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STOCK AND WARRANT PURCHASE AGREEMENT
DATED AS OF JULY 30, 1997
AMONG
SAFETY 1ST, INC.
(THE "COMPANY"),
AND
THE INVESTORS NAMED HEREIN
(THE "INVESTORS")
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SCHEDULES AND EXHIBITS
Schedule I - Investors
Schedule 3.1 - Jurisdictions
Schedule 3.2 - Consents
Schedule 3.4 - Capitalization
Schedule 3.4A - Subsidiaries
Schedule 3.5 - Financial Information
Schedule 3.6 - Liabilities
Schedule 3.7 - Changes
Schedule 3.8 - Encumbrances
Schedule 3.9 - Leased Real Property
Schedule 3.10 - Leased Personal Property
Schedule 3.11 - Intellectual Property
Schedule 3.12 - Material Agreements
Schedule 3.13 - Litigation and Other Proceedings
Schedule 3.14 - Compliance with Laws
Schedule 3.15 - Taxes
Schedule 3.16 - Labor Relations; Employees
Schedule 3.17 - Employee Benefit Plans
Schedule 3.18 - Related Party Transactions
Schedule 3.22 - Insurance
Schedule 3.23 - Environmental
Schedule 9.2 - Insurance
Exhibit A - Form of Certificate of Designation
Exhibit B - Form of Registration Rights Agreement
Exhibit C - Form of Conditional Warrant
Exhibit D - Form of Unconditional Warrant
Exhibit E - Forms of Legal Opinions of counsel to the Company
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STOCK AND WARRANT PURCHASE AGREEMENT
dated as of July 30, 1997, among SAFETY
1ST, INC., a Massachusetts corporation
(the "Company"), and the Investors
listed on Schedule I (the "Investors"
which expression shall include all
transferees pursuant to Section 10.4
hereof).
The Company is in the business of developing, marketing and
distributing child safety and care products and home security products (the
"Business"). The Company desires to raise $15,000,000 in equity financing, and
the Investors are willing to purchase certain shares of the Company's preferred
stock and warrants to purchase shares of the Company's common stock in
connection therewith, all on the terms and subject to the conditions set forth
herein.
ACCORDINGLY, in consideration of the foregoing and the
covenants, agreements, representations and warranties contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINED TERMS; RULES OF CONSTRUCTION
1.1. DEFINED TERMS.
Capitalized terms used and not otherwise defined in this Agreement
have the meanings ascribed to them below or in the other locations of this
Agreement specified below:
"Affiliate" means (i) with respect to any individual, (A) a
spouse or descendant of such individual and (B) any trust or family partnership
whose beneficiaries shall solely be such individual and/or such individual's
spouse and/or any Person related by blood or adoption to such individual or such
individual's spouse, (ii) with respect to any Person which is not an individual,
any other Person that, directly or indirectly through one or more intermediaries
Controls, is Controlled by, or is under common Control with, such Person and/or
one or more Affiliates thereof and, without limiting the generality of the
foregoing, with respect to BT Capital includes (x) the ultimate parent
corporation of BT Capital and (y) a corporation, a general partnership, a
limited partnership or limited liability corporation, in which all the
beneficial interests of any of the foregoing entities is owned directly or
indirectly by one or more present or former employees or executives of BT
Capital or their
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respective Affiliates. As used in this definition, the term "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Articles of Organization" means the Restated Articles of
Organization of the Company as amended and restated and in effect at the time in
question.
"Bear Xxxxxxx" means Bear, Xxxxxxx & Co., Inc.
"Best Knowledge" has the meaning given to it in Section 1.2.
"BT Capital" means BT Capital Partners, Inc.
"Business" has the meaning given to it in the Preamble to this
Agreement.
"Business Day" means any day that is not a Saturday, Sunday,
legal holiday or other day on which banks are required to be closed in New York,
New York.
"By-laws" means the by-laws of the Company, as amended and in
effect at the time in question.
"Certificate of Designation" means the Certificate of
Designation dated as of the date hereof of the Company, a form of which is
attached as Exhibit A.
"Change of Control" shall mean the occurrence of the situation
described in (i) of the definition of Change of Control (as defined in the
Certificate of Designation) with respect to 51% (and not 30%) or more of the
total voting stock or the occurrence of any of the situations described in (ii)
of the definition of Change of Control (as defined in the Certificate of
Designation).
"Claim" means any claim, demand, assessment, judgment, order,
decree, action, cause of action, litigation, suit, investigation or other
Proceeding.
"Closing" has the meaning given to it in Section 2.1(b).
"Closing Certificate" has the meaning given to it in Section
6.1.
"Closing Date" has the meaning given to it in Section 2.1(b).
"Code" means the Internal Revenue Code of 1986, as amended, or
any similar Federal law then in force, and the rules
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and regulations promulgated thereunder, all as the same may from time to time be
in effect.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means the common stock, $.01 par value, of the
Company.
"Common Equivalents" means a share of Common Stock or the
right to acquire, whether or not immediately exercisable, one share of Common
Stock pursuant to a Warrant.
"Company" has the meaning given to it in the caption to this
Agreement.
"Company Indemnified Persons" has the meaning given to it in
Section 6.2(e).
"Confidential and Proprietary Information" means information
that is not generally known to the public and that is used, developed or
obtained by the Company and/or its Subsidiaries, or by their clients or
customers and disclosed to the Company and/or its Subsidiaries, in connection
with its or their business, including, but not limited to, (i) information,
observations, procedures and data obtained by the Company and/or its
Subsidiaries concerning the business or affairs of the Company and/or its
Subsidiaries or any of their clients or customers, (ii) products or services,
(iii) costs and pricing structures, (iv) analyses, (v) drawings, photographs and
reports, (vi) computer software, including operating systems, applications and
program listings, (vii) flow charts, manuals and documentation, (viii) data
bases, (ix) accounting and business methods, (x) inventions, devices, new
developments, methods and processes, whether patentable or unpatentable and
whether or not reduced to practice, (xi) customers and customer lists, (xii)
other copyrightable works, (xiii) all production methods, processes, technology
and trade secrets, and (xiv) all similar and related information in whatever
form.
"Conditional Warrants" shall mean the warrants to purchase
shares of Common Stock each dated as of the Closing Date, to be executed and
delivered on the Closing Date in accordance with Section 2.1 in the form of
Exhibit C.
"Credit Agreement" means the Credit Agreement dated as of July
30, 1997, among the Company, Safety 1st Home Products Canada Inc., the lenders
party thereto and BT Commercial Corporation, as Agent, as the same may be
restated, replaced, amended, supplemented or otherwise modified from time to
time.
"Documents" means this Agreement, the Warrants, the
Certificate of Designation, the Voting Agreement, the Registration Rights
Agreement and the SBA Letter.
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"Employee Plans" means any current or previously terminated
"employee benefit plan" (as defined in Section 3(3) of ERISA) as well as any
other plan, program or arrangement involving direct and indirect compensation or
benefits, in each case, under which the Company or any ERISA Affiliate of the
Company has any present or future obligations or Liability on behalf of its
employees or former employees, contractual employees or their dependents or
beneficiaries.
"Encumbrance" has the meaning given to it in Section 3.8.
"Environmental and Safety Requirements" means all Legal
Requirements, Orders, contractual obligations and all common law concerning
public health and safety, worker health and safety, and pollution or protection
of the environment, including, without limitation, all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, or cleanup of any hazardous materials,
substances or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation, including but not limited to, the
Solid Waste Disposal Act, as amended, 42 U.S.C. Section 6901, et seq., the Clean
Air Act, as amended, 42 U.S.C. Section 7401, et seq. the Federal Water Pollution
Control Act, as amended, 33 U.S.C. Section 1251, et seq., the Emergency Planning
and Community Right-to-Know Act, 42 U.S.C. Section 11001, et seq., the
Comprehensive Environmental Response, Compensation, and Liability Act, as
amended, 42 U.S.C. Section 9601, et seq., the Hazardous Materials Transportation
Uniform Safety Act, as amended, 49 U.S.C. Section 1804, et seq., the
Occupational Safety and Health Act of 1970, and the regulations promulgated
thereunder.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended, or any similar Federal law in force, and the rules and
regulations promulgated thereunder, all as the same may be amended.
"ERISA Affiliate" means, with respect to any Person, any
entity that is a member of a "controlled group of corporations" with, or is
under "common control" with, or is a member of the same "affiliated service
group" with such Person as defined in Sections 414(b), 414(c), 414(m) or 414(o)
of the Code.
"Escrow Agreement" means the Escrow Agreement dated as of
January 31, 1997 among the Company, Xxxxxxx Xxxxx Credit Partners L.P. and
O'Melveny & Xxxxx LLP.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal Statute then in force, and the rules and
regulations promulgated thereunder, all as the same may from time to time be in
effect.
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"Existing Credit Agreement" means the First Amended and
Restated Loan Agreement dated as of January 31, 1997 among the Company, the
lenders named therein and Xxxxxxx Xxxxx Credit Partners L.P.
"Existing Indebtedness" has the meaning given to it in the
Certification of Designation.
"Fundamental Documents" means the documents by which any
Person (other than an individual) establishes its legal existence or which
govern its internal affairs. The Fundamental Documents of the Company are the
Articles of Organization and By-laws.
"GAAP" means United States generally accepted accounting
principles.
"Governmental Authority" means any domestic or foreign
government or political subdivision thereof, whether on a federal, state or
local level and whether executive, legislative or judicial in nature, including
any agency, authority, board, bureau, commission, court, department or other
instrumentality thereof.
"Indebtedness" has the meaning given to it in the Certificate
of Designation.
"Indemnified Persons" means any of the Company Indemnified
Persons or any of the Investor Indemnified Persons, as the context may require.
"Indemnifying Persons" has the meaning given to it in Section
6.2(b).
"Insurance Policies" has the meaning given to it in Section
3.22.
"Intellectual Property Rights" means all industrial and
intellectual property rights, including, without limitation, patents, patent
applications, patent rights, trademarks, trademark applications, trade names,
service marks, service xxxx applications, copyrights, copyright applications,
know-how, trade secrets, proprietary processes and formulae, confidential
information, franchises, licenses, inventions, instructions, marketing
materials, trade dress, logos and designs and all documentation and media
constituting, describing or relating to the foregoing, including manuals,
memoranda and records.
"Investor" has the meaning given to it in the caption to this
Agreement.
"Investor Indemnified Person" has the meaning given to it in
Section 6.2(a).
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"Leased Real Property" has the meaning given to it in Section
3.9.
"Legal Requirements" means, as to any Person, all federal,
state, local or foreign laws, statutes, rules, regulations, ordinances, permits,
certificates, requirements, regulations, and restrictions of any Governmental
Authority applicable to such Person or any of its properties or assets.
"Liability" means, to the Best Knowledge of the Company, any
material liability or obligation, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated and whether due or
to become due, regardless of when asserted.
"Lien" has the meaning given to it in the Certificate of
Designation.
"Loss" means any loss (including diminution in value of
Securities), Liability, demand, claim, action, cause of action, cost, damage,
deficiency, Tax (including any Taxes imposed with respect to any indemnity
payments for any such Loss), penalty, fine or expense, whether or not arising
out of any Claims by or on behalf of any party to this Agreement or any third
party, including interest, penalties, reasonable attorneys' fees and expenses
and all amounts paid in investigation, defense or settlement of any of the
foregoing which any such party may suffer, sustain or become subject to, as a
result of, in connection with, relating or incidental to or by virtue of any
indemnifiable event or condition.
"Material Adverse Effect" means, with respect to any Person, a
material adverse effect on the business, condition (financial and otherwise),
operations, results of operations, assets (including levels of working capital
and components thereof), Liabilities and customer, vendor and employee
relationships of such Person.
"Material Agreements" has the meaning given to it in Section
3.12(a).
"Order" means any judgment, writ, decree, injunction, order,
stipulation, compliance agreement or settlement agreement issued or imposed by,
or entered into with, a Governmental Authority.
"Permits" has the meaning given to it in Section 3.14.
"Permitted Encumbrances" has the meaning given to it in
Section 3.8.
"Person" shall be construed as broadly as possible and shall
include an individual, a partnership (including a limited liability
partnership), a corporation, an association, a joint stock company, a limited
liability company, a trust, a joint
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venture, an unincorporated organization and a Governmental Authority.
"Proceeding" means any legal, administrative or arbitration
action, suit, complaint, charge, hearing, inquiry, investigation or proceeding.
