection with the Company's and
its subsidiaries' business; or (d) made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any Person (whether or not a
government official) with respect to matters pertaining to the Company.
(v) Contracts and Commitments. (i) Except as expressly contemplated by
this Agreement or as set forth on Schedule 4(v), neither the Company nor any of
its subsidiaries is a party to any written or oral:
(A) profit sharing, stock option, employee stock purchase or other plan or
arrangement providing for deferred or other compensation to employees or any
other employee benefit plan or arrangement, or any contract with any labor
union, or any severance agreements (in each case excluding items disclosed on
Schedule 4(r));
(B) contract for the employment of any officer, individual employee or
other Person on a full-time, part-time, consulting or other basis providing
annual compensation in excess of $100,000 or contract relating to loans to
officers, directors or affiliates;
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(C) contract under which the Company or any of its subsidiaries has
advanced or loaned any other Person amounts in the aggregate exceeding
$100,000;
(D) agreement or indenture relating to the borrowing of money or the
mortgaging, pledging or otherwise placing a lien on any material asset or
material group of assets of the Company and its subsidiaries;
(E) guarantee of any obligation of any other Person in excess of $100,000
(other than by the Company of a wholly-owned subsidiary's debts or a
guarantee by a subsidiary of the Company's debts or another subsidiary's
debts);
(F) agreement under which it has granted any Person any registration rights
(including piggyback rights);
(G) contract or agreement with any officer, director, employee or
Affiliate, or any Affiliate of any officer, director or employee;
(H) contract or agreement prohibiting it from freely engaging in any
business or competing anywhere in the world; or
(I) contract or group of related contracts with the same party or group of
affiliated parties the performance of which involves consideration in excess
of $500,000 per annum, other than purchase orders and sale orders made in the
ordinary course of business;
(ii) All of the contracts, agreements and instruments set forth on
Schedules 4(t) and 4(v) are valid, binding and enforceable in accordance with
their respective terms. Except as set forth on Schedules 4(t) and 4(v), the
Company and each of its subsidiaries have performed all material obligations
required to be performed by them and are not in default under or in breach of
nor in receipt of any claim of default or breach in each case in any material
respect under any contract, agreement or instrument to which the Company or any
of its subsidiaries is subject; no event has occurred which with the passage of
time or the giving of notice or both would result in a default, breach or event
of
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noncompliance in each case in any material respect under any contract, agreement
or instrument to which the Company or any of its subsidiaries is subject;
neither the Company nor any of its subsidiaries has any present expectation or
intention of not fully performing all such obligations; neither the Company nor
any of its subsidiaries has knowledge of any material breach by the other
parties.
(iii) The Purchasers have been supplied with a true and correct copy of
each of the written contracts and an accurate written description of the oral
contracts listed on Schedules 4(t) and 4(v), together with all amendments,
waivers or other changes thereto.
(w) Labor Matters. (i) Except as set forth on Schedule 4(w), neither the
Company nor any of its subsidiaries is party to any labor or collective
bargaining agreement and there are no labor or collective bargaining agreements
which pertain to employees of the Company or any of its subsidiaries.
(ii) No employees of the Company or any of its subsidiaries are
represented by any labor organization. Except as set forth in Schedule 4(w),
no labor organization or group of employees of the Company or any of its
subsidiaries has made a pending demand for recognition or certification, and
there are no representation or certification proceedings or petitions seeking a
representation proceeding presently pending or, to the knowledge of the
Company, threatened to be brought or filed, with the National Labor Relations
Board or any other labor relations tribunal or authority. To the knowledge of
the Company, there are no organizing activities involving the Company or any of
its subsidiaries pending with, or threatened by, any labor organization.
(iii) There are no material strikes, work stoppages, slowdowns, lockouts,
arbitrations or grievances or other material labor disputes pending or, to the
knowledge of the Company, threatened against or involving the Company or any of
its subsidiaries. Except as would not have a Material Adverse Effect, there
are no unfair labor practice charges, grievances or complaints pending or, to
the knowledge of the Company, threatened by or on behalf of any employees or
group of employees of the Company or any of its subsidiaries.
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(x) Insurance. Each insurance policy maintained by the Company and its
subsidiaries with respect to its properties, assets and businesses is in full
force and effect as of the date hereof. Neither the Company nor any of its
subsidiaries is in default in any material respect with respect to its
obligations under any insurance policy maintained by it. The insurance
coverage of the Company and its subsidiaries is customary for corporations of
similar size engaged in similar lines of business.
(y) Related Party Transactions. Except as set forth on Schedule 4(y)
hereto, no Affiliate of the Company has borrowed any monies from or has
outstanding any indebtedness or other similar obligations to the Company or any
of its subsidiaries which exceed $5,000 principal amount in any one case or
$50,000 principal amount in the aggregate. Except as set forth on Schedule
4(y) hereto, no Affiliate of the Company (i) owns any direct or indirect
interest of any kind (excluding holdings of less than five (5%) percent of the
common stock of any publicly traded company) in, or is a director, officer,
employee, partner or Associate (as such term is defined in Rule 12b-2 under the
Exchange Act) of, or consultant or lender to, or borrower from, or has the
right to participate in the management, operations or profits of, any person or
entity which is (a) a competitor, supplier, customer, distributor, lessor,
tenant, creditor or debtor of the Company or any of its subsidiaries, (b)
engaged in a business related to the business of the Company or (c)
participating in any transaction to which the Company or any of its
subsidiaries is a party or (ii) is otherwise a party to any contract,
arrangement or understanding with the Company or any of its subsidiaries. The
Company believes that each of the contracts, arrangements or understandings set
forth on Schedule 4(y) hereto to which the Company or any of its subsidiaries
is a party provides for terms and conditions that are no less favorable to the
Company then could be obtained from a non-Affiliate third-party in an
arms-length transaction.
5. Representations and Warranties of the Purchasers. The Purchasers
hereby represent and warrant to the Company as follows:
(a) Organization of Purchasers. Each of the Purchasers is duly organized
and validly existing under the laws of the jurisdiction of its organization.
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(b) Authority and Authorization of the Purchasers. Each of the Purchasers
has the requisite power and authority to enter into this Agreement and the
Registration Rights Agreement and to carry out its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Registration Rights Agreement by each of the Purchasers has been duly and
validly authorized and no other proceedings on their part are necessary to
authorize this Agreement or the Registration Rights Agreements or the
transactions contemplated hereby or thereby. Each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by each of
the Purchasers and is (assuming the due authorization, execution and delivery
by the Company) a valid and binding agreement of each of the Purchasers,
enforceable against each of the Purchasers in accordance with its terms except
as may be limited by bankruptcy and insolvency laws and by other laws affecting
the rights of creditors generally and except as may be limited by the
availability of equitable remedies and except as rights of indemnity or
contribution may be limited by federal or state securities or other laws or the
public policy underlying such laws.
(c) Non-Contravention. The execution, delivery and performance of this
Agreement by each of the Purchasers and the consummation of any of the
transactions contemplated hereby by such Purchaser will not (a) conflict with
or result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default), under or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of such Purchaser
pursuant to any agreement, instrument, franchise, license or permit to which
such Purchaser is a party or by which any of its properties or assets may be
bound or (b) violate or conflict with any judgment, decree, order, statue, rule
or regulation of any court or any public, governmental or regulatory agency or
body applicable to such Purchaser or any of its properties or assets, other
than such breaches, defaults or violations that are not reasonably expected to
impair the ability of Purchaser to consummate the transactions contemplated by
this Agreement. The execution, delivery and performance of this Agreement by
each of the Purchasers and the consummation of the transactions contemplated
hereby by such Purchaser do not and will not violate or conflict with any
provision of the organizational documents of such Purchaser, as currently in
effect.
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(d) No Consents. No consent, authorization or approval of, or filing
with, any person or any U.S. or foreign federal, state or local governmental
department, commission, board, agency or instrumentality is required to be made
or obtained by any of the Purchasers in connection with their execution and
performance of this Agreement, the Registration Rights Agreement or the
purchase of the Shares, except for such consents, authorizations, approvals or
filings, the absence of which would not prevent, impair, hinder or delay the
consummation of the transactions contemplated by this Agreement or the
Registration Rights Agreement.
(e) Experience of Purchasers; Acquisition for Investment. Each of the
Purchasers is an accredited investor as defined in Regulation D under the
Securities Act. Each of the Purchaser's financial condition and investments is
such that it is in a position to hold the Shares and the shares of Common Stock
issuable upon conversion of the Shares for an indefinite period, bear the
economic risks of the investment and to withstand the complete loss of the
investment. Each Purchaser has extensive knowledge and experience in financial
and business matters and has the capability to evaluate the merits and risks of
an investment in the Shares and the shares of Common Stock issuable upon
conversion of the Shares. Each of the Purchasers represents that it is
acquiring the Shares solely for its own account for the purpose of investment
and not with a view to or for sale in connection with any distribution thereof,
and that it has no present intention or plan to effect any distribution of the
Shares or the shares of Common Stock issuable upon conversion of the Shares;
provided, however that the disposition of each Purchaser's property shall at
all times be and remain within such Purchaser's control and subject to the
provisions of this Agreement and the Registration Rights Agreement. Each
Purchaser understands that the Shares and the shares of Common Stock issuable
upon conversion of the Shares have not been registered under the Securities Act
by reason of specific exemptions therefrom which depend upon, among other
things, the bona fide nature of the investment intent and the accuracy of such
Purchaser's representations as expressed herein. The Shares and the shares of
Common Stock shall bear a legend as set forth in Section 11(r) hereof.
(f) Rule 144. Each Purchaser acknowledges that the Shares and the shares
of Common Stock issuable upon conversion of the Shares must be held
indefinitely unless
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subsequently registered under the Securities Act or any applicable state
securities laws or unless exemptions from such registrations are available.
Each Purchaser is aware of the provisions of Rule 144 promulgated under the
Securities Act which permit limited resale of securities purchased in a private
placement subject to the satisfaction of certain conditions.
(g) HSR Act. No person has the right to 50% or more of the profits or 50%
or more of the assets upon dissolution of any of the Purchasers and each
Purchaser is its own ultimate parent entity for purposes of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended.
6. Covenants of the Company. The Company hereby covenants to the
Purchasers as follows:
(a) Reporting. The Company will, so long as the Shares or the shares of
Common Stock issuable upon conversion thereof are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, file reports and other information with the Commission under
Section 13 or 15(d) of the Exchange Act.
(b) Inspection of Property; Access to Information. The Company covenants
that it will permit each of the Purchasers and the Purchasers' Affiliates, for
so long as they own any Shares or shares of Common Stock that, in the
aggregate, represent either (x) at least 50% of the Shares purchased hereunder
(or shares of Common Stock issued upon conversion thereof) or (y) at least 7.5%
of the Total Voting Power of the Company (the "Minimum Threshold"), and any
Person acting in a representative capacity on behalf of any of the Purchasers
and who is designated in writing by the Purchasers, to (i) upon reasonable
notice to the Company and at such Person's expense, visit any of the properties
and inspect any of the corporate books and financial records of the Company and
its subsidiaries during normal business hours, provided that such visitations
do not unreasonably disrupt the business of the Company or its subsidiaries and
(ii) reasonably request and be furnished with such data, books and records as
will enable the Purchasers to confirm the Company's compliance with its
obligations set forth in Section 6(e) hereof. The Purchasers shall, and shall
cause any Person designated by them pursuant to the first sentence of this
Section 6(b) to, keep confidential all information furnished to, or made
available to, them pursuant to this Section 6(b), nor shall any of them use, or
permit any such
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Person to use, any such information for any purpose other than to evaluate their
investment in the Shares (or shares of Common Stock into which Shares have been
converted); except that the Purchasers and such other holders shall have no
obligation to keep confidential information which is or becomes generally
available to the public other than as a result of a disclosure by the Purchasers
or any such other holders or their representatives.
(c) Financial Records. The Company will, and will cause each of its
subsidiaries to, maintain in all material respects its financial records
(including, but not limited to, its journals and ledgers) in accordance with
generally accepted accounting principles and in accordance with any prescribed
system of accounts applicable to the Company or any such subsidiary, as the
case may be.
(d) Election of Directors. (i) The Purchasers shall be entitled, with
respect to each election of directors, to designate two persons to be elected
to the Company's Board of Directors and such persons have been elected as
directors of the Company at the meeting of the Company's Board of Directors on
the date hereof (it being understood that one of such directors shall be in the
class of directors whose terms expire in 1999 and one of such directors shall
be in the class of directors whose terms expire in 2000), and the Company shall
use its reasonable best efforts to have such persons elected to the Company's
Board of Directors at each annual meeting (or special meeting, if applicable)
of stockholders held thereafter (or, at each such meeting at which directors of
the applicable class are to be elected). Such efforts by the Company shall
include, without limitation, including the nominees of the Purchasers in
management's slate for election and nomination, solicitation of proxies on
their behalf and voting any Voting Securities held by the Company or its
subsidiaries entitled to vote for such nominees. Prior to making the
designation of any person to serve as a director of the Company, the Purchasers
shall consult with the Company. In the event that any person so designated and
elected to the Company's Board of Directors shall cease to serve as a director
for any reason, the vacancy resulting therefrom shall be filled by such Board
with a substitute nominee designated by the Purchasers.
(ii) Notwithstanding the foregoing, the number of persons the Purchasers
shall be entitled to designate for
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election to the Company's Board of Directors pursuant to this Section 6(d) shall
be reduced as follows:
(A) in the event the Purchasers and the Purchaser Affiliates both
(x) shall have sold, transferred or otherwise disposed of not less than
25% of the Shares purchased hereunder (or shares of Common Stock issued
upon conversion thereof) other than to a Purchaser Affiliate and (y) do
not own Shares or shares of Common Stock that, in the aggregate,
represent at least 12.5% of the Total Voting Power of the Company, the
Purchasers shall be entitled to designate one director; or
(B) in the event the Purchasers and the Purchaser Affiliates both
(x) shall have sold, transferred or otherwise disposed of not less than
50% of the Shares purchased hereunder (or shares of Common Stock issued
upon conversion thereof) other than to a Purchaser Affiliate and (y) do
not own Shares or shares of Common Stock that, in the aggregate,
represent at least 7.5% of the Total Voting Power of the Company, the
Purchasers shall not be entitled to designate any directors;
it being understood that any such determination shall be made only as of the
date and after giving effect to any such transfer.
(iii) Each of the persons designated by the Purchasers for election
to the Company's Board of Directors shall be entitled to compensation,
including, without limitation, in the form of fees, option grants and expense
reimbursements, that shall be not less favorable than that paid by the Company
in respect of the services of any other non-management director of the Company.
(e) Transactions with Shareholders and Affiliates. For so long as
the Purchasers and the Purchaser Affiliates own Shares or shares of Common Stock
that, in the aggregate, represent at least the Minimum Threshold, the Company
will not, and will not permit any of its subsidiaries to, directly or
indirectly, make loans, advances or payments to, or sell, transfer or lease any
assets or property to, any Person who beneficially owns in the aggregate 5% or
more of the Voting Securities of the Company or any Affiliate or Associate (as
such terms are defined in the rules and regulations under the Exchange Act)
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of such owner (a "Prohibited Transaction"), other than a Prohibited Transaction
to which the Company or any of its subsidiaries is contractually bound on the
Closing Date and which is disclosed in Schedule 4(y), unless a majority of the
disinterested members of the Board of Directors of the Company has approved such
transaction (and in connection therewith any director interested in such
transaction shall recuse himself from the discussion and vote on such
transaction); provided, however, that a change in the terms of any existing
Prohibited Transaction shall require a similar Board determination.
Notwithstanding the foregoing, a Prohibited Transaction shall not include any
transactions involving payments by or obligations or transfers of property in
the ordinary course of business with a value less than $25,000.
(f) Exchange of Stock Certificates. Upon surrender of any certificate
representing Shares for exchange at the office of the Company, the Company at
its expense will cause to be issued in exchange therefor new certificates in
such denomination or denominations as may be requested for the same aggregate
number of Shares represented by the certificate so surrendered and registered as
such holder may request.
(g) Lost Certificates Evidencing Shares. Upon receipt by the Company
of evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any certificate evidencing any of the Shares, and (in case of
loss, theft or destruction) of indemnity reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of such certificate, if mutilated, the Company
will make and deliver in lieu of such certificate a new certificate of like
tenor and for the number of shares evidenced by such certificate which remain
outstanding. A Purchaser's agreement of indemnity shall constitute indemnity
satisfactory to the Company for the purposes of this Section 6(g).