"Purchased Shares" has the meaning given to it in Section
2.1(a).
"Purchased Warrants" has the meaning given to it in Section
2.1.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the date hereof among the Company and the Investors (as
defined therein) a form of which is attached as Exhibit B.
"Requisite Investors" means Investors holding Common
Equivalents representing 51% or more of all the outstanding Common Equivalents
at the time in question.
"Reserved Common Shares" means the shares of Common Stock
issuable upon the exercise of the Purchased Warrants.
"Restricted Payments" means (i) any dividend or other
distribution on any shares of the capital stock of the Company or its
Subsidiaries (other than stock splits, like kind stock dividends) or (ii) any
payment on account of the purchase, redemption, retirement or acquisition of any
shares of capital stock of the Company or its Subsidiaries (other than the
Series A Preferred Stock).
"Restricted Securities" shall mean the Purchased Shares, the
Purchased Warrants, the Reserved Common Shares and any shares of capital stock
received in respect of any thereof, in each case which have not then been sold
to the public pursuant to (a) registration under the Securities Act or (b) Rule
144 (or similar or successor rule) promulgated under the Securities Act.
"Restricted Shares" shall mean the Reserved Common Shares that
constitute Restricted Securities.
"Returns" has the meaning set forth in Section 3.15 of this
Agreement.
"SBA Letter" has the meaning set forth in Section 5.13 of this
Agreement.
"SEC" has the meaning set forth in Section 3.5.
"SEC Reports" has the meaning set forth in Section 3.5.
"Securities" means, with respect to any Person, such Person's
"securities" as defined in Section 2(1) of the
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Securities Act and includes such Person's capital stock or other equity
interests or any options, warrants or other securities or rights that are
directly or indirectly convertible into, or exercisable or exchangeable for,
such Person's capital stock or other equity interests.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same may from time to time be in
effect.
"Series A Preferred Stock" means the Series A Preferred Stock,
$1.00 par value, of the Company.
"Shares" means the Purchased Shares and the Reserved Common
Shares.
"Significant Investor" has the meaning set forth in Section
8.1.
"Stock Option Plan" means collectively the Stock Option Plans
of the Company which have been filed with the SEC Reports.
"Subsidiary" shall mean, at any time, with respect to any
Person (the "Subject Person"), (i) any Person of which either (x) more than 50%
of the shares of stock or other interests entitled to vote in the election of
directors or comparable Persons performing similar functions (excluding shares
or other interests entitled to vote only upon the failure to pay dividends
thereon or other contingencies) or (y) more than a 50% interest in the profits
or capital of such Person, are at the time owned or controlled directly or
indirectly by the Subject Person or through one or more Subsidiaries of the
Subject Person or by the Subject Person and one or more Subsidiaries of the
Subject Person, or (ii) any Person whose assets, or portions thereof, are
consolidated with the net earnings of the Subject Person and are recorded on the
books of the Subject Person for financial reporting purposes in accordance with
GAAP.
"Tax" means any Taxes and the term "Taxes" means, with respect
to any Person, (A) all income taxes (including any tax on or based upon net
income, or gross income, or income as specially defined, or earnings, or
profits, or selected items of income, earnings or profits) and all gross
receipts, sales, use, ad valorem, transfer, franchise, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property or
windfall profits taxes, alternative or add-on minimum taxes, customs duties or
other taxes, fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts imposed
by any taxing authority (domestic or foreign) on such Person and (B) any
Liability for the payment of any amount of the type described in the immediately
preceding clause (A) as a result of being a "transferee" (within the meaning of
Section 6901 of the
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Code or any other applicable Legal Requirement) of another Person or a member of
an affiliated or combined group.
"Transfer" shall mean any disposition of any shares or other
units of Restricted Securities or any interest therein which would constitute a
sale thereof within the meaning of the Securities Act.
"Unconditional Warrants" shall mean the warrants to purchase
Common Stock each dated as of the Closing Date, to be executed and delivered on
the Closing Date in accordance with Section 2.1 in the form of Exhibit D.
"Voting Agreement" means the Voting Agreement dated as of the
date hereof among the Company and the other parties named therein.
"Warrants" shall mean collectively the Conditional Warrants
and the Unconditional Warrants (together with any Warrants issued after the
Closing Date in substitution or exchange for any Warrants in accordance with the
provisions of this Agreement or the Warrants).
1.2. RULES OF CONSTRUCTION.
The term "this Agreement" means this agreement together with all
schedules and exhibits hereto, as the same may from time to time be amended,
modified, supplemented or restated in accordance with the terms hereof. In this
Agreement, the term "Best Knowledge" of any Person means (i) actual knowledge of
such Person (including the actual knowledge of the executive officers and
directors of such Person) and (ii) that knowledge which could have been acquired
by such Person after making such due inquiry and exercising such due diligence
as a prudent business person would have made or exercised in the management of
his or her business affairs, including due inquiry of those key employees and
professionals of such Person who could reasonably be expected to have actual
knowledge of the matters in question. The use in this Agreement of the term
"including" means "including, without limitation." The words "herein," "hereof,"
"hereunder" and other words of similar import refer to this Agreement as a
whole, including the schedules and exhibits, as the same may from time to time
be amended, modified, supplemented or restated, and not to any particular
section, subsection, paragraph, subparagraph or clause contained in this
Agreement. All references to sections, schedules and exhibits mean the sections
of this Agreement and the schedules and exhibits attached to this Agreement,
except where otherwise stated. The title of and the section and paragraph
headings in this Agreement are for convenience of reference only and shall not
govern or affect the interpretation of any of the terms or provisions of this
Agreement. The use herein of the masculine, feminine or neuter forms shall also
denote the other forms, as in each case the context may require or permit. Where
specific language is used to clarify by example a general statement contained
herein, such specific language
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shall not be deemed to modify, limit or restrict in any manner the construction
of the general statement to which it relates. The language used in this
Agreement has been chosen by the parties to express their mutual intent, and no
rule of strict construction shall be applied against any party.
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1. CLOSING.
(a) At the Closing (as defined below), subject to the
satisfaction of the conditions in Article V, the Company shall issue and sell to
each Investor, and each Investor shall severally purchase from the Company, (i)
that number of shares of Series A Preferred Stock set forth opposite the name of
such Investor in the second column of Schedule I (the aggregate number of the
shares of Series A Preferred Stock purchased by the Investors referred to herein
as the "Purchased Shares") and (ii) that number of Unconditional Warrants and
Conditional Warrants set forth opposite the name of such Investor in the third
and fourth columns of Schedule I, respectively (the aggregate number of Warrants
purchased by the Investors referred to herein as the "Purchased Warrants"), for
the aggregate purchase price set forth opposite the name of such Investor in the
fifth column of Schedule I. The Company and the Investors agree that no later
than 10 business days following the Closing they shall agree upon a mutually
acceptable allocation of the aggregate purchase price of $15,000,000 payable by
the Investors pursuant to this Section 2.1 as between the Purchased Shares and
the Purchased Warrants.
(b) The closing (the "Closing") hereunder with respect to
the issuance and sale of the Purchased Shares and the Purchased Warrants and the
consummation of the related transactions contemplated hereby shall, subject to
the satisfaction or waiver of the applicable conditions set forth in Article V,
take place at the offices of X'Xxxxxxxx Graev & Karabell, LLP, 00 Xxxxxxxxxxx
Xxxxx, Xxx Xxxx, Xxx Xxxx, xx the date hereof (the "Closing Date"). At the
Closing, the Company shall (i) deliver to each Investor one or more certificates
representing the Purchased Shares being purchased by such Investor at the
Closing, registered in the name of such Investor, against receipt by the Company
of the aggregate purchase price therefor, payable in its entirety by wire
transfer of immediately available funds to a bank and account number details of
which shall have previously been notified to each Investor and (ii) deliver to
each Investor one or more certificates representing the number of Conditional
Warrants and Unconditional Warrants purchased by such Investor at the Closing,
registered in the name of such Investor, against receipt by the Company of the
aggregate purchase price therefor, payable in its entirety by wire transfer of
immediately available funds to a bank and account number
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details of which shall have previously been notified to the Company.
2.2. USE OF PROCEEDS.
The proceeds received by the Company from the sale of all
Purchased Shares and Purchased Warrants shall be used by the Company solely for
(i) the repayment in part of all indebtedness due and payable under the Existing
Credit Agreement, (ii) the payment of fees and expenses incurred in connection
with the consummation of this transaction and (iii) working capital needs, each
as described in the detailed analysis of the use of proceeds previously
delivered to the Investors.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
The Company represents and warrants to the Investors that:
3.1. ORGANIZATION, POWER, AUTHORITY AND GOOD STANDING.
The Company and each of its Subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its assets and properties and to carry on its business as presently
conducted and as presently proposed to be conducted. The Company and each of its
Subsidiaries is duly qualified and in good standing to transact business as a
foreign Person in the respective jurisdictions set forth on Schedule 3.1, which
constitute all the jurisdictions in which the character of the property owned,
leased or operated by the Company and each of its Subsidiaries or the nature of
the business or activities conducted by the Company and each of its Subsidiaries
makes such qualification necessary. The Investors have been furnished with true,
correct and complete copies of the Articles of Organization and By-laws of the
Company and each of its Subsidiaries, in each case as amended and in effect on
the date hereof. The Company has never engaged in any businesses other than the
Business.
3.2. AUTHORIZATION, EXECUTION AND ENFORCEABILITY.
The Company has all requisite corporate power and authority to
execute and deliver and perform its obligations under the Documents to which it
is a party and to consummate the transactions contemplated by such Documents.
The Company's execution and delivery of, and performance of its obligations
under, the Documents to which the Company is a party have been duly and validly
authorized by all requisite action on the part
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of the Company, and each such Document constitutes, or upon its execution and
delivery will constitute, a valid and binding obligation of the Company
enforceable against it in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and
other similar laws and subject to general principles of equity. Except as set
forth on Schedule 3.2 and relying on the accuracy of the representations of the
Investors contained in Section 4.2, the Company's execution and delivery of, and
performance of its obligations under, the Documents to which it is a party, and
the consummation of the transactions contemplated thereby, including the
authorization, reservation, issuance, sale and delivery, as the case may be, of
the Shares and the Purchased Warrants, will not (a) violate any Legal
Requirement applicable to the Company or any of its Subsidiaries or any of their
properties or assets or (b) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute (with due notice or lapse of
time, or both) a default or give rise to any right of termination, cancellation
or acceleration, or result in the creation of any Encumbrance upon any of the
properties or assets of the Company or any of its Subsidiaries, under, any
provision of the Fundamental Documents of the Company or any of its Subsidiaries
or any Material Agreement or Permit to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
their assets or properties are or may be bound.
3.3. AUTHORIZATION.
The authorization, reservation, issuance, sale and delivery, as
applicable, of the Shares and the Purchased Warrants have been duly and validly
authorized by all requisite action on the part of the Company. Upon payment of
the consideration therefor in accordance with the terms hereof, the Purchased
Shares, the Purchased Warrants and the Reserved Common Shares (assuming the
issuance thereof in accordance with the applicable terms of the Warrant), will
be duly and validly issued and outstanding, fully paid and nonassessable, and
not subject to any preemptive rights, rights of first refusal or other similar
rights of the stockholders of the Company.
3.4. CAPITALIZATION AND EQUITY INVESTMENT.
(c) The authorized capital stock of the Company
immediately after the consummation of the Closing shall consist of:
(i) 15,000,000 duly authorized shares of Common
Stock, of which:
(A) 7,187,288 shares shall be duly and
validly issued and outstanding, fully paid and
nonassessable;
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(B) 1,699,993 shares shall be duly and
validly reserved for issuance pursuant to outstanding
options granted to and held by the employees,
directors or independent contractors of the Company
in the amounts set forth on Schedule 3.4;
(C) 1,268,346 shares shall be duly and
validly reserved for issuance upon the exercise of
the Purchased Warrants; and
(D) 7,812,712 shares shall be unissued;
and
(ii) 15,000 duly authorized shares of Series A
Preferred Stock, of which:
(A) 15,000 shares shall be duly and
validly issued and outstanding, fully paid and
nonassessable, all of which shall be held of record
and beneficially by the Persons and in the amounts
set forth on Schedule 3.4; and
(B) No shares shall be unissued.
(b) Schedule 3.4 hereto also contains a list of all
outstanding warrants, options, agreements, convertible securities and other
commitments pursuant to which the Company is or may become obligated to issue,
sell or otherwise transfer any Securities of the Company, which list names all
Persons entitled to receive such Securities, indicates whether or not such
Securities are entitled to any anti-dilution or similar adjustments upon the
issuance of additional Securities of the Company or otherwise (other than due to
stock splits or the like) and sets forth the shares of capital stock and other
Securities required to be issued thereunder (calculated after giving effect to
all such anti-dilution and other similar adjustments resulting from the issuance
of the Purchased Shares).
(c) Except as set forth on Schedule 3.4 there are no
preemptive rights of first refusal or other similar rights to purchase or
otherwise acquire shares of capital stock or other Securities of the Company
pursuant to any Legal Requirement, any Fundamental Document of the Company or
any agreement to which the Company is a party or may be bound. Except as set
forth on Schedule 3.4 or as contemplated by the Documents and the Fundamental
Documents of the Company, there is no Encumbrance (such as a right of first
refusal, right of first offer, proxy, voting trust or voting agreement) with
respect to the sale or voting of any Securities of the Company (whether
outstanding or issuable upon the conversion, exchange or exercise of outstanding
Securities).
(d) Other than as required by the Articles of
Organization (including the Certificate of Designation) there are no obligations
to redeem, repurchase or otherwise acquire shares
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of capital stock or other Securities of the Company pursuant to any Legal
Requirement, any Fundamental Document of the Company or any agreement to which
the Company is a party or may be bound.
(e) All Securities issued by the Company have been either
issued in transactions in accordance with or exempt from registration under the
Securities Act and the rules and regulations promulgated thereunder and all
applicable state securities or "blue sky" laws, and the Company has not violated
the Securities Act or any applicable state securities or "blue sky" laws in
connection with the issuance of any such Securities.
(f) The are no restrictions upon the voting rights
associated with, or the transfer of, any of the capital stock of the Company,
except as provided by (i) United States or state securities laws or (ii) the
terms and provisions of the Documents or as are disclosed in the SEC Reports.
(g) Except as set forth on Schedule 3.4A, the Company
does not have any Subsidiaries, nor does it own any capital stock or other
proprietary interest, directly or indirectly, in any other Person. Except as set
forth on Schedule 3.4A hereto, the Corporation owns, directly or through another
Subsidiary, all of the capital stock of each Subsidiary and there are no
options, warrants or other rights to acquire any capital stock of any
Subsidiary.
3.5. REPORTS AND FINANCIAL INFORMATION.
(a) The Company has filed in a timely manner, all reports
required to be filed by it with the Securities and Exchange Commission (the
"SEC") pursuant to the Exchange Act since April 1, 1993, including, without
limitation, an Annual Report on Form 10-K for the year ended December 31, 1996
and a Form 10-Q for the quarterly period ended March 31, 1997 (collectively and
as amended to date, the "SEC Reports"), and has previously furnished or made
available to the Investors true and complete copies of all SEC Reports. None of
the SEC Reports or any Registration Statement, definitive proxy statement and
other documents filed by the Company with the SEC since April 1, 1993
(collectively, the "33 and 34 Act Reports"), as of their respective dates (as
amended through the date hereof), (i) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or (ii) failed to comply with the
requirements of the Securities Act, the Exchange Act or the respective rules and
regulations of the SEC thereunder.
(b) Except as set forth on Schedule 3.5 attached hereto,
the financial statements contained in the 33 and 34 Act Reports and the
unaudited balance sheet of the Company as of June 30, 1997, and the related
statements of operations and statements of cash flows for the period then ended
annexed hereto
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(collectively, the "Financial Statements") (i) were in accordance with the books
and records of the Company, (ii) presented fairly the consolidated financial
condition and results of operations of the Corporation as of the dates and for
the periods indicated and (iii) were prepared in accordance with generally
accepted accounting principles consistently applied (except as set forth in the
notes thereto and subject, in the case of Financial Statements as at the end of
or for the periods other than fiscal years, to normal year-end audit
adjustments, provided that such adjustments are not material individually or in
the aggregate).
(c) The Financial Statements complied, when filed, as to
form in all material respects with the applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto.
3.6. ABSENCE OF UNDISCLOSED LIABILITIES.
Except as set forth on Schedule 3.6 attached hereto, to the Best
Knowledge of the Company, the Company has no material Liability which was not
provided for or disclosed in the SEC Reports (including the Financial
Statements), other than Liabilities incurred in the ordinary course of business
since March 31, 1997.
3.7. ABSENCE OF CHANGES.
Except as set forth on Schedule 3.7 attached hereto or otherwise
disclosed in the SEC Reports, since March 31, 1997 there has not been any (i)
event or condition which has had or could reasonably be expected to have a
Material Adverse Effect on the Company and its Subsidiaries, (ii) material
deviation from historical accounting and other practices in connection with the
maintenance of the Company's books and records, (iii) damage, destruction or
loss, whether or not covered by insurance, which has had or could reasonably be
expected to have a Material Adverse Effect on the Company and its Subsidiaries,
(iv) declaration or payment of any dividend or other distribution on or with
respect to the shares of capital stock of the Company or Securities exercisable
or exchangeable for, or convertible into, capital stock of the Company, or any
direct or indirect redemption, purchase or other acquisition of any shares of
capital stock or other Securities of the Company, (v) except as in the ordinary
course of business consistent with past practice, increase in or prepayment of
the compensation payable or to become payable by the Company or any of its
Subsidiaries to any of its directors, officers, employees or agents, or the
making of any bonus payment or similar arrangement to or with any of them, (vi)
except for the write-off of accounts receivable in the ordinary course of
business consistent with past practice, cancellation of indebtedness due to the
Company or any of its Subsidiaries from others, (vii) material Liability created
or incurred, or any transaction, contract or commitment entered into, by the
Company or any of its Subsidiaries, other than such
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items created or incurred in the ordinary course of business and consistent with
past practice, (viii) material change in the manner in which the Company or any
of its Subsidiaries extends discounts or credits to customers or otherwise deals
with customers, (ix) material change in the manner in which the Company or any
of its Subsidiaries markets its products or services or material increase or
decrease in inventory levels in excess of historical levels for comparable
periods, (x) waiver or release of any material rights of the Company or any of
its Subsidiaries, except in the ordinary course of business and for fair value,
or any lapse or other loss of a material right of the Company or any of its
Subsidiaries to use its assets or conduct its business, (xi) sale, transfer or
other disposition of a material portion of the assets of the Company or any of
its Subsidiaries, except in the ordinary course of business and for fair value,
or scrapping of a material portion of the assets of the Company or any of its
Subsidiaries as obsolete, (xii) commitments for capital expenditures of the
Company or any of its Subsidiaries in excess of $500,000 in the aggregate,
(xiii) change in accounting policies of the Company, including any change in
accounting practices concerning slow selling inventory, or (xiv) material change
in the policies of the Company or any of its Subsidiaries with respect to the
payment of accounts payable or other current Liabilities or the collection of
accounts receivable, including any acceleration or deferral of the payment or
collection thereof, as applicable.
3.8. TITLE TO ASSETS, PROPERTIES AND RIGHTS.
Except as set forth in the SEC Reports or on Schedule 3.8 hereto,
each of the Company and its Subsidiaries has good and marketable title to all
properties, interests in properties and assets, real, personal, intangible or
mixed, used in the conduct of its business, free and clear of all mortgages,
judgments, claims, liens, security interests, pledges, escrows, charges,
restrictions or other encumbrances of any kind or character whatsoever
("Encumbrances"), other than Permitted Encumbrances. As used herein, "Permitted
Encumbrances" shall mean (i) Encumbrances listed on Schedule 3.8 hereto, (ii)
liens for taxes not yet due and payable and for which an appropriate reserve has
been taken and (iii) rights of way, easements and other minor defects in title
which do not adversely affect in any material respect the use or value of the
real property subject to such Encumbrance.
3.9. OWNED AND LEASED REAL PROPERTY.
(a) The Company and the Subsidiaries do not own any real
property. Schedule 3.9 contains a list and brief description of all of the real
property subject to one or more leases (the "Leased Real Property"), including
the names of the lessor and the lessee. Except as stated in Schedule 3.9, the
Leased Real Property constitutes all real properties used or occupied by the
Company and the Subsidiaries in the connection with the Business.
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(b) Except as set forth on Schedule 3.9, with respect to
the Leased Real Property:
(i) to the best knowledge of the Company, no
portion thereof is subject to any pending condemnation Proceeding
or Proceeding by any public or quasi-public authority and there is
no threatened condemnation or Proceeding with respect thereto;
(ii) all buildings and structures located on the
Leased Real Property, as well as the operation and maintenance
thereof, comply in all material respects with all applicable Legal
Requirements, and do not violate in any respect the rights of any
Person;
(iii) no notice of any increase in the assessed
valuation of the Leased Real Property and no notice of any
contemplated special assessment has been received by the Company
or any Affiliate thereof and there is no threatened increase in
assessed valuation or threatened special assessment pertaining to
any of the Leased Real Property;
(iv) there are no contracts, agreements,
instruments, licenses, commitments, leases or similar document,
written or oral, to which the Company or any Affiliate thereof is
a party, granting to any one or more Persons the right of use or
occupancy of any portion of the parcels of the Leased Real
Property; and
(v) there are no Persons (other than the Company,
the Subsidiaries or its lessees disclosed pursuant to clause (iv)
above) in possession of the Leased Real Property.
3.10. LEASED PERSONAL PROPERTY.
Schedule 3.10 contains a list of all leases involving
aggregate lease payments over the life of such lease in excess of $200,000 under
which the Company and the Subsidiaries is a lessee of or holds or operates any
personal property owned by any third Person, true, complete and correct copies
(or, in the case of oral leases, written descriptions) of which have been
previously furnished to the Investors.
3.11. INTELLECTUAL PROPERTY.
(a) Except as set forth on Schedule 3.11:
(i) each of the Company and the Subsidiaries
owns, has the right to use, sell, license and dispose of, and has
the right to bring actions for the infringement of, all
Intellectual Property Rights (as defined below)
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necessary or required for the conduct of the business of the
Company and the Subsidiaries (collectively, the "Owned Requisite
Rights"), other than those Intellectual Property Rights for which
the Company and the Subsidiaries has a valid license, all of which
to the extent they are Material Agreements are listed on Schedule
3.11 (collectively, the "Licensed Requisite Rights"; and together
with the Owned Requisite Rights, the "Requisite Rights"), and such
rights to use, sell, license, dispose of and bring actions are
exclusive with respect to the Owned Requisite Rights;
(ii) the Requisite Rights of the Company and the
Subsidiaries, all of which are listed on Schedule 3.11, are
sufficient for the conduct of the business of the Company and the
Subsidiaries as currently conducted;
(iii) the Company and the Subsidiaries either own
or have made timely and proper application for issuance of letters
patent in the United States for all significant patentable
inventions included within the Owned Requisite Rights;
(iv) there are no royalties, honoraria, fees or
other payments payable by the Company and the Subsidiaries to any
Person by reason of the ownership, use, sale or disposition of the
Owned Requisite Rights;
(v) no activity, service or procedure currently
conducted or proposed to be conducted by the Company and the
Subsidiaries violates any contract, instrument, license,
commitment, lease or similar document of the Company and the
Subsidiaries with any third Person relating to any Intellectual
Property Rights;
(vi) the Company and the Subsidiaries have taken
reasonable and practicable steps (including, without limitation,
entering into confidentiality and nondisclosure agreements with
all officers and employees of and consultants to the Company and
the Subsidiaries and other Persons with access to or knowledge of
Confidential or Proprietary Information) designed to safeguard and
maintain (i) the secrecy and confidentiality of Confidential or
Proprietary Information and (ii) the proprietary rights of the
Company and the Subsidiaries in all of its Owned Requisite Rights;
(vii) to the Best Knowledge of the Company, the
Company and the Subsidiaries have not interfered with, infringed
upon, misappropriated or otherwise come into conflict with any
Intellectual Property Rights of any Person or committed any acts
of unfair competition, and the Company and the Subsidiaries have
not received from
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any Person in the past five years (or since its inception, if
shorter) any notice, charge, complaint, claim or assertion
thereof, and no such claim is impliedly threatened by an offer to
license from another Person under a claim of use to the extent any
of the foregoing would have a Material Adverse Effect; and
(viii) the Company and the Subsidiaries have not
sent to any Person in the past five years (or since its inception,
if shorter), or otherwise communicated to any Person, any notice,
charge, complaint, claim or other assertion of any present,
impending or threatened infringement by or misappropriation of, or
other conflict with, any Intellectual Property Rights of the
Company and the Subsidiaries by such other Person or any acts of
unfair competition by such other Person, nor, to the Best
Knowledge of the Company, is any such infringement,
misappropriation, conflict or act of unfair competition occurring
or threatened to the extent any of the foregoing would have a
Material Adverse Effect; and
(ix) all software (except for Off-the-Shelf
Computer Software) necessary for or used by the Company and the
Subsidiaries in the conduct of the Business as presently conducted
that contains or relies upon a calendar function, including but
not limited to any function that is indexed to a CPU clock,
provides specific dates or calculates spans of dates, is able to
record, store, process and provide true and accurate dates and
calculations for dates and spans of dates including and following
January 1, 2000.