(h) Pre-Emptive Rights of Purchasers. For so long as the Purchaser
and the Purchaser Affiliates own Shares or shares of Common Stock that, in the
aggregate, represent at least the Minimum Threshold:
(i) Each Purchaser shall have the right to purchase, pro rata, a
portion of any New Securities (as hereinafter defined) that the Company may,
from time to time
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hereafter, propose to sell and issue. Each such Purchaser's pro rata share of
New Securities, for the purposes of this right, is the ratio of the sum of (x)
the number of shares of Common Stock into which the Shares have been converted
and which are held by such Purchaser at the time the New Securities are offered
and (y) the number of shares of Common Stock into which the Shares held by such
Purchaser at the time the New Securities are offered are then convertible (the
"Conversion Shares") to the total number of then outstanding shares of Common
Stock, including such Conversion Shares. "New Securities" shall mean any shares
of capital stock or securities or rights convertible, exercisable or
exchangeable for capital stock of the Company ("Convertible Securities");
provided, however, that New Securities does not include
(A) capital stock issued or issuable on conversion or exercise of
the Convertible Preferred Stock, options to purchase Common Stock or
other Convertible Securities outstanding on the date hereof, or issued
after the date hereof provided that the rights established by this
Section 6(h) applied with respect to the initial issuance by the Company
of such convertible securities;
(B) capital stock or Convertible Securities issued by the Company
pursuant to any public offering;
(C) Common Stock issued in connection with any share split, payment
of a dividend or other distribution in respect of its capital stock or
recapitalization of the Company;
(D) capital stock or Convertible Securities issued to a third party
in connection with any acquisition of the stock or assets of another
Person by the Company by merger, purchase, joint venture or other
reorganization or business combination;
(E) options to purchase Common Stock issued to employees, officers
or independent directors of the Company, provided that any such issuance
is or has been duly approved by the Compensation Committee of the Board
of Directors of the Company and a majority of the disinterested members
of the Board of Directors of the Company; and
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(F) capital stock or Convertible Securities issued to a third party
in consideration of services provided by such third party.
(ii) If the Company proposes to undertake an issuance of New
Securities, it shall give each Purchaser having a right under this Section 6(h)
written notice of its intention, describing the type of New Securities, the
price and the general terms and conditions upon which the Company proposes to
issue the same. Each such Purchaser shall have twenty-five (25) calendar days
from the giving of such notice to agree to purchase its pro rata share of New
Securities for the price and upon the 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.
(iii) If any of the Purchasers fail to exercise its right under this
Section 6(h) to purchase its pro-rata share of the New Securities within
twenty-five (25) calendar days following the date of the first notice
contemplated by Section 6(h)(ii), the Company shall have until the ninetieth
(90th) day following such date to enter into a letter of intent or definitive
agreement and a period of ninety (90) days thereafter to sell any of the New
Securities in respect of which such Purchaser's 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 to the Purchasers pursuant to Section
6(h). If the Company has not entered into such a letter of intent or agreement
or sold such New Securities within such period, the Company shall not thereafter
issue or sell any such New Securities, without again first offering such
securities to the Purchasers in the manner provided in this Section 6(h).
7. Covenants of the Purchasers. Each of the Purchasers covenants
with the Company as follows:
(a) Prohibited Actions. From the Closing Date and until the date
when the Purchasers and the Purchaser Affiliates do not own any Shares or any
shares of Common Stock, the Purchasers shall not, singly or as part of a group,
directly or indirectly, through one or more intermediaries or otherwise: (i)
purchase, acquire or own, or offer, propose or agree to purchase, acquire or
own, directly or indirectly, any Voting Securities, any option, warrant or other
right to acquire, directly or indirectly, any Voting Securities or any
securities which are
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convertible into or exchangeable or exercisable for Voting Securities
(excluding, in each case, the Shares purchased pursuant to this Agreement and
the Permitted Additional Securities (as defined below) and any securities issued
upon conversion, exchange or otherwise in respect thereof); (ii) make, or in any
way participate, directly or indirectly, in any "solicitation" of "proxies" to
vote (as such terms are used in the proxy rules of the SEC), initiate, propose
or otherwise solicit stockholders of the Company for the approval of one or more
stockholder proposals, or induce or attempt to induce any other person to
initiate any stockholder proposal, or advise or influence, or seek to advise or
influence, any person with respect to the voting of any Voting Securities of the
Company; (iii) deposit any Voting Securities in a voting trust or subject any
Voting Securities to any agreement or arrangement with respect to the voting of
any Voting Securities or other agreement having similar effect; (iv) form a
partnership, syndicate or other group (as defined in Rule 13d-3 under the
Exchange Act) for the purpose of acquiring, holding, voting or disposing of
Voting Securities with any person that is not a Purchaser or Purchaser
Affiliate, (v) vote for directors of the Company (other than the Purchasers'
designees in accordance with Section 6(d)) except, at the Purchasers' election,
voting in proportion to the votes of the stockholders of the Company that are
not Affiliates of the Company or in accordance with the recommendations of the
Board of Directors of the Company or (vi) prior to any conversion of the Shares,
without the Company's consent, effect any short sales of the Common Stock;
provided, however, that actions taken by any representative of the Purchasers on
the Board of Directors of the Company, acting in his or her capacity as such a
director, shall not violate this Section 7(a). The Purchasers further covenant
to promptly cause the termination or resignation of any director of the Company
designated by the Purchasers if, pursuant to Section 6(d)(ii) hereof, there is a
reduction in the number of persons the Purchasers are entitled to designate as
directors. In addition to and not in limitation of any other remedies at law or
in equity available to the Purchasers for a breach of any provision of this
Agreement or of the Certificate of Designation, the restrictions contained in
this Section 7(a) shall not apply following the occurrence and during the
continuation of any Restriction Event pursuant to clauses (i) or (ii) of Section
5(a) of the Certificate of Designation. The Company may not assign any of its
rights under this Section 7(a) and the obligations of the Purchasers under this
Section 7(a) shall
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not be binding upon any subsequent holders of the Shares other than Purchaser
Affiliates. Notwithstanding anything in this paragraph to the contrary, in the
event that (i) a third party (which term for purposes of this Section shall
include any group as defined in Section 13(d)(3) of the Exchange Act) makes a
tender or exchange offer which, if consummated, would result in such third party
owning at least a majority of the Voting Securities and the Company's Board of
Directors does not oppose such tender or exchange offer at the time at which it
is required by applicable securities laws to make a recommendation regarding
such tender or exchange offer to the Company's stockholders, (ii) the Company
agrees to an acquisition by such a third party of shares representing at least
30% of the Voting Securities of the Company or a substantial portion of the
assets of the Company (other than the purchase of assets in the ordinary course
of business), (iii) the Company publicly announces its intent to consider a
possible sale of the Company or any other transaction specified in this sentence
or (iv) the Company's Board of Directors approves a definitive written agreement
with respect to a business combination or other extraordinary transaction
involving the Company as a result of which more than 50% of the assets of the
Company would be transferred or a Change of Control (as defined below) would
occur, then the restrictions in this Section 7(a) shall terminate. In addition,
in the event that the Company enters into any confidentiality or "standstill"
agreement with any third party in connection with a possible sale of the Company
or other transaction specified in the preceding sentence, which agreement
contains terms and conditions more favorable to such party than those contained
in this Section 7(a) (other than solely with respect to the stated term of any
such "standstill" obligations), the Company shall promptly notify the Purchasers
in writing of such terms and conditions and the provisions of this Section 7(a)
shall be deemed to be modified to reflect such terms and conditions to the
extent they are in fact more favorable. For purposes hereof, (x) "Change of
Control" shall mean any transaction as a result of which (i) the owners of a
majority of the Voting Securities of the Company immediately prior to
consummation of the transaction will not continue to own upon completion of the
transaction (A) a majority of the Voting Securities of the Company or (B) a
majority of the Voting Securities of any other person into or for the securities
of which the Voting Securities of the Company will be converted or exchanged as
a result of the transaction or (ii) as a result of which any third party is
entitled to elect a majority of the members of the Board of
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Directors of the Company, and (y) "Permitted Additional Securities" shall mean,
with respect to the Purchasers, in the aggregate, up to an additional 400,000
shares of Common Stock plus 200,000 additional shares commencing on each of the
fourth, fifth and sixth anniversaries of the Closing Date (subject to
proportionate adjustment to reflect any stock dividends, stock splits,
combinations or recapitalizations after the date of this Agreement) and any
securities purchased pursuant to the preemptive rights pursuant to Section 6(h),
and such additional purchases of securities as shall be approved by the Board of
Directors of the Company.
(b) Exempt Voting Securities. Notwithstanding anything to the
contrary contained in this Agreement, (i) the restrictions and obligations
contained in Section 7(a) shall not apply to any Voting Securities acquired or
held by the State Board of Administration of Florida (the "State Board") with
respect to which none of Centre Parallel Management Partners, L.P. ("CPMP"), the
Purchasers, nor any of the Purchaser Affiliates has sole or shared voting or
dispositive power with respect thereto pursuant to the Investment Management
Agreement between the State Board and CPMP (the "Management Agreement"), but in
any event such restrictions and obligations shall apply to the Shares acquired
by the State Board pursuant to this Agreement (or shares of Common Stock into
which such Shares have been converted), and (ii) except with respect to the
Shares acquired pursuant to this Agreement (or shares of Common Stock into which
such Shares have been converted, the State Board shall not be bound by the
obligations or prohibitions set forth in Section 7(a); provided, however, that
the foregoing shall not be deemed to be a limitation of any of the obligations
imposed by this Agreement upon CPMP, acting on behalf of the State Board.
8. Conditions to the Obligations of the Parties.
(a) Obligations of the Purchasers. The obligation of each of the
Purchasers to consummate the transactions contemplated hereby is subject to the
satisfaction or waiver by the Purchasers of each of the following conditions:
(i) General Conditions to Obligations of the Purchasers. The
representations and warranties of the Company herein contained shall be true and
correct in all material respects, as of the date hereof and as of the
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Closing Date, and the Company shall have performed in all material respects its
obligations hereunder.
(ii) Registration Rights Agreement. The Registration Rights
Agreement shall have been executed and delivered by each of the parties thereto
and shall continue to be in full force and effect.
(iii) Officers' Certificates. The Purchasers at the Closing Date
shall have received a certificate of the Chief Executive Officer and Chief
Financial Officer of the Company, dated the Closing Date, to the effect that (1)
as of the date hereof and as of the Closing Date, the representations and
warranties of the Company set forth in Section 4 hereof are true and correct in
all material respects and (2) as of the Closing Date, the obligations of the
Company to be performed hereunder on or prior to the Closing Date have been duly
performed in all material respects.
(iv) Opinions. Each of the Purchasers at the Closing Date shall
have received the opinion of Xxxxxxxxxxxx Xxxx & Xxxxxxxxx, in form and
substance reasonably satisfactory to the Purchasers.
(v) Certificate of Designation. The Certificate of Designation
attached hereto as Exhibit B shall have been duly adopted by the Company and
filed with the Secretary of State of Delaware.
(vi) Material Adverse Effect. Since March 28, 1998 there shall
have occurred no fact or condition which would have, or insofar as reasonably
can be foreseen could have, a Material Adverse Effect.
(vii) Schedules. The Purchasers shall have received from the
Company the Schedules to this Agreement (other than Schedule I appended hereto)
which Schedules shall be in form and substance in all material respects
satisfactory to the Purchasers.
(viii) Transfer Agent Certificate. The Purchasers shall have
received a certificate of the Company's transfer agent with respect to the
number of issued and outstanding shares of the Company's common stock.
(ix) Loan Facilities. The Loan Facilities shall have closed and
the Company shall have received at
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least $82 million in cash thereunder, and the terms of such Loan Facilities
shall be satisfactory to the Purchasers.
(x) Windmere. The Proposed Transactions with Windmere-Durable
Holdings, Inc. referred to in the "highly confident" letter dated June 25, 1998
from Centre Partners Management LLC to the Special Committee of the Board of
Directors of the Company shall have been, or shall concurrently with the Closing
be, consummated.
(xi) Directors. Concurrently with the Closing, the designees of the
Purchasers shall have been elected to the Board of Directors of the Company as
provided in Section 6(d) hereof.
(xii) Incumbency; Resolutions. The Company shall have delivered to
the Purchasers a certificate, dated the Closing Date and in form and substance
reasonably satisfactory to the Purchasers, of the President or the Chief
Executive Officer of the Company as to (i) the incumbency of those officers of
the Company who shall be executing and delivering this Agreement and the
Registration Rights Agreement, which shall be certified by the Secretary of the
Company, and (ii) the adoption of appropriate corporate resolutions authorizing
the execution and delivery of each of this Agreement and the Registration Rights
Agreement and consummation of the transactions contemplated hereby and thereby.
(b) Obligations of the Company. The obligation of the Company to
sell the Shares to each of the Purchasers is subject to the accuracy of the
representations and warranties of each of the Purchasers herein contained except
to the extent any inaccuracies do not materially impair the ability of the
Purchasers to consummate the transaction contemplated by the Agreement, as of
the date hereof and as of the Closing Date, and to the performance in all
material respects by each of the Purchasers of its obligations hereunder.
(c) Obligations of Each of the Company and the Purchasers. The
obligations of each of the Company and the Purchasers to consummate the
transactions contemplated herein are subject to the satisfaction of the
following conditions:
(i) No Injunction. No temporary restraining order, preliminary
or permanent injunction or other order
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shall have been issued by any court of competent jurisdiction prohibiting or
preventing consummation of the transactions contemplated herein shall be in
effect.
(ii) NASDAQ. The NASDAQ National Market System shall have
confirmed that the issuance and sale of the Shares does not constitute a "change
of control" or otherwise require shareholder consent under the rules of the
NASDAQ National Market System.
9. Definitions.
"Affiliate" shall have the meaning set forth in Rule 12b-2 under the
Exchange Act (as in effect on the date of this Agreement) and any person who is
a director of, or beneficially owns (within the meaning of Rule 13d-3
promulgated under the Exchange Act) five percent or more of the outstanding
Common Stock, of the Company.
"By-laws" shall mean the By-laws of the Company, as amended to the
Closing Date.
"Capital Stock" shall mean with respect to any person any and all
shares, interests, participations or other equivalents (however designated) of
corporate stock, including each class of common stock and preferred stock of
such person.
"Certificate of Designation" shall mean the Certificate of
Designation setting forth the relative powers, preferences and rights and
qualifications, limitations and restrictions of the Convertible Preferred Stock
in the form of Exhibit B hereto.
"Common Stock" shall mean the Common Stock of the Company, par value
$.01 per share.
"Financial Statements" shall mean the consolidated balance sheets of
the Company and its subsidiaries at July 1, 1995, June 29, 1996 and June 28,
1997; March 29, 1997 and March 28, 1998; and May 30, 1998, and the consolidated
statements of income and cash flows for each of the three years in the period
ended June 28, 1997, including the notes thereto, all as reported on by Deloitte
& Touche, independent accountants, and for the thirty-nine weeks ended March 29,
1997 and March 28, 1998, and the one month and year to date periods ended May
30, 1998 and the comparable
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period of the immediately preceding fiscal year of the Company.
"Indebtedness" shall mean, for any entity, (a) its liabilities for
borrowed money or the deferred purchase price of property or services, (b)
capitalized lease obligations of such entity, and (c) all liabilities of any
other entity for borrowed money or for the deferred purchase price of property
or services (other than trade accounts payable, and any such purchase price
payable for goods or services acquired, in either case in the ordinary course of
business) (i) which is or are secured by any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance upon or in property owned
by such entity, whether or not such entity has assumed or become liable for the
payment of such liability, or (ii) for which such entity has assumed or
otherwise become directly or contingently liable for the payment of such
liability.
"June 28, 1997 Balance Sheet" shall mean the balance sheet of the
Company and its subsidiaries as of such date, including the notes thereto,
included in the Financial Statements.
"Loan Facilities" shall mean the Credit Agreement dated on or about
the Closing Date among the Company as Borrower, the lenders party thereto and
Xxxxxx Brothers Inc. or its affiliates, as Arranger and agents thereunder and
all renewals, extensions, amendments and modifications thereof and any refunding
or refinancing of the Indebtedness thereunder so long as the same is in the form
of Indebtedness under a credit facility with banks or other financial
institutions.
"March 28, 1998 Balance Sheet" shall mean the balance sheet of the
Company and its subsidiaries as of such date, including the notes thereto,
included in the Financial Statements.