(b) Schedule 3.11 contains a true and complete list of
all applications, filings and other formal actions made or taken by the Company
and the Subsidiaries pursuant to applicable Legal Requirements to perfect or
protect its interest in its Intellectual Property Rights, including all patents,
patent applications, trademarks, trademark applications, service marks and
service xxxx applications.
3.12. MATERIAL AGREEMENTS.
(a) Schedule 3.12 contains a true and complete list and
brief description of all written and oral contracts, agreements, instruments and
other understandings and commitments to which each of the Company and the
Subsidiaries is a party and (x) which were entered into or made outside the
ordinary course of business or (y) which were entered into or made in the
ordinary course of business and are described in clauses (i) through (xv) of
this Section 3.12 (all such contracts, agreements, instruments and other
understandings and commitments, together with those listed on Schedules 3.4,
3.9, 3.10, 3.11, 3.17, 3.18 and 3.22, being collectively called "Material
Agreements" herein). Except as set forth on Schedule 3.12, neither the Company
nor any of the
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Subsidiaries is a party to any of the following, whether written or oral:
(i) distributorship, dealer, sales, advertising,
agency, manufacturer's representative or other contract relating
to the payment of a commission in each case in excess of $200,000
per annum;
(ii) collective bargaining agreement or other
contract with or commitment to any labor union or proposed labor
union;
(iii) continuing contract for the future purchase
of products, material, supplies, equipment or services (excluding
purchase orders entered into in the ordinary course of business
which are to be completed within three months of entering into
such purchase orders) which is not immediately terminable by the
Company or the Subsidiaries without cost, forfeiture or other
Liability at or at any time after the Closing in each case in
excess of $200,000 per annum;
(iv) continuing contract for future sales
(excluding purchase orders entered into in the ordinary course of
business which are to be completed within three months of entering
into such purchase orders) which is not immediately terminable by
the Company or the Subsidiaries without cost or other Liability at
or at any time after the Closing in each case in excess of
$200,000 per annum;
(v) contract or commitment for the employment of
any officer, employee or consultant or any other type of contract
or understanding with any officer, employee or consultant,
including any agreement or understanding relating to severance
payments, in each case in excess of $100,000 per annum;
(vi) indenture, mortgage, promissory note, loan
agreement, pledge agreement, guarantee or other agreement or
commitment for the borrowing of money, for a line of credit or for
a leasing transaction of a type required to be capitalized in
accordance with Statement of Financial Accounting Standards No. 13
of the Financial Accounting Standards Board in each case in excess
of $200,000 per annum;
(vii) contract or commitment for charitable
contributions in each case in excess of $200,000 per annum;
(viii) contract or commitment for capital
expenditures in each case in excess of $200,000 per annum;
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(ix) agreement or arrangement for the sale of any
assets, properties or rights or services or products other than
the sale thereof in the ordinary course of business at normal
profit margins;
(x) contract with respect to the lending or
investing of funds in each case in excess of $200,000 per annum;
(xi) contract or indemnification with respect to
any form of intangible property, including any Intellectual
Property Rights or Confidential and Proprietary Information
(except prepackaged software used in the ordinary course) in each
case in excess of $200,000 per annum;
(xii) contract which restricts the Company or any
of the Subsidiaries from engaging in any aspect of their
businesses anywhere in the world;
(xiii) contract or group of related contracts
with the same Person (excluding purchase orders entered into in
the ordinary course of business which are to be completed within
three months of entering into such purchase orders) for the
purchase or sale of products or services under which the
undelivered balance thereof has a selling price in each case in
excess of $200,000 per annum;
(xiv) agreement for the acquisition or
disposition of a Person or a division of a Person made within the
preceding 5 years (whether or not such acquisition or disposition
was consummated) in each case in excess of $200,000 per annum; or
(xv) other contract material to the business of
the Company or any of the Subsidiaries including any agreements,
instruments, commitments, plans or arrangements, a copy of which
would be required to be filed with the Commission as an exhibit to
a registration statement on Form S-1 if the Company were
registering securities under the Securities Act on the date
hereof.
(b) Except as disclosed in Schedule 3.12, all Material
Agreements are in full force and effect, constitute legal, valid and binding
obligations of the respective parties thereto, and are enforceable in accordance
with their respective terms. Each of the Company and the Subsidiaries have in
all material respects performed all of the obligations required to be performed
by each of them to date pursuant to the Material Agreements, and there exists no
material default, or any event which upon the giving of notice or the passage of
time, or both, would give rise to a claim of a material default in the
performance by the Company and the Subsidiaries or, to the Best Knowledge of the
Company, any other party to any of the Material Agreements. The Investors
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have been furnished with true, complete and correct copies of all Material
Agreements.
3.13. LITIGATION AND OTHER PROCEEDINGS.
Except as set forth on Schedule 3.13, there are no (i) Proceedings
pending or, to the Best Knowledge of the Company, threatened against or
involving the Company or any of the Subsidiaries, which would likely result in a
Material Adverse Effect, whether at law or in equity, whether civil or criminal
in nature or by or before any Governmental Authority, nor to the Best Knowledge
of the Company does there exist any basis therefor, (ii) customer claims of any
nature against the Company or any of the Subsidiaries, which would likely result
in a Material Adverse Effect, nor to the Best Knowledge of the Company does
there exist any basis therefor, or (iii) Orders of any Governmental Authority
with respect to or involving the Company or any of the Subsidiaries, which would
likely result in a Material Adverse Effect.
3.14. COMPLIANCE WITH LAWS.
(a) Except as disclosed on Schedule 3.14, the Company and
each of the Subsidiaries (i) has complied in all material respects with, and is
in compliance with, in all respects all Legal Requirements applicable to it and
its business and (ii) has all material federal, state, local and foreign
governmental licenses and permits (collectively, "Permits") used or necessary in
the conduct of its business. Such Permits are in full force and effect, no
violations with respect to any thereof have occurred or are or have been
recorded, no Proceeding is pending or, to the Best Knowledge of the Company,
threatened to revoke or limit any thereof. Schedule 3.14 contains a true,
correct and complete list of (A) all such Permits and (B) all Orders under which
the Company and the Subsidiaries is operating or bound. To the Best Knowledge of
the Company, there is no proposed change in any applicable Legal Requirement
which would require the Company or any of the Subsidiaries to obtain any Permits
not set forth on Schedule 3.14 in order to conduct the business of the Company
and the Subsidiaries as each is presently conducted and as presently proposed to
be conducted. None of such Permits or Orders shall be adversely affected as a
result of the Company's execution and delivery of, or the performance of its
obligations under, any Document to which it is a party, or the consummation of
the transactions contemplated thereby. The Company, after due inquiry, is not
aware of any proposed Legal Requirement which would prohibit or restrict the
Company or any of the Subsidiaries from, or otherwise materially adversely
affect the Company or any of the Subsidiaries in, conducting each of their
businesses in any jurisdiction in which each is now conducting business or which
it proposes to conduct business.
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3.15. TAXES.
Except as disclosed on Schedule 3.15, (a) the Company and each
other Person included in any consolidated or combined Tax Return and part of an
affiliated group, within the meaning of Section 1504 of the Code, of which the
Company and each Subsidiary is or has been a member has filed all returns,
declarations of estimated tax, tax reports, information returns and statements
(collectively, the "Returns") required to be filed by it (other than those for
which extensions have been granted and have not expired) relating to any Taxes
(as defined below); (b) as of the time of filing, the Returns were complete and
correct in all material respects and all Taxes shown on the Returns have been
paid; (c) the Company and each Subsidiary has paid or made provisions for all
Taxes payable for any period that ended on or before the Closing Date and for
any period that began on or before the Closing Date and ends after the Closing
Date, to the extent such Taxes are attributable to the portion of any such
period ending on the Closing Date; (d) the Company and each Subsidiary is not
delinquent in the payment of any Taxes nor has it requested any extension of
time within which to file any Return, which Return has not since been filed; (e)
there are no pending tax audits of any Returns of the Company or any Subsidiary,
and neither the Company nor any Subsidiary has received notice of any pending
tax audits of any Returns of the Company or any Subsidiary; (f) no tax liens
have been filed and no deficiency or addition to Taxes, interest or penalties
for any Taxes have been proposed, asserted or assessed in writing against the
Company or any Subsidiary; (g) neither the Company nor any Subsidiary has
granted any extension of the statute or any Subsidiary of limitations applicable
to any Return or other Tax claim with respect to any of its respective income,
properties or operations or any Subsidiary; (h) neither the Company nor any
Subsidiary has been a personal holding company within the meaning of Section 542
of the Code; (i) neither the Company nor any Subsidiary has not made any
election under Section 341(f) of the Code; (j) neither the Company nor any
Subsidiary is currently, nor has they ever been, a "United States real property
holding corporation" as such term is defined in Section 897 of the Code; (k) the
Company and the Subsidiaries have complied in all material respects with all
applicable Legal Requirements relating to the payment and withholding of Taxes
(including sales and use Taxes, and amounts required by law to be withheld and
paid from the wages or salaries of employees), and neither the Company nor any
Subsidiary is liable for any Taxes for failure to comply with any such Legal
Requirement; (l) neither the Company nor any Subsidiary is and has never been a
party to any Tax sharing agreement; and (m) neither the Company nor any
Subsidiary has agreed to, is not required to, and will not be obligated to, make
any adjustments either on, before or after the Closing Date, to its existing tax
accounting method by reason of Section 481 of the Code, or due to a
determination by the Board of Directors of the Company (acting on the advice of
the Company's accountant, as the case may be) that any existing method of
accounting is not permissible or appropriate, and the Internal Revenue Service
has
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not proposed any such adjustments or changes in the Company's accounting method.
3.16. LABOR RELATIONS.
(a) Schedule 3.16 sets forth a list of all directors and
executive officers of the Company and the Subsidiaries as of the date hereof,
together with their respective titles (if any), their current base salary and
bonus compensation and the respective dates on which they commenced employment.
To the extent any such employee is on a leave of absence, Schedule 3.16
indicates the nature of such leave of absence and such employee's anticipated
date of return to active employment. Except as disclosed on Schedule 3.16, to
the Best Knowledge of the Company, none of the employees listed on Schedule 3.16
has any plans or intends to terminate his or their employment or engagement with
the Company or the Subsidiaries.
(b) Except as set forth on Schedule 3.16:
(i) the Company and each Subsidiary has complied
in all material respects, and is in compliance, in all material
respects with all applicable Legal Requirements regarding labor,
employment and employment practices, terms and conditions of
employment and wages and hours, including provisions thereof
relating to equal opportunity, collective bargaining and the
payment of social security and other Taxes;
(ii) there is no unfair labor practice complaint
against the Company or any Subsidiary pending before the National
Labor Relations Board or any other Governmental Authority;
(iii) the Company and the Subsidiaries generally
enjoy good relations with all of their employees, and there is no
labor strike, dispute or grievance, slowdown or stoppage actually
pending or, to the Best Knowledge of the Company, threatened
against or involving the Company or any of the Subsidiaries;
(iv) neither the Company nor any Subsidiary is a
party to or bound by any collective bargaining agreement, union
contract or singular agreement, no such agreement is currently
being negotiated by the Company or any Subsidiary, no labor union
has taken any action with respect to organizing employees of the
Company or any Subsidiary and no representation question exists
with respect to any such employees; and
(v) neither the Company nor any Subsidiary is a
party to or bound by any agreement for the leasing of employees by
the Company Subsidiaries and under any obligation to assume any
collective bargaining agreement,
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union contract or singular agreement with respect to any such leased employees.
(c) The Company's execution and delivery of, and
performance of its obligations under, the Documents to which it is a party, and
the consummation of the transactions contemplated thereby, will not (i) result
in any payment (including, without limitation, severance, unemployment
compensation, "golden parachute", bonus or otherwise) becoming due from the
Company to any director, officer or employee of the Company, (ii) increase any
such benefits otherwise payable, or (iii) result in the acceleration of the time
of payment or vesting of any such benefits.
3.17. ERISA PLANS AND CONTRACTS.
(a) Schedule 3.17 hereto contains a true and complete
list of all Employee Plans. All Employee Plans have been operated and
administered in compliance in all material respects with ERISA, the Code and
other applicable Legal Requirements.
(b) Except as set forth in Schedule 3.17:
(i) each Employee Plan, if intended to be
"qualified" within the meaning of Section 401(a) of the Code has
been determined by the Internal Revenue Service to be so qualified
and the related trusts are exempt from tax under Section 501(a) of
the Code, and to the Best Knowledge of the Company, nothing has
occurred that has or could reasonably be expected to affect
adversely such qualification or exemption;
(ii) neither the Company nor any of its ERISA
Affiliates, nor to the Best Knowledge of the Company and its ERISA
Affiliates, any other "disqualified person" or "party in interest"
(as such terms are defined in Section 4975 of the Code and Section
3(14) of ERISA, respectively) with respect to an Employee Plan has
breached the fiduciary rules of ERISA or engaged in a prohibited
transaction that could subject the Company or any of its ERISA
Affiliates to any tax or penalty imposed under Section 4975 of the
Code or Section 502(i), (j) or (l) or ERISA;
(iii) all required or declared Company
contributions (or premium payments) to (or in respect of) all
Employee Plans have been properly made when due, and the Company
has timely deposited all amounts withheld from employees for
pension, welfare or other benefits into the appropriate trust or
accounts;
(iv) no proceedings (other than routine claims
for benefits) are pending, or to the Best Knowledge of the
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Company, threatened, with respect to or involving any Employee
Plan;
(v) except as may be required under Legal
Requirements of general application, none of the Employee Plans
obligate the Company or any of the Subsidiaries to provide any
employee or former employee, or their spouses, family member or
beneficiaries, any post-employment or post-retirement health or
life insurance, accident or other "welfare-type" benefits;
(vi) each Employee Plan that is a "group health
plan" with the meaning of Section 5000 of the Code has been
maintained in compliance with Section 4980B of the Code and Title
I, Subtitle B, Part 6 of ERISA and no tax payable on account of
Section 4980B of the Code has been or is expected to be incurred;
(vii) all reporting and disclosure obligations
imposed under ERISA and the Code have been satisfied with respect
to each Employee Plan; and
(viii) no benefit or amount payable or which may
become payable by the Company or its ERISA Affiliates pursuant to
any Employee Plan, agreement or contract with any employee, shall
constitute an "excess parachute payment," within the meaning of
Section 280G of the Code, which is or may be subject to the
imposition of an excise tax under Section 4999 of the Code or
which would not be deductible by reason of Section 280G of the
Code.
(c) Neither the Company nor any of its ERISA Affiliates
is or has ever maintained or been obligated to contribute a "multiple employer
plan" (as defined in Section 413 of the Code), a "multiemployer plan" (as
defined in Section 3 (37) of ERISA) or a "defined benefit pension plan" (as
defined in Section 3(35) of ERISA).
(d) The Company has provided the Investors with true and
complete copies of all documents pursuant to which each Employee Plan is
maintained and administered, the two most recent annual reports (Form 5500 and
attachment) and financial statements therefore, all governmental rulings,
determination, and opinions (and pending requests therefor), and the most recent
valuation of the present and future obligations under each Employee Plan that
provides post retirement or post-employment health and life insurance and
accident or other "welfare type" benefits.
(e) No employee of the Company or its ERISA Affiliates is
a "leased employee" (as defined in Section 414(n) of the Code) with respect to
any client of the Company or its ERISA Affiliates.
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3.18. RELATED PARTY TRANSACTIONS.
Except as set forth in the SEC Reports, and, except for reasonable
compensation to regular employees of the Company and any Affiliate for services
rendered in the ordinary course of business, no current or former Affiliate of
the Company or any "Associate" (as defined in the rules and regulations
promulgated under the Exchange Act) thereof, is presently, or during the last
three fiscal years (or since inception, if shorter) has been, (i) a party to any
agreement or transaction with the Company or any of its Subsidiaries (including,
but not limited to, any contract, agreement or other arrangement providing for
the furnishing of services by, or rental of real or personal property from, or
otherwise requiring payments to, any such Affiliate or Associate) or (ii) the
direct or indirect owner of an interest in any Person which is a present or
potential competitor, supplier or customer of the Company or any its
Subsidiaries (other than non-affiliated holdings in publicly held companies),
nor does any such Person receive income from any source other than the Company
which relates to the business of, or should properly accrue to, the Company.
Except as set forth on Schedule 3.18, the Company and each of its Subsidiaries
is not a guarantor or otherwise liable for any actual or potential Liability or
obligation, whether direct or indirect, of any of its Affiliates. Except as set
forth on Schedule 3.18, the Company and each of its Subsidiaries does not (i)
own or operate any vehicles, boats, aircraft, apartments or other residential or
recreational properties or facilities for executive, administrative or sales
purposes or (ii) own or pay for any social club memberships, whether or not for
the benefit of the Company, its Subsidiaries and/or any of their executives.
3.19. CONFLICTS OF INTEREST.
(a) Neither the Company, the Subsidiaries nor any
executive officer acting on behalf of the Company or any of the Subsidiaries
has, directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any Governmental Authority or other Person
who was, is, or may be in a position to help or hinder the business of the
Company or any of the Subsidiaries (or assist in connection with any actual or
proposed transaction) that (i) might subject the Company or any of the
Subsidiaries to any damage or penalty in any Proceeding, (ii) if not given in
the past, would have resulted in a Material Adverse Effect on the Company and
the Subsidiaries, or (iii) if not continued in the future, could reasonably be
expected to have a Material Adverse Effect.
(b) Neither the Company nor any of the Subsidiaries has
taken any action which would cause it to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any rules and regulations thereunder.
There is not now, and there has
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never been, any employment by the Company and the Subsidiaries of, or beneficial
ownership in the Company by, any governmental or political official in any
country in the world.
3.20. PRIVATE SALE.
Assuming the accuracy of the representations of the Investors in
Section 4.2, the offering, sale, and issuance of the Purchased Shares, the
Purchased Warrants and the Reserved Common Shares, as the case may be, will be,
exempt from registration under the Securities Act and applicable state
securities laws and the rules and regulations promulgated thereunder. Neither
the Company nor any Person authorized or employed by the Company as agent,
broker, dealer or otherwise in connection with the offering, sale or issuance of
the Purchased Shares and the Purchased Warrants has offered the same for sale
to, or solicited any offers to buy the same from, or otherwise approached or
negotiated with respect thereto, any Person or Persons other than the Investors.
3.21. BROKERS.
Except for payments which the Company has agreed to make to each
of BT Capital and Bear Xxxxxxx pursuant to letters between each of the foregoing
and the Company as of today's date, neither the Company nor any of its officers,
directors, stockholders or employees (or any Affiliate of the foregoing) has
employed any broker or finder or incurred any actual or potential Liability or
obligation, whether direct or indirect, for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated by this
Agreement.
3.22. INSURANCE.
Schedule 3.22 hereto lists and briefly describes each insurance
policy maintained by the Company and the Subsidiaries with respect to the
properties, assets and business of the Company and the Subsidiaries (the
"Insurance Policies"). All of such Insurance Policies are in full force and
effect, and neither the Company nor any of the Subsidiaries is in default in any
material respect with respect to its obligations under any of such insurance
policies and has not received any notification of cancellation of any of such
Insurance Policies and has no claim outstanding which could be expected to cause
a material increase in the insurance rates. To the Best Knowledge of the
Company, no facts or circumstances exist that would relieve any insurer under
any such policies of their obligations to satisfy in full any claim of the
Company thereunder. The Company has not received any notice that (i) any of such
policies has been or will be canceled or terminated or will not be renewed on
substantially the same terms as are now in effect or (ii) the premium on any of
such policies will be materially increased on the renewal thereof. The Company
maintains insurance for its benefit in amounts and against all risks that are
normal and customary for
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Persons operating similar properties and businesses under policies in effect and
issued by insurers of recognized responsibility.
3.23. ENVIRONMENTAL MATTERS.
(a) Neither the Company, the Subsidiaries nor any of
their past owned or leased real properties or operations, are subject to or the
subject of, any Proceeding, Order, settlement, or other contract arising under
Environmental and Safety Requirements, nor, to the Best Knowledge of the
Company, has any investigation been commenced or is any Proceeding threatened
against the Company or any of the Subsidiaries under the Environmental and
Safety Requirements with regard to the Business.
(b) Except as set forth on Schedule 3.23, neither the
Company nor any of the Subsidiaries have received any written notice, report or
other information regarding any actual or alleged violation of any Environmental
and Safety Requirement, or any Liabilities or potential Liabilities, including
any investigatory, remedial or corrective obligations, relating to the Business
or the Leased Real Property and arising under any Environmental and Safety
Requirement.
(c) Schedule 3.23 sets forth a complete and accurate list
of all real estate previously owned or operated by the Company and the
Subsidiaries. Except as set forth on Schedule 3.23, to the Best Knowledge of the
Company none of the following exists, nor has ever existed, at any of the Leased
Real Property or any other real property previously owned or operated by the
Company: (1) underground storage tanks, (2) asbestos-containing material in any
form or condition, (3) materials or equipment containing polychlorinated
biphenyls or (4) landfills, surface impoundments or disposal areas.
(d) With respect to the Business, neither the Company nor
any of the Subsidiaries has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or released any substance, or
owned or operated any real property (and no such real property is contaminated
by any such substance) in a manner that has given or could reasonably be
expected to give rise to Liabilities pursuant to any Environmental and Safety
Requirement, including any Liability for response costs, corrective action
costs, personal injury, property damage, natural resources damage or attorney
fees, or any investigative, corrective or remedial obligations.
(e) To the Best Knowledge of the Company, no facts,
events or conditions relating to the past or present real properties or
operations of the Company and the Subsidiaries or the Business will prevent
continued compliance by the Business with any Environmental and Safety
Requirement, give rise to any investigatory, remedial or corrective obligations
pursuant to any Environmental and Safety Requirement, including, without
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limitation, any relating to on-site or off-site releases or threatened releases
of materials, substances or wastes, personal injury, property damage or natural
resources damage.
(f) The Company has provided the Investors with correct
and complete copies of all reports and studies within the possession or control
of the Company and the Subsidiaries with respect to past or present
environmental conditions or events at any of the Real Property.
3.24. CUSTOMER RELATIONS, PROFITABILITY.
The Company has no notice that any customer, agent,
representative or supplier of the Company and the Subsidiaries intends to
discontinue, diminish or change its relationship with the Company or any of the
Subsidiaries, the effect of which would have a Material Adverse Effect. Each
such relationship is in material conformity with standard industry terms and
conditions. Each such relationship wherein the Company is obligated to perform
under contract services with respect to the Business is priced at a profit level
reasonably consistent with the business practices of the Company and the
Subsidiaries.
3.25. DISCLOSURE.
Neither this Agreement nor any of the Schedules or Exhibits, nor
any other written material delivered to any of the Investors, when taken
together, contains any untrue statement of a material fact or omits a material
fact necessary to make the statements contained herein and therein, in light of
the circumstances in which they were made, not misleading. To the Best Knowledge
of the Company, there is no fact, circumstance or condition which has had or
could reasonably be expected to have a Material Adverse Effect on the Company
and the Subsidiaries, taken as a whole which has not been set forth in this
Agreement or in the Schedules or the Exhibits. Except for the provisions of the
Documents, neither the Company nor any of the Subsidiaries is obligated under
any contract or agreement or subject to any restriction set forth in its
Fundamental Documents which has or could reasonably be expected to have a
Material Adverse Effect on the Company and the Subsidiaries, taken as a whole.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE INVESTORS
Each Investor represents and warrants to the Company as to itself
severally, and not jointly as to any other Investor, as follows:
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4.1. AUTHORIZATION OF THE DOCUMENTS.
Such Investor has all requisite power and authority to execute,
deliver and perform the Documents to which it is a party and the transactions
contemplated thereby, and the execution, delivery and performance by such
Investor of the Documents to which it is a party have been duly and validly
authorized by all requisite action by such Investor and each such Document
constitutes or upon execution and delivery will constitute a valid and binding
obligation of such Investor enforceable against such Investor in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws and subject to general
principles of equity.