"Material Adverse Effect" shall mean a material adverse effect on the
business, properties, condition (financial or otherwise), prospects or results
of operation of the Company and its subsidiaries, taken as a whole.
"Person" shall mean any individual, partnership, joint venture,
corporation, trust, organization, government or department or agency of a
government.
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"Preferred Stock" shall mean the Company's Preferred Stock, par value
$.01 per share designated in Article IV of the Second Amended and Restated
Certificate of Incorporation.
"Purchaser Affiliate" shall mean any Affiliate of a Purchaser, and
shall include any successor to (but not any assignee of) a Purchaser or
Purchaser Affiliate, it being understood that any limited partner of any
Purchaser shall not be an Affiliate of such Purchaser solely by virtue of its
status as such a limited partner.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement with respect to the Shares substantially in the form of Exhibit A
attached hereto.
"Second Amended and Restated Certificate" shall mean the Second
Amended and Restated Certificate of Incorporation of the Company.
"Shares" shall have the meaning set forth in Section 2.
"Subsidiary" shall mean any Person a majority of the voting stock of
which is owned by the Company.
"Total Voting Power" of any Person at any time shall mean the total
combined voting power in the general election of directors of all the
outstanding shares of all classes of capital stock of such Person which are then
entitled to vote generally in the election of directors.
"Voting Securities" shall mean Common Stock and any other securities
of the Company entitled to vote generally for the election of directors.
10. Indemnification.
(a) Company Indemnification. The Company agrees to indemnify and
hold harmless each Purchaser, each person who controls any Purchaser within the
meaning of Section 15 of the Securities Act and/or Section 20 of the Exchange
Act, each member of any advisory or similar committee or Board of each of the
Purchasers, its Affiliates and each of their respective officers, directors,
employees, representatives and agents (the "Purchaser Indemnitees"), to the
fullest extent lawful, from and against (i) any and all actions, suits, claims,
proceedings, costs, losses, liabilities,
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damages, judgments, amounts paid in settlement in accordance with Section 10(c)
and reasonable expenses (including, without limitation, reasonable attorneys'
fees and disbursements)(hereinafter collectively referred to as a "Loss" or
"Losses"), joint or several that may be incurred by or asserted or awarded
against any Purchaser Indemnitee in each case arising out of or in connection
with or relating to any investigation, litigation, or proceeding or the
preparation of any defense with respect thereto arising out of any inaccuracy in
or breach violation or nonobservance of the representations, warranties,
covenants or agreements made by the Company herein or in the Registration Rights
Agreement and (ii) any and all Losses relating to or arising out of any action
or failure to act undertaken by a Purchaser Indemnitee at the specific written
request of or with the written consent of the Company or its Chairman or
otherwise relating to or arising out of the transactions contemplated hereby or
by the Registration Rights Agreement, provided that any Loss referred to in this
clause (ii) shall (x) have been incurred or suffered by a Purchaser Indemnitee
in connection with a threatened or actual investigation, action, suit, claim or
proceeding involving the Purchaser Indemnitee as defendant, co-defendant,
deponent, witness or in any capacity whatsoever other than as a plaintiff
initiating an action, suit, claim or proceeding against any person or entity and
(y) not have resulted from the bad faith, wilful misconduct or gross negligence
of such Purchaser Indemnitee, as determined by a court of competent jurisdiction
in a final, non-appealable order.
(b) Purchaser Indemnification. The Purchasers agree to indemnify and
hold harmless the Company, the directors, officers, employees and agents of the
Company, and each person who controls the Company within the meaning of Section
15 of the Securities Act and/or Section 20 of the Exchange Act from and against
any and all Losses suffered or incurred by the Company as a result of any
inaccuracy in or breach, violation or nonobservance of the representations,
warranties or covenants made by the Purchasers herein.
(c) Expenses, Reimbursement. Any Person (an "Indemnifying Person")
who is obligated to indemnify another Person (an "Indemnified Person") pursuant
hereto promptly shall reimburse any such Indemnified Person for all Losses
constituting reasonable out-of-pocket expenses (including reasonable attorneys'
fees and disbursements) as they are incurred in connection with investigating,
preparing to
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defend or defending any such action, suit, claim or proceeding (including any
inquiry or investigation) for which indemnity is available under Sections 10(a)
or 10(b), whether or not such Indemnified Person is a party thereto. To the
extent that any Indemnifying Person shall indemnify or reimburse any Indemnified
Person for Losses or expenses pursuant to Sections 10(a), 10(b) or this Section
10(c) and it is subsequently judicially determined that such Indemnified Person
is not entitled to such indemnity or reimbursement of expenses hereunder, such
Indemnified Person shall promptly refund to any Indemnifying Person the amounts
so received by it. In the event that any Indemnified Person shall appeal a
judgment contemplated by the preceding sentence that is adverse to such
Indemnified Person and thereafter it shall be judicially determined that such
Indemnified Person was entitled to indemnity hereunder, such Indemnifying Person
shall reimburse the Indemnified Person for all Losses incurred by such
Indemnified Person, including without limitation amounts earlier refunded to
such Indemnifying Person by such Indemnified Person and the costs associated
with pursuing and prosecuting the appeal.
(d) Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Sections 10(a) and 10(b) is due in accordance with its terms but is for any
reason held by a court to be unavailable from any Indemnifying Person on grounds
of public policy or otherwise, then such Indemnifying Person shall, to the
fullest extent permitted by law, contribute to the aggregate Losses of such
Indemnified Person in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and the Purchasers on the other in
connection with the conduct which resulted in the Loss. The parties agree that
it would not be just or equitable if contribution were determined by pro rata
allocation or by any other method of allocation which does not take account of
relative fault and other equitable considerations. The parties further agree
that if and to the extent that pro rata contribution were nevertheless
considered by a court, all Purchaser Indemnitees collectively on the one hand,
and the Company and each other Person indemnified pursuant to Section 10(b)
collectively on the other hand, shall each be deemed to be one person. No
Purchaser Indemnitee shall in any event have liability to the Company arising
out of any inaccuracy in or breach of the representations, warranties, covenants
or agreements made by the Company herein; other conduct by the Company or its
employees or agents; or any action or failure
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to act undertaken by a Purchaser Indemnitee at the written request of or with
the written consent of the Company.
(e) Indemnification Procedure. An Indemnified Person shall give
written notice to the Indemnifying Person of any claim with respect to which it
seeks indemnification promptly after the discovery by such parties of any
matters giving rise to a claim for indemnification pursuant to Sections 10(a) or
10(b), as the case may be; provided that the failure of any Indemnified Person
to give notice as provided herein shall not relieve any Indemnifying Person of
its obligations under this Section 10 except to the extent that such
Indemnifying Person is actually prejudiced by such failure to give notice. In
case any such action, proceeding or claim is brought against any Indemnified
Person, the Indemnifying Persons shall be entitled to participate in and, unless
in the reasonable good faith judgment of the Indemnified Persons a conflict of
interest between them and the Indemnifying Persons may exist in respect of such
action, proceeding or claim, to assume the defense thereof, with counsel
reasonably satisfactory to the Indemnified Persons, and after notice from the
Indemnifying Persons to the Indemnified Persons of their election so to assume
the defense thereof, the Indemnifying Persons shall not be liable to such
Indemnified Persons for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. In any event, unless and until the Indemnifying Persons elect in
writing to assume and do so assume the defense of any such claim, proceeding or
action, the Indemnified Persons' reasonable costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be Losses subject to indemnification hereunder in accordance with the
provisions hereof. If the Indemnifying Persons elect to defend any such action
or claim, then the Indemnified Persons shall be entitled to participate in such
defense with counsel of their choice at their sole cost and expense. The
Indemnifying Persons shall not be liable for any settlement of any action, claim
or proceeding effected without its written consent; provided, however, that the
Indemnifying Persons shall not unreasonably withhold, delay or condition their
consent. Anything in this Section 10 to the contrary notwithstanding, the
Indemnifying Persons shall not, without the Indemnified Persons' prior written
consent (which consent shall not be unreasonably withheld), settle or compromise
any claim or consent to entry of any judgment in respect thereof which imposes
any future obligation on the
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Indemnified Persons or which does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the Indemnified Persons, a
release from all liability in respect of such claim.
(f) Survival. The obligations of the Company and the Purchasers
under this Section 10 shall survive the transfer of any Shares or shares of
Common Stock or the Closing or termination of this Agreement and the
transactions contemplated hereby. The agreements contained in this Section 10
shall be in addition to any other rights of any party hereto against any other
party with respect to the matters referred to in Sections 10(a), 10(b) and 10(c)
or others, except that, absent fraud, this Section 10 shall be the exclusive
remedy of the Purchasers for any claims for Losses arising as a consequence of
any breach of the representations and warranties of the Company hereunder other
than the representations and warranties set forth in Sections 4(a), (b), (c),
(d), (e) and (j) hereof (the "Excluded Representations").
(g) Indemnification Threshold. Notwithstanding anything herein to
the contrary, the Company shall not have any liability under Section 10(a)(i)
(other than in respect of the Excluded Representations) unless the aggregate
amount of Losses to the indemnified parties based on, attributable to or
resulting from the failure of the representations and warranties of the Company
hereunder (other than the Excluded Representations) to be true and correct
exceeds $2,000,000 and, in such event, the Company shall be required to pay the
full amount of such Losses including the first $2,000,000.
11. Miscellaneous. (a) Home Office Payment. The Company agrees
that, as long as the Purchasers shall hold any Shares, any payments to be made
on, or in connection with the redemption of, such Shares will be made at the
place and in the manner indicated on Schedule 11(a) hereto or such other place
or manner as the Purchasers may designate in writing.
(b) Expenses. Except for Barrington Associates, who have provided
certain brokerage and financial advisory services to the Company with respect to
the issuance and sale of the Shares, the Company on the one hand and the
Purchasers on the other each represents to the other that it has not used a
broker in connection with the transactions contemplated by this Agreement.
Whether or not the transactions contemplated hereby shall be consummated, the
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Company agrees to pay, and hold the Purchasers harmless against liability for
the payment of, up to $400,000 (or $450,000 if the Closing shall occur) (unless
the Company and the Purchasers agree upon a higher limit) of reasonably
documented out-of-pocket expenses (including amounts paid to third parties)
arising in connection with the preparation, negotiation and execution of this
Agreement, the Registration Rights Agreement and the Closing of the purchase and
sale of the Shares, including, without limitation, the reasonable fees and
expenses of the Purchasers' counsel retained in connection with such agreements
and the Closing. The Company shall be responsible for any and all fees and
expenses owing to Barrington Associates. In addition, at the Closing, the
Company shall pay a transaction fee of $500,000 to Centre Partners Management
LLC.
(c) Survival of Representations and Warranties. The representations
and warranties set forth in this Agreement shall survive until the tenth (10th)
business day following the filing by the Company of its Annual Report on Form
10-K, including all required financial statements, for the 1999 fiscal year. No
action may be brought pursuant to Section 10 with respect to a breach of any
representation or warranty in this Agreement after such time unless, prior to
such time, the party seeking to bring such action has notified the other party
of such claim, specifying in reasonable detail the nature of the loss suffered.
(d) Assignment and Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the successors and permitted assigns of the
parties pursuant to this paragraph. Neither the Company nor the Purchasers
shall assign all or any part of this Agreement without the prior written consent
of the other parties, provided that nothing in this Section 11(d) shall restrict
or require the consent of the Company, subject to Section 11(r), for any
transfer or assignment of the Shares (or shares of Common Stock into which the
Shares shall have been converted) or the rights of the Purchasers under the
Registration Rights Agreement in accordance with the provisions thereof.
(e) Independent Investment Banking Firm. So long as the Purchasers
or any Purchaser Affiliates hold any Shares, any independent investment banking
firm or appraisal firm used pursuant to Section 3 of the Certificate of
Designation shall be mutually acceptable to the Company, on
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the one hand, and the Purchasers or such Purchaser Affiliates on the other hand.
(f) Headings. Subject headings are included for convenience only and
shall not affect the interpretation of any provisions of this Agreement.
(g) Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if personally served or
transmitted via telecopy, (ii) on the next business day after delivery to an
overnight carrier or (iii) on the third day after mailing if mailed to the party
to whom notice is to be given, by first class mail, registered, return receipt
requested, postage prepaid and addressed as follows:
(i) If to the Company: Salton/Maxim Housewares, Inc
000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxx Xxxxxxxx, Xxxxxxxx 00000
Attention: Chairman
With a copy to: Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxxxxxxx
Fax: 000-000-0000
(ii)(a) If to a Purchaser, to:
c/o Centre Partners Management LLC
00 Xxxxxxxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxxx
Telecopier: (000) 000-0000
With a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000
(h) Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND GOVERNED BY, THE LAWS OF
41
46
THE STATE OF DELAWARE WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS
THEREOF.
(i) Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto, sets forth the entire understanding and agreement of the
parties hereto relating to the purchase and sale of the Shares and supersedes
any and all other understandings, negotiations or agreements between the parties
hereto relating to the sale and purchase of the Shares.
(j) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which together shall
constitute a single agreement.
(k) Severability. In the event that any one or more of the
immaterial provisions contained in this Agreement shall for any reason be held
to be invalid, illegal or unenforceable, the same shall not affect any other
provision of this Agreement, but this Agreement shall be construed in a manner
which, as nearly as possible, reflects the original intent of the parties.
(l) Words in Singular and Plural Form. Words used in the singular
form in this Agreement shall be deemed to import the plural, and vice versa, as
the sense may require.
(m) Amendment and Modification. This Agreement may be amended or
modified only by written agreement executed by the Company and the holders of
the Shares (or of the securities issued upon the conversion or exchange of the
Shares) representing a majority of the voting rights of the Shares (or other
securities) outstanding, it being understood that the Shares (or any other
securities other than Common Stock) shall be deemed to have been converted into
Common Stock for such purpose.
(n) Waiver. Any agreement on the part of a party hereto to any
waiver of any provision hereof shall be valid against such party only if set
forth in an instrument in writing signed by such party but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not be deemed to be construed as a further or
continuing waiver of any such obligation, covenant agreement or condition or of
the breach of any other provision, term, covenant, representation or warranty of
this Agreement and shall not operate as a waiver
42
47
of, or estoppel with respect to, any subsequent or future failure.
(o) Sections, Exhibits, Schedules. References to a section are,
unless otherwise specified, to one of the sections of this Agreement and
references to an "Exhibit" or "Schedule" are, unless otherwise specified, to one
of the exhibits or schedules attached to this Agreement. References to this
Agreement include, unless otherwise specified, the exhibits or Schedules
attached hereto.
(p) Specific Enforcement. Purchasers, on the one hand, and the
Company, on the other, acknowledge and agree that irreparable damage would occur
in the event that any of the covenants contained in Section 6(d), (e) or (h) or
(k) or Section 7(a) of this Agreement were not performed in accordance with
their specific terms or were otherwise breached, and that money damages are an
inadequate remedy for breach thereof because of the difficulty of ascertaining
and quantifying the amount of damage that will be suffered by the parties hereto
in the event that such covenants are not performed in accordance with their
terms or are otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of the
covenants referred to in the immediately preceding sentence and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state thereof having jurisdiction, this being in addition to any other
rights and remedies to which they may be entitled at law or equity.
(q) Confidentiality. The Purchasers agree that they shall not
disclose any non-public information concerning the Company which they receive
from the Company except (i) such information which is required to be disclosed
by applicable law or in connection with any legal proceeding and (ii)
disclosures to directors, officers, employees, agents and representatives of the
Purchasers who agree to maintain the confidentiality of such information in
accordance with this Section 11(q). The foregoing shall not apply to
information that shall be or hereinafter become publicly available other than as
a result of a disclosure by the Purchasers or information which has been or is
subsequently acquired by the Purchasers from a third party who, to the knowledge
of the Purchasers after due inquiry, is not prohibited from disclosing such
information by a contractual, legal or fiduciary obligation to the Company.
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48
(r) Restrictive Legend. (i) Each certificate representing (i) the
Shares, (ii) shares of the Common Stock issuable upon conversation of any
Shares, and (iii) any other securities issued in respect of the Shares or Common
Stock issued upon conversation of any Shares upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event (each of the
foregoing securities in (i) through (ii) being referred to herein as "Restricted
Securities"), shall (unless otherwise permitted by the provisions of Section
11(r)(ii) below) be stamped or otherwise imprinted with a legend substantially
in the following form (in addition to the legend required under any applicable
state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SHARES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATIONS OR EXEMPTIONS THEREFROM UNDER SAID ACT OR LAWS.
COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND
THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE
BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF
THE COMPANY.