4.2. INVESTMENT REPRESENTATIONS.
(a) Such Investor is acquiring the Purchased Shares and
the Purchased Warrants hereunder and, in the event that such Investor should
acquire any Reserved Common Shares, will be acquiring such Reserved Common
Shares, for its own account, for investment and not with a view to the
distribution thereof in violation of the Securities Act or applicable state
securities laws.
(b) Such Investor understands that (i) the Purchased
Shares and the Purchased Warrants have not been, and the Reserved Common Shares
will not be, registered under the Securities Act or applicable state securities
laws and have been issued by the Company in a transaction exempt from the
registration requirements of the Securities Act and applicable state securities
laws and (ii) the Purchased Shares and the Purchased Warrants, and if acquired,
the Reserved Common Shares must be held by such Investor indefinitely unless a
subsequent disposition thereof is registered under the Securities Act and
applicable state securities laws or is exempt from registration.
(c) Each Investor further understands that the exemption
from registration afforded by Rule 144 (the provisions of which are known to
such Investor) promulgated under the Securities Act depends on the satisfaction
of various conditions, and that, if applicable, Rule 144 may only afford the
basis for sales of Securities acquired hereunder only in limited amounts.
(d) Such Investor has not employed any broker or finder
in connection with the transactions contemplated by this Agreement.
(e) Such Investor is an "accredited investor" (as defined
in Rule 501(a) of Regulation D promulgated under the Securities Act). The
Company has made available to such Investor or its representatives all
agreements, documents, records and books that such Investor has requested
relating to an investment in the Securities which may be acquired by the
Investor hereunder. Such Investor has had an opportunity to ask questions
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of, and receive answers from, a person or persons acting on behalf of the
Company, concerning the terms and conditions of this investment, and answers
have been provided to all of such questions to the full satisfaction of such
Investor. Such Investor has such knowledge and experience in financial and
business matters that it is capable of evaluating the risks and merits of this
investment. Such Investor's representations in this subsection shall in no way
limit the enforceability of any representations made by the Company in any of
the Documents to which it is a party except that made in Section 3.2 hereof.
(f) The state in which any offer to purchase shares
hereunder was made to or accepted by such Investor is the state shown as the
Investor's address on Schedule I hereto.
(g) Such Investor is not a person which itself is, or
would cause the Company to be, disqualified pursuant to Rule 262 promulgated
under the Securities Act.
(h) Such Investor was not formed for the purpose of
investing in the Securities which may be acquired hereunder.
4.3. RESIGNATIONS FROM BOARD OF DIRECTORS.
Each Investor agrees and covenants that, at the earlier of (i) the
expiration of the Term (as defined in the Voting Agreement) and (ii) the date
that such Investor shall cease to have the right to designate a Director under
Section 2.1(a) of the Voting Agreement, such Investor shall cause its designee,
if any, who is at that time a member of the Company's Board of Directors to
forthwith offer his or her resignation from the Board of Directors.
ARTICLE V
CONDITIONS TO CLOSING
The obligation of each Investor to purchase and pay for the
Purchased Shares and the Purchased Warrants hereunder at the Closing, is subject
to the satisfaction of the following conditions precedent (unless waived by such
Investor). The Company shall use its reasonable best efforts to ensure that all
conditions to the Closing set forth in this Article V are satisfied on or prior
to the Closing Date, including executing and delivering all documents required
to be delivered by the Company at the Closing and taking any and all actions
which may be necessary on its part to cause each other party to the Documents to
so execute and deliver each Document.
5.1. CERTIFICATE OF DESIGNATION.
The Certificate of Designation has been filed with and accepted by
the Secretary of the Commonwealth of Massachusetts,
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and evidence of such filing and acceptance satisfactory to the Investors, shall
have been delivered to the Investors.
5.2. PAYMENT OF OBLIGATIONS TO LENDERS.
The Investors shall have received evidence reasonably satisfactory
to each of them that immediately following the consummation of the transactions
contemplated by this Agreement and the Credit Agreement (a) all the Indebtedness
and other obligations of the Company and the Subsidiaries under the Existing
Credit Agreement shall have been repaid and discharged, respectively, and (b)
all the Escrowed Warrants (as such term is defined in the Escrow Agreement)
shall have been delivered to the Company and cancelled.
5.3. VOTING AGREEMENT.
The Voting Agreement shall have been executed and delivered by the
Company and all parties thereto.
5.4. REGISTRATION RIGHTS AGREEMENT.
The Registration Rights Agreement shall have been executed and
delivered by the Company and all parties thereto.
5.5. ISSUANCE OF THE PURCHASED SHARES AND PURCHASED WARRANTS.
The Company shall have duly issued and delivered (i) to such
Investor the certificate or certificates for the number of Purchased Shares
being purchased by such Investor at the Closing and (ii) to such Investor the
certificate or certificates for the number of Purchased Warrants being purchased
by such Investor at the Closing.
5.6. DOCUMENTS.
The other Documents shall have been duly authorized, executed and
delivered by the Company and the other parties thereto (other than the
Investors) and shall be in full force and effect and enforceable against the
Company and such parties in accordance with their respective terms.
5.7. KEY PERSON LIFE INSURANCE.
The Company shall have obtained a life insurance policy on the
life of Xxxxxxx Xxxxxx, which policy shall be in a face amount of at least equal
to $5,000,000 and shall in its commercially reasonable judgment increase the
face amount of such policy to $10,000,000, and shall use its best efforts to
obtain such a policy on the life of Xxxxxxx Xxxx, which policy shall be in a
face amount of at least equal to $1,000,000, to be issued by a financially sound
and reputable insurer, and name the Company as beneficiary.
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5.8. PERFORMANCE.
The Company shall have performed and complied in all material
respects with all agreements and conditions contained in the Documents required
to be performed or complied with by it prior to or at the Closing and shall have
certified to such effect to such Investor in writing.
5.9. ALL PROCEEDINGS TO BE SATISFACTORY.
All corporate and other proceedings to be taken and all waivers,
consents, approvals, qualifications and registrations required to be obtained or
effected in connection with the execution, delivery and performance of this
Agreement and the other Documents and the transactions contemplated hereby and
thereby (including those disclosed on Schedule 3.2) shall have been taken,
obtained or effected (except for the filing of any notice subsequent to the
Closing that may be required under applicable Federal or state securities laws,
which notice shall be filed on a timely basis following the Closing as so
required), and all documents incident thereto shall be satisfactory in form and
substance to such Investor. Such Investor shall have received all such originals
or certified or other copies of such documents as have been reasonably requested
by them.
5.10. OPINION OF COUNSEL.
Xxxxxxx & Xxxxx, PC, Phillips, Friedman, Kotler, and Xxxxxxx
Xxxxxxx, each counsel to the Company, shall have delivered their opinions
addressed to the Investors, dated as of the Closing Date, in substantially the
form attached hereto as Exhibit E.
5.11. SUPPORTING DOCUMENTS.
Such Investor shall have received copies of the following
supporting documents (in form and substance reasonably satisfactory to such
Investor):
(i) certificates of the Secretary of the
Commonwealth of the Commonwealth of Massachusetts, dated as of a
recent date as to the due incorporation or organization and good
standing of the Company and listing all documents of the Company
on file with said Secretary;
(ii) a telegram, telex or other acceptable method
of confirmation from said Secretary as of the close of business on
the next business day preceding the date of the Closing as to the
continued good standing of the Company;
(iii) a certificate of the Clerk or an Assistant
Clerk of the Company, dated as of the date of the Closing and
certifying: (1) that attached thereto is a true,
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correct and complete copy of each of the Articles of Organization
and By-laws as in effect on the date of such certification (each
of which shall be in form and substance satisfactory to such
Investor); (2) that attached thereto is a true, correct and
complete copy of all resolutions adopted by the Board of Directors
(and any committees thereof) of the Company authorizing the
execution, delivery and performance of the Documents and the
issuance, sale, and delivery of the Purchased Shares, and that all
such resolutions are still in full force and effect; (3) that the
Articles of Organization has not been amended since the date of
the last amendment referred to in the certificate delivered
pursuant to clause (i) above; and (4) the incumbency and specimen
signature of all officers of the Company executing the Documents,
the stock certificates representing the Purchased Shares, and any
certificate or instrument furnished pursuant hereto, and a
certification by another officer of the Company as to the
incumbency and signature of the officer signing the certificate
referred to in this clause (iii); and
(iv) such additional supporting documents and
other information with respect to the operations and affairs of
the Company as such Investor may reasonably request.
5.12. NO LITIGATION OR LEGISLATION.
No Legal Requirement shall have been enacted after the date hereof
and no Proceeding shall be pending which prohibits or seeks to prohibit, or
materially restricts or delays the consummation of the transactions contemplated
by the Documents or materially restricts or impairs the ability of the Investors
to own Securities of the Company.
5.13. SBA LETTER.
BT Capital shall have prepared the side letter regarding SBA
regulatory compliance (the "SBA Letter") and the Company shall have executed the
SBA Letter and delivered it to BT Capital.
5.14. FEES
The Company shall have paid BT Capital and Bear Xxxxxxx the fees
payable to each of them at Closing pursuant to the terms of the letters
referenced in Section 3.21 hereof.
5.15. OTHER CLOSING CONDITIONS.
All conditions to closing under the Credit Agreement shall have
been satisfied and the Company shall deliver a certificate to the Investors to
that effect.
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The obligations of the Company to sell the Purchased Shares
and the Purchased Warrants to the Investors at the Closing are subject to the
satisfaction of the following conditions: (a) each of the Investors shall have
delivered to the Company the consideration set forth in Sections 2.1(a) and
2.1(b), and (b) each Investor shall have entered into the Documents to which it
is a party and such agreements shall be in full force and effect.
ARTICLE VI
INDEMNIFICATION
6.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS, ETC.
All statements contained in any other Document or any closing
certificate delivered by the Company or the Investors, pursuant to this
Agreement or in connection with the transactions contemplated by this Agreement
(each, a "Closing Certificate") shall constitute representations and warranties
by the Company, or the Investors, as applicable, under this Agreement.
Notwithstanding any investigation made at any time by or on behalf of any party
hereto, all representations and warranties contained in this Agreement or made
in writing by or on behalf of the Company, or an Investor, in connection with
the transactions contemplated by this Agreement shall survive the Closing until
the expiration of two years following the Closing Date except that (i) those
contained in Section 3.5 shall expire eighteen months following the Closing
Date, (ii) those contained in Section 3.23 shall expire on the sixth anniversary
of the Closing Date and (iii) those contained in Section 3.15 and Section 4.2
shall expire upon the thirtieth day after the expiration of the applicable
statute of limitations (taking into account any waivers or extensions thereof).
6.2. INDEMNIFICATION.
(a) In addition to all other rights and remedies
available to the Investors, the Company shall indemnify, defend and hold
harmless each Investor and its Affiliates and their respective partners,
officers, directors, employees, agents and representatives (collectively, the
"Investor Representatives"; and together with such Investor, the "Investor
Indemnified Persons") against all Losses, and none of the Investor Indemnified
Persons shall be liable to the Company or any other stockholder of the Company
for or with respect to any and all Losses, together with all costs and expenses
(including legal and accounting fees and expenses) related thereto or incurred
in enforcing this Article VI, (i) arising from the untruth, inaccuracy or breach
of any of the representations or warranties of the Company contained in any
Document or Closing Certificate or any facts or circumstances constituting any
such untruth, inaccuracy or breach, (ii) arising from the breach of any
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covenant or agreement of the Company contained in any Document or Closing
Certificate or any facts or circumstances constituting such breach, or (iii)
arising from any Claim (whenever made) resulting from or caused by any
transaction, status, event, condition, occurrence or situation relating to,
arising out of or in connection with (A) the status of, or conduct of the
business and affairs of, the Company, (B) the execution, delivery and
performance of this Agreement and the other Documents and the related documents
and agreements contemplated hereby and thereby or (C) any actions taken by or
omitted to be taken by any of the Investor Indemnified Persons in connection
with this Agreement and the other Documents or the related documents and
agreements contemplated hereby and thereby. Notwithstanding the foregoing, upon
judicial determination, which is final and no longer appealable, to the extent
that the act or omission giving rise to the indemnification pursuant to clause
(iii) of Section 6.2(a) resulted out of or was based upon the indemnified
party's gross negligence, fraud or willful misconduct, (unless such action was
based upon the Investor Indemnified Person's reliance in good faith upon any of
the representations, warranties, covenants or promises made by the Company
herein, or in the Documents), the Company shall not be responsible for any
Losses sought to be indemnified in connection therewith, and the Company shall
be entitled to recover from the indemnified party all amounts previously paid in
full or partial satisfaction of such indemnity, together with all costs and
expenses of the Company reasonably incurred in effecting such recovery, if any.