The Company will promptly, upon request, remove any such legend when
no longer required by the terms of this Agreement or by applicable law.
(ii) Transfers. Unless there is in effect a registration statement
under the Securities Act covering a proposed transfer of any Restricted
Securities, each certificate evidencing the Restricted Securities transferred by
the holder thereof shall bear the restrictive legend set forth in Section
11(r)(i) above except that such certificate shall not bear such restrictive
legend if (i) in the opinion of counsel for such holder, such legend is not
required in order to establish compliance with any provisions of the Securities
Act, (ii) a period of at least one year has elapsed since the later of the date
the Restricted Securities were acquired from the Company or from an affiliate of
the Company, and such Person represents to the Company that it is not an
affiliate of the Company and has not been an affiliate during the preceding
three months, or (iii) the Restricted Securities have been sold pursuant to Rule
144(k) and the certificate is accompanied by a representation by such Person
that it is not an affiliate of
44
49
the Company, has not been an affiliate during the three-month period prior to
the sale and has held the Restricted Securities for more than two years.
45
50
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
THE COMPANY
SALTON/MAXIM HOUSEWARES, INC.
By:
----------------------------
Name:
Title:
THE PURCHASERS:
CENTRE CAPITAL INVESTORS II, L.P.
CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P.
CENTRE CAPITAL OFFSHORE INVESTORS II, L.P.
By: Centre Partners II, L.P.
General Partner
By: Centre Partners Management LLC
Attorney-in-fact
By:
----------------------------
Xxxxx X. Xxxxxxx
Managing Director
46
00
XXXXX XXXXX XX XXXXXXXXXXXXXX XX XXXXXXX
By: Centre Parallel Management Partners,
L.P.
Manager
By: Centre Partners Management LLC
Attorney-in-fact
By:
----------------------------
Xxxxx X. Xxxxxxx
Managing Director
CENTRE PARALLEL MANAGEMENT PARTNERS, L.P.
CENTRE PARTNERS COINVESTMENT, L.P.
By: Centre Partners II LLC
General Partner
By:
---------------------------------
Xxxxx X. Xxxxxxx
Managing Director
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52
SCHEDULE I
Purchase Investment
Price Shares Percentage
------------ ---------- ----------
CENTRE CAPITAL INVESTORS II, L.P. $12,312,000 12,312 30.7800%
CENTRE CAPITAL TAX-EXEMPT 4,006,000 4,006 10.0150%
INVESTORS II, L.P.
CENTRE CAPITAL OFFSHORE 2,679,000 2,679 6.6975%
INVESTORS II, L.P.
CENTRE PARALLEL MANAGEMENT 189,000 189 0.4725%
PARTNERS, L.P.
CENTRE PARTNERS COINVESTMENT, L.P. 2,117,000 2,117 5.2925%
STATE BOARD OF ADMINISTRATION 18,697,000 18,697 46.7425%
OF FLORIDA ----------- ------ ---------
$40,000,000 40,000 100.0000%
=========== ======= =========
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53
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT dated as of July 15, 1998 by and among
SALTON/MAXIM HOUSEWARES, INC., a Delaware corporation (the "Company"), and each
of the parties listed on the signature pages hereto under the caption
"Purchasers" (each, a "Purchaser," and collectively, the "Purchasers").
This Agreement is made pursuant to the Stock Purchase Agreement (the
"Purchase Agreement"), dated as of July 15, 1998, by and among the Company and
the Purchasers, whereby the Company has agreed, among other things, to issue to
the Purchasers 40,000 shares of its Series A Voting Convertible Preferred
Stock, par value $0.01 per share (the "Preferred Stock"). The Preferred Stock
is convertible into shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), at a conversion price of $17.00 per share, as such
price may be adjusted pursuant to the Certificate of Designation of the
relative powers, preferences and rights and qualifications of the Preferred
Stock.
In order to induce the Purchasers to enter into the Purchase Agreement,
the Company has agreed to provide the registration rights set forth in this
Agreement. This
54
Agreement shall become effective upon the issuance of the shares of Preferred
Stock to the Purchasers pursuant to the Purchase Agreement.
In consideration of the foregoing and the respective covenants and
agreements herein contained, the parties hereto, intending to be legally bound
hereby, agree as follows:
SECTION 1. Definitions. Capitalized terms used and not defined herein
have the meanings assigned to such terms in the Purchase Agreement. As used
herein, unless the context otherwise requires, the following terms have the
following respective meanings:
"Blue Sky Filing" is defined in Section 2.07(a) of this Agreement.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" is defined in the introduction to this Agreement.
"Company" is defined in the introduction to this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all
2
55
as the same shall be in effect at the time. Reference to a particular section
therein shall include a reference to the comparable section, if any, of any
such successor federal statute.
"Person" means a corporation, an association, a partnership, an
organization, a business, an individual, a governmental or political
subdivision thereof or a governmental agency.
"Preferred Stock" is defined in the introduction to this Agreement.
"Purchase Agreement" is defined in the introduction to this Agreement.
"Purchasers" is defined in the introduction to this Agreement.
"Registrable Securities" means any (i) shares of Preferred Stock, (ii)
shares of Common Stock issued upon the conversion of the Preferred Stock and
(iii) securities issued or issuable with respect to any shares of Preferred
Stock or Common Stock by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (a) a
registration
3
56
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) they shall have been
sold to the public pursuant to Rule 144 (or any successor provision) under the
Securities Act, (c) they shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and in the opinion of counsel reasonably
satisfactory to the Company subsequent public distribution of them shall not
require registration or qualification of them under the Securities Act or any
similar state law then in force, or (d) they shall have ceased to be
outstanding.
"Registration Expenses" is defined in Section 2.09(a) of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section therein shall include a reference to the comparable section,
if any, of any such similar federal statute.
4
57
SECTION 2. Registration under Securities Act.
SECTION 2.01. Demand Registration. (a) Request. At any time after the
date hereof, upon the written request of the Purchasers that the Company
effect the registration under the Securities Act of all or part (subject to
Section 2.01(f)) of the Purchasers' Registrable Securities and specifying the
types of Registrable Securities to be registered and the intended method of
disposition thereof, the Company will give prompt written notice of such
request to all registered holders of Registrable Securities, and thereupon the
Company will, subject to the terms of this Agreement, use its reasonable best
efforts to effect the registration under the Securities Act of:
(i) the Registrable Securities which the Company has been
requested to register by the Purchasers, and
(ii) all other Registrable Securities which the Company has
been requested to register by written request of the holders
thereof given to the Company within 30 days after the giving of
the aforesaid written notice by the Company (specifying the
intended method of disposition of such Registrable Securities),
all to the extent
5
58
requisite to permit the intended disposition of the Registrable
Securities to be so registered.
(b) Registration of Other Securities. Whenever the Company shall effect a
registration pursuant to this Section 2.01 in connection with an underwritten
offering by one or more holders of Registrable Securities, no securities other
than Registrable Securities shall be included among the securities covered by
such registration unless (i) the managing underwriter of such offering shall
have advised the Purchasers in writing that the inclusion of such other
securities would not adversely affect such offering or (ii) the Purchasers
shall have consented in writing to the inclusion of such other securities.
(c) Registration Statement Form. Registrations under this Section 2.01
shall be on such appropriate registration form of the Commission (i) as shall
be selected by the Company and (ii) as shall permit the disposition of such
Registrable Securities in accordance with the intended method or methods of
disposition specified in their request for such registration; provided,
however, that if at the time of such registration the Company satisfies the
eligibility requirements for use of a registration statement on Form S-3 under
the Securities Act, the Purchasers may request a registration on Form S-3 for
an offering to be
6
59
made on a continuous basis pursuant to Rule 415 under the Securities Act (a
"Shelf Registration") and the Company shall use all reasonable efforts to cause
the registration to be made on such form. The Company agrees to include in any
such registration statement all information which, in the opinion of counsel to
the Purchasers or counsel to the Company, is required to be included.
(d) Effective Registration Statement. A registration requested pursuant
to this Section 2.01 shall not be deemed to have been effected and will not be
considered one of the three demand registrations which may be requested
pursuant to this Agreement (i) if the registration statement with respect
thereto does not become effective, (ii) if after it has become effective, it
does not remain effective for a period of at least 90 days or, in the case of a
Shelf Registration, one year (or in each case such shorter period during which
all the Registrable Securities registered thereunder are sold or disposed of)
or such registration is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or court
for any reason and has not thereafter become effective, or (iii) if the
conditions to closing specified in the underwriting agreement entered into in
connection with such registration are not satisfied
7
60
or waived other than by reason of the failure or refusal of a holder of
Registrable Securities to satisfy or perform a condition to such closing or a
default by an underwriter. If a demand is made pursuant to Section 2.01 and
the Company files a registration statement and causes (or is in the process of
causing) such registration statement to become effective and the holders
requesting registration decide not to proceed with such registration for
reasons other than a breach by the Company of its obligations hereunder or the
Company's inability or failure to obtain the effectiveness of such registration
statement, such request shall nevertheless count as one demand under Section
2.01.
(e) Priority in Demand Registrations. If a demand registration pursuant
to this Section 2.01 involves an underwritten offering, and the managing
underwriter shall advise the Company in writing (with a copy sent to each
holder of the Registrable Securities requesting registration) that the number
of securities requested to be included in such registration exceeds the number
which can be sold in such offering within a price range acceptable to the
Purchasers or such other person entitled to make a demand registration pursuant
to Section 8 hereof, such registration will include only that number of
Registrable Securities which the Company is so advised can be sold in
8
61
such offering, drawn pro rata from the holders of the Registrable Securities
requesting such registration on the basis of the percentage of Registrable
Securities held by the holders of Registrable Securities which have requested
that such securities be included. In connection with any such registration, no
securities other than Registrable Securities shall be covered by such
registration.
(f) Limitations on Registration; Expenses. The Company will not be
required to effect, in the aggregate, more than three demand registrations
pursuant to this Section 2.01 (or any other provision of this Agreement), of
which the Company shall pay all Registration Expenses in connection with all
three demand registrations. The Company shall not be required to effectuate
any registration pursuant to this Section 2.01 within less than six months
after the end of the effectiveness period of any other registration pursuant to
Section 2.01. Notwithstanding the foregoing, no demand may be made in respect
of a number of Registrable Securities by all holders demanding registration
which is less than the lesser of (x) 25% of the total Registrable Securities
originally issued (or the equivalent thereof in the case of securities issued
upon the conversion thereof) or (y) the number of Registrable Securities having
9
62
a market value (as reasonably estimated in good faith by the holders requesting
registration) of at least $10,000,000.
SECTION 2.02. Incidental Registration. (a) Right to Include the
Registrable Securities. If the Company at any time proposes to register any of
its securities under the Securities Act by registration on Forms X-x, X-0 or
S-3 or any successor or similar form(s), whether or not for sale for its own
account, it will each such time give prompt written notice to the Purchasers
and all other holders of Registrable Securities of its intention to do so and
of such holders' rights under this Section 2.02. Upon the written request of
any such holder made within 30 days after the receipt of any such notice (15
days if the Company gives telephonic notice to all holders of Registrable
Securities, with written confirmation to follow promptly thereafter, stating
that (i) such registration will be on Form S-3 and (ii) such shorter period of
time is required because of a planned filing date) (which request shall specify
the Registrable Securities to be disposed of by such holder), the Company will,
subject to the next sentence, use its reasonable best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the holders thereof, to the extent
requisite to permit the disposition
10
63
of such Registrable Securities to be so registered. If the Company
thereafter determines for any reason not to register or to delay registration
of such securities, the Company may, at its election, give written notice of
such determination to each holder of Registrable Securities and, thereupon, (i)
in the case of a determination not to register, shall be relieved of the
obligation to register such Registrable Securities in connection with such
registration (but not from any obligation of the Company to pay the
Registration Expenses in connection therewith), without prejudice, however, to
the rights (if any) of the Purchasers or an assignee to request that such
registration be effected as a registration under Section 2.01, and (ii) in the
case of a determination to delay registration, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registration of such other securities. All obligations of the Company with
respect to any registration described in this Section 2.02(a) shall be subject
to the rights of the Company set forth in the immediately preceding sentence.
No registration effected under this Section 2.02 shall relieve the Company of
its obligation to effect any registration upon request under Section 2.01. The
Company will pay all Registration Expenses in connection with registration of
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64
Registrable Securities requested pursuant to this Section 2.02. If such
offering is to be underwritten, the holders seeking to sell such Registrable
Securities agree to join in such underwritten offering.
(b) Priority in Incidental Registrations. In a registration pursuant to
this Section 2.02 involving an underwritten offering of the securities so being
registered, whether or not for sale for the account of the Company by or
through one or more underwriters of recognized standing, if the managing
underwriter of such underwritten offering shall inform the Company and the
holders of Registrable Securities requesting registration in such offering by
letter of its belief that the number or type of securities to be included in
such registration would interfere with the successful marketing of the
securities being distributed by such underwriters, then the Company will be
required to include in such registration only that number and type of
Registrable Securities which it is so advised can be sold in such offering,
drawn pro rata from the holders of Registrable Securities requesting such
registration and the holders of any other securities to be registered (whether
or not pursuant to the exercise of a demand registration right by such holders)
on the basis of the number of securities the registration of which shall have
been requested by such
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65
holders (it being understood that this provision shall not limit the number of
securities that the Company shall be entitled to register for sale for its own
account).
SECTION 2.03. Registration Procedures. In connection with the Company's
obligations pursuant to Sections 2.01 and 2.02 hereof, the Company will use its
reasonable best efforts to effect such registrations to permit the sale of
Registrable Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company will as expeditiously as
possible:
(a) prepare and, as soon as reasonably practicable and in any
event within 30 days after the end of the period within which
requests for registration may be given to the Company, file with
the Commission (but not earlier than 90 days after the end of the
Company's fiscal year or 45 days after the end of the last fiscal
quarter), a registration statement or registration statements on
the appropriate form under the Securities Act, which form shall be
available for the sale of the Registrable Securities by the
holders thereof in accordance with the intended method or methods
of distribution thereof, and use its reasonable best
13
66
efforts to cause such registration statement to become effective
and to remain continuously effective for a period of 90 days
following the date on which such registration statement is
declared effective (or, in the case of a Shelf Registration, for a
period of one year following such date); provided that the Company
shall have no obligation to maintain the effectiveness of such
registration statement after the sale of all Registrable
Securities registered thereunder or for a period longer than that
specified in this paragraph (a);
(b) prepare and file with the Commission such amendments and
post-effective amendments to the registration statement as may be
necessary to keep such registration statement effective for the
applicable period; cause the related prospectus to be supplemented
by any required prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 under the Securities Act; and comply
with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration
statement during the applicable period in accordance with the
intended
14
67
methods of disposition by the sellers thereof set forth in such
registration statement or supplement to such prospectus;
(c) notify the selling holders of Registrable Securities, and
the managing underwriters, if any, promptly, and (if requested by
any such Person) confirm such advice in writing, (i) when a
prospectus or any prospectus supplement or post-effective
amendment has been filed, and, with respect to a registration
statement or any post-effective amendment, when the same has
become effective, (ii) of any request by the Commission for
amendments or supplements to a registration statement or related
prospectus or for additional information, (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of a
registration statement or the initiation of any proceedings for
that purpose, (iv) if at any time the representations and
warranties of the Company made as contemplated by Section 2.04(a)
below cease to be true and correct in any material respect, (v) of
the receipt by the Company of any notification with respect to the
suspension of the qualification of any of the
15
68
Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (vi)
of the happening of any event which requires the making of any
changes in a registration statement or related prospectus so that
such documents will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading
and (vii) if the Company reasonably determines that a
post-effective amendment to a registration statement would be
appropriate;
(d) use its reasonable best efforts to prevent the issuance
of any order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of a
Prospectus or suspending the qualification (or exemption from
qualification) of any Registrable Securities for sale in any
jurisdiction and, if any such order is issued, to obtain the
withdrawal of any such order at the earliest possible moment.
(e) if requested by the managing underwriters or any holder
of Registrable
16
69
Securities being sold in connection with an underwritten offering,
immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing
underwriters and such holder agree should be included therein
relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the
number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and
with respect to any other terms of the underwritten (or best
efforts underwritten) offering of the Registrable Securities to be
sold in such offering; make all required filings of such
prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and supplement or make
amendments to any registration statement if requested by any
holder of Registrable Securities covered by such registration
statement or any underwriter of such Registrable Securities;
17
70
(f) furnish to each selling holder of Registrable Securities
and each managing underwriter, without charge, at least one signed
copy of the registration statement or statements and any
post-effective amendment thereto, including financial statements
and schedules, all documents incorporated therein by reference and
all exhibits (including those incorporated by reference);
(g) deliver to each holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of the
prospectus or prospectuses (including each preliminary Prospectus)
and any amendment or supplement thereto as such Persons may
reasonably request; the Company consents to the use of such
prospectus or any amendment or supplement thereto by each of the
selling holders of Registrable Securities and the underwriters, if
any, in connection with the offering and sale of the Registrable
Securities covered by such Prospectus or any amendment or
supplement thereto;
(h) prior to any public offering of Registrable Securities,
use its reasonable best
18
71
efforts to register or qualify or cooperate with the selling
holders of Registrable Securities, the underwriters, if any, and
their respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as any
selling holder or underwriter reasonably requests in writing; keep
each such registration or qualification effective during the
period such registration statement is required to be kept
effective and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the
applicable registration statement; provided that the Company will
not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any
action which would subject it to general service of process in any
such jurisdiction where it is not then so subject;
(i) cooperate with the selling holders of Registrable
Securities and the managing underwriters, if any, to facilitate
the timely
19
72
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends
unless required by applicable law; and enable such Registrable
Securities to be in such denominations and registered in such
names as the managing underwriters may request at least two
business days prior to any sale of Registrable Securities to the
underwriters;
(j) use its reasonable best efforts to cause the Registrable
Securities covered by the applicable registration statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers
thereof or the underwriters, if any, to consummate the disposition
of such Registrable Securities;
(k) upon the occurrence of any event contemplated by
paragraph (c)(vi) above, prepare a supplement or post-effective
amendment to the applicable registration statement or related
prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered
to the purchasers of
20
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the Registrable Securities being sold thereunder, such
prospectus will not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein not misleading;
(l) take all such actions in connection therewith in order to
expedite or facilitate the disposition of such Registrable
Securities;
(m) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission and make
generally available to its security holders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder;
(n) permit any holder of Registrable Securities, which
holder, in the judgment of its counsel, might be deemed to be a
"control person" of the Company (within the meaning of Section 15
of the Securities Act and Section 20 of the Exchange Act), to
participate in the preparation of such registration statement and
include therein material, furnished to the Company in writing
which, in the reasonable judgment of such holder
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and its counsel, is required to be included therein;
(o) use its reasonable best efforts to cause all such
Registrable Securities to be listed on each securities exchange,
if any, on which Registrable Securities of the type then being
registered are listed; and
(p) provide and cause to be maintained a transfer agent and
registrar (if applicable) for all Registrable Securities covered
by such registration statement from and after a date not later
than the effective date of such registration statement.
The Company may require each holder of Registrable Securities as to which
any registration is being effected to furnish to the Company such information
regarding such holder and the distribution of such Registrable Securities as
the Company may from time to time reasonably request in writing in order to
comply with the Securities Act. Each holder of Registrable Securities as to
which any registration is being effected agrees to notify the Company, as
promptly as practicable, of any inaccuracy or change in information previously
furnished by such holder to the Company or of the happening of any event in
either case as a
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result of which any prospectus relating to such registration contains an
untrue statement of a material fact regarding such holder or the distribution
of such Registrable Securities or omits to state any material fact regarding
such holder or the distribution of such Registrable Securities required to be
stated therein or necessary to make the statement therein not misleading in
light of the circumstances then existing, and to promptly furnish to the
Company any additional information required to correct and update any
previously furnished information or required such that such prospectus shall
not contain, with respect to such holder or the distribution of such
Registrable Securities, an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
Each holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 2.03(c)(ii), (iii), (v), (vi) or (vii) hereof, such holder will
forthwith discontinue disposition of such Registrable Securities covered by
such registration statement or prospectus until such holder's receipt of the
copies of the supplemented or amended prospectus relating to such registration
statement
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or prospectus, or until it is advised in writing by the Company that
the use of the applicable prospectus may be resumed, and has received copies of
any additional or supplemental filings which are incorporated by reference in
such Prospectus, and, if so directed by the Company, such holder will deliver
to the Company (at the Company's expense) all copies, other than permanent file
copies then in such holder's possession, of the prospectus covering the
Registrable Securities current at the time of receipt of such notice.
SECTION 2.04. Underwritten Offerings.
(a) Demand Underwritten Offerings. In any offering by holders of
Registrable Securities pursuant to a registration requested under Section
2.01, sales shall, at the request of the Purchasers, be made through a
nationally recognized investment banking firm (or syndicate managed by such a
firm) selected by the holders of at least a majority in aggregate principal
amount of the Registrable Securities to be included in such offering and
approved by the Company (which approval shall not be unreasonably withheld) and
the Company shall enter into an underwriting agreement which shall be
reasonably satisfactory in form and substance to each holder and the
underwriters and which shall contain representations, warranties and agreements
(including
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indemnification agreements to the effect and to the extent provided in Section
2.07(a)) as are customarily included by an issuer in underwriting agreements
with respect to primary distributions. The holders of Registrable Securities
to be distributed by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all
of the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable Securities
shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such holder, such holder3s Registrable
Securities and such holder's intended method of distribution and any other
representation required by law.
(b) Incidental Underwritten Offerings. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by
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Section 2.02 and such securities are to be distributed by or through one or
more underwriters, the Company will, if requested by any holder of Registrable
Securities as provided in Section 2.02 and subject to the provisions of Section
2.02(b), use its reasonable best efforts to arrange for such underwriters to
include all the Registrable Securities to be offered and sold by such holder
among the securities to be distributed by such underwriters. The holders of
Registrable Securities to be distributed by such underwriters shall be parties
to the underwriting agreement between the Company and such underwriters. Any
such holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding
such holder, such holder's Registrable Securities and such holder's intended
method of distribution and any other representation required by law.
SECTION 2.05. Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company will give the holders of
Registrable Securities to be registered under such registration statement,
their underwriters, and their respective counsel and accountants the
opportunity to
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participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such holders3 and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
SECTION 2.06. Limitations, Conditions and Qualifications to Obligations
Under Registration Covenants. The obligations of the Company to use its
reasonable efforts to cause the Registrable Securities to be registered under
the Securities Act are subject to each of the following limitations, conditions
and qualifications:
(a) The Company shall not be obligated to file or keep effective any
registration statement pursuant to Section 2.01 hereof at any time if the
Company would be required to include financial statements audited as of any
date other than the end of its fiscal year.
(b) The Company shall be entitled to postpone for a reasonable period of
time (but not exceeding 30 days and not more than once in any six-month period)
the filing or
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effectiveness of any registration statement otherwise required to be prepared
and filed by it pursuant to Section 2.01 if the Company determines, in its
reasonable judgment, that (i) the Company is in possession of material
information that has not been disclosed to the public and the Company
reasonably determines that it would be significantly detrimental to the Company
and its stockholders to disclose such information at such time in a
registration statement or (ii) such registration and offering would
significantly interfere with any financing, acquisition, corporate
reorganization or other material transaction involving the Company or any of
its Affiliates (as defined in the rules and regulations adopted under the
Exchange Act) and, in any such case, the Company promptly gives the requesting
holders of Registrable Securities written notice of such determination,
containing a general statement of the reasons for such postponement and an
approximation of the anticipated delay. If the Company shall so postpone the
filing of a registration statement, the requesting holders of Registrable
Securities shall have the right to withdraw the request for registration by
giving written notice to the Company within 30 days after receipt of the notice
of postponement and, in the event of such withdrawal, such request shall not be
counted for purposes
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of the requests for registration to which the Purchasers and their assignees
are entitled pursuant to Section 2.01 hereof.
(c) No holder of Registrable Securities may participate in any
underwritten offering hereunder unless such holder (i) agrees to sell such
holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
SECTION 2.07. Indemnification. (a) Indemnification by the Company. In
the event of any registration of any Registrable Securities under the
Securities Act, the Company will, and hereby does, indemnify and hold harmless,
to the fullest extent permitted by law, the holder of any Registrable
Securities whose Registrable Securities are covered by such registration
statement, its directors and officers, each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person,
if any, who controls such seller or any such underwriter within the meaning of
the Securities Act, against any and all losses, claims, damages, liabilities
and
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expenses, joint or several, (or actions or proceedings, whether commenced
or threatened, in respect thereof) to which they or any of them may become
subject under the Securities Act or any other statute or common law, including
any amount paid in settlement of any litigation, commenced or threatened, and
to reimburse them for any reasonable legal or other expenses incurred by them
in connection with investigating any claims and defending any actions, insofar
as any such losses, claims, damages, liabilities, expenses or actions arise out
of or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the registration statement or prospectus relating to
the sale of such securities or any post-effective amendment thereto or in any
filing made in connection with the qualification of the offering under Blue Sky
or other securities laws of jurisdictions in which the Registrable Securities
are offered ("Blue Sky Filing"), or the omission or alleged omission to state
therein 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 or (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, if used
prior to the effective date of such registration statement (unless
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such statement is corrected in the final prospectus and the Company has
previously furnished copies thereof to any holder of Registrable Securities
seeking such indemnification and the underwriters), or contained in the final
prospectus (as amended or supplemented if the Company shall have filed with the
Commission any amendment thereof or supplement thereto) if used within the
period during which the Company is required to keep the registration statement
to which such prospectus relates current, or the omission or alleged omission
to state therein (if so used) a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the indemnification agreement contained
herein shall not (i) apply to such losses, claims, damages, liabilities,
expenses or actions arising out of, or based upon, any such untrue statement or
alleged untrue statement, or any such omission or alleged omission, if such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company by such seller or such underwriter
specifically stating that it is for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus
contained in the registration statement, any such amendment or supplement
thereto or any
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Blue Sky Filing or (ii) inure to the benefit of any underwriter or any person
controlling such underwriter, to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
such person's failure to send or give a copy of the final prospectus, as the
same may be then supplemented or amended, to the person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
person if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director, officer
or controlling person and shall survive the transfer of such securities by such
seller.
(b) Indemnification by the Sellers. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed pursuant to Section 2.01 or 2.02, that the Company shall have received an
undertaking satisfactory to it from the prospective seller of such securities,
to indemnify and hold harmless (in the same manner and to the same extent as
set forth in subdivision (a) of this Section 2.07(a)) the Company, each
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director of the Company, each officer of the Company and each other person, if
any, who controls the Company within the meaning of the Securities Act, with
respect to any untrue statement or alleged untrue statement in, or omission or
alleged omission from, such registration statement, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereto,
if such statement or omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly
executed by such seller specifically stating that it is for use in such
registration statement, preliminary prospectus, final prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such seller. In no event shall any indemnity or contribution paid by any
seller to the Company pursuant to this Section 2.07, or otherwise, exceed the
proceeds received by such seller in such offering. In the case of an
underwritten offering of Registrable Securities, each holder of Registrable
Securities shall agree to indemnify such underwriters, their officers and
directors, if any, and each person, if any, who controls such underwriters
within the
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meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act, with respect to information furnished by them for use in the
registration statement or prospectus to the extent customary in the
circumstances for a selling stockholder in an underwritten public offering.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 2.07(a), such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter within five days of the
commencement of such action; provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under the preceding subdivisions of this Section 2.07(a),
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought against an
indemnified party, the indemnifying party shall be entitled to participate in
and, unless in such indemnified party's reasonable good faith judgment a
conflict of interest between such indemnified and indemnifying parties may
exist in respect of such claim, to assume the defense thereof, jointly with any
other
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indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. In the event that the indemnifying party advises an indemnified
party that it will contest a claim for indemnification hereunder, or fails,
within thirty (30) days of receipt of any indemnification notice to notify, in
writing, such person of its election to defend, settle or compromise, at its
sole cost and expense, any action, proceeding or claim (or discontinues its
defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim. In any event, unless and until the indemnifying party elects
in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's reasonable out-of-pocket costs
and expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The
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indemnified party shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the indemnified party which relates to such action or
claim. The indemnifying party shall keep the indemnified party fully appraised
at all times as to the status of the defense or any settlement negotiations
with respect thereto. If the indemnifying party elects to defend any such
action or claim, then the indemnified party shall be entitled to participate in
such defense with counsel of its choice at its sole cost and expense. If the
indemnifying party does not assume such defense, the indemnified party shall
keep the indemnifying party appraised at all times as to the status of the
defense; provided, however, that the failure to keep the indemnifying party so
informed shall not affect the obligations of the indemnifying party hereunder.
No indemnifying party shall be liable for any settlement of any action, claim
or proceeding effected without its written consent; provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the consent of the indemnified
party (which consent shall not be
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unreasonably withheld, delayed or conditioned), consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Contribution. (i) If the indemnification from the indemnifying party
as provided in this Section 2.07 is unavailable or is otherwise insufficient to
hold harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party shall,
to the fullest extent permitted by law, contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party shall be determined by reference to, among
other things, whether any action in question, including any untrue (or alleged
untrue) statement of a material fact or omission (or alleged omission) to state
a
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material fact, has been made, or related to information supplied by such
indemnifying party, and the parties3 relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 2.07(c), any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
(ii) The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2.07 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. If however, indemnification is available under this Section
2.07, the indemnifying parties shall indemnify each indemnified party to the
fullest extent provided in Section 2.07(a) and (b) hereof without regard to the
relative fault of said indemnifying party or indemnified
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party or any other equitable consideration provided for in this Section
2.07(d).
(e) Indemnification Payments. The indemnification and contribution
required by this Section 2.07(a) shall be made by periodic payments of the
amount thereof during the course of the investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred.
(f) Other Rights; Liabilities. The indemnity agreements contained herein
shall be in addition to (i) any cause of action or similar right of the
indemnified party against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
SECTION 2.08. Adjustments Affecting Registrable Securities.
(a) During any period commencing on either (i) the date a request for a
demand registration has been made pursuant to Section 2.01(a) hereof or (ii)
the date on which any holder of Registrable Securities makes written request in
accordance with the terms of Section 2.02(a) hereof to have its Registrable
Shares registered, and in either event, terminating on the date which is the
earlier of (i) 180 days after the date on which the registration statement
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registering such Registrable Securities becomes effective and (ii) the date on
which all Registrable Securities registered under such registration statement
are sold, transferred or disposed of, the Company will not, without the consent
of the Purchasers, effect, permit to occur or announce any future intent to
effect or permit to occur, any combination or subdivision of shares which would
materially adversely affect the ability of the holders of Registrable
Securities to include Registrable Securities in any registration of securities
contemplated by this Section 2 or the marketability of Registrable Securities
under any such registration.
SECTION 2.09. Registration Expenses. (a) Except as provided in Section
2.09(b), all expenses incident to the Company's performance of or compliance
with this Agreement, including without limitation (i) any allocation of
salaries and expenses of Company personnel or other general overhead expenses
of the Company, or other expenses for the preparation of historical and pro
forma financial statements or other data normally prepared by the Company in
the ordinary course of business or customarily prepared by the issuer in a
public offering; (ii) all registration, application, filing, listing, transfer
and registrar fees; (iii) all National Association of Securities Dealers fees
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and fees and expenses of registration or qualification of Registrable
Securities under state securities or blue sky laws; (iv) all word processing,
duplicating and printing expenses, messenger and delivery expenses; and (v) the
fees and disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel retained by the holder or holders a majority of
the Registrable Securities being registered and the fees and disbursements of
the Company's independent public accountants, including the expenses of
customary "cold comfort" letters required by or incident to such performance
and compliance; and (vi) subject to the proviso hereinbelow, any fees and
disbursements of underwriters and broker-dealers customarily paid by issuers or
sellers of securities (all such expenses being herein called "Registration
Expenses") will be borne or caused to be borne by the Company whether or not
any of the Registration Statements become effective provided, however, that in
all cases in which the Company is required to pay Registration Expenses
hereunder, Registration Expenses shall exclude, and the sellers of the
Registrable Securities being registered shall pay, all underwriting discounts
and commissions and transfer taxes in respect of the Registrable Securities
under state securities or blue sky laws.
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SECTION 2.10. Other Sales. (a) The Company hereby agrees not to effect,
any public sale or distribution of any securities of the same class as (or
otherwise similar to) the Registrable Securities, or any securities which, with
notice, lapse of time and/or payment of monies, are exchangeable or exercisable
for or convertible into any such securities, or to enter into any agreement to
make, file a registration statement for, or announce any such public sale or
distribution of, any such securities, excluding the grant and exercise of
employee stock options and the issuance of shares in connection with
acquisitions as long as all executive officers, directors and other affiliates
of the entity being acquired have agreed in writing to the restrictions set
forth in this Section 2.10(a), during the 15-day period prior to, and during
the 90-day period commencing on, the effective date of a registration statement
filed with the Commission in connection with an underwritten offering effected
pursuant to Section 2.1 of this Agreement without the prior written consent of
the managing underwriters of such offering.