(b) In addition all other rights and remedies available
to the Company, each Investor severally as to itself only and not as to any
other Investor, shall indemnify, defend and hold harmless the Company and its
officers, directors, employees, agents and representatives (collectively, the
"Company Indemnified Persons,") against all Losses, together with all reasonable
out-of-pocket costs and expenses (including legal and accounting fees and
expenses) related thereto or incurred in enforcing this Article VI, (i) arising
from the untruth, inaccuracy or breach of any of the representations or
warranties of such Investor contained in any Document or Closing Certificate or
any facts or circumstances constituting such untruth, inaccuracy or breach or
(ii) arising from the breach of any covenant or agreement of such Investor
contained in any Document or Closing Certificate or any facts or circumstances
constituting such breach.
(c) If for any reason the indemnity provided for in this
Section is unavailable to any Indemnified Person or is insufficient to hold each
such Indemnified Person harmless from all such Losses arising with respect to
the transactions contemplated by this Agreement, then the Indemnifying Persons
shall contribute to the amount paid or payable for such Losses in such
proportion as is appropriate to reflect not only the relative benefits received
by the Indemnifying Persons on the one hand and such Indemnified Person on the
other but also the relative fault of the Indemnifying Persons and the
Indemnified
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Person as well as any relevant equitable considerations. In addition, the
Indemnifying Persons shall reimburse any Indemnified Person upon demand for all
reasonable expenses (including legal counsel fees) incurred by such Indemnified
Person in connection with investigating, preparing for or defending any such
action or claim. The indemnity, contribution and expenses reimbursement
obligations that the Indemnifying Persons have under this Article VI shall be in
addition to any Liability that the Indemnifying Persons may otherwise have. The
Indemnifying Persons further agree that the indemnification and reimbursement
commitments set forth in this Agreement shall apply whether or not the
Indemnified Person is a formal party to any such Claim.
(d) Any indemnification of an Indemnified Person by
Indemnifying Persons pursuant to this Section shall be effected by wire transfer
of immediately available funds from the Indemnifying Persons to an account
designated by the Indemnified Person within 15 days after the determination
thereof.
ARTICLE VII
TRANSFER OF SECURITIES
7.1. RESTRICTION ON TRANSFER.
The Restricted Securities shall not be transferable except upon
the conditions specified in this Article VII, which conditions are intended to
insure compliance with the provisions of the Securities Act in respect of the
transfer thereof; provided, however, that notwithstanding the provisions of this
Article VII any holder of Restricted Securities may Transfer, by assignment or
otherwise, without complying with the requirements of Section 7.3(a) all or any
portion of such holder's interest in any Restricted Securities held by it to an
Affiliate of such holder provided that, in each case, each such Transfer must
comply with all provisions of the Securities Act applicable to any such Transfer
and without the creation of any obligation on the part of the Company except as
otherwise set forth in the Documents.
7.2. RESTRICTIVE LEGENDS.
Each certificate evidencing the Restricted Securities and each
certificate for any such securities issued to subsequent transferees of any such
certificate shall (unless otherwise permitted by the provisions of Section 7.3
hereof) be stamped or otherwise imprinted with a legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THESE
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SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR
APPLICABLE STATE BLUE SKY LAWS. ADDITIONALLY, THE TRANSFER OF
THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE
STOCK AND WARRANT PURCHASE AGREEMENT DATED AS OF JULY 30,
1997, AMONG THE ISSUER HEREOF AND CERTAIN OTHER SIGNATORIES
THERETO, AND NO TRANSFER OF THESE SECURITIES SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. COPIES OF
SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE CLERK
OF THE ISSUER HEREOF."
7.3. NOTICE OF TRANSFER.
(a) The holder of any Restricted Securities, by
acceptance thereof agrees, prior to any Transfer of any Restricted Securities,
to give written notice to the Company of such holder's intention to effect such
transfer and to comply in all other respects with the provisions of this Section
7.3. Each such notice shall describe the manner and circumstances of the
proposed transfer and shall be accompanied by (i) the written opinion, addressed
to the Company, of counsel for the holder of Restricted Securities, as to
whether in the opinion of such counsel (which opinion and counsel shall be
reasonably satisfactory to the Company) such proposed transfer involves a
transaction requiring registration of such Restricted Securities under the
Securities Act, and (ii) in the case of Restricted Shares, if in the opinion of
such counsel such registration is required, a written request addressed to the
Company by the holder of Restricted Shares, describing in detail the proposed
method of disposition and requesting the Company to effect the registration of
such Restricted Shares pursuant to the terms and provisions of the Registration
Rights Agreement; provided, however, that (A) in the case of a holder of
Restricted Securities which is a partnership, no such opinion of counsel shall
be necessary for a Transfer by such holder of Restricted Securities to a partner
of such holder of Restricted Securities, or a retired partner of such holder who
retires after the date hereof, or the estate of any such partner or retired
partner, if in each case the transferee agrees in writing to be subject to the
terms of this Article VII to the same extent as if such transferee were
originally a signatory to this Agreement, and (B) no such opinion shall be
required in connection with a Transfer pursuant to Rule 144 (as amended from
time to time) promulgated under the Securities Act (or successor rule thereto),
provided, that the Company, shall be provided with customary written
representations relating to such transaction reasonably satisfactory to counsel
for the Company.
(b) If in the opinion of such counsel (if such opinion is
required hereunder) the proposed Transfer of Restricted Securities may be
effected without registration under the Securities Act, the holder of Restricted
Securities shall thereupon be entitled to Transfer the Restricted Securities in
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accordance with the terms of the notice delivered by it to the Company.
(c) Each certificate or other instrument evidencing the
securities issued upon the Transfer of any Restricted Securities (and each
certificate or other instrument evidencing any untransferred balance of such
securities) shall bear the legend set forth in Section 7.2 hereof unless (i) in
the opinion of such counsel registration of future Transfer is not required by
the applicable provisions of the Securities Act or (ii) the Company shall have
waived the requirement of such legends; provided, however, that such legend
shall not be required on any certificate or other instrument evidencing the
securities issued upon such Transfer in the event such Transfer shall be made in
compliance with the requirements of Rule 144 (as amended from time to time)
promulgated under the Securities Act (or successor rule thereto) unless such
Transfer is made to an Affiliate of the Company.
(d) The holder of Restricted Securities shall not
Transfer such Restricted Securities until such opinion of counsel has been given
(unless waived by the Company, or unless such opinion is not required in
accordance with the provisions of Section 7.1 or this Section 7.3) or until
registration of the Restricted Shares involved in the above-mentioned request
has become effective under the Securities Act.
7.4. TRANSFER PURSUANT TO RULE 144.
The Company agrees to use its best efforts to provide to the
holders of the Restricted Securities (and upon a holder's request to any
prospective investors designated by a holder) the financial and other
information specified in Rule 144 under the Securities Act and to take any other
action or to execute any certificates necessary to permit a transfer by any
holder of Restricted Securities to qualify for the exemption set forth in Rule
144.
ARTICLE VIII
INFORMATION RIGHTS
8.1. ACCESS TO RECORDS.
(a) The Company shall afford to each Significant Investor
and its employees, counsel and other authorized representatives, during normal
business hours, reasonable access, upon reasonable advance notice, to all of the
books, records and properties of the Company and its Subsidiaries and to all
officers and employees of the Company and its Subsidiaries; provided, however,
that such investigation shall not unreasonably interfere with the operations of
the Company and its Subsidiaries. The Company will instruct its independent
public
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accountants to discuss such aspects of the financial condition of the Company
with any Investor and its representatives as such Investor may reasonably
request, and to permit such Investor and its representatives to inspect, copy
and make extracts from such financial statements, analyses, work papers and
other documents and information (including electronically stored documents and
information) prepared by such accountants with respect to the Company as such
holder may reasonably request. All costs and expenses incurred by such Investor
and its representatives in connection with exercising such rights of access
shall be borne by such Persons, and all out-of-pocket costs and expenses
incurred by the Company in complying with any extraordinary requests by such
Investor and its representatives in connection with exercising such access
rights shall be borne by such Investor.
(b) Each Investor shall use its best efforts to maintain
the confidentiality of any confidential and proprietary information obtained by
it under this Section 8.1 and shall not use, or permit the use of, any of such
confidential and proprietary information in its business or the business of any
company in which it may have an ownership interest or in any manner or for any
other purpose except as contemplated hereby; provided, however, that the
foregoing shall in no way limit or otherwise restrict the ability of any
Investor or such authorized representatives to disclose any such information
concerning the Company which it may be required to disclose (i) to its partners
or limited partners to the extent required to satisfy its fiduciary obligations
to such persons or (ii) otherwise pursuant to or as required by law.
(c) As used herein, "Significant Investor" shall mean and
include any Investor who, at the time in question, shall own, together with its
Affiliates, at least 5% of the outstanding Common Equivalents at the time in
question.
8.2. FINANCIAL REPORTS.
The Company shall furnish each Significant Investor with the
following:
(a) Quarterly Statements. Upon the request of such
Significant Investor, within 45 days after the end of each quarterly accounting
period, except after the end of the fourth quarterly accounting period in the
Company's fiscal year in which case the time period shall be 90 days, an
unaudited financial report of the Company, which report shall be prepared in
accordance with generally accepted accounting principles consistently applied,
and which shall include the following:
(i) a profit and loss statement for such
quarterly accounting period, together with a cumulative profit and
loss statement from the first day of the current year to the last
day of such quarterly accounting period;
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(ii) a balance sheet as at the last day of such
quarterly accounting period;
(iii) a cash flow analysis for such quarterly
accounting period on a cumulative basis for the fiscal year to
date;
(iv) a schedule showing all expenditures of a
capital nature in excess of $250,000 individually during such
quarterly accounting period; and
(v) a comparison between the actual figures for
such quarterly accounting period and the comparable figures (with
respect to clauses (i) and (ii) only) for the prior year (if any)
for such quarterly accounting period, with an explanation of any
material differences between them.
(b) Copies of all financial statements, reports, press
releases, notices, proxy statements and other documents sent by the Company to
its stockholders generally or released to the public and copies of all regular
and periodic reports filed by the Company with the SEC, or any securities
exchange.
(c) Upon the request of such Significant Investor, copies
of all reports prepared for or delivered to the management of the Company by its
Accountants;
(d) Upon the request of such Significant Investor, any
other routinely collected financial or other information available to management
of the Company (including, without limitation, routinely collected statistical
data);
(e) Upon the request of such Significant Investor, within
sixty (60) days after commencement of each new fiscal year, a business plan and
projected financial statements for such fiscal year, which financial statements
shall include a comparison between the actual figures for such fiscal year and
the comparable figures for the prior year (if any) for such fiscal year, with an
explanation of any material differences between them; and
(f) Promptly following its receipt of notice of the
commencement of any action, suit, claim, legal or administrative or arbitration
proceeding or investigation, any of which could reasonably be expected, on the
basis of current economic conditions and other facts and circumstances known to
the Company at the time, to have a Material Adverse Effect, the Company shall
deliver a written notice to each Significant Investor describing in reasonable
detail such proceeding.
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ARTICLE IX
ADDITIONAL AGREEMENTS OF THE CORPORATION
9.1. COMPLIANCE.
The Company and the Subsidiaries (a) in carrying out their
businesses shall comply in all material respects with Legal Requirements and
Orders of any Governmental Authority applicable to it, its business and the
ownership of its assets and (b) shall obtain and maintain in full force and
effect all Federal, state, local and foreign governmental licenses and permits
material to and necessary in the conduct of its business and such licenses and
permits shall be maintained, in full force and effect.
9.2. INSURANCE.
(a) All the insurable properties of the Company and the
Subsidiaries shall be insured for the benefit of the Company and its
Subsidiaries in the full amounts required to protect the Company and its
Subsidiaries against all risks usually insured against by Persons operating
similar properties in the localities in which such properties are located under
policies in effect and issued by national insurers of recognized responsibility.
(b) The Company shall maintain the other insurance
coverage specified on Schedule 9.2 hereto including product liability,
directors' and officers' liability and key person life insurance.