(b) The Purchasers (and their assigns) agree, during the 10-day period
prior to, and during the 90-day period commencing on, the effective date of a
registration statement filed with the Commission (other than on Form S-8)
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95
in connection with an underwritten offering of securities of the same class as
the then outstanding Registrable Securities (or any securities issuable upon
conversion or exchange thereof), not to make any sales of Registrable
Securities (or such other securities) pursuant to Rule 144, provided that they
were given the opportunity, if required by (and subject to) Section 2.02
hereof, to include in such registration statement all such Registrable
Securities as they may have requested.
SECTION 3. Rule 144. The Company shall take all actions reasonably
necessary to enable holders of Registrable Securities to sell such securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission including, without limiting the generality of the
foregoing, filing on a timely basis all reports required to be filed by the
Exchange Act. Upon the request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement as to whether it has
complied with such requirements. Notwithstanding anything herein to the
contrary, no holder may exercise any right to require the registration of a
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number of Registrable Securities which he is at such time able to sell pursuant
to Rule 144 (without being limited by any volume restriction therein with
respect to Registrable Securities desired to be sold immediately by such
holder).
SECTION 4. Entire Agreement; Amendments and Waivers. This Agreement,
together with the Purchase Agreement and the agreements, schedules, exhibits
and annexes referred to therein, and the Certificate of Designation, represents
the entire agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersedes any and all prior oral and written
agreements, arrangements and understandings among the parties hereto with
respect to such subject matters. This Agreement may be amended, waived or
modified only by a written instrument signed by the Company and the holder or
holders of a majority of the shares of Registrable Securities.
SECTION 5. Other Registration Rights. The Company hereby covenants and
agrees not to hereafter enter into any agreement, arrangement or understanding
with respect to its securities which conflicts with or is inconsistent with the
rights granted to the holders of Registrable Securities under this Agreement.
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SECTION 6. Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election, be treated as the holder of
such securities for purposes of any request or other action by any holder or
holders of securities pursuant to this Agreement or any determination of any
number or percentage of shares of securities held by any holder or holders of
securities contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities.
SECTION 7. Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if personally served or
transmitted via telecopy, (ii) on the next business day after delivery to an
overnight carrier or (iii) on the third day after mailing if mailed to the
party to whom notice is to be given, by first class mail, registered, return
receipt requested, postage prepaid and (a) if addressed to the Purchasers,
addressed to such party in the manner set forth in the Purchase Agreement, or
at such other address as such
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party shall have furnished to the Company in writing, or (b) if addressed to
any other holder of Registrable Securities, at the address that such holder
shall have furnished to the Company in writing, or, until any such other holder
so furnishes to the Company an address, then to and at the address of the last
holder of such securities who has furnished an address to the Company, or (c)
if addressed to the Company, at 000 Xxxxxxxx Xxxxxx Xxxxx, Xxxxx Xxxxxxxx,
Xxxxxxxx, 00000 attention of the General Counsel or at such other address, or
to the attention of such other officer, as the Company shall have furnished to
each holder of Registrable Securities at the time outstanding.
SECTION 8. Assignment. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors by merger, consolidation or amalgamation and permitted assigns. The
Company may not assign any of its rights and obligations hereunder without the
consent of the holders of all the Registrable Securities then outstanding. Any
Purchaser may assign its rights hereunder without the consent of the Company to
any Purchaser Affiliate (as defined in the Purchase Agreement) or successor or
to any Person who purchases or otherwise duly receives title to 10% or more of
the Registrable Securities then outstanding; provided that
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such assignee agrees in writing to be bound by the terms of this Agreement.
This Agreement shall not inure to the benefit of any person who is not a party
hereto or a successor to or permitted assignee of a party hereto.
SECTION 9. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
SECTION 10. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE,
APPLICABLE TO CONTRACTS TO BE MADE, EXECUTED, DELIVERED AND PERFORMED WHOLLY
WITHIN SUCH STATE AND, IN ANY CASE, WITHOUT REGARD TO THE CONFLICTS OF LAW
PRINCIPLES OF SUCH STATE.
SECTION 11. Severability. If at any time subsequent to the date hereof,
any provision of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be of
no force and effect, but the illegality or unenforceability of such provision
shall have no effect upon and shall not impair the enforceability of any other
provision of this Agreement.
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SECTION 12. Equitable Remedies. The parties hereto agree that irreparable
harm would occur in the event that any of the agreements and provisions of this
Agreement were not performed fully by the parties hereto in accordance with
their specific terms or conditions or were otherwise breached, and that money
damages are an inadequate remedy for breach of this Agreement because of the
difficulty of ascertaining and quantifying the amount of damage that will be
suffered by the parties hereto in the event that this Agreement is not
performed in accordance with its terms or conditions or is otherwise breached.
It is accordingly hereby agreed that the parties hereto shall be entitled to an
injunction or injunctions to restrain, enjoin and prevent breaches of this
Agreement by the other parties and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, such remedy being in addition to and not in lieu of, any other
rights and remedies to which the other parties are entitled to at law or in
equity.
SECTION 13. No Waiver. The failure of any party at any time or times to
require performance of any provision hereof (within the time limitations
contained herein) shall not affect the right at a later time to enforce the
same. No waiver by any party of any condition, and no breach of
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101
any provision, term, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
SECTION 14. Counterparts. This Agreement may be executed simultaneously
in any number of counterparts, each of which shall be deemed an original, but
all such counterparts shall together constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized as of the
date first above written.
THE COMPANY
SALTON/MAXIM HOUSEWARES, INC.
By:
------------------------------
Name:
Title:
THE PURCHASERS:
CENTRE CAPITAL INVESTORS II, L.P.
CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P.
CENTRE CAPITAL OFFSHORE INVESTORS II, L.P.
By: Centre Partners II, L.P.
General Partner
By: Centre Partners Management LLC
Attorney-in-fact
By:
------------------------------------
Xxxxx X. Xxxxxxx
Managing Director
50
000
XXXXX XXXXX XX XXXXXXXXXXXXXX XX XXXXXXX
By: Centre Parallel Management Partners, L.P.
Manager
By: Centre Partners Management LLC
Attorney-in-fact
By:
-----------------------------------------
Xxxxx X. Xxxxxxx
Managing Director
CENTRE PARALLEL MANAGEMENT PARTNERS, L.P.
CENTRE PARTNERS COINVESTMENT, L.P.
By: Centre Partners II LLC
General Partner
By:
-----------------------------------------
Xxxxx X. Xxxxxxx
Managing Director
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Exhibit B
Salton/Maxim Housewares, Inc.
CERTIFICATE OF DESIGNATION OF SERIES A VOTING
CONVERTIBLE PREFERRED STOCK SETTING FORTH THE
POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF SUCH SERIES
OF PREFERRED STOCK
Salton/Maxim Housewares, Inc. (hereinafter referred to as the
"Corporation"), a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware, as amended
(the "Delaware Code"), does HEREBY CERTIFY:
That, pursuant to authority conferred by Article IV of the Second
Amended and Restated Certificate of Incorporation of the Corporation, the Board
of Directors of the Corporation has adopted a resolution providing for the
issuance of a series of Preferred Stock consisting of 40,000 shares designated
"Series A Voting Convertible Preferred Stock", which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors (the "Board") of Salton/Maxim Housewares, Inc., a Delaware
corporation (the "Corporation"), by Article IV of the Second Amended and
Restated Certificate of Incorporation of the Corporation (the "Second
Restated Certificate"), the Board does hereby create, provide for and
approve a series of Preferred Stock, par value $.01 per share (herein
called "Preferred Stock"), of the Corporation to be designated "Series A
Voting Convertible Preferred Stock" (such series being herein called the
"Convertible Preferred Stock"), consisting of 40,000 shares of the
presently authorized but unissued shares of Preferred Stock, and does
hereby fix and herein state and express the designations, powers,
preferences and relative, participating, optional and other special
rights, and the qualifications, limitations and restrictions of the
Convertible Preferred Stock as follows (all terms used herein which are
defined in the
105
Second Restated Certificate shall have the meaning
provided in said Second Restated Certificate):
Section 1. Dividends.
(a) Upon the occurrence and during the continuation of a Restriction
Event described in Section 5(a)(i) or (ii), the holders of shares of Convertible
Preferred Stock shall be entitled to receive, out of funds legally available
therefor, cumulative dividends on the shares of Convertible Preferred Stock at
the Restriction Event Dividend Rate (as defined below) computed as a percentage
of the liquidation preference per share per year, payable quarterly on the 15th
day of each of January, April, July and October, respectively (each, a
"Quarterly Dividend Payment Date"), commencing on the first such Quarterly
Dividend Payment Date after the occurrence of such Restriction Event (except
that if any such date is a Saturday, Sunday or legal holiday, then such dividend
shall be payable on the next day that is not a Saturday, Sunday or legal
holiday). Such dividends shall be payable in cash. The amount of dividends
payable per share of Convertible Preferred Stock for each quarterly dividend
period shall be computed by dividing the annual amount by four. The amount of
dividends payable for the initial dividend period and any period shorter than a
full quarterly dividend period shall be computed on a pro rata basis, based on
the number of days
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elapsed. For purposes hereof, "Restriction Event Dividend Rate" means a rate
per annum equal to 12 1/2%.
(b) On each Quarterly Dividend Payment Date all dividends which shall
have accrued on each share of Convertible Preferred Stock outstanding on such
date shall accumulate and shall be deemed to have become due. Additional
dividends shall be paid to reflect amounts equivalent to interest on accrued but
unpaid dividends at the Restriction Event Dividend Rate from the Quarterly
Dividend Payment Date with respect to which such dividend was not paid until the
date such dividend is paid.
(c) In addition to the dividend provided hereinabove, in the event
the Board of Directors of the Corporation shall determine to pay any cash or
non-cash dividends or distributions on its Common Stock (other than dividends
payable in shares of its Common Stock, as to which the provisions of Section
3(a) below shall apply), the holders of shares of Convertible Preferred Stock
shall be entitled to receive cash and non-cash dividends or distributions in an
amount and of kind equal to the dividends or distributions that would have been
payable to each such holder if the Convertible Preferred Stock held by such
holder had been converted into Common Stock immediately prior to the record date
for the determination of the holders of Common Stock entitled to each such
dividend or
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distribution; provided, however, that if the Corporation shall dividend or
otherwise distribute rights to all holders of Common Stock entitling the holders
thereof to subscribe for or purchase shares of capital stock of the Corporation,
which rights (i) until the occurrence of a specified event or events are deemed
to be transferred with such shares of Common Stock and are not exercisable and
(ii) are issued in respect of future issuances of Common Stock, the holders of
shares of the Convertible Preferred Stock shall not be entitled to receive any
such rights until such rights separate from the Common Stock or become
exercisable, whichever is sooner.
(d) No dividends or other distributions, other than dividends payable
solely in shares of Common Stock or other capital stock of the Corporation
ranking junior as to dividends and as to any distribution of assets other than
by way of dividends to the Convertible Preferred Stock, shall be paid, or
declared and set apart for payment by the Corporation, and no purchase,
redemption or other acquisition shall be made by the Corporation or any of its
subsidiaries of, any shares of Common Stock or other capital stock of the
Corporation ranking junior as to dividends or as to any distribution of assets
other than by way of dividends to the Convertible Preferred Stock (the "Junior
Stock") unless and until all accrued and unpaid dividends
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and distributions on the Convertible Preferred Stock, if any, including the full
dividend for the then current dividend period, shall have been paid or declared
and set apart for payment.
Section 2. Voting Rights.
In addition to any voting rights provided by law, the holders of
shares of Convertible Preferred Stock shall have the following voting rights:
(a) So long as the Convertible Preferred Stock is outstanding, each
share of Convertible Preferred Stock shall entitle the holder thereof to
vote on all matters voted on by holders of the capital stock of the
Corporation into which such share of Convertible Preferred Stock is
convertible, voting together as a single class with the other shares
entitled to vote, at all meetings of the stockholders of the Corporation.
With respect to any such vote, each share of Convertible Preferred Stock
shall entitle the holder thereof to cast the number of votes equal to the
number of votes which could be cast in such vote by a holder of the
number of shares of capital stock of the Corporation into which such
share of Convertible Preferred Stock is convertible on the record date
for such vote.
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109
(b) So long as any shares of Convertible Preferred Stock are
outstanding, subject to the provisions of Section 275(c) of the Delaware
Code, the Corporation shall not, without consent of the holders of at
least a majority of the number of shares of Convertible Preferred Stock
at the time outstanding, given in person or by proxy, either in writing
or by vote at a special meeting called for the purpose, enter into any
plan of complete liquidation or dissolution or otherwise effect the
voluntary liquidation, dissolution or winding up of the Corporation
unless, as a result of such liquidation, dissolution or winding-up, the
liquidation preference on the Convertible Preferred Stock is satisfied in
full pursuant to Section 6 herein.
(c) Except as otherwise required by applicable law, the consent of a
majority of the number of shares of Convertible Preferred Stock at the
time outstanding, given in person or by proxy, either in writing or by
vote, at a special or annual meeting, shall be necessary to (i) authorize
or issue, or obligate the Corporation to issue, any other capital stock
or security or right convertible or exchangeable for capital stock of the
Corporation that is senior to or on a parity with the Convertible
Preferred Stock as to
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rights on liquidation or which is not Junior Stock for purposes of Section
1(d) herein; (ii) increase the authorized number of shares of the
Convertible Preferred Stock; (iii) enter any agreement, contract or
understanding or otherwise incur any obligation which by its terms would
violate or be in conflict with the holders of Convertible Preferred Stock
hereunder or the Corporation's performance of the terms of its Second
Amended and Restated Articles of Incorporation; (iv) amend the Second
Amended and Restated Articles of Incorporation or By-laws of the
Corporation, if such amendment would adversely affect the rights of the
holders of the Convertible Preferred Stock in any material respect; or (v)
amend or waive any provision of this Certificate of Designation.
Section 3. Conversion.
At the option of the holder thereof and upon surrender thereof for
conversion to the Corporation at the office of the Transfer Agent of the
Corporation's Common Stock (or to the Corporation's principal executive
offices), each share of Convertible Preferred Stock shall be convertible at any
time (or if such share is called or surrendered for redemption, then in respect
of such share to and including, but not after, the close of business on the
redemption date, unless the Corporation shall default in the
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111
payment of the redemption price, in which case such right shall not terminate at
such time and date) into that number of fully paid and nonassessable shares of
Common Stock (calculated as to each conversion to the nearest 1/100 of a share)
obtained by dividing $1,000.00 by the Conversion Price (as defined below) in
effect at such time.
Each holder that desires to convert Convertible Preferred Stock into
Common Stock pursuant to this Section 3 shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Transfer Agent (or
to the Corporation's principal executive offices) as aforesaid, and shall give
notice to the Corporation at such office that such holder elects to convert the
same and shall state therein the number of shares of Convertible Preferred
Stock being converted. Thereupon the Corporation shall promptly issue and
deliver at such office to such holder certificates for the number of shares of
Common Stock to which such holder is entitled upon conversion. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the certificate representing the shares of
Convertible Preferred Stock to be converted, and the person entitled to receive
the Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such Common Stock on such date.
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112
The "Conversion Price" shall mean and be $17.00, subject to adjustment
from time to time by the Corporation as follows:
(a) In case the Corporation shall, at any time or from time to time
while any of the shares of Convertible Preferred Stock are outstanding, (i) pay
a dividend or make a distribution on its Common Stock in shares of its Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares or (iv) issue by reclassification of its shares of
Common Stock any shares of its capital stock (each such transaction being called
a "Stock Transaction"), then and in each such case, the Conversion Price in
effect immediately prior thereto shall be adjusted so that the holder of a share
of Convertible Preferred Stock surrendered for conversion after the record date
fixing stockholders to be affected by such Stock Transaction shall be entitled
to receive upon conversion the number of such shares of Common Stock or other
capital stock of the Corporation that he would have owned or been entitled to
receive after the happening of such event had such share of Convertible
Preferred Stock been converted immediately prior to such record date (or, if no
record date, the effective date). Such adjustment shall be made whenever any of
such events
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shall happen, but shall also be effective retroactively as to shares of
Convertible Preferred Stock converted between such record date and the date of
the happening of any such event.