9.3. AFFIRMATIVE COVENANTS.
As long as the Investors hold at least 5% of the outstanding
Common Equivalents, the Company shall, and shall cause its Subsidiaries, as
applicable, to observe and perform the following:
(a) Payment of Dividends. The Company shall pay or
accrue, as the case may be, the required dividends on the shares of Series A
Preferred Stock and any other amounts payable under the Documents in accordance
with the terms of the Documents.
(b) Proceeds. The Company shall use the proceeds of the
sale of the Purchased Shares and the Purchased Warrants solely in the manner
described in this Agreement.
(c) Payment of Taxes, etc. The Company shall pay and
discharge, and cause each of its Subsidiaries to pay and discharge, before the
same shall become delinquent, (i) all amounts of taxes, assessments and
governmental charges or levies imposed upon it or upon its property and (ii) all
lawful claims that, if unpaid, could reasonably be expected by law to become an
Encumbrance upon its property; provided, however, that neither the Company nor
any of its Subsidiaries shall be required to pay
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or discharge any such tax, assessment, charge or claim (y) that is being
contested in good faith and by proper proceedings and as to which appropriate
reserves are being maintained or (z) the non-payment or non-discharge of which
could not reasonably be expected to have a Material Adverse Effect.
(d) Preservation of Corporate Existence, etc. The Company
shall preserve and maintain, and cause each of its Subsidiaries to preserve and
maintain, its corporate existence (except pursuant to a Change of Control);
provided, however, that any Subsidiary may merge or consolidate with any other
Subsidiary or the Company. The Company shall preserve and maintain, and cause
each of its Subsidiaries to preserve and maintain, its rights (charter and
statutory), and all material permits, licenses, approvals, privileges and
franchises necessary or desirable in the normal conduct of its business, except
any thereof the non-preservation or non-maintenance of which could not
reasonably be expected to have a Material Adverse Effect.
(e) Keeping of Books. The Company shall keep, and cause
each of its Subsidiaries to keep, proper books of record and account, in which
entries which are full and correct in all material respects shall be made of all
financial transactions and the assets and business of the Company and each such
Subsidiary in accordance with generally accepted accounting principles.
(f) Maintenance of Properties, etc. The Company shall
maintain and preserve, and cause each of its Subsidiaries to maintain and
preserve, all of its properties that are reasonably required in the conduct of
its business in good working order and condition, ordinary wear, tear and
depletion excepted, except any thereof the non-maintenance or non-preservation
of which could not reasonably be expected to have a Material Adverse Effect.
(g) Transactions with Affiliates. The Company shall
conduct, and cause each of its Subsidiaries to conduct, all transactions
otherwise permitted under the Documents with any of their Affiliates on terms
that are fair and reasonable and no less favorable to the Company or such
Subsidiary than it would obtain in a comparable arm's-length transaction with a
Person not an Affiliate.
9.4. NEGATIVE COVENANTS.
As long as the Investors hold at least 5% of the outstanding
Common Equivalents, the Company shall not, without the prior written consent of
the Requisite Investors:
(a) Related Transactions. Enter into or permit any
Subsidiary to enter into, any transaction (including, without limitation, the
purchase, sale, lease or exchange of property or the rendering of services) with
any Affiliate provided however, that the Company may enter into ordinary course
transactions with Affiliates including, granting options to and entering into
and amending employment agreements with management employees,
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provided that such transactions are approved by the Board of Directors or the
applicable committee thereof.
(b) Restricted Payments. Neither the Company nor its
Subsidiaries shall declare or make any Restricted Payments.
(c) Issuance of Capital Stock or Other Equity Interests.
Permit any Subsidiary to authorize or create any capital stock or issue any
capital stock (including any options or warrants convertible into capital stock)
to any Person other than the Company or another Subsidiary.
(d) Board of Directors. Permit the number of members of
the board of directors (other than members selected or designated by the
Investors) of the Company to exceed ten (10) and the Company agrees to use its
best efforts to add the respective designees of BT Capital and Bear Xxxxxxx
pursuant to the provisions of the Voting Agreement.
(e) Agreements. Enter into any agreement or commitment or
otherwise become bound or obligated to do or perform any of the foregoing
actions.
ARTICLE X
MISCELLANEOUS
10.1. FEES.
(a) The Company will pay, and save the Investors harmless
against all Liability for the payment of, (i) all costs and other expenses
incurred from time to time by the Company in connection with the Company's
performance of and compliance with all agreements and conditions contained
herein on its part to be performed or complied with (including the reasonable
costs and expenses of counsel incurred in connection with the review and
preparation of the Documents), (ii) the actual, out-of-pocket costs and expenses
incurred by the Investors at or prior to closing in connection with the
transactions contemplated hereby, including fees and charges of X'Xxxxxxxx Graev
& Karabell, LLP (counsel to the Investors), Price Waterhouse LLP (accountant to
the Investors) and LEK/Alcar Consulting Group (consultant to the Investors), in
connection with the purchase and ownership of the Purchased Shares and the
Purchased Warrants, (iii) the reasonable costs and expenses (including fees and
expenses of counsel) incurred by the Investors in connection with any amendment
or waiver of, or enforcement of, any Document relating to the transactions
contemplated hereby, and (iv) the reasonable fees and expenses incurred by each
Investor in any filing with any Governmental Authority with respect to its
investment in the Company or in any other filing with any Governmental Authority
with respect to the Company that mentions such Investor.
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(b) The Company further agrees that it will pay, and will
save the Investors harmless from, any and all Liability with respect to any
stamp or similar taxes which may be determined to be payable in connection with
the execution and delivery and performance of the Documents or any modification,
amendment or alteration of the terms or provisions of the Documents, and that it
will similarly pay and hold the Investors harmless from all issue taxes in
respect of the issuance of the Reserved Common Shares to the Investors.
10.2. FURTHER ASSURANCES.
The Company shall duly execute and deliver, or cause to be duly
executed and delivered, at its own cost and expense, such further instruments
and documents and to take all such action, in each case as may be necessary or
proper in the reasonable judgment of the Investors to carry out the provisions
and purposes of the Agreement and the other Documents.
10.3. REMEDIES.
In case any one or more of the representations, warranties,
covenants and/or agreements set forth in this Agreement shall have been breached
by the Company, the Investors (or any Investor) may proceed to protect and
enforce its or their rights either by suit in equity and/or by action at law,
including an action for damages as a result of any such breach and/or an action
for specific performance of any such covenant or agreement contained in this
Agreement.
10.4. SUCCESSORS AND ASSIGNS.
This Agreement shall bind and inure to the benefit of the Company
and the Investors and their respective successors, transferees, assigns, heirs
and personal representatives. Upon any Transfer of the Purchased Shares, the
Purchased Warrants or the Reserved Common Shares, the transferee shall be bound
by, and entitled to the benefits of, this Agreement with respect to such
transferred shares in the same manner as the transferring Investor.
10.5. ENTIRE AGREEMENT.
This Agreement and the other writings referred to herein or
delivered pursuant hereto which form a part hereof contain the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
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10.6. NOTICES.
All notices and other communications delivered hereunder (whether
or not required to be delivered hereunder) shall be deemed to be sufficient and
duly given if contained in a written instrument (a) personally delivered, (b)
sent by telecopier, (c) sent by nationally-recognized overnight courier
guaranteeing next Business Day delivery or (d) sent by first class registered or
certified mail, postage prepaid, return receipt requested, in each case
addressed as follows:
(i) if to the Company, to:
Safety 1st, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxxxx Xxxxxx;
with a copy to:
Xxxxxxx & Xxxxx, PC
000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxx, Esq.;
if to any Investor, to him, her or it at his, her
or its address set forth on Schedule I attached
hereto;
with a copy to:
X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
or to such other address as the party to whom such notice or other communication
is to be given may have furnished to each other party in writing in accordance
herewith. Any such notice or communication shall be deemed to have been received
(i) when delivered, if personally delivered, (ii) when sent, if sent by telecopy
on a Business Day (or, if not sent on a Business Day, on the next Business Day
after the date sent by telecopy), (iii) on the next Business Day after dispatch,
if sent by nationally recognized, overnight courier guaranteeing next Business
Day delivery, and (iv) on the fifth Business Day following the date on which the
piece of mail containing such communication is posted, if sent by mail.
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10.7. AMENDMENTS, MODIFICATIONS AND WAIVERS.
The terms and provisions of this Agreement may not be modified or
amended, nor may any of the provisions hereof be waived, temporarily or
permanently, except pursuant to a written instrument executed by the Company and
the holders of a majority of the Purchased Shares and the Purchased Warrants
issued pursuant to this Agreement and held by Investors.
10.8. GOVERNING LAW; WAIVER OF JURY TRIAL.
(a) All questions concerning the construction,
interpretation and validity of this Agreement shall be governed by and construed
and enforced in accordance with the domestic laws of the State of New York,
without giving effect to any choice or conflict of law provision or rule
(whether in the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. In furtherance of the foregoing, the internal law of the State of New York
will control the interpretation and construction of this Agreement, even if
under such jurisdiction's choice of law or conflict of law analysis, the
substantive law of some other jurisdiction would ordinarily or necessarily
apply.
(b) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX
FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
10.9. NO THIRD PARTY RELIANCE.
Anything contained herein to the contrary notwithstanding, the
representations and warranties of the Company contained in this Agreement (a)
are being given by the Company as an inducement to the Investors to enter into
this Agreement and the other Documents (and the Company acknowledges that the
Investors have expressly relied thereon) and (b) are solely for the benefit of
the Investors. Accordingly, no third party (including, without limitation, any
holder of capital stock of the Company) or anyone acting on behalf of any
thereof other than the Investors or the Investor Representatives, and each of
them, shall be a third party or other beneficiary of such representations and
warranties and no such third party shall have any rights of contribution against
the Investors or the Company with respect to such representations or warranties
or any matter
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subject to or resulting in indemnification under this Agreement or otherwise.
10.10. EXTENSION; WAIVER.
At any time prior to the Closing, the parties may (a) extend the
time for the performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement and (c) waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party, and any such waiver shall not operate or be
construed as a waiver of any subsequent breach by the other party.
10.11. SEVERABILITY.
It is the desire and intent of the parties that the provisions of
this Agreement be enforced to the fullest extent permissible under the law and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not be invalid,
prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
10.12. INDEPENDENCE OF AGREEMENTS, COVENANTS, REPRESENTATIONS AND WARRANTIES.
All agreements and covenants hereunder shall be given independent
effect so that if a certain action or condition constitutes a default under a
certain agreement or covenant, the fact that such action or condition is
permitted by another agreement or covenant shall not affect the occurrence of
such default, unless expressly permitted under an exception to such initial
covenant. In addition, all representations and warranties hereunder shall be
given independent effect so that if a particular representation or warranty
proves to be incorrect or is breached, the fact that another representation or
warranty concerning the same or similar subject matter is correct or is not
breached will not affect the incorrectness of or a breach of a representation
and warranty hereunder. The exhibits and schedules attached hereto are hereby
made part of this Agreement in all respects. Any disclosure made in any Schedule
to this
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Agreement which should, based on the substance of such disclosure, be applicable
to another Schedule to this Agreement shall be deemed to be made with respect to
such other Schedule regardless of whether or not a specific reference is made
thereto; provided, that the description of such item on a Schedule is such that
the Investor could reasonably be expected to ascertain that such disclosure
would relate to such other provision of this Agreement.
10.13. COUNTERPARTS; FACSIMILE SIGNATURES.
This Agreement may be executed in any number of counterparts, and
each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts together shall constitute but one agreement. Facsimile
counterpart signatures to this Agreement shall be acceptable and binding.
* * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Stock and Warrant Purchase Agreement as of the date first above written.
SAFETY 1ST, INC.
By: /s/ Xxxxxxx X. Xxxx
----------------------------
Name: Xxxxxxx X. Xxxx
Title: President
INVESTORS:
BT CAPITAL PARTNERS, INC. BEAR, XXXXXXX & CO. INC.
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxxxxx
--------------------------- ---------------------------
Name: Xxxxx X. Xxxxxxx Name: Xxxxx X. Xxxxxxx
Title: Vice President Title: Managing Director
54
SCHEDULE I
INVESTORS
Name and Address Purchased Unconditional Conditional Aggregate
for Notices Shares Warrants Warrants Purchase
----------- ------ -------- -------- --------
BT Capital Partners, Inc.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx 7,500 570,755 63,418 7,500,000
Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
Attention: Xxxx Xxxxxx 7,500 570,755 63,418 7,500,000
------ --------- ------- ----------
TOTAL 15,000 1,141,510 126,836 15,000,000
====== ========= ======= ==========