(b) (i) In case the Corporation shall, at any time or from time to
time while any of the shares of Convertible Preferred Stock are outstanding,
issue, sell or exchange shares of Common Stock (other than (w) pursuant to any
right or warrant to purchase or acquire shares of Common Stock (including as
such a right or warrant any security convertible into or exchangeable for shares
of Common Stock), (x) pursuant to any employee or director incentive or benefit
plan or arrangement, including any employment, severance or consulting agreement
but excluding any employee stock ownership plan within the meaning of Section
4975(e)(7) of the Internal Revenue Code of 1986, as amended (an "ESOP"), whether
presently existing or, subject to approval by a majority of the disinterested
members of the Board of Directors of the Corporation, to be established in the
future, of the Corporation or any subsidiary of the Corporation heretofore or
hereafter adopted, (y) pursuant to a Minor Acquisition (as defined below) and
(z) in a Permitted Secondary Offering (as defined below)) for a consideration
having a Fair Market Value (as defined below) on the date of such issuance, sale
or exchange that is less
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than the Market Price (as defined below) of such shares on the date of such
issuance, sale or exchange, then and in each case, the Conversion Price shall be
adjusted by multiplying such Conversion Price by a fraction (which shall not be
greater than 1), the numerator of which shall be the sum of (x) the Current
Market Price per share of Common Stock as of the trading day immediately
preceding the date of the public announcement of the actual terms (including the
pricing terms) of such issuance, sale or exchange (or if there is no such public
announcement prior to the effective date of such issuance, sale or exchange,
such effective date) multiplied by the number of shares of Common Stock
outstanding immediately prior to such issuance, sale or exchange plus (y) the
aggregate Fair Market Value of the consideration received by the Corporation in
respect of such issuance, sale or exchange of shares of Common Stock, and the
denominator of which shall be the product of (x) the Current Market Price per
share of Common Stock referred to in the immediately preceding clause (x)
multiplied by (y) the sum of the number of shares of Common Stock outstanding on
such day plus the number of shares of Common Stock so issued, sold or exchanged
by the Corporation. For purposes of the preceding sentence, the aggregate
consideration receivable by the Corporation in connection with the issuance,
sale or exchange of shares of Common Stock shall
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be deemed to be equal to the sum of the aggregate offering price (before
deduction of reasonable underwriting discounts or commissions and expenses) of
all such shares.
(ii) In the event the Corporation shall, at any time or from time to
time while any shares of Convertible Preferred Stock are outstanding, issue,
sell or exchange any right or warrant to purchase or acquire shares of Common
Stock (including as such a right or warrant any security convertible into or
exchangeable for shares of Common Stock) (other than (x) any issuance, sale or
exchange to holders of shares of Common Stock as a dividend or distribution
(including by way of a reclassification of shares or a recapitalization of the
Corporation), and (y) pursuant to any employee or director incentive or benefit
plan or arrangement (excluding any ESOP), of the Corporation or any subsidiary
of the Corporation heretofore or, subject to approval by a majority of the
disinterested members of the Board of Directors of the Corporation, hereafter
adopted), for a consideration having a Fair Market Value on the date of such
issuance, sale or exchange less than the Fair Market Value of such rights or
warrants on the date of such issuance, sale or exchange, then and in each case,
the Conversion Price shall be adjusted by multiplying such Conversion Price by a
fraction (which shall not be greater than 1), the numerator of which shall be
the sum of (a) the
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Current Market Price per share of Common Stock as of the trading date
immediately preceding the date of the public announcement of the actual terms
(including the price terms) of such issuance, sale or exchange (or if there is
no such public announcement prior to the effective date of such issuance, sale
or exchange, such effective date) multiplied by the number of shares of Common
Stock outstanding immediately prior to such issuance, sale or exchange plus (b)
the aggregate Fair Market Value of the consideration received by the Corporation
in respect of such issuance, sale or exchange of such right or warrant, and the
denominator of which shall be the sum of (i) the Current Market Price per share
of Common Stock referred to in the preceding clause (a) multiplied by the number
of shares of Common Stock outstanding immediately prior to such issuance, sale
or exchange plus (ii) the aggregate Fair Market Value of such rights or warrants
at the time of such issuance. For the purposes of the preceding sentence, the
aggregate consideration receivable by the Corporation in connection with the
issuance, sale or exchange of any such right or warrant shall be deemed to be
equal to the sum of the aggregate offering price (before deduction of reasonable
underwriting discounts or commissions and expenses) of all such rights or
warrants.
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(c) In the event the Corporation or any of its subsidiaries shall, at
any time or from time to time while any shares of Convertible Preferred Stock
are outstanding, repurchase or redeem any of the Corporation's outstanding
capital stock at a premium over the average Market Price per share on the
trading day immediately preceding such repurchase or redemption (a
"Repurchase"), then and in the case of each Repurchase the Conversion Price in
effect immediately prior thereto shall be adjusted by multiplying such
Conversion Price by a fraction, the numerator of which is (i) the product of (x)
the number of shares of Common Stock outstanding immediately before such
repurchase or redemption multiplied by (y) the average Market Price per share of
Common Stock on the five (5) trading days immediately following the consummation
of such Repurchase minus (ii) the aggregate purchase price of the Repurchase and
the denominator of which shall be the product of (x) the number of shares of
Common Stock outstanding immediately before such Repurchase minus the number of
shares of Common Stock repurchased or redeemed by the Corporation multiplied by
(y) the average Market Price per share of Common Stock on such five trading days
referred to in the preceding clause (i)(y); provided, however, that the
conversion price shall not be so adjusted with respect to any Repurchase of the
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Convertible Preferred Stock pursuant to Section 6 or 7 hereof.
(d) For the purposes of any computation under paragraphs (a) through
(c) of this Section 3, the following definitions shall apply:
(i) "Closing Price" of publicly traded shares of Common Stock or any
other class of capital stock or other security of the Corporation or any
other issuer for a day shall mean the average of the reported closing bid
and asked prices, in either case as reported by the NASDAQ National
Market System or, if such security is not listed or admitted to trading
on the NASDAQ National Market System, the last reported sales price,
regular way, on the principal national securities exchange on which such
security is listed or admitted to trading or, if not listed or admitted
to trading on any national securities exchange, the average of the
closing bid and asked prices on each such day in the over-the-counter
market as reported by NASDAQ or, if bid and asked prices for such
security on each such day shall not have been reported through NASDAQ,
the average of the bid and asked prices of such day as furnished by any
New York Stock Exchange member firm regularly making a market in such
security selected for such purpose by the Board of Directors of
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the Corporation or a committee thereof. If the Common Stock or other
class of capital stock or security in question is not publicly held, or so
listed, or publicly traded, "Closing Price" shall mean the Fair Market
Value thereof.
(ii) "Current Market Price" per share of Common Stock as of any date
shall be deemed to be the average of the daily Closing Price per share
for the ten (10) consecutive trading days ending on and including the day
in question.
(iii) "Fair Market Value" of any consideration other than cash or of
any securities shall mean the amount which a willing buyer would pay to a
willing seller in an arm's length transaction as determined by an
independent investment banking or appraisal firm experienced in the
valuation of such securities or property selected in good faith by the
Board of Directors of the Corporation or a committee thereof.
(iv) "Market Price" per share at any date shall be the Closing Price
on the specified date; provided, that, in the case of the issuance, sale
or exchange of shares of Common Stock pursuant to paragraph (b) of this
Section 3 that are not registered under the Securities Act of 1933 Market
Price shall be reduced by an amount, if any (as determined by an
independent
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120
investment banking or appraisal firm experienced in the valuation of such
securities or property selected in good faith by the Board of Directors of
the Corporation or a committee thereof), to compensate for the fact that
such shares are not so registered, and in making such determination any
registration rights granted by the Company shall be taken into account.
(v) "Minor Acquisition" means any acquisition of the stock or
assets of an unaffiliated third party by the Corporation by merger,
purchase, joint venture or other reorganization or business combination
in consideration for the issuance of Common Stock having a Fair Market
Value not greater than $5,000,000.
(vi) "Permitted Secondary Offering" means any firmly underwritten
public offering of the Common Stock at a price to the public equal to or
greater than the Conversion Price then in effect.
(e) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least $.01 in such
price; provided, however, that any adjustments which by reason of this paragraph
(e) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this Section 3 shall be
made to the nearest one-hundredth of a share.
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(f) No fractional shares or scrip representing fractional shares of
Common Stock shall be issued upon the conversion of any share of Convertible
Preferred Stock. If the conversion thereof results in a fraction, an amount
equal to such fraction multiplied by the Current Market Price per share of
Common Stock (as defined above) as of the conversion date shall be paid to such
holder in cash by the Corporation.
(g) In the event of any capital reorganization or reclassification of
outstanding shares of Common Stock (other than a reclassification covered by
paragraph (a) of this Section 3), or in case of any merger, consolidation or
other corporate combination of the Corporation with or into another corporation,
or in case of any sale or conveyance to another corporation of the property of
the Corporation as an entirety or substantially as an entirety (each of the
foregoing being referred to as a "Transaction"), each share of Convertible
Preferred Stock shall continue to remain outstanding if the Corporation is the
Surviving Person (as defined below) of such Transaction, and shall be subject to
all the provisions of the Certificate of Designation of Series A Convertible
Preferred Stock which embodies this resolution, as in effect prior to such
Transaction (including, without limitation, the provisions of Section 4 hereof
if such Transaction also constitutes a Change of
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Control (as hereinafter defined)), or if the Corporation is not the Surviving
Person in such Transaction, then each holder of shares of Convertible Preferred
Stock may elect (which election shall be made within twenty days (20) of the
Transaction) to either (1) have Section 4 hereof be applicable to such holder's
shares of Convertible Preferred Stock or (2) if the consideration to be received
by stockholders of the Corporation in the Transaction does not consist entirely
of cash, have each share of Convertible Preferred Stock be exchanged for a new
series of senior preferred stock of the Surviving Person, or in the case of a
Surviving Person other than a corporation, comparable securities of such
Surviving Person, in either case having economic terms as nearly equivalent as
possible to, and with the same voting and other rights as, the Convertible
Preferred Stock (including the right to convert into Survivor Common Stock);
provided, however, that, at the option of the holder of any shares of
Convertible Preferred Stock (which election shall be made within such twenty
days), each share of Convertible Preferred Stock then outstanding or deemed to
be outstanding, as the case may be, shall entitle the holder thereof to receive,
upon presentation of the certificate therefor to the Surviving Person subsequent
to the consummation of such Transaction the kind and amount of shares of stock
and other securities
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123
and property receivable (including cash) upon the consummation of such
Transaction by a holder of that number of shares of Common Stock into which one
share of Convertible Preferred Stock was convertible immediately prior to such
Transaction; provided, further, that if in connection with the Transaction a
tender or exchange offer shall have been made and there shall have been acquired
pursuant thereto more than 50% of the outstanding shares of Common Stock, and if
the holder of shares of Convertible Preferred Stock so designates in the notice
given to the Corporation which specifies such holder's selection of this
alternative, such holder of such shares shall be entitled to receive upon
conversion thereof, the amount of securities or other property to which such
holder would actually have been entitled as a holder of shares of Common Stock
if such holder had converted such shares of Convertible Preferred Stock prior to
the expiration of such tender or exchange offer and accepted such offer and had
sold therein the percentage of all the shares of Common Stock issuable upon
conversion of its shares of Convertible Preferred Stock equal to the percentage
of shares of the then outstanding Common Stock so purchased in the tender or
exchange offer, with the remaining portion of its shares of Convertible
Preferred Stock thereafter being convertible into the amount of securities or
other property to which such holder would
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actually have been entitled upon the consummation of the Transaction as a holder
of shares of Common Stock if such holder had converted such shares of
Convertible Preferred Stock immediately prior to such Transaction (subject to
adjustments from and after the consummation of the Transaction as nearly
equivalent as possible to the adjustments provided for in this Section 3). In
any such case, if necessary, appropriate adjustment (as determined by the Board
of Directors in good faith) shall be made in the application of the provisions
set forth in this Section 3 with respect to the rights and interests thereafter
of the holders of shares of Convertible Preferred Stock to the end that the
provisions set forth herein for the protection of the conversion rights of the
Convertible Preferred Stock shall thereafter be applicable, as nearly as
reasonably may be, to any such other shares of stock and other securities and
property deliverable upon conversion of the shares of Convertible Preferred
Stock remaining outstanding (with such adjustments in the conversion price and
number of shares issuable upon conversion and such other adjustments in the
provisions hereof as the Board of Directors in good faith shall determine to be
appropriate). In case securities or property other than Common Stock shall be
issuable or deliverable upon conversion as aforesaid, then all references in
this Section 3 shall be deemed to apply, so
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far as appropriate and as nearly as may be, to such other securities or
property.
Notwithstanding anything contained herein to the contrary, the
Corporation will not effect any Transaction unless, prior to the consummation
thereof, (i) proper provision is made to ensure that the holders of shares of
Convertible Preferred Stock will be entitled to receive the benefits afforded by
this paragraph (i) of Section 3, and (ii) if, following the Transaction, one or
more entities other than the Corporation shall be required to deliver securities
or other property upon the conversion of the Convertible Preferred Stock, such
entity or entities shall assume, by written instrument delivered to each holder
of shares of Convertible Preferred Stock, if such shares are held by 10 or fewer
holders or group of affiliated holders, or to each Transfer Agent for the shares
of Convertible Preferred Stock, if such shares are held by a greater number of
holders, the obligation to deliver to such holder the amounts in cash to which,
in accordance with the foregoing provisions, such holder is entitled.
For purposes of this paragraph (i) of Section 3, the following terms
shall have the meanings ascribed to them below:
(i) "Surviving Person" shall mean the continuing or surviving Person
of a merger, consolidation or other
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corporate combination, the Person receiving a transfer of all or a substantial
part of the properties and assets of the Corporation, or the Person
consolidating with or merging into the Corporation in a merger, consolidation or
other corporate combination in which the Corporation is the continuing or
surviving Person, but in connection with which the Convertible Preferred Stock
or Common Stock of the Corporation is exchanged, converted or reclassified into
the securities of any other Person or cash or any other property.
(ii) "Survivor Common Stock" with respect to any Person shall mean
shares of such Person of any class or series which has no preference or priority
in the payment of dividends or in the distribution of assets upon any voluntary
or involuntary liquidation, dissolution or winding up of such Person and which
is not subject to redemption by such Person provided, however, that if (x) the
shares of such class or series are not (or upon consummation of such Transaction
will not be) listed on the New York Stock Exchange or the American Stock
Exchange or quoted by the NASDAQ National Market System or any successor thereto
or comparable system, and (y) the Surviving Person is a direct or indirect
subsidiary of a Qualified Person, the Survivor Common Stock shall be the common
stock (or equivalent equity
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securities referred to in the definition of "Qualified Person") of such
Qualified Person.
(iii) "Qualified Person" shall mean any Person that, immediately
after giving effect to the applicable Transaction, is a solvent corporation or
other entity organized under the laws of any state of the United States of
America having its common stock or, in the case of an entity other than a
corporation, equivalent equity securities, listed on the New York Stock Exchange
or the American Stock Exchange or quoted by the NASDAQ National Market System or
any successor thereto or comparable system.
(iv) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
(v) "Current Market Price" shall have the meaning set forth in
paragraph (d) of this Section 3.
(h) In case at any time or from time to time, the Corporation shall
pay any dividend or make any other distribution to the holders of its Common
Stock of, or shall offer for subscription pro rata to the holders of its Common
Stock, any additional shares of stock of any class or any other right, or there
shall be any capital reorganization or reclassification of the Common Stock of
the Corporation or merger, consolidation or other corporate combination of the
Corporation with or into another corporation, or any sale or
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conveyance to another corporation of the property of the Corporation as an
entirety or substantially as an entirety, or there shall be a voluntary or
involuntary dissolution, liquidation or winding up the Corporation, then, in any
one or more of said cases the Corporation shall give written notice at the same
time as, or as soon as practicable after, such event is first communicated
(including by announcement of a record date in accordance with the rules of any
stock exchange on which the Common Stock is listed or admitted to trading) to
holders of Common Stock, but in any event at least 10 days prior to the record
date for such event specified below (the time of mailing of such notice shall be
deemed to be the time of delivery thereof) to the registered holders of the
Convertible Preferred Stock at the addresses of each as shown on the books of
the Corporation maintained by the Transfer Agent thereof of the date on which
(x) the books of the corporation shall close or a record shall be taken for such
stock dividend, distribution or subscription rights or (y) such reorganization,
reclassification, merger, consolidation, corporate combination, sale or
conveyance, dissolution, liquidation or winding up shall take place, as the case
may be. Such notice shall also specify the date as of which the holders of the
Common Stock of record shall participate in said dividend, distribution,
subscription rights or shall be entitled to exchange their Common Stock
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for securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, corporate combination, sale or
conveyance or participate in such dissolution, liquidation or winding up, as the
case may be, as well as the conversion price and the number of shares into which
each share of Convertible Preferred Stock may be converted at such time. Failure
to give such notice shall not invalidate any action so taken.
(i) The Corporation covenants that it will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock or its issued shares of Common
Stock held in its treasury, or both, for the purpose of effecting conversions of
shares of Convertible Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all outstanding shares of Convertible
Preferred Stock not theretofore converted. For purposes of this Section 3(i),
the number of shares of Common Stock which shall be deliverable upon the
conversion of all outstanding shares of Convertible Preferred Stock shall be
computed as if at the time of computation all outstanding shares of Convertible
Preferred Stock were held by a single holder.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par
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value (if any) of the shares of Common Stock deliverable upon conversion of the
shares of Convertible Preferred Stock, the Corporation will take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue fully paid and non-assessable shares
of Common Stock at such adjusted Conversion Price.
(j) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock upon conversions of shares of Convertible Preferred Stock pursuant
hereto.
(k) Upon any adjustment of the Conversion Price, then, and in each
such case, the Corporation shall promptly deliver to the transfer agent of the
Convertible Preferred Stock and the Common Stock, a certificate signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the Conversion Price then in
effect following such adjustment. The Corporation shall also promptly after the
making of such adjustment give written notice to the registered holders of the
Convertible Preferred Stock at the address of each
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holder as shown on the books of the Corporation maintained by the transfer agent
thereof, which notice shall state the Conversion Price then in effect, as
adjusted, and shall set forth in reasonable detail the method of calculation of
the same and a brief statement of the facts requiring such adjustment. Where
appropriate, such notice to holders of the Convertible Preferred Stock may be
given in advance and included as part of the notice required under the
provisions of Section 3(i).
Section 4. Change of Control.
(a) (i) In the event that any Change of Control (as hereinafter
defined) shall occur at any time and from time to time while any shares of
Convertible Preferred Stock are outstanding, each holder of Convertible
Preferred Stock shall have the right to give notice that it is exercising a
Change of Control election (a "Change of Control Election"), with respect to all
or any number of such holder's shares of Convertible Preferred Stock, during the
period (the "Exercise Period") beginning on the 30th day and ending on the 90th
day after the date of such Change of Control. Upon any such election, the
Corporation shall redeem each such holder's shares for which such an election is
made, to the extent the Corporation shall have capital and surplus lawfully
available therefor, at a redemption price per share
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equal to the liquidation preference per share plus an amount equivalent to
interest accrued thereon at a rate of 7% per annum compounded annually on each
anniversary date of the original issuance of the Convertible Preferred Stock for
the period from the date of such original issuance through the earlier of the
date of such redemption or the fifth (5th) anniversary of the date of such
original issuance.
(b) As used herein, "Change of Control" shall mean:
(i) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934)
(the "Acquiring Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under such Act) of 50% or more of the combined voting power of
the then outstanding voting securities of the Corporation entitled to vote
generally in the election of directors, but excluding, for this purpose, any
such action by (x) the Corporation or any of its subsidiaries, (y) any Purchaser
(as defined in Section 5) or (z) any corporation or other entity with respect to
which, following such acquisition, more than 50% of the combined voting power of
the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors (or if another entity, more than 50% of
the equivalent controlling interests) is then beneficially
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owned, directly or indirectly, by individuals and entities who were the
beneficial owners of voting securities of the Corporation immediately prior to
such acquisition in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the combined voting power of the then
outstanding voting securities of the Corporation entitled to vote generally in
the election of directors; or
(ii) consummation of a reorganization, merger or consolidation
involving the Corporation, in each case, with respect to which the individuals
and entities who were the respective beneficial owners of at least 80% of the
voting securities of the Corporation immediately prior to such reorganization,
merger or consolidation do not or will not, following such reorganization,
merger or consolidation, beneficially own, directly or indirectly, more than 50%
of the combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors of the corporation resulting from
such reorganization, merger or consolidation; or
(iii) the sale or other disposition of all or substantially all the
assets of the Corporation in one transaction or series of related transactions;
or
(iv) individuals who would constitute a majority of the members of
the Board of Directors elected at any
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meeting of stockholders or by written consent (without regard to any members of
the Board of Directors elected pursuant to the terms of any series of Preferred
Stock) shall be elected to the Board of Directors and the election or the
nomination for election by the Corporation's Stockholders of such directors was
not approved by a vote of at least a majority of the directors in office
immediately prior to such election or nomination.
(c) On or before the fourteenth (14th) day after a Change of Control,
the Corporation shall mail to all holders of record of the Convertible Preferred
Stock at their respective addresses as the same shall appear on the books of the
Corporation as of such date, a notice disclosing (i) the Change of Control, (ii)
the redemption price per share of the Convertible Preferred Stock applicable
hereunder and (iii) the procedure which the holder must follow to exercise the
redemption right provided above. To exercise such redemption right, if
applicable, a holder of the Convertible Preferred Stock must deliver during the
Exercise Period written notice to the Corporation (or an agent designated by the
Corporation for such purpose) of the holder's exercise of such redemption right,
and, to be valid, any such notice of exercise must be accompanied by each
certificate evidencing shares of the Convertible Preferred Stock with respect to
which the redemption right
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is being exercised, duly endorsed for transfer. On or prior to the fifth (5th)
business day after receipt of such written notice, the Corporation shall accept
for payment all shares of Convertible Preferred Stock properly surrendered to
the Corporation (or an agent designated by the Corporation for such purpose)
during the Exercise Period for redemption in connection with the valid exercise
of such redemption right and shall cause payment to be made in cash for such
shares of Convertible Preferred Stock. If at the time of any Change of Control,
the Corporation does not have sufficient capital and surplus legally available
to purchase all of the outstanding shares of Convertible Preferred Stock, the
Corporation shall take all measures permitted under the Delaware Code to
increase the amount of its capital and surplus legally available, and the
Corporation shall offer in its written notice of such Change of Control to
purchase as many shares of Convertible Preferred Stock as it has capital and
surplus legally available therefor, ratably from the holders thereof in
proportion to the total number of shares tendered, and shall thereafter,
whenever it shall have capital and surplus legally available therefor, offer to
purchase as many shares of Convertible Preferred Stock as it has capital and
surplus available therefor until it has offered to purchase all of the
outstanding shares of Convertible Preferred Stock.
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(d) In the event of any Change of Control, proper provision shall be
made to ensure that the holders of shares of Convertible Preferred Stock will be
entitled to receive the benefits afforded by this Section 4; provided, however,
that in the event of any Change of Control effected with the Corporation3s
consent, such provision to ensure the benefits of this Section 4 shall be made
prior to such Change of Control. If, following the Change of Control, one or
more entities other than the Corporation shall be required to deliver securities
or other property upon the conversion of the Convertible Preferred Stock, such
entity or entities shall assume, by written instrument delivered to each holder
of shares of Convertible Preferred Stock, if such shares are held by ten (10) or
fewer holders or group of affiliated holders, or to each Transfer Agent for the
shares of Convertible Preferred Stock, if such shares are held by a greater
number of holders; the obligation to deliver to such holder the amounts in cash
to which, in accordance with the foregoing provisions, such holder is entitled.
Section 5. Certain Restrictions.
(a) In case of the happening of any of the following events
("Restriction Events"): (i) the Corporation breaches in any material respect
(x) any of its obligations under Section 6(d) of the Stock Purchase
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Agreement (the "Stock Purchase Agreement") dated as of July 15, 1998, among the
Corporation and the purchasers named therein (the "Purchasers"), and such breach
shall have continued for ten (10) days after notice thereof by any holder to the
Corporation or (y) any of its other material obligations under the Stock
Purchase Agreement or under the Registration Rights Agreement or this
Certificate of Designation, and such breach shall have continued for twenty days
(20) after notice thereof by any holder; (ii) the Corporation shall not have
redeemed any shares of the Convertible Preferred Stock when required pursuant to
this Certificate; (iii) a default or breach shall occur and be continuing under
any other agreement, document or instrument to which the Corporation is a party
relating to indebtedness for borrowed money incurred by it which is not cured
within any applicable grace period, and such default or breach (x) involves the
failure to make any payment of principal, premium or interest when due in
respect of such indebtedness or (y) results in the acceleration of such
indebtedness prior to its express meaning and, in each case the principal amount
of such indebtedness, together with the principal amount of any other
indebtedness as to which there has been such a payment default or the maturity
of which has been accelerated, aggregates $1,000,000 or more; and (iv) a case or
proceeding shall have been commenced against the
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Corporation seeking a decree or order in respect of the Corporation (x) under
Title 11 of the United States Code, as now constituted or hereafter amended or
any other applicable federal, state or foreign bankruptcy or other similar law,
(y) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) for the Corporation or of any substantial
part of the Corporation's assets, or (z) ordering the winding-up or liquidation
of the affairs of the Corporation, and such case or proceeding shall remain
undismissed or unstayed for sixty (60) days or more or such court shall enter a
decree or order granting the relief sought in such case or proceeding, then,
until such breach is cured or until such redemption occurs: (x) in the case of
any Restriction Event described in Section 5(a)(i) or (ii), dividends shall
accrue as set forth in Section 1; and (y) in the case of any Restriction Event,
the Corporation shall not:
(1) declare or pay dividends on, or make any other distributions of
cash, properties or securities of the Corporation on or with respect to
any shares of capital stock ranking junior (as to any distribution of
assets) to the Convertible Preferred Stock;
(2) redeem or purchase or otherwise acquire for consideration (or
make any sinking fund, purchase fund or other similar payments in respect
of) any shares of
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capital stock ranking (as to any distribution of assets) junior to, or on
parity with, the Convertible Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire shares
of capital stock ranking on parity with the Convertible Preferred Stock in
exchange for shares of any capital stock ranking junior to the Convertible
Preferred Stock, or permit any subsidiary of the Corporation to purchase
or otherwise acquire for consideration any shares of capital stock of the
Corporation unless the Corporation could, pursuant to this Section 5,
purchase such shares at such time and in such manner;
(3) make, or permit to remain outstanding after such time when
pursuant to its terms such loan or advance would be due, any loan or
advance (including any guarantee of a loan or advance by a third party)
by the Corporation or a subsidiary to any person who beneficially owns
any capital stock ranking junior (as to any distribution of assets) to
the Convertible Preferred Stock, or any affiliate or associate of such
Person; or
(4) without the consent of the holders of at least a majority of the
number of shares of the Convertible Preferred Stock at the time
outstanding, given in person or by proxy, either in writing or by
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vote at a special meeting called for the purpose, redeem or purchase or
otherwise acquire for consideration or offer to redeem, purchase or
acquire for consideration any shares of Convertible Preferred Stock except
as provided in Section 4 and Section 7.
Section 6. Liquidation Preference.
In the event of a liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of Convertible
Preferred Stock shall be entitled to receive out of the assets of the
Corporation, whether such assets are stated capital or surplus of any nature, an
amount equal to $1,000.00 per share, plus the amount of any accrued and unpaid
dividends or distributions payable pursuant to Section 1 hereinabove. Such
payments shall be made before any payment shall be made or any assets
distributed to the holders of Common Stock or any other class or series of the
Corporation3s capital stock ranking junior as to liquidation rights to the
Convertible Preferred Stock. Neither a consolidation, merger or other business
combination of the Corporation3s assets for cash, securities or other property
shall be considered a liquidation, dissolution or winding up of the Corporation
for purposes of this Section 6 (unless in connection
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therewith the liquidation of the Corporation is specifically approved).
Section 7. Optional and Mandatory Redemption.
(a) The Corporation may not redeem the Convertible Preferred Stock
prior to July 15, 2003.
(b) The Corporation, at its option, may at any time on and after July
15, 2003 redeem the Convertible Preferred Stock in whole or in part, at a cash
redemption price per share equal to 100% of the liquidation preference, if the
daily Closing Price (as defined in Section 3(c)) per share of the Common Stock
for the 20 consecutive trading days ending two days preceding the mailing of the
redemption notice provided in Section 7(d) is greater than or equal to 200% of
the then current Conversion Price.
(c) On September 15, 2008, the Corporation shall redeem all
outstanding shares of Convertible Preferred Stock at a redemption price equal to
the liquidation preference per share. The redemption price shall be paid, at
the Corporation3s option, in cash or in shares of Common Stock which shall be
registered for resale pursuant to a permanent shelf registration statement or
for which any subsequent public distribution shall not require registration or
qualification of such shares under applicable federal and state securities laws.
If the redemption price is paid in
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shares of freely tradeable Common Stock, each share of Common Stock shall be
valued at the product of (1) .95 and (2) the average of the daily Closing Prices
per share of the Common Stock for the twenty (20) consecutive trading days
immediately ending two (2) days preceding the redemption date.
(d) Not more than sixty (60) nor less than thirty (30) days prior to
the redemption date, notice by first class mail, postage prepaid, shall be given
to each holder of record of the Convertible Preferred Stock to be redeemed, at
such holder's address as it shall appear upon the stock transfer books of the
Corporation. Each such notice of redemption shall be irrevocable and shall
specify the date fixed for redemption, the Redemption Price (or the method by
which such price will be determined), whether such redemption price shall be
paid in cash or in shares of Common Stock, the identification of the shares to
be redeemed (if fewer than all the outstanding shares are to be redeemed), the
place or places of payment, that payment will be made upon presentation and
surrender of the certificate(s) evidencing the shares of Convertible Preferred
Stock to be redeemed, the then effective Conversion Price pursuant to Section 3
and that the right of holders to convert shares called for redemption shall
terminate at the close of business on the redemption date
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(unless the Corporation defaults in the payment of the Redemption Price).
(e) Any notice that is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of the
Convertible Preferred Stock receives such notice; and failure to give such
notice by mail, or any defect in such notice, to the holders of any shares
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of Convertible Preferred Stock. On or after
the date fixed for redemption as stated in such notice, each holder of the
shares called for redemption shall surrender the certificate evidencing such
shares to the Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the Redemption Price in the manner
set forth in the notice. If fewer than all the shares represented by any such
surrendered certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares. If, on the date fixed for redemption, funds
(or shares of Common Stock) necessary for the redemption shall be available
therefor and shall have been irrevocably deposited or set aside, then,
notwithstanding that the certificates evidencing any shares so called for
redemption shall not have been surrendered, the shares shall no longer be deemed
outstanding, the holders thereof shall
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cease to be stockholders, and all rights whatsoever with respect to the shares
so called for redemption (except the right of the holders to receive the
Redemption Price without interest upon surrender of their certificates therefor)
shall terminate.
(f) In the event that any shares of Convertible Preferred Stock shall
be converted into Common Stock pursuant to Section 3, then (i) the Corporation
shall not have the right to redeem such shares and (ii) any funds which shall
have been deposited for the payment of the Redemption Price for such shares
shall be returned to the Corporation immediately after such conversion.
(i) If fewer than all the shares outstanding are to be redeemed, the
Corporation shall select the shares to be redeemed pro rata.
Section 8. Rank.
All shares of Convertible Preferred Stock shall rank, as to
distribution of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, prior to all classes and series
of the Corporation's Preferred Stock, par value $.01 per share, and prior to all
of the Corporation's now or hereafter issued Common Stock. The term "Common
Stock" shall mean the Common Stock, $.01 par value per share, of the
Corporation
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as the same exists at the date hereof or as such stock may be constituted from
time to time, except that for the purpose of Section 3, the term "Common Stock"
shall also mean and include stock of the Corporation of any class, whether now
or hereafter authorized, which shall have the right to participate in the
distribution of either dividends or assets of the Corporation upon liquidation,
dissolution or winding up, without limit as to the amount or percentage.
Section 9. Notice. All notices hereunder shall be in writing.
Section 10. Reacquired Shares. Any shares of Convertible Preferred
Stock converted, purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares of Convertible Preferred Stock shall upon their
cancellation, and upon the filing of an appropriate certificate with the
Secretary of the State of Delaware, become authorized but unissued shares of
Preferred Stock, par value $.01 per share, of the Corporation, undesignated as
to series, and may be reissued as part of another series of Preferred Stock, par
value $.01 per share, of the Corporation subject to the conditions of
restrictions on issuance set forth therein.
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